<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>v05776exv10w1.txt
<DESCRIPTION>EXHIBIT 10.1
<TEXT>
<PAGE>
 
                                                                    EXHIBIT 10.1
 
                              WEYERHAEUSER COMPANY
                                 2004 LONG-TERM
                                 INCENTIVE PLAN
 
                                                        Approved by Shareholders
                                                                  April 13, 2004
 
<PAGE>
 
                              WEYERHAEUSER COMPANY
                          2004 LONG-TERM INCENTIVE PLAN
 
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SECTION   1.  PURPOSE AND ESTABLISHMENT                                                1
        1.1   Purpose                                                                  1
        1.2   Replacement Plan                                                         1
SECTION   2.  DEFINITIONS                                                              1
SECTION   3.  ADMINISTRATION                                                           6
        3.1   Administration of the Plan                                               6
        3.2   Administration and Interpretation by Committee                           6
SECTION   4.  SHARES SUBJECT TO THE PLAN                                               7
        4.1   Authorized Number of Shares                                              7
        4.2   Share Usage                                                              8
        4.3   Limitations                                                              8
SECTION   5.  ELIGIBILITY                                                              9
SECTION   6.  AWARDS                                                                   9
        6.1   Form and Grant of Awards                                                 9
        6.2   Evidence of Awards                                                       9
        6.3   Deferrals                                                                9
SECTION   7.  OPTIONS                                                                 10
        7.1   Grant of Options                                                        10
        7.2   Option Exercise Price                                                   10
        7.3   Terms of Options                                                        10
        7.4   Exercise of Options                                                     10
        7.5   Payment of Exercise Price                                               10
        7.6   Post-Termination Exercise                                               11
        7.7   Incentive Stock Options                                                 11
SECTION   8.  STOCK APPRECIATION RIGHTS                                               12
        8.1   Grant of Stock Appreciation Rights                                      12
        8.2   Payment of SAR Amount                                                   12
SECTION   9.  RESTRICTED STOCK AND STOCK UNITS                                        12
        9.1   Grant of Restricted Stock and Stock Units                               12
        9.2   Issuance of Shares                                                      13
        9.3   Dividends and Distributions                                             13
SECTION  10.  PERFORMANCE SHARES AND PERFORMANCE UNITS                                13
       10.1   Grant of Performance Shares                                             13
       10.2   Grant of Performance Units                                              13
SECTION  11.  PERFORMANCE CRITERIA                                                    14
       11.1   Awards Subject to Performance Goals                                     14
       11.2   Use and Calculation of Performance Criteria                             14
SECTION  12.  OTHER STOCK OR CASH BASED AWARDS                                        14
SECTION  13.  WITHHOLDING                                                             15
SECTION  14.  ASSIGNABILITY                                                           15
SECTION  15.  AMENDMENT AND TERMINATION                                               15
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                                                                               i
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       15.1   Amendment, Suspension or Termination of the Plan                        16
       15.2   Term of the Plan                                                        16
       15.3   Consent of Participant                                                  16
SECTION  16.  GENERAL                                                                 16
       16.1   No Individual Rights                                                    16
       16.2   Issuance of Shares                                                      16
       16.3   No Rights as a Shareholder                                              17
       16.4   Compliance with Laws and Regulations                                    17
       16.5   Participants in Other Countries                                         17
       16.6   No Trust or Fund                                                        17
       16.7   Successors                                                              18
       16.8   Severability                                                            18
       16.9   Choice of Law                                                           18
      16.10   Treatment of Awards Following a Change in Control                       18
SECTION  17.  EFFECTIVE DATE                                                          19
> 
 
                              WEYERHAEUSER COMPANY
                          2004 LONG-TERM INCENTIVE PLAN
 
                      SECTION 1. PURPOSE AND ESTABLISHMENT
 
      1.1   PURPOSE
 
      The purposes of this 2004 Long-Term Incentive Plan (the "Plan") is to
promote the interests of Weyerhaeuser Company (the "Company") and its
shareholders by attracting, retaining and motivating employees, officers and
directors key to the growth and success of the Company by providing them the
opportunity to acquire a proprietary interest in the Company and to link their
interests and efforts to the long-term interests of the Company's shareholders.
 
      1.2   REPLACEMENT PLAN
 
      This Plan will replace the Company's 1998 Long-Term Incentive Compensation
Plan and 1992 Long-Term Incentive Compensation Plan (collectively, the "Prior
Plans"). No further grants may be made under the Prior Plans on or after the
date the Plan is approved by shareholders of the Company. Shares of Common Stock
reserved for issuance under the 1998 Plan in excess of the number of shares as
to which awards have been made as April 12, 2003, will no longer be available
for issuance on or after the date of shareholder approval of the Plan.
 
                             SECTION 2. DEFINITIONS
 
      As used in the Plan, the following definitions apply to the terms
indicated below:
 
      2.1   "AWARD" means any Option, Stock Appreciation Right, Restricted
Stock, Stock Unit, Performance Share, Performance Unit, dividend equivalent,
cash-based award or other incentive payable in cash or in shares of Common Stock
as may be designated by the Committee from time to time.
 
      2.2   "BENEFICIAL OWNER" has the meaning ascribed to such term in Rule
13d-3 promulgated under the Exchange Act.
 
      2.3   "BOARD" means the Board of Directors of the Company.
 
