SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or
(S)240.14a-12
MAXXAM Inc.
---------------------------------------------------
(Name of Registrant as Specified In Its Charter)
MAXXAM Inc.
---------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:*
4) Proposed maximum aggregate value of transaction:
* Set forth the amount on which the filing is calculated
and state how it was determined.
[X] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount previously paid: $125
2) Form, Schedule or Registration No.: 1-03924
3) Filing Party: MAXXAM Inc.
4) Date Filed: April 8, 1994
Notes:
<PAGE>
[MAXXAM Inc. logo]
April 29, 1994
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of
Stockholders (the "Annual Meeting") of MAXXAM Inc. to be held at 10:00
a.m. on Wednesday, May 25, 1994, at the Westchase Hilton Hotel, 9999
Westheimer Road, Houston, Texas.
Although you may presently plan to attend the Annual Meeting, we
urge you to indicate your approval in the spaces provided on the enclosed
proxy card by voting "FOR" the election of the directors named in the
attached proxy statement and "FOR" the proposals to approve the MAXXAM
1994 Omnibus Employee Incentive Plan, the MAXXAM 1994 Non Employee
Director Plan and the MAXXAM 1994 Executive Bonus Plan described herein.
Please then date, sign and promptly return the proxy card in the enclosed
envelope. If you are a stockholder of record and attend the Annual
Meeting, as we hope you will, you may vote in person even if you have
previously mailed a proxy card.
We look forward to seeing as many of you as possible at the Annual
Meeting.
CHARLES E. HURWITZ
Chairman of the Board,
Chief Executive Officer
and President
<PAGE>
MAXXAM INC.
5847 San Felipe, Suite 2600
Houston, Texas 77057
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 25, 1994
The Annual Meeting of Stockholders (the "Annual Meeting") of
MAXXAM Inc. (the "Company") will be held at the Westchase Hilton Hotel,
9999 Westheimer Road, Houston, Texas, on Wednesday, May 25, 1994, at
10:00 a.m., local time, for the following purposes:
1. To elect two (2) directors to serve on the
Board of Directors of the Company, one of
which will be elected by the holders of
Common Stock, voting separately as a class,
and will hold office until the 1995 Annual
Meeting of Stockholders or until his
successor is elected and qualified, and one
of which will be elected by the holders of
Common Stock and Class A $.05
Non-Cumulative Participating Convertible
Preferred Stock, voting together as a
single class, and will hold office until
the 1997 Annual Meeting of Stockholders or
until his successor is elected and
qualified; and
2. To consider and vote upon a proposal to
approve the MAXXAM 1994 Omnibus Employee
Incentive Plan;
3. To consider and vote upon a proposal to
approve the MAXXAM 1994 Non Employee
Director Plan;
4. To consider and vote upon a proposal to
approve the MAXXAM 1994 Executive Bonus
Plan; and
5. To transact such other business as may
properly be presented to the Annual Meeting
or any adjournments thereof.
Stockholders of record as of the close of business on March 31,
1994 are entitled to notice of and to vote at the Annual Meeting. A list
of stockholders will be available commencing May 11, 1994, and may be
inspected for purposes germane to the Annual Meeting during normal
business hours prior to the Annual Meeting at the offices of the Company,
5847 San Felipe, Suite 2600, Houston, Texas.
By Order of the Board of Directors
BYRON L. WADE
Secretary
April 29, 1994
IMPORTANT
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE PROVIDED FOR YOUR CONVENIENCE AND WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THE PROMPT RETURN OF
PROXIES WILL ENSURE A QUORUM AND SAVE THE COMPANY THE EXPENSE OF FURTHER
SOLICITATION. ANY STOCKHOLDER PRESENT AT THE MEETING MAY VOTE PERSONALLY
ON ALL MATTERS BROUGHT BEFORE THE MEETING AND, IN THAT EVENT, HIS OR HER
PROXY WILL NOT BE USED.
<PAGE> 1
MAXXAM INC.
5847 San Felipe, Suite 2600
Houston, Texas 77057
PROXY STATEMENT
for
ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 25, 1994
This proxy statement is furnished to stockholders in connection
with the solicitation by the Board of Directors of MAXXAM Inc. (the
"Company"), a Delaware corporation, of proxies for use at the Annual
Meeting of Stockholders (the "Annual Meeting") to be held on Wednesday,
May 25, 1994, and any adjournments thereof, at the time and place and for
the purposes set forth in the accompanying notice. This proxy statement,
the proxy and the Company's 1993 Annual Report to Stockholders included
herewith are being mailed to stockholders of record as of the close of
business on March 31, 1994 (the "Record Date"), commencing on or about
May 2, 1994. The Company's 1993 Annual Report is not a part of this
proxy statement nor of the proxy solicitation materials.
We cordially invite you to attend the Annual Meeting. Whether
or not you plan to attend, please complete, date, sign and promptly
return your proxy in the enclosed envelope. You may revoke your proxy at
any time prior to its exercise at the Annual Meeting by notice to the
Company's Secretary, by filing a later dated proxy or, if you attend the
Annual Meeting, by voting your shares of stock in person. Proxies will
be voted in accordance with the directions specified thereon or, in the
absence of instructions, FOR the election of the nominees named herein to
the Board of Directors and "FOR" the proposals to approve the MAXXAM 1994
Omnibus Employee Incentive Plan, the MAXXAM 1994 Non Employee Director
Plan and the MAXXAM 1994 Executive Bonus Plan (collectively, the
"Plans"), as described herein.
Only holders of record of the 8,698,464 shares of Common Stock
(the "Common Stock") and the 678,239 shares of Class A $.05
Non-Cumulative Participating Convertible Preferred Stock ("Class A
Preferred Stock") of the Company outstanding as of the Record Date are
entitled to vote at the Annual Meeting. Each share of Common Stock is
entitled to one vote and each share of Class A Preferred Stock is
entitled to ten votes on each matter to be voted upon, except that the
holders of Common Stock, voting separately as a class, will be entitled
to elect one member of the Company's Board of Directors. A plurality of
the votes present, in person or by proxy, is necessary for the election
of directors. Under applicable Delaware law, abstentions and broker non-
votes will have no effect on the outcome of election of directors.
Abstentions and broker non-votes are counted for purposes of determining
the presence or absence of a quorum for the transaction of business. For
purposes of determining whether the proposals to approve the Plans
receive an affirmative vote of the holders of a majority of the votes
entitled to be cast, abstentions will be included in the number of shares
present and entitled to vote and treated as "no" votes. Broker non-votes
will be excluded from the number of shares present and entitled to vote
thereon, however, broker non-votes will also be treated as "no" votes.
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation currently
provides for three classes of directors having staggered terms of office,
with directors of each class to be elected by the holders of the
Company's Common Stock and Class A Preferred Stock, voting together as a
single class, for terms of three years and until their respective
successors have been duly elected and qualified. The Company's Restated
Certificate of Incorporation also provides that so long as any shares of
the Class A Preferred Stock are outstanding, the
<PAGE> 2
holders of Common Stock,
voting as a class separately from the holders of any other class or
series of stock, shall be entitled to elect, for terms of one year, at
each annual meeting, the greater of (i) two directors, or (ii) that
number of directors which constitutes 25% of the total number of
directors (rounded up to the nearest whole number) to be in office
subsequent to such annual meeting.
Both persons nominated for election to the Board of Directors
at the Annual Meeting are currently members of the Board of Directors.
One of the nominees, Stanley D. Rosenberg, has been nominated for
election by the holders of Common Stock, voting separately as a class, to
hold office until the 1995 Annual Meeting of the Stockholders or until
his successor shall have been duly elected and qualified. The second
nominee, Ezra G. Levin, has been nominated for election by the holders of
Common Stock and Class A Preferred Stock, voting together as a single
class, to hold office until the 1997 Annual Meeting of Stockholders or
until his successor shall have been duly elected and qualified. See,
"Executive Officers and Directors" and "Principal Stockholders" for
information concerning each of the nominees and other directors,
including the dates on which they first became directors, their business
experience during the past five years and the number of shares of the
Company's Common Stock and Class A Preferred Stock owned beneficially by
each of them as of March 15, 1994. Each of the nominees has consented to
serve as a member of the Board of Directors if elected.
The persons named in the proxies will vote the shares
represented thereby for the election of the foregoing named nominees
except where authority has been withheld as to a particular nominee or as
to all such nominees. Should any nominee decline or be unable to serve
as a director of the Company, which is not anticipated, the persons named
in the proxies will vote for the election in his stead of such other
person as the Board of Directors may recommend.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF
ALL NOMINEES FOR DIRECTOR OF THE COMPANY.
<PAGE> 3
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of the Company (sometimes referred to
herein as the "Board") held five meetings and acted by written consent on
20 occasions during 1993. In addition, management confers frequently
with its directors on an informal basis to discuss Company affairs.
During 1993, no director attended fewer than 75% of the aggregate of the
meetings of the Board and all Committees on which he served, except for
Mr. Connally, who due to illness, attended 50% of such meetings.
The Board of Directors of the Company has the following
standing committees: Executive, Audit, Compensation, and Conflicts and
Compliance Committees. The Board of Directors of the Company does not
have a standing nominating committee nor does it have any committee
performing a similar function.
The Executive Committee meets on call and has authority to act
on most matters during the intervals between meetings of the entire Board
of Directors. Its current members are Messrs. Hurwitz (Chairman) and
Levin. The Executive Committee held no meetings during 1993.
The Audit Committee presently consists of Messrs. Levin
(Chairman) and Rosenberg. The Audit Committee meets with appropriate
Company financial and legal personnel, internal auditors and independent
public accountants and reviews the internal controls of the Company and
the objectivity of its financial reporting. This Committee recommends to
the Board the appointment of the independent public accountants to serve
as auditors in examining the corporate accounts of the Company. The
independent public accountants periodically meet privately with the Audit
Committee and have access to the Audit Committee at any time. The Audit
Committee met on two occasions during 1993.
