2004 Stock Option Award Agreement



 EXHIBIT 10.21 
  
 RAYONIER INC. 
  
 2,500,000 Common Shares 
  
 2004 RAYONIER INCENTIVE STOCK 
 AND

 MANAGEMENT BONUS PLAN 
  
 PLAN INFORMATION 
  
 THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES 
 THAT HAVE BEEN REGISTERED UNDER THE 
 SECURITIES ACT OF 1933. 
  
 The Prospectus covers such additional securities as may be issuable as a
result of anti-dilution provisions contained in the instruments pursuant to which securities covered by the Prospectus are issued. 
  
 THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES 
 AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS 
 THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES 
 COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE 
 PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A 
 CRIMINAL OFFENSE. 







 Additional information about the Plan and its administration may be obtained by writing the Manager of
Stock Option Plan Administration, Rayonier Inc., 50 No. Laura Street, Jacksonville, FL 32202, or telephoning the Manager at (904) 357-9100. 
  
 Any statement contained in a document incorporated or deemed to be incorporated by reference in the Prospectus shall be deemed to be modified or
superseded for purposes of the Prospectus to the extent that a statement contained in the Prospectus or in any other subsequently filed document which also is or is deemed to be incorporated by reference in the Prospectus modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of the Prospectus. Any such document, as well as Rayonier’s most recent annual report to shareholders and any
other report or communication distributed to Rayonier shareholders generally, may be obtained without charge by written request to W. Edwin Frazier, III, Corporate Secretary, Rayonier Inc., 50 No. Laura Street, Jacksonville, FL 32202, or by
telephoning W. Edwin Frazier, III at (904) 357-9100. 
  
 TABLE
OF CONTENTS 
  

			
	 General Information
	  	3
	 The Plan
	  	4
	 Administration
	  	15
	 Federal Tax Treatment
	  	17

  

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 GENERAL INFORMATION 
  
 The 2004 Rayonier Incentive Stock and Management Bonus Plan (the “Plan”) was adopted by the Board of Directors of
Rayonier Inc. and approved by its shareholder to be effective January 1, 2004. 
  
 The maximum number of common shares of Rayonier Inc. (the “Common Shares”) for which incentive stock options may be issued under
the Plan is one million (1,000,000). The total number of shares available under the Plan registered currently on Form S-8 with the Securities & Exchange Commission is two million five hundred thousand (2,500,000). 
  
 In addition to non-qualified stock options and incentive stock options, the
committee administering the Plan (the “Committee”) may grant stock appreciation rights (“SAR’s”) in connection with options to those employees who are considered directors or executive officers for purposes of Section 16(b)
of the Securities Exchange Act of 1934, as amended. The Plan permits the Committee to award performance shares and restricted stock, as well as non-qualified stock options, incentive stock options, SAR’s, Restricted Stock units and senior
management bonus awards in stock or in cash. Reference is made to the text of the Plan herein for a complete description of awards permitted under the Plan and the relevant provisions and conditions applicable thereto. 
  
 The prospectus does not cover resales of Common Shares acquired pursuant to
the provisions of the Plan. Resales may be subject to restrictions or limitations imposed by the Securities Act of 1933 and the Securities Exchange Act of 1934. 
  

The Plan is not subject to any of the provisions of the Employee Retirement Income Security Act of 1974. Furthermore, Section 401 of the Internal
Revenue Code relating to certain qualified pension, profit-sharing and stock bonus plans does not apply to the Plan. 
  
 Plan participants receive information with respect to their participation, including the date of grant, the exercise price, the amount exercisable and the
expiration date, applicable information concerning performance shares or restricted stock and bonus awards that may be relevant to them. 
  
 The Plan contains a 650,000 share limitation on the number of shares which may be issued as restricted or performance share awards, as well as an annual limitation on the
number of shares which one employee may be awarded annually. 
  
