Exhibit 10.2

 

Rayonier Inc.

Executive Severance Pay Plan

 

Human Resources

September 2005

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RAYONIER INC.

 

EXECUTIVE SEVERANCE PAY PLAN

 

1. Purpose

 

The Compensation and Management Development Committee of the Board of Directors
of Rayonier Inc. recognizes that, as with many publicly held corporations, there
exists the possibility of a Change in Control of the Company. This possibility
and the uncertainty it creates may result in the loss or distraction of senior
executives of the Company, to the detriment of the Company and its shareholders.

 

Accordingly, the Committee has determined that appropriate steps should be taken
to assure the Company of the continued employment, attention and dedication to
duty of its senior executives-including maintaining professionalism,
indifference and objectivity in negotiating with a potential acquirer and to
seek to ensure the availability of their continued service, notwithstanding the
possibility, threat, or occurrence of a Change in Control.

 

Therefore, in order to fulfill the above purposes, this Executive Severance Pay
Plan is adopted effective as specified in Section 17.

 

The definitions of capitalized terms are located in Section 8.

 

2. Covered Employees

 

Covered employees under this Plan are those full-time, regular executive
salaried employees of the Company, who are identified and designated as Tier I
or Tier II on Appendix A attached hereto (each an “Executive”), as such Appendix
A may be amended by the Committee from time to time prior to a Change in
Control.

 

An Executive shall cease to be a participant in this Plan only as a result of
termination or amendment of this Plan complying with Section 13, or when he or
she ceases to be a full time employee of the Company, unless, at the time he or
she ceases to be an employee, such Executive is entitled to payment of
Separation Benefits as provided in this Plan or there has been an event or
occurrence that constitutes Good Reason after a Change in Control that would
enable Executive to terminate his or her employment and receive Separation
Benefits. An Executive entitled to payment of Separation Benefits under the Plan
shall remain a participant in the Plan until the full amount of the Separation
Benefits has been paid to Executive.

 

3. Upon a Qualifying Termination

 

A.

Qualifying Termination. If, within two years following a Change in Control,
(a) an Executive terminates his or her full time employment for Good Reason, or
(b) the Company terminates an Executive’s full time employment, the Executive
shall be provided Scheduled Severance Pay and Additional Severance
(collectively, “Separation

 

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Benefits”) in accordance with the terms of this Plan, except that Separation
Benefits shall not be payable where Executive:

 

  •   is terminated for Cause;

 

  •   voluntarily resigns (including normal retirement), other than for Good
Reason;

 

  •   voluntarily fails to return from an approved leave of absence (including a
medical leave of absence); or

 

  •   terminates employment as a result of Executive’s death or Disability.

 

Any non-excepted termination is a “Qualifying Termination.”

 

B. Definitions Related to Qualifying Termination. For purposes of this
Section 3, the following terms have the indicated definitions:

 

“Cause” shall mean with respect to any Executive: (i) the willful and continued
failure of Executive for a period of ninety (90) days to perform substantially
Executive’s duties with the Company (other than any such failure resulting from
incapacity due to physical or mental illness), after a written demand for
substantial performance is delivered to Executive by the Board of Directors of
the Company that specifically identifies the manner in which the Board believes
that Executive has not substantially performed Executive’s duties, or (ii) the
engaging by Executive in illegal conduct or gross misconduct that is
demonstrably injurious to the Company. For purposes of this definition, no act
or failure to act on the part of Executive shall be considered “willful” unless
it is done, or omitted to be done, by Executive without reasonable belief that
Executive’s action or omission was in the best interests of the Company. Any act
or failure to act based upon authority given pursuant to a resolution duly
adopted by the Board of Directors or upon the instructions of the Chief
Executive Officer or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by Executive in good faith and, in the best interests of the Company.
An Executive shall be deemed to have engaged in illegal conduct and shall be
subject to termination for Cause if Executive has been indicted or charged by
any prosecuting agency with the commission of a felony.

 

“Disability” shall mean an illness or injury that has prevented Executive from
performing his or her duties (as they existed immediately prior to the illness
or injury) on a full-time basis for 180 consecutive business days.

 

“Good Reason” shall mean, with respect to any Executive: (i) the assignment to
Executive of any duties inconsistent in any respect with Executive’s position
(including status, offices, titles and reporting requirements), authority,
duties or responsibilities immediately before the Change in Control, or any
other action by the Company that results in a significant diminution in such
position, authority, duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith and which
is remedied by the Company promptly after receipt of notice thereof given by
Executive; (ii) any material reduction in Executive’s Base Pay, opportunity to

 

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earn annual bonuses or other compensation or employee benefits, other than as a
result of an isolated and inadvertent action not taken in bad faith and that is
remedied by the Company promptly after receipt of notice thereof given by
Executive; (iii) the Company’s requiring Executive to relocate his or her
principal place of business to a place which is more than thirty-five (35) miles
from his or her previous principal place of business; or (iv) any purported
termination of this Plan otherwise than as expressly permitted by this Plan. For
purposes of this Plan, any good faith determination of Good Reason made by
Executive shall be conclusive.

