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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 ON
FORM 8-A/A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF THE
SECURITIES EXCHANGE ACT OF 1934
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ITT RAYONIER INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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NORTH CAROLINA 13-2607329
(State of incorporation or organization) (I.R.S. employer identification number)
1177 SUMMER STREET
STAMFORD, CONNECTICUT 06904
(Address of principal executive offices) (Zip Code)
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
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COMMON SHARES NEW YORK STOCK EXCHANGE
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
(Title of Class)
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ITEM 1. DESCRIPTION OF THE REGISTRANT'S SECURITIES TO BE REGISTERED
The title of the class of securities to be registered hereunder is: Common
Shares (the "Rayonier Common Stock").
A description of the Rayonier Common Stock is set forth under the caption
"Description of Rayonier Capital Stock" in the Information Statement filed as an
exhibit to this Registration Statement, which description is incorporated herein
by reference.
ITEM 2. EXHIBITS
The following documents are filed as exhibits hereto:
2.1 Form of Distribution Agreement between ITT Corporation and ITT
Rayonier Incorporated.
3.1 Form of Amended and Restated Articles of Incorporation.
3.2 Form of By-laws.
4.1 Specimen common share certificate.
10.1 Form of Administrative Services Agreement between ITT Corporation and
ITT Rayonier Incorporated (which is attached as Exhibit A to the
Distribution Agreement filed as Exhibit 2.1 hereto).
10.2 Form of Employee Benefits Agreement between ITT Corporation and ITT
Rayonier Incorporated (which is attached as Exhibit B to the
Distribution Agreement filed as Exhibit 2.1 hereto).
10.3 Form of Tax Allocation Agreement between ITT Corporation and ITT
Rayonier Incorporated (which is attached as Exhibit C to the
Distribution Agreement filed as Exhibit 2.1 hereto).
10.4 Form of Canadian Assets Purchase Agreement (which is attached as
Exhibit D to the Distribution Agreement filed as Exhibit 2.1 hereto).
10.5 Form of Rayonier Incentive Stock Plan.
10.6 Form of Rayonier Senior Executive Severance Pay Plan.
10.7 Form of Rayonier Investment and Savings Plan.
10.8 Form of Rayonier Salaried Employees Retirement Plan.
21.1 Subsidiaries.*
99.1 Information Statement.
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* Previously filed.
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
ITT RAYONIER INCORPORATED
Date: February 4, 1994 By: /s/ Gerald J. Pollack
Name: Gerald J. Pollack
Title: Senior Vice President and
Chief Financial Officer
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INDEX TO EXHIBITS
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EXHIBIT NO. EXHIBIT
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2.1 Form of Distribution Agreement between ITT Corporation and
ITT Rayonier Incorporated.
3.1 Form of Amended and Restated Articles of Incorporation.
3.2 Form of By-laws.
4.1 Specimen common share certificate.
10.1 Form of Administrative Services Agreement between ITT
Corporation and ITT Rayonier Incorporated (which is
attached as Exhibit A to the Distribution Agreement filed
as Exhibit 2.1 hereto).
10.2 Form of Employee Benefits Agreement between ITT
Corporation and ITT Rayonier Incorporated (which is
attached as Exhibit B to the Distribution Agreement filed
as Exhibit 2.1 hereto).
10.3 Form of Tax Allocation Agreement between ITT Corporation
and ITT Rayonier Incorporated (which is attached as
Exhibit C to the Distribution Agreement filed as Exhibit
2.1 hereto).
10.4 Form of Canadian Assets Purchase Agreement (which is
attached as Exhibit D to the Distribution Agreement filed
as Exhibit 2.1 hereto).
10.5 Form of Rayonier Incentive Stock Plan.
10.6 Form of Rayonier Senior Executive Severance Pay Plan.
10.7 Form of Rayonier Investment and Savings Plan.
10.8 Form of Rayonier Salaried Employees Retirement Plan.
21.1 Subsidiaries.*
99.1 Information Statement.
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* Previously filed.
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EXHIBIT 2.1
DISTRIBUTION AGREEMENT, dated as of February , 1994, by and
between ITT CORPORATION, a Delaware corporation ("ITT"), and ITT
RAYONIER INCORPORATED, a North Carolina corporation
("Rayonier").
WHEREAS, the Board of Directors of ITT has determined that it is
appropriate and desirable to distribute to the holders of shares of Common
Stock, par value $1.00 per share, of ITT (the "ITT Common Stock") and
Cumulative Preferred Stock, without par value, $2.25 Convertible Series N of
ITT (the "ITT Series N Preferred Stock") all the outstanding Common Shares of
Rayonier (the "Rayonier Common Shares"); and
WHEREAS, ITT and Rayonier have determined that it is necessary
and desirable to set forth the principal corporate transactions required to
effect such separation and such distribution and to set forth other agreements
that will govern certain other matters following such distribution.
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, the parties hereby agree
as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 GENERAL
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
AAA: As defined in Article V.
ACTION: any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
AFFILIATE: as defined in Rule 12b-2 promulgated under the Securities
Exchange Act of 1934, as such Rule is in effect on the date hereof.
AGENT: As defined in Section 2.01 (a).
ANCILLARY AGREEMENTS: this Agreement and the following other
agreements, each of which is between ITT or an ITT Subsidiary and Rayonier or a
Rayonier Subsidiary and
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a copy of each of which is attached hereto as an exhibit as designated: the
Administrative Services Agreement (Exhibit A), the Employee Benefits Services
and Liability Agreement (Exhibit B), the Tax Allocation Agreement (Exhibit C)
and the Canadian Assets Purchase Agreement (Exhibit D).
CODE: the Internal Revenue Code of 1986, as amended, and the Treasury
Regulations promulgated thereunder, including any successor legislation.
COMMISSION: as defined in Section 4.02(b).
DISTRIBUTION: the distribution on the Distribution Date to holders of
record of shares of ITT Common Stock and ITT Series N Preferred Stock as of the
Distribution Record Date of the Rayonier Common Shares owned by ITT on the
basis of one Rayonier Common Share for each outstanding four shares of ITT
Common Stock and one Rayonier Common Share for each outstanding 3.1595 shares
of ITT Series N Preferred Stock.
DISTRIBUTION DATE: February 28, 1994 or such other date as may
hereafter be determined by ITT's Board of Directors as the date as of which the
Distribution shall be effected.
DISTRIBUTION RECORD DATE: February 24, 1994 or such other date as may
hereafter be determined by ITT's Board of Directors as the record date for the
Distribution.
EFFECTIVE TIME: 11:59 p.m., New York time, on the Distribution Date.
ENVIRONMENTAL LAWS: laws, ordinances, codes, standards, administrative
rulings, regulations or guidances of any Federal, provincial, state or local
governmental authority relating to, and common law causes of action, such as
trespass and nuisance, based on, (i) the emission, discharge, release or
threatened release of Hazardous Substances into the environment (including,
without limitation, the air, surface water, ground water, land or subsurface
strata) or (ii) the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances.
FENCOURT LOSSES: claims paid and expenses reasonably incurred by
Fencourt Reinsurance Company, Ltd., a Bermuda company and an ITT Subsidiary
engaged in the reinsurance business, and any successors thereto or assigns
thereof after the date hereof, which claims are paid or expenses incurred under
policies effective after January 1, 1986 involving the Rayonier Business or the
SWP Business and arise out of or are based upon Environmental Laws.
GHP: GHP Leasing Company, a Delaware corporation (formerly known as
Grays Harbor Paper Company), jointly owned by Rayonier and International Paper
Company.
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HAZARDOUS SUBSTANCES: pollutants, contaminants or hazardous or toxic
substances, materials or wastes, including, but not limited to, those defined
in the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, the Resource Conservation and Recovery Act, as amended, the
Toxic Substances Control Act, as amended, petroleum, including crude oil or any
fraction thereof, and those substances regulated under any applicable law due
to their known or suspected ability to cause harm to human health or the
environment.
INDEMNIFIABLE LOSSES: any and all losses, liabilities, claims, damages,
demands, costs or expenses (including, without limitation, Fencourt Losses,
reasonable attorney's fees and any and all expenses whatsoever reasonably
incurred in investigating, preparing for or defending against any Actions or
potential Actions).
INDEMNIFYING PARTY: As defined in Section 3.03.
INDEMNITEE: As defined in Section 3.03.
INSURANCE ACTIONS: As defined in Section 2.09(b).
INSURANCE RECOVERY: As defined in Section 2.09(b).
INFORMATION STATEMENT: the Information Statement sent to the holders of
shares of ITT Common Stock and ITT Series N Preferred Stock in connection with
the Distribution.
ITT: ITT Corporation, a Delaware corporation and its predecessor
Maryland corporation.
ITT AGENT: any individual retained as a consultant, agent, advisor or
independent contractor by ITT or any ITT Subsidiary on, before or following the
Distribution Date, but only during the time such individual was or is retained
by ITT or any ITT Subsidiary.
ITT EMPLOYEE: any individual employed by ITT or any ITT Subsidiary on,
before or following the Distribution Date, but only during the time such
individual was or is employed by ITT or any ITT Subsidiary.
ITT INDEMNITEES: ITT, each of its directors, officers, employees and
agents, each Affiliate of ITT and each of the heirs, executors, successors and
assigns of any of the foregoing.
ITT LIABILITIES: collectively, (i) all the Liabilities of ITT and ITT
Subsidiaries under any of the Ancillary Agreements, (ii) all the Liabilities
(whenever arising whether prior to, on or following the Effective Time) arising
out of or in connection with or otherwise relating to the management or conduct
of any business conducted by ITT or any ITT Subsidiary in the past, at the date
hereof or in the future (other than the Rayonier
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Business and the SWP Business), including without limitation, the products
made, sold or distributed by, and the operations of, ITT or any ITT Subsidiary
prior to, on or following the Distribution Date, the former, present or future
assets of ITT or any such ITT Subsidiary or the former, present or future ITT
Agents or ITT Employees (but only with respect to the time any such Subsidiary
or individual was an ITT Subsidiary, ITT Agent or ITT Employee, respectively),
and (iii) all the Liabilities arising out of or based upon any untrue statement
of material fact contained in any portion of the Information Statement other
than any portion of the Information Statement set forth on Schedule 1.01, or
the omission or alleged omission to state in any such portion a material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of circumstances under which they were made, not misleading.
ITT RECORDS: As defined in Section 4.01(a).
ITT SUBSIDIARY: any entity which is or was a Subsidiary of ITT on or at
any time before the Distribution Date (including without limitation Eason Oil
Company and its Subsidiaries, Carbon Industries, Inc. and its Subsidiaries and
Pennsylvania Glass Sand Corporation and its Subsidiaries, but not including
Rayonier, any Rayonier Subsidiary or SWP), and any Subsidiary of ITT which may
thereafter be organized or acquired, but only during the time such entity was
or is an ITT Subsidiary.
LIABILITIES: any and all debts, liabilities and obligations, absolute
or contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, including, without limitation,
those debts, liabilities and obligations arising under any law, rule,
regulation, Action, threatened Action, order or consent decree of any court,
any governmental or other regulatory or administrative agency or commission or
any award of any arbitration tribunal, and those arising under any contract,
guarantee, commitment or undertaking. Without limiting the generality of the
foregoing, "Liabilities" specifically includes any debts, liabilities and
obligations, absolute or contingent, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising, under
any Environmental Law.
RAYONIER: ITT Rayonier Incorporated, a North Carolina corporation to be
renamed "Rayonier Inc." in connection with the Distribution, and its
predecessor Delaware corporation.
RAYONIER AGENT: any individual retained as a consultant, agent, advisor
or independent contractor by Rayonier or any Rayonier Subsidiary on, before or
following the Distribution Date, but only during the time such individual was
or is retained by Rayonier or any Rayonier Subsidiary.
RAYONIER BUSINESS: the forest products and market pulp businesses and
any other businesses conducted by Rayonier or any Rayonier Subsidiary in the
past, at the date hereof or in the future, and any forest products or market
pulp business actually conducted by any ITT Subsidiary with the active
participation of Rayonier management.
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RAYONIER EMPLOYEE: any individual employed by Rayonier or any Rayonier
Subsidiary on, before or following the Distribution Date, but only during the
time such individual was or is employed by Rayonier or any Rayonier Subsidiary.
RAYONIER INDEMNITEES: Rayonier, each of its directors, officers,
employees and agents, each Affiliate of Rayonier and each of the heirs,
executors, successors and assigns of any of the foregoing.
RAYONIER LIABILITIES: collectively, (i) all the Liabilities of Rayonier
and Rayonier Subsidiaries under any of the Ancillary Agreements, (ii) all the
Liabilities (whenever arising whether prior to, on or following the Effective
Time) arising out of or in connection with or otherwise relating to the
management or conduct of the Rayonier Business in the past, at the date hereof
or in the future, including without limitation, the products made, sold or
distributed by, and the operations of, Rayonier, GHP or any Rayonier Subsidiary
prior to, on or following the Distribution Date, the former, present or future
assets of Rayonier, GHP or any Rayonier Subsidiary or the former, present or
future Rayonier Agents and Rayonier Employees (but only with respect to the
time any such Subsidiary or individual was a Rayonier Subsidiary, Rayonier
Agent or Rayonier Employee, respectively), and (iii) all the Liabilities
arising out of or based upon any untrue statement of material fact contained in
any portion of the Information Statement set forth on Schedule 1.01 or the
omission or alleged omission to state in any such portion a material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of circumstances under which they were made, not misleading.
RAYONIER RECORDS: As defined in Section 4.01(b).
RAYONIER SUBSIDIARY: any entity which is or was a Subsidiary of
Rayonier at any time on or before the Distribution Date (including without
limitation Rayonier Timberlands, L.P. and Rayonier Timberlands Operating
Company, L.P., but not including Pennsylvania Glass Sand Corporation and its
Subsidiaries or SWP), and any Subsidiary of Rayonier which may thereafter be
organized or acquired, but only during the time such entity was or is a
Rayonier Subsidiary.
SUBSIDIARY: any corporation, partnership or other entity of which
another entity (i) owns, directly or indirectly, ownership interests sufficient
to elect a majority of the Board of Directors (or persons performing similar
functions) (irrespective of whether at the time any other class or classes of
ownership interests of such corporation, partnership or other entity shall or
might have such voting power upon the occurrence of any contingency) or (ii) is
a general partner or an entity performing similar functions (e.g., a trustee).
SWP: Southern Wood Piedmont Company, the current Subsidiary of
Rayonier, and all of its predecessors, including Southern Wood Piedmont
Company, the former Subsidiary of ITT, and all of its predecessors and
associated companies, any past present
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or future Subsidiary of any of the foregoing companies, and any other companies
or entities engaged in the SWP Business at any time which, directly or
indirectly, are or were wholly or partly owned by or otherwise belonged to ITT.
SWP AGENT: any individual retained as a consultant, agent, advisor or
independent contractor by SWP or any Subsidiary of SWP on, before or following
the Distribution Date, but only during the time such individual was or is
retained by SWP or any Subsidiary of SWP.
SWP BUSINESS: the wood preserving business of SWP and any successors
thereto or assigns thereof after the date hereof.
SWP EMPLOYEE: any individual employed by SWP or any Subsidiary of SWP
on, before or following the Distribution Date, but only during the time such
individual was or is employed by SWP or any Subsidiary of SWP.
SWP LIABILITIES: all the Liabilities (whenever arising whether prior
to, on or following the Effective Time) arising out of or in connection with or
otherwise relating to the management or conduct of the SWP Business in the
past, at the date hereof or in the future, including without limitation, the
products made, sold or distributed by, the plants, properties and equipment
owned or used by, the operations of, and all other past, present or future
assets of, the SWP Business, or the former, present or future SWP Agents and
SWP Employees (but only with respect to the time any such individual was a SWP
Agent or SWP Employee).
THIRD PARTY CLAIM: As defined in Section 3.04.
SECTION 1.02 REFERENCES
References to an "Exhibit" or to a "Schedule" are, unless otherwise
specified, to one of the Exhibits or Schedules attached to this Agreement, and
references to a "Section" are, unless otherwise specified, to one of the
Sections of this Agreement.
ARTICLE II
DISTRIBUTION AND RELATED TRANSACTIONS
SECTION 2.01 THE DISTRIBUTION. On the Distribution Date, the following
transactions shall occur:
(a) Stock Dividend to ITT. Rayonier shall issue to ITT as a stock
dividend a number of Rayonier Common Shares as required to effect the
Distribution and certified by ITT's distribution agent, ITT Corporate Stock
Services (the "Agent"). In connection therewith ITT shall deliver to Rayonier
for cancellation the share certificate currently held by it representing 79
Common Shares and
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shall receive a new certificate representing the total number of Rayonier
Common Shares to be owned by ITT after giving effect to such stock dividend.
(b) Amendment to Rayonier Articles of Incorporation. Rayonier shall
have filed with the Secretary of State of North Carolina an amendment to its
Articles of Incorporation to change its name to "Rayonier Inc."
(c) Rayonier Directors. All existing directors of Rayonier shall have
submitted their written resignations. ITT as the sole shareholder of Rayonier
on and prior to the Distribution Date shall have taken action by written
consent in lieu of the 1994 Annual Meeting of Shareholder of Rayonier to elect
to Rayonier's Board of Directors the individuals identified in the Information
Statement as Rayonier directors for the terms specified in the Information
Statement.
(d) Delivery of Shares to Agent. ITT shall deliver to the Agent the
share certificate representing Rayonier Common Shares issued to ITT by Rayonier
pursuant to Section 2.01(a) and shall instruct the Agent to distribute, on or
as soon as practicable following the Distribution Date, such Rayonier Common
Shares to holders of record of shares of ITT Common Stock and ITT Series N
Preferred Stock on the Distribution Record Date. Rayonier shall provide all
share certificates that the Agent shall require in order to effect the
Distribution.
SECTION 2.02 CERTAIN FINANCIAL ARRANGEMENTS
(a) Intercompany Accounts. All intercompany receivables and payables
(other than receivables and payables otherwise specifically provided for in any
of the Ancillary Agreements) between Rayonier or any Rayonier Subsidiary, on
the one hand, and ITT or any ITT Subsidiary, on the other hand, shall, as of
the Effective Time, be settled or converted into ordinary trade accounts, as
may be agreed in writing prior to the Effective Time by duly authorized
representatives of ITT and Rayonier.
(b) Operations in Ordinary Course. Each of ITT and Rayonier
covenants and agrees that, except as otherwise provided in any Ancillary
Agreement, during the period from the date of this Agreement through the
Distribution Date, it will, and will cause any entity which is a Subsidiary of
such party at any time during such period to, conduct its business in a manner
substantially consistent with current operating practices and in the ordinary
course, including, without limitation, with respect to the payment and
administration of accounts payable and the administration of accounts
receivable, the purchase of capital assets and equipment and the management of
inventories.
SECTION 2.03 ASSIGNMENT OF PATENTS.
Prior to or on the Distribution Date, ITT shall, or shall cause an ITT
Subsidiary to, assign to Rayonier or a Rayonier Subsidiary, as directed by
Rayonier, all right, title and interest to all letters patent and applications
therefor in any country owned by ITT or any ITT Subsidiary which originated
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from Rayonier or any Rayonier Subsidiary, including without limitation the
patents set forth on Exhibit E hereto.
SECTION 2.04 ASSUMPTION AND SATISFACTION OF LIABILITIES
Except as otherwise set forth in any Ancillary Agreement, from and after
the Effective Time, (a) ITT shall, and shall cause the ITT Subsidiaries to,
pay, perform and discharge in due course all ITT Liabilities and (b) Rayonier
shall, and shall cause the Rayonier Subsidiaries and SWP to, assume, pay,
perform, and discharge in due course all Rayonier Liabilities and all SWP
Liabilities.
SECTION 2.05 RESIGNATIONS
ITT shall cause all ITT Employees to resign, effective as of the
Effective Time, from all positions as officers of Rayonier or as officers or
directors of any Rayonier Subsidiary in which they serve. Rayonier shall cause
all Rayonier Employees to resign, effective as of the Effective Time, from all
positions as officers of any ITT division or as officers or directors of any
ITT Subsidiary in which they serve.
SECTION 2.06 FURTHER ASSURANCES
In case at any time after the Effective Time any further action is
reasonably necessary or desirable to carry out the purposes of this Agreement
and the other Ancillary Agreements or to vest Rayonier with full title to all
properties, assets, rights, approvals, immunities and franchises pertaining to
the Rayonier Business and the SWP Business, the proper officers of each party
to this Agreement shall take all such necessary action. Without limiting the
foregoing, ITT and the ITT Subsidiaries and Rayonier and the Rayonier
Subsidiaries shall use their reasonable best efforts, and Rayonier will cause
SWP to use its reasonable best efforts, to obtain all consents and approvals,
to enter into all amendatory agreements and to make all filings and
applications which may be required for the consummation of the transactions
contemplated by this Agreement and the other Ancillary Agreements, including,
without limitation, all applicable regulatory filings.
SECTION 2.07 NO REPRESENTATIONS OR WARRANTIES
Each of the parties hereto understands and agrees that, except as
otherwise expressly provided, no party hereto is, in this Agreement or in any
other agreement or document contemplated by this Agreement or otherwise, making
any representation or warranty whatsoever, including, without limitation, as to
title, value or legal sufficiency.
SECTION 2.08 GUARANTEES.
ITT and Rayonier shall use their best efforts to have, on or prior to
the Distribution Date, or as soon as practicable thereafter, ITT or any ITT
Subsidiary removed as guarantor of or obligor for indebtedness or obligations
for which Rayonier,
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any Rayonier Subsidiary or SWP is primarily liable. Any such indebtedness or
obligation of Rayonier, a Rayonier Subsidiary or SWP guaranteed by ITT shall be
considered a "Rayonier Liability" for purposes of this Agreement.
SECTION 2.09 PENDING ACTIONS
(a) At all times from and after the Distribution Date, each of
Rayonier and ITT shall use reasonable efforts to make available to the other
upon written request its and its Subsidiaries' officers, directors, employees
and agents as witnesses to the extent that such persons may reasonably be
required in connection with any Action (including without limitation the
Insurance Actions referred to in Section 2.09(b)) in which the requesting party
may from time to time be involved (without reimbursement for such persons'
salaries).
(b) The parties recognize that ITT, certain ITT Subsidiaries,
Rayonier and SWP are currently engaged in Actions (the "Insurance Actions")
relating to the liability of their insurance carriers to indemnify them for
damages and remediation costs associated with past discharges or emissions into
the environment. The first Insurance Action, seeking indemnification, was
brought by ITT Fluid Technology Corporation as plaintiff in the Superior Court,
Los Angeles County, California against the carriers, and the insurance carriers
are contesting jurisdiction in that court. The insurance carriers in turn have
brought another Insurance Action as plaintiffs for declaratory judgment in the
Court of Common Pleas of Cuyahoga County, Ohio, naming the plaintiffs in the
California action and others as defendants. Rayonier will not pay any of ITT's
attorneys fees in either such Insurance Action or any Actions relating to
similar issues which may hereafter be brought to which ITT and/or any ITT
Subsidiaries are parties. Any recovery by ITT relating to any such Action,
whether received pursuant to court order, settlement or otherwise (herein
called the "Insurance Recovery") shall be shared by ITT with Rayonier on such
basis as ITT, in its sole discretion, shall determine taking into account the
following factors: (i) the gross dollar amount of claims by SWP and Rayonier
as opposed to claims by ITT or any ITT Subsidiary, (ii) the legal fees ITT has
expended in obtaining the Insurance Recovery and (iii) the relative strength
under California law of insurance company defenses regarding claims by SWP and
Rayonier as compared to claims by ITT or any ITT Subsidiary.
SECTION 2.10 CERTAIN POST-DISTRIBUTION TRANSACTIONS
(a)(i) ITT shall comply with each representation and statement made, or
to be made, to Cravath, Swaine & Moore in connection with such firm's rendering
an opinion to ITT and Rayonier as to certain tax aspects of the Distribution
and (ii) until February __, 1996 ITT will maintain its status as a company
engaged in the active conduct of a trade or business, as defined in Section
355(b) of the Code.
(b)(i) Rayonier shall comply with each representation and statement
made, or to be made, to Cravath, Swaine & Moore in connection with such firm's
rendering an opinion
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to ITT and Rayonier as to certain tax aspects of the Distribution and (ii)
until February __, 1996 Rayonier will maintain its status as a company engaged
in the active conduct of a trade or business, as defined in Section 355(b) of
the Code.
(c) ITT represents and warrants to Rayonier, and Rayonier represents
and warrants to ITT, that it has no present intention to take any action
prohibited to it by this Section 2.10.
SECTION 2.11 AFFILIATION AND IDENTIFICATION INDICATIONS
Except as otherwise hereafter provided, (1) any material of any kind
existing on the Distribution Date which implicitly or explicitly indicates any
affiliation or connection between ITT or an ITT Subsidiary and Rayonier or a
Rayonier Subsidiary or SWP may be used by ITT or said ITT Subsidiary and
Rayonier or said Rayonier Subsidiary or SWP only for a period of one year after
the Distribution Date, and (2) any material of any kind of Rayonier or a
Rayonier Subsidiary or SWP existing on the Distribution Date which incorporates
any name, mark or other proprietary identification of ITT or an ITT Subsidiary,
and any material of any kind of ITT or an ITT Subsidiary existing on the
Distribution Date which incorporates any name, mark or other proprietary
identification of Rayonier or a Rayonier Subsidiary or SWP, may be used
respectively by Rayonier or said Rayonier Subsidiary or SWP and by ITT or said
ITT Subsidiary only for a period of one year after the Distribution Date.
After the Distribution Date, neither party shall otherwise represent to third
parties that it has a present business affiliation with the other. Moreover,
in no instance may any of the aforementioned materials be used after the
Distribution Date if the use of any such material by Rayonier or a Rayonier
Subsidiary or SWP would give rise to a legal commitment by ITT or an ITT
Subsidiary or if the use of any such material by ITT or an ITT Subsidiary would
give rise to a legal commitment by Rayonier or a Rayonier Subsidiary or SWP.
ARTICLE III
INDEMNIFICATION
SECTION 3.01 INDEMNIFICATION BY ITT
Except as otherwise specifically set forth in any other provision of
this Agreement or of any other Ancillary Agreement, ITT shall indemnify, defend
and hold harmless the Rayonier Indemnitees from and against any and all
Indemnifiable Losses of the Rayonier Indemnitees arising out of, by reason of
or otherwise in connection with the ITT Liabilities.
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SECTION 3.02 INDEMNIFICATION BY RAYONIER
Except as otherwise set forth in any other Ancillary Agreement, Rayonier
shall indemnify, defend and hold harmless the ITT Indemnitees from and against
any and all Indemnifiable Losses of the ITT Indemnitees arising out of, by
reason of or otherwise in connection with the Rayonier Liabilities and the SWP
Liabilities.
SECTION 3.03 LIMITATIONS ON INDEMNIFICATION OBLIGATIONS
The amount which any party (an "Indemnifying Party") is or may be
required to pay to any other party (an "Indemnitee") pursuant to Section 3.01
or Section 3.02 shall be reduced (retroactively or prospectively) by any
insurance proceeds or other amounts actually recovered by or on behalf of such
Indemnitee, in reduction of the related Indemnifiable Loss. If an Indemnitee
shall have received the payment required by this Agreement from an Indemnifying
Party in respect of an Indemnifiable Loss and shall subsequently actually
receive insurance proceeds or other amounts in respect of such Indemnifiable
Loss, then such Indemnitee shall pay to such Indemnifying Party a sum equal to
the amount of such insurance proceeds or other amounts actually received, up to
the aggregate amount of any payments received from such Indemnifying Party
pursuant to this Agreement in respect of such Indemnifiable Loss.
SECTION 3.04 PROCEDURE FOR INDEMNIFICATION
(a) If an Indemnitee shall receive notice or otherwise learn of the
assertion by a person (including, without limitation, any governmental entity)
who is not a party to any of the Ancillary Agreements of any claim or of the
commencement by any such person of any Action (a "Third Party Claim") with
respect to which an Indemnifying Party may be obligated to provide
indemnification pursuant to this Agreement, such Indemnitee shall give such
Indemnifying Party written notice thereof promptly after becoming aware of such
Third Party claim; provided, however, that the failure of any Indemnitee to
give notice as provided in this Section 3.04 shall not relieve the applicable
Indemnifying Party of its obligations under this Article III or the Tax
Allocation Agreement, except to the extent that such Indemnifying Party is
prejudiced by such failure to give notice. Such notice shall describe the
Third Party Claim in reasonable detail under the circumstances. Sections
3.04(b), (c), (d) and (e) of this Agreement shall not govern procedures for
Third Party Claims relating to income tax deficiencies or refund claims. Such
procedures shall be governed by the Tax Allocation Agreement between the
parties in the form attached hereto as Exhibit C, including Section 8(a)
thereof.
(b) Subject to the proviso of the following sentence, an Indemnifying
Party shall (in the Indemnitee's name, if necessary) defend or seek to settle
or compromise any Third Party Claim, at such Indemnifying Party's own expense
and with counsel reasonably satisfactory to the Indemnitee. Within 30 days of
the receipt of notice from an Indemnitee in accordance with Section 3.04(a) (or
sooner, if the nature of such Third Party Claim so requires), the Indemnifying
Party shall notify the applicable Indemnitee whether the Indemnifying Party
will assume responsibility for defending such Third Party Claim, which notice
shall specify any reservations or exceptions with respect to such assumption of
responsibility; provided, however, that an Indemnifying Party may elect not to
assume responsibility for defending a Third Party Claim only in the event of a
good faith dispute as
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<PAGE> 12
to whether a claim was appropriately tendered under Section 3.01 or 3.02, as
the case may be, and if the Indemnifying Party makes such election, the
Indemnitee may defend or seek to compromise or settle such Third Party Claim
with counsel reasonably satisfactory to the Indemnifying Party. In the case of
a Third Party Claim described in the proviso to the preceding sentence, the
costs of defense or attempt to compromise or settle shall initially be paid by
the Indemnitee subject to ultimate determination pursuant to the dispute
resolution provisions of Article V of which party should bear such costs and
pay any Liabilities with respect to such Third Party Claim. After notice from
an Indemnifying Party to an Indemnitee of its election to assume the defense of
a Third Party Claim, such Indemnifying Party shall not be liable to such
Indemnitee under this Article III for any legal or other expenses (except
expenses approved in advance by the Indemnifying Party) subsequently incurred
by such Indemnitee in connection with the defense thereof. Notwithstanding the
foregoing, the Indemnifying Party shall not be liable for any settlement of any
such Claim or action effected without its written consent (which shall not be
unreasonably withheld).
(c) If an Indemnifying Party elects to defend or to seek to
compromise any Third Party Claim, the appropriate Indemnitee (x) shall
cooperate in all reasonable respects with the Indemnifying Party in connection
with such defense, (y) shall not admit any liability with respect to, or
settle, compromise or discharge, such Third Party Claim without the
Indemnifying Party's prior written consent (which shall not be unreasonably
withheld) and (z) shall agree to any settlement, compromise or discharge of
such Third Party Claim which the Indemnifying Party may recommend and which by
its terms obligates the Indemnifying Party to pay the full amount of the
Liability in connection with such Third Party Claim and which releases the
Indemnitee completely in connection with such Third Party Claim.
(d) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third Party Claim, such Indemnifying Party
shall, to the extent of such payment, be subrogated to and shall stand in the
place of such Indemnitee as to any events or circumstances with respect to
which such Indemnitee may have any right or claim relating to such Third Party
Claim against any claimant or plaintiff asserting such Third Party Claim. Such
Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner,
and at the cost and expense of such Indemnifying Party, in prosecuting any
subrogated right or claim.
(e) With respect to any Third Party Claim for which the Indemnifying
Party assumes responsibility for defense, the Indemnifying Party shall inform
the Indemnitee, upon the reasonable written request of the Indemnitee, of the
status of efforts to resolve such Third Party Claim. With respect to any Third
Party Claim for which the Indemnifying Party does not assume such
responsibility, the Indemnitee shall inform the Indemnifying Party, upon the
reasonable written request of the Indemnifying Party, of the status of efforts
to resolve such Third Party Claim.
SECTION 3.05 SURVIVAL OF INDEMNITIES
The obligations of ITT and Rayonier under this Article III shall survive
the sale or other transfer by either of
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<PAGE> 13
them of any assets or businesses or the assignment by either of them of any
Liabilities, with respect to any Indemnifiable Loss of the other related to
such assets, businesses or Liabilities.
ARTICLE IV
ACCESS TO INFORMATION
SECTION 4.01 PROVISION OF CORPORATE RECORDS
(a) ITT shall arrange, as soon as practicable following the
Distribution Date, for the transportation at Rayonier's cost to Rayonier of all
original agreements, documents, books, records and files (collectively
"Rayonier Records") relating to or affecting Rayonier, any Rayonier Subsidiary,
SWP, the Rayonier Business or GHP, to the extent such items are not already in
the possession of Rayonier, a Rayonier Subsidiary or SWP, subject to the
following exceptions:
(i) Rayonier recognizes that certain Rayonier Records may
contain incidental information relating to Rayonier, any Rayonier
Subsidiary, SWP, the Rayonier Business or GHP or may relate primarily to
Subsidiaries or divisions of ITT other than Rayonier, the Rayonier
Subsidiaries, SWP and GHP, and that ITT may retain such Rayonier Records
and shall provide copies of the relevant portions thereof to Rayonier;
and
(ii) ITT may retain any tax returns, reports, forms or work
papers, and Rayonier shall be provided with copies of such returns,
reports, forms or work papers only to the extent that they relate to or
affect Rayonier's, the Rayonier Subsidiaries', SWP's and GHP's returns
or tax liability.
(b) Rayonier shall arrange, as soon as practicable following the
Distribution Date, for the transportation at ITT's cost to ITT of all original
agreements, documents, books, records and files (collectively "ITT Records")
relating to or affecting ITT or any ITT Subsidiary which are in the possession
of Rayonier or a Rayonier Subsidiary, subject to the following exceptions:
(i) ITT recognizes that certain ITT Records may contain
incidental information relating to ITT and the ITT Subsidiaries or may
relate primarily to Rayonier, Rayonier Subsidiaries, SWP and/or GHP, and
that Rayonier may retain such ITT Records and shall provide copies of
the relevant portions thereof to ITT; and
(ii) Rayonier may retain any tax returns, reports, forms or work
papers, and ITT shall be provided with copies of such returns, reports,
forms or work papers only to the extent that they relate to or affect
ITT's and the ITT Subsidiaries' returns or tax liability.
13
<PAGE> 14
SECTION 4.02 ACCESS TO INFORMATION
(a) From and after the Distribution Date, each of ITT and Rayonier
shall afford to the other and its authorized accountants, counsel and other
designated representatives reasonable access during normal business hours,
subject to appropriate restrictions for classified information, to the
personnel, properties, books and records of such party and its Subsidiaries
insofar as such access is reasonably required by the other party.
(b) For a period of two years following the Distribution Date, each
of Rayonier and ITT shall provide to the other, promptly following such time at
which such documents shall be filed with the Securities and Exchange Commission
(the "Commission"), all documents which shall be filed by it (and, in the case
of Rayonier, by any of its Subsidiaries or SWP) with the Commission pursuant to
the periodic and interim reporting requirements of the Securities Exchange Act
of 1934, as amended, and the rules and regulations of the Commission
promulgated thereunder.
SECTION 4.03 CONFIDENTIALITY
Each of ITT and the ITT Subsidiaries on the one hand, and Rayonier and
the Rayonier Subsidiaries on the other hand, shall not use or permit the use of
(without the prior written consent of the other) and shall hold, and shall
cause its consultants and advisors to hold, in strict confidence, all
information concerning the other in its possession or under its control (except
to the extent that (a) such information has been in the public domain through
no fault of such party or (b) such information has been later lawfully acquired
from other sources by such party or (c) this Agreement or any other Ancillary
Agreement or any other document entered into pursuant hereto permits the use or
disclosure of such information) to the extent such information (i) relates to
the period up to the Effective Time, (ii) relates to any Ancillary Agreement or
(iii) is obtained in the course of performing services for the other party
pursuant to any Ancillary Agreement, and each party shall not (without the
prior written consent of the other) otherwise release or disclose such
information to any other person, except its auditors and attorneys, unless
compelled to disclose by judicial or administrative process or, as advised by
its counsel, by other requirements of law. To the extent either party
discloses any such information concerning the other party under circumstances
where any evidentiary privilege (including without limitation the privilege for
communications between attorney and client) would be available, the party
disclosing such information agrees to assert such privilege.
ARTICLE V
DISPUTE RESOLUTION
In the event of any dispute between the parties hereto arising under
this Agreement, any other Ancillary Agreement or any other document entered
into pursuant hereto or any transaction contemplated hereby, the parties shall
attempt to resolve the
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<PAGE> 15
dispute in an amicable fashion and shall continue to perform their obligations
hereunder. If the parties cannot reach an amicable resolution of such a
dispute within sixty days, the parties agree to first endeavor in good faith to
settle the dispute by mediation administered by the American Arbitration
Association ("AAA") under its Commercial Mediation Rules before resorting to
arbitration. Thereafter, if such dispute remains unresolved, it shall be
settled by arbitration by a single arbitrator having expertise in the subject
matter of the dispute, chosen from the AAA's Large Complex Case panel
administered by the AAA in accordance with its Commercial Arbitration Rules and
the Supplementary Procedures for Large Complex Disputes, and judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. Any such arbitration shall be held in New York, New
York. Each party thereto shall pay its own expenses, and the fee of the
mediator and the arbitrator and the administrative fee of the AAA shall be paid
one half by ITT and one half by Rayonier.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01 COMPLETE AGREEMENT; CONSTRUCTION
This Agreement, including the Exhibits and Schedules, and the other
Ancillary Agreements shall constitute the entire agreement between the parties
with respect to the subject matter hereof and shall supersede all previous
negotiations, commitments and writings with respect to such subject matter.
Notwithstanding any other provisions in this Agreement to the contrary, in the
event and to the extent that there shall be a conflict between the provisions
of this Agreement and the provisions of any other Ancillary Agreement, such
other Ancillary Agreement shall control.
SECTION 6.02 SURVIVAL OF AGREEMENTS
Except as otherwise contemplated by this Agreement, all covenants and
agreements of the parties contained in this Agreement shall survive the
Distribution Date.
SECTION 6.03 EXPENSES
(a) Except as otherwise set forth in this Agreement or any other
Ancillary Agreement, all costs and expenses incurred on or prior to the
Distribution Date (whether or not paid on or prior to the Distribution Date) in
connection with the preparation, execution, delivery and implementation of this
Agreement and any other Ancillary Agreement, the Information Statement, the
Distribution and the consummation of the transactions contemplated thereby
shall be paid by ITT, except that Rayonier shall pay fees and expenses of
counsel and other consultants retained by Rayonier and expenses relating to the
New York Stock Exchange listing fees for the Rayonier Common Shares. Each
party shall bear its own costs and expenses incurred after the Distribution
Date.
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<PAGE> 16
(b) A party seeking reimbursement of costs and expenses under this
Section 6.03 from another party shall render to such other party an invoice for
such costs and expenses, along with appropriate verification of such costs and
expenses, and such other party shall pay the other as soon as practicable, but
in any event within 30 days of the date of such invoice.
SECTION 6.04 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts executed in and to be
performed in that state.
SECTION 6.05 NOTICES
All notices and other communications hereunder shall be in writing and
hand delivered or mailed by registered or certified mail (return receipt
requested) or sent by any means of electronic message transmission with
delivery confirmed (by voice or otherwise) to the parties at the following
addresses (or at such other addresses for a party as shall be specified by like
notice) and will be deemed given on the date on which such notice is received:
To ITT Corporation:
1330 Avenue of the Americas
New York, NY 10019
Attn: Senior Vice President
and General Counsel
To Rayonier:
1177 Summer Street
Stamford, CT 06904
Attn: Vice President
and General Counsel
SECTION 6.06 AMENDMENTS
This Agreement may not be modified or amended except by an agreement in
writing signed by the parties.
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<PAGE> 17
SECTION 6.07 SUCCESSORS AND ASSIGNS
This Agreement shall be assignable in whole in connection with a merger
or consolidation or the sale of all or substantially all the assets of a party
hereto. Otherwise this Agreement shall not be assignable, in whole or in part,
directly or indirectly, by either party hereto without the prior written
consent of the other, and any attempt to assign any rights or obligations
arising under this Agreement without such consent shall be void; provided,
however, that the provisions of this Agreement shall be binding upon, inure to
the benefit of and be enforceable by the parties and their respective
successors and permitted assigns.
SECTION 6.08 TERMINATION
This Agreement may be terminated and the Distribution may be amended,
modified or abandoned at any time prior to the Distribution Record Date by and
in the sole discretion of ITT without the approval of Rayonier. In the event
of such termination, neither party shall have any liability of any kind to any
other party.
SECTION 6.09 SUBSIDIARIES
Each of the parties hereto shall cause to be performed, and hereby
guarantees the performance of, all actions, agreements and obligations set
forth herein to be performed by any Subsidiary of such party which is
contemplated to be a Subsidiary of such party on and after the Distribution
Date.
SECTION 6.10 THIRD PARTY BENEFICIARIES
Except for the provisions of Article III relating to Indemnitees, this
Agreement is solely for the benefit of the parties hereto and their respective
Subsidiaries and Affiliates and should not be deemed to confer upon third
parties any remedy, claim, liability, reimbursement, claim of action or other
right in excess of those existing without reference to this Agreement.
SECTION 6.11 TITLE AND HEADINGS
Titles and headings to sections herein are inserted for the convenience
of reference only and are not intended to be a part of or to affect the meaning
or interpretation of this Agreement.
SECTION 6.12 EXHIBITS AND SCHEDULES
The Exhibits and schedules shall be construed with and as an integral
part of this Agreement to the same extent as if the same had been set forth
verbatim herein.
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<PAGE> 18
SECTION 6.13 LEGAL ENFORCEABILITY
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. Without prejudice to any rights or remedies otherwise
available to any party hereto, each party hereto acknowledges that damages
would be an inadequate remedy for any breach of the provisions of this
Agreement and agrees that the obligations of the parties hereunder shall be
specifically enforceable.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the day and year first above written.
ITT CORPORATION
By:
-----------------------
ITT RAYONIER INCORPORATED
By:
-----------------------
18
<PAGE> 19
Schedule 1.01
<TABLE>
<CAPTION>
RAYONIER SECTIONS OF INFORMATION STATEMENT
<S> <C>
SUMMARY "Business of Rayonier", "Rayonier
Timberlands, L.P.", "Rayonier
Common Stock Listing" and
"Rayonier Dividend Policy"
SUMMARY FINANCIAL
INFORMATION All
RAYONIER All
THE DISTRIBUTION "Reasons for the Distribution" (third
and fourth paragraphs) and "Listing
and Trading of Rayonier Common
Stock"
SPECIAL FACTORS "Cyclical Operating Results",
"Strategic Prospects for Specialty
Pulp Facilities", "Environmental
Regulation", "Rayonier Dividend
Policy" and "Absence of Trading
Market for Rayonier Common
Stock"
CAPITALIZATION All
SELECTED FINANCIAL AND
OPERATING DATA All
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS All
BUSINESS OF RAYONIER All
MANAGEMENT AND EXECUTIVE
COMPENSATION All
DESCRIPTION OF RAYONIER
CAPITAL STOCK All
CONSOLIDATED FINANCIAL
STATEMENTS All
</TABLE>
<PAGE> 20
EXHIBIT A
TO DISTRIBUTION
AGREEMENT
ADMINISTRATIVE SERVICES AGREEMENT
This Agreement is made as of February___, 1994 by ITT CORPORATION, a Delaware
corporation ("ITT"), and ITT RAYONIER INCORPORATED, a North Carolina
corporation to be renamed "Rayonier Inc." in connection with the Distribution
hereafter referred to ("Rayonier").
BACKGROUND
The Board of Directors of ITT has determined that it is appropriate and
desirable to make a distribution (the "Distribution") to the holders of shares
of Common Stock, par value $1.00 per share, of ITT and Cumulative Preferred
Stock, without par value, $2.25 Convertible Series N of ITT of all the
outstanding Common Shares of Rayonier; and
ITT and Rayonier recognize that it is advisable that ITT continue to provide
certain administrative and other services to Rayonier, and that Rayonier
continue to provide certain services to ITT with respect to particular ITT
subsidiaries which were formerly the management responsibility of Rayonier,
until Rayonier or ITT, as the case may be, has had a reasonable opportunity to
evaluate its continued need for the services and to investigate other sources
of the services.
AGREEMENT
The parties agree as follows:
Section 1. Performance of Services. Beginning on the date determined by ITT's
Board of Directors as the date as of which the Distribution shall be effected
(the "Distribution Date"), each party will provide, or cause one or more of its
subsidiaries to provide, to the other party and its subsidiaries on an
"as-needed" basis (as determined by the party to whom the services are to be
provided or its subsidiaries) such services as may be agreed upon between ITT
and Rayonier from time to time in writing. The party which is to provide the
services (the "Provider") will use (and will cause its subsidiaries to use) its
best efforts to provide such services to the other party (the "Recipient") and
its subsidiaries in a satisfactory and timely manner. ITT and Rayonier will
cooperate in planning the scope and timing of services provided under this
Agreement.
Section 2. Payment for Services, Expense Reimbursement.
(a) As compensation for the services performed hereunder, the Recipient will
pay the Provider (i) the allocated portion of the base salaries of the
Provider's employees providing such services and (ii) the amount of the
Provider's actual out-of-pocket costs, expenses and disbursements reasonably
incurred by the Provider related directly to the
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<PAGE> 21
performance of any such services and which would not reasonably have been
incurred by the Provider to deliver such services to the businesses of the
Recipient but for the Distribution.
(b) Notwithstanding subsection (a), the parties agree that
(i) with respect to each out-of-pocket expense provided under
subsection (a)(ii) which individually is greater than $2,500, the
Provider will use (and will cause its subsidiaries to use) reasonable
efforts to notify the Recipient, prior to incurring or assessing such
expense, of the scope and effect of such expense on the related
services; and
(ii) with respect to each allocated salary provided under subsection
(a)(i) and each out-of pocket expense provided under subsection
(a)(ii) which individually is greater than $25,000, the Recipient
shall have 30 days following the Provider's written notice to advise
the Provider if the Recipient does not want the Provider to incur or
provide on the Recipient's behalf the services to which such salary or
expense relates. If the Provider timely receives the Recipient's
written notice, such services shall be discontinued or modified as the
Provider and the Recipient determine is appropriate.
(c) Each party will periodically, but not less frequently than quarterly,
submit to the other party for payment statements of amounts due under this
Agreement. The statement will specify the nature of the services provided, the
identity of the Recipient's department or employee(s) requesting such services,
the identity of the Provider's department or employee(s) performing such
services and any other supporting detail which the Recipient reasonably
requests. The Recipient will pay the amounts due within 30 days after the
Recipient's receipt of each statement.
Section 3. Independence. All employees and representatives of the Provider
providing the scheduled services to the Recipient will be deemed for purposes
of all compensation and employee benefits to be employees or representatives of
the Provider and not employees or representatives of the Recipient. In
performing such services, such employees and representatives will be under the
direction, control and supervision of the Provider (and not the Recipient) and
the Provider will have the sole right to exercise all authority with respect to
the employment (including termination of employment), assignment and
compensation of such employees and representatives.
Section 4. Non-exclusivity. Nothing in this Agreement precludes either party
from obtaining, in whole or in part, services of any nature which may be
obtainable from the other party from its own employees or from providers other
than the other party.
Section 5. Confidentiality. Each party (the "first party") agrees to hold in
confidence, and to use its best efforts to cause its employees and
representatives to hold in confidence, all confidential information concerning
the other party furnished to or
2
<PAGE> 22
obtained by the first party after the Distribution Date in the course of
providing and receiving services hereunder in a manner consistent with ITT's
standard policies in effect on the date hereof with respect to the preservation
and disclosure of confidential information concerning ITT and its subsidiaries
and operating divisions.
Section 6. Termination. Unless otherwise specifically provided in a separate
written agreement between the parties hereto (including without limitation any
other agreement entered into in connection with the Distribution), this
Agreement will continue in effect until December 31, 1994. Upon termination,
the parties will make all payments of compensation described in subsection 2(a)
to the extent that such compensation has not been fully paid prior to the
termination date.
Section 7. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
executed in and to be performed in that state.
Section 8. Notices. All notices and other communications hereunder must be in
writing and hand delivered or mailed by registered or certified mail (return
receipt requested) or sent by any means of electronic message transmission with
delivery confirmed (by voice or otherwise) to the parties at the following
addresses (or at such other address specified by like notice) and will be
deemed given on the date such notice is received:
To ITT:
ITT Corporation
1330 Avenue of the Americas
New York, NY 10019
Attn: Senior Vice President
and General Counsel
To Rayonier:
Rayonier Inc.
1177 Summer Street
Stamford, CT 06904
Attn: Vice President
and General Counsel
Section 9. Waivers. The failure of either party to require strict performance
by the other party of any provision in this Agreement will not waive or
diminish that party's right to demand strict performance thereafter of that or
any other provision hereof.
3
<PAGE> 23
Section 10. Amendments. This Agreement may not be modified or amended except
by an agreement in writing signed by the parties.
Section 11. Successors and Assigns. This Agreement shall be assignable in
whole in connection with a merger or consolidation or the sale of all or
substantially all the assets of a party hereto. Otherwise this Agreement shall
not be assignable, in whole or in part, directly or indirectly, by either party
hereto without the prior written consent of the other, and any attempt to
assign any rights or obligations arising under this Agreement without such
consent shall be void; provided, however, that the provisions of this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the
parties and their respective successors and permitted assigns.
Section 12. Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and their respective subsidiaries and affiliates
and should not be deemed to confer upon third parties any remedy, claim,
liability, reimbursement, claim of action or other right in excess of those
existing without reference to this Agreement.
Section 13. Title and Headings. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
Section 14. Legal Enforceability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the day and year first above written.
ITT CORPORATION
By:_______________________
ITT RAYONIER INCORPORATED
By:_______________________
4
<PAGE> 24
EXHIBIT B
TO DISTRIBUTION
AGREEMENT
Employee Benefit Services and Liability Agreement
AGREEMENT, dated as of , by and between ITT CORPORATION, a
Delaware Corporation (which, together with its subsidiaries, is hereinafter
referred to as "ITT") and ITT RAYONIER INCORPORATED, a North Carolina
Corporation to be renamed "Rayonier Inc." (which together with its
subsidiaries is hereinafter referred to as "Rayonier").
W I T N E S S E T H
WHEREAS, ITT intends to spin off its forest products businesses by
consolidating those businesses into Rayonier (and its subsidiaries) and
distributing Rayonier stock to the stockholders of ITT as a dividend on
February , 1994 (the "Distribution Date"), and making Rayonier stock
available for public purchase on the New York Stock Exchange; and
WHEREAS, in connection with the foregoing transaction, ITT and Rayonier
desire to enter into an Employee Benefit Services and Liabilities Agreement,
signed as of (the "Benefit Agreement");
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, ITT and Rayonier agree as follows:
1. RETIREMENT PLAN FOR SALARIED EMPLOYEES (a) Rayonier Retirement Plan
for Salaried Employees. Rayonier shall establish, effective as of the
Distribution Date, a defined benefit salaried employee retirement plan (the
"Rayonier Retirement Plan") with terms similar in all material respects to the
Retirement Plan for Salaried Employees of ITT Corporation (the "ITT Retirement
Plan"), subject to such modifications as are considered appropriate to assure
that the Rayonier Retirement Plan will obtain a favorable determination letter
from the Internal Revenue Service (the "IRS"). Rayonier shall adopt such
amendments as the IRS shall require as a condition for issuing a favorable
determination letter.
(b) Rayonier Retirement Plan Eligibility Service and Benefit Service. The
Rayonier Retirement Plan shall
<PAGE> 25
2
include as service for all purposes of determining eligibility and
vesting, including, without limitation, eligibility service for purposes of
determining eligibility for plan membership, preretirement survivor benefits,
standard early retirement benefits, special early retirement benefits and
normal retirement benefits, all service rendered prior to the Distribution Date
which is recognized as Eligibility Service under the terms of the ITT
Retirement Plan. The Rayonier Retirement Plan (i) shall include as service for
benefit accrual purposes all service rendered prior to the Distribution Date
which is recognized as Benefit Service under the terms of the ITT Retirement
Plan and (ii) shall provide for an offset of any benefit payable from the ITT
Retirement Plan as provided in Section 1 of this Agreement.
(c) ITT Retirement Plan--Retention of Liability and Accrued Benefits. ITT
agrees that the ITT Retirement Plan shall retain liability for accrued benefits
determined under the terms and conditions of said Plan as of the Distribution
Date for (i) all Rayonier Salaried Employees (including, without limitation,
those who, as of the Distribution Date, participate in, or are in the process
of satisfying the eligibility requirements for participation in, the ITT
Retirement Plan), (ii) any former Rayonier salaried employee who, as of the
Distribution Date, is retired or entitled to receive a deferred vested benefit
and (iii) all hourly employees of Rayonier who, as of the Distribution Date,
have an accrued benefit under the ITT Retirement Plan. For purposes of this
Benefit Agreement, the term "Rayonier Salaried Employees" means all persons
employed on a salaried basis by Rayonier on the Distribution Date and in
addition shall include persons who are absent from work at Rayonier by reason
of layoff, leave of absence, short-term disability or long-term disability.
For purposes of this Section 1, the term Rayonier Salaried Employees will also
include persons employed on a salaried basis by Rayonier on December 1, 1993.
Those employees listed in Annex A who have an accrued benefit under the ITT
Retirement Plan will also be accorded the treatment provided for in Section
1(d).
(d) ITT Retirement Plan--Recognition of Post-Distribution Date Service and
Compensation Increases for Rayonier Salaried Employees. Subject to Sections
1(e)-(i) hereof and to the extent permitted by applicable law, for all Rayonier
Salaried Employees referred to in Section 1(c) (but in no event with respect to
any former employee of ITT
<PAGE> 26
3
or Rayonier whether or not such person is employed at any time after the
Distribution Date by Rayonier), (i) ITT shall recognize post-Distribution Date
service with Rayonier, but only to the extent such service is counted under
Section 1(g) hereof, of all such Rayonier Salaried Employees under the ITT
Retirement Plan for all purposes of eligibility and vesting, including, without
limitation, eligibility service for purposes of preretirement death benefits,
standard early retirement and special early retirement benefits, and normal
retirement benefits, and (ii) ITT shall recognize post-Distribution Date
compensation increases of such Rayonier Salaried Employees while they are
employed by Rayonier, but only for periods of service counted under Section
1(g) hereof, for purposes of the Average Final Compensation calculation under
the ITT Retirement Plan, provided that for each calendar year, starting in
1994, total compensation recognized for such pension purposes shall not exceed
105% of the total compensation recognized in the immediately preceding calendar
year, with pro-rata adjustment for partial years. In order to apply this
limitation consistent with the definition of Average Final Compensation under
the ITT Retirement Plan, the limit in any year will first be applied against
base salary and then against other forms of pensionable compensation.
Pensionable compensation shall generally fall within the definition of
compensation as applied by ITT in accordance with the administrative rules and
procedures for the ITT Retirement Plan.
(e) Effect of Employment with Rayonier. During any period while (i) the
arrangement under Section 1(d) continues in effect as provided herein and (ii)
any Rayonier Salaried Employee affected by the arrangement under Section 1(d)
is employed with Rayonier or an affiliate thereof, including periods after
re-employment following a termination of employment occurring after the
Distribution Date, such Rayonier Salaried Employee (I) shall not be deemed
either to have terminated employment or to be in retirement status under the
ITT Retirement Plan and (II) shall not be eligible to receive payment of his or
her vested benefit or retirement allowance under the ITT Retirement Plan.
(f) Provision of Benefits. ITT at its option and in its sole discretion,
exercised for any or no reason, may satisfy its obligations under Section 1(d)
hereof by providing all or any portion of the benefits to be provided under
this Agreement (i) through the ITT Retirement Plan,
<PAGE> 27
4
(ii) through any successor or other tax-qualified retirement plan, and/or (iii)
outside any qualified retirement plan, including, without limitation, any such
benefits which, by reason of the limits imposed by Section 415 of the Internal
Revenue Code of 1986, as amended (the "Code"), may not be paid from any
qualified retirement plan.
(g) Limited Obligation of ITT To Recognize Service and Compensation
Increases. With respect to any individual Rayonier Salaried Employee (i)
service required to be recognized and subject to the limitations under the
arrangement described in Section 1(d) hereof shall be the same years and
portions thereof of service recognized for similar purposes under the Rayonier
Retirement Plan, but no other; and (ii) compensation increases required to be
recognized and subject to the limitations under Section 1(d) hereof shall be
taken into account for the same years and portions thereof with respect to
which eligibility or benefit service is credited under the Rayonier Retirement
Plan, but no other.
(h) ITT Obligation--Effect of Post-Distribution Date Changes in the ITT
Retirement Plan. ITT's obligation under Section 1(d) hereof shall be to
maintain the arrangement under said Section in accordance with the terms of
such arrangement as applied with respect to the ITT Retirement Plan as in
effect as of the Distribution Date, without regard to any subsequent amendment
or other change to said Plan, except that any such change or amendment which
would reduce benefit accruals under said arrangement with respect to periods
after the effective date of the change or amendment but which is required
solely to comply with applicable legal requirements, and with respect to which
ITT has no optional means of compliance which if pursued would not reduce
future benefit accruals under said arrangement, shall be taken into account, to
the extent determined by ITT in its sole discretion, to reduce ITT's obligation
under Section 1(d). Any amendment to the ITT Retirement Plan (or other
arrangement provided in accordance with Section 1(f) hereof), that is identical
to an amendment to the Rayonier Retirement Plan shall not be treated as an
amendment that reduces benefit accruals.
(i) ITT Retirement Plan--Effect of Post-Distribution Date Changes in
Rayonier Retirement Plan. (1) This provision shall govern the period of time
during which the arrangement provided in Section 1(d) hereof shall
<PAGE> 28
5
continue with respect to all or any portion of the Rayonier Salaried Employees.
(2)(A) The following definitions shall apply for purposes of this Section
1(i):
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Information Event" means any failure by Rayonier to provide to ITT
information or data necessary or appropriate for ITT's administration and
implementation of the arrangement under Section 1(d) hereof, unless such
failure is cured by Rayonier within sixty (60) days after written notice by ITT
of such failure. The effective date of an "Information Event" shall be the
date sixty (60) days after such notice is received by Rayonier.
"Modification" means any amendment to or other change in the Rayonier
Retirement Plan (including, without limitation, any merger with another plan or
spin-off of any portion of the Rayonier Retirement Plan), effective any time
after the Distribution Date, which substantially reduces benefit accruals under
such plan for periods after the effective date of the amendment or change, with
respect to (i) the benefit formula, (ii) the definition of average final
compensation, (iii) the number of years taken into account for purposes of
benefit accrual, (iv) the percentage of average final compensation taken into
account for each year of service, (v) the method of Social Security integration
(to the extent discretionary on the part of Rayonier), (vi) the optional forms
of benefits, (vii) early retirement and special early retirement provisions
and/or (viii) the manner in which service is taken into account including,
without limitation, service with ITT. The term "Modification" shall not
include any amendment or other change to the Rayonier Retirement Plan (I)
required solely to comply with applicable legal requirements and with respect
to which Rayonier has no optional means of compliance which if pursued would
not result in a Modification (except for this sentence) or (II) that is
identical to an amendment to the ITT Retirement Plan (or other arrangement
provided in accordance with Section 1(f) hereof.
"Plan Termination" means any termination, under Title IV of ERISA, of the
Rayonier Retirement Plan.
<PAGE> 29
6
"Partial Plan Termination" means any partial termination, under Section 411
of the Code, of the Rayonier Retirement Plan.
"Rayonier Unit" means any subsidiary or business unit of Rayonier.
"Unit Sale" means any termination, whether by sale or otherwise, of
Rayonier's majority ownership or control of any Rayonier Unit.
(2)(B) At any time after the Distribution Date, Rayonier shall promptly
notify ITT in writing of any and all amendments and changes to the Rayonier
Retirement Plan, any Plan Termination or Partial Plan Termination, under Title
IV of ERISA or Section 411 of the Code, of the Rayonier Retirement Plan and any
Unit Sale (such events to be referred to as "Notice Events"), such notice to be
given as of the earlier of (i) the effective date of the Notice Event or (ii)
the date the Notice Event is adopted or has otherwise become subject of a
legally binding and noncancelable commitment to carry out such Notice Event.
Any failure of Rayonier (i) to give such notice or (ii) to promptly provide
upon ITT's request any information or data reasonably necessary or appropriate
to accomplish the determination referred to in Section 1(i) (5) shall
constitute a "Failure to Notify". The effective date of a Failure to Notify
shall be the effective date of the Notice Event with respect to which such
failure occurs.
(3) Upon the occurrence (as determined under Section 1(i)(5) hereof) of any
Modification, Plan Termination, Partial Plan Termination, Unit Sale, Failure to
Notify or Information Event (any such event to be referred to as an
"Arrangement Termination Event"), and effective as of the effective date
thereof (a "Termination Date"), the arrangement provided in Section 1(d) hereof
shall automatically and of its own accord terminate. Upon such termination,
the obligations of Rayonier under Sections 1(i) and 1(j) hereof shall
terminate, but only with respect to service and compensation increases after
such termination. Upon such termination, ITT will cause any Rayonier salaried
employees then participating in and/or having an accrued benefit under the ITT
Retirement Plan and affected by such termination to be 100 percent vested in
their accrued benefits under the ITT Retirement Plan as of the applicable
Termination Date, for service and total compensation to the applicable
Termination Date, determined under the terms and
<PAGE> 30
7
conditions of the ITT Retirement Plan as amended to provide for the arrangement
under Section 1(d), unless ITT shall determine, in its sole discretion, to
continue voluntarily, for such period as ITT determines, such arrangement upon
the terms provided in Section 1(d), or another arrangement upon such other
terms as ITT shall determine, but which continuation, in no event, shall be
less favorable to the affected Rayonier salaried employees than the arrangement
under Section 1(d) hereof, and provided that, upon termination by ITT of any
such voluntary continuation, which termination may occur at any time in ITT's
sole discretion, the above 100 percent vesting arrangement shall then become
effective.
(4) For any Arrangement Termination Event applicable to a particular
location or group or class of employees, this Section 1(i) will cause the
termination of the arrangement under Section 1(d) only with respect to such
location or group or class of employees, unless such Arrangement Termination
Event alone, or in combination with any prior or coincident Arrangement
Termination Event, would also constitute an Arrangement Termination Event with
respect to the entire Rayonier Retirement Plan.
(5) The occurrence of an Arrangement Termination Event shall be determined
by ITT, subject to review and agreement by Rayonier. In the event ITT and
Rayonier disagree as to such occurrence, any party may deliver to the other a
written demand for arbitration to determine such occurrence. In such event,
the American Arbitration Association shall be asked to appoint the arbitrator
to rule on the matter, such arbitrator to be a person familiar with United
States pension and employee benefit matters and such appointment to be made and
such arbitration to be held in accordance with the Commercial Arbitration Rules
of the American Arbitration Association then in effect. The decision of the
arbitrator so appointed as to the occurrence of an Arrangement Termination
Event shall be binding and conclusive upon the parties hereto. Judgment upon
any award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. Any such arbitration shall be held in New York, New
York. Each party to any arbitration shall pay its own expenses and the fees of
the arbitrator and the administrative fee of the American Arbitration
Association shall be paid one half by ITT and one half by Rayonier.
<PAGE> 31
8
2. SAVINGS PROGRAM -- INVESTMENT & SAVINGS PROGRAMS (a) Effective as of
the Distribution Date, Rayonier will adopt a defined contribution investment
and savings plan (the "Rayonier Savings Plan") with terms similar in all
material respects to the ITT Investment and Savings Plan for Salaried Employees
(the "ITT Savings Plan"). ITT shall cause the transfer, as soon as practicable
on or after the Distribution Date, of the accounts of all Rayonier Salaried
Employees, plus the portion of any trust earnings attributable to such
employees, from the ITT Savings Plan to the Rayonier Savings Plan, on the
following terms:
(b) ITT Preferred Stock held in the ESOP portion of the ITT Savings Plan
shall be transferred in the form of ITT Common Stock.
(c) With respect to assets held in Funds A, B, C and R of the ITT Savings
Plan, assets will be transferred in kind to the maximum extent practicable.
(d) With respect to the assets in Fund D in the ITT Savings Plan, assets
will be transferred in cash.
3. EXCESS NON-QUALIFIED SUPPLEMENTAL BENEFIT PLANS (a) Excess Pension
Plans: Rayonier shall adopt Excess Pension Plans identical to ITT Excess
Pension Plans and shall assume all liabilities with respect to Rayonier
Salaried Employees accrued under such Plans after the Distribution Date. ITT
shall be responsible for any Excess Pension Plan benefits attributable to
benefit service up to the Distribution Date subject to the provisions of
Section 1(d) of this Agreement.
(b) Excess Savings Plan: Rayonier shall adopt an Excess Savings Plan
identical to ITT's Excess Savings Plan. ITT shall transfer reserves
attributable to Rayonier Salaried Employees as of the Distribution Date.
4. RAYONIER SALARIED EMPLOYEE WELFARE BENEFIT PLANS (a) Rayonier shall
establish, effective as of the Distribution Date, Salaried Employee Welfare
Benefit Plans identical to those covering the Rayonier Salaried Employees
immediately preceding the Distribution Date. Such Salaried Employee Welfare
Benefit Plans shall include coverage for life insurance, disability, health,
accident and post-retirement health and life insurance.
<PAGE> 32
9
(b) ITT will retain liability for post-retirement health and life
insurance benefits with respect to any former Rayonier salaried employee
covered by the ITT Salaried Medical and Dental Plan and the ITT Salaried Life
Insurance Plan who has retired as of the Distribution Date.
(c) Rayonier agrees to reimburse ITT for any liability for post-retirement
health benefits which hereafter may be imposed upon ITT by virtue of any
legislation or regulation with respect to any Rayonier Salaried Employee.
5. SEVERANCE As of the Distribution Date, Rayonier will provide Severance
Plans for all Rayonier Salaried Employees which are substantially equivalent to
those ITT Severance Plans covering such employees prior to the Distribution
Date. The Rayonier Severance Plans will be maintained without modification for
a minimum of one year.
6. LIFE INSURANCE (a) As of the Distribution Date, Rayonier will
establish a Life Insurance Plan for Rayonier Salaried Employees identical to
the ITT Salaried Life Insurance Plan. ITT will retain the liability for
post-retirement life insurance for any employee covered by the ITT Salaried
Life Insurance Plan who (i) has retired prior to the Distribution Date or (ii)
is eligible to retire as of the Distribution Date. ITT will transfer to
Rayonier a proportionate share of the reserves it maintains for providing
post-retirement life insurance for any other active Rayonier salaried employee
not referred to in (ii) above.
(b) As of the Distribution Date, Rayonier will establish a supplemental,
company-paid death benefit plan covering Mr. R. M. Gross, identical to the plan
which he has with ITT. ITT will transfer its reserve for this benefit to
Rayonier.
7. EXCESS LONG-TERM DISABILITY INSURANCE As of the Distribution Date,
Rayonier will establish an Excess Long-Term Disability Insurance Plan,
identical to the ITT Excess Long-Term Disability Insurance Plan covering those
eligible Rayonier salaried employees. ITT will transfer to Rayonier its
proportionate share of the reserves for this benefit.
8. BENEFIT PROGRAM PARTICIPATION (a) Except as specifically provided
herein, all Rayonier employees
<PAGE> 33
10
(including Rayonier Salaried Employees) will cease participation in all ITT
Benefit Plans and Programs as of the Distribution Date. ITT will remain
responsible for life insurance and medical and dental claims incurred prior to
the Distribution Date. As soon as practicable, ITT will provide an accounting
of the 1993 claims experience for Rayonier's Welfare Plans and determine any
reconciliation payment necessary.
(b) Rayonier shall recognize each Rayonier Salaried Employee's service
with ITT for purposes of determining (i) eligibility for vacation benefits,
short-term disability, and severance benefits and (ii) eligibility for vesting
under all other employee benefit plans and policies of Rayonier applicable to
Rayonier Salaried Employees, to the extent such service was recognized by ITT
for such purposes.
(c) Nothing in this Agreement shall be construed or interpreted to
restrict ITT's or Rayonier's right or authority to amend or terminate any of
its employee Benefit plans, policies or programs effective as of a date
following the Distribution Date, except as explicitly stated within this
Agreement.
9. BENEFIT COMMUNICATIONS AND ADMINISTRATIVE SERVICES ITT shall be
responsible for providing communications and administrative services for
individuals who are, as of the Distribution Date, former salaried employees of
Rayonier (and their eligible dependents and survivors) who, as of the
Distribution Date, retain a benefit under ITT's Salaried Benefit Program.
10. HOLD HARMLESS/INDEMNIFICATION (a) Rayonier shall hold harmless,
indemnify and defend ITT from and against any and all costs, expenses, claims,
damages, lawsuits, reasonable attorneys' and accountants' fees and costs,
losses, deficiencies, assessments, administrative orders, fines, penalties,
actions, proceedings, judgments, liabilities and obligations of any kind or
description (a "Claim" or "Claims") asserted against, incurred or required to
be paid by ITT (regardless of when asserted or by whom), associated with or
arising under any employee benefit plan, policy, program or arrangement
established or adopted by Rayonier effective on or after the Distribution Date
or liability assumed by Rayonier, pursuant to the terms and conditions set
forth in this Agreement.
<PAGE> 34
11
(b) ITT shall hold harmless, indemnify and defend Rayonier from and
against any and all Claims, asserted against, incurred or required to be paid
by Rayonier (regardless of when asserted or by whom), associated with or
arising under any employee benefit plan, policy, program or arrangement
maintained by ITT and not expressly assumed by Rayonier pursuant to this
Agreement, regardless of whether such Claim is asserted before, on or after the
Distribution Date.
11. INFORMATION AND DATA EXCHANGE Each party shall furnish, or shall cause
to be furnished to the other party, a list of all Benefit Plan participants and
employee data or information in its possession which is necessary for such
other party to maintain and implement any Benefit Plan or arrangement covered
by this Benefit Agreement, or to comply with the provisions of this Benefit
Agreement, and which is not otherwise readily available to such other party.
Each shall have the right, at its own cost and expense, at any reasonable time,
with reasonable intervals, during normal business hours, upon reasonable prior
written notice, to examine employee records in connection with legitimate
business purposes, and to audit, examine and make copies of or extracts from
the books, accounts and other records of the other in order to verify the
accuracy of such records insofar as they are relevant to this Benefit
Agreement. Such audit, examination, copying and extracting may be conducted by
employees of ITT or Rayonier or a firm of independent public accountants or
other experts designated by the remaining party; provided that, prior thereto,
such firm's executives deliver to the party to be audited an appropriate
confidentiality agreement.
12. SCOPE OF AGREEMENT (a) This Benefit Agreement shall be binding upon,
and inure to the benefit of, the parties and their respective successors and
permitted assigns. Nothing contained herein shall be deemed to create any
third-party beneficiary rights in any individual who or entity which is not a
party to this Benefit Agreement. Any assignment or delegation of this Benefit
Agreement by either party without the prior written consent of the other party
shall be void, except that no such consent shall be required with respect to an
assignment or delegation made in connection with the sale, transfer or other
disposition of all or substantially all of the businesses of either party.
<PAGE> 35
12
(b) This Benefit Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts executed in and
to be performed in that state.
(c) This Benefit Agreement and the Annexes attached hereto constitute the
entire understanding of the parties with respect to the subject matter hereof
and supersede as of the Distribution Date any and all previous agreements and
understandings, oral or written, between the parties to the extent such
previous agreements and understandings address such subject matter. No
modification of this Benefit Agreement or waiver of any provision hereof or
right hereunder will be binding upon either party unless signed in writing by
an authorized representative of such party.
(d) This Benefit Agreement will continue in force on the terms and
conditions described herein until terminated or amended by mutual agreement of
the parties.
(e) Notwithstanding anything in this Benefit Agreement to the contrary, all
actions contemplated herein with respect to Benefit Plans which are to be
consummated pursuant to this Benefit Agreement shall be subject to such notices
to, and/or approvals by, the IRS (or other governmental agency or entity) as
are required or deemed appropriate by such Benefit Plan's sponsor. ITT and
Rayonier each agrees to use its best efforts to cause all such notices and/or
approvals to be filed or obtained, as the case may be.
(f) Any provision of this Benefit Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(g) From and after the Distribution Date, each of ITT and Rayonier shall
cause to be performed, and hereby guarantees the performance and payment of,
all actions, agreements, obligations and liabilities set forth herein to be
performed or paid by its subsidiaries.
<PAGE> 36
13
(h) No failure or delay on the part of ITT or Rayonier in exercising any
power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other
right or power. No modification or waiver of any provision of this Benefit
Agreement nor consent to any departure by ITT or Rayonier therefrom shall in
any event be effective unless the same shall be in writing, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given.
(i) For the convenience of the parties, any number of copies of this
Benefit Agreement may be executed by the parties hereto, and each such executed
counterpart shall be deemed to be an original instrument.
13. NOTICE All notices and other communications hereunder must be in
writing and hand delivered or mailed by registered or certified mail (return
receipt requested) or sent by any means of electronic message transmission with
delivery confirmed (by voice or otherwise) to the parties at the following
addresses (or at such other address specified by like notice) and will be
deemed given on the date such notice is received:
To ITT:
ITT Corporation
1330 Avenue of the Americas
New York, NY 10019
Attn: Senior Vice President, Human Resources
<PAGE> 37
14
To Rayonier:
Rayonier Inc.
1177 Summer Street
Stamford, CT 06904
Attn: Senior Vice President, Human Resources
IN WITNESS WHEREOF, the parties have duly executed and entered into this
Benefit Agreement, as of the date first above written.
ITT Corporation
By:______________________
Name:____________________
Title:___________________
ITT Rayonier Incorporated
By:______________________
Name:____________________
Title:___________________
<PAGE> 38
15
ANNEX A
[LIST OF EMPLOYEES TO COME]
<PAGE> 39
EXHIBIT C
TO DISTRIBUTION
AGREEMENT
DRAFT 1/31/94
T A X A L L O C A T I O N A G R E E M E N T
THIS AGREEMENT (the "Agreement"), dated as of February [ ], 1994 by
and between ITT Corporation ("ITT") and ITT Rayonier Incorporated ("Rayonier"),
on behalf of itself and its directly or indirectly owned domestic subsidiaries
which would be eligible to join in a consolidated Federal income tax return, or
which have joined in any consolidated Federal income tax return, of ITT
(collectively the "Rayonier Group" and individually a "Rayonier Subsidiary").
WHEREAS, ITT is the common parent of an affiliated group of domestic
corporations including the Rayonier Group (the "ITT Group") which has elected
to file a consolidated Federal income tax return ("Consolidated Return");
WHEREAS, the Rayonier Group members will cease to be members of the
ITT Group upon the proposed distribution by ITT of all of its stock interest in
Rayonier to ITT's common and Series N preferred shareholders (the
"Distribution") on or about February [ ], 1994 (the "Closing Date");
WHEREAS, ITT and Rayonier have entered into a Distribution Agreement
setting forth agreements governing matters following the distribution; and
WHEREAS, ITT and Rayonier desire to provide tax allocation
arrangements between each other which afford the same allocation of tax burdens
and benefits to ITT and Rayonier for transactions which occurred prior to the
Closing Date as would have been afforded to each other absent the Distribution
and to provide for certain other tax matters.
1
<PAGE> 40
NOW, THEREFORE, in consideration of the premises and the agreements
herein set forth, ITT and Rayonier (on its own behalf and on behalf of each
Rayonier Subsidiary) hereby agree as follows:
1. Rayonier will join, and will cause each Rayonier Subsidiary to
join, in the Consolidated Returns for the calendar years 1993 and 1994 to the
extent they are eligible to join in such returns under the provisions of the
Internal Revenue Code of 1986, as amended, (the "Code") and the regulations
thereunder. Rayonier will neither elect to file separate returns for such
periods nor will it cause or permit any of the Rayonier Subsidiaries to so
elect.
2. Rayonier hereby irrevocably designates, and Rayonier agrees to
cause each of the Rayonier Subsidiaries to so designate, ITT as its agent to
take any and all actions necessary or incidental to the filing of Treasury Form
1122 (or any amendment thereto) with respect to any taxable period in which
Rayonier or any of the Rayonier Subsidiaries is a member of the ITT Group (a
"Consolidated Return Year") and Rayonier agrees to deliver, and to cause each
of the Rayonier Subsidiaries to deliver, executed copies of said Form 1122 (or
any amendment thereto) to ITT, if required, with respect to any such year.
3. Rayonier agrees to cooperate with ITT, and will cause each of
the Rayonier Subsidiaries to so cooperate, in a timely manner consistent with
existing practice in filing any return or consent contemplated by this
Agreement. Rayonier also agrees to take, and will cause the appropriate
Rayonier Subsidiary to take, such action as ITT may reasonably request,
including but not limited to the filing of requests for the extension of time
within which to file tax returns, and to cooperate in connection with any
refund claim with respect to any year it is included in the ITT Group.
Rayonier further agrees to furnish timely, and to cause each of the Rayonier
Subsidiaries to so furnish, ITT with any
2
<PAGE> 41
and all information reasonably requested by ITT in order to carry out the
provisions of this Agreement. ITT agrees to furnish timely to Rayonier any and
all information requested by Rayonier in order to carry out the provisions of
this Agreement.
4. (a) ITT will file a Consolidated Return for its year
ending December 31, 1993. ITT and Rayonier agree to make a settlement on or
before March 1, 1994 equal to an interim amount approximating the aggregate
amount of the separate consolidated Federal income tax liability which the
Rayonier Group would have incurred if that group constituted an affiliated
group eligible to file a consolidated return for 1993 and filed a return for
such period. An appropriate adjusting payment shall be made by Rayonier or ITT
on or before October 15, 1994, based on ITT's 1993 Consolidated Return as
filed.
(b) ITT will file a Consolidated Return for the period
ending December 31, 1994, which will include the Rayonier Group for the period
beginning on January 1 , 1994, and ending on the Closing Date (the "Short
Year"). Rayonier agrees to pay to ITT on or before 60 days after the Closing
Date an interim amount equal to the aggregate amount of the separate
consolidated Federal income tax liability which the Rayonier Group would have
incurred if the Rayonier Group constituted an affiliated group of corporations
eligible to file a Consolidated Return for the Short Year (based on a closing
of the books of the Rayonier Group as of the close of business on the Closing
Date) and filed such a return for such period. An appropriate adjusting
payment shall be made by Rayonier or ITT on or before October 15, 1995 based on
ITT's 1994 Consolidated Return as filed. ITT agrees to elect, to the extent
legally permitted, the depreciation method allowed in Section 168(b)(1) of the
Code and the shortest recovery periods permitted by Section 168(c) of the Code
for the Rayonier Group for any recovery property placed in service during the
Short Year. Rayonier shall refrain, and shall cause
3
<PAGE> 42
each of the Rayonier Subsidiaries to refrain, from making any election under
Section 13261(g)(2) of the Revenue Reconciliation Act of 1993 without the prior
written consent of ITT.
(c) In making computations of the separate consolidated
Federal income tax liability of the Rayonier Group for purposes of the
Agreement, the Rayonier Group will be deemed to have filed a separate
consolidated Federal income tax return for the Short Year and all prior taxable
periods to the extent it would have been permitted to do so as an affiliated
group of corporations.
5. (a) The computation of the amount of Federal income tax
liability of the Rayonier Group for any period in which any member of the
Rayonier Group joins in ITT's Consolidated Return shall be adjusted when
payments are made, or refunds are received, as a result of an adjustment by the
Internal Revenue Service with respect to the taxable income, loss or deduction
or tax credits of the Rayonier Group. Rayonier agrees to pay to ITT any
additional amounts (including penalties and additions to tax) on account of
increases in the Federal income tax of the Rayonier Group resulting from any
such adjustment, and ITT will pay to Rayonier any refunds to which the Rayonier
Group (or any member thereof) may be entitled, in each case, together with any
interest relating thereto at the Federal statutory rate used by the Internal
Revenue Service in computing the interest payable by or to it.
(b) Amounts due to ITT by Rayonier under this paragraph
shall be paid within 30 days of the receipt from ITT of written request
therefor provided that prior to such request there has been a payment by ITT of
Federal income tax pursuant to an adjustment as described in subparagraph (a);
and any amounts due by ITT to Rayonier as a result of the receipt of a refund
shall be paid within 30 days after such receipt. After
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<PAGE> 43
expiration of either 30 day period any amounts unpaid shall bear interest
computed from the date of receipt of a request at the Federal statutory rate as
described in this paragraph.
6. (a) In the event that Rayonier, any Rayonier Subsidiary
or the Rayonier Group, in any consolidated income tax return filed for periods
after the Closing Date, incurs a Net Operating Loss ("NOL") for tax purposes,
that NOL will not be carried back to any ITT Group tax return without the
specific consent of ITT. ITT need consent only if the carryback of such NOL to
an ITT Group return will cause no detriment to ITT's tax position.
(b) For purposes of this Agreement, the term "tax
credits" shall include, but shall not be limited to, the rehabilitation tax
credit, foreign tax credit, research tax credit, WIN tax credit, targeted jobs
tax credit, and the alternative minimum tax credit. ITT will reimburse
Rayonier for carrybacks of Rayonier Group NOLs or tax credits into any ITT
Group return only to the extent that such carrybacks reduce the ITT Group's tax
burden after taking into account all other tax credits and carrybacks available
to the ITT Group. In the event that ITT pays an amount to Rayonier for an NOL
or tax credit carryback and the benefit of such NOL or tax credit carryback is
subsequently modified (whether as the result of an Internal Revenue Service or
foreign tax authority's adjustment, a carryback from a subsequent year or for
any other reason), the amount previously paid shall be appropriately increased
or decreased as the case may be with interest, penalties and additions to tax
as provided in paragraph 5(a).
(c) Under the ITT Group's intercompany tax settlement
rules applicable to years in which ITT incurred Alternative Minimum Tax
("AMT"), a portion of the ITT Group's AMT may have been charged to and paid by
Rayonier ("Rayonier AMT"). Some portion of the Rayonier AMT may not yet have
been reimbursed by ITT to Rayonier after
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<PAGE> 44
the tax settlements contemplated in paragraphs 4(a) and (b). After filing the
Consolidated Return which includes the Short Year, the ITT Group may have an
AMT credit carryforward, a portion of which may be allocated to Rayonier
("Rayonier AMTC C/F"). If the Rayonier AMTC C/F exceeds the unreimbursed
Rayonier AMT, Rayonier will reimburse ITT for such excess when Rayonier
realizes a tax benefit in respect of the Rayonier AMTC C/F in any Rayonier
Group tax return. If the unreimbursed Rayonier AMT exceeds the Rayonier AMTC
C/F, ITT will reimburse Rayonier for such excess when the ITT Group realizes a
tax benefit in respect of the Rayonier AMTC C/F in any tax return. In either
case, the determination of the extent to which such excess produces a benefit
in any year shall be made as if such excess were the last item to be considered
in computing the ITT Group or the Rayonier Group tax liability.
(d) Amounts equal to allowable research credits
attributable to the Rayonier Group's activities as a part of the ITT Group will
be paid to Rayonier by ITT. However, if no credit is allowed to the ITT Group,
ITT will make no payment to Rayonier. If a portion of the total credit claimed
on an ITT Group return is not allowed by the Internal Revenue Service, only a
pro rata amount (based upon that year's expenditures as finally allowed) will
be paid to Rayonier by ITT.
7. (a) Rayonier and the Rayonier Subsidiaries file income
and franchise tax returns in those states of the United States and in certain
local jurisdictions in which they carry on their business. In several states,
Rayonier and the Rayonier Subsidiaries file consolidated state tax returns with
ITT and certain ITT Subsidiaries. If any state or local income or franchise
tax audit adjustment attributable to Rayonier or a Rayonier Subsidiary
increases or decreases such consolidated tax liability for a taxable period
ending on or before the Closing Date, an amount in respect of that adjustment
shall be paid as provided in paragraph 7(c).
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(b) Tax liabilities incurred and refunds received by
Rayonier or a Rayonier Subsidiary (other than those relating to Federal, state
and local income or franchise taxes) for all foreign taxes and all taxes not
measured by income, including, but not limited to, ad valorem, capital stock,
sales, use, real and property, special assessment, franchise, automobile
registration, employment, earnings, duty and import taxes (plus interest) shall
be for the account of Rayonier.
(c) ITT will reimburse Rayonier and Rayonier will
reimburse ITT, as the case may be, for any payment by Rayonier or ITT,
respectively, to a state or local tax authority determined to be for the
account of ITT or Rayonier, respectively. The rules of paragraph 5(b) will
apply to amounts either party must pay.
8. (a) (i) Any income tax deficiencies or refund claims
which arise with respect to the tax liability of the ITT Group are attributable
to Rayonier, a Rayonier Subsidiary or the Rayonier Group and are severable from
issues not involving Rayonier, a Rayonier Subsidiary or the Rayonier Group may,
at the option of Rayonier, be defended or prosecuted by Rayonier at its own
cost and expense and with counsel and accountants of its own selection. ITT
may participate in any such prosecution or defense at its own cost and expense
(in either event such cost or expense not to include the amount of any payment
of any tax claim, interest or penalties, or of any compromise settlement or
other disposition thereof). Rayonier shall, if it exercises its option, have
control of the proceedings, but Rayonier shall not compromise or settle any
deficiency of tax or refund claim of the ITT Group without the prior written
consent of ITT, which will not be unreasonably withheld. If Rayonier exercises
its option, Rayonier shall keep ITT reasonably informed of matters relating to
such defense or prosecution. (ii) Any income tax deficiencies or refund claims
which arise with respect to the tax liability of Rayonier, a
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Rayonier Subsidiary or the Rayonier Group and which are attributable to ITT or
the ITT Group (or any member thereof) may, at the option of ITT, be defended or
prosecuted by ITT at its own cost and expense and with counsel and accountants
of its own selection. Rayonier may participate in any such prosecution or
defense at its own cost and expense (in either event such cost or expense not
to include the amount of any payment of any tax claim, interest or penalties,
or of any compromise settlement or other disposition thereof that is for the
account of ITT under this Agreement) to the extent such defense or prosecution
is severable from issues not involving Rayonier, a Rayonier Subsidiary or the
Rayonier Group. ITT shall, if it exercises its option, have control of the
proceedings, but ITT shall not compromise or settle any deficiency of tax or
refund claim of Rayonier, a Rayonier Subsidiary or the Rayonier Group without
the prior written consent of Rayonier, which will not be unreasonably withheld.
If ITT exercises its option, ITT shall keep Rayonier reasonably informed of
matters relating to such defense or prosecution. (iii) ITT and Rayonier agree
to cooperate in all reasonable respects with respect to tax deficiencies or
refund claims described in Section 8(a)(i) or (ii), which cooperation shall
include executing and filing such waivers, consents, other Treasury Department
forms, state tax authority forms, court petitions, refund claims, complaints,
powers of attorney and other documents needed from time to time in order to
defend, prosecute or resolve any such asserted income tax deficiencies or
refund claims.
(b) All computations or recomputations of Federal or
state and local income and franchise tax liability, and all computations or
recomputations of any amount or any payment (including, but not limited to,
computations of the amount of the tax liability, any loss or credit or
deduction, Federal statutory tax rate change for a year, interest, penalties,
and adjustments) and all determinations of the amount of payments or
repayments, or determinations of any other nature required to be made pursuant
to this Agreement are subject to review by Arthur Andersen & Co. If any
disagreement remains
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<PAGE> 47
after any Arthur Andersen & Co. review, that disagreement will be resolved as
provided by the Distribution Agreement entered into between ITT and Rayonier in
connection with the distribution of Rayonier stock.
9. (a) In computing any Rayonier payment to ITT under
paragraphs 4, 5 and 7, Rayonier, the Rayonier Group and the Rayonier
Subsidiaries will determine their tax liability as if their tax benefit
transfer leases were not in effect.
(b) Rayonier agrees to maintain, and shall cause each
Rayonier subsidiary to maintain, accurate records identifying each asset it
owns subject to a tax benefit transfer lease. Rayonier will indemnify ITT if
ITT is required to make any termination payments to any lessor with respect to
such a lease.
10. The provisions of this Agreement shall survive the Closing
Date and remain in full force until all periods of limitations, including any
extensions or waiver periods, for all of ITT's taxable periods prior to or
including the Closing Date have expired. At that time all payments required
under this Agreement shall become immediately due.
11. In the event that the Distribution is ultimately held to be a
taxable transaction, ITT will bear the entire tax liability on any gain
recognized to it. ITT will not require Rayonier to bear the cost of additional
taxes paid by ITT shareholders receiving Rayonier stock in the Distribution,
except as provided below. If Rayonier or any Rayonier Subsidiary takes any
action which materially contributes to a final determination that the
Distribution is a taxable event, Rayonier will indemnify ITT for its tax
liability and for any resulting payments ITT makes to its shareholders that
received Rayonier stock in the Distribution, whether or not ITT is legally
obligated to make such payments (it being
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<PAGE> 48
understood that, although ITT may not be obligated to make such payments to
shareholders, ITT may choose to do so in settlement of an actual or threatened
claim).
12. Any notices, payments or other communications required by this
Agreement shall be made as provided in the Distribution Agreement; however,
copies of such shall, for both ITT and Rayonier, be sent to the attention of
the Director of Taxes.
13. ITT shall indemnify Rayonier for any Federal or state income
or franchise taxes for any taxable period (or portion of a taxable period)
ending before or including the Closing Date for which the Rayonier Group or any
Rayonier Subsidiary may be liable solely as a result of the operation of
Treasury Regulation Sections 1.1502-6 and 1.1502-77 or any state counterpart
statute or regulation.
14. This Agreement shall be governed and construed in accordance
with the laws of the State of New York applicable to contracts executed in and
to be performed in that state, and shall be binding on the successors and
assignees of the parties hereto.
15. This Agreement contains the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior written tax sharing or tax allocation agreements, memoranda, negotiations
and oral understandings, if any, and may not be amended, supplemented or
discharged except by performance or by an instrument in writing signed by both
of the parties hereto.
16. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first above written.
ITT Corporation
(Corporate Seal)
ATTEST: BY_________________________________
ITT Rayonier Incorporated
(Corporate Seal)
ATTEST: BY_________________________________
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EXHIBIT D
TO DISTRIBUTION
AGREEMENT
013194
CANADIAN ASSETS PURCHASE AGREEMENT
THIS ASSETS PURCHASE AGREEMENT made as of February ___, 1994 by and
between ITT Industries of Canada, Ltd., a British Columbia corporation (the
"Seller"), and Rayonier Canada Limited, a federal corporation incorporated
under the laws of Canada corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Seller owns the Purchased Assets (as hereinafter defined);
WHEREAS, the parties hereto desire that the Seller sell the Purchased
Assets to the Purchaser, and that the Purchaser purchase the Purchased Assets
from the Seller;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I. Definitions.
Whenever used in this Agreement the following terms shall have the
following respective meanings:
"Adjusted Net Worth" has the meaning ascribed thereto in Section
2.1(b);
"Associate" means with respect to any entity any other entity directly
or indirectly controlling, controlled by or under common control with such
specified entity. For purposes of this definition control means ownership of
more than 50% of the shares having power to elect directors or persons
performing a similar function;
<PAGE> 51
013194
"Assumed Liabilities" means the liabilities of the Seller set forth in
Exhibit A;
"Benefit Plans" means plans, contracts, agreements, practices, policies
or arrangements, whether oral or written, providing for any bonuses, deferred
compensation, pension, retirement benefits, excess benefits, profit sharing,
stock bonuses, stock options, stock purchases, life, accident and health
insurance, hospitalization, savings, holiday, vacation, severance pay, sick
pay, sick leave, disability, tuition refund, service awards, company car,
scholarship, relocation, or any other employee or executive benefits.