The Compensation Committee reviews and advises management,
makes recommendations to the Board of Directors, and reviews and approves
proposals regarding the establishment or change of benefit plans,
salaries or other compensation afforded the executive officers and other
employees of the Company. Messrs. Cruikshank, Levin (Chairman) and
Rosenberg currently serve as members of this Committee. The Compensation
Committee met on three occasions during 1993.
The Conflicts and Compliance Committee has the authority to
interpret, administer and enforce the guidelines set forth in the
Company's Code of Business Conduct. In addition, it has the power to
make new rules and guidelines relating to the administration or violation
of such Code. The Conflicts and Compliance Committee reports its
activities to the Board of Directors on a regular basis. This Committee
currently consists of Messrs. Cruikshank, Levin and Rosenberg (Chairman)
and met on five occasions during 1993.
Director Compensation
Directors who were not employees of or consultants to the
Company received a retainer of $30,000 for the 1993 calendar year and no
additional compensation for attending Committee meetings. Directors were
reimbursed for travel and other disbursements relating to Board and
Committee meetings. Fees to directors who were also employees of or
consultants to the Company were deemed to be included in their salary or
consulting fees. Non-employee directors of the Company who also serve as
directors of the Company's majority-owned subsidiaries, Kaiser Aluminum
Corporation ("Kaiser") and/or Kaiser Aluminum & Chemical Corporation
("KACC"), may also receive additional director or committee fees and be
reimbursed for expenses pertaining to their services in such capacities.
During 1993, Mr. Levin received an aggregate $7,250 in such committee
fees from Kaiser and KACC.
<PAGE> 4
In November 1988, MAXXAM Group Inc. ("MGI"), a wholly owned
subsidiary of the Company, entered into a one-year consulting agreement
with one of the Company's former directors, John B. Connally, under which
Mr. Connally received $250,000. The agreement was subsequently renewed
each year on the same terms and was effective until June 1993.
<PAGE> 5
PROPOSAL TO APPROVE
THE MAXXAM 1994 OMNIBUS EMPLOYEE
INCENTIVE PLAN AND
THE MAXXAM 1994 NON EMPLOYEE
DIRECTOR PLAN
On March 30, 1994, the Compensation Committee (the "Committee")
recommended to the Board the adoption of the MAXXAM 1994 Omnibus Employee
Incentive Plan (the "Omnibus Plan") and the MAXXAM 1994 Non Employee
Director Plan (the "Director Plan") (collectively, the "New Plans"). As
of March 30, 1994, the Board adopted the New Plans, and is hereby
submitting the New Plans for approval by the stockholders of the Company.
COPIES OF THE NEW PLANS AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION MAY BE OBTAINED WITHOUT CHARGE BY WRITING TO THE COMPANY AT
5847 SAN FELIPE, SUITE 2600, P.O. BOX 572887, HOUSTON, TEXAS 77257-2887,
ATTENTION: BYRON L. WADE, OR CALLING (713) 267-3670. The following
descriptions of the New Plans are qualified in their entirety by
reference to the full text of the New Plans.
The purpose of the New Plans is to benefit the Company, its
subsidiaries and stockholders by encouraging and providing for the
acquisition of an equity interest in the Company by its middle and
executive management and non employee directors, and to advance the
interests of the Company by increasing such individuals proprietary
interest in the success of the Company and its subsidiaries. The Board
also believes that the New Plans will advance the interests of the
Company and its stockholders by enabling the Company to attract and
retain the services of key employees and non-employee directors upon
whose judgment, interest and special effort the successful conduct of its
operations is largely dependent. A similar employee incentive plan was
adopted during 1993 for eligible employees of Kaiser and its
subsidiaries. There are three non employee directors eligible to
participate in the Director Plan, and there are approximately 30
employees eligible to participate in the Omnibus Plan.
The Omnibus Plan
General Provisions
The Omnibus Plan will be administered by the Committee or a
designated subcommittee thereof. (For simplicity, the Committee or any
designated subcommittee thereof shall be hereafter referred to
interchangeably as the "Committee"). It is the intention of the Board
that the Omnibus Plan be formulated, adopted and administered in a manner
which will allow for transactions under it to be exempt employee benefit
transactions under Rule 16b-3 in effect from time to time under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
Accordingly, no person shall serve on the Committee who has received any
grant or award under the Omnibus Plan within one year prior to his/her
appointment nor shall any person receive a grant or award under the
Omnibus Plan while a member of the Committee. Further, the Committee
must be comprised solely of at least two "outside directors" as such term
is defined or interpreted for purposes of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). The Committee will select
participants for awards in its sole discretion, including but not limited
to those employees of the Company recommended by the Chief Executive
Officer of the Company.
The Committee will have discretion to make awards under the
Omnibus Plan. In making awards, the Committee will have flexibility in
choosing from a variety of stock-based incentive alternatives and in
setting the vesting schedules of any such award. The Omnibus Plan allows
for the grant of incentive stock options ("ISOs"), nonstatutory stock
options, stock appreciation rights ("SARs"), performance units,
performance shares, restricted stock and unrestricted stock; however, it
is not contemplated that any participant will receive awards from all
categories available under the Omnibus Plan. Up to 1,000,000 shares of
Common Stock and 1,000,000 shares of preferred stock of the Company
(collectively, the "Capital Stock") will be
<PAGE> 6
reserved for awards or for payment of rights granted under the Omnibus
Plan (subject to adjustment in the event of certain changes in the
capitalization of the Company). Payments under the Omnibus Plan for
other than direct awards of stock may be made in cash, in stock or partly
in each, at the discretion of the Committee. If any award terminates or
lapses prior to the expiration or earlier termination of the Omnibus
Plan, the shares of Capital Stock subject to the award will be available
again for award under the Omnibus Plan (except in the case of a stock
option as to which a related SAR has been exercised).
The maximum number of shares of each class of Capital Stock for
which awards may be granted under the Omnibus Plan to any one participant
during any three-year period is 300,000, subject to certain adjustments
in capitalization.
The Omnibus Plan will become effective upon stockholder
approval and will expire on December 31, 2003. Awards made under the
Omnibus Plan prior to its termination shall remain in effect until they
shall have been exercised, satisfied or terminated as set forth in the
Omnibus Plan. The Board of Directors may suspend or terminate the
Omnibus Plan at any time prior to its scheduled expiration subject to
stockholder approval. However, no plan amendment may adversely impact a
previously granted award made under the Omnibus Plan without consent of
the grantee.
To the extent necessary to comply with Rule 16b-3 under the
Exchange Act and Section 422 of the Code, ISOs outstanding under the
Omnibus Plan may not be transferred except by will or the laws of descent
and distribution. Stock obtained under the Omnibus Plan may be subject
to restrictions and recipients will be subject to reporting and
disposition restrictions under Section 16 of the Exchange Act and related
insider trading laws.
Stock Options
The Committee may grant options to purchase shares of Capital
Stock. Such options may be nonstatutory or nonqualified stock options
and ISOs pursuant to Section 422 of the Code.
The option price for any option may not be less than the par
value of Capital Stock, and ISOs granted under the Omnibus Plan may not
utilize an exercise price which is less than the fair market value of
Capital Stock on the date of the grant. The option price may be paid in
cash, in previously acquired Capital Stock held for at least six (6)
months and with a fair market value on the date of exercise equal to the
option price, or by combination of cash and Capital Stock. The Committee
may also approve other forms of payment.
Stock Appreciation Rights
The Committee may grant SARs in conjunction with, or apart
from, stock options. An SAR entitles the grantee to receive a payment
from the Company equal to the excess of the fair market value of a share
of Common Stock at the date of exercise over a specified price fixed by
the Committee. The Committee may establish a maximum appreciation value
when granting SARs. Payment upon exercise of SARs may be made in cash,
Capital Stock, or a combination thereof, at the discretion of the
Committee.
Restricted Stock
The Committee may grant shares of restricted Capital Stock
under the Omnibus Plan. The Committee may make the vesting of restricted
stock subject to various conditions including the participant remaining
employed by the Company for a number of years. Participants holding
shares of restricted stock may exercise full voting rights with respect
to those shares but shall not be entitled to receive dividends and other
distributions paid, if any, with respect to those shares during the
period of restriction. A holder of restricted
<PAGE> 7
stock may not sell or otherwise transfer the Capital Stock until the
restrictions have lapsed or have been removed.
Performance Units and Performance Shares
The Committee may grant performance units and performance
shares under the Omnibus Plan. In such event, the Committee will
establish a performance period over which corporate, business unit or
individual performance goals set by the Committee will be measured. At
the end of the performance period, the performance units or performance
shares will be paid out at their initial established values, increased or
decreased, as the case may be, based upon performance above or below
target levels. Payment may be made in cash, Capital Stock, or a
combination thereof as determined by the Committee. Payment may be made
in a lump sum or in installments at the Committee's discretion. In the
event payment is deferred, interest or dividend equivalents may be paid
to participants.
Unrestricted Stock
Unrestricted shares of Capital Stock also may be awarded under
the Omnibus Plan, as well as upon the exercise of stock options, in
connection with distributions due on the exercise of SARs or as payment
on performance units or performance shares.
Certain Tax Consequences
The following summary is a general discussion of certain
Federal income tax consequences expected to result to the Company and
participants of the Omnibus Plan in connection with certain awards
granted under the Omnibus Plan. This discussion is based upon provisions
of the Code, the regulations, administrative rulings and judicial
decisions in effect at the date of this proxy statement, all of which are
subject to change (possibly with retroactive effect) or different
interpretations.
<PAGE> 8
The grant of a nonstatutory stock option creates no taxable
income to a participant. Upon exercise of a nonstatutory stock option, a
participant will generally recognize ordinary income to the extent that
the fair market value of the stock on the date of exercise exceeds the
option price. When the stock is eventually sold, a participant
recognizes capital gain or loss to the extent that the sale price differs
from the fair market value of the stock on the date of exercise. To the
extent that a participant recognizes ordinary income, the Company will
generally receive a corresponding tax deduction.