 

4. Plan Benefits

 

For purposes of this Plan, “Plan Benefits” consist of (i) Scheduled Severance
Pay calculated as provided in Section 4A, (ii) Additional Severance calculated
as provided in Section 4B and Section 4C, (iii) the Single Trigger Benefits as
provided in Section 4D, and (iv) certain additional amounts provided for in
Section 7. The Company shall pay the Scheduled Severance Pay and Additional
Severance to Executive in a lump sum not later than 10 days after the Effective
Date of the Executive’s Qualifying Termination. The Company shall pay the Single
Trigger Benefits as provided in Section 4D upon a Change in Control and, if
applicable, the additional amounts as provided in Section 7.

 

A. An Executive’s “Scheduled Severance Pay” is the product of the Executive’s
Base Pay times the Executive’s Applicable Tier Multiplier.

 

B. An Executive’s “Additional Severance” is the sum of the Executive’s Benefits
Continuation Amount, calculated as provided in Section 4C below, and the
Executive’s Bonus Severance, calculated as provided in this Section 4B.

 

  (i) An Executive’s “Bonus Severance” is the product of the Executive’s
Applicable Bonus times the Executive’s Applicable Tier Multiplier, together with
an additional amount equal to the Executive’s Current Pro-rata Bonus.

 

  (1) An Executive’s “Applicable Bonus” is the greatest of (A) the highest bonus
amount actually paid to the Executive under the Rayonier annual incentive bonus
plan (the “Bonus Plan”) in the three year period comprised of the year of the
Qualifying Termination and the two immediately preceding calendar years, (B) the
Executive’s Target Bonus Award under the Bonus Plan for the year in which the
Change in Control takes place or (C) the Executive’s Target Bonus Award under
the Bonus Plan in the year of Qualifying Termination. The Executive’s Applicable
Bonus shall be determined without regard to any election the Executive may have
made to defer receipt of all or any portion thereof as if there had been no
deferral election in effect.

 

  (2) An Executive’s “Current Pro-rata Bonus” is equal to the product of the
Executive’s Applicable Bonus times a fraction the numerator of which is the
number of months or portion thereof lapsed in the then current year prior to the
Qualifying Termination and the denominator of which is twelve.

 

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C. Benefits Continuation Amounts. The Executive’s Benefits Continuation Amount
is the sum of the Executive’s Retirement Savings Adjustment and Other Benefits
Adjustment. The Executive’s Retirement Savings Adjustment shall be in addition
to amounts to which Executive is entitled under the Retirement Plan for Salaried
Employees of Rayonier Inc., the Retirement Plan for Salaried Employees of ITT
Corporation, the Rayonier Investment and Savings Plan for Salaried Employees and
the Supplemental Plans (collectively, the “Retirement Plans”), in effect on the
Effective Date of the Qualifying Termination. (Capitalized terms in this
Section 4C that are not otherwise defined here or elsewhere in this Plan shall
have the meaning ascribed to them in the applicable Retirement Plans.)

 

  (i) An Executive’s “Retirement Savings Adjustment” is an amount equal to the
excess of (X) over (Y), where (X) is the “Equivalent Actuarial Value” of the
benefit to which Executive would have been entitled under the terms of the
Retirement Plans, without regard to “vesting” thereunder, had Executive
accumulated an additional 3 years of eligibility service as a fully vested
participant in the Retirement Plans and an additional 3 years of benefit service
in all the Retirement Plans other than the Retirement Plan for Salaried
Employees of ITT Corporation and the ITT Supplemental Plans and as if Executive
were 3 years older, solely for purposes of benefit eligibility and determining
the amount of reduction in benefit on account of payment commencing prior to the
Executive’s normal retirement date, and by defining Executive’s “Final Average
Compensation” as equal to the greater of Executive’s Base Pay on the Effective
Date of Executive’s Qualifying Termination or Executive’s Final Average
Compensation as determined under the terms of the Retirement Plan for Salaried
Employees of Rayonier Inc., and (Y) is the Equivalent Actuarial Value of the
amounts otherwise actually payable to Executive under the Retirement Plans. The
Equivalent Actuarial Value shall be determined using the same assumptions
utilized under the Rayonier Inc. Excess Benefit Plan upon the date of payment of
the Benefits Continuation Amount and based on Executive’s age on such date.