  

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 2004 RAYONIER INCENTIVE STOCK AND MANAGEMENT BONUS PLAN 
  
 1. Purpose 
  
 The purpose of the 2004 Rayonier Incentive Stock and Management Bonus 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, performance bonus awards or any combination of the foregoing, as the Committee may determine. 
  
 2. Definitions 
  
 When
used herein, the following terms shall have the following meanings: 
  
 “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, Restricted Stock or Performance Bonus Awards, or any combination of the
foregoing. 
  
 “Award Agreement” means the written
agreement evidencing each Award, other than Performance Bonus Awards, granted to a Key Employee under the Plan. 
  
 “Beneficiary” means the estate of a Key Employee or such other beneficiary or beneficiaries lawfully designated pursuant to Section 11 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. 
  
 “Change in Control” has the meaning specified in the Retirement Plan. 
  
 “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. 
  
 “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 for the most recently completed trading day 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. 
  

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 “GAAP” means U.S. Generally Accepted Accounting Principles. 
  
 “Incentive Stock Option” means a stock option qualified under
Section 422 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 that shall become exercisable automatically upon the occurrence of a Change in Control as described in Section 10 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 that at the time such Option is granted
qualifies as a “subsidiary” of the Company under Section 425(f) of the Code. 
  
 “Participant” means each Key Employee of the Participating Company selected by the Committee as eligible for a Performance Bonus Award who could potentially be described in Section 162(m)(3) of the Code, as
well as, in the discretion of the Committee, the President and Chief Executive Officer and any Key Employee reporting directly to the President and Chief Executive Officer. 
  
 “Performance Bonus Award” means the right of a Participant to receive cash following the completion of a
Performance Period based upon performance in respect of one or more of the Performance Goals during such Performance Period, as specified in Section 9. 
  
 “Performance Goals” means or may be expressed in terms of any, but not limited to, of the following business criteria: (i) net income, (ii)
earnings per share, (iii) operating income, (iv) operating cash flow, (v) earnings before income taxes and depreciation, (vi) earnings before interest, taxes, depreciation and amortization, (vii) operating margins (viii) reductions in operating
expenses, (ix) sales or return on sales (x) total stockholder return (xi) return on equity, (xii) return on total capital, (xiii) return on invested capital, (xiv) return on assets, (xv) economic value added, (xvi) cost reductions and savings,
(xvii) increase in surplus, (xviii) productivity improvements, (xix) an executive’s attainment of personal objectives with respect to any of the foregoing criteria or other criteria such as growth and profitability, customer satisfaction,
leadership effectiveness, business development, negotiating transactions and sales or developing long term business goals. A Performance Goal may be measured over a Performance Period on a periodic, annual, cumulative or average basis and may be
established on a corporate-wide basis or established with respect to one or more operating units, divisions, subsidiaries, acquired businesses, minority investments, partnerships or joint ventures. Unless otherwise determined by the Committee, the
Performance Goals will be determined using GAAP consistently applied during a Performance Period by no later than the earlier of the date that is ninety days after the commencement of the Performance Period or the day prior to the date on which
twenty-five percent of the Performance Period has elapsed. 
  
 “Performance Objective” means the level or levels of performance required to be attained with respect to specified Performance Goals in order that a Key Employee shall become entitled to specified rights in connection with a
Performance Share or Performance Bonus Award. 
  
 “Performance Period” means the calendar year, or such other shorter or longer period designated by the Committee, during which performance will be measured in order to determine a Key Employee’s entitlement to receive payment
of a Performance Share or Performance Bonus Award, respectively. 
  

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 “Performance Share” means a performance share awarded under Section 6 of the Plan. 

 
 “Plan” means the 2004 Rayonier Incentive Stock and Management
Bonus 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.

  
 “Restricted Stock Unit” has the meaning set forth in
Section 6 of the Plan. 
  
 “Retirement Plan” means the
Retirement Plan for Salaried Employees of Rayonier Inc., as amended effective July 18, 1997, and as the same may be thereafter amended from time to time prior to the occurrence of a Change in Control. 
  