The grant and the exercise of an ISO generally creates no
regular taxable income to a participant. When the stock is eventually
sold, a participant recognizes capital gain to the extent that the sale
price exceeds the option price, provided the participant has held the
stock for at least two years from the date of the grant of the stock
option and at least one year from the date of its exercise. If the
holding period requirements are not met, a participant recognizes
ordinary income in an amount equal to the lesser of (i) the fair market
value of the stock on the date of exercise over the option price, or (ii)
the amount realized on disposition over the option price. Any excess of
the sale price over the fair market value of the stock on the date of
exercise is taxed as capital gain to the participant. The Company
generally receives a corresponding tax deduction to the extent that the
gain recognized by the participant is treated as ordinary income. The
excess of the fair market value of the stock on the date of exercise over
the option price is included in alternative minimum taxable income,
possibly subjecting a participant to alternative minimum tax.
The grant of performance units or performance shares creates no
taxable income to the participant. Upon payment of such awards, the
amount of cash and/or the fair market value of stock received by the
participant will generally be recognized as taxable ordinary income and
the Company will generally receive a corresponding tax deduction.
The grant of SARs creates no taxable income to the participant.
Upon the exercise of SARs, the amount of cash and/or the fair market
value of stock received by the participant will generally be recognized
as taxable ordinary income and the Company will generally receive a
corresponding tax deduction.
Restricted stock is generally not taxable to a participant
until the restricted stock is no longer subject to restrictions or to a
substantial risk of forfeiture. A participant may elect under Section
83(b) of the Code, however, to have an amount equal to the difference
between the fair market value of the stock on the date of grant and the
participant's cost, if any, taxed as ordinary income at the time of the
grant, with any future appreciation taxed as capital gain. In the
absence of such an election, upon lapse of the restrictions or a
substantial risk of forfeiture, a participant recognizes ordinary income
to the extent that the fair market value of the stock on the date the
restrictions lapse exceeds the participant's cost, if any. Subsequent
appreciation in the value of the restricted stock is taxable as capital
gain to the participant when recognized. To the extent that a
participant recognizes ordinary income, the Company will generally
receive a corresponding tax deduction.
Unrestricted stock is generally taxable to a participant upon
receipt in an amount equal to the difference between the fair market
value of the stock on the date of grant and the participant's cost, if
any. Any such amount is taxed as ordinary income at the time of the
grant, with any future appreciation taxed as capital gain when
recognized. The Company generally receives a tax deduction in the amount
of ordinary income recognized by the participant.
Compensation Deduction Limitation
In the 1993 Omnibus Budget Reconciliation Act ("OBRA"),
Congress limited to $1 million per year the tax deduction available to
public companies for certain compensation paid to designated executive
officers effective January 1, 1994. OBRA provides an exception from this
limitation for certain "performance based" compensation, if various
requirements are satisfied. The Omnibus Plan is designed to give the
Committee flexibility to satisfy this exception for certain grants
thereunder whereby the compensation the employee could receive is based
solely on an increase in the value of the stock after the date of the
grant.
APPROVAL OF THE OMNIBUS PLAN REQUIRES THE AFFIRMATIVE VOTE OF
THE HOLDERS OF A MAJORITY OF THE COMPANY'S CAPITAL STOCK REPRESENTED AT
THE ANNUAL MEETING. THE BOARD OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS OF THE COMPANY VOTE "FOR" APPROVING THE OMNIBUS PLAN.
The Director Plan
General Provisions
The Director Plan is designed to be a nondiscretionary formula
plan and will be administered by the Board of Directors. Non-qualified
stock options to purchase 500 shares of Common Stock shall be granted to
each new non employee director the day following the annual meeting of
stockholders at which such director is first elected or appointed to the
Board as a director. Thereafter, each eligible non employee director
shall receive annual option grants the day following the annual meeting
of stockholders to purchase 300 shares of Common Stock. Assuming
stockholder approval of the Director Plan, initial options to purchase
500 shares of Common Stock shall be granted to each non-employee director
on the day following the 1994 Annual Meeting.
<PAGE> 9
Under the Director Plan, options are granted for a term of ten
years and become cumulatively exercisable as to 25 percent of the shares
of Common Stock on each of the first, second, third and fourth
anniversaries of the date of grant. No stock option can be exercised
earlier than six months from the date of grant. An option granted under
the Director Plan will terminate on the earlier of the date of expiration
or one year after the date of ceasing to serve as a director. Special
rules also apply if an optionee dies or if the optionee has ceased to
serve as a director on or after attaining the age of sixty five years.
Options granted under the Director Plan will not be transferable by the
optionee other than by will or under the laws of descent and distribution
and will be exercisable only by him or his legal guardian or
representative during his lifetime.
The exercise price per share of Common Stock for an option
granted under the Director Plan shall be the fair market value of a share
of Common Stock on the date such option is granted. Under the Director
Plan, the option price may be paid either in cash or by tendering Common
Stock having a value equal to the option price.
Under the Director Plan, the total amount of Common Stock with
respect to which options may be granted shall not exceed 35,000 shares.
Only non employee directors of the Company are eligible to participate in
the Director Plan, of which there are currently three. In the event an
option expires or is terminated or cancelled, the shares of Common Stock
allocable to the unexercised portion of such option may again be subject
to an option under the Director Plan.
Adjustments will be made under the Director Plan in the number
of shares of Common Stock which are issuable upon exercise of options and
in the price per share thereof to protect the holders of options against
dilution in the event of any subdivision or consolidation of Common Stock
or any other capital adjustment, the payment of a stock dividend, or
other increase or decrease in shares of Common Stock effected without
receipt of consideration by the Company. Adjustments will also be made
as necessary in the event of mergers, consolidations and sales of
substantially all the assets of the Company. In the event of a sale or
merger or consolidation in which the Company is not the surviving
corporation or if the Company sells substantially all of its assets and
is liquidated, however, the holder of an option under the Director Plan
shall have the right to exercise any non qualified option held for at
least six months in full during the period preceding the effective date
of such merger, consolidation or sale and liquidation.
The Board of Directors has the power to amend, terminate or
suspend the Director Plan; provided, however, that to the extent required
to qualify the plan under Rule 16b 3 of the Securities Exchange Act of
1934, as amended and as may be amended from time to time, the Board may
not materially increase the aggregate number of shares of Common Stock
which may be issued under the Director Plan, materially modify the
requirements as to eligibility for participation in the plan or
materially increase the benefits accruing to participants under the plan,
without stockholder approval, and provided further that the Board may not
amend the plan more than once every six months that would change the
amount, price or timing of the initial and annual grant other than to
comport with changes in applicable law.
Certain Tax Consequences
The Federal income tax consequences expected to result to the
Company and participants of the Director Plan are similar to those
discussed previously for the Omnibus Plan.
APPROVAL OF THE DIRECTOR PLAN REQUIRES THE AFFIRMATIVE VOTE OF
THE HOLDERS OF A MAJORITY OF THE COMPANY'S CAPITAL STOCK REPRESENTED AT
THE ANNUAL MEETING. THE BOARD OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS OF THE COMPANY VOTE "FOR" APPROVING THE DIRECTOR PLAN.
<PAGE> 10
New Plan Benefits Table
As of the date of this proxy statement, the following table
sets out the determinable number of shares of Common Stock that will be
issued or allocated to each of the named executive officers and the
following groups under the Omnibus Plan and the Director Plan:
<TABLE>
<CAPTION>
Omnibus Plan Director Plan
-------------------------- ---------------------------
Number of Number of
Name and Position Dollar Value ($) Shares Dollar Value ($) Shares
--------------------------------- ---------------- --------- ---------------- ---------
<S> <C> <C> <C> <C>
Charles E. Hurwitz,
Chairman of the Board, Chief
Executive Officer, President
and Director . . . . . . . . $ -- --(1) $ -0- -0-
Anthony R. Pierno,
Senior Vice President and
General Counsel . . . . . . . -0- -0- -0- -0-
John T. La Duc,
Senior Vice President and
Chief
Financial Officer . . . . . . -0- -0- -0- -0-
Paul N. Schwartz,
Senior Vice President,
Corporate Development . . . . -0- -0- -0- -0-
Executive Group . . . . . . . . . $ -- --(1) -0- -0-
Non-Executive Director Group . . -0- -0- $ --(2) 1,500
Non-Executive Officer Employee
Group . . . . . . . . . . . . . . -0- -0- -0- -0-
<FN>
---------------
(1) See text following table under "Executive Compensation--Option/SAR Grants
Table" regarding a possible future grant.
(2) The actual value grantees may realize, if any, will be the market price per share of Common Stock on the date of exercise
less the exercise price, which is or will be the closing price on the date of grant as reported on the American Stock
Exchange. The closing price per share of the Common Stock on April 6, 1994, as reported in The Wall Street Journal was
$36.00.
</TABLE>
PROPOSAL TO APPROVE THE MAXXAM 1994 EXECUTIVE BONUS PLAN
The MAXXAM 1994 Executive Bonus Plan (the "Executive Plan") was
also recommended by the Committee, and adopted by the Board subject to
stockholder approval, on March 30, 1994, and is hereby submitted to the
stockholders of the Company for approval.
The purpose of the Executive Plan will be to provide
performance incentives to participants while securing, to the extent
practicable, a tax deduction by the Company for payments of additional
incentive compensation to each participant. Participants in the
Executive Plan will be those officers whose base salary is equal to or in
excess of $600,000. The Executive Plan will be administered by the
Compensation Committee or a designated subcommittee thereof, again,
comprised solely of at least two "outside directors" as such term is
defined or interpreted for purposes of Section 162(m) of the Code. Upon
stockholder approval, the Executive Plan will become effective
retroactive to January 1, 1994.
Prior to the first day of each fiscal year (or during such
subsequent period as may be permitted under applicable regulations), the
Committee will set specific performance goals for each participant for
such year under each of the following business criteria: (a) improvement
in consolidated financial results, (b) the completion of specific
business development project(s), (c) the completion of one or more
transactions involving an acquisition or disposition of securities or
assets with a fair market value greater than $100 million, (d)
improvement in earnings per share, and (e) the achievement of a
predetermined level of net income or loss for the principal divisions of
the Company. Pursuant to transition rules in the proposed
<PAGE> 11
regulations under Section 162(m) of the Code, the specific goals for 1994
were set by the Committee prior to April 1, 1994.
