INCENTIVE STOCK PLANS

The Rayonier Advanced Materials Incentive Stock Plan (“the Stock Plan”) provides for up to 5.2 million shares of stock to be granted for incentive stock options, non-qualified stock options, stock appreciation rights, performance shares, restricted stock and restricted stock units, subject to certain limitations. At September 27, 2014, approximately 4.0 million shares were available for future grants under the Stock Plan.

In connection with the separation from Rayonier, incentive stock options, performance shares and restricted stock awards issued to employees and directors under the Rayonier Incentive Stock Plan prior to the Distribution were adjusted or converted, as applicable, into new awards using formulas generally designed to preserve the value of the awards immediately prior to the Distribution.

The Employee Matters Agreement between Rayonier and the Company, which was executed in connection with the Distribution and filed with the Form 10, describes how the Rayonier stock awards will be treated. In summary:

Stock Options: Rayonier stock options were converted into both an adjusted Rayonier stock option and a Company stock option, with adjustments made to the exercise prices and number of shares in order to preserve the aggregate intrinsic value of the original award as measured immediately before and immediately after the Distribution.

Restricted Stock: Holders of Rayonier restricted stock, including Rayonier non-employee directors, retained those awards and also received one share of Company restricted stock for every three shares of Rayonier restricted stock held prior to spin-off.

Performance Share Awards

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Performance-based stock unit awards granted in 2012 (with a 2012-2014 performance period) will continue to be subject to the same performance criteria as applied immediately prior to the separation, except that total shareholder return at the end of the performance period will be based on the combined stock prices of Rayonier and the Company and any payment with respect to a Rayonier Advanced Materials performance share award will be made in shares of the Company’s common stock. The number of shares, if any, that are ultimately awarded is contingent upon the Company’s total shareholder return versus selected peer group companies. The conversion ratio for the 2012 performance share awards is between 0 and 200 percent of target. The payout is based on a market condition and as such, the awards are valued using a Monte Carlo simulation model. The model generates the fair value of the award at the grant date, which is then amortized over the vesting period. The Company has reserved 83,454 shares of common stock for these awards as of September 27, 2014.


•	Performance-based stock unit awards granted in 2013 (with a 2013-2015 performance period) were canceled as of the distribution date and replaced with restricted stock awards of the Company that will vest 24 months after the distribution date, generally subject to the holder’s continued employment.

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Performance-based stock unit awards granted in 2014 (with a 2014-2016 performance period) were canceled and replaced with performance-based restricted stock of the Company and will be subject to the achievement of performance criteria that relate to the post-separation business during a performance period ending December 31, 2016. The number of shares, if any, that are ultimately awarded is contingent upon the Company’s total shareholder return versus selected peer group companies. The conversion ratio for the 2014 performance share awards is between 0 and 200 percent of target. The payout is based on a market condition and as such, the awards are valued using a Monte Carlo simulation model. The model generates the fair value of the award at the grant date, which is then amortized over the vesting period. The Company has reserved 313,423 shares of common stock for these awards as of September 27, 2014.

The adjusted awards resulted in incremental compensation expense of $2.3 million that will be recognized over a two year period following the Distribution.

The Company’s total stock based compensation cost, including allocated amounts, for the nine months ended September 27, 2014 and September 30, 2013 was $5.6 million and $4.8 million, respectively. These amounts may not reflect the cost of current or future equity awards nor results we would have experienced, or expect to experience, as an independent, publicly traded company.

Outstanding Awards



	Stock Options				Restricted Stock				Performance-Based Stock Units			Performance-Based Restricted Stock
	Options		Weighted Average Exercise Price		Awards		Weighted Average Grant Date Fair Value		Awards	Weighted Average Grant Date Fair Value		Awards	Weighted Average Grant Date Fair Value
Outstanding at January 1, 2014	—		$	—	—		$	—	—	$	—	—	$	—
Awards granted in connection with spin-off	500,681		31.15		145,201		42.43		49,811	42.27		146,732	39.67
Granted	5,130		39.07		15,083		40.86		—	—		9,980	46.38
Forfeited	(228	)	39.03		—		—		—	—		—	—
Exercised or settled	(24,689	)	22.21		(1,875	)	33.82		—	—		—	—
Expired or canceled	(57	)	42.12		—		—		—	—		—	—
Outstanding at September 27, 2014	480,837		$	31.69	158,409		$	42.38	49,811	$	42.27	156,712	$	40.10

All option, restricted stock and performance share awards presented in this table are for Rayonier Advanced Materials stock only, including those awards held by Rayonier Inc. employees.

As of September 27, 2014, unrecognized compensation cost related to stock option awards was $2.5 million, which is expected to be recognized over a weighted average period of 0.9 years. Unrecognized compensation cost related to restricted stock awards was $6.3 million, which is expected to be recognized over a weighted average period of 1.8 years. Unrecognized compensation cost related to performance-based stock units and performance-based restricted stock awards was $6.3 million, which is expected to be recognized over a weighted average period of 2.6 years.

The Company issued a $4.0 million fixed award at the separation from Rayonier to be settled in the Company’s common stock. The award will vest on August 31, 2018 contingent on certain factors. The number of shares issued will be determined based on an average of the stock’s closing price prior to vesting.