-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AljF1NtnqwdzwMun8v4WNnfI3fl4cAphPFWKqAY7DgW03M2yA7lDwcSWmr/JUaqg WU7nr9g69RxsGZJ0X2j1Sw== 0000891618-99-000720.txt : 19990223 0000891618-99-000720.hdr.sgml : 19990223 ACCESSION NUMBER: 0000891618-99-000720 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19990222 EFFECTIVENESS DATE: 19990222 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POPE & TALBOT INC /DE/ CENTRAL INDEX KEY: 0000311871 STANDARD INDUSTRIAL CLASSIFICATION: PAPER MILLS [2621] IRS NUMBER: 940777139 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: SEC FILE NUMBER: 333-72737 FILM NUMBER: 99546843 BUSINESS ADDRESS: STREET 1: 1500 SW FIRST AVE CITY: PORTLAND STATE: OR ZIP: 97201 BUSINESS PHONE: 5032289161 MAIL ADDRESS: STREET 1: 1500 S W FIRST AVE CITY: PORTLAND STATE: OR ZIP: 97201 S-8 1 FORM S-8 1 As filed with the Securities and Exchange Commission on February 22, 1999 Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------- FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 POPE & TALBOT, INC. (Exact name of issuer as specified in its charter) DELAWARE 94-0777139 (State or other jurisdiction (I.R.S. of incorporation or organization) Employer Identification No.)
1500 S.W. FIRST AVENUE, PORTLAND, OR 97201 (Address of principal executive offices) (Zip Code) POPE & TALBOT, INC. STOCK OPTION AND APPRECIATION PLAN SPECIAL NON-EMPLOYEE DIRECTOR STOCK RETAINER FEE PLAN (Full title of the plan) PETER T. POPE CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER POPE & TALBOT, INC. 1500 S.W. FIRST AVENUE, PORTLAND, OR 97201 (Name and address of agent for service) (503) 228-9161 (Telephone number, including area code, of agent for service)
CALCULATION OF REGISTRATION FEE ============================================================================================================= Proposed Proposed Maximum Maximum Title of Securities Amount to be Offering Price per Aggregate Offering Amount of to be Registered Registered (1) Share (2) Price (2) Registration Fee ---------------- -------------- --------- --------- ---------------- Stock Option and Appreciation Plan Common Stock, $1.00 par value 300,000 $7.28 $2,184,000 $607.15 Special Non-Employee Director Stock Retainer Fee Plan Common Stock, $1.00 par value 300,000 $7.28 $2,184,000 $607.15 Aggregate Registration Fee $1,214.30 =============================================================================================================
(1) This Registration Statement shall also cover any additional shares of the Registrant's Common Stock which become issuable under the Stock Option and Appreciation Plan and Special Non-Employee Director Stock Retainer Fee Plan by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the Registrant's receipt of consideration which results in an increase in the number of outstanding shares of the Registrant's Common Stock. (2) Calculated solely for purposes of this offering under Rule 457(h) of the Securities Act of 1933, as amended, on the basis of the average of the high and low selling prices per share of the Registrant's Common Stock on February 17, 1999 as reported on the New York Stock Exchange. 2 PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT Item 3. Incorporation of Certain Documents by Reference Pope & Talbot, Inc. (the "Registrant") hereby incorporates by reference into this Registration Statement the following documents previously filed with the Securities and Exchange Commission (the "Commission"): (a) The Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 filed with the Commission on March 31, 1998; (b) The Registrant's Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 1998, June 30, 1998 and September 30, 1998 filed with the Commission on May 14, 1998, August 10, 1998 and November 8, 1998, respectively; (c) The Registrant's Current Report on Form 8-K, filed with the Commission on April 7, 1998 and an amendment thereto filed on April 17, 1998; and (d) (1) The Registrant's Registration Statement on Form 8-A filed with the Commission on December 3, 1985, together with Amendments 1 and 2, filed with the Commission on January 10, 1986, and March 9, 1987, respectively, in which there is described the terms, rights and provisions applicable to the Registrant's outstanding Common Stock. (2) The Registrant's Registration Statements on Form 8-A filed with the Commission on April 7, 1998 and April 21, 1998, respectively, together with Amendment No. 1 filed on April 21, 1998, in which there is described the terms, rights and provisions applicable to the Registrant's preferred stock purchase rights distributed as a dividend on the outstanding shares of Registrant's Common Stock. All reports and definitive proxy or information statements filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act"), after the date of this Registration Statement and prior to the filing of a post-effective amendment which indicates that all securities offered hereby have been sold or which deregisters all securities then remaining unsold shall be deemed to be incorporated by reference into this Registration Statement and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any subsequently filed document which also is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement. Item 4. Description of Capital Stock Inapplicable. Item 5. Interests of Named Experts and Counsel Inapplicable. II-1 3 Item 6. Indemnification of Directors and Officers The Registrant's Restated Certificate of Incorporation provides that no member of the Registrant's Board of Directors or Executive Committee of the Board will be personally liable to the Registrant or any of its stockholders for monetary damages arising from such member's breach of his fiduciary duties to the Registrant. However, this does not apply with respect to any action in which such person would be liable under Section 174 of Title 8 of the General Corporation Law of Delaware, nor does it apply with respect to any liability in which such person (i) breached his duty of loyalty to the Registrant; (ii) did not act in good faith or, in failing to act, did not act in good faith; (iii) acted in a manner involving intentional misconduct or a knowing violation of law or, in failing to act, acted in a manner involving intentional misconduct or a knowing violation of law; or (iv) derived an improper personal benefit. Pursuant to the provisions of Section 145 of the General Corporation Law of Delaware, every Delaware corporation has power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Registrant or of any corporation, partnership, joint venture, trust or other enterprise for which he is or was serving in such capacity at the request of the Registrant, against any and all expenses, judgments, fines and settlement amounts reasonably incurred by him in connection with such action, suit or proceeding. The power to indemnify applies only if such person acted in good faith and in a manner he reasonably believed to be in the best interests, or not opposed to the best interests, of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The power to indemnify applies to actions brought by or in the right of the corporation as well, but only to the extent of defense and settlement expenses and not to any satisfaction of a judgment or settlement of the claim itself, and with the further limitation that in such actions no indemnification shall be made in the event of any adjudication of negligence or misconduct unless the court, in its discretion, feels that in the light of all the circumstances indemnification should apply. To the extent any of the persons referred to in the two immediately preceding paragraphs is successful in the defense of the actions referred to therein, such person is entitled pursuant to Section 145 to indemnification as described above. Section 145 also empowers the corporation to advance litigation expenses to such person upon receipt of any undertaking to repay such advances in the event no right to indemnification is subsequently shown. A corporation may also obtain insurance at its expense to protect anyone who might be indemnified, or has a right to insist on indemnification, under the statute. The Registrant has entered into indemnification agreements with certain of its officers and all of its current directors which provide for indemnification to the fullest extent permitted by Delaware General Corporation Law, including Section 145 thereof. Such agreements have been approved by the Registrant's stockholders. The Registrant's stockholders also approved the use of similar agreements which may be entered into from time to time with future directors and/or future officers of the Registrant. Item 7. Exemption from Registration Claimed Inapplicable. II-2 4 Item 8. Exhibits
Exhibit Number Exhibit - -------------- ------- 4.0 Instruments Defining Rights of Stockholders. Reference is made to the Registrant's Registration Statements on Form 8-A, together with the Amendments thereto, which are incorporated herein by reference pursuant to Items 3(d)(1) and 3(d)(2) of this Registration Statement. 5.0 Opinion of Brobeck, Phleger & Harrison LLP. 23.1 Consent of Independent Public Accountants -- Arthur Andersen LLP. 23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5. 24.0 Power of Attorney. Reference is made to page II-4 of this Registration Statement. 99.1 Stock Option and Appreciation Plan. 99.2 Stock Option and Appreciation Plan Amendment 99.3* Form of Non-Statutory Stock Option Agreement generally used in connection with the Stock Option and Appreciation Plan. 99.4* Form of Independent Stock Appreciation Right Grant. 99.5 Special Non-Employee Director Stock Retainer Fee Plan 99.6 Form of Notice of Grant under Special Non-Employee Director Stock Retainer Fee Program 99.7 Form of Stock Option Agreement generally used in connection with the Special Non-Employee Director Stock Retainer Fee Plan. - ----------
* Exhibits 99.3 and 99.4 are incorporated herein by reference to Exhibits 28.2 and 28.3, respectively, to the Registrant's Post-Effective Amendment No. 1 to Form S-8 Registration Statement No. 33-8966 which was filed with the Commission on December 15, 1987. Item 9. Undertakings. A. The undersigned Registrant hereby undertakes: (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement (i) to include any prospectus required by Section 10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement, and (iii) to include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement; provided, however, that clauses (1)(i) and (1)(ii) shall not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in the periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act that are incorporated by reference into this Registration Statement; (2) that, for the purpose of determining any liability under the 1933 Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the Registrant's Stock Option and Appreciation Plan and Special Non-Employee Director Stock Retainer Fee Plan. B. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the 1933 Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is incorporated by reference into this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. C. Insofar as indemnification for liabilities arising under the 1933 Act may be permitted to directors, officers or controlling persons of the Registrant pursuant to the indemnification provisions summarized in Item 6 above or otherwise, the Registrant has been informed that in the opinion of the Commission such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a II-3 5 director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by the Registrant is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue. SIGNATURES Pursuant to the requirements of the 1933 Act, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Portland, State of Oregon on this day of February , 1999. POPE & TALBOT, INC. By: /s/ PETER T. POPE ------------------------------------ Peter T. Pope Chairman of the Board and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That the undersigned officers and directors of POPE & TALBOT, INC., a Delaware corporation, do hereby constitute and appoint Peter T. Pope and Robert J. Day, and each one of them, the lawful attorneys and agents, with full power and authority to do any and all acts and things and to execute any and all instruments which said attorneys and agents, or either of them, determine may be necessary or advisable or required to enable said corporation to comply with the 1933 Act, and any rules or regulations or requirements of the Commission in connection with this Registration Statement. Without limiting the generality of the foregoing power and authority, the powers granted include the power and authority to sign the names of the undersigned officers and directors in the capacities indicated below to this Registration Statement, to any and all amendments, both pre-effective and post-effective, and supplements to this Registration Statement, and to any and all instruments or documents filed as part of or in conjunction with this Registration Statement or amendments or supplements thereof, and each of the undersigned hereby ratifies and confirms all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. This Power of Attorney may be signed in several counterparts. IN WITNESS WHEREOF, each of the undersigned has executed this Power of Attorney as of the date indicated. Pursuant to the requirements of the 1933 Act, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