For each specific performance goal, a predetermined bonus
amount can be earned by the participant upon achievement of such goal.
The Executive Plan will be a cash-only bonus plan under which bonuses
earned by each participant thereunder may not exceed an aggregate of
$3,000,000 per fiscal year. The Committee has absolute discretion to
reduce any bonus payments earned under the Executive Plan.
The Board of Directors may terminate, suspend or amend the
Plan, in whole or part, at any time, including the adoption of amendments
deemed necessary or advisable provided stockholder approval is obtained
if required by Section 162(m) of the Code.
APPROVAL OF THE EXECUTIVE PLAN REQUIRES THE AFFIRMATIVE VOTE OF
THE HOLDERS OF A MAJORITY OF THE COMPANY'S CAPITAL STOCK REPRESENTED AT
THE ANNUAL MEETING. THE BOARD OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS OF THE COMPANY VOTE "FOR" APPROVING THE EXECUTIVE PLAN.
<PAGE> 12
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information, as of the
record date, with respect to the executive officers and directors of the
Company. All officers and directors hold office until their respective
successors are elected and qualified or until their earlier resignation
or removal.
<TABLE>
<CAPTION>
NAME POSITIONS AND OFFICES WITH THE COMPANY
-------------------- ----------------------------------------
<S> <C>
Charles E. Hurwitz Chairman of the Board, Chief Executive
Officer, President and Director
John T. La Duc Senior Vice President and Chief Financial
Officer
Anthony R. Pierno Senior Vice President and General Counsel
Paul N. Schwartz Senior Vice President -- Corporate
Development
Robert E. Cole Vice President -- Federal Government
Affairs
Diane M. Dudley Vice President -- Chief Personnel Officer
Robert W. Irelan Vice President -- Public Relations
Jacques C. Lazard Vice President and Corporate Controller*
Ronald L. Reman Vice President -- Taxes
Byron L. Wade Vice President, Secretary and Deputy
General Counsel
Robert J. Cruikshank Director
Ezra G. Levin Director
Stanley D. Rosenberg Director
<FN>
---------------
* Mr. Lazard elected to leave the employment of the Company effective March 31, 1994.
</TABLE>
Charles E. Hurwitz. Mr. Hurwitz, age 53, has served as a
member of the Board of Directors and the Executive Committee of the
Company since August 1978 and was elected as Chairman of the Board and
Chief Executive Officer of the Company in March 1980. Since January 1,
1993, Mr. Hurwitz has also served the Company as President. Since
July 1993, Mr. Hurwitz has also served as a director
and Chairman of the Board of SHRP, Inc.
("SHRP"), the sole general partner of Sam Houston Race Park, Ltd., a
Texas limited partnership, which has been granted a license to operate a
horse racing facility in Harris County, Texas. He has also served
since July 1993 as a director, Chairman of the Board and President of
SHRP Capital Corp. ("SHRP Capital"), a wholly owned subsidiary of
Sam Houston Race Park, Ltd. Mr. Hurwitz has served as
a director of Kaiser since October 1988 and of KACC since November 1988.
Since May 1982, Mr. Hurwitz has been Chairman of the Board and Chief
Executive Officer, and since January 1, 1993, President, of MGI. From
May 1986 until February 1993, Mr. Hurwitz served as a director of The
Pacific Lumber Company ("Pacific Lumber"), a subsidiary of the Company
engaged in forest products operations, and from December 31, 1992 until
February 1993, he served as Chairman of the Board of Pacific Lumber.
Mr. Hurwitz has been, since January 1974, Chairman of the Board and Chief
Executive Officer of Federated Development Company ("Federated"), a New
York business trust primarily engaged in the management of real estate
investments.
John T. La Duc. Mr. La Duc, age 51, has served as Senior Vice
President and Chief Financial Officer of the Company since September
1990, and as Vice President and Chief Financial Officer of MGI since
October 1990. Mr. La Duc has also been Chief Financial Officer of Kaiser
since May 1990 and a Vice President since June 1989. He has also served
as a Vice President since June 1989 and Chief Financial Officer since
January 1990 of KACC. From January 1, 1993 until April 5, 1993, Mr. La
Duc served as Treasurer of Kaiser and KACC, having previously served as
Treasurer of Kaiser and KACC from September 1987 to May 1990 and January
1990, respectively, Assistant Treasurer of Kaiser from February 1987 to
September 1987 and Assistant Treasurer of KACC from April 1985 until
1987. Mr. La Duc was Treasurer, International Operations of KACC from
1982 until 1984. Mr. La Duc also currently serves
<PAGE> 13
as a director, Vice President and Chief Financial Officer of Pacific
Lumber and its wholly owned subsidiary, Scotia Pacific Holding Company
("Scotia Pacific").
Anthony R. Pierno. Mr. Pierno, age 62, serves as Senior Vice
President and General Counsel of the Company, positions he has held since
February 1989. He also serves as Vice President and General Counsel of
MGI, Pacific Lumber and Scotia Pacific and as a director of Pacific
Lumber since November 1993. Additionally, Mr. Pierno has served as Vice
President and General Counsel of Kaiser and KACC since January 1992.
From 1986 until joining the Company in February 1989, Mr. Pierno served
as partner in charge of the business practice group in the Los Angeles
office of the law firm of Pillsbury, Madison & Sutro. He has served as
the Commissioner of Corporations of the State of California and as Chair
of several committees of the State Bar of California. Mr. Pierno is
Chairman of the Board of Trustees of Whittier College, and a former
member and past Chairman of the Board of Trustees of Marymount College.
Paul N. Schwartz. Mr. Schwartz, age 47, has served as Senior
Vice President--Corporate Development of the Company since June 1987,
after serving as Vice President--Corporate Development of the Company
from July 1985 to June 1987. Mr. Schwartz has served as a Vice President
of MGI and Pacific Lumber since May 1987 and January 1987, respectively.
He also serves as Chairman of the Board and sole executive officer of
United Financial Group, Inc., a Delaware public corporation, and has
served as a director of Pacific Lumber and Scotia Pacific since February
1993. Since July 1993, Mr. Schwartz has served as a director and
Executive Vice President of both SHRP and of SHRP Capital.
Robert E. Cole. Mr. Cole, age 47, has served the Company as
Vice President--Federal Government Affairs since September 1990. Since
March 1981, Mr. Cole has also served as a Vice President of KACC. In
addition, Mr. Cole has served as Vice President--Federal Government
Affairs for MGI and Pacific Lumber since September 1990. He also
currently serves as Treasurer and as a director of National Environmental
Development Association, and as a director, Secretary and Treasurer of
Global Climate Coalition, both of which are 501(c)(6) organizations.
Diane M. Dudley. Ms. Dudley, age 53, was named Vice President-
-Chief Personnel Officer in May 1990. From June 1987 until May 1990, she
was Vice President--Personnel and Administration of the Company. From
December 1983 until June 1987, Ms. Dudley served as Assistant Vice
President--Personnel of the Company.
Robert W. Irelan. Mr. Irelan, age 57, has served the Company
as Vice President--Public Relations since September 1990. He has also
been Vice President--Public Relations of MGI and Pacific Lumber since
September 1990, and Vice President--Public Relations of KACC since
February 1988. From June 1985 to February 1988, Mr. Irelan served as
Divisional Vice President--Corporate Public Relations of KACC, and from
1968 to June 1985 he served KACC and certain affiliated companies in a
variety of positions.
Jacques C. Lazard. Mr. Lazard, age 42, served as Controller of
the Company from February 1982 until May 1990 when he was named Corporate
Controller. In June 1987, he was elected a Vice President of the
Company. He previously had served as an Assistant Vice President of the
Company from December 1983 to June 1987. Mr. Lazard served as Vice
President--Controller of MGI and as Vice President of Pacific Lumber from
June 1988. From May 1987 until June 1988, Mr. Lazard served as
Controller of MGI. In November 1992, Mr. Lazard was elected a Vice
President of Scotia Pacific. He also served as a director, Vice
President and Controller of certain subsidiaries of the Company engaged
in real estate operations. Mr. Lazard resigned all his positions with
the Company and its subsidiaries as of March 31, 1994.
Ronald L. Reman. Mr. Reman, age 36, was named Vice President--
Taxes of the Company in September 1992. Prior to September 1992, he had
served the Company as Director of Taxes since joining the Company in
October 1986. From July 1984 until October 1986, Mr. Reman was a Senior
Manager in
<PAGE> 14
the Tax Department of the New York office of Price Waterhouse after
having served seven years with the New York office of Coopers & Lybrand,
both of which are accounting firms. Mr. Reman also serves as Vice
President--Taxes of MGI and certain other subsidiaries of the Company,
and as Assistant Treasurer of Kaiser and KACC.
Byron L. Wade. Mr. Wade, age 47, has served as Vice President
and Deputy General Counsel of the Company since May 1990, and Secretary
of the Company since October 1988. Mr. Wade has also served as Vice
President and Secretary of Kaiser and KACC since January 1992, and Deputy
General Counsel of Kaiser and KACC since May 1992 and June 1992,
respectively. Since November 1992, he has been Vice President, Secretary
and Deputy General Counsel of Scotia Pacific. In addition, Mr. Wade has
served as a director, Vice President and Secretary of both SHRP,
and SHRP Capital since July
1993. He was Assistant Secretary of the Company from November 1987 to
October 1988 and Assistant General Counsel from November 1987 until May
1990. Mr. Wade has served as a Vice President of Pacific Lumber since
June 1990 and as a Vice President of MGI since July 1990. He had
previously served as Vice President, Secretary and General Counsel of MCO
Resources, Inc., a publicly traded oil and gas company, which was
majority owned by the Company.
