Exhibit 10.26
TRUST AGREEMENT
FOR THE
RAYONIER INC.
SUPPLEMENTAL SENIOR EXECUTIVE
SEVERANCE PAY PLAN
AND
THE CHANGE IN CONTROL AGREEMENT FOR
W. XXX XXXXXX
EXECUTIVE SEVERANCE TRUST
This Agreement is made this ___ day of _______________, 2001, by and
between Rayonier Inc., a North Carolina corporation (the "Company"), and
Wachovia Bank, N.A., a national banking association, as trustee hereunder
("Trustee").
WHEREAS, the Company adopted the Rayonier Inc. Supplemental Senior
Executive Severance Pay Plan effective March 1, 1994 (the "Supplemental
Severance Plan"), and on or about August 16, 2001, entered into the Change in
Control Agreement for W. Xxx Xxxxxx (the "Change in Control Agreement")
(Supplemental Severance Plan and Change in Control Agreement are each sometimes
referred to herein as a "Severance Arrangement" and, together, as the "Severance
Arrangements");
WHEREAS, the Company has incurred or expects to incur liability under
the terms of the Supplemental Severance Plan with respect to the Tier I and Tier
II executives participating in the Supplemental Severance Plan as identified on
Schedule 1 thereto from time to time (a current copy of which is attached
hereto), and also under the terms of the Change in Control Agreement with
respect to W. Xxx Xxxxxx (herein each, an "Executive" and together, the
"Executives");
WHEREAS, the Company wishes to establish a Executive Severance Trust
(hereinafter called this "Trust") and to contribute to it assets that shall be
held therein, subject to the claims of the Company's creditors in the event of
the Company's Insolvency, as herein defined, until paid to or for the benefit of
the Executives and their beneficiaries to pay any amounts due to them under the
Severance Arrangements (as hereinafter defined, "Severance Payments");
WHEREAS, it is the intention of the Company to make contributions to
this Trust to provide itself with a source of funds to provide Severance
Payments as herein provided; and
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WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of each of
the Severance Arrangements as an unfunded arrangement maintained for the purpose
of providing deferred compensation for a select group of management or highly
compensated employees for purposes of Title I of the Employee Retirement Income
Security Act of 1974.
NOW, THEREFORE, the parties do hereby establish this Trust and agree
that this Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of Trust.
----------------------
(a) The Company hereby deposits with Trustee in trust the amount of
one million dollars ($1,000,000), which together with the additional amounts to
be deposited as provided below, shall become the principal of this Trust to be
held, administered and disposed of by Trustee as provided in this Agreement.
Terms not otherwise defined herein shall have the meaning set forth in the
Supplemental Severance Plan and, in the case of W. Xxx Xxxxxx, the Change in
Control Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) This Trust is intended to be a grantor trust, of which the
Company is the grantor, within the meaning of subpart E, part I, subchapter J,
chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended (the
"Code"), and shall be construed accordingly.
(d) The principal of this Trust, and any earnings thereon, shall be
held separate and apart from other funds of the Company and, subject to Section
8 below, shall be used exclusively for the uses and purposes of the Executives
and general creditors, as herein set forth. The Executives and their
beneficiaries shall have no preferred claim on, or any beneficial ownership
interest in, any assets of this Trust. Any rights created under the Supplemental
Severance Plan, Change in Control Agreement and
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this Agreement shall be mere unsecured contractual rights of the Executives and
their beneficiaries against the Company. Any assets held by this Trust will be
subject to the claims of the Company's general creditors under federal and state
law in the event of Insolvency, as defined in Section 5 below.
(e) Without limiting the mandatory contribution provision of Section
3, the Company, in its sole discretion, may at any time, or from time to time,
make additional deposits of cash or other property in trust with Trustee to
augment the principal to be held, administered and disposed of by Trustee as
provided in this Agreement. Neither Trustee nor any Executive or beneficiary
shall have any right to compel such additional deposits.
Section 2. Addition or Removal of Executives.
---------------------------------
(a) At any time prior to a Change in Control, the Company may remove
individuals, other than W. Xxx Xxxxxx, or include additional individuals as
Executives hereunder upon written notice to Trustee together with an amended
copy of Schedule 1 to the Supplemental Severance Plan; provided that, removal of
the name of an Executive from the Supplemental Severance Plan shall not alone
operate to remove the individual as a participant hereunder. Subject to the
provisions of Section 13(c) below, the Company has agreed that from and after a
Change in Control it shall not be entitled to remove the name of any Executive
covered hereunder prior to the time that all amounts due in respect of such
Executive under the applicable Severance Arrangement shall have been fully paid
to such Executive or his or her beneficiaries.