 

Notwithstanding the foregoing, for purposes of calculating the Retirement
Savings Adjustment, Executive shall not be required to contribute to the
Rayonier Investment and Savings Plan for Salaried Employees (the “Savings Plan”)
or the Rayonier Inc. Excess Savings and Deferred Compensation Plan (the “Excess
Plan”) as a condition to receiving the Retirement Savings Adjustment nor shall
the Company be required to include in the Retirement Savings Adjustment amounts
attributable to contributions Executive would have made under the Savings Plan
or the Excess Plan had Executive continued to participate in those plans. The
Company shall only be obligated to include in the Retirement Savings Adjustment
the Company contributions that would have been made under the Savings Plan and
the Excess Plan had Executive continued to participate in those plans at the
level of compensation and rate of contribution in effect as of the pay date
immediately preceding the Effective Date of the Qualifying Termination, without
allocating any deemed earnings to said Company contributions.

 

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  (ii) Other Benefits Adjustment. The “Other Benefits Adjustment” is an amount
equal to the sum of the Medical Benefits Payment, the Executive Tax Services
Payment and the Outplacement Services, determined as provided in subsections (1)
- (3) below.

 

  (1) An Executive’s “Medical Benefits Payment” is the product of the employer
contribution component of the health and welfare plans maintained for the
Executive as of the Change in Control under the applicable employee welfare
benefit plan (within the meaning of Section 3(1) of ERISA) maintained by the
Company for the benefit of the Company’s employees at such date, times the
Executive’s Applicable Tier Multiplier, discounted for present value applying a
4% discount rate.

 

  (2) An Executive’s “Executive Tax Services Payment” means $10,000 in the case
of a Tier II Executive and, in the case of a Tier I Executive, the amount that
otherwise would be payable for one year under the Company’s Senior Executive Tax
Plan (or any successor thereto), as applicable to the Executive immediately
prior to the Change in Control, together with an amount equal to any Senior
Executive Tax Plan benefits accrued but unpaid as of the Effective Date of the
Qualifying Termination.

 

  (3) “Outplacement Services” means the cost of outplacement services, the scope
and provider of which shall be selected by Executive in his or her sole
discretion, for a period not to extend beyond twelve (12) months after the
Effective Date of Executive’s Qualifying Termination, in an amount not to exceed
$30,000 in the aggregate.

 

D. Single Trigger Benefits. Company shall provide to Executive the following
additional benefits upon a Change in Control, and without regard to whether or
not there has been, or there subsequently occurs, a Qualifying Termination with
respect to the Executive, to the extent not actually provided under an
Applicable Incentive Stock Plan of the Company (collectively, the “Single
Trigger Benefits”). Terms used in this Section 4D not otherwise defined in this
Plan shall have the meaning assigned in the Applicable Incentive Stock Plan.

 

  (i) Options. The Company shall cause (a) all of the options to purchase the
Common Shares of the Company (“Stock Options”) granted to Executive prior to the
Change in Control by the Company to become immediately exercisable in full in
accordance with the terms of the Applicable Incentive Stock Plan pursuant to
which they were issued (provided that no Stock Option shall be exercisable after
the termination date of such Stock Option), and (b) Limited Stock Appreciation
Rights as such term is defined in the Applicable Incentive Stock Plan to be
provided in respect of such Stock Options in accordance with the Applicable
Incentive Stock Plan to the same extent and in the same amount as provided for
under such Incentive Stock Plan as in effect immediately prior to the Change in
Control.

 

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  (ii) Restricted Stock. The Company shall (a) cause Executive to immediately
vest in all outstanding shares of Restricted Stock that were the subject of an
Award under an Incentive Stock Plan of the Company which Restricted Stock is
held by or for the benefit of the Executive immediately prior to the Change in
Control without any remaining restrictions other than those imposed by
applicable securities laws, (b) issue stock certificates in respect thereof to
Executive without a restrictive legend and (c) permit Executive to tender within
60 days of the Change in Control all such Restricted Stock to the Company and in
the event of such a tender forthwith pay to the Executive the Formula Price
therefore.

 

  (iii) Performance Share Awards. In the event of a Change in Control, Awards of
“Performance Shares” under all “Performance Share Award Programs” shall be
settled as follows: (a) with respect to any Award for which the applicable
Performance Period is more than 50% completed, the Performance Period shall be
deemed to end as of the Change in Control and the Executive shall receive the
greater of (1) the Award resulting from utilizing the Formula Price in
calculating total shareholder return for the Company for purposes of measuring
Company performance with that of the comparison group under the applicable
program, and (2) the Award at 100% of target performance under the applicable
program; and (b) with respect to any Award as to which the applicable
Performance Period is not more than 50% completed, the Executive shall receive
the Award at 100% of target performance under the applicable program.
Performance Shares due hereunder shall be settled in cash and paid on the basis
of the Formula Price.

 

  (iv) Coordination with Incentive Stock Plans. Any amounts paid hereunder shall
be an offset against amounts otherwise due from the Company under the Applicable
Incentive Stock Plan in respect of the same Award covered herein.