      2.4   "CHANGE IN CONTROL" or "CIC" of the Company shall be deemed to have
occurred as of the first day that any one or more of the following conditions
shall have been satisfied:
 
            (a) Any Person, but excluding the Company and any subsidiary of the
Company and any employee benefit plan (or related trust) sponsored or maintained
by the Company or any subsidiary of the Company (collectively, "Excluded
Persons"), directly or indirectly, becomes the Beneficial Owner of securities of
the Company representing 20% or more of the combined voting power of the
Company's then outstanding securities with respect to
the election of directors of the Company and such ownership continues for at
least a period of 30 days (with the end of such period being deemed the
effective date of the CIC); or
 
            (b) During any 24-consecutive month period, the individuals who, at
the beginning of such period, constitute the Board (the "Incumbent Directors")
cease for any reason other than death to constitute at least a majority of the
Board, provided, however, that except as set forth in the following sentence, an
individual who becomes a member of the Board subsequent to the beginning of the
24-month period shall be deemed to have satisfied such 24-month requirement (and
be an Incumbent Director) if such director was elected by, or on the
recommendation of or with the approval of, at least two-thirds of the directors
who then qualified as Incumbent Directors either actually (because they were
directors at the beginning of such period) or by prior operation of the
provisions of this Section 2.4(b). Notwithstanding the proviso set forth in the
preceding sentence, if any such individual initially assumes office as a result
of or in connection with either an actual or threatened solicitation with
respect to the election of directors (as such terms are used in Rule 14a-12(c)
of Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board, then such individual shall not be considered an Incumbent
Director. For purposes of this Section 2.4(b), if at any time individuals who
initially assumed office as a result of or in connection with an arrangement or
understanding between the Company and any Person (an "Entity Designee")
constitute at least one-half of the Board, none of such Entity Designees shall
be considered Incumbent Directors from that time forward; or
 
            (c) There is consummated:
 
                  (i)   a plan of complete liquidation of the Company; or
 
                  (ii)  a sale or disposition of all or substantially all the
                        Company's assets in one or a series of related
                        transactions; or
 
                  (iii) a merger, consolidation, or reorganization of the
                        Company or the acquisition of outstanding Common Stock
                        and as a result of or in connection with such
                        transaction (A) 35% or more of the outstanding Common
                        Stock or the voting securities of the Company
                        outstanding immediately prior thereto or the outstanding
                        shares of common stock or the combined voting power of
                        the outstanding voting securities of the surviving
                        entity are owned, directly or indirectly, by any other
                        corporation or Person other than (x) an Excluded Person
                        or (y) a Person who is, or if such Person beneficially
                        owned 5% or more of the outstanding Common Stock would
                        be, eligible to report such Person's beneficial
                        ownership on Schedule 13G pursuant to the rules under
                        Section 13(d) of the Exchange Act or (z) a Person that
                        has entered into an agreement with the Company pursuant
                        to which such Person has agreed not to acquire
                        additional voting securities of the Company (other than
                        pursuant to the terms of such agreement), solicit
                        proxies with respect to the Company's voting securities
                        or otherwise participate
 
                        in any contest relating to the election of directors of
                        the Company, or take other actions that could result in
                        a Change in Control of the Company; provided that this
                        exclusion shall apply only so long as such agreement
                        shall remain in effect, or (B) the voting securities of
                        the Company outstanding immediately prior thereto do not
                        immediately after such transaction continue to represent
                        (either by remaining outstanding or by being converted
                        into voting securities of the surviving entity) more
                        than sixty percent (60%) of the combined voting power of
                        the voting securities of the Company (or such surviving
                        entity) outstanding immediately after such merger,
                        consolidation, or reorganization.
 
      2.5   "CHANGE IN CONTROL PRICE" means, with respect to a share of Common
Stock, the higher of (i) the highest reported sales price, regular way, of such
share of Common Stock in any transaction reported on the New York Stock Exchange
Composite Tape or other national exchange on which such shares are listed during
the 60-day period prior to and including the date of the Change in Control or
(ii) if the Change in Control is the result of a tender or exchange offer or a
merger, reorganization or consolidation or sale or other disposition of all or
substantially all of the assets of the Company, the highest price per such share
of Common Stock paid in such transaction; provided, however, that in the case of
Incentive Stock Options and Stock Appreciation Rights relating to Incentive
Stock Options, the Change in Control Price shall be the Fair Market Value of
such share of Common Stock on the date such Incentive Stock Option or Stock
Appreciation Right is exercised or deemed exercised pursuant to Section
16.10(b). To the extent the consideration paid in any such transaction described
above consists all or in part of securities or other non-cash consideration, the
value of such securities or other non-cash consideration shall be determined in
the sole discretion of the Board.
 
      2.6   "CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
 
      2.7   "COMMITTEE" has the meaning set forth in Section 3.1.
 
      2.8   "COMMON STOCK" means the common stock, par value $1.25 per share, of
the Company.
 
      2.9   "COMPANY" means Weyerhaeuser Company, a Washington corporation.
 
      2.10  "COVERED EMPLOYEE" means a "covered employee" as that term is
defined in Section 162(m) of the Code or any successor provision.
 
      2.11  "DISABILITY" means "Disability" as defined by the Committee or the
Company's vice president of human resources for purposes of the Plan or an
Award, or in the instrument evidencing the Award, or in a written employment or
services agreement.
 
      2.12  "EFFECTIVE DATE" has the meaning set forth in Section 17.
 
      2.13  "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time.
 
      2.14  "FAIR MARKET VALUE" means the average of the high and low per share
trading prices (or the average of the opening and closing prices, or the closing
price, if so determined by the Committee) for the Common Stock as reported on
the consolidated transaction reporting system for New York Stock Exchange issues
during regular session trading or such other source the Committee deems reliable
for a single trading day or an average of trading days not to exceed 30 days
from the Grant Date or other date on which the Fair Market Value is determined,
at the Committee's discretion.
 
      2.15  "GRANT DATE" means the date on which the Committee completes the
corporate action authorizing the grant of an Award or such later date specified
by the Committee, provided that conditions to the exercisability or vesting of
Awards shall not defer the Grant Date.
 
      2.16  "INCENTIVE STOCK OPTION" means an Option granted with the intention
that it qualify as an "incentive stock option" as that term is defined in
Section 422 of the Code or any successor provision.
 
      2.17  "LAYOFF" means "Layoff" as defined by the Committee or the Company's
vice president of human resources for purposes of the Plan or an Award or in the
instrument evidencing the Award or in a written employment or services
agreement.
 
      2.18  "NON-QUALIFIED STOCK OPTION" means an Option other than an Incentive
Stock Option.
 