Section 3. Covered Payments/Additional Contributions.
-----------------------------------------
(a) On the effective date hereof, and no less frequently than
annually on or before January 15 of each year thereafter, and at the time of any
additional contribution hereunder, the Company shall deliver to Trustee a
payment schedule (the "Payment Schedule") that indicates the "Cash Portion"
payable in respect of each Executive (and his or her beneficiaries) under the
applicable Severance Arrangement and that provides a
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formula or other instructions acceptable to Trustee for determining the
amounts so payable, the form in which such amount is to be paid (as provided for
or available under the applicable Severance Arrangement), and the time of
commencement for payment of such amounts. Upon the effective date hereof, and as
necessary or appropriate thereafter, the Company shall deliver to the Trustee a
full and complete copy of the Severance Arrangements as they may be in effect
from time to time for each Executive.
(b) Not later than the effective time of a Change in Control pursuant
to the terms of the applicable Severance Arrangement, the Company shall make
additional deposits with the Trustee under this Trust in immediately available
funds, in an amount equal to the full maximum amount of the Cash Portion to
which each Executive may become entitled in the event of a termination of
employment under the applicable Severance Arrangement, together with all the
additional payments in respect of tax gross up provided for under the applicable
Severance Arrangement, computed on the assumption that all amounts when payable
thereunder are parachute payments under Sections 280G and 4999 of the Code. For
this purpose, the maximum amount of the Cash Portion shall be computed on the
assumption that the bonus payments for the current year will become payable at
the 100% rate and that a like amount is earned as a bonus in each subsequent
year, as applicable under the particular Severance Arrangement.
(c) Prior to a Change in Control (and following a Change in Control,
absent obvious mistake), the entitlement of an Executive or his or her
beneficiaries to benefits under the applicable Severance Arrangement shall be
determined by the Company or such party as it shall designate under the
applicable Severance Arrangement, and, in any event, any claim for benefits
shall be considered and reviewed under the procedures set out in the applicable
Severance Arrangement.
(d) The Company may make payment of benefits directly to an Executive
as they become due under the terms of the Severance Arrangements. The Company
shall notify Trustee of its payment of benefits at the time amounts are payable
to participants
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or their beneficiaries. Upon any such payment, the Company shall provide Trustee
with a new Payment Schedule reflecting the payments made by the Company.
(e) Nothing in this Agreement shall serve to relieve the obligations
of the Company to make payments under the Severance Arrangements in respect of
an Executive prior to the time that any payment has been made to an Executive or
his or her beneficiary. If the principal of this Trust, and any earnings
thereon, are not sufficient to make payments of benefits in accordance with the
terms of the Severance Arrangements, the company shall make the balance of each
such payment as it falls due. Trustee shall notify the Company where principal
and earnings are not sufficient.
(f) Immediately upon receipt of deposits hereunder, the Trustee shall
send written notice thereof to the trustee under the Rayonier Inc. Legal
Resources Trust of such deposit, together with a copy of the then current
Payment Schedule in respect of each Executive. The Trustee shall advise the
trustee of the Rayonier Inc. Legal Resources Trust as amounts are paid under
this Trust and as notice is received from the Company of payments made to
Executives covered by this Trust of amounts that could otherwise be payable from
this Trust.
Section 4. Payment of Severance Payments to Executives.
-------------------------------------------
Pursuant to the terms of the payment schedules delivered to the Trustee
in respect of the Supplemental Severance Plan and the Change in Control
Agreement, the Trustee shall direct payment of any Cash Portion due to an
Executive or his or her beneficiaries from the assets held in this Trust. Such
payments shall be reduced by any payments made directly to an Executive by the
Company as provided in Section 3 (c) hereof. The termination of the employment
of an Executive following the effective time of a change in control and, in the
case of any Executive other than W. Xxx Xxxxxx, within two years thereafter
shall be deemed conclusive evidence of entitlement of such Executive to the Cash
Portion of the Severance Payment.