Signatures Title Date ---------- ----- ---- /s/ PETER T. POPE Chairman of the Board, February 22, 1999 - ----------------------------- Chief Executive Officer and Director Peter T. Pope (Principal Executive Officer)
II-4 6
Signatures Title Date ---------- ----- ---- /s/ MICHAEL FLANNERY President and Director February 22, 1999 - ------------------------------ Michael Flannery /s/ ROBERT J. DAY Senior Vice President and February 22, 1999 - ------------------------------ Chief Financial Officer Robert J. Day (Principal Financial Officer) /s/ MARIA M. POPE Treasurer and Secretary February 22, 1999 - ------------------------------ Maria M. Pope /s/ GORDON P. ANDREWS Director February 22, 1999 - ------------------------------ Gordon P. Andrews /s/ HAMILTON W. BUDGE Director February 22, 1999 - ------------------------------ Hamilton W. Budge /s/ CHARLES CROCKER Director February 22, 1999 - ------------------------------ Charles Crocker /s/ KENNETH G. HANNA Director February 22, 1999 - ------------------------------ Kenneth G. Hanna /s/ ROBERT STEVENS MILLER, JR. Director February 22, 1999 - ------------------------------ Robert Stevens Miller, Jr. /s/ HUGO G.L. POWELL Director February 22, 1999 - ------------------------------ Hugo G.L. Powell /s/ BROOKS WALKER, JR. Director February 22, 1999 - ------------------------------ Brooks Walker, Jr. /s/ GERALD L. BRICKEY Financial Controller February 22, 1999 - ------------------------------ (Principal Accounting Officer) Gerald L. Brickey
II-5 7 EXHIBIT INDEX
Exhibit Number Exhibit - -------------- 4.0 Instruments Defining Rights of Stockholders. Reference is made to the Registrant's Registration Statement on Form 8-A, together with the Amendments thereto, which are incorporated herein by reference pursuant to Items 3(d)(1) and 3(d)(2) of this Registration Statement. 5.0 Opinion of Brobeck, Phleger & Harrison LLP. 23.1 Consent of Independent Public Accountants -- Arthur Andersen LLP. 23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5. 24.0 Power of Attorney. Reference is made to page II-4 of this Registration Statement. 99.1 Stock Option and Appreciation Plan. 99.2 Stock Option and Appreciation Plan Amendment. 99.3* Form of Non-Statutory Stock Option Agreement generally used in connection with the Stock Option and Appreciation Plan. 99.4* Form of Independent Stock Appreciation Right Grant. 99.5 Special Non-Employee Director Stock Retainer Fee Plan. 99.6 Form of Notice of Grant under Special Non-Employee Director Stock Retainer Fee Program. 99.7 Form of Stock Option Agreement generally used in connection with the Special Non-Employee Director Stock Retainer Fee Plan.
* Exhibits 99.3 and 99.4 are incorporated herein by reference to Exhibits 28.2 and 28.3, respectively, to the Registrant's Post-Effective Amendment No. 1 to Form S-8 Registration Statement No. 33-8966 which was filed with the Commission on December 15, 1987. EX-5.0 2 OPINION OF BROBECK, PHLEGER & HARRISON LLP 1 EXHIBIT 5.0 OPINION OF BROBECK, PHLEGER & HARRISON LLP February 22, 1999 Pope & Talbot, Inc. 1500 S.W. First Avenue Portland, OR 97201 Re: Pope & Talbot, Inc. Registration Statement for Offering of an aggregate of 600,000 Shares of Common Stock Ladies and Gentlemen: We have acted as counsel to Pope & Talbot, Inc., a Delaware corporation (the "Company") in connection with the registration on Form S-8 (the "Registration Statement") under the Securities Act of 1933, as amended, of (i) an additional 300,000 shares of common stock and related stock options for issuance under the Stock Option and Appreciation Plan (the "Option Plan") and (ii) an initial reserve of 300,000 shares of common stock and related stock options for issuance under the Special Non-Employee Director Stock Retainer Fee Plan (the "Retainer Fee Plan"). This opinion is being furnished in accordance with the requirements of Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K. We have reviewed the Company's charter documents and the corporate proceedings taken by the Company in connection with the amendment of the Option Plan and the establishment of the Retainer Fee Plan. Based on such review, we are of the opinion that, if, as and when the shares of the Company's common stock are issued and sold (and the consideration therefor received) pursuant to the provisions of option agreements duly authorized under the Option Plan or the Retainer Fee Plan and in accordance with the Registration Statement, such shares will be duly authorized, legally issued, fully paid and nonassessable. We consent to the filing of this opinion letter as Exhibit 5 to the Registration Statement. This opinion letter is rendered as of the date first written above and we disclaim any obligation to advise you of facts, circumstances, events or developments which hereafter may be brought to our attention and which may alter, affect or modify the opinion expressed herein. Our opinion is expressly limited to the matters set forth above and we render no opinion, whether by implication or otherwise, as to any other matters relating to the Company, the Option Plan or the Retainer Fee Plan or the shares of the Company's common stock issuable under such plans or options. Very truly yours, /s/ Brobeck, Phleger & Harrison LLP ----------------------------------- BROBECK, PHLEGER & HARRISON LLP EX-23.1 3 CONSENT OF INDPENDENT PUBLIC ACCOUNTANTS 1 EXHIBIT 23.1 Consent of Independent Public Accountants As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our report dated January 19, 1998 (except with respect to the matters discussed in Notes 2 and 9 of the notes to the financial statements, as to which the dates are February 2, 1998 and March 6, 1998, respectively) incorporated by reference in Pope & Talbot, Inc.'s Form 10-K for the year ended December 31, 1997 and to all references to our Firm included in this registration statement. /s/ Arthur Andersen LLP Portland, Oregon February 17, 1999 EX-99.1 4 STOCK OPTION AND APPRECIATION PLAN 1 EXHIBIT 99.1 POPE & TALBOT, INC. STOCK OPTION AND APPRECIATION PLAN (As Amended and Restated Effective March 1, 1993) I. PURPOSES OF THE PLAN This Stock Option and Appreciation Plan (the "Plan") is intended to promote the interests of Pope & Talbot, Inc. (the "Corporation") and its subsidiaries by providing a method whereby employees of the Corporation and its subsidiaries who are primarily responsible for the management, growth and success of the business may be offered incentives and rewards which will encourage them to continue in the employ of the Corporation or its subsidiaries. II. ADMINISTRATION OF THE PLAN (a) The Plan shall be administered by the Human Resources Committee ("Committee") appointed from time to time by the Corporation's Board of Directors (the "Board"). The Committee shall consist of two (2) or more Board members who shall serve for such term as the Board may determine and shall be subject to removal by the Board at any time. However, no Board member shall be eligible to serve on the Committee if such individual has, within the twelve (12)-month period immediately preceding the date he is to be appointed to the Committee, received an option grant or share issuance under this Plan or any other stock option, stock appreciation, stock bonus or other stock plan of the Corporation or its subsidiaries. (b) The Committee shall have full authority to administer the Plan, including authority to interpret and construe any provision of the Plan and to adopt such rules and regulations for administering the Plan as it may deem necessary. Decisions of the Committee shall be final and binding on all persons who have an interest in the Plan. III. STOCK SUBJECT TO THE PLAN (a) The stock which is to be made the subject of the options or stock appreciation rights granted under the Plan shall be the Corporation's authorized but unissued or reacquired common stock, par value $1.00 per share ("Common Stock"). In connection with the issuance of shares under the Plan, the Corporation may repurchase shares of Common Stock on the open market or otherwise. The total number of shares issuable under the Plan upon the exercise of options and stock appreciation rights granted under the Plan shall not exceed 2 1,700,000 shares. However, from and after March 1, 1993 not more than 1,380,858 shares shall be issued under this Plan. In addition, the Committee may issue (i) Independent Stock Appreciation Rights (as defined in Section VI) covering up to a total of 1,500,000 shares(2) of Common Stock over the term of the Plan and (ii) Tandem Stock Appreciation Rights (as defined in Section VI) covering up to a total of 1,700,000 shares(2) of Common Stock over the term of the Plan. (b) The number of shares of Common Stock available for issuance under this Plan shall be subject to adjustment in accordance with the following guidelines: (1) If any outstanding option granted under the Plan expires or is terminated or cancelled for any reason prior to exercise in full, then the unissued shares of Common Stock subject to the unexercised portion of such option may become the subject of subsequent stock option or stock appreciation right grants under the Plan. (2) If any outstanding option is in whole or in part surrendered pursuant to a Tandem Stock Appreciation Right under Section VI, then the shares subject to such surrendered option (or the surrendered portion thereof) shall reduce on a share-for-share basis the number of shares of Common Stock available for the subsequent grant of stock options and stock appreciation rights under this Plan or for subsequent issuance under the Corporation's Restricted Stock Bonus Plan. (3) Should the exercise price of an outstanding option under the Plan be paid with shares of Common Stock or should shares of Common Stock otherwise issuable under the Plan be withheld by the Corporation in satisfaction of the withholding taxes incurred in connection with the exercise of an outstanding option under the Plan, then the number of shares of Common Stock available for issuance under the Plan or issuable in the aggregate under this Plan and the Corporation's Restricted Stock Bonus Plan shall be reduced by the gross number of shares for which the option is exercised, and not by the net number of shares of Common Stock actually issued to the option holder. (4) To the extent that any outstanding Independent Stock Appreciation Right expires or terminates prior to exercise in full, the shares as to which such right is not exercised may become the subject of new Independent Stock Appreciation Rights granted under the Plan. (5) However, the following limitations shall be in effect under the Plan: i) the maximum number of shares for which Tandem Stock Appreciation Rights may be granted in any one calendar year shall not exceed 200,000 shares; - ---------- (2) Reflects the 400,000-share increase approved at the 1993 Annual Shareholders Meeting. 2. 