"Business" means the business of the Seller relating to the (growing,
purchase and sale of timber);
"Closing" has the meaning ascribed thereto in Section 2.2;
"Closing Balance Sheet" has the meaning ascribed thereto in Section
2.4(a)(ii);
"Closing Date" has the meaning ascribed thereto in Section 2.2;
"Closing Payment" has the meaning ascribed thereto in Section 2.3(b);
"Contracts" means contracts, agreements, plans, leases, licenses and
franchises;
"Controlled Real Property" means Real Property and Improvements owned,
leased or controlled on or prior to the Closing Date by the Seller in respect
of the Business or any predecessor thereof;
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013194
"Distribution Agreement" means the agreement of that name dated as of
February ____, 1994 by and between ITT Corporation ("ITT") and ITT Rayonier
Incorporated ("Rayonier") providing for the principal corporate transactions
required to effect the distribution of all the outstanding common shares of
Rayonier to the holders of shares of common stock and cumulative preferred
stock $2.25 convertible series N of ITT;
"Distribution Date" shall have the same meaning as in the Distribution
Agreement;
"Environmental Laws" means Laws relating to, and common law causes of
action, such as trespass and nuisance, based on, (i) emission, discharge,
release or threatened release of Hazardous Substances, into the environment
(including, without limitation, the air, surface water, ground water, land or
subsurface strata) or (ii) the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of Hazardous Substances;
"Excluded Assets" means the assets set forth in Exhibit B;
"Hazardous Substances" means pollutants, contaminants or hazardous or
toxic substances, materials or wastes including, but not limited to, those
defined in the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, the Resource Conservation and Recovery Act, as amended
and the Toxic Substances Control Act, as amended, petroleum, including crude
oil or any fraction thereof and those substances regulated under any applicable
Law due to their known or suspected ability to cause harm to human health or
the environment;
"Improvements" means buildings and other improvements;
"Indemnifying Party" means an indemnitor under this Agreement;
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013194
"Indemnitee" means a Purchaser Indemnitee or a Seller Indemnitee;
"Laws" means laws, ordinances, codes, standards, administrative rulings
or regulations of any federal, provincial, state or local governmental
authority;
"Losses" has the meaning ascribed thereto in Section 4.2;
"Pension Plan" means ("employee pension benefit plan" as defined in
Section 3(2) of ERISA);
"Purchase Price" has the meaning ascribed thereto in Section 2.1(b);
"Purchased Assets" means all the assets of the Seller used or held for
use primarily or exclusively in the Business, other than Excluded Assets,
including but not limited to the following:
(a) Land and land improvements;
(b) Buildings and other improvements;
(c) Machinery and equipment;
(d) Furniture and fixtures;
(e) Inventories of finished goods, raw material and
work in process;
(f) Accounts receivable;
(g) Prepaid expenses;
(h) Contracts, including leases;
(i) Customer lists and business records;
(j) goodwill;
"Purchaser" has the meaning ascribed thereto on page 1 of this
Agreement;
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013194
"Purchaser Indemnitee" has the meaning ascribed thereto in Section 4.1;
"Real Property" means real property and interests in real property;
"Reference Balance Sheet" means the three column balance sheet attached
hereto as Exhibit C showing for illustrative purposes in the second column
thereof the adjustments which should have been made to determine Adjusted Net
Worth if the Closing had taken place on the date of such balance sheet;
"Seller" has the meaning ascribed thereto on page 1 of this Agreement;
"Seller Indemnitee" has the meaning ascribed thereto in Section 4.1.
ARTICLE II. Purchase and Sale
2.1. Terms of Purchase and Sale.
Subject to the terms and conditions of this Agreement at the
Closing:
(a) The Seller shall sell, assign and transfer the
Purchased Assets to the Purchaser and the Purchaser shall purchase the
Purchased Assets from the Seller.
(b) In consideration for the Purchased Assets, the
Purchaser shall pay to the Seller a purchase price (the "Purchase Price") equal
to the Adjusted Net Worth as of the Closing Date, as determined pursuant to
Section 2.4. The term "Adjusted Net Worth" shall mean the book value as of the
close of business on the Closing Date of the Purchased Assets less the Assumed
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013194
Liabilities determined in accordance with Canadian generally accepted
accounting principles.
(c) The Purchaser shall assume and agree to pay, perform
and discharge when due the assumed Liabilities.
2.2. The Closing. Consummation of the sale and purchase of the
Business (the "Closing") shall take place on the Distribution Date at the
offices of ITT Corporation, 1330 Avenue of the Americas, New York, NY 10019.
The date of Closing is herein called the "Closing Date."
2.3. Closing Deliveries. At the Closing:
(a) The Seller shall deliver to the Purchaser the documents
referred to in Section 2.8 and shall deliver to the Purchaser possession of the
Purchased Assets;
(b) The Purchaser shall deliver to the Seller CDN $________
(the "Closing Payment") by wire transfer in immediately available funds; and
(c) The Seller and the Purchaser each shall deliver such
other documents as may be reasonably requested by the other.
2.4. Determination of Adjusted Net Worth.
Adjusted Net Worth shall be determined following the Closing Date as
follows:
(a) As soon as practicable after the Closing Date the
Seller shall deliver to the Purchaser an adjusted balance sheet (the "Closing
Balance Sheet") which shall be presented in the same three-column format as the
Reference Balance Sheet and shall present:
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013194
(i) in column 1 a balance sheet of the assets and liabilities of
the Business as of the Closing Date,
(ii) in column 2 the assets in column 1 which are not Purchased
Assets and the liabilities in column 1 which are not Assumed Liabilities, and
(iii) in column 3 the Adjusted Net Worth.
Columns 1 and 3 of the Closing Balance Sheet shall present fairly in all
material respects the assets and liabilities of the Business and the Adjusted
Net Worth, respectively, as of the Closing Date in conformity with Canadian
generally accepted accounting principles. The Purchaser shall cooperate fully
with the Seller in the preparation of the Closing Balance Sheet. Further,
during such period employees of the Purchaser shall be entitled to access to
the Seller's work papers prepared in connection with the Closing Balance Sheet
and shall be entitled to review and discuss such work papers with the Seller.
(b) The Purchaser may dispute the Adjusted Net Worth as
shown on the Closing Balance Sheet by notifying the Seller in writing within 30
days after receipt of the Closing Balance Sheet. If the Purchaser does not so
notify the Seller within such period, the Adjusted Net Worth as shown on the
Closing Balance Sheet shall be final, binding and conclusive on the parties.
If the Purchaser does so notify the Seller, the Purchaser and the Seller shall
attempt to reconcile their differences, and any resolution by them as to any
disputed amounts shall be final, binding and conclusive on the parties.
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013194
(c) If the Purchaser and the Seller are unable to reach a
resolution with respect to all of the items specified in the notice referred to
in Section 2.4(b) within 20 days after the date of receipt by the Seller of
such notice, then either party may submit the items remaining in dispute for
resolution to ____________________ or to such other accounting firm of national
recognition mutually acceptable to the Purchaser and the Seller (the
"Independent Accounting Firm"), which shall, within 20 days after such
submission or such longer period as the Independent Accounting Firm may
require, determine and report to the Seller and the Purchaser upon such
remaining disputed items, and such determination shall be final, binding and
conclusive on the parties hereto. The fees and disbursements of the
Independent Accounting Firm shall be borne half by the Purchaser and half by
the Seller.
2.5. Settlement of Purchase Price.
If the Adjusted Net Worth as finally determined pursuant to
Sections 2.4 (b) or (c) results in a Purchase Price which exceeds the Closing
Payment, the Purchaser shall, within five business days after such final
determination, pay such excess to the Seller. If the Adjusted Net Worth as
finally determined pursuant to Sections 2.4 (b) or (c) results in a Purchase
price which is less than the Closing Payment, the Seller shall, within five
business days after such final determination, pay such difference to the
Purchaser. The party making such payment shall pay interest thereon to the
other party for the period from the Closing Date to the date of payment at the
annual rate announced
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013194
from time to time by Citibank, N.A., New York, New York as the base rate
charged by it for loans to prime commercial customers. Payment of such excess
(or difference) and interest thereon shall be made by wire transfer in
immediately available funds.
2.6. Assignment and Assumption.
(Except as otherwise provided in Article III hereof (relating to
employees and employee benefits)), the Contracts which are Purchased Assets
shall be assigned to the Purchaser at the Closing. Nothing in this Agreement
shall be construed as an attempt to assign any Contract which by its terms or
by law is not assignable without the consent of the other party or parties
thereto, unless such consent shall have been given. If any required consent is
not obtained, the Seller will cooperate with the Purchaser in any reasonable
arrangement designed to provide for the Purchaser the benefits under any such
Contract.
2.7. No Representations or Warranties. Each of the parties hereto
understands and agrees that no party hereto is in this Agreement or in any
other document contemplated by this Agreement or otherwise making any
representation or warranty whatsoever including, without limitation, as to
title, value or legal sufficiency.
2.8. Instruments of Conveyance. In order to effectuate the sale,
conveyance, transfers and assignments contemplated by Sections 2.1 and 2.6
hereof, the Seller will execute and deliver at the Closing all such deeds,
bills of sale and other documents or instruments of conveyance, transfer or
assignment as shall be
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013194
necessary or appropriate to vest in or to confirm in the Purchaser such title
to all of the Purchased Assets as the Seller has.
ARTICLE III. Employees and Employee Benefits
( to be drafted after key benefits issues have been surfaced )
ARTICLE IV. Indemnification
4.1. Indemnification.
(a) From and after the Closing the Purchaser agrees to indemnify the
Seller, and its officers, directors, employees and agents (individually a
"Seller Indemnitee" and collectively the "Seller Indemnitees") and to hold each
Seller Indemnitee harmless from and against all damages, losses and expenses
(including reasonable expenses of investigation and attorneys' fees) ("Losses")
caused by or arising out of any:
(i) breach of the covenants of the Purchaser set forth in
Article III;
(ii) liability under, violation of or non-compliance with any
Environmental Law (whether now existing or hereinafter enacted or adopted)
resulting from acts or omissions on or prior to the Closing Date of the Seller
in respect of the Business, any predecessor thereof or any predecessor in
interest to the Controlled Real Property;
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013194
(iii) liability under any Environmental Law (whether now
existing or hereinafter enacted or adopted) resulting from the presence on or
prior to the Closing Date of any Hazardous Substance on any Controlled Real
Property;
(iv) liability for removal, remediation, cleanup or costs of
response required under any Environmental Law (whether now existing or
hereinafter enacted or adopted) resulting from the manufacture, processing,
use, generation, storage, transport, disposal, emission or discharge on or
prior to the Closing Date of any Hazardous Substance by the Seller in respect
of the Business, any predecessor thereof or any predecessor in interest to any
Controlled Real Property; and,
(v) failure of the Purchaser to discharge any Assumed
Liabilities.
(b) From and after the Closing the Seller agrees to indemnify the
Purchaser and its officers, directors, employees and agents (individually a
"Purchaser Indemnitee" and collectively the "Purchaser Indemnitees") and to
hold each Purchaser Indemnitee harmless from and against all Losses caused by
or arising out of any breach of the covenants of the Seller set forth in
Article III.
4.2. Indemnification Procedure as to Third Party Claims. The
provisions of Section 3.04 of the Distribution Agreement shall apply with
respect to any third party claim indemnified pursuant to this Agreement.
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013194
ARTICLE V Miscellaneous
5.1. Books and Records. At reasonable times after the Closing (a) the
Purchaser shall make available to the Seller for inspection and copying the
books and records which are Purchased Assets to the extent reasonably required
by the Seller for tax, financial reporting and other purposes and (b) the
Seller shall make available to the Purchaser for inspection and copying any of
Seller's books and records relating to the Business which are not Purchased
Assets to the extent reasonably required by the Purchaser for such purposes.
Neither the Seller on the one hand nor the Purchaser on the other hand will
dispose of any of such books and records without first offering them to the
other.
5.2. Further Assurances and Assistance. The Seller and the Purchaser
agree that after the Closing each will execute and deliver to the other any and
all documents, and take such further acts, in addition to those expressly
provided for herein, that may be necessary or appropriate to effectuate the
provisions of this Agreement.
5.3. Notices. All notices and other communications hereunder shall be
in writing and hand delivered or mailed by registered or certified mail (return
receipt requested) or sent by any means of electronic message transmission with
delivery confirmed (by voice or otherwise) to the parties at the following
addresses (or at such other addresses for a party as shall be specified by like
notice) and will be deemed given on the date on which such notice is received:
if to Purchaser, to:
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013194
with a copy to:
ITT Corporation
1330 Avenue of the Americas
New York, New York 10019
Attn: Senior Vice President
and General Counsel
if to Seller to:
with a copy to
Rayonier Incorporated
1177 Summer Street
Stamford, CT 06904
Attn: Vice President
and General Counsel
5.4. Transaction Expenses. Costs and expenses (including, without
limitation, legal and accounting fees and expenses) incurred by the parties
with respect to the negotiation of this Agreement and the consummation of the
transactions contemplated hereby shall be paid as provided in Section 6.03 of
the Distribution Agreement.
5.5. Miscellaneous Taxes and Expenses. Any sales, use or other tax or
recording cost imposed upon the transfer of the assets and business to be
acquired by the Purchaser pursuant to this Agreement shall be paid by the
Purchaser. All ad valorem property taxes and all rentals, water, electricity,
gas, telephone and other similar and usual expenses in respect of the Business
shall be apportioned as of the Closing Date to the extent not provided for on
the Closing Balance Sheet.
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013194
5.6. Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that neither party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other party hereto, except that the
Purchaser may assign, delegate or otherwise transfer its rights under this
Agreement to an Associate of the Purchaser, provided that such assignment,
delegation or transfer shall not relieve the Purchaser of its obligations
hereunder.
5.7. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
executed and to be performed in that state.
5.8. Disputes. Any controversy or claim arising out of this Agreement,
or the breach thereof, shall be resolved in accordance with the provisions of
Article V of the Distribution Agreement provided, however, the provisions of
Article V of such Agreement shall not apply with respect to controversies or
claims arising out of the provisions of Section 2.4 of this Agreement or breach
thereof.
5.9. Entire Agreement; Third Party Rights. This Agreement and the
Schedules hereto constitute the entire understanding of the parties, supersede
any prior agreements or understandings, written or oral, between the parties
with respect to the subject
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013194
matter thereof, and are not intended to confer upon any other person any rights
or remedies.
5.10. Amendment; Waiver. This Agreement shall not be amended or
modified except by written agreement executed by each of the parties hereto.
No provision hereof shall be deemed waived except in writing executed by the
waiving party.
5.11. Effect of Captions. The captions in this Agreement are included
for convenience only and shall not in any way affect the interpretation or
construction of any of the provisions hereof.
5.12. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized representatives as of the day and year
first above written.
ITT INDUSTRIES OF CANADA, LTD.
BY:____________________________
RAYONIER CANADA LIMITED
By: _______________________
15
<PAGE> 65
013194
Exhibit A
Assumed Liabilities
All liabilities of the Seller in respect of the Business (other
than liabilities in respect of income taxes relating to the
period prior to Closing).
16
<PAGE> 66
013194
Exhibit B
Excluded Assets
Cash (other than petty cash)
Insurance policies and coverages
Any rights to the name or mark "ITT".
Refunds for income taxes paid or relating to the period prior to Closing.
17
<PAGE> 67
013194
Exhibit C
Reference Balance Sheet
18
<PAGE> 68
<TABLE>
<CAPTION>
EXHIBIT E
TO DISTRIBUTION
AGREEMENT
PART 1 - Issued Patents
========================================================================
Country Patent Issue Application Filing
Number Date Number Date
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AUSTR
120471 06/12/91 84103167.7 03/22/84
372412 02/15/83 3832 07/24/80
BELGM
120471 06/12/91 84103167.7 03/22/84
820891 04/10/75 10/10/74
CANAD
1007648 03/29/77 188328 12/17/73
1025850 02/07/78 179175 08/20/73
1037468 08/29/78 233677 08/18/75
1037469 08/29/78 233680 08/18/75
1048055 02/06/79 256054 06/30/76
1050225 03/13/79 211228 10/11/74
1050255 03/13/79 211110 10/09/74
1053878 05/08/79 233988 08/22/75
1061336 08/28/79 256564 07/08/76
1067263 10/04/79 211262 10/11/74
1069746 01/15/80 231546 06/15/75
1074027 03/18/80 262893 10/07/76
1082403 07/29/80 248028 03/16/76
1082691 07/29/80 272650 02/25/77
1082692 07/29/80 272651 02/25/77
1082693 07/29/80 272675 02/25/77
1082694 07/29/80 272714 02/25/77
1087771 10/14/80 311232 09/13/78
1087772 10/14/80 311233 09/13/78
1095673 02/17/81 252808 05/18/76
1097253 03/10/81 184857 08/17/77
1097254 03/10/81 284912 08/17/77
1101589 05/19/81 303967 05/24/78
1105365 07/21/81 310586 09/05/78
1106364 08/04/81 323363 03/13/79
1117669 02/02/82 320880 02/06/79
1119388 03/09/82 347068 03/05/80
1141758 02/22/83 367506 12/23/80
1142305 03/08/83 356554 07/18/80
1149219 07/05/83 389138 10/30/81
1153852 09/20/83 355377 07/03/80
1162819 02/28/84 389140 10/30/81
1184904 04/02/85 418999 01/06/83
1208631 07/29/86 449964 03/20/84
1283406 04/23/91 556888 01/20/88
FINLN
68529 10/10/85 812964 09/23/81
69311 01/10/86 830038 01/06/83
69549 03/10/86 812965 09/23/81
74309 01/11/88 811968 06/23/81
79725 02/12/90 841220 03/27/84
FRANC
51230 07/04/84 81108847.5 10/24/81
120471 06/12/91 84103167.7 03/22/84
7902456 10/15/84 7902456 01/31/79
</TABLE>
<PAGE> 69
<TABLE>
<CAPTION>
EXHIBIT E
PART 1 - Issued Patents
========================================================================
Country Patent Issue Application Filing
Number Date Number Date
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8016008 03/09/87 8016008 07/21/80
8026894 04/07/86 8026894 12/18/80
GERWE
3027033 10/11/90 3027033 07/16/80
3047351 01/03/91 3047351 12/16/80
3164599 07/04/84 3164599 10/24/81
3484688.3 06/12/91 P 34 84 688.3 03/22/84
HOLLN
8102857 06/15/81
51230 07/04/84 81108847.5 10/24/81
120471 06/12/91 84103167.7 03/22/84
188810 09/08/92 8004199 07/22/80
ITALY
51230 07/04/84 81108847.5 10/24/81
120471 06/12/91 84103167.7 03/22/84
1193545 07/08/88 23633A/80 07/23/80
1194822 09/28/88 26850 12/22/80
JAPAN
1306435 03/13/86 102302 07/25/80
1339238 09/29/86 189393 12/26/80
1339252 09/29/86 173161 10/30/81
1495456 05/16/89 56022 03/13/86
1506557 07/13/89 173162 10/30/81
1587435 11/19/90 40287 02/28/85
LIECH
51230 07/04/84 81108847.5 10/24/81
120471 06/12/91 84103167.7 03/22/84
LUXMB
120471 06/12/91 84103167.7 03/22/84
MEXIC
7152 11/13/87 9723 10/26/81
7287 04/14/88 9724 10/26/81
161160 08/09/90 200247 02/06/84
162684 06/17/91 187926 06/22/81
NORWA
153343 02/26/86 811900 06/04/81
158810 11/02/88 813664 10/29/81
165932 05/02/91 840717 02/24/84
SPAIN
503323 02/15/82 503323 06/23/81
506718 04/21/92 506718 10/30/81
SWEDN
51230 07/04/84 81108847.5 10/24/81
120471 06/12/91 84103167.7 03/22/84
SWITZ
51230 07/04/84 81108847.5 10/24/81
120471 06/12/91 84103167.7 03/22/84
648071 02/28/85 3923 06/15/81
TAIWN
21588 03/27/85 73100320 01/27/84
UNIKN
51230 07/04/84 81108847.5 10/24/81
120471 06/12/91 84103167.7 03/22/84
</TABLE>
<PAGE> 70
<TABLE>
<CAPTION>
EXHIBIT E
PART 1 - Issued Patents
========================================================================
Country Patent Issue Application Filing
Number Date Number Date
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2013646 07/12/82 7903226 01/30/79
2055107 04/13/83 8023958 07/22/80
2066145 05/25/83 8040179 12/16/80
USA
4018681 04/19/77 631370 11/12/75
4022631 05/10/77 578934 05/19/75
4044090 08/23/77 594325 07/09/75
4056675 11/01/77 662132 02/27/76
4064166 12/20/77 673614 04/05/76
4073660 02/14/78 715223 08/18/76
4076932 02/28/78 662137 02/27/76
4076933 02/28/78 662138 02/27/76
4082617 04/04/78 715422 08/18/76
4086418 04/25/78 662134 02/27/76
4118350 10/03/78 833077 09/14/77
4120836 10/17/78 833076 09/14/77
4123398 10/31/78 800186 05/25/77
4131705 12/26/78 830471 09/06/77
4155804 05/22/79 559174 03/17/75
4162359 07/24/79 886285 03/13/78
4248842 02/03/81 17388 03/05/79
4295929 10/20/81 131813 03/19/80
4302252 11/24/81 145333 04/30/80
4341807 07/27/82 202741 10/31/80
4374027 02/15/83 14853 02/26/79
4374702 02/22/83 313726 10/22/81
4378381 03/29/83 202740 10/31/80
4399275 08/16/83 337447 01/06/82
4402899 09/06/83 283069 07/13/81
4452721 06/05/84 441689 11/15/82
4452722 06/05/84 441628 11/15/82
4464287 08/07/84 441550 11/15/82
4481076 11/06/84 479555 03/28/83
4481077 11/06/84 479556 03/28/83
4483743 11/20/84 434724 10/18/82
4487634 12/11/84 441684 11/15/82
4500546 02/19/85 441686 11/15/82
4551305 11/05/85 544384 10/21/83
4728727 03/01/88 007772 01/28/87
5169931 12/08/92 704448 05/23/91
- -------------------------------------------------------------------
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
EXHIBIT E
PART 2 - Pending Applications
======================================
Country Application Filing
Number Date
--------------------------------------
<S>> <C> <C>
JAPAN
4-150001 05/19/92
NORWA
P921878 05/12/92
USA
07/942507 09/09/92
07/963853 10/20/92
07/960483 10/09/92
08/007741 01/22/93
08/164624 12/08/93
=======================================
</TABLE>
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION C-0335068
__________
OF
ITT RAYONIER INCORPORATED
______________________________________________
Pursuant to sec. 55-10-07 of the General Statutes of North
Carolina, the undersigned corporation hereby submits the following for the
purpose of amending and restating its articles of incorporation:
1. The name of the corporation is ITT Rayonier Incorporated (the
"Corporation").
2. Attached hereto as an exhibit are Amended and Restated Articles
of Incorporation of the Corporation.
3. These Amended and Restated Articles of Incorporation, which
contain an amendment requiring shareholder approval, were adopted by written
action without meeting of the sole shareholder of the Corporation on the 13th
day of December, 1993, in the manner prescribed by the North Carolina Business
Corporation Act.
4. These Amended and Restated Articles of Incorporation do not
contain an amendment providing for an exchange, reclassification, or
cancellation of issued shares.
5. These Amended and Restated Articles of Incorporation will be
effective upon filing.
This the 13th day of December, 1993.
ITT RAYONIER INCORPORATED
By: /s/ R. M. Gross
--------------------------
Ronald M. Gross
Title: President
<PAGE> 2
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
ITT RAYONIER INCORPORATED
________________________________________
The Corporation hereinafter named has duly adopted these Amended and
Restated Articles of Incorporation (hereinafter, the "Articles of
Incorporation") for the purpose of continuing a business corporation formed
under and by virtue of the laws of the state of North Carolina, including the
provisions of the North Carolina Business Corporation Act, as amended from time
to time or any successor statute (the "NCBCA").
I.
The name of the corporation is ITT RAYONIER INCORPORATED (hereinafter,
the "Corporation").
II.
The Corporation shall have authority to issue 75,000,000 shares, of
which 60,000,000 shall be Common Shares, and of which 15,000,000 shares shall
be Preferred Shares, with the following powers, preferences and rights, and
qualifications, limitations and restrictions:
(a) Except as otherwise provided by law, each Common
Share shall have one vote, and, except as otherwise provided in respect of any
series of Preferred Shares hereafter classified or reclassified, the exclusive
voting power for all purposes shall be vested in the holders of the Common
Shares. In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Common Shares
shall be entitled, after payment or provision for payment of the debts and
other liabilities of the Corporation and the amount to which the holders of any
series of Preferred Shares hereafter classified or reclassified having a
preference on distributions in the liquidation, dissolution or winding up of
the Corporation shall be entitled, to share ratably in the remaining net assets
of the Corporation.
(b) The Board of Directors is authorized, subject to
limitations prescribed by the NCBCA and these Articles of Incorporation, to
adopt and file from time to time articles of amendment that authorize the
issuance of Preferred Shares which may be divided into two or more series with
such preferences, limitations, and relative rights as the Board of Directors
may determine, provided, however, that no holder of any Preferred Share shall
be authorized or entitled to receive upon the involuntary liquidation of the
Corporation an amount in excess of $100.00 per Preferred Share.
1
<PAGE> 3
(c) No holder of any share of the Corporation, whether
now or hereafter authorized, shall have any preemptive right to subscribe for
or to purchase any shares or other securities of the Corporation, nor have any
right to cumulate his votes for the election of Directors.
III.
The address of the registered office of the Corporation in the
State of North Carolina is 225 Hillsborough Street, Raleigh, Wake County, North
Carolina 27603; and the name of its initial registered agent at such address is
CT Corporation System.
IV.
(a) The Board of Directors shall have the exclusive power
and authority to direct the management of the business and affairs of the
Corporation and shall exercise all corporate powers, and possess all authority,
necessary or appropriate to carry out the intent of this provision, and which
are customarily exercised by the board of directors of a public company. In
furtherance of the foregoing, but without limitation, the Board of Directors
shall have the exclusive power and authority to: (i) elect all officers of the
Corporation as the Board may deem necessary or desirable from time to time, to
serve at the pleasure of the Board; (ii) fix the compensation of such officers;
(iii) fix the compensation of Directors; and (iv) determine the time and place
of all meetings of the Board of Directors and Shareholders.
(b) The Board of Directors may create and make
appointments to one or more committees of the Board comprised exclusively of
Directors who will serve at the pleasure of the Board and who may have and
exercise such powers of the Board in directing the management of the business
and affairs of the Corporation as the Board may delegate, in its sole
discretion, consistent with the provisions of the NCBCA and these Articles of
Incorporation. The Board of Directors may not delegate its authority over the
expenditure of funds of the Corporation except to a committee of the Board and
except to one or more officers of the Corporation elected by the Board. No
committee comprised of persons other than members of the Board of Directors
shall possess or exercise any authority in the management of the business and
affairs of the Corporation.
(c) The Board of Directors may adopt, amend or repeal the
Corporation's bylaws, in whole or in part, including amendment or repeal of any
bylaw adopted by the Shareholders.
(d) A majority of the Directors in office shall
constitute a quorum for the transaction of business at a meeting of the Board
of Directors.
2
<PAGE> 4
V.
(a) The number of Directors constituting the Board of
Directors shall be not less than three nor more than twelve, as may be fixed
from time to time by resolution duly adopted by the Board of Directors (except
that until the annual meeting of Shareholder in 1994 such number shall be
three). Provided that at the record date for the annual meeting of
Shareholders in 1995 the number of members of the Board of Directors equals or
exceeds the number then required under the NCBCA to stagger the terms of
directors, the Board of Directors shall be divided into three classes, as
nearly equal in number as may be possible, to serve respectively until the
annual meetings in 1995, 1996 and 1997 in the classes designated by the
Shareholder at the 1994 annual meeting, and until their successors shall be
elected and shall qualify, and thereafter the successors shall be elected to
serve for terms of three years and until their successors shall be elected and
shall qualify. However, if at the record date for the annual meeting of
Shareholders in 1995 there is not a sufficient number of members of the Board
of Directors to permit the terms of the Directors to be staggered under the
NCBCA, the terms of all Directors shall expire at the next annual meeting of
Shareholders. In the event of any increase or decrease in the number of
Directors during the time as there shall be classes of Directors, the
additional or eliminated directorships shall be so classified or chosen such
that all classes of Directors shall remain or become equal in number, as nearly
as may be possible.
(b) A vacancy occurring on the Board of Directors,
including without limitation, a vacancy resulting from an increase in the
number of Directors or from the failure by the Shareholders to elect the full
authorized number of Directors, may only be filled by a majority of the
remaining Directors or by the sole remaining Director in office. In the event
of the death, resignation, retirement, removal or disqualification of a
Director during his elected term of office, his successor shall serve until the
next Shareholders' meeting at which Directors are elected. Directors may be
removed from office only for cause.
(c) The only qualifications for Directors of the
Corporation shall be those set forth in these Articles of Incorporation.
Directors need not be residents of the State of North Carolina or Shareholders
of the Corporation.
VI.
(a) The Corporation shall, to the fullest extent
permitted from time to time by law, indemnify its Directors and
officers against all liabilities and expenses in any suit or proceeding,
whether civil, criminal, administrative or investigative, and whether or not
brought by or on behalf of the Corporation, including all appeals therefrom,
arising out of their status as such or their activities in any of the foregoing
capacities, unless the activities of the person to be indemnified were at the
time taken known or believed by him to be clearly in conflict with the best
interests of the Corporation. The Corporation shall likewise and to the same
extent indemnify any person who, at the request of the Corporation, is or was
serving as a director, officer, partner, trustee, employee or agent of another
foreign or domestic corporation, partnership, joint venture, trust or other
enterprise, or as a trustee or administrator under any employee benefit plan.
3
<PAGE> 5
(b) The right to be indemnified hereunder shall include,
without limitation, the right of a Director or officer to be paid expenses in
advance of the final disposition of any proceeding upon receipt of an
undertaking to repay such amount unless it shall ultimately be determined that
he is entitled to be indemnified hereunder.
(c) A person entitled to indemnification hereunder shall
also be paid reasonable costs, expenses and attorneys' fees (including
expenses) in connection with the enforcement of rights to the indemnification
granted hereunder.
(d) The foregoing rights of indemnification shall not be
exclusive of any other rights to which those seeking indemnification may be
entitled and shall not be limited by the provisions of Section 55-8-51 of the
General Statutes of North Carolina or any successor statute.
(e) The Board of Directors may take such action as it
deems necessary or desirable to carry out these indemnification provisions,
including adopting procedures for determining and enforcing the rights
guaranteed hereunder, and the Board of Directors is expressly empowered to
adopt, approve and amend from time to time such bylaws, resolutions or
contracts implementing such provisions or such further indemnification
arrangement as may be permitted by law.
(f) Neither the amendment or repeal of this Article, nor
the adoption of any provision of these Articles of Incorporation inconsistent
with this Article, shall eliminate or reduce any right to indemnification
afforded by this Article to any person with respect to their status or any
activities in their official capacities prior to such amendment, repeal or
adoption.
VII.
To the full extent from time to time permitted by law, no person who
is serving or who has served as a Director of the Corporation shall be
personally liable in any action for monetary damages for breach of any duty as
a Director, whether such action is brought by or in the right of the
Corporation or otherwise. Neither the amendment or repeal of this Article, nor
the adoption of any provision of these Articles of Incorporation inconsistent
with this Article, shall eliminate or reduce the protection afforded by this
Article to a Director of the Corporation with respect to any matter which
occurred, or any cause of action, suit or claim which but for this Article
would have accrued or risen, prior to such amendment, repeal or adoption.
VIII.
The provisions of Article 9A of the NCBCA shall not be applicable to
the Corporation.
4
<PAGE> 6
IX.
Except as may be otherwise determined by the Board of Directors, the
Shareholders of the Corporation shall have access as a matter of right only to
the books and records of the Corporation as may be required to be made
available to qualified Shareholders by the NCBCA.
X.
To the extent that there ever may be any inconsistency between these
Articles of Incorporation and the bylaws of the Corporation as may be adopted
or amended from time to time, the Articles of Incorporation shall always
control.
5
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
ITT RAYONIER INCORPORATED
Effective December 13, 1993
<PAGE> 2
BYLAWS
OF
ITT RAYONIER INCORPORATED
ARTICLE 1 -- OFFICES
Section 1. Offices. The principal office of the Corporation
shall be located at Stamford, Connecticut. The Corporation may have offices at
such other places, either within or without the State of North Carolina, as the
Board of Directors may from time to time determine.
ARTICLE 2 -- MEETINGS OF SHAREHOLDERS
Section 1. Place of Meeting. Meetings of Shareholders shall
be held at such places, either within or without the State of North Carolina,
as shall be designated in the notice of the meeting.
Section 2. Annual Meeting. The annual meeting of
Shareholders shall be held on such date and at such time as the Board of
Directors shall determine each year in advance thereof, for the purpose of
electing Directors of the Corporation and the transaction of such other
business as may be a proper subject for action at the meeting.
Section 3. Special Meetings. Special meetings of the
Shareholders shall be held at such places and times as determined by the Board
of Directors in their discretion as provided in the Articles of Incorporation.
Section 4. Notice of Meetings. At least 10 and no more than
60 days prior to any annual or special meeting of Shareholders, the Corporation
shall notify Shareholders of the date, time and place of the meeting and, in
the case of a special meeting or where otherwise required by the Articles of
Incorporation or by law, shall briefly describe the purpose or purposes of the
meeting. Only business within the purpose or purposes described in the notice
may be conducted at a special meeting. Unless otherwise required by the
Articles of Incorporation or by law, the Corporation shall be required to give
notice only to Shareholders entitled to vote at the meeting. If an annual or
special Shareholders' meeting is adjourned to a different date, time or place,
notice thereof need not be given if the new date, time or place is announced at
the meeting before adjournment. If a new record date for the adjourned meeting
is fixed pursuant to Article 7, Section 5 hereof, notice of the adjourned
meeting shall be given to persons who are Shareholders as of the new record
date. If mailed, notice shall be deemed to be effective when deposited in the
United States mail with postage thereon prepaid, correctly addressed to the
Shareholder's address shown in the Corporation's current record of
Shareholders.
2
<PAGE> 3
Section 5. Quorum. Except as may be provided in the terms of
a series of Preferred Stock, a majority of the votes entitled to be cast by a
voting group on a matter, represented in person or by proxy at a meeting of
Shareholders, shall constitute a quorum for that voting group for any action on
that matter, unless quorum requirements are otherwise fixed by a court of
competent jurisdiction acting pursuant to Section 55-7-03 of the General
Statutes of North Carolina. Once a share is represented for any purpose at a
meeting, it is deemed present for quorum purposes for the remainder of the
meeting and any adjournment thereof, unless a new record date is or must be set
for the adjournment. Action may be taken by a voting group at any meeting at
which a quorum of that voting group is represented, regardless of whether
action is taken at that meeting by any other voting group. In the absence of a
quorum at the opening of any meeting of Shareholders, such meeting may be
adjourned from time to time by a vote of the majority of the shares voting on
the motion to adjourn.
Section 6. Voting of Shares. Except as otherwise provided by
the Articles of Incorporation or by law, each outstanding share of voting
capital stock of the Corporation shall be entitled to one vote on each matter
submitted to a vote at a meeting of the Shareholders. Action on a matter by a
voting group for which a quorum is present is approved if the votes cast within
the voting group favoring the action exceed the votes cast opposing the action,
unless the vote of a greater number is required by law, by the Articles of
Incorporation, by rules of any exchange on which the voting group's stock is
listed or by Section 55-10-03(c) of the North Carolina Business Corporation Act
(the "NCBCA"). Voting on all matters shall be by ballot vote.
ARTICLE 3 -- BOARD OF DIRECTORS
Section 1. General Powers. Except as otherwise expressly
provided in the Articles of Incorporation or by law, the Board of Directors
shall have the exclusive power and authority to direct the management of the
business and affairs of the Corporation and shall exercise all corporate
powers, and possess all authority, necessary or appropriate to carry out the
intent of this provision, and which are customarily exercised by the board of
directors of a public company.
Section 2. Number, Term and Qualification. The number, term
and qualification of Directors of the Corporation shall be as provided in the
Articles of Incorporation.
Section 3. Removal. Directors may be removed from office only
for the reasons, if any, specified in the Articles of Incorporation.
Section 4. Vacancies. Vacancies occurring in the Board of
Directors shall be filled only as provided in the Articles of Incorporation.
Section 5. Compensation. Compensation for the services of
Directors as such shall be determined exclusively by the Board of Directors as
provided in the Articles of Incorporation.
3
<PAGE> 4
ARTICLE 4 -- MEETINGS OF DIRECTORS
Section 1. Annual and Regular Meetings. All annual and
regular meetings of the Board of Directors shall be held at such places and
times as determined by the Board of Directors in their discretion as provided
in the Articles of Incorporation.
Section 2. Special Meetings. Special meetings of the Board
of Directors shall be held at such places and times as determined by the Board
of Directors in their discretion as provided in the Articles of Incorporation.
Section 3. Notice of Meetings. Unless the Board of Directors
by resolution determines otherwise in accordance with authority set forth in
the Articles of Incorporation, all meetings of the Board of Directors may be
held without notice of the date, time, place or purpose of the meeting. The
Secretary shall give such notice of any meetings called by the Board by such
means of communication as may be specified by the Board.
Section 4. Quorum. The percentage of Directors in office
specified in the Articles of Incorporation will constitute a quorum for the
transaction of business at any meeting of the Board of Directors.
Section 5. Manner of Acting. A majority of Directors who are
present at a meeting at which a quorum is present will constitute the required
vote to effect any action taken by the Board of Directors.
Section 6. Action Without Meeting. Action required or
permitted to be taken at a meeting of the Board of Directors may be taken
without a meeting if the action is taken by all members of the Board. The
action must be evidenced by one or more written consents signed by each
Director before or after such action, describing the action taken, and included
in the minutes or filed with the corporate records. Action taken without a
meeting is effective when the last Director signs the consent, unless the
consent specifies a different effective date.
Section 7. Meeting by Communications Device. The Board of
Directors may permit Directors to participate in any meeting of the Board of
Directors by, or conduct the meeting through the use of, any means of
communication by which all Directors participating may simultaneously hear each
other during the meeting. A Director participating in a meeting by this means
is deemed to be present in person at the meeting.
ARTICLE 5 -- COMMITTEES
Section 1. Election and Powers. The Board of Directors may
have such committees, with such members who shall have such powers and
authority as may be determined by the Board of Directors as provided by the
Articles of Incorporation. To the extent specified by the Board of Directors
or in the Articles of Incorporation, each committee shall have and may exercise
the powers of the Board in the management of the business and affairs of the
Corporation, except that no committee shall have authority to do the following:
4
<PAGE> 5
(a) Authorize distributions.
(b) Approve or propose to Shareholders action required to
be approved by Shareholders.
(c) Fill vacancies on the Board of Directors or on any of
its committees.
(d) Amend the Articles of Incorporation.
(e) Adopt, amend or repeal the bylaws.
(f) Approve a plan of merger not requiring Shareholder
approval.
(g) Authorize or approve the reacquisition of shares,
except according to a formula or method prescribed by the Board of Directors.
(h) Authorize or approve the issuance, sale or contract
for sale of shares, or determine the designation and relative rights,
preferences and limitations of a class or series of shares, except that the
Board of Directors may authorize a committee (or a senior executive officer of
the Corporation) to do so within limits specifically prescribed by the Board of
Directors.
Section 2. Removal; Vacancies. Unless the Board of Directors
by resolution determines otherwise in accordance with authority specified in
the Articles of Incorporation, any member of a committee may be removed at any
time exclusively by the Board of Directors with or without cause, and vacancies
in the membership of a committee as a result of death, resignation,
disqualification or removal shall be filled by a majority of the whole Board of
Directors.
Section 3. Meetings. The provisions of Article 4 governing
meetings of the Board of Directors, action without meeting, notice, waiver of
notice and quorum and voting requirements shall apply to the committees of the
Board and its members to the extent not otherwise prescribed by the Board in
the resolution authorizing the establishment of the committee.
Section 4. Minutes. Each committee shall keep minutes of its
proceedings and shall report thereon to the Board of Directors at or before the
next meeting of the Board.
ARTICLE 6 -- OFFICERS
Section 1. Titles. Pursuant to authority conferred in the
Articles of Incorporation, the Board of Directors shall have the exclusive
power and authority to elect from time to time such officers of the
Corporation, including a Chairman and a President (one of whom shall be the
Chief Executive Officer), a Vice Chairman, one or more Executive Vice
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a
Chief Financial Officer, a General
5
<PAGE> 6
Counsel, a Controller, a Treasurer, a Secretary, one or more Assistant
Controllers, one or more Assistant Treasurers, and one or more Assistant
Secretaries, and such other officers as shall be deemed necessary or desirable
from time to time. The officers shall have the authority and perform the
duties as set forth herein or as from time to time may be prescribed by the
Board of Directors. Any two or more offices may be held by the same
individual, but no officer may act in more than one capacity where action of
two or more officers is required.
Section 2. Election; Removal. Pursuant to authority
conferred in the Articles of Incorporation, the officers of the Corporation
shall be elected exclusively by the Board of Directors and shall serve at the
pleasure of the Board as specified at the time of their election, until their
successors are elected and qualify, or until the earlier of their resignation
or removal. Pursuant to authority conferred in the Articles of Incorporation,
any officer may be removed by the Board at any time with or without cause.
Section 3. Compensation. Pursuant to authority conferred in
the Articles of Incorporation, the compensation of the officers shall be fixed
by the Board of Directors.
Section 4. General Powers of Officers. Except as may be
otherwise provided in these bylaws or in the NCBCA, the Chairman, the
Vice-Chairman, the President, any Executive Vice President, any Senior Vice
President, any Vice President, the Chief Financial Officer, the General
Counsel, the Controller, the Treasurer, the Secretary, or any one of them, may
(i) execute and deliver in the name of the Corporation, in the name of any
division of the Corporation or in both names any agreement, contract, deed,
instrument, power of attorney or other document pertaining to the business or
affairs of the Corporation or any division of the Corporation, and (ii)
delegate to any employee or agent the power to execute and deliver any such
agreement, contract, instrument, power of attorney or other document.
Section 5. Chief Executive Officer. The Chief Executive
Officer of the Corporation shall report directly to the Board. Except in such
instances as the Board may confer powers in particular transactions upon any
other officer, and subject to the control and direction of the Board, the Chief
Executive Officer shall manage the business and affairs of the Corporation and
shall communicate to the Board and any committee thereof reports, proposals and
recommendations for their respective consideration or action. He may do and
perform all acts on behalf of the Corporation.
Section 6. Chairman. The Chairman shall preside at meetings
of the Board of Directors and the Shareholders and shall have such other powers
and perform such other duties as the Board may prescribe or as may be
prescribed in these bylaws.
Section 7. Vice Chairman. The Vice Chairman shall have such
powers and perform such duties as the Board or the Chairman (to the extent he
is authorized by the Board of Directors to prescribe the authority and duties
of other officers) may from time to time prescribe or as may be prescribed in
these bylaws.
Section 8. President. The President shall have such powers
and perform such duties as the Board and the Chief Executive Officer (to the
extent he is authorized by the Board
6
<PAGE> 7
of Directors to prescribe the authority and duties of other officers) may from
time to time prescribe or as may be prescribed in these bylaws.
Section 9. Executive Vice Presidents, Senior Vice Presidents
and Vice Presidents. The Executive Vice Presidents, Senior Vice Presidents and
Vice Presidents shall have such powers and perform such duties as the Board or
the Chief Executive Officer (to the extent he is authorized by the Board of
Directors to prescribe the authority and duties of other officers) may from
time to time prescribe or as may be prescribed in these bylaws.
Section 10. Chief Financial Officer. The Chief Financial
Officer shall have such powers and perform such duties as the Board or the
Chief Executive Officer (to the extent he is authorized by the Board of
Directors to prescribe the authority and duties of other officers) may from
time to time prescribe or as may be prescribed in these bylaws. The Chief
Financial Officer shall present to the Board such balance sheets, income
statements, budgets and other financial statements and reports as the Board or
the Chief Executive Officer (to the extent he is authorized by the Board of
Directors to prescribe the authority and duties of other officers) may require
and shall perform such other duties as may be prescribed or assigned pursuant
to these bylaws and all other acts incident to the position of Chief Financial
Officer.
Section 11. Controller. The Controller shall be responsible
for the maintenance of adequate accounting records of all assets, liabilities,
capital and transactions of the Corporation. The Controller shall prepare such
balance sheets, income statements, budgets and other financial statements and
reports as the Board or the Chief Executive Officer or the Chief Financial
Officer (to the extent they are authorized by the Board of Directors to
prescribe the authority and duties of other officers) may require, and shall
perform such other duties as may be prescribed or assigned pursuant to these
bylaws and all other acts incident to the position of Controller.
Section 12. Treasurer.
(a) The Treasurer shall have the care and custody of all
the funds and securities of the Corporation except as may be otherwise ordered
by the Board, and shall cause such funds (i) to be invested or reinvested from
time to time for the benefit of the Corporation as may be designated by the
Board or by the Chairman, the Vice Chairman, the President, the Chief Financial
Officer or the Treasurer (to the extent they are authorized by the Board of
Directors to make such designations), or (ii) to be deposited to the credit of
the Corporation in such banks or depositories as may be designated by the Board
or by the Chairman, the President, the Chief Financial Offer or the Treasurer
(to the extent they are authorized by the Board of Directors to make such
designations), and shall cause such securities to be placed in safekeeping in
such manner as may be designated by the Board or by the Chairman, the
President, the Chief Financial Officer or the Treasurer (to the extent they are
authorized by the Board of Directors to make such designations).
(b) The Treasurer or such other person or persons as may
be designated for such purpose by the Board or by the Chairman, the President,
the Chief Financial Officer or the Treasurer (to the extent they are authorized
by the Board of Directors to make such
7
<PAGE> 8
designations) may endorse in the name and on behalf of the Corporation all
instruments for the payment of money, bills of lading, warehouse receipts,
insurance policies and other commercial documents requiring such endorsement.
(c) The Treasurer or such other person or persons as may
be designated for such purpose by the Board or by the Chairman, the President,
the Chief Financial Officer or the Treasurer (to the extent they are authorized
by the Board of Directors to make such designations), (i) may sign all receipts
and vouchers for payments made to the Corporation; (ii) shall prepare a
statement of the cash account of the Corporation to the Board as often as it
shall require the same; and (iii) shall enter regularly in books to be kept for
that purpose full and accurate account of all moneys received and paid on
account of the Corporation and of all securities received and delivered by the
Corporation.
(d) The Treasurer shall perform such other duties as may
be prescribed or assigned pursuant to these bylaws and all other acts incident
to the position of Treasurer.
Section 13. Secretary. The Secretary shall keep the minutes
of all proceedings of the Shareholders, the Board and the Committees of the
Board. The Secretary shall attend to the giving and serving of all notices of
the Corporation, in accordance with the provisions of these bylaws and as
required by the laws of the State of North Carolina. The Secretary shall cause
to be prepared and maintained (i) at the office of the Corporation a stock
ledger containing the names and addresses of all Shareholders and the number of
shares held by each and (ii) any list of Shareholders required by law to be
prepared for any meeting of Shareholders. The Secretary shall be responsible
for the custody of all stock books and of all unissued stock certificates. The
Secretary shall be the custodian of the seal of the Corporation. The Secretary
shall affix or cause to be affixed the seal of the Corporation to such
contracts, instruments and other documents requiring the seal of the
Corporation, and when so affixed may attest the same and shall perform such
other duties as may be prescribed or assigned pursuant to these bylaws and all
other acts incident to the position of Secretary.
Section 14. Voting Upon Securities. Unless otherwise ordered
by the Board of Directors, the Chairman, the President, any Executive Vice
President, any Senior Vice President or any Vice President shall have full
power and authority in behalf of the Corporation to attend, act and vote at
meetings of the security holders of any entity in which this Corporation may
hold securities, and at such meetings shall possess and may exercise any and
all rights and powers incident to the ownership of such securities and which,
as the owner, the Corporation might have possessed and exercised if present.
The Board of Directors may by resolution from time to time confer such power
and authority upon any other person or persons.
Section 15. Continuing Determination by Board. All powers
and duties of the officers shall be subject to a continuing determination by
the Board of Directors.
8
<PAGE> 9
ARTICLE 7 -- CAPITAL STOCK
Section 1. Certificates. Unless the Board determines
otherwise, shares of the capital stock of the Corporation shall be represented
by certificates. The name and address of the persons to whom shares of capital
stock of the Corporation are issued, with the number of shares and date of
issue, shall be entered on the stock transfer records of the Corporation.
Certificates for shares of the capital stock of the Corporation shall be in
such form not inconsistent with the Articles of Incorporation of the
Corporation as shall be approved by the Board of Directors. Each certificate
shall be signed (either manually or by facsimile) by (a) the Chairman, the Vice
Chairman, the President or any Vice President and by the Secretary, Assistant
Secretary, Treasurer or Assistant Treasurer or (b) any two officers designated
by the Board of Directors. Each certificate may be sealed with the seal of the
Corporation or a facsimile thereof.
Section 2. Transfer of Shares. Transfer of shares shall be
made on the stock transfer records of the Corporation, and transfers shall be
made only upon surrender of the certificate for the shares sought to be
transferred by the recordholder or by a duly authorized agent, transferee or
legal representative. All certificates surrendered for transfer or reissue
shall be cancelled before new certificates for the shares shall be issued.
Section 3. Transfer Agent and Registrar. The Board of
Directors may appoint one or more transfer agents and one or more registrars of
transfers and may require all stock certificates to be signed or countersigned
by the transfer agent and registered by the registrar of transfers.
Section 4. Regulations. The Board of Directors may make
rules and regulations as it deems expedient concerning the issue, transfer and
registration of shares of capital stock of the Corporation.
Section 5. Fixing Record Date. For the purpose of
determining Shareholders entitled to notice of or to vote at any meeting of
Shareholders, or entitled to receive payment of any dividend, or in order to
make a determination of Shareholders for any other purpose, the Board of
Directors may fix in advance a date as the record date for the determination of
Shareholders. The record date shall be not more than 70 days before the
meeting or action requiring a determination of Shareholders. A determination
of Shareholders entitled to notice of or to vote at a Shareholders' meeting
shall be effective for any adjournment of the meeting unless the Board of
Directors fixes a new record date, which it shall do if the meeting is
adjourned to a date more than 120 days after the date fixed for the original
meeting.
Section 6. Lost Certificates. The Board of Directors must
authorize the issuance of a new certificate in place of a certificate claimed
to have been lost, destroyed or wrongfully taken, upon receipt of (a) an
affidavit from the person explaining the loss, destruction or wrongful taking,
and (b) a bond from the claimant in a sum as the Corporation may reasonably
direct to indemnify the Corporation against loss from any claim with respect to
the certificate claimed to have been lost, destroyed or wrongfully taken. The
Board of Directors may, in its
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<PAGE> 10
discretion, waive the affidavit and bond and authorize the issuance of a new
certificate in place of a certificate claimed to have been lost, destroyed or
wrongfully taken.
ARTICLE 8 -- GENERAL PROVISIONS
Section 1. Dividends and other Distributions. The Board of
Directors may from time to time declare and the Corporation may pay dividends
or make other distributions with respect to its outstanding shares in the
manner and upon the terms and conditions provided by law.
Section 2. Seal. The seal of the Corporation shall be any
form approved from time to time or at any time by the Board of Directors.
Section 3. Waiver of Notice. Whenever notice is required to
be given to a Shareholder, director or other person under the provisions of
these bylaws, the Articles of Incorporation or applicable law, a waiver in
writing signed by the person or persons entitled to the notice, whether before
or after the date and time stated in the notice, and delivered to the
Corporation shall be equivalent to giving the notice.
Section 4. Depositaries. The Chairman, the President, the
Chief Financial Officer, and the Treasurer are each authorized to designate
depositaries for the funds of the Corporation deposited in its name or that of
a division of the Corporation, or both, and the signatories with respect
thereto in each case, and form time to time, to change such depositaries and
signatories, with the same force and effect as if each such depositary and the
signatories with respect thereto and changes therein had been specifically
designated or authorized by the Board; and each depositary designated by the
Board or by the Chairman, the President, the Chief Financial Officer, or the
Treasurer shall be entitled to rely upon the certificate of the Secretary or
any Assistant Secretary of the Corporation or of a division of the Corporation
setting forth the fact of such designation and of the appointment of the
officers of the Corporation or of the Division or of both or of other persons
who are to be signatories with respect to the withdrawal of funds deposited
with such depositary, or from time to time the fact of any change in any
depositary or in the signatories with respect thereto.
Section 5. Signatories. Unless otherwise designated by the
Board or by the Chairman, the President, the Chief Financial Officer or the
Treasurer, all notes, drafts, checks, acceptances, orders for the payment of
money shall be (a) signed by the Treasurer or any Assistant Treasurer and (b)
countersigned by the Controller or any Assistant Controller, or either signed
or countersigned by the Chairman, the Vice Chairman, the President, any
Executive Vice President, any Senior Vice President or any Vice President in
lieu of either the officers designated in (a) or the officers designated in (b)
of this Section.
Section 6. Fiscal Year. The fiscal year of the Corporation
shall be fixed by the Board of Directors.
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<PAGE> 11
Section 7. Amendments. These bylaws may be amended or
repealed by the Board of Directors, including any bylaw adopted, amended or
repealed by the Shareholders generally. These bylaws may be amended or
repealed by the Shareholders even though the bylaws may also be amended or
repealed by the Board of Directors.
* * * * *
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<PAGE> 12
THIS IS TO CERTIFY that the above bylaws of ITT Rayonier
Incorporated were adopted by the Board of Directors of the Corporation by
action without a meeting effective on December 13, 1993.
THIS 13th day of December, 1993.
/s/ John Canning
---------------------
Secretary
[Corporate Seal]
12
<PAGE> 1
EXHIBIT 4.1
COMMON COMMON
SHARES SHARES
INCORPORATED
UNDER THE LAWS
OF NORTH CAROLINA CUSIP 754907 10 3
RAYONIER INC.
CERTIFICATE NUMBER DATE REFERENCE NUMBER SHARES
MA
This
Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE COMMON SHARES OF
Rayonier Inc., transferable on the books of the Corporation by the holder
hereof in person or by duly authorized attorney, upon surrender of this
certificate properly endorsed. This certificate and the shares represented
hereby are issued and shall be held subject to all the provisions of the
Articles of Incorporation and the amendments thereto (copies of which are on
file with the Transfer Agent) to all of which provisions the holder by
acceptance hereof, assents. This certificate is not valid unless countersigned
by the Transfer Agent and registered by the Registrar.
Witness the signatures of the duly authorized officers.
CERTIFICATE OF STOCK
DATED:
COUNTERSIGNED AND REGISTERED:
<TABLE>
<S> <C> <C> <C>
THE BANK OF NEW YORK
BY TRANSFER AGENT
AND REGISTRAR,
William J. Danner John B. Canning R. M. Gross
AUTHORIZED SIGNATURE CORPORATE SECRETARY CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
</TABLE>
<PAGE> 2
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM -- as tenants in common GIFT MIN ACT -- Custodian Under
---------- --------------
(Cust) (Minor)
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of the Transfers to Minors Act
---------------
(State)
survivorship and not as tenants
in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, the undersigned hereby sells(s), assign(s) and transfer(s)
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE
the within Depositary Receipt and all rights thereunder, hereby irrevocably
constituting and appointing __________________________ attorney to transfer
said Depositary Receipt on the books of the Company with full power of
substitution in the premises.
Dated:
NOTICE: The signature to this
assignment must correspond
with the name as written upon
the face of the certificate
in every particular without
alteration or enlargement or
any change whatever. The
signature of the person
executing this power must be
guaranteed by an Eligible
Guarantor Institution such as
a Commercial Bank, Trust
Company, Securities
Broker/Dealer, Credit Union,
or a Savings Association
participating in a Medallion
progarm approved by the
Securities Transfer
Association, Inc.
<TABLE>
<S> <C>
AMERICAN BANKNOTE COMPANY PRODUCTION COORDINATOR VICTOR COLON-215-830-2198
680 BLAIR MILL ROAD PROOF OF JANUARY 16, 1994
HORSHAM, PA 19044 RAYONIER
215-657-3480 H 27633
SALES PERSON G. BEEHLER-212-582-9200 Opr. JW/lr NEW
/home/joew/inprogress/home14/RAYIONER27633 /net/banknote/home14/R
</TABLE>
<PAGE> 1
EXHIBIT 10.5
1994 RAYONIER INCENTIVE STOCK PLAN
The following is the text of the 1994 Rayonier Incentive Stock Plan:
1. PURPOSE
The purpose of the 1994 Rayonier Incentive Stock Plan is to motivate
and reward superior performance on the part of employees of Rayonier and its
subsidiaries and to thereby attract and retain employees of superior ability.
In addition, the Plan is intended to further opportunities for stock ownership
by such employees in order to increase their proprietary interest in Rayonier
and, as a result, their interest in the success of the Company. Awards will be
made, in the discretion of the Committee, to Key Employees (including officers
and directors who are also employees) whose responsibilities and decisions
directly affect the performance of any Participating Company and its
subsidiaries. Such incentive awards may consist of stock options, stock
appreciation rights payable in stock or cash, performance shares, restricted
stock or any combination of the foregoing, as the Committee may determine.
2. DEFINITIONS
When used herein, the following terms shall have the following
meanings:
"Acceleration Event" means the occurrence of an event defined in
Section 9 of the Plan.
"Act" means the Securities Exchange Act of 1934.
"Award" means an award granted to any Key Employee in accordance with
the provisions of the Plan in the form of Options, Rights, Performance Shares
or Restricted Stock, or any combination of the foregoing.
"Award Agreement" means the written agreement evidencing each Award
granted to a Key Employee under the Plan.
"Beneficiary" means the beneficiary or beneficiaries designated
pursuant to Section 10 to receive the amount, if any, payable under the Plan
upon the death of a Key Employee.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended. (All citations to sections of the Code are to such sections
as they may from time to time be amended or renumbered.)
"Committee" means the Compensation and Management Development
Committee of the Board or such other committee as may be designated by the
Board to administer the Plan.
"Company" means Rayonier Inc. and its successors and assigns.
<PAGE> 2
-2-
"Fair Market Value", unless otherwise indicated in the provisions of
this Plan, means, as of any date, the composite closing price for one share of
Stock on the New York Stock Exchange or, if no sales of Stock have taken place
on such date, the composite closing price on the most recent date on which
selling prices were quoted, the determination to be made in the discretion of
the Committee.
"Incentive Stock Option" means a stock option qualified under Section
422A of the Code.
"Key Employee" means an employee (including any officer or director
who is also an employee) of any Participating Company whose responsibilities
and decisions, in the judgment of the Committee, directly affect the
performance of the Company and its subsidiaries.
"Limited Stock Appreciation Right" means a stock appreciation right
which shall become exercisable automatically upon the occurrence of an
Acceleration Event as described in Section 9 of the Plan.
"Option" means an option awarded under Section 5 of the Plan to
purchase Stock of the Company, which option may be an Incentive Stock Option or
a non-qualified stock option.
"Participating Company" means the Company or any subsidiary or other
affiliate of the Company; provided, however, for Incentive Stock Options only,
"Participating Company" means the Company or any corporation which at the time
such Option is granted qualifies as a "subsidiary" of the Company under Section
425(f) of the Code.
"Performance Share" means a performance share awarded under Section 6
of the Plan.
"Plan" means the 1994 Rayonier Incentive Stock Plan, as the same may
be amended, administered or interpreted from time to time.
"Plan Year" means the calendar year.
"Retirement" means eligibility to receive immediate retirement
benefits under a Participating Company pension plan.
"Restricted Stock" means Stock awarded under Section 7 of the Plan
subject to such restrictions as the Committee deems appropriate or desirable.
"Right" means a stock appreciation right awarded in connection with an
Option under Section 5 of the Plan.
"Stock" means the common stock of the Company.
"Total Disability" means the complete and permanent inability of a Key
Employee to perform all of his or her duties under the terms of his or her
employment with any Participating Company, as determined by the Committee upon
the basis of such evidence, including independent medical reports and data, as
the Committee deems appropriate or necessary.
<PAGE> 3
-3-
3. SHARES SUBJECT TO THE PLAN
The aggregate number of shares of Stock which may be awarded under the
Plan in any Plan Year shall be subject to an annual limit. The maximum number
of shares of Stock for which Awards may be granted under the Plan in each Plan
Year shall be 1.5 percent (1.5%) of the total of the issued and outstanding
shares of Stock reported in the Annual Report on Form 10-K of the Company for
the fiscal year ending immediately prior to any Plan Year. Any unused portion
of the annual limit for any Plan Year shall be carried forward and be made
available for awards in succeeding Plan Years.
In addition to the foregoing, in no event shall more than one million
(1,000,000) shares of Stock be cumulatively available for Awards of incentive
stock options under the Plan, and provided further, that no more than twenty
percent (20%) of the total number of shares on a cumulative basis shall be
available for restricted stock and performance shares Awards. For any Plan
Year, no individual employee may receive an Award of stock options for more
than ten percent (10%) of the annual limit on available shares applicable to
that Plan Year.
Subject to the above limitations, shares of Stock to be issued under
the Plan may be made available from the authorized but unissued shares, or
shares held by the Company in treasury or from shares purchased in the open
market. For the purpose of computing the total number of shares of Stock
available for Awards under the Plan, there shall be counted against the
foregoing limitations the number of shares of Stock which equal the value of
performance share Awards, in each case determined as at the dates on which such
Awards are granted. If any Awards under the Plan are forfeited, terminated,
expire unexercised, are settled in cash in lieu of Stock or are exchanged for
other Awards, the shares of Stock which were theretofore subject to such Awards
shall again be available for Awards under the Plan to the extent of such
forfeiture or expiration of such Awards. Further, any shares that are
exchanged (either actually or constructively) by optionees as full or partial
payment to the Company of the purchase price of shares being acquired through
the exercise of a stock option granted under the Plan may be available for
subsequent Awards, provided however, that such shares may be awarded only to
those participants who are not directors or executive officers (as that term is
defined in the rules and regulations under Section 16 of the Exchange Act).
For the initial Plan Year commencing March 1, 1994, the applicable annual limit
shall be 400,000 shares of Stock.
4. GRANT OF AWARDS AND AWARD AGREEMENTS
(a) Subject to the provisions of the Plan, the Committee shall (i)
determine and designate from time to time those Key Employees or groups of Key
Employees to whom Awards are to be granted; (ii) determine the form or forms of
Award to be granted to any Key Employee; (iii) determine the amount or number
of shares of Stock subject to each Award; and (iv) determine the terms and
conditions of each Award.
(b) Each Award granted under the Plan shall be evidenced by a written
Award Agreement. Such agreement shall be subject to and incorporate the
express terms and conditions, if any, required under the Plan or required by
the Committee.
<PAGE> 4
-4-
5. STOCK OPTIONS AND RIGHTS
(a) With respect to Options and Rights, the Committee shall (i)
authorize the granting of Incentive Stock Options, non- qualified stock
options, or a combination of Incentive Stock Options and non-qualified stock
options; (ii) authorize the granting of Rights which may be granted in
connection with all or part of any Option granted under this Plan, either
concurrently with the grant of the Option or at any time thereafter during the
term of the Option; (iii) determine the number of shares of Stock subject to
each Option or the number of shares of Stock that shall be used to determine the
value of a Right; and (iv) determine the time or times when and the manner in
which each Option or Right shall be exercisable and the duration of the
exercise period.
(b) No employee eligible to participate herein shall be granted
Incentive Stock Options to purchase shares, which said options are exercisable
during any one calendar year, to the extent that the fair market value of such
shares (determined at the time that the options are granted) exceeds $100,000.
No employee shall be given the opportunity to exercise Incentive Stock Options
granted hereunder with respect to shares valued in excess of $100,000 in any
calendar year, except and to the extent that the Incentive Stock Options shall
have accumulated over a period in excess of one year.
(c) Rights may be granted only to Key Employees who may be considered
directors or officers of the Company for purposes of Section 16 of the Act.
(d) The exercise period for a non-qualified stock option and any
related Right shall not exceed ten years and two days from the date of grant,
and the exercise period for an Incentive Stock Option and any related Right
shall not exceed ten years from the date of grant.
(e) The Option price per share shall be determined by the Committee at
the time any Option is granted and shall be not less than the Fair Market Value
of one share of Stock on the date the Option is granted.
(f) No part of any Option or Right may be exercised until the Key
Employee who has been granted the Award shall have remained in the employ of a
Participating Company for such period after the date of grant as the Committee
may specify, if any, and the Committee may further require exercisability in
installments; provided, however, the period during which a Right is exercisable
shall commence no earlier than six months following the date the Option or
Right is granted.
(g) The purchase price of the shares as to which an Option shall be
exercised shall be paid to the Company at the time of exercise either in cash
or Stock already owned by the optionee having a total Fair Market Value equal
to the purchase price, or a combination of cash and Stock having a total fair
market value, as so determined, equal to the purchase price. The Committee
shall determine acceptable methods for tendering Stock as payment upon exercise
of an Option and may impose such limitations and prohibitions on the use of
Stock to exercise an Option as it deems appropriate.
(h) Unless Section 9 shall provide otherwise, Rights granted to a
director or officer shall terminate when such person ceases to be considered a
director or officer of the Company subject to Section 16 of the Act.
<PAGE> 5
-5-
(i) In case of termination of employment, the following provisions
shall apply:
(A) If a Key Employee who has been granted an Option shall die
before such Option has expired, his or her Option may be exercised in full by
the person or persons to whom the Key Employee's rights under the Option pass
by will, or if no such person has such right, by his or her executors or
administrators, at any time, or from time to time, within five years after the
date of the Key Employee's death or within such other period, and subject to
such terms and conditions as the Committee may specify, but not later than the
expiration date specified in Section 5(d) above.
(B) If the Key Employee's employment by any Participating
Company terminates because of his or her Retirement or Total Disability, he or
she may exercise his or her Options in full at any time, or from time to time,
within five years after the date of the termination of his or her employment or
within such other period, and subject to such terms and conditions as the
Committee may specify, but not later than the expiration date specified in
Section 5(d) above. Any such Options not fully exercisable immediately prior
to such optionee's retirement shall become fully exercisable upon such
retirement unless the Committee, in its sole discretion, shall otherwise
determine.
(C) Except as provided in Section 9, if the Key Employee shall
voluntarily resign before eligibility for Retirement or he or she is terminated
for cause as determined by the Committee, the Options or Rights shall be
cancelled coincident with the effective date of the termination of employment.
(D) If the Key Employee's employment terminates for any other
reason, he or she may exercise his or her Options, to the extent that he or she
shall have been entitled to do so at the date of the termination of his or her
employment, at any time, or from time to time, within three months after the
date of the termination of his or her employment or within such other period,
and subject to such terms and conditions as the Committee may specify, but not
later than the expiration date specified in Section 5(d) above.
(j) No Option or Right granted under the Plan shall be transferable
other than by will or by the laws of descent and distribution. During the
lifetime of the optionee, an Option or Right shall be exercisable only by the
Key Employee to whom the Option or Right is granted.
(k) With respect to an Incentive Stock Option, the Committee shall
specify such terms and provisions as the Committee may determine to be
necessary or desirable in order to qualify such Option as an "incentive stock
option" within the meaning of Section 422A of the Code.
(l) With respect to the exercisability and settlement of Rights:
(i) Upon exercise of a Right, the Key Employee shall be
entitled, subject to such terms and conditions the Committee may
specify, to receive upon exercise thereof all or a portion of the
excess of (A) the Fair Market Value of a specified number of shares of
Stock at the time of exercise, as determined by the Committee, over
(B) a specified
<PAGE> 6
-6-
amount which shall not, subject to Section 5(e), be less than the Fair
Market Value of such specified number of shares of Stock at the time
the Right is granted. Upon exercise of a Right, payment of such
excess shall be made as the Committee shall specify in cash, the
issuance or transfer to the Key Employee of whole shares of Stock with
a Fair Market Value at such time equal to any excess, or a combination
of cash and shares of Stock with a combined Fair Market Value at such
time equal to any such excess, all as determined by the Committee. The
Company will not issue a fractional share of Stock and, if a
fractional share would otherwise be issuable, the Company shall pay
cash equal to the Fair Market Value of the fractional share of Stock
at such time.
(ii) For the purposes of Subsection (i) of this Section 5(l), in
the case of any such Right or portion thereof, other than a Right
related to an Incentive Stock Option, exercised for cash during a
"window period" specified by Rule 16b-3 under the Act, the Fair Market
Value of the Stock at the time of such exercise shall be the highest
composite daily closing price of the Stock during such window period.
(iii) In the event of the exercise of such Right, the Company's
obligation in respect of any related Option or such portion thereof
will be discharged by payment of the Right so exercised.
6. PERFORMANCE SHARES
(a) Subject to the provisions of the Plan, the Committee shall (i)
determine and designate from time to time those Key Employees or groups of Key
Employees to whom Awards of Performance Shares are to be made, (ii) determine
the Performance Period (the "Performance Period") and Performance Objectives
(the "Performance Objectives") applicable to such Awards, (iii) determine the
form of settlement of a Performance Share and (iv) generally determine the
terms and conditions of each such Award. At any date, each Performance Share
shall have a value equal to the Fair Market Value of a share of Stock at such
date; provided that the Committee may limit the aggregate amount payable upon
the settlement of any Award.
(b) The Committee shall determine a Performance Period of not less
than two nor more than five years. Performance Periods may overlap and Key
Employees may participate simultaneously with respect to Performance Shares for
which different Performance Periods are prescribed.
(c) The Committee shall determine the Performance Objectives of Awards
of Performance Shares. Performance Objectives may vary from Key Employee to
Key Employee and between groups of Key Employees and shall be based upon such
performance criteria or combination of factors as the Committee may deem
appropriate, including, but not limited to, minimum earnings per share or
return on equity. If during the course of a Performance Period there shall
occur significant events which the Committee expects to have a substantial
effect on the applicable Performance Objectives during such period, the
Committee may revise such Performance Objectives.
(d) At the beginning of a Performance Period, the Committee shall
determine for each Key Employee or group of Key Employees the number of
Performance Shares or the percentage of Performance Shares which shall be paid
to the Key Employee or member of the group of Key Employees if the applicable
Performance Objectives are met in whole or in part.
<PAGE> 7
-7-
(e) If a Key Employee terminates service with all Participating
Companies during a Performance Period because of death, Total
Disability, Retirement, or under other circumstances where the Committee in its
sole discretion finds that a waiver would be in the best interests of the
Company, that Key Employee may, as determined by the Committee, be entitled to
an Award of Performance Shares at the end of the Performance Period based upon
the extent to which the Performance Objectives were satisfied at the end of
such period and prorated for the portion of the Performance Period during which
the Key Employee waS employed by any Participating Company; provided, however,
the Committee may provide for an earlier payment in settlement of such
Performance Shares in such amount and under such terms and conditions as the
Committee deems appropriate or desirable. If a Key Employee terminates service
with all Participating Companies during a Performance Period for any other
reason, then such Key Employee shall not be entitled to any Award with respect
to that Performance Period unless the Committee shall otherwise determine.
(f) Each Award of a Performance Share shall be paid in whole shares of
Stock, or cash, or a combination of Stock and cash either as a lump sum payment
or in annual installments, all as the Committee shall determine, with payment
to commence as soon as practicable after the end of the relevant Performance
Period.
7. RESTRICTED STOCK
(a) Restricted Stock shall be subject to a restriction period (after
which restrictions will lapse) which shall mean a period commencing on the date
the Award is granted and ending on such date as the Committee shall determine
(the "Restriction Period"). The Committee may provide for the lapse of
restrictions in installments where deemed appropriate.
(b) Except when the Committee determines otherwise pursuant to Section
7(d), if a Key Employee terminates employment with all Participating Companies
for any reason before the expiration of the Restriction Period, all shares of
Restricted Stock still subject to restriction shall be forfeited by the Key
Employee and shall be reacquired by the Company.
(c) Except as otherwise provided in this Section 7, no shares of
Restricted Stock received by a Key Employee shall be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of during the
Restriction Period.
(d) In cases of death, Total Disability or Retirement or in cases of
special circumstances, the Committee may, in its sole discretion when it finds
that a waiver would be in the best interests of the Company, elect to waive any
or all remaining restrictions with respect to such Key Employee's Restricted
Stock.
(e) The Committee may require, under such terms and conditions as it
deems appropriate or desirable, that the certificates for Stock delivered under
the Plan may be held in custody by a bank or other institution, or that the
Company may itself hold such shares in custody until the Restriction Period
expires or until restrictions thereon otherwise lapse, and may require, as a
condition of any Award of Restricted Stock that the Key Employee shall have
delivered a stock power endorsed in blank relating to the Restricted Stock.
<PAGE> 8
-8-
(f) Nothing in this Section 7 shall preclude a Key Employee from
exchanging any shares of Restricted Stock subject to the restrictions contained
herein for any other shares of Stock that are similarly restricted.
(g) Subject to Section 7(e) and Section 8, each Key Employee entitled
to receive Restricted Stock under the Plan shall be issued a certificate for
the shares of Stock. Such certificate shall be registered in the name of the
Key Employee, and shall bear an appropriate legend reciting the terms,
conditions and restrictions, if any, applicable to such Award and shall be
subject to appropriate stop-transfer orders.
8. CERTIFICATES FOR AWARDS OF STOCK
(a) The Company shall not be required to issue or deliver any
certificates for shares of Stock prior to (i) the listing of such shares on any
stock exchange on which the Stock may then be listed and (ii) the completion of
any registration or qualification of such shares under any federal or state
law, or any ruling or regulation of any government body which the Company
shall, in its sole discretion, determine to be necessary or advisable.
(b) All certificates for shares of Stock delivered under the Plan
shall also be subject to such stop-transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Stock is then listed and any applicable federal or state securities
laws, and the Committee may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions. The foregoing
provisions of this Section 8(b) shall not be effective if and to the extent
that the shares of Stock delivered under the Plan are covered by an effective
and current registration statement under the Securities Act of 1933, or if and
so long as the Committee determines that application of such provisions is no
longer required or desirable. In making such determination, the Committee may
rely upon an opinion of counsel for the Company.
(c) Except for the restrictions on Restricted Stock under Section 7,
each Key Employee who receives Stock in settlement of an Award of Stock, shall
have all of the rights of a shareholder with respect to such shares, including
the right to vote the shares and receive dividends and other distributions. No
Key Employee awarded an Option, a Right or Performance Share shall have any
right as a shareholder with respect to any shares covered by his or her Option,
Right or Performance Share prior to the date of issuance to him or her of a
certificate or certificates for such shares.
9. ACCELERATION EVENTS
(a) For the purposes of this Plan, an Acceleration Event shall occur
if (i) a report on Schedule 13D shall be filed with the Securities and Exchange
Commission pursuant to Section 13(d) of the Act disclosing that any person
(within the meaning of Section 13(d) of the Act), other than the Company or a
subsidiary of the Company or any employee benefit plan sponsored by the Company
or a subsidiary of the Company, is the beneficial owner directly or indirectly
of twenty percent or more of the outstanding Stock of the Company; (ii) any
person (within the meaning of Section 13(d) of the Act), other than the Company
or a subsidiary of the Company or any employee benefit plan sponsored by the
Company or a subsidiary of the Company, shall purchase shares pursuant to a
<PAGE> 9
-9-
tender offer or exchange offer to acquire any Stock of the Company (or
securities convertible into Stock) for cash, securities or any other
consideration, provided that after consummation of the offer, the person in
question is the beneficial owner (as such term is defined in Rule 13d-3 under
the Act), directly or indirectly, of fifteen percent or more of the outstanding
Stock of the Company (calculated as provided in paragraph (d) of Rule 13d-3
under the Act in the case of rights to acquire Stock); (iii) the stockholders
of the Company shall approve (A) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant to
which shares of Stock of the Company would be converted into cash, securities
or other property, other than a merger of the Company in which holders of Stock
of the Company immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation immediately after the
merger as immediately before, or (B) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or
substantially all the assets of the Company; or (iv) there shall have been a
change in a majority of the members of the Board within a 12-month period
unless the election or nomination for election by the Company's stockholders of
each new director during such 12-month period was approved by the vote of
two-thirds of the directors then still in office who were directors at the
beginning of such 12-month period.
(b) Notwithstanding any provisions in this Plan to the contrary:
(i) Each outstanding Option granted under the Plan shall become
immediately exercisable in full for the aggregate number of shares
covered thereby and all related Rights shall also become exercisable
upon the occurrence of an Acceleration Event described in this Section
9 and shall continue to be exercisable in full for cash for a period
of 60 calendar days beginning on the date that such Acceleration Event
occurs and ending on the 60th calendar day following that date;
provided, however, that (A) no Right shall become exercisable earlier
than six months following the date the Right is granted, and (B) no
Option or Right shall be exercisable beyond the expiration date of its
original term.
(ii) Options and Rights shall not terminate and shall continue
to be fully exercisable for a period of seven months following the
occurrence of an Acceleration Event in the case of an employee who is
terminated other than for just cause or who voluntarily terminates his
employment because he in good faith believes that as a result of such
Acceleration Event he is unable effectively to discharge his present
duties or the duties of the position he occupied just prior to the
occurrence of such Acceleration Event. For purposes of Section 9 only,
termination shall be for "just cause" only if such termination is
based on fraud, misappropriation or embezzlement on the part of the
employee which results in a final conviction of a felony. Under no
circumstances, however, shall any Option or Right be exercised beyond
the expiration date of its original term.
(iii) Any Right or portion thereof may be exercised for cash
within the 60-calendar-day period following the occurrence of an
Acceleration Event with settlement, except in the case of a Right
related to an
<PAGE> 10
-10-
Incentive Stock Option, based on the "Formula Price" which shall be
the highest of (A) the highest composite daily closing price of the
Stock during the period beginning on the 60th calendar day prior to
the date on which the Right is exercised and ending on the date such
Right is exercised, (B) the highest gross price paid for the Stock
during the same period of time, as reported in a report on Schedule
13D filed with the Securities and Exchange Commission or (C) the
highest gross price paid or to be paid for a share of Stock (whether
by way of exchange, conversion, distribution upon merger, liquidation
or otherwise) in any of the transactions set forth in this Section 9
as constituting an Acceleration Event.
(iv) Upon the occurrence of an Acceleration Event, Limited Stock
Appreciation Rights shall automatically be granted as to any Option
with respect to which Rights are not then outstanding; provided,
however, that Limited Stock Appreciation Rights shall be provided at
the time of grant of any Incentive Stock Option subject to
exercisability upon the occurrence of an Acceleration Event. Limited
Stock Appreciation Rights shall entitle the holder thereof, upon
exercise of such rights and surrender of the related Option or any
portion thereof, to receive, without payment to the Company (except
for applicable withholding taxes), an amount in cash equal to the
excess, if any, of the Formula Price as that term is defined in
Section 9 over the option price of the Stock as provided in such
Option; provided that in the case of the exercise of any such Limited
Stock Appreciation Right or portion thereof related to an Incentive
Stock Option, the Fair Market Value of the Stock at the time of such
exercise shall be substituted for the Formula Price. Each such
Limited Stock Appreciation Right shall be exercisable only during the
period beginning on the first business day following the occurrence of
such Acceleration Event and ending on the 60th day following such date
and only to the same extent the related Option is exercisable. In the
case of persons who are considered directors or officers of the
Company for purposes of Section 16 of the Act, Limited Stock
Appreciation Rights shall not be so exercisable until they have been
outstanding for at least six months. Upon exercise of a Limited Stock
Appreciation Right and surrender of the related Option, or portion
thereof, such Option, to the extent surrendered, shall not thereafter
be exercisable.
(v) The restrictions applicable to Awards of Restricted Stock
issued pursuant to Section 7 shall lapse upon the occurrence of an
Acceleration Event and the Company shall issue stock certificates
without a restrictive legend. Key Employees holding Restricted Stock
on the date of an Acceleration Event may tender such Restricted Stock
to the Company which shall pay the Formula Price as that term is
defined in Section 9; provided, such Restricted Stock must be tendered
to the Company within 60 calendar days of the Acceleration Event.
(vi) If an Acceleration Event occurs during the course of a
Performance Period applicable to an Award of Performance Shares
pursuant to Section 6, then the Key Employee shall be deemed to have
satisfied the Performance Objectives and settlement of such
Performance Shares shall be based on the Formula Price, as defined in
this Section 9.
<PAGE> 11
-11-
10. BENEFICIARY
(a) Each Key Employee shall file with the Company a written
designation of one or more persons as the Beneficiary who shall be entitled to
receive the Award, if any, payable under the Plan upon his or her death. A Key
Employee may from time to time revoke or change his or her Beneficiary
designation without the consent of any prior Beneficiary by filing a new
designation with the Company. The last such designation received by the
Company shall be controlling; provided, however, that no designation, or change
or revocation thereof, shall be effective unless received by the Company prior
to the Key Employee's death, and in no event shall it be effective as of a date
prior to such receipt.
(b) If no such Beneficiary designation is in effect at the time of a
Key Employee's death, or if no designated Beneficiary survives the Key Employee
or if such designation conflicts with law, the Key Employee's estate shall be
entitled to receive the Award, if any, payable under the Plan upon his or her
death. If the Committee is in doubt as to the right of any person to receive
such Award, the Company may retain such Award, without liability for any
interest thereon, until the Committee determines the rights thereto, or the
Company may pay such Award into any court of appropriate jurisdiction and such
payment shall be a complete discharge of the liability of the Company therefor.
11. ADMINISTRATION OF THE PLAN
(a) Each member of the Committee shall be both a member of the Board
and a "disinterested person" within the meaning of Rule 16b-3 under the Act or
successor rule or regulation. No member of the Committee shall be, or shall
have been, eligible to receive an Award under the Plan or any other plan
maintained by any Participating Company to acquire stock, stock options, stock
appreciation rights, performance shares or restricted stock of a Participating
Company at any time within the one year immediately preceding the member's
appointment to the Committee.
(b) All decisions, determinations or actions of the Committee made or
taken pursuant to grants of authority under the Plan shall be made or taken in
the sole discretion of the Committee and shall be final, conclusive and binding
on all persons for all purposes.
(c) The Committee shall have full power, discretion and authority to
interpret, construe and administer the Plan and any part thereof, and its
interpretations and constructions thereof and actions taken thereunder shall
be, except as otherwise determined by the Board, final, conclusive and binding
on all persons for all purposes.
(d) The Committee's decisions and determinations under the Plan need
not be uniform and may be made selectively among Key Employees, whether or not
such Key Employees are similarly situated.
(e) The Committee may, in its sole discretion, delegate such of its
powers as it deems appropriate.
<PAGE> 12
-12-
(f) If an Acceleration Event has not occurred and if the Committee
determines that a Key Employee has taken action inimical to the best interests
of any Participating Company, the Committee may, in its sole discretion,
terminate in whole or in part such portion of any Option (including any related
Right) as has not yet become exercisable at the time of termination, terminate
any Performance Share Award for which the Performance Period has not been
completed or terminate any Award of Restricted Stock for which the Restriction
Period has not lapsed.
12. AMENDMENT, EXTENSION OR TERMINATION
The Board may, at any time, amend or terminate the Plan and,
specifically, may make such modifications to the Plan as it deems necessary to
avoid the application of Section 162(m) of the Code and the Treasury
regulations issued thereunder. However, no amendment shall, without approval
by a majority of the Company's stockholders, (a) alter the group of persons
eligible to participate in the Plan, (b) except as provided in Section 13
increase the maximum number of shares of Stock which are available for Awards
under the Plan or (c) extend the period during which awards may be granted
beyond December 31, 2003. If an Acceleration Event has occurred, no amendment
or termination shall impair the rights of any person with respect to a prior
Award.
13. ADJUSTMENTS IN EVENT OF CHANGE IN COMMON STOCK
In the event of any recapitalization, reclassification, split-up or
consolidation of shares of Stock or, stock dividend, merger or consolidation of
the Company or sale by the Company of all or a portion of its assets, the
Committee may make such adjustments in the Stock subject to Awards, including
Stock subject to purchase by an Option, or the terms, conditions or
restrictions on Stock or Awards, including the price payable upon the exercise
of such Option, as the Committee deems equitable.
14. MISCELLANEOUS
(a) Except as provided in Section 9, nothing in this Plan or any Award
granted hereunder shall confer upon any employee any right to continue in the
employ of any Participating Company or interfere in any way with the right of
any Participating Company to terminate his or her employment at any time. No
Award payable under the Plan shall be deemed salary or compensation for the
purpose of computing benefits under any employee benefit plan or other
arrangement of any Participating Company for the benefit of its employees
unless the Company shall determine otherwise. No Key Employee shall have any
claim to an Award until it is actually granted under the Plan. To the extent
that any person acquires a right to receive payments from the Company under
this Plan, such right shall be no greater than the right of an unsecured
general creditor of the Company. All payments to be made hereunder shall be
paid from the general funds of the Company and no special or separate fund
shall be established and no segregation of assets shall be made to assure
payment of such amounts except as provided in Section 7(e) with respect to
Restricted Stock.
<PAGE> 13
-13-
(b) The Committee may cause to be made, as a condition precedent to
the payment of any Award, or otherwise, appropriate arrangements with the Key
Employee or his or her Beneficiary, for the withholding of any federal, state,
local or foreign taxes.
(c) The Plan and the grant of Awards shall be subject to all
applicable federal and state laws, rules, and regulations and to such approvals
by any government or regulatory agency as may be required.
(d) The terms of the Plan shall be binding upon the Company and its
successors and assigns.
(e) Captions preceding the sections hereof are inserted solely as a
matter of convenience and in no way define or limit the scope or intent of any
provision hereof.
15. EFFECTIVE DATE, TERM OF PLAN AND SHAREHOLDER APPROVAL
The effective date of the Plan shall be March 1, 1994. No Award shall
be granted under this Plan after the Plan's termination date. The Plan's
termination date shall be December 31, 2003. The Plan will continue in effect
for existing Awards as long as any such Award is outstanding.
<PAGE> 1
EXHIBIT 10.6
RAYONIER INCORPORATED
SENIOR EXECUTIVE SEVERANCE PAY PLAN
1. Purpose
The purpose of this Rayonier Senior Executive Severance Pay Plan ("Plan") is to
assist in occupational transition by providing severance pay for employees
covered by this Plan whose employment is terminated under conditions set forth
in this Plan and to assist covered employees whose employment terminates within
two years after a Change in Control event.
2. Covered Employees
Covered employees under this Plan ("Executives") are those full-time, regular
Senior Executive salaried employees of Rayonier Incorporated ("Company") who
are United States citizens, or who are employed in the United States and are
identified in Appendix "A" attached hereto.
3. Severance Pay Upon Termination of Employment
If the Company terminates a Senior Executive's employment, the Executive shall
be provided severance pay in accordance with the terms of this Plan, except
where the Executive:
o is terminated for cause;
o accepts employment or refuses comparable employment with a purchases as
provided in Section 8, "Divestiture";
o is terminated with an Effective Date on or after the Executive's Normal
Retirement Date as defined herein, or;
o terminates employment with the Company prior to the
<PAGE> 2
Effective Date.
No severance pay will be provided under this Plan where the Executive
terminates employment by:
o voluntarily resigning;
o voluntarily retiring or;
o failing to return from an approved leave of absence (including a
medical leave of absence).
No severance pay will be provided under this Plan upon any termination of
employment as a result of the Executive's death or disability.
"Normal Retirement Date" shall mean the first of the month which coincides with
or follows the Executive's 65th birthday.
4. Schedule of Severance Pay
Severance pay will be provided in accordance with the following Schedule of
Severance Pay which sets forth the months of Base Pay which is provided to an
Executive, based upon the Executive's Years of Service as of the Effective
Date.
<TABLE>
<CAPTION>
Years of Service Months of Base Pay
---------------- ------------------
<S> <C> <C>
Less than 4 12
4 13
5 14
6 15
7 16
8 17
9 18
10 19
11 20
12 21
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
13 22
14 23
15 or more 24
</TABLE>
"Base Pay" shall mean the annual base salary rate payable to the Executive at
the Effective Date divided by twelve (12) months. Such annual base salary rate
shall in no event be less than the highest annual base salary rate paid to the
Executive at any time during the twenty-four (24) month period immediately
preceding the Effective Date.
"Effective Date" is the date the Company selects as the Executive's last day of
active employment.
"Years of Service" shall mean the total number of completed years of
employment, inclusive of credited ITT system service, since the Executive's
Rayonier service date to the Effective Date, rounded to the nearest whole year.
The ITT system service date is the date from which employment in the ITT system
is recognized in conjunction with Rayonier service for purposes of determining
eligibility for vesting under the applicable ITT and Rayonier retirement plans
covering the Executive on the Effective Date. Notwithstanding the above
Schedule of Severance Pay, (i) in no event shall months of Base Pay provided to
an Executive exceed the number of months remaining between the Effective Date
and the Executive's Normal Retirement Date or (ii) shall severance pay exceed
the equivalent of twice the Executive's total annual compensation during the
year immediately preceding the Effective Date.
5. Form of Payment of Severance Pay
Severance pay shall be paid in the form of periodic payments according to the
regular payroll schedule ("Salary Continuation"), provided that the Company
reserves the right at any time to pay the remaining severance pay in the form
of a discounted lump sum.
3
<PAGE> 4
Any discounted lump sum paid under this Plan shall be equal to the present
value of the remaining periodic payments of severance pay as determined by the
Company using an interest rate equal to the prime rate at the ________ Bank in
effect on the date the Company notifies the Executive that it is exercising its
right to pay severance in the discounted lump sum.
Salary Continuation will commence or the discounted lump sum will be paid on
the next day following the Effective Date except that where the Company
exercises its right to pay the discounted lump sum after the commencement of
Salary Continuation, it will be paid promptly after the Company exercises such
right.
In the event of an Executive's death during the period the Executive is
receiving Salary Continuation, the amount of severance pay remaining shall be
paid in a discounted lump sum to the Executive's spouse or to such other
beneficiary or beneficiaries designated by the Executive in writing or, if the
Executive is not married and failing such designation, the estate of the
Executive.
If an Executive is receiving Salary Continuation, the Executive must continue
to be available to render to the company reasonable assistance, consistent with
the level of the Executive's prior position with the company, at times and
locations that are mutually acceptable. In requesting such services, the
Company will take into account any other commitments which the Executive may
have. After the Effective Date and normal wind up of the Executive's former
duties, the Executive will not be required to perform any regular services for
the Company. In the event the Executive secures other employment during the
period the Executive is receiving Salary Continuation, the Executive must
promptly notify the Company.
4
<PAGE> 5
Salary Continuation will cease if an Executive is rehired by the Company.
6. Benefits During Severance Pay
As long as an Executive is receiving Salary Continuation, except as provided in
this Section, the Executive will continue to be eligible for participation in
company employee benefit plans, including without limitation, any non-qualified
excess or supplemental benefit plans, in accordance with the provisions of such
plans as in effect on the Effective Date An executive will not be eligible to
participate in any Company short-term or long-term disability plans, the
company business travel accident plan or any new employee benefit plan or any
improvement to any existing employee benefit plan adopted by the Company after
the Effective Date.
7. Excluded Executive Compensation Plans, Programs,
Arrangements and Perquisites
During the period an Executive is receiving Salary Continuation, the Executive
will not be eligible to accrue any vacation or participate in any (i) bonus
program, (ii) special termination programs, (iii) tax or financial advisory
services, (iv) new awards under any stock option or stock related plan for
executives (provided that the Executive will be eligible to exercise any
outstanding stock options in accordance with the terms of any applicable stock
option Plan, (v) new or revised executive compensation programs that may be
introduced after the Effective Date and (vi) any other executive compensation
program, plan, arrangement, practice, policy or perquisites unless specifically
authorized by the Company in writing. The period during which an Executive is
receiving Salary Continuation does not count as service for the purpose of any
Company long-term incentive award program
5
<PAGE> 6
including, but not limited to, Rayonier Incorporated's Long-Term Incentive Plan
and any similar plan.
8. Divestiture
If a Rayonier Inc. subsidiary or division of Rayonier Inc. or a portion thereof
at which an Executive is employed is sold or divested and if (i) the Executive
accepts employment or continued employment with the purchaser and (ii) refuses
employment or continued employment with the purchaser on terms and conditions
substantially comparable to those in effect immediately preceding the sale or
divestiture, the Executive shall not be provided severance pay under this Plan.
The provisions of this Section 8 apply to divestitures accomplished through
sales of assets or through sales of corporate entities.
9. Disqualifying Conduct
If during the period an Executive is receiving Salary Continuation, the
Executive (i) engages in any activity which is inimical to be best interests of
the Company, (ii) disparages the Company; (iii) fails to comply with any
Company Covenant Against Disclosure and Assignment of Rights to Intellectual
Property; (iv) without Rayonier Inc.'s, prior consent, induces any employees of
the Company to leave their Company employment; (v) without Rayonier Inc's.
prior consent, engages in, becomes affiliated with, or becomes employed by any
business competitive with the company; or (vi) fails to comply with applicable
provisions of the Rayonier Code of Business Conduct or applicable Rayonier Inc.
Corporate policies, then the Company will have no further obligation to provide
severance pay.
10. Release
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<PAGE> 7
No severance pay will be provided under this Plan unless the Executive executes
and delivers to the Company a release, satisfactory to Rayonier Inc. in which
the Executive discharges and release 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 any Company employee benefit
plan) arising out of Executive's employment or termination of employment.