Robert J. Cruikshank. Mr. Cruikshank, age 63, was elected a
director of the Company at the Company's Annual Meeting in May 1993. In
addition, he was appointed a director of Kaiser and KACC on January 26,
1994. Mr. Cruikshank was a Senior Partner in the international public
accounting firm of Deloitte & Touche from December 1989 until his
retirement in March 1993. Prior to its merger with Touche Ross & Co. in
December 1989, Mr. Cruikshank served as Managing Partner of Deloitte
Haskins & Sells from June 1974 until the merger and served on such firm's
board of directors from 1981 to 1985. Mr. Cruikshank also serves as a
director of Houston Industries Incorporated, a public utility holding
company with interests in electric utilities, cable television, coal and
transportation businesses; Compass Bank of Texas; and Texas Biotechnology
Incorporated.
Ezra G. Levin. Mr. Levin, age 60, was first elected a director
of the Company in May 1978. Mr. Levin is a nominee for reelection as a
director of the Company to serve until the 1997 Annual Meeting of
Stockholders. From May 1982 through December 1993, he also served as a
director of MGI. He is a partner in the law firm of Kramer, Levin,
Naftalis, Nessen, Kamin & Frankel. Mr. Levin also serves as a trustee of
Federated and as a director of Kaiser, KACC, Pacific Lumber, Scotia
Pacific and UMB Bank and Trust Company.
Stanley D. Rosenberg. Mr. Rosenberg, age 62, was first elected
to the Board of Directors of the Company in June 1981. He is a partner
in the law firm of Rosenberg, Tuggey, Agather & Rosenthal. Mr. Rosenberg
was a partner in the law firm of Oppenheimer, Rosenberg & Kelleher, Inc.
from its inception in 1971 until February 1990, at which time he assumed
through June 30, 1993, the position Of Counsel with that firm.
<PAGE> 15
PRINCIPAL STOCKHOLDERS
As of March 15, 1994, Federated and various other persons and
entities beneficially owned, in the aggregate, 2,747,994 shares, or
approximately 31.3% of the Company's outstanding Common Stock, and
658,050 shares, or approximately 97.0%, of the Company's outstanding
Class A Preferred Stock. Based on the information contained in a
statement on Schedule 13D filed with the Securities and Exchange
Commission and information otherwise available to the Company, such
persons may be deemed a "group" (the "Stockholder Group") within the
meaning of Section 13(d) of the Exchange Act. The shares directly held
by members of the Stockholder Group are as follows: Federated--1,740,626
shares of Common Stock and 656,853 shares of Class A Preferred Stock
(approximately 19.9% and 96.8%, respectively, of the outstanding shares);
Charles E. Hurwitz--1,006,016 shares of Common Stock and 1,064 shares of
Class A Preferred Stock (approximately 11.7% and less than 1%,
respectively, of the outstanding shares); James H. Paulin, Jr., Secretary
and Treasurer of Federated--352 shares of Common Stock and 133 shares of
Class A Preferred Stock (less than 1% of the respective outstanding
shares); and Ezra G. Levin--1,000 shares of Common Stock (less than 1% of
the outstanding shares). Federated shares include exercisable options to
purchase 71,175 shares of Common Stock, which shares Federated and Mr.
Hurwitz are deemed to own beneficially. Messrs. Hurwitz and Levin serve
as trustees of Federated, and Mr. Hurwitz, together with members of his
immediate family and trusts for the benefit thereof, owns all of the
voting shares of Federated, and his positions include Chairman of the
Board and Chief Executive Officer of the Company and Federated and
membership on the Company's Executive Committee. By reason of the
foregoing and their relationship with the members of the Stockholder
Group, Messrs. Hurwitz and Levin may be deemed to possess shared voting
and investment power with respect to the shares held by the Stockholder
Group.
The following table sets forth, as of March 15, 1994, the
beneficial ownership of the Company's Common Stock and Class A Preferred
Stock by (i) those persons known by the Company to own beneficially more
than 5% of the shares of each class then outstanding, (ii) each of the
named executive officers (other than Mr. Hurwitz), and (iii) all
directors and officers of the Company as a group.
<TABLE>
<CAPTION>
Amount and
Nature of Percent Combined
Beneficial of Voting
Beneficial Owner Title of Class Ownership(1) Class Power(2)
------------------------------------------- --------------- ------------------------- ----------- -----------
<S> <C> <C> <C> <C>
Federated Development Company (3) Common Stock 1,740,626(4) 19.9%
Class A 53.4%
Preferred 656,853 96.8%
Stock
The Stockholder Group(3) Common Stock 2,747,994(4)(5) 31.3%
Class A 59.9%
Preferred 658,050 97.0%
Stock
Harold C. Simmons, Kronos, Inc., Common Stock 1,278,150(6) 14.7% 8.2%
The Combined Master Retirement Trust,
NL Industries, Inc. and related
entities
Robert J. Cruikshank Common Stock None -- --
Charles E. Hurwitz Common Stock 2,746,642(4)(5)(7) 31.3%
Class A 59.9%
Preferred 657,917 97.0%
Stock
John T. La Duc Common Stock 491(8) * *
Ezra G. Levin Common Stock 1,000(7) * *
Anthony R. Pierno Common Stock -0-(8) -- --
Stanley D. Rosenberg Common Stock 2,000 * *
Paul N. Schwartz Common Stock 11,977(9) * *
Byron L. Wade Common Stock 737(8) * *
All directors and executive officers of Common Stock 2,768,228(4)(5)(10) 31.6%
the Company as a group (13 persons) Class A 60.1%
Preferred 657,917(11) 97.0%
Stock
<FN>
<PAGE> 16
---------------
* Less than 1%.
(1) Except as may otherwise be indicated, the beneficial owners have sole voting and investment power with respect to the
shares listed in the table.
(2) The Company's Class A Preferred Stock is generally entitled to ten votes per share on matters presented to a vote of the
Company's stockholders.
(3) The address of Federated is 5847 San Felipe, Suite 2600, Houston, Texas 77057. The address of the Stockholder Group is c/
Ezra G. Levin, Esq., Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, 919 Third Avenue, New York, New York 10022.
(4) Includes 71,175 shares of Common Stock which may be acquired in exchange for 7% Cumulative Exchangeable Preferred Stock of
MCO Properties, Inc. owned by Federated.
(5) Includes as of December 31, 1993 (a) 1,669,451 shares of Common Stock and 656,853 shares of Class A Preferred Stock,
respectively, owned by Federated as to which Mr. Hurwitz possesses voting and investment power, (b) 1,526 shares of Common
Stock owned by Mr. Hurwitz's spouse as separate property, (c) 46,500 shares of Common Stock owned by a limited partnership
controlled by Mr. Hurwitz and his spouse, 23,250 of which shares were separately owned by Mr. Hurwitz's spouse prior to
their transfer to such limited partnership and as to which Mr. Hurwitz disclaims beneficial ownership, and (d) 158,564
shares of Common Stock owned by 1992 Hurwitz Investment Partnership, L.P., of which 79,282 shares are owned by Mr.
Hurwitz's spouse as separate property.
(6) Information set forth herein is based solely on the Schedule 13D filed with the Securities and Exchange Commission on
June 30, 1989, as amended through March 15, 1994 (the "Schedule 13D"). The Schedule 13D was filed by Harold C. Simmons,
Kronos, Inc. ("Kronos"), NL Industries, Inc. ("NL"), The Combined Master Retirement Trust (the "Trust") and certain relate
entities, reporting beneficial ownership of the Company's Common Stock. The Schedule 13D states that Kronos and the Trust
are the direct beneficial owners of 250,900 and 1,027,250 shares of the Company's Common Stock, respectively. The Schedul
13D also states that Mr. Simmons may be deemed to have the direct power to vote and direct the disposition of the shares o
the Company's Common Stock held by the Trust and that Mr. Simmons and the entities other than Kronos who filed the Schedul
13D may be deemed to share the indirect power to vote and direct the disposition of the shares of the Company's Common
Stock held by Kronos. Mr. Simmons disclaims beneficial ownership of all of such shares of the Company's Common Stock. Th
address of Mr. Simmons and the Trust is Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240. The
address of Kronos and NL is 3000 North Sam Houston Parkway East, Houston, Texas 77032.
(7) Does not include shares owned by other members of the Stockholder Group.
(8) Represents the number of shares such person would have received on March 15, 1994 for his exercisable stock appreciation
rights (excluding SARs payable in cash only) if such rights had been paid solely in shares of Common Stock.
(9) Includes 1,228 shares representing the number of shares Mr. Schwartz would have received on March 15, 1994 for his
exercisable stock appreciation rights (excluding SARs payable in cash only) if such rights had been paid solely in shares
of Common Stock.
(10) The Stockholder Group beneficially owns 2,747,994 of such shares. As to the remaining shares, the directors and officers
owning such shares have sole voting and investment power with respect to all such shares except 10,749 owned by a trust of
which an officer and his spouse are trustees.
(11) All of such shares are beneficially owned by the Stockholder Group.
</TABLE>
<PAGE> 17
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth compensation information, cash
and non-cash, for each of the Company's last three completed fiscal years
with respect to the Chief Executive Officer and the four most highly
compensated executive officers of the Company (collectively referred to
as the "named executive officers") for the fiscal year ended December 31,
1993:
<TABLE>
<CAPTION>
Long-Term Compensation
---------------------------
Annual Compensation Awards Payouts
--------------------------------- ------------------ ------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted
Annual Stock Options/ LTIP All Other
Name and Salary Bonus Compensation Award(s) SARs Payouts Compensation
Principal Position Year ($) ($) ($)(1)(2) ($) (#) ($) ($)(1)
------------------------- ---- ---------- -------- ----------- --------- ------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles E. Hurwitz, 1993 $590,000 $400,000 $-0- $-0- 50,000 $-0- $97,494(3)
Chief Executive Officer, 1992 558,250 400,000 -0- -0- -0- -0- 88,102(3)
Chairman of the Board 1991 538,935 375,000 -- -0- -0- -0- --
and President
Anthony R. Pierno, 1993 321,232 290,000(4) -0- -0- -0- -0- 57,179(3)
Senior Vice President and 1992 302,275 265,000(4) -0- -0- -0- -0- 50,123(3)
General Counsel 1991 288,922 265,000(4) -- -0- -0- -0- --
Paul N. Schwartz, 1993 256,210 293,000(4) -0- -0- -0- -0- 47,426(3)
Senior Vice President-- 1992 239,035 216,000(4) -0- -0- 25,000 -0- 44,538(3)
Corporate Development 1991 228,488 181,600(4) -- -0- -0- -0- --
John T. La Duc,(5) 1993 240,000 25,000 -0- -0-(6) -0- -0- 4,872(10)
Senior Vice President and 1992 225,000 45,000 -0- 1,428,967(7) 10,000 192,698(8) 8,469(10)
Chief Financial Officer 1991 195,000 53,500 -- -0- -0- 1,000,000(9) --
Byron L. Wade 1993 165,833 124,412 -0- -0- -0- -0- 30,955(3)
Vice President, Secretary 1992 156,054 95,000 -0- -0- 15,000 -0- 28,854(3)
and Deputy General Counsel 1991 149,169 95,000 -0- -0- -0- -0- --
<FN>
(1) Pursuant to the transition rules effective October 21, 1992, these
amounts are excluded for the Company's 1991 fiscal year.