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Section 5. Trustee Responsibility Regarding Payments to Trust
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Beneficiary When The Company Is Insolvent.
-----------------------------------------
(a) Trustee shall cease payments hereunder if the Company is
Insolvent. The Company shall be considered "Insolvent" for purposes of this
Agreement if (i) the Company is unable to pay its debts as they become due, or
(ii) the Company is subject to a pending proceeding as a debtor under the United
States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of this Trust shall be subject to
claims of general creditors of the Company under federal and state law as set
forth below.
(1) The Board of Directors and the Chief Executive Officer of
the Company shall have the duty to inform Trustee in writing of the Company's
Insolvency. If a person claiming to be a creditor of the Company alleges in
writing to Trustee that the Company has become Insolvent, Trustee shall
determine whether the Company is Insolvent and, pending such determination,
Trustee shall discontinue Severance Payments to Executives or their
beneficiaries.
(2) Unless Trustee has actual knowledge of the Company's
Insolvency, or has received notice from the Company or a person claiming to be a
creditor alleging that the Company is Insolvent, Trustee shall have no duty to
inquire whether the Company is Insolvent. Trustee may in all events rely on such
evidence concerning the Company's solvency as may be furnished to Trustee and
that provides Trustee with a reasonable basis for making a determination
concerning the Company's solvency.
(3) If at any time Trustee has determined that the Company is
Insolvent, Trustee shall discontinue payments hereunder and shall hold the
assets of this Trust for the benefit of the Company's general creditors. Nothing
in this Agreement shall in any way diminish any rights of Executives or their
beneficiaries to pursue their rights
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as general creditors of the Company with respect to severance payments due under
the Severance Arrangements or otherwise.
(4) Trustee shall resume the payments in accordance with
Section 3 of this Agreement only after Trustee has determined that the Company
is not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment from this Trust pursuant to this Section 5 and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due under the
terms hereof for the period of such discontinuance, less the aggregate amount,
if any, paid directly to Executives or their beneficiaries by the Company in
lieu of the payments provided for hereunder during any such period of
discontinuance.
Section 6. Payments to the Company.
-----------------------
Except as provided in Section 5 hereof, after a Change in Control, the
Company shall have no right or power to direct Trustee to return to the Company
or to divert to others any of this Trust assets before all payment of benefits
have been made to Executives and their beneficiaries pursuant to the terms of
the Severance Arrangements.
Notwithstanding the preceding sentence, in the event of a deposit by
the Company with the Trustee under Section 3 as a result of a Change-in-Control
based upon a change in the ownership of voting securities of the Company, where
a Change-in-Control as a result of a change in the composition of the Board of
Directors has not occurred within two years thereafter (or such longer time
period during which Severance Payments could become payable under the Severance
Arrangements following a Change-in-Control), the Trustee shall return to the
Company any amounts deposited with the Trustee in respect of the
Change-in-Control; provided that, no one shall have become entitled to any
Severance Payment under Section 4 during such time period. Upon any such return
of funds to the Company, the Company shall again be obligated to deposit funds
under Section 3 upon the occurrence of a subsequent Change-in-Control.
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Section 7. Investment Authority.
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(a) In no event may Trustee invest in securities (including stock or
rights to acquire stock) or obligations issued by the Company, other than a de
minimis amount held in common investment vehicles in which Trustee invests. All
rights associated with assets of this Trust shall be exercised by Trustee or the
person designated by Trustee and shall in no event be exercisable by or rest
with the Executives.
(b) The Trustee shall invest the principal of this Trust and any
earnings thereon in such short-term investments designed to preserve capital as
chosen by the Trustee in the prudent exercise of its fiduciary duty hereunder;
provided that, with respect to any deposits made prior to a Change in Control,
the Trustee shall invest the Trust principal and earnings in such a manner as
directed by the Pension Fund Trust and Investment Committee.
(c) The Company shall have the right, at anytime, and from time to
time in its sole discretion, to substitute marketable securities of equal fair
market value for any asset held by this Trust; provided that, following a Change
in Control, such substitution of assets shall be subject to the acceptance of
Trustee.
Section 8. Disposition of Income.