 

5. Dispute Resolution.

 

A. If there has been a Change in Control and any dispute arises between
Executive and the Company as to the validity, enforceability and/or
interpretation of any right or benefit afforded by this Plan, at Executive’s
option such dispute shall be resolved by binding arbitration proceedings in
accordance with the rules of the American Arbitration Association. The
arbitrators shall presume that the rights and/or benefits afforded by this Plan
which are in dispute are valid and enforceable and that Executive is entitled to
such rights and/or benefits. The Company shall be precluded from asserting that
such rights and/or benefits are not valid, binding and enforceable and shall
stipulate before such arbitrators that the Company is bound by all the
provisions of this Plan. The burden of overcoming by clear and convincing
evidence the presumption that Executive is entitled to such rights and/or
benefits shall be on the Company. The results of any arbitration shall be
conclusive on both parties and shall not be subject to judicial interference or
review on any ground whatsoever, including without limitation any claim that the
Company was wrongfully induced to enter into this agreement to arbitrate such a
dispute.

 

The Company shall pay the cost of any arbitration proceedings under this Plan.
Executive shall be entitled (within two (2) business days of requesting such
advance) to an advance

 

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of the actual legal fees and expenses incurred by such Executive in connection
with such proceedings and Executive shall be obligated to reimburse the Company
for such fees and expenses in connection with such arbitration proceedings only
if it is finally and specifically determined by the arbitrators that Executive’s
position in initiating the arbitration was frivolous and completely without
merit.

 

B. In the event Executive is required to defend in any legal action or other
proceeding the validity or enforceability of any right or benefit afforded by
this Plan, the Company will pay any and all actual legal fees and expenses
incurred by such Executive regardless of the outcome of such action and, if
requested by Executive, shall (within two business days of such request) advance
such expenses to Executive. The Company shall be precluded from asserting in any
judicial or other proceeding commenced with respect to any right or benefit
afforded by this Plan that such rights and benefits are not valid, binding and
enforceable and shall stipulate in any such proceeding that the Company is bound
by all the provisions of this Plan.

 

C. Amounts payable by the Company under this Section 5 shall in the first
instance be paid by the trustee under the trust established by that certain
Trust Agreement, known as the “Legal Resources Trust” authorized by the
Compensation and Management Development Committee on July 20, 2001, to the
extent such amounts were previously transferred by the Company to the trustee of
the Legal Resources Trust.

 

6. Covenants of Executive.

 

A. As a condition to the receipt of a portion of the Single Trigger Benefits if
there has been no Qualifying Termination, and the other Plan Benefits if there
has been a Qualifying Termination, in either case payable in cash (such portion,
the “Covenant Amount”) and in consideration thereof, Executive shall be deemed
to have made and be bound by the “Change in Control Covenants” (defined below),
which at the request of the Company shall be acknowledged by Executive in a
simple declarative statement “I hereby confirm that I am bound by the Change in
Control Covenants” attested to in writing by the Executive. The Covenant Amount
shall be equal to so much of the identified amount payable in cash as the
Company shall designate in a written notice to Executive given within thirty
(30) days of the Change in Control and as may be adjusted upon a subsequent
Qualifying Termination; provided that, the Covenant Amount shall not exceed an
amount equal to the Base Pay of Executive immediately before the Change in
Control times the Executive’s Applicable Tier Multiplier (without regard to
whether or not there is a Qualifying Termination) and determined by the Company
in good faith to be reasonable compensation for the Change in Control Covenants.
The intention is that the amount be allocated so as to minimize the additional
amounts payable by the Company pursuant to Section 7.

 

B. The Executive’s “Change in Control Covenants” are the Non-compete Covenants
and the Confidentiality Covenants as set forth in this Section 6B.

 

  (i)

Non-compete Covenants. While employed by the Company following a Change in
Control, and for a period (the “Covenant Period”) equal to the shorter of (a)

 

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two years from the Change in Control or (b) one year following a Qualifying
Termination, Executive covenants that Executive shall not, without the prior
authorization of the Company (which shall not be unreasonably withheld):

 

  (1) accept or maintain employment with, or act as a principal of, or advisor
or consultant to, or otherwise act as an agent of, any person, firm, corporation
or other entity that competes directly with the timberland management or
performance fibers businesses of the Company immediately before the Change in
Control (collectively, the “Businesses”); or

 

  (2) solicit any client having a relationship with the Businesses, to terminate
or reduce in a way materially adverse to the Businesses any relationship such
client has with the Businesses; or

 

  (3) solicit for employment any individual that was employed by the Businesses
within sixty (60) days preceding the Change in Control and who was employed in
the Businesses during the Covenant Period and within sixty (60) days prior to
such solicitation; or

 

  (4) except as permitted or compelled by law, orally or in writing, disparage,
demean or deprecate the Company or any products of the Businesses.