11. Change in Control
Other provisions of this Plan to the contrary notwithstanding, in the event of
a Change in Control (as defined in Appendix (B"):
o If an Executive's employment with the Company terminates, whether
voluntarily or involuntarily (except upon termination as a result of
death, disability or on or after the Executive's Normal Retirement Date),
within two years after a Change in Control event, the Executive shall
receive severance pay as provided for in this Plan.
o Such Executive may elect, and any executive receiving Salary Continuation
may elect, to receive severance pay as either Salary Continuation or in a
discounted lump sum. The Company shall not have the right to make payment
in a discounted lump sum.
After a Change in Control event, and during the period when Executive is
receiving Salary Continuation if, for any reason at any time the company is
unable to treat the Executive as being eligible for ongoing participation in
any Company employee benefit plan as provided in Section 6, "Benefits During
Severance Pay", in existence immediately prior to the Change in Control event,
and if as a result thereof the Executive does not receive a benefit or receives
a reduced
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<PAGE> 8
benefit, the Company shall provide such benefits by (i) direct payment to the
Executive of the amounts the Executive would have received from such benefit
plan had the Executive continued to be eligible or (ii) at the company's
option, make available equivalent benefits from other sources.
12. Administration of Plan
This Plan shall be administered by the Rayonier Board of Directors Compensation
and Management Development Committee (the "Committee") who shall have the
exclusive right to interpret this Plan, adopt any rules and regulations for
carrying out this Plan as may be appropriate and decide any and all matters
arising under this Plan, including but not limited to the right to determine
appeals. Subject to applicable Federal and state law, all interpretations and
decisions by the Company shall be final, conclusive and binding on all parties
affected thereby.
13. Termination or Amendment
Rayonier Incorporated may terminate or amend this Plan ("Plan change") at any
time, except that no such Plan Change may reduce or adversely affect severance
pay for any Executive whose employment terminates within two years of the
Effective Date of such Plan Change provided that the Executive was a covered
employee under this Plan on the date of Plan Change. Notwithstanding the
foregoing, for two years after the occurrence of a Change in Control event,
this Plan may not be terminated or amended.
14. Offset
Any severance pay provided to an Executive under this Plan shall be offset by
reducing such severance pay by any severance pay, salary continuation,
termination pay or similar
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<PAGE> 9
pay or allowance which Executive receives or is entitled to receive (i) under
any other company plan, policy, practice, program, arrangement; (ii) pursuant
to any employment agreement or other agreement with the Company; (iii) by
virtue of any law, custom or practice. Any severance pay provided to
Executives under this Plan shall also be offset by reducing such severance pay
by any severance pay, salary continuation pay, termination pay or similar pay
or allowance received by the Executive as a result of any prior termination of
employment with the Company.
Coordination of severance pay with any pay or benefits provided by any
applicable Rayonier Incorporated short-term or long-term disability plan shall
be in accordance with the provisions of those plans.
15. Miscellaneous
Except as provided in this Plan, the 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 the Executive in a
lump sum.
Benefits under this Plan are paid for entirely by the Company from its general
assets.
This Plan is not a contract of employment, does not guarantee the Executive
employment for any specified period and does not limit the right of the Company
to terminate the employment of the Executive at any time.
The section headings contained in this Plan are included solely from
convenience of reference and shall not in any way affect the meaning of any
provision of this Plan.
9
<PAGE> 10
16. Adoption Date and Amendment
This Plan was adopted by Rayonier Incorporated's Board of Directors on December
8, 1993 ("Adoption Date") and does not apply to any termination of employment
which occurred or which was communicated to the Executive prior to the Adoption
Date.
10
<PAGE> 11
APPENDIX A
SENIOR EXECUTIVE OFFICERS
Ronald M. Gross
Chairman, President and Chief Executive Officer
W. L. Nutter
Executive Vice President
William S. Berry
Senior Vice President, Forest Resources and Corporate
Development
Gerald J. Pollack
Senior Vice President and Chief Financial Officer
Kevin S. O'Brien
Senior Vice President, Pulp Marketing
John P. O'Grady
Senior Vice President, Human Resources
Roger H. Watts
Vice President and General Counsel
Kent B. Smith
Vice President, Forest Operations
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<PAGE> 12
APPENDIX B
For purposes of this Appendix B, each of the following events shall constitute
a "Change in Control Event";
(i) a report on Schedule 13D shall be filed with the Securities and Exchange
Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934
(the "Act") disclosing that any person (within the meaning of Section 13(d) of
the Act), other than Rayonier Incorporated (the "Corporation") or a subsidiary
of the Corporation or any employee benefit plan sponsored by the Corporation or
a subsidiary of the Corporation, is the beneficial owner directly or indirectly
of twenty percent or more of the outstanding Common Stock of the Corporation;
(ii) any person (within the meaning of Section 13(d) of the Act), other than
the Corporation or a subsidiary of the Corporation or any employee benefit plan
sponsored by the Corporation or a subsidiary of the Corporation, shall purchase
shares pursuant to a tender offer or exchange offer to acquire any Common Stock
of the Corporation (or securities convertible into such Common Stock) for cash,
securities or any other consideration, provided that after consummation of the
offer, the person in question is the beneficial owner (as such term is defined
in Rule 13d-3 under the Act) directly or indirectly, of fiften percent or more
of the outstanding Common Stock of the Corporation (calculated as provided in
paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire
Common Stock);
(iii) the stockholders of the Corporation shall approve (A) any consolidation
or merger of the Corporation in which the Corporation is not the continuing or
surviving Corporation or pursuant to which shares of Common Stock of the
corporation would be converted into cash, securities or
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<PAGE> 13
other property, other than a merger of the Corporation in which holders of
Common Stock of the Corporation immediately prior to the merger have the same
proportionate ownership of common stock of the surviving Corporation
immediately after the merger as immediately before, or (B) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of the Corporation; or
(iv) there shall have been a change in a majority of the members of the Board
of Directors of the Corporation within a 12-month period, unless the election
or nomination for election by the Corporation's stockholders of each new
Director during such 12-month period was approved by the vote of two-thirds of
the Directors then still in office who were Directors at the beginning of such
12- month period.
13
<PAGE> 1
EXHIBIT 10.7
Proposed First Draft: January 31, 1994
RAYONIER INVESTMENT AND SAVINGS PLAN
FOR SALARIED EMPLOYEES
Effective March 1, 1994
<PAGE> 2
RAYONIER INVESTMENT AND SAVINGS PLAN
FOR SALARIED EMPLOYEES
Effective March 1, 1994
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE ONE. INTRODUCTION AND PURPOSE 1
ARTICLE TWO. DEFINITIONS
2.1 Accounts 2
2.2 Actual Contribution Percentage 2
2.3 Actual Deferral Percentage 2
2.4 After-Tax Savings 2
2.5 Basic After-Tax Investment Account 3
2.6 Basic After-Tax Savings 3
2.7 Basic Before-Tax Investment Account 3
2.8 Basic Before-Tax Savings 3
2.9 Basic Investment Account 3
2.10 Basic Savings 3
2.11 Before-Tax Savings 3
2.12 Beneficiary 3
2.13 Board of Directors 4
2.14 Break in Service 4
2.15 Code 4
2.16 Company 4
2.17 Company Contribution Account 4
2.18 Compensation 5
2.19 Deferred Member 5
2.20 Disability 5
2.21 Effective Date 5
2.22 Employee 5
2.23 Enrollment Date 6
2.24 Hardship Committee 6
2.25 Highly Compensated Employee 6
2.26 Hours Worked 7
2.27 ITT 7
2.28 ITT Common Stock 7
2.29 ITT Plan 7
2.30 Loan Valuation Date 8
2.31 Matching Company Allocation 8
2.32 Member 8
2.33 Non-U.S. Citizen Employee 8
2.34 Participating Corporation 9
2.35 Participating Division 9
2.36 Plan 9
2.37 Plan Committee 9
2.38 Plan Year 9
2.39 Prior Plan Transfer 9
</TABLE>
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<PAGE> 3
RAYONIER INVESTMENT AND SAVINGS PLAN
FOR SALARIED EMPLOYEES
Effective March 1, 1994
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
2.40 Retirement 10
2.41 Retirement Allocation 6
2.42 Retirement Account 6
2.43 Salary 10
2.44 Savings Plan Administrator 10
2.45 Service 10
2.46 Supplemental After-Tax Investment Account 12
2.47 Supplemental After-Tax Savings 12
2.48 Supplemental Before-Tax Investment Account 12
2.49 Supplemental Before-Tax Savings 12
2.50 Supplemental Investment Account 13
2.51 Supplemental Savings 13
2.52 Termination of Employment 13
2.53 Trust Fund 13
2.54 Trustee 13
2.55 Valuation Date 13
2.56 Vested Company Contribution Account 14
2.57 Vested Share 14
2.58 Withdrawal Valuation Date 14
ARTICLE THREE. MEMBERSHIP
3.1 Membership 15
3.2 Enrollment Form 15
ARTICLE FOUR. MEMBER SAVINGS
4.1 Member Before-Tax Savings 16
4.2 Member After-Tax Savings 18
4.3 Suspension and Resumption of Member Savings 21
4.4 Vesting of Member's and Deferred
Member's Contributions 21
ARTICLE FIVE. COMPANY CONTRIBUTIONS
5.1 Company Contributions 22
5.2 Vesting 23
5.3 Forfeitures 23
5.4 Maximum Annual Additions 24
ARTICLE SIX. INVESTMENT OF CONTRIBUTIONS
6.1 Investment Funds 27
6.2 Investment of Contributions 28
6.3 Change in Investment Election 29
</TABLE>
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<PAGE> 4
RAYONIER INVESTMENT AND SAVINGS PLAN
FOR SALARIED EMPLOYEES
Effective March 1, 1994
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
6.4 Redistribution of Member Savings 29
6.5 Investment Option at Age 55 30
6.6 Voting of Rayonier Stock 30
ARTICLE SEVEN. CREDITS TO MEMBERS' ACCOUNTS,
VALUATION AND ALLOCATION OF ASSETS
7.1 Crediting Savings and Contributions 32
7.2 Credits to Members' Accounts 32
7.3 Valuation of Assets 32
7.4 Allocation of Assets 32
ARTICLE EIGHT. WITHDRAWALS PRIOR TO TERMINATION
OF EMPLOYMENT
8.1 General Conditions for Withdrawals 34
8.2 Withdrawals from Supplemental After-Tax
Investment Account and Basic After-Tax
Investment Account 34
8.3 Withdrawal of Vested Company Contribution
Account 35
8.4 Withdrawal from Supplemental Before-Tax
Investment Account and Basic Before-Tax
Investment Account 36
8.5 Ordering of Withdrawals 38
8.6 Repayment of Withdrawal From Plan 38
8.7 Withdrawal Limitation after Loan Application 39
8.8 Direct Rollover 39
8.9 Fund I Amounts 40
ARTICLE NINE. LOANS
9.1 General Conditions For Loans 41
9.2 Amounts Available for Loans 41
9.3 Account Ordering for Loans 41
9.4 Interest Rate for Loans 42
9.5 Term and Repayment of Loan 42
9.6 Frequency of Loan Requests 42
9.7 Loan Limitation after Withdrawal Application 43
9.8 Prepayment of Loans 43
9.9 Outstanding Loan Balance at Termination
of Employment 43
9.10 Loan Default during Employment 43
9.11 Incorporation by Reference 44
9.12 Fund I Amounts 44
</TABLE>
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<PAGE> 5
RAYONIER INVESTMENT AND SAVINGS PLAN
FOR SALARIED EMPLOYEES
Effective March 1, 1994
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE TEN. DISTRIBUTIONS
10.1 General 45
10.2 Valuation Date and Conditions of Distribution 47
10.3 Methods of Distribution 48
10.4 Death of Spouse Beneficiary 51
10.5 Proof of Death and Right of Beneficiary or
Other Person 51
10.6 Completion of Appropriate Forms 51
10.7 Restoration of Prior Forfeiture 52
10.8 Direct Rollover of Certain Distributions 53
ARTICLE ELEVEN. MANAGEMENT OF FUNDS
11.1 Rayonier Pension Fund Trust and
Investment Committee 56
11.2 Trust Fund 56
11.3 Reports to Members and Deferred Members 57
11.4 Fiscal Year 57
ARTICLE TWELVE. ADMINISTRATION OF PLAN
12.1 Appointment of Plan Committee 58
12.2 Powers of Plan Committee 58
12.3 Plan Committee Action 59
12.4 Compensation 60
12.5 Committee Liability 60
ARTICLE THIRTEEN. HARDSHIP COMMITTEES
13.1 Appointment of Hardship Committees 61
13.2 Powers of Hardship Committees 61
13.3 Hardship Committee Action 62
13.4 Compensation 62
ARTICLE FOURTEEN. AMENDMENT AND TERMINATION
14.1 Amendment 63
14.2 Termination of Plan 63
14.3 Merger or Consolidation of Plan 64
</TABLE>
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<PAGE> 6
RAYONIER INVESTMENT AND SAVINGS PLAN
FOR SALARIED EMPLOYEES
Effective March 1, 1994
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE FIFTEEN. TENDER OFFER
15.1 Applicability 65
15.2 Instructions to Trustee 65
15.3 Trustee Action on Member Instructions 66
15.4 Action With Respect to Members Not
Instructing the Trustee or Not Issuing
Valid Instructions 66
15.5 Investment of Plan Assets after Tender Offer 66
ARTICLE SIXTEEN. GENERAL AND ADMINISTRATIVE
PROVISIONS
16.1 Payment of Expenses 68
16.2 Source of Payment 68
16.3 Inalienability of Benefits 68
16.4 No Right to Employment 69
16.5 Uniform Action 69
16.6 Headings 69
16.7 Use of Pronouns 69
16.8 Construction 70
ARTICLE SEVENTEEN. TOP-HEAVY PROVISIONS
17.1 Determination of Top-Heavy Status 71
17.2 Minimum Requirements 71
</TABLE>
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<PAGE> 7
RAYONIER INVESTMENT AND SAVINGS PLAN FOR SALARIED EMPLOYEES
EFFECTIVE MARCH 1, 1994
ARTICLE ONE
INTRODUCTION AND PURPOSE
Rayonier Inc. ("Rayonier") established the Rayonier Investment and Savings Plan
for Salaried Employees (the "Plan") as of March 1, 1994. The Plan contains
assets received in a spin-off from the ITT Investment and Savings Plan for
Salaried Employees. The purpose of the Plan is to increase the level of
ownership of stock of Rayonier by salaried employees of Rayonier to provide a
convenient way for such salaried employees to increase their financial security
for emergencies and financial hardships and to supplement retirement income by
saving on a regular and long-term basis, thereby offering these employees an
additional incentive to continue their careers with Rayonier. The Plan is
intended to meet the requirements of sections 401(a), 401(k), 401(m) and 501(a)
of the Internal Revenue Code of 1986, as amended.
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<PAGE> 8
ARTICLE TWO
DEFINITIONS
2.1 "Accounts" shall mean, with respect to any Member or Deferred
Member, his Basic Investment Account, Supplemental Investment Account, his
Company Contribution Account and his Retirement Account.
2.2 "Actual Contribution Percentage" shall mean, with respect to a
specified group of Employees referred to in sections 4.2(b) and 4.2(c), the
average of the ratios, calculated separately for each Employee in that group,
of (a) the After-Tax Savings and Matching Company Allocation made by the
Employee for a Plan Year and, at the option of the Company, the Retirement
contribution made for the Employee for the Plan Year under section 5.1(a) to
(b) the Employee's Salary for that Plan Year. Such Actual Contribution
Percentage shall be computed to the nearest one-hundredth of one percent of the
Employee's Salary. For purposes of this section 2.3, Salary shall exclude
compensation paid to the Employee while he is not a Plan Member.
2.3 "Actual Deferral Percentage" shall mean, with respect to a
specified group of Employees referred to in sections 4.1(c) and 4.2(c), the
average of the ratios, calculated separately for each Employee in that group,
of (a) the amount of Before-Tax Savings made on the Employee's behalf for a
Plan Year and, at the option of the Company, the Retirement contribution made
for the Employee for the Plan Year under section 5.1(a) to (b) the Employee's
Salary for that Plan Year. Such Actual Deferral Percentage shall be computed
to the nearest one-hundredth of one percent of the Employee's Salary. For
purposes of this section 2.4, Salary shall exclude compensation paid to the
Employee while he is not a Plan Member.
2.4 "After-Tax Savings" shall mean the contributions made by a
Member pursuant to section 4.2.
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<PAGE> 9
2.5 "Basic After-Tax Investment Account" shall mean that portion
of the Trust Fund which, with respect to any Member or Deferred Member, is
attributable to Basic After-Tax Savings and any investment earnings and gains
or losses thereon.
2.6 "Basic After-Tax Savings" shall mean the contributions made by
a Member which are credited lo his Basic After-Tax Investment Account in
accordance with section 4.2(a)(i).
2.7 "Basic Before-Tax Investment Account" shall mean that portion
of the Trust Fund which, with respect to any Member or Deferred Member, is
attributable to Basic Before-Tax Savings and any investment earnings and gains
or losses thereon.
2.8 "Basic Before-Tax Savings" shall mean the contributions made
on a Member's behalf which are credited to his Basic Before-Tax Investment
Account in accordance with section 4.1(a)(i).
2.9 "Basic Investment Account" shall mean that portion of the
Trust Fund which, with respect to any Member or Deferred Member, includes his
Basic Before-Tax Investment Account and his Basic After-Tax Investment Account.
2.10 "Basic Savings" shall mean the Basic After-Tax Savings
contributed by a Member and the Basic Before-Tax Savings contributed on a
Member's behalf.
2.11 "Before-Tax Savings" shall mean those contributions made on a
Member's behalf pursuant to section 4.1.
2.12 "Beneficiary" shall mean such beneficiary or beneficiaries as
may be designated from time to time by the Member or Deferred Member, on a form
made available by the Plan Committee for such purpose, to receive, in the event
of the Member's or Deferred Member's death, the value of his Accounts at the
time of his death. In the case of a Member or Deferred
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<PAGE> 10
Member who is married, the Beneficiary shall be the Member's or Deferred
Member's spouse unless such spouse consents in writing on a form witnessed by a
notary public to the designation of another person or trust as Beneficiary.
For purposes of this section 2.13 a Deferred Member shall not include a
Deferred Member who is an alternate payee designated as such pursuant to a
qualified domestic relations order.
2.13 "Board of Directors" shall mean the Board of Directors of
Rayonier or of any successor by merger, purchase or otherwise.
2.14 "Break in Service" shall mean a five consecutive year period
in which an employee does not have any Hours Worked, which shall be treated as
commencing on the date of severance from Service.
2.15 "Code" means the Internal Revenue Code of 1986, as amended
from time to time. References to any section of the Code shall include any
successor provision thereto.
2.16 "Company" shall mean Rayonier or any successor by merger,
purchase or otherwise with respect to its Employees, any Participating Division
with respect to its Employees, and any Participating Corporation with respect
to its Employees.
2.17 "Company Contribution Account" shall mean that portion of the
Trust Fund which, with respect to any Member or Deferred Member, is
attributable to any contributions made on his behalf by the Company pursuant to
section 5.1 with respect to Basic Savings and any investment earnings and gains
or losses thereon, and/or any contributions and investment earnings thereon
made on his behalf and transferred to the Trust Fund pursuant to a Prior Plan
Transfer.
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<PAGE> 11
2.18 "Compensation" shall mean, for purposes of sections 2.33 and
5.6, total wages and other compensation paid to or for the Member as reported
on the Member's Form W-2, Wage and Tax Statement, plus elective contributions
under sections 401(k) and 125 of the Code. In no event shall Compensation
exceed the indexed dollar limit prescribed under section 401(a)(17) of the
Code.
2.19 "Deferred Member" shall mean a Member who has terminated
employment with the Company and whose Vested Share will be deferred in
accordance with section 10.1(a). "Deferred Member" shall also include an
alternate payee designated as such pursuant to a qualified domestic relations
order.
2.20 "Disability" shall mean, with respect to a Member, the total
disability of such Member that results in the Member qualifying for benefits
under the Rayonier Long Term Disability Plan for Salaried Employees. If a
Member qualifies for benefits under the Rayonier Long Term Disability Plan for
Salaried Employees then he shall be deemed to be totally disabled as determined
by the insurance company that administers such plan.
2.21 "Effective Date" shall mean March 1, 1994 with respect to
those Participating Corporations and Participating Divisions that began their
participation in the Plan on such date; "Effective Date" with respect to any
other Participating Corporation or Participating Division shall mean the date
as of which such Participating Corporation or Participating Division begins its
participation in the Plan.
2.22 "Employee" shall mean any person regularly employed by the
Company who is considered a salaried employee for purposes of the Company's
other employee benefit plans, who is paid from a payroll maintained in the
continental United States and who receives regular and stated compensation
other than a pension or retainer. However, except as the Board of Directors or
the Plan Committee, pursuant to authority delegated to it by the Board of
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<PAGE> 12
Directors, may otherwise provide on a basis uniformly applicable to all persons
similarly situated, and, except as specified below, no person shall be an
"Employee" for purposes of the Plan whose terms and conditions of employment
are determined by a collective bargaining agreement with the Company which does
not make this Plan applicable to him, or who is a leased employee as defined in
Code section 414(n).
2.23 "Enrollment Date" shall mean January 1 or July 1 of any
calendar year.
2.24 "Hardship Committee" shall mean the Investment and Savings
Plan Hardship Committee or Committees established hereunder for the purposes
provided in Article Thirteen.
2.25 "Highly Compensated Employee" shall mean, with respect to any
Plan Year, any employee who in the immediately preceding Plan Year (i) was a
five percent owner, (ii) earned annual Compensation from the Company or an
affiliated company which exceeds a dollar amount that is indexed annually and
is determined pursuant to section 414(q)(1)(B) of the Code, (iii) earned annual
Compensation from the Company or an affiliated company which exceeds a dollar
amount that is indexed annually and is determined pursuant to section
414(q)(1)(C) of the Code and was among the top 20% of employees in terms of pay
or (iv) was an officer of the Company or an affiliated company (subject to the
limitations of section 414(q) of the Code) and received more than fifty percent
of the amount in effect under Code section 415(b)(1)(A) for such year in annual
compensation. The thresholds referred to in (ii) and (iii) above shall be
adjusted at the same time and in the same manner as the dollar limit on
benefits under a defined benefit plan is adjusted pursuant to section 415(d) of
the Code. Notwithstanding the foregoing, an Employee who meets the criteria
under clause (ii), (iii) or (iv) for the current year (based on the threshold
dollar amounts in effect for the current year) but not for the preceding year
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<PAGE> 13
(based on the threshold amounts in effect for such year) will not be considered
a highly compensated employee for the current year unless the employee is one
of the 100 highest-paid employees of the Company or an affiliated company.
2.26 "Hours Worked" shall mean hours for which an employee is
compensated whether or not he has worked, such as paid holidays, paid vacation,
paid sick leave and paid time off, and back pay for the period for which it was
awarded, and each such hour shall be computed as only one hour, even though he
is compensated at more than the straight time rate. With respect to any period
for which an employee is compensated but has not worked, hours counted shall be
included on the basis of the employee's normal work-day or work-week. This
definition of Hours Worked shall be applied in compliance with 29 Code of
Federal Regulations section 2530.200b-2(b) and (c), as promulgated by the
United States Department of Labor, in a consistent and nondiscriminatory
manner.
2.27 "ITT" shall mean ITT Corporation.
2.28 "ITT Common Stock" shall mean shares of common stock of ITT.
2.29 "ITT Plan" shall mean the ITT Investment and Savings Plan for
Salaried Employees.
2.30 "Loan Valuation Date" shall mean the last day of the calendar
month in which a Member's properly completed application for a loan under the
Plan as transmitted by the Company is received by the Savings Plan
Administrator.
2.31 "Matching Company Allocation" means the Rayonier Stock
allocated to a Member's Retirement Account.
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2.32 "Member" shall mean any person who has become a Member as
provided in Article Three or on whose behalf a Prior Plan Transfer has been
made.
2.33 "Non-U.S. Citizen Employee" shall mean any person who is
considered a salaried employee for purposes of the Company's employee benefit
plans, who is
(a) not a citizen of the United States,
(b) paid from a payroll maintained in the continental United
States, and
(c) employed by the Company in a permanent position (as
distinguished from a temporary assignment) in the continental
United States, even though such person may be covered under a
retirement plan of the Company other than those enumerated in
section 2.22. The hire or assignment on or after March 1,
1994 of a Non-U.S. Citizen Employee who is participating in
such other Company retirement plan to a position in the
continental United States, at a Participating Corporation or a
Participating Division, is deemed to be the hiring or
assignment for a permanent position, for purposes of
eligibility for Plan Membership, when the employee has been in
such position for a period of thirty-six consecutive months.
2.34 "Participating Corporation" shall mean any subsidiary or
affiliated company of Rayonier or designated division(s) or unit(s) only of
such subsidiary or affiliate which, by appropriate action of the Board of
Directors or by a designated officer of Rayonier pursuant to authorization
delegated to him by the Board of Directors has been designated as a
Participating Corporation in the Plan as to all of its employees or as to the
employees of one or more of its operating or other units and the Board of
Directors of which shall have taken appropriate action to adopt this Plan.
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<PAGE> 15
2.35 "Participating Division" shall mean any division of Rayonier
or designated unit(s) only of such division which by appropriate action of the
Board of Directors or by a designated officer of Rayonier pursuant to
authorization delegated to him by the Board of Directors has been designated as
a Participating Division in this Plan.
2.36 "Plan" shall mean the Rayonier Investment and Savings Plan for
Salaried Employees as set forth herein or as amended from time to time.
2.37 "Plan Committee" shall mean the Investment and Savings Plan
Committee established hereunder for the purposes of administering the Plan as
provided in Article Twelve.
2.38 "Plan Year" initially shall mean the period commencing March
1, 1994 and ending December 31, 1994 and there after shall mean the calendar
year.
2.39 "Prior Plan Transfer" shall mean that portion of the Account
of any Member or Deferred Member that is attributable to amounts transferred on
his behalf from the spin-off of the ITT Plan.
2.40 "Retirement" shall mean early or normal retirement under the
Retirement Plan for Salaried Employees of Rayonier. Normal retirement may be
elected under the above-stated Retirement Plans on or after the first day of
the calendar month coincident with or next following the 65th anniversary of an
Employee's birth. Early retirement may be elected at any time after the 50th
anniversary of an Employee's birth, provided service requirements specified in
the stated Retirement Plans are met. "Retirement" for Members not covered by
the above stated Retirement Plans shall mean separation from service on or
after attaining age 65.
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<PAGE> 16
2.41 "Retirement Allocation" means the Rayonier Stock allocated to
a Member's Retirement Account pursuant to section 7.4.
2.42 "Retirement Account" shall mean that portion of the Trust Fund
which, with respect to any Member or Deferred Member, is attributable to
Retirement Allocations.
2.43 "Salary" shall mean an Employee's compensation from the
Company at his base rate, determined prior to any election by the Member
pursuant to section 4.1(a) hereof and prior to any election by the Member
pursuant to section 125 of the Code, excluding any overtime, bonus, foreign
service allowance or any other form of compensation, except to the extent
otherwise deemed "Salary" for purposes of the Plan under such nondiscriminatory
rules as are adopted by the Plan Committee with respect to all Members or any
particular Participating Company or Participating Division, and limited to a
dollar amount which is indexed annually and determined in accordance with
section 401(a)(17) of the Code.
2.44 "Savings Plan Administrator" shall mean the Savings Plan
Administrator designated by the Company.
2.45 "Service" shall mean the period of elapsed time beginning on
the date an Employee commences employment with the Company and any service
credited under the Prior Plan, and ending on his most recent severance date,
which shall be the earlier of (i) the date he quits, is discharged, retires or
dies or (ii) the first anniversary of the date on which he is first absent from
service, with or without pay, for any reason such as vacation, sickness,
disability, layoff or leave of absence. If Service is interrupted for
maternity or paternity reasons, meaning an interruption of Service by reason of
(a) the pregnancy of the employee, (b) the birth of a child of the employee or
(c) the placement of a child with the employee by reason of adoption, or for
purposes of caring for a newborn child of the employee
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<PAGE> 17
immediately following the birth or adoption of the newborn, then the date of
severance from Service shall be the earlier of (i) the date he quits, is
discharged, retires or dies, or (ii) the second anniversary of the date on
which he is first absent from Service. If an Employee terminates and is later
reemployed within 12 months of (i) his date of termination or (ii) the first
day of an absence from service immediately preceding his date of termination,
if earlier, the period between his severance date and his date of reemployment
shall be included in his Service. With respect to Service for purposes of the
vesting schedule in section 5.2, if an Employee terminates and is later
reemployed after 12 or more months have elapsed since his severance date, the
period of service prior to his severance date shall be included in his Service.
For purposes of eligibility for membership in the Plan provided in Article
Three, an Employee whose employment with the Company is on a temporary or less
than full-time basis shall be eligible if he is regularly scheduled to complete
or has completed at least 1,000 Hours Worked in a twelve consecutive month
period of employment measured from the date on which such Employee's Service
commences or from any subsequent anniversary thereof. After such an Employee
has become a Member of the Plan as provided in Article Three, Service for
purposes of meeting the requirements for vesting shall be determined in
accordance with the first paragraph of this section 2.45.
Under the circumstances hereinafter stated and upon such conditions as the Plan
Committee shall determine on a basis uniformly applicable to all employees
similarly situated, the period of Service of an employee shall be deemed not to
be
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<PAGE> 18
interrupted by an absence of the type hereinafter stated and the period of such
absence shall be included in determining the length of an employee's Service:
(a) if a leave of absence has been authorized by the Company or
any subsidiary or affiliate of the Company, for the period of
such authorized leave of absence only; or
(b) if an employee enters service in the armed forces of the
United States and if the employee's right to re-employment is
protected by the Selective Service Act or any similar law then
in effect and if the employee returns to regular employment
within the period during which the right to re-employment is
protected by any such law.
2.46 "Supplemental After-Tax Investment Account" shall mean that
portion of the Trust Fund which, with respect to any Member or Deferred Member,
is attributable to Supplemental After-Tax Savings and any investment earnings
and gains or losses thereon.
2.47 "Supplemental After-Tax Savings" shall mean the contributions
made by a Member which are credited to his Supplemental After-Tax Investment
Account in accordance with section 4.2(a)(ii) and/or which are credited on his
behalf pursuant to a Prior Plan Transfer.
2.48 "Supplemental Before-Tax Investment Account" shall mean that
portion of the Trust Fund which, with respect to any Member or Deferred Member,
is attributable to Supplemental Before-Tax Savings and any investment earnings
and gains or losses thereon.
2.49 "Supplemental Before-Tax Savings" shall mean the contributions
made on a Member's behalf which are credited to his Supplemental Before-Tax
Investment Account in accordance with section 4.1(a)(ii) and/or which are
credited on his behalf pursuant to a Prior Plan Transfer.
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<PAGE> 19
2.50 "Supplemental Investment Account" shall mean that portion of
the Trust Fund which, with respect to any Member or Deferred Member, includes
his Supplemental Before-Tax Investment Account and his Supplemental After-Tax
Investment Account.
2.51 "Supplemental Savings" shall mean the Supplemental After-Tax
Savings contributed by a Member, Supplemental Before-Tax Savings contributed on
a Member's behalf, and the Supplemental After-Tax Savings and Supplemental
Before-Tax Savings credited on a Member's behalf pursuant to a Prior Plan
Transfer.
2.52 "Termination of Employment" shall mean separation from the
employment of the Company for any reason, including, but not limited to,
Retirement, death, Disability, resignation or dismissal by the Company;
provided, however, that transfer in employment between the Company and any
other subsidiary or affiliate of Rayonier shall not be deemed to be
"Termination of Employment." With respect to any leave of absence and any
period of service in the armed forces of the United States, section 2.45 shall
govern.
2.53 "Trust Fund" shall mean the aggregate funds held by the
Trustee under the trust agreement or agreements established for the purposes of
this Plan, consisting of Funds R, B, C, D, and I as described in Article Six.
2.54 "Trustee" shall mean the Trustee or Trustees at any time
acting as such under the trust agreement or agreements established for the
purposes of this Plan.
2.55 "Valuation Date" shall mean the date or dates, as applicable,
on which the Trust Fund is valued in accordance with Article Seven.
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<PAGE> 20
2.56 "Vested Company Contribution Account" shall mean, with respect
to a Member or Deferred Member, that portion of his Company Contribution
Account which is vested in accordance with the terms of section 5.4.
2.57 "Vested Share" shall mean, with respect to a Member or
Deferred Member, that portion of his Accounts vested in accordance with the
terms of sections 4.4 and 5.4.
2.58 "Withdrawal Valuation Date" shall mean, with respect to
withdrawals made pursuant to sections 8.2 and 8.3 and with respect to
withdrawals made after age 59-1/2 pursuant to section 8.4, the last day of the
calendar month in which a Member's properly completed request for a withdrawal
under the Plan as transmitted by the Company is received by the Savings Plan
Administrator. With respect to withdrawals made prior to age 59-1/2 pursuant
to section 8.4, "Withdrawal Valuation Date" shall mean the last day of the
calendar month in which a Member's properly completed request for a withdrawal
under the Plan as transmitted by the Company is approved by the relevant
Hardship Committee.
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<PAGE> 21
ARTICLE THREE
MEMBERSHIP
3.1 Membership. All Employees of the Company who were Members of
the ITT Plan shall become Members of the Plan on the Effective Date. Any other
Employee shall become a Member on any Enrollment Date following his completion
of six months of Service; provided, however, that an Employee whose employment
with the Company is on a temporary or less than full-time basis shall become a
Member on any Enrollment Date coinciding with or next following fulfillment of
the conditions of section 2.45.
3.2 Enrollment Form. A Member must file an enrollment form
approved by the Plan Committee with the Company at least 15 days prior to an
Enrollment Date. By filing the enrollment form, the Employee shall designate a
Beneficiary and he may:
(a) designate the rate of his After-Tax Savings,
(b) authorize the Company to make regular payroll deductions of
the amount of his After-Tax Savings, if any,
(c) designate the rate of his Before-Tax Savings,
(d) authorize the Company to reduce his Salary by the amount of
his Before-Tax Savings, if any,
(e) make an investment election as described in section 6.2.
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<PAGE> 22
ARTICLE FOUR
MEMBER SAVINGS
4.1 Member Before-Tax Savings.
(a) Each Member may elect, subject to the provisions of section
4.1(b), to have his subsequent Salary reduced by 2%, 3%, 4%,
5%, 6%, 7%, 8%, 9%, 10%, 11%, 12%, 13%, 14%, 15% or 16%, and
have that amount contributed to the Trust Fund by the Company
that employs said Member. Such election shall be effective
with the first payroll paid on or after the date as of which
the election is to apply. From time to time and in order to
comply with section 401(k)(3) of the Code, the Plan Committee
may impose a limitation on the extent to which a Member who is
a Highly Compensated Employee may reduce his Salary in
accordance herewith, based on the Plan Committee's reasonable
projection of savings rates of Members who are not Highly
Compensated Employees.
(i) Basic Before-Tax Savings--Contributions under this
section which are not in excess of 6% of such
Member's Salary for the month for which such
contributions are made shall be known as "Basic
Before-Tax Savings" and shall be credited to his
Basic Before-Tax Investment Account; and
(ii) Supplemental Before-Tax Savings--Contributions under
this section which are in excess of the maximum
allowed under the preceding paragraph (i) shall be
known as "Supplemental Before-Tax Savings" and shall
be credited to his Supplemental Before-Tax Investment
Account.
Before-Tax Savings shall also include amounts credited on a
Member's behalf pursuant to a Prior Plan Transfer. As of any
January 1, April 1, July 1, or October 1, a Member may elect
to change the rate of his Salary reduction by giving the
Company at least 15 days prior written notice on a form
approved by the Plan Committee for such purpose.
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<PAGE> 23
(b) The maximum dollar amount of Before-Tax Savings that may be
made on behalf of any Member for a calendar year shall be the
maximum amount determined by the Secretary of the Treasury,
pursuant to section 402(g) of the Code. In the event the
foregoing limitation is exceeded for any calendar year, the
excess Before-Tax Savings as adjusted for investment
experience will be deemed to have been distributed to the
Member and recontributed to the Plan as After-Tax Savings or
returned to the Member on behalf of whom such Before-Tax
Savings were contributed, in accordance with the Member's
election. Any amounts so returned to the Member will be
returned no later than the April 15 following the end of the
calendar year for which the contributions were made. However,
in the event the Member participated in more than one
qualified defined contribution plan under which he contributed
pursuant to a salary deferral arrangement, the Member shall
notify the Committee by March 1 of the following calendar year
of the amount of the excess deferrals to be allocated to this
Plan and such portion of the excess deferrals so allocated
shall be recontributed to the Plan as After-Tax Savings or
returned to the Member as provided in the preceding sentence .
(c) With respect to each Plan Year, the Actual Deferral Percentage
for Highly Compensated Employees who are Members shall not
exceed the greater of: (a) 125 percent of the Actual Deferral
Percentage for all other Employees who are Members or (b) the
lesser of (i) 200 percent of the Actual Deferral Percentage of
all other Employees who are Members or (ii) the Actual
Deferral Percentage of all other Employees who are Members
plus 2 percentage points. In the event the Actual Deferral
Percentage for Highly Compensated Employees for any Plan Year
exceeds the limits described in the preceding sentence, then
the amount of excess deferrals, determined by reducing
contributions
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<PAGE> 24
made on behalf of Highly Compensated Employees in order of the
Actual Deferral Percentages beginning with the highest of such
percentages, as adjusted for investment experience, will be
distributed to the Members on whose behalf such deferrals were
made or, under rules to be adopted by the Committee, such
Members may elect to recharacterize such adjusted deferrals as
After-Tax Savings. Any distribution of the adjusted excess
deferrals will be made to the Highly Compensated Employees on
the basis of the respective portion of the adjusted excess
deferrals attributable to each of such employees and will be
returned to the employees on whose behalf such contributions
were made within 2-1/2 months following the end of the Plan
Year for which the deferrals were made. In the event that any
portion of a Member's Before-Tax Savings, as adjusted for
investment experience, is returned or recharacterized pursuant
to section 4.1(b) as a result of the annual limit applicable
to Before-Tax Savings, such Member's Average Deferral
Percentage shall be determined before such excess deferral is
returned. Any such adjusted excess deferrals that are
recharacterized shall be treated as (a) annual additions
pursuant to section 5.6 and (b) Before-Tax Savings for
purposes of their withdrawability prior to Termination of
Employment and shall be subject to the financial hardship
requirement provisions of section 8.4.
4.2 Member After-Tax Savings.
(a) By authorizing payroll deductions, each Member may elect to
contribute to the Trust Fund 1%, 2%, 3%, 4%, 5%, 6%, 7%, 8%,
9%, 10%, 11%, 12%, 13%, 14%, 15% or 16% of his Salary in such
payroll period, effective with the first payroll paid on or
after the date as of which the election is to apply. A Member
may not contribute more than the difference between 16% of his
Salary and
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<PAGE> 25
the amount of savings he elected pursuant to section 4.1. A
Member who contributes only After-Tax Savings in accordance
with this section 4.2 shall be subject to a minimum
contribution of 2% of his Salary. From time to time and in
order to comply with section 401(m) of the Code, the Plan
Committee may impose an additional limit on the extent to
which a Member who is a Highly Compensated Employee may
contribute to the Trust Fund as After-Tax Savings, based on
the Plan Committee's reasonable projection of savings rates of
Members who are not Highly Compensated Employees. Each
Member's contributions shall be paid monthly into the Trust
Fund and shall be credited as follows:
(i) Basic After-Tax Savings--Contributions by a Member
that are not in excess of the difference between 6%
of such Member's Salary for the month for which such
contributions are made and the amount credited as
Basic Before-Tax Savings for that month shall be
known as "Basic After-Tax Savings" and shall be
credited to his Basic After-Tax Investment Account;
and
(ii) Supplemental After-Tax Savings--Any contributions by
a Member that are in excess of the maximum allowed
under the preceding paragraph (i) shall be known as
"Supplemental After-Tax Savings" and shall be
credited to his Supplemental After-Tax Investment
Account.
After-Tax Savings may also include amounts credited on a
Member's behalf pursuant to a Prior Plan Transfer.
As of January 1, April 1, July 1 or October 1, a Member may
elect to change his after-tax contribution rate by giving the
Company at least 15 days prior written notice on a form
approved by the Plan Committee for such purpose.
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<PAGE> 26
(b) With respect to each Plan Year, the Actual Contribution
Percentage for Highly Compensated Employees who are Members
shall not exceed the greater of (a) 125 percent of the Actual
Contribution Percentage for all other Employees who are
Members or (b) the lesser of (i) 200 percent of the Actual
Contribution Percentage of all other Employees who are Members
or (ii) the Actual Contribution Percentage of all other
Employees who are Members plus 2 percentage points. In the
event the Actual Contribution Percentage for Highly
Compensated Employees for any Plan Year exceeds the limits
described in the preceding sentence, such excess contributions
determined by reducing contributions made on behalf of Highly
Compensated Employees in order of the Actual Contribution
Percentages beginning with the highest such percentages, as
adjusted for investment experience, will be returned to, or
paid to, the employees for whom such contributions were made
within 2-1/2 months following the end of the Plan Year for
which the contributions were made.
A Member's Actual Contribution Percentage shall be determined
after a Member's excess Before-Tax Savings are either
recontributed to the Plan as After-Tax Savings or paid to the
Member.
(c) Notwithstanding the provisions of section 4.1(c) and section
4.2(b) above, in no event shall the sum of the Actual Deferral
Percentage of the group of eligible Highly Compensated
Employees and the Actual Contribution Percentage of such
group, after applying the provisions of section 4.1(c) and
section 4.2(b) above, exceed the "aggregate limit" as such
term is defined under regulations prescribed by the Secretary
of the Treasury under section 401(m) of the Code. In the
event the aggregate limit is exceeded for any Plan
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<PAGE> 27
Year, the Actual Contribution Percentages of the Highly
Compensated Employees shall be reduced to the extent necessary
to satisfy the aggregate limit in accordance with the
procedure set forth in section 4.2(b) above.
4.3 Suspension and Resumption of Member Savings. A Member may
suspend his savings under section 4.1 and section 4.2 by giving to the Company
written notice on a form approved by the Plan Committee for such purpose. Such
suspension will become effective with the first payroll paid in the month
following the date written notice is received by the Company. If a Member
takes a withdrawal from his Supplemental Before-Tax Investment Account and
Basic Before-Tax Investment Account under section 8.4 he may elect to suspend
his savings for a period of not less than 12 months in lieu of disclosing his
financial resources. Such suspension will become effective in the third month
following the month in which the Valuation Date of the Member's distribution
occurs. No Matching Company Allocations shall be made under section 7.3 during
the period of a Member's suspension although he will continue to be considered
a Member for purposes of sections 4.1(c), 4.2(b) and 4.2(c).
A Member who suspends his savings in accordance with the first sentence of the
preceding paragraph may resume his savings under section 4.1 and/or under
section 4.2 as of any January 1, April 1, July 1 or October 1 after the date
the suspension commenced by giving to the Company at least 15 days' prior
written notice on a form approved by the Plan Committee for such purpose. A
Member who elects to suspend his savings in accordance with the third sentence
of the preceding paragraph may resume his savings under section 4.1 and/or
under section 4.2 as of any January 1, April 1, July 1, or October 1 following
a period of suspension of not less than 12 months, by giving to the Company at
least 15 days prior written notice on a form approved by the Plan Committee for
such purpose.
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<PAGE> 28
4.4 Vesting of Member's and Deferred Member's Contributions. Each
Member's and Deferred Member's Basic Investment Account and Supplemental
Investment Account shall at all times be fully vested.
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<PAGE> 29
ARTICLE FIVE
COMPANY CONTRIBUTIONS
5.1 Company Contributions.
(a) Retirement Contributions. The Company shall contribute each
Plan Year to the Retirement Account of a Member an amount
equal to one-half of one percent of the Member's salary for
the Plan Year.
(b) Matching Company Contributions. The Company, with respect to
each Member employed by it, shall contribute to the Trust Fund
an amount equal to 50% of such Member's Basic Savings for the
corresponding month. The Company contributions with respect
to a Member shall be paid into the Trust Fund and credited to
such Member's Company Contribution Account. No Company
contributions shall be made with respect to a Member's
Supplemental Savings. Notwithstanding the foregoing, no
Company contributions shall be made in respect of a Member's
Basic Savings which were made during a suspension period
following a withdrawal prior to Termination of Employment as
provided in sections 8.2, 8.3 and 8.4 herein. Company
contributions shall be made in either cash or Rayonier stock,
as the Company shall determine (including Treasury shares or
newly issued shares of previously authorized but unissued
Rayonier stock).
(c) Contributions From Profits. Contributions under this Article
V shall be made from the Company's profits, which shall mean
the net income of the Company for the Company's fiscal year as
determined by the Company according to generally accepted
accounting principles and practices, but without regard to any
federal, state, or local income and/or franchise taxes which
may be payable with respect to such income.
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<PAGE> 30
5.2 Vesting. A Member shall be vested in, and have a
nonforfeitable right to, his Company Contribution Account and in accordance
with the following schedule:
<TABLE>
<CAPTION>
NONFORFEITABLE
YEARS OF SERVICE PERCENTAGE
---------------- --------------
<S> <C>
less than 1 year............ 0%
1 but less than 2 years .... 20%
2 but less than 3 years .... 40%
3 but less than 4 years .... 60%
4 but less than 5 years .... 80%
5 or more years ............ 100%
</TABLE>
Notwithstanding the foregoing schedule, a Member shall immediately be fully
vested in his Company Contribution Account in the event of any one of the
following:
(a) attainment of age 65,
(b) his Retirement,
(c) his Disability,
(d) his death,
(e) termination of the Plan, or
(f) complete discontinuance of Company contributions.
A Member shall at all times be fully vested in, and shall have a nonforfeitable
right to 100 percent of, the portion of his Retirement Account.
5.3 Forfeitures.
(a) In the event of Termination of Employment of a Member for any
reason other than the foregoing listed in (a) through (d) of
section 5.4, then the portion of the Member's Company
Contribution Account in which he is not vested in accordance
with section 5.4 shall be forfeited However, if he is
reemployed by the Company prior to the expiration of a Break
in Service, the provisions of section 10.7 shall apply.
(b) If a Member shall have withdrawn all or a portion of the value
of his Vested Company Contribution Account at any time before
Termination of Employment, then all or a portion of the excess
of the value of his Company
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<PAGE> 31
Contribution Account over the value of his Vested Company
Contribution Account shall be forfeited as provided in section
8.3. However, the Member may restore such forfeited amounts
in accordance with the provisions of section 8.6.
(c) As soon as practicable after an event giving rise to a
forfeiture shall have occurred, the amount of any forfeiture
under the foregoing subdivisions of this section 5.5, reduced
by any forfeited amounts restored to a Member's Accounts,
shall be applied to reduce future Company contributions under
section 5.1.
(d) In the event of the termination of the Plan or complete
discontinuance of Company contributions hereunder, any
forfeitures not previously applied in accordance with the
foregoing provisions of this section shall be credited
proportionately to the accounts of all Members as provided in
section 14.2(b).
5.4 Maximum Annual Additions.
(a) Notwithstanding any other provision of the Plan, except as
otherwise provided in this section 5.4(a), the annual addition
to a Member's Accounts for any Plan Year, when added to the
Member's annual addition for that Plan Year under any other
qualified defined contribution plan of the Company or any
subsidiary or affiliate of the Company, shall not exceed an
amount which is equal to the lesser of (i) 25% of his
aggregate Compensation for that Plan Year determined after (A)
any reduction of Salary pursuant to section 4.1(a) and (B)
after any reduction of Salary as a result of elective
contributions pursuant to section 125 of the Code, or (ii)
$30,000. As of January 1 of each Plan Year, one-quarter of
the dollar limitation in effect under section 415(b)(1)(A) of
the Code, if greater, shall become effective as the
alternative maximum permissible annual addition during that
Plan Year in lieu of $30,000.
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<PAGE> 32
(b) For purposes of this section 5.4, the "annual addition" for a
Plan Year to a Member's Accounts under this Plan shall be the
sum of (i) the amount of such Member's Before-Tax Savings for
such Plan Year, (ii) the amount of such Member's After-Tax
Savings for such Plan Year, and (iii) all contributions by the
Company or any subsidiary or affiliate of the Company to such
Member's Company Contribution Account or Retirement Account
for such Plan Year.
(c) For purposes of this section 5.4, the term subsidiary or
affiliate shall mean any such company within the controlled
group of companies within the meaning of Code section 414,
except the phrase "more than 50 percent" shall be substituted
for the phrase "at least 80 percent" each place it appears in
section 1563(a)(1) of such Code.
(d) In the event that it is determined that the annual additions
to a Member's Accounts for any Plan Year would be in excess of
the limitations contained herein, such annual additions shall
be reduced to the extent necessary to bring such annual
additions within the limitations contained in this section
5.4. The Member's allocable share of Company contributions
for such Plan Year shall be reduced and reallocated to the
other Members in the Plan, in the proportion that the Salary
of each other Member bears to the total Salaries for all such
other Members for such Plan Year; subject, however, to the
limitations contained in section 5.4(a).
(e) In the event that any Member of this Plan is a participant in
any other defined contribution plan (whether or not
terminated), maintained by the Company or any subsidiary or
affiliate of the Company the total amount of annual additions
to such Member's accounts under all such defined contribution
plans shall not exceed the limitations set forth in this
section 5.4.
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<PAGE> 33
If it is determined that as a result of the limitations set
forth in this Subparagraph (e), the annual additions to such
Member's accounts must be reduced:
(i) first, the annual additions to such Member's accounts
under other defined contribution plans shall be
reduced to the extent necessary and to the extent
permitted by law so that the limitations described in
section 5.4(a) are not exceeded; and
(ii) second, if after application of clause (i), the
annual additions to such Member's accounts are still
in excess of the permissible amount, the annual
additions to such Member's Account under this Plan
shall be reduced.
In the event that any Member of the Plan is also a participant
in any defined benefit plan maintained by the Company or any
subsidiary or affiliate of the Company, it is intended that
the benefits under such defined benefit plan shall be reduced
prior to the application of the limitations contained in
section 5.4(a) to the annual additions to such Member's
Accounts under this Plan to the extent NECESSARY TO SATISFY
THE requirements of section 415(e) of the Code.
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<PAGE> 34
ARTICLE SIX
INVESTMENT OF CONTRIBUTIONS
6.1 Investment Funds. Contributions to the Plan shall be invested
by the Trustee in the following funds:
FUND R--a fund invested primarily in Rayonier Common Stock.
Such common stock shall be purchased by the Trustee regularly
on the open market, in accordance with a non-discretionary purchase
program, by the exercise of stock rights or by private purchase;
provided, however, that at the option and direction of Rayonier,
treasury stock or newly issued shares of Rayonier Common Stock
previously authorized and unissued may be contributed to the Trustee
as provided in section 5.1.
FUND B--a fund invested in a portfolio of common stocks, all
of which are included in the Standard and Poor's 500 Composite Stock
Index ("S&P 500"), with the objective of providing investment results
which will approximate the performance of the S&P 500 (the "Index
Fund"). The Index Fund will be managed by the Trustee using
statistical methods designed to achieve the foregoing objective,
individual stocks being selected by the Trustee on the basis of their
contribution to the objective of the Index Fund as a whole, without
regard to economic, market or financial analysis.
FUND C--a fund, together with the earnings thereon, invested
in a diversified portfolio consisting of fixed income investments and
agreements in support of capital preservation and liquidity. The
fixed income investments will in each case represent an issuer's
promise to repay principal plus a rate of interest and may include,
but are not limited to, group annuity contracts with life insurance
companies, deposit agreements with banks, obligations of the United
States Government or its agencies, and asset-backed securities. Fund
C will be managed to provide a stable rate of return consistent with
the preservation of principal.
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<PAGE> 35
FUND D--a fund invested through an actively managed portfolio
of the following asset classes: equity securities, fixed income
securities, and money market instruments (the "Balanced Fund"). The
fund's investments will be actively shifted among these asset classes
in order to capitalize on intermediate-term (i.e., 12-18 months)
valuation opportunities and to maximize the fund's total return. Fund
D's objective is to approach long-term stock market returns with less
volatility.
FUND I--a fund invested primarily in ITT Common Stock
attributable to the spin-off from the ITT Plan.
In any Fund, the Trustee temporarily may hold cash or make short-term
investments in obligations of the United States Government, commercial paper,
an interim investment fund for tax qualified employee benefit plans established
by the Trustee, unless otherwise provided by applicable law, or other
investments of a short-term nature.
6.2 Investment of Contributions. Contributions under the Plan
shall be invested by the Trustee as follows:
(a) Matching Company contributions and Retirement contributions
shall be invested entirely in Fund R, except when a Member who
has attained age 55 elects to have all or part of his Company
contributions transferred to or invested in Fund C pursuant
to section 6.5.
(b) Contributions for Member savings made pursuant to section 4.1
or section 4.2 shall be invested, in multiples of 5%, in any
one or more of Fund R, B C, or D as elected by the Member.
No amounts shall be invested in Fund I.
A Company Contribution Account shall be established for each Member in each
Fund to which Matching Company contributions made pursuant to section 5.1 with
respect to him have been made or transferred. A Retirement Account shall be
established for each Member in each Fund in which Retirement contributions with
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respect to him have been made. A Basic After-Tax Investment Account, a Basic
Before-Tax Investment Account, a Supplemental After-Tax Investment Account, and
a Supplemental Before-Tax Investment Account, as applicable, shall be
established for each Member in each Fund to which such Member's savings have
been directed.
6.3 Change in Investment Election. Not more than once in any
calendar month, by giving to the Company prior written notice on a form
approved by the Plan Committee for such purpose, a Member may change his
investment election within the limitation set forth in section 6.2 with respect
to savings to be made for any payroll paid on or after the effective date of
such notice. The effective date of notice shall be the first day of the
calendar month immediately following the date on which properly completed
written notice is received by the Company.
6.4 Redistribution of Member Savings. Not more than once in any
calendar month, by giving written notice to the Company on a form approved by
the Plan Committee for such purpose, a Member, Deferred Member or Beneficiary
who was the spouse of a Member and who elects to defer receipt of the Member's
or Deferred Member's Vested Share in accordance with section 10.1(a) or (b) may
elect to redistribute on any Valuation Date all or part, in multiples of 5%, of
his Basic Investment Account and/or Supplemental Investment Account among the
Funds R, B, C, or D. The Valuation Date applicable to the redistribution
reallocation shall be the last day of the calendar month in which properly
completed written notice is received by the Savings Plan Administrator. With
respect to Fund I, a Member may elect only to transfer amounts from Fund I to
another fund.
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6.5 Investment Option at Age 55. By giving to the Company written
notice on a form approved by the Plan Committee for such purpose, any Member
who has attained age 55 shall have an option to elect the following:
(a) to have transferred to Fund C all or part, in multiples of 5%,
of his previously credited Company Contribution Account and/or
his Retirement Account,
(b) to have invested in Fund C all or part, in multiples of 25%,
of his future Matching Company Allocations and Retirement
Allocations, and
(c) if a Member is age 55 or older when he joins the Plan or
becomes a Member, he can have all or part of the Matching
Company Allocations and Retirement Allocations mad on his
behalf invested in Fund C in multiples of 25% thereof.
A Member may make the elections described above only once, and if a Member
desires to make more than one type of election, such elections must be made
simultaneously.
The Valuation Date applicable with respect to transfers and investments made in
accordance with subparagraph (a) above shall be the last day of the calendar
month in which the Member's request is filed with the Company. The effective
date applicable with respect to investments made in accordance with
subparagraph (b) above shall be the first day of the calendar month following
the calendar month in which the Member's request is filed with the Company.
6.6 Voting of Rayonier Stock. Each Member is, for the purposes of
this section 6.6, hereby designated a named fiduciary within the meaning of
section 402(a)(2) of the Employee Retirement Income Security Act of 1974, as
amended, with respect to the shares of Rayonier Stock allocated to his Account.
Each Member and Deferred Member (or Beneficiary in the event of the death of
the Member or Deferred Member) may direct the Trustee as
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to the manner in which the Rayonier Stock allocated to his Accounts is to be
voted. Before each annual or special meeting of shareholders of Rayonier there
shall be sent to each Member, Deferred Member and such Beneficiary a copy of
the proxy solicitation material for such meeting, together with a form
requesting instructions to the Trustee on how to vote the Rayonier Stock
allocated to such Member's, Deferred Member's and Beneficiary's Accounts. Upon
receipt of such instructions, the Trustee shall vote such shares as instructed,
determined separately with respect to shares of Rayonier Stock held in Fund R.
In lieu of voting fractional shares as instructed by Members, Deferred Members
or Beneficiaries, the Trustee may vote the combined fractional shares of
Rayonier Stock to the extent possible to reflect the directions of Members,
Deferred Members or Beneficiaries with allocated fractional shares of each
class of stock. The Trustee shall vote shares of Rayonier Stock allocated to
Accounts under the Plan but for which the Trustee received no valid voting
instructions in the same manner and in the same proportion, determined
separately with respect to shares of Rayonier Stock held in Fund R, as the
shares of Rayonier Stock in the Accounts in the respective funds with respect
to which the Trustee received valid voting instructions are voted.
Instructions to the Trustee shall be in such form and pursuant to such
regulations as the Plan Committee may prescribe.
Any instructions received by the Trustee from Members, Deferred Members and
Beneficiaries regarding the voting of Rayonier Stock shall be confidential and
shall not be divulged by the Trustee to the Company, or to any director,
officer, employee or agent of the Company, it being the intent of this
provision of section 6.6 to ensure that the Company (and its directors,
officers, employees and agents) cannot determine the voting instructions given
by any Member, Deferred Member or Beneficiary.
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ARTICLE SEVEN
CREDITS TO MEMBERS' ACCOUNTS, VALUATION AND
ALLOCATION OF ASSETS
7.1 Crediting Savings and Contributions. Before-Tax Savings and
After-Tax Savings made on behalf of or by a Member shall be allocated to the
Basic Investment Account or Supplemental Investment Account of such Member, as
appropriate, as soon as practicable after such contributions are transferred to
the Trust Fund. Company contributions and Retirement contributions made on
behalf of a Member shall be allocated to the appropriate account as soon as
practicable after contribution to the Trust Fund.
7.2 Credits to Members' Accounts. At the end of each month in
which the Plan is in effect and operation, the amount of each Member's credit
in each of the Funds R, B, C, D, and I shall be expressed and credited in
dollars of contributions by the Member and Company contributions and Rayonier
Stock allocated to a Member's Accounts for such month. For the purposes of
section 6.6 and Article Fifteen, a Member's interest in Fund R shall be
converted into shares of Rayonier Common Stock at any time of determination by
dividing the value of all shares of Rayonier Common Stock in Fund R by the
value of such Member's interest in Fund R at the time. The resulting number of
shares of Rayonier Common Stock shall be deemed allocated to such Member.
7.3 Valuation of Assets. At the end of each month after the first
month in which the Plan is in operation, the Trustee shall determine the total
fair market value of all assets then held by it in each Fund.
7.4 Allocation of Assets. At the end of each month when the value
of all assets in each Fund has been determined pursuant to section 7.3, the
Trustee shall determine the gain or loss in the value of such assets in each of
the Funds R, B, C, D, and I. Such gain or loss shall be allocated pro rata by
Fund to the
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balances credited to the Accounts of all Members and Deferred Members
immediately prior to the end of such month, not including new contributions to
that Fund at the end of that month for that month.
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ARTICLE EIGHT
WITHDRAWALS PRIOR TO TERMINATION OF EMPLOYMENT
8.1 General Conditions for Withdrawals. Subject to the
restriction in section 8.7, at any time before Termination of Employment, a
Member may file with the Company a written notice on a form approved by the
Plan Committee requesting a withdrawal from his Accounts. Any such withdrawal
shall be payable only in cash and shall be in accordance with the conditions of
section 8.2, 8.3, or 8.4. For purposes of this Article Nine, a Member's
Accounts shall be valued as of the applicable Withdrawal Valuation Date.
Amounts to be distributed to Members will not participate in the investment
experience of the Plan after the Withdrawal Valuation Date. Such amounts
generally will be paid within approximately six weeks following the Withdrawal
Valuation Date.
8.2 Withdrawals from Supplemental After-Tax Investment Account and
Basic After-Tax Investment Account. Subject to the provisions of section 8.1,
one and only one withdrawal from a Member's Supplemental After-Tax Investment
Account and Basic After-Tax Investment Account may be made by a Member in any
six-month period before Termination of Employment. Such withdrawal may be:
(a) any specified whole dollar amount which is less than the full
value of his Supplemental After-Tax Investment Account and
Basic After-Tax Investment Account, or
(b) the full value of his Supplemental After-Tax Investment
Account, or
(c) the full value of his Basic After-Tax Investment Account. For
a withdrawal in accordance with subparagraph (a) above, certain conditions will
apply: (i) the amount withdrawn must be at least $300; (ii) if the amount
withdrawn exceeds the value of the Member's Supplemental After-Tax Savings and
investment earnings and gains thereon (such value for this purpose will be
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determined as of the Valuation Date immediately preceding the applicable
Withdrawal Valuation Date), Matching Company Allocations will be suspended and
will not be resumed for a period of at least three months following the
applicable Withdrawal Valuation Date; (iii) if a Member has accounts in more
than one Fund, the amount withdrawn shall be prorated among such accounts
(except for Fund I) based on their respective values; and (iv) further Basic
and Supplemental Savings by the Member under the Plan may be continued without
interruption.
For a withdrawal in accordance with subparagraph (b) above, further Basic and
Supplemental Savings by the Member under the Plan may be continued without
interruption.
For a withdrawal in accordance with subparagraph (c) above, certain conditions
will apply: (i) the Member must simultaneously withdraw his Supplemental
After-Tax Investment Account, if any; (ii) Matching Company Allocations will be
suspended and will not be resumed for a period of three months following the
applicable Withdrawal Valuation Date; and (iii) further Basic and Supplemental
Savings by the Member under the Plan may be continued without interruption.
8.3 Withdrawal of Vested Company Contribution Account. Subject to
the provisions of section 8.1, not more frequently than once in any six-month
period, a Member who has withdrawn the maximum amount available from his
Supplemental After-Tax Investment Account and Basic After-Tax Investment
Account pursuant to section 8.2 may withdraw, in 25 percent increments, all or
a portion of the value of his Vested Company Contribution Account. Upon such a
withdrawal, a percentage of the excess of the value of a Member's Company
Contribution Account over the value of his Vested Company Contribution Account
shall be forfeited by the Member. Such percentage will be equal to the
percentage of his Vested Company Contribution Account that the Member elects to
withdraw. Such Member may continue his Basic and Supplemental Savings under
the Plan without interruption;
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however, Matching Company Allocations will be suspended for a period of three
months following the applicable Withdrawal Valuation Date. Such three month
suspension period shall run concurrently with any three-month suspension period
resulting from a withdrawal pursuant to section 8.2. Such Member shall be able
to have the forfeited amount restored pursuant to section 8.6.
8.4 Withdrawal from Supplemental Before-Tax Investment Account and
Basic Before-Tax Investment Account.
(a) Subject to the provisions of section 8.1, a Member
who has not attained age 59-1/2 may withdraw all or a portion
of his Supplemental Before-Tax Investment Account and his Basic
Before-Tax Investment Account, except for that portion of each
such Account which represents investment earnings credited to
the Account subsequent to December 31, 1988, in the ITT Plan
only if he is able to establish to the satisfaction of the
relevant Hardship Committee that a bona fide financial
hardship exists and only if he has obtained (i) all
distributions (other than hardship distributions) available
under all other retirement plans maintained by the Employer,
including this Plan and (ii) all non-taxable loans available
under all retirement plans maintained by the Employer,
including this Plan, provided that the loan repayments do not
result in a financial hardship for the Member. For this
purpose, a bona fide financial hardship shall mean an
immediate and heavy need to draw on financial resources not
reasonably available from other sources of the Member. Bona
fide financial hardships shall include cash down payments
and/or closing costs associated with the purchase of a
Member's principal residence; medical expenses for a Member,
his spouse or dependents, or expenses necessary for those
persons to obtain medical care, which were not paid or
reimbursed by insurance; tuition expenses and related
educational fees for
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post-secondary education for a Member, his spouse or
dependents for the next academic year; payments to prevent a
Member's eviction from his principal residence or foreclosure
of a mortgage on such residence; and any other reasons which
the relevant Hardship Committee may deem appropriate. A
Member's withdrawal from Before-Tax Investment Accounts,
together with his concomitant withdrawal from After-Tax
Investment and Vested Company Contribution Accounts and Plan
loan, if any, shall be limited to the amount of the financial
need plus taxes on such withdrawals for which the Member is
liable. A Member may demonstrate lack of other reasonably
available financial resources by disclosing on a form approved
by the relevant Hardship Committee for such purpose relevant
details of his personal and family finances or, alternatively,
the relevant Hardship Committee may deem that the Member has
no other financial resources reasonably available if (i) the
Member agrees to cease all Before-Tax Savings and After-Tax
Savings for a period of not less than 12 months and (ii) in
the calendar year in which the Member is eligible to resume
saving under the Plan, to have his maximum permissible
Before-Tax Savings to the Plan, as defined in section 4.1(b),
reduced by any Before-Tax Savings made on his behalf in the
previous calendar year. The relevant Hardship Committee shall
make determinations of financial hardship in a uniform and
nondiscriminatory manner, with reference to all the relevant
facts and circumstances and in accordance with applicable tax
law under section 401(k) of the Code. Subsequent to the
attainment of age 59-1/2, a Member may at any time before
Termination of Employment, and without regard to financial
hardship, withdraw all or a portion of his Supplemental
Before-Tax Investment Account and his Basic Before-Tax
Investment Account.
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8.5 Ordering of Withdrawals. For purposes of processing a
withdrawal, Basic After-Tax Savings made by a Member attributable to the ITT
Plan on or after January 1, 1987, and investment earnings and gains thereon and
Supplemental After-Tax Savings made by a Member on or after January 1, 1987,
and investment earnings and gains thereon shall constitute a separate contract
(Contract II) and all remaining amounts in the Plan with respect to a Member
shall constitute another contract (Contract I) for purposes of section 72(e) of
the Code. The Plan Committee shall maintain records of withdrawals,
contributions, earnings and other additions and subtractions attributable to
each separate contract and shall credit or charge the appropriate contract, and
adjust the non-taxable basis of each contract, for transactions properly
allocable to such contract. For purposes of processing a withdrawal under
section 8.2 or 8.3, and a withdrawal from Before-Tax Investment Accounts under
section 8.4 by a member who has attained age 59-1/2, such withdrawals will be
deducted from the Member's Accounts in Contract I and Contract II in the
following order: (i) the value of the Member's Supplemental After-Tax
Investment Account in Contract I, (ii) the value of the Member's Supplemental
After-Tax Investment Account in Contract II, (iii) the value of the Member's
Basic After-Tax Investment Account in Contract I, (iv) the value of the
Member's Basic After-Tax Investment Account in Contract II and (v) the value of
the Member's Vested Company Contribution Account.
8.6 Repayment of Withdrawal From Plan. If a Member makes a
withdrawal pursuant to section 8.3 and he forfeits all or a portion of the
value of his Company Contribution Account, he shall be permitted to repay in
full the amounts previously withdrawn from his Basic After-Tax Investment
Account and his Vested Company Contribution Account to the Plan by giving to
the Company prior written notice on a form approved by the Plan Committee for
such purpose. At his option, the Member may repay the amount of his
Supplemental After-Tax Investment Account.
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Such payment may be made at any time after the three month suspension of
Matching Company Allocations described in section 8.3 above, provided the
Member is then eligible for the Plan and further provided the Member has not
incurred a Break in Service. Such repayment amounts shall be invested in Fund
R, Fund B, Fund C, and Fund D (Balanced Fund) in the same amounts as were
withdrawn from each Fund except with respect to amounts in Fund I, which may
not be withdrawn. Upon such repayment the Plan Committee shall instruct the
Trustee to restore the balance of the Member's Accounts in each Fund to its
value at the time of the withdrawal payment. However, repayments of amounts
previously withdrawn from the short-term U.S. Government Obligations Fund
(which was eliminated from the ITT Plan effective July 1, 1993) will be
invested in Fund C. With respect to a Member who has exercised the investment
option at age 55 pursuant to section 6.5, repayment and restoration of the
Member's Company Contribution Account shall be made in accordance with the
Member's election pursuant to such section 6.5 in effect at the time of
repayment.
8.7 Withdrawal Limitation after Loan Application. A Member who
has applied for a loan in accordance with Article Nine may not apply for a
withdrawal of any type from his Accounts before the third calendar month
following the Loan Valuation Date which is applicable to his loan. A Member
may, however, file application for a withdrawal, subject to the conditions of
sections 8.2, 8.3, or 8.4, at the same time he files application with the
Company for a loan provided such withdrawal and loan applications are appended
together upon transmittal to and receipt by the Savings Plan Administrator.
(See section 9.7 for similar loan limitation after withdrawal application.)
8.8 Direct Rollover. Certain withdrawals or portions thereof paid
on or after January 1, 1993 pursuant to this Article Nine may be "eligible
rollover distributions" as defined and discussed in section 10.9, and shall be
treated as such to the extent required under section 402 of the Code.
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8.9 Fund I Amounts. Notwithstanding any provision of Article
Eight to the contrary, the value of a Member's interest in Fund I shall not be
used to calculate the amount of any withdrawal and shall not be available for
withdrawal under this Article Eight, except to the extent required under
section 411(d)(6) of the Code.
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ARTICLE NINE
LOANS
9.1 General Conditions For Loans. Subject to the restrictions in
sections 9.6 and 9.7, at any time before Termination of Employment, a Member
may file with the Company a written notice on forms approved by the Plan
Committee requesting a loan from his Accounts. By filing the loan forms, the
Member:
(a) specifies the amount and the term of the loan,
(b) agrees to the annual percentage rate of interest,
(c) agrees to the finance charge,
(d) promises to repay the loan, and
(e) authorizes the Company to make regular payroll deductions to
repay the loan.
9.2 Amounts Available for Loans. Subject to the following sentence,
a Member may request a loan in any specified whole dollar amount which must be
at least $1,000 but which may not exceed the lesser of 50% of the Vested Share,
or $50,000 reduced by the Member's highest outstanding loan balance, if any,
during the prior one-year period. In no event may a Member borrow any amount
from his Retirement Account. For purposes of determining amounts available for
loans, a Member's Vested Share shall be determined based on the latest
information available to the Company at the time he files his loan request with
the Company. Notwithstanding the foregoing, such amounts may automatically be
borrowed from a Member's Retirement Account as may be necessary to fulfill the
loan request of such Member if, as a result of a decrease in market value, the
amount available for loan on the Loan Valuation Date is less than the amount
calculated as being available for loan at the time the Member filed his loan
request with the Company.
9.3 Account Ordering for Loans. For purposes of processing a
loan, the amount of such loan will be deducted from the Member's Accounts in
the following order: (i) the value of the Member's Before-Tax Savings
(including investment earnings and
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gains or losses thereon), (ii) the value of the Member's After-Tax Savings
(including investment earnings and gains or losses thereon), (iii) the Member's
Vested Company Contribution Account, (iv) the Member's Vested Matching Company
Allocation, and (v) the Member's Retirement Allocation. A loan is deducted
from a Member's Accounts as of the Loan Valuation Date. Amounts so deducted
and distributed to a Member as a Plan loan will not participate in the
investment experience of the Plan except as such amounts are repaid to the
Member's Accounts.
9.4 Interest Rate for Loans. The Plan Committee shall establish
and communicate to Members a reasonable market rate of interest for loans.
9.5 Term and Repayment of Loan. A Member may elect to repay a
loan no less frequently than on a monthly basis over a period of 12, 24, 36,
48, or 60 months. A Member who is using a loan to acquire his own principal
residence may elect to repay a loan over a period of 120 or 180 months. No
extension of the loan term shall be permitted after the loan is made.
Repayment of the loan is made to the Member's Accounts from which the loan
amount was deducted in inverse order to the Account Ordering for Loans
described in section 9.3. Repayments are invested in the Member's Accounts in
accordance with his current investment election. Repayments of amounts
deducted from the Member's Vested Company Contribution Account are invested in
accordance with the investment direction applicable to the Member's Company
contributions at the time of repayment under the terms of the Plan. Loan
repayments are not credited with investment experience under the Plan until the
first of the month following the month in which such repayments are made.
9.6 Frequency of Loan Requests. A Member may have only one loan
outstanding at any time. A Member who fully repays a loan may not apply for
another loan before the third calendar month following the last day of the
month in which the loan is repaid.
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9.7 Loan Limitation after Withdrawal Application. A Member who
requests a withdrawal of any type in accordance with Article Nine may not apply
for a loan before the third calendar month following the applicable Withdrawal
Valuation Date. A Member may, however, file application for a loan, subject to
the conditions of sections 9.1 and 9.2, at the same time he files application
with the Company for a withdrawal provided such loan and withdrawal
applications are appended together upon transmittal to and receipt by the
Savings Plan Administrator. (See section 8.7 for similar withdrawal limitation
after loan application.)
9.8 Prepayment of Loans. A Member may prepay the entire
outstanding balance of a loan, with interest to date of prepayment, at any
time. The date of prepayment will be the last day of the month in which the
prepayment is made.
9.9 Outstanding Loan Balance at Termination of Employment. Upon
the Member's Termination of Employment, the outstanding balance of any loan
shall become due and payable and shall either be cancelled or, if the Member so
elects, prepaid in full to his Accounts with interest to the date of
prepayment; such prepayment date may not be later than the Valuation Date of
the Member's distribution at Termination of Employment or the date he becomes a
Deferred Member.
9.10 Loan Default during Employment. Under certain circumstances,
including, but not limited to, the Member's failure to make repayment or the
bankruptcy of the Member, the Plan Committee may declare a Member's loan to be
in default. In the event default is declared, the outstanding loan balance and
any accrued interest may be treated as a withdrawal prior to Termination of
Employment subject to the provisions of Article Eight.
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9.11 Incorporation by Reference. Any additional rules or
restrictions as may be necessary to implement and administer Plan loans shall
be in writing and communicated to Members. Such further documentation is
hereby incorporated into the Plan by reference, and pursuant to subparagraph
(b) of section 12.2, the Plan Committee is hereby authorized to make such
revisions to these rules as it deems necessary or appropriate on the advice of
counsel.
9.12 Fund I Amounts. Notwithstanding any provision of Article Nine
to the contrary, in no event may a Member borrow any amounts from, or repay any
amounts to, Fund I.
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ARTICLE TEN
DISTRIBUTIONS
10.1 General.
(a) Upon Termination of Employment, a Member may apply for
distribution of the value of his Vested Share. Alternatively,
upon Termination of Employment before normal retirement date,
a Member whose Vested Share as of the Valuation Date of the
month in which he files appropriate application with the
Savings Plan Administrator exceeds $3,500 may elect to defer
distribution of such Vested Share until the January 31
Valuation Date immediately following his attainment of age
70-1/2. A Member who terminates employment and elects to
defer distribution of his Vested Share shall become a Deferred
Member. A Deferred Member may, however, file application for
distribution of his Vested Share at any time prior to the
January 31 following his attainment of age 70-1/2. If a
Member terminates employment and does not apply for a
distribution of his Vested Share, or does not elect to defer
distribution of his Vested Share, within 60 days of his
Termination of Employment, and the value of his Vested Share
as of the Valuation Date coincident with or next following the
60th day after his Termination of Employment exceeds $3,500,
such Member will be deemed to be a Deferred Member; provided,
however, that distribution of the Vested Share of a Member so
deemed to be a Deferred Member shall commence not later than
the 60th day after the close of the Plan Year in which the
later of the following events occurs: (i) the Member's
attainment of age 65, or (ii) the date of the Member's
Termination of Employment. A Deferred Member may elect to
redistribute his Basic Investment Account and/or Supplemental
Investment Account in accordance with section 6.4 among Funds
R, B, C, or D and to make the investment election described in
section 6.5.
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(b) Upon the death of a Member or Deferred Member, the value of
such Member's or Deferred Member's Vested Share shall be
distributed to his Beneficiary. If the Member's or the
Deferred Member's Beneficiary is not the spouse of such Member
or Deferred Member, the value of the Member's or Deferred
Member's Vested Share shall be distributed to the Beneficiary
within one year from the Member's or Deferred Member's date of
death. However, if the Member's or Deferred Member's
Beneficiary is his spouse and the value of the Vested Share to
be distributed to the spouse Beneficiary exceeds $3,500, such
spouse Beneficiary may elect to defer receipt of the Member's
or Deferred Member's Vested Share until the date as of which
the Member or Deferred Member would have reached age 70-1/2.
If the value of the Vested Share to be distributed to a spouse
Beneficiary exceeds $3,500 and such spouse Beneficiary neither
files application for distribution of such Vested Share nor
elects to defer receipt of such Vested Share, then such spouse
Beneficiary shall be deemed to have deferred receipt of such
Vested Share until the January 31 Valuation Date immediately
following the date as of which the Member or Deferred Member
would have attained age 70-1/2. A spouse Beneficiary may,
however, file application for distribution of such Vested
Share at any time prior to the January 31 Valuation Date
immediately following the year in which the Member or Deferred
Member would have attained age 70-1/2.
(c) A Member who attains age 70-1/2 on or after January 1, 1988
must commence distribution of his Vested Share by no later
than the April 1 following the year in which he attains age
70-1/2. The Vested Share of such Member shall be paid under
the payment method described in section 10.3(e)(i) below, if
permissible under the terms of that payment method. If
payment under the terms of that payment method is not
permissible, the
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Vested Share of the Member shall be paid in an immediate lump
sum. Alternatively, the Member may elect that his Vested
Share be paid under the payment method described in section
10.3(e)(ii) below, if permissible under the terms of that
payment method, or in an immediate lump sum. Payment of the
Vested Share of a Member who has attained age 70-1/2 pursuant
to this section shall be made no less frequently than
annually, and once such payment has commenced, the Member may
not elect an alternate method for payment of such Vested Share
while the Member is still an Employee.
10.2 Valuation Date and Conditions of Distribution.
(a) The value of any distribution will be determined as of the
Valuation Date of the calendar month in which a properly
completed application for the distribution by the Member,
Deferred Member or Beneficiary, as transmitted by the Company,
is received by the Savings Plan Administrator. In no event,
however, may the Valuation Date of a Member's Accounts precede
the Valuation Date of the month in which Termination of
Employment occurs.
(b) Application by the Member, Deferred Member or Beneficiary must
be in writing on a form approved by the Plan Committee.
(c) Generally, all funds distributed will be paid within
approximately six weeks following the applicable Valuation
Date. If part of the distribution is to be paid in stock, the
stock certificate will be distributed after the check
representing the cash distribution.
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10.3 Methods of Distribution. After Termination of Employment
occurs, and as soon as practicable following application by the Member,
Deferred Member or Beneficiary, distributions under the Plan shall be made in
the following manner:
(a) all distributions from Fund B, Fund C, Fund D, and Fund I
shall be made in cash;
(b) unless the Member, Deferred Member or Beneficiary elects to
take cash for distributions from Fund R, distributions from
Fund R shall be in Rayonier Common Stock, except that any
fractional interest in a share of Rayonier Common Stock shall
be paid in cash;
(c) all distributions of cash and Rayonier Common Stock shall be
made as soon as practicable after receipt of the application
by the Member, Deferred Member or Beneficiary in accordance
with section 10.2(b).
However, with prior written notice on a form approved by the
Plan Committee for such purpose, a Member who is terminating
employment after attaining age 55 or who is terminating
employment by reason of Retirement or Disability may elect to
receive distribution in the method of payment described in (i)
or (ii) below. With prior written notice on a form approved
by the Plan Committee for such purpose, a Deferred Member who
elects to receive his distribution after attaining age 55 may
elect to receive distribution in the method of payment
described in (i) or (ii) below.
(i) Provided the value of the Member's or Deferred
Member's vested Accounts is at least $3,500, and
the first payment is at least $1,000, by payment in
not more than twenty annual installments, with all
such installments to be paid in cash, as follows:
the amount of the annual installments to be paid to
each Member or Deferred Member making such
an election shall be based upon the value of his
Accounts as of the Valuation Date coinciding
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with or next following the date of receipt by the
Savings Plan Administrator of his properly completed
application as transmitted by the Company and each
anniversary thereof, and shall be determined by
multiplying such value by a fraction, the numerator
of which shall be one and the denominator of which
shall be the number of unpaid annual installments.
Notwithstanding the foregoing, the number of annual
installments elected may not exceed the life
expectancy of the Member or Deferred Member, or if
the Member or Deferred Member is married, the joint
life expectancy of the Member or Deferred Member and
his spouse. Any Member or Deferred Member who elects
annual installment payments may, at any time
thereafter, elect by filing a request with the Plan
Committee to receive in a lump sum the remaining
value of any unpaid annual installments. The
Valuation Date applicable to such election shall be
the last day of the calendar month in which his
request to receive the remaining value of any unpaid
annual installments is received by the Savings Plan
Administrator.
(ii) Provided the value of the Member's or Deferred Member's vested
Accounts is at least $3,500, and the first payment is at least
$1,000, by payment in annual cash installments over the
Member's life expectancy, as actuarially determined at the
time of commencement of the initial installment and as
redetermined annually thereafter. The amount of such
installments will be based on the value of his Accounts as of
the Valuation Date coinciding with or next following the date
of receipt by the Savings Plan Administrator of his properly
completed application as transmitted by the Company and each
anniversary thereof, and shall be determined by multiplying
such value by a
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fraction, the numerator of which shall be one and the
denominator of which shall be the number of years and
fraction thereof of his life expectancy based on his
age at the time the installment is payable. Any
Member or Deferred Member who elects annual cash
installment payments over his life expectancy may not
thereafter elect to receive in a lump sum the
remaining value of his Accounts.
If a Member or Deferred Member elects a distribution as
provided in the first sentence of section 10.3(e) and the
Member or Deferred Member dies after the Valuation Date
applicable to such distribution but prior to receipt of the
cash and/or Rayonier stock comprising such distribution, then
the distribution shall be paid to his estate. If a Member or
Deferred Member elects a distribution as provided in the first
sentence of section 10.3(e) and the Member or Deferred Member
dies prior to the Valuation Date applicable to such
distribution, then the distribution shall be paid to his
Beneficiary.
If a Member or Deferred Member elects a distribution as
provided in paragraphs (i) or (ii) of this section 10.3(e) and
the Member or Deferred Member dies before all the installments
are paid, then the following procedure shall apply: if an
installment is paid with a Valuation Date that occurred prior
to the date of death of the Member or Deferred Member and
prior to the Member's or Deferred Member's receipt of the cash
comprising such installment, then such installment shall be
paid to his estate. The remaining value of the Member's or
Deferred Member's Accounts shall be paid to his beneficiary at
one time.
The Vested Share of a Member who, following Termination of
Employment, fails to apply for distribution of such Vested
Share, shall be paid entirely in cash, provided
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that the value of such Vested Share is less than $3,500 on a
Valuation Date no earlier than the second Valuation Date
following his Termination of Employment. Alternative methods
of distribution may apply to that portion of a Member's or a
Deferred Member's Accounts attributable to a Prior Plan
Transfer.
In no event shall the foregoing provisions permit the
distribution of a Member's Accounts to commence later than the
April 1 following the calendar year in which he attains age
70-1/2.
10.4 Death of Spouse Beneficiary. Upon the death of a spouse
Beneficiary with Accounts remaining in the Plan, the remaining value of all
such Accounts shall be paid to the estate of the spouse Beneficiary.
10.5 Proof of Death and Right of Beneficiary or Other Person. The
Plan Committee may require and rely upon such proof of death and such evidence
of the right of any Beneficiary or other person to receive the undistributed
value of the Accounts of a deceased Member, Deferred Member or Beneficiary as
the Plan Committee may deem proper, and its determination of death and of the
right of such Beneficiary or other person to receive payment shall be
conclusive.
10.6 Completion of Appropriate Forms. The Plan Committee has
prescribed forms providing written notice to the Company in order for a
distribution to be made under the Plan. No distribution shall be made under
the Plan unless such forms are properly filed by the Member, Deferred Member or
Beneficiary; however, if a distribution is due to a Member, Deferred Member or
Beneficiary under the terms of the Plan, the Savings Plan Administrator will
take necessary action to cause the distribution to be made.
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10.7 Restoration of Prior Forfeiture.
(a) On Repayment of Accounts Following Rehire
If a Member's employment is terminated otherwise than
by Retirement or Disability and as a result of such
termination an amount to his credit is forfeited, such amount
shall be subsequently restored to his Accounts provided he is
reemployed by the Company prior to the expiration of a Break
in Service, and, after giving prior written notice on a form
approved by the Plan Committee for such purpose, he repays to
the Trust Fund an amount in cash equal to the full amounts of
his Basic Investment Account, his Vested Company Contribution
Account and his vested Rayonier Account distributed to him
from the Trust Fund on account of his Termination of
Employment. (At his option, the Member may repay the amount
of his Supplemental Investment Account.) Such repayment must
be made within five years of the date he again becomes
eligible to become a Member of the Plan. Such repayment shall
be invested in Fund R, Fund B, Fund C, and Fund D (Balanced
Fund) in the same amounts as were withdrawn from each Fund.
Any amount withdrawn from Fund I shall be repaid to Fund R.
Repayment of amounts previously withdrawn from the short-term
U.S. Government Obligations Fund under the ITT Plan (which
was eliminated effective July 1, 1993 from the ITT Plan) will
be reinvested in Fund C. With respect to a Member who had
exercised the investment option at age 55 pursuant to section
6.5, repayment and restoration of the Member's Company
Contribution Account and Retirement Account shall be made in
accordance with the Member's election pursuant to such section
6.5.
Upon such repayment, the Trustee shall restore the balance of
the Member's Accounts in each Fund to its value at the time
the distribution was made. Any amounts restored under this
paragraph shall be repaid
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as amounts included in the Member's Basic After-Tax Investment
Account and Supplemental After-Tax Investment Account.
(b) On Rehire of Deferred Member
If a Deferred Member whose employment terminated
otherwise than by Retirement or Disability and as a result of
such termination an amount to his credit was forfeited, such
amount shall be subsequently restored to his Accounts at its
current value assuming such amount, from the time of
termination to the date of restoration, was subject to the
same overall investment experience as the Member's Matching
Company Allocations while he was a Deferred Member, provided
he is reemployed by the Company prior to the expiration of a
Break in Service. Such restoration shall be made as of the
Valuation Date next following the date the Savings Plan
Administrator is informed of the Deferred Member's
reemployment provided such Deferred Member is again eligible
to become a Member of the Plan. Such restoration of the
Company Contribution Account shall be invested in Fund R.
However, with respect to a Deferred Member who had exercised
the investment option at age 55 pursuant to section 6.5, the
restoration and transfer of the Company Contribution Account
and the remainder of the Retirement Account shall be made in
accordance with the Member's election pursuant to such section
6.5.
10.8 Direct Rollover of Certain Distributions. Notwithstanding any
other provision of this Plan, with respect to any withdrawal or distribution
from the Plan pursuant to Article Eight or this Article Ten which is (a)
payable on and after January 1, 1993 to a "distributee" and (b) determined by
the Plan Administrator to be an "eligible rollover distribution," such
distributee may elect, at the time and in a manner prescribed by
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the Plan Committee for such purpose, to have the Plan make a "direct rollover"
of all or part of such withdrawal or distribution to an "eligible retirement
plan" which accepts such rollover. The following definitions apply to the
terms used in this section 10.8:
(a) "Distributee" means a Member or Deferred Member. In addition,
the Member's or Deferred Member's spouse Beneficiary and the
Member's or Deferred Member's spouse or former spouse who is
the alternate payee under a qualified domestic relations order
as defined in section 414(p) of the Code, are distributees
with regard to the interest of the spouse or former spouse.
(b) "Eligible rollover distribution" is any withdrawal or
distribution of all or any portion of a Member or Deferred
Member's Vested Share owing to the credit of a distributee,
except that the following distributions shall not be eligible
rollover distributions: (i) any distribution that is one of a
series of substantially equal periodic payments made for the
life or life expectancy of the distributee or the joint lives
or joint life expectancies of the distributee and the
distributee's designated beneficiary, or for a specified
period of ten years or more, (ii) any distribution required
under section 401(a)(9) of the Code, and (iii) the portion of
a distribution ont includable in gross income.
(c) "Eligible retirement plan" means an individual retirement
account described in section 408(a) of the Code, an annuity
plan described in section 403(a) of the Code or a qualified
trust described in section 401(a) of the Code that accepts the
eligible rollover distribution. However, in the case of an
eligible rollover distribution to the spouse Beneficiary of
the Member or Deferred Member, an eligible retirement plan is
an individual retirement account or individual retirement
annuity only.
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(d) "Direct rollover" means a payment by the Plan directly to the
eligible retirement plan specified by the distributee.
In the event that the provisions of this section 10.8 or any part thereof cease
to be required by law as a result of subsequent legislation or otherwise, this
section 10.8 or applicable part thereof shall be ineffective without necessity
of further amendment of the Plan.
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ARTICLE ELEVEN
MANAGEMENT OF FUNDS
11.1 Rayonier Pension Fund Trust and Investment Committee. The
Rayonier Pension Fund Trust and Investment Committee shall be responsible,
except as otherwise herein expressly provided, for the management of the assets
of the Plan. Said Committee is designated a named fiduciary of the Plan within
the meaning of section 402(a) of the Employee Retirement Income Security Act of
1974 and shall have the authority, powers and responsibilities delegated and
allocated to it from time to time by resolutions of the Board of Directors,
including, but not by way of limitation, the authority to establish one or more
trusts for the Plan pursuant to trust instrument(s) approved or authorized by
the Committee and--subject to the provisions of such trust instrument(s) to:
(i) provide, consistent with the provisions of the Plan, direction
to the Trustee thereunder, which may involve but need not be
limited to direction of investment of Plan assets and the
establishment of investment criteria, and
(ii) appoint and provide for use of investment advisors and
investment managers.
In discharging its responsibility, the Committee shall evaluate and monitor the
investment performances of the Trustee and investment managers, if any.
11.2 Trust Fund. All the funds of the Plan shall be held by a
Trustee appointed from time to time by the Rayonier Pension Fund Trust and
Investment Committee in one or more trusts under a trust instrument or
instruments approved or authorized by said Committee for use in providing the
benefits of the Plan; provided that no part of the corpus or income of the
Trust Fund shall be used for, or diverted to, purposes other than for the
exclusive benefit of Members, Deferred Members, and Beneficiaries.
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11.3 Reports to Members and Deferred Members. At least annually at
a time to be determined by the Plan Committee, each Member and Deferred Member
shall be furnished a written statement setting forth the value of each of his
Accounts, together with a statement of the amounts contributed to each such
Account by himself and by the Company on his behalf and the vested amount of
the Company Contribution Account and Retirement Account, or the earliest time a
portion of the Company Contribution Account and Retirement Account will become
vested.
11.4 Fiscal Year. The fiscal year of the Plan and the Trust shall
end on the 31st day of December of each year or at such other date as may be
designated by the Rayonier Pension Fund Trust and Investment Committee.
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ARTICLE TWELVE
ADMINISTRATION OF PLAN
12.1 Appointment of Plan Committee. From time to time, the Board
of Directors or an officer of Rayonier to whom authority has been delegated by
the Board shall appoint a Plan Committee of not less than five persons to serve
during the pleasure of the appointing Board or officer and shall designate a
Chairman of the Plan Committee from among the members and a Secretary who may
be, but need not be, one of the members of the Plan Committee. Any person so
appointed may resign at any time by delivering his written resignation to the
Secretary of Rayonier and the Chairman or Secretary of the Plan Committee.
Notwithstanding any vacancies, the Plan Committee may act so long as there are
at least three members of the Plan Committee.
12.2 Powers of Plan Committee.
(a) The Plan Committee is designated a named fiduciary within the
meaning of section 402(a)(2) of the Employee Retirement Income
Security Act of 1974, and shall have authority and
responsibility for general supervision of the administration
of the Plan.
(b) The Plan Committee shall establish such policies, rules and
regulations as it may deem necessary to carry out the
provisions of the Plan and transactions of its business,
including, without limitation, such rules and regulations
which may become necessary with respect to loans and any
defaults thereof.
(c) Except as to matters which are required by law to be
determined or performed by the Board of Directors, or which
from time to time the Board may reserve to itself or allocate
or delegate to officers of Rayonier or to another Committee,
the Plan Committee shall determine any question arising in the
administration, interpretation and application of the Plan,
including
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the right to remedy possible ambiguities, inconsistencies or
commissions. Such determinations shall be final, conclusive
and binding on all parties affected thereby.