 “Right” means a stock appreciation right awarded in connection with
an option under Section 5 of the Plan. 
  
 “Share Limit”
has the meaning set forth in Section 3. 
  
 “Stock”
means the common shares 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. 
  
 “Voting Securities” means any securities of the Company that vote generally in the election of directors. 
  
 3. Shares Subject to the Plan 
  
 The aggregate number of shares of Stock that may be awarded under the Plan
is 2.5 million. 
  
 No more than 650,000 of such total number of
shares shall be available for restricted stock and Performance Share Awards. 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. For any Plan Year, no individual employee may receive an Award of Options, Performance Shares, Restricted Stock or Rights for more than four percent (4%) of the total number of shares authorized under the Plan (with respect to any Key
Employee, his or her “Share Limit”). The number of shares available in each category hereunder shall be subject to adjustment as provided in Section 14 in connection with a Stock split, Stock dividend, or other extraordinary transaction
affecting the Stock. 
  
 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 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 that equal the maximum number of Performance Share Awards issuable in any outstanding grant, 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 that were theretofore subject to such Awards shall again be available
for Awards under the Plan to the extent of such 
  

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 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. 
  
 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, other than Performance Bonus Awards, 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. 
  
 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 that 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) Any Option issued hereunder that is intended to qualify as an Incentive
Stock Option shall be subject to such limitations or requirements as may be necessary for the purposes of Section 422 of the Code or any regulations and rulings thereunder to the extent and in such form as determined by the Committee in its
discretion. 
  
 (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 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. 
  

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 (h) Unless Section 10 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. 
  
 (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 10, 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 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 422 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 as 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 amount that 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 
  

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 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 and 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 with respect to the award of Performance Shares. 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 Goals as the Committee may deem appropriate. The
Performance Objective shall be established by the Committee prior to, or reasonably promptly following the inception of, a Performance Period but, to the extent required by Section 162(m) of the Code, by no later than the earlier of the date that is
ninety days after the commencement of the Performance Period or the day prior to the date on which twenty-five percent of the Performance Period has elapsed. 
  
 (d) Following the completion of each Performance Period, the Committee shall certify in writing, in accordance with the requirements of Section 162(m) of
the Code to the extent applicable, whether the Performance Objective and other material terms for paying amounts in respect of each Performance Share Award related to that Performance Period have been achieved or met. Unless the Committee determines
otherwise, Performance Share Awards shall not be settled until the Committee has made the certification specified under this Section 6(d). 
  
 (e) The Committee is authorized at any time during or after a Performance Period to reduce or eliminate the Performance Share Award of any Key Employee
for any reason, including, without limitation, changes in the position or duties of any Key Employee with the Participating Company during or after a Performance Period, whether due to any termination of employment (including death, disability,
retirement, voluntary termination or termination with or without cause) or otherwise. In addition, to the extent necessary to preserve the intended economic effects of the Plan to the Participating Company and the Key Employee, the Committee shall
adjust Performance Objectives, the Performance Share Awards or both to take into account: (i) a change in corporate capitalization, (ii) a corporate transaction, such as any merger of the Company or any subsidiary into another corporation, any
consolidation of the Company or any subsidiary into another corporation, any separation of the Company or any subsidiary (including a spin-off or the distribution of stock or property of the Company or any subsidiary), any reorganization of the
Company or any subsidiary or a large, special and non-recurring dividend paid or distributed by the Company (whether or not such reorganization comes within the definition of Section 368 of the Code), (iii) any partial or complete liquidation of the
Company or any subsidiary or (iv) a change in accounting or other relevant rules or regulations (any adjustment pursuant to this Clause (iv) shall be subject to the timing requirements of the last sentence of the definition of 
  

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 Performance Goal set forth in Section 2 of the Plan); provided, however, that no adjustment hereunder shall
be authorized or made if and to the extent that the Committee determines that such authority or the making of such adjustment would cause the Performance Bonus Awards to fail to qualify as “qualified performance-based compensation” under
Section 162(m) of the Code with respect to a particular Key Employee. 
  