 

  (ii) Confidentiality Covenants. While employed by the Company following the
Change in Control, and for a period of three (3) years from the Change in
Control, or two (2) years following a Qualifying Termination, whichever is
longer (the “Confidential Information Period”), Executive covenants that
Executive shall not disclose or make available to any person or entity any
“Confidential Information” (as defined below) and shall not use or cause to be
used any Confidential Information for any purpose other than fulfilling
Executive’s employment obligations to the Company, without the express prior
written authorization of the Company. For this purpose, “Confidential
Information” means all information about the Company relating to any of its
products or services or any phase of operations, including, without limitation,
business plans and strategies, trade secrets, know-how, contracts, financial
statements, pricing strategies, costs, customers and potential customers,
vendors and potential vendors, marketing and distribution information, business
results, software, hardware, databases, processes, procedures, technologies,
designs, concepts, ideas, and methods not generally known through legitimate
means to any of its competitors with which Executive became acquainted during
the term of employment by the Company. Confidential Information also includes
confidential information of third parties made available to the Company on a
confidential basis, but does not include information which is generally known to
the public without breach by Executive, (b) was given to Executive by a third
party without any obligation of confidentiality, or (c) was obtained or
independently developed by Executive prior to or following employment by the
Company without the use of information that is otherwise Confidential
Information.

 

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  (iii) Certain Public Company Employment. Executive will not be considered to
have violated the covenant in Section 6B(i)(1) above by employment with a public
company that competes with the Company as long as no competing division of the
public company reports to Employee.

 

C. Remedies Limited to Equitable Relief. By accepting payment of the Covenant
Amount, Executive shall be deemed (a) to have acknowledged that in the event
Executive breaches any of the Change in Control Covenants, the damages to the
Company would be irreparable and that the Company shall have the right to seek
injunctive and/or other equitable relief in any court of competent jurisdiction
to enforce the Change in Control Covenants and (b) to have consented to the
issuance of a temporary restraining order to maintain the status quo pending the
outcome of any proceeding. The foregoing shall be the exclusive remedy of the
Company for a breach of the Change in Control Covenants and under no
circumstances shall the Company be entitled to seek return of all or any portion
of the Covenant Amount or of any other amount payable hereunder, nor shall the
Company be awarded or accept monetary damages for any such breach.

 

7. Certain Additional Payments by the Company

 

A. Anything in this Plan to the contrary notwithstanding and except as set forth
below, in the event it shall be determined that any payment or distribution by
the Company to or for the benefit of any Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Plan or otherwise,
but determined without regard to any additional payments required under this
Section 7,a “Payment”) would be subject to the excise tax imposed by
Section 4999 of the Code, or any interest or penalties are incurred by Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the “Excise
Tax”), then Executive shall be entitled to receive an additional payment (a
“Gross-Up Payment”) in an amount such that after payment by the Executive of all
taxes (including any income taxes and interest or penalties imposed with respect
to any such taxes), and the Excise Tax imposed upon the Gross-Up Payment,
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.

 

B.

Subject to the provisions of Section 7C, all determinations required to be made
under this Section 7, including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by such nationally recognized
certified public accounting firm as may be designated by Executive (the
“Accounting Firm”), which shall provide detailed supporting calculations both to
the Company and Executive within fifteen (15) business days of the receipt of
notice from Executive that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity, or group effecting the Change
of Control, Executive shall appoint another nationally recognized accounting
firm to make the determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
as determined pursuant to this Section 7, shall be paid by the Company to
Executive within five (5) days

 

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of the receipt of the Accounting Firm’s determination. Any determination by the
Accounting Firm shall be binding upon the Company and Executive. As a result of
the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments that should have been made by the Company will not have been
made by the Company (an “Underpayment”), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 7C and Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by the Company to or for the benefit of Executive.

 

C. Executive shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company of
the Gross-Up Payment. Such notification shall be given as soon as practicable
but no later than ten (10) business days after Executive is informed in writing
of such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. Executive shall not pay such
claim prior to the expiration of the thirty (30)-day period following the date
on which it gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due). If the
Company notifies Executive in writing prior to the expiration of such period
that it desires to contest such claim, Executive shall:

 

  (i) give the Company any information reasonably requested by the Company
relating to such claim;

 

  (ii) take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company;

 

  (iii) cooperate with the Company in good faith in order effectively to contest
such claim; and

 

  (iv)

permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 7C, the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option either direct
Executive to pay the tax claimed and sue for a refund or contest the claim in a
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more

 

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appellate courts as the Company shall determine; provided, however, that if the
Company directs Executive to pay such claim and sue for a refund, the Company
shall advance the amount of such payment to Executive on an interest-free basis
and shall indemnify and hold Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance and further provided that an extension of the statute of
limitations relating to payment of taxes for the taxable year of Executive with
respect to which such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company’s control of the contest shall
be limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.