(d) The Plan Committee shall have the right to exercise powers
reserved to the Board of Directors hereunder to the extent
that the right to exercise such powers may from time to time
be allocated or delegated to the Plan Committee by the Board
of Directors and to such further extent that, in the judgment
of the Plan Committee, the exercise of such powers does not
involve any material cost to the Company.
(e) The Plan Committee may retain counsel, employ agents and
provide for such clerical, accounting and other services as it
may require in carrying out the provisions of the Plan.
(f) The Plan Committee may appoint from its number such committees
with such powers as it shall determine and may authorize one
or more of its number or any agent to execute or deliver any
instrument or make any payment on its behalf.
(g) The Plan Committee may delegate to an administrator the
responsibility of administering and operating the details of
the Plan in accordance with the provisions of tile Plan and
any policies which, from time to time, may be established by
the Plan Committee.
12.3 Plan Committee Action. Action by the Plan Committee may be
taken by majority vole at a meeting upon such notice, or upon waiver of notice,
at such time and place as it may determine from time to time; or action may be
taken by unanimous written consent of the members without a meeting with the
same effect for all purposes as if assented to at a meeting.
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12.4 Compensation. No member of the Plan Committee shall receive
any compensation for his services as such, and, except as required by law, no
bonds or other security shall be required of him in such capacity in any
jurisdiction.
12.5 Committee Liability. The members of the Plan Committee as
well as the Rayonier Pension Fund Trust and Investment Committee and the
Hardship Committees shall use that degree of care, skill, prudence and
diligence in carrying out their duties that a prudent man, acting in a like
capacity and familiar with such matters, would use in his conduct of a similar
situation. A member of any Committee shall not be liable for the breach of
fiduciary responsibility of another fiduciary unless:
(a) he participates knowingly in, or knowingly undertakes to
conceal, an act or omission of such other fiduciary, knowing
such act or omission is a breach; or
(b) by his failure to discharge his duties solely in the interest
of the Members and other persons entitled to benefits under
the Plan, for the exclusive purpose of providing benefits and
defraying reasonable expenses of administering the Plan not
met by the Company, he has enabled such other fiduciary to
commit a breach; or
(c) he has knowledge of a breach by such other fiduciary and does
not make reasonable efforts to remedy the breach; or
(d) if the Committee of which he is a member improperly allocates
responsibilities among its members or to others and he fails
to review prudently such allocation.
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ARTICLE THIRTEEN
HARDSHIP COMMITTEES
13.1 Appointment of Hardship Committees. From time to time, the
Chairman of the Plan Committee shall appoint a Hardship Committee of not less
than three persons who may be, but need not be, members of the Plan Committee
and shall designate a Chairman of the Hardship Committee from among the members
and a Secretary who may be, but need not be, one of the members of the Hardship
Committee. Any person so appointed may resign at any time by delivering his
written resignation to the Chairman of the Plan Committee. Notwithstanding any
vacancies, the Hardship Committee may act so long as there are two members of
the Hardship Committee. The Chairman of the Plan Committee may appoint a
separate Hardship Committee with respect to Members employed by Hartford which
shall have the authority described in section 13.2 only with respect to such
Members and shall be subject to the provisions of this Article Thirteen.
13.2 Powers of Hardship Committees.
(a) Each Hardship Committee is designated a named fiduciary within
the meaning of section 402(a) of the Employee Retirement
Income Security Act of 1974, and shall have authority to
determine whether a bona fide financial hardship exists as a
condition for a Member's withdrawal from his Supplemental
Before-Tax Investment Account and his Basic Before-Tax
Investment Account under section 8.4 herein. The relevant
Hardship Committee shall take into account all pertinent facts
and circumstances and shall base its determination on the
meaning of hardship as construed by the applicable tax law,
including cases and Internal Revenue Service guidelines
thereunder. A determination by such Hardship Committee as to
the existence or absence of a hardship shall be final,
conclusive and binding.
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(b) The Hardship Committees shall establish such policies, rules
and regulations as they may deem necessary to carry out the
provisions of the Plan and transactions of their business.
(c) The Hardship Committees may retain counsel, employ agents and
provide for such clerical, accounting and other services as
they may require in carrying out the provisions of the Plan.
(d) Each Hardship Committee may appoint from its number such
committees with such powers as it shall determine and may
authorize one or more of its number or any agent to execute or
deliver any instrument or make any payment on its behalf.
13.3 Hardship Committee Action. Action by each Hardship Committee
shall be taken by majority vote at a meeting upon such notice, or upon waiver
of notice, at such time and place as it may determine from time to time; or
action may be taken by written consent of a majority of the members without a
meeting with the same effect for all purposes as if assented to at a meeting.
13.4 Compensation. No member of a Hardship Committee shall receive
any compensation for his services as such.
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ARTICLE FOURTEEN
AMENDMENT AND TERMINATION
14.1 Amendment. The Board of Directors reserves the right at
any time and from time to time, and retroactively if deemed necessary or
appropriate to conform with governmental regulations or other policies, to
modify or amend in whole or in part any or all of the provisions of the Plan;
provided that no such modification or amendment shall make it possible for any
part of the funds of the Plan to be used for, or diverted to, purposes other
than for the exclusive benefit of Members, Deferred Members, and Beneficiaries,
or shall increase the duties of the Trustee without its consent thereto in
writing. Except as may be required to conform with governmental regulations, no
such amendment shall adversely affect the rights of any Member or Deferred
Member with respect to contributions made on his behalf prior to the date of
such amendment.
14.2 Termination of Plan.
(a) The Plan is entirely voluntary on the part of the Company.
The Board of Directors reserves the right at any time to
terminate the Plan, the trust agreement and the trust
hereunder or to suspend, reduce or partially or completely
discontinue contributions thereto. In the event of such
termination or partial termination of the Plan or complete
discontinuance of contributions, the interests of Members and
Deferred Members shall automatically become nonforfeitable.
(b) In the event of such termination or partial termination or
complete discontinuance, any forfeitures not previously
applied in accordance with section 5.3 shall be credited
ratably to the Accounts of all Members and Deferred Members in
proportion to the amounts of Matching Company Allocations made
pursuant to section 5.1 credited to that portion of their
respective Retirement Accounts that is attributable to
Matching Company Allocations during the current calendar year,
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or, if no Matching Company Allocations have been made during
the current calendar year, then in proportion to such Matching
Company Allocations during the last previous calendar year
during which such Matching Company Allocations were made.
14.3 Merger or Consolidation of Plan. The Plan may not be merged
or consolidated with, nor may its assets or liabilities be transferred to, any
other plan unless each Member, Deferred Member, or Beneficiary under the Plan
would, if the resulting plan were then terminated, receive a benefit
immediately after the merger, consolidation, or transfer which is equal to or
greater than the benefit he would have been entitled to receive immediately
before the merger, consolidation, or transfer if the Plan had then terminated.
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ARTICLE FIFTEEN
TENDER OFFER
15.1 Applicability. The provisions of this Article Sixteen shall
apply in the event any person, either alone or in conjunction with others,
makes a tender offer, or exchange offer, or otherwise offers to purchase or
solicits an offer to sell to such person one percent or more of the outstanding
shares of a class of Rayonier Stock held by a Trustee hereunder (herein jointly
and severally referred to as a "tender offer"). As to any tender offer, each
Member and Deferred Member (or Beneficiary in the event of the death of the
Member or Deferred Member) shall have the right to determine confidentially
whether shares held subject to the Plan will be tendered.
15.2 Instructions to Trustee. In the event a tender offer for
Rayonier Stock is commenced, the Plan Committee, promptly after receiving
notice of the commencement of such tender offer, shall transfer certain of its
recordkeeping functions to an independent recordkeeper. The functions so
transferred shall be those necessary to preserve the confidentiality of any
directions given by the Members and Deferred Members (or Beneficiary in the
event of the death of the Member or Deferred Member) in connection with the
tender offer. A Trustee may not take any action in response to a tender offer
except as otherwise provided in this Article Fifteen. Each Member is, for all
purposes of this Article Fifteen, hereby designated a named fiduciary within
the meaning of section 402(a)(2) of the Employee Retirement Income Security Act
of 1974, as amended, with respect to the shares of Rayonier Stock allocated to
his Accounts. Each Member and Deferred Member (or Beneficiary in the event of
the death of the Member or Deferred Member) may direct the Trustee to sell,
offer to sell, exchange or otherwise dispose of the Rayonier Stock allocated to
any such individual's Accounts in accordance with the provisions, conditions
and terms of such tender offer and the provisions of this Article Fifteen;
provided, however, that such directions shall be confidential and shall not be
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divulged by the Trustee or independent recordkeeper to the Company or to any
director, officer, employee or agent of the Company, it being the intent of
this provision of section 15.2 to ensure that the Company (and its directors,
officers, employees and agents) cannot determine the direction given by any
Member, Deferred Member or Beneficiary. Such instructions shall be in such
form and shall be filed in such manner and at such time as the Trustee may
prescribe. The confidentiality provision of this section shall likewise apply
to the directions given to, and actions taken by, the Trustee pursuant to
section 15.5.
15.3 Trustee Action on Member Instructions. The Trustee shall
sell, offer to sell, exchange or otherwise dispose of the Rayonier Stock
allocated to the Member's, Deferred Member's or Beneficiary's Accounts with
respect to which it has received directions to do so under this Article Fifteen
or as provided in section 15.5. The proceeds of a disposition directed by a
Member, Deferred Member or Beneficiary from his Accounts under this Article
Fifteen shall be allocated to such individual's Accounts and be governed by the
provisions of section 15.6 or other applicable provisions of the Plan and the
trust agreements established under the Plan.
15.4 Action With Respect to Members Not Instructing the Trustee or
Not Issuing Valid Instructions. To the extent to which Members, Deferred
Members and Beneficiaries do not issue valid directions to the Trustee to sell,
offer to sell, exchange or otherwise dispose of the Rayonier Stock allocated to
their Accounts, such individuals shall be deemed to have directed the Trustee
that such shares remain invested in Rayonier Stock subject to all provisions of
the Plan, including section 15.6.
15.5 Investment of Plan Assets after Tender Offer. To the extent
possible, the proceeds of a disposition of Rayonier Stock in an individual's
Accounts shall be reinvested in Rayonier Stock by the Trustee as expeditiously
as possible in the exercise of the Trustee's fiduciary responsibility and shall
otherwise be
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held by the Trustee subject to the provisions of the trust agreement, the Plan
and any applicable note or loan agreement. In the event that Rayonier Common
Stock is no longer available to be acquired following a tender offer, the
Company may direct the substitution of new employer securities for the Rayonier
Common Stock or for the proceeds of any disposition of Rayonier Common Stock.
Pending the substitution of new employer securities or the termination of the
Plan and trust, the Trust Fund shall be invested in such securities as the
Trustee shall determine; provided, however, that, pending such investment, the
Trustee shall invest the cash proceeds in short-term securities issued by the
United States of America or any agency or instrumentality thereof or any other
investments of a short-term nature, including corporate obligations or
participations therein and interim collective or common investment funds.
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ARTICLE SIXTEEN
GENERAL AND ADMINISTRATIVE PROVISIONS
16.1 Payment of Expenses.
(a) Direct charges and expenses arising out of the purchase or
sale of securities and taxes levied on or measured by such
transactions with respect to any Fund shall be subsidized by
the Company.
(b) The Company shall pay all other expenses reasonably incurred
in administering the Plan, including expenses of the Plan
Committee, the Rayonier Pension Fund Trust and Investment
Committee, the Hardship Committees and the Trustee(s), such
compensation to the Trustee(s) as from time to time may be
agreed between the Rayonier Pension Fund Trust and Investment
Committee and Trustee(s), fees for legal services, investment
management and all taxes, if any.
16.2 Source of Payment. Benefits under the Plan shall be payable
only out of the Trust Fund, and the Company shall not have any legal
obligation, responsibility or liability to make any direct payment of benefits
under the Plan. Neither the Company nor the Trustee guarantees the Trust Fund
against any loss or depreciation or guarantees the payment of any benefit
hereunder. No person shall have any rights under the Plan with respect to the
Trust Fund, or against the Company, except as specifically provided for herein.
16.3 Inalienability of Benefits. Except as specifically provided
in the Plan or as applicable law may otherwise require or as may be required
under the terms of a qualified domestic relations order, no benefit under the
Plan shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge, and any attempts so to do
shall be void, nor shall any such benefit be in any manner liable for or
subject to debts, contracts, liabilities, engagements or torts of the person
entitled to such benefit; and
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in the event that the Plan Committee shall find that any Member, Deferred
Member or Beneficiary who is or may become entitled to benefits hereunder has
become bankrupt or that any attempt has been made to anticipate, alienate,
sell, transfer, assign, pledge, encumber or charge any of his benefits under
the Plan, except as specifically provided in the Plan or as applicable law may
otherwise require, then such benefit shall cease and terminate, and in that
event the Plan Committee shall hold or apply the same to or for the benefit of
such Member, Deferred Member or Beneficiary who is or may become entitled to
benefits hereunder, his spouse, children, parents or other blood relatives, or
any of them.
16.4 No Right to Employment. Nothing herein contained nor any
action taken under the provisions hereof shall be construed as giving any
Employee the right to be retained in the employ of the Company.
16.5 Uniform Action. Action by the Plan Committee and the Hardship
Committees shall be uniform in nature as applied to all persons similarly
situated, and no such action shall be taken which will discriminate in favor of
and Members who are Highly Compensated Employees.
16.6 Headings. The headings of the sections in this Plan are
placed herein for convenience of reference and in the case of any conflict, the
text of the Plan, rather than such headings, shall control.
16.7 Use of Pronouns. The masculine pronouns as used herein shall
be equally applicable to both men and women, and words used in the singular are
intended to include the plural, whenever appropriate.
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16.8 Construction. The Plan shall be construed, regulated and
administered in accordance with the laws of the State of Connecticut, subject
to the provisions of applicable Federal laws.
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ARTICLE SEVENTEEN
TOP-HEAVY PROVISIONS
17.1 Determination of Top-Heavy Status. For purposes of this
Article Eighteen, the Plan shall be "top-heavy" with respect to any Plan Year,
if, as of the last day of the preceding Plan Year, the value of the aggregate
of the Accounts under the Plan for "key employees" exceeds 60 percent of the
value of the aggregate of the Accounts under the Plan for all Employees. The
value of such Accounts shall be determined as of the Valuation Date coincident
with or immediately preceding the last day of such preceding Plan Year, in
accordance with sections 416(g)(3) and (4) of the Code and Article Seven of
this Plan. The determination as to whether an Employee will be considered a
"key employee" shall be made in accordance with the provisions of sections
416(i)(1) and (5) of the Code and any regulations thereunder, and, where
applicable, on the basis of the Employee's remuneration from the Company, or a
subsidiary or affiliate of the Company, as reported on Form W-2 for the
applicable Plan Year. For purposes of determining whether the Plan is
top-heavy, the account balances under the Plan will be combined with the
account balances or the present value of accrued benefits under any other
qualified plan of the Company or its subsidiaries or affiliates in which there
are members who are "key employees" or which enables the Plan to meet the
requirements of section 401(a)(4) or 410 of the Code; and, in the Company's
discretion, may be combined with the account balances or the present value of
accrued benefits under any other qualified plan of the Company or its
subsidiaries or affiliates in which all members are non-key employees, if the
contributions or benefits under the other plan are at least comparable to the
benefits provided under this Plan.
17.2 Minimum Requirements. For any Plan Year with respect to which
the Plan is top-heavy, an additional Company contribution shall be allocated on
behalf of each Member (or each Employee eligible to become a Member) who is not
a "key employee," and who has not separated from service as of the last
-72-
<PAGE> 79
day of the Plan Year, to the extent that the amounts allocated to his Accounts
as a result of contributions made on his behalf under sections 5.1 and 5.2 for
the Plan Year would otherwise be less than 3% of his remuneration (as reported
on Form W-2 for that Plan Year). However, if the greatest percentage of
remuneration (as reported on Form W-2 for that Plan Year and limited to a
dollar amount that is indexed annually in accordance with section 401(a)(1) of
the Code) contributed on behalf of a "key employee" under section 4.1 or
allocated to his Accounts as a result of contributions made pursuant to section
5.1 for the Plan Year would be less than 3%, such lesser percentage shall be
substituted for "3%" in the preceding sentence. Notwithstanding the foregoing
provisions of this section 17.2, no minimum contribution shall be made with
respect to a Member (or an Employee eligible to become a Member) if the
required minimum benefit under section 416(c)(1) of the Code is provided by the
Retirement Plan for Salaried Employees of Rayonier Company.
* * * * * * * * * *
IN WITNESS WHEREOF, RAYONIER INC. has caused this instrument to be
executed effective as of March 1, 1994.
RAYONIER INC.
By:____________________________
Date: ______________, 19____
-73-
<PAGE> 1
EXHIBIT 10.8
WORKING DRAFT
RETIREMENT PLAN
FOR SALARIED EMPLOYEES
OF RAYONIER, INC.
<PAGE> 2
RETIREMENT PLAN FOR SALARIED EMPLOYEES
OF RAYONIER, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Foreword
--------
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-----------
ARTICLE 2 SERVICE
-------
2.01 Eligibility Service . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.02 Benefit Service19
2.03 Questions relating to Service under the Plan . . . . . . . . . . . . . . 24
ARTICLE 3 MEMBERSHIP
----------
3.01 Persons employed on the Effective Date . . . . . . . . . . . . . . . . . 25
3.02 Persons first employed as Employees on or
after the Effective Date . . . . . . . . . . . . . . . . . . . . . . . 25
3.03 Persons employed as a Leased Employee with the
Company or an Associated Company . . . . . . . . . . . . . . . . . . . 25
3.04 Persons employed as other than Employees
by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.05 Reemployment of former Employees, former
Members and retired Members . . . . . . . . . . . . . . . . . . . . . . 26
3.06 Termination of membership . . . . . . . . . . . . . . . . . . . . . . . . 27
3.07 Questions relating to membership in the Plan . . . . . . . . . . . . . . 27
ARTICLE 4 BENEFITS
--------
4.01 Normal Retirement Allowance . . . . . . . . . . . . . . . . . . . . . . . 28
4.02 Postponed Retirement Allowance . . . . . . . . . . . . . . . . . . . . . 30
4.03 Standard Early Retirement Allowance . . . . . . . . . . . . . . . . . . . 31
4.04 Special Early Retirement Allowance . . . . . . . . . . . . . . . . . . . 33
4.05 Vested Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.06 Forms of Benefit Payment after Retirement . . . . . . . . . . . . . . . . 36
(a) Automatic Forms of Payment . . . . . . . . . . . . . . . . . . . . . 36
(b) Optional Forms of Payment . . . . . . . . . . . . . . . . . . . . . 38
(c) Required Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(d) Election of Options . . . . . . . . . . . . . . . . . . . . . . . . 40
4.07 Survivor's Benefit Applicable Before Retirement . . . . . . . . . . . . . 42
4.08 Maximum benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
4.09 No duplication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
4.10 Payment of benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
4.11 Reemployment of former Member or retired Member . . . . . . . . . . . . . 65
4.12 Top-heavy provisions . . . . . . . . . . . . . . . . . . . . . . . . . . 68
4.13 Payment of Medical Benefits for Benefits for Certain
Members who retire under the Plan . . . . . . . . . . . . . . . . . . . 72
4.14 Transfers from Hourly Plans maintained by the
Company or an Associated Company . . . . . . . . . . . . . . . . . . . 74
4.15 Direct Rollover of Certain Distributions . . . . . . . . . . . . . . . . 74
</TABLE>
<PAGE> 3
RETIREMENT PLAN FOR SALARIED EMPLOYEES
OF RAYONIER, INC.
TABLE OF CONTENTS
(Cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 5 ADMINISTRATION OF PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
----------------------
ARTICLE 6 CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
-------------
ARTICLE 7 MANAGEMENT OF FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
-------------------
ARTICLE 8 CERTAIN RIGHTS AND LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 85
------------------------------
ARTICLE 9 NONALIENATION OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
-------------------------
ARTICLE 10 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
----------
</TABLE>
<PAGE> 4
FOREWORD
The Plan as set forth in this document is known as the Retirement Plan for
Salaried Employees of Rayonier, Inc. (hereinafter called the Plan).
Unless otherwise expressly provided in this Plan and consistent with applicable
law, (i) the rights and benefits of any Member who retires or whose employment
is terminated, whichever first occurs, are determined in accordance with the
provisions of the Plan in effect at the time of such retirement or termination,
and (ii) no revision to the Plan shall deprive any Member who retires or whose
employment is terminated prior to such revisions, of any rights and benefits
which theretofore had accrued under the Plan.
This Plan is intended to qualify under the Internal Revenue Code of 1986.
Subject to the preceding sentence, the Plan shall be construed, regulated and
administered under the laws of the State of North Carolina.
<PAGE> 5
RETIREMENT PLAN FOR SALARIED EMPLOYEES
OF RAYONIER, INC.
ARTICLE 1 - DEFINITIONS
1.01 Accrued Benefit shall mean, as of any date of determination, the
normal retirement allowance computed under Section 4.01(b) and payable
as of his Normal Retirement Date.
1.02 Annual Dollar Limit means $150,000, except that if for any calendar
year after 1994 the cost-of-living adjustment as hereafter defined is
equal to or greater than $10,000, then the Annual Dollar Limit (as
previously adjusted under this Section) for any Plan Year beginning in
any subsequent calendar year shall be increased by the amount of such
cost-of-living adjustment, rounded to the next lowest multiple of
$10,000. The cost-of-living adjustment shall equal the excess of (i)
$150,000 increased by the adjustment made under Section 415(d) of the
Code for the calendar year except that the base period for purposes of
Section 415(d)(1)(A) of the Code shall be the calendar quarter
beginning October 1, 1993 over (ii) the Annual Dollar Limit in effect
for the Plan Year beginning in the calendar year.
1.03 Annuity Starting Date shall mean the first day of the first period for
which an amount is due on behalf of a Member or former Member as an
annuity or any other form of payment under the Plan.
1.04 Appendix shall mean the tables of factors which are used in
determining the amount of the various forms of benefits payable under
the Plan.
<PAGE> 6
Page 2
1.05 Associated Company shall mean that any such division, subsidiary or
affiliated company of Rayonier, Inc. not participating in the Plan
which is (i) a component member of a controlled group of corporations
(as defined in Section 414(b) of the Code), which controlled group of
corporations includes as a component member Rayonier, Inc., (ii) any
trade or business under common control (as defined in Section 414(c)
of the Code) with Rayonier, Inc., (iii) any organization (whether or
not incorporated) which is a member of an affiliated service group (as
defined in Section 414(m) of the Code) which includes Rayonier, Inc.
or (iv) any other entity required to be aggregated with Rayonier, Inc.
pursuant to regulations under Section 414(o) of the Code, shall
automatically be an Associated Company hereunder during the period it
is a division, subsidiary or affiliated company of Rayonier, Inc. or
during such period as may otherwise be determined by the Board of
Directors or the Pension Administration Committee. Notwithstanding
the foregoing, for purposes of the preceding sentence and Section 4.08
of the Plan the definitions of Section 414(b) and (c) of the Code
shall be modified as provided in Section 415(h) of the Code.
1.06 Beneficiary shall mean any person or entity named by a Member by
written designation to receive certain benefits payable in the event
of his death as provided under Section 4.07.
1.07 Benefit Service shall mean employment recognized as such for the
purposes of computing a benefit under the Plan as provided under
Article 2.
1.08 Board of Directors shall mean the Board of Directors of Rayonier, Inc.
or of any successor by merger, purchase or otherwise.
<PAGE> 7
Page 3
1.09 Code shall mean the Internal Revenue Code of 1986, as amended from
time to time.
1.10 Company shall mean Rayonier, Inc. formerly known as ITT Rayonier
Corporation with respect to its Employees; and any Participating Unit
with respect to its Employees. When used herein, the term Company
shall collectively include Rayonier, Inc. and any Participating Unit.
1.11 Compensation shall mean the total remuneration paid to a Member
(whether before or after membership in the Plan) for services rendered
including annual base salary and overtime (determined prior to any
pre-tax contributions under a "qualified cash or deferred
arrangement", as defined under Section 401(k) of the Code and its
applicable regulations, or under a "cafeteria plan", as defined under
Section 125 of the Code and its applicable regulations), but excluding
foreign service pay, automobile allowance, separation pay or other
special pay or allowances of similar nature, commissions and all
bonuses, unless heretofore or hereafter specifically designated as
being included in Compensation for purposes of the Plan by the Board
of Directors under rules or regulations uniformly applicable to all
Members similarly situated, and excluding the cost of any public or
private employee benefit plan, including the Plan; provided, however,
Compensation taken into account for any purpose under the Plan shall
not exceed the Annual Dollar Limitation. For purposes of applying the
Annual Dollar Limit on Compensation, the family unit of an Employee,
who is either (i) a 5% owner or (ii) both a highly compensated
employee (as defined in Section 414(q) of the Code) and one of the ten
most highly compensated employees, will be treated as a single
Employee with one Compensation, and the Annual Dollar Limit will be
allocated among the members of the family unit in proportion to each
<PAGE> 8
Page 4
such Member's Compensation. For this purpose, a family unit is the
Employee who is a 5% owner or one of the ten most highly compensated
employees, the Employee's spouse, and the Employee's lineal
descendants who have not attained age 19 before the close of the year.
The Pension Administration Committee shall resolve any questions
arising hereunder as to the meaning of Compensation on a basis
uniformly applicable to all Employees similarly situated.
1.12 Early Retirement Date shall mean the date as determined in the manner
set forth in Section 4.03.
1.13 Effective Date of the Plan shall mean February ___, 1994.
1.14 Eligibility Service shall mean any employment recognized as such for
the purposes of meeting the eligibility requirements for membership in
the Plan and for eligibility for benefits under the Plan as provided
under Article 2.
1.15 Employee shall mean any person regularly employed by the Company who
is paid from a payroll maintained in the continental United States,
Hawaii, Puerto Rico or the U.S. Virgin Islands and who receives
regular and stated compensation other than a pension or retainer;
provided, however, that except as the Board of Directors or the
Pension Administration Committee, pursuant to the authority delegated
to it by the Board of Directors, may otherwise provide on a basis
uniformly applicable to all persons similarly situated, no person
shall be an Employee for purposes of the Plan who is (i) engaged as a
consultant, (ii) a non-resident alien, (iii) paid on an hourly basis
and who, under the Company's employment
<PAGE> 9
Page 5
classification practices, is considered as an hourly-rated employee
for purposes of the Company's employee benefit plans, (iv) accruing
benefits in respect of current service under any other pension,
retirement, qualified profit-sharing or other similar plan of the
Company (other than the Rayonier, Inc. Investment and Savings Plan for
Salaried Employees,) or of any Associated Company (v) a Leased
Employee; and provided further, that no person shall be an Employee
for purposes of the Plan whose terms and conditions of employment are
determined by a collective bargaining agreement with the Company which
does not make this Plan applicable to him.
1.16 Equivalent Actuarial Value shall mean equivalent value of a benefit
under the Plan determined on the basis of the applicable factors set
forth in Appendix A, except as otherwise specified in the Plan. In
any other event, Equivalent Actuarial Value shall be determined on the
same actuarial basis utilized to compute the factors set forth in
Appendix A.
1.17 Final Average Compensation shall mean the sum of
(a) The average of a Member's annual base salary earned in any
five calendar years of Eligibility Service in which such
Compensation was highest, plus
(b) The average of a Member's annual Compensation in excess of
base annual salary earned in any five calendar years of
Eligibility Service in which such Compensation was highest;
provided, however, that the calendar years on which such averages are
based shall be any five calendar years during the last 120 calendar
months of a Member's Eligibility Service or, if the Member has less
than five calendar years of Eligibility Service, all of his calendar
<PAGE> 10
Page 6
years of Eligibility Service; provided, further, however, that (i) the
annual base salary earned in any calendar year and taken into account
for purposes of "Final Average Compensation", and (ii) the amount in
excess of base annual salary earned in any calendar year and taken
into account for purposes of "Final Average Compensation", and (iii)
the sum of (i) and (ii) taken into account for any calendar year, each
shall not exceed the Annual Dollar Limit. If the Member terminates
employment before the last day of the calendar year or otherwise
experiences an interruption in Eligibility Service, the Pension
Administration Committee shall, in accordance with rules uniformly
applicable to all persons similarly situated, determine the amount of
the Member's Final Average Compensation. Unless otherwise determined
by the Board of Directors or the Pension Administration Committee,
pursuant to authority delegated to it by the Board of Directors, the
term Eligibility Service as used in this Section shall include all
service recognized as Eligibility Service for purposes of eligibility
requirements under Article 2.
1.18 Hour of Service shall mean hours of employment as defined pursuant to
the provisions of Section 2.01(b).
1.19 Leased Employee shall mean any person as so defined in Section 414(n)
of the Code by virtue of his performance of services for the Company
or an Associated Company.
1.20 Member shall mean any person included in the membership of the Plan as
provided in Article 3. The pronoun he, his or him is used in this
document solely for convenience and does not in any way connote a
limit or restriction to persons of the masculine gender. In
<PAGE> 11
Page 7
all cases, when he, his or him is used it means with equal effect
persons of the feminine gender.
1.21 Normal Retirement Date shall mean the first day of the calendar month
coincident with or next following the date the Employee attains age
65, which is his Normal Retirement Age.
1.22 Parental Leave shall mean a period in which a person is absent from
work because of the person's pregnancy, the birth of a person's child,
the adoption by a person of a child, or, for purposes of caring for
that child, for a period beginning immediately following such birth or
adoption.
1.23 Participating Unit shall mean, in addition to Rayonier Inc., any
subsidiary, division or affiliated company of Rayonier, Inc., any
designated division(s) only of such subsidiary or affiliated company
or any designated unit(s) only of such subsidiary, division or
affiliated company which has by appropriate action of the Board of
Directors been designated as a Participating Unit and the board of
directors of any such subsidiary or affiliated company shall have
taken appropriate action to adopt the Plan. The Board of Directors
shall take action (i) to designate such entity as a Participating
Unit, (ii) to determine that such persons are Employees, and (iii) to
establish the terms and conditions under which such Employees are to
be included in the Plan.
If a group of persons is transferred to or assigned to a Participating
Unit or are hired by a Participating Unit as the result of the opening
or purchase of a plant or the merger of one unit into another, such
persons shall not be deemed to be Employees for purposes of the Plan
until further action by the Board of Directors including the
determination that such
<PAGE> 12
Page 8
persons are Employees for purposes of the Plan and the establishment
of the terms and conditions under which such Employees are to be
included in the Plan.
To the extent that the Board of Directors shall have authorized and
established the basis for recognition under the Plan of service with a
predecessor corporation(s), if any, reference in this Plan to service
with a Participating Unit shall include service with the predecessor
corporation(s) of such Participating Unit, provided that all or part
of the business and assets of any such corporation shall have been
acquired by Rayonier, Inc. or by a Participating Unit.
1.24 Pension Administration Committee shall mean the committee established
for the purposes of administering the Plan as provided in Article 5.
1.25 Pension Fund Trust and Investment Committee shall mean the committee
established by Rayonier, Inc. for the purposes of managing the assets
of the Plan as provided in Article 5.
1.26 Plan shall mean the Retirement Plan for Salaried Employees of
Rayonier, Inc. as set forth herein or as hereafter amended.
1.27 Plan Year shall mean the calendar year.
1.28 Postponed Retirement Date shall mean, with respect to an Employee who
does not retire at Normal Retirement Date but who works after such
date, the first day of the calendar month coincident with or next
following the date on which such Employee retires from
<PAGE> 13
Page 9
active service. No retirement allowance shall be paid to the Employee
until his Postponed Retirement Date, except as otherwise provided in
Article 4.
1.29 Prior Salaried Plan shall mean the Retirement Plan for Salaried
Employees of ITT Corporation, as in effect on February __, 1994 and as
thereafter amended from time to time.
1.30 Qualified Joint and Survivor Annuity shall mean an annuity described
in Section 4.06(a)(i).
1.31 Severance Date shall mean the date an Employee is considered to have
severed his employment as defined pursuant to the provisions of
Section 2.01(a).
1.32 Social Security Benefit shall mean the amount of annual old age or
disability insurance benefit under Title II of the Federal Social
Security Act as determined by the Pension Administration Committee
under reasonable rules uniformly applied, on the basis of such Act as
in effect at the time of retirement or termination to which a Member
or former Member is or would upon application be entitled, even though
the Member does not receive such benefit because of his failure to
apply therefor or he is ineligible therefor by reason of earnings he
may be receiving in excess of any limit on earnings for full
entitlement to such benefit. In computing the Member's Social
Security Benefit, no wage index adjustment or cost of living
adjustment shall be assumed with respect to any period after the end
of the calendar year in which the Member retires or terminates
service. For all years prior to retirement or other termination of
employment with the Company where actual earnings are not available,
the Member's Social Security Benefit shall be determined on the basis
of
<PAGE> 14
Page 10
the Member's actual earnings in conjunction with a salary increase
assumption based on the actual yearly change in national average wages
as determined by the Social Security Administration. If, within a
reasonable time after the later of (i) the date of retirement or other
termination of employment or (ii) the date on which a Member is
notified of the retirement allowance or vested benefit to which he is
entitled, the Member provides documentation from the Social Security
Administration as to his actual earnings history with respect to those
prior years, his Social Security Benefit shall be redetermined using
the actual earnings history. If this recalculation results in a
different Social Security Benefit, his retirement allowance or vested
benefit shall be adjusted to reflect this change. Any adjustment to
his retirement allowance or vested benefit shall be made retroactive
to the date his payments commenced. The Pension Administration
Committee shall resolve any questions arising under this Section on a
basis uniformly applicable to all Employees similarly situated.
1.33 Social Security Retirement Age shall mean age 65 with respect to a
Member who was born before January 1, 1938; age 66 with respect to a
Member who was born after December 31, 1937 and before January 1,
1955; and age 67 with respect to a Member who was born after December
31, 1954.
1.34 Special Early Retirement Date shall mean the date as determined in the
manner set forth in Section 4.04.
1.35 Spousal Consent shall mean written consent given by a Member's or
former Member's spouse to an election made by the Member or former
Member which specifies the form of
<PAGE> 15
Page 11
retirement allowance, vested benefit, Beneficiary, or contingent
annuitant designated by the Member or former Member. The specified
form or specified Beneficiary or contingent annuitant shall not be
changed unless further Spousal Consent is given. Spousal Consent
shall be duly witnessed by a notary public or, in accordance with
uniform rules of the Pension Administration Committee, by a Plan
representative and shall acknowledge the effect on the spouse of the
Member's or former Member's election. The requirement for Spousal
Consent may be waived by the Pension Administration Committee in
accordance with applicable law. Spousal Consent shall be applicable
only to the particular spouse who provides such consent.
1.36 Trustee shall mean the trustee or trustees by which the funds of the
Plan are held as provided in Article 7.
<PAGE> 16
Page 12
ARTICLE 2 - SERVICE
2.01 Eligibility Service
(a) Eligibility Service on and after the Effective Date. Unless the Board
of Directors or the Pension Administration Committee determines
otherwise on a basis uniformly applicable to all persons similarly
situated and except as otherwise provided in this Article 2, all
uninterrupted employment with the Company or with an Associated
Company rendered on and after (i) the Effective Date or (ii) date of
employment, if later, and prior to such Member's Severance Date shall
be recognized as Eligibility Service for all Plan purposes.
"Severance Date" shall mean the earlier of (i) the date a Member
resigns, is discharged, retires or dies or (ii) one year from the date
the Member is continuously absent from service for any other reason as
provided in this Article 2. Eligibility Service for any period of
employment rendered prior to the Effective Date shall be determined as
set in Section 2.01(g).
(b) Eligibility Service for Plan membership by Employees hired on other
than a full-time basis -With respect to any Employee whose employment
with the Company or with an Associated Company is on a temporary or
less than full-time basis, "one year of Eligibility Service" for
purposes of meeting the requirements for membership in the Plan as
provided in Article 3 shall mean a period of twelve consecutive months
of employment and measured from the date on which he first completes
an Hour of Service or from any subsequent anniversary thereof and
during which he has completed at least 1,000 Hours of Service with the
Company or with an Associated Company. After such an Employee has met
the requirements for membership in the Plan as provided in Article 3,
Eligibility Service for
<PAGE> 17
Page 13
purposes of meeting the eligibility requirements for benefits and for
vesting shall be determined in accordance with Sections 2.01(a) and
2.01(g).
"Hours of Service" shall include hours worked and hours for which a
person is compensated by the Company or by an Associated Company for
the performance of duties for the Company or an Associated Company,
although he has not worked (such as: paid holidays, paid vacation,
paid sick leave, paid time off and back pay for the period for which
it was awarded), and each such hour shall be computed as only one
hour, even though he is compensated at more than the straight time
rate. This definition of "Hours of Service" shall be applied in a
consistent and non-discriminatory manner in compliance with 29 Code of
Federal Regulations, Section 2530.200b-2(b) and (c) as promulgated by
the United States Department of Labor and as may hereafter be amended.
Solely for purposes of this paragraph (b), if a temporary or less than
full-time Employee does not complete more than 500 Hours of Service in
the twelve month period beginning on the date on which he first
completes an Hour of Service or beginning on any subsequent
anniversary thereof (which for purposes of this paragraph (b) shall be
known as the "computation period"), he shall incur a one-year break in
service. Solely for purposes of determining whether such an Employee
has incurred a break in service, hours shall include each Hour of
Service for which such Employee would otherwise have been credited
under this paragraph (b) were it not for the Employee's absence due to
Parental Leave. Hours of Service credited under the preceding
sentence shall not exceed the number of hours needed to avoid a break
in service in the computation period in which the Parental Leave first
began, and in any event shall not exceed 501 hours; if no hours are
needed to avoid a break in service in such computation period, then
the provisions of the preceding sentence
<PAGE> 18
Page 14
shall apply as though the Parental Leave began in the immediately
following computation period. If such an Employee has had a break in
service before becoming eligible for membership, Eligibility Service
shall begin from the date of his return to the employ of the Company
or an Associated Company. Except as otherwise provided in this
Article 2, his Eligibility Service before the break in service shall
be restored only upon completion of one year of Eligibility Service
within the twelve-month period following his break in service. If,
however, the periods of consecutive one-year breaks in service equals
or exceeds the greater of (i) five years or (ii) the total number of
years of Eligibility Service before the break in service, his
Eligibility Service prior to the break shall never be restored.
(c) Employment with the Company or an Associated Company but not as an
Employee - Eligibility Service with respect to prior employment
rendered by any person who, on or after the Effective Date and prior
to the date on which he becomes an Employee, is or was in the employ
of the Company or an Associated Company but not as an Employee shall,
subject to the provisions of Section 2.01(e) and Section 2.01(f), be
equal to:
(i) the number of years credited to him, if any, on the basis of
the "1,000 hour rule" under a pension plan maintained by the
Company or an Associated Company applicable to him for the
period of such prior employment ending on the last day of the
calendar year preceding the date on which he becomes an
Employee or the date on which such prior employment
terminated, plus
(ii) the greater of (1) the service credited to him, if any, on the
basis of the "1,000 hour rule" for the portion of the calendar
year ending on the date immediately preceding the date he
becomes an Employee or the date on which such prior employment
terminated, or (2) the Eligibility Service he would be
credited with under this Plan
<PAGE> 19
Page 15
for the entire calendar year in which the transfer or
termination of employment took place.
In the event a person's prior employment was not covered by or
credited under a pension plan which recognized employment on the basis
of the "1,000 hour rule", any such prior employment with the Company
or an Associated Company whether rendered before or after the
Effective Date shall be recognized in accordance with the terms of
this Article 2 and subject to any limitations set forth by the Board
of Directors or Pension Administration Committee on a basis uniformly
applicable to all persons similarly situated.
(d) Certain absences to be recognized as Eligibility Service - Except as
otherwise indicated in this Article 2, the following periods of
approved absence rendered on and after the Effective Date shall be
recognized as Eligibility Service under the Plan and shall not be
considered as breaks in Eligibility Service:
(i) The period of any leave of absence granted in respect of
service with the armed forces of the United States on or after
the Effective Date provided the Employee shall have returned
to the service of the Company or an Associated Company in
accordance with reemployment rights under applicable law and
shall have complied with all of the requirements of such law
as to reemployment.
(ii) Except as provided by law, the period on or after the
Effective Date of any leave of absence granted in respect of
service, not exceeding two years, with any other agency or
department of the United States Government.
(iii) The period on and after the Effective Date of any total and
permanent disability during which an Employee becomes entitled
to a disability benefit under Title II of the Federal Social
Security Act as amended from time to time or the period on and
<PAGE> 20
Page 16
after the Effective Date of total and permanent disability as
determined by the Pension Administration Committee on the
basis of such medical information as it shall require.
(iv) The period of any leave of absence on and after the Effective
Date during which Company sickness or accident benefits are
payable.
(v) The period on and after the Effective Date of any leave of
absence approved by the Company during which an Employee is
paid Compensation at a rate which is at least one-half of the
Employee's basic rate of Compensation in effect immediately
prior to such leave.
(vi) In any event, Eligibility Service shall include the period,
with or without Compensation, immediately preceding the
Employee's Severance Date but not in excess of 12 consecutive
months inclusive of those periods of approved absences already
included in sub-paragraphs (i) through (v) above, during which
an Employee is continuously absent from service.
(vii) The period between an Employee's Severance Date and his
reemployment if he returns to the employ of the Company or an
Associated Company before the first anniversary date of his
Severance Date; provided, however, that the combined periods
recognized under sub-paragraph (vi) above and under this
sub-paragraph (vii) shall not exceed 12 consecutive months.
Except to the extent provided under sub-paragraph (vi) and, if
applicable, under sub-paragraph (vii) above, if an Employee fails to
return to active employment upon expiration of the approved absences
specified in sub-paragraphs (i), (ii), (iv) and (v) above, such
periods of approved absence shall not be considered as Eligibility
Service under the Plan.
<PAGE> 21
Page 17
(e) Breaks in Service - All absences from the Company or from an
Associated Company, other than the absences specified in paragraph (d)
above, shall be considered as breaks in Eligibility Service; provided,
however, that in no event shall there be a break in Eligibility
Service if an Employee (i) is continuously absent from service with
the Company or with an Associated Company and returns to the employ of
the Company or an Associated Company before the first anniversary of
his Severance Date or (ii) is absent from work because of a Parental
Leave and returns to the employ of the Company or an Associated
Company within two years of his Severance Date. If the provisions of
clause (ii) above are applicable, the first year of such absence for
Parental Leave, measured from an Employee's Severance Date, shall not
be considered in determining the Employee's period of break in service
for purposes of Section 2.01(f) below.
(f) Bridging breaks in service
(i) If an Employee has a break in service and such Employee was
eligible for a vested benefit under Section 4.05 at the time
of his break in service, employment both before and after the
Employee's absence shall be immediately recognized as
Eligibility Service, subject to this provisions of this
Section 2.01, upon his return to the employ of the Company or
an Associated Company.
(ii) If an Employee has a break in service and such Employee was
not eligible for a vested benefit under Section 4.05 at the
time of his break in service, Eligibility Service shall begin
from the date of his return to the employ of the Company or an
Associated Company. If such Employee returns to the employ of
the Company or an Associated Company and the period of the
Employee's break is less than the greater of (1) five years or
(2) the service rendered prior to such break, the service
<PAGE> 22
Page 18
prior to such break shall be included as Eligibility Service,
subject to the provisions of this Section 2.01, only upon
completion of at least twelve months of Eligibility Service
following his break in service. However, if the period of the
Employee's break in service equals or exceeds the greater of
(1) five years or (2) the service rendered prior to such
break, the service rendered prior to such break shall be
included as Eligibility Service, subject to the provisions of
this Section 2.01, only upon completion of a period of
Eligibility Service equal to the lesser of the period of his
break in service or ten years.
(g) Eligibility Service prior to the Effective Date
(i) Notwithstanding any foregoing provisions to the contrary, with
respect to any person who (1) becomes a Member of the Plan on
the Effective Date pursuant to the provisions of Section 3.01
or (2) was employed by ITT Rayonier Corporation on a salaried
basis on December 1, 1993, Eligibility Service for determining
eligibility for benefits shall include any employment rendered
by such Member prior to the Effective Date to the extent such
employment is recognized as Eligibility Service under the
provisions of the Prior Salaried Plan as defined in Section
1.29.
(ii) Notwithstanding any foregoing provision to the contrary, if an
Employee other than an Employee described in subparagraph (i)
above was employed by the Company prior to the Effective Date
upon the satisfaction by such Member of the provisions of
Section 2.01(f)(ii) with respect to bridging breaks in
service, Eligibility Service for determining Plan membership
and eligibility for benefits shall include any employment
rendered by such Employee prior to Effective Date to the
extent such
<PAGE> 23
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employment is or would have been recognized as Eligibility
Service under the provisions of the Prior Salaried Plan as
defined in Section 1.29.
2.02 Benefit Service
(a) Benefit Service on and after the Effective Date . Unless the Board of
Directors or the Pension Administration Committee determines otherwise
on a basis uniformly applicable to all persons similarly situated and
except as hereinafter otherwise provided, all uninterrupted employment
with the Company rendered by such Member as an Employee on and after
the Effective Date and prior to his Severance Date shall be recognized
as Benefit Service under the Plan. Benefit Service for any period of
employment rendered prior to the Effective Date shall be determined as
forth in Section 2.02(f).
(b) Employment with an Associated Company - No employment with an
Associated Company rendered by a Member shall be recognized as Benefit
Service under the Plan; except, however, if a Member completes
thirty-six consecutive months of Eligibility Service as an Employee,
any employment rendered on and after the Effective Date at an
Associated Company located outside the United States before
classification as an Employee shall be recognized as Benefit Service
subject to any limitations set forth by the Pension Administration
Committee for the Associated Company at which the Member was employed.
If a Member ceases to be an Employee and is again employed at an
Associated Company located outside the United States on and after the
Effective Date, such future employment will not be recognized as
Benefit Service unless and until the Member again (i) becomes an
Employee and (ii) completes thirty-six consecutive months of
Eligibility Service as an Employee.
<PAGE> 24
Page 20
(c) Employment with the Company but not as an Employee
With respect to (i) any person who on or after the Effective Date and
immediately prior to the date on which he becomes an Employee, is in
the employ of the Company but not as an Employee and (ii) any Employee
who completes an Hour of Service on and after the Effective Date and
who ceases to be an Employee but remains in the employ of the Company
and, on or after the Effective Date again becomes an Employee,
uninterrupted employment with the Company otherwise than as an
Employee shall be recognized, provided such person is a Member of the
Plan, as Benefit Service upon completion of thirty-six consecutive
months of Eligibility Service as an Employee, subject to the
limitations set forth by the Board of Directors or the Pension
Administration Committee for the Participating Unit at which such
person was first employed.
(d) Certain absences to be recognized as Benefit Service - Except as the
Board of Directors or the Pension Administration Committee may
otherwise determine or as otherwise indicated below, the following
periods of approved absence rendered on and after the Effective Date
shall be recognized as Benefit Service and shall not be considered as
breaks in Benefit Service:
(i) The period of any leave of absence granted in respect of
service with the armed forces of the United States on and
after the Effective Date provided the Employee shall have
returned to the service of the Company or an Associated
Company in accordance with reemployment rights under
applicable law and shall have complied with all of the
requirements of such law as to reemployment.
<PAGE> 25
Page 21
(ii) Except as provided by law, the period on and after the
Effective Date of any leave of absence granted in respect of
service, not exceeding two years, with any other agency or
department of the United States Government.
(iii) The period on and after the Effective Date of any total and
permanent disability during which an Employee becomes entitled
to a disability benefit under Title II of the Federal Social
Security Act as amended from time to time; provided, however,
that, if such disability benefit ceases to be paid solely due
to the Employee's age, Benefit Service shall include the
period of total and permanent disability during which the
Employee is entitled or would have been entitled if he had
participated in the Company's applicable long term disability
plan to receive disability benefit under such long term
disability plan.
(iv) The period on and after the Effective Date of any leave of
absence during which Company sickness or accident benefits are
payable.
(v) The period on and after the Effective Date of any leave of
absence approved by the Company during which an Employee is
paid Compensation at a rate which is at least one-half of the
Employee's basic rate of Compensation in effect immediately
prior to such leave.
(vi) In any event, Benefit Service shall include the period, with
or without Compensation, immediately preceding the Employee's
Severance Date not in excess of 12 consecutive months
inclusive of those periods of approved absences already
included in sub- paragraphs (i) through (v) above, during
which an Employee is continuously absent from service.
Except to the extent provided under sub-paragraph (vi) above, if an
Employee fails to return to active employment upon expiration of the
approved absences specified in sub-paragraphs
<PAGE> 26
Page 22
(i), (ii), (iv) and (v) above, such periods of approved absence shall
not be considered as Benefit Service under the Plan.
The Compensation of a Member during the periods of absence covered by
clause (i), (ii), (iv) or (vi) above shall be the Compensation the
Member actually receives during such period. The Compensation of a
Member during the period of absence covered by clause (iii) above
shall be deemed to be the Member's Final Average Compensation based on
his Eligibility Service up to such absence. Unless the Pension
Administration Committee determines otherwise on a basis uniformly
applicable to all persons similarly situated, the Social Security
Benefit of a Member covered by clause (iii) above shall be based on
the benefit awarded by the Social Security Administration at the date
of his total and permanent disability.
(e) All Other Absences for Employees
(i) No period of absence approved by the Company other than those
specified in Section 2.02(d) above shall be recognized as
Benefit Service unless otherwise determined by the Board of
Directors or the Pension Administration Committee on a basis
uniformly applicable to all persons similarly situated.
(ii) No other absence, other than the absence covered by the
exception in clause (i) above, shall be recognized as Benefit
Service and any such absence shall be considered as a break in
Benefit Service; provided, however, that in no event shall
there be a break in Benefit Service if an Employee is
continuously absent from service with the Company or with an
Associated Company for a period not in excess of 12 months and
returns as an Employee to the employ of the Company before the
first anniversary date of his Severance Date. However, any
period between a
<PAGE> 27
Page 23
Severance Date and a reemployment date which is counted as
Eligibility Service under Section 2.01(d)(vii) shall not be
counted as Benefit Service.
If the Employee was eligible for a vested benefit under
Section 4.05 at the time of a break in service, Benefit
Service both before and after the Employee's absence shall be
immediately recognized as Benefit Service under the Plan upon
his return to service.
If the Employee was not eligible for a vested benefit under
Section 4.05 at the time of a break in service, Benefit
Service shall begin from the date of the Employee's return to
the employ of the Company. However, any Benefit Service
rendered prior to such break in service shall be included,
subject to the provisions of this Section 2.02, as Benefit
Service only at the time that he bridges his Eligibility
Service in accordance with the provisions of Section 2.01(f).
(f) Benefit Service prior to the Effective Date
(i) With respect to any person who (1) becomes a Member of the
Plan on the Effective Date pursuant to the provisions of
Section 3.01 or (2) was employed by ITT Rayonier Corporation
on a salaried basis and becomes a Member of the Plan, Benefit
Service shall include any employment rendered by such Member
prior to the Effective Date to the extent such employment is
recognized as Benefit Service under the provisions of the
Prior Salaried Plan as defined in Section 1.29.
(ii) Notwithstanding the foregoing, if a Member other than a Member
described in subparagraph (i) above was an employee of the
Company prior to the Effective Date, Benefit Service shall
include at the time the Member satisfies the provisions of
Section 2.01(f)(ii) with respect to bridging breaks in
service, any employment
<PAGE> 28
Page 24
rendered by the Member prior to the Effective Date to the
extent such employment is or would have been recognized as
Benefit Service under the terms of the Prior Salaried Plan as
defined in Section 1.29.
2.03 Questions relating to Service under the Plan - If any question shall
arise hereunder as to an Employee's Eligibility Service or Benefit
Service, such question shall be resolved by the Pension Administration
Committee on a basis uniformly applicable to all Employee(s) similarly
situated. The Pension Administration Committee may, with respect to
any person or any group of persons which it considers to be not
substantial in number, determine whether the employment of such
person(s), the Company or any Associated Company shall be recognized
under the Plan as Eligibility Service or Benefit Service. If, in the
judgment of the Pension Administration Committee, a group of persons
is considered to be substantial in number, the employment of such
persons with the Company or any Associated Company shall not be
recognized under the Plan as Eligibility Service or Benefit Service
until further action by the Board of Directors.
<PAGE> 29
Page 25
ARTICLE 3 - MEMBERSHIP
3.01 Persons employed on the Effective Date
(a) Every Employee who is a member of the Prior Salaried Plan on
February ___, 1994 shall become a Member of the Plan on the
Effective Date.
(b) Any person who would be classified as an Employee as defined
in Section 1.15 on the Effective Date, who is absent from work
at the Company by reason of layoff, leave of absence, short
term disability or long term disability and who is a Member of
the Prior Salaried Plan on February _____, 1994 shall become a
Member of the Plan on the Effective Date.
3.02 Persons first employed as Employees on or after the Effective Date -
Unless otherwise determined by the Board of Directors or the Pension
Administration Committee, every person who is first employed as an
Employee on or after the Effective Date shall become a Member of the
Plan as of the first day of the calendar month coincident with or next
following the later of:
(a) the date on which he attains the 21st anniversary of his
birth, or
(b) the date on which he completes one year of Eligibility Service.
3.03 Persons employed as a Leased Employee with the Company or an
Associated Company - Any person who is a Leased Employee shall not be
eligible to participate in the Plan. However, if a Leased Employee
subsequently becomes an Employee as defined in Section 1.15 or an
Employee as defined in Section 1.15 subsequently becomes employed as a
Leased Employee, uninterrupted employment with the Company or an
Associated Company as a
<PAGE> 30
Page 26
Leased Employee, shall be counted for the sole purpose of determining
Eligibility Service but not for the purpose of determining Benefit
Service; provided, however, that Eligibility Service shall not be
counted for any Leased Employee for any period of his employment
during which he meets the requirements of Section 414(n)(5) of the
Code.
3.04 Persons employed as other than Employees by the Company - Unless the
Pension Administration Committee authorizes membership in the Plan on
a different basis, every person employed as other than an Employee by
a Participating Unit shall become a Member of the Plan as of the first
day of the calendar month coincident with or next following the date
on which he first becomes an Employee, but not unless and until he
satisfies the same terms and conditions which would have been
applicable had he always been an Employee at such Participating Unit.
3.05 Reemployment of former Employees, former Members and retired Members -
Any person reemployed by the Company as an Employee shall be
considered a new Employee for membership purposes under the Plan if
such Employee was not previously a Member of the Plan.
The membership of any person reemployed by the Company as an Employee
shall be immediately resumed if such Employee was previously a Member
of the Plan.
If a retired Member or a former Member is reemployed by the Company or
by an Associated Company, his membership in the Plan shall be
immediately resumed and any payment of a retirement allowance with
respect to his original retirement or any payment
<PAGE> 31
Page 27
of a vested benefit with respect to his original employment shall
cease in accordance with the provisions of Section 4.11.
3.06 Termination of membership - Unless otherwise determined by the Pension
Administration Committee under rules uniformly applicable to all
person(s) or Employee(s) similarly situated, an Employee's membership
in the Plan shall terminate if he ceases to be an Employee and he is
not entitled to either a retirement allowance or vested benefit under
Sections 4.01, 4.02, 4.03, 4.04 or 4.05, except that an Employee's
membership shall continue (a) during any period while on leave of
absence approved by the Company, (b) while absent by reason of
temporary disability, (c) during the period of any total and permanent
disability which continues to be recognized as Eligibility Service and
Benefit Service as provided in Article 2, or (d) while he is not an
Employee as herein defined but is in the employ of the Company or an
Associated Company. Employees covered by the Plan may not waive such
coverage.
3.07 Questions relating to membership in the Plan - If any question shall
arise hereunder as to the commencement, duration or termination of the
membership of any person(s) or Employee(s) employed by the Company or
by an Associated Company, such question shall be resolved by the
Pension Administration Committee under rules uniformly applicable to
all person(s) or Employee(s) similarly situated.
<PAGE> 32
Page 28
ARTICLE 4 - BENEFITS
4.01 Normal Retirement Allowance
(a) The right of a Member to his normal retirement allowance shall be
nonforfeitable as of his Normal Retirement Age. A Member may retire
from active service on a normal retirement allowance upon reaching his
Normal Retirement Date. If a Member postpones his retirement and
continues in active service after his Normal Retirement Date or
returns to service after his Normal Retirement Date, the provisions of
Section 4.02 shall be applicable.
(b) Benefit - Prior to adjustment in accordance with Sections 4.06(a) and
4.07(c), the annual normal retirement allowance payable on a lifetime
basis upon retirement at a Member's Normal Retirement Date shall be
equal to the sum of (i) and (ii) where:
(i) equals
(1) 2 percent of the Member's Final Average Compensation
multiplied by the portion of the first 25 years of his Benefit
Service rendered prior to the Effective Date;
(2) plus 1-1/2 percent of the Member's Final Average Compensation
multiplied by the next 15 years of his Benefit Service
rendered prior to the Effective Date, to a combined maximum of
40 years of Benefit Service;
(3) reduced by 1-1/4 percent of the Social Security Benefit
multiplied by the portion of his years of Benefit Service
rendered prior to the Effective Date, and not in excess of 40
years;
(4) reduced by the annual normal retirement allowance determined
under the provisions of Section 4.01(b) of the Prior Salaried
Plan as defined in Section 1.29 with respect to the Member's
period of employment rendered prior to the Effective Date
which
<PAGE> 33
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has been credited as Benefit Service hereunder pursuant to the
provisions of Section 2.02(f), and
(ii) equals:
(1) 2 percent of the Member's Final Average Compensation
multiplied by the balance of the portion of the first 25 years
of his Benefit Service rendered on and after the Effective
Date;
(2) plus 1-1/2 percent of the Member's Final Average Compensation
multiplied by the balance of the portion of the next 15 years
of his Benefit Service rendered on or after the Effective
Date, to a combined maximum of 40 years of Benefit Service
minus the total number of years of Benefit Service rendered
prior to the Effective Date;
(3) reduced by 1-1/2 percent of the Social Security Benefit
multiplied by the balance of the portion of the number of
years of his Benefit Service rendered on or after the
Effective Date not in excess of 40 years.
The combined maximum years of Benefit Service and to compute the
annual normal retirement allowance under clause (i) and (ii) above
shall not exceed 40 years.
The annual normal retirement allowance determined prior to reduction
to be made on account of the Social Security Benefit shall be an
amount not less than the greatest annual early retirement allowance
which would have been payable to a Member had he retired under Section
4.03 or Section 4.04 at any time before his Normal Retirement Date and
as such early retirement allowance would have been reduced to commence
at such earlier date but without reduction on account of the Social
Security Benefit. The reduction to be made on account of the Social
Security Benefit shall in any event be based on the Federal Social
Security Act in effect at the time of the Member's actual retirement.
<PAGE> 34
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4.02 Postponed Retirement Allowance
(a) A Member who continues in active service after his Normal Retirement
Date or returns to active service on or after his Normal Retirement
Date shall be retired from active service on a postponed retirement
allowance on the first day of the month following his termination of
employment, which date shall be his Postponed Retirement Date.
(b) Benefit - Except as hereinafter provided and prior to adjustment in
accordance with Sections 4.06(a) and 4.07(c), the annual postponed
retirement allowance payable on a lifetime basis upon retirement at a
Member's Postponed Retirement Date shall be equal to the greater of:
(i) an amount determined in accordance with Section 4.01(b) but
based on the Member's Benefit Service, Social Security Benefit
and Final Average Compensation as of his Postponed Retirement
Date or
(ii) the annual normal retirement allowance to which the Member
would have been entitled under Section 4.01(b) had he retired
on his Normal Retirement Date, increased by an amount which is
the Equivalent Actuarial Value of the monthly payments which
would have been payable with respect to each month in which he
worked fewer than eight days. Any monthly payment determined
under this sub-paragraph (ii) with respect to any such month
in which he worked fewer than eight days shall be computed as
if the Member had retired on his Normal Retirement Date and
shall reflect additional benefit accruals, if any, recomputed
as of the first day of each subsequent Plan Year during which
payment would have been made on the basis of his Final Average
Compensation and Benefit Service accrued to such recomputation
date.
<PAGE> 35
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(c) Benefit for Member in Active Service after he attains Age 70-1/2 - In
the event a Member's retirement allowance is required to begin under
Section 4.10 while the Member is in active service, the January 1
immediately following the calendar year in which the Member attained
age 70-1/2 shall be the Member's Annuity Starting Date for purposes of
this Article 4 and the Member shall receive a postponed retirement
allowance commencing on that January 1 in an amount determined as if
he had retired on such date. As of each succeeding January 1 prior to
the Member's actual Postponed Retirement Date and as of his actual
Postponed Retirement Date, the Member's retirement allowance shall be:
(i) recomputed to reflect any additional retirement allowance
attributable to his Compensation and Benefit Service earned
during the immediately preceding calendar year and based on
his age at each succeeding January 1 or actual Postponed
Retirement Date, and
(ii) reduced by the Equivalent Actuarial Value of the total
payments of his postponed retirement allowance made with
respect to each month of continued employment in which he was
credited with at least eight days of service and which were
paid prior to each such recomputation;
provided that no such reduction shall reduce the Member's postponed
retirement allowance below the amount of postponed retirement
allowance payable to the Member immediately prior to the recomputation
of such retirement allowance.
4.03 Standard Early Retirement Allowance
(a) Eligibility - A Member, who has not reached his Normal Retirement Date
but has, prior to his termination of employment, reached the 55th
anniversary of his birth and completed ten years of Eligibility
Service, is eligible to retire on a standard early retirement
allowance on
<PAGE> 36
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the first day of the calendar month coincident with or next following
termination of employment, which date shall be his Early Retirement
Date.
(b) Benefit - Except as hereinafter provided and prior to adjustment in
accordance with Sections 4.06(a) and 4.07(c) the standard early
retirement allowance shall be an allowance deferred to commence on the
Member's Normal Retirement Date and shall be equal to the Member's
Accrued Benefit earned up to his Early Retirement Date, computed on
the basis of his Final Average Compensation, Social Security Benefit
and Benefit Service at his Early Retirement Date.
The Member may, however, elect to receive an early retirement
allowance commencing on his Early Retirement Date or the first day of
any calendar month before his Normal Retirement Date specified in his
later request therefor in a reduced amount which, prior to adjustment
in accordance with Sections 4.06(a) and 4.07(c) shall be equal to his
Accrued Benefit earned up to his Early Retirement Date prior to the
reduction for the Social Security Benefit, reduced by 1/4 of 1 percent
per month for each month by which the commencement date of his
retirement allowance precedes his Normal Retirement Date.
The reduction to be made on account of the Social Security Benefit
shall be determined on the assumption that the Member had no earnings
after his Early Retirement Date and, with respect to the retirement
allowance payable to a Member retiring prior to his 62nd birthday,
shall not be made until such time as the Member is or would upon
proper application first be entitled to receive said Social Security
Benefit. With respect to a Member who retires on and after said date
and prior to attaining age 62, the reduction to be made to the
retirement allowance payable to such Member or any benefit payable
after his death to his
<PAGE> 37
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spouse or to a contingent annuitant pursuant to the provisions of
Section 4.06 on account of the Social Security Benefit shall not be
made until such time as the Member is or would have, had he survived,
upon proper application first been entitled to receive said Social
Security Benefit.
4.04 Special Early Retirement Allowance
(a) Eligibility - A Member who has not reached his Normal Retirement Date
but who prior to his termination of employment (i) has reached the
55th anniversary of his birth and completed fifteen years of
Eligibility Service or (ii) has reached the 50th anniversary of his
birth but not the 55th anniversary of his birth and whose age plus
years of Eligibility Service equals eighty or more, is eligible, in
either case, to retire on a special early retirement allowance on the
first day of the calendar month coincident with or next following
termination of employment, which date shall be his Special Early
Retirement Date.
(b) Benefit - Except as hereinafter otherwise provided and prior to
adjustment in accordance with Sections 4.06(a) and 4.07(c) the special
early retirement allowance shall be an allowance deferred to commence
on the Member's Normal Retirement Date and shall be equal to his
Accrued Benefit earned up to the Member's Special Early Retirement
Date, computed on the basis of his Final Average Compensation, Social
Security Benefit and Benefit Service at his Special Early Retirement
Date.
At or after his Special Early Retirement Date, however, the Member may
elect to receive early payment of his Accrued Benefit commencing on
the later of his Special Early
<PAGE> 38
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Retirement Date or the first day of any later calendar month prior to
his Normal Retirement Date as specified in his request therefor.
In the event of early payment commencing on the first day of
the month coincident with or following the 60th anniversary of a
Member's birth, the special early retirement allowance, prior to any
adjustment in accordance with Sections 4.06(a) and 4.07(c), payable
prior to age 62 shall be equal to his Accrued Benefit earned up to the
Member's Special Early Retirement Date prior to the reduction for the
Social Security Benefit; such retirement allowance shall not be
increased to reflect a commencement date later than the 60th
anniversary of the Member's birth.
In the event of early payment commencing prior to the 60th anniversary
of a Member's birth, the special early retirement allowance, prior to
any adjustment in accordance with Sections 4.06(a) and 4.07(c),
payable prior to age 62 shall be equal to his Accrued Benefit earned
up to the Member's Special Early Retirement Date prior to the
reduction for the Social Security Benefit but reduced by 5/12 of 1
percent per month for each month up to 60 months by which the
commencement date of his special early retirement allowance precedes
the first day of the calendar month coinciding with or next following
the 60th anniversary of his birth.
The reduction to be made on account of the Social Security Benefit
shall be determined on the assumption that the Member had no earnings
after his Special Early Retirement Date and, with respect to the
retirement allowance payable to a Member retiring prior to his 62nd
birthday, shall be made at such time as the Member is or would upon
proper application first be entitled to receive said Social Security
Benefit. With respect to a Member who retires prior to attaining age
62, the reduction to be made to the retirement allowance payable to
such Member or any benefit payable after his death to his spouse or to
a
<PAGE> 39
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contingent annuitant pursuant to the provisions of Section 4.06 on
account of the Social Security Benefit shall not be made until such
time as the Member is or would have, if he had survived, upon proper
application first been entitled to receive said Social Security
Benefit.
4.05 Vested Benefit
(a) Eligibility - A Member shall be vested in, and have a nonforfeitable
right to, his Accrued Benefit upon completion of five years of
Eligibility Service. If such Member's services are subsequently
terminated for reasons other than death or early retirement prior to
his Normal Retirement Date, he shall be entitled to a vested benefit
under the provisions of this Section 4.05.
(b) Benefit - Prior to adjustment in accordance with Sections 4.06(a) and
4.07(a), the vested benefit payable to a Member shall be a benefit
deferred to commence on the former Member's Normal Retirement Date and
shall be equal to his Accrued Benefit earned up to the date the
Member's employment is terminated, computed on the basis of his Final
Average Compensation, Social Security Benefit and Benefit Service at
his date of termination, with the Social Security Benefit determined
on the assumption that he continued in service to his Normal
Retirement Date at his rate of Compensation in effect as of his date
of termination. On or after the date on which the former Member shall
have reached the 55th anniversary of his birth he may elect to receive
a benefit commencing on the first day of any calendar month coincident
with or next following the 55th anniversary of his birth and prior to
his Normal Retirement Date as specified in his request therefor, after
receipt by the Pension Administration Committee of written application
therefor made by the former Member and filed with the Pension
Administration Committee. Upon such
<PAGE> 40
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earlier payment, the vested benefit otherwise payable at the former
Member's Normal Retirement Date will be reduced by 1/180th for each
month up to 60 months by which the commencement date of such payments
precedes his Normal Retirement Date and further reduced by 1/360th for
each such month in excess of 60 months.
4.06 Forms of Benefit Payment after Retirement
(a) Automatic Forms of Payment
(i) Automatic Joint and Survivor Annuity - If a Member or former
Member who is married on his Annuity Starting Date has not
made an election of an optional form of payment as provided in
Section 4.06(b), the retirement allowance or vested benefit
payable to such Member or former Member shall automatically be
adjusted as follows in order to provide that, after his death,
a lifetime benefit as described below shall be payable to the
spouse to whom he is married on his Annuity Starting Date:
(1) 90/50 Spouse's Annuity - If such Member retires from
active service under Section 4.01, Section 4.02, Section
4.03 or Section 4.04, the automatic joint and survivor
annuity payable to the Member shall provide (A) a reduced
retirement allowance payable to the Member during his
life equal to 90% of the retirement allowance otherwise
payable without optional modification to the Member under
Section 4.01, 4.02, 4.03 or 4.04, as the case may be,
further adjusted, if necessary, as provided in the
following sentence and (B) a benefit payable after his
death to his surviving spouse equal to 50% of the
retirement allowance otherwise payable without optional
modification to the Member under Section 4.01, 4.02, 4.03
or 4.04, as the case may be, and without further
adjustment as provided in the following sentence. If
such spouse is more than 5 years older
<PAGE> 41
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than the Member, the reduced retirement allowance payable
to the Member shall be increased for each such additional
full year in excess of 5 years, but for not more than 20
years, by one-half of 1% of the retirement allowance
payable to the Member prior to optional modification. If
such spouse is more than 5 years younger than the Member,
the reduced retirement allowance payable to the Member
shall be further reduced for each such additional full
year in excess of 5 years by one-half of 1% of the
retirement allowance payable to the Member prior to
optional modification.
Notwithstanding the foregoing, the retirement allowance
payable to the Member shall not be less than the
retirement allowance otherwise payable without optional
modification to the Member at retirement under Section
4.01, 4.02, 4.03 or 4.04, as the case may be, multiplied
by the appropriate factor contained in Table 3 of
Appendix A.
(2) Retired Spouse's Benefit - If such Member terminates
service and is entitled to a vested benefit under Section
4.05, the joint and survivor annuity payable to the
former Member shall provide (A) a reduced vested benefit
payable to the former Member during his life equal to his
vested benefit computed in accordance with Section 4.05
multiplied by the appropriate factor contained in Table 1
of Appendix A and (B) a benefit payable after his death
to his surviving spouse equal to 50% of the reduced
vested benefit payable to the former Member.
(ii) Automatic Life Annuity - If a Member or former Member is not
married on his Annuity Starting Date, the retirement allowance
or vested benefit computed in accordance with Section 4.01,
4.02, 4.03, 4.04 or 4.05, as the case may be, shall be
<PAGE> 42
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paid to the Member or former Member in the form of a lifetime
benefit payable during his own lifetime with no further
benefit payable to anyone after his death, unless the Member
or former Member is eligible for and makes an election of an
optional form of payment under Section 4.06(b).
(b) Optional Forms of Payment
(i) Life Annuity Option - Any Member or former Member who retires
or terminates employment with the right to a retirement
allowance or vested benefit may elect, in accordance with the
provisions of Section 4.06(d), to provide that the retirement
allowance payable to him under Section 4.01, 4.02, 4.03 or
4.04 or the vested benefit payable to him under Section 4.05
shall be in the form of a lifetime benefit payable during his
own lifetime with no further benefit payable to anyone after
his death.
(ii) 80/80 Spouse's Annuity Option - Any Member who retires from
active service under Section 4.01, 4.02, 4.03 or 4.04, who is
married on his Annuity Starting Date, may elect, in accordance
with the provisions of Section 4.06(d), to convert the
retirement allowance otherwise payable to him without optional
modification under Section 4.01, 4.02, 4.03 or 4.04, as the
case may be, into the following alternative benefit in order
to provide that, after his death, a lifetime benefit shall be
payable to the spouse to whom he is married on his Annuity
Starting Date.
The Member shall receive a reduced retirement allowance
payable during his life equal to 80% of the retirement
allowance otherwise payable without optional modification to
the Member at retirement under Section 4.01, 4.02, 4.03 or
4.04, as the case may be, further adjusted, if necessary, as
provided below. The Member's
<PAGE> 43
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surviving spouse shall receive a benefit payable after the
Member's death equal to the Member's retirement allowance as
reduced in this Section 4.06(b)(ii).
If such spouse is more than 5 years older than the Member, the
reduced retirement allowance payable to the Member shall be
increased for each such additional full year in excess of 5
years, but for not more than 20 years, by 1% of the retirement
allowance payable to the Member prior to optional
modification. If such spouse is more than 5 years younger
than the Member, the reduced retirement allowance payable to
the Member shall be further reduced for each such additional
full year in excess of 5 years by 1% of the retirement
allowance payable to the Member prior to optional
modification.
Notwithstanding the foregoing, the retirement allowance
payable to the Member and his surviving spouse shall not be
less than the retirement allowance that would have been
payable if the Member had elected Option 1 under Section
4.06(b)(iii).
(iii) Contingent Annuity Option - Any Member who retires from active
service under Section 4.01, 4.02, 4.03 or 4.04 may elect, in
accordance with the provisions of Section 4.06(d), to convert
the retirement allowance otherwise payable to him without
optional modification under Section 4.01, 4.02, 4.03 or 4.04,
as the case may be, into one of the following alternative
options in order to provide that after his death, a lifetime
benefit shall be payable to the person who, when the option
became effective, was designated by him to be his contingent
annuitant. The optional benefit elected shall be the
Equivalent Actuarial Value of the retirement allowance
otherwise payable without optional modification under Section
4.01, 4.02, 4.03 or 4.04.
<PAGE> 44
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Option 1 - A reduced retirement allowance payable during the
Member's life with the provisions that after his death a
benefit equal to 100% of his reduced retirement allowance
shall be paid during the life of, and to, his surviving
contingent annuitant.
Option 2 - A reduced retirement allowance payable during the
Member's life with the provision that after his death a
benefit equal to 50% of his reduced retirement allowance shall
be paid during the life of, and to, his surviving contingent
annuitant.
(c) Required Notice - No less than 30 days and no more than 90 days before
his Annuity Starting Date, the Pension Administration Committee shall
furnish to each Member or former Member a written explanation in
non-technical language of the terms and conditions of the Automatic
Joint and Survivor Annuity and the Automatic Life Annuity as described
in Section 4.06(a) and the optional forms of benefits described in
Section 4.06(b). Such explanation shall include (i) a general
description of the eligibility conditions for, the material features
of and the relative values of the optional forms of payment under the
Plan, (ii) any rights the Member or former Member may have to defer
commencement of his retirement allowance or vested benefit, (iii) the
requirement for Spousal Consent as provided in Section 4.06(d) and
(iv) the right of the Member or former Member, prior to his Annuity
Starting Date to make and to revoke elections under Section 4.06.
(d) Election of Options - A Member may, subject to the provisions of this
Section 4.06(d), elect to receive his retirement allowance or vested
benefit in the optional form of payment described in Section
4.06(b)(i) or, in the case of a Member who retires under the
provisions of Section 4.01, 4.02, 4.03 or 4.04, one of the optional
forms of payment described in Section
<PAGE> 45
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4.06(b)(ii) or 4.06(b)(iii), in lieu of the automatic forms of payment
described in Section 4.06(a). A married Member's or a married former
Member's election of a Life Annuity form of payment under Section
4.06(b)(i) or any optional form of payment under Section 4.06(b)(ii)
and Section 4.06(b)(iii), which does not provide for monthly payments
to his spouse for life after the Member's or former Member's death, in
an amount equal to at least 50% but not more than 100% of the monthly
amount payable under that form of payment to the Member or former
Member and which is not of Equivalent Actuarial Value to the Automatic
Joint and Survivor Annuity described in Section 4.06(a)(i), shall be
effective only with Spousal Consent; provided such Spousal Consent to
the election has been received by the Pension Administration
Committee.
Any election made under Section 4.06(a) or Section 4.06(b) shall be
made on a form approved by the Pension Administration Committee and
may be made during the 90-day period ending on the Member's Annuity
Starting Date, but not prior to the date the Member or former Member
receives the written explanation described in Section 4.06(c). Any
such election shall become effective on the Member's or former
Member's Annuity Starting Date, provided the appropriate form is filed
with and received by the Pension Administration Committee and may not
be modified or revoked after his Annuity Starting Date. Any election
made under Section 4.06(a) or Section 4.06(b) after having been filed,
may be revoked or changed by the Member or former Member only by
written notice received by the Pension Administration Committee before
his election becomes effective on his Annuity Starting Date. Any
subsequent elections and revocations may be made at any time and from
time to time during the 90-day period ending on the Member's or former
Member's Annuity Starting Date. A revocation shall be effective when
the completed notice is received by the Pension Administration
Committee. A re-election shall be effective on
<PAGE> 46
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the Member's or former Member's Annuity Starting Date. If, however,
the Member or the spouse or the contingent annuitant designated in the
election dies before the election has become effective, the election
shall thereby be revoked.
With respect to a Member who retires under the provisions of Section
4.03 or Section 4.04, the reduction on account of the Social Security
Benefit to made to the benefit, if any, payable in accordance with
Section 4.06(a) or Section 4.06(b) to his designated spouse or to his
contingent annuitant shall not be made until such time as the Member
would have, had he survived, upon proper application first been
entitled to receive said Social Security Benefit.
If a Member dies after his Annuity Starting Date, any payment
continuing on to his spouse or contingent annuitant shall be
distributed at least as rapidly as under the method of distribution
being used as of the Member's date of death.
4.07 Survivor's Benefit Applicable Before Retirement
The term "Beneficiary" for purposes of this Section 4.07 shall mean
any person or any trust established by the Member or the Member's
estate, named by the Member by written designation to receive benefits
payable under the automatic Pre-Retirement Survivor's Benefit and
under the optional Supplemental Pre-Retirement Survivor's Benefit;
provided, however, that, for any married Member the term "Beneficiary"
shall automatically mean the Member's spouse and any prior designation
to the contrary will be cancelled, unless the Member, with Spousal
Consent, designates otherwise. An election of a non-spouse
Beneficiary by a married Member shall be effective only if accompanied
by Spousal Consent and such Spousal Consent has been received by the
Pension Administration Committee. If the Member dies without an
effective designation of Beneficiary, the Member's
<PAGE> 47
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Beneficiary for purposes of this Section 4.07 shall automatically be
the Member's spouse, if any, or his estate. If the Member elects the
additional optional protection of the Supplemental Pre-Retirement
Survivor's Benefit, the Member's Beneficiary thereunder shall
automatically be the same as the Beneficiary under the Pre-Retirement
Survivor's Benefit. The Pension Administration Committee shall
resolve any questions arising hereunder as to the meaning of
"Beneficiary" on a basis uniformly applicable to all Members similarly
situated.
(a) Automatic Vested Spouse's Benefit
(i) Automatic Vested Spouse's Benefit applicable before
termination of employment - The surviving spouse of a Member
who has completed 5 years of Eligibility Service but who has
not yet completed 10 years of Eligibility Service and attained
age 55 shall automatically receive a benefit payable under the
Automatic Vested Spouse's Benefit of this Section 4.07(a)(i)
in the event said Member should die after the effective date
of coverage hereunder and before termination of employment.
The benefit payable to the Member's spouse shall be equal to
50% of the benefit the Member would have received if he had
terminated his employment on his date of death, survived to
Normal Retirement Date, and on the day before he would have
reached Normal Retirement Date had elected to begin receiving
his vested benefit, or with respect to a Member who had met
the eligibility requirements set forth in Section 4.04(a)(ii)
and died in active employment prior to the 55th anniversary of
his birth, his early retirement allowance accrued to his date
of death in the form of the Automatic Joint and Survivor
Annuity under Section 4.06(a)(i). Such benefit shall be
payable for the life of the spouse commencing on what would
have been the
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Member's Normal Retirement Date. However, the Member's spouse
may elect, by written application filed with the Pension
Administration Committee, to have payments begin as of the
first day of any calendar month on or after the date the
former Member would have reached the 55th anniversary of his
birth provided, however, if the Member dies after having met
the requirements set forth in Section 4.04(a)(ii) for a
special early retirement allowance, the Member's spouse may
elect to have payments begin under this Automatic Vested
Spouse's Benefit as of the first day of any month following
the Member's death.
If the Member's spouse elects to commence payment of the
Automatic Vested Spouse's Benefit prior to what would have
been the Member's Normal Retirement Date, the amount of such
benefit payable to the spouse shall be based on (i) the
reduced vested benefit to which the Member would have been
entitled, had the Member elected to have payments commence to
himself on such earlier date in accordance with the provisions
of Section 4.05(b) or (ii) in the case of a Member who dies
after having met the requirements for a special early
retirement allowance as set forth Section 4.04(a)(ii), the
reduced early retirement allowance to which the Member would
have been entitled had he elected to have payments commence to
himself on such earlier date in accordance with the provisions
of Section 4.04(b).
Coverage hereunder shall be applicable to a married Member in
active service who has satisfied the eligibility requirements
for a vested benefit under Section 4.05 and shall become
effective on the date the Member marries and shall cease on
the earlier of (i) the date such active Member reaches the
55th anniversary of his birth and completes 10 years of
Eligibility Service, (ii) the date such active Member reaches
the 65th anniversary of his birth, (iii) the date such active
Member's
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marriage is legally dissolved by a divorce decree, or (iv) the
date such active Member's spouse dies. Coverage under Section
4.07(b)(i) shall commence on the date a Member in active
service reaches the earlier of (i) the 55th anniversary of his
birth or, if later, the date he completes 10 years of
Eligibility Service or (ii) the 65th anniversary of his birth.
(ii) Automatic Vested Spouse's Benefit applicable upon termination
of employment - In the case of a former Member who is married
and entitled to a vested benefit under Section 4.05, the
provisions of this Section 4.07(a)(ii) shall apply to the
period between the date his services are terminated or the
date, if later, the former Member is married and his Annuity
Starting Date, or other cessation of coverage as later
specified in this Section 4.07(a)(ii).
In the event of a married former Member's death during any
period in which these provisions have not been waived or
revoked by the former Member and his spouse, the benefit
payable to the former Member's spouse shall be equal to 50% of
the vested benefit the former Member would have received on
his Normal Retirement Date if he had elected to receive such
benefit in the form of the Automatic Joint and Survivor
Annuity under Section 4.06(a)(i).
The spouse's benefit shall be payable for the life of the
spouse commencing on what would have been the former Member's
Normal Retirement Date. However, the former Member's spouse
may elect, by written application filed with the Pension
Administration Committee, to have payments begin as of the
first day of any calendar month on or after the date the
former Member would have reached the 55th anniversary of his
birth. If the former Member's spouse elects to commence
payment of this Automatic Vested Spouse's Benefit prior to
what would have been
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the former Member's Normal Retirement Date, the amount of such
benefit payable to the spouse shall be based on the reduced
vested benefit to which the former Member would have been
entitled, had the former Member elected to have payments
commence to himself on such earlier date in accordance with
the provisions of Section 4.05(b).
The vested benefit payable to a former Member whose spouse is
covered under this Section 4.07(a)(ii) or, if applicable, the
benefit payable to his spouse upon his death shall be reduced
by the applicable percentages shown below. Such reduction
shall commence on and after the first of the month coincident
with or following the effective date of coverage hereunder and
cease when coverage ceases; provided, however, no reduction
shall be made with respect to any period before the later of
(1) the date the Pension Administration Committee furnishes
the Member the notice of his right to waive the Automatic
Vested Spouse's Benefit or (2) the commencement of the
election period specified below.
ANNUAL REDUCTION FOR SPOUSE'S COVERAGE
AFTER TERMINATION OF EMPLOYMENT
<TABLE>
<CAPTION>
Age Reduction
--- ---------
<S> <C>
Less than 40 1/10 of 1% per year
40 but prior to 50 2/10 of 1% per year
50 but prior to 55 3/10 of 1% per year
55 but prior to 60 5/10 of 1% per year
60 but less than 65 1% per year
</TABLE>
The Pension Administration Committee shall furnish to each
former Member a written explanation which describes (1) the
terms and conditions of the Automatic Vested Spouse's Benefit,
(2) the former Member's right to make, and the effect of,
<PAGE> 51
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an election to waive the Automatic Vested Spouse's Benefit,
(3) the rights of the former Member's spouse, and (4) the
right to make, and the effect of, a revocation of such a
waiver. Such written explanation shall be furnished to each
former Member before the first anniversary of the date he
terminated service and shall be furnished to such former
Member even though he is not married.
The period during which the former Member may make an election
to waive the Automatic Vested Spouse's Benefit provided under
this Section 4.07(a)(ii) shall begin not later than the date
his employment terminates and end on his Annuity Starting Date
or, if earlier, his date of death. Any waiver, revocation or
re-election of the Automatic Vested Spouse's benefit shall be
made on a form provided by the Pension Administration
Committee and shall require Spousal Consent. If, upon
termination of employment, the former Member waives coverage
hereunder in accordance with administrative procedures
established by the Pension Administration Committee for all
Members similarly situated, such waiver shall be effective as
of the Member's Severance Date. Any later re-election or
revocation shall be effective on the first day of the month
coincident with or next following the date the completed form
is received by the Pension Administration Committee. If a
former Member dies during the period after a waiver or
revocation is in effect there shall be no benefits payable
under the provisions of this Section 4.07.
Except as described above in the event of a waiver or
revocation, coverage under this Section 4.07(a)(ii) shall
cease to be effective upon a former Member's Annuity Starting
Date, or upon the date a former Member's marriage is legally
dissolved by a divorce decree, or upon the death of the
spouse, whichever event shall first occur.
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(b) Automatic Pre-Retirement Survivor's Benefit
(i) Automatic Pre-Retirement Survivor's Benefit applicable before
a Member retires under the provisions of Section 4.01, Section
4.02, Section 4.03 or Section 4.04 - The Beneficiary of a
Member who has reached the 65th anniversary of his birth or
who has reached the 55th anniversary of his birth and
completed 10 years of Eligibility Service, shall automatically
receive a benefit payable under the Pre-Retirement Survivor's
Benefit of this Section 4.07(b)(i) in the event said Member
should die before he retires under the provisions of Section
4.01, 4.02, 4.03 or 4.04 or reaches his Annuity Starting Date
pursuant to the provisions of Section 4.02(d), if earlier.
The benefit payable during the life of, and to, the
Beneficiary shall be equal to one-half of the Member's Accrued
Benefit, without optional modification in accordance with the
provisions of Section 4.06, accrued to the date of his death,
adjusted to take into account the Member's Social Security
Benefit. The Social Security Benefit shall be determined on
the assumption that the Member had no earnings after his date
of death and, if his death occurs prior to the time the Member
is or would upon proper application first be entitled to
receive such Social Security Benefit, such adjustment shall
nevertheless be made at the Member's date of death. If the
Beneficiary is more than 5 years younger than the Member, the
benefit payable to the Beneficiary shall be reduced by
one-half of 1% for each full year the Beneficiary is more than
5 years younger.
Coverage hereunder shall be effective on the first day of the
calendar month coincident with or next following the date the
Member reaches his 55th birthday and completes 10 years of
Eligibility Service or, if earlier, his Normal Retirement
Date. In the case of a married Member coverage under Section
4.07(a)(i) shall cease on
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the date coverage under this Section 4.07(b)(i) is effective
as set forth in the preceding sentence.
(ii) Automatic Pre-Retirement Survivor's Benefit applicable between
Standard Early or Special Early Retirement Date and the
Member's Annuity Starting Date - In the case of a Member
retired early under Section 4.03 or Section 4.04 of the Plan
with the payment of the early retirement allowance deferred to
commence at a date later than his Standard Early or Special
Early Retirement Date, whichever is applicable, the provisions
of this Section 4.07(b)(ii) shall apply to the period between
his Standard Early or Special Early Retirement Date and his
Annuity Starting Date. The Member shall, at his Standard
Early or Special Early Retirement Date, complete such forms as
are required under this Section 4.07(b)(ii) and coverage
hereunder shall be effective as of his Standard Early or
Special Early Retirement Date.
In the event of the Member's death during the period in which
these provisions are in effect, the benefit payable during the
life of, and to, the Beneficiary shall be equal to one-half of
the Member's Accrued Benefit, without optional modification in
accordance with the provisions of Section 4.06, accrued to the
date of his death, adjusted to take into account the Member's
Social Security Benefit. If the Member's death occurs prior
to the time the Member is or would upon proper application
first be entitled to receive such Social Security Benefit,
such adjustment shall nevertheless be made at the Member's
date of death. If the Beneficiary is more than 5 years
younger than the Member, the benefit payable to the
Beneficiary shall be reduced by one-half of 1% for each full
year the Beneficiary is more than 5 years younger.
<PAGE> 54
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The automatic Pre-Retirement Survivor's Benefit shall be payable for
the life of the Beneficiary commencing on what would have been the
Member's Normal Retirement Date or date of death, if later. However,
if a Member dies prior to his Normal Retirement Date, the Beneficiary
of the Member may elect, by written application filed with the Pension
Administration Committee, to have such payments begin as of the first
day of any calendar month following the Member's date of death and
prior to what would have been the Member's Normal Retirement Date. If
the Beneficiary elects to commence payment of the Automatic
Pre-Retirement Survivor's Benefit prior to what would have been the
Member's Normal Retirement Date the amount of such benefit shall be
determined in accordance with Sections 4.07(b)(i) and (ii) above, as
applicable, and without reduction for such early commencement.
Notwithstanding the foregoing, in the event the Member's Beneficiary
is someone other than his spouse, payment of the automatic
Pre-Retirement Survivor's Benefit shall commence within one year of
the Member's date of death and in the event such commencement date is
prior to the 55th anniversary of the Member's birth, the benefit
payable to the Beneficiary shall be of Equivalent Actuarial Value to
the benefit otherwise payable to the Beneficiary on the date the
Member would have attained age 55.
(c) Optional Supplemental Pre-Retirement Survivor's Benefit
(i) Optional Supplemental Pre-Retirement Survivor's Benefit
applicable before a Member retires under the provisions of
Section 4.01, Section 4.02, Section 4.03 or Section 4.04 - A
Member, who has reached the 65th anniversary of his birth or
who has reached the 55th anniversary of his birth and
completed 10 years of Eligibility Service, may elect to
receive a reduced retirement allowance upon his retirement in
order to provide that, if he should die after his election
becomes effective but before
<PAGE> 55
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he retires under the provisions of Section 4.01, Section 4.02,
4.03 or 4.04 or reaches his Annuity Starting Date pursuant to
the provisions of Section 4.02(d), a benefit shall be paid to
the Beneficiary designated by him in accordance with the
following terms and conditions.
The Member may elect to reduce the retirement allowance to
which he would otherwise be entitled at retirement under
Section 4.01, 4.02, 4.03 or 4.04 by one-half of 1% per year
for each year between the date on which the election becomes
effective and the earliest of the Member's Standard Early
Retirement Date, Special Early Retirement Date, Annuity
Starting Date, or the date the election is revoked as provided
in Section 4.07(i).
If the Member makes such an election and dies before he
retires under the provisions of Section 4.01, 4.02, 4.03 or
4.04, the benefit payable during the life of, and to, the
Beneficiary shall be equal to 25% of the Member's Accrued
Benefit without optional modification in accordance with the
provisions of Section 4.06, accrued to the date of his death
adjusted (1) to take into account the Member's Social Security
Benefit and (2) as provided below. The Social Security
Benefit shall be determined on the assumption that the Member
had no earnings after his date of death and, if his death
occurs prior to the time the Member is or would upon proper
application first be entitled to receive such Social Security
Benefit, such adjustment shall nevertheless be made at the
Member's date of death. The benefit payable to the
Beneficiary shall be reduced by one-half of 1% per year for
each year between the date on which the election became
effective and the date of the Member's death. If the
Beneficiary is more than 5 years younger than the Member,
<PAGE> 56
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the benefit payable to the Beneficiary shall be further
reduced by one-half of 1% for each full year the Beneficiary
is more than 5 years younger.
If the Member makes an election under this Section 4.07(c)(i)
at or prior to the time he is first eligible to do so, it
shall become effective on the first day of the calendar month
coincident with or next following the date the Member reaches
his 55th birthday and completes 10 years of Eligibility
Service or, if earlier, his Normal Retirement Date. A Member
will be deemed to have waived coverage under this Section
4.07(c)(i) if he does not file the appropriate forms with the
Pension Administration Committee when first eligible to do so.
If the Member does not make such election until after he is
first eligible to do so, it shall become effective one year
after the first day of the calendar month coincident with or
next following (1) the date the notice is received by the
Pension Administration Committee or (2) the date specified in
such notice, if later.
(ii) Optional Supplemental Pre-Retirement Survivor's Benefit
applicable between Standard Early or Special Early Retirement
Date and the Member's Annuity Starting Date - In the case of a
Member retired early under the provisions of Section 4.03 or
Section 4.04 of the Plan with the payment of the early
retirement allowance deferred to commence at a date later than
his Standard Early or Special Early Retirement Date, the
provisions of this Section 4.07(c)(ii) shall apply to the
period between his Standard Early or Special Early Retirement
Date and his Annuity Starting Date.