3 ii) the maximum number of shares for which Independent Stock Appreciation Rights may be granted in any one calendar year shall not exceed 200,000 shares; and iii) to the extent the distribution paid on any Independent Stock Appreciation Right is made in shares of Common Stock, the number of shares so distributed shall reduce, on a one-for-one basis, the number of shares of Common Stock remaining available for future issuance under this Plan or the Restricted Stock Bonus Plan. (c) In the event any change is made to the Common Stock issuable under the Plan or subject to any outstanding stock option or stock appreciation right granted under the Plan (whether by reason of (I) any merger, consolidation or reorganization or (II) any recapitalization, stock dividend, stock split, combination of shares, exchange of shares or other change in corporate structure effected without the Corporation's receipt of consideration), then appropriate adjustments shall be made to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the maximum number and/or class of securities for which Tandem and Independent Stock Appreciation Rights may be issued under the Plan, (iii) the maximum number and/or class of securities for which Tandem Stock Appreciation Rights or Independent Stock Appreciation Rights may be granted in any one calendar year, (iv) the maximum number and/or class of securities which may in the aggregate be issued under this Plan and the Corporation's Restricted Stock Bonus Plan, (v) the number and/or class of securities and price per share in effect under outstanding options and (vii) the number and/or class of securities and the base price per share in effect under outstanding Tandem and Independent Stock Appreciation Rights. IV. SELECTION OF OPTIONEES The persons who shall be eligible to receive options under the Plan shall be such key employees of the Corporation and its subsidiaries (including officers, whether or not they are directors) as the Committee shall from time to time select. Non-employee members of the Board shall not be eligible to participate in this Plan or in any other stock option, stock appreciation, stock bonus or other stock plan of the Corporation or its subsidiaries. V. TERMS AND CONDITIONS OF STOCK OPTIONS The Committee shall have the sole and exclusive authority to grant to the selected key employees one or more stock options under the Plan. The Committee shall have full authority to determine whether each such granted option is to be an incentive stock option ("Incentive Option") satisfying the requirements of Section 422 of the Internal Revenue Code or a non-qualified option not intended to meet such requirements. Each option granted under the Plan shall be evidenced by an instrument in such form as the Committee may from time to time approve. Such instrument, however, shall conform to the terms and conditions specified below. Each instrument evidencing an Incentive Option shall, in addition, be subject to the applicable provisions of Section VII. (a) Option Price. The option price per share shall be fixed by the Committee, but in no event shall the option price be less than eighty-five percent (85%) of the fair market 3. 4 value per share of Common Stock on the date the option is granted. For purposes of the preceding sentence (and for all other valuation purposes under the Plan), the fair market value per share of Common Stock shall be its closing price, as officially quoted on the New York Stock Exchange Composite-Tape (or any similar successor quotation system), on the day immediately prior to the date in question. If there is no quotation available for such day, then the closing price on the next preceding day for which there does exist such a quotation shall be determinative of fair market value. (b) Number of Shares, Term and Exercise. (1) Each option granted under the Plan shall be exercisable on such date or dates, during such period or periods and for such number of shares as shall be determined by the Committee and set forth in the instrument evidencing such option. No option granted under the Plan, however, shall become exercisable during the first six months of the option term, except to the extent the instrument evidencing such option provides for exercisability upon the optionee's death or disability; nor shall any option have an expiration date which is more than 10 years after the grant date. (2) Any option granted under the Plan may be exercised upon written notice to the Corporation at any time prior to the expiration or sooner termination of the option term. The option price for the number of shares of Common Stock for which the option is exercised shall become immediately due and payable, and no certificates for the shares shall be issued until payment has been made in accordance with subparagraph (3) below. (3) The option price shall be payable in one or more of the following alternative forms specified in the instrument evidencing the option: full payment in cash or cash equivalents; or full payment in shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's earnings and valued at fair market value on the Exercise Date (as such term is defined below); or full payment through a combination of shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's earnings and valued at fair market value on the Exercise Date and cash or cash equivalents; or full payment effected through a broker-dealer sale and remittance procedure pursuant to which the optionee (A) shall provide irrevocable written instructions to the designated brokerage firm to effect the immediate sale of the purchased shares and to remit to the Corporation, out of the sale proceeds available on the settlement date, an amount equal to the aggregate option price payable for the purchased shares plus all applicable Federal and State income and employment taxes required to be withheld by the Corporation in connection with such purchase and sale and (B) shall provide written directives to the Corporation to deliver the 4. 5 certificates for the purchased shares directly to such brokerage firm in order to complete the sale transaction. For purposes of this subparagraph (3), the Exercise Date shall be the date on which written notice of the option exercise is delivered to the Corporation. Except to the extent the sale and remittance procedure is utilized in connection with the option exercise, payment of the option price for the purchased shares must accompany the exercise notice. (c) Termination of Employment. (1) Should an optionee cease to be an Employee of the Corporation other than by reason of death or termination for gross and willful misconduct, then each outstanding option held by such optionee under the Plan shall not remain exercisable for more than a twelve (12) month period (or such shorter period as may be specified in the instrument evidencing such option) following the date of such cessation of Employee status, except to the extent the Committee may specifically provide otherwise pursuant to its authority under Section XI below. Under no circumstances, however, shall any such option be exercisable after the specified expiration date of the option term. Each such option shall, during such period of limited exercisability, be exercisable only to the extent of the number of shares (if any) for which such option is exercisable on the date of the optionee's cessation of Employee status. However, to the extent the option is held by an individual described in Section VI(c)(3), such option shall remain exercisable until the later of (i) the end of the twelve-month period (or such shorter period as may be specified in the instrument evidencing such option) following the date of such individual's cessation of Employee status or (ii) the end of the window period immediately following the window period within which or immediately prior to which occurs such individual's cessation of Employee status, but in no event shall such option remain exercisable at any time after its specified expiration date. (2) If the optionee's status as an Employee is terminated for gross and willful misconduct, including (without limitation) the wrongful appropriation of employer funds or the commission of a felony, then any outstanding options granted such optionee under the Plan may be terminated by the Committee as of the date of such misconduct. (3) For purposes of the Plan, an individual shall be considered to be an Employee of the Corporation for so long as such individual continues in employment with the Corporation or one or more subsidiaries of the Corporation. A subsidiary of the Corporation shall be any company (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each of the companies in such unbroken chain (other than the last company) owns, at the time of determination, stock possessing 50% or more of the total combined voting power of all classes of stock in one other company in such chain. (d) Death of Optionee. Any option under the Plan held by the optionee on the date of his death may be exercised, to the extent of the number of shares (if any) for which such option was exercisable on the date the optionee ceased Employee status (less any option shares subsequently purchased by the optionee prior to death), by the personal representative of the optionee's estate or by the person or persons to whom the option is transferred pursuant to the optionee's will or in accordance with the laws of descent and distribution. Such option may be 5. 6 exercised at any time prior to the earlier of (A) the specified expiration date of the option term or (B) the first anniversary of the optionee's death. Upon the occurrence of the earlier event, the option shall terminate and cease to be exercisable. (e) Acceleration Upon Cessation of Employee Status. The Committee shall have complete discretion, exercisable either at the time of the option grant or at any time while the option remains outstanding, to provide with respect to one or more options granted under the Plan that during the limited period of exercisability following the optionee's cessation of Employee status (as provided in Section V(c)(1) or Section V(d) above), the option may be exercised not only with respect to the number of shares for which it is exercisable at the time of such cessation of Employee status but also with respect to one or more installments of purchasable shares for which the option otherwise would have become exercisable had such cessation of Employee status not occurred. (f) Assignability. No option or stock appreciation right granted under the Plan shall be assignable or transferable by the optionee other than by will or by the laws of descent and distribution following the optionee's death, and during the optionee's lifetime, the option and all stock appreciation rights pertaining to such option shall be exercisable only by the optionee. (g) Immediate Exercise of Option. In the event that the Corporation or its shareholders enter into an agreement to dispose of all or substantially all of the assets or outstanding capital stock of the Corporation by means of a sale, merger, reorganization or liquidation ("Corporate Transaction"), then each option to acquire Common Stock at the time outstanding under the Plan shall become exercisable, immediately prior to the consummation of such Corporate Transaction, with respect to the full number of shares of Common Stock at the time subject to such option; provided, however, that (i) the exercise of any accelerated pre-1987 Incentive Option shall be subject to the sequential exercise limitations of Section VII(b) and (ii) the exercisability as an incentive stock option under the Federal tax laws of any accelerated post-1986 option shall be subject to the applicable dollar limitation of Section VIII(c). However, an outstanding option shall not be so accelerated if the terms of the agreement require as a prerequisite for the consummation of the Corporate Transaction that such option is either to be assumed by the successor corporation or parent thereof or to be replaced with a comparable option to purchase shares of capital stock of the successor corporation or parent thereof. The determination of such comparability shall be made by the Board, and its determination shall be conclusive and binding on all persons who have an interest in the Plan. Immediately after the consummation of the Corporate Transaction, all outstanding options (whether or not accelerated) shall expire and be of no further force or effect whatsoever, unless assumed by the successor corporation or parent thereof. (h) Stockholder Rights. No person shall have any rights as a stockholder with respect to the shares of Common Stock purchasable under any option granted under the Plan until he shall have exercised such option and paid the exercise price for the purchased shares. VI. STOCK APPRECIATION RIGHTS The Committee shall have full power and authority, exercisable in its sole discretion, to grant to selected key employees of the Corporation and its subsidiaries stock 6. 