 

D. If, after the receipt by Executive of an amount advanced by the Company
pursuant to Section 7C, Executive becomes entitled to receive any refund with
respect to such claim, Executive shall (subject to the Company’s complying with
the requirements of Section 7C) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by Executive of an amount advanced by
the Company pursuant to Section 7C, a determination is made that Executive shall
not be entitled to any refund with respect to such claim and the Company does
not notify Executive in writing of its intent to contest such denial of refund
prior to the expiration of thirty (30) days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.

 

8. Definitions

 

The following terms used in this Plan have the indicated meaning:

 

“Additional Severance” with respect to an Executive means the sum of Executive’s
Benefits Continuation Amount and Executive’s Bonus Severance as set forth in
Section 4B.

 

“Applicable Bonus” has the definition set forth in Section 4B(i)(1).

 

“Applicable Incentive Stock Plan” means the 2004 Rayonier Incentive Stock and
Management Bonus Plan, as amended, or the 1994 Rayonier Incentive Stock Plan, as
amended, as the context dictates, as in effect immediately prior to a Change in
Control.

 

“Applicable Tier Multiplier” means three (3) for Tier I Executives and two
(2) for Tier II Executives.

 

“Award” has the meaning set forth in the Applicable Incentive Stock Plan, as the
context requires.

 

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“Base Pay” means the annual base salary rate payable to Executive at the
Effective Date of the Qualifying Termination, including compensation converted
to other benefits under a flexible pay arrangement maintained by the Company or
deferred pursuant to a written plan or agreement with the Company, provided
that, such annual base salary rate shall in no event be less than the highest
annual base salary rate paid to Executive at any time during the twenty-four
(24) month period immediately preceding the Change in Control.

 

“Benefits Continuation Amount” with respect to an Executive means the amount
calculated as provided in Section 4C and payable upon a Qualifying Termination.

 

“Bonus Plan” has the definition set forth in Section 4B(i)(1).

 

“Bonus Severance” with respect to an Executive means the sum of the amount
calculated under Section 4B(i)(1) and the Current Pro-rata Bonus calculated
under Section 4B(i)(2), and payable upon a Qualifying Termination.

 

“Businesses” has the definition set forth in Section 6B(i)(1).

 

“Cause” has the definition provided in Section 3B.

 

“Change in Control” has the definition set forth in the Retirement Plan for
Salaried Employees of Rayonier Inc. as amended October 19, 2001, and as the same
may be hereafter amended from time to time prior to the occurrence of a Change
in Control.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time.

 

“Committee” means the Compensation and Management Development Committee of the
Board of Directors of the Company.

 

“Company” means Rayonier Inc. and any successor to, or assignee of, the business
or assets thereof that becomes bound by this Plan as provided in Section 10.

 

“Confidentiality Covenants” with respect to an Executive are the covenants set
forth in Section 6B (ii) and for which purpose “Confidential Information” has
the definition set forth in Section 6 B(ii).

 

“Covenant Amount” with respect to an Executive is the cash portion of Plan
Benefits designated as provided in Section 6A.

 

“Covenant Period” is the period determined under Section 6B(i) during which an
Executive is bound by the Non-compete Covenants.

 

“Current Pro-rata Bonus” has the definition set forth in Section 4B(i)(2).

 

“Disability” has the definition provided in Section 3B.

 

“Effective Date of the Qualifying Termination” is the date the Company selects
as the Executive’s last day of active full-time employment.

 

“Equivalent Actuarial Value” has the definition applicable under the Retirement
Plans.

 

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“Executive Tax Services Payment” means the amount calculated in accordance with
Section 4C(ii)(2).

 

“Excess Plan” has the definition provided in Section 4C(i).

 

“Executive” means a person identified on Appendix A, as amended from time to
time by the Committee prior to a Change in Control.

 

“Final Average Compensation” has the meaning applicable under the Retirement
Plans.

 

“Formula Price” has the meaning set forth in the Applicable Incentive Stock
Plan.

 

“Good Reason” has the definition provided in Section 3B.

 

“Gross-Up Payment” and the associated terms “Payment,” “Excise Tax,” “Accounting
Firm” and “Underpayment” have the definitions set forth in Section 7.

 

“Legal Resources Trust” has the definition provided in Section 5C.

 

“Medical Benefits Payment” means the amount calculated in accordance with
Section 4C(ii)(1).

 

“Non-compete Covenants” with respect to an Executive are the covenants set forth
in Section 6(B)(i).

 

“Other Benefits Adjustment” has the definition in Section 4C(ii).

 

“Outplacement Services” has the definition set forth in Section 4C(ii)(3).

 

“Performance Shares” and “Performance Share Award Programs” mean the right to
receive contingent performance shares or performance shares (or other Awards) to
be made at the end of a performance period under programs adopted by the
Committee under Section 6 of the Applicable Incentive Stock Plan under which
such program was authorized, upon attainment of the comparative performance
measures provided for in such program.