The Member may elect to reduce the early retirement allowance
to which he would otherwise be entitled under Section 4.03 or
Section 4.04 by one-half of 1% per year for each year between
his Standard Early or Special Early Retirement Date and the
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earlier of the date the election is revoked pursuant to
Section 4.07(i) or his Annuity Starting Date.
If the Member makes such an election and dies during the
period the election is in effect, the benefit payable during
the life of, and to, his Beneficiary shall be equal to 25% of
the Member's Accrued Benefit, without optional modification in
accordance with the provisions of Section 4.06, accrued to his
date of death, adjusted (1) to take into account the Member's
Social Security Benefit and (2) as provided below. If the
Member's death occurs prior to the time the Member is or would
upon proper application first be entitled to receive such
Social Security Benefit, such adjustment shall nevertheless be
made at the Member's date of death. The benefit payable to
the Beneficiary shall be reduced by one-half of 1% per year
for each year between the date on which the election became
effective and the date of the Member's death. If the
Beneficiary is more than 5 years younger than the Member, the
benefit payable to the Beneficiary shall be further reduced by
one-half of 1% for each full year the Beneficiary is more than
5 years younger.
The Member shall, at his Standard Early or Special Early
Retirement Date, complete such forms as are required under
this Section 4.07(c)(ii) and, if he so elects, coverage
hereunder shall be effective as of his Standard Early or
Special Early Retirement Date. A Member will be deemed to
have waived coverage under this Section 4.07(c)(ii) if he does
not file the appropriate forms with the Pension Administration
Committee at his Standard Early or Special Early Retirement
Date. If the Member subsequently makes an election hereunder,
it shall become effective one year after the first day of the
calendar month coincident with or next following
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(1) the date the notice is received by the Pension
Administration Committee or (2) the date specified in such
notice, if later.
The optional Supplemental Pre-Retirement Survivor's Benefit shall be
payable for the life of the Beneficiary commencing on what would have
been the Member's Normal Retirement Date or date of death, if later.
However, if a Member dies prior to his Normal Retirement Date, the
Beneficiary may elect, by written application filed with the Pension
Administration Committee, to have such payments begin as of the first
day of any calendar month coincident with or next following the
Member's date of death and prior to what would have been the Member's
Normal Retirement Date. If the Beneficiary elects to commence payment
of the optional Supplemental Pre-Retirement Survivor's Benefit prior
to what would have been the Member's Normal Retirement Date and after
what would have been the 55th anniversary of the Member's birth, the
amount of such benefit shall be determined in accordance with Section
4.07(c)(i) and (ii) above, as applicable and without reduction for
such early commencement. If the Beneficiary elects to commence
payment of the optional Supplemental Pre-Retirement Survivor's Benefit
prior to what would have been the 55th anniversary of the Member's
birth, the benefit payable to the Beneficiary shall be of Equivalent
Actuarial Value to the benefit otherwise payable to Beneficiary on the
date the Member would have attained age 55. Notwithstanding any
foregoing provision to the contrary, payment of the optional
Supplemental Pre- Retirement Survivor Benefit must commence as of the
same date payment of the Automatic Pre-Retirement Survivor Benefit
commences.
Notwithstanding the foregoing, in the event the Member's Beneficiary
is someone other than his spouse, payment of the optional Supplemental
Pre-Retirement Survivor's Benefit shall
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commence within one year of the Member's date of death and in the
event such commencement date is prior to the 55th anniversary of the
Member's birth, the benefit payment to the Beneficiary shall be of
Equivalent Actuarial Value to the benefit otherwise payable to the
Beneficiary on the date the Member would have attained age 55.
(d) Notwithstanding any provision of Section 4.07(b) or Section 4.07(c) to
the contrary, in no event shall the sum of the Automatic Pre-
Retirement Survivor's Benefit payable under the provisions of Section
4.07(b) and the optional Supplemental Pre-Retirement Survivor's
Benefit payable under the provisions of Section 4.07(c) to the
Beneficiary be less than the amount of benefit the spouse would have
received if the retirement allowance to which the Member was entitled
at his date of death (i) had commenced on the date the spouse elects
to have such Pre-Retirement Survivor's Benefit payments commence, (ii)
in the form of an Automatic Joint and Survivor Annuity under Section
4.06(a)(i), and (iii) the Member had died immediately thereafter.
However, in lieu of the Automatic Joint and Survivor Annuity referred
to in the preceding sentence, the 80/80 Spouse's Annuity Option
described in Section 4.06(b)(ii) shall be used to compute the amount
payable to the spouse if, within the 90 day period prior to his
Annuity Starting Date, the Member elected such optional form of
payment.
(e) Benefits payable to an estate or trust - If a Member's Beneficiary
under this Section 4.07 is his estate or a trust, the benefits
otherwise payable under Section 4.07(b), and, if elected under Section
4.07(c) shall be commuted into a single lump sum amount, which amount
shall be determined by multiplying the benefits otherwise payable by
the appropriate factor in Tables 4 or 5 of Appendix A and calculated
by assuming the Beneficiary had been a person of the same age as the
Member at the Member's date of death. In no event shall the amount of
the lump sum be less than the amount required by applicable law. The
payment
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of such single lump sum amount shall represent the full and total
payment of all benefits due under the Plan. The Pension
Administration Committee shall resolve any questions arising hereunder
on a basis uniformly applicable to all Members similarly situated.
(f) If the Member's Beneficiary dies during the period coverage is
effective under Section 4.07(b) and Section 4.07(c), the Beneficiary
designation shall thereby be cancelled. However, coverage under
Section 4.07(b) and, if elected, under Section 4.07(c) shall
nevertheless continue in full effect. The Member's Beneficiary
thereafter shall be in accordance with his subsequent designation of a
new Beneficiary or in accordance with the term "Beneficiary" as
defined herein.
If the Member's Beneficiary is his spouse and if the Member's marriage
to said spouse is legally dissolved by a divorce decree, the
Beneficiary designation under Sections 4.07(b) and 4.07(c) shall
remain in effect until a subsequent Beneficiary designation is
submitted by the Participant to the Pension Administration Committee
or until the Member remarries. Coverage under Section 4.07(b) and, if
elected, under Section 4.07(c) shall continue in full effect.
A Member may change his Beneficiary designation at any time, subject
to Spousal Consent. Any such change shall become effective on the
first day of the calendar month coincident with or next following the
(i) date the notice of change is received by the Pension
Administration Committee or (ii) the date specified in such notice, if
later, and the original designation shall remain in effect until such
date.
(g) The Pension Administration Committee shall furnish to each Member a
written explanation in non-technical language which describes (i) the
terms and conditions of the automatic Pre-
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Retirement Survivor's Benefit and the optional Supplemental
Pre-Retirement Survivor's Benefit, (ii) the Member's right to make an
election to designate a Beneficiary other than his spouse and the
effect of such election, (iii) the right to revoke, prior to the
Annuity Starting Date, such designation and the effect of such
revocation, and (iv) the rights of the Member's spouse, if any. The
Pension Administration Committee shall furnish this written
explanation to each Member during the period beginning one year prior
to the earlier of (i) the date the Member retires pursuant to the
provision of Section 4.04(a)(ii), (ii) the date the Member reaches the
55th anniversary of his birth and completes 10 years of Eligibility
Service, or (iii) in the Member's Normal Retirement Date, and ending
within one year after such date.
(h) A Member may revoke an election made under Section 4.07(c) at any time
prior to his Annuity Starting Date. There shall be no further
reduction to the Member's retirement allowance for any period during
which an election is not effective. The Member may make a new
election at any time thereafter and any subsequent election shall
become effective one year after the first day of the calendar month
coincident with or next following the (i) date the notice is received
by the Pension Administration Committee or (ii) the date specified in
such notice, if later.
If the Member dies prior to the time an election under Section 4.07(c)
becomes effective, the election shall thereby be cancelled.
Any designation of a Beneficiary and any election made under Section
4.07 (including any waiver or revocation of either of them) shall be
made on a form approved by and filed with the Pension Administration
Committee and in accordance with the term "Beneficiary" as defined in
this Section 4.07.
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4.08 Maximum benefits
(a) The maximum annual postponed, normal, standard early or special early
retirement allowance, death in service benefit, or vested benefit
attributable to Company contributions, (collectively referred to in
this Section as "retirement allowance") payable after adjustment for
the Automatic Joint and Survivor Annuity or for any optional elections
under Section 4.06(b)(ii) or Section 4.06(b)(iii) (provided the
Member's spouse is the designated contingent annuitant), shall be
equal to the lesser of:
(i) $90,000 adjusted in accordance with regulations issued under
Section 415 of the Internal Revenue Code by the Secretary of
the Treasury or his delegate; provided, however, that each
year in which such an adjustment is made, it shall not become
effective prior to January 1 of such year, or
(ii) the Member's average annual remuneration during the three
consecutive years of Eligibility Service as a Member affording
the highest such average or during all of the years of such
Eligibility Service if less than three years;
provided that, if the Member has not been a Member of the Plan for at
least 10 years, the maximum annual retirement allowance in
subparagraph (i) above shall be multiplied by the ratio which the
number of years of his membership bears to 10. If the Member has not
completed 10 years of Eligibility Service such maximum annual
retirement allowance provided in subparagraph (ii) shall be multiplied
by the ratio which the number of years of his Eligibility Service
bears to 10.
(b) If the retirement allowance begins before the Member's Social Security
Retirement Age but on or after his 62nd birthday, the maximum
retirement allowance in subparagraph (i) of paragraph (a) shall be
reduced by 5/9 of one percent for each of the first 36 months plus
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5/12 of one percent for each additional month by which the Member is
younger than the Social Security Retirement Age at the date his
retirement allowance begins. If the retirement allowance begins
before the Member's 62nd birthday, the maximum retirement allowance in
subparagraph (i) of paragraph (a) shall be of Equivalent Actuarial
Value to the maximum benefit payable to age 62 as determined in
accordance with the preceding sentence.
If the retirement allowance begins after the Member's Social Security
Retirement Age, the maximum retirement allowance in subparagraph (i)
of paragraph (a) shall be of Equivalent Actuarial Value to that
maximum benefit payable at the Social Security Retirement Age.
As of January 1 of each calendar year commencing on or after January
1, 1988, the dollar limitation as determined by the Commissioner of
Internal Revenue for that calendar year shall become effective as the
maximum permissible dollar amount of retirement allowance payable
under the Plan during the calendar year, including any retirement
allowance payable to Members who retired prior to that calendar year,
in lieu of the dollar amount in sub-paragraph (i) of paragraph (a).
(c) In the case of a Member who is participating in the Rayonier, Inc.
Investment and Savings Plan for Salaried Employees or any other
defined contribution plan or plans of the Company or Associated
Company, the maximum benefit limitation shall not exceed the adjusted
limitation computed as follows:
(i) Determine the "defined contribution fraction" as set forth in
sub-paragraph (i) of the following paragraph (d).
(ii) Subtract the result of (i) from one (1.0) with the result not
to be less than zero.
(iii) Multiply the dollar amount in Section 4.08(a)(i) by 1.25.
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(iv) Multiply the amount described in Section 4.08(a)(ii) by 1.4.
(v) Multiply the lesser of the result of (iii) or the result of
(iv) by the result of (ii) to determine the adjusted maximum
benefit limitation applicable to the Member.
(d) For purposes of this Section 4.08(d)
(i) The "defined contribution fraction" for a Member who is
participating in the Rayonier, Inc. Investment and Savings
Plan for Salaried Employees or any other defined contribution
plan or plans of the Company or an Associated Company shall be
a fraction, the numerator of which is the sum of the
following:
(1) the Company's and Associated Company's contributions
credited to the Member's accounts under any defined
contribution plan or plans, including the amount of any
contribution made on a Member's behalf on a salary
reduction basis under any such plan qualified under
Section 401(k) of the Internal Revenue Code,
(2) any forfeitures allocated to his accounts under such plan
or plans, but reduced by any amount permitted by
regulations promulgated by the Commissioner of Internal
Revenue; and the denominator of which is the lesser of
the following amounts determined for each year of the
Member's Eligibility Service:
(3) 1.25 multiplied by the maximum dollar amount allowed by
law for that year; or
(4) 1.4 multiplied by 25% of the Member's remuneration for
that year.
(ii) a "defined contribution plan" means a qualified pension plan
which provides for an individual account for each participant
and for benefits based solely upon the amount contributed to
the participant's account, and any income, expenses, gains
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and losses, and any forfeitures of accounts of other
participants which may be allocated to that participant's
accounts, subject to (iii) below;
(iii) a "defined benefit plan" means any qualified pension plan
which is not a defined contribution plan; however in the case
of a defined benefit plan which provides a benefit which is
based partly on the balance of the separate account of a
participant, that plan shall be treated as a defined
contribution plan to the extent benefits are based on the
separate account of a participant and as a defined benefit
plan with respect to the remaining portion of the benefits
under the plan; and
(iv) the term "remuneration" for purposes of this Section 4.08 with
respect to any Member shall mean the wages, salaries and other
amounts paid to such Member by the Company for personal
services actually rendered, determined after any reduction for
contributions made on his behalf on a salary reduction basis
under any plan qualified under Section 401(k) of the Internal
Revenue Code, and shall include, without being limited to,
bonuses, overtime payments and commissions; and shall exclude
deferred compensation, stock options and other distributions
which receive special tax benefits under the Internal Revenue
Code.
4.09 No duplication
Except as hereinafter provided, there shall be deducted from any
retirement allowance or vested benefit payable under this Plan the
part of any pension or comparable benefit, including any lump sum
payment, provided by employer contributions which Rayonier, Inc., any
Participating Unit, (including any former Participating Unit divested
by Rayonier, Inc.), any Associated Company or any affiliate of the
Company is obligated to pay or has paid to or under any pension plan
or other agreement (except for any pension plan or other agreement
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which provides for the payment of that portion of any benefits accrued
under the Plan but not payable from the Plan on account of Section
4.08) with respect to any service which is Benefit Service for
purposes of computation of benefits under this Plan.
4.10 Payment of benefits
(a) Unless otherwise provided under an optional benefit elected pursuant
to Section 4.06, the survivor's benefits available under Section
4.07, or the provisions of Section 4.10(e)(ii), all retirement
allowances, vested benefits or other benefits payable under the Plan
will be paid in monthly installments as of the end of each month
beginning with (i) the month in which a Member has reached his Normal
Retirement Date and has retired from active service, (ii) the month in
which a Member has reached his Postponed Retirement Date and has
retired from active service, (iii) the month in which a Member, upon
proper application, has requested commencement of his vested benefit
or early retirement allowance, or (iv) the month in which benefits
under an optional benefit under Section 4.06 or the survivor's
benefits under Section 4.07 become payable, whichever is applicable.
Such monthly installments shall cease with the payment for the month
in which the recipient dies. In no event shall a retirement allowance
or vested benefit be payable to a Member who continues in or resumes
active service with the Company or an Associated Company for any
period between his Normal Retirement Date and Postponed Retirement
Date, except as provided in Sections 4.02(d), and 4.10(e).
(b) In any case, a lump sum payment equal to the vested benefit payable
under Section 4.05 or the vested spouse's benefit payable under
Section 4.07(a) multiplied by the appropriate factor contained in
Table 4, 5 or 6 of Appendix A shall be made in lieu of any vested
benefit
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payable to a former Member or any vested spouse's benefit payable to a
spouse of a Member or a former Member, if the lump sum present value
of such benefit amounts to $3,500 or less. In no event, however,
shall that adjustment factor produce a lump sum that is less than the
amount determined by using the interest rate assumption used by the
Pension Benefit Guaranty Corporation for valuing benefits for
determining lump sum payments under single employer plans that
terminate on January 1 of the Plan Year in which the Annuity Starting
Date occurs. The lump sum payment may be made at any time on or after
the date the Member has terminated employment or died, but in any
event prior to the date his benefit payment would have otherwise
commenced.
In the event a Member is not entitled to any retirement allowance or
vested benefit upon his termination of employment, he shall be deemed
"cashed-out" under the provisions of this paragraph (b) as of the date
he terminated service.
(c) In the event that the Pension Administration Committee shall find that
a person to whom benefits are payable is unable to care for his
affairs because of illness or accident or is a minor or has died,
then, unless claim shall have been made therefor by a legal
representative, duly appointed by a court of competent jurisdiction,
the Pension Administration Committee may direct that any benefit
payment due him be paid to his spouse, a child, a parent or other
blood relative, or to a person with whom he resides, and any such
payment made shall be a complete discharge of the liabilities of the
Plan therefor.
(d) Before any benefit shall be payable to a Member, a former Member, or
other person who is or may become entitled to a benefit hereunder,
such Member, former Member, or other
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person shall file with the Pension Administration Committee such
information as it shall require to establish his rights and benefits
under the Plan.
(e) (i) Except as otherwise provided in this Article 4, payment of a
Member's retirement allowance or a former Member's vested
benefit shall begin as soon as administratively practicable
following the latest of (1) the Member's Normal Retirement Age
or (2) the date he terminates service with the Company and all
Associated Companies (but not more than 60 days after the
close of the Plan Year in which the latest of (1) or (2)
occurs).
(ii) Notwithstanding anything contained in the Plan to the
contrary, in the case of a Member who owns either (1) more
than five percent of the outstanding stock of the Company or
(2) stock possessing more than five percent of the total
combined voting power of all stock of the Company, the
Member's retirement allowance shall begin not later than the
April 1 following the calendar year in which he attains age
70-1/2.
Payment of any other Member's retirement allowance or vested
benefit shall begin not later than April 1 of the calendar
year following the calendar year in which the Member attains
age 70-1/2, provided that such commencement of benefit
payments while in active service shall not be required with
respect to a Member who attains age 70-1/2 prior to January 1,
1988 and who is not a five percent owner as described above.
(f) Notwithstanding any other provision of this Article 4, all
distributions from this Plan shall conform to the regulations issued
under Section 401(a)(9) of the Code, including the
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incidental death benefit provisions of Section 401(a)(9)(G) of the
Code. Further, such regulations shall override any plan provision
that is inconsistent with Section 401(a)(9) of the Code.
4.11 Reemployment of former Member or retired Member
(a) Cessation of benefit payments. If a former Member or a retired Member
entitled to or in receipt of a vested benefit or retirement allowance
is reemployed by the Company or by an Associated Company as an
Employee or as other than an Employee, any benefit payments he is
receiving shall cease, except as otherwise provided in Section 4.02(d)
and Section 4.10(e).
(b) Optional forms of pension benefits
(i) If the Member is reemployed any previous election of an
optional benefit under Section 4.06 or a survivor's benefit
under Section 4.07 shall be revoked and the terms and
conditions of subparagraph (ii) of this paragraph (b) shall
apply.
(ii) Any Member who is at least age 55 with 10 or more years of
Eligibility Service when he is reemployed shall, with respect
to the vested benefit or retirement allowance earned prior to
his reemployment and with respect to any additional benefits
earned during reemployment, be covered by the provisions of
Section 4.07(b) -- Pre-Retirement Survivor's Benefit and be
eligible to elect coverage under Section 4.07(c) Supplemental
Pre-Retirement Survivor's Benefit. Coverage under Section
4.07(b) shall be effective on the first day of the calendar
month coincident with or next following the date of his
reemployment and any previous election shall remain in effect
until such date. If, within 30 days after reemployment, the
Member elects
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coverage under Section 4.07(c), such coverage shall be
effective as of the first day of the calendar month coincident
with or next following the date of his reemployment. If the
Member does not make an election under Section 4.07(c) within
30 days after his reemployment or he waives such coverage, any
later election shall become effective one year after the first
day of the calendar month coincident with or next following
the date notice is received by the Pension Administration
Committee or on the date specified in such notice, if later.
Any Member or former Member with 5 or more years of
Eligibility Service who is less than age 55 when he is
reemployed shall be covered by the provisions of Sections
4.07(a)(i) -- Automatic Vested Spouse's Benefit until he
attains age 55 and such coverage shall be effective on the
first day of the calendar month coincident with or next
following the date of his reemployment and any previous
election shall remain in effect until such date. Such former
Member and any other Member or former Member shall be covered
by the provisions of Section 4.07(b) -- Pre-Retirement
Survivor's Benefit and shall be eligible to elect coverage
under Section 4.07(c) Supplemental Pre-Retirement Survivor's
Benefit upon the later of the date he attains age 55, the date
he completes 10 years of Eligibility Service, or his Normal
Retirement Date, and such coverage shall be in accordance with
the provisions of such Sections and shall apply with respect
to his retirement allowance or vested benefit earned prior to
his reemployment, as well as any additional benefits earned
during reemployment.
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(c) Benefit payments at subsequent termination or retirement
(i) In accordance with the procedure established by the Pension
Administration Committee on a basis uniformly applicable to
all Members similarly situated, upon the subsequent retirement
of a Member in service after his Normal Retirement Date,
payment of such Member's retirement allowance shall resume no
later than the third month after the final month during the
reemployment period in which he is credited with at least
eight days of service.
(ii) Upon the subsequent retirement or termination of employment of
a retired or former Member, the Pension Administration
Committee shall, in accordance with rules uniformly applicable
to all Members similarly situated, determine the amount of
vested benefit or retirement allowance which shall be payable
to such Member. Such vested benefit or retirement allowance
shall not be less than the sum of (1) the original amount of
vested benefit or retirement allowance previously earned by
such Member in accordance with the terms of the Plan in effect
during such previous employment adjusted to reflect the
election of any survivor's benefits pursuant to Section
4.07(a)(ii) or 4.07(c) and reduced by an amount of Equivalent
Actuarial Value to the benefits, if any, he received before
the earlier of the date of his restoration to service or his
Normal Retirement Date and (2) any additional vested benefit
or retirement allowance earned during his period of
reemployment, such amounts to be adjusted to reflect the
election during reemployment of any survivor's benefits
pursuant to Section 4.07(a)(ii) or 4.07(c). Notwithstanding
anything to the contrary contained in this Plan, the vested
benefit or retirement allowance for Benefit Service credited
prior to the date of reemployment shall not be re-calculated
or increased unless and until the Member, regardless of his
vested status, has
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satisfied the provisions of Section 2.01(f)(ii) with respect
to bridging breaks in service and, in such event, the re-
calculated vested benefit or retirement allowance, prior to
any optional modification in accordance with the provisions of
Section 4.06, shall be reduced by an amount determined by
dividing the sum of any payments previously received by the
former Member or retired Member before the earlier of his
restoration to service or his Normal Retirement Date by the
appropriate factor contained in Table 5 of Appendix A;
provided that no such reduction shall reduce such retirement
allowance or vested benefit below the amount determined
pursuant to clause (1) of the preceding sentence.
(d) Questions relating to reemployment of former Members or retired
Members. If, at subsequent termination of employment or retirement,
any question shall arise under this Section 4.11 as to the calculation
or re-calculation of a reemployed former Member's or retired Member's
vested benefit or retirement allowance or election of an optional form
of benefit under the Plan, such question shall be resolved by the
Pension Administration Committee on a basis uniformly applicable to
all Members similarly situated.
4.12 Top-heavy provisions
(a) The following definitions apply to the terms used in this Section:
(i) "applicable determination date" means the last day of the
preceding Plan Year;
(ii) "top-heavy ratio" means the ratio of (A) the present value of
the cumulative Accrued Benefits under the Plan for key
employees to (B) the present value of the cumulative Accrued
Benefits under the Plan for all key employees and non-key
employees; provided, however, that if a key employee has not
performed services for
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the Company at any time during the 5-year period ending on the
applicable determination date, any Accrued Benefit for such
individual (and any account balances of such individual) shall
not be taken into account;
(iii) "applicable valuation date" means the date within the
preceding Plan Year as of which annual Plan costs are or would
be computed for minimum funding purposes;
(iv) "key employee" means an Employee determined to be a "key
employee" in accordance with the provisions of Section
416(i)(1) and (5) of the Code and any regulations thereunder,
and, where applicable, on the basis of the Employee's
remuneration (defined as set forth in Section 4.08(d)(iv) of
the Plan except that any pre-tax contributions under a
"qualified cash or deferred arrangement as defined in Section
401(k) of the Code and its applicable regulations, or under a
"cafeteria plan" as defined in Section 125 of the Code and its
applicable regulations shall be included) from the Company or
an Associated Company;
(v) "non-key employee" means any employee who is not a key
employee;
(vi) "average remuneration" means the average annual remuneration
of a Member for the five consecutive years of his Eligibility
Service after December 31, 1983 during which he received the
greatest aggregate remuneration from the Company or Associated
Company, excluding any remuneration for service after the last
Plan Year with respect to which the Plan is top-heavy;
(vii) "required aggregation group" means each other qualified plan
of the Company or an Associated Company (including plans that
terminated within the five-year period ending on the
determination date) in which there are members who are key
employees or which enables the Plan to meet the requirements
of Section 401(a)(4) or 410 of the Code; and
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(viii) "permissive aggregation group" means each plan in the required
aggregation group and any other qualified plan(s) of the
Company or an Associated Company in which all members are
non-key employees, if the resulting aggregation group
continues to meet the requirements of Sections 401(a)(4) and
410 of the Code.
(b) For purposes of this Section 4.12, the Plan shall be "top-heavy" with
respect to any Plan Year beginning on or after January 1, 1984 if, as
of the applicable determination date, the top-heavy ratio exceeds 60
percent. The top-heavy ratio shall be determined as of the applicable
valuation date in accordance with Section 416(g)(3) and (4)(B) of the
Code on the basis of the same mortality and interest rate assumptions
used to value the Plan. For purposes of determining whether the Plan
is top-heavy, the present value of Accrued Benefits under the Plan
will be combined with the present value of accrued benefits or account
balances under each other plan in the required aggregation group, and,
in the Company's discretion, may be combined with the present value of
accrued benefits or account balances under any other qualified plan(s)
in the permissive aggregation group. The Accrued Benefit of a non-key
employee under the Plan or any other defined benefit plan in the
aggregation group shall be (i) determined under the method, if any,
that uniformly applies for accrual purposes under all plans maintained
by the Company or an Associated Company or (ii) if there is no such
method, as if such benefit accrued not more rapidly than the slowest
accrual rate permitted under the fractional rule described in Section
411(b)(i)(C) of the Code.
(c) The following provisions shall be applicable to Members for any Plan
Year with respect to which the Plan is top-heavy:
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(i) In lieu of the vesting requirements specified in Section 4.05,
the following vesting schedule shall apply:
<TABLE>
<CAPTION>
Years of Eligibility Service Percentage Vested
---------------------------- -----------------
<S> <C>
Less than 2 years 0%
2 years 20
3 years 40
4 years 60
5 or more years 100
</TABLE>
(ii) The Accrued Benefit of a Member who is a non-key employee
shall not be less than two percent of his "average
remuneration" multiplied by the number of years of his
Eligibility Service, not in excess of 10, during the Plan
Years for which the Plan is top-heavy. Such minimum benefit
shall be payable at a Member's Normal Retirement Date. If
payments commence at a time other than the Member's Normal
Retirement Date, the minimum Accrued Benefit shall be of
Equivalent Actuarial Value to such minimum benefit, as
determined on the basis of the actuarial assumptions stated in
Section 4.14(b) above.
(iii) The multiplier "1.25" in subsections (c)(iii) and (d)(i)(3) of
Section 4.08 shall be reduced to "1.0", and the dollar amount
"$51,875" in Subsection (d)(i)(6) of Section 4.08 shall be
reduced to "$41,500."
(d) If the Plan is top-heavy with respect to a Plan Year and ceases to be
top-heavy for a subsequent Plan Year, the following provisions shall
be applicable:
(i) The Accrued Benefit in any such subsequent Plan Year shall not
be less than the minimum Accrued Benefit provided in Section
4.12(c) (ii) above, computed as of the end of the most recent
Plan Year for which the Plan was top-heavy.
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(ii) If a Member has completed three years of Eligibility Service
on or before the last day of the most recent Plan Year for
which the Plan was top-heavy, the vesting schedule set forth
in Section 4.12(c)(i) above shall continue to be applicable.
(iii) If a Member has completed at least two, but less than three
years of Eligibility Service on or before the last day of the
most recent Plan Year for which the Plan is top-heavy, the
vesting provisions of Section 4.05 shall again be applicable;
provided, however, that in no event shall the vested
percentage of a Member's accrued benefit be less than the
percentage determined under Section 4.14(c)(i) above as of the
last day of the most recent Plan Year for which the Plan was
top-heavy.
4.13 Payment of Medical Benefits for Benefits for Certain Members who
retire under the Plan
This Section 4.13 defines the basis of providing medical benefits to
eligible Members or their eligible dependents as defined below for
those expenses incurred by such Members or their eligible dependents
on or after the date specified in Section 4.15(a).
(a) In order to be eligible for the benefits provided hereunder, a person
must be a Plan Member who retired under the Plan provisions during the
period designated by the Pension Administration Committee and be
currently eligible for post-retirement medical benefits under a plan
maintained by the Company and hereinafter referred to as the "Medical
Plan" or be an eligible dependent of such a Member. To the extent
they are not otherwise reimbursed from Company assets, covered medical
expenses incurred during the applicable period shown below by such a
Member or his eligible dependents shall be reimbursed hereunder.
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(b) The level of medical benefits covered under the provisions of this
Section 4.13 shall be the medical coverage in effect under the terms
of the Medical Plan. Except as provided in Article 10, such medical
coverage or benefit plan may be withdrawn or amended from time to time
as the Company shall determine.
(c) Except as provided in Section 4.13(e), all contributions made to the
trust to provide medical benefits under this Section 4.13 shall be
maintained in a separate account and such assets may not be used for
or diverted to any purpose other than to provide said medical
benefits; provided, however, none of the assets so set aside may be
used to provide medical benefits for a Member, former Member or their
dependents if the Member or former Member is a "key employee" as
determined in accordance with the provisions of Section 416(i)(1) and
(5) of the Internal Revenue Code. Similarly, none of the assets
accumulated to provide the retirement allowances or vested benefits
set forth in the foregoing provisions of this Article 4 may, prior to
the termination of the Plan and satisfaction of all the liabilities
for such retirement allowances or vested benefits, be used or diverted
to provide medical benefits under this Section 4.13. The assets, if
any, accumulated to provide medical benefits under this Section 4.13
may be invested pursuant to the provisions of Article 7.
(d) It is the intention of the Company to continue providing medical
benefits under this Section 4.13 and to make contributions to the
Trustee to fund such medical benefits in such amounts as the Company
shall deem necessary or appropriate. Any forfeitures of a Member's
interest in the medical benefit accounts as provided hereunder prior
to any discontinuance of medical benefits by the Board of Directors
shall be applied to reduce any subsequent Company contributions made
pursuant to this Section 4.13.
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(e) Except as provided in Article 10, the Board of Directors may
discontinue providing medical benefits under this Section 4.13 for any
reason at any time, in which event the assets allocated to provide
medical benefits hereunder, if any remain, shall, to the extent they
are not otherwise reimbursed from Company assets, be used to continue
medical benefits to Members who are eligible for them prior to the
discontinuance date as long as any assets remain. However, if, after
the satisfaction of all medical benefits provided hereunder, there
remain any assets, the program shall be deemed to be terminated and
such remainder shall be returned to the Company, in accordance with
Section 401(h)(5) of the Internal Revenue Code.
4.14 Transfers from Hourly Plans maintained by the Company or an Associated
Company
At the discretion and direction of the Pension Administration
Committee, the Plan may accept from a hourly pension plan maintained
by the Company or an Associated Company which is qualified under
Section 401(a) of the Code a transfer of (i) liabilities with respect
to the accrued benefit under such hourly plan of a Member who has
employment with the Company rendered otherwise than as an Employee
recognized as Benefit Service pursuant to the provisions of Section
2.02(c) of the Plan and (ii) with respect to such liabilities, any
assets determined by the Company to be applicable.
All such transfers shall be made in accordance with the provisions of
the Code and the Employee Retirement Income Security Act of 1974, as
amended.
4.15 Direct Rollover of Certain Distributions
Notwithstanding any other provision of this Plan, with respect to any
distribution from this Plan which is (a) payable to a "distributee"
and (b) determined by the Pension
<PAGE> 79
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Administration Committee to be an "eligible rollover distribution",
such distributee may elect, at the time and in the manner prescribed
by the Pension Administration Committee, to have the Plan make a
"direct rollover" of all or part of such distribution to an "eligible
retirement plan" which accepts such rollover. The following
definitions apply to the terms used in this Section:
(a) a "distributee" means a Member or former Member. In addition,
the Member's or former Member's surviving spouse and the
Member's or former Member's spouse or former spouse who is the
alternate payee under a qualified domestic relations order as
defined in Section 414(p) of the Code, are distributees with
regard to the interest of the spouse or former spouse;
(b) an "eligible rollover distribution" is any distribution of all
or any portion of the retirement allowance or vested benefit
owing to the credit of a distributee, except that the
following distributions shall not be eligible rollover
distributions: (i) any distribution that is one of a series of
substantially equal periodic payments made for the life or
life expectancy of the distributee or the joint lives or joint
life expectancies of the distributee and the distributee's
designated beneficiary, or for a specified period of ten years
or more, (ii) any distribution required under Section
401(a)(9) of the Code and (iii) the portion of a distribution
not includible in gross income;
(c) an "eligible retirement plan" is an individual retirement
account described in Section 408(a) of the Code, an individual
retirement annuity described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the Code or a
qualified trust described in Section 401(a) of the Code that
accepts the eligible rollover distribution; however, in the
case of an eligible rollover distribution to the
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Member's surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement
annuity only; and
(d) "direct rollover" means a payment by the Plan directly to the
eligible retirement plan specified by the distributee.
In the event that the provisions of this Section 4.15 or any part
thereof cease to be required by law as a result of subsequent
legislation or otherwise, this Section 4.15 or applicable part thereof
shall be ineffective without necessity of further amendment of the
Plan.
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ARTICLE 5 - ADMINISTRATION OF PLAN
5.01 The responsibility for carrying out all phases of the administration
of the Plan and any Former Pension Plans (referred to collectively in
this Article as the "Plan"), except those phases connected with the
management of assets, shall be placed in a Pension Administration
Committee of not less than three persons appointed from time to time
by the Board of Directors to serve at the pleasure of the Board of
Directors. The Board of Directors may also designate alternate
members to act in the absence of the regular members. The Board of
Directors shall designate a Chairman of the Pension Administration
Committee from among the regular members and a Secretary who may be,
but need not be, one of its members. Any member of the Pension
Administration Committee may resign by delivering his written
resignation to the Board of Directors and the Secretary of the Pension
Administration Committee.
5.02 The responsibility for the management of the assets of the Plan shall
be placed in a Pension Fund Trust and Investment Committee of not less
than three persons appointed from time to time by the Board of
Directors to serve at the pleasure of the Board of Directors. The
Board of Directors may also designate alternate members to act in the
absence of the regular members. The Board of Directors shall
designate a Chairman of the Pension Fund Trust and Investment
Committee from among the regular members and a Secretary who may be,
but need not be, one of the members of the Pension Fund Trust and
Investment Committee. Any member of the Pension Fund Trust and
Investment Committee may resign by delivering his written resignation
to the Board of Directors and the Secretary of the Pension Fund Trust
and Investment Committee.
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5.03 The Pension Administration Committee and the Pension Fund Trust and
Investment Committee (hereinafter collectively referred to as the
("Committees") are designated as named fiduciaries within the meaning
of Section 402(a) of the Employee Retirement Income Security Act of
1974.
5.04 The Committees shall hold meetings upon such notice, at such place or
places, and at such time or times as each may respectively determine.
The action of at least a majority of the members, or alternate
members, of a Committee expressed from time to time by a vote at a
meeting or in writing without a meeting shall constitute the action of
that Committee and shall have the same effect for all purposes as if
assented to by all members of such Committee at the time in office.
No member of either Committee shall receive any compensation for his
service as such.
5.05 Each Committee may authorize one or more of its number or any agent to
execute or deliver any instrument or make any payment on its behalf;
may retain counsel, employ agents and such clerical, accounting and
actuarial services as it may require in carrying out the provisions of
the Plan for which it has responsibility; may allocate among its
members or to other persons all or such portion of its duties
hereunder as it, in its sole discretion, shall decide.
5.06 The Pension Fund Trust and Investment Committee shall be responsible
for managing the assets under the Plan. If it deems such action to be
advisable, the Committee, subject to the provisions of the trust
instrument(s) adopted for use in implementing the Plan pursuant to
Section 7.01 hereof, may:
<PAGE> 83
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(a) provide direction to the trustee(s) thereunder, including, but
not by way of limitation, the direction of investment of all
or part of the Plan assets and the establishment of investment
criteria, and
(b) appoint and provide for use of investment advisors and
investment managers.
In discharging its responsibility, the Committee shall evaluate and
monitor the investment performance of the trustee(s) and investment
manager, if any.
5.07 Subject to the limitations of the Plan, the Pension Administration
Committee from time to time shall establish rules or regulations for
the administration of the Plan and the transaction of its business.
The Pension Administration Committee shall have full discretionary
authority, except as to matters which the Board of Directors from time
to time may reserve to itself, to interpret the Plan and to make
factual determinations regarding any and all matters arising
hereunder, including but not limited to, the right to determine
eligibility for benefits and to construe the terms of the Plan
including the right to remedy possible ambiguities, inequities,
inconsistencies or omissions. The Pension Administration Committee
shall also have the right to exercise powers otherwise exercisable by
the Board of Directors hereunder to the extent that the exercise of
such powers does not involve the management of Plan assets nor, in the
judgment of the Pension Administration Committee, a substantial number
of persons. In addition, where the number of persons is deemed to be
substantial, the Pension Administration Committee shall have the
further right to exercise such powers as may be delegated to the
Pension Administration Committee by the Board of Directors.
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Subject to applicable Federal and State Law, all interpretations,
determinations and decisions of the Pension Administration Committee
or the Board of Directors in respect of any matter hereunder shall be
final, conclusive and binding on all parties affected thereby.
5.08 The members of the Committees shall use that degree of care, skill,
prudence and diligence in carrying out their duties that a prudent
man, acting in a like capacity and familiar with such matters, would
use in his conduct of a similar situation. A member of either
Committee shall not be liable for the breach of fiduciary
responsibility of another fiduciary unless:
(a) he participates knowingly in, or knowingly undertakes to
conceal, an act or omission of such other fiduciary, knowing
such act or omission is a breach; or
(b) by his failure to discharge his duties solely in the interest
of the Members and other persons entitled to benefits under
the Plan, for the exclusive purpose of providing benefits and
defraying reasonable expenses of administering the Plan not
met by the Company, he has enabled such other fiduciary to
commit a breach; or
(c) he has knowledge of a breach by such other fiduciary and does
not make reasonable efforts to remedy the breach; or
(d) if the Committee of which he is a member improperly allocates
responsibilities among its members or to others and he fails
to review prudently such allocation.
5.09 The Pension Administration Committee, the Pension Fund Trust and
Investment Committee, and the Company shall be "named fiduciaries"
within the meaning of Section 402(a) of ERISA.
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ARTICLE 6 - CONTRIBUTIONS
6.01 It is the intention of the Company to continue the Plan and make
regular contributions to the Trustee each year in such amounts as are
necessary to maintain the Plan on a sound actuarial basis and to meet
minimum funding standards as prescribed by any applicable law.
However, subject to the provisions of Article 8, the Company may
reduce or suspend its contributions for any reason at any time. Any
forfeitures shall be used to reduce the Company contributions
otherwise payable, and will not be applied to increase the benefits
any Member or other person would otherwise receive under the Plan.
6.02
(a) If a contribution is conditioned on initial qualification of the Plan
under Section 401(a) of the Code, and if the Commissioner of Internal
Revenue, on timely application made after the establishment of the
Plan, determines that the Plan is not initially so qualified, or
refuses, in writing, to issue a determination as to whether the Plan
is so qualified, said contribution shall be returned to the Company
without interest. The return shall be made within one year after the
date of the final determination of the denial of qualification. The
provisions of this paragraph (a) shall apply only if the application
for the determination is made by the time prescribed by law for filing
the Company's return for the taxable year in which the Plan was
adopted, or such later date as the Secretary of the Treasury may
prescribe.
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(b) The Company's contributions to the Plan are conditioned upon their
deductibility under Section 404 of the Code. In the event that all or
part of the Company's deductions under Section 404 of the Code for
contributions to the Plan are disallowed by the Internal Revenue
Service, the portion of the contributions to which such disallowance
applies shall be returned to the Company without interest but reduced
by any investment loss attributable to those contributions. Such
return shall be made within one year after the disallowance of
deduction.
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ARTICLE 7 - MANAGEMENT OF FUNDS
7.01 All the funds of the Plan shall be held by a Trustee or Trustees
including any member(s) of the Rayonier, Inc. Pension Fund Trust and
Investment Committee, appointed from time to time by said Committee or
Rayonier, in one or more trusts under a trust instrument or
instruments approved or authorized by said Committee or Rayonier,
Inc.for use in providing the benefits of the Plan and paying any
expenses of the Plan not paid directly by the Company; provided,
however, that the Pension Fund Trust and Investment Committee may, in
its discretion, also enter into any type of contract with any
insurance company or companies selected by it for providing benefits
under the Plan.
7.02 Prior to the satisfaction of all liabilities with respect to persons
entitled to benefits, except for the payment of expenses, no part of
the corpus or income of the funds shall be used for, or diverted to,
purposes other than for the exclusive benefit of Members and other
persons who are or may become entitled to benefits hereunder, under a
Prior Salaried Plan or under a Former Pension Plan, or under any trust
instrument or under any insurance contract made pursuant to this Plan.
7.03 Subject to applicable Federal and State law, no person shall have any
interest in or right to any part of the corpus or income of the funds,
except as and to the extent expressly provided in the Plan and in any
trust instrument or under any insurance contract made pursuant to this
Plan.
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7.04 Subject to applicable Federal and State law, the Company shall have no
liability for the payment of benefits under the Plan nor for the
administration of the funds paid over to the Trustee(s) or insurer(s)
except as expressly provided under this Plan.
7.05 Except to the extent permitted by applicable Federal law, no part of
the corpus or income of the trust shall be invested in securities of
the Company or of any Associated Company or in real property and
related personal property which is leased to the Company or any
Associated Company or in the securities of the Trust or Trustees or
their subsidiary companies, if any.
7.06 Notwithstanding the foregoing, the Company may recover without
interest the amount of its contributions to the Plan made on account
of a mistake in fact, provided that such recovery is made within one
year after the date of such contribution.
7.07 The Pension Fund Trust and Investment Committee may, in its
discretion, appoint one or more investment managers (within the
meaning of Section 3(38) of ERISA) to manage (including the power to
acquire and dispose of) all or part of the assets of the Plan, as the
Investment Committee shall designate. In that event, authority over
and responsibility for the management of the assets so designated
shall be the sole responsibility of that investment manager.
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ARTICLE 8 - CERTAIN RIGHTS AND LIMITATIONS
The following provisions shall apply in all cases whenever a Member or any
other person is affected thereby.
8.01 Termination of the Plan
(a) The Board of Directors may terminate the Plan for any reason at any
time. In case of termination of the Plan, the rights of Members to
the benefits accrued under the Plan to the date of the termination, to
the extent then funded or protected by law, if greater, shall be
nonforfeitable. The funds of the Plan shall be used for the exclusive
benefit of persons entitled to benefits under the Plan as of the date
of termination, except as provided in Section 6.02. However, any
funds not required to satisfy all liabilities of the Plan for benefits
because of erroneous actuarial computation shall be returned to the
Company except as otherwise in Section 8.06. The Pension
Administration Committee shall determine on the basis of an actuarial
valuation the share of the funds of the Plan allocable to each person
entitled to benefits under the Plan in accordance with Section 4044 of
ERISA or corresponding provision of any applicable law in effect at
the time. In the event of a partial termination of the Plan, the
provisions of this Section shall be applicable to the Members affected
by that partial termination.
(b) Plan Merger or Consolidation
The Plan may not be merged or consolidated with, nor may its assets or
liabilities be transferred to, any other plan unless each Member or
other person entitled to a benefit
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under the Plan would, if the resulting plan were then terminated,
receive a benefit immediately after the merger, consolidation, or
transfer which is equal to or greater than the benefit he would have
been entitled to receive immediately before the merger, consolidation,
or transfer, if the Plan had then terminated; provided that, subject
to the provisions of Article 10 on or after the date of the first
occurrence of a Change in Control Event, (i) no transfer of assets or
liabilities, except as specifically permitted under Section 8.01(a),
between the Plan and any Employee Benefit Plan, as hereinafter
defined, (ii) no spin-off of Plan assets or Plan liabilities to any
Employee Benefit Plan, (iii) no withdrawal of Plan assets, in the
event such withdrawal is permitted under applicable law or (iv) no
merger or consolidation of the Plan with any Employee Benefit Plan
shall be permitted.
For purposes of this Section 8.01(b), Employee Benefit Plan has the
same meaning as the term "employee benefit plan" has under Section
3(3) of the Employee Retirement Income Security Act of 1974.
8.02 Limitation Concerning Highly Compensated Employees
or Highly Compensated Former Employee
(a) The provisions of this Section shall apply (i) in the event the Plan
is terminated, to any Member who is a highly compensated employee or
highly compensated former employee (as those terms are defined in
Section 414(q) of the Code) of the Company or an Associated Company
and (ii) in any other event, to any Member or former Member who is one
of the 25 highly compensated employees or highly compensated former
employees of the Company or Associated Company with the greatest
compensation in any Plan Year. The amount of the annual payments to
any one of the Members or former Member to whom this Section applies
shall not be greater than an amount equal to the payments that
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would be made on behalf of the Member or former Member under a single
life annuity that is of Equivalent Actuarial Value to the sum of the
Member's or former Member's Accrued Benefit and any other benefits
payable to the Member and former Member under the Plan.
(b) If, (i) after payment of an Accrued Benefit or other benefits to any
one of the Members or to whom this Section applies, the value of Plan
assets equals or exceeds 110 per cent of the value of current
liabilities (as that term is defined in Section 412(1)(7) of the Code)
of the Plan or (ii) the value of the Accrued Benefit and other
benefits of any one of the Members or former Members to whom this
Section applies is less than one percent of the value of current
liabilities of the Plan or (iii) the value of the Accrued Benefit and
other benefits of any one of the Members or former Members to whom
this Section applies does not exceed $3,500, the provisions of
paragraph (a) above will not be applicable to the payment of benefits
to the Member or former Member.
(c) Notwithstanding paragraph (a) of this Section , in the event the Plan
is terminated, the restriction of this Section shall not be applicable
if the benefits payable to any highly compensated employee and any
highly compensated former employee is limited to a benefit that is
nondiscriminatory under Section 401(a)(4) of the Code.
(d) If it should subsequently be determined by statute, court decision
acquiesced in by the Commissioner of Internal Revenue, or ruling by
the Commissioner of Internal Revenue, that the provisions of this
Section are no longer necessary to qualify the Plan under the Code,
this Section shall be ineffective without the necessity of further
amendment to the Plan.
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8.03 Conditions of Employment Not Affected by Plan
The establishment of the Plan shall not be construed as conferring any
legal rights upon any Employee or other person for a continuation of
employment, nor shall it interfere with the rights of the Company to
discharge any Employee or other person and to treat him without regard
to the effect which such treatment might have upon him under the Plan.
8.04 Offsets - Unless the Board of Directors otherwise provides under rules
uniformly applicable to all Employees similarly situated, the Pension
Administration Committee shall deduct from the amount of any
retirement allowance or vested benefit under the Plan, any amount paid
or payable to or on account of any Member under the provisions of any
present or future law, pension or benefit scheme of any sovereign
government, or any political subdivision thereof or any fund or
organization or government agency or department on account of which
contributions have been made or premiums or taxes paid by the Company,
any Participating Unit, or any Associated Company with respect to any
service which is Benefit Service for purposes of computation of
benefits under the Plan; provided, however, that pensions payable for
government service or benefits under Title II of the Social Security
Act are not to be used to reduce the benefits otherwise provided under
this Plan except as specifically provided herein.
8.05 Denial of Benefits - The Pension Administration Committee may
prescribe rules on a basis uniformly applicable to all Employees
similarly situated under which an Employee whose employment is
terminated because of dishonesty, conviction of a felony or other
conduct prejudicial to the Company may be denied any benefit or
benefits for which he would otherwise be eligible under the Plan,
except his retirement allowance pursuant to
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Section 4.01 or his vested benefit pursuant to Section 4.05; provided,
however, that such denial is not contrary to applicable law.
8.06 Change in Control - In the event of a Change in Control (as
hereinafter defined) the following restrictions shall apply:
(a) Notwithstanding any other provision of the plan, in the event
of a Change in Control, neither the Board of Directors, its
designee, the Pension Administration Committee nor the Trustee
may merge or consolidate the Plan with any other plan,
transfer any Plan assets to any other retirement or welfare
benefit plan, transfer any other welfare or retirement benefit
plan's liabilities to the Plan, spin-off or split-off any part
of the Plan or group of Members in the Plan, or reduce future
Plan benefits, or cause or permit the Plan to acquire any
security of the Company or any Associate Company, during the
five-year period commencing on the date on which the Change in
Control occurs.
(b) Notwithstanding any other provision of the Plan, in the event
of a Change in Control, neither the Board of Directors nor its
designee may, during the five-year period commencing on the
date on which the Change in Control occurs, designate any new
Participating Units or designate any new groups of Employees
as eligible to participate in the Plan.
(c) Notwithstanding any other provision of the Plan, if at any
time during the five-year period commencing on the date on
which a Change in Control occurs, the Plan is terminated, any
Member who was an Employee on the date of the Change in
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Control shall, if not previously vested, become fully vested
in all Plan benefits. If the Plan has surplus assets, all of
the surplus assets shall be allocated to Plan Members who were
Members as of the date on which a Change in Control occurs
(including Members who terminated employment with entitlement
to a retirement allowance and Members who are, on the date on
which a Change in Control occurs, receiving a retirement
allowance) on pro rata basis, to the benefits accrued prior to
the date of Change in Control and none of this surplus may be
recovered by the Company, any successor or any Associated
Company. For purposes of this Section 8.06(c) the amount of
surplus assets will be determined as part of the process to
purchase non- participating group annuity contracts to be
purchased in connection with the termination of the Plan. In
purchasing such annuities, the Plan shall seek competitive
bids from at least three unrelated insurance companies. In no
event shall the increase in the Retirement Allowance payable
pursuant to this paragraph cause the retirement allowance to
exceed the limitations in Section 4.08 of the Plan.
(d) Notwithstanding any other provision of the Plan, if at any
time during the five-year period commencing on the date on
which a Change in Control occurs (i) a substantial Reduction
in Force (as hereinafter defined) occurs or (ii) any action
prohibited by paragraph (a) or (b) of this Section 8.06 is
taken, then any Member who was an Employee on the date of the
Change in Control shall, if not previously vested, become
fully vested in all Plan benefits. Furthermore, if, as of the
date either of the events described in (i) or (ii) above
occur, the fair market value of the Plan's assets exceeds the
Plan's Current Liability pursuant to Section 412(1)(7) of the
Code (based on the Plan's actuarial assumptions on the date
the Change in
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Control occurs except that the underlying interest rate shall
be the greater of the interest rate in effect on the date of
calculation) the amount of such excess assets shall be applied
to increase, as described below, the Accrued Benefit of all
Plan Members who were Members as of the date on which a Change
in Control occurs. For purposes of determining the increase
in Accrued Benefit under this Section 8.06(d) Plan Member
includes both Members who are Employees as well as former
Employees, or Beneficiaries of former Employees either
entitled to future benefits or currently in receipt of Plan
benefits. The Equivalent Actuarial Value of each Plan
Member's Accrued Benefit shall be increased by the amount
determined by multiplying (a) the Plan's excess assets as
defined in this Section 8.06(d) by (b) the ratio that the
Current Liability of each Plan Member bears to the sum of the
Current Liability of all Plan Members such increased present
value will be converted into an enhanced Accrued Benefit for
each Plan Member. In no event, however, shall such increase
cause a Plan Member's Accrued Benefit to exceed the limitation
of Section 4.08 of the Plan.
(e) In the event the Internal Revenue Service makes a final
determination that the utilization of surplus assets of the
Plan (or any portion thereof) in accordance with paragraph (c)
or (d) of this Section 8.06 cannot be accomplished in any
manner without disqualifying the Plan, the Company shall
utilize such assets which cannot be so utilized to provide
benefits to those Members who were Employees on the date of
the Change in Control in any manner that the Company deems to
be in the best interests of such Members and which would not
disqualify the Plan. Such utilization may include the
transfer of such assets to another employee benefit plan
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of the Company, including a voluntary employees' beneficiary
association as described in Section 501(c)(9) of the Code;
provided, however, that in no event shall any such assets be
transferred to any entity other than a trust devoted
exclusively to providing benefits to employees and retirees
who were Plan Members as of the date of the Change in Control.
(f) For purposes of this Section 8.06, each of the following
events shall constitute a "Change in Control Event":
(i) a report on Schedule 13D shall be filed with the
Securities and Exchange Commission pursuant to
Section 13(d) of the Securities Exchange Act of 1934
(the "Act") disclosing that any person (within the
meaning of Section 13(d) of the Act), other than the
Company or a subsidiary of the Company or any
employee benefit plan sponsored by the Company or a
subsidiary of the Company, is the beneficial owner
directly or indirectly of twenty percent or more of
the outstanding Common Stock of the Company;
(ii) any person (within the meaning of Section 13(d) of
the Act), other than the Company or a subsidiary of
the Company or any employee benefit plan sponsored by
the Company or a subsidiary of the Company, shall
purchase shares pursuant to a tender offer or
exchange offer to acquire any Common Stock of the
Company (or securities convertible into such Common
Stock), for cash, securities or any other
consideration, provided that after consummation of
the offer the person in question is the beneficial
owner (as such term is defined in Rule 13d-3 under
the Act) directly or indirectly of fifteen percent or
more of the outstanding Common Stock (calculated as
provided
<PAGE> 97
Page 93
in paragraph (d) of Rule 13d-3 under the Act in the
case of rights to acquire Common Stock);
(iii) the stockholders of the Company shall approve (1) any
consolidation or merger of the Company in which the
Company is not the continuing or surviving
corporation or pursuant to which shares of Common
Stock of the Company would be converted into cash,
securities or other property, other than a merger of
the Company in which holders of Common Stock of the
Company immediately prior to the merger have the same
proportionate ownership of common stock of the
surviving corporation immediately after the merger as
immediately before, or (2) any sale, lease, exchange
or other transfer (in one transaction or a series of
related transactions) of all or substantially all the
assets of the Company; or
(iv) there shall have been a change in a majority of the
members of the Board of Directors of the Company
within a 12-month period unless the election or
nomination for election by the Company's stockholders
of each new director during such 12-month period was
approved by the vote of two-thirds of the directors
then still in office who were directors at the
beginning of such 12-month period.
8.07 Prevention of Escheat - If the Pension Administration Committee cannot
ascertain the whereabouts of any person to whom a payment is due under
the Plan, the Pension Administration Committee may, no earlier than
three years from the date such payment is due, mail a notice of such
due and owing payment to the last known address of such person as
shown on the records of the Pension Administration Committee or the
Company. If such
<PAGE> 98
Page 94
person has not made written claim therefor within three months of the
date of the mailing, the Pension Administration Committee may, if it
so elects and upon receiving advice from counsel to the Plan, direct
that such payment and all remaining payments otherwise due such person
be cancelled on the records of the Plan and the amount thereof applied
to reduce the contributions of the Company. Upon such cancellation,
the Plan shall have no further liability therefor except that, in the
event such person or his beneficiary later notifies the Pension
Administration Committee of his whereabouts and requests the payment
or payments due to him under the Plan, the amount so applied shall be
paid to him in accordance with the provisions of the Plan.
<PAGE> 99
Page 95
ARTICLE 9 - NONALIENATION OF BENEFITS
9.01
(a) Subject to any applicable Federal and State law, no benefit under the
Plan shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge except any
election to make a contribution necessary to provide post- retirement
medical benefits under any Plan maintained by the Company and, any
attempt so to do shall be void, except as specifically provided in the
Plan, nor shall any such benefit be in any manner liable for or
subject to garnishment, attachment, execution or levy or liable for or
subject to the debts, contracts, liabilities, engagements or torts of
the person entitled to such benefit.
(b) Subject to applicable Federal and State law, in the event that the
Pension Administration Committee shall find that any Member or other
person who is or may become entitled to benefits hereunder has become
bankrupt or that any attempt has been made to anticipate, alienate,
sell, transfer, assign, pledge, encumber or charge any of his benefits
under the Plan, except as specifically provided in the Plan, or if any
garnishment, attachment, execution, levy or court order for payment of
money has been issued against any of his benefits under the Plan, then
such benefit shall cease and terminate. In such event the Pension
Administration Committee shall hold or apply the payments to or for
the benefit of such Member or other person who is or may become
entitled to benefits hereunder, his spouse, children, parents or other
blood relatives, or any of them.
(c) Notwithstanding the foregoing provisions of the Plan, payment shall be
made in accordance with the provisions of any judgment, decree, or,
domestic relations order which:
<PAGE> 100
Page 96
(i) creates for, or assigns to, a spouse, former spouse, child or
other dependent of a Member the right to receive all or a
portion of the Member's benefits under the Plan for the
purpose of providing child support, alimony payments or
marital property rights to that spouse, child or dependent,
(ii) is made pursuant to the domestic relations law of any State
(as such term is defined in Section 3(10) of the Employee
Retirement Income Security Act of 1974, (ERISA)),
(iii) does not require the Plan to provide any type of benefit, or
any option, not otherwise provided under the Plan, and
(iv) otherwise meets the requirements of Section 206(d) of ERISA
(as amended) to be a "qualified domestic relations order" as
determined by the Pension Administration Committee.
If the lump sum present value of any series of payments made under the
criteria set forth in paragraphs (i) through (iv) above amounts to
$3,500 or less, then a lump sum payment of Equivalent Actuarial Value
(determined in the manner described in Section 4.10) shall be made in
lieu of the series of payments.
(d) The Pension Administration Committee shall resolve any questions
arising under this Article 9 on a basis uniformly applicable to all
persons similarly situated.
<PAGE> 101
Page 97
ARTICLE 10 - AMENDMENTS
10.01 Subject to Section 10.02, the Board of Directors reserves the right at
any time and from time to time and retroactively if deemed necessary
or appropriate to conform with governmental regulations or other
policies, to modify or amend in whole or in part any or all of the
provisions of the Plan; provided that no such modification or
amendment shall make it possible for any part of the funds of the Plan
to be used for, or diverted to, purposes other than for the exclusive
benefit of Members, spouses, or contingent annuitants or other persons
who are or may become entitled to benefits hereunder prior to the
satisfaction of all liabilities with respect to them; and that no
modification or amendment shall be made which has the effect of
decreasing the Accrued Benefit of any Member or of reducing the
nonforfeitable percentage of the Accrued Benefit of a Member
attributable to Company contributions below that nonforfeitable
percentage thereof computed under the Plan as in effect on the later
of the date on which the amendment is adopted or becomes effective.
10.02 Notwithstanding the above, on or after the date a Change in Control
Event (as defined in Section 8.06) first occurs, Section 8.01, Section
8.06 and this Article 10, as they pertain to events occurring on or
after the date such Change in Control Event occurs, may not be further
amended by the Board of Directors without written consent of not less
than three- quarters (3/4) of the Members and other persons entitled
to benefits under the Plan.
<PAGE> 102
APPENDIX A
TABLE 1
50% JOINT AND SURVIVORSHIP
OPTION FACTORS
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 55 56 57 58 59 60 61 62
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20 * 0.8999 0.8928 0.8852 0.8774 0.8689 0.8600 0.8507 0.8409
21 * 0.9004 0.8932 0.8858 0.8778 0.8694 0.8605 0.8511 0.8414
22 * 0.9008 0.8938 0.8862 0.8784 0.8699 0.8610 0.8517 0.8418
23 * 0.9014 0.8943 0.8868 0.8789 0.8704 0.8615 0.8522 0.8425
24 * 0.9019 0.8949 0.8874 0.8794 0.8710 0.8622 0.8528 0.8431
25 * 0.9025 0.8955 0.8879 0.8801 0.8716 0.8628 0.8534 0.8437
26 * 0.9032 0.8961 0.8886 0.8808 0.8723 0.8634 0.8541 0.8444
27 * 0.9039 0.8968 0.8893 0.8815 0.8730 0.8642 0.8548 0.8451
28 * 0.9046 0.8975 0.8900 0.8822 0.8738 0.8649 0.8556 0.8458
29 * 0.9054 0.8983 0.8908 0.8830 0.8745 0.8657 0.8564 0.8467
30 * 0.9061 0.8991 0.8917 0.8839 0.8754 0.8666 0.8573 0.8476
31 * 0.9070 0.9000 0.8925 0.8847 0.8763 0.8675 0.8582 0.8485
32 * 0.9079 0.9009 0.8935 0.8857 0.8774 0.8685 0.8592 0.8496
33 * 0.9089 0.9019 0.8945 0.8867 0.8784 0.8695 0.8603 0.8506
34 * 0.9099 0.9030 0.8956 0.8878 0.8795 0.8706 0.8614 0.8517
35 * 0.9110 0.9041 0.8967 0.8890 0.8807 0.8719 0.8626 0.8530
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 63 64 65 66 67 68 69 70
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20 * 0.8307 0.8200 0.8089 0.7974 0.7856 0.7734 0.7608 0.7478
21 * 0.8312 0.8205 0.8094 0.7979 0.7861 0.7739 0.7614 0.7484
22 * 0.8317 0.8210 0.8099 0.7984 0.7867 0.7744 0.7619 0.7489
23 * 0.8322 0.8216 0.8105 0.7990 0.7872 0.7749 0.7624 0.7495
24 * 0.8329 0.8222 0.8111 0.7996 0.7878 0.7755 0.7631 0.7500
25 * 0.8335 0.8228 0.8117 0.8002 0.7885 0.7762 0.7637 0.7501
26 * 0.8342 0.8235 0.8124 0.8010 0.7892 0.7769 0.7644 0.7514
27 * 0.8349 0.8242 0.8131 0.8017 0.7899 0.7776 0.7651 0.7521
28 * 0.8357 0.8251 0.8139 0.8025 0.7907 0.7785 0.7659 0.7529
29 * 0.8365 0.8259 0.8148 0.8033 0.7916 0.7793 0.7668 0.7538
30 * 0.8374 0.8267 0.8157 0.8043 0.7925 0.7802 0.7677 0.7547
31 * 0.8384 0.8277 0.8167 0.8052 0.7934 0.7812 0.7687 0.7557
32 * 0.8394 0.8287 0.8177 0.8062 0.7945 0.7822 0.7697 0.7567
33 * 0.8405 0.8298 0.8188 0.8074 0.7956 0.7834 0.7709 0.7579
34 * 0.8417 0.8311 0.8200 0.8085 0.7968 0.7846 0.7720 0.7591
35 * 0.8429 0.8323 0.8212 0.8098 0.7981 0.7858 0.7733 0.7604
</TABLE>
<PAGE> 103
APPENDIX A
TABLE 1
50% JOINT AND SURVISORSHIP
OPTION FACTORS
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 55 56 57 58 59 60 61 62
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
36 * 0.9121 0.9052 0.8979 0.8902 0.8818 0.8731 0.8639 0.8542
37 * 0.9133 0.9064 0.8992 0.8914 0.8832 0.8744 0.8653 0.8557
38 * 0.9145 0.9078 0.9004 0.8928 0.8845 0.8759 0.8667 0.8571
39 * 0.9159 0.9090 0.9018 0.8942 0.8860 0.8774 0.8682 0.8586
40 * 0.9172 0.9105 0.9033 0.8957 0.8875 0.8789 0.8698 0.8603
41 * 0.9187 0.9119 0.9048 0.8973 0.8891 0.8806 0.8715 0.8619
42 * 0.9201 0.9135 0.9064 0.8989 0.8908 0.8823 0.8733 0.8638
43 * 0.9217 0.9151 0.9081 0.9006 0.8926 0.8840 0.8751 0.8656
44 * 0.9233 0.9168 0.9098 0.9024 0.8944 0.8860 0.8771 0.8677
45 * 0.9249 0.9185 0.9116 0.9042 0.8963 0.8879 0.8791 0.8698
46 * 0.9267 0.9203 0.9135 0.9062 0.8984 0.8900 0.8812 0.8720
47 * 0.9285 0.9222 0.9154 0.9082 0.9004 0.8922 0.8834 0.8742
48 * 0.9303 0.9241 0.9173 0.9103 0.9026 0.8944 0.8658 0.8766
49 * 0.9322 0.9261 0.9194 0.9124 0.9048 0.8968 0.8882 0.8792
50 * 0.9341 0.9281 0.9216 0.9147 0.9072 0.8992 0.8907 0.8818
51 * 0.9361 0.9302 0.9238 0.9169 0.9095 0.9016 0.8933 0.8845
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 63 64 65 66 67 68 69 70
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
36 * 0.8442 0.8336 0.8225 0.8112 0.7995 0.7872 0.7747 0.7617
37 * 0.8456 0.8350 0.8240 0.8126 0.8009 0.7887 0.7762 0.7632
38 * 0.8471 0.8365 0.8255 0.8141 0.8024 0.7902 0.7777 0.7648
39 * 0.8486 0.8381 0.8271 0.8158 0.8040 0.7918 0.7794 0.7665
40 * 0.8502 0.8398 0.8288 0.8175 0.8058 0.7936 0.7811 0.7682
41 * 0.8520 0.8415 0.8307 0.8193 0.8077 0.7955 0.7830 0.7701
42 * 0.8538 0.8435 0.8326 0.8212 0.8096 0.7975 0.7850 0.7721
43 * 0.8558 0.8454 0.8346 0.8233 0.8117 0.7995 0.7872 0.7742
44 * 0.8579 0.8475 0.8367 0.8255 0.8139 0.8018 0.7894 0.7765
45 * 0.8600 0.8497 0.8389 0.8277 0.8162 0.8042 0.7918 0.7790
46 * 0.8623 0.8520 0.8413 0.8302 0.8186 0.8067 0.7943 0.7815
47 * 0.8646 0.8544 0.8437 0.8326 0.8212 0.8093 0.7969 0.7842
48 * 0.8670 0.8570 0.8464 0.8353 0.8239 0.8120 0.7998 0.7870
49 * 0.8696 0.8596 0.8490 0.8381 0.8267 0.8149 0.8027 0.7900
50 * 0.8723 0.8624 0.8519 0.8410 0.8297 0.8180 0.8059 0.7932
51 * 0.8751 0.8652 0.8549 0.8441 0.8329 0.8211 0.8091 0.7965
</TABLE>
<PAGE> 104
APPENDIX A
TABLE 1
50% JOINT AND SURVIVORSHIP
OPTION FACTORS
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 55 56 57 58 59 60 61 62
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
52 * 0.9381 0.9323 0.9260 0.9193 0.9120 0.9042 0.8960 0.8873
53 * 0.9402 0.9345 0.9283 0.9218 0.9145 0.9069 0.8987 0.8901
54 * 0.9422 0.9367 0.9306 0.9242 0.9171 0.9096 0.9015 0.8931
55 * 0.9444 0.9389 0.9330 0.9267 0.9198 0.9124 0.9045 0.8961
56 * 0.9465 0.9412 0.9354 0.9292 0.9225 0.9152 0.9075 0.8992
57 * 0.9486 0.9435 0.9378 0.9318 0.9252 0.9181 0.9105 0.9024
58 * 0.9508 0.9458 0.9403 0.9344 0.9280 0.9210 0.9135 0.9057
59 * 0.9530 0.9481 0.9428 0.9370 0.9308 0.9240 0.9167 0.9090
60 * 0.9551 0.9504 0.9452 0.9397 0.9335 0.9270 0.9198 0.9123
61 * 0.9572 0.9527 0.9477 0.9423 0.9364 0.9299 0.9231 0.9157
62 * 0.9593 0.9549 0.9501 0.9449 0.9392 0.9330 0.9262 0.9191
63 * 0.9614 0.9572 0.9526 0.9475 0.9420 0.9360 0.9295 0.9225
64 * 0.9635 0.9594 0.9549 0.9501 0.9447 0.9390 0.9326 0.9259
65 * 0.9654 0.9615 0.9573 0.9527 0.9476 0.9419 0.9358 0.9293
66 * 0.9674 0.9637 0.9596 0.9552 0.9502 0.9449 0.9390 0.9326
67 * 0.9693 0.9658 0.9619 0.9577 0.9529 0.9478 0.9421 0.9360
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 63 64 65 66 67 68 69 70
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
52 * 0.8780 0.8682 0.8579 0.8473 0.8361 0.8245 0.8124 0.8000
53 * 0.8810 0.8713 0.8611 0.8505 0.8396 0.8280 0.8161 0.8037
54 * 0.8841 0.8745 0.8645 0.8539 0.8431 0.8316 0.8197 0.8074
55 * 0.8873 0.8778 0.8679 0.8575 0.8467 0.8354 0.8237 0.8115
56 * 0.8905 0.8813 0.8714 0.8612 0.8505 0.8393 0.8277 0.8155
57 * 0.8938 0.8847 0.8751 0.8650 0.8544 0.8433 0.8319 0.8198
58 * 0.8973 0.8883 0.8788 0.8689 0.8585 0.8476 0.8362 0.8243
59 * 0.9007 0.8920 0.8826 0.8728 0.8626 0.8511 0.8407 0.8289
60 * 0.9042 0.8957 0.8865 0.8769 0.8668 0.8562 0.8452 0.8336
61 * 0.9079 0.8994 0.8905 0. 8810 0.8711 0.8607 0.8499 0.8385
62 * 0.9114 0.9032 0.8945 0.8852 0.8756 0.8653 0.8547 0.8434
63 * 0.9151 0.9070 0.8985 0.8895 0.8800 0.8700 0.8595 0.8485
64 * 0.9187 0.9109 0.9026 0.8937 0.8846 0.8747 0.8645 0.8536
65 * 0.9223 0.9148 0.9066 0.8981 0.8890 0.8795 0.8694 0.8589
66 * 0.9259 0.9185 0.9107 0.9024 0.8936 0.8842 0.8745 0.8641
67 * 0.9295 0.9224 0.9148 0.9067 0.8982 0.8891 0.8796 0.8694
</TABLE>
<PAGE> 105
APPENDIX A
TABLE 1
50% JOINT AND SURVIVORSHIP
OPTION FACTORS
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 55 56 57 58 59 60 61 62
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
68 * 0.9712 0.9678 0.9641 0.9601 0.9555 0.9506 0.9451 0.9393
69 * 0.9730 0.9698 0.9663 0.9624 0.9581 0.9533 0.9481 0.9425
70 * 0.9747 0.9717 0.9684 0.9647 0.9605 0.9560 0.9511 0.9457
71 * 0.9763 0.9735 0.9703 0.9669 0.9630 0.9587 0.9540 0.9489
72 * 0.9780 0.9752 0.9723 0.9691 0.9653 0.9613 0.9567 0.9519
73 * 0.9795 0.9770 0.9741 0.9711 0.9676 0.9637 0.9595 0.9548
74 * 0.9810 0.9786 0.9760 0.9730 0.9697 0.9661 0.9620 0.9577
75 * 0.9824 0.9802 0.9777 0.9749 0.9718 0.9684 0.9645 0.9604
76 * 0.9837 0.9816 0.9793 0.9768 0.9738 0.9705 0.9670 0.9630
77 * 0.9850 0.9830 0.9808 0.9785 0.9757 0.9727 0.9693 0.9656
78 * 0.9861 0.9844 0.9823 0.9801 0.9775 0.9747 0.9715 0.9681
79 * 0.9872 0.9856 0.9836 0.9816 0.9793 0.9765 0.9736 0.9704
80 * 0.9883 0.9867 0.9850 0.9831 0.9808 0.9784 0.9756 0.9725
81 * 0.9892 0.9878 0.9862 0.9844 0.9824 0.9801 0.9775 0.9747
82 * 0.9902 0.9888 0.9874 0.9857 0.9838 0.9817 0.9792 0.9766
83 * 0.9910 0.9897 0.9884 0.9870 0.9852 0.9832 0.9809 0.9785
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 63 64 65 66 67 68 69 70
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
68 * 0.9330 0.9262 0.9188 0.9110 0.9027 0.8939 0.8846 0.8747
69 * 0.9365 0.9299 0.9228 0.9152 0.9073 0.8987 0.8897 0.8801
70 * 0.9399 0.9336 0.9268 0.9195 0.9118 0.9035 0.8947 0.8855
71 * 0.9433 0.9372 0.9306 0.9236 0.9162 0.9082 0.8998 0.8907
72 * 0.9465 0.9407 0.9345 0.9278 0.9206 0.9129 0.9047 0.8961
73 * 0.9497 0.9442 0.9382 0.9317 0.9249 0.9175 0.9097 0.9013
74 * 0.9529 0.9475 0.9419 0.9356 0.9292 0.9221 0.9145 0.9064
75 * 0.9559 0.9509 0.9454 0.9395 0.9333 0.9265 0.9193 0.9115
76 * 0.9587 0.9540 0.9489 0.9432 0.9373 0.9308 0.9239 0.9165
77 * 0.9616 0.9570 0.9522 0.9468 0.9413 0.9350 0.9285 0.9214
78 * 0.9642 0.9600 0.9553 0.9503 0.9450 0.9392 0.9329 0.9261
79 * 0.9668 0.9628 0.9584 0.9536 0.9486 0.9430 0.9372 0.9307
80 * 0.9692 0.9654 0.9614 0.9569 0.9521 0.9469 0.9412 0.9351
81 * 0.9716 0.9680 0.9641 0.9599 0.9554 0.9505 0.9452 0.9394
82 * 0.9737 0.9704 0.9668 0.9629 0.9586 0.9539 0.9490 0.9435
83 * 0.9757 0.9727 0.9693 0.9656 0.9616 0.9572 0.9526 0.9475
</TABLE>
<PAGE> 106
APPENDIX A
TABLE 1
50% JOINT AND SURVIVORSHIP
OPTION FACTORS
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 55 56 57 58 59 60 61 62
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
84 * 0.9918 0.9907 0.9894 0.9880 0.9865 0.9846 0.9825 0.9802
85 * 0.9925 0.9915 0.9904 0.9891 0.9875 0.9859 0.9840 0.9819
86 * 0.9932 0.9922 0.9912 0.9901 0.9886 0.9871 0.9853 0.9834
87 * 0.9938 0.9930 0.9920 0.9910 0.9897 0.9882 0.9867 0.9848
88 * 0.9944 0.9936 0.9928 0.9919 0.9906 0.9893 0.9878 0.9862
89 * 0.9950 0.9942 0.9935 0.9927 0.9915 0.9904 0.9889 0.9874
90 * 0.9954 0.9948 0.9940 0.9933 0.9923 0.9913 0.9900 0.9886
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 63 64 65 66 67 68 69 70
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
84 * 0.9777 0.9749 0.9717 0.9682 0.9645 0.9604 0.9560 0.9511