 (f) 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 that shall be paid to the Key Employee or
member of the group of Key Employees if Performance Objectives are met in whole or in part. 
  
 (g) 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, which Award, in the discretion of the Committee, may be maintained without change or reduced 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, but only to the extent consistent with the requirements of Section 162(m) of the Code to the extent applicable in respect of such Key Employee. 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. 
  
 (h) 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 but no earlier than following the determination made in
Section 6(d) hereof. Subject to the terms of the applicable program, the Award may also be paid in shares of Stock or Restricted Stock. 
  
 (i) With respect to Performance Shares that may be settled through the grant of Stock, a Key Employee shall not be granted Performance Shares for all of
the Performance Periods commencing in a calendar year that permit the Key Employee to earn Stock covering more than the Share Limit in respect of such Key Employee. In addition, separate and apart from the limit in the previous sentence, with
respect to Performance Share Awards to be settled in cash, a Key Employee shall not be granted Performance Share Awards for all of the Performance Periods commencing in a calendar year that permit the Key Employee in the aggregate to earn a cash
payment in excess of the Fair Market Value of the Share Limit as of the first day of the first Performance Period commencing in such calendar year. 
  
 (j) Performance Share Awards may be structured in the form of Restricted Stock Units or any substantially similar instrument evidencing the right to
receive a share of Stock, or a cash payment equal to the Fair Market Value of a share of Stock, at some future date upon the lapse of the applicable restrictions established by the Committee or upon the satisfaction of any applicable Performance
Goals established by the Committee hereunder. To the extent provided for by the Committee, the rules of Section 7 shall apply to Restricted Stock Units payable in Stock. 
  
 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. 
  

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 (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. 
  
 (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 that 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. 
  

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 9. Management Performance Bonus Awards 
  
 (a) Form of Award. The Committee is authorized to grant Awards pursuant to this Section 9. An Award shall represent
the conditional right of the Participant to receive cash, or at the discretion of the Committee (and subject to the limitations in Section 3), in whole or in part in shares of stock, based upon achievement of one or more pre-established Performance
Objectives during a Performance Period, subject to the terms of this Section 9 and the other applicable terms of the Plan. Awards shall be subject to such conditions, including deferral of settlement, risks of forfeiture, restrictions on
transferability and other terms and conditions as shall be specified by the Committee. The Performance Bonus Award hereunder may take the form of a percentage of a bonus pool the magnitude of which shall be determined in a manner consistent with the
determination of individual Performance Bonus Awards based on individual Performance Objectives hereunder for all of the members in the pool, with the time period for establishing the magnitude of the pool and the fixing of the applicable percentage
available to any individual determined in accordance with the requirements of Section 162(m) of the Code applicable to any such individuals in the pool. 
  
 (b) Performance Objectives. The Committee shall establish the Performance Objective for each Performance Bonus Award, consisting of one or more
business criteria permitted as Performance Goals hereunder, one or more levels of performance with respect to each such criteria, and the amount or amounts payable or other rights that the Participant will be entitled to upon achievement of such
levels of performance. The Performance Objective shall be established by the Committee prior to, or reasonably promptly following the inception of, a Performance Period but, to the extent required by Section 162(m) of the Code, by no later than the
earlier of the date that is ninety days after the commencement of the Performance Period or the day prior to the date on which twenty-five percent of the Performance Period has elapsed. 
  
 (c) Additional Provisions Applicable to Performance Bonus Awards. More than one Performance Goal may be incorporated
in a Performance Objective, in which case achievement with respect to each Performance Goal may be assessed individually or in combination with each other. The Committee may, in connection with the establishment of Performance Objectives for a
Performance Period, establish a matrix setting forth the relationship between performance on two or more Performance Goals and the amount of the Performance Bonus Award payable for that Performance Period. The level or levels of performance
specified with respect to a Performance Goal may be established in absolute terms, as objectives relative to performance in prior periods, as an objective compared to the performance of one or more comparable companies or an index covering multiple
companies, or otherwise as the Committee may determine. Performance Objectives shall be objective and shall otherwise meet the requirements of Section 162(m) of the Code. Performance Objectives may differ for Performance Bonus Awards granted to any
one Participant or to different Participants. 
  