(2) Excludes perquisites and other personal benefits because the
aggregate amount of such compensation is the lesser of either
$50,000 or 10% of the total of annual salary and bonus reported for
the named executive officer.
(3) Reflects the following aggregate amounts accrued in respect of the
Company's Revised Capital Accumulation Plan for 1993 and 1992,
respectively, pursuant to which, in general, benefits vesting 10%
annually are payable upon termination of employment with the
Company; Mr. Hurwitz--$88,500 and $83,738; Mr. Pierno--$48,185 and
$45,341; Mr. Schwartz--$38,432 and $35,855; and Mr. Wade--$24,875
and $23,408. Additionally, these amounts reflect matching
contributions by the Company under its 401(k) savings plan for 1993
and 1992, respectively, as follows: Mr. Hurwitz-- $8,994 and
$4,364; Mr. Pierno--$8,994 and $4,782; Mr. Schwartz--$8,994 and
$8,728; and Mr. Wade--$6,080 and $5,446.
(4) Pursuant to the employment agreements of Messrs. Pierno and
Schwartz, their personal loans from the Company outstanding on the
date of such agreements are forgiven at the rate of $15,000 and
$20,000, respectively, per year. These amounts are included here as
additional bonus compensation. See, "Certain Transactions" for
discussion on such personal loans.
(5) Mr. La Duc received his compensation principally from KACC; however,
the Company paid his 1993 and
reimbursed KACC for certain allocable costs associated
with the performance of services for the Company by such executive
officer. The table reflects such officer's total compensation,
rather than any allocated part of such compensation.
<PAGE> 18
(6) As of December 31, 1993, Mr. La Duc held 131,110 shares of
restricted common stock of Kaiser valued at approximately $1,179,990
based on the closing price of $9.00 per share. Restrictions on such
shares will be lifted on each December 2, 1994, 1995 and 1996 as to
shares totaling 36,237, 47,436 and 47,437, respectively. No
dividends will be paid to Mr. La Duc in respect of any restricted
shares held. No other named executive officer held restricted stock
of Kaiser or the Company at fiscal year end 1993.
(7) Includes payout during 1993 of $5,934 of shares of KAC common stock
issued in April 1993 as 5% of 1992 distribution, $699 in cash paid
in April 1993 for fractional shares and balance of 1992 LTIP
account pursuant to December 1992 election
as described in footnote (8) below, and $332,918 of shares of KAC
common stock issued in November and December 1993 as to which
restrictions were lifted.
(8) In December 1992, in connection with the subsequent stockholder
approval of the Kaiser 1993 Omnibus Stock Incentive Plan (the
"Plan"), participants in Kaiser's and KACC's long-term incentive
plan, as amended (the "LTIP") elected to receive payment of their
LTIP account balances as of December 31, 1992 as follows: (i)
Amounts earned and vested were paid half in cash and half in _________________
restricted shares of Kaiser common stock. The portion payable in
restricted shares of Kaiser common stock was divided by the average of
December closing prices of $8.539 per share (December 1
through December 28, 1992) to determine the number of shares
granted. The portion payable in cash
was reduced by 1992 bonuses paid to recipients and by appropriate
tax withholdings. (ii) Amounts earned and unvested were paid in _______________
options or shares of restricted stock under the Plan during 1993.
Restrictions will be removed or options will vest at the rate of 25%
each December for four (4) years, which began December 1993. (iii)
Amounts unearned and unvested were paid in options or shares of _____________________
restricted stock under the Plan during 1993. Restrictions will be
removed or options will vest as to 50% thereof in each of December
1995 and December 1996. The payments made in accordance with item
(i) above were separate and apart from the Plan and are reflected in
column (h) of the Summary Compensation Table for 1992. The grants
made in accordance with items (ii) and (iii) are reflected in column
(f) for 1992. Without such elections and subject to certain
reductions and limitations, participants were generally entitled to
receive the vested portion of their LTIP account balances on the
earlier to occur of (a) termination of their employment, (b)
termination of the LTIP if prior to December 31, 1996, or (c) April
10, 1997.
(9) Pursuant to 1991 amendments, Kaiser LTIP participants were permitted
to elect an accelerated payment option pursuant to which they could
receive in December 1991 and April 1992 amounts approximating 95%
and 5%, respectively, of the vested portion of their LTIP account
balances (excluding bonuses previously paid), subject to certain
maximum dollar limitations. Without such accelerated payment option
and subject to certain reductions and limitations, participants were
generally entitled to receive the vested portion of their LTIP
account balances on the earlier to occur of (a) termination of their
employment, (b) termination of the LTIP if prior to December 31,
1993, or (c) April 10, 1994.
(10) Amount for 1992 includes moving related items of $3,969. Remaining
amount for 1992 and total amount for 1993 are contributions under
the KACC 401(k) savings plan by KACC.
</TABLE>
Option/SAR Grants Table
The following table sets forth certain information concerning
phantom share rights granted in fiscal year 1993 to any of the named
executive officers, of which there was only one:
<TABLE>
<CAPTION>
Grant
Individual Grants Date Value
----------------------------------------------------------------------------------------------------------- -----------------
(a) (b) (c) (d) (e) (f)
% of Total
Number of Options/
Securities SARS Grant
Underlying Granted to Exercise or Date
Options/SARs Employees in Base Price Expiration Present
Name Grants (#) 1993(1) ($/Share) Date Value $ (1)
------------------------------- ----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Charles E. Hurwitz 50,000 100% $38.50 12/9/2003 $1,338,800
<FN>
-----------------
(1) Valuation utilizing Black-Scholes Option Price Model using the
following assumptions: 5-year monthly volatility, 5.92% risk-free
rate (10-year Government Bond), no dividend yield and 10-year
exercise or expiration date. No adjustments were made for non-
transferability or risk of forfeiture.
</TABLE>
<PAGE> 19
The SARs set forth in the above table were granted on December
9, 1993 to Mr. Hurwitz under MAXXAM's 1984 Phantom Share Plan. SARs
under such plan are exercisable for cash, Common Stock or a combination
thereof at the discretion of the Company's Board, and vest with respect
to 20% on the anniversary date of the grant and an additional 20% on each
anniversary date thereafter until fully vested.
In connection with the proposed Omnibus Plan as described
above, the Committee is considering recommending to the Board that
Mr. Hurwitz be given an option to elect to relinquish the above SAR
award in return for the grant of 50,000 SARs under
the Omnibus Plan. Options granted after February 17, 1993 under
the 1984 Phantom Stock Plan are subject to the
deduction limitations of Section 162(m) of the Code. It is intended that
such compensation payable to Mr. Hurwitz by the Company pursuant to a
grant under the Omnibus Plan be deductible by the Company for Federal
income tax purposes provided the Omnibus Plan is approved by
stockholders.
Option/SAR Exercises and Fiscal Year End Value Table
The table below provides information on an aggregated basis
concerning each exercise of stock options (or tandem SARs) and
freestanding SARs during the fiscal year ended December 31, 1993 by each
of the named executive officers, of which there was only one, and the
1993 fiscal year-end value of unexercised options and SARs, including
SARs exercisable for cash only.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Unexercised Value of Unexercised
Options/SARs in-the-Money Options/SARs
at Year End (#) at Fiscal Year-End ($) (2)
------------------------------- ------------------------------
Shares Acquired
on Value
Name Exercise (#) (1) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---------------------------- --------------- -------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles E. Hurwitz 60,000 $533,475(3) -0- 50,000 -0- -0-
-- -- 31,425 53,375 $568,772 $29,953
John T. La Duc -- -- 2,000 8,000 17,750 71,000
Paul N. Schwartz -- -- 21,500 21,500 351,313 190,813
Anthony R. Pierno -- -- 26,000 7,000 53,250 17,750
Byron L. Wade -- -- 21,400 12,600 471,925 111,825
<FN>
---------------
(1) If no shares received, the number reflected, if any, represents the
number of securities with respect to which options/SARs were
exercised.
(2) Valued at $36.875, the closing price of the Company's Common Stock
on the American Stock Exchange on December 31, 1993 (the "Closing
Price"), less exercise price. If exercise price is lower than the
Closing Price, no value is shown with respect to such SARs/Options.
(3) Represents value received pursuant to Mr. Hurwitz's election to
surrender options granted to him on December 12, 1985 under the
MAXXAM Group 1976 Stock Option Plan (the "1976 Plan") with regard to
60,000 shares of MAXXAM Group Inc. common stock, as provided in
Section 9 of the 1976 Plan. Pursuant to the Merger Agreement
between MAXXAM Group Inc., a New York corporation, with the Company,
upon exercise of the option for 60,000 shares of MAXXAM Group Inc.
common stock, Mr. Hurwitz was entitled to receive 15,000 shares of
the Company's Common Stock, $360,000 principal amount of the
Company's 13 1/2% Senior Subordinated Reset Notes due 2000, which
notes have been reset and now bear an interest rate of 14% per annum
(the "Reset Notes") and $366,600 cash. However, Mr. Hurwitz elected
to surrender his options for all cash, the amount of cash to which
he was entitled to receive was calculated as the difference between
(a) the exercise value and (b) the value of .25 of a share of the
Company's Common Stock, $6.00 principal amount of the Reset Notes
and $6.11 cash, with the Company's Common Stock, valued at its
closing price on the American Stock Exchange on the date of
surrender and the Reset Notes valued at par.