85 * 0.9795 0.9769 0.9740 0.9707 0.9672 0.9634 0.9593 0.9547
86 * 0.9812 0.9787 0.9761 0.9730 0.9699 0.9663 0.9625 0.9582
87 * 0.9829 0.9806 0.9780 0.9753 0.9724 0.9690 0.9654 0.9614
88 * 0.9844 0.9823 0.9799 0.9774 0.9747 0.9715 0.9683 0.9645
89 * 0.9858 0.9838 0.9817 0.9793 0.9768 0.9739 0.9709 0.9674
90 * 0.9871 0.9854 0.9834 0.9811 0.9789 0.9763 0.9734 0.9702
</TABLE>
<PAGE> 107
APPENDIX A
TABLE 1
50% JOINT AND SURVIVORSHIP
OPTION FACTORS
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 71 72 73 74 75 76 77 78
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20 * 0.7346 0.7210 0.7071 0.6928 0.6783 0.6633 0.6481 0.6328
21 * 0.7352 0.7215 0.7076 0.6932 0.6787 0.6638 0.6486 0.6332
22 * 0.7357 0.7220 0.7081 0.6938 0.6792 0.6643 0.6491 0.6337
23 * 0.7363 0.7226 0.7087 0.6944 0.6798 0.6648 0.6496 0.6342
24 * 0.7368 0.7232 0.7093 0.6949 0.6804 0.6655 0.6503 0.6349
25 * 0.7375 0.7239 0.7099 0.6956 0.6810 0.6660 0.6509 0.6354
26 * 0.7382 0.7245 0.7106 0.6962 0.6816 0.6667 0.6515 0.6361
27 * 0.7390 0.7252 0.7113 0.6969 0.6824 0.6674 0.6522 0.6368
28 * 0.7397 0.7261 0.7121 0.6977 0.6831 0.6682 0.6530 0.6375
29 * 0.7406 0.7269 0.7130 0.6986 0.6840 0.6691 0.6538 0.6384
30 * 0.7415 0.7278 0.7138 0.6995 0.6849 0.6700 0.6547 0.6393
31 * 0.7424 0.7288 0.7149 0.7005 0.6859 0.6709 0.6556 0.6402
32 * 0.7436 0.7299 0.7159 0.7015 0.6869 0.6729 0.6567 0.6412
33 * 0.7447 0.7310 0.7170 0.7027 0.6880 0.6730 0.6578 0.6423
34 * 0.7459 0.7322 0.7183 0.7038 0.6892 0.6743 0.6590 0.6435
35 * 0.7472 0.7334 0.7195 0.7051 0.6905 0.6756 0.6602 0.6448
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 79 80 81 82 83 84 85
BEN *
<S> <C> <C> <C> <C> <C> <C> <C>
20 * 0.6172 0.6017 0.5861 0.5704 0.5549 0.5395 0.5245
21 * 0.6177 0.6021 0.5865 0.5709 0.5553 0.5400 0.5249
22 * 0.6182 0.6026 0.5870 0.5713 0.5558 0.5404 0.5253
23 * 0.6187 0.6031 0.5875 0.5718 0.5563 0.5409 0.5258
24 * 0.6193 0.6037 0.5880 0.5724 0.5568 0.5414 0.5263
25 * 0.6199 0.6043 0.5886 0.5730 0.5574 0.5420 0.5269
26 * 0.6206 0.6049 0.5893 0.5736 0.5580 0.5426 0.5275
27 * 0.6212 0.6056 0.5899 0.5743 0.5587 0.5433 0.5281
28 * 0.6220 0.6064 0.5907 0.5750 0.5594 0.5440 0.5288
29 * 0.6228 0.6072 0.5915 0.5758 0.5601 0.5447 0.5295
30 * 0.6237 0.6081 0.5923 0.5766 0.5610 0.5455 0.5303
31 * 0.6246 0.6089 0.5932 0.5775 0.5619 0.5464 0.5312
32 * 0.6256 0.6100 0.5942 0.5784 0.5628 0.5473 0.5322
33 * 0.6267 0.6110 0.5953 0.5795 0.5639 0.5483 0.5332
34 * 0.6279 0.6122 0.5965 0.5806 0.5650 0.5494 0.5342
35 * 0.6291 0.6134 0.5977 0.5818 0.5661 0.5506 0.5354
</TABLE>
<PAGE> 108
APPENDIX A
TABLE 1
50% JOINT AND SURVIVORSHIP
OPTION FACTORS
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 71 72 73 74 75 76 77 78
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
36 * 0.7485 0.7349 0.7209 0.7065 0.6919 0.6769 0.6616 0.6461
37 * 0.7500 0.7364 0.7223 0.7079 0.6933 0.6784 0.6630 0.6475
38 * 0.7516 0.7379 0.7239 0.7096 0.6950 0.6799 0.6646 0.6491
39 * 0.7533 0.7396 0.7526 0.7112 0.6966 0.6816 0.6663 0.6507
40 * 0.7551 0.7414 0.7275 0.7130 0.6984 0.6834 0.6681 0.6525
41 * 0.7570 0.7433 0.7294 0.7150 0.7003 0.6853 0.6700 0.6544
42 * 0.7590 0.7454 0.7314 0.7170 0.7023 0.6874 0.6720 0.6564
43 * 0.7611 0.7475 0.7336 0.7192 0.7045 0.6895 0.6742 0.6586
44 * 0.7635 0.7498 0.7359 0.7215 0.7069 0.6919 0.6765 0.6609
45 * 0.7658 0.7522 0.7783 0.7239 0.7093 0.6943 0.6790 0.6634
46 * 0.7684 0.7548 0.7410 0.7266 0.7119 0.6970 0.6815 0.6660
47 * 0.7712 0.7576 0.7437 0.7294 0.7147 0.6997 0.6844 0.6688
48 * 0.7741 0.7605 0.7467 0.7323 0.7177 0.7027 0.6874 0.6717
49 * 0.7771 0.7635 0.7497 0.7354 0.7209 0.7059 0.6905 0.6749
50 * 0.7802 0.7668 0.7530 0.7388 0.7242 0.7092 0.6939 0.6783
51 * 0.7836 0.7702 0.7564 0.7423 0.7278 0.7128 0.6975 0.6818
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 79 80 81 82 83 84 85
BEN *
<S> <C> <C> <C> <C> <C> <C> <C>
36 * 0.6304 0.6147 0.5990 0.5831 0.5674 0.5519 0.5366
37 * 0.6318 0.6162 0.6004 0.5845 0.5688 0.5532 0.5380
38 * 0.6334 0.6177 0.6019 0.5860 0.5702 0.5547 0.5394
39 * 0.6351 0.6193 0.6035 0.5876 0.5718 0.5562 0.5409
40 * 0.6368 0.6211 0.6052 0.5893 0.5735 0.5579 0.5425
41 * 0.6387 0.6229 0.6071 0.5911 0.5753 0.5597 0.5443
42 * 0.6407 0.6249 0.6090 0.5931 0.5773 0.5616 0.5462
43 * 0.6428 0.6271 0.6111 0.5952 0.5793 0.5637 0.5482
44 * 0.6452 0.6293 0.6134 0.5974 0.5815 0.5658 0.5504
45 * 0.6476 0.6318 0.6158 0.5998 0.5840 0.5682 0.5527
46 * 0.6502 0.6344 0.6184 0.6024 0.5865 0.5707 0.5551
47 * 0.6530 0.6371 0.6212 0.6051 0.5892 0.5733 0.5578
48 * 0.6560 0.6401 0.6241 0.6081 0.5921 0.5762 0.5606
49 * 0.6591 0.6432 0.6272 0.6111 0.5952 0.5793 0.5637
50 * 0.6625 0.6466 0.6306 0.6145 0.5984 0.5826 0.5669
51 * 0.6660 0.6502 0.6341 0.6180 0.6020 0.5860 0.5704
</TABLE>
<PAGE> 109
APPENDIX A
TABLE 1
50% JOINT AND SURVIVORSHIP
OPTION FACTORS
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 71 72 73 74 75 76 77 78
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
52 * 0.7872 0.7738 0.7601 0.7459 0.7314 0.7165 0.7012 0.6856
53 * 0.7909 0.7776 0.7640 0.7498 0.7354 0.7205 0.7052 0.6896
54 * 0.7948 0.7816 0.7680 0.7539 0.7395 0.7246 0.7094 0.6938
55 * 0.7989 0.7857 0.7722 0.7582 0.7439 0.7290 0.7138 0.6983
56 * 0.8031 0.7901 0.7766 0.7627 0.7484 0.7337 0.7185 0.7030
57 * 0.8075 0.7945 0.7812 0.7673 0.7532 0.7385 0.7234 0.7080
58 * 0.8121 0.7992 0.7860 0.7723 0.7582 0.7435 0.7285 0.7131
59 * 0.8168 0.8041 0.7910 0.7773 0.7633 0.7488 0.7338 0.7185
60 * 0.8216 0.8091 0.7961 0.7826 0.7687 0.7543 0.7393 0.7241
61 * 0.8267 0.8142 0.8014 0.7880 0.7742 0.7599 0.7451 0.7300
62 * 0.8318 0.8196 0.8069 0.7936 0.7800 0.7658 0.7511 0.7360
63 * 0.8370 0.8250 0.8125 0.7993 0.7859 0.7718 0.7573 0.7423
64 * 0.8424 0.8306 0.8182 0.8052 0.7920 0.7781 0.7637 0.7488
65 * 0.8479 0.8362 0.8241 0.8113 0.7981 0.7844 0.7702 0.7555
66 * 0.8533 0.8419 0.8300 0.8175 0.8045 0.7909 0.7769 0.7623
67 * 0.8588 0.8477 0.8360 0.8237 0.8110 0.7976 0.7837 0.7694
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 79 80 81 82 83 84 85
BEN *
<S> <C> <C> <C> <C> <C> <C> <C>
52 * 0.6698 0.6540 0.6379 0.6217 0.6057 0.5898 0.5741
53 * 0.6738 0.6580 0.6419 0.6258 0.6097 0.5937 0.5779
54 * 0.6781 0.6622 0.6461 0.6300 0.6139 0.5979 0.5822
55 * 0.6826 0.6667 0.6507 0.6344 0.6184 0.6024 0.5865
56 * 0.6873 0.6784 0.6554 0.6392 0.6231 0.6071 0.5913
57 * 0.6923 0.6764 0.6604 0.6442 0.6281 0.6120 0.5962
58 * 0.6974 0.6816 0.6657 0.6495 0.6333 0.6173 0.6015
59 * 0.7029 0.6871 0.6711 0.6550 0.6389 0.6228 0.6069
60 * 0.7086 0.6929 0.6770 0.6608 0.6447 0.6286 0.6128
61 * 0.7145 0.6989 0.6830 0.6668 0.6508 0.6347 0.6189
62 * 0.7207 0.7051 0.6893 0.6732 0.6572 0.6411 0.6253
63 * 0.7271 0.7116 0.6958 0.6798 0.6638 0.6478 0.6319
64 * 0.7337 0.7183 0.7026 0.6866 0.6707 0.6547 0.6388
65 * 0.7405 0.7252 0.7096 0.6937 0.6778 0.6619 0.6461
66 * 0.7474 0.7323 0.7168 0.7011 0.6852 0.6693 0.6536
67 * 0.7546 0.7397 0.7243 0.7086 0.6929 0.6771 0.6614
</TABLE>
<PAGE> 110
APPENDIX A
TABLE 1
50% JOINT AND SURVIVORSHIP
OPTION FACTORS
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 71 72 73 74 75 76 77 78
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
68 * 0.8645 0.8535 0.8421 0.8300 0.8176 0.8044 0.7907 0.7766
69 * 0.8701 0.8594 0.8482 0.8364 0.8242 0.8113 0.7978 0.7839
70 * 0.8757 0.8653 0.8544 0.8428 0.8308 0.8182 0.8050 0.7913
71 * 0.8813 0.8713 0.8606 0.8494 0.8376 0.8252 0.8122 0.7988
72 * 0.8869 0.8771 0.8668 0.8558 0.8444 0.8324 0.8196 0.8064
73 * 0.8924 0.8829 0.8730 0.8623 0.8512 0.8394 0.8271 0.8141
74 * 0.8979 0.8888 0.8791 0.8688 0.8579 0.8465 0.8344 0.8218
75 * 0.9033 0.8945 0.8852 0.8752 0.8647 0.8536 0.8418 0.8295
76 * 0.9086 0.9001 0.8912 0.8816 0.8714 0.8606 0.8492 0.8372
77 * 0.9139 0.9057 0.8971 0.8878 0.8780 0.8676 0.8566 0.8448
78 * 0.9190 0.9112 0.9028 0.8939 0.8846 0.8744 0.8638 0.8525
79 * 0.9239 0.9164 0.9086 0.9000 0.8909 0.8812 0.8709 0.8600
80 * 0.9286 0.9216 0.9140 0.9058 0.8972 0.8879 0.8779 0.8674
81 * 0.9333 0.9265 0.9193 0.9115 0.9032 0.8943 0.8848 0.8746
82 * 0.9377 0.9313 0.9244 0.9171 0.9091 0.9006 0.8915 0.8818
83 * 0.9420 0.9359 0.9295 0.9223 0.9148 0.9067 0.8980 0.8887
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 79 80 81 82 83 84 85
BEN *
<S> <C> <C> <C> <C> <C> <C> <C>
68 * 0.7620 0.7471 0.7320 0.7164 0.7007 0.6850 0.6694
69 * 0.7695 0.7548 0.7398 0.7243 0.7088 0.6932 0.6777
70 * 0.7771 0.7627 0.7478 0.7326 0.7171 0.7016 0.6862
71 * 0.7848 0.7706 0.7559 0.7409 0.7256 0.7103 0.6949
72 * 0.7927 0.7787 0.7642 0.7494 0.7343 0.7190 0.7039
73 * 0.8006 0.7868 0.7726 0.7580 0.7431 0.7280 0.7131
74 * 0.8087 0.7951 0.7812 0.7668 0.7521 0.7373 0.7224
75 * 0.8167 0.8034 0.7898 0.7755 0.7611 0.7465 0.7318
76 * 0.8247 0.8118 0.7984 0.7845 0.7703 0.7559 0.7415
77 * 0.8327 0.8201 0.8070 0.7934 0.7795 0.7654 0.7512
78 * 0.8407 0.8285 0.8157 0.8024 0.7888 0.7749 0.7610
79 * 0.8485 0.8367 0.8242 0.8113 0.7980 0.7845 0.7709
80 * 0.8563 0.8448 0.8328 0.8202 0.8072 0.7940 0.7807
81 * 0.8640 0.8529 0.8413 0.8289 0.8164 0.8035 0.7905
82 * 0.8715 0.8608 0.8495 0.8376 0.8255 0.8129 0.8002
83 * 0.8788 0.8686 0.8577 0.8463 0.8345 0.8223 0.8098
</TABLE>
<PAGE> 111
APPENDIX A
TABLE 1
50% JOINT AND SURVIVORSHIP
OPTION FACTORS
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 71 72 73 74 75 76 77 78
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
84 * 0.9460 0.9403 0.9342 0.9275 0.9205 0.9127 0.9044 0.8954
85 * 0.9499 0.9445 0.9388 0.9325 0.9258 0.9184 0.9105 0.9020
86 * 0.9537 0.9486 0.9432 0.9373 0.9309 0.9239 0.9165 0.9084
87 * 0.9573 0.9525 0.9474 0.9418 0.9359 0.9293 0.9221 0.9146
88 * 0.9606 0.9562 0.9514 0.9462 0.9406 0.9344 0.9277 0.9204
89 * 0.9637 0.9596 0.9553 0.9503 0.9452 0.9394 0.9329 0.9262
90 * 0.9669 0.9631 0.9590 0.9543 0.9494 0.9441 0.9381 0.9317
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 79 80 81 82 83 84 85
BEN *
<S> <C> <C> <C> <C> <C> <C> <C>
84 * 0.8860 0.8761 0.8657 0.8546 0.8432 0.8314 0.8195
85 * 0.8930 0.8835 0.8735 0.8629 0.8519 0.8404 0.8289
86 * 0.8997 0.8907 0.8811 0.8709 0.8603 0.8494 0.8381
87 * 0.9063 0.8977 0.8885 0.8788 0.8686 0.8580 0.8473
88 * 0.9127 0.9045 0.8959 0.8865 0.8767 0.8667 0.8563
89 * 0.9189 0.9111 0.9029 0.8940 0.8846 0.8751 0.8651
90 * 0.9248 0.9175 0.9097 0.9012 0.8925 0.8833 0.8738
</TABLE>
<PAGE> 112
APPENDIX A
TABLE 2
100% JOINT AND SURVIVORSHIP
OPTION FACTORS
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 55 56 57 58 59 60 61 62
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20 * 0.8180 0.8064 0.7941 0.7815 0.7681 0.7543 0.7401 0.7254
21 * 0.8128 0.8071 0.7949 0.7822 0.7689 0.7551 0.7408 0.7261
22 * 0.8196 0.8079 0.7958 0.7830 0.7697 0.7559 0.7416 0.7269
23 * 0.8205 0.8088 0.7966 0.7839 0.7706 0.7568 0.7425 0.7278
24 * 0.8214 0.8098 0.7976 0.7848 0.7715 0.7577 0.7434 0.7287
25 * 0.8224 0.8107 0.7985 0.7858 0.7725 0.7587 0.7443 0.7296
26 * 0.8235 0.8118 0.7996 0.7869 0.7735 0.7597 0.7454 0.7307
27 * 0.8246 0.8130 0.8007 0.7880 0.7746 0.7608 0.7465 0.7317
28 * 0.8258 0.8141 0.8019 0.7892 0.7758 0.7620 0.7477 0.7329
29 * 0.8271 0.8154 0.8032 0.7905 0.7771 0.7632 0.7489 0.7341
30 * 0.8284 0.8168 0.8046 0.7918 0.7785 0.7646 0.7503 0.7355
31 * 0.8299 0.8182 0.8060 0.7933 0.7799 0.7661 0.7517 0.7369
32 * 0.8314 0.8197 0.8075 0.7948 0.7814 0.7676 0.7532 0.7385
33 * 0.8330 0.8214 0.8092 0.7964 0.7831 0.7692 0.7549 0.7400
34 * 0.8347 0.8231 0.8109 0.7982 0.7849 0.7710 0.7566 0.7418
35 * 0.8365 0.8249 0.8127 0.8001 0.7867 0.7728 0.7585 0.7437
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 63 64 65 66 67 68 69 70
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20 * 0.7104 0.6949 0.6791 0.6631 0.6469 0.6305 0.6140 0.5973
21 * 0.7111 0.6956 0.6798 0.6638 0.6476 0.6311 0.6146 0.5979
22 * 0.7119 0.6964 0.6806 0.6645 0.6483 0.6319 0.6153 0.5986
23 * 0.7127 0.6972 0.6814 0.6653 0.6491 0.6326 0.6161 0.5993
24 * 0.7136 0.6981 0.6822 0.6661 0.6499 0.6334 0.6168 0.6001
25 * 0.7145 0.6990 0.6831 0.6670 0.6508 0.6343 0.6177 0.6009
26 * 0.7155 0.7000 0.6841 0.6680 0.6517 0.6352 0.6186 0.6018
27 * 0.7166 0.7010 0.6851 0.6690 0.6527 0.6362 0.6196 0.6028
28 * 0.7178 0.7021 0.6863 0.6701 0.6538 0.6373 0.6206 0.6038
29 * 0.7190 0.7034 0.6875 0.6713 0.6550 0.6384 0.6217 0.6049
30 * 0.7203 0.7047 0.6888 0.6726 0.6562 0.6396 0.6229 0.6061
31 * 0.7217 0.7061 0.6901 0.6739 0.6576 0.6410 0.6242 0.6073
32 * 0.7232 0.7076 0.6916 0.6754 0.6590 0.6424 0.6256 0.6087
33 * 0.7249 0.7092 0.6932 0.6770 0.6605 0.6439 0.6270 0.6101
34 * 0.7265 0.7109 0.6949 0.6786 0.6622 0.6455 0.6287 0.6117
35 * 0.7284 0.7127 0.6967 0.6804 0.6640 0.6473 0.6304 0.6134
</TABLE>
<PAGE> 113
APPENDIX A
TABLE 2
100% JOINT AND SURVIVORSHIP
OPTION FACTORS
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 55 56 57 58 59 60 61 62
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
36 * 0.8385 0.8269 0.8147 0.8020 0.7887 0.7748 0.7604 0.7456
37 * 0.8405 0.8289 0.8168 0.8041 0.7907 0.7769 0.7625 0.7477
38 * 0.8426 0.8311 0.8190 0.8063 0.7930 0.7791 0.7648 0.7499
39 * 0.8448 0.8333 0.8212 0.8086 0.7953 0.7815 0.7671 0.7523
40 * 0.8471 0.8357 0.8236 0.8110 0.7977 0.7839 0.7696 0.7548
41 * 0.8495 0.8382 0.8262 0.8136 0.8003 0.7866 0.7722 0.7574
42 * 0.8521 0.8408 0.8288 0.8163 0.8031 0.7893 0.7750 0.7602
43 * 0.8548 0.8435 0.8316 0.8191 0.8060 0.7922 0.7780 0.7632
44 * 0.8575 0.8464 0.8345 0.8221 0.8090 0.7953 0.7810 0.7663
45 * 0.8604 0.8493 0.8375 0.8252 0.8121 0.7985 0.7843 0.7696
46 * 0.8634 0.8524 0.8407 0.8284 0.8154 0.8018 0.7877 0.7730
47 * 0.8666 0.8556 0.8440 0.8318 0.8189 0.8053 0.7912 0.7766
48 * 0.8697 0.8589 0.8474 0.8353 0.8224 0.8090 0.7949 0.7804
49 * 0.8731 0.8623 0.8509 0.8389 0.8262 0.8129 0.7988 0.7843
50 * 0.8764 0.8659 0.8546 0.8427 0.8301 0.8168 0.8029 0.7885
51 * 0.8799 0.8695 0.8584 0.8466 0.8341 0.8209 0.8071 0.7928
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 63 64 65 66 67 68 69 70
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
36 * 0.7303 0.7147 0.6986 0.6823 0.6659 0.6491 0.6323 0.6152
37 * 0.7325 0.7168 0.7007 0.6844 0.6679 0.6511 0.6342 0.6171
38 * 0.7347 0.7190 0.7029 0.6865 0.6700 0.6532 0.6363 0.6191
39 * 0.7370 0.7213 0.7052 0.6889 0.6723 0.6555 0.6385 0.6214
40 * 0.7395 0.7238 0.7077 0.6914 0.6747 0.6579 0.6409 0.6237
41 * 0.7422 0.7264 0.7104 0.6940 0.6773 0.6605 0.6434 0.6262
42 * 0.7450 0.7292 0.7132 0.6967 0.6801 0.6632 0.6461 0.6289
43 * 0.7479 0.7322 0.7161 0.6997 0.6830 0.6661 0.6490 0.6317
44 * 0.7511 0.7353 0.7192 0.7028 0.6861 0.6692 0.6521 0.6348
45 * 0.7544 0.7386 0.7225 0.7061 0.6895 0.6724 0.6553 0.6379
46 * 0.7578 0.7421 0.7260 0.7096 0.6929 0.6759 0.6587 0.6414
47 * 0.7614 0.7458 0.7927 0.7133 0.6966 0.6796 0.6624 0.6450
48 * 0.7653 0.7497 0.7336 0.7172 0.7006 0.6835 0.6663 0.6488
49 * 0.7693 0.7537 0.7377 0.7213 0.7047 0.6876 0.6704 0.6529
50 * 0.7735 0.7580 0.7420 0.7256 0.7090 0.6920 0.6748 0.6573
51 * 0.7779 0.7625 0.7465 0.7302 0.7136 0.6966 0.6793 0.6618
</TABLE>
<PAGE> 114
APPENDIX A
TABLE 2
100% JOINT AND SURVISORSHIP
OPTION FACTORS
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 55 56 57 58 59 60 61 62
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
52 * 0.8835 0.8732 0.8622 0.8506 0.8382 0.8252 0.8115 0.7973
53 * 0.8872 0.8771 0.8662 0.8548 0.8425 0.8296 0.8161 0.8020
54 * 0.8909 0.8810 0.8703 0.8590 0.8470 0.8342 0.8208 0.8068
55 * 0.8947 0.8849 0.8745 0.8633 0.8514 0.8389 0.8257 0.8118
56 * 0.8985 0.8889 0.8787 0.8678 0.8561 0.8437 0.8306 0.8169
57 * 0.9024 0.8930 0.8830 0.8723 0.8608 0.8486 0.8357 0.8222
58 * 0.9063 0.8972 0.8874 0.8769 0.8656 0.8536 0.8409 0.8277
59 * 0.9101 0.9013 0.8917 0.8815 0.8704 0.8587 0.8463 0.8332
60 * 0.9140 0.9054 0.8961 0.8862 0.8754 0.8639 0.8517 0.8388
61 * 0.9180 0.9097 0.9006 0.8909 0.8803 0.8691 0.8571 0.8445
62 * 0.9218 0.9138 0.9050 0.8956 0.8853 0.8743 0.8627 0.8503
63 * 0.9257 0.9179 0.9095 0.9003 0.8903 0.8797 0.8682 0.8561
64 * 0.9295 0.9220 0.9138 0.9050 0.8953 0.8849 0.8738 0.8620
65 * 0.9333 0.9260 0.9182 0.9096 0.9003 0.8902 0.8794 0.8679
66 * 0.9369 0.9300 0.9224 0.9142 0.9051 0.8954 0.8850 0.8739
67 * 0.9405 0.9339 0.9266 0.9187 0.9100 0.9006 0.8905 0.8797
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 63 64 65 66 67 68 69 70
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
52 * 0.7825 0.7671 0.7512 0.7349 0.7184 0.7014 0.6842 0.6667
53 * 0.7872 0.7719 0.7561 0.7399 0.7234 0.7064 0.6892 0.6717
54 * 0.7922 0.7770 0.7613 0.7451 0.7287 0.7117 0.6946 0.6771
55 * 0.7973 0.7823 0.7666 0.7506 0.7342 0.7173 0.7002 0.6827
56 * 0.8026 0.7877 0.7722 0.7562 0.7399 0.7231 0.7061 0.6886
57 * 0.8080 0.7933 0.7779 0.7621 0.7459 0.7291 0.7121 0.6947
58 * 0.8137 0.7990 0.7839 0.7681 0.7520 0.7354 0.7185 0.7011
59 * 0.8194 0.8049 0.7899 0.7743 0.7584 0.7419 0.7250 0.7078
60 * 0.8252 0.8110 0.7961 0.7808 0.7650 0.7486 0.7319 0.7147
61 * 0.8312 0.8172 0.8026 0.7874 0.7717 0.7555 0.7389 0.7219
62 * 0.8372 0.8235 0.8091 0.7941 0.7787 0.7626 0.7461 0.7293
63 * 0.8434 0.8299 0.8157 0.8010 0.7857 0.7699 0.7536 0.7369
64 * 0.8495 0.8363 0.8225 0.8079 0.7929 0.7773 0.7612 0.7446
65 * 0.8558 0.8428 0.8292 0.8150 0.8002 0.7849 0.7690 0.7526
66 * 0.8620 0.8493 0.8361 0.8221 0.8077 0.7925 0.7770 0.7607
67 * 0.8682 0.8559 0.8429 0.8294 0.8151 0.8003 0.7850 0.7690
</TABLE>
<PAGE> 115
APPENDIX A
TABLE 2
100% JOINT AND SURVIVORSHIP
OPTION FACTORS
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 55 56 57 58 59 60 61 62
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
68 * 0.9439 0.9377 0.9307 0.9232 0.9148 0.9058 0.8960 0.8856
69 * 0.9474 0.9414 0.9347 0.9276 0.9195 0.9108 0.9014 0.8913
70 * 0.9507 0.9450 0.9387 0.9318 0.9241 0.9157 0.9067 0.8970
71 * 0.9538 0.9485 0.9424 0.9359 0.9286 0.9206 0.9120 0.9026
72 * 0.9569 0.9518 0.9461 0.9399 0.9330 0.9253 0.9171 0.9081
73 * 0.9599 0.9550 0.9496 0.9438 0.9372 0.9299 0.9221 0.9135
74 * 0.9627 0.9581 0.9530 0.9475 0.9413 0.9344 0.9269 0.9187
75 * 0.9653 0.9611 0.9563 0.9511 0.9452 0.9387 0.9316 0.9238
76 * 0.9679 0.9640 0.9595 0.9546 0.9490 0.9428 0.9361 0.9287
77 * 0.9704 0.9666 0.9624 0.9579 0.9526 0.9468 0.9404 0.9335
78 * 0.9726 0.9692 0.9652 0.9610 0.9560 0.9507 0.9446 0.9380
79 * 0.9748 0.9716 0.9679 0.9640 0.9593 0.9542 0.9486 0.9424
80 * 0.9768 0.9739 0.9705 0.9667 0.9624 0.9576 0.9524 0.9465
81 * 0.9787 0.9760 0.9728 0.9694 0.9653 0.9609 0.9560 0.9505
82 * 0.9805 0.9779 0.9751 0.9718 0.9681 0.9639 0.9594 0.9543
83 * 0.9822 0.9798 0.9771 0.9742 0.9708 0.9668 0.9626 0.9579
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 63 64 65 66 67 68 69 70
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
68 * 0.8744 0.8625 0.8498 0.8366 0.8227 0.8081 0.7931 0.7774
69 * 0.8806 0.8689 0.8567 0.8438 0.8303 0.8161 0.8013 0.7859
70 * 0.8866 0.8755 0.8635 0.8510 0.8379 0.8240 0.8095 0.7945
71 * 0.8926 0.8818 0.8703 0.8582 0.8454 0.8319 0.8178 0.8030
72 * 0.8985 0.8881 0.8770 0.8653 0.8529 0.8398 0.8261 0.8117
73 * 0.9042 0.8943 0.8837 0.8723 0.8604 0.8476 0.8343 0.8203
74 * 0.9099 0.9004 0.8901 0.8792 0.8677 0.8554 0.8425 0.8289
75 * 0.9154 0.9063 0.8964 0.8860 0.8749 0.8631 0.8506 0.8375
76 * 0.9207 0.9120 0.9027 0.8926 0.8820 0.8706 0.8586 0.8459
77 * 0.9259 0.9177 0.9087 0.8991 0.8889 0.8780 0.8665 0.8542
78 * 0.9309 0.9230 0.9146 0.9054 0.8957 0.8852 0.8742 0.8624
79 * 0.9356 0.9282 0.9202 0.9115 0.9022 0.8922 0.8817 0.8703
80 * 0.9402 0.9332 0.9256 0.9173 0.9086 0.8990 0.8890 0.8781
81 * 0.9446 0.9379 0.9307 0.9230 0.9147 0.9057 0.8961 0.8857
82 * 0.9487 0.9425 0.9358 0.9284 0.9205 0.9119 0.9029 0.8930
83 * 0.9526 0.9468 0.9404 0.9336 0.9262 0.9181 0.9095 0.9001
</TABLE>
<PAGE> 116
APPENDIX A
TABLE 2
100% JOINT AND SURVIVORSHIP
OPTION FACTORS
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 55 56 57 58 59 60 61 62
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
84 * 0.9837 0.9816 0.9791 0.9764 0.9732 0.9696 0.9656 0.9613
85 * 0.9851 0.9831 0.9809 0.9784 0.9755 0.9722 0.9685 0.9643
86 * 0.9864 0.9846 0.9826 0.9803 0.9776 0.9746 0.9711 0.9674
87 * 0.9877 0.9861 0.9841 0.9821 0.9796 0.9768 0.9737 0.9701
88 * 0.9889 0.9874 0.9856 0.9838 0.9814 0.9789 0.9760 0.9727
89 * 0.9899 0.9886 0.9870 0.9853 0.9832 0.9808 0.9782 0.9752
90 * 0.9909 0.9896 0.9882 0.9867 0.9848 0.9827 0.9802 0.9776
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 63 64 65 66 67 68 69 70
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
84 * 0.9563 0.9509 0.9449 0.9384 0.9315 0.9239 0.9157 0.9069
85 * 0.9598 0.9548 0.9492 0.9431 0.9367 0.9295 0.9219 0.9135
86 * 0.9631 0.9585 0.9532 0.9476 0.9415 0.9348 0.9276 0.9197
87 * 0.9663 0.9619 0.9571 0.9518 0.9461 0.9398 0.9332 0.9258
88 * 0.9692 0.9651 0.9607 0.9558 0.9506 0.9447 0.9384 0.9315
89 * 0.9720 0.9682 0.9640 0.9596 0.9546 0.9492 0.9434 0.9369
90 * 0.9745 0.9710 0.9672 0.9631 0.9586 0.9536 0.9482 0.9422
</TABLE>
<PAGE> 117
APPENDIX A
TABLE 2
100% JOINT AND SURVISORSHIP
OPTION FACTORS
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 71 72 73 74 75 76 77 78
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20 * 0.5806 0.5638 0.5469 0.5300 0.5131 0.4962 0.4794 0.4628
21 * 0.5812 0.5644 0.5475 0.5305 0.5137 0.4968 0.4800 0.4633
22 * 0.5819 0.5650 0.5481 0.5312 0.5142 0.4973 0.4805 0.4638
23 * 0.5826 0.5657 0.5488 0.5318 0.5149 0.4980 0.4811 0.4644
24 * 0.5833 0.5664 0.5495 0.5325 0.5156 0.4986 0.4817 0.4650
25 * 0.5842 0.5672 0.5503 0.5332 0.5163 0.4993 0.4824 0.4657
26 * 0.5850 0.5680 0.5511 0.5340 0.5170 0.5001 0.4831 0.4664
27 * 0.5860 0.5690 0.5520 0.5349 0.5179 0.5009 0.4840 0.4671
28 * 0.5869 0.5699 0.5529 0.5358 0.5183 0.5017 0.4848 0.4680
29 * 0.5880 0.5710 0.5539 0.5368 0.5198 0.5027 0.4857 0.4689
30 * 0.5892 0.5721 0.5550 0.5379 0.5208 0.5037 0.4867 0.4698
31 * 0.5904 0.5733 0.5562 0.5390 0.5219 0.5048 0.4877 0.4708
32 * 0.5918 0.5746 0.5575 0.5403 0.5231 0.5059 0.4889 0.4719
33 * 0.5932 0.5760 0.5588 0.5416 0.5244 0.5072 0.4901 0.4731
34 * 0.5947 0.5775 0.5603 0.5430 0.5258 0.5085 0.4914 0.4744
35 * 0.5964 0.5791 0.5619 0.5446 0.5273 0.5100 0.4928 0.4757
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 79 80 81 82 83 84 85
BEN *
<S> <C> <C> <C> <C> <C> <C> <C>
20 * 0.4464 0.4303 0.4145 0.399O 0.3840 0.3694 0.3554
21 * 0.4469 0.4307 0.4149 0.3994 0.3844 0.3698 0.3558
22 * 0.4474 0.4313 0.4154 0.3999 0.3849 0.3702 0.3562
23 * 0.4480 0.4318 0.4159 0.4004 0.3853 0.3707 0.3567
24 * 0.4486 0.4324 0.4165 0.4009 0.3858 0.3712 0.3571
25 * 0.4492 0.4330 0.4171 0.4015 0.3864 0.3717 0.3576
26 * 0.4499 0.4336 0.4177 0.4021 0.3870 0.3723 0.3582
27 * 0.4506 0.4344 0.4184 0.4028 0.3876 0.3729 0.3588
28 * 0.4514 0.4351 0.4191 0.4035 0.3883 0.3736 0.3594
29 * 0.4522 0.4359 0.4199 0.4043 0.3890 0.3743 0.3601
30 * 0.4532 0.4368 0.4208 0.4051 0.3898 0.3751 0.3609
31 * 0.4541 0.4378 0.4217 0.4060 0.3907 0.3759 0.3616
32 * 0.4552 0.4388 0.4227 0.4069 0.3916 0.3768 0.3625
33 * 0.4564 0.4399 0.4238 0.4079 0.3926 0.3778 0.3634
34 * 0.4576 0.4411 0.4249 0.4091 0.3937 0.3788 0.3644
35 * 0.4589 0.4424 0.4262 0.4103 0.3948 0.3799 0.3655
</TABLE>
<PAGE> 118
APPENDIX A
TABLE 2
100% JOINT AND SURVIVORSHIP
OPTION FACTORS
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 71 72 73 74 75 76 77 78
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
36 * 0.5981 0.5809 0.5636 0.5462 0.5289 0.5116 0.4943 0.4772
37 * 0.6000 0.5827 0.5654 0.5480 0.5306 0.5132 0.4959 0.4788
38 * 0.6020 0.5847 0.5673 0.5499 0.5325 0.5150 0.4977 0.4805
39 * 0.6042 0.5868 0.5694 0.5519 0.5345 0.5170 0.4996 0.4823
40 * 0.6065 0.5890 0.5716 0.5541 0.5366 0.5190 0.5016 0.4843
41 * 0.6089 0.5915 0.5740 0.5564 0.5388 0.5213 0.5037 0.4863
42 * 0.6116 0.5940 0.5765 0.5589 0.5413 0.5236 0.5060 0.4886
43 * 0.6143 0.5968 0.5792 0.5615 0.5438 0.5262 0.5085 0.4910
44 * 0.6174 0.5997 0.5821 0.5643 0.5466 0.5288 0.5111 0.4936
45 * 0.6205 0.6029 0.5852 0.5674 0.5496 0.5317 0.5139 0.4963
46 * 0.6239 0.6062 0.5885 0.5706 0.5527 0.5348 0.5170 0.4992
47 * 0.6275 0.6098 0.5919 0.5740 0.5561 0.5381 0.5202 0.5024
48 * 0.6313 0.6135 0.5957 0.5777 0.5597 0.5417 0.5237 0.5057
49 * 0.6354 0.6176 0.5997 0.5816 0.5636 0.5454 0.5273 0.5094
50 * 0.6397 0.6218 0.6039 0.5857 0.5676 0.5494 0.5312 0.5132
51 * 0.6442 0.6263 0.6083 0.5902 0.5720 0.5537 0.5354 0.5173
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 79 80 81 82 83 84 85
BEN *
<S> <C> <C> <C> <C> <C> <C> <C>
36 * 0.4603 0.4438 0.4275 0.4116 0.3961 0.3811 0.3667
37 * 0.4619 0.4452 0.4289 0.4129 0.3974 0.3824 0.3679
38 * 0.4635 0.4468 0.4305 0.4144 0.3989 0.3838 0.3693
39 * 0.4653 0.4485 0.4321 0.4160 0.4004 0.3853 0.3707
40 * 0.4672 0.4504 0.4339 0.4178 0.4021 0.3869 0.3722
41 * 0.4692 0.4524 0.4358 0.4196 0.4039 0.3886 0.3739
42 * 0.4714 0.4544 0.4378 0.4216 0.4058 0.3905 0.3757
43 * 0.4737 0.4567 0.4401 0.4237 0.4078 0.3924 0.3776
44 * 0.4762 0.4592 0.4424 0.4260 0.4100 0.3945 0.3797
45 * 0.4789 0.4617 0.4449 0.4284 0.4124 0.3968 0.3819
46 * 0.4817 0.4645 0.4476 0.4310 0.4149 0.3993 0.3842
47 * 0.4848 0.4675 0.4505 0.4338 0.4176 0.4019 0.3868
48 * 0.4881 0.4707 0.4536 0.4368 0.4205 0.4047 0.3895
49 * 0.4916 0.4741 0.4569 0.4401 0.4237 0.4078 0.3924
50 * 0.4953 0.4777 0.4605 0.4435 0.4270 0.4110 0.3956
51 * 0.4993 0.4817 0.4643 0.4472 0.4306 0.4145 0.3990
</TABLE>
<PAGE> 119
APPENDIX A
TABLE 2
100% JOINT AND SURVIVORSHIP
OPTION FACTORS
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 71 72 73 74 75 76 77 78
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
52 * 0.6490 0.6311 0.6130 0.5948 0.5766 0.5582 0.5399 0.5216
53 * 0.6541 0.6361 0.6181 0.5998 0.5815 0.5630 0.5446 0.5263
54 * 0.6595 0.6415 0.6234 0.6050 0.5867 0.5682 0.5497 0.5312
55 * 0.6651 0.6471 0.6289 0.6106 0.5921 0.5736 0.5550 0.5365
56 * 0.6710 0.6530 0.6348 0.6164 0.5980 0.5793 0.5607 0.5421
57 * 0.6772 0.6592 0.6410 0.6226 0.6040 0.5854 0.5667 0.5480
58 * 0.6836 0.6656 0.6475 0.6290 0.6105 0.5918 0.5729 0.5541
59 * 0.6903 0.6724 0.6542 0.6358 0.6172 0.5984 0.5795 0.5607
60 * 0.6973 0.6794 0.6613 0.6429 0.6242 0.6054 0.5865 0.5676
61 * 0.7045 0.6867 0.6686 0.6502 0.6316 0.6128 0.5938 0.5748
62 * 0.7120 0.6943 0.6763 0.6579 0.6393 0.6204 0.6015 0.5824
63 * 0.7197 0.7021 0.6842 0.6658 0.6472 0.6284 0.6094 0.5903
64 * 0.7277 0.7102 0.6923 0.6740 0.6555 0.6367 0.6177 0.5985
65 * 0.7358 0.7184 0.7007 0.6825 0.6641 0.6453 0.6263 0.6071
66 * 0.7442 0.7269 0.7094 0.6913 0.6730 0.6542 0.6352 0.6160
67 * 0.7526 0.7356 0.7183 0.7003 0.6820 0.6634 0.6444 0.6253
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 79 80 81 82 83 84 85
BEN *
<S> <C> <C> <C> <C> <C> <C> <C>
52 * 0.5036 0.4858 0.4683 0.4511 0.4344 0.4182 0.4025
53 * 0.5082 0.4903 0.4727 0.4554 0.4385 0.4222 0.4064
54 * 0.5130 0.4950 0.4773 0.4599 0.4429 0.4265 0.4106
55 * 0.5181 0.5000 0.4822 0.4646 0.4476 0.4310 0.4150
56 * 0.5236 0.5054 0.4874 0.4697 0.4525 0.4358 0.4197
57 * 0.5294 0.5110 0.4930 0.4752 0.4579 0.4410 0.4247
58 * 0.5355 0.5170 0.4989 0.4809 0.4634 0.4464 0.4300
59 * 0.5419 0.5234 0.5051 0.4870 0.4694 0.4523 0.4357
60 * 0.5487 0.5301 0.5117 0.4935 0.4757 0.4584 0.4417
61 * 0.5558 0.5371 0.5186 0.5002 0.4824 0.4649 0.4480
62 * 0.5634 0.5445 0.5258 0.5074 0.4894 0.4718 0.4548
63 * 0.5712 0.5523 0.5335 0.5150 0.4968 0.4791 0.4619
64 * 0.5794 0.5604 0.5415 0.5228 0.5045 0.4867 0.4693
65 * 0.5879 0.5688 0.5499 0.5311 0.5127 0.4946 0.4772
66 * 0.5968 0.5777 0.5587 0.5397 0.5212 0.5030 0.4854
67 * 0.6060 0.5868 0.5677 0.5488 0.5301 0.5118 0.4940
</TABLE>
<PAGE> 120
APPENDIX A
TABLE 2
100% JOINT AND SURVIVORSHIP
OPTION FACTORS
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 71 72 73 74 75 76 77 78
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
68 * 0.7613 0.7445 0.7272 0.7095 0.6914 0.6728 0.6539 0.6347
69 * 0.7700 0.7535 0.7365 0.7189 0.7009 0.6825 0.6637 0.6446
70 * 0.7789 0.7626 0.7459 0.7284 0.7106 0.6924 0.6737 0.6547
71 * 0.7878 0.7718 0.7553 0.7381 0.7206 0.7024 0.6839 0.6650
72 * 0.7968 0.7811 0.7649 0.7480 0.7307 0.7128 0.6944 0.6757
73 * 0.8058 0.7905 0.7746 0.7580 0.7409 0.7232 0.7050 0.6865
74 * 0.8148 0.7998 0.7843 0.7680 0.7513 0.7338 0.7159 0.6975
75 * 0.8237 0.8092 0.7940 0.7781 0.7617 0.7445 0.7269 0.7087
76 * 0.8325 0.8185 0.8037 0.7882 0.7721 0.7554 0.7379 0.7200
77 * 0.8413 0.8277 0.8133 0.7982 0.7825 0.7661 0.7490 0.7315
78 * 0.8500 0.8367 0.8229 0.8082 0.7929 0.7769 0.7602 0.7430
79 * 0.8584 0.8457 0.8323 0.8181 0.8032 0.7877 0.7713 0.7544
80 * 0.8668 0.8545 0.8416 0.8279 0.8135 0.7983 0.7824 0.7659
81 * 0.8749 0.8631 0.8507 0.8374 0.8235 0.8089 0.7934 0.7773
82 * 0.8827 0.8714 0.8595 0.8468 0.8334 0.8192 0.8042 0.7886
83 * 0.8902 0.8796 0.8681 0.8560 0.8431 0.8294 0.8149 0.7997
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 79 80 81 82 83 84 85
BEN *
<S> <C> <C> <C> <C> <C> <C> <C>
68 * 0.6155 0.5963 0.5772 0.5581 0.5394 0.5209 0.5031
69 * 0.6254 0.6062 0.5870 0.5679 0.5490 0.5305 0.5124
70 * 0.6355 0.6163 0.5971 0.5779 0.5590 0.5404 0.5222
71 * 0.6460 0.6268 0.6076 0.5884 0.5694 0.5507 0.5324
72 * 0.6567 0.6376 0.6184 0.5992 0.5802 0.5614 0.5430
73 * 0.6676 0.6486 0.6295 0.6103 0.5913 0.5724 0.5540
74 * 0.6788 0.6599 0.6409 0.6217 0.6027 0.5838 0.5653
75 * 0.6902 0.6715 0.6525 0.6334 0.6144 0.5956 0.5770
76 * 0.7017 0.6832 0.6644 0.6454 0.6265 0.6076 0.5891
77 * 0.7134 0.6951 0.6765 0.6576 0.6388 0.6200 0.6015
78 * 0.7252 0.7071 0.6887 0.6700 0.6513 0.6327 0.6142
79 * 0.7370 0.7192 0.7010 0.6826 0.6640 0.6455 0.6271
80 * 0.7489 0.7314 0.7135 0.6952 0.6769 0.6585 0.6402
81 * 0.7606 0.7435 0.7260 0.7079 0.6898 0.6716 0.6535
82 * 0.7723 0.7555 0.7384 0.7207 0.7028 0.6849 0.6669
83 * 0.7839 0.7676 0.7508 0.7334 0.7159 0.6982 0.6804
</TABLE>
<PAGE> 121
APPENDIX A
TABLE 2
100% JOINT AND SURVIVORSHIP
OPTION FACTORS
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 71 72 73 74 75 76 77 78
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
84 * 0.8975 0.8874 0.8765 0.8649 0.8526 0.8393 0.8254 0.8108
85 * 0.9046 0.8950 0.8846 0.8735 0.8618 0.8491 0.8356 0.8215
86 * 0.9114 0.9023 0.8925 0.8819 0.8707 0.8587 0.8458 0.8321
87 * 0.9179 0.9093 0.9000 0.8901 0.8793 0.8678 0.8556 0.8424
88 * 0.9241 0.9160 0.9074 0.8979 0.8878 0.8768 0.8652 0.8526
89 * 0.9301 0.9225 0.9144 0.9054 0.8959 0.8855 0.8744 0.8625
90 * 0.9358 0.9287 0.9211 0.9127 0.9037 0.8940 0.8835 0.8722
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 79 80 81 82 83 84 85
BEN *
<S> <C> <C> <C> <C> <C> <C> <C>
84 * 0.7954 0.7796 0.7631 0.7462 0.7289 0.7115 0.6941
85 * 0.8067 0.7914 0.7753 0.7588 0.7420 0.7249 0.7077
86 * 0.8179 0.8029 0.7874 0.7714 0.7549 0.7382 0.7213
87 * 0.8287 0.8144 0.7995 0.7837 0.7678 0.7515 0.7350
88 * 0.8394 0.8256 0.8112 0.7961 0.7806 0.7648 0.7487
89 * 0.8499 0.8367 0.8228 0.8083 0.7933 0.7779 0.7623
90 * 0.8602 0.8477 0.8343 0.8202 0.8058 0.7909 0.7759
</TABLE>
<PAGE> 122
APPENDIX A
TABLE 3
50% UNREDUCED BENEFIT
TO THE BENEFICIARY
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 55 56 57 58 59 60 61 62
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20 * 0.8888 0.8799 0.8704 0.8602 0.8491 0.8372 0.8244 0.8107
21 * 0.8894 0.8805 0.8710 0.8608 0.8497 0.8378 0.8251 0.8114
22 * 0.8900 0.8812 0.8716 0.8615 0.8504 0.8386 0.8258 0.8122
23 * 0.8906 0.8818 0.8723 0.8622 0.8511 0.8393 0.8266 0.8130
24 * 0.8913 0.8825 0.8731 0.8629 0.8519 0.8401 0.8274 0.8138
25 * 0.8920 0.8833 0.8738 0.8637 0.8527 0.8409 0.8283 0.8147
26 * 0.8928 0.8840 0.8746 0.8646 0.8536 0.8419 0.8292 0.8156
27 * 0.8936 0.8850 0.8755 0.8655 0.8545 0.8428 0.8301 0.8167
28 * 0.8945 0.8859 0.8764 0.8665 0.8555 0.8438 0.8312 0.8178
29 * 0.8954 0.8868 0.8775 0.8675 0.8566 0.8449 0.8323 0.8190
30 * 0.8964 0.8878 0.8785 0.8686 0.8577 0.8461 0.8336 0.8202
31 * 0.8975 0.8889 0.8796 0.8697 0.8589 0.8473 0.8348 0.8215
32 * 0.8986 0.8901 0.8808 0.8709 0.8602 0.8486 0.8362 0.8229
33 * 0.8998 0.8913 0.8821 0.8722 0.8615 0.8500 0.8376 0.8243
34 * 0.9010 0.8925 0.8834 0.8736 0.8629 0.8514 0.8391 0.8260
35 * 0.9023 0.8939 0.8848 0.8751 0.8645 0.8530 0.8408 0.8277
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 63 64 65 66 67 68 69 70
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20 * 0.7961 0.7805 0.7638 0.7460 0.7271 0.7069 0.6856 0.6629
21 * 0.7968 0.7812 0.7645 0.7467 0.7279 0.7078 0.6865 0.6638
22 * 0.7976 0.7820 0.7653 0.7476 0.7288 0.7087 0.6874 0.6647
23 * 0.7985 0.7828 0.7662 0.7485 0.7297 0.7096 0.6884 0.6657
24 * 0.7993 0.7837 0.7671 0.7494 0.7306 0.7106 0.6894 0.6668
25 * 0.8002 0.7847 0.7680 0.7504 0.7317 0.7117 0.6905 0.6679
26 * 0.8012 0.7857 0.7691 0.7515 0.7328 0.7128 0.6917 0.6692
27 * 0.8023 0.7868 0.7702 0.7526 0.7340 0.7141 0.6930 0.6705
28 * 0.8034 0.7880 0.7715 0.7539 0.7353 0.7154 0.6943 0.6719
29 * 0.8045 0.7891 0.7727 0.7552 0.7366 0.7168 0.6958 0.6734
30 * 0.8058 0.7905 0.7741 0.7566 0.7381 0.7183 0.6973 0.6750
31 * 0.8072 0.7919 0.7755 0.7581 0.7396 0.7199 0.6990 0.6767
32 * 0.8087 0.7934 0.7771 0.7597 0.7413 0.7216 0.7008 0.6786
33 * 0.8102 0.7950 0.7787 0.7614 0.7431 0.7234 0.7026 0.6805
34 * 0.8119 0.7966 0.7805 0.7633 0.7449 0.7254 0.7047 0.6826
35 * 0.8135 0.7985 0.7824 0.7652 0.7470 0.7275 0.7068 0.6848
</TABLE>
<PAGE> 123
APPENDIX A
TABLE 3
50% UNREDUCED BENEFIT
TO THE BENEFICIARY
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 55 56 57 58 59 60 61 62
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
36 * 0.9036 0.8953 0.8863 0.8766 0.8660 0.8547 0.8425 0.8294
37 * 0.9051 0.8968 0.8879 0.8782 0.8677 0.8564 0.8443 0.8313
38 * 0.9066 0.8984 0.8895 0.8799 0.8694 0.8582 0.8462 0.8333
39 * 0.9081 0.9000 0.8911 0.8817 0.8713 0.8602 0.8482 0.8353
40 * 0.9098 0.9017 0.8929 0.8836 0.8732 0.8622 0.8503 0.8376
41 * 0.9114 0.9035 0.8948 0.8854 0.8752 0.8643 0.8525 0.8399
42 * 0.9132 0.9053 0.8967 0.8875 0.8774 0.8666 0.8548 0.8423
43 * 0.9151 0.9072 0.8988 0.8896 0.8796 0.8688 0.8573 0.8448
44 * 0.9169 0.9092 0.9008 0.8918 0.8819 0.8713 0.8598 0.8475
45 * O.9189 0.9183 0.9030 0.8941 0.8843 0.8738 0.8624 0.8503
46 * 0.9209 0.9134 0.9052 0.8965 0.8869 0.8764 0.8652 0.8531
47 * 0.9230 0.9156 0.9076 0.8989 0.8894 0.8791 0.8681 0.8561
48 * 0.9251 0.9178 0.9099 0.9014 0.8921 0.8819 0.8710 0.8593
49 * 0.9272 0.9201 0.9124 0.9040 0.8948 0.8848 0.8741 0.8625
50 * 0.9295 0.9225 0.9149 0.9067 0.8976 0.8879 0.8772 0.8659
51 * 0.9318 0.9249 0.9175 0.9094 0.9005 0.8910 0.8805 0.8693
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 63 64 65 66 67 68 69 70
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
36 * 0.8154 0.8004 0.7844 0.7672 0.7491 0.7297 0.7091 0.6872
37 * 0.8173 0.8024 0.7864 0.7694 0.7514 0.7321 0.7116 0.6898
38 * 0.8194 0.8046 0.7886 0.7717 0.7538 0.7345 0.7142 0.6925
39 * 0.8216 0.8068 0.7910 0.7741 0.7563 0.7372 0.7169 0.6953
40 * 0.8239 0.8092 0.7935 0.7768 0.7589 0.7400 0.7199 0.6984
41 * 0.8263 0.8117 0.7961 0.7795 0.7618 0.7429 0.7229 0.7015
42 * 0.8288 0.8144 0.7989 0.7824 0.7648 0.7461 0.7262 0.7049
43 * 0.8315 0.8172 0.8017 0.7854 0.7680 0.7493 0.7296 0.7085
44 * 0.8342 0.8200 0.8048 0.7885 0.7713 0.7528 0.7332 0.7122
45 * 0.8372 0.8231 0.8080 0.7919 0.7748 0.7565 0.7370 0.7163
46 * 0.8402 0.8263 0.8113 0.7953 0.7785 0.7603 0.7410 0.7204
47 * 0.8434 0.8296 0.8148 0.7990 0.7823 0.7643 0.7452 0.7248
48 * 0.8467 0.8330 0.8184 0.8029 0.7862 0.7685 0.7496 0.7294
49 * 0.8501 0.8366 0.8222 0.8069 0.7904 0.7729 0.7542 0.7342
50 * 0.8536 0.8403 0.8261 0.8109 0.7948 0.7774 0.7590 0.7393
51 * 0.8572 0.8443 0.8303 0.8152 0.7993 0.7822 0.7640 0.7446
</TABLE>
<PAGE> 124
APPENDIX A
TABLE 3
50% UNREDUCED BENEFIT
TO THE BENEFICIARY
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 55 56 57 58 59 60 61 62
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
52 * 0.9341 0.9274 0.9201 0.9123 0.9035 0.8941 0.8839 0.8729
53 * 0.9363 0.9299 0.9227 0.9151 0.9066 0.8974 0.8873 0.8765
54 * 0.9388 0.9324 0.9254 0.9179 0.9097 0.9006 0.8908 0.8803
55 * 0.9411 0.9350 0.9282 0.9209 0.9128 0.9040 0.8944 0.8840
56 * 0.9435 0.9375 0.9309 0.9239 0.9159 0.9074 0.8980 0.8879
57 * 0.9459 0.9401 0.9338 0.9268 0.9191 0.9108 0.9017 0.8919
58 * 0.9483 0.9427 0.9365 0.9298 0.9224 0.9143 0.9054 0.8958
59 * 0.9506 0.9452 0.9393 0.9328 0.9256 0.9177 0.9092 0.8999
60 * 0.9530 0.9478 0.9421 0.9358 0.9288 0.9212 0.9129 0.9039
61 * 0.9553 0.9503 0.9448 0.9388 0.9320 0.9247 0.9166 0.9079
62 * 0.9576 0.9528 0.9475 0.9417 0.9352 0.9282 0.9204 0.9120
63 * 0.9599 0.9553 0.9502 0.9446 0.9384 0.9316 0.9242 0.9160
64 * 0.9621 0.9577 0.9528 0.9475 0.9416 0.9350 0.9278 0.9200
65 * 0.9642 0.9600 0.9554 0.9503 0.9446 0.9384 0.9314 0.9239
66 * 0.9663 0.9623 0.9579 0.9531 0.9476 0.9417 0.9350 0.9278
67 * 0.9684 0.9646 0.9604 0.9558 0.9506 0.9449 0.9385 0.9316
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 63 64 65 66 67 68 69 70
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
52 * 0.8610 0.8482 0.8344 0.8196 0.8040 0.7871 0.7692 0.7500
53 * 0.8649 0.8523 0.8386 0.8243 0.8008 0.7922 0.7746 0.7557
54 * 0.8689 0.8566 0.8432 0.8290 0.8139 0.7975 0.7801 0.7616
55 * 0.8729 0.8608 0.8478 0.8338 0.8189 0.8030 0.7859 0.7676
56 * 0.8770 0.8652 0.8525 0.8388 0.8242 0.8085 0.7918 0.7739
57 * 0.8813 0.8697 0.8572 0.8439 0.8296 0.8142 0.7979 0.7803
58 * 0.8855 0.8742 0.8621 0.8490 0.8352 0.8201 0.8041 0.7869
59 * 0.8898 0.8788 0.8670 0.8543 0.8408 0.8260 0.8104 0.7936
60 * 0.8941 0.8635 0.8719 0.8596 0.8464 0.8321 0.8168 0.8004
61 * 0.8985 0.8681 0.8770 0.8650 0.8521 0.8362 0.8234 0.8073
62 * 0.9028 0.8929 0.8820 0.8703 0.8579 0.8444 0.8299 0.8143
63 * 0.9071 0.8975 0.8870 0.8757 0.8637 0.8505 0.8365 0.8214
64 * 0.9115 0.9021 0.8920 0.8812 0.8694 0.8568 0.8432 0.8286
65 * 0.9157 0.9067 0.8970 0.8865 0.8752 0.8629 0.8499 0.8356
66 * 0.9200 0.9114 0.9019 0.8918 0.8810 0.8691 0.8564 0.8427
67 * 0.9241 0.9159 0.9068 0.8971 0.8866 0.8753 0.8630 0.8498
</TABLE>
<PAGE> 125
APPENDIX A
TABLE 3
50% UNREDUCED BENEFIT
TO THE BENEFICIARY
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 55 56 57 58 59 60 61 62
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
68 * 0.9704 0.9668 0.9628 0.9584 0.9534 0.9479 0.9420 0.9354
69 * 0.9722 0.9688 0.9651 0.9610 0.9562 0.9510 0.9453 0.9391
70 * 0.9741 0.9708 0.9673 0.9634 0.9589 0.9540 0.9486 0.9426
71 * 0.9758 0.9728 0.9695 0.9658 0.9616 0.9569 0.9517 0.9461
72 * 0.9775 0.9747 0.9715 0.9681 0.9641 0.9596 0.9547 0.9494
73 * 0.9791 0.9764 0.9735 0.9702 0.9665 0.9623 0.9577 0.9527
74 * 0.9806 0.9781 0.9753 0.9723 0.9688 0.9649 0.9605 0.9558
75 * 0.9820 0.9798 0.9771 0.9743 0.9711 0.9673 0.9633 0.9588
76 * 0.9834 0.9813 0.9788 0.9762 0.9731 0.9697 0.9658 0.9617
77 * 0.9847 0.9827 0.9804 0.9780 0.9751 0.9719 0.9683 0.9643
78 * 0.9859 0.9841 0.9820 0.9797 0.9770 0.9741 0.9707 0.9670
79 * 0.9871 0.9853 0.9835 0.9814 0.9788 0.9760 0.9729 0.9695
80 * 0.9881 0.9865 0.9843 0.9828 0.9804 0.9779 0.9750 0.9718
81 * 0.9891 0.9877 0.9860 0.9843 0.9820 0.9797 0.9770 0.9740
82 * 0.9901 0.9887 0.9872 0.9855 0.9836 0.9813 0.9788 0.9760
83 * 0.9909 0.9896 0.9862 0.9868 0.9850 0.9829 0.9805 0.9780
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 63 64 65 66 67 68 69 70
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
68 * 0.9282 0.9202 0.9116 0.9023 0.8923 0.8813 0.8695 0.8568
69 * 0.9322 0.9247 0.9163 0.9074 0.8978 0.8872 0.8760 0.8637
70 * 0.9361 0.9288 0.9210 0.9124 0.9032 0.8931 0.8824 0.8706
71 * 0.9399 0.9330 0.9255 0.9173 0.9086 0.8989 0.8886 0.8773
72 * 0.9435 0.9370 0.9298 0.9221 0.9138 0.9046 0.8947 0.8840
73 * 0.9470 0.9409 0.9342 0.9267 0.9189 0.9101 0.9007 0.8904
74 * 0.9505 0.9447 0.9383 0.9313 0.9238 0.9155 0.9065 0.8968
75 * 0.9538 0.9483 0.9423 0.9356 0.9285 0.9207 0.9122 0.9030
76 * 0.9570 0.9518 0.9461 0.9398 0.9331 0.9257 0.9177 0.9089
77 * 0.9601 0.9552 0.9498 0.9439 0.9375 0.9305 0.9229 0.9147
78 * 0.9629 0.9584 0.9532 0.9478 0.9418 0.9351 0.9281 0.9202
79 * 0.9657 0.9614 0.9566 0.9514 0.9459 0.9396 0.9329 0.9255
80 * 0.9682 0.9642 0.9598 0.9549 0.9497 0.9439 0.9376 0.9306
81 * 0.9707 0.9669 0.9627 0.9583 0.9534 0.9479 0.9420 0.9355
82 * 0.9730 0.9696 0.9656 0.9614 0.9568 0.9517 0.9462 0.9401
83 * 0.9752 0.9719 0.9683 0.9644 0.9602 0.9554 0.9502 0.9445
</TABLE>
<PAGE> 126
APPENDIX A
TABLE 3
50% UNREDUCED BENEFIT
TO THE BENEFICIARY
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 55 56 57 58 59 60 61 62
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
84 * 0.9917 0.9906 0.9893 0.9879 0.9863 0.9843 0.9822 0.9798
85 * 0.9924 0.9915 0.9903 0.9890 0.9874 0.9857 0.9837 0.9815
86 * 0.9932 0.9922 0.9911 0.9900 0.9885 0.9869 0.9851 0.9832
87 * 0.9937 0.9929 0.9919 0.9909 0.9895 0.9881 0.9865 0.9846
88 * 0.9944 0.9936 0.9927 0.9918 0.9905 0.9892 0.9877 0.9860
89 * 0.9949 0.9942 0.9934 0.9926 0.9914 0.9903 0.9888 0.9873
90 * 0.9954 0.9948 0.9940 0.9932 0.9922 0.9912 0.9899 0.9885
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 63 64 65 66 67 68 69 70
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
84 * 0.9772 0.9742 0.9708 0.9672 0.9633 0.9588 0.9540 0.9487
85 * 0.9791 0.9764 0.9732 0.9698 0.9662 0.9620 0.9576 0.9527
86 * 0.9809 0.9783 0.9755 0.9724 0.9689 0.9651 0.9609 0.9564
87 * 0.9826 0.9803 0.9776 0.9747 0.9716 0.9680 0.9641 0.9599
88 * 0.9841 0.9820 0.9795 0.9768 0.9740 0.9707 0.9672 0.9633
89 * 0.9856 0.9836 0.9813 0.9789 0.9763 0.9733 0.9700 0.9663
90 * 0.9870 0.9851 0.9830 0.9808 0.9785 0.9757 0.9727 0.9693
</TABLE>
<PAGE> 127
APPENDIX A
TABLE 3
50% UNREDUCED BENEFIT
TO THE BENEFICIARY
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 71 72 73 74 75 76 77 78
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20 * 0.6368 0.6131 0.5857 0.5566 0.5255 0.4924 0.4571 0.4197
21 * 0.6397 0.6141 0.5867 0.5576 0.5266 0.4915 0.4583 0.4206
22 * 0.6407 0.6150 0.5878 0.5586 0.5277 0.4947 0.4595 0.4221
23 * 0.6418 0.6162 0.5889 0.5598 0.5289 0.4959 0.4607 0.4234
24 * 0.6428 0.6173 0.5901 0.5611 0.5302 0.4972 0.4621 0.4248
25 * 0.6441 0.6185 0.5913 0.5624 0.5315 0.4986 0.4636 0.4264
26 * 0.6453 0.6198 0.5927 0.5638 0.5330 0.5001 0.4652 0.4280
27 * 0.6466 0.6212 0.5942 0.5653 0.5346 0.5017 0.4668 0.4297
28 * 0.6481 0.6227 0.5957 0.5669 0.5362 0.5035 0.4686 0.4316
29 * 0.6496 0.6243 0.5974 0.5686 0.5380 0.5053 0.4706 0.4336
30 * 0.6514 0.6261 0.5992 0.5705 0.5399 0.5073 0.4726 0.4357
31 * 0.6531 0.6279 0.6011 0.5724 0.5420 0.5094 0.4748 0.4381
32 * 0.6550 0.6298 0.6031 0.5745 0.5442 0.5118 0.4772 0.4405
33 * 0.6571 0.6320 0.6053 0.5768 0.5465 0.5142 0.4798 0.4432
34 * 0.6592 0.6342 0.6077 0.5793 0.5491 0.5168 0.4825 0.4460
35 * 0.6615 0.6366 0.6102 0.5818 0.5517 0.5196 0.4854 0.4490
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 79 80 81 82 83 84 85
BEN *
<S> <C> <C> <C> <C> <C> <C> <C>
20 * 0.3799 0.3379 0.2936 0.2469 0.1979 0.1466 0.0930
21 * 0.3811 0.3392 0.2949 0.2483 0.1993 0.1481 0.0946
22 * 0.3824 0.3406 0.2963 0.2497 0.2009 0.1497 0.0963
23 * 0.3838 0.3420 0.2978 0.2513 0.2025 0.1514 0.0960
24 * 0.3853 0.3436 0.2994 0.2530 0.2042 0.1532 0.0999
25 * 0.3869 0.3452 0.3011 0.2547 0.2061 0.1551 0.1019
26 * 0.3886 0.3469 0.3030 0.2566 0.2080 0.1572 0.1040
27 * 0.3904 0.3488 0.3049 0.2587 0.2102 0.1594 0.1063
28 * 0.3923 0.3508 0.3070 0.2609 0.2124 0.1617 0.1086
29 * 0.3944 0.3590 0.3093 0.2632 0.2149 0.1643 0.1114
30 * 0.3967 0.3553 0.3117 0.2657 0.2175 0.1670 0.1143
31 * 0.3990 0.3578 0.3143 0.2684 0.2203 0.1699 0.1174
32 * 0.4016 0.3605 0.3171 0.2713 0.2233 0.1731 0.1206
33 * 0.4044 0.3634 0.3201 0.2745 0.2266 0.1765 0.1242
34 * 0.4073 0.3665 0.3233 0.2778 0.2301 0.1801 0.1279
35 * 0.4105 0.3697 0.3267 0.2814 0.2338 0.1840 0.1320
</TABLE>
<PAGE> 128
APPENDIX A
TABLE 3
50% UNREDUCED BENEFIT
TO THE BENEFICIARY
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 71 72 73 74 75 76 77 78
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
36 * 0.6640 0.6392 0.6128 0.5846 0.5546 0.5226 0.4885 0.4523
37 * 0.6666 0.6419 0.6156 0.5876 0.5577 0.5258 0.4918 0.4557
38 * 0.6695 0.6448 0.6187 0.5907 0.5610 0.5292 0.4954 0.4594
39 * 0.6724 0.6479 0.6219 0.5940 0.5644 0.5328 0.4991 0.4633
40 * 0.6756 0.6512 0.6253 0.5976 0.5681 0.5367 0.5031 0.4675
41 * 0.6789 0.6546 0.6289 0.6013 0.5720 0.5408 0.5074 0.4720
42 * 0.6824 0.6583 0.6327 0.6053 0.5762 0.5451 0.5119 0.4767
43 * 0.6861 0.6622 0.6368 0.6096 0.5806 0.5497 0.5167 0.4817
44 * 0.6901 0.6663 0.6411 0.6140 0.5853 0.5545 0.5218 0.4870
45 * 0.6942 0.6707 0.6456 0.6188 0.5902 0.5597 0.5272 0.4926
46 * 0.6986 0.6752 0.6503 0.6237 0.5954 0.5651 0.5328 0.4985
47 * 0.7032 0.6800 0.6554 0.6290 0.6009 0.5709 0.5388 0.5048
48 * 0.7080 0.6851 0.6606 0.6345 0.6067 0.5769 0.5452 0.5114
49 * 0.7130 0.6903 0.6662 0.6403 0.6127 0.5833 0.5518 0.5184
50 * 0.7184 0.6959 0.6720 0.6464 0.6191 0.5899 0.5588 0.5257
51 * 0.7239 0.7017 0.6781 0.6528 0.6258 0.5970 0.5662 0.5335
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 79 80 81 82 83 84 85
BEN *
<S> <C> <C> <C> <C> <C> <C> <C>
36 * 0.4139 0.3732 0.3304 0.2852 0.2378 0.1881 0.1363
37 * 0.4175 0.3770 0.3343 0.2893 0.2420 0.1925 0.1409
38 * 0.4213 0.3810 0.3385 0.2936 0.2465 0.1973 0.1458
39 * 0.4254 0.3853 0.3429 0.2982 0.2514 0.2023 0.1511
40 * 0.4297 0.3898 0.3476 0.3032 0.2565 0.2077 0.1567
41 * 0.4344 0.3947 0.3527 0.3084 0.2620 0.2134 0.1627
42 * 0.4393 0.3998 0.3580 0.3140 0.2678 0.2195 0.1690
43 * 0.4445 0.4052 0.3637 0.3199 0.2740 0.2260 0.1758
44 * 0.4500 0.4110 0.3697 0.3263 0.2806 0.2328 0.1829
45 * 0.4559 0.4171 0.3761 0.3329 0.2876 0.2401 0.1905
46 * 0.4621 0.4236 0.3829 0.3400 0.2950 0.2478 0.1986
47 * 0.4687 0.4305 0.3901 0.3475 0.3028 0.2560 0.2072
48 * 0.4756 0.4377 0.3977 0.3554 0.3111 0.2647 0.2162
49 * 0.4829 0.4453 0.4057 0.3638 0.3199 0.2739 0.2258
50 * 0.4906 0.4534 0.4141 0.3727 0.3291 0.2835 0.2359
51 * 0.4987 0.4619 0.4230 0.3820 0.3389 0.2937 0.2466
</TABLE>
<PAGE> 129
APPENDIX A
TABLE 3
50% UNREDUCED BENEFIT
TO THE BENEFICIARY
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 71 72 73 74 75 76 77 78
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
52 * 0.7296 0.7077 0.6844 0.6595 0.6328 0.6043 0.5739 0.5415
53 * 0.7356 0.7140 0.6910 0.6664 0.6401 0.6120 0.5820 0.5500
54 * 0.7418 0.7205 0.6979 0.6736 0.6478 0.6200 0.5904 0.5588
55 * 0.7482 0.7273 0.7051 0.6811 0.6556 0.6283 0.5991 0.5680
56 * 0.7548 0.7343 0.7124 0.6889 0.6638 0.6369 0.6082 0.5776
57 * 0.7616 0.7415 0.7200 0.6969 0.6723 0.6458 0.6176 0.5875
58 * 0.7686 0.7489 0.7278 0.7051 0.6809 0.6550 0.6273 0.5977
59 * 0.7757 0.7564 0.7357 0.7135 0.6899 0.6645 0.6373 0.6083
60 * 0.7830 0.7640 0.7439 0.7222 0.6990 0.6741 0.6475 0.6190
61 * 0.7903 0.7719 0.7522 0.7310 0.7084 0.6840 0.6580 0.6301
62 * 0.7978 0.7798 0.7606 0.7400 0.7179 0.6941 0.6687 0.6414
63 * 0.8053 0.7879 0.7692 0.7491 0.7275 0.7043 0.6795 0.6530
64 * 0.8129 0.7960 0.7778 0.7582 0.7373 0.7147 0.6905 0.6646
65 * 0.8205 0.8040 0.7864 0.7674 0.7471 0.7252 0.7016 0.6764
66 * 0.8281 0.8122 0.7952 0.7767 0.7570 0.7357 0.7128 0.6883
67 * 0.8357 0.8203 0.8038 0.7860 0.7669 0.7463 0.7240 0.7002
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 79 80 81 82 83 84 85
BEN *
<S> <C> <C> <C> <C> <C> <C> <C>
52 * 0.5072 0.4708 0.4323 0.3918 0.3491 0.3045 0.2578
53 * 0.5160 0.4801 0.4421 0.4020 0.3599 0.3157 0.2697
54 * 0.5254 0.4899 0.4524 0.4127 0.3712 0.3275 0.2820
55 * 0.5350 0.5000 0.4631 0.4240 0.3829 0.3399 0.2950
56 * 0.5451 0.5106 0.4742 0.4357 0.3952 0.3528 0.3085
57 * 0.5555 0.5216 0.4857 0.4478 0.4080 0.3662 0.3226
58 * 0.5663 0.5329 0.4977 0.4604 0.4212 0.3801 0.3372
59 * 0.5774 0.5447 0.5100 0.4734 0.4349 0.3945 0.3523
60 * 0.5888 0.5567 0.5227 0.4868 0.4490 0.4093 0.3679
61 * 0.6005 0.5691 0.5358 0.5005 0.4635 0.4246 0.3840
62 * 0.6125 0.5817 0.5492 0.5147 0.4784 0.4403 0.4005
63 * 0.6246 0.5946 0.5628 0.5290 0.4936 0.4563 0.4174
64 * 0.6370 0.6077 0.5766 0.5437 0.5090 0.4726 0.4346
65 * 0.6496 0.6210 0.5907 0.5586 0.5248 0.4893 0.4521
66 * 0.6622 0.6345 0.6049 0.5736 0.5407 0.5061 0.4699
67 * 0.6750 0.6479 0.6193 0.5889 0.5568 0.5231 0.4878
</TABLE>
<PAGE> 130
APPENDIX A
TABLE 3
50% UNREDUCED BENEFIT
TO THE BENEFICIARY
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 71 72 73 74 75 76 77 78
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
68 * 0.8432 0.8284 0.8125 0.7952 0.7768 0.7568 0.7353 0.7123
69 * 0.8507 0.8365 0.8211 0.8045 0.7866 0.7673 0.7466 0.7243
70 * 0.8581 0.8444 0.8296 0.8136 0.7964 0.7778 0.7577 0.7363
71 * 0.8654 0.8522 0.8380 0.8227 0.8061 0.7883 0.7989 0.7481
72 * 0.8725 0.8599 0.8464 0.8316 0.8157 0.7985 0.7799 0.7600
73 * 0.8795 0.8675 0.8544 0.8403 0.8252 0.8087 0.7908 0.7716
74 * 0.8864 0.8749 0.8625 0.8490 0.8344 0.8187 0.8016 0.7831
75 * 0.8930 0.8820 0.8703 0.8574 0.8436 0.8285 0.8121 0.7945
76 * 0.8995 0.8891 0.8778 0.8656 0.8525 0.8381 0.8224 0.8056
77 * 0.9057 0.8959 0.8853 0.8736 0.8611 0.8474 0.8324 0.8165
78 * 0.9117 0.9025 0.8924 0.8814 0.8694 0.8564 0.8423 0.8270
79 * 0.9176 0.9068 0.8993 0.8686 0.8776 0.8652 0.8518 0.8372
80 * 0.9232 0.9149 0.9058 0.8961 0.8854 0.8737 0.8609 0.8471
81 * 0.9285 0.9207 0.9122 0.9029 0.8929 0.8818 0.8698 0.8567
82 * 0.9335 0.9262 0.9184 0.9096 0.9001 0.8896 0.8783 0.8659
83 * 0.9384 0.9316 0.9241 0.9158 0.9070 0.8972 0.8865 0.8747
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 79 80 81 82 83 84 85
BEN *
<S> <C> <C> <C> <C> <C> <C> <C>
68 * 0.6877 0.6615 0.6337 0.6041 0.5730 0.5402 0.5060
69 * 0.7005 0.6751 0.6482 0.6195 0.5893 0.5575 0.5242
70 * 0.7132 0.6887 0.6627 0.6348 0.6056 0.5748 0.5425
71 * 0.7260 0.7023 0.6771 0.6502 0.6219 0.5921 0.5608
72 * 0.7386 0.7158 0.6914 0.6655 0.6382 0.6094 0.5792
73 * 0.7510 0.7292 0.7057 0.6807 0.6544 0.6265 0.5974
74 * 0.7634 0.7424 0.7198 0.6958 0.6704 0.6436 0.6156
75 * 0.7756 0.7553 0.7337 0.7107 0.6863 0.6605 0.6336
76 * 0.7875 0.7681 0.7475 0.7254 0.7019 0.6772 0.6513
77 * 0.7992 0.7807 0.7609 0.7397 0.7173 0.6935 0.6688
78 * 0.8105 0.7930 0.7740 0.7537 0.7323 0.7096 0.6859
79 * 0.8215 0.8048 0.7869 0.7674 0.7470 0.7253 0.7027
80 * 0.8323 0.8163 0.7992 0.7807 0.7613 0.7406 0.7190
81 * 0.8427 0.8275 0.8112 0.7938 0.7752 0.7556 0.7349
82 * 0.8526 0.8382 0.8228 0.8062 0.7885 0.7699 0.7503
83 * 0.8622 0.8486 0.8340 0.8183 0.8016 0.7838 0.7651
</TABLE>
<PAGE> 131
APPENDIX A
TABLE 3
50% UNREDUCED BENEFIT
TO THE BENEFICIARY
P E N S I O N E R
<TABLE>
<CAPTION>
AGE *
OF * 71 72 73 74 75 76 77 78
BEN *
<S> <C> <C> <C> <C> <C> <C> <C> <C>
84 * 0.9429 0.9365 0.9296 0.9218 0.9136 0.9044 0.8942 0.8832
85 * 0.9473 0.9413 0.9348 0.9276 0.9198 0.9111 0.9017 0.8914
86 * 0.9514 0.9459 0.9397 0.9330 0.9258 0.9177 0.9088 0.8991
87 * 0.9553 0.9501 0.9444 0.9382 0.9315 0.9239 0.9156 0.9066
88 * 0.9590 0.9542 0.9489 0.9431 0.9368 0.9299 0.9220 0.9136
89 * 0.9625 0.9580 0.9532 0.9478 0.9419 0.9353 0.9281 0.9202
90 * 0.9658 0.9617 0.9571 0.9522 0.9468 0.9408 0.9341 0.9267
</TABLE>
<TABLE>
<CAPTION>
AGE *
OF * 79 80 81 82 83 84 85
BEN *
<S> <C> <C> <C> <C> <C> <C> <C>
84 * 0.8714 0.8585 0.8448 0.8299 0.8141 0.7972 0.7796
85 * 0.8801 0.8682 0.8552 0.8411 0.8262 0.8102 0.7935
86 * 0.8886 0.8773 0.8651 0.8518 0.8376 0.8227 0.8069
87 * 0.8966 0.8861 0.8745 0.8620 0.8488 0.8346 0.8198
88 * 0.9043 0.8945 0.8837 0.8719 0.8595 0.8462 0.8320
89 * 0.9117 0.9024 0.8924 0.8814 0.8697 0.8572 0.8440
90 * 0.9187 0.9102 0.9007 0.8905 0.8796 0.8678 0.8555
</TABLE>
<PAGE> 1
INFORMATION STATEMENT
RAYONIER INC.
DISTRIBUTION OF APPROXIMATELY 29,567,000 COMMON SHARES
This Information Statement is being furnished to stockholders of ITT
Corporation in connection with the distribution (the "Distribution") by ITT to
holders of its Common Stock, par value $1.00 per share ("ITT Common Stock"), and
Cumulative Preferred Stock, without par value, $2.25 Convertible Series N ("ITT
Series N Preferred Stock"), of approximately 29,567,000 Common Shares ("Rayonier
Common Stock"), of its wholly owned subsidiary, Rayonier Inc. (as ITT Rayonier
Incorporated will be renamed in connection with the Distribution). As used
herein, "ITT" refers to ITT Corporation and its subsidiaries excluding, unless
the context otherwise requires, Rayonier. "Rayonier" or the "Company" refers to
Rayonier Inc. and its subsidiaries.
The Distribution will be made on February 28, 1994 (11:59 p.m., New York
time) (the "Distribution Date"), to holders of record of ITT Common Stock and
ITT Series N Preferred Stock as of the close of business (5:00 p.m., New York
time) on February 24, 1994 (the "Record Date") on the basis of one share of
Rayonier Common Stock for every four shares of ITT Common Stock held and, in
accordance with the terms of the Restated Certificate of Incorporation of ITT,
one share of Rayonier Common Stock for every 3.1595 shares of ITT Series N
Preferred Stock held. No consideration will be required to be paid by
stockholders of ITT for the shares of Rayonier Common Stock to be received in
the Distribution, and stockholders will not be required to surrender or exchange
their shares of ITT Common Stock or ITT Series N Preferred Stock in order to
receive Rayonier Common Stock. No fractional shares of Rayonier Common Stock
will be delivered in the Distribution. Instead, all fractional shares will be
aggregated by the Distribution Agent (as defined herein) and sold by the
Transfer Agent (as defined herein). A pro-rata cash payment will be made to
holders of ITT Common Stock and ITT Series N Preferred Stock otherwise entitled
to a fractional share of Rayonier Common Stock as a result of the Distribution.
There has not been a trading market in Rayonier Common Stock. The Rayonier
Common Stock will be listed and traded on the New York Stock Exchange ("NYSE")
under the symbol "RYN".
Investors should understand that Rayonier Common Stock is a different
security from Class A Limited Partnership Units of Rayonier Timberlands, L.P.
("RTLP"), a minority share (25.3%) of which trade on the NYSE under the symbol
"LOG". RTLP is a publicly traded master limited partnership of which Rayonier
and a wholly owned subsidiary are general partners and of which Rayonier has
retained the remaining ownership.
In reviewing this Information Statement, you should carefully consider the
matters described under the caption "SPECIAL FACTORS". Neither ITT nor Rayonier
will receive any cash or other proceeds from the Distribution.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS INFORMATION
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
NO VOTE OF STOCKHOLDERS IS REQUIRED IN CONNECTION WITH THIS DISTRIBUTION. WE ARE
NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
The date of this Information Statement
is February 4, 1994.
<PAGE> 2
AVAILABLE INFORMATION
ITT and Rayonier are subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act"), and in accordance
therewith file reports, proxy statements and other information with the
Commission. The reports, proxy statements and other information filed by ITT and
Rayonier with the Commission may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the Regional Offices of the Commission at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, IL
60661 and 14th Floor, Seven World Trade Center, New York, NY 10048. Copies of
such information may also be obtained by mail at prescribed rates from the
Public Reference Branch of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549.
Rayonier will furnish holders of Rayonier Common Stock with annual reports
containing consolidated financial statements prepared in accordance with United
States generally accepted accounting principles and audited and reported on with
an opinion expressed by an independent public accounting firm, as well as
quarterly reports for the first three quarters of each fiscal year containing
unaudited financial information.
Rayonier has filed with the Commission a Registration Statement on Form 8-A
(as amended, the "Registration Statement") under the Exchange Act covering the
Rayonier Common Stock. In addition, Rayonier has filed with the Commission its
Annual Report on Form 10-K for the year ended December 31, 1992, and its
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1993, June 30,
1993 and September 30, 1993 and will file its Annual Report on Form 10-K for the
year ended December 31, 1993. As a wholly owned subsidiary of ITT which only had
debt securities registered under the Exchange Act, Rayonier has met the
conditions for filing its reports in a reduced disclosure format and files its
reports in such format. After the Distribution, Rayonier will no longer be
eligible to file its reports in such format, and Rayonier's filings will include
additional information relating to Rayonier's business, properties, selected
financial data, directors and executive officers, management compensation and
security ownership of Rayonier as well as a more complete Management's
Discussion and Analysis of Financial Condition and Results of Operations.
This Information Statement does not contain all the information in the
Registration Statement, Rayonier's other filings with the Commission and the
related exhibits. Statements in this Information Statement as to the contents of
any contract, agreement or other document are summaries only and are not
necessarily complete. For complete information as to these matters, refer to the
applicable exhibit to the Registration Statement or to Rayonier's other filings
with the Commission. The Registration Statement, such other filings and the
related exhibits filed by Rayonier with the Commission may be inspected at the
public reference facilities of the Commission listed above.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS INFORMATION STATEMENT, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. NEITHER THE DELIVERY OF THIS INFORMATION STATEMENT NOR
ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL IMPLY THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF RAYONIER SINCE
THE DATE HEREOF.
ii
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
- --------------------------------------------------------------------------
<S> <C>
SUMMARY............................................................. 1
SUMMARY FINANCIAL INFORMATION....................................... 3
RAYONIER............................................................ 5
THE DISTRIBUTION.................................................... 5
SPECIAL FACTORS..................................................... 8
RELATIONSHIP BETWEEN ITT AND RAYONIER AFTER THE DISTRIBUTION........ 11
CAPITALIZATION...................................................... 12
SELECTED FINANCIAL AND OPERATING DATA............................... 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS............................................. 15
BUSINESS OF RAYONIER................................................ 24
MANAGEMENT AND EXECUTIVE COMPENSATION............................... 33
DESCRIPTION OF RAYONIER CAPITAL STOCK............................... 50
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.......................... F-1
</TABLE>
iii
<PAGE> 4
SUMMARY
This is a Summary. It is qualified by the more detailed information
(including financial information and related notes) in this Information
Statement, which should be read in its entirety. Capitalized terms in this
Summary are defined elsewhere in this Information Statement.
<TABLE>
<S> <C>
DISTRIBUTING COMPANY ITT Corporation, a Delaware corporation.
SHARES TO BE Approximately 29,567,000 shares of Rayonier Common Stock,
DISTRIBUTED representing all the Rayonier Common Stock outstanding on the
Record Date, based on 117,538,893 shares of ITT Common Stock and
577,608 shares of ITT Series N Preferred Stock outstanding as of
January 31, 1994, and a Distribution Ratio of one share of
Rayonier Common Stock for every four shares of ITT Common Stock
and, in accordance with the terms of the Restated Certificate of
Incorporation of ITT, one share of Rayonier Common Stock for
every 3.1595 shares of ITT Series N Preferred Stock. See "THE
DISTRIBUTION" and "DESCRIPTION OF RAYONIER CAPITAL STOCK".
BUSINESS OF RAYONIER Rayonier is a leading international forest products company
primarily engaged in the trading, merchandising and manufacture
of logs, timber and wood products, and in the production and
sale of high value added specialty pulps. Rayonier traces its
origin to the founding of Rainier Pulp and Paper Company in
Shelton, Washington, in 1926. With the consolidation of several
pulp companies in 1937, the Company became "Rayonier
Incorporated", a corporation whose stock was publicly traded on
the NYSE. In 1968, Rayonier became a wholly owned subsidiary of
ITT. Rayonier owns, leases or controls approximately 1.5 million
acres of timberland in the United States and New Zealand and two
lumber manufacturing operations and owns and operates three pulp
mills. With customers in over 60 countries, more than half of
Rayonier's approximately $1 billion in sales are destined for
foreign markets, with Asian and Western European countries
representing 35% and 15% of sales in 1992, respectively. See
"BUSINESS OF RAYONIER".
RAYONIER TIMBERLANDS, Investors should understand that Rayonier Common Stock is a
L.P. different security from Class A Limited Partnership Units of
RTLP, a minority share (25.3%) of which trade on the NYSE under
the symbol "LOG". RTLP is a master limited partnership of which
Rayonier and a wholly owned subsidiary are general partners.
Rayonier also owns the remaining 74.7% of the Class A Limited
Partnership Units. Class A Units participate principally in the
revenues, expenses and cash flow associated with RTLP's sales of
timber through December 31, 2000, and to a significantly lesser
extent in subsequent periods. RTLP's sales of timber after that
date as well as cash flow associated with land management
activities before and after that date are principally allocable
to the Class B Limited Partnership Units, all of which have been
retained by Rayonier. RTLP is reported in Rayonier's financial
statements as a consolidated entity.
DISTRIBUTION RATIOS One share of Rayonier Common Stock for every four shares of ITT
Common Stock and one share of Rayonier Common Stock for every
3.1595 shares of ITT Series N Preferred Stock in accordance with
the terms of the Restated Certificate of Incorporation of ITT.
FRACTIONAL SHARES OF No fractional shares of Rayonier Common Stock will be delivered
RAYONIER COMMON STOCK in the Distribution. Instead, all fractional shares will be
aggregated by the
</TABLE>
1
<PAGE> 5
<TABLE>
<S> <C>
Distribution Agent and sold by the Transfer Agent. A pro-rata
cash payment will be made to holders of ITT Common Stock and ITT
Series N Preferred Stock otherwise entitled to a fractional
share of Rayonier Common Stock as a result of the Distribution.
The amount of such payment will depend upon the prices at which
the aggregated fractional shares are sold by the Transfer Agent
in the open market shortly after the Distribution Date. See "THE
DISTRIBUTION -- Manner of Effecting the Distribution".
SPECIAL FACTORS Stockholders should consider certain factors relating to
cyclical operating results, strategic prospects for the
specialty pulp facilities, environmental regulation, Rayonier
dividend policy, the absence of a trading market for Rayonier
Common Stock and changes in the trading prices of ITT Common
Stock as discussed under "SPECIAL FACTORS".
RECORD DATE Close of business (5:00 p.m., New York time) on February 24,
1994.
DISTRIBUTION DATE February 28, 1994 (11:59 p.m., New York time). On March 1, 1994,
the Distribution Agent will begin delivering Rayonier Common
Stock certificates to holders of record (as of the Record Date)
of ITT Common Stock and ITT Series N Preferred Stock in
accordance with the terms of the Restated Certificate of
Incorporation of ITT. ITT stockholders will not be required to
make any payment or to take any other action to receive their
Rayonier Common Stock. See "THE DISTRIBUTION -- Manner of
Effecting the Distribution".
DISTRIBUTION AGENT ITT, through its Corporate Stock Services Department, will be
the Distribution Agent (the "Distribution Agent").
TRANSFER AGENT AND The Bank of New York will be the Transfer Agent (the "Transfer
REGISTRAR Agent") and Registrar.
FEDERAL INCOME TAX ITT and Rayonier have received an opinion of counsel to the
CONSIDERATIONS effect that for Federal income tax purposes the receipt of
shares of Rayonier Common Stock by ITT stockholders will be
tax-free. Such opinion is subject to certain factual
representations and assumptions. No ruling has been or will be
sought from the Internal Revenue Service with respect to the
Federal income tax consequences of the Distribution. See "THE
DISTRIBUTION -- Federal Income Tax Consequences of the
Distribution."
REASONS FOR THE ITT believes that the Distribution will accomplish its basic
DISTRIBUTION business objective of consolidating the ITT group around
businesses that advance ITT's corporate policies and goals.
Rayonier's management believes that Rayonier can fit its own
activities to meet its unique financial and operating
characteristics and, in the course of business, source its
capital and personnel requirements in a manner more befitting a
forest products company. Management of ITT therefore believes
that the Distribution will be beneficial to both ITT and
Rayonier. See "THE DISTRIBUTION -- Reasons for the
Distribution".
LIMITED RELATIONSHIP After the Distribution, ITT will not have any ownership interest
BETWEEN ITT AND in Rayonier, and Rayonier will be an independent public company.
RAYONIER AFTER THE Rayonier and ITT will enter into certain agreements governing
DISTRIBUTION their relationship subsequent to the Distribution. The
agreements will provide for each party to make certain
administrative services available to the other party, for
employee benefit services to be provided to Rayonier by ITT and
for allocation of tax and certain other liabilities and
obligations arising from periods prior to the Distribution. In
addition, two directors of ITT will serve on the Board of
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C>
Directors of Rayonier. See "RELATIONSHIP BETWEEN ITT AND
RAYONIER AFTER THE DISTRIBUTION".
RAYONIER COMMON STOCK Application has been made to list the Rayonier Common Stock on
LISTING the NYSE under the symbol "RYN".
RAYONIER DIVIDEND The payment and level of cash dividends by Rayonier after the
POLICY Distribution will be subject to the discretion of the Rayonier
Board of Directors. The Board initially expects to declare
quarterly dividends of $0.18 per share. Dividend decisions will
be based on a number of factors, including the operating results
and financial requirements of Rayonier on a stand-alone basis,
and although there can be no assurance that dividends will be
paid, management believes that its cash flows are sufficiently
strong that, barring unforeseen circumstances, the initial
dividend rate can be maintained for the foreseeable future.
RAYONIER PAYMENTS TO Pursuant to a previously planned recapitalization program,
ITT Rayonier paid a dividend to ITT in the fourth quarter of 1993 of
$90 million in addition to the normal dividends on earnings. In
addition, Rayonier made in the fourth quarter, and will make
prior to the Distribution Date, payments to ITT aggregating
approximately $21 million in settlement of certain intercompany
account items. As a result, the Company's short-term debt will
increase during this period by $111 million, with the proceeds
used to finance such payments. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Liquidity and Capital Resources."
</TABLE>
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER
30, YEARS ENDED DECEMBER 31,
----------------- ----------------------------
1993 1992 1992 1991 1990
------ ------ ------ ------ ------
($ IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Sales.................................... $ 699 $ 733 $ 974 $ 979 $1,104
Operating Income Before Provision for
Dispositions........................... 110 87 102 97 190
Provision for Dispositions............... -- -- (189)(1) -- --
Operating Income (Loss).................. 110 87 (87) 97 190
Income (Loss) from Continuing
Operations............................. 49 33 (82) 44 109
Provision for Discontinued Operations.... -- -- -- -- (43)(3)
Cumulative Effect of Accounting
Changes................................ -- (22)(2) (22)(2) -- --
Net Income (Loss)........................ 49 11 (104) 44 66
Earnings Per Share(4).................... 1.67 0.39 (3.50) 1.50 2.23
Dividends(5).............................
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER
30, AS OF DECEMBER 31,
---------------- ----------------------------
1993 1992 1992 1991 1990
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total Assets............................. $1,518 $1,580 $1,476 $1,372 $1,353
Long-Term Debt........................... 318 312 302 193 141
</TABLE>
- ---------------
(1) Represents a charge of $189 million ($121 million after-tax) to provide for
the loss on the disposal of assets along with the costs for severance,
demolition, and other closedown items associated with the disposition of
certain facilities; $180 million ($115 million after-tax) of this charge
relates to the Grays Harbor Complex (as defined herein).
(2) Represents the cumulative effect of accounting changes due to the adoption
of Statement of Financial Accounting Standards (SFAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions," and SFAS No.
112, "Employers' Accounting for Postemployment Benefits." These standards
3
<PAGE> 7
were adopted as of January 1, 1992 using the immediate recognition method,
and the resulting after-tax charge of $22 million ($33 million before tax)
is included in net income (loss) in 1992.
(3) Represents an adjustment for reserves of discontinued operations which, net
of taxes, was $43 million in 1990.
(4) Earnings Per Share have been calculated by dividing net income (loss) by the
approximate number of shares of Rayonier Common Stock expected to be
distributed (29,567,000). This does not include any potential dilutive
effect of options to purchase Rayonier Common Stock which may be
outstanding as of the Distribution Date.
(5) Pursuant to a previously planned recapitalization program, Rayonier paid a
dividend to ITT in the fourth quarter of 1993 of $90 million in addition to
the normal dividends on earnings through the Distribution Date. Dividends
paid by Rayonier to ITT are not indicative of future dividends to be paid
after the Distribution. Dividends paid by Rayonier to ITT amounted to $30
million and $18 million for the nine months ended September 30, 1993 and
1992, respectively, and amounted to $18 million, $20 million and $61
million in 1992, 1991 and 1990, respectively.
4
<PAGE> 8
RAYONIER
Rayonier is a leading international forest products company primarily
engaged in the trading, merchandising and manufacture of logs, timber and wood
products, and in the production and sale of high value added specialty pulps.
Rayonier traces its origin to the founding of Rainier Pulp and Paper Company in
Shelton, Washington in 1926. With the consolidation of several pulp companies in
1937, the Company became "Rayonier Incorporated", a corporation whose stock was
publicly traded on the NYSE. In 1968, Rayonier became a wholly owned subsidiary
of ITT. Rayonier owns, leases or controls approximately 1.5 million acres of
timberland in the United States and New Zealand and two lumber manufacturing
operations and owns and operates three pulp mills.
With customers in over 60 countries, more than half of Rayonier's
approximately $1 billion in sales are destined for foreign markets, with Asian
and Western European countries representing 35% and 15% of sales in 1992,
respectively. See "BUSINESS OF RAYONIER".
TIMBER AND WOOD PRODUCTS
Rayonier buys and harvests timber stumpage, as well as purchases delivered
logs, in North America and New Zealand and subsequently sells logs into export
markets (primarily to Japan, Korea and China), as well as to domestic lumber and
pulp mills. Rayonier also produces dimension and specialty lumber products for
residential construction and industrial uses.
In the United States, Rayonier manages timberlands and sells timber
stumpage directly through RTLP, a master limited partnership. Rayonier and
Rayonier Forest Resources Company ("RFR"), a wholly owned subsidiary, are the
general partners of RTLP, and Rayonier owns all the limited partnership
interests except for 25.3% of the Class A Limited Partnership Units, which are
publicly traded. For a description of RTLP, see "BUSINESS OF
RAYONIER -- Rayonier Timberlands, L.P.".
SPECIALTY PULP PRODUCTS
Rayonier is a leading manufacturer of chemical cellulose, often called
dissolving pulp, from which customers produce a wide variety of products,
principally textile, industrial and filtration fibers, plastics and other
chemical intermediate industrial products. Rayonier also manufactures fluff
pulps that customers use to produce diapers and other sanitary products, and
specialty paper pulps used in the manufacture of products such as filters and
decorative laminates. Rayonier believes that it is one of the world's largest
manufacturers of high grade chemical cellulose.
Rayonier is a North Carolina corporation with its principal executive
offices at 1177 Summer Street, Stamford, CT 06904, and its telephone number is
(203) 348-7000.
THE DISTRIBUTION
GENERAL
On December 7, 1993, the Board of Directors (the "ITT Board") of ITT
Corporation, a Delaware corporation, approved a plan to distribute all the
outstanding shares of Rayonier Common Stock in the Distribution to all holders
of outstanding ITT Common Stock and ITT Series N Preferred Stock. The ITT Board
declared a dividend (subject to final action by an ITT Board committee setting
the Record Date), payable to each holder of record on the Record Date, of one
share of Rayonier Common Stock for every four shares of ITT Common Stock and one
share of Rayonier Common Stock for every 3.1595 shares of ITT Series N Preferred
Stock (the "Distribution Ratios") held by such holder on the Record Date.
Pursuant to the Restated Certificate of Incorporation of ITT, the Distribution
to holders of ITT Common Stock will be carried out in such a manner that holders
of ITT Series N Preferred Stock participate in the Distribution to the same
extent as such holders would have been entitled to participate had such holders
converted their shares of ITT Series N Preferred Stock into shares of ITT Common
Stock prior to the Record Date.
5
<PAGE> 9
REASONS FOR THE DISTRIBUTION
The Board of Directors and management of ITT have determined, primarily for
the reasons set forth below, to separate Rayonier's forest products business
from ITT's other businesses. The ITT Board believes that the Distribution will
be beneficial to both ITT and Rayonier.
ITT believes that the Distribution will further its basic business
objective of consolidating the ITT group around businesses that advance ITT's
corporate policies and goals. ITT recognizes that Rayonier's financial and
operational profile and, in particular, capital expenditure requirements, depart
substantially from that framework. ITT also believes that removing Rayonier from
ITT's overall consolidated results will benefit ITT in its attempts to reduce
its overall leverage and debt service and Rayonier by eliminating restrictions
imposed by ITT on Rayonier's access to debt financing.
Rayonier's management believes that as a separate, publicly traded company,
Rayonier will be able to establish different strategies and objectives than
ITT's current umbrella strategy which covers businesses unlike Rayonier.
Rayonier can then fit its own activities to meet its unique financial and
operating characteristics and, in the course of business, source its capital and
personnel requirements in a manner more befitting a forest products company.
Rayonier expects to have greater flexibility in its capital structure, leverage
capability and acceptable performance criteria than when restricted by the
limitations imposed by ITT's consolidated financial policies.
Rayonier's management also believes that incentive compensation of key
employees of the Company should be tied to the equity value of the Company along
narrower business lines and, thus, its own business performance. This will be
more likely achievable if key employees can have direct ownership of stock in
the Company as a publicly held corporation.
MANNER OF EFFECTING THE DISTRIBUTION
The general terms and conditions relating to the Distribution will be set
forth in the Distribution Agreement between Rayonier and ITT (the "Distribution
Agreement"). See "RELATIONSHIP BETWEEN ITT AND RAYONIER AFTER THE
DISTRIBUTION -- Distribution Agreement".
Pursuant to the terms and conditions of the Distribution Agreement, on the
Distribution Date, ITT will effect the Distribution by providing for the
delivery of all outstanding shares of Rayonier Common Stock to the Distribution
Agent for the transfer and distribution to the holders of ITT Common Stock and
ITT Series N Preferred Stock on the Record Date. The Distribution will be made
on the basis of one share of Rayonier Common Stock for every four shares of ITT
Common Stock and one share of Rayonier Common Stock for every 3.1595 shares of
ITT Series N Preferred Stock held on the Record Date. No certificates
representing fractional shares of Rayonier Common Stock will be issued to ITT
stockholders as part of the Distribution. The Distribution Agent will aggregate
fractional shares into whole shares of Rayonier Common Stock and the Transfer
Agent will sell them in the open market at prevailing prices on behalf of
holders who otherwise would be entitled to receive fractional share interests.
Such persons will instead receive a cash payment for the amount of their
allocable share of the total sale proceeds. Such sales are expected to be made
as soon as practicable after the mailing of the Rayonier Common Stock
certificates to ITT stockholders. ITT will bear the cost of any commissions
incurred in connection with such sales. See "Federal Income Tax Consequences of
the Distribution" below.
Certificates representing shares of Rayonier Common Stock will be mailed or
delivered by the Distribution Agent beginning on the business day next following
the Distribution Date. The shares of Rayonier Common Stock will be fully paid
and nonassessable and the holders thereof will not be entitled to preemptive
rights. See "DESCRIPTION OF RAYONIER CAPITAL STOCK".
Holders of ITT Common Stock and ITT Series N Preferred Stock on the Record
Date will not be required to pay cash or any other consideration for the
Rayonier Common Stock received in the Distribution or to surrender or exchange
certificates representing shares of ITT Common Stock and ITT Series N Preferred
Stock in order to receive Rayonier Common Stock. Holders of ITT Common Stock and
ITT Series N Preferred Stock will continue to own their shares of ITT Common
Stock and ITT Series N Preferred
6
<PAGE> 10
Stock and, if such stockholders were stockholders of record on the Record Date,
they will also receive shares of Rayonier Common Stock. The Distribution will
not change the number of outstanding shares of ITT Common Stock or ITT Series N
Preferred Stock.
The ITT Board may amend, modify or abandon the Distribution at any time
prior to the Distribution Date.
Stockholders of ITT having inquiries relating to the Distribution prior to
the Distribution Date should write to the Director of Investor Relations, ITT
Corporation, 1330 Avenue of the Americas, New York, NY 10019-5490, or contact
the Distribution Agent, ITT's Corporate Stock Services Department, at the
following telephone number: 1-800 DIAL-ITT (342-5488). Questions relating to
transfers of Rayonier Common Stock after the Distribution Date should be
addressed to: Annette Cruz-Hogan, Associate Manager -- Investor Relations;
telephone (203) 964-4467.
FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
ITT and Rayonier have received an opinion of Cravath, Swaine & Moore,
counsel to ITT, to the effect that for Federal income tax purposes:
1. The Distribution will qualify as a tax-free spin-off under Section
355 of the Internal Revenue Code of 1986, as amended (the "Code").
2. No gain or loss will be recognized by ITT upon the Distribution.
3. No gain or loss will be recognized by holders of the ITT Common
Stock or ITT Series N Preferred Stock solely as a result of their receipt
of the Rayonier Common Stock in the Distribution.
4. The tax basis of the ITT Common Stock or ITT Series N Preferred
Stock, as the case may be, and the Rayonier Common Stock held immediately
after the Distribution by any holder will equal such holder's tax basis in
its ITT Common Stock or ITT Series N Preferred Stock, as the case may be,
immediately before the Distribution, allocated in proportion to the
relative fair market values of the ITT Common Stock or ITT Series N
Preferred Stock, as the case may be, and the Rayonier Common Stock at the
time of the Distribution.
5. The holding period of the Rayonier Common Stock received in the
Distribution will include the holding period of the ITT Common Stock or ITT
Series N Preferred Stock, as the case may be, with respect to which the
Rayonier Common Stock was distributed, provided that such ITT Common Stock
or ITT Series N Preferred Stock was held as a capital asset on the
Distribution Date.
Such opinion of counsel is subject to certain assumptions and the accuracy
of factual representations made by ITT and Rayonier. ITT is not aware of any
present facts or circumstances that would cause such representations and
assumptions to be untrue. ITT and Rayonier will also agree to certain
restrictions on their future actions to provide further assurances that the
Distribution will qualify as tax-free. See "RELATIONSHIP BETWEEN ITT AND
RAYONIER AFTER THE DISTRIBUTION -- Distribution Agreement". No ruling has been
or will be sought from the Internal Revenue Service with respect to the Federal
income tax consequences of the Distribution, and there can be no assurance that
the Internal Revenue Service will not take a position contrary to that expressed
in Cravath, Swaine & Moore's opinion.
If the Distribution were not to qualify under Section 355 of the Code, then
(i) ITT would recognize capital gain equal to the excess of (x) the fair market
value of the Rayonier Common Stock on the Distribution Date over (y) its
adjusted tax basis in the Rayonier Common Stock, and (ii) each holder of ITT
Common Stock or ITT Series N Preferred Stock who receives shares of Rayonier
Common Stock in the Distribution would be treated as if such stockholder
received a taxable distribution in an amount equal to the fair market value of
such shares of Rayonier Common Stock on the Distribution Date, taxed first as a
dividend to the extent of such stockholder's pro rata share of ITT's current and
accumulated earnings and profits, and then as a nontaxable return of capital to
the extent of such stockholder's basis in the ITT Common Stock or ITT Series N
Preferred Stock, as the case may be (with any remaining amount being taxed as
capital gain).
7
<PAGE> 11
ITT and Rayonier will each be severally liable to the Internal Revenue Service
for the full amount of the Federal capital gains tax described in (i) above that
is not paid by the other. Pursuant to the Distribution Agreement, ITT and
Rayonier will indemnify each other for any liabilities resulting from any breach
of their respective representations made to Cravath, Swaine & Moore in
connection with its opinion. Neither ITT nor Rayonier will indemnify any holder
of ITT Common Stock or ITT Series N Preferred Stock who receives shares of
Rayonier Common Stock in the Distribution for any tax liabilities.
In any case, cash received by a holder of ITT Common Stock or ITT Series N
Preferred Stock in lieu of a fractional share of Rayonier Common Stock will be
treated as received in exchange for such fractional share and the holder will
recognize gain or loss for Federal income tax purposes measured by the
difference between the amount of cash received and the holder's tax basis in the
fractional share. Such gain or loss will be capital gain or loss to the holder
if the ITT Common Stock or ITT Series N Preferred Stock to which the fractional
share pertains has been held as a capital asset, which will be long-term capital
gain or loss if such ITT Common Stock or ITT Series N Preferred Stock has been
held for more than one year.
The foregoing discussion of the anticipated Federal income tax consequences
of the Distribution is for general information only and may not be applicable to
stockholders who received their ITT Common Stock or ITT Series N Preferred Stock
pursuant to the exercise of an incentive stock option within the meaning of
Section 422 of the Code. ITT stockholders should consult their own advisers as
to the specific tax consequences of the Distribution, including the effects of
foreign, state and local tax laws and the effect of possible changes in tax
laws.
LISTING AND TRADING OF RAYONIER COMMON STOCK
Application has been made to list the Rayonier Common Stock on the NYSE
under the symbol "RYN".
It is estimated that Rayonier will initially have approximately 50,000
stockholders of record, which does not include an indeterminable number of
stockholders who hold shares through nominees. The Transfer Agent and Registrar
for the Rayonier Common Stock will be The Bank of New York.
Shares of Rayonier Common Stock issued in the Distribution will be freely
transferable, except for securities received by persons who may be deemed to be
affiliates of Rayonier ("Affiliates") under the Securities Act of 1933 (the
"Securities Act"). Affiliates would generally include individuals or entities
that control, are controlled by, or are under common control with Rayonier and
may include certain officers and directors of Rayonier as well as any
substantial stockholders of Rayonier. Persons who are Affiliates of Rayonier
will be permitted to sell their shares of Rayonier Common Stock only pursuant to
an effective registration statement under the Securities Act or an exemption
from the registration requirements of the Securities Act, such as the limited
exemption afforded by Section 4(2) of the Securities Act and Rule 144
thereunder.
Investors should understand that Rayonier Common Stock is a different
security from Class A Limited Partnership Units of RTLP, a minority share
(25.3%) of which is traded on the NYSE under the symbol "LOG". For a description
of RTLP, see "BUSINESS OF RAYONIER -- Rayonier Timberlands, L.P.".