 (d) Duration
of the Performance Period. The Committee shall establish the duration of each Performance Period at the time that it sets the Performance Objectives applicable to that Performance Period. The Committee shall be authorized to permit overlapping
or consecutive Performance Periods. 
  
 (e) Certification.
Following the completion of each Performance Period, the Committee shall certify in writing, in accordance with the requirements of Section 162(m) of the Code, whether the Performance Objective and other material terms for paying amounts in respect
of each Performance Bonus Award related to that Performance Period have been achieved or met. Unless the Committee determines otherwise, Performance Bonus Awards shall not be settled until the Committee has made the certification specified under
this Section 9(e). 
  
 (f) Adjustment. The Committee is
authorized at any time during or after a Performance Period to reduce or eliminate the Performance Bonus Award of any Participant for any reason, including, without limitation, changes in the position or duties of any Participant with the
Participating Company during or after a Performance Period, whether due to any termination of employment (including death, disability, Retirement, voluntary termination or termination with or without cause) or otherwise. In addition, to the extent
necessary to preserve the intended economic effects of the Plan to the Participating Company and the Participants, the Committee shall adjust Performance Objectives, the Performance Bonus Awards or both to 
  

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 take into account: (i) a change in corporate capitalization, (ii) a corporate transaction, such as any merger of the
Company or any subsidiary into another corporation, any consolidation of the Company or any subsidiary into another corporation, any separation of the Company or any subsidiary (including a spin-off or the distribution of stock or property of the
Company or any subsidiary), any reorganization of the Company or any subsidiary or a large, special and non-recurring dividend paid or distributed by the Company (whether or not such reorganization comes within the definition of Section 368 of the
Code), (iii) any partial or complete liquidation of the Company or any subsidiary or (iv) a change in accounting or other relevant rules or regulations (any adjustment pursuant to this Clause (iv) shall be subject to the timing requirements of the
last sentence of the definition of Performance Goal set forth in Section 2 of the Plan); provided, however, that no adjustment hereunder shall be authorized or made if and to the extent that the Committee determines that such authority
or the making of such adjustment would cause the Performance Bonus Awards to fail to qualify as “qualified performance-based compensation” under Section 162(m) of the Code. 
  
 (g) Timing of Payment. Except as provided below, any amounts payable in respect of Performance Bonus Awards for a
Performance Period will generally be paid as soon as practicable following the determination in respect thereof made pursuant to Section 9(e). 
  
 (h) Deferral of Payments. Subject to such terms, conditions and administrative guidelines as the Committee shall specify from time to time, a
Participant shall have the right to elect to defer receipt of part or all of any payment due with respect to a Performance Bonus Award. 
  
 (i) Maximum Amount Payable Per Participant Under This Section 9. A Participant shall not be granted Performance Bonus Awards for all of the
Performance Periods commencing in a calendar year that permit the Participant in the aggregate to earn a payment in excess of 200% of the Participant’s base salary in effect at the beginning of such calendar year. 
  
 (j) Termination of Employment. In the event a Participant terminates
employment for any reason during a Performance Period or prior to the Performance Bonus Award payment, he or she (or his or her Beneficiary, in the case of death) shall not be entitled to receive any Performance Bonus Award for such Performance
Period unless the Committee, in its sole and absolute discretion, elects to pay all or any part of a Performance Bonus Award to such Participant. 
  
 10. Change in Control 
  
 Notwithstanding any provisions in this Plan to the contrary: 
  
 (a) 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 a Change in Control and shall continue to be exercisable in full for cash for a period of 60 calendar days beginning on the date that such Change in Control occurs
and ending on the 60th calendar day following that date; provided, however, that no Option or Right shall be exercisable beyond the expiration date of its original term. 
  