      2.19  "NON-RECURRING ITEMS" means non-recurring items deemed not
reflective of the Company's core operating performance, including, but not
limited to, exogenous events, acquisitions, divestitures, changes in accounting
principles or "extraordinary items" determined under generally accepted
accounting principles.
 
      2.20  "OPTION" means a right to purchase Common Stock granted under
Section 7.
 
      2.21  "PARTICIPANT" means any eligible person as set forth in Section 5 to
whom an Award is granted.
 
      2.22  "PERFORMANCE CRITERIA" has the meaning set forth in Section 11.1.
 
      2.23  "PERFORMANCE SHARE" has the meaning set forth in Section 10.1.
 
      2.24  "PERFORMANCE UNIT" has the meaning set forth in Section 10.2.
 
      2.25  "PERSON" means any individual, corporation, partnership,
association, limited liability company, joint-stock company, trust,
unincorporated organization or government or political subdivision thereof, and
as used in Section 13(d) and 14(d) of the Exchange Act, including a "group" as
defined in Section 13(d).
 
      2.26  "PLAN" means the Weyerhaeuser Company 2004 Long-Term Incentive
Compensation Plan.
 
      2.27  "PRIOR PLANS" has the meaning set forth in Section 1.2.
 
      2.28  "RELATED COMPANY" means any entity that is directly or indirectly
controlled by the Company.
 
      2.29  "RESTRICTED STOCK" means an Award of shares of Common Stock granted
under Section 9, the rights of ownership of which may be subject to restrictions
prescribed by the Committee.
 
      2.30  "RETIREMENT" means "Retirement" as defined by the Committee or the
Company's vice president of human resources for purposes of the Plan or an Award
or in the instrument evidencing the Award or in a written employment or services
agreement.
 
      2.31  "SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
 
      2.32  "STOCK APPRECIATION RIGHT" has the meaning set forth in Section 8.1.
 
      2.33  "STOCK UNIT" means an Award granted under Section 9 denominated in
units of Common Stock.
 
      2.34  "SUBSTITUTE AWARDS" means Awards granted or shares of Common Stock
issued by the Company in assumption of, or in substitution or exchange for,
awards previously granted, or the right or obligation to make future awards, by
a company acquired by the Company or with which the Company combines.
 
      2.35  "TERMINATION OF SERVICE," unless otherwise defined by the Committee
or the Company's vice president of human resources or in the instrument
evidencing the Award or in a written employment or services agreement, means a
termination of employment or service relationship with the Company or a Related
Company for any reason, whether voluntary or involuntary, including by reason of
death, Disability, Retirement, or Layoff. Any question as to whether and when
there has been a Termination of Service for the purposes of an Award and the
cause of such Termination of Service shall be determined by the Company's vice
president of human resources or by the Committee with respect to officers
subject to the reporting requirements of Section 16(a) of the Securities Act,
and such determination shall be final. Transfer of a Participant's employment or
service relationship between wholly owned subsidiaries of the Company, or
between the Company and any wholly owned subsidiaries of the Company, shall not
be considered a Termination of Service for purposes of an Award. Unless the
Committee determines otherwise, a Termination of Service shall be deemed to
occur if the Participant's employment or service relationship is with an entity
that has ceased to be a Related Company.
 
                            SECTION 3. ADMINISTRATION
 
      3.1   ADMINISTRATION OF THE PLAN
 
      The Plan shall be administered by the Compensation Committee of the Board.
Notwithstanding the foregoing, the Board or the Compensation Committee may
delegate responsibility for administering the Plan with respect to designated
classes of eligible persons to different committees consisting of one or more
members of the Board, subject to such limitations as the Board or the
Compensation Committee deems appropriate, except with respect to benefits to
non-employee directors and to officers subject to Section 16 of the Exchange Act
or officers who are or may be Covered Employees. Members of any committee shall
serve for such term as the Board may determine, subject to removal by the Board
at any time. To the extent consistent with applicable law, the Board or the
Compensation Committee may authorize one or more officers of the Company to
grant Awards to designated classes of eligible persons, within limits
specifically prescribed by the Board or the Committee; provided, however, that
no such officer shall have or obtain authority to grant Awards to himself or
herself or to any person subject to Section 16 of the Exchange Act. All
references in the Plan to the "Committee" shall be, as applicable, to the
Compensation Committee, or any other committee or any officer to whom the Board
or the Compensation Committee has delegated authority to administer the Plan.
 
      3.2   ADMINISTRATION AND INTERPRETATION BY COMMITTEE
 
      Except for the terms and conditions explicitly set forth in the Plan, the
Committee shall have full power and exclusive authority, subject to such orders
or resolutions not inconsistent with the provisions of the Plan as may from time
to time be adopted by the Board, to (a) select the eligible persons as set forth
in Section 5 to whom Awards may from time to time be granted under the Plan; (b)
determine the type or types of Award to be granted to each Participant under the
Plan; (c) determine the number of shares of Common Stock to be covered by each
Award granted under the Plan; (d) determine the terms and conditions of any
Award granted under the Plan; (e) approve the forms of agreements for use under
the Plan; (f) determine whether, to what extent and under what circumstances
Awards may be settled in cash, shares of Common Stock or other property or
canceled or suspended; (g) determine whether, to what extent and under what
circumstances cash, shares of Common Stock, other property and other amounts
payable with respect to an Award shall be deferred either automatically or at
the election of the Participant; (h) interpret and administer the Plan and any
instrument or agreement entered into under the Plan; (i) establish such rules
and regulations and appoint such agents as it shall deem appropriate for the
proper administration of the Plan; (j) delegate ministerial duties to such of
the Company's officers as it so determines; and (k) make any other determination
and take any other action that the Committee deems necessary or desirable for
administration of the Plan. Decisions of the Committee shall be final,
conclusive and binding on all persons, including the Company, any Participant,
any shareholder and any eligible person. A majority of the members of the
Committee may determine its actions and fix the time and place of its meetings.
 