SPECIAL FACTORS
Certain factors, including those described below, could adversely affect
the value of Rayonier Common Stock. Neither ITT nor Rayonier makes, nor is any
other person authorized to make, any representation as to the future market
value of the Rayonier Common Stock.
CYCLICAL OPERATING RESULTS
Operating results in the forest products industry are cyclical. Rayonier's
recent operating results for the timber and wood products segment have improved
due to significantly higher selling prices and increased activity resulting from
the Company's May 1992 expansion of its New Zealand operations. However,
Rayonier's recent operating results for the pulp products segment have been
adversely affected by lower selling
8
<PAGE> 12
prices and reduced shipments resulting from excess capacity in the pulp industry
combined with weak domestic and international markets. As a result, sales for
the Company's specialty pulp products segment declined in the last three fiscal
years, affecting total Company sales results. In 1992 and the first nine months
of 1993, increasing timber and wood products sales have offset the specialty
pulp products sales decline. During the most recent economic downturn, the
Company remained profitable, except for the effect of the pre-tax restructuring
charge for the Grays Harbor Complex of $180 million (as described below), which
resulted in a net loss in 1992 of $(104) million.
Pulp product operating results in 1993 have continued to decline from prior
year levels as a result of an extended period of slow economic growth and
overcapacity in the industry. Operating results in this business segment
declined in the fourth quarter of 1993, and the Company expects that this
business segment will continue to be under pressure in 1994.
STRATEGIC PROSPECTS FOR SPECIALTY PULP FACILITIES
Rayonier's results continue to be heavily dependent on the pulp industry
cycle, and the Company continues to look at the strategic value of its
facilities in light of these market conditions. In 1992 the Company terminated
operations at its Grays Harbor pulp mill, its Vanillin plant, and its joint
venture with International Paper Co., the Grays Harbor Paper Company
(collectively, the "Grays Harbor Complex"). The Company took a charge of $189
million ($121 million after-tax) in the year for the write-off of assets and
closure costs for certain facilities; $180 million ($115 million after-tax) of
this charge related to the Grays Harbor Complex.
The Company's two other sulfite mills, Port Angeles, Washington, and
Fernandina Beach, Florida are currently facing severe margin pressure as a
result of many factors including their age and size and possible environmental
compliance costs, and the mill in Port Angeles, Washington, in particular, has
faced and will likely continue to face significantly higher wood costs than
facilities in other parts of the country. The viability of these two particular
facilities will be dependent upon a resurgence of economic growth in Rayonier's
markets and, for the Port Angeles mill, the return of Northwest wood costs to a
more competitive level. If the resurgence in economic growth is delayed, and, in
the case of Port Angeles, raw material wood costs do not become more
competitive, the Company may be faced with considering other alternatives to
running these facilities, including sale of the facilities, restructuring the
operations to make alternative products, temporary mothball, joint-venture
arrangements or possible closure and termination of operations. The net plant
and equipment invested in the Port Angeles and Fernandina pulp facilities were
$102 million and $141 million, respectively, at September 30, 1993. The
Company's repositioning of strategic assets into timber and wood markets, such
as the expansion of its New Zealand timber and wood based operations, and its
significant timberland holdings, have allowed it to moderate the effect of the
pulp cycle and, except for the significant write-off of the Grays Harbor Complex
in 1992, report profitable results for the last three fiscal years and for the
first nine months of 1993.
LIQUIDITY AND CAPITAL RESOURCES
Pursuant to a previously planned recapitalization program, Rayonier paid a
dividend to ITT in the fourth quarter of 1993 of $90 million in addition to the
normal dividends on earnings. In addition, Rayonier made in the fourth quarter,
and will make prior to the Distribution Date, payments to ITT aggregating
approximately $21 million in settlement of certain intercompany account items.
The Company's short-term debt will increase during this period by $111 million,
with the proceeds used to finance such payments. As a result of funding the $90
million dividend to ITT and intercompany settlements related to the Distribution
with short-term debt, it is anticipated that the Company will have negative
working capital at December 31, 1993 and possibly at March 31, 1994. The Company
has commenced discussions with its lenders to refinance a portion of its short-
term debt with long-term funding sufficient to return to a positive working
capital position. Based on these recent conversations with its lenders, the
Company remains confident of its ability to obtain such refinancing. The impact
on net income for the additional debt of $111 million would be approximately $5
million on an annual basis, assuming an average incremental borrowing rate of
6.75%.
9
<PAGE> 13
ENVIRONMENTAL REGULATION
Rayonier has become subject to increasingly stringent environmental laws
and regulations concerning air emission, water discharges and waste disposal
which, in the opinion of management, will require substantial expenditures over
the next ten years. Recently proposed federal environmental regulations
governing air and water discharges may require further expenditures and, if
finally enacted in their proposed form, may prevent the Company from
manufacturing some of its high purity cellulose products. While these
regulations may have a material effect on Rayonier's operations if not changed,
it will not be possible for Rayonier to determine the nature or costs of such
effect until the regulations are issued in final form. In addition, legislation,
litigation and pressure from various preservationist groups have restricted
regional timber availability, a development which in turn has increased wood
costs at Rayonier's Port Angeles, Washington, facility. Finally, a wholly owned
subsidiary of the Company, Southern Wood Piedmont Company ("SWP"), which has
been a discontinued operation since 1986, was formerly in the wood preserving
business and continues to incur substantial expenditures in cleaning up its
former wood preserving sites. Since 1986, the Company had to periodically
increase its estimates of future expenditures in connection with SWP, as a
result of actual experience and new regulatory demands. See Notes to
Consolidated Financial Statements -- Discontinued Operations and Units Held for
Disposition.
See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- Environmental Regulation," "BUSINESS OF
RAYONIER -- Environmental Matters" and "Dispositions/Discontinued Operations."
RAYONIER DIVIDEND POLICY
The payment and level of cash dividends by Rayonier after the Distribution
will be subject to the discretion of the Rayonier Board. The Board initially
expects to declare quarterly dividends of $0.18 per share. Dividend decisions
will be based on a number of factors, including the operating results and
financial requirements of Rayonier on a stand-alone basis, and although there
can be no assurance that dividends will be paid, management believes that its
cash flows are sufficiently strong that, barring unforeseen circumstances, the
initial dividend rate can be maintained for the foreseeable future.
ABSENCE OF TRADING MARKET FOR RAYONIER COMMON STOCK
There has not been any established public trading market for Rayonier
Common Stock since Rayonier was acquired by ITT in 1968. The Rayonier Common
Stock will be listed for trading on the NYSE under the symbol "RYN". Trading in
the Rayonier Common Stock to be distributed may commence on a "when issued"
basis prior to the Distribution Date. There can be no assurance as to the prices
at which the Rayonier Common Stock will trade before, on, or after the
Distribution Date. Until the Rayonier Common Stock is fully distributed and an
orderly market develops, the prices at which such stock trades may fluctuate
significantly and may be lower than prices that would be expected for a fully
distributed issue. Prices for the Rayonier Common Stock will be determined in
the marketplace and may be influenced by many factors, including the depth and
liquidity of the market for Rayonier Common Stock, developments affecting the
forest products industry generally, investor perception of Rayonier and general
economic and market conditions.
CHANGES IN TRADING PRICES OF ITT COMMON STOCK AND ITT SERIES N PREFERRED STOCK
After the Distribution, the ITT Common Stock and ITT Series N Preferred
Stock will continue to be listed for trading on the NYSE and the Pacific Stock
Exchange under the symbols "ITT" and "ITTpfN". As a result of the Distribution,
the trading prices of ITT Common Stock and ITT Series N Preferred Stock may be
lower immediately following the Distribution as compared to the trading prices
of ITT Common Stock and ITT Series N Preferred Stock immediately prior to the
Distribution. The aggregate market values of ITT Common Stock, ITT Series N
Preferred Stock and Rayonier Common Stock after the Distribution may be less
than, equal to, or greater than, the aggregate market value of ITT Common Stock
and ITT Series N Preferred Stock prior to the Distribution. See "THE
DISTRIBUTION -- Listing and Trading of Rayonier Common Stock".
10
<PAGE> 14
RELATIONSHIP BETWEEN ITT AND
RAYONIER AFTER THE DISTRIBUTION
Rayonier has been wholly owned by ITT and included in ITT's consolidated
financial results, although Rayonier's operations have been separately reported
since 1971 through filings under the Exchange Act with the Commission because it
has had debt securities registered under the Exchange Act.
After the Distribution, ITT will not have any ownership interest in
Rayonier, and Rayonier will be an independent public company. Rayonier and ITT
will enter into certain agreements, described below, governing their
relationship subsequent to the Distribution and providing for the allocation of
tax and certain other liabilities and obligations arising from periods prior to
the Distribution. Copies of the forms of such agreements are filed as exhibits
to the Registration Statement of which this Information Statement is a part. The
following description summarizes the material terms of such agreements, but is
qualified by reference to the texts of such agreements, which are incorporated
herein by reference.
DISTRIBUTION AGREEMENT
ITT and Rayonier will enter into the Distribution Agreement providing for,
among other things, the principal corporate transactions required to effect the
Distribution and other arrangements between Rayonier and ITT related to the
Distribution.
The Distribution Agreement will provide for the retention by ITT of all
liabilities relating to the business conducted by ITT or any subsidiary of ITT
(excluding Rayonier and its subsidiaries) and the indemnification of Rayonier
with respect to such liabilities. The Distribution Agreement also will provide
for the retention by Rayonier of all liabilities relating to the business
conducted by Rayonier and its subsidiaries (including environmental liabilities)
and the indemnification of ITT with respect to such liabilities.
The Distribution Agreement will provide that neither ITT nor Rayonier will
take any action that would jeopardize the intended tax consequences of the
transaction. Specifically, each of ITT and Rayonier will maintain its status as
a company engaged in the active conduct of a trade or business, as defined in
Section 355(b) of the Internal Revenue Code of 1986, as amended, until February
28, 1996. Neither ITT nor Rayonier expects this limitation to inhibit its
financing or other activities or its ability to respond to unanticipated
developments. See "THE DISTRIBUTION -- Federal Income Tax Consequences of the
Distribution".
The Distribution Agreement will provide that, except as otherwise provided
in any related agreement, all costs and expenses in connection with the
Distribution incurred on or prior to the Distribution Date will be paid by ITT,
except that Rayonier will pay fees and expenses of its counsel and other
consultants and expenses relating to the NYSE listing fees for the Rayonier
Common Stock. ITT and Rayonier will each pay their own costs and expenses
incurred after the Distribution Date.
TAX ALLOCATION AGREEMENT
ITT and Rayonier will enter into a Tax Allocation Agreement (the "Tax
Allocation Agreement") providing that Rayonier will pay its share of ITT's
consolidated tax liability for the tax years Rayonier is included in ITT's
consolidated Federal income tax return. The Agreement will also provide for
sharing of pre-closing state taxes where appropriate as well as certain other
matters.
EMPLOYEE BENEFITS AGREEMENT
ITT and Rayonier will enter into an Employee Benefit Services and Liability
Agreement providing for the allocation of retirement, medical, disability, and
other employee welfare benefit plans between ITT and Rayonier.
11
<PAGE> 15
ADMINISTRATIVE SERVICES AGREEMENT
For the purpose of an orderly transition following the Distribution Date,
ITT and Rayonier will enter into an Administrative Services Agreement pursuant
to which, until December 31, 1994, ITT will provide to Rayonier such corporate
administrative services as Rayonier may request, and Rayonier will provide to
ITT similar services with respect to particular ITT subsidiaries which were
formerly the management responsibility of Rayonier (the "Administrative Services
Agreement"). The party which provides any such services will be compensated by
the other party.
CANADIAN ASSETS PURCHASE AGREEMENT
A subsidiary of ITT and a subsidiary of Rayonier will enter into a Canadian
Assets Purchase Agreement pursuant to which the ITT subsidiary will sell to the
Rayonier subsidiary certain assets located in Canada and owned by the ITT
subsidiary which are used in the Canadian operations of Rayonier.
DIRECTORS
After the Distribution Date, two current ITT directors, Messrs. Rand V.
Araskog and Paul G. Kirk, are expected to serve on the Board of Directors of
Rayonier.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of September 30, 1993 on a historical basis and as adjusted to give
effect to (i) a previously planned recapitalization program, including a
dividend to ITT of $90 million in addition to the normal dividends on earnings
through the Distribution Date, (ii) the Distribution which includes the
settlement of certain intercompany account items with ITT for $21 million and
(iii) as a result, an increase of $111 million in the Company's short-term debt
to finance such dividend and settlement of intercompany accounts.
<TABLE>
<CAPTION>
OUTSTANDING AS ADJUSTED (A)
--------------- ---------------
<S> <C> <C>
($ IN MILLIONS)
(UNAUDITED)
Total Short-Term Debt(b)...................................... $ 90 $ 201
------- -------
Long Term Debt:
7.5% Notes Due 2002......................................... 110 110
Term Loan Due 1997.......................................... 100 100
Medium Term Notes Due 1998-1999............................. 16 16
Other Long-Term Debt........................................ 92 92
------- -------
Total Long-Term Debt..................................... 318 318
------- -------
Rayonier Equity:
Common Shares and Capital Surplus........................... 158 158
Retained Earnings........................................... 537 447
------- -------
Total Equity............................................. 695 605
------- -------
Total Capitalization.......................................... $ 1,103 $ 1,124
------- -------
------- -------
</TABLE>
- ---------------
(a) The impact on net income for the additional Rayonier debt of $111 million
would be approximately $5 million on an annual basis, assuming an average
incremental borrowing rate of 6.75%.
(b) Includes current maturities of long-term debt of $0.2 million and short-term
loans payable to various banks totalling $90 million at September 30, 1993.
12
<PAGE> 16
SELECTED FINANCIAL AND OPERATING DATA
The following table summarizes certain selected historical financial and
operating information with respect to the Company and is derived from the
consolidated financial statements of the Company. The summary of historical
financial data for the nine months ended September 30, 1993 and 1992, is derived
from the unaudited consolidated financial statements included in the Company's
quarterly reports on Form 10-Q for those periods. Such historical financial data
may not be indicative of the future results of the Company and interim results
may not be indicative of the results for the year. The information set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" herein, and the consolidated
financial statements and related notes of the Company contained elsewhere in
this Information Statement.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER
30, YEARS ENDED DECEMBER 31,
---------------- ----------------------------------------------
1993 1992 1992 1991 1990 1989 1988
------ ------ ------ ------ ------ ------ ------
($ IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Sales........................... $ 699 $ 733 $ 974 $ 979 $1,104 $1,082 $1,010
Operating Income Before
Provision for Dispositions.... 110 87 102 97 190 224 177
Provision for Dispositions...... -- -- (189)(1) -- -- 2 (5)
Operating Income (Loss)......... 110 87 (87) 97 190 226 172
Income (Loss) from Continuing
Operations.................... 49 33 (82) 44 109 128 91
Provision for Discontinued
Operations.................... -- -- -- -- (43)(3) -- (30)(3)
Cumulative Effect of Accounting
Changes....................... -- (22)(2) (22)(2) -- -- -- --
Net Income (Loss)............... 49 11 (104) 44 66 128 61
Earnings Per Share(4)........... 1.67 0.39 (3.50) 1.50 2.23 4.33 2.08
Dividends(5)....................
BALANCE SHEET DATA
Total Assets.................... $1,518 $1,580 $1,476 $1,372 $1,353 $1,330 $1,231
Long-Term Debt.................. 318 312 302 193 141 174 211
CASH FLOW DATA
Capital Expenditures............ $ 50 $ 70 $ 97 $ 134 $ 100 $ 80 $ 69
Depreciation, Depletion, and
Amortization.................. 57 60 78 69 64 64 66
EBITDA(6)....................... 153 127 156 147 234 271 232
EBIT(7)......................... 96 67 78 78 170 207 166
SELECTED FINANCIAL RATIOS AND
OPERATING DATA (unaudited)
Debt to Capitalization.......... 37.0% 33.1% 37.4% 20.5% 18.3% 19.1% 25.7%
Timber Harvested (in thousands
of cunits(8))................. 604 774 973 927 909 1,055 1,094
Logs Sold (in millions of board
feet)......................... 390 408 549 572 622 652 728
Lumber Produced (in millions of
board feet)................... 87 81 111 101 116 123 119
Wood Pulp Produced (in thousands
of metric tons)(9)............ 534 634 836 868 885 876 871
</TABLE>
- ---------------
(1) Represents a charge of $189 million ($121 million after-tax) to provide for
the loss on the disposal of assets along with the costs for severance,
demolition and other closedown items associated with the disposition of
certain facilities; $180 million ($115 million after-tax) of this charge
relates to the Grays Harbor Complex.
13
<PAGE> 17
(2) Represents the cumulative effect of accounting changes due to the adoption
of Statement of Financial Accounting Standards (SFAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions," and SFAS No.
112, "Employers' Accounting for Postemployment Benefits." These standards
were adopted as of January 1, 1992 using the immediate recognition method,
and the resulting after-tax charge of $22 million ($33 million pre-tax) is
included in net income (loss) in 1992.
(3) Represents adjustments for reserves of discontinued operations which, net of
taxes, were $43 million in 1990 and $30 million in 1988.
(4) Earnings Per Share have been calculated by dividing net income (loss) by the
approximate number of shares of Rayonier Common Stock expected to be
distributed (29,567,000). This does not include any potential dilutive
effect of options to purchase Rayonier Common Stock which may be
outstanding as of the Distribution Date.
(5) Pursuant to a previously planned recapitalization program, Rayonier paid a
dividend to ITT in the fourth quarter of 1993 of $90 million in addition to
the normal dividends on earnings through the Distribution Date. Dividends
paid by Rayonier to ITT are not indicative of future dividends to be paid
after the Distribution. Dividends paid by Rayonier to ITT amounted to $30
million and $18 million for the nine months ended September 30, 1993 and
1992, respectively, and amounted to $18 million, $20 million, $61 million,
$48 million and $33 million in 1992, 1991, 1990, 1989 and 1988,
respectively.
(6) EBITDA is defined as earnings (income) from continuing operations (before
the cumulative effect of accounting changes and any provision for
dispositions) before income taxes, interest expense and depreciation,
depletion and amortization.
(7) EBIT is defined as earnings (income) from continuing operations (before the
cumulative effect of accounting changes and any provision for dispositions)
before income taxes and interest expense.
(8) A cunit is a unit of measure for standing timber equal to one hundred cubic
feet of solid wood. It is the customary common unit of measure to
consolidate regional information based on local commercial measurements
such as board feet or tons. A cunit equals approximately .43 thousand board
feet or 3.83 tons.
(9) Includes wood pulp produced by the Grays Harbor pulp mill in thousands of
metric tons of 50 for the nine months ended September 30, 1992 and 62, 78,
103, 105 and 108 for the years ended December 31, 1992, 1991, 1990, 1989
and 1988, respectively.
14
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS CONDITIONS
Operating results in the forest products industry are cyclical. Rayonier's
recent operating results for the timber and wood products segment have improved
due to significantly higher selling prices and increased activity resulting from
the Company's May 1992 expansion of its New Zealand operations. However,
Rayonier's recent operating results for the pulp products segment have been
adversely affected by lower selling prices and reduced shipments resulting from
excess capacity in the pulp industry combined with weak domestic and
international markets. As a result, sales for the Company's specialty pulp
products segment declined in the last three fiscal years, affecting total
Company sales results. In 1992 and the first nine months of 1993, increasing
timber and wood products sales have offset the specialty pulp products sales
decline. During the most recent economic downturn, the Company remained
profitable, except for the effect of the pre-tax restructuring charge for the
Grays Harbor Complex of $180 million, which resulted in a net loss in 1992 of
$(104) million.
Pulp product operating results in 1993 have continued to decline from prior
year levels as a result of an extended period of slow economic growth and
overcapacity in the industry. Operating results in this business segment
declined in the fourth quarter of 1993, and the Company expects that this
business segment will continue to be under pressure in 1994.
Rayonier's results continue to be heavily dependent on the pulp industry
cycle, and the Company continues to look at the strategic value of its
facilities in light of these market conditions. In 1992 the Company closed the
Grays Harbor Complex. The Company took a charge of $189 million ($121 million
after-tax) in the year for the write-off of assets and closure costs for certain
facilities; $180 million ($115 million after-tax) of this charge related to the
Grays Harbor Complex.
The Company's two other sulfite mills, Port Angeles, Washington, and
Fernandina Beach, Florida, are currently facing severe margin pressure as a
result of many factors including their age and size and possible environmental
compliance costs, and the mill in Port Angeles, Washington, in particular, has
faced and will likely continue to face significantly higher wood costs than
facilities in other parts of the country. The viability of these two particular
facilities will be dependent upon a resurgence of economic growth in Rayonier's
markets and, for the Port Angeles mill, the return of Northwest wood costs to a
more competitive level. If the resurgence in economic growth is delayed, and, in
the case of Port Angeles, raw material wood costs do not become more
competitive, the Company may be faced with considering other alternatives to
running these facilities, including sale of the facilities, restructuring the
operations to make alternative products, temporary mothball, joint-venture
arrangements or possible closure and termination of operations. The net plant
and equipment invested in the Port Angeles and Fernandina pulp facilities were
$102 million and $141 million, respectively, at September 30, 1993. The
Company's repositioning of strategic assets into timber and wood markets, such
as the expansion of its New Zealand timber and wood based operations, and its
significant timberland holdings, have allowed it to moderate the effect of the
pulp cycle and, except for the significant write-off of the Grays Harbor Complex
in 1992, report profitable results for the last three fiscal years and for the
first nine months of 1993.
15
<PAGE> 19
The following tables summarize the sales and operating income of the
Company, for the periods indicated, by business segment (in millions of
dollars):
SALES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------- ------------------------
1993 1992 1992 1991 1990
---- ---- ---- ---- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Timber and Wood Products.......................... $386 $334 $443 $402 $ 418
Specialty Pulp Products........................... 341 390 525 553 615
Intersegment Eliminations......................... (28) (27) (34) (31) (11)
---- ---- ---- ---- ------
Total Before Dispositions......................... 699 697 934 924 1,022
Dispositions...................................... -- 36 40 55 82
---- ---- ---- ---- ------
Total............................................. $699 $733 $974 $979 $1,104
---- ---- ---- ---- ------
---- ---- ---- ---- ------
OPERATING INCOME (LOSS)
NINE MONTHS
ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------- ------------------------
1993 1992 1992 1991 1990
---- ---- ---- ---- ------
(UNAUDITED)
Timber and Wood Products.......................... $113 $ 85 $100 $ 78 $ 74
Specialty Pulp Products........................... (2) 11 6 36 113
Intersegment Eliminations......................... (1) 1 3 (1) (1)
---- ---- ---- ---- ------
Total Before Dispositions......................... 110 97 109 113 186
Dispositions...................................... -- (10) (196) (16) 4
---- ---- ---- ---- ------
Total............................................. $110 $ 87 $(87) $ 97 $ 190
---- ---- ---- ---- ------
---- ---- ---- ---- ------
</TABLE>
Reference is also made to "Segment Information" in the Notes to Consolidated
Financial Statements and to "Business of Rayonier" contained elsewhere in this
Information Statement.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993
COMPARED WITH THE NINE MONTHS ENDED SEPTEMBER 30, 1992
SALES AND OPERATING INCOME
Sales of $699 million for the nine months ended September 30, 1993 were $34
million (5%) lower than the comparable period of 1992, with sales in the third
quarter of $226 million declining 15 percent from the prior year third quarter.
Operating income of $110 million for the nine months ended September 30,
1993 increased $23 million (26%) over the comparable 1992 period; however,
operating income in the third quarter of $24 million represented a 24% decrease
from the prior year third quarter. Commission expenses for the nine months ended
September 30,1993 decreased $4 million from the prior year, as 1992 included
external commissions incurred under a sales agency agreement with ITT Foreign
Sales Corporation which ITT transferred to Rayonier effective January l, 1993.
16
<PAGE> 20
Timber and Wood Products
Sales for the Timber and Wood Products segment were $386 million,
an increase of $52 million (15%) over 1992 sales due to significantly
higher selling prices and increased activity resulting from the
Company's May 1992 major expansion of its New Zealand operations
partially offset by lower North American log and stumpage volume.
Prices were substantially higher for stumpage, logs and lumber
products due to supply shortages caused by environmental restrictions
and litigation in the Northwest U.S., wet weather conditions in the
Southeast U.S. in the first quarter and concerns over the availability
of timber and lumber supplies worldwide. Sales in 1993 were adversely
affected by lower timber harvest volumes in the Southeast due to soft
demand from the pulp and paper industry and, more recently, in the
Northwest as a result of customers delaying stumpage harvesting due to
previously contracted prices outpacing end use export log values.
Sales in the first nine months of 1992 included $17 million in
timberland parcel sales in the Northwest with no comparable sales
during 1993.
Timber and Wood Products operating income improved $28 million
(33%) to $113 million reflecting significantly improved stumpage, log
and lumber prices and expanded New Zealand operations. Nine month 1992
operating income included $16 million from the Northwest timberland
parcel sales. Other operating expenses in 1992 included several
charges for contract settlements and reserves.
Specialty Pulp Products
Sales for the Specialty Pulp Products segment were $341 million,
declining $49 million (12%) from the prior period. The decrease
primarily reflects lower selling prices and reduced volume resulting
from excess capacity in the pulp industry combined with weak domestic
and international markets.
Operating income for Specialty Pulp Products decreased $13
million to an operating loss of $2 million, reflecting lower pulp
prices, lower sales volume, market related shutdown costs and higher
pulpwood costs.
Dispositions
The Dispositions segment includes the results of the Grays Harbor
Complex which was closed in 1992, and other miscellaneous operations
that are being held for disposition. These operations had no sales or
operating losses in 1993. Essentially all of the Grays Harbor Complex
assets were sold in August 1993. Sales during the first nine months of
1992 were $36 million and operating losses for the same period were
$10 million. See "Discontinued Operations and Units Held for
Disposition."
Intersegment sales consist primarily of pulpwood sales by the
Timber and Wood Products segment to the Company's pulp mills.
Third quarter sales decreased $39 million (15%) from the prior year quarter
as pulp sales volume and prices declined and 1992's period included a timberland
parcel sale in the Northwest for $8 million.
Operating income in the third quarter of $24 million represented an $8
million (24%) decrease from the prior year quarter. Timber and Wood Products
third quarter operating income was significantly lower than prior year, with
1993 results of $24 million declining $10 million from 1992 mainly due to the
absence of $8 million in timberland parcel sales in 1993. The positive impacts
of the expanded New Zealand operations were offset by reduced sales volumes and
profit margins for U.S. log exports and lower timber stumpage volumes in both
regions. The third quarter operating loss for Specialty Pulp Products was $1
million, representing a decline of $5 million from 1992's comparable quarter,
primarily due to lower pulp selling prices and higher costs.
17
<PAGE> 21
NET INCOME
Equity in the net loss of Grays Harbor Paper Company decreased $3 million
from the prior year as this joint venture company ceased operations in late
1992. See "Discontinued Operations and Units Held for Disposition." Minority
interest in Rayonier Timberlands, L.P. declined $3 million in 1993 due to lower
partnership earnings as 1992 results included two Northwest timberland sales.
Interest expense increased $2 million from the prior year reflecting higher debt
levels resulting from the May 1992 New Zealand timber rights acquisition.
In the third quarter of 1993, the provision for income taxes was adversely
impacted by the effects of tax reform legislation enacted August 10, 1993. This
legislation increased the corporate income tax rate from 34 percent to 35
percent retroactive to January 1, 1993 and eliminated tax benefits related to
log exports for foreign sales corporations effective in the third quarter. The
provision for income taxes includes a charge of $2 million as a result of the
remeasurement of the Company's deferred tax liability for the 1 percent increase
in the corporate income tax rate. In total, the 1993 tax reform legislation
negatively impacted results by $3 million.
The 1992 net income of $11 million includes an after tax charge of $22
million to record the cumulative effect of accounting changes for the adoption
of Statement of Financial Accounting Standards (SFAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions" and SFAS No. 112,
"Employers' Accounting for Postemployment Benefits". Excluding the cumulative
effect of accounting changes recorded in 1992, net income of $49 million in the
first nine months of 1993 increased $16 million (48%) over the comparable period
of last year.
Third quarter operating results and net income were significantly lower
than the previous two quarters in 1993 due to reduced export log demand and a
continued decline in pulp prices and volume. The Company does not anticipate
significant recovery in export log market demand and pricing during the fourth
quarter and expects to continue taking market downtime at its pulp facilities
during the remainder of the year. Accordingly, the Company anticipates that
fourth quarter operating results and net income will continue to decline from
results earlier in the year.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1992
COMPARED WITH THE YEAR ENDED DECEMBER 31, 1991
SIGNIFICANT ACTIONS DURING 1992
Two significant actions occurred in 1992. In May, the Company acquired
rights to 250,000 acres of timber in New Zealand, the operations of which are
reported in the Timber and Wood Products segment. Second, in the fourth quarter,
the Company permanently terminated operations at the Grays Harbor Complex. See
"Discontinued Operations and Units Held for Disposition." As a result, the
percentage of Rayonier's total assets employed in the Timber and Wood Products
segment increased from 29 percent at year-end 1991 to 40 percent at December
1992.
SALES AND OPERATING INCOME
Sales of $974 million for the year ended December 31, 1992 were $5 million
less than the $979 million realized in 1991. United States export sales of the
Company in 1992 represented 53 percent of sales as compared to 52 percent in
1991.
The 1992 operating loss of $87 million represented a decline of $184
million from 1991 operating income of $97 million, primarily due to the
Company's 1992 provision for dispositions of $189 million related to the closure
of the Grays Harbor Complex and other miscellaneous facilities.
Timber and Wood Products
Sales of Timber and Wood Products of $443 million in 1992
represented an increase of $41 million (10%) from 1991 sales of $402
million. The increase primarily resulted from the Company's May 1992
expansion of its New Zealand operations, the closing of the final two
parcels
18
<PAGE> 22
of a previously contracted timberland sale in the Northwest versus one
closing in 1991, and higher selling prices. Selling prices were higher
for stumpage and logs due to regional supply shortages caused by a
decline in the availability of competitive timber in the Northwest and
a continuation of wet weather conditions in the Southeast. Increased
demand for lumber resulted in higher prices and volume for the
Company's lumber operations. Sales improvements were partially offset
by lower export log volume in the Northwest and planned timber harvest
reductions in the Southeast.
Operating income for the Timber and Wood Products segment was
$100 million, an improvement of $22 million (29%) from 1991,
reflecting the additional timberland sale in the Northwest region
during 1992, expanded New Zealand operations and strong pricing. These
improvements were partially offset by other 1992 operating expenses
relating to contract settlements and reserves.
Specialty Pulp Products
Revenues of the Specialty Pulp Products segment for 1992 declined
$28 million (5%) and operating income decreased $30 million (82%) from
the 1991 period. Most of the decrease in both revenues and operating
income resulted from lower selling prices and volumes for fluff, paper
and chemical cellulose pulp products. Pulp sales volume of 766,000
metric tons in 1992 was 27,000 metric tons or 3% below 1991's level.
The decrease in prices reflected excess capacity in the pulp industry
combined with weak domestic and international markets and the
strengthening of the U.S. dollar. Pulp manufacturing costs increased
in 1992 primarily due to higher pulpwood costs in the Northwest as a
result of reduced timber availability and in the Southeast due to
exceptionally wet weather.
NET INCOME
The Company's equity share in the losses of a jointly-owned company, Grays
Harbor Paper Company, increased $2 million during 1992 primarily as a result of
lower selling prices and volume in its paper products business segment. See
"Discontinued Operations and Units Held for Disposition". Interest expense
increased $7 million (53%) as a result of higher debt levels resulting from the
New Zealand acquisition of forest assets in May 1992. Minority interest in the
results of the Company's timberlands partnership increased $3 million (14%) to
$23 million in 1992 as a result of increased earnings attributable to that
portion of the Timber and Wood Products segment.
Continuing operations posted a loss in 1992 of $82 million, representing a
$126 million decline from income of $44 million in 1991. The decline in earnings
primarily reflects the after tax effect of the $121 million charge to provide
for the closure of the Grays Harbor Complex and other miscellaneous facilities.
Net loss for 1992 of $104 million also included a charge of $22 million to
record the cumulative effect of accounting changes, reflecting the Company's
adoption of SFAS No. 106 and SFAS No. 112 as of January 1, 1992.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1991
COMPARED WITH THE YEAR ENDED DECEMBER 31, 1990
SALES AND OPERATING INCOME
Sales of $979 million for the year ended December 31, 1991 were $125
million (11%) less than the $1,104 million realized in 1990, with year over year
declines in each of the Company's business segments. Export sales for the
Company in 1991 represented 52 percent of sales from the United States as
compared to 53 percent in 1990.
Operating income of $97 million declined $93 million (49%) from the 1990
level reflecting significantly lower prices for pulp products, partially offset
by an overall decrease in selling and general expenses and foreign sales
commission expense and by increased other operating income.
Timber and Wood Products
Sales of Timber and Wood Products of $402 million in 1991 represented
a $16 million (4%) decline from 1990 levels although operating income of
$78 million represented a $4 million (5%) improvement.
19
<PAGE> 23
Sales declined as a result of reduced North American export log activity,
planned stumpage harvest reductions in the Northwest and lower stumpage
prices in both regions, partially offset by increased Southeast stumpage
volumes and higher land sales. In addition to the planned harvest
reductions in the Northwest, volume and prices during 1991 continued to
reflect concerns over the impact of proposed environmental and export
restrictions and the weak export log market. Lower export log margins
resulted from higher timber stumpage costs in the Northwest.
Southeast stumpage contract volume for 1991 was increased primarily in
order to take advantage of stronger prices resulting from a temporary
regional supply shortage caused by exceptionally wet weather. Other
operating income, including contract settlement gains and the partial
recovery of a previously written-off timberland sale note, contributed to
the year over year improvement in operating income, along with higher
lumber results and lower foreign sales commission expenses.
Specialty Pulp Products
Revenues of the Specialty Pulp Products segment for 1991 declined $62
million (10%) while operating income decreased $77 million (68%) from the
1990 period. Most of the decrease in both revenues and operating income was
the result of significantly reduced prices for chemical cellulose, fluff,
and paper pulp products as average prices, which declined in 1990 from
cyclical high levels of 1989, continued to decrease throughout 1991. Pulp
sales volume of 793,000 metric tons in 1991 was similar to the 1990 sales
level. The decreases in prices reflected excess capacity in the pulp
industry combined with weak domestic and international markets. Higher pulp
manufacturing costs, primarily for wood fiber, impacted this segment's
results as the availability of pulpwood became scarce in the Northwest due
to reduced harvesting caused by weak export markets and concerns over the
impact of proposed environmental restrictions. In the Southeast, the wood
supply was affected by exceptionally wet weather in that region.
Sales volumes between segments rose principally due to higher pulpwood
purchases by the Pulp Products segment, resulting from the limited supply
of wood in both the Northwest and Southeast regions.
NET INCOME
Interest expense increased $2 million as the effects of higher average debt
levels, incurred primarily for capital expenditures, were only partially offset
by an increase in capitalized interest of $3 million. Minority interest in the
results of the Company's timberlands partnership declined $2 million to $20
million in 1991 as a result of decreased earnings attributable to that portion
of the Timber and Wood Products business segment.
Income from continuing operations of $44 million, reflecting the lower
operating results, declined $65 million (59%) from 1990. Net income for 1991 of
$44 million declined $22 million from the prior year which included an after-tax
provision for discontinued operations of $43 million.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities for the first nine months of 1993
amounted to $97 million, a decrease of $4 million from the comparable period of
the prior year. Cash from operating activities and an increase in debt of $5
million were mainly used for capital expenditures of $50 million, cash dividends
to ITT of $30 million and environmental clean up and other corrective action
programs at SWP and various closure costs of units held for disposition of $22
million.
Cash flow from operating activities in 1992 amounted to $124 million, a
decrease of $9 million from the prior year level of $133 million and $75 million
below the 1990 level of $199 million. An increase in debt of $198 million in
1992 was mainly used for the New Zealand forest assets acquisition of $197
million. Cash from operating activities (along with an increase in debt of $32
million in 1991) was mainly utilized for capital expenditures of $97 million,
$134 million and $100 million in 1992, 1991 and 1990, respectively, cash
dividends to ITT of $18 million, $20 million and $61 million in 1992, 1991 and
1990, respectively, and environmental clean-up and other corrective action
programs at SWP of $18 million, $17 million and
20
<PAGE> 24
$48 million in 1992, 1991 and 1990, respectively. Capital expenditures in 1992
were $37 million less than 1991, when additional capital spending was required
to lower sulfite emissions at the Jesup, Georgia pulp mill to meet new Federal
and State standards while also achieving cost reductions and increased
productive capacity.
The Company's EBITDA, defined as earnings (income) from continuing
operations (before the cumulative effect of accounting changes and any provision
for dispositions) before income taxes, interest expense and depreciation,
depletion and amortization, for the first nine months of 1993 amounted to $153
million, increasing $26 million from the comparable period of the prior year,
due to the higher pre-tax income reported in 1993. EBITDA for 1992 was $156
million, also increasing from the prior year level of $147 million, but
decreasing $78 million and $115 million, respectively, below the Company's
recent cyclical peak levels of $234 million in 1990 and $271 million in 1989.
During the second quarter of 1992 the Company completed the purchase of
forest assets, primarily Crown forest licenses consisting of long-term rights to
utilize approximately 250,000 acres of plantation forest in New Zealand. These
assets were acquired from the New Zealand government for a cash purchase price
of approximately $197 million. Bridge financing for the acquisition was
partially obtained through the issuance of preferred stock to ITT (which has
been redeemed) and through additional borrowings from banks and ITT. By October
15, 1992 the Company had completed its external financing program for this
acquisition, as described more fully below.
The forest products industry requires substantial annual capital
expenditures to maintain production facilities at peak operating efficiency and
to comply with environmental standards. The Company anticipates no material
increase in capital expenditure requirements in the near future over its recent
historical trends.
As of September 30, 1993 the Company had net working capital of $42 million
as compared to $7 million at the 1992 year end. The Company's current assets
increased in several categories, including inventories by $17 million with
higher pulp finished goods and logs along with prepaid timber stumpage by $16
million. Bank loans and current maturities of long-term debt decreased $12
million, mainly due to the issuance of $16 million of medium term notes and the
repayment of bank loans.
The Company had net working capital of $7 million at December 31, 1992 as
compared to $138 million and $128 million at the end of 1991 and 1990,
respectively. The Company increased its short-term bank loans from $5 million in
1991 to $100 million at the end of 1992, primarily as a result of financing the
New Zealand forest asset acquisition. The Company decreased its short-term bank
loans from $25 million in 1990 to $5 million at the end of 1991, mainly as a
result of the term loan agreement entered into during 1991.
Dividends paid by the Company on its stock during the first nine months of
1993 were $30 million. Pursuant to a previously planned recapitalization
program, Rayonier paid a dividend to ITT in the fourth quarter of 1993 of $90
million in addition to the normal dividends on earnings. In addition, Rayonier
made in the fourth quarter, and will make prior to the Distribution Date,
payments to ITT aggregating approximately $21 million in settlement of certain
intercompany account items. As a result, the Company's short-term debt will
increase during this period by $111 million, with the proceeds used to finance
such payments. Dividends paid during 1992, 1991 and 1990 were $18 million, $20
million and $61 million, respectively. Dividends paid by Rayonier to ITT are not
indicative of future dividends to be paid after the Distribution.
As a result of funding the $90 million dividend to ITT and intercompany
settlements related to the Distribution with short-term debt, it is anticipated
that the Company will have negative working capital at December 31, 1993 and
possibly at March 31, 1994. The Company has commenced discussions with its
lenders to refinance a portion of its short-term debt with long-term funding
sufficient to return to a positive working capital position. Based on these
recent conversations with its lenders, the Company remains confident of its
ability to obtain such refinancing. The impact on net income for the additional
debt of $111 million would be approximately $5 million on an annual basis,
assuming an average incremental borrowing rate of 6.75%.
The Company believes it has good relations with major regional, national
and international banks and recently accessed the public markets through a $110
million public debt offering in 1992 and medium term note offerings in 1993. Its
interest and cash flow coverage ratios have been well above the average of the
forest products industry. As a capital intensive company in a cyclical industry,
the Company goes through periods of
21
<PAGE> 25
time where its cash flow after capital investments requires an increase in
borrowings. The borrowings then, generally, are reduced during the business
cycle upturn when cash flows increase. It is expected that the Company will
borrow funds in 1994 to support its capital program, but its debt levels will
stabilize, absent any major acquisition or new major capital program, in the
1995-1996 period.
During the fourth quarter of 1991, Rayonier borrowed $90 million under a
term loan agreement which expires on October 31, 1997. This loan agreement was
amended in 1992 allowing Rayonier to borrow an additional $10 million. The loan
is repayable in three equal annual installments starting in October of 1995 and
ending in October of 1997. The proceeds of this loan were primarily used to
retire short-term bank borrowings, pay debt owed to ITT Corporation and for
other corporate purposes. The debt bears a variable rate of interest equal to
the London Interbank Offering Rate (LIBOR) plus fifty basis points.
The Company established a $140 million Medium Term Note program on April 5,
1993 pursuant to a Registration Statement filed on Form S-3 effective September
29, 1992. The Registration Statement permitted the Company to issue up to $250
million in debt securities through public offerings of which $110 million was
issued in October 1992. The Company used the net proceeds from the sale of the
7.5 percent notes to repay bank debt which was utilized as bridge financing for
the purchase of forest assets in New Zealand. During April 1993, $16 million of
medium term notes, maturing in April 1998 and 1999, were issued under this
program at an average effective cost to the Company of 6.25 percent.
The most restrictive long-term debt agreement in effect at September 30,
1993, as amended in December 1993, provides that the ratio of the Company's
indebtedness to the sum of such indebtedness plus consolidated tangible net
worth cannot exceed 50%. As of September 30, 1993, this ratio was 37% and the
ratio increased to approximately 45% at year end after the Company completed its
previously planned recapitalization program. In addition, at September 30, 1993,
a total of $367 million of retained earnings was unrestricted as to the payment
of dividends, which was reduced by $90 million upon the payment of a dividend to
ITT pursuant to such recapitalization program. There are no provisions in any of
the debt agreements that will cause the acceleration of the debt at the
Distribution Date. However, under a lease to the Company of its Baxley, Georgia
sawmill entered into in 1985, the trustee on behalf of the lessor and the loan
participant has the right to require the Company to purchase the sawmill for
approximately $8.4 million if ITT ceases to own a majority of the Company's
voting stock.
As of September 30, 1993, the Company had $408 million in debt with $318
million funded in the bank term and public debt markets, and $90 million in the
short term bank debt market. Of the Company's short term debt, $50 million was
under committed lines, the earliest of which expires in June 1994. The remainder
of the short term debt was funded under uncommitted lines. None of the debt is
guaranteed by ITT.
September 30, 1993 debt of $408 million represented 37% of the total of
debt and equity which is the same debt to capitalization ratio as the 1992 year
end period. The ratio increased to approximately 45% at year end after the
Company completed its planned recapitalization program. The total debt to
capitalization ratio was 20% and 18% at the end of 1991 and 1990, respectively.
The increase in debt to total capitalization during 1992 was mainly due to the
financing related to the New Zealand forest assets acquisition. The percentage
of debt with fixed interest rates was 53% as of September 1993 as compared to
50%, 56% and 91% at year end 1992, 1991 and 1990, respectively.
The Company intends to open discussions with both current and new lenders
prior to the Distribution to (a) re-establish their commitment to funding the
Company's requirements and (b) to put in place committed facilities in the range
of $100-150 million to assure credit availability as Rayonier operates as a
stand-alone company.
As a result of ITT's decision to make the Distribution, Rayonier's senior
debt ratings were placed under review. Moody's Investor Service confirmed the
Company's rating at Baa2 and Standard & Poor's Corporation ("S&P") lowered the
Company's rating from A+ to BBB. The earlier S&P rating had carried with it an
implied support from ITT (although ITT did not have any legally enforceable
obligations with respect to Rayonier's debt). It is expected that some of the
Company's borrowing costs may rise as a result of the Distribution, but the
increased interest expense, if any, is not expected to be material.
22
<PAGE> 26
DISCONTINUED OPERATIONS AND UNITS HELD FOR DISPOSITION
In 1986 the Company discontinued its SWP treated wood business segment. The
Company is currently actively involved in implementing clean-up and closure
programs for SWP and is in negotiations with state and environmental agencies on
the scope and timing of such programs. In prior years, the Company had provided
$153 million in pre-tax reserves for discontinued operations, including an
increase to the reserve in 1990 of $66 million ($43 million after tax) as a
result of revisions in the estimate of future environmental costs for closure,
post-closure and corrective action programs at SWP. The costs of the corrective
action and closure programs at SWP's nine primary manufacturing locations are
affected by many factors, which has led to increases in the reserves for such
programs in the past, and may result in increases in the future, as the
effectiveness of the existing clean up programs is measured against applicable
standards. Expenditures for such programs will also depend on, among other
things, new laws, regulations and administrative interpretations, governmental
responses to programs proposed by the Company and changes in environmental
control technology. Although considerable progress on clean up was made by year
end 1993, in particular at three of SWP's nine locations where the installation
of corrective action facilities has been completed, there is still uncertainty
as to the timing and amount of expenditures beyond 1993 at these sites and the
extent and timing for completing programs at all sites. The Company currently
estimates that expenditures at these sites during the two year period 1994-1995
will approximate $20 million.
In the fourth quarter of 1992, the Company provided $180 million, pre-tax,
for the loss on disposal of assets along with the costs for severance,
demolition and other closedown items associated with the disposition of the
Grays Harbor Complex. In August 1993 the bulk of the Grays Harbor Complex was
sold.
As of September 30, 1993 the Company had $86 million reserved for
discontinued operations and units held for disposition. Subject to the
uncertainties discussed above, the Company believes that its reserves
established to divest or close all of these business activities are adequate.
The Company further believes that any future change in estimates, if necessary,
will not materially affect the financial condition of the Company. See "BUSINESS
OF RAYONIER -- Dispositions/Discontinued Operations".
ENVIRONMENTAL REGULATION
The Company is subject to Federal and state pollution control laws and
regulations in all domestic jurisdictions in which it has operating facilities.
Compliance with these requirements involves the use of capital and operating
funds which increase the Company's business costs. Since the cost of future
compliance will depend on technologies still under development, environmental
standards which are subject to change and continued revision of regulatory
requirements, it is difficult to determine the total amount of such expenditures
that may be required in the future (although it is unlikely such expenditures
will be reduced from anticipated levels). During 1992 the Company spent
approximately $25 million for capital projects related to environmental
compliance for its continuing operations. The Company expects to spend
approximately $5 million on such projects for its continuing operations for the
two-year period 1993-1994. See "SPECIAL FACTORS -- Environmental Regulation";
"BUSINESS OF RAYONIER -- Environmental Matters".
23
<PAGE> 27
BUSINESS OF RAYONIER
GENERAL
Rayonier is a leading international forest products company primarily
engaged in the trading, merchandising and manufacture of logs, timber and wood
products, and in the production and sale of high value added specialty pulps. In
the nine months ended September 30, 1993, timber and wood products accounted for
51% of sales and pulp products accounted for 49%. For further data on sales,
operating income and identifiable assets by segment see "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS".
Rayonier traces its origin to the founding of Rainier Pulp and Paper
Company in Shelton, Washington, in 1926. With the consolidation of several pulp
companies in 1937, the Company became "Rayonier Incorporated", a corporation
whose stock was publicly traded on the NYSE. In 1968, Rayonier became a wholly
owned subsidiary of ITT.
Rayonier owns, leases or controls approximately 1.5 million acres of
timberland in the United States and New Zealand and two lumber manufacturing
operations and owns and operates three pulp mills. In 1992 the Company made two
strategic moves to better balance operating assets between pulp products and its
more stable timber and wood products business. In May, 1992, the Company
acquired long-term harvest rights to 250,000 acres of timberland in New Zealand,
and in the fourth quarter of 1992, permanently terminated operations at the
Grays Harbor Complex.
With customers in over 60 countries, more than half of Rayonier's
approximately $1 billion in sales are destined for foreign markets, with Asian
and Western European countries representing 35% and 15% of sales in 1992,
respectively.
TIMBER AND WOOD PRODUCTS
Rayonier owns, buys and harvests timber stumpage, as well as purchases
delivered logs, in North America and New Zealand, for subsequent sale into
export markets (primarily to Japan, Korea and China), as well as to domestic
lumber and pulp mills. Rayonier also produces dimension and specialty lumber
products for residential construction and industrial uses.
Rayonier participates in the worldwide timber and wood products business in
three specific ways:
Log Trading and Merchandising -- The Company harvests logs from Company
owned and from third party parcels on which the Company has acquired cutting
rights, as well as purchases logs on the open market and then subsequently
packages and sells these logs throughout the world.
Timberlands Management and Stumpage (Standing Timber) Sales -- The Company
manages owned, leased and otherwise controlled timber properties and, after
scientifically growing and nurturing the trees to their economic peak, sells the
cutting rights to the timber on these properties at market prices through
auction or negotiation.
Wood Products Sales -- The Company manufactures and sells lumber products
for construction and other uses both domestically and in international markets.
24
<PAGE> 28
Sales for the last three years and for the nine months ended September 30,
1993 by principal line of business are shown below (in millions of dollars):
<TABLE>
<CAPTION>
SALES
-------------------------------------------
NINE MONTHS
ENDED
SEPTEMBER 30,
TIMBER AND WOOD PRODUCTS 1993 1992 1991 1990
- ----------------------------------------------------- ------------- ------ ------ ------
<S> <C> <C> <C> <C>
Log Trading and Merchandising........................ $ 283.7 $301.0 $294.1 $305.3
Timberlands Management and Stumpage (Standing Timber)
Sales.............................................. 79.7 122.8 105.4 108.8
Wood Products Sales.................................. 31.0 32.6 23.9 26.5
------------- ------ ------ ------
Total Before Intrasegment Eliminations............... 394.4 456.4 423.4 440.6
Intrasegment Eliminations............................ (8.6) (13.8) (21.9) (22.6)
------------- ------ ------ ------
Total........................................... $ 385.8 $442.6 $401.5 $418.0
------------- ------ ------ ------
------------- ------ ------ ------
</TABLE>
LOG TRADING AND MERCHANDISING
Rayonier is a leading supplier and exporter of softwood logs. Rayonier buys
and harvests timber stumpage (cutting rights to standing timber) principally in
Northwest North America from third parties as well as from Company sources on an
arms-length basis, competitively auctioned or negotiated. The Company also
purchases, merchandises and sells purchased logs from New Zealand, both
domestically as well as in export markets. In New Zealand 67% of its 1992 sales
came from Company-managed timberlands. In North America 9% was directly sourced
from Rayonier timberlands, however, approximately another 2% is purchased as
logs from local dealers who had, in turn, purchased their cutting rights from
the Company's timberland stumpage sales.
The logs harvested and purchased are sold into export markets (primarily to
Japan, Korea, and China), as well as to pulp and lumber mills in domestic
markets. The Company also trades Canadian and Russian timber. During 1992,
approximately 78% of the revenues Rayonier derived from the sale of logs were
from logs sold to foreign markets. The sale of logs accounted for approximately
68% of the Timber and Wood Products segment's sales in 1992.
TIMBERLANDS MANAGEMENT AND STUMPAGE (STANDING TIMBER) SALES
Rayonier manages timberlands, scientifically growing and nurturing tree
stands until their economic peak for specific markets. The average rotation age
for timber destined for export markets from the Northwestern United States is 50
years (primarily Douglas fir and hemlock species). The average rotation age for
timber from the Southeastern United States is 25 years for timber sold to
sawmills and 20 years for pulp wood destined to pulp and paper mills. The
Company manages its timberlands on a sustainable yield basis in conformity with
forest industry practices.
The Company is organized to regularly sell timber stumpage in North America
through auction processes predominately to third parties. By requiring the
Company's other business sectors (e.g., Specialty Pulps and Log Trading) to
competitively bid on the stumpage, the Company believes it can maximize the true
economic return on its investment.
Also key to the success of the Company's management of timberlands has been
the extensive application of Rayonier's silvicultural expertise to species
selection for plantations, soil preparation, thinning of timber stands, pruning
of selected species and careful timing of harvest, all designed to maximize
growth and forest yields while responding to environmental needs.
As of September 30, 1993, Rayonier managed approximately 1.5 million acres
of timberlands, with approximately 864,000 acres or 58% located in the
Southeastern United States, approximately 379,000 acres
25
<PAGE> 29
or 25% located in the Pacific Northwest and approximately 253,000 acres, or 17%,
located in New Zealand. See "Rayonier Timberlands, L.P.".
The 864,000 acres of Southeastern timberlands are located primarily in
Georgia and Florida. Their proximity to a large number of pulp, paper and lumber
mills results in significant competition for the purchase of Rayonier's timber.
Approximately 727,000 acres are owned in fee and 137,000 acres are held under
long-term leases. The Southeastern timberlands include approximately 555,000
acres of pine plantations, 290,000 acres of hardwood lands and 19,000 non-forest
acres (representing main line and access roads and other acreage not suitable
for forest development). Approximately 60% of the timber harvest is pulpwood,
which is sold to pulp mills, with the remaining 40% being higher value sawlogs,
which are sold to sawmills. Over the last five years the Company, through
advanced silvicultural practices, has been able to increase the amount of timber
volume per acre available for harvest from its Southeastern timberlands by
approximately 2-3% per year and expects this trend to continue.
The 379,000 acres of the Company's Northwestern timberlands are located
primarily on the Olympic Peninsula in Washington State, are all owned in fee and
consist almost entirely of second-growth trees. The dramatic reduction of
Northwest federal timber supply due to a shift to preservationist management has
significantly increased demand on all alternative private timber supply,
including that of the Company's. These timberlands include approximately 322,000
acres of softwood stands, approximately 70% of which is hemlock and 30% Douglas
fir, western red cedar and white fir. The Northwestern timberlands also include
approximately 19,000 acres of hardwood timber stands, consisting principally of
alder and maple. The remaining 38,000 acres are classified as non-forest lands.
On May 15, 1992, Rayonier, through its wholly owned New Zealand subsidiary,
purchased for approximately $197 million from the New Zealand government forest
assets consisting primarily of Crown Forest licenses providing the right to
utilize approximately 250,000 acres of New Zealand plantation forests for a
minimum period of 35 years. Most of these timberlands consist of radiata pine
trees, with a planting-to-harvesting time of approximately 27 years, well-suited
for the highest quality lumber and panel products. These trees typically produce
up to twice as much fiber per acre, per year as the most productive commercial
tree species in the United States. Rayonier intends to grow and harvest the New
Zealand timber for both domestic New Zealand uses and for export primarily to
Pacific Rim markets. The Company believes the acquisition was an important
strategic initiative as noted earlier, in that it increased Rayonier's assets
employed in the Timber and Wood Products segment from 29% to 40% of total
assets, further reducing the effects of the Specialty Pulp Products segment's
cyclicality on Rayonier's earnings and cash flows because of the more stable
characteristics of the timber stumpage business.
Rayonier seeks to maximize timberland value through reforestation and
intensive silvicultural research to improve tree growth and to systematically
manage the timberlands investment cycle by optimizing the economic returns on a
species, site and market driven basis. Management of the Company's forest
resources includes the annual planting of millions of genetically improved
seedlings developed at Rayonier or co-operative nurseries.
WOOD PRODUCTS SALES
Rayonier's two Georgia lumber mills located at Baxley and Swainsboro
convert southern yellow pine timber into dimension and specialty lumber products
for residential construction and industrial uses. The Baxley mill utilizes
modern and technologically advanced equipment, including computer and laser
technology. The mills have an annual capacity of approximately 200 million board
feet of lumber and an annual output of approximately 483,000 tons of wood chips
for pulping. The mills sell their lumber output primarily in Southeastern
markets. Their entire wood chip production, however, is shipped to Rayonier's
Jesup, Georgia pulp facility and accounts for approximately 20% of Jesup's pine
chip consumption. The sale of lumber from the Baxley mill accounted for
approximately 7% of the Timber and Wood Products segment's sales of 1992. The
other lumber mill (an integrated complex located at Swainsboro and Lumber City,
Georgia) was acquired in October, 1993.
26
<PAGE> 30
Sales of logs and lumber in the Timber and Wood Products segment are made
directly by Rayonier sales personnel to customers, although sales to certain
export locations are made through agents.
SPECIALTY PULP PRODUCTS
Rayonier is a leading specialty manufacturer of chemical cellulose, often
called dissolving pulp, from which customers produce a wide variety of products,
principally textile, industrial and filtration fibers, plastics and other
chemical intermediate industrial products. Rayonier also manufactures fluff
pulps that customers use to produce diapers and other sanitary products, and
specialty paper pulps used in the manufacture of products such as filters and
decorative laminates. Rayonier believes that it is one of the world's largest
manufacturers of high grade chemical cellulose. In 1992 Specialty Pulp Products
sales were $525 million comprising 54% of Rayonier's total sales.
Sales for the last three years, and first nine months of 1993, by principal
line of business are shown below (in millions of dollars):
<TABLE>
<CAPTION>
SALES
-------------------------------------------
NINE MONTHS
ENDED
SEPTEMBER 30,
SPECIALTY PULP PRODUCTS 1993 1992 1991 1990
- ----------------------------------------------------- ------------- ------ ------ ------
<S> <C> <C> <C> <C>
Chemical Cellulose................................... $ 206.7 $306.9 $325.4 $340.9
Fluff and Specialty Paper Pulps...................... 134.7 218.4 227.9 274.4
------------- ------ ------ ------
Total.............................................. $ 341.4 $525.3 $553.3 $615.3
------------- ------ ------ ------
------------- ------ ------ ------
</TABLE>
Rayonier manufactures more than 25 different grades of pulp. The Company
owns and operates three wood pulp mills which have an aggregate annual capacity
of approximately 826,000 metric tons. Rayonier's wood pulp production facilities
are able to manufacture a broad mix of products to meet customers' needs. The
Company owns market pulp production facilities in Jesup, Georgia; Fernandina
Beach, Florida; and Port Angeles, Washington. The Jesup facility, a kraft mill,
began operations in 1954, and was subsequently significantly expanded and
modernized, today accounting for approximately 530,000 metric tons of annual
wood pulp production capacity, or 64% of Rayonier's current total. The
Fernandina Beach facility began operations in 1939 and accounts for
approximately 146,000 metric tons of annual wood pulp production capacity, or
18% of Rayonier's current total. The Port Angeles facility began operations in
1929 and accounts for approximately 150,000 metric tons of annual wood pulp
production capacity, or 18% of Rayonier's current total.
Rayonier does not convert its pulps into finished products but instead
concentrates on the production of specialty market pulps that are sold to
industrial companies producing a wide variety of products. Approximately half of
Rayonier's wood pulp sales, which are manufactured to customers' specifications,
are to export customers, with the more important overseas markets being Western
Europe (27% of sales) and Japan (12% of sales). Approximately 92% of all sales
in 1992 were sales made directly by Rayonier sales personnel. In certain of the
Company's export locations, sales are made with the aid of agents.
CHEMICAL CELLULOSE
Rayonier is one of the world's leading producers of chemical cellulose,
often called dissolving pulp, which is a highly-purified form of pulp. Chemical
cellulose is used in a wide variety of products such as textile fibers, rigid
packaging, photographic film, impact-resistant plastics, high tenacity rayon
yarn for tires and industrial hoses, pharmaceuticals, cosmetics, detergents,
sausage casings, food products, thickeners for oil well drilling muds, cigarette
filters, lacquers, paints, printing inks and explosives.
Within the chemical cellulose industry, Rayonier concentrates on the most
highly valued, technologically demanding end uses, such as cellulose acetate and
high purity cellulose ethers. In each of these markets, Rayonier believes it is
the leading supplier.
27
<PAGE> 31
FLUFF AND SPECIALTY PAPER PULPS
Rayonier believes it is one of the top five suppliers to the fluff pulp
sector. Fluff pulp is used as an absorbent medium in products such as disposable
baby diapers, personal sanitary napkins, incontinent pads, convalescent bed
pads, industrial towels and wipes and non-woven fabrics. Fluff pulp accounted
for approximately 34% of the Company's pulp products sales in 1992.
Rayonier is a major producer of specialty paper pulps and produces a small
volume of regular paper pulp. Customers use Rayonier's specialty paper pulps to
manufacture paper for decorative laminates for counter tops, shoe innersoles,
battery separators, circuit boards, air and oil filters and filter media for the
food industry. Specialty paper pulp sales were 6% of Rayonier's total pulp sales
in 1992. A small volume of regular paper pulp, less than 2% of total Company
pulp sales, is used in the manufacture of bond, book and printing paper.
PULP PRICING
Rayonier believes pulp industry prices are currently at or near a cyclical
low. On an inflation adjusted basis such prices are at or below historical lows.
However, while Rayonier's pricing has been adversely impacted, the Company's
higher value pulps are significantly less cyclical than commodity paper pulp.
Because Rayonier is a non-integrated market pulp producer, its high value
product mix pricing trends tend to lag (on both the upturn and downturn) pulp
and paper industry trends which are dominated by paper, paperboard and newsprint
products. Over the past ten to twelve years, compared to commodity paper pulp
prices, the Company's price trends for fluff grades have lagged by one to two
quarters and for chemical cellulose by three to four quarters.
EXPORT SALES AND FOREIGN OPERATIONS
Rayonier relies on export markets for its pulp and timber products with
approximately 50% of its sales going to export countries during the past five
years. Asian markets accounted for 31% of its U.S. exports and Western Europe
15% in 1992. Asia also accounts for 64% of its New Zealand timber products
trade. The Company is therefore reasonably dependent upon strong economic growth
in all international markets including that of the United States. With alternate
markets in Latin and South America and the Middle East, however, the Company has
been able to spread its geographical risk when specific markets have entered
economic recessions.
In recent years substantially all Rayonier's operating activities have been
in the United States. In May 1992 the Company purchased timber rights in New
Zealand significantly increasing its overseas assets to 14% of total assets as
of the end of 1992, and its sales from non-U.S. sources in 1993 are estimated to
be 10% of total sales.
The following tables summarize the sales, operating income and identifiable
assets of the Company by geographical operating area for the nine months ended
September 30, 1993 and for the three years ended December 31, 1992 (in millions
of dollars):
<TABLE>
<CAPTION>
SALES
----------------------------------------------
NINE MONTHS
ENDED
SEPTEMBER 30,
1993 1992 1991 1990
------------- -------- -------- --------
<S> <C> <C> <C> <C>
United States............................................................ $ 626.4 $ 944.2 $ 967.6 $1,098.6
New Zealand.............................................................. 68.7 29.5 11.3 5.7
All other................................................................ 4.2 -- -- --
------------- -------- -------- --------
Total.................................................................. $ 699.3 $ 973.7 $ 978.9 $1,104.3
------------- -------- -------- --------
------------- -------- -------- --------
</TABLE>
28
<PAGE> 32
<TABLE>
<CAPTION>
OPERATING INCOME (LOSS)
--------------------------------------- IDENTIFIABLE ASSETS
NINE MONTHS ----------------------------------------------
ENDED AS OF
SEPTEMBER 30, SEPTEMBER 30,
1993 1992 1991 1990 1993 1992 1991 1990
------------- ------ ----- ------ ------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
United States..................... $ 84.5 $(88.9) $99.1 $190.6 $ 1,289.8 $1,270.8 $1,366.9 $1,349.4
New Zealand....................... 26.6 4.7 0.5 0.5 225.8 205.2 5.0 3.5
All other......................... (1.5) (2.4) (2.9) (1.1) 2.4 0.4 0.4 0.2
------ ------ ----- ------ ------------- -------- -------- --------
Total........................... $ 109.6 $(86.6) $96.7 $190.0 $ 1,518.0 $1,476.4 $1,372.3 $1,353.1
------ ------ ----- ------ ------------- -------- -------- --------
------ ------ ----- ------ ------------- -------- -------- --------
</TABLE>
Reference is also made to "Segment Information" in the Notes to Consolidated
Financial Statements contained elsewhere in this Information Statement.
DISPOSITIONS/DISCONTINUED OPERATIONS
Dispositions/Discontinued Operations includes units and site facilities no
longer considered integral to Rayonier's business strategy. This segment
includes operations of SWP, the Grays Harbor Complex and other miscellaneous
operations held for disposition.
Management made a determination effective December 31, 1986, to phase out
and discontinue SWP, its treated wood and preserving business subsidiary,
establishing an after-tax provision for its discontinuation. Increases to the
after-tax provision were recorded in 1988 and 1990, primarily as a result of
revisions in Rayonier's estimate of environmental costs for closure,
post-closure, and corrective action programs at SWP. Rayonier's financial
statements reflect SWP as a discontinued operation.
Rayonier is currently actively involved in implementing cleanup and closure
programs for SWP in compliance with the Resource Conservation and Recovery Act
("RCRA") and is in negotiations with federal and state environmental agencies on
such programs. The costs of the corrective action and closure programs at SWP's
nine primary manufacturing locations are affected by many factors, which has led
to increases in the reserves for such programs in the past, and may result in
increases in the future, as the effectiveness of the existing cleanup programs
is measured against applicable standards. Expenditures for such programs will
also depend on new laws, regulations and administrative interpretations,
governmental responses to programs proposed by Rayonier and changes in
environmental control technology. Although there will have been considerable
progress on cleanup made by year-end 1993, in particular at three of SWP's nine
locations where the installation of corrective action facilities has been
completed, there is still uncertainty as to the timing and amount of
expenditures beyond 1993 at these sites and the extent and timing for completing
programs at all sites.
In 1992, Rayonier provided $180 million, pre-tax, for the loss on disposal
of assets along with the costs for severance, demolition and other close down
items associated with the disposition of the Grays Harbor Complex. In August,
1993 the bulk of the Grays Harbor Complex was sold.
Management believes established reserves are adequate to cover all
contingent liabilities related to dispositions and discontinued operations.
RAYONIER TIMBERLANDS, L.P.
In the United States, Rayonier manages timberlands and sells timber
stumpage directly through RTLP, a publicly-traded master limited partnership.
Rayonier and RFR, a wholly owned subsidiary, are the general partners of RTLP.
Rayonier also owns 74.7% of the Class A Limited Partnership Units, the remaining
25.3% being publicly held. Class A Units participate principally in the
revenues, expenses and cash flow associated with RTLP's sales of timber through
December 31, 2000 and to a significantly lesser extent in subsequent periods.
RTLP's sales of timber after that date as well as cash flow associated with land
management activities before and after that date are principally allocable to
the Class B Limited Partnership Units, all of which have been retained by
Rayonier. RTLP, through Rayonier Timberlands Operating Company, L.P., owns,
leases and
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manages timberlands in the Southeastern and Northwestern United States
previously owned or leased by Rayonier, sells timber stumpage from such
timberlands and from time to time purchases and sells timberlands. RTLP's
timberlands provide a major source of wood used in Rayonier's other businesses.
Since RTLP is majority owned by the Company, RTLP is included in the Company's
consolidated financial statements as a consolidated entity. The Company's
investment in RTLP as of September 30, 1993 was $216 million, on the basis of
historical cost.
PATENTS
Rayonier has a large number of patents which relate primarily to its
products and processes. It also has pending a number of patent applications.
Some of these are registered in the name of ITT and will be transferred to
Rayonier in connection with the Distribution pursuant to the Distribution
Agreement. Although, overall, Rayonier's patents are of importance in the
operation of its business, Rayonier does not consider any of its patents or
group of patents relating to a particular product or process as of material
importance from the standpoint of Rayonier's total business.
COMPETITION AND CUSTOMERS
Rayonier has for many years targeted the Pacific Rim as a market for its
timber and wood products. Rayonier has been involved in the marketing of pulp
products in Japan since the 1930's and in Korea and China for over 16 and 15
years, respectively. With the acquisition of the New Zealand timberland assets
described above, Rayonier believes it is in a better position to service its
existing and future Pacific Rim customers.
The Company's domestic timberlands are located in two major timber growing
regions of the United States (the Southeast and the Northwest), where timber
markets are fragmented and very competitive. In the Northwest, stumpage sold by
Hancock Insurance Company and from Washington State owned public forests is the
most significant competition. In both the Northwest and Southeast smaller forest
products companies and private land owners compete with the Company. Price is
the principal method of competition in this market.
Export markets for Rayonier's logs are equally competitive, with logs
available to customers from several countries and from several suppliers within
each country. Within New Zealand, major competitors include Carter Holt Harvey
Limited, Fletcher Challenge Limited and New Zealand Forestry Corporation.
Weyerhaeuser Company, International Paper Company and Cavenham Forest
Industries, Inc. are the principal competitors to Rayonier in the log trading
business. Log customers may switch species of logs from those sold by Rayonier
to other lower-cost species sourced elsewhere. Price is the principal method of
competition with respect to the acquisition of logs or stumpage for resale, and
price and customer relationships are important methods of competition in the
sale of logs to final customers.
Rayonier's wood products, in particular lumber, compete with the products
of numerous companies, many of which are larger and have greater resources than
Rayonier. Such lumber also competes with alternative construction materials. In
most of the markets in which Rayonier is engaged, competition is primarily
through price, quality, customer relationships and technical service.
Rayonier is a major producer of specialty pulp products, including chemical
cellulose, fluff and specialty paper pulps (for example, pulps for filtration
papers) and is only a minor producer of regular paper making pulp. The Company's
products are marketed worldwide against strong competition from domestic and
foreign producers. Some of Rayonier's major competitors are Georgia-Pacific
Corporation, International Paper Company, Weyerhaeuser Company, Buckeye
Cellulose Corporation and Stora Kopparbergs Bergslags AB. Product performance,
pricing and, to a lesser extent, technical service are the principal methods of
competition.
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<PAGE> 34
Rayonier sells its pulp products primarily to a diversified group of major
domestic and foreign companies, with no single customer accounting for more than
8% of total sales. In 1992, 45% of pulp product sales were to North America, 27%
to Western Europe, 12% to Japan and 9% to Latin America.
ENVIRONMENTAL MATTERS
Rayonier's current and future operations are closely linked with the
environment. Timber regeneration, wildlife protection, recycling and waste
reduction, energy conservation and compliance with increasingly stringent
environmental standards are significant factors affecting operations. As a
result, Rayonier closely monitors all of its environmental responsibilities,
together with trends in environmental laws.
Historically, Rayonier has invested substantial capital in order to comply
with Federal, state and local environmental laws and regulations. During 1992
and 1993, capital expenditures attributable to environmental compliance amounted
to $28 million. By making the anticipated expenditures for its ongoing pollution
abatement program, Rayonier believes that it will continue to meet the
environmental standards now applicable to its various facilities. Failure to
meet applicable pollution control standards could result in interruption or
suspension of operations of the affected facilities, or could require additional
capital expenditures at these facilities in the future.
Rayonier believes that the Clean Air Act Amendments of 1990 (the "CAAA")
will require substantial capital expenditures by the pulp and paper industry
over the next ten years. In particular, regulations recently proposed by the
U.S. Environmental Protection Agency (the "EPA") would require incineration of
volatile pulp mill emissions and scrubbing of similar emissions from bleach
plants. While Rayonier has some of the technology to meet these proposed
regulations in place, it believes that certain parts of this proposal are not
based on sound technology and are outside the authority of the law that the EPA
seeks to apply. During the regulatory comment period, Rayonier will file
comments with the EPA documenting this position and seeking to have the EPA
modify these proposed regulations.
Rayonier believes that many provisions of these proposed regulations, if
adopted in their current form, would also require substantial modifications in
the operations of most mills within the industry. Other provisions of the CAAA
will require more stringent monitoring of mill emissions than has previously
been required in order to demonstrate compliance with air permits to be issued
under Title V of the CAAA. These permits will apply emission limitations on a
facility-wide basis to each of Rayonier's mill operations.
The EPA is also revising effluent guidelines applicable to pulp and paper
facilities under the Clean Water Act ("CWA"). The proposed regulations, which
are designed to reduce or eliminate the discharge of chlorinated organics, are,
in some cases, based on technological requirements which would prevent Rayonier
from meeting certain product quality specifications for some of its high purity
cellulose products and in other cases will increase the cost of making such
products. Rayonier expects to file comments with the EPA during the CWA
regulatory comment period to challenge the technical and legal bases of these
proposed regulations and to seek to have the proposals modified by the EPA.
These proposed regulations would also require a large reduction in the
discharge of conventional pollutants from dissolving sulfite mills (Rayonier's
Port Angeles, Washington and Fernandina, Florida mills are dissolving sulfite
mills). Here again, Rayonier expects to submit comments challenging the
technical and legal bases for the proposed regulations.
The proposed regulations under the CAAA and CWA are scheduled to be
promulgated in final form by late 1995, and compliance must be achieved within
three years thereafter. While these regulations may have a material effect on
Rayonier's operations if not changed, it will not be possible for Rayonier to
determine the nature or costs of such effect until the regulations are issued in
final form. Rayonier has been discussing these proposed regulations with the
EPA, both individually and through the industry trade association. Rayonier
cannot predict, however, whether efforts to modify the proposed regulations will
be successful.
Over the past three years, the harvest of timber from private lands in the
State of Washington has been restricted as a result of the listing of the
northern spotted owl as a threatened species under the Endangered Species Act
("ESA"). These restrictions have caused RTLP to restructure and reschedule some
of its harvest plans.
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Although the current designation by the U.S. Fish and Wildlife Service ("FWS")
of critical habitat does not include RTLP's timberlands or any other privately
owned land, the FWS is developing a proposed rule under the ESA to redefine
protective measures for the northern spotted owl on private lands. This rule, as
currently drafted, would reduce the harvest restrictions on private lands except
within specified "Special Emphasis Areas," where restrictions would be
increased. One proposed Special Emphasis Area is on the Olympic Peninsula, where
a significant portion of RTLP's Washington timberlands are located. The new rule
may also incorporate guidelines for the protection within Special Emphasis Areas
of the marbled murrelet, also recently listed as a threatened species under the
ESA. Rayonier is engaged in discussions with the FWS to have the rule modified
while still allowing the FWS to achieve its habitat objectives. Separately, in
1994 the State of Washington will be reevaluating regulations to protect the
northern spotted owl and the marbled murrelet. Rayonier is unable at this time
to predict either the form in which the FWS rule or the State of Washington
regulations will eventually be adopted or the effect of such rule or regulations
on Rayonier's operations.
See "Legal Proceedings".
RAW MATERIALS
Regional timber availability continues to be restricted by legislation,
litigation and pressure from various preservationist groups. While Rayonier's
timber products business has benefited from a significant increase in log and
timber stumpage prices, this has also adversely impacted fiber costs at
Rayonier's Port Angeles pulp manufacturing facility in the Northwest.
Rayonier has pursued, and is continuing to pursue, reductions in costs of
other raw materials, supplies and contract services at the Company's pulp mills.
Lower prices have already been negotiated for caustic/chlorine. Management
foresees no constraints in pricing or availability of its key raw materials,
other than the comments concerning wood fiber above.
RESEARCH AND DEVELOPMENT
Rayonier believes it has one of the preeminent research facilities and
staffs in the forest products industry. Rayonier has been able to utilize this
research resource to enhance the marketing of its products to various customers.
For its pulp business, research and development efforts are directed primarily
at the development of new and improved pulp grades, improved manufacturing
efficiency, reduction of energy needs, product quality, and development of
improved environmental controls. Research efforts are concentrated at the
Rayonier Research Center in Shelton, Washington. Research activities related to
Rayonier's forest resources operations include genetic tree improvement programs
as well as applied silviculture programs to identify management practices that
improve returns from the timberland asset. 1992, 1991 and 1990 research and
development expenditures were $8.3 million, $7.7 million and $7.2 million,
respectively.
EMPLOYEE RELATIONS
Rayonier currently employs approximately 2,600 people. Of this number,
approximately 2,500 are employees in the United States, of whom 60% are
represented by labor unions. Most hourly employees are represented by labor
unions. Generally, labor relations have been maintained in a normal and
satisfactory manner.
The ten labor unions within Rayonier represent approximately 1,500
employees at the three pulp mills and at the Rayonier Research Center.
Bargaining activity in 1993 resulted in a three-year extension of the Port
Angeles pulp mill's two labor agreements. The Fernandina Pulp mill
(approximately 300 covered employees) and the Rayonier Research Center
(approximately 25 covered employees) contracts will expire on April 30, 1994 and
August 31, 1994, respectively. During 1995, labor contracts of Rayonier's Jesup
mill will expire, covering approximately 875 employees.
Rayonier has in effect various plans which extend to its employees and
retirees certain group medical, dental and life insurance coverage, pension, and
other benefits. The cost of such benefit plans is borne primarily by Rayonier,
with the exception of health care, for which employees are responsible for
approximately 20% of premium costs.
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PROPERTIES
RTLP owns, leases or controls approximately 1.2 million acres of
timberlands in the United States previously owned or leased by Rayonier. (See
Notes to Consolidated Financial Statements, "Rayonier Timberlands,
L.P.") Rayonier, through its wholly owned subsidiary, RFR, as managing general
partner of RTLP, continues on behalf of RTLP to manage such properties and sell
stumpage therefrom to Rayonier as well as unaffiliated parties. Rayonier's New
Zealand subsidiary owns or manages the forest assets on approximately 253,000
acres of plantation forests in New Zealand. Rayonier and its wholly owned
subsidiaries own or lease various other properties used in their operations,
including three pulp mills, two lumber manufacturing facilities, a research
facility, various other timberlands, and Rayonier's executive offices. These
facilities (except for the executive offices in Stamford, Connecticut) are
located in the northwestern and southeastern portions of the United States and
in New Zealand.
LEGAL PROCEEDINGS
The Company and its wholly owned subsidiary, SWP, are named defendants in
six cases arising out of former wood preserving operations at SWP's plant
located in Augusta, Georgia. In general, these cases, five pending in the U.S.
District Court for the Southern District of Georgia and one pending in the
Superior Court of Richmond County, Georgia, seek recovery for property damage
and personal injury or medical monitoring costs based on the alleged exposure to
toxic chemicals used by SWP in its former operations. One case, Ernest Jordan v.
Southern Wood Piedmont Co., et al, seeks certification as a class action and
damages in the amount of $700 million. Counsel for the Company believes that the
Company has meritorious defenses in all these cases. Several previous lawsuits
related to the Augusta facility have been settled for amounts not material to
the Company.
Rayonier has been named as a "Potentially Responsible Party" ("PRP") or is
a defendant in actions being brought by a PRP in five proceedings instituted by
the U.S. Environmental Protection Agency ("EPA") under the Comprehensive
Environmental Response Compensation and Liability Act ("CERCLA") or state
agencies under comparable state statutes. In each case, Rayonier has already
established reserves for its estimated liability. In three of these proceedings,
Rayonier is presently considered a "de minimis" participant. In one proceeding,
the Company is not a "de minimis" participant because of the limited number of
PRP's, and the Company believes that its share of liability for total cleanup
costs (currently estimated to be between $30 million and $39 million) will be
less than 9%. In another proceeding, the Company is not a "de minimis"
participant based on an analysis of the volume and type of waste that the
Company is alleged to have disposed of at the site, and the Company believes
that its share of liability for total cleanup costs (currently estimated to be
between $25 million and $32 million) will be less than 1.75%. Rayonier has also
received requests for information from the EPA in connection with two other
CERCLA sites, but the Company does not currently know to what extent, if at all,
liability under CERCLA will be asserted against Rayonier with respect to either
site.
There are various other lawsuits pending against or affecting Rayonier and
its subsidiaries, some of which involve claims for substantial amounts. Pursuant
to the Distribution Agreement, Rayonier and ITT will allocate liabilities and
obligations relating to litigation matters arising from periods prior to the
Distribution. See "RELATIONSHIP BETWEEN ITT AND RAYONIER AFTER THE
DISTRIBUTION".
The ultimate liability with respect to all actions pending against Rayonier
and its subsidiaries is not considered material in relation to the consolidated
financial condition of Rayonier and its subsidiaries.
MANAGEMENT AND EXECUTIVE COMPENSATION
BOARD OF DIRECTORS
The Rayonier Articles of Incorporation as in effect on the Distribution
Date will provide that the number of directors shall be not less than three and
not more than twelve, with the exact number to be fixed by the Rayonier Board of
Directors from time to time. Immediately after the Distribution, Rayonier
expects to have a
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board of eight directors, which will be divided into three classes, with the
term of Class I to expire in 1995, the term of Class II to expire in 1996, and
the term of Class III to expire in 1997. This classification is conditional,
however, upon compliance of such classification with North Carolina law at the
time of the 1995 annual meeting. If such classification is not in compliance
with North Carolina law at such time the Board will not be classified and all
directors will be elected annually. It is the intent of the Company that a
majority of the directors comprising the Company's Board will not be employees
of the Company and that a majority of the non-employee directors will be
individuals who will not be directors of ITT.
The following table sets forth information as to the persons who are
expected to serve as directors of the Company, following the Distribution. The
table also sets forth the names of the directors of each class and their
original terms.
<TABLE>
<CAPTION>
CLASS I, TERM EXPIRES IN 1995
NAME, AGE AND PRINCIPAL
OCCUPATION INFORMATION
- --------------------------------- ---------------------------------------------------------
<S> <C>
Ronald M. Gross, 60.............. He joined Rayonier in March 1978 as President and Chief
Chairman, President and Operating Officer. He was elected Chairman in 1984. Mr.
Chief Executive Officer, Gross serves as President and Director of RFR, the
Rayonier managing general partner of RTLP. From 1968 to 1978, he
was with Canadian Cellulose Company Limited of Vancouver,
British Columbia, where he held various senior positions
before becoming President and Chief Executive Officer and
Director in 1973. Mr. Gross is currently a Director of
Lukens Inc. He serves as a member of the Executive
Committee of the Board of Directors of the American
Forest and Paper Association ("AFPA") and is Vice
Chairman of the AFPA International Business Committee. He
is a member of the Investment Policy Advisory Committee
of the United States Trade Representative. Mr. Gross is a
graduate of Ohio State University and the Harvard
Graduate Business School.
</TABLE>
<TABLE>
<S> <C>
Katherine D. Ortega, 59.......... She served as the 38th Treasurer of the United States
Former Treasurer of the from September 1983 through June 1989 and as Alternate
United States Representative of the United States to the United Nations
General Assembly during 1990 to 1991. Prior to these
appointments, she served as a Commissioner of the
Copyright Royalty Tribunal and as a member of the
President's Advisory Committee on Small and Minority
Business. Before entering government, Ms. Ortega
practiced as a certified public accountant with Peat,
Marwick, Mitchell & Co. in Los Angeles from 1969 to 1972,
was Vice President of the Pan American National Bank of
East Los Angeles from 1972 to 1975 and was President and
Director of the Santa Ana State Bank from 1975 to 1978.
She currently serves on the Boards of Directors of
Diamond Shamrock, Inc., Ralston Purina Company, The
Kroger Co., Long Island Lighting Company, Catalyet and
Quest International and is a member of the Comptroller
General's Consultant Panel. She is a graduate of Eastern
New Mexico University, holds three honorary Doctor of Law
Degrees and one honorary Doctor of Social Science Degree.
</TABLE>
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<PAGE> 38
<TABLE>
<CAPTION>
CLASS I, TERM EXPIRES IN 1995
NAME, AGE AND PRINCIPAL
OCCUPATION INFORMATION
- --------------------------------- ---------------------------------------------------------
<S> <C>
Burnell R. Roberts, 66........... He served as chairman of the Board and chief executive
Chairman, Sweetheart Holdings, officer of Mead Corporation (an integrated manufacturer
Inc. and Sweetheart Cup of paper and forest products and provider of electronic
Company (producer of plastic and publishing services) from April 1982 until his retirement
paper disposable food service in May 1992. Previously he was president of Mead from
and food packaging products) 1981 to 1982 and Senior Vice-President from 1979 to 1981.
He was a director of Mead from October 1981 until May
1993. He continues to serve as a director of National
City Corporation, Cleveland, OH; Armco Inc., Pittsburgh,
PA; The Perkin-Elmer Corporation, Norwalk, CT, and DPL
Inc., Dayton, OH. He also serves as a director of the
Japan Society, New York. He is a graduate of the
University of Wisconsin and Harvard Graduate School of
Business Administration.
William J. Alley, 64............. He joined The Franklin Life Insurance Company in 1967 and
Chairman of the Board and was Chairman, President and Chief Executive Officer of
Chief Executive Officer, that organization when it was acquired by American
American Brands, Inc. Brands, Inc. in 1979. He was elected to the Board of
(diversified manufacturing and Directors of American Brands in 1979 and subsequently
other businesses) held various senior executive positions with American
Brands before being elected to his present position on
June 15, 1987. He is also a director of Central Illinois
Public Service Company, Bunn-O-Matic Corporation, Moorman
Manufacturing Company, The Business Council of
Southwestern Connecticut (SACIA), Co-operation Ireland,
United Way of Tri-State and the Connecticut Business for
Education Coalition, Inc. and on the Advisory Board of
Governors of the National Women's Economic Alliance
Foundation. He is a member of the Business Roundtable and
is also a member of The Conference Board, The Board of
Overseers of the Executive Council on Foreign Diplomats,
The Ambassadors' Roundtable Advisory Council and The
Economic Club of New York. He is a graduate of
Northeastern Oklahoma A&M College, the University of
Oklahoma School of Business and the University of
Oklahoma School of Law.
</TABLE>
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<PAGE> 39
<TABLE>
<CAPTION>
CLASS II, TERM EXPIRES IN 1996
NAME, AGE AND PRINCIPAL
OCCUPATION INFORMATION
- --------------------------------- ---------------------------------------------------------
<S> <C>
Paul G. Kirk, 55................. He became a partner in the law firm of Sullivan &
Of counsel to Sullivan & Worcester in 1977 and is presently of Counsel to the
Worcester (law firm) firm. He served as chairman of the Democratic National
Committee from 1985 to 1989 and as treasurer from 1983 to
1985. Following his graduation from law school, Mr. Kirk
became an assistant district attorney in Massachusetts.
In 1969 he went to Washington to serve as assistant
counsel to the Senate Judiciary Committee's Subcommittee
on Administrative Practices and Procedures. In 1971, he
left the Subcommittee staff to join Senator Edward M.
Kennedy's U.S. Senate staff as special assistant.
Following his resignation in 1989 as chairman of the
Democratic National Committee, he returned to Sullivan &
Worcester as a partner in general corporate practice at
the firm's Boston and Washington offices. Mr. Kirk is a
director of Kirk-Sheppard & Co., Inc., of which he also
is chairman and treasurer. He is a trustee of the Bradley
Real Estate Trust and a director of ITT and of Hartford
Fire Insurance Company, a subsidiary of ITT. He is
co-chairman of the Commission on Presidential Debates,
chairman of the John F. Kennedy Library Foundation Board
of Directors and a trustee of Stonehill College. He is a
graduate of Harvard College and Harvard Law School.
Gordon I. Ulmer, 61.............. He joined Connecticut Bank and Trust Company ("CBT") in
Retired Chairman and 1957 and held numerous positions before being elected
Chief Executive Officer President and Director in 1980 and Chairman and Chief
of the Connecticut Bank Executive Officer in 1985. In 1988 he was elected
and Trust Company and President of the Bank of New England Corporation
Retired President of Bank ("BNEC"), holding company of CBT. He retired from his
of New England Corporation positions with CBT in December 1990 and as President of
BNEC in February 1991. In January 1991, BNEC filed a
petition under Chapter 7 of the Bankruptcy Code and CBT
commenced insolvency proceedings. Mr. Ulmer also serves
as a director of Hartford Fire Insurance Company and the
Old State House Association. He is a graduate of
Middlebury College, the American Institute of Banking and
Harvard Business School Advanced Management Program and
attended New York University's Graduate School of
Engineering.
</TABLE>
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<PAGE> 40
<TABLE>
<CAPTION>
CLASS III, TERM EXPIRES IN 1997
NAME, AGE AND PRINCIPAL
OCCUPATION INFORMATION
- --------------------------------- ---------------------------------------------------------
<S> <C>
Rand V. Araskog, 62.............. He joined ITT in 1966 and has been chief executive of ITT
Chairman, President and since 1979 and chairman since 1980. In March 1991, he
Chief Executive Officer assumed the title of president. Mr. Araskog is a director
ITT Corporation of ITT and of Hartford Fire Insurance Company and ITT
Sheraton Corporation, subsidiaries of ITT, and of Alcatel
Alsthom of France, in which ITT holds a seven percent
interest. He is also a director of Dow Jones & Company,
Inc.; Dayton-Hudson Corporation; Shell Oil Company; the
New York Stock Exchange; and the Federal Reserve Bank of
New York. He is a member of The Business Council, The
Business Roundtable, the Council on Foreign Relations,
The Economic Club of New York, the Rockefeller University
Council, the Competitiveness Policy Council, the
Trilateral Commission, the Business-Higher Education
Forum and the West Point Society of New York. He is a
trustee of the New York Zoological Society, a member of
the International Council of the Salk Institute and a
partner of the New York City Partnership. In 1988, Mr.
Araskog was named Officier de la Legion d'Honneur by the
President of the French Republic, Francois Mitterand; and
in April 1991, he was awarded the Vermeil Grand Medal of
the City of Paris. In May 1991, he was awarded the Order
of Merit of the Republic of Italy in the level of Grand
Officer. Mr. Araskog is a graduate of the U.S. Military
Academy at West Point and attended Harvard Graduate
School of Arts and Sciences.
</TABLE>
<TABLE>
<S> <C>
Donald W. Griffin, 56............ He joined Olin in 1961 and was part of its Brass Division
Vice Chairman of the marketing organization beginning in 1963. He advanced
Board, Olin Corporation through various managerial positions and in 1983 was
(diversified manufacturing elected an Olin corporate vice president and appointed
corporation) president of the Brass Division. He became president of
the Winchester Division of Olin in 1985, was appointed
president of Olin's Defense Systems Group in 1986 and was
elected an executive vice president of Olin in 1987. He
became a director of Olin in 1990 and was elected Vice
Chairman of the Board for Operations on January 12, 1993.
He is also a director of the Sporting Arms and Ammunition
Manufacturers Institute, the Wildlife Management
Institute, the National Shooting Sports Foundation, River
Bend Bancshares, Inc. and Illinois State Bank and Trust
in East Alton, Illinois. He is a trustee of the Buffalo
Bill Historical Center, the Olin Charitable Trust and the
National Security Industrial Association. He is a member
of the American Society of Metals, the Association of the
U.S. Army and the American Defense Preparedness
Association. He is a life member of the Navy League of
the United States and the Surface Navy Association. He is
a graduate of the University of Evansville, Evansville,
Indiana and has completed the Graduate School for Sales
and Marketing Managers at Syracuse University, Syracuse,
N.Y.
</TABLE>
DIRECTORS' COMPENSATION
No director who is an employee of the Company will be compensated for
service as a member of the Board of Directors or any Committee of the Board of
Directors. Compensation for non-employee directors consists of an annual
retainer of $20,000, a $1,000 fee for each Board meeting attended, and a $750
fee for
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<PAGE> 41
each Committee meeting attended. Directors will be reimbursed for travel
expenses incurred on behalf of the Company.
DIRECTOR'S RETIREMENT POLICY
The Company's Board of Directors has adopted a retirement policy which
provides (i) that no person may be nominated for election or reelection as a
non-employee director after reaching age 72, and (ii) that no employee of
Rayonier or of any of its subsidiaries (other than an employee who has served as
chief executive of Rayonier) may be nominated for election or reelection as a
director after reaching age 65, unless there has been a specific waiver by the
Board of Directors of these age requirements.
COMMITTEES OF THE BOARD OF DIRECTORS
Prior to the Distribution, the Company will establish Audit, Compensation
and Management Development, Environmental and Legal Affairs and Nominating
Committees of the Company's Board of Directors.
Audit Committee. The Audit Committee will support the independence of the
Company's external and internal auditors and the objectivity of the Company's
financial statements. The Audit Committee will (1) review the Company's
principal policies for accounting, internal control and financial reporting, (2)
recommend to the Company's Board of Directors the engagement or discharge of the
external auditors, (3) review with the external auditors the plan, scope and
timing of their audit and (4) review the auditors' fees and, after completion of
the audit, review with management the external auditors' report.
The Audit Committee will also review, before publication, the annual
financial statements of the Company, the independence of the external auditors,
the adequacy of the Company's internal accounting control system, and the
Company's policies on business integrity and ethics and conflicts of interest.
The Audit Committee will also perform a number of other review functions related
to auditing the financial statements and internal controls. The Audit Committee
will be comprised of three or more non-employee directors.