---------------------
During the term of this Trust prior to a Change in Control, all
Distributable Income received by this Trust, net of expenses and taxes, shall be
distributed to the Company no less frequently than semi-annually, unless
otherwise directed by the Company, and from and after a Change in Control shall
be accumulated and reinvested. "Distributable Income" shall mean gain or income
actually realized on the amounts held in Trust but only to the extent that the
aggegregate fair market value of the assets held in Trust following the
distribution of such amounts and payment of all expenses of this Trust paid or
accrued as of the distribution date not otherwise satisfied by the Company,
would equal or exceed the principal amounts deposited by the Company with
Trustee under Section 1(a).
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Section 9. Accounting by Trustee.
---------------------
Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between the
Company and Trustee. Within 30 days following the close of each calendar year
and within 30 days after the removal or resignation of Trustee, Trustee shall
deliver to the Company a written account of its administration of this Trust
during such year or during the period from the close of the last preceding year
to the date of such removal or resignation, setting forth all investments,
receipts, disbursements and other transactions effected by it, including a
description of all securities and investments purchased and sold with the cost
or net proceeds of such purchases or sales (accrued interest paid or receivable
being shown separately), and showing all cash, securities and other property
held in this Trust at the end of such year or as of the date of such removal or
resignation, as the case may be.
Section 10. Responsibility of Trustee.
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(a) Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by the Company which is contemplated by,
and in conformity with, the terms of the Severance Arrangements or this Trust
and is given in writing by the Company. In the event of a dispute between the
Company and a party, Trustee may apply to a court of competent jurisdiction to
resolve the dispute.
(b) The Company hereby indemnifies Trustee against losses,
liabilities, claims, costs and expenses in connection with the administration of
this Trust, unless resulting from the gross negligence or willful misconduct of
Trustee. To the extent the Company fails to make any payment on account of an
indemnity provided in this Section 10(b), in a reasonably timely manner, Trustee
may obtain payment from this Trust. If Trustee undertakes or defends any
litigation arising in connection with this Trust or to
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protect an Executive's or beneficiary's rights under the Severance Arrangements,
the Company agrees to advance to Trustee, and to indemnify Trustee against
Trustee's costs, reasonable expenses and liabilities (including, without
limitation, attorneys' fees and expenses) relating thereto and to be primarily
liable for such payments. If the Company does not pay such costs, expenses and
liabilities in a reasonably timely manner, Trustee may obtain payment from this
Trust.
(c) Trustee may consult with legal counsel (who may also be counsel
for the Company generally) with respect to any of its duties or obligations
hereunder. Following a Change in Control, Trustee may select independent legal
counsel (which can include its in-house counsel) and may consult with counsel or
other experts with respect to its duties and with respect to the rights of
Executives and their beneficiaries under the Severance Arrangements.
(d) Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder and in good faith may rely
on any determinations made by such agents and information provided to it by the
Company.
(e) Trustee shall have, without exclusion, all powers conferred on
trustees by applicable law, unless expressly provided otherwise herein.
(f) Notwithstanding any powers granted to Trustee pursuant to this
Agreement or to applicable law, Trustee shall not have any power that could give
this Trust the objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Code.
Section 11. Compensation and Expenses of Trustee and Resignation and
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Removal of Trustee.
------------------
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(a) The Company shall timely pay all administrative and Trustee's fees and
expenses. If not so paid, the fees and expenses shall be paid from this Trust.
(b) Prior to a Change in Control, Trustee may resign at any time by written
notice to the Company, which shall be effective sixty (60) days after receipt of
such notice unless the Company and Trustee agree otherwise. Following a Change
in Control, Trustee may resign only after the appointment of a successor Trustee
reasonably acceptable to a majority of the Executives hereunder. If Trustee
resigns within two years after a Change in Control or if the Company fails to
act within a reasonable period of time following such resignation, Trustee shall
apply, at the expense of the Company, to a court of competent jurisdiction for
the appointment of a successor Trustee or for instructions.
(c) Trustee may be removed by the Company on sixty (60) days notice or upon
shorter notice accepted by Trustee prior to a Change in Control. Following a
Change in Control, Trustee may only be removed by the Company with the consent
of a majority of the Executives hereunder and upon appointment of a qualified
successor Trustee hereunder reasonably acceptable to the majority of the
Executives hereunder.
(d) Upon resignation or removal of Trustee and appointment of a successor
Trustee, all assets shall subsequently be transferred to the successor Trustee.