7 appreciation rights pertaining to all or part of the shares of Common Stock subject to one or more option grants made to such individuals under the Plan. Two types of stock appreciation rights shall be authorized for issuance under the Plan: i) Tandem Stock Appreciation Rights which require the holder to elect between the exercise of the underlying option for shares of Common Stock or the surrender of such option for an appreciation distribution from the Corporation equal to the excess of the fair market value of the shares of Common Stock subject to the surrendered option over the aggregate option price payable for such shares. ii) Independent Stock Appreciation Rights which are to be exercisable concurrently with (or within a period not to exceed twelve (12) months following) the exercise of the underlying option and without the surrender of all or part of such option. The appreciation distribution to which the holder of such independent right shall be entitled upon exercise shall be in an amount not to exceed the product of (I) the number of shares of Common Stock covered by the exercised right and (II) the lower of (A) the excess of the fair market value per share of Common Stock on the exercise date over the base price per share in effect under the exercised right or (B) the ordinary income per share recognized by the holder in connection with the exercise of the underlying option for the same number of shares. The terms and conditions applicable to each Tandem Stock Appreciation Right ("Tandem Right") or Independent Stock Appreciation Right ("Independent Right") shall be as follows: (a) Tandem Rights. (1) Tandem Rights may be tied to either Incentive Options or non-qualified options, and such rights shall, except as specifically set forth in this Section VI(a), be subject to the same terms and conditions applicable to stock option grants made under Section V of the Plan. (2) The Tandem Right shall be exercised by surrendering the underlying option to the Corporation, in whole or in part to the extent such option is at the time exercisable for shares of Common Stock. If the entire option is surrendered or if a portion of the option is surrendered without a concurrent exercise of all or part of the remainder, then the Appreciation Distribution to which the option-holder becomes entitled shall be made in the form of Common Stock and cash in accordance with the percentages of each designated by the option-holder on the surrender-notification form; provided, however, that at least 70% of the distribution must be made in whole shares of Common Stock. For purposes of computing the number of shares to be distributed, the Common Stock shall be valued at fair market value on the date the option is surrendered. (3) Should an option-holder surrender the option in part for an Appreciation Distribution and concurrently exercise the option in part for Common Stock, then 7. 8 the Appreciation Distribution on the surrendered portion of the option shall first be applied as a cash credit against the option price payable for the Common Stock for which the option is exercised. Should the Appreciation Distribution exceed the option price payable for the purchased Common Stock, then the excess shall be distributed in accordance with terms and conditions of subparagraph (a)(2) above. (4) The Appreciation Distribution to which the holder of the exercised Tandem Right shall be entitled shall be in an amount equal to the excess of the fair market value (on the date of the option surrender) of the number of shares of Common Stock for which the surrendered option (or surrendered portion) is at the time exercisable over the aggregate option price payable for such shares. (5) The following special provisions shall be applicable to any Incentive Option which is to be surrendered pursuant to a Tandem Right under this Section VI(a): i) The right to surrender the Incentive Option may only be transferred or assigned in connection with a transfer or assignment of the Incentive Option in compliance with the limitations of Section V(f). ii) The Incentive Option may only be surrendered when there is a positive spread between the fair market value of the Common Stock subject to the surrendered option and the aggregate option price payable for such Common Stock. iii) The Incentive Option may not be surrendered any time after the expiration or sooner termination of the option term. (b) Independent Stock Appreciation Right. (1) Independent Rights may only be granted in conjunction with non-qualified options, and such rights shall, except as specifically set forth in this Section VI(b), be subject to the same terms and conditions applicable to stock option grants made under Section V of the Plan. Independent Rights may be granted at the same time the underlying option is granted or at any time thereafter while such option remains outstanding; provided, however, that in no event shall the number of shares of Common Stock to which the Independent Right pertains exceed the number of shares at the time subject to the underlying option. (2) The base price in effect for measuring the Appreciation Distribution payable with respect to each Independent Right granted under the Plan shall be fixed by the Committee at the time of grant, but in no event shall such base price be less than eighty-five percent (85%) of the fair market value per share of Common Stock on the grant date. (3) The Independent Right may be exercised either (i) concurrently with the exercise of the underlying option or (ii) at any time thereafter within a period not to exceed twelve (12) months, but in no event after the specified expiration date of such right. The Committee shall establish the exercise schedule to be in effect for each Independent Right at the time of grant. The number of shares as to which the Independent Right may in any instance be exercised shall not exceed on an aggregate basis the corresponding number of shares for which 8. 9 the underlying option has been exercised. If the Independent Right is not exercised within the applicable exercise period, it shall terminate and cease to be exercisable with respect to the particular shares as to which the Independent Right could have been (but was not) exercised during such period. (4) The Appreciation Distribution to which the holder of the Independent Right shall become entitled upon exercise shall not exceed in amount the product of (I) the number of shares for which such right is exercised and (II) the lower of (A) the excess of the fair market value of one share of Common Stock on the date of exercise over the base price per share in effect for the exercised right or (B) the ordinary income per share recognized in connection with the exercise of the underlying option for the same number of shares. The Committee shall, at the time of grant, determine the specific percentage (not to exceed 100%) of such product to be paid upon the subsequent exercise of the Independent Right. (5) Unless the instrument evidencing the Independent Right specifies the particular method of payment, the Appreciation Distribution shall be paid in cash, in shares of Common Stock (valued as of the date of exercise) or in a combination of cash and Common Stock, as the Committee shall in its sole discretion deem appropriate. (c) Terms Applicable to Both Tandem Rights and Independent Rights. (1) Neither a Tandem Right nor an Independent Right may be exercised for any shares of Common Stock to which it pertains, unless (and only to the extent) the underlying option has become exercisable for the same number of shares. (2) To exercise any outstanding Tandem or Independent Right, the holder must provide written notice of exercise to the Corporation in compliance with the provisions of the instrument evidencing such right. (3) If a Tandem Right or an Independent Right is granted to an individual who (i) is at the time an officer or director of the Corporation subject to Section 16(b) of the Securities Exchange Act of 1934 or (ii) was such an officer or director at any time during the six-month period immediately preceding the date of grant and made any non-exempt Section 16(b) purchase or sale of Common Stock during such six-month period, then such Tandem Right or Independent Right shall not become exercisable in whole or in part at any time during the initial six-month period following the grant date, except to the extent the instrument evidencing such right provides for exercisability upon the holder's death or disability. (4) If the holder of the Tandem or Independent Right (i) is at the time of exercise considered an officer or director of the Corporation subject to Section 16(b) of the Securities Exchange Act of 1934 or (ii) was such an officer or director at any time during the six-month period immediately preceding the date of exercise and made any non-exempt Section 16(b) purchase of Common Stock during such six-month period, then the following additional terms and condition shall apply to the exercise of such Tandem or Independent Right: i) The right can only be exercised during the so-called "window period" commencing on the third and ending on the twelfth business day following the 9. 10 day on which the Corporation's quarterly or annual summaries of income and earnings are released to the public. ii) The exercise of such right shall be effective only if it is approved by the Committee, which shall have sole discretion in the matter. iii) If the exercise of a Tandem Right is disapproved, then the holder shall retain whatever rights he had under the surrendered option (or the surrendered portion thereof) on the option surrender date and may exercise such rights at any time prior to the later of (a) the expiration of the 5 business-day period following the date on which he received notification of the disapproval or (b) the last day on which the option is otherwise exercisable, but in no event may such rights be exercised at any time after ten (10) years after the date of the option grant. iv) If the exercise of an Independent Right is disapproved, then such right shall terminate and cease to be exercisable with respect to the particular shares of Common Stock for which such exercise is disapproved. (5) No limitation shall exist on the aggregate amount of cash payments the Corporation may make under the Plan in connection with the exercise of Tandem Rights or Independent Rights pursuant to this Section VI. However, to the extent the Appreciation Distribution payable with respect to any exercised Independent Right is made in shares of Common Stock, then the number of shares of Common Stock remaining available for future issuance under this Plan or the Restricted Stock Bonus Plan shall be reduced on a one-for-one basis. To the extent any outstanding option under the Plan is surrendered in connection with the exercise of a Tandem Right, the number of shares subject to the surrendered option shall not be available for future issuance under this Plan or the Restricted Stock Bonus Plan. VII. INCENTIVE OPTIONS Incentive Options may be granted under the Plan shall be subject to the additional terms and conditions specified below. Options which are specifically designated as "non-qualified options" or "non-statutory options" at the time of grant shall not be subject to any of the terms and conditions specified below and accordingly shall not be Incentive Options. (a) Option Price. The option price per share of the Common Stock subject to an Incentive Option shall in no event be less than one hundred percent (100%) of the fair market value of a share of Common Stock on the date of grant. (b) Sequential Exercise Rule. Except to the extent now or hereafter permitted by Section 422 of the Internal Revenue Code, no Incentive Option granted prior to January 1, 1987 may be exercised while there remains outstanding (within the meaning of subsection (c) (7) of Section 422 of the Internal Revenue Code) any other pre-1987 Incentive Option which was granted at an earlier date to the optionee to purchase stock in the Company or in any other corporation which is on the date of grant of the later option either a parent or subsidiary corporation of the Company or a predecessor corporation of any of such corporations. 10. 