 

“Plan Benefits” has the definition provided in Section 4.

 

“Plan Change” has the definition set forth in Section 13

 

“Plan” means this Executive Severance Pay Plan effective as provided in
Section 17.

 

“Qualifying Termination” has the definition provided in Section 3A.

 

“Retirement Plans” has the definition provided in Section 4C.

 

“Retirement Savings Adjustment” with respect to an Executive means the amount
calculated in accordance with Section 4C(i), for which purpose “normal
retirement date” means the first of the month that coincides with or follows
Executive’s 65th birthday.

 

“Savings Plan” has the definition set forth in Section 4C(i).

 

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“Scheduled Severance Pay” with respect to an Executive means the amount
calculated as provided in Section 4A and payable upon a Qualifying Termination.

 

“Separation Benefits” as provided in Section 3A means with respect to an
Executive means the sum of the Executive’s Scheduled Severance Pay and
Additional Severance payable in respect of a Qualifying Termination.

 

“Severance Trust” has the definition provided in Section 11.

 

“Single Trigger Benefits” with respect to an Executive means the Plan Benefits
payable as provided in Section 4D upon a Change in Control without regard to
whether or not the Executive is terminated, for which purpose “Performance
Period”, “Limited Stock Appreciation Rights”, “Stock Options” and “Restricted
Stock” have the meanings set forth in the Applicable Incentive Stock Plan and
the programs thereunder.

 

“Supplemental Plans” means any excess benefit plan, within the meaning of
Section 3(36) of the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder (“ERISA”), or any supplemental executive
retirement plan or other employee pension benefit plan, within the meaning of
Section 3(2) of ERISA, not intended to be qualified under Section 401 (a) of the
Code, maintained by the Company or by ITT Corporation, subject to the terms and
conditions of such plans, in which the Executive is entitled to benefits by
virtue of his employment with the Company or prior employment by ITT
Corporation.

 

“Target Bonus Award” means the standard bonus target percentages of base
salaries, as defined under the Bonus Plan for the respective executive salary
grades as determined pursuant to Company base salary compensation schedules in
effect for eligible executives at a 100 percent performance factor as of
December 31 of the year in which the Change in Control takes place.

 

“Tier I” or “Tier II” means the designation assigned to an Executive on Appendix
A as adopted and in effect immediately prior to a Change in Control.

 

9. Release

 

No Separation Benefits will be provided under this Plan unless Executive
executes and delivers to the Company a mutual release, satisfactory to the
Company, in which Executive discharges and releases the Company and the
Company’s directors, officers, employees, and employee benefit plans from all
claims (other than for benefits, to which Executive is entitled under this Plan
or any Company employee benefit plan) arising out of Executive’s employment or
termination of employment and the Company discharges and releases Executive from
any and all claims arising out of Executive’s employment or termination of
employment with the Company.

 

10. Successor to Company

 

This Plan shall bind any successor of the Company, its assets, or its businesses
(whether direct or indirect, by purchase, merger, consolidation, or otherwise),
in the same manner and to the same extent that the Company would be obligated
under this Plan if no succession had taken place.

 

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In the case of any transaction in which a successor would not by the foregoing
provision or by operation of law be bound by this Plan, the Company shall
require such successor expressly and unconditionally to assume and agree to
perform the Company’s obligations under this Plan, in the same manner and to the
same extent that the Company would be required to perform if no such succession
had taken place.

 

11. Administration of Plan/Coordination with Severance Trust

 

The Company is the Named Fiduciary for the Plan under ERISA. The Committee is
the Plan Administrator, which shall have the exclusive right to interpret this
Plan, adopt any rules and regulations for carrying out this Plan as may be
appropriate and, except as otherwise provided in this Plan, decide any and all
matters arising under this Plan. All interpretations and decisions by the
Committee shall be final, conclusive and binding on all parties affected
thereby.

 

Amounts payable by the Company under this Plan (except under Section 5) may be
made by direction of the Company to the trustee under the trust established by
that certain Trust Agreement for the Rayonier Inc. Supplemental Senior Executive
Pay Plan and for the Change in Control Agreement for W. Lee Nutter authorized by
the Compensation and Management Development Committee on July 20, 2001 (the
“Severance Trust”), to the extent such amounts were previously transferred by
the Company to the trustee of the Severance Trust, but shall be deemed to have
been paid only upon receipt by the Executive.