</TABLE>
<PAGE> 20
Pension Plans
All officers who are also employees and other regular employees
of the Company automatically participate in the Company's Pension Plan
(the "Pension Plan"), a noncontributory, funded plan. Benefits equal the
sum of an employee's "past service benefit" and "future service benefit."
Benefits are based on an employee's base salary or wages, plus overtime
(excluding bonuses, commissions, incentive compensation and all other
extra compensation).
Under the Pension Plan, the annual past service benefit is the
greatest of
(i) benefits accrued under the plan through December 31,
1986,
(ii) the product of (a) the sum of 0.8% of the
participant's Past Service Compensation Base (as
defined), plus 0.8% of his Past Service
Compensation Base in excess of $15,000
multiplied by (b) his credited years of service
prior to January 1, 1987, or
(iii) the product of 1.2% of his Past Service
Compensation Base multiplied by his
credited years of service prior to
January 1, 1987.
For 1987 and 1988, the annual future service benefit equaled
1.6% of an employee's compensation up to two-thirds of the Social
Security wage base, plus 2.4% of any remaining compensation. Effective
January 1, 1989, the annual future service benefit equals 1.75% of an
employee's compensation for each year of participation, plus 0.6% of the
employee's compensation in excess of $10,000.
The amount of an employee's aggregate compensation that may be
included in benefit computations under the Pension Plan is limited to
$235,840 for 1993. This amount is reduced to $150,000 beginning in 1994.
Benefits are generally payable as a lifetime annuity or, with respect to
married employees, as a 50% joint and survivor annuity, or, if the
employee elects (with spousal consent), in certain alternative annuity
forms. Benefits under the Pension Plan are not subject to any deductions
for Social Security or other offsets. The covered compensation for 1993
and credited years of service as of December 31, 1993 for the Pension
Plan and estimated annual benefits payable upon retirement at normal
retirement age for the named executive officers (other than those
compensated by KACC who do not participate in this Pension Plan) were as
follows: Mr. Hurwitz: $235,840--13 years--$110,880; Mr. Pierno:
$235,840--4 years--$35,783; Mr. Schwartz: $235,840--13 years--$110,000;
and Mr. Wade: $165,833--13 years--$91,988.
The projected benefits shown above were computed as lifetime
annuity amounts, payable beginning at age 65. The benefit amounts
reflect a covered compensation limit of $150,000 for 1994 and subsequent
years under Section 401(a)(17) of the Code. In addition, the amounts
reflect a maximum benefit limit of $118,800 for 1994 and subsequent years
(with early retirement reductions where applicable) that is placed upon
annual benefits that may be paid to a participant in the Pension Plan at
retirement under Section 415 of the Code. Combined plan limits
applicable to employees participating in both defined contribution and
defined benefit plans have not been reflected.
KACC maintains a qualified, defined-benefit Retirement Plan
(the "Kaiser Retirement Plan") for salaried employees of KACC and co-
sponsoring subsidiaries who meet certain eligibility requirements. The
table below shows estimated annual retirement benefits payable under the
terms of the Kaiser Retirement Plan to participants with the indicated
years of credited service without reduction for the limitations imposed
by the Code on qualified plans and before adjustment for the Social
Security offset, thereby reflecting cumulative benefits to be received
under the Kaiser Retirement Plan in conjunction with the Kaiser
Supplemental Benefit Plan (as defined below).
<PAGE> 21
<TABLE>
<CAPTION>
YEARS OF SERVICE
ANNUAL --------------------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
$125,000 $28,125 $37,500 $46,875 $56,250 $65,625
150,000 33,750 45,000 56,250 67,500 78,750
175,000 39,375 52,500 65,625 78,750 91,875
200,000 45,000 60,000 75,000 90,000 105,000
225,000 50,625 67,500 84,375 101,250 118,125
250,000 56,250 75,000 93,750 112,500 131,250
300,000 67,500 90,000 112,500 135,000 157,500
400,000 90,000 120,000 150,000 180,000 210,000
450,000 101,250 135,000 168,750 202,500 236,250
500,000 112,500 150,000 187,500 225,000 262,500
600,000 135,000 180,000 225,000 270,000 315,000
720,000 162,000 216,000 270,000 324,000 378,000
</TABLE>
The estimated annual retirement benefits shown are based upon
the assumptions that current Kaiser Retirement Plan provisions remain in
effect, that the participant retires at age 65, and that the retiree
receives payments based on a straight life annuity for his lifetime. Mr.
La Duc had 24.3 years of credited service on December 31, 1993. Monthly
retirement benefits, except for certain minimum benefits, are determined
by multiplying years of credited service (not in excess of 40) by the
difference between 1.50% of average monthly compensation for the highest
base period (of 36, 48 or 60 consecutive months, depending upon
compensation level) in the last 10 years of employment and 1.25% of
monthly primary Social Security benefits.
The compensation covered by the Kaiser Retirement Plan includes
base salary and bonus payments. No named executive officer of the
Company had compensation covered by the Kaiser Retirement Plan which
differed by more than 10% from that set forth in the Summary Compensation
Table (column (c) plus column (d) thereof).
Participants are entitled to retire and receive pension
benefits, unreduced for age, upon reaching age 62 or after 30 years of
credited service. Full early pension benefits (without adjustment for
Social Security offset prior to age 62) are payable to participants who
are at least 55 years of age and have completed 10 or more years of
pension service (or whose age and years of pension service total 70) and
who have been terminated by KACC or an affiliate for reasons of job
elimination or partial disability. Participants electing to retire prior
to age 62 who are at least 55 years of age and have completed 10 or more
years of pension service (or whose age and years of pension service total
at least 70) may receive pension benefits, unreduced for age, payable at
age 62 or reduced benefits payable earlier. Participants who terminate
their employment after five years or more of pension service, or after
age 55 but prior to age 62, are entitled to pension benefits, unreduced
for age, commencing at age 62 or actuarially reduced benefits payable
earlier. For participants with five or more years of pension service or
who have reached age 55 and who die, the Kaiser Retirement Plan provides
a pension to their eligible surviving spouses. Upon retirement,
participants may elect among several payment alternatives including, for
most types of retirement, a lump-sum payment.
MAXXAM Supplemental Executive Retirement Plan
Effective March 8, 1991, the Company adopted an unfunded non-
qualified Supplemental Executive Retirement Plan (the "SERP"). The SERP
provides that participants are entitled to receive benefits which would
have been payable to such participants under the Pension Plan except for
the limitations imposed by the Code. Participants in such plan are
selected by the Company's Board of Directors or are entitled to
participate by virtue of provisions in their employment agreements. Only
two executive officers of the Company, Messrs. Schwartz and Pierno, were
entitled to receive benefits under the SERP during 1993.
<PAGE> 22
The following projections are based on the same assumptions as
utilized in connection with the Pension Plan projections above. The 1994
qualified plan pay limit ($150,000) and benefit limit ($118,800) are
reflected for all years in the future. In addition, no future increases
in the participants' covered compensation amounts from the 1993 levels
are assumed.
<TABLE>
<CAPTION>
Pierno Schwartz
------------- --------------
<S> <C> <C>
COVERED COMPENSATION FOR 1993:
Qualified Plan $ 235,840 $ 235,840
Nonqualified Plan 85,392 20,370
------- -------
Total $ 321,232 $ 256,210
======= =======
CREDITED YEARS OF SERVICE AS OF 4 13
DECEMBER 31, 1993
PROJECTED NORMAL RETIREMENT
BENEFIT:
Qualified Plan $ 35,873 $ 110,000
Nonqualified Plan 18,778 43,380
------ -------
Total $ 54,561 $ 153,380
====== =======
</TABLE>
Kaiser Supplemental Benefits Plan
KACC maintains an unfunded, non-qualified Supplemental Benefits
Plan (the "Kaiser Supplemental Benefits Plan"), the purpose of which is
to restore benefits which would otherwise be paid from the Kaiser
Retirement Plan or the Supplemental Savings and Retirement Plan, a
qualified Section 401(k) plan (the "Kaiser Savings Plan"), were it not
for the limitations imposed by the Code. Participation in the Kaiser
Supplemental Benefits Plan includes all employees of KACC and its
subsidiaries whose benefits under the Kaiser Retirement Plan and Kaiser
Savings Plan are likely to exceed the maximum dollar limitations imposed
by the Code.
Kaiser Termination Payments and Benefits Continuation Policy
Most full-time salaried employees of KACC are eligible for
benefits under an unfunded termination policy if their employment is
involuntarily terminated, subject to a number of exclusions. The policy
provides for lump sum payments after termination ranging from
one-half month's salary for less than one year of service to eight
months' salary for 30 or more years of service. The amount payable to
Mr. La Duc under the policy if he had been involuntarily terminated on
December 31, 1993 would have been $120,000.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
Mr. Pierno and the Company entered into a five-year employment
agreement effective as of March 8, 1990. Pursuant to the terms of the
agreement, Mr. Pierno was entitled during 1993 to a base salary of
$321,232 per year, which amount is increased annually by an amount not
less than the increase in the Consumer Price Index for that year. The
agreement provided for a bonus for the year 1992 in an amount not less
than 75% and not more than 125% of Mr. Pierno's then base salary.
Although the agreement specifies no bonus percentage for the years 1993
and 1994, a bonus as reflected in the Summary Compensation Table was paid
during 1993, and in the employment agreement the Company expresses an
intent to pay a bonus during 1994 in the same percentage range. The
agreement also entitles Mr. Pierno to participate in employee benefit
plans and programs applicable to senior executives of the Company.