 (b) Options and Rights shall not terminate and shall continue to be fully exercisable for a period of seven
months following the occurrence of a Change in Control in the case of an employee who is terminated other than for just cause or who voluntarily terminates his or her employment because he or she in good faith believes that as a result of such
Change in Control he or she is unable effectively to discharge the duties of the position he or she occupied just prior to the occurrence of such Change in Control. For purposes of Section 10 only, termination shall be for “just cause”
only if such termination is based on fraud, misappropriation or embezzlement on the part of the employee that 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. 
  
 (c) Any Right or
portion thereof may be exercised for cash within the 60-calendar-day period following the occurrence of a Change in Control with settlement, except in the case of a Right 
  

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 related to an Incentive Stock Option, based on the “Formula Price” that 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 the definition of “Change in Control” in the Retirement Plan. 
  
 (d) Upon the occurrence of a Change in Control, 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 a Change in Control. 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 10 over the exercise 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 Change in Control and ending on the 60th calendar day following such date and only to the same extent the related Option is exercisable.
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. 
  
 (e) The restrictions applicable to Awards of Restricted Stock issued pursuant to Section 7 shall lapse upon
the occurrence of a Change in Control and the Company shall issue stock certificates without a restrictive legend. Key Employees holding Restricted Stock on the date of a Change in Control may tender such Restricted Stock to the Company that shall
pay the Formula Price as that term is defined in Section 10; provided, such Restricted Stock must be tendered to the Company within 60 calendar days of the Change in Control. 
  
 (f) If a Change in Control 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 10. 
  
 11. Beneficiary 
  
 The Beneficiary of a Key Employee shall be the Key Employee’s estate, which shall be entitled to receive the Award, if
any, payable under the Plan upon his or her death. A Key Employee may file with the Company a written designation of one or more persons as a Beneficiary in lieu of his or her estate, who shall be entitled to receive the Award, if any, payable under
the Plan upon his or her death, subject to the enforceability of the designation under applicable law at that time. A Key Employee may from time-to-time revoke or change his or her Beneficiary designation, with or without the consent of any prior
Beneficiary as required by applicable law, by filing a new designation with the Company. Subject to the foregoing, 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. 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 therefore. 
  

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 12. Administration of the Plan 
  
 (a) Each member of the Committee shall be both a member of the Board, a “non-employee director” within the meaning
of Rule 16b-3(b)(3)(i) under the Act or successor rule or regulation and an “outside director “ within the meaning of Section 162(m) of the Code. 
  
 (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; provided, however, that the Committee
may not delegate its responsibility (i) to make Awards to executive officers of the Company; (ii) to make Awards that are intended to constitute “qualified performance-based compensation” under Section 162(m) of the Code; or (iii) to
certify the satisfaction of Performance Objectives pursuant to Sections 6(d) or 9(e) in accordance with Section 162(m) of the Code. The Committee may also appoint agents to assist in the day-to-day administration of the Plan and may delegate the
authority to execute documents under the Plan to one or more members of the Committee or to one or more officers of the Company. 
  
 (f) If a Change in Control 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. 
  
 13. 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 14 increase the maximum number of shares of Stock that are available for Awards under the Plan, or (c) except for adjustments pursuant to Section 14 or as otherwise provided for in the Plan, decrease the
Option price for any outstanding Option after the date the Option is granted or accept the surrender of any outstanding Option as consideration for the grant of a new Option with a lower price than the Option being surrendered. If a Change in
Control has occurred, no amendment or termination shall impair the rights of any person with respect to a prior Award. 
  
 14. 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. With respect to Awards intended to 
  

 15 








 qualify as “performance-based compensation” under Section 162(m) of the Code, such adjustments shall be made
only to the extent that the Committee determines that such adjustments may be made without a loss of deductibility for such Awards under Section 162(m) of the Code. 
  