 
                      SECTION 4. SHARES SUBJECT TO THE PLAN
 
      4.1   AUTHORIZED NUMBER OF SHARES
 
            (a) Subject to adjustment from time to time as provided in this
Section 4.1, the maximum number of shares of Common Stock available for issuance
under the Plan shall be 17,000,000.
 
            (b) In the event a company acquired by the Company or with which the
Company combines ("Acquisition Party") has shares available for awards or grants
under a pre-existing plan not adopted in contemplation of such acquisition or
combination, to the extent determined by the Committee or the Board, a number of
shares of Common Stock determined by applying the exchange ratio or other
adjustment or valuation ratio or formula used in such acquisition or combination
to determine the consideration payable to the holders of common stock of the
Acquisition Party to the number of shares available for grant under the terms of
such pre-existing plan shall be available for Awards under the Plan and shall
not reduce the shares of Common Stock authorized for issuance under the Plan;
provided, that such Awards shall not be made after the date awards or grants
could have been made under the terms of the pre-existing plan, absent the
acquisition or combination; and provided, further, that such Awards shall be
made only to individuals who were not employees or non-employee directors of the
Company or a Related Company prior to such acquisition or combination.
 
            (c) Shares available for issuance under the Plan shall be increased
by any shares subject to outstanding awards under the Company's Prior Plans on
the date of shareholder approval of the Plan that cease to be subject to such
awards (other than by reason of exercise or settlement of the awards to the
extent they are exercised for or settled in shares of Common Stock), up to an
aggregate maximum of 1,939,181 shares, subject to adjustment from time to time
as provided in this Section 4.1, which shares of Common Stock shall cease, as of
such date, to be available for grant and issuance under the Prior Plans, but
shall be available for issuance under the Plan.
 
            (d) In the event, at any time or from time to time, a stock
dividend, stock split, reverse stock split, spin-off, combination or exchange of
shares, recapitalization, merger, consolidation, distribution to shareholders
other than a normal cash dividend or other change in the Company's corporate or
capital structure results in (i) the outstanding shares of Common Stock, or any
securities exchanged therefore or received in their place, being exchanged for a
different number or kind of securities of the Company or of any other company or
(ii) new, different or additional securities of the Company or of any other
company being received by the holders of shares of Common Stock, then the
Committee shall make proportional adjustments in (A) the maximum number and kind
of securities available for issuance under the Plan; (B) the maximum number and
kind of securities issuable as Incentive Stock Options as set forth in Section
4.2; (C) the maximum number and kind of securities that may be issued to an
individual in any one calendar year as set forth in Section 4.3; (D) the maximum
number and kind of securities that may be made subject to the different types of
Awards available under the Plan; and (E) the number and kind of securities that
are subject to any outstanding Award and the per share price of such securities,
without any change in the aggregate price to be paid therefor.
 
            (e) The determination by the Committee as to the terms of any of the
foregoing adjustments shall be conclusive and binding.
 
            (f) Notwithstanding the foregoing, the issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services rendered, either upon
direct sale or upon the exercise of rights or warrants to subscribe therefore,
or upon conversion of shares or obligations of the Company convertible into such
shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to, outstanding Awards.
 
      4.2   SHARE USAGE
 
            (a) Shares of Common Stock covered by an Award shall not be counted
as used unless and until they are actually issued and delivered to a
Participant. If any Award based on shares is settled for cash, or lapses,
expires, terminates or is canceled prior to the issuance of shares thereunder,
the shares subject to such Awards shall again be available for issuance under
the Plan. In the event that any Option or other Award granted hereunder is
exercised through the tendering of shares (either actually or by attestation) or
in the event that withholding tax liabilities arising from such Award are
satisfied by the tendering of shares or by the withholding of shares by the
Company, the number of shares of Common Stock issued net of the shares of Common
Stock tendered or withheld shall be counted for purposes of determining the
maximum number of shares of Common Stock available for issuance under the Plan.
In addition, Substitute Awards shall not reduce the shares of Common Stock
authorized for issuance under the Plan. The number of shares available for
issuance under the Plan shall not be reduced to reflect any dividends or
dividend equivalents that are reinvested into additional shares or credited as
additional Restricted Stock, Stock Units, Performance Shares or Performance
Units. All shares issued under the Plan shall be authorized and unissued shares.
 
            (b) The Committee shall have the authority to grant Awards as an
alternative to or as the form of payment for grants or rights earned or due
under other compensation plans or arrangements of the Company.
 
            (c) Notwithstanding the foregoing, the maximum number of shares that
may be issued upon the exercise of Incentive Stock Options shall be 18,939,181,
subject to adjustment as provided in Section 4.1(d); and provided, further, that
for purposes of Section 4.3, any such shares shall be counted in accordance with
the requirements of Section 162(m) of the Code.
 
      4.3   LIMITATIONS
 
            (a) Subject to adjustment as provided in Section 4.1(d), no
Participant shall be eligible to receive in any one calendar year (i) Options or
Stock Appreciation Rights under the Plan relating to more than 500,000 shares of
Common Stock or (ii) Restricted Stock, Stock Units, Performance Shares or
Performance Units under the Plan aggregating more than 200,000 shares of Common
Stock.
            (b) Subject to adjustment as provided in Section 4.1(d), the
aggregate number of shares that may be issued pursuant to Awards granted under
the Plan (other than Awards of Options or Stock Appreciation Rights) shall not
exceed 20% of the authorized number of shares pursuant to Section 4.1(a).
 
            (c) Subject to adjustment as provided in Section 4.1(d), the
aggregate number of shares that may be issued pursuant to Awards granted under
the Plan (other than Awards of Options or Stock Appreciation Rights) that (i)
are not (A) subject to restrictions based on the satisfaction of specified
performance goals or (B) granted in lieu of the payment of performance-based
cash incentive awards; or (ii) contain no restrictions or contain restrictions
based solely on continuous employment or services for less than three years
(except where Termination of Service occurs by reason of death, Retirement,
Disability or Layoff) shall not exceed 5% of the authorized number of shares
pursuant to Section 4.1(a).
 