The transfer shall be completed with sixty (60) days after receipt of acceptance
of an appointment as trustee by a successor trustee, unless the Company extends
the time limit.
(e) If Trustee resigns or is removed, a successor shall be appointed by the
Company, in accordance with Section 12 hereof, by the effective date of
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resignation or removal under this Section 11. If no such appointment has been
made, Trustee may apply to a court of competent jurisdiction for appointment of
a successor or for instructions. All expenses of Trustee in connection with the
proceeding shall be allowed as administrative expenses of this Trust.
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(f) Any Trustee of any trust created hereunder shall be an institution
having total assets under management of at least five hundred million dollars
($500,000,000) at the time of appointment and at all times thereafter (the
"Minimum Assets Requirement"). Should Trustee cease to have total assets of at
least five hundred million dollars ($500,000,000) under management or cease to
be so selected, Trustee shall be removed and a successor Trustee appointed in
accordance with the provisions of Sections 10 and 11 hereof.
Section 12. Appointment of Successor.
------------------------
(a) If Trustee resigns or is removed in accordance with Section 11 hereof,
the Company may appoint any bank trust department or other party that may be
granted corporate trustee powers under state law who meets the Minimum Assets
Requirement, as a successor to replace Trustee upon resignation or removal (a
"Qualified Trustee"); provided that, following a Change in Control, if Trustee
resigns or is removed in accordance with Section 11 the successeor trustee shall
be reasonably acceptable to a majority of the Executives hereunder at the time.
In any such event, the appointment shall be effective when accepted in writing
by the new Trustee, who shall have all of the rights and powers of the former
Trustee, including ownership rights in this Trust . The former Trustee shall
execute any instrument necessary or reasonably requested by the Company or the
successor Trustee to evidence the transfer.
(b) The successor Trustee need not examine the records and acts of any
prior Trustee and may retain or dispose of existing Trust assets, subject to
Sections 9 and 10 hereof. The successor Trustee shall not be responsible for and
the Company shall indemnify and defend the successor Trustee from any claim or
liability resulting from any action or inaction of any prior Trustee or from any
other past event, or any condition existing at the time it becomes successor
Trustee.
(c) The Company shall provide the name of the successor Trustee to each
Executive, or if applicable, his or her beneficiaries receiving benefits at the
time of the appointment of Trustee.
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(d) The Company shall execute such indemnification or other agreement with
Trustee as may be reasonably requested and customary for trustees performing
services of this kind.
Section 13. Amendment or Termination.
------------------------
(a) This Agreement may be amended by a written instrument executed by
Trustee and the Company. Notwithstanding the foregoing, no such amendment shall
conflict with the terms of the Severance Arrangements or shall make this Trust
revocable after it has become irrevocable in acordance with Section 1 hereof.
(b) Except as provided in Section 13(c), this Trust shall not terminate
until the date on which each Executive and their beneficiaries are no longer
entitled to benefits pursuant to the terms of the Severance Arrangements and all
fees and expenses of this Trust have been paid.
(c) Upon written approval of all Executives and beneficiaries entitled to
payment of benefits pursuant to the terms of the Severance Arrangements, the
Company may terminate this Trust prior to the time all benefit payments under
the Severance Arrangements have been made.
(d) This Agreement may not be amended or terminated by the Company for two
(2) years following a Change in Control without the written consent of a
majority of the Executives then covered by this Agreement except, if in the
opinion of Review Counsel (as such term is defined in Schedule 3 hereto), such
amendment is necessary to maintain the tax status of this Trust, the deferred
compensation status of the Severance Arrangements, or status of this Trust under
the Employee Retirement Income Security Act of 1974 as amended to this Trust.
(e) Upon termination of this Trust any assets remaining in this Trust,
after payment of all expenses of this Trust, shall be returned to the Company.
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Section 14. Miscellaneous.
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(a) Any provision of this Agreement prohibited by law shall be ineffective
to the extent of any such prohibition, without invalidating the remaining
provisions hereof.
(b) Benefits payable to any Executive and his or her beneficiaries under
this Agreement may not be anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of North Carolina, to the extent not preempted by
applicable federal law.
Section 15. Effective Date.
--------------
The effective date of this Agreement shall be the date and year first above
written.
RAYONIER INC.
By: _____________________________
Xxxx X. X'Xxxxx
Its: Senior Vice President
Administration
_____________________________
, as Trustee
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