 15. Forfeiture of Gains on Exercise. Except following a Change in Control, if the Key Employee terminates employment in breach of any
covenants and conditions subsequent set forth in Section 16 and becomes employed by a competitor of the Company within one year after the date of exercise of any Option or the receipt of any Award, the Key Employee shall pay to the Company an amount
equal to any gain from the exercise of the Option or the value of the Award other than Options, in each case measured by the amount reported as taxable compensation to the Key Employee by the Company for federal income tax purposes and in the case
of Options that are incentive stock options, in an amount equal to the amount that would have been reported as taxable income were such Options not incentive stock options, and in each case without regard to any subsequent fluctuation in the market
price of the shares of common stock of the Company. Any such amount due hereunder shall be paid by the Key Employee within thirty days of becoming employed by a competitor. By accepting an Option or other Award hereunder, the Key Employee is
authorizing the Company to withhold, to the extent permitted by law, the amount owed to the Company hereunder from any amounts that the Company may owe to the Key Employee in any capacity whatsoever. 
  
 16. Conditions Subsequent. Except after a Change in Control, the exercise of any
Option or Right and the receipt of any Award shall be subject to the satisfaction of the following conditions subsequent: (i) that Key Employee refrain from engaging in any activity that in the opinion of the Committee is competitive with any
activity of the Company or any Subsidiary, excluding any activity undertaken upon the written approval or request of the Company, (ii) that Key Employee refrain from otherwise acting in a manner inimical or in any way contrary to the best interests
of the Company, and (iii) that the Key Employee furnish the Company such information with respect to the satisfaction of the foregoing conditions subsequent as the Committee shall reasonably request. In addition, except as may otherwise be excused
by action of the Committee, the Key Employee by the exercise of the Option or the receipt of the Award agrees to remain in the employ of the Company, unless earlier terminated by the Company or by the Key Employee by reason of his or her death,
disability or retirement. 
  
 17. Miscellaneous 
  
 (a) Except as provided in Section 10, 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. 
  
 (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. 
  

 16 








 (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. 
  
 (f) To the extent Awards issued under the Plan are intended to be exempt from the application of Section 162(m) of the Code, which restricts under certain circumstances the Federal income tax deduction for compensation paid by a public
company to named executives in excess of $1 million per year, the Committee may, without stockholder approval, amend the Plan retroactively or prospectively to the extent it determines necessary in order to comply with any subsequent clarification
of Section 162(m) of the Code required to preserve the Company’s Federal income tax deduction for compensation paid pursuant to the Plan. 
  
 18. Effective Date, Term of Plan and Shareholder Approval 
  
 The effective date of the Plan is January 1, 2004. The Plan will continue in effect for existing Awards as long as any such Award is outstanding. Unless the Company
determines otherwise, Section 6 and 9 of the Plan and the definition of “Performance Goal” shall be submitted to the Company’s stockholders at the first stockholder meeting that occurs in the fifth year following the year in which the
Plan was last approved by stockholders (or any earlier meeting designated by the Board), in accordance with the requirements of Section 162(m) of the Code. 
  
 FEDERAL INCOME TAX TREATMENT 
  
 The following is a brief summary of the current Federal income tax rules generally applicable to options, stock appreciation rights, performance shares
and restricted stock. Recipients of Awards and Substitute Stock Options should consult their own tax advisors as to the specific Federal, state and local tax consequences applicable to them. 
  
 A. Options and Stock Appreciation Rights 
  
 Options granted under the Plan may be either non-qualified options or
“incentive stock options” qualifying under Section 422 of the Internal Revenue Code. The Substitute Stock Options are non-qualified options. 
  
 Non-qualified Options 
  
 An optionee is not subject to Federal income tax upon grant of a non-qualified option. At the time of exercise, the optionee will realize compensation
income (subject to withholding) to the extent that the then fair market value of the stock exceeds the option price. The amount of such income will constitute an addition to the optionee’s tax basis in the optioned stock. Sale of the shares
will result in capital gain or loss (long-term or short-term depending on the optionee’s holding period). Rayonier is entitled to a Federal tax deduction at the same time and to the same extent that the optionee realizes compensation income.