                             SECTION 5. ELIGIBILITY
 
      An Award may be granted to any employee, officer or director of the
Company or a Related Company whom the Committee from time to time selects. The
above are "eligible persons."
 
                                SECTION 6. AWARDS
 
      6.1   FORM AND GRANT OF AWARDS
 
      The Committee shall have the authority, in its sole discretion, to
determine the type or types of Awards to be granted under the Plan. Such Awards
may be granted either alone, in addition to or in tandem with any other type of
Award.
 
      6.2   EVIDENCE OF AWARDS
 
      Awards granted under the Plan shall be evidenced by a written instrument
that shall contain such terms, conditions, limitations and restrictions as the
Committee shall deem advisable and that are not inconsistent with the Plan.
 
      6.3   DEFERRALS
 
      The Committee may permit or require a Participant to defer receipt of the
payment of any Award. If any such deferral election is permitted or required,
the Committee, in its sole discretion, shall establish rules and procedures for
such payment deferrals, which may include the grant of additional Awards or
provisions for the payment or crediting of interest or dividend equivalents,
including converting such credits to deferred stock unit equivalents.
 
                               SECTION 7. OPTIONS
 
      7.1   GRANT OF OPTIONS
 
      The Committee may grant Options designated as Incentive Stock Options or
Non-qualified Stock Options.
 
      7.2   OPTION EXERCISE PRICE
 
      The exercise price for shares purchased under an Option shall be as
determined by the Committee, but shall not be less than the Fair Market Value of
the Common Stock for the Grant Date, except in the case of Substitute Awards. In
no event shall the Committee, without the prior approval of the Company's
shareholders, cancel any outstanding Option for the purpose of reissuing the
Option to the Participant at a lower exercise price or reduce the exercise price
of an outstanding Option.
 
      7.3   TERMS OF OPTIONS
 
      Subject to earlier termination in accordance with the terms of the Plan
and the instrument evidencing the Option, the maximum term of an Option shall be
as established for that Option by the Committee or, if not so established, shall
be 10 years from the Grant Date.
 
      7.4   EXERCISE OF OPTIONS
 
            (a) The Committee shall establish and set forth in each instrument
that evidences an Option the time at which, or the installments in which, the
Option shall vest and become exercisable, any of which provisions may be waived
or modified by the Committee at any time.
 
            (b) To the extent an Option has vested and become exercisable, the
Option may be exercised in whole or from time to time in part by delivery as
directed by the Company to the Company or a brokerage firm designated or
approved by the Company of a written stock option exercise agreement or notice,
in a form and in accordance with procedures established by the Committee,
setting forth the number of shares with respect to which the Option is being
exercised, the restrictions imposed on the shares purchased under such exercise
agreement, if any, and such representations and agreements as may be required by
the Committee, accompanied by payment in full as described in Section 7.5. An
Option may be exercised only for whole shares and may not be exercised for less
than a reasonable number of shares at any one time, as determined by the
Committee.
 
      7.5   PAYMENT OF EXERCISE PRICE
 
      The exercise price for shares purchased under an Option shall be paid in
full as directed by the Company to the Company or a brokerage firm designated or
approved by the Company by delivery of consideration equal to the product of the
Option exercise price and the number of shares purchased. Such consideration
must be paid before the Company will issue the shares
 
being purchased and must be in a form or a combination of forms acceptable to
the Committee for that purchase, which forms may include: (a) check; (b) wire
transfer; (c) tendering by attestation shares of Common Stock already owned by
the Participant for at least six months (or any shorter period sufficient to
avoid a charge to the Company's earnings for financial reporting purposes) that
on the day prior to the exercise date have a Fair Market Value equal to the
aggregate exercise price of the shares being purchased under the Option; (d) to
the extent permitted by applicable law, delivery of a properly executed exercise
notice, together with irrevocable instructions to a brokerage firm designated or
approved by the Company to deliver promptly to the Company the aggregate amount
of sale or loan proceeds to pay the Option exercise price and any tax
withholding obligations that may arise in connection with the exercise, all in
accordance with the regulations of the Federal Reserve Board; or (e) such other
consideration as the Committee may permit in its sole discretion, including,
where permitted by law and the Committee, other Awards. Notwithstanding the
foregoing, if the Company becomes subject to new accounting rules applicable to
equity-based compensation, and is required to or elects to expense the cost of
Options pursuant to FAS 123 (or a successor or other standard), the Committee
shall have the sole discretion to substitute, without receiving Participant
permission, SARs paid only in stock for outstanding Options; provided, the terms
of the substituted stock SARs are the same as the terms for the Options, the
number of shares underlying the number of stock SARs equals the number of shares
underlying the Options and the difference between the Fair Market Value of the
underlying Shares and the Grant Price of the SARs is equivalent to the
difference between the Fair Market Value of the underlying Shares and the Option
Price of the Options.
 
      7.6   POST-TERMINATION EXERCISE
 
      The Committee shall establish and set forth in each instrument that
evidences an Option whether the Option shall continue to be exercisable, and the
terms and conditions of such exercise, after a Termination of Service, any of
which provisions may be waived or modified by the Committee at any time.
 
      7.7   INCENTIVE STOCK OPTIONS
 
      The terms of any Incentive Stock Options shall comply in all respects with
the provisions of Section 422 of the Code, or any successor provision, and any
regulations promulgated thereunder. Individuals who are not employees of the
Company or one of its parent or subsidiary corporations (as such terms are
defined for purposes of Section 422 of the Code) may not be granted Incentive
Stock Options. To the extent that the aggregate Fair Market Value of Common
Stock with respect to which Incentive Stock Options are exercisable for the
first time by a Participant during any calendar year exceeds $100,000 or, if
different, the maximum limitation in effect at the time of grant under the Code
(the Fair Market Value being determined as of the Grant Date for the Option),
such portion in excess of $100,000 shall be treated as Nonqualified Stock
Options.
 