Compensation and Management Development Committee. The Compensation and
Management Development Committee will (1) review and make recommendations to the
Company's Board of Directors with respect to the direct and indirect
compensation and employee benefits of the Chairman of the Board and other
elected officers of the Company, (2) review, administer and make recommendations
to the Company's Board of Directors with respect to any incentive plans and
bonus plans that include elected officers and (3) review the Company's policies
relating to the compensation of senior management and, generally, other
employees. In addition, the Committee will review management's long-range
planning for executive development and succession, establish and periodically
review policies on management perquisites and perform certain other review
functions relating to management compensation and employee relations policies.
The Compensation and Management Development Committee will be comprised of three
or more non-employee directors.
Environmental and Legal Affairs Committee. The Environmental and Legal
Affairs Committee will (1) review and recommend to the Company's Board of
Directors proposed actions on major environmental compliance and regulatory
matters which could have a significant impact on the Company's business and
strategic operating objectives, and (2) review and consider major claims and
litigation, and legal, regulatory, patent and related governmental policy
matters affecting the Company. In addition, the Committee reviews and approves
management policies and programs relating to compliance with environmental
matters, legal and regulatory requirements and business ethics. The
Environmental and Legal Affairs Committee will be comprised of three or more
non-employee directors.
Nominating Committee. The Nominating Committee will make recommendations
concerning the organization, size and composition of the Board of Directors and
its Committees, propose nominees for election to the Board and its Committees
and consider the qualifications, compensation and retirement of directors. The
Nominating Committee will be comprised of three or more non-employee directors.
38
<PAGE> 42
EXECUTIVE OFFICERS
Listed below is certain information as to the Company's executive officers
who have been selected to serve after the Distribution.
<TABLE>
<CAPTION>
NAME, POSITION WITH COMPANY AND
AGE BIOGRAPHICAL DATA
- --------------------------------- ---------------------------------------------------------
<S> <C>
Ronald M. Gross, 60.............. See information under "Board of Directors."
Chairman, President and
Chief Executive Officer
Wallace L. Nutter, 49............ He was elected Executive Vice President of Rayonier in
Executive Vice President 1987 and has overall responsibility for the market pulp
and wood products business. He was named Senior Vice
President, Operations in 1985 and Vice President and
Director, Forest Products Operations in 1984. He joined
Rayonier in 1967 in the Northwest Forest Operations. Mr.
Nutter is a member of the Board of Governors of the
National Council for Air and Stream Improvement. He holds
a BA in Business Administration from the University of
Washington and has completed the Advanced Management
Program at the Harvard Business School.
William S. Berry, 52............. He was elected Senior Vice President, Forest Resources
Senior Vice President, Forest and Corporate Development, of Rayonier in January 1994.
Resources and Corporate He was Senior Vice President, Land and Forest Resources,
Development of Rayonier from January 1986 to January 1994. From
October 1981 to January 1986 he was Vice President and
Director of Forest Products Management. Mr. Berry joined
Rayonier in 1980 as Director of Wood Products Management.
He serves as Senior Vice President of RFR, the managing
general partner of RTLP. He also serves on the Executive
Boards of the American Forest Council and the Center for
Streamside Studies. Prior to joining Rayonier, Mr. Berry
was employed with Champion International and
Kimberly-Clark Corporation. He holds a BS in Forestry
from the University of California at Berkeley and an MS
in Forestry from the University of Michigan.
Gerald J. Pollack, 51............ He was elected Senior Vice President and Chief Financial
Senior Vice President and Officer of Rayonier in May 1992. From July 1986 to May
Chief Financial Officer 1992, he was Vice President and Chief Financial Officer.
Mr. Pollack joined Rayonier in June 1982 as Vice
President and Controller. Prior to joining Rayonier, Mr.
Pollack was employed with Avis, Inc. where he held a
number of positions, including Vice President and
Corporate Comptroller and finally Vice
President-Operations, Europe, Africa and Middle East
Divisions in England. He serves as Chief Financial
Officer of RFR, the managing general partner of RTLP. Mr.
Pollack has a B.S. degree in Physics from Rensselaer
Polytechnic Institute and an MBA in Accounting and
Finance from the Amos Tuck School at Dartmouth.
</TABLE>
39
<PAGE> 43
<TABLE>
<CAPTION>
NAME, POSITION WITH COMPANY AND
AGE BIOGRAPHICAL DATA
- --------------------------------- ---------------------------------------------------------
<S> <C>
Kevin S. O'Brien, 61............. He was elected Senior Vice President, Pulp Marketing for
Senior Vice President, Pulp Rayonier in November 1989. From 1982 to 1989, he was Vice
Marketing President, Strategic Planning and Development. In 1980 he
was elected a Vice President and was appointed Director
of Strategic Planning and Development. Since joining
Rayonier in 1957, Mr. O'Brien has held a variety of
assignments in domestic and international sales and
marketing, including an assignment at ITT Corporate
Headquarters as Product Line Manager for Natural
Resources from 1977 to 1979. He holds an AB in Economics
from Harvard University and an MBA from New York
University.
John P. O'Grady, 48.............. He was elected Senior Vice President, Human Resources, of
Senior Vice President, Human Rayonier in January 1994. He was Vice President,
Resources Administration, of Rayonier from July 1991 to January
1994. From December 1975 to July 1991, he held a number
of human resources positions at ITT. Prior to joining
Rayonier, he was Vice President, Administration at ITT
Federal Services Corporation from October 1983 through
June 1991. Mr. O'Grady is a Management Trustee for United
Paperworkers' Health and Welfare Trust and serves on the
Board of Directors of Trenton State College Business and
Industry Council. He holds a B.S. degree in Labor
Economics from the University of Akron, an M.S. degree in
Industrial Relations from Rutgers University and a Ph.D
in Management from California Western University.
</TABLE>
40
<PAGE> 44
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning shares of Rayonier
Common Stock projected to be beneficially owned after the Distribution Date by
(a) each of the Company's directors and executive officers and (b) all directors
and executive officers as a group. The projections are based on the number of
shares of ITT Common Stock owned by such persons at December 31, 1993 and
reflect the Distribution Ratio of one share of Rayonier Common Stock for every
four shares of ITT Common Stock. None of the directors or executive officers,
individually, nor all the directors and executive officers as a group, will
beneficially own as much as 1% of the outstanding shares of Rayonier Common
Stock after the Distribution.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP
- -------------------------------------------------------------------------- --------------------
<S> <C>
Rand V. Araskog........................................................... 101,452
4,244*
Ronald M. Gross........................................................... 11,701
697*
William J. Alley.......................................................... 0
Donald W. Griffin......................................................... 0
Paul G. Kirk.............................................................. 252
Katherine D. Ortega....................................................... 0
Burnell R. Roberts........................................................ 0
Gordon I. Ulmer........................................................... 0
Wallace L. Nutter......................................................... 1,885**
William S. Berry.......................................................... 169
149*
Gerald J. Pollack......................................................... 85*
Kevin S. O'Brien.......................................................... 0
John P. O'Grady........................................................... 11*
Directors and executive
officers as a group..................................................... 120,645
----------
----------
</TABLE>
- ---------------
* Indicates that the shares are to be distributed with respect to shares of
ITT Common Stock held under the ITT Investment and Savings Plan and/or
Dividend Reinvestment Plan. All other shares, if any, indicated for the
individual concerned are to be distributed with respect to shares of ITT
Common Stock owned directly by such individual.
** Includes 1,264 shares to be distributed with respect to ITT shares owned by
a corporation of which Mr. Nutter and his spouse are the sole stockholders.
All other shares in this total are to be distributed with respect to shares
of ITT Common Stock held under the ITT Investment and Savings Plan or
Dividend Reinvestment Plan.
41
<PAGE> 45
COMPENSATION OF EXECUTIVE OFFICERS
The following table discloses compensation received by Rayonier's Chief
Executive Officer and the four other most highly paid executive officers for the
fiscal year ended December 31, 1993.
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARD OF
--------------------------------- STOCK ALL OTHER
NAME SALARY($) BONUS($) OTHER($) OPTIONS(3) COMPENSATION(4)($)
- --------------------------------- --------- -------- -------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Ronald M. Gross.................. 421,920 185,000 64(2) 33,000 14,767
Wallace L. Nutter................ 235,631 90,000 0 7,000 8,247
William S. Berry................. 180,000 60,000 0 4,500 6,300
Kevin S. O'Brien................. 178,962 35,000 0 2,000 6,264
Gerald J. Pollack................ 167,042 60,000 0 4,500 5,846
</TABLE>
- ---------------
(1) This table does not include columns for Restricted Stock Awards and
Long-Term Incentive Plan Compensation since Rayonier had no amounts to
report for 1993.
(2) Represents tax reimbursement allowances which are intended to offset the
inclusion in taxable income of the value of certain benefits.
(3) The stock options reported are for ITT Common Stock and do not represent
options to acquire Rayonier Common Stock. In the event options are
exercised and shares of ITT Common Stock are issued prior to the Record
Date, the option holder will receive Rayonier Common Stock in the
Distribution on the same basis as all other shareholders of record of ITT
Common Stock on the Record Date. In connection with the Distribution,
options to purchase ITT Common Stock which are not exercised will be
surrendered and cancelled, and it is contemplated that options to acquire
Rayonier Common Stock will be granted to replace the cancelled options. See
"Stock Options Generally".
(4) All the amounts shown in this column are company contributions under the ITT
Investment and Savings Plan and the ITT Excess Savings Plan, which are
defined contribution plans. ITT makes a matching contribution in an amount
equal to 50% of an employee's contribution not to exceed three percent (3%)
of such employee's salary. Under these plans, ITT also makes a non-matching
contribution equal to one-half of one percent (0.5%) of an employee's
salary.
ANNUAL BONUS PLAN
Eligible executives and key managers of Rayonier participate in an annual
incentive bonus program sponsored by ITT. Under this program, each executive and
key manager is assigned to a salary grade which has a standard bonus associated
with it expressed as a percentage of the executive's year-end base salary rate
("standard bonus"). At year end, the aggregate amount of individual standard
bonuses is adjusted in accordance with a preestablished formula to create a
spendable bonus pool for the year. The current formula measures actual net
income, return on total capital ("ROTC") and operating funds flow ("OFF")
against the approved budgeted amounts for the year for each performance measure.
Net income, ROTC and OFF performance is weighted 60%, 25%, 15%, respectively.
The maximum spendable pool is 150% of the aggregate standard bonus pool.
Individual bonus amounts within the authorized pool are determined on a
discretionary basis taking into account specific personal contributions during
the year.
Bonus awards for Rayonier executive officers are subject to approval by ITT
senior line management. Bonus awards for Messrs. Gross and Nutter are subject to
final approval by the ITT Compensation and Personnel Committee.
During 1993, the standard bonus adjustment factor pursuant to the above
formula was 100%. In total, $1,358,000 was authorized for expenditure to 54
executives, including the amounts indicated in the Summary Compensation Table
for the named executive officers.
42
<PAGE> 46
It is contemplated that the annual bonus program will be carried forward in
future years in substantially the same form after the Distribution and that it
will be administered by the Compensation and Management Development Committee of
the Rayonier Board of Directors.
STOCK OPTIONS GENERALLY
The employees of Rayonier hold as of December 31, 1993 unexercised options
to acquire 149,887 shares of ITT Common Stock, of which 6 executive officers
hold 105,001 such unexercised options. To the extent those ITT options are not
exercised prior to the Record Date, it is anticipated that the holders will
surrender the ITT options for cancellation. In connection with the Distribution,
Rayonier intends to grant to the named executive officers substitute options to
acquire Rayonier Common Stock in substitution for the surrendered options on ITT
Common Stock. The substitution of options will maintain the economic value of
each option, and the total number of Rayonier options granted will be determined
so that the aggregate spread between the exercise price and the fair market
value with respect to the Rayonier options will equal such aggregate spread with
respect to the ITT options. As of December 31 1993, it is anticipated that
options to acquire not more than 600,000 shares of Rayonier Common Stock will be
granted to the named Rayonier executives in substitution for the surrendered ITT
options.
Replacement of the surrendered ITT options is believed to be beneficial to
Rayonier and its shareholders, since it will allow Rayonier to restore
meaningful compensation incentives to key employees.
OPTION GRANTS ON ITT COMMON STOCK TO RAYONIER EXECUTIVES IN LAST FISCAL YEAR
The following table provides information on fiscal year 1993 grants of
options to the named Rayonier executives to purchase shares of ITT Common Stock.
No options to acquire Rayonier Common Stock have been granted or are
outstanding.
INDIVIDUAL GRANTS TO PURCHASE ITT COMMON STOCK
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
% OF TOTAL RATES OF STOCK PRICE
OPTIONS APPRECIATION FOR OPTION
GRANTED TO TERM(4)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -----------------------
NAME GRANTED(1) 1993(2) PRICE/SHARE(3) DATE 5% 10%
- ------------------------ ---------- ------------ -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ronald M. Gross......... 33,000 1.6% $92.00 10/16/2003 $1,909,324 $4,838,602
Wallace L. Nutter....... 7,000 0.3% 92.00 10/16/2003 405,008 1,026,370
William S. Berry........ 4,500 0.2% 92.00 10/16/2003 260,362 659,809
Kevin S. O'Brien........ 2,000 0.1% 92.00 10/16/2003 115,717 293,249
Gerald J. Pollack....... 4,500 0.2% 92.00 10/16/2003 260,362 659,809
</TABLE>
- ---------------
(1) The numbers on this column represent the options to purchase ITT Common
Stock.
(2) Percentages are based on a total of 2,070,900 options granted to 677 ITT
employees during 1993.
(3) The exercise price per share is 100% of the fair market value of ITT Common
Stock on the date of grant, which was October 14, 1993. The exercise price
may be paid in cash or in shares of ITT Common Stock valued at their fair
market value on the date of exercise.
Options granted to Messrs. Gross and Nutter are not exercisable until the
trading price of ITT Common Stock equals or exceeds $115 per share for 10
consecutive trading days at which time two-thirds of the options will be
exercisable; when the trading price equals or exceeds $128.80 per share for
10 consecutive trading days, the options will be fully exercisable.
Notwithstanding the above, the options will be fully exercisable on October
16, 2002.
Options granted to the other three named officers will be exercisable as to
one-third on the first anniversary date of grant; two-thirds on the second
anniversary date of the grant and in full on the third anniversary of the
grant date.
43
<PAGE> 47
(4) At the end of the term of the options granted on October 14, 1993, the
projected price of a share of ITT Common Stock would be $149.86 at an
assumed annual appreciation rate of 5% and $238.62 at an assumed annual
appreciation rate of 10%. Gains to ITT Common stockholders at those assumed
annual appreciation rates would exceed $6.8 billion and $17.4 billion,
respectively, over the term of the options.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUE
The following table provides information on option exercises in 1993 by the
named Rayonier executives and the value of each such executive's unexercised
options to acquire ITT Common Stock at December 31, 1993.
<TABLE>
<CAPTION>
SHARES REPRESENTED VALUE OF UNEXERCISED
OPTIONS EXERCISED DURING 1993 BY UNEXERCISED IN-THE-MONEY OPTIONS
-------------------------------- OPTIONS AT 12/31/93 HELD AT 12/31/93(1)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE VALUE REALIZED UNEXERCISABLE UNEXERCISABLE
- --------------------------------- --------------- -------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Ronald M. Gross.................. 54,500 $1,849,605 12,000/33,000 $ 511,440/-0-
Wallace L. Nutter................ 5,000 158,750 32,500/ 7,000 1,228,625/-0-
William S. Berry................. 8,333 227,408 1,667/ 4,500 71,048/-0-
Kevin S. O'Brien................. 2,500 100,800 2,500/ 2,000 100,625/-0-
Gerald J. Pollack................ 3,500 100,500 1,834/ 4,500 75,795/-0-
</TABLE>
- ---------------
(1) The values reported in this column are based on the New York Stock Exchange
consolidated trading closing price of ITT Common Stock of $91.25 at
December 31, 1993.
ITT LONG-TERM PERFORMANCE PLAN
Under the ITT Long-Term Performance Plan, target contingent cash awards
were made on December 12, 1991 (the "1992 Class Awards") to ITT executives
including the executive officers of Rayonier. With respect to Rayonier executive
officers, under the 1992 Class Awards, the ultimate payment value of a target
award, if any, will be based upon Rayonier's return on equity ("ROE")
performance during the three-year period 1993 through 1995 as measured against
predetermined ROE goals for each year. Each year of the performance period has
been assigned a specific weighting: 15%, 35% and 50% for 1993, 1994 and 1995,
respectively. If the actual weighted average ROE performance is less than 90% of
the ROE goals, no payment is earned.
1992 Class Awards for the five most highly compensated executive officers
of Rayonier are listed in the table below:
<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER
PERIOD UNTIL 1992 CLASS 1992 CLASS 1992 CLASS
CONTINGENT TARGET MATURATION OR AWARD AWARD AWARD
NAME AWARDS PAYOUT THRESHOLD(1) TARGET(2) MAXIMUM(3)
- -------------------------------- ----------------- ------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Ronald M. Gross................. $ 700,000 12/31/95 $233,333 $ 700,000 $1,400,000
Wallace L. Nutter............... 300,000 12/31/95 100,000 300,000 600,000
William S. Berry................ 200,000 12/31/95 66,667 200,000 400,000
Kevin S. O'Brien................ 200,000 12/31/95 66,667 200,000 400,000
Gerald J. Pollack............... 180,000 12/31/95 60,000 180,000 360,000
</TABLE>
- ---------------
(1) Based upon a weighted average ROE goal achievement of 90%, resulting in
payment of 33 1/3% of the target award in the first quarter of 1996.
(2) Based upon a weighted average ROE goal achievement of 100%, resulting in
payment of 100% of the target award in the first quarter of 1996.
(3) Based upon a weighted average ROE goal achievement of 130% or more,
resulting in payment of 200% of the target award in the first quarter of
1996.
44
<PAGE> 48
For all 18 Rayonier participants as of November 30, 1993, an aggregate 1992
Class Award target amount of $2,790,000 is outstanding. Reserves for these
awards are maintained on the books of Rayonier. It is contemplated that these
awards will be continued after the Distribution and that the program will be
administered by the Compensation and Management Development Committee of the
Rayonier Board of Directors in accordance with the provisions of the Long-Term
Performance Plan.
The Plan provides that in the event of material changes in accounting
practices, principles, or their application, the Committee may make such
adjustments as it deems appropriate in Performance Goals and/or target values so
that the performance measurement for all purposes of this Plan with respect to
awards may be made as nearly as practicable on the same accounting basis. In
addition, the Committee may make such other adjustments as it deems appropriate
in Performance Goals and/or target values for material acquisitions or
dispositions of stock or property or for other circumstances specified by the
Committee in order to limit or avoid distortion in the operation of the Plan
that may result from such circumstances.
It is contemplated that any modification of the pre-established ROE goals
pursuant to the above provision will be disclosed to and, if required under
Federal income tax or other laws, approved by Rayonier's shareholders.
The following is a description of the compensation, benefit and retirement
plans currently expected to be adopted by the Company.
1994 RAYONIER INCENTIVE STOCK PLAN
One of the principal objectives of the Distribution is to enable Rayonier
to provide meaningful long-term incentives for its executives and other key
employees, directly related to their individual and collective performance in
enhancing shareholder value. Once the Distribution has been effected and a
public market has developed for the Rayonier Common Stock, market-based
incentives based on Rayonier stock performance will allow Rayonier to provide
significant incentives to the key employees of Rayonier to a degree not
previously available under ITT's compensation programs. Awards of stock options
and other market-based incentives will permit key employees to profit
proportionately as shareholder value is enhanced (as evidenced by the market
price for Rayonier Common Stock), and will also give Rayonier an effective tool
to encourage key employees to continue in the employ of Rayonier.
In order to achieve these objectives, effective prior to the Distribution,
the Board of Directors of Rayonier is expected to adopt, and ITT as its sole
shareholder is expected to approve, the 1994 Rayonier Incentive Stock Plan (the
"1994 Plan"). The 1994 Plan will be administered by the Compensation and
Management Development Committee (the "Committee").
The 1994 Plan provides for the grant of incentive stock options (qualifying
under Section 422 of the Internal Revenue Code of 1986, as amended),
non-qualified stock options, stock appreciation rights ("Rights"), performance
shares and restricted stock, or any combination of the foregoing, as the
Committee may determine (collectively, "Awards"). The 1994 Plan will expire on
December 31, 2003.
The 1994 Plan contains a formula for establishing an annual limit on the
number of shares which may be awarded (or with respect to which non-stock Awards
may be made) in any given calendar year (the "Annual Limit"). The Annual Limit
formula is expressed as a percentage of Rayonier's total issued Common Stock as
of the year end immediately preceding the year of awards ("Plan Year"). Under
the Annual Limit formula, the maximum number of shares of Rayonier Common Stock
for which Awards may be granted under the Plan in each Plan Year shall be 1.5
percent (1.5%) of the total of the issued and outstanding shares of Rayonier
Common Stock as reported in the Annual Report on Form 10-K of the Corporation
for the fiscal year ending immediately prior to any Plan Year. Any unused
portion of the Annual Limit for any Plan Year shall be carried forward and be
made available for awards in succeeding Plan Years.
In addition to the foregoing, in no event shall more than one million
(1,000,000) shares of Rayonier Common Stock be cumulatively available for Awards
of incentive stock options under the 1994 Plan, and provided further, that no
more than twenty percent (20%) of the total number of shares available on a
cumulative basis shall be available for restricted stock and performance share
awards. For any Plan Year, no
45
<PAGE> 49
individual employee may receive stock options for more than ten percent (10%) of
the Annual Limit applicable to that Plan Year.
Subject to the above limitations, shares of Rayonier Common Stock to be
issued under the 1994 Plan may be made available from the authorized but
unissued Rayonier Common Stock, or from shares held in the treasury. In the
event of a stock split or stock dividend, reorganization, recapitalization, or
other similar event affecting the price of Rayonier Common Stock, the number of
shares subject to the 1994 Plan, the number of shares then subject to Awards and
the price per share payable on exercise of options may be appropriately adjusted
by the Committee. Other than the above adjustments, it is the Rayonier Board's
policy that no options will be cancelled and reissued at a lower price unless
the shareholders approve such action.
For the purpose of computing the total number of shares of stock available
for Awards under the 1994 Plan, there shall be counted against the foregoing
limitations the number of shares of Rayonier Common Stock subject to issuance
upon exercise or settlement of Awards and the number of shares of Rayonier
Common Stock which equal the value of Performance Share Awards, in each case
determined as at the dates on which such Awards are granted. If any Awards under
the 1994 Plan are forfeited, terminated, expire unexercised, are settled in cash
in lieu of Rayonier Common Stock or are exchanged for other Awards, the shares
of Stock which were theretofore subject to such Awards shall again be available
for Awards under the 1994 Plan to the extent of such forfeiture or expiration of
such Awards. Further, any shares that are exchanged (either actually or
constructively) by optionees as full or partial payment to the Company of the
purchase price of shares being acquired through the exercise of a stock option
granted under the 1994 Plan may be available for subsequent Awards, provided,
however, that such shares may be awarded only to those participants who are not
directors or executive officers (as that term is defined in the rules and
regulations under Section 16 of the Exchange Act).
At the Distribution Date, approximately 29,567,000 Rayonier shares are
expected to be issued and outstanding. The Annual Limit applicable to 1994 for
Awards under the 1994 Plan is 1.5% thereof or approximately 443,500 shares.
Reference is made to the "Individual Grants to Purchase ITT Common Stock"
table which sets forth information concerning the grant of ITT stock options
made effective on October 14, 1993 to Rayonier's chief executive officer and the
other named executive officers in 1993.
The Committee, made up entirely of outside directors, none of whose members
may receive any Award under the 1994 Plan, will administer the 1994 Plan,
including, but not limited to, making determinations with respect to the
designation of those employees who shall receive Awards, the number of shares to
be covered by options, Rights and restricted stock awards, the exercise price of
options (which may not be less than 100% of the fair market value of Rayonier
Common Stock of the date of grant), other option terms and conditions, and the
number of performance shares to be granted and the applicable performance
objectives. The Committee may impose such additional terms and conditions on an
Award as it deems advisable. The Committee's decisions in the administration of
the 1994 Plan shall be binding on all persons for all purposes.
The Committee may in its sole discretion delegate such administrative
powers as it may deem appropriate to the chief executive officer or other
members of senior management, except that Awards to executive officers shall be
made solely by the Committee and subject to compliance with Rule 16b-3 of the
Exchange Act.
Awards will be made, in the discretion of the Committee, to employees of
Rayonier and any of its subsidiaries (including officers and members of the
Board of Directors who are also employees) whose responsibilities and decisions
directly affect the performance of Rayonier and its subsidiaries. No final
determination has yet been made as to the number of recipients or the number of
shares to be granted during the 1994 and later plan years. During 1993, 22
employees of Rayonier, including the named officers, were awarded options under
an ITT employee stock option plan to purchase 74,300 shares of ITT Common Stock.
There were no awards to employees of Rayonier of Rights, performance shares or
restricted stock during 1993.
Stock Options and Related Rights. Incentive stock options and related
Rights under the 1994 Plan must expire within ten years after grant;
non-qualified stock options and related Rights will expire not more than ten
years and two days after grant. No Right may be exercised until at least six
months after it is granted. The
46
<PAGE> 50
exercise price for options and Rights must be at least equal to the fair market
value of the Rayonier Common Stock on the date of grant. The exercise price for
options must be paid to Rayonier at the time of exercise and, in the discretion
of the Committee, may be paid in the form of cash or already-owned shares of
Rayonier Common Stock or a combination thereof. During the lifetime of an
employee, an option must be exercised only by the individual (or his or her
estate or designated beneficiary) but no later than three months after his or
her termination of employment (or for longer periods as determined by the
Committee if termination is caused by retirement, disability or death, but in no
event later than the expiration of the original term of the option). If an
optionee voluntarily resigns or is terminated for cause, the options and Rights
are cancelled immediately.
Performance Shares. Performance shares under the 1994 Plan are contingent
rights to receive future payments based on the achievement of individual or
Company performance objectives as prescribed by the Committee. The amounts paid,
which may be subject to a prescribed maximum, will be based on actual
performance over a period from two to five years, as determined by the
Committee, using such objective criteria as it deems appropriate including, but
not limited to, earnings per share and return on equity of Rayonier. Payments
may be made in the form of shares of Rayonier Common Stock, cash or a
combination of Rayonier Common Stock and cash. The ultimate payments are
determined by the number of shares earned out and the price of Rayonier Common
Stock at the end of the performance period. In the event an employee terminates
employment during such a performance period, the employee will forfeit any right
to payment. However, in the case of retirement, permanent total disability,
death or cases of special circumstances, the employee may, in the discretion of
the Committee, be entitled to an award prorated for the portion of the
performance period during which he was employed by Rayonier.
Restricted Shares. Restricted shares of Rayonier Common Stock awarded
under the 1994 Plan shall be issued subject to a restriction period set by the
Committee during which time the shares may not be sold, transferred, assigned or
pledged. In the event an employee terminates employment during a restriction
period, all such shares still subject to restrictions will be forfeited by the
employee and reacquired by Rayonier. The Committee may provide for the lapse of
restrictions in installments where deemed appropriate and it may also require
the achievement of predetermined performance objectives in order for such shares
to vest. The recipient, as owner of the awarded shares, shall have all other
rights of a shareholder, including the right to vote the shares and receive
dividends and other distributions during the restriction period. The
restrictions may be waived, in the discretion of the Committee, in the event of
the awardee's retirement, permanent total disability, death or in cases of
special circumstances.
Compensation Upon Change of Control. The 1994 Plan provides for the
automatic protection of intended economic benefits by key employees in the event
of a change in control of Rayonier (i.e., upon the occurrence of an Acceleration
Event as defined in the 1994 Plan). Notwithstanding any other provisions of the
1994 Plan, upon the occurrence of an Acceleration Event (a) all options and
Rights will generally become immediately exercisable for a period of 60 calendar
days; (b) options and Rights will continue to be exercisable for a period of
seven months in the case of an employee whose employment is terminated other
than for cause or who voluntarily terminates employment because of a good faith
belief that such employee will not be able to discharge his or her duties; (c)
Rights exercised during the 60-day period will be settled fully in cash based on
a formula price generally reflecting the highest price paid for a Common Share
during the 60-day period preceding the date such Right is exercised; (d)
"limited stock appreciation rights" shall automatically be granted on all
outstanding options not otherwise covered by a Right, which shall generally be
immediately exercisable in full and which shall entitle the holders to the same
exercise period and formula price referred to in (a), (b) and (c) above; (e)
outstanding performance share awards shall automatically vest, with the
valuation of such performance shares based on the formula price; and (f)
restrictions applicable to awards of restricted stock shall be automatically
waived.
Options, Rights, performance shares or restricted stock which are granted,
accelerated or enhanced upon the occurrence of a takeover (i.e., an Acceleration
Event as defined in the 1994 Plan) may give rise, in whole or in part, to
"excess parachute payments" within the meaning of Section 280G of the Internal
Revenue Code and, to such extent, will be nondeductible by Rayonier and subject
to a 20% excise tax to the awardee.
47
<PAGE> 51
The Board may amend or discontinue the 1994 Plan at any time and,
specifically, may make such modifications to the Plan as it deems necessary to
avoid the application of Section 162(m) of the Internal Revenue Code of 1986, as
amended, and the Treasury regulations issued thereunder. However, shareholder
approval is required for certain amendments, including any amendment which may
(i) increase the number of shares reserved for awards (except as provided in the
1994 Plan with respect to stock splits or other similar changes), (ii)
materially change the group of employees eligible for Awards, (iii) materially
increase the benefits accruing to participants under the 1994 Plan or (iv)
permit Awards after December 31, 2003.
RAYONIER SENIOR EXECUTIVE SEVERANCE PAY PLAN
The Rayonier Senior Executive Severance Pay Plan applies to 8 Rayonier
senior executives who are United States citizens or who are employed in the
United States, including all executive officers. Under the Plan, if a
participant's employment is terminated by Rayonier, other than for cause or as a
result of other occurrences specified in the Plan, the participant is entitled
to severance pay in an amount up to 24 months' base salary depending upon his or
her length of service, but in no event more than the amount of base salary for
the number of months remaining between the termination of employment and the
participant's normal retirement date or two times the participant's total annual
compensation during the year immediately preceding such termination.
Based upon their length of service, each of the aforementioned executive
officers is entitled to severance pay under the Plan in an amount of 24 months'
base salary, subject to the above-mentioned limitation in the event of an
earlier retirement date. The Plan includes offset provisions for other
compensation from Rayonier and requirements on the part of executives with
respect to non-competition and compliance with the Rayonier Code of Corporate
Conduct. While under the Plan severance payments would ordinarily be made
monthly over the scheduled term of such payments, Rayonier has the option to
make such payments in the form of a single lump-sum payment discounted to
present value.
If within two years after a change in corporate control (as defined in the
Plan), a participant terminates employment or is terminated, he or she will have
the option to receive severance pay in a single discounted lump-sum payment. The
current aggregate amount of the annual base salaries of such 8 senior officers
is approximately $1.6 million. The annual salaries of Messrs. Gross, Nutter,
Berry, O'Brien and Pollack as of December 31, 1993 were $430,000, $236,000,
$180,000, $180,000 and $174,000, respectively.
RAYONIER INVESTMENT AND SAVINGS PLAN
Many of the Company's salaried employees have been participants in the ITT
Investment and Savings Plan for Salaried Employees, and at or prior to the
Distribution Date the Company and its participating subsidiaries will adopt a
substantially similar Rayonier Investment and Savings Plan, with a transfer of
the account balances of each Company employee participating in the ITT
Investment and Savings Plan to an account for such employee in the Rayonier
Investment and Savings Plan.
Salaried employees of Rayonier and certain of its subsidiaries who become
members of the Rayonier Investment and Savings Plan may elect to make
contributions to a trust fund, through payroll deductions, of 2 percent to 16
percent of their salary up to the allowable compensation maximum for qualified
plans. The contributions of highly compensated salaried employees are limited to
lesser amounts. The employing company makes a matching contribution in an amount
equal to 50 percent of the employee's contribution, not to exceed 3 percent of
each employee's salary. In addition, Rayonier makes a non-matching contribution
equal to one-half of one percent (.5%) of an employee's salary. Such amounts are
invested in accordance with the provisions of the Plan. A before-tax savings
feature of the Plan permits employees to have their salaries reduced by up to
the aforementioned percentages, but not in excess of limits prescribed by tax
law, and have such amounts contributed to the trust fund under the Plan for
their benefit. Matching company contributions become vested at the rate of 20
percent after the first year of employment and another 20 percent after each
additional year of employment, with full vesting after five years of employment;
however, full vesting takes place immediately upon the attainment of age 65,
retirement, disability, death, termination of the Plan or
48
<PAGE> 52
complete discontinuance of company contributions. The non-matched company
contribution is fully vested immediately.
Federal legislation limits the annual contributions which an employee may
make to the Investment and Savings Plan, a tax-qualified retirement Plan.
Accordingly, Rayonier has adopted the Rayonier Excess Savings Plan which enables
an employee who is precluded by these limitations from contributing 6 percent of
salary to the tax-qualified plan to make up the shortfall through salary
deferrals and thereby receive the 3 percent maximum matching company
contribution and one-half of one percent non-matching company contribution
otherwise allowable under the tax-qualified plan. Salary deferrals, company
contributions and investment earnings are entered into a book reserve account
maintained by the Company for each participant.
RAYONIER RETIREMENT PROGRAM
Most of the Company's salaried employees have been participants in the ITT
Retirement Plan for Salaried Employees, and at or prior to the Distribution
Date, the Company and its participating subsidiaries will adopt an identical
"mirror-image" Rayonier Salaried Employees Retirement Plan.
The Company's Retirement Plan will cover substantially all eligible
salaried employees of the Company, including senior executive officers and other
Rayonier executives. The cost of the Retirement Program is borne entirely by the
Company.
The annual pension amounts to two percent of a member's average final
compensation (as defined below) for each of the first 25 years of benefit
services, plus one and one-half percent of a member's average final compensation
for each of the next 15 years of benefit service, reduced by one and one-quarter
percent of the member's primary Social Security benefit for each year of benefit
service to a maximum of 40 years; provided that no more than one-half of the
member's primary Social Security benefit is used for such reduction. A member's
average final compensation (including salary plus approved bonus payments) is
defined under the Plan as the total of (i) a member's average annual base salary
for the five calendar years of the last 120 consecutive calendar months of
eligibility service affording the highest such average plus (ii) a member's
average annual compensation not including base salary for the five calendar
years of the member's last 120 consecutive calendar months of eligibility
service affording the highest such average. The Plan also provides for
undiscounted early retirement pensions for members who retire at or after age 60
following completion of 15 years of eligibility service. A member is vested in
benefits accrued under the Plan upon completion of five years of eligibility
service.
Applicable Federal legislation limits the amount of benefits that can be
paid and compensation which may be recognized under a tax-qualified retirement
plan. The Company will adopt a non-qualified unfunded retirement plan ("Excess
Plan") for payment of those benefits at retirement that cannot be paid from the
qualified Retirement Plan. The practical effect of the Excess Plan is to
continue calculation of retirement benefits to all employees on a uniform basis.
Benefits under the Excess Plan will generally be paid directly by the Company.
Based on various assumptions as to remuneration and years of service,
before Social Security reductions, the following table illustrates the estimated
annual benefits payable from the Retirement Program at retirement at age 65 that
are paid for by the Company.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE
FINAL ------------------------------------------------------------
COMPENSATION 20 25 30 35 40
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 50,000 $ 20,000 $ 25,000 $ 28,750 $ 32,500 $ 36,250
100,000 40,000 50,000 57,500 65,000 72,500
300,000 120,000 150,000 172,500 195,000 217,500
500,000 200,000 250,000 287,500 325,000 362,500
750,000 300,000 375,000 431,250 487,500 543,750
1,000,000 400,000 500,000 575,000 650,000 725,000
</TABLE>
49
<PAGE> 53
The amounts shown under "Salary" and "Bonus" opposite the names of the
individuals in the Summary Compensation Table comprise their compensation which
is used for purposes of determining "average final compensation" under the plan.
The plan will recognize their service with ITT for eligibility and vesting
purposes which, as of December 31, 1993, are as follows: Mr. Gross, 15.83 years;
Mr. Nutter, 26.55 years; Mr. Berry, 13.58 years; Mr. O'Brien, 34.29 years; and
Mr. Pollack, 11.58 years.
RAYONIER EMPLOYEE WELFARE BENEFITS
At or prior to the Distribution Date, the Company and its participating
subsidiaries will adopt a broad-based employee welfare benefits program which
will "mirror image" the various ITT welfare benefit programs previously
available to salaried employees. Rayonier executives will participate in the
Company's comprehensive benefits program which will include group medical and
dental coverage, group life insurance and other benefit plans, in addition to
the pension program and investment and savings plan described previously. In
addition to the coverage available generally to salaried employees under the
Rayonier welfare benefits plans, Mr. Gross has Company-provided death benefits
equal to his annual salary during active employment and reduced coverage after
retirement.
DESCRIPTION OF RAYONIER CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The total number of shares of all classes of stock that Rayonier has
authority to issue under its Articles of Incorporation, the form of which has
been filed as an exhibit to the Registration Statement of which this Information
Statement forms a part (the "Rayonier Articles"), is 75,000,000 shares of which
15,000,000 represent Preferred Shares (the "Rayonier Preferred Stock"), and
60,000,000 represent shares of Rayonier Common Stock. Based on 117,538,893
shares of ITT Common Stock outstanding as of January 31, 1994, and a
Distribution Ratio of one share of Rayonier Common Stock for every four shares
of ITT Common Stock, and one share of Rayonier Common Stock for every 3.1595
shares of ITT Series N Preferred Stock, of which 577,608 shares were outstanding
as of such date, it is expected that approximately 29,384,000 shares of Rayonier
Common Stock will be distributed to holders of ITT Common Stock and
approximately 182,800 shares of Rayonier Common Stock will be distributed to
holders of ITT Series N Preferred Stock on the Distribution Date.
RAYONIER COMMON STOCK
The holders of Rayonier Common Stock will be entitled to one vote for each
share on all matters voted on by stockholders, including the election of
directors. The Rayonier Articles do not provide for cumulative voting in the
election of directors. Subject to any preferential rights of any outstanding
series of Rayonier Preferred Stock created by the Rayonier Board, the holders of
Rayonier Common Stock will be entitled to such dividends as may be declared from
time to time by the Rayonier Board from funds available therefor, and upon
liquidation will be entitled to receive, pro rata, all the net assets of
Rayonier available for distribution to such holders.
The payment and level of cash dividends, if any, declared by Rayonier after
the Distribution will be subject to the discretion of the Rayonier Board. The
Board initially expects to declare quarterly dividends of $0.18 per share.
Dividend decisions will be based on a number of factors, including the operating
results and financial requirements of Rayonier on a stand-alone basis, and
although there can be no assurance that dividends will be paid, management
believes that its cash flows are sufficiently strong that, barring unforeseen
circumstances, the initial dividend rate can be maintained for the foreseeable
future. See "SPECIAL FACTORS -- Rayonier Dividend Policy".
RAYONIER PREFERRED STOCK
The Rayonier Articles authorize the Rayonier Board to establish series of
Rayonier Preferred Stock and to determine, with respect to any series of
Rayonier Preferred Stock, the voting powers, full or limited, or no
50
<PAGE> 54
voting powers, and such designations, preferences and relative, participating,
optional or other special rights and such qualifications, limitations or
restrictions thereof, as are stated in the resolutions of the Rayonier Board
providing for such series.
NO PREEMPTIVE RIGHTS
No holder of any stock of Rayonier of any class authorized at the
Distribution Date will then have any preemptive right to subscribe to any
securities of Rayonier of any kind or class.
SHARE ACQUISITIONS
North Carolina law includes two provisions relating to changes in control
of a public company as a result of share acquisitions. The first is the Control
Share Act, which requires an acquiror to obtain the favorable vote of the
company's other shareholders before it is allowed to vote shares acquired in
excess of certain statutory percentages. As permitted by the Act, the Rayonier
Articles provide that this Act shall not be applicable to Rayonier. The second
is the Shareholder Protection Act, which establishes minimum safeguards for the
company's public shareholders in the event another company first acquires more
than 20% of the stock and then wishes to accomplish a second-step combination of
the two businesses. Such safeguards relate to the minimum value to be paid to
the company's remaining shareholders in any such combination; preservation of
board of directors representation for the publicly owned shares and of the
dividend rate; limitations on intercorporate transactions during such interim
period, and requirements as to disclosure to remaining shareholders in
connection with any such proposed combination. Unless these minimum safeguards
are observed, any such combination would require a 95% vote of the shareholders.
51
<PAGE> 55
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Management............................................................ F-2
Report of Independent Public Accountants........................................ F-3
Statements of Consolidated Income for the Years Ended December 31, 1992, 1991
and
1990 (and for the Nine Months Ended September 30, 1993 and 1992, unaudited)... F-4
Consolidated Balance Sheets as of December 31, 1992 and 1991
(and September 30, 1993, unaudited)........................................... F-5 to F-6
Statements of Consolidated Retained Earnings, Capital Stock and Surplus for the
Years Ended December 31, 1992, 1991 and 1990 (and for the Nine Months Ended
September 30, 1993 and 1992, unaudited)....................................... F-7
Statements of Consolidated Cash Flows for the Years Ended December 31, 1992,
1991 and 1990 (and for the Nine Months Ended September 30, 1993 and 1992,
unaudited).................................................................... F-8
Notes to Consolidated Financial Statements...................................... F-9 to F-22
</TABLE>
F-1
<PAGE> 56
REPORT OF MANAGEMENT
The management of ITT Rayonier Incorporated is responsible for the
preparation and integrity of the information contained in the accompanying
financial statements. The financial statements are prepared in accordance with
generally accepted accounting principles and, where necessary, include amounts
that are based on management's informed judgments and estimates.
Rayonier's financial statements are audited by Arthur Andersen & Co.,
independent public accountants. Management has made Rayonier's financial records
and related data available to Arthur Andersen & Co., and believes that the
representations made to the independent public accountants are valid and
complete.
Rayonier's system of internal controls is a major element in management's
responsibility for the fair presentation of the financial statements. The system
includes both accounting controls and the internal auditing program, which are
designed to provide reasonable assurance that the assets are safeguarded, that
transactions are properly recorded and executed in accordance with management's
authorization, and that fraudulent financial reporting is prevented or detected.
Rayonier's internal controls provide for the careful selection and training
of personnel and for appropriate divisions of responsibility. The controls are
documented in written codes of conduct, policies and procedures that are
communicated to Rayonier's employees. Management continually monitors the system
of internal controls for compliance. Rayonier's internal auditors independently
assess the effectiveness of internal controls and make recommendations for
improvement on a regular basis. The independent public accountants also evaluate
internal controls and perform tests of procedures and accounting records to
enable them to express their opinion on Rayonier's financial statements. They
also make recommendations for improving internal controls, policies and
practices. Management takes appropriate action in response to each
recommendation from the internal auditors and the independent public
accountants.
The Board of Directors and the officers of Rayonier monitor management's
administration of Rayonier's financial and accounting policies and practices and
the preparation of financial reports.
F-2
<PAGE> 57
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
ITT Rayonier Incorporated:
We have audited the accompanying consolidated financial statements of ITT
Rayonier Incorporated (a Delaware corporation and a wholly owned subsidiary of
ITT Corporation) and subsidiaries as of December 31, 1992 and 1991, and for each
of the three years in the period ended December 31, 1992, as described in the
Index to Financial Statements. These financial statements are the responsibility
of Rayonier's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ITT Rayonier Incorporated
and subsidiaries as of December 31, 1992 and 1991, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1992 in conformity with generally accepted accounting principles.
As discussed in the accompanying notes to financial statements, in 1992,
Rayonier adopted three new accounting standards promulgated by the Financial
Accounting Standards Board, changing its methods of accounting for income taxes,
postretirement benefits other than pensions and postemployment benefits.
ARTHUR ANDERSEN & CO.
Stamford, Connecticut
February 19, 1993
F-3
<PAGE> 58
ITT RAYONIER INCORPORATED AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------- ---------------------------------
1993 1992 1992 1991 1990
----------- ----------- --------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales................................. $ 699,340 $ 733,187 $ 973,673 $978,950 $1,104,330
----------- ----------- --------- -------- ----------
Costs and expenses, net
Cost of sales....................... 570,881 610,466 821,571 846,246 862,989
Selling and general expenses........ 20,161 22,563 32,228 29,550 30,518
Commission expenses................. 635 4,422 13,115 14,707 21,132
Other operating expenses
(income), net.................... (1,981) 8,843 4,639 (8,298) (284)
Provision for dispositions.......... -- -- 188,724 -- --
----------- ----------- --------- -------- ----------
589,696 646,294 1,060,277 882,205 914,355
----------- ----------- --------- -------- ----------
Operating income (loss)............... 109,644 86,893 (86,604) 96,745 189,975
Equity in net loss of Grays Harbor
Paper Company....................... -- (3,061) (3,257) (1,587) (1,536)
----------- ----------- --------- -------- ----------
109,644 83,832 (89,861) 95,158 188,439
Interest expense...................... (17,163) (15,056) (21,327) (13,942) (12,394)
Interest and miscellaneous income..... 904 1,614 2,004 2,562 2,801
Minority interest..................... (15,013) (18,226) (22,702) (19,884) (21,451)
----------- ----------- --------- -------- ----------
Income (loss) from continuing
operations before income taxes...... 78,372 52,164 (131,886) 63,894 157,395
Income tax benefit (expense).......... (29,029) (18,745) 50,366 (19,557) (48,121)
----------- ----------- --------- -------- ----------
Income (loss) from continuing
operations.......................... 49,343 33,419 (81,520) 44,337 109,274
Provision for discontinued operations,
net................................. -- -- -- -- (43,400)
----------- ----------- --------- -------- ----------
Income (loss) before cumulative effect
of accounting changes............... 49,343 33,419 (81,520) 44,337 65,874
Cumulative effect of accounting
changes (SFAS No. 106 and SFAS No.
112) net of tax benefit of
$11,310............................. -- (21,956) (21,956) -- --
----------- ----------- --------- -------- ----------
Net income (loss)..................... $ 49,343 $ 11,463 $(103,476) $ 44,337 $ 65,874
----------- ----------- --------- -------- ----------
----------- ----------- --------- -------- ----------
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these consolidated statements.
F-4
<PAGE> 59
ITT RAYONIER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -------------------------
1993 1992 1991*
------------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS
Cash................................................ $ 4,787 $ 5,731 $ 8,751
Short-term investments.............................. -- 5,000 5,000
Accounts receivable, less allowance for doubtful
accounts of $4,125, $4,049 and $2,761............ 87,800 74,249 98,410
Inventories
Finished goods................................... 63,665 57,457 44,793
Work in process.................................. 19,124 16,945 19,652
Raw materials.................................... 46,935 39,552 35,786
Manufacturing and maintenance supplies........... 27,488 26,026 30,446
------------- ---------- ----------
157,212 139,980 130,677
Deferred income taxes............................... 20,764 18,409 11,417
Prepaid timber stumpage............................. 56,698 40,544 42,935
Other current assets................................ 9,877 7,624 7,525
------------- ---------- ----------
Total current assets........................ 337,138 291,537 304,715
INVESTMENTS........................................... 1,603 1,603 10,945
OTHER ASSETS.......................................... 23,283 29,734 23,805
TIMBER STUMPAGE....................................... 18,196 7,881 13,916
TIMBERLANDS, TIMBER AND LOGGING ROADS, NET OF
DEPLETION AND AMORTIZATION.......................... 462,487 464,123 265,453
PLANT, PROPERTY AND EQUIPMENT
Land, buildings, machinery and equipment............ 1,154,146 1,129,209 1,229,407
Less -- accumulated depreciation.................... 478,809 447,643 475,921
------------- ---------- ----------
675,337 681,566 753,486
------------- ---------- ----------
$ 1,518,044 $1,476,444 $1,372,320
------------- ---------- ----------
------------- ---------- ----------
</TABLE>
* Restated for the impacts of the adoption of SFAS No. 109, "Accounting for
Income Taxes."
The accompanying Notes to Consolidated Financial Statements are an
integral part of these consolidated statements.
F-5
<PAGE> 60
ITT RAYONIER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
LIABILITIES AND STOCKHOLDER EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -----------------------
1993 1992 1991*
------------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable...................................... $ 81,779 $ 72,321 $ 89,767
Bank loans............................................ 90,000 100,000 5,000
Current maturities of long-term debt.................. 181 1,770 6,691
Accrued taxes......................................... 17,530 5,363 10,252
Accrued payroll and benefits.......................... 18,404 17,689 24,455
Accrued interest...................................... 6,818 5,367 5,709
Due to parent and affiliated companies-net............ 8,000 10,106 7,288
Other current liabilities............................. 39,253 40,926 16,369
Reserves for dispositions and discontinued
operations......................................... 33,528 31,231 1,334
------------- ---------- ----------
Total current liabilities..................... 295,493 284,773 166,865
DEFERRED INCOME TAXES................................... 108,489 86,478 148,312
LONG-TERM DEBT.......................................... 317,933 301,634 193,415
NONCURRENT RESERVES FOR DISPOSITIONS AND DISCONTINUED
OPERATIONS
(Net of discontinued operations' assets of $11,434,
$11,003 and $9,470)................................... 40,554 64,439 30,721
OTHER NONCURRENT LIABILITIES............................ 25,775 26,025 3,392
MINORITY INTEREST....................................... 34,973 37,417 32,931
STOCKHOLDER EQUITY
Common stock, $100 par value, 500 shares authorized,
79 shares issued and outstanding................... 8 8 8
Capital surplus....................................... 157,418 157,418 157,418
Retained earnings..................................... 537,401 518,252 639,258
------------- ---------- ----------
694,827 675,678 796,684
------------- ---------- ----------
$ 1,518,044 $1,476,444 $1,372,320
------------- ---------- ----------
------------- ---------- ----------
</TABLE>
* Restated for the impacts of the adoption of SFAS No. 109, "Accounting for
Income Taxes."
The accompanying Notes to Consolidated Financial Statements are an
integral part of these consolidated statements.
F-6
<PAGE> 61
ITT RAYONIER INCORPORATED AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED RETAINED EARNINGS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31.
------------------- ------------------------------
1993 1992 1992 1991 1990
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance, beginning of year before SFAS
No. 109 restatement..................... $518,252 $612,446 $612,446 $587,722 $583,200
Effect in prior period of change in
accounting principle (SFAS No.
109)................................. -- 26,812 26,812 26,812 26,812
-------- -------- -------- -------- --------
Balance, beginning of year, as restated... 518,252 639,258 639,258 614,534 610,012
Net income (loss)....................... 49,343 11,463 (103,476) 44,337 65,874
Cash dividends to parent................ (30,194) (17,530) (17,530) (19,613) (61,352)
-------- -------- -------- -------- --------
Balance, end of period.................... $537,401 $633,191 $518,252 $639,258 $614,534
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
STATEMENTS OF CONSOLIDATED CAPITAL STOCK AND SURPLUS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993 AND 1992 (UNAUDITED)
AND FOR THE YEARS ENDED DECEMBER 31, 1992, 1991 AND 1990
(THOUSANDS OF DOLLARS, EXCEPT FOR SHARES)
<TABLE>
<CAPTION>
CUMULATIVE
COMMON STOCK PREFERRED STOCK
--------------- ------------------ CAPITAL
SHARES AMOUNT SHARES AMOUNT SURPLUS
------ ------ ------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1990...................... 79 $8 -- $ -- $157,418
------ ------- -------- --------
--
Balance, December 31, 1990.................... 8 -- -- 157,418
79
------ ------- -------- --------
--
Balance, December 31, 1991.................... 8 -- -- 157,418
79
Issuance of Cumulative Preferred Stock...... -- 30,000 30,000 --
--
Redemption of Cumulative Preferred Stock.... -- (30,000) (30,000) --
--
------ ------- -------- --------
--
Balance, September 30, 1992................... 8 -- -- 157,418
79
------ ------- -------- --------
--
Balance, December 31, 1992.................... 8 -- -- 157,418
79
------ ------- -------- --------
--
Balance, September 30, 1993................... $8 -- $ -- $157,418
79
------ ------- -------- --------
------ ------- -------- --------
--
--
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these consolidated statements.
F-7
<PAGE> 62
ITT RAYONIER INCORPORATED AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- -------------------------------------
1993 1992 1992 1991 1990
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)............................................. $ 49,343 $ 11,463 $(103,476) $ 44,337 $ 65,874
Cumulative effect of accounting changes....................... -- 21,956 21,956 -- --
--------- --------- --------- --------- ---------
Income (loss) before cumulative effect of accounting
changes..................................................... 49,343 33,419 (81,520) 44,337 65,874
Non-cash items included in income
Depreciation, depletion and amortization.................... 57,160 59,512 77,885 69,270 63,764
Deferred income taxes....................................... 17,247 1,082 (56,938) 5,244 (2,197)
Equity in undistributed losses of Grays Harbor Paper
Company................................................... -- 3,061 3,257 1,587 1,536
Write-down of property, plant, and equipment assets......... -- -- 81,804 -- 200
Reserves for dispositions................................... -- -- 106,920 -- --
Reserves for discontinued operations........................ -- -- -- -- 65,700
(Decrease) increase in other noncurrent liabilities........... (250) (618) (1,387) (4,239) 4,216
Change in accounts receivable, inventories, and accounts
payable..................................................... (21,325) (34,093) (13,711) (31,083) 69
(Increase) decrease in prepaid timber stumpage................ (16,154) 7,645 2,391 29,684 8,994
Change in due to parent and affiliated companies -- net....... (2,106) 9,931 1,927 15,823 (13,848)
Increase (decrease) in accrued taxes.......................... 12,167 17,037 (4,889) (885) (2,672)
Other changes in working capital.............................. (1,760) 13,910 17,316 1,809 1,521
Taxes related to discontinued operations...................... 2,409 (9,783) (8,933) 1,621 5,909
--------- --------- --------- --------- ---------
Cash from operating activities................................ 96,731 101,103 124,122 133,168 199,066
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
INVESTING ACTIVITIES
Capital expenditures net of sales, retirements and
reclassifications of $382, $1,018, $755, $1,554 and $758.... (49,295) (69,337) (96,289) (132,002) (98,814)
New Zealand forest assets acquisition......................... -- (196,500) (196,500) -- --
Expenditures for dispositions and discontinued operations..... (21,588) (15,015) (18,213) (16,962) (47,569)
Change in investments, other assets and timber stumpage....... (3,864) 3,414 (1,394) 5,679 3,558
--------- --------- --------- --------- ---------
Cash used for investing activities............................ (74,747) (277,438) (312,396) (143,285) (142,825)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
FINANCING ACTIVITIES
Increase in indebtedness to parent............................ -- 167,000 167,000 30,800 --
Repayments of indebtedness to parent.......................... -- (167,000) (167,000) (71,100) (29,000)
Issuance of debt.............................................. 109,635 264,700 424,700 99,439 55,648
Repayments of debt............................................ (104,925) (79,066) (226,402) (26,788) (34,727)
Issuance of preferred stock................................... -- 30,000 30,000 -- --
Redemption of preferred stock................................. -- (30,000) (30,000) -- --
Cash dividends to parent...................................... (30,194) (17,530) (17,530) (19,613) (61,352)
(Decrease) increase in minority interest...................... (2,444) 4,564 4,486 1,813 3,067
--------- --------- --------- --------- ---------
Cash from (used for) financing activities..................... (27,928) 172,668 185,254 14,551 (66,364)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
CASH AND SHORT-TERM INVESTMENTS
(Decrease) increase in cash and short term investments........ (5,944) (3,667) (3,020) 4,434 (10,123)
Balance at beginning of year.................................. 10,731 13,751 13,751 9,317 19,440
--------- --------- --------- --------- ---------
Balance at end of period...................................... $ 4,787 $ 10,084 $ 10,731 $ 13,751 $ 9,317
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Supplemental disclosures of cash flow information
Cash paid (received) during the period for
Interest.................................................... $ 15,713 $ 16,413 $ 22,562 $ 15,879 $ 11,112
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Income taxes, net of refunds................................ $ (3,448) $ 7,939 $ 13,835 $ (6,863) $ 43,129
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these consolidated statements.
F-8
<PAGE> 63
ITT RAYONIER INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
INTERIM FINANCIAL INFORMATION
The interim financial information included herein is unaudited; however,
the information reflects all adjustments that are, in the opinion of management,
necessary to a fair presentation of the financial position, results of
operations and cash flows for the interim periods presented.
CHANGES IN ACCOUNTING PRINCIPLES
Statement of Financial Accounting Standards No. 109 -- Adopted by Restatement of
Prior Periods
During the second quarter of 1992, ITT Rayonier Incorporated (Rayonier)
adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting
for Income Taxes," by restating financial statements of prior periods. The new
standard requires, among other things, that an asset and liability approach be
applied in accounting for income taxes. The significant effects of the adoption
of SFAS No. 109 on the balance sheet were to increase stockholder equity by
$26,812 at December 31, 1991 and 1990 and to adjust deferred tax assets and
deferred tax liabilities by a corresponding amount. The adoption of SFAS No. 109
had no effect on net income.
Statement of Financial Accounting Standards No. 106 -- Adopted with a one-time
Cumulative
Adjustment to Net Income
Effective January 1, 1992, Rayonier adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions," using the immediate
recognition method. The new standard requires accrual of postretirement health
care and life insurance benefit costs during the years that an employee provides
services to the Company rather than on the pay-as-you-go basis generally in
effect. Accordingly, a cumulative adjustment (through December 31, 1991) of
$31,916 pre-tax has been recognized at January 1, 1992.
Statement of Financial Accounting Standards No. 112 -- Adopted with a one-time
Cumulative
Adjustment to Net Income
Effective January 1, 1992, Rayonier adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits," using the immediate recognition method.
The new standard requires current recognition of costs associated with benefits
provided to former or inactive employees after employment but before retirement.
These postemployment benefits are primarily comprised of obligations to provide
medical and life insurance to employees on long-term disability. Accordingly, a
cumulative adjustment (through December 31, 1991) of $1,350 pre-tax has been
recognized at January 1, 1992. Except for the one-time cumulative adjustment,
the adoption of SFAS No. 112 was not material to the 1992 results of operations.
Rayonier's cash flows were not impacted by these changes in accounting
principles.
ACCOUNTING POLICIES
Consolidation Principles
The consolidated financial statements of Rayonier include the accounts of
all subsidiaries and a partnership. Intercompany transactions have been
eliminated. Investments in non-controlled companies are included on the equity
basis.
Certain reclassifications have been made to prior years' financial
statements to conform to current year presentation.
F-9
<PAGE> 64
ITT RAYONIER INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
Research and Development
Significant costs are incurred each year for research and development
programs expected to contribute to the profitability of future operations. Such
costs are charged to income as incurred. Research and development expenditures
amounted to $8,267, $7,651 and $7,220 in 1992, 1991 and 1990, respectively.
Research and development expenditures totaled $5,319 and $5,715 for the nine
month periods ended September 30, 1993 and 1992, respectively (unaudited).
Inventories
Inventories are generally valued at the lower of cost (first-in,
first-out), or market. In the pulp manufacturing operations, a full absorption
procedure is employed using standard cost techniques. Physical counts of
inventories are made at least annually. Potential losses from obsolete, excess
or slow-moving inventories are provided for currently.
Prepaid Timber Stumpage/Timber Stumpage
Rayonier, mainly through its northwest forest operations, purchases timber
stumpage from RTLP and other private and public owners of timberlands. The
timber stumpage is harvested by Rayonier for use in its log export, pulp and
wood products businesses. Timber stumpage is classified as a current asset,
Prepaid Timber Stumpage, based upon the amount of harvest expected to occur
within one year of the balance sheet date. The remainder is classified as a
non-current asset, Timber Stumpage.
Timber Cutting Contracts
Rayonier evaluates the realizability of its future timber harvests in the
northwestern and southeastern portions of the United States based on the
estimated aggregate cost, including the cost of fee timber, timber stumpage and
timber available under cutting contracts, of such harvests and the market sales
values to be realized at the anticipated time of harvesting that timber.
Potential losses are recorded in the period that a determination is made that
the aggregate harvest costs in a major operating area will not be recoverable.
Timber and Timberlands
The acquisition cost of land, timber, real estate taxes, lease payments,
site preparation and other costs relating to the planting and growing of timber
are capitalized. Such costs attributed to merchantable timber are charged
against revenue at the time the timber is harvested based on the relationship of
harvested timber to the estimated volume of currently recoverable timber. Timber
and timberlands are stated at the lower of original acquisition cost, net of
timber cost depletion, or market value.
Logging Roads
Logging roads, including bridges, are stated at cost, less accumulated
amortization. The costs of roads developed for reforestation activities are
amortized using the straight-line method over their useful lives estimated at 40
years for roads and 20 years for bridges. Road costs associated with harvestable
timber access are charged to a prepaid account and amortized as the related
timber is sold, generally within two years.
Plant, Property and Equipment
Plant, property and equipment additions are recorded at cost which includes
applicable freight, taxes, interest, construction and installation costs.
Interest capitalized in connection with major construction projects amounted to
$893, $3,214 and $460 during 1992, 1991 and 1990, respectively. Interest
capitalized during the nine months ended September 30, 1993 and 1992 was $0 and
$893, respectively (unaudited). Upon ordinary
F-10
<PAGE> 65
ITT RAYONIER INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
retirement or sale of property, accumulated depreciation is charged with the
cost of the property removed and credited with the proceeds of salvage value and
no gain or loss is recognized. Gains and losses with respect to any significant
and unusual retirements of assets are included in operating income.
Depreciation
Pulp manufacturing facilities are depreciated using the units of production
method. Depreciation on other buildings and equipment is provided on a
straight-line basis over the useful economic lives of the assets involved.
Rayonier normally claims the maximum depreciation deduction allowable for tax
purposes.
NEW ZEALAND ACQUISITION
During the second quarter of 1992 the Company completed the purchase of
forest assets, primarily Crown forest licenses consisting of long-term rights to
utilize approximately 250,000 acres of plantation forest in New Zealand. These
assets were acquired from the New Zealand government for a cash purchase price
of approximately $197 million. Bridge financing for the acquisition was obtained
through the issuance of preferred stock to ITT Corporation (ITT) and through
additional borrowings from banks and ITT. By October 15, 1992 the Company had
completed its financing program for this acquisition (see "Stockholder Equity,"
"Long-Term Debt" and "Transactions between ITT and Rayonier"). The Company
harvests timber for export to Pacific Rim markets and sale locally in New
Zealand. Substantially all of the assets were purchased by, and substantially
all future operations will be conducted through ITT Rayonier New Zealand
Limited, an indirect subsidiary of the Company.
RAYONIER TIMBERLANDS, L.P.
In 1985, Rayonier transferred substantially all of its timberlands business
to Rayonier Timberlands, L.P., a master limited partnership, in exchange for 20
million Class A and 20 million Class B Depositary Units. Thereafter, Rayonier
offered and sold 5.06 million Class A Units (25.3%) to the public. Class A Units
participate principally in the revenues and costs associated with RTLP's sales
of timber through December 31, 2000 and to a significantly lesser extent in
subsequent periods. RTLP's sales of timber after that date as well as cash flow
associated with land management activities before and after that date are
principally allocable to the Class B Units, all of which have been retained by
Rayonier. Rayonier and a subsidiary, as general partners, plan to operate and
manage RTLP throughout its existence. RTLP is majority owned by Rayonier and is
included in these consolidated financial statements.
TRANSACTIONS BETWEEN ITT AND RAYONIER
Rayonier is a wholly owned subsidiary of ITT. See "Stockholder Equity."
Rayonier paid sales commissions to ITT Foreign Sales Corporation ("FSC")
amounting to $12,362, $13,727 and $20,053 in 1992, 1991 and 1990, respectively,
under a sales agency agreement initiated in August 1988. Dividends paid to ITT
have been reduced by the after tax cost of the foreign sales commissions so as
not to impact the financial condition of Rayonier due to this arrangement.
Effective January 1, 1993 ITT transferred ownership of FSC to Rayonier.
ITT renders advice and assistance to Rayonier in general engineering,
plants, traffic, operating, accounting, commercial, financial and other matters.
The fee for such services is approximately 1/4 of 1 percent of Rayonier's annual
sales. The total fee paid by Rayonier to ITT for these services amounted to
$2,413, $2,450 and $2,762 in 1992, 1991 and 1990, respectively. For the nine
months ended September 30, 1993 and 1992, such fees totaled $1,737 and $1,849,
respectively (unaudited).
F-11
<PAGE> 66
ITT RAYONIER INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
On May 14, 1992 Rayonier borrowed $167 million from ITT, the proceeds of
which were utilized as bridge financing in the New Zealand acquisition. On July
28, 1992 all outstanding borrowings from ITT were replaced by bank borrowings at
variable interest rates. There were no outstanding borrowings from ITT as of
December 31, 1992 and 1991. In addition, as of September 30, 1993, there were no
outstanding borrowings from ITT (unaudited).
During 1991 and 1990, Rayonier repaid $40,300 and $29,000 of a variable
rate loan from ITT which was borrowed in 1988 and used primarily to retire
commercial paper. The loan has been fully repaid primarily with cash flow
generated from operating activities in 1990 and with funds borrowed from banks
in 1991. See also "Long-Term Debt" for further discussion.
Interest expense paid to ITT amounted to $2,092, $1,817 and $3,093 in 1992,
1991 and 1990, respectively. Interest expense paid to ITT during the nine month
period ended September 30, 1992 was $2,092 (unaudited). No interest expense was
paid to ITT during 1993 (unaudited).
Rayonier is one of several affiliates participating in the ITT Salaried
Retirement Plan as well as health care and life insurance programs for salaried
employees sponsored by ITT (see "Employee Benefit Plans").
INCOME TAXES
Rayonier and its U.S. subsidiaries are included in ITT's consolidated U.S.
Federal Income Tax Return, and Rayonier remits to ITT its current income tax
liability. Rayonier computes its tax provision in accordance with tax-sharing
arrangements with ITT which, prior to 1993, include the use by Rayonier of tax
benefits realized by ITT as a result of a foreign sales agency agreement between
ITT Foreign Sales Corporation (FSC) and Rayonier.
The provision for income taxes was adversely impacted in 1993 by the
effects of tax reform legislation enacted August 10, 1993. This legislation
increased the corporate income tax rate from 34 percent to 35 percent
retroactive to January 1, 1993 and eliminated tax benefits related to log
exports for foreign sales corporations effective in the third quarter. The
provision for income taxes also includes a charge of $1.7 million (unaudited) as
a result of the remeasurement of the Company's deferred tax liability for the 1
percent increase in the corporate income tax rate. In total, the 1993 tax reform
legislation negatively impacted results by $2.9 million (unaudited).
F-12
<PAGE> 67
ITT RAYONIER INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
Income tax data before discontinued operations and cumulative effect of
accounting changes are as follows:
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED DECEMBER 31,
ENDED --------------------------------
SEPTEMBER 30, 1993 1992 1991 1990
------------------ -------- ------- -------
<S> <C> <C> <C> <C>
(UNAUDITED)
Provision (benefit) for income tax
Current
U.S. Federal............................. $ 4,105 $ 1,199 $ 6,781 $41,713
State and local.......................... 1,601 117 932 4,151
Foreign.................................. 3,667 -- -- --
---------- -------- ------- -------
9,373 1,316 7,713 45,864
---------- -------- ------- -------
Deferred
U.S. Federal............................. 16,631 (47,795) 10,870 2,187
State and local.......................... 1,000 (3,268) 974 70
Foreign.................................. 2,025 (619) -- --
---------- -------- ------- -------
19,656 (51,682) 11,844 2,257
---------- -------- ------- -------
$ 29,029 $(50,366) $19,557 $48,121
---------- -------- ------- -------
---------- -------- ------- -------
</TABLE>
Deferred income tax provision (benefit) represents the tax effect related
to recording revenues and expenses in different periods for financial reporting
and tax return purposes. Deferred tax assets (liabilities) include the following
at December 31, 1992:
<TABLE>
<S> <C>
Accelerated depreciation......................................... $(110,748)
Reserves and other............................................... 42,679
---------
$ (68,069)
---------
---------
</TABLE>
A reconciliation of the tax (benefit) provision at the U.S. statutory rate
to the (benefit) provision for income tax as reported is as follows:
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED DECEMBER 31,
ENDED --------------------------------
SEPTEMBER 30, 1993 1992 1991 1990
------------------ -------- ------- -------
<S> <C> <C> <C> <C>
(UNAUDITED)
Tax (benefit) provision at U.S. statutory
rate........................................ $ 27,430 $(44,841) $21,724 $53,514
Benefit of FSC related tax-sharing
arrangement................................. -- (4,201) (2,920) (4,858)
Effect of remeasurement of deferred tax
liability................................... 1,687 -- -- --
State and local taxes, net of federal tax
benefit..................................... 1,691 (2,080) 1,258 2,786
All other, net................................ (1,779) 756 (505) (3,321)
---------- -------- ------- -------
Provision (benefit) for income tax............ $ 29,029 $(50,366) $19,557 $48,121
---------- -------- ------- -------
---------- -------- ------- -------
</TABLE>
"All other, net" represents tax provisions adjustments for permanent
differences, tax credits and other items which are not individually significant.
DISCONTINUED OPERATIONS AND UNITS HELD FOR DISPOSITION
In 1986 the Company discontinued its Southern Wood Piedmont Company ("SWP")
treated wood business segment. The Company is currently actively involved in
implementing clean up and closure programs
F-13
<PAGE> 68
ITT RAYONIER INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
for SWP and is in negotiations with state and environmental agencies on the
scope and timing of such programs. In prior years, the Company had provided
$152.8 million in pre-tax reserves for discontinued operations, including an
increase to the reserve in 1990 of $65.7 million ($43.4 million after-tax) as a
result of revisions in the estimate of future environmental costs for closure,
post-closure and corrective action programs at SWP. The costs of the corrective
action and closure programs at SWP's nine primary manufacturing locations are
affected by many factors, which has led to increases in the reserves for such
programs in the past, and may result in increases in the future, as the
effectiveness of the existing clean up programs is measured against applicable
standards. Expenditures for such programs will also depend on, among other
things, new laws, regulations and administrative interpretations, governmental
responses to programs proposed by the Company and changes in environmental
control technology. Although considerable progress on clean up was made by year
end 1993, in particular at three of SWP's nine locations where the installation
of corrective action facilities has been completed, there is still uncertainty
as to the timing and amount of expenditures beyond 1993 at these sites and the
extent and timing for completing programs at all sites. The Company currently
estimates that expenditures at these sites during the two year period 1994-1995
will approximate $20 million.
In the fourth quarter of 1992, the Company provided $180 million, pre-tax,
for the loss on disposal of assets along with the costs for severance,
demolition and other closedown items associated with the disposition of the
Grays Harbor Pulp Mill and Vanillin plant, and the associated Grays Harbor Paper
Company (collectively referred to as the Grays Harbor Complex). In August, 1993
the bulk of the Grays Harbor Complex was sold.
As of September 30, 1993 the Company had $85.5 million (unaudited) reserved
for discontinued operations and units held for disposition. Subject to the
uncertainties discussed above, the Company believes that its reserves
established to divest or close all of these business activities are adequate.
The Company further believes that any future change in estimates, if necessary,
will not materially affect the financial condition of the Company.
BANK LOANS
At September 30, 1993, Rayonier had short-term loans payable to various
banks totaling $90 million at interest rates ranging from 3.3 percent to 3.9
percent (unaudited). At December 31, 1992, the Company had short-term loans
payable to various banks totaling $100 million at interest rates ranging from
3.75 percent to 4.44 percent. At December 31, 1991, Rayonier had a short-term
bank loan of $5 million with an interest rate of 5 percent.
The fair value of Rayonier's short-term bank loans approximates carrying
value at September 30, 1993 (unaudited).
F-14
<PAGE> 69
ITT RAYONIER INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
LONG-TERM DEBT
As of September 30, 1993 (unaudited) and December 31, 1992 and 1991
Rayonier's long-term debt at various interest rates included the following
(thousands of dollars):
<TABLE>
<CAPTION>
YEARS OF UNDER 5% TO OVER
MATURITY 5% 7% 7% TOTAL
----------------------------------------- -------- ------- -------- --------
<S> <C> <C> <C> <C>
1994 ............................. $ -- $ 87 $ 1,116 $ 1,203
1995 ............................. 33,333 92 126 33,551
1996 ............................. 33,333 387 137 33,857
1997 ............................. 34,107 2,080 149 36,336
1998 -- 2002............................. -- 27,395 110,337 137,732
2003 -- 2007............................. -- 14,510 23,300 37,810
2008 -- 2012............................. -- 15,705 -- 15,705
2015 ............................. -- 6,920 15,000 21,920
-------- ------- -------- --------
TOTAL -- 1993.................. $100,773 $67,176 $150,165 $318,114
-------- ------- -------- --------
-------- ------- -------- --------
TOTAL -- 1992.................. $100,773 $40,951 $161,680 $303,404
-------- ------- -------- --------
-------- ------- -------- --------
TOTAL -- 1991.................. $ 783 $97,511 $101,812 $200,106
-------- ------- -------- --------
-------- ------- -------- --------
</TABLE>
On October 15, 1992, the Company issued $110 million of 7.5 percent notes
due October 15, 2002 (the Notes). The Notes were issued pursuant to a
Registration Statement, filed on Form S-3 effective September 29, 1992, which
permits the Company to issue up to $250 million in debt securities through
public offerings. The Company used the net proceeds from the sale of the Notes
to repay bank debt which was utilized as bridge financing for the purchase of
forest assets in New Zealand (see "New Zealand Acquisition").
On April 5, 1993, the Company established a $140 million Medium Term Note
program pursuant to the Registration Statement filed on Form S-3 effective
September 29, 1992. During April 1993, $16 million of medium term notes,
maturing in April 1998 and 1999, were issued under this program at an average
effective cost to the Company of 6.25 percent (unaudited).
During the fourth quarter of 1991, Rayonier borrowed $90 million under a
term loan agreement which expires on October 31, 1997. This loan agreement was
amended in 1992 allowing Rayonier to borrow an additional $10 million. The loan
is repayable in three equal annual installments starting in October of 1995 and
ending in October of 1997. The proceeds of this loan were primarily used to
retire short-term bank borrowings, pay off debt to ITT and for other corporate
purposes. The debt bears a variable rate of interest equal to the London
Interbank Offering Rate (LIBOR) plus fifty basis points. At December 31, 1992,
the variable rate of interest was 4.06 percent. At September 30, 1993, the
variable rate of interest was 3.63 percent (unaudited).
The estimated fair value of long-term debt as of September 30, 1993 exceeds
the carrying value of such debt by approximately $16 million (unaudited).
The most restrictive long-term debt agreement in effect at September 30,
1993, as amended in December 1993, provides that the ratio of the Company's
indebtedness to the sum of such indebtedness plus consolidated tangible net
worth cannot exceed 50%. As of September 30, 1993, this ratio was 37% and the
ratio increased to approximately 45% at year end after the Company completed its
previously planned recapitalization program (unaudited). In addition, at
September 30, 1993, a total of $367 million of retained earnings was
unrestricted as to the payment of dividends (unaudited), which was reduced by
$90 million upon the payment of a dividend to ITT pursuant to such
recapitalization program.
F-15
<PAGE> 70
ITT RAYONIER INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
STOCKHOLDER EQUITY
On May 11, 1992, the Company filed a Restated Certificate of Incorporation
which amended its Certificate of Incorporation to authorize 250,000 shares of a
new class of stock designated as preferred stock with a par value of $1.00 per
share. The preferred stock may be issuable in series as authorized by the
Company's Board of Directors. The Restated Certificate also renamed the
Company's existing $100.00 par value per share capital stock as common stock and
increased, to 500, the number of shares authorized. The number of shares issued
and outstanding remains at 79.
The Restated Certificate designated 100,000 shares of the authorized
preferred stock as Cumulative Preferred Stock, $77.50 Series A with a redemption
value of $1,000.00 per share. Such shares are callable by the Company and in
most regards have voting rights similar to the Company's common stock. Dividends
are payable quarterly.
On May 15, 1992, the Company issued 30,000 shares of its Cumulative
Preferred Stock $77.50 Series A to ITT for $30 million in cash to fund a portion
of the cost of the New Zealand acquisition. The shares were redeemed by the
Company on July 28, 1992 with the proceeds of short-term bank borrowings.
Dividends paid by the Company on its classes of stock during 1992, 1991 and
1990 were $17,530, $19,613 and $61,352, respectively. The 1992 amount includes
$471 paid on the Series A Preferred Stock. Dividends paid by the Company during
the nine month period ended September 30, 1993 totaled $30,194 (unaudited).
EMPLOYEE BENEFIT PLANS
Rayonier has several pension plans covering substantially all of its
employees. The entire cost of these plans is borne by Rayonier. Contributions to
certain plans are subject to union negotiation. Rayonier is also one of several
affiliates participating in the ITT Salaried Retirement Plan.
The following table discloses periodic pension cost for Rayonier plans and
total Rayonier pension expense for the three years ended December 31, 1992:
<TABLE>
<CAPTION>
1992 1991 1990
------- ------- -------
<S> <C> <C> <C>
Defined Benefit Plans
Service Cost........................................ $ 1,668 $ 1,574 $ 1,472
Interest Cost....................................... 5,707 5,562 5,350
Return on Assets.................................... (5,325) (6,320) 1,255
Net Amortization and Deferral....................... (1,451) (73) (7,257)
------- ------- -------
Net Periodic Pension Cost of Rayonier Plans......... 599 743 820
Other Pension Costs
Rayonier Portion of ITT Salaried Retirement Plan.... 2,938 2,460 2,651
Multi-Employer Plan................................. -- 24 43
Defined Contribution (Savings) Plans................ 1,329 1,267 1,352
------- ------- -------
Total Pension Expense....................... $ 4,866 $ 4,494 $ 4,866
------- ------- -------
------- ------- -------
</TABLE>
Pension expense during the nine month period ended September 30, 1993
totaled $3,795 (unaudited).
F-16
<PAGE> 71
ITT RAYONIER INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
The following table sets forth the funded status of the Rayonier pension
plans, the amounts recognized in the balance sheets of the Company at December
31, 1992 and 1991 and the principal weighted average assumptions inherent in
their determinations:
<TABLE>
<CAPTION>
ASSETS EXCEED
ACCUMULATED BENEFITS
ACTUAL PRESENT VALUE ---------------------
OF BENEFIT OBLIGATIONS 1992 1991
--------------------------------------------------------------- ------- -------
<S> <C> <C>
Vested benefit obligation...................................... $67,340 $65,496
------- -------
------- -------
Accumulated benefit obligation................................. $71,175 $69,111
------- -------
------- -------
Projected benefit obligation................................... $71,448 $69,342
Plan assets at fair value...................................... 77,303 75,507
------- -------
Projected benefit obligation under plan assets................. 5,855 6,165
Unrecognized net (gain) loss................................... 6,491 4,287
Unrecognized past service cost................................. 5,059 6,063
Unrecognized net assets at January 1, 1992 and 1991............ (6,959) (8,012)
------- -------
Prepaid pension asset recognized in the balance sheets......... $10,446 $ 8,503
------- -------
------- -------
Actuarial Assumptions:
Discount Rate................................................ 8.50% 8.50%
Rate of Return on Invested Assets............................ 9.75% 9.75%
Salary Increase Assumption................................... 5.00% 5.00%
</TABLE>
Rayonier provides health care and life insurance benefits for certain
eligible retired employees. Benefits under these plans covering salaried
retirees are maintained through the applicable plans of ITT and, other than for
the amount of the expense recorded for the period, all asset and liability
accounts are maintained by ITT. Effective January 1, 1992, Rayonier adopted SFAS
No. 106, using the immediate recognition method for all benefits accumulated to
date. Accordingly, an expense was recorded as of that date of $23,223 for
salaried retirees and $8,693 for hourly paid retirees which is included in the
adjustment to record the cumulative effect of accounting changes. The Company is
not currently funding this obligation; however, it may pre-fund some portion if
it can be accomplished on a tax-effective basis.
Postretirement health care and life insurance benefits expense (excluding
the cumulative catch up adjustment) was comprised of the following in 1992:
<TABLE>
<S> <C>
Service Cost................................................................ $ 239
Interest Cost............................................................... 721
-------
Net periodic expense for hourly plans....................................... 960
Rayonier portion of expense for ITT Plans for salaried employees............ 1,653
-------
Total Postretirement expense................................................ $ 2,613
-------
-------
</TABLE>
Postretirement health care and life insurance benefits expense during the
nine month period ended September 30, 1993 totaled $1,673 (unaudited). For 1991
and 1990, the aggregate costs amounted to $2,232 and $2,287 under the prior
accounting method.
F-17
<PAGE> 72
ITT RAYONIER INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
The following table sets forth the status of the postretirement benefit
plans other than pensions for hourly paid employees, amounts recognized in
Rayonier's balance sheet at December 31, 1992 and the principal weighted average
assumptions inherent in their determination:
<TABLE>
<S> <C>
Accumulated postretirement
benefit obligation................................ $ 9,228
-------
-------
Liability recognized in the
balance sheet..................................... $ 9,228
-------
-------
Discount rate....................................... 8.50%
Ultimate health care trend rate..................... 6.60%
</TABLE>
The assumed rate of future increases in the per capita cost of health care
(the health care trend rate) was 13.0 percent for 1992, decreasing ratably to
6.6 percent in the year 2001. Increasing the table of health care trend rates by
one percent per year would have the effect of increasing the accumulated
postretirement benefit obligation by $900 and annual expense by $100. To the
extent that the actual experience differs from the inherent assumptions, the
effect will be amortized over the average future service of the covered active
employees.
LEASES AND RENTALS
As of December 31, 1992, minimum rental commitments under noncancelable
operating leases were as follows (thousands of dollars):
<TABLE>
<CAPTION>
YEAR
---------------------------------------------------
<S> <C>
1993............................................... $ 4,805
1994............................................... 4,659
1995............................................... 4,506
1996............................................... 3,987
1997............................................... 3,219
Remaining Years.................................... 6,404
-------
Total Minimum Lease Payments............. $27,580
-------
-------
</TABLE>
Operating lease commitments at December 31, 1992 include the 1985 sale and
leaseback of Rayonier's Baxley, Georgia sawmill assets amounting to
approximately $10.6 million, the lease on Rayonier's executive offices, which
was renegotiated and renewed in 1991, of approximately $9.8 million, the fixed
portions of the 1985 lease of equipment under a master lease agreement through
ITT of approximately $3.6 million and the 1992 lease of New Zealand office space
of $1.1 million.
Total rental expense for operating leases amounted to $6,485, $6,301 and
$7,332 in 1992, 1991 and 1990, respectively. Such rental expense totaled $4,883
and $4,864 during the nine month periods ended September 30, 1993 and 1992,
respectively (unaudited).
CONTINGENCIES
Rayonier and its subsidiaries are involved in various legal actions, some
of which involve claims for substantial sums. Rayonier's ultimate liability with
respect to these and other contingencies is not considered material to its
consolidated financial position. Reference is made to "BUSINESS OF
RAYONIER -- Legal Proceedings" contained elsewhere in this Information
Statement.
F-18
<PAGE> 73
ITT RAYONIER INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
SEGMENT INFORMATION
Segment information for the nine months ended September 30, 1993 and 1992
and the three years ended December 31, 1992 was as follows (millions of
dollars):
<TABLE>
<CAPTION>
SALES
----------------------------------------------------
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------- -------------------------------
1993 1992 1992 1991 1990
------ ------ ------- ------ --------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Timber and Wood Products..................... $385.8 $334.3 $ 442.6 $401.5 $ 418.0
Specialty Pulp Products...................... 341.4 389.6 525.3 553.3 615.3
Intersegment Eliminations.................... (27.9) (27.4) (34.1) (30.7) (11.1)
------ ------ ------- ------ --------
Total before Dispositions.......... 699.3 696.5 933.8 924.1 1,022.2
Dispositions................................. -- 36.7 39.9 54.8 82.1
------ ------ ------- ------ --------
Total.............................. $699.3 $733.2 $ 973.7 $978.9 $1,104.3
------ ------ ------- ------ --------
------ ------ ------- ------ --------
</TABLE>
<TABLE>
<CAPTION>
OPERATING INCOME (LOSS)
----------------------------------------------------
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------- -------------------------------
1993 1992 1992 1991 1990
------ ------ ------- ------ --------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Timber and Wood Products..................... $113.1 $ 84.7 $ 100.0 $ 77.8 $ 74.4
Specialty Pulp Products...................... (2.4) 11.5 6.5 36.1 112.7
Intersegment Eliminations.................... (1.1) 1.0 2.9 (1.4) (1.3)
------ ------ ------- ------ --------
Total before Dispositions.......... 109.6 97.2 109.4 112.5 185.8
Dispositions................................. -- (10.3) (196.0) (15.8) 4.2
------ ------ ------- ------ --------
Total.............................. $109.6 $ 86.9 $ (86.6) $ 96.7 $ 190.0
------ ------ ------- ------ --------
------ ------ ------- ------ --------
</TABLE>
<TABLE>
<CAPTION>
DEPRECIATION, DEPLETION AND AMORTIZATION
----------------------------------------------------
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------- -------------------------------
1993 1992 1992 1991 1990
------ ------ ------- ------ --------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Timber and Wood Products..................... $ 15.4 $ 13.1 $ 16.3 $ 11.9 $ 11.7
Specialty Pulp Products...................... 41.8 41.4 55.4 49.4 43.4
Dispositions................................. -- 5.0 6.2 8.0 8.7
------ ------ ------- ------ --------
Total.............................. $ 57.2 $ 59.5 $ 77.9 $ 69.3 $ 63.8
------ ------ ------- ------ --------
------ ------ ------- ------ --------
</TABLE>
F-19
<PAGE> 74
ITT RAYONIER INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
<TABLE>
<CAPTION>
GROSS PLANT ADDITIONS
----------------------------------------------------
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------- -------------------------------
1993 1992 1992 1991 1990
------ ------ ------- ------ --------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Timber and Wood Products..................... $ 19.7 $ 15.0 $ 22.6 $ 19.7 $ 16.6
Specialty Pulp Products...................... 29.6 52.7 71.1 107.6 76.2
Dispositions................................. -- 1.9 2.2 5.3 6.2
Unallocated.................................. 0.4 0.8 1.1 1.0 0.6
------ ------ ------- ------ --------
Total.............................. $ 49.7 $ 70.4 $ 97.0 $133.6 $ 99.6
------ ------ ------- ------ --------
------ ------ ------- ------ --------
</TABLE>
<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS
--------------------------------------------------------
AS OF YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ----------------------------------
1993 1992 1991 1990
------------- -------- -------- --------
<S> <C> <C> <C> <C>
(UNAUDITED)
Timber and Wood Products................. $ 661.1 $ 591.1 $ 399.7 $ 436.5
Specialty Pulp Products.................. 806.3 822.2 790.9 726.9
Dispositions............................. 3.8 11.6 131.3 128.8
Unallocated.............................. 46.8 51.5 50.4 60.9
------------- -------- -------- --------
Total.......................... $ 1,518.0 $1,476.4 $1,372.3 $1,353.1
------------- -------- -------- --------
------------- -------- -------- --------
</TABLE>
Sales to unaffiliated customers in foreign countries from United States
based operations:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1993 YEAR ENDED DECEMBER 31,
---------------- -------------------------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) 1992 1991 1990
---------------- ------- ------ --------
Asia Pacific................................. $222.8 $ 302.5 $291.3 $ 350.1
Western Europe............................... 81.9 145.8 159.8 170.0
Other........................................ 47.1 63.4 61.9 69.8
------ ------- ------ --------
Total.............................. $351.8 $ 511.7 $513.0 $ 589.9
------ ------- ------ --------
------ ------- ------ --------
</TABLE>
Sales by industry segment includes sales to unaffiliated customers and
sales between industry segments. The intersegment sales consist principally of
sales of pulpwood by the Timber and Wood Products segment to the Company's pulp
mills. The intersegment sales price approximates the market value of these
products.
Reference is made to "Business of Rayonier" contained elsewhere in this
Information Statement, for a further description of the industry segments of
Rayonier.
F-20
<PAGE> 75
ITT RAYONIER INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
GEOGRAPHICAL INFORMATION -- TOTAL SEGMENTS
<TABLE>
<CAPTION>
SALES
-----------------------------------------------------------
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- ----------------------------------
1993 1992 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
United States........................... $ 626.4 $ 713.3 $ 944.2 $ 967.6 $1,098.6
New Zealand............................. 68.7 19.9 29.5 11.3 5.7
Other................................... 4.2 -- -- -- --
-------- -------- -------- -------- --------
Total......................... $ 699.3 $ 733.2 $ 973.7 $ 978.9 $1,104.3
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
OPERATING INCOME (LOSS)
-----------------------------------------------------------
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- ----------------------------------
1993 1992 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
United States........................... $ 84.5 $ 85.6 $ (88.9) $ 99.1 $ 190.6
New Zealand............................. 26.6 3.2 4.7 0.5 0.5
Other................................... (1.5) (1.9) (2.4) (2.9) (1.1)
-------- -------- -------- -------- --------
Total......................... $ 109.6 $ 86.9 $ (86.6) $ 96.7 $ 190.0
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AS OF
SEPTEMBER 30,
1993 YEAR ENDED DECEMBER 31,
--------------------- ----------------------------------
(UNAUDITED) 1992 1991 1990
--------------------- -------- -------- --------
United States........................... $1,289.8 $1,270.8 $1,366.9 $1,349.4
New Zealand............................. 225.8 205.2 5.0 3.5
Other................................... 2.4 0.4 0.4 0.2
-------- -------- -------- --------
Total......................... $1,518.0 $1,476.4 $1,372.3 $1,353.1
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
SUPPLEMENTARY INCOME STATEMENT INFORMATION
Additional information relating to certain items charged to costs and
expenses in the statements of consolidated income is as follows (thousands of
dollars):
<TABLE>
<CAPTION>
1992 1991 1990
------- ------- -------
<S> <C> <C> <C>
Taxes other than payroll and income taxes................. $13,258 $14,569 $13,673
------- ------- -------
------- ------- -------
Maintenance and repairs................................... $65,778 $66,047 $69,544
------- ------- -------
------- ------- -------
</TABLE>
F-21
<PAGE> 76
ITT RAYONIER INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
QUARTERLY RESULTS FOR 1993, 1992 AND 1991 (UNAUDITED) (THOUSANDS OF DOLLARS):
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------
1993 MARCH 31 JUNE 30 SEPT. 30 DEC. 31 TOTAL
- ---------------------------------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Sales............................. $216,320 $256,575 $226,445 $ 699,340
-------- -------- -------- ---------
-------- -------- -------- ---------
Operating Income.................. $ 36,649 $ 48,750 $ 24,245 $ 109,644
-------- -------- -------- ---------
-------- -------- -------- ---------
Net Income........................ $ 16,820 $ 24,790 $ 7,733 $ 49,343
-------- -------- -------- ---------
-------- -------- -------- ---------
1992
- ----------------------------------
Sales............................. $232,390 $235,218 $265,579 $ 240,486 $ 973,673
-------- -------- -------- --------- ---------
-------- -------- -------- --------- ---------
Operating Income (Loss)........... $ 31,944 $ 22,987 $ 31,962 $(173,497) $ (86,604)
-------- -------- -------- --------- ---------
-------- -------- -------- --------- ---------
Net Income (Loss)................. $ (8,287)(a) $ 6,996 $ 12,754 $(114,939)(b) $(103,476)
-------- -------- -------- --------- ---------
-------- -------- -------- --------- ---------
1991
- ----------------------------------
Sales............................. $222,706 $250,103 $245,154 $ 260,987 $ 978,950
-------- -------- -------- --------- ---------
-------- -------- -------- --------- ---------
Operating Income.................. $ 33,331 $ 23,573 $ 19,837 $ 20,004 $ 96,745
-------- -------- -------- --------- ---------
-------- -------- -------- --------- ---------
Net Income........................ $ 17,391 $ 10,119 $ 9,213 $ 7,614 $ 44,337
-------- -------- -------- --------- ---------
-------- -------- -------- --------- ---------
</TABLE>
- ---------------
(a) The first quarter of 1992 includes an after tax adjustment of $22.0 million
to record the cumulative effect of changes in accounting principles due to
the adoption of SFAS No. 106, Employers' Accounting for Postretirement
Benefits Other than Pensions and SFAS No. 112, Employers' Accounting for
Postemployment Benefits. See "Changes in Accounting Principles."
(b) The fourth quarter of 1992 includes an after tax charge of $115 million to
provide for the loss on disposal of assets along with the costs for
severance, demolition and other closedown items associated with the
disposition of the Grays Harbor Complex.
F-22