 

12. Claims Procedure

 

If an employee or former employee makes a written request alleging a right to
receive benefits under this Plan or alleging a right to receive an adjustment in
benefits being paid under the Plan, the Company shall treat it as a claim for
benefit. All claims for benefit under the Plan shall be sent to the Company’s
Senior Vice President, Administration, or such other officer as may be
designated by the Committee, and must be received within thirty (30) days after
termination of employment. If the Company determines that any individual who has
claimed a right to receive benefits, or different benefits, under the Plan is
not entitled to receive all or any part of the benefits claimed, it will inform
the claimant in writing of its determination and the reasons therefor in terms
calculated to be understood by the claimant. The notice will be sent within
ninety (90) days of the claim unless the Company determines additional time, not
exceeding ninety (90) days, is needed. The notice shall make specific reference
to the pertinent Plan provisions on which the denial is based, and describe any
additional material or information as necessary. Such notice shall, in addition,
inform the claimant what procedure the claimant should follow to take advantage
of the review procedures set forth below in the event the claimant desires to
contest the denial of the claim. The claimant may within ninety (90) days
thereafter submit in writing to the Company a notice that the claimant contests
the denial of his or her claim by the Company and desires a further review. The
Company shall within sixty (60) days thereafter review the claim and authorize
the claimant to appear personally and review pertinent documents and submit
issues and comments relating to the claim to the persons responsible for making
the determination on behalf of the Company. The Company will render its final
decision with specific reasons therefor in writing and will transmit it to the
claimant within sixty (60) days of the written request for review, unless the
Company determines additional time, not exceeding sixty (60) days, is needed,
and so notifies the employee. If the Company fails to respond to a claim filed
in accordance with the foregoing within sixty (60) days or any such extended
period, the Company shall be deemed to have denied the claim.

 

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13. Termination or Amendment

 

The Committee or the Company’s Board of Directors may amend or terminate this
Plan (a “Plan Change”) at any time, except that no such Plan Change may reduce
or adversely affect Separation Benefits for any Executive who has a Qualifying
Termination within two years of the effective date of such Plan Change provided
that Executive was a Covered Employee under this Plan on the date of the Plan
Change; provided that (a) a change in Appendix A prior to a Change in Control
shall not be deemed to be an Plan Change and (b) an Executive by accepting any
benefit under this Plan that was introduced prior to a Change in Control and not
available prior to the Plan Change, shall be deemed to have waived the two-year
limitation. Notwithstanding the foregoing, for two years after the occurrence of
a Change in Control event, this Plan may not be terminated or amended until
after all Executives who become entitled to any payments hereunder shall have
received such payments in full. Any extension, amendment, or termination of this
Plan in accordance with the foregoing shall be made in accordance with the
Company’s charter and bylaws and applicable law, and shall be evidenced by a
written instrument signed by a duly authorized officer of the Company,
certifying that such action has been taken.

 

14. Plan Supersedes Prior Plans

 

This Plan supersedes and replaces all prior severance policies, plans, or
practices maintained by the Company with respect to all Covered Employees other
than individualized written agreements executed by the Company and Executive.

 

15. Unfunded Plan Status

 

This Plan is intended to be an unfunded plan maintained primarily for the
purpose of providing deferred compensation for a select group of management or
highly compensated employees, within the meaning of Section 401 of ERISA. All
payments pursuant to the Plan shall be made from the general funds of the
Company and no special or separate fund shall be established or other
segregation of assets made to assure payment. No Participant or other person
shall have under any circumstances any interest in any particular property or
assets of the Company as a result of participating in the Plan. Notwithstanding
the foregoing, the Company may but shall not be obligated to create one or more
grantor trusts, such as the Legal Resources Trust and the Severance Trust, the
assets of which are subject to the claims of the Company’s creditors, to assist
it in accumulating funds to pay its obligations under the Plan.

 

16. Miscellaneous

 

Except as provided in this Plan, Executive shall not be entitled to any notice
of termination or pay in lieu thereof.

 

In cases where Severance Pay is provided under this Plan, pay in lieu of any
unused current year vacation entitlement will be paid to Executive in a lump
sum.

 

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If any amount payable under or in respect of this Plan is determined to be
deferred compensation subject to Section 409A of the Code and the regulations
promulgated thereunder, payment of such amount shall be deferred to the earliest
time when such payment can be made without penalty.

 

This Plan is not a contract of employment, does not guarantee any Executive
employment for any specified period and does not limit the right of the Company
to terminate the employment of any Executive at any time.

 

The section headings contained in this Plan are included solely for convenience
of reference and shall not in any way affect the meaning of any provision of
this Plan.

 

If, for any reason, any one or more of the provisions or part of a provision
contained in this Plan shall be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Plan not held so invalid,
illegal or unenforceable, and each other provision or part of a provision shall
to the full extent consistent with law remain in full force and effect.

 

17. Adoption Date and Amendment

 

This Plan was first adopted effective March 1, 1994. On May 16, 1997, changes to
the Plan were approved effective as of June 1, 1997. Subsequently on July 18,
1997, additional changes to the Plan were approved effective retroactive to
June 1, 1997.

 

On September 2, 2005, this amended and restated Plan was approved and adopted
and renamed the Rayonier Inc. Executive Severance Pay Plan, effective as of that
date.

 

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