                      SECTION 8. STOCK APPRECIATION RIGHTS
 
      8.1   GRANT OF STOCK APPRECIATION RIGHTS
 
      The Committee may grant stock appreciation rights ("Stock Appreciation
Rights" or "SARs") to Participants at any time. A SAR may be granted in tandem
with an Option or alone ("freestanding"). The grant price of a tandem SAR shall
be equal to the exercise price of the related Option, and the grant price of a
freestanding SAR shall be equal to the Fair Market Value of the Common Stock for
the Grant. A SAR may be exercised upon such terms and conditions and for the
term as the Committee determines in its sole discretion; provided, however,
that, subject to earlier termination in accordance with the terms of the Plan
and the instrument evidencing the SAR, the term of a freestanding SAR shall be
as established for that SAR by the Committee or, if not so established, shall be
10 years, and in the case of a tandem SAR, (a) the term shall not exceed the
term of the related Option and (b) the tandem SAR may be exercised for all or
part of the shares subject to the related Option upon the surrender of the right
to exercise the equivalent portion of the related Option, except that the tandem
SAR may be exercised only with respect to the shares for which its related
Option is then exercisable.
 
      8.2   PAYMENT OF SAR AMOUNT
 
      Upon the exercise of a SAR, a Participant shall be entitled to receive
payment from the Company in an amount determined by multiplying: (a) the
difference between the market price at which the shares of Common Stock are
trading on the New York Stock Exchange as of the time of exercise over the grant
price by (b) the number of shares with respect to which the SAR is exercised. At
the discretion of the Committee, the payment upon exercise of a SAR may be in
cash, in shares of equivalent value, in some combination thereof or in any other
manner approved by the Committee in its sole discretion.
 
                   SECTION 9. RESTRICTED STOCK AND STOCK UNITS
 
      9.1   GRANT OF RESTRICTED STOCK AND STOCK UNITS
 
      The Committee may grant Restricted Stock and Stock Units on such terms and
conditions and subject to such repurchase or forfeiture restrictions, if any
(which may be based on continuous service with the Company or a Related Company
or the achievement of any of the Performance Criteria set forth in Section
11.1), as the Committee shall determine in its sole discretion, which terms,
conditions and restrictions shall be set forth in the instrument evidencing the
Award.
 
      9.2   ISSUANCE OF SHARES
 
      Upon the satisfaction of any terms, conditions and restrictions prescribed
with respect to Restricted Stock or Stock Units, or upon a Participant's release
from any terms, conditions and restrictions of Restricted Stock or Stock Units,
as determined by the Committee, and subject to the provisions of Section 13, (a)
the shares of Restricted Stock covered by each Award of Restricted Stock shall
become freely transferable by the Participant, and (b) Stock Units shall be paid
in cash, shares of Common Stock or a combination of cash and shares of Common
Stock as the Committee shall determine in its sole discretion. Any fractional
shares subject to such Awards shall be paid to the Participant in cash.
 
      9.3   DIVIDENDS AND DISTRIBUTIONS
 
      Participants holding shares of Restricted Stock or Stock Units may, if the
Committee so determines, be credited with dividends paid with respect to the
underlying shares or dividend equivalents while they are so held in a manner
determined by the Committee in its sole discretion. The Committee may apply any
restrictions to the dividends or dividend equivalents that the Committee deems
appropriate. The Committee, in its sole discretion, may determine the form of
payment of dividends or dividend equivalents, including cash, shares of Common
Stock, Restricted Stock or Stock Units.
 
              SECTION 10. PERFORMANCE SHARES AND PERFORMANCE UNITS
 
      10.1  GRANT OF PERFORMANCE SHARES
 
      The Committee may grant Awards of performance shares ("Performance
Shares") and designate the Participants to whom Performance Shares are to be
awarded and determine the number of Performance Shares, the length of the
performance period and the other terms and conditions of each such Award. Each
Award of Performance Shares shall, upon the attainment of performance goals and
other terms and conditions specified by the Committee, entitle the Participant
to a payment in the form established by the Committee. The form of payment may
be in cash, shares of Common Stock, Options, Share Appreciation Rights,
Restricted Stock or other awards or any combination of cash, shares of Common
Stock, Share Appreciation Rights, Restricted Stock or other awards.
Notwithstanding satisfaction of any performance goals, the number of shares of
Common Stock issued under an Award of Performance Shares may be adjusted on the
basis of such further consideration as the Committee shall determine in its sole
discretion. However, the Committee may not, in any event, increase the number of
shares of Common Stock earned upon satisfaction of any performance goal by any
Covered Employee.
 
      10.2  GRANT OF PERFORMANCE UNITS
 
      The Committee may grant Awards of performance units ("Performance Units")
and designate the Participants to whom Performance Units are to be awarded and
determine the number of Performance Units and the terms and conditions of each
such Award. Performance Units shall entitle the Participant to a payment in cash
upon the attainment of performance goals and other terms and conditions
specified by the Committee. Notwithstanding the satisfaction ofany performance goals, the amount to be paid under an Award of Performance Units
may be adjusted on the basis of such further consideration as the Committee
shall determine in its sole discretion. However, the Committee may not, in any
event, increase the amount earned under Awards of Performance Units upon
satisfaction of any performance goal by any Covered Employee, and the maximum
amount earned by such Covered Employee in any calendar year may not exceed
$5,000,000. The Committee, in its discretion, may substitute actual shares of
Common Stock for the cash payment otherwise required to be made to a Participant
pursuant to a Performance Unit.
 
                        SECTION 11. PERFORMANCE CRITERIA
 
      11.1  AWARDS SUBJECT TO PERFORMANCE GOALS
 
      Awards of Restricted Stock, Stock Units, Performance Shares, Performance
Units and other Awards made pursuant to the Plan may be made subject to the
attainment of performance goals relating to one or more of the following
business criteria within the meaning of Section 162(m) of the Code: profits
(including, but not limited to, profit growth, net operating profit or economic
profit); profit-related return ratios; return measures (including, but not
limited to, return on assets, capital, equity or sales); cash flow (including,
but not limited to, operating cash flow, free cash flow or cash flow return on
capital); earnings (including, but not limited to, earnings growth, net
earnings, earnings per share, or earnings before or after taxes); net sales
growth; net income (before or after taxes, interest, depreciation and/or
amortization); gross or operating margins; productivity ratios; share price
(including, but not limited to, growth measures and total shareholder return);
expense targets; margins; cost reduction; cash value added; operating
efficiency; customer satisfaction; and working capital targets ("Performance
Criteria"). Performance Criteria may be stated in absolute terms or relative to
comparison companies or indices to be achieved during a period of time.
 