  
 Incentive Stock Options (“ISOs”) 
  
 Options under the Plan denominated as ISOs are intended to constitute
incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended. An optionee is not subject to Federal income tax upon either the grant or exercise of an ISO. If the optionee holds the shares acquired upon exercise for at
least one year after issuance of the optioned shares and until at least two years after grant of the option, then the difference between the amount realized on a subsequent sale or other taxable disposition of the shares and the option price will
constitute long-term capital gain or loss. To obtain favorable tax treatment, an ISO must be exercised within three months after termination of employment (other than by retirement, disability, or 
  

 17 








 death) with Rayonier or subsidiary. To obtain favorable tax treatment, an ISO must be exercised within three months of
retirement or within one year of cessation of employment for disability (with no limitation in the case of death), notwithstanding any longer exercise period permitted under the terms of the Plan. Rayonier will not be entitled to a Federal tax
deduction with respect to the grant or exercise of the ISO. 
  
 If
the optionee disposes of the shares acquired under an ISO before the requisite holding period, he or she will be deemed to have made a “disqualifying disposition” of the shares and will realize compensation income in the year of
disposition equal to the lesser of the fair market value of the shares at exercise or the amount realized on their disposition over the option price of the shares. (However, if the disposition is by gift or by sale to a related party, the
compensation income must be measured by the value of the shares at exercise over the option price.) Any gain recognized upon a disqualifying disposition in excess of the ordinary income portion will constitute either short-term or long-term capital
gain. In the event of a disqualifying disposition, Rayonier will be entitled to a Federal tax deduction in the amount of the compensation income realized by the optionee. 
  
 The option spread on the exercise of an ISO is an adjustment in computing alternative minimum taxable income. No adjustment
is required, however, if the optionee made a disqualifying disposition of the shares in the same year as he or she is taxed on the exercise. 
  
 Stock Appreciation Rights (“SARs”) 
  
 SARs may be awarded to officers and directors of Rayonier subject to Section 16(b) of the Securities Exchange Act of 1934 with respect to both incentive
stock options and non-qualified options granted under the Plan. An optionee is not taxed upon the grant of SARs. An optionee exercising SARs for cash will realize compensation income (subject to withholding) in the amount of the cash received.
Rayonier is entitled to a tax deduction at the same time and to the same extent that the optionee realizes compensation income. 
  
 B. Performance Shares 
  
 A recipient of performance shares generally will realize compensation income (subject to withholding) when and to the extent that payment is made, whether
in the form of cash or shares of Rayonier Common Shares. To the extent that payment is made in the form of stock, income shall be measured by the then fair market value of the shares, which shall constitute an addition to the recipient’s tax
basis in such shares. Rayonier will be entitled to a Federal tax deduction for the value of payment at the time of payment. 
  
 C. Restricted Stock 
  
 A recipient of restricted stock generally will realize compensation income (subject to withholding) when and to the extent that the restrictions on the
shares lapse, as measured by the value of the shares at the time of lapse. The recipient’s holding period for the shares will not commence until the date of lapse, and dividends paid during the restriction period will be treated as
compensation. The income realized on lapse of the restrictions will constitute an addition to the recipient’s tax basis in the shares. 
  
 In lieu of deferred recognition of income, the recipient may file an election with the Internal Revenue Service, within 30 days of award, to realize
compensation income at the time of award, as measured by the fair market value of the stock on the date of award determined without regard to the restrictions. The income realized will constitute an addition to the tax basis of the shares. In the
case of such election, any appreciation 
  

 18 








 (or depreciation) on the shares during the restriction period will give rise to capital gain (or capital loss). In the
event that the recipient terminates employment during the restriction period and forfeits his or her shares, no deduction may be claimed and the taxes paid on award of the shares shall be forfeited. 
  
 Rayonier will be entitled to a Federal tax deduction at the same time and to
the same extent that the recipient realizes compensation income. 
  

 19