11 (c) Dollar Limitation. The aggregate fair market value (determined as of the respective date or dates of grant) of the Common Stock for which one or more options granted after December 31, 1986 to any Employee under this Plan (or any other option plan of the Corporation or its parent or subsidiary corporations) may for the first time become exercisable as incentive stock options under the Federal tax laws during any one post-1986 calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000) or such greater amount as may be permitted under subsequent amendments to Section 422 of the Internal Revenue Code. To the extent the Employee holds two or more post-1986 options which become exercisable for the first time in the same calendar year, the foregoing limitations or the exercisability thereof as incentive stock options under the Federal tax laws shall be applied on the basis of the order in which such options are granted. Should the number of shares of Common Stock for which any Incentive Option first becomes exercisable in any calendar year exceed the applicable One Hundred Thousand Dollar ($100,000) limitation, then the option may nevertheless be exercised in that calendar year for the excess number of shares as a non-qualified option under the Federal tax laws. (d) 10% Shareholder. If any individual to whom an Incentive Option is to be granted pursuant to the provisions of the Plan is on the date of grant the owner of stock (as determined under Section 424(d) of the Internal Revenue Code) possessing more than 10% of the total combined voting power of all classes of stock of the Corporation or any one of its subsidiaries, then the following special provisions shall be applicable to the option granted to such individual: i) The option price per share of the Common Stock subject to such Incentive Option shall not be less than one hundred and ten percent (110%) of the fair market value of one share of Common Stock on the date of grant; and ii) The option shall not have a term in excess of five (5) years from the date of grant. Except as modified by the preceding provisions of this paragraph VII, all the provisions of the Plan shall be applicable to the Incentive Options granted hereunder. VIII. EFFECTIVE DATE AND TERM OF PLAN (a) The Plan initially became effective on the date it was adopted by the Board, but before any options granted under the Plan could become exercisable, the Plan had to be approved by the holders of at least a majority of the Corporation's outstanding voting stock represented and voting at a duly-held meeting at which a quorum was present, provided the shares voting for approval also constituted at least a majority of the required quorum. If such stockholder approval had not been obtained, then any options previously granted under the Plan would have terminated and no further options would have been granted. Subject to such limitation, the Committee was authorized to grant options under the Plan at any time after the adoption of the Plan by the Board. (b) The provisions of the Plan as amended effective March 1, 1993 shall apply only to options granted under the Plan from and after such date. All stock options and stock 11. 12 appreciation rights issued and outstanding under the Plan immediately prior to such effective date shall continue to be governed by the terms and conditions of the Plan (and the respective instruments evidencing each such option or right) as in effect on the date each such option or right was previously granted, and none of the March 1, 1993 amendments to the Plan shall be deemed to affect or otherwise modify the rights or obligations of the holders of such options or stock appreciation rights with respect to the acquisition of shares of Common Stock thereunder or the exercise of their outstanding stock appreciation rights. However, the Committee may, in its discretion, modify one or more options issued and outstanding under the Plan prior to the March 1, 1993 effective date of such amendments to incorporate one or more features added to the Plan by those amendments. (c) No option granted on the basis of the 400,000-share increase included as part of the March 1, 1993 amendments to the Plan is to become exercisable in whole or in part at any time prior to shareholder approval of the amendments at the 1993 Annual Meeting. Should such stockholder approval not be obtained, then any and all options granted on the basis of such 400,000-share increase shall immediately terminate and shall not become exercisable for any of the shares of Common Stock subject thereto. Subject to such limitation, the Committee is authorized to grant options on the basis of such 400,000-share increase at any time after the March 1, 1993 effective date of such share increase. (d) The sale and remittance procedure authorized for the exercise of outstanding options shall be available for all options granted under the Plan to officers and directors of the Corporation from and after May 1, 1991 and for all outstanding non-qualified options under the Plan held on that date by such officers and directors. The sale and remittance procedure authorized for the exercise of outstanding options shall be available for all options granted under the Plan from and after March 1, 1990 to individuals who are not officers and directors of the Corporation at the time of such grant and for all outstanding non-qualified options under the Plan held by such individuals on that date. The Committee may also allow such procedure to be utilized in connection with one or more disqualifying dispositions of incentive stock option shares effected on or after the applicable effective date specified above, whether or not the option was granted on or before such date. (e) Unless sooner terminated in accordance with Section IX, the Plan shall terminate upon the earlier of (i) December 31, 2002(3) or (ii) the date upon which all the shares of Common Stock available for issuance under the Plan shall have been issued pursuant to the exercise of options or stock appreciation rights granted hereunder. If the date of termination is determined under clause (i) above, then any options or stock appreciation rights outstanding on such date shall not be affected by the termination of the Plan and shall continue to have force and effect in accordance with the provisions of the instruments evidencing such options or stock appreciation rights. - ---------- (3) Approved at the 1993 Annual Shareholders Meeting. 12. 13 IX. AMENDMENT OR DISCONTINUANCE BY BOARD ACTION (a) The Board may amend, suspend or discontinue the Plan in whole or in part at any time; provided, however, that such action shall not adversely affect rights and obligations with respect to options or stock appreciation rights at the time outstanding under the Plan. In addition, no modification of the Plan by the Board shall without the approval of the Corporation's stockholders (i) materially increase the number of shares of Common Stock or the number of Tandem or Independent Stock Appreciation Rights which may be issued under the Plan, the number of shares of Common Stock for which stock appreciation rights may be granted in any one calendar year or the aggregate number of shares of Common Stock which may be issued under this Plan and the Corporation's Restricted Stock Bonus Plan (unless necessary to effect the adjustments required under Section III(c)), (ii) materially increase the benefits accruing to participants under the Plan or (iii) materially modify the eligibility requirements for the grant of options or stock appreciation rights under the Plan. (b) Notwithstanding the provisions of Section IX(a), the Board hereby reserves the right to amend or modify the terms and provisions of the Plan and of any outstanding options or stock appreciation rights under the Plan to the extent necessary to qualify any or all options under the Plan for such favorable Federal income tax treatment as may be afforded employee stock options under Section 422 of the Internal Revenue Code and regulations subsequently promulgated thereunder. X. CANCELLATION AND REGRANT The Committee shall have the exclusive authority to effect, at any time and from time to time, with the consent of the affected holders, the cancellation of any or all outstanding options or stock appreciation rights under the Plan and to grant in substitution therefor new options or stock appreciation rights under the Plan covering the same or different numbers of shares of Common Stock but having an option price per share not less than eighty-five percent (85%) of fair market value on the new grant date or a base price per share not less than eighty-five percent (85%) of fair market value on the new grant date. If one or more cancelled options are pre-1987 Incentive Options, then such options shall, for purposes of the "sequential exercise" rule of Section VII(b), be considered to be outstanding options until the expiration date initially specified for the option term. XI. SPECIAL POWERS In addition to the power and authority provided the Committee pursuant to the foregoing provisions of the Plan, the Committee shall have the full power and authority, exercisable from time to time in its sole discretion, to extend, either at the time the option or stock appreciation right is granted or at any time during which the option or stock appreciation right remains outstanding, the period for which the option or stock appreciation right is to remain exercisable following the holder's termination of Employee status from the twelve (12) month or shorter period set forth in the agreement evidencing such option or stock appreciation right to such greater period of time as the Committee shall deem appropriate; provided, however, that in no event shall such option or stock appreciation right be exercisable after the specified expiration date of the term thereof. 13. 14 XII. SPECIAL TAX WITHHOLDING ELECTION The Committee may, in its discretion and in accordance with the provisions of this Section XII and such supplemental rules as the Committee may from time to time adopt, provide any or all holders of non-qualified options under the Plan with the right to use shares of the Corporation's Common Stock in satisfaction of the Federal and State income and employment tax liability incurred in connection with the exercise of such options (the "Taxes"). Such right may be provided to any such option holder in either or both of the following formats: 1. Stock Withholding: The holder of the non-qualified option may be provided with the election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the exercise of such non-qualified option, a portion of such shares with an aggregate fair market value equal to the designated percentage (any multiple of 5% up to 100% as specified by the option holder) of the applicable Taxes. Any such stock withholding election shall be subject to the following terms and conditions: i) The election must be made on or before the date the amount of the Taxes incurred in connection with the exercise of the option is determined (the "Tax Determination Date"). ii) The election shall be irrevocable. iii) The exercise of such election shall be subject to the approval of the Committee, and none of the shares of Common Stock for which the option is exercised shall be withheld in satisfaction of the Taxes incurred in connection with such exercise except to the extent the election is approved by the Committee. iv) The shares of Common Stock withheld pursuant to the election shall be valued at fair market value on the Tax Determination Date in accordance with the valuation procedures of Paragraph V(a). v) In no event may the requested withholding exceed the dollar amount of Taxes incurred in connection with the exercise of the non-qualified option. Stock withholding elections made by individuals who (A) are at the time officers or directors of the Corporation subject to the short-swing profit restrictions of Section 16(b) of the Securities Exchange Act of 1934 or (B) were such officers or directors at any time during the six (6)-month period immediately preceding the exercise of such election and made any non-exempt Section 16(b) purchases or sales of Common Stock during such six (6)-month periods shall be subject to the following limitations in addition to the preceding provisions of this Section XII: vi) The election shall not become effective at any time prior to the expiration of the six (6)-month period measured from the later of the grant date of the non-qualified option to which such election pertains or the actual grant date of the 14. 