      11.2  USE AND CALCULATION OF PERFORMANCE CRITERIA
 
      Any Performance Criteria may be used to measure the performance of the
Company as a whole or any business unit of the Company. Any Performance Criteria
may include or exclude Non-recurring Items. Performance Criteria shall be
calculated in accordance with (a) the Company's financial statements or
generally accepted accounting principles, or (b) under a methodology established
by the Committee prior to the issuance of an Award that is consistently applied
and identified in the audited financial statements, including footnotes, or the
Management's Discussion and Analysis section of the Company's annual report. The
Committee may not in any event increase the amount of compensation payable to a
Covered Employee upon the satisfaction of any Performance Criteria.
 
                  SECTION 12. OTHER STOCK OR CASH BASED AWARDS
 
      In addition to the Awards described in Sections 7 through 10, and subject
to the terms of the Plan, the Committee may grant other incentives payable in
cash or in shares of Common Stock under the Plan as it determines to be in the
best interests of the Company and subject to such other terms and conditions as
it deems appropriate; provided, however, that the maximum
 
amount that any Participant shall be eligible to receive in any one calendar
year shall be $5,000,000.
 
                             SECTION 13. WITHHOLDING
 
            (a) The Company may require the Participant to pay to the Company
the amount of (i) any taxes that the Company is required by applicable federal,
state, local or foreign law to withhold with respect to the grant, vesting or
exercise of an Award ("tax withholding obligations") and (ii) any amounts due
from the Participant to the Company or to any Related Company ("other
obligations"). The Company shall not be required to issue any shares of Common
Stock under the Plan until such tax withholding obligations and other
obligations are satisfied.
 
            (b) The Committee may permit or require a Participant to satisfy all
or part of his or her tax withholding obligations and other obligations by (i)
paying cash to the Company, (ii) having the Company withhold an amount from any
cash amounts otherwise due or to become due from the Company to the Participant,
(iii) having the Company withhold a number of shares of Common Stock that would
otherwise be issued to the Participant (or become vested in the case of
Restricted Stock) having a Fair Market Value equal to the tax withholding
obligations and other obligations (up to the employer's minimum required tax
withholding rate if such a limitation is necessary to avoid a charge to the
Company for financial reporting purposes), or (iv) surrendering a number of
shares of Common Stock the Participant already owns having a value equal to the
tax withholding obligations and other obligations (up to the employer's minimum
required tax withholding rate to the extent the Participant has owned the
surrendered shares for less that six months if such a limitation is necessary to
avoid a charge to the Company for financial reporting purposes).
 
                            SECTION 14. ASSIGNABILITY
 
      No Award or interest in an Award may be sold, assigned, pledged (as
collateral for a loan or as security for the performance of an obligation or for
any other purpose) or transferred by the Participant or made subject to
attachment or similar proceedings otherwise than by will or by the applicable
laws of descent and distribution, except that to the extent permitted by the
Committee, in its sole discretion, a Participant may designate one or more
beneficiaries on a Company-approved form who may receive payment under an Award
after the Participant's death. During a Participant's lifetime, an Award may be
exercised only by the Participant.
 
                      SECTION 15. AMENDMENT AND TERMINATION
 
      15.1  AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
 
      The Board or the Compensation Committee of the Board may amend, suspend or
terminate the Plan or any portion of the Plan at any time and in such respects
as it shall deem advisable; provided, however, that, to the extent required by
applicable law, regulation or stock exchange rule, shareholder approval shall be
required for any amendment to the Plan.
 
 
      15.2  TERM OF THE PLAN
 
      Unless sooner terminated as provided herein, the Plan shall terminate on
April 13, 2013. After the Plan is terminated, no future Awards may be granted,
but Awards previously granted shall remain outstanding in accordance with their
applicable terms and conditions and the Plan's terms and conditions.
Notwithstanding the foregoing, no Incentive Stock Options may be granted more
than 10 years after April 13, 2004.
 
      15.3  CONSENT OF PARTICIPANT
 
      The amendment, suspension or termination of the Plan or a portion thereof
or the amendment of an outstanding Award shall not, without the Participant's
consent, materially adversely affect any rights under any outstanding Award
under the Plan. Any change or adjustment to an outstanding Incentive Stock
Option shall not, without the consent of the Participant, be made in a manner so
as to constitute a "modification" that would cause such Incentive Stock Option
to fail to continue to qualify as an Incentive Stock Option. Notwithstanding the
foregoing, any adjustments made pursuant to Section 4.1 shall not be subject to
these restrictions.
 
                               SECTION 16. GENERAL
 
      16.1  NO INDIVIDUAL RIGHTS
 
            (a) No individual or Participant shall have any claim to be granted
any Award under the Plan, and the Company has no obligation for uniformity of
treatment of Participants under the Plan.
 
            (b) Nothing in the Plan or any Award granted under the Plan shall be
deemed to constitute an employment contract or confer or be deemed to confer on
any Participant any right to continue in the employ of, or to continue any other
relationship with, the Company or any Related Company or limit in any way the
right of the Company or any Related Company to terminate a Participant's
employment or other relationship at any time, with or without cause.
 
      16.2  ISSUANCE OF SHARES
 
            (a) Notwithstanding any other provision of the Plan, the Company
shall have no obligation to issue or deliver any shares of Common Stock under
the Plan or make any other distribution of benefits under the Plan unless, in
the opinion of the Company's counsel, such issuance, delivery or distribution
would comply with all applicable laws (including, without limitation, the
requirements of the Securities Act or the laws of any state or foreign
jurisdiction) and the applicable requirements of any securities exchange or
similar entity.
 