Mr. Schwartz and the Company entered into a five-year
employment agreement effective as of March 8, 1990. Pursuant to the
terms of the agreement, Mr. Schwartz was entitled during 1993 to a base
salary of
<PAGE> 23
$256,210 per year, which amount is increased annually by an amount not
less than the increase in the Consumer Price Index for that year. The
agreement provided for a bonus for the year 1992 in an amount not less
than 75% and not more than 125% of Mr. Schwartz' then base salary.
Although the agreement specifies no bonus percentage for the years 1993
and 1994, a bonus as reflected in the Summary Compensation Table was paid
during 1993 and in the agreement the Company expresses an intent to pay a
bonus during 1994 in the same percentage range. The agreement also
entitles Mr. Schwartz to participate in employee benefit plans and
programs applicable to senior executives of the Company.
Mr. La Duc held the positions of Senior Vice President and
Chief Financial Officer of the Company and Vice President and Chief
Financial Officer of Kaiser and KACC pursuant to an employment agreement
among the Company, KACC and Mr. La Duc, which commenced September 26,
1990, and expired December 31, 1993. The agreement provided for an
initial base salary of $190,000, with any increases at the discretion of
the Company and KACC. Currently, Mr. La Duc continues in his employment
in such positions with the Company, Kaiser and KACC. Subject to
limitations pursuant to the LTIP, an annual bonus may be paid under the
terms of the Kaiser Bonus Plan. Mr. La Duc is eligible to participate in
the employee benefit plans and programs maintained by KACC as from time
to time in effect applicable to senior executives of KACC, including, but
not limited to, the LTIP and the Kaiser 1993 Omnibus Incentive Stock
Option Plan.
Mr. Wade and the Company entered into a five-year employment
agreement effective as of March 8, 1990. Pursuant to the terms of the
agreement, Mr. Wade was entitled during 1993 to a base salary of $165,833
per year, which amount is increased annually by an amount not less than
the increase in the Consumer Price Index for that year. The agreement
provided for a bonus for the year 1992 in an amount not less than 50% and
not more than 100% of Mr. Wade's then base salary. Although the
agreement specifies no bonus percentage for the years 1993 and 1994, a
bonus as reflected in the Summary Compensation Table was paid during 1993
and in the agreement the Company expresses an intent to pay a bonus
during 1994 in the same percentage range. The agreement also entitles
Mr. Wade to participate in employee benefit plans and programs applicable
to senior executives of the Company, and designates Mr. Wade as a
participant in the SERP.
COMPENSATION COMMITTEE REPORT
ON
EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of MAXXAM Inc.
(the "Company") consists of Messrs. Cruikshank, Levin and Rosenberg.
Members of the Committee annually stand for appointment by the Company's
Board of Directors. The most recent appointments were in May 1993 for
Messrs. Levin and Rosenberg, and December 1993 for Mr. Cruikshank when he
first joined the Committee. Annually, the Committee reviews and approves
proposals which cover the initiation, modification or termination of
benefit plans, salaries or other compensation for all executive officers.
The Committee reviews plans for the Company, The Pacific Lumber Company,
MAXXAM Property Company and the Company's other participating
subsidiaries. This Committee does not review the plans of Kaiser
Aluminum Corporation or its subsidiaries.
The Committee also has responsibility for reviewing proposals
for initiation, modification or termination of the qualified retirement
plans and welfare plans for the companies indicated above, unless these
functions are performed by specific committees, i.e, administrative and
investment committees from such plans. Employee benefit plans,
compensation programs and executive employment agreements are generally
prepared or negotiated at the direction or with the prior knowledge of
the Committee and are reviewed and approved by the Committee.
<PAGE> 24
In performing its responsibilities, the Committee frequently
obtains recommendations from management, particularly from the Company's
Chief Executive Officer ("CEO"), and occasionally from other executive
officers of the Company. In formulating management's recommendations,
the Company's executive officers from time to time have studied reports
appearing in human resources and executive compensation literature as
well as studies and recommendations from outside consulting firms
prepared specifically for the Company.
The elements of executive compensation utilized by the Company
consist principally of a base salary and an annual bonus. Bonuses are
discretionary, except as provided in certain written employment
agreements previously approved by the Committee or the Board of
Directors. From time to time, the Committee also recommends or approves
participation by selected executives in certain additional incentive
compensation programs such as the Company's 1984 Phantom Share Plan.
The employment agreements of certain of the executive officers
of the Company have five year terms and were negotiated prior to the
relocation of the Company's corporate offices from Los Angeles to Houston
in 1990. The ranges for the incentive awards as well as the stock-based
incentive awards were established during these negotiations by the CEO
and approved by the Committee. In some instances, the Company also
expressed its intention in written agreements to compensate particular
executives with bonuses on a certain basis or at a certain level.
Factors considered by the Committee in approving these employment
agreements were the relevant executive's compensation history, particular
talents and responsibilities, and relative contributions to the Company.
Bonus levels provided for in the agreements were generally established as
a percentage of salary with a view that bonuses play an important role in
total annual compensation. Specifically, Senior Vice Presidents
relocating from Los Angeles to Houston were entitled to initial bonus
levels from 75% to 125% of their respective annual salaries. Vice
Presidents relocating from Los Angeles to Houston were entitled to a
bonus range of 50% to 100% of their respective annual salaries. The
Company, since entering into such agreements, has awarded bonuses at the
lower ranges of such levels. These employment agreements were entered
into in order to assure continued employment of such executives in their
respective capacities, and in order to procure for the Company their
continuing commitments for that period of time. In recent years,
specific determinations as to executive compensation have been based
primarily on the level of achievement by the Company toward its corporate
objectives, individual performance and assumption of additional duties or
responsibilities by the particular executive.
At fiscal year-end, base salaries for employees earning
$100,000 or more are reviewed individually and recommendations as to
increases are made by the Committee. For the most part, these increases
have been the average of the U.S. Consumer Price Index.
In general, bonuses granted by the Company are discretionary.
When granted, bonus amounts paid by the Company are approved by the
Committee for employees who generally earn at least $75,000 per year.
Certain of the Company's executive officers were or are compensated
principally by a majority owned subsidiary of the Company, Kaiser
Aluminum & Chemical Corporation ("KACC"), which establishes salaries and
other elements of compensation for such executive officers. Where an
executive officer of both the Company and KACC is compensated by KACC
(such as Mr. La Duc), or where an executive officer of both the Company
and KACC is compensated by the Company (such as Messrs. Pierno and Wade),
the respective corporations make intercompany allocations of the costs of
employment of the executive officer based on an allocation of that
executive officer's time as expended among the Company or KACC and
respective subsidiaries.
The Committee acknowledges that the Company's particular
origins and management are unique in that it consists of units operating
in three wholly separate industries: aluminum, forest products and real
estate. In 1993, subsidiaries of the Company acquired various interests
in a Class I horse racing facility under construction in Harris County,
Texas ("Sam Houston Race Park"). Many of the Company's executives also
serve in executive capacities in some or all of its operating
subsidiaries in the varying industries. While the Company's annual
earnings are a primary focus, its principal objective for the past decade
has been the
<PAGE> 25
enhancement of stockholder value which is measured only in part by
current earnings. The Company was one of the country's fastest-growing
major corporations during the past ten years. That growth was
accomplished primarily through acquisitions, and the Company's executives
have responsibilities related to corporate development through
acquisition and assimilation of operating businesses that are additional
to the responsibilities of most executives at corporations of comparable
size. Accordingly, the Committee recognizes that the particular talents
of its executives in building the Company's asset base, in expanding into
new business segments and in assimilating acquired businesses, is not
necessarily tied to current earnings. That factor presents a particular
challenge for the Committee in determining appropriate approaches to
executive compensation.
For those executive officers of the Company not covered by an
employment agreement, the Company's executive compensation philosophy is
to pay base salaries adequate to attract and retain executives whose
education, training, experience, talents and particular knowledge of the
Company, its businesses and industries allow them to be key contributors
to the administration, management and operations of the Company.
Generally, the Company and the Committee utilize annual bonuses as the
primary incentive and recognition for particular contributions, efforts
and results pertaining to a particular time period, project or
accomplishment of executive officers.
The Company has not awarded across-the-board stock-based
incentives to its executives since mid-1989. Since that time, the
Company has only rarely awarded such incentives, and then on selective
and particular situation basis in connection with assumption of
additional duties or corporate roles by executives, or in connection with
negotiated employment agreements as previously discussed.
Discretion of the Committee
The Committee deems it necessary and appropriate to retain
broad discretion as to the types and levels of compensation for its
executive officers. The Committee considers factors such as the cost of
living, compensation practices at other corporations with which its
individual directors are familiar and such other objective and
quantitative factors as it deems relevant. Among such factors are the
compensation levels and determinations made by its principal operating
units with respect to compensation of their executives. Due to recent
tax law changes as well as the Committee's desire to value executive
compensation levels appropriately, the Committee has asked management to
assist it in re-evaluating a recent compensation study conducted to
determine its appropriateness in today's environment. This re-evaluation
is moving forward with an expected completion in the third quarter of
1994. Because of the range and varying nature of the duties of the
Company's executive officers, the Committee considers non-quantitative
and subjective factors unique to the Company, including individual
talents and performance perceived by management and by the Committee. It
is mindful that activities in one year may relate to results achieved in
another year and that, particularly with respect to certain
responsibilities, services provided during difficult times may be more
exacting and require more effort, and therefore, call for equal or
greater compensation than that provided in periods yielding better
results. The Committee generally meets three to four times per year and
makes its final determinations as to salaries and bonuses, as well as to
compensation of the CEO, in executive sessions where persons affected by
its decisions are not present.
Compensation of the Chief Executive Officer for the Last Completed Fiscal
Year
Mr. Hurwitz is the Company's principal business strategist and
the Committee believes that his talents and efforts have been a primary
cause of the Company's extraordinary growth. The Committee approved a
salary increase of 3.2% for Mr. Hurwitz in December of 1993. This was
the same percentage of increase generally provided to the Company's
executive officers and other employees. During 1993, Mr. Hurwitz