15 stock withholding election, and no shares shall accordingly be withheld in connection with any Tax Determination Date which occurs before the expiration of such six (6)-month period. vii) Either the election must be made six (6) months or more prior to the Tax Determination Date or the exercise of such election and the underlying stock option must occur concurrently within the same quarterly "window" period. Quarterly window periods shall begin on the third (3rd) business day following the date of public release of each quarterly or annual summary statement of the Corporation's sales and earnings and end on the earlier of the twelfth (12th) business day following such release date or the Tax Determination Date. viii) The six (6)-month period specified in clauses (i) and (ii) shall not be applicable in the event of the option holder's death or disability. 2. Stock Delivery: The Committee may, in its discretion, provide the holder of the non-qualified option with the election to deliver, at the time the non-qualified option is exercised, one or more shares of Common Stock already held by such individual with an aggregate fair market value equal to the designated percentage (any multiple of 5% up to 100% as specified by the option holder) of the Taxes incurred in connection with such option exercise. Any such stock delivery election shall be subject to the following terms and conditions: i) The election must be made on or before the date the amount of the Taxes incurred in connection with the exercise of the option is determined (the "Tax Determination Date"). ii) The election shall be irrevocable. iii) The exercise of the election shall be subject to the approval of the Committee, and none of the delivered shares of Common Stock shall be accepted in satisfaction of the Taxes incurred in connection with the option exercise except to the extent the election is approved by the Committee. iv) The shares of Common Stock delivered in satisfaction of such Taxes shall be valued at fair market value on the Tax Determination Date in accordance with the valuation procedures of Paragraph V(a). v) In no event may the value of the delivered shares exceed the dollar amount of Taxes incurred in connection with the exercise of the non-qualified option. Stock delivery elections made by individuals who (A) are at the time officers or directors of the Corporation subject to the short-swing profit restrictions of Section 16(b) of the Securities Exchange Act of 1934 or (B) were such officers or directors at any time during the six 15. 16 (6)-month period immediately preceding the exercise of such election and made any non-exempt Section 16(b) purchases or sales of Common Stock during such six (6)-month period shall NOT be subject to any of the special limitations otherwise applicable in connection with the exercise of the stock withholding election specified above. 16. EX-99.2 5 STOCK OPTION AND APPRECIATION PLAN AMENDMENT 1 EXHIBIT 99.2 POPE & TALBOT, INC. STOCK OPTION AND APPRECIATION PLAN PLAN AMENDMENT THE POPE & TALBOT STOCK OPTION AND APPRECIATION PLAN, as amended and restated effective March 1, 1993 (the "Plan"), is hereby further amended and modified, effective as of February 4, 1998. 1. Section III(a) of the Plan is hereby amended in its entirety to read as follows: (a) The stock which is to be made the subject of the options or stock appreciation rights granted under the Plan shall be the Corporation's authorized but unissued or reacquired common stock ("Common Stock"). In connection with the issuance of shares under the Plan, the Corporation may repurchase shares of Common Stock on the open market or otherwise. The total number of shares issuable in the aggregate under the Plan and the Corporation's Restricted Stock Bonus Plan (the "Restricted Plan") shall not exceed 2,000,000 shares. However, from and after February 28, 1998, not more than 1,360,182 shares may be issued under the Plan, and none of the shares attributable to the 400,000-share increase approved by the stockholders at the 1993 Annual Meeting or the 300,000-share increase effected by this Plan Amendment shall be issuable under the Restricted Plan. In addition, the Committee may issue (i) Independent Stock Appreciation Rights (as defined in Section VI) covering up to a total of 1,500,000 shares of Common Stock over the term of the Plan and (ii) Tandem Stock Appreciation Rights (as defined in Section VI) covering up to a total of 1,700,000 shares of Common Stock over the term of the Plan. 2. Section III(c) of the Plan is hereby redesignated as Section III(d), and new Section III(c) is hereby added to the Plan to read as follows: (c) In no event shall any one participant in the Plan receive stock options and separately exercisable stock appreciation rights for more than 200,000 shares of Common Stock in the aggregate per calendar year, beginning with the 1998 calendar year. 3. Redesignated Section III(d) is hereby amended to read as follows: (d) In the event that any change is made to the Common Stock issuable under the Plan or subject to any outstanding stock option or stock appreciation right granted under the Plan (whether by reason of (I) any merger, consolidation or other reorganization or (II) any stock dividend, stock split, recapitalization, combination of shares, exchange of shares or other change in corporate structure effected without the Corporation's receipt of consideration), appropriate adjustments shall be made to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the maximum number and/or class of securities for which Independent and Tandem Stock Appreciation Rights may each be granted over the term of the Stock Option Plan, (iii) the maximum number and/or class of securities for 2 which Independent Stock Appreciation Rights and Tandem Stock Appreciation Rights may each be granted in any one calendar year, (iv) the maximum number and/or class of securities which may in the aggregate be issued under the Plan and the Restricted Plan, (v) the maximum number and/or class of securities for which stock options and separately exercisable stock appreciation rights may be granted under the Plan to any one participant per calendar year, beginning with the 1998 calendar year, and (vi) the number and/or class of securities and price per share in effect under each outstanding stock option and stock appreciation right. 4. There is hereby added to Article VIII of the Plan new section (f) to read as follows: (f) No option or stock appreciation right shall be granted on the basis of the 300,000-share increase which forms part of this Plan Amendment, unless and until this Plan Amendment is approved by the stockholders at the 1998 Annual Meeting. Should such stockholder approval not be obtained, then the 300,000-share increase shall not be implemented; however, the Plan shall continue in effect until the share reserve as last approved by the stockholders has been issued pursuant to the exercise of stock options and stock appreciation rights granted under this Plan. 5. Except as modified by this Plan Amendment, all the terms and provisions of the Plan (as amended and restated effective March 1, 1993) shall continue in full force and effect. IN WITNESS WHEREOF, POPE & TALBOT, INC. has caused this Plan Amendment to be executed on its behalf by its duly authorized officer as of the effective date indicated above. POPE & TALBOT, INC. BY: /s/ ROBERT J. DAY ------------------------------------ TITLE: SENIOR VICE PRESIDENT AND CFO EX-99.5 6 SPECIAL NON-EMPLOYEE DIRECTOR STOCK RETAINER FEE 1 EXHIBIT 99.5 POPE & TALBOT, INC. SPECIAL NON-EMPLOYEE DIRECTOR STOCK RETAINER FEE PLAN I. PURPOSE OF THE PLAN This Special Non-Employee Director Stock Retainer Fee Plan (the "Plan") is intended to promote the interests of Pope & Talbot, Inc., a Delaware corporation (the "Corporation"), by providing the non-employee members of the Corporation's Board of Directors with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in the service of the Corporation. II. ADMINISTRATION OF THE PLAN The terms and conditions of each option grant (including the timing and pricing of the option grant) shall be determined solely pursuant to the express terms and conditions of the Plan, and neither the Board nor any committee of the Board shall exercise any discretionary functions with respect to option grants made pursuant to the Plan. III. STOCK SUBJECT TO THE PLAN A. Shares of the Corporation's Common Stock shall be available for issuance under the Plan and shall be drawn from either the Corporation's authorized but unissued shares of Common Stock or from reacquired shares of Common Stock, including shares repurchased by the Corporation on the open market. The maximum number of shares of Common Stock issuable under this Plan shall not exceed 300,000 shares, subject to adjustment from time to time in accordance with the provisions of this Article III. B. Should one or more outstanding options under the Plan expire or terminate for any reason prior to exercise in full, then the shares subject to the portion of each option not so exercised shall be available for subsequent option grant under the Plan. In addition, should the exercise price of an outstanding option under the Plan be paid with shares of Common Stock, then the number of shares of Common Stock available for issuance under this Plan shall be reduced only by the net number of shares of Common Stock actually issued to the holder of such option, and not by the gross number of shares for which such option is exercised. C. Should any change be made to the Common Stock issuable under the Plan by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration, then the Board shall make appropriate adjustments to (i) the maximum number and/or class of securities issuable under the Plan and (ii) the number and/or class of securities and price per share in effect for each option outstanding under the Plan. Such adjustments to the outstanding options are to be effected in a manner which shall preclude the enlargement or dilution of rights and benefits under such options. The adjustments determined by the Board shall be final, binding and conclusive. 2 IV. OPTION GRANTS Each non-employee Board member may elect to apply all or a portion, in twenty-five percent (25%) increments, of the annual retainer fee and any Chairman of the Board fees for the year to the acquisition of stock options under the Plan in lieu of payment of those fees in cash. Such election must be filed with the Corporation's Chief Financial Officer prior to the start of the calendar year for which the fees which are the subject of that election would otherwise be payable in cash. Each non-employee Board member who files such a timely election shall automatically be granted four (4) separate stock options under this Plan during the calendar year for which such election is in effect. The grants shall be made on the first business day in January, April, July and October of that year. However, no option grants shall be made to any non-employee Board member following his or her cessation of Board service. V. OPTION GRANTS Each quarterly stock option grant shall be a Non-Statutory Option governed by the terms and conditions specified below. A. Exercise Price. The exercise price per share shall be equal to the Fair Market Value per share of Common Stock on the grant date. B. Number of Option Shares. The number of shares of Common Stock subject to the option shall be determined by dividing (i) one-fourth of the fees for the year applied to the program by (ii) the Black-Scholes formula value of the option, as determined by the Corporation's independent financial advisors. C. Option Term. Each option shall have a maximum term of ten (10) years measured from the grant date. D. Exercisability. Each option grant shall be immediately exercisable for any or all of the option shares as fully vested shares. However, any options granted prior to the 1999 Annual Stockholders Meeting shall be subject to stockholder approval of this Plan at such Annual Meeting and shall not become exercisable unless and until such stockholder approval is obtained. E. Limited Transferability of Options. During the lifetime of the Optionee the option may, in connection with the Optionee's estate plan, be assigned in whole or in part to one or more members of the Optionee's immediate family or to a trust established exclusively for one or more such family members. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Corporation may deem appropriate. Should the Optionee die while holding the option, then that option shall be transferred in accordance with the Optionee's will or the laws of descent and distribution. 2 3 F. Effect of Termination of Board Service. 1. Should the Optionee cease for any reason to serve as a Board member while holding one or more option grants under the Plan, then such individual shall have a three (3)-year period following the date of such cessation of Board service in which to exercise each such option for any or all of the option shares at the time subject to that option. In no event shall any option grant remain exercisable after the expiration date of the ten (10)-year option term. 2. Should the Optionee die while holding one or more option grants under the Plan, then each such grant may subsequently be exercised, for any or all of the option shares at the time subject to that option, by the personal representative of the Optionee's estate or by the person or persons to whom the option is transferred pursuant to the Optionee's will or in accordance with the laws of descent and distribution. The right to exercise each such option shall lapse upon the earlier of (i) the expiration of the three (3)-year period measured from the date of the Optionee's cessation of Board service or (ii) the expiration of the ten (10) year option term. G. Corporate Transaction. Each outstanding option shall terminate at the time of a Corporate Transaction, except to the extent that option is assumed by the successor entity or its parent company. Each option which is so assumed shall, immediately after the Corporate Transaction, be appropriately adjusted to apply and pertain to the number and class of securities which would have been issued to the option holder in the consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate Transaction. Appropriate adjustments shall also be made to the option exercise price payable per share, provided the aggregate option exercise price shall remain the same. H. Stockholder Rights. The holder of an option grant shall have no stockholder rights with respect to any shares subject to such option until such individual shall have exercised the option, paid the exercise price for the purchased shares and become a holder of record of the shares. I. Remaining Terms. The remaining terms and conditions of each option grant shall be as set forth in the form of Stock Option Agreement attached as Exhibit A. VI. AMENDMENT OF THE PLAN AND AWARDS The Board shall have complete and exclusive power and authority to amend or modify the Plan in any or all respects. However, no such amendment or modification shall adversely affect the rights and obligations with respect to stock options at the time outstanding under the Plan unless the affected Optionees consent to such amendment or modification. In addition, certain amendments may require stockholder approval pursuant to applicable laws or regulations. 3 4 VII. EFFECTIVE DATE AND TERM OF PLAN A. The Plan shall be implemented effective January 4, 1999, subject to stockholder approval of the Plan at the 1999 Annual Stockholders Meeting. If such stockholder approval is not obtained, then the Plan shall terminate, all options previously granted hereunder shall terminate and cease to be outstanding, and no further option grants shall be made under the Plan. B. If the Plan is approved by the stockholders at the 1999 Annual Meeting, then the Plan shall remain in effect until the earlier of (i) December 31, 2008 or (ii) the date on which all shares available for issuance under this Plan shall have been issued pursuant to the exercise of outstanding options. If the date of plan termination is determined under clause (i) above, then all option grants outstanding on such date shall thereafter continue to have force and effect in accordance with the provisions of the instruments evidencing those grants. VIII. USE OF PROCEEDS Any cash proceeds received by the Corporation from the sale of shares pursuant to option grants or share issuances under the Plan shall be used for general corporate purposes IX. REGULATORY APPROVALS A. The implementation of the Plan, the granting of any option under the Plan and the issuance of Common Stock upon the exercise of the option grants made hereunder shall be subject to the Corporation's procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the options granted under it, and the Common Stock issued pursuant to it. B. No shares of Common Stock or other assets shall be issued or delivered under this Plan unless and until there shall have been compliance with all applicable requirements of Federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement for the shares of Common Stock issuable under the Plan, and all applicable listing requirements of any securities exchange on which the Common Stock is then listed for trading. X. NO IMPAIRMENT OF RIGHTS Neither the action of the Corporation in establishing the Plan nor any provision of the Plan shall be construed or interpreted so as to affect adversely or otherwise impair the right of the Corporation or the stockholders to remove any individual from the Board at any time in accordance with the provisions of applicable law. XI. MISCELLANEOUS PROVISIONS A. The right to acquire Common Stock or other assets under the Plan may not be assigned, encumbered or otherwise transferred by any Optionee. 4 5 B. The provisions of the Plan relating to the exercise of the outstanding options shall be governed by the laws of the State of Oregon, as such laws are applied to contracts entered into and performed in such State. C. The provisions of the Plan shall inure to the benefit of, and be binding upon, the Corporation and its successors or assigns, and the Optionees, the legal representatives of their respective estates, their respective heirs or legatees and their permitted assignees. 5 6 APPENDIX For purposes of the Plan, the following definitions shall be in effect: A. BOARD: the Corporation's Board of Directors. B. CODE: the Internal Revenue Code of 1986, as amended. C. COMMON STOCK: shares of the Corporation's common stock. D. CORPORATE TRANSACTION: any of the following stockholder-approved transactions to which the Corporation is a party: (i) a merger or consolidation in which the Corporation is not the surviving entity, except for a transaction the principal purpose of which is to change the State in which the Corporation is incorporated, (ii) the sale, transfer or other disposition of all or substantially all of the Corporation's assets in complete liquidation or dissolution of the Corporation, or (iii) any reverse merger in which the Corporation is the surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such merger. E. EFFECTIVE DATE: the January 4, 1999 date on which the first stock option grants shall be made under the Plan, subject to stockholder approval at the 1999 Annual Meeting. F. FAIR MARKET VALUE: the Fair Market Value per share of Common Stock determined in accordance with the following provisions: (i) If the Common Stock is at the time listed or admitted to trading on the New York Stock Exchange or on any other national securities exchange, then the Fair Market Value shall be the closing selling price per share on the date in question, as officially quoted on the composite tape of transactions on the exchange serving as the primary market for the Common Stock. If there is no reported sale of Common Stock on such exchange on the date in question, then the Fair Market Value shall be the closing selling price on the exchange on the last preceding date for which such quotation exists. (ii) If the Common Stock is not at the time listed or admitted to trading on any national securities exchange but is traded on the Nasdaq National Market, the Fair Market Value shall be the closing selling price per share on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market. If there is no reported closing selling price for the Common Stock on the grant date, then the closing selling price on the last preceding date for which such quotation exists shall be determinative of Fair Market Value. G. 1934 ACT: the Securities Exchange Act of 1934, as amended. A-1 7 H. OPTIONEE: any person to whom an option is granted under the Plan. A-2 8 EXHIBIT A STOCK OPTION AGREEMENT EX-99.6 7 FORM OF NOTICE OF GRANT 1 EXHIBIT 99.6 POPE & TALBOT, INC. NOTICE OF GRANT OF STOCK OPTION UNDER SPECIAL NON-EMPLOYEE DIRECTOR STOCK RETAINER FEE PROGRAM Notice is hereby given of the following option grant (the "Option") to purchase shares of the Common Stock of Pope & Talbot, Inc. (the "Corporation"): Optionee:__________________________________________________________________ Grant Date: _________________________________________________________, 1999 Exercise Price: $________________________________________________ per share Number of Option Shares: ___________________________ shares of Common Stock Expiration Date: ____________________________________________________, 2009 Type of Option: Non-Statutory Stock Option Exercise Date: Immediately Exercisable Vesting Schedule: The Option Shares shall be fully vested upon issuance. Optionee understands and agrees that the Option is granted subject to and in accordance with the terms of the Special Non-Employee Director Stock Retainer Fee Plan (the "Plan"). Optionee further agrees to be bound by the terms of the Plan and the terms of the Option as set forth in the Stock Option Agreement attached hereto as Exhibit A. A copy of the Plan is available upon request made to the Corporate Secretary at the Corporation's principal offices. No Impairment of Rights. Nothing in this Notice or in the attached Stock Option Agreement or in the Plan shall adversely affect or otherwise impair the right of the Corporation or the stockholders to remove the Optionee from the Board at any time in accordance with the provisions of applicable law. 2 Definitions. All capitalized terms in this Notice shall have the meaning assigned to them in this Notice or in the attached Stock Option Agreement. DATED: ________________________, 1999 POPE & TALBOT, INC. By:_____________________________________ Title:__________________________________ ________________________________________ OPTIONEE Address: _______________________________ ________________________________________ ATTACHMENT EXHIBIT A -- STOCK OPTION AGREEMENT 2 3 EXHIBIT A STOCK OPTION AGREEMENT EX-99.7 8 FORM OF STOCK OPTION AGREEMENT 1 EXHIBIT 99.7 POPE & TALBOT, INC. STOCK OPTION AGREEMENT RECITALS A. The Corporation has implemented the Special Non-Employee Director Stock Retainer Fee Plan (the "Plan") pursuant to which eligible non-employee members of the Corporation's Board of Directors (the "Board") may elect to apply all or a portion of the annual retainer fee and any Chairman of the Board fees for the year to the acquisition of stock options in lieu of payment of those fees in cash. B. Optionee is an eligible non-employee Board member, and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the grant of a stock option to purchase shares of the Corporation's common stock ("Common Stock") under the Plan. C. The granted option is intended to be a non-statutory option which does not meet the requirements of Section 422 of the Internal Revenue Code. D. All capitalized terms in this Agreement, to the extent not otherwise defined in the Agreement, shall have the meaning assigned to them in the attached Appendix. NOW, THEREFORE, it is hereby agreed as follows: 1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as of the Grant Date, a Non-Statutory Option to purchase up to the number of Option Shares specified in the Grant Notice. The Option Shares shall be purchasable from time to time during the option term specified in Paragraph 2 at the Exercise Price. 2. OPTION TERM. This option shall have a maximum term of ten (10) years measured from the Grant Date and shall accordingly expire at the close of business on the Expiration Date, unless sooner terminated in accordance with Paragraph 5 or Paragraph 6. 3. LIMITED TRANSFERABILITY. During the lifetime of the Optionee the option may, in connection with the Optionee's estate plan, be assigned in whole or in part to one or more members of the Optionee's immediate family or to a trust established exclusively for one or more such family members. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate. Should Optionee die while holding this option, then the option shall be transferred in accordance with Optionee's will or the laws of descent and distribution. 2 4. EXERCISABILITY/VESTING. This option shall be immediately exercisable for any or all of the Option Shares as fully-vested shares and shall remain so exercisable until the Expiration Date or the sooner termination of the option term under Paragraph 5 or Paragraph 6. In no event, however, shall this option become exercisable for any of the Option Shares prior to stockholder approval of the Plan at the 1999 Annual Stockholders Meeting. Should such stockholder approval not be obtained, then this option shall immediately terminate. 5. CESSATION OF BOARD SERVICE. Should Optionee cease service as a Board member while this option remains outstanding, then the option term specified in Paragraph 2 shall terminate (and this option shall cease to be outstanding) prior to the Expiration Date in accordance with the following provisions: - Should Optionee cease for any reason to serve as a Board member while this option is outstanding, then the period during which this option may be exercised, for any or all of the Option Shares at the time subject to this option, shall be limited to the three (3)-year period measured from the date of such cessation of Board service. In no event, however, shall this option be exercisable at any time after the Expiration Date. - Should Optionee die while holding this option, then the personal representative of Optionee's estate or the person or persons to whom the option is transferred pursuant to Optionee's will or in accordance with the laws of descent and distribution shall have the right to exercise this option for any or all of the Option Shares at the time subject to this option. Such right shall terminate, and this option shall accordingly cease to be exercisable for such Option Shares, upon the earlier of (A) the expiration of the three (3)-year period measured from the date of Optionee's cessation of Board service or (B) the specified Expiration Date of the option term. 6. CORPORATE TRANSACTION. This option shall terminate at the time of a Corporate Transaction, except to the extent assumed by the successor entity or its parent company. To the extent this option is so assumed, the option shall be appropriately adjusted, immediately after the Corporate Transaction, to apply and pertain to the number and class of securities which would have been issued to the holder of this option in the consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate Transaction. Appropriate adjustments shall also be made to the Exercise Price payable per share, provided the aggregate Exercise Price shall remain the same. 7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration, appropriate adjustments shall be made to (i) the total number and/or class of securities subject to this option and (ii) the Exercise Price in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder. 2 3 8. STOCKHOLDER RIGHTS. The holder of this option shall not have any stockholder rights with respect to the Option Shares until such person shall have exercised the option, paid the Exercise Price and become a holder of record of the purchased shares. 9. MANNER OF EXERCISING OPTION. A. In order to exercise this option for all or any part of the Option Shares for which the option is at the time exercisable, Optionee (or in the case of exercise after Optionee's death, Optionee's executor, administrator, heir or legatee, as the case may be) must take the following actions: (i) The Secretary of the Corporation shall be provided with written notice of the option exercise (the "Exercise Notice"), in substantially the form of Exhibit I attached hereto, in which there is specified the number of Option Shares to be purchased under the exercised option. (ii) The aggregate Exercise Price for the purchased shares shall be paid in one or more of the following alternative forms: - payment in cash or check made payable to the Corporation; or - payment in shares of Common Stock held by Optionee (or any other person or persons exercising the option) for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date; or - payment effected through a broker-dealer sale and remittance procedure pursuant to which Optionee shall provide irrevocable instructions (A) to a Corporation-designated brokerage firm to effect the immediate sale of the shares purchased under the option and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate Exercise Price payable for those shares plus the applicable Federal, State and local income taxes required to be withheld by the Corporation by reason of such exercise and (B) to the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale. (iii) Appropriate documentation evidencing the right to exercise this option shall be furnished the Corporation if the person or persons exercising the option is other than the Optionee. (iv) Appropriate arrangement must be made with the Corporation for the satisfaction of all Federal, State and local income tax withholding requirements applicable to the option exercise. 3 4 B. Except to the extent the sale and remittance procedure specified above is utilized in connection with the exercise of the option, payment of the Exercise Price for the purchased shares must accompany the Exercise Notice delivered to the Corporation in connection with the option exercise. C. As soon as practical after the Exercise Date, the Corporation shall issue to or on behalf of Optionee (or any other person or persons exercising this option) a certificate or certificates representing the purchased Option Shares. D. In no event may this option be exercised for any fractional shares. 10. NO IMPAIRMENT OF RIGHTS. This Agreement shall not in any way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise make changes in its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. In addition, this Agreement shall not in any way be construed or interpreted so as to affect adversely or otherwise impair the right of the Corporation or the stockholders to remove Optionee from the Board at any time in accordance with the provisions of applicable law. 11. COMPLIANCE WITH LAWS AND REGULATIONS. A. The exercise of this option and the issuance of the Option Shares upon such exercise shall be subject to compliance by the Corporation and Optionee with all applicable requirements of law relating thereto and with all applicable regulations of the New York Stock Exchange. B. The inability of the Corporation to obtain approval from any regulatory body having authority deemed by the Corporation to be necessary to the lawful issuance and sale of any Common Stock pursuant to this option shall relieve the Corporation of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. However, the Corporation shall use its best efforts to obtain all such applicable approvals. 12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in Paragraph 3 or Paragraph 6, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and Optionee, Optionee's assigns and the legal representatives, heirs and legatees of Optionee's estate. 13. CONSTRUCTION/GOVERNING LAW. This Agreement and the option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the express terms and provisions of the Plan. The interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the State of Oregon without resort to that State's conflict-of-laws rules. 4 5 14. NOTICES. Any notice required to be given or delivered to the Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated below Optionee's signature line on the Grant Notice. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified. 5 6 EXHIBIT I NOTICE OF EXERCISE I hereby notify Pope & Talbot, Inc. (the "Corporation") that I elect to purchase ______________ shares of the Corporation's Common Stock (the "Purchased Shares") at the option exercise price of $_____ per share (the "Exercise Price") pursuant to that certain option (the "Option") granted to me under the Corporation's Special Non-Employee Director Stock Retainer Fee Plan on ________, 1999. Concurrently with the delivery of this Exercise Notice to the Secretary of the Corporation, I shall hereby pay to the Corporation the Exercise Price for the Purchased Shares in accordance with the provisions of my agreement with the Corporation evidencing the Option and shall deliver whatever additional documents may be required by such agreement as a condition for exercise. Alternatively, I may utilize the special broker/dealer sale and remittance procedure specified in my agreement to effect payment of the Exercise Price for any Purchased Shares. ___________________________________ ________________________________________ Date Optionee Address: _______________________________ ________________________________________ Print name in exact manner it is to appear on the stock certificate: ________________________________________ Address to which certificate is to be sent, if different from address above: ________________________________________ ________________________________________ Social Security Number: ________________________________________ 7 APPENDIX The following definitions shall be in effect under the Agreement: A. AGREEMENT shall mean this Stock Option Agreement. B. BOARD shall mean the Corporation's Board of Directors. C. CODE shall mean the Internal Revenue Code of 1986, as amended. D. COMMON STOCK shall mean the Corporation's common stock. E. CORPORATE TRANSACTION shall mean any of the following stockholder-approved transactions to which the Corporation is a party: (i) a merger or consolidation in which the Corporation is not the surviving entity, except for a transaction the principal purpose of which is to change the State in which the Corporation is incorporated, (ii) the sale, transfer or other disposition of all or substantially all of the Corporation's assets in complete liquidation or dissolution of the Corporation, or (iii) any reverse merger in which the Corporation is the surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such merger. F. CORPORATION shall mean Pope & Talbot, Inc., a Delaware corporation. H. EXERCISE DATE shall mean the date on which the option shall have been exercised in accordance with Paragraph 9 of the Agreement. I. EXERCISE PRICE shall mean the exercise price payable per share as specified in the Grant Notice. J. EXPIRATION DATE shall mean the date on which the option term expires as specified in the Grant Notice. K. FAIR MARKET VALUE per share of Common Stock on any relevant date shall be determined as follows: (i) If the Common Stock is at the time listed or admitted to trading on the New York Stock Exchange or on any other national securities exchange, then the Fair Market Value shall be the closing selling price per share on the date in question, as officially quoted on the composite tape of transactions on the exchange serving as the primary market for the Common Stock. If there is no reported sale of Common Stock on such exchange on the date in question, then the Fair Market Value shall be the closing selling price on the exchange on the last preceding date for which such quotation exists. A-1 8 (ii) If the Common Stock is not at the time listed or admitted to trading on any national securities exchange but is traded on the Nasdaq National Market, the Fair Market Value shall be the closing selling price per share on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market. If there is no reported closing selling price for the Common Stock on the grant date, then the closing selling price on the last preceding date for which such quotation exists shall be determinative of Fair Market Value. L. GRANT DATE shall mean the date of grant of the option as specified in the Grant Notice. M. GRANT NOTICE shall mean the Notice of Grant of Stock Option accompanying the Agreement, pursuant to which Optionee has been informed of the basic terms of the option evidenced hereby. N. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended. O. NON-STATUTORY OPTION shall mean an option not intended to satisfy the requirements of Code Section 422. P. OPTION SHARES shall mean the number of shares of Common Stock subject to the option. Q. OPTIONEE shall mean the person to whom the option is granted as specified in the Grant Notice. S. PLAN shall mean the Corporation's Special Non-Employee Director Stock Retainer Fee Plan. A-2 -----END PRIVACY-ENHANCED MESSAGE-----