            (b) The Company shall be under no obligation to any Participant to
register for offering or resale or to qualify for exemption under the Securities
Act, or to register or qualify under the laws of any state or foreign
jurisdiction, any shares of Common Stock, security or interest in a security
paid or issued under, or created by, the Plan, or to continue in effect any
such registrations or qualifications if made. The Company may issue certificates
for shares with such legends and subject to such restrictions on transfer and
stop-transfer instructions as counsel for the Company deems necessary or
desirable for compliance by the Company with federal, state and foreign
securities laws. The Company may also require such other action or agreement by
the Participants as may from time to time be necessary to comply with applicable
securities laws.
 
            (c) To the extent the Plan or any instrument evidencing an Award
provides for issuance of stock certificates to reflect the issuance of shares of
Common Stock, the issuance may be effected on a non-certificated basis, to the
extent not prohibited by applicable law or the applicable rules of any stock
exchange.
 
      16.3  NO RIGHTS AS A SHAREHOLDER
 
      Unless otherwise provided by the Committee or in the instrument evidencing
the Award or in a written employment or services agreement, no Option or Award
denominated in units shall entitle the Participant to any cash dividend, voting
or other right of a shareholder unless and until the date of issuance under the
Plan of the shares that are the subject of such Award.
 
      16.4  COMPLIANCE WITH LAWS AND REGULATIONS
 
      Notwithstanding anything in the Plan to the contrary, the Committee, in
its sole discretion, may bifurcate the Plan so as to restrict, limit or
condition the use of any provision of the Plan to Participants who are officers
or directors subject to Section 16 of the Exchange Act without so restricting,
limiting or conditioning the Plan with respect to other Participants.
Additionally, in interpreting and applying the provisions of the Plan, any
Option granted as an Incentive Stock Option pursuant to the Plan shall, to the
extent permitted by law, be construed as an "incentive stock option" within the
meaning of Section 422 of the Code.
 
      16.5  PARTICIPANTS IN OTHER COUNTRIES
 
      The Committee shall have the authority to adopt such modifications,
procedures and subplans as may be necessary or desirable to comply with
provisions of the laws of other countries in which the Company or any Related
Company may operate to ensure the viability of the benefits from Awards granted
to Participants employed in such countries, to comply with applicable foreign
laws and to meet the objectives of the Plan.
 
      16.6  NO TRUST OR FUND
 
      The Plan is intended to constitute an "unfunded" plan. Nothing contained
herein shall require the Company to segregate any monies or other property, or
shares of Common Stock, or to create any trusts, or to make any special deposits
for any immediate or deferred amounts payable to any Participant, and no
Participant shall have any rights that are greater than those of a general
unsecured creditor of the Company.
      16.7  SUCCESSORS
 
      All obligations of the Company under the Plan with respect to Awards shall
be binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation,
or otherwise, of all or substantially all the business and/or assets of the
Company.
 
      16.8  SEVERABILITY
 
      If any provision of the Plan or any Award is determined to be invalid,
illegal or unenforceable in any jurisdiction, or as to any person, or would
disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or, if it cannot be so construed or deemed amended without, in
the Committee's determination, materially altering the intent of the Plan or the
Award, such provision shall be stricken as to such jurisdiction, person or
Award, and the remainder of the Plan and any such Award shall remain in full
force and effect.
 
      16.9  CHOICE OF LAW
 
      The Plan, all Awards granted thereunder and all determinations made and
actions taken pursuant hereto, to the extent not otherwise governed by the laws
of the United States, shall be governed by the laws of the State of Washington
without giving effect to principles of conflicts of law.
 
      16.10 TREATMENT OF AWARDS FOLLOWING A CHANGE IN CONTROL
 
            (a) Notwithstanding any other provision in the Plan to the contrary,
upon the occurrence of a Change in Control, unless otherwise provided in the
instrument evidencing the Award or in a written employment or other agreement
between the Participant and the Company, or specifically prohibited under
applicable laws, or by the rules and regulations of any governing governmental
agencies or national securities exchanges:
 
                  (i)   Any and all Options and Stock Appreciation Rights shall
                        become fully vested and immediately exercisable, and
                        shall remain exercisable throughout their entire term;
 
                  (ii)  Any restriction periods and restrictions imposed on
                        Restricted Stock or Stock Unit Awards that are not
                        performance-based shall lapse;
 
                  (iii) The target pay out opportunities attainable under all
                        outstanding Awards that are performance-based shall be
                        deemed to have been fully earned for the entire
                        performance period(s) and deferral or other restriction
                        shall lapse and such Awards shall be immediately settled
                        or distributed;
 
                  (iv)  The restrictions and deferral limitations and other
                        conditions applicable to any other Stock Unit Awards or
                        any other awards shall lapse, and such other Stock Unit
                        Awards or such other awards shall become free of all
                        restrictions, limitations or conditions and become fully
                        vested and transferable to the full extent of the
                        original grant.
 
            (b) Notwithstanding any other provision of the Plan, during the
60-day period from and after a Change in Control (the "Exercise Period"), if the
Committee shall determine at, or at any time after, the time of grant, a
Participant holding an Option or Stock Appreciation Right shall have the right,
whether or not the Option or Stock Appreciation Right is fully exercisable and
in lieu of the payment of the purchase price for the shares of Common Stock
being purchased under the Option or Stock Appreciation Right and by giving
notices to the Company, to elect (within the Exercise Period) to surrender all
or part of the Option or Stock Appreciation Right to the Company and to receive
cash, within 30 days of such notice, in an amount equal to the amount by which
the Change in Control Price per share on the date of such election shall exceed
the purchase price per share of Common Stock under the Option or Stock
Appreciation Right (the "spread") multiplied by the number of shares of Common
Stock granted under the Option or Stock Appreciation Right as to which the right
granted under this Section 16.10(b) shall have been exercised.
 
                           SECTION 17. EFFECTIVE DATE
 
      The Plan shall become effective (the "Effective Date") immediately
following shareholder approval of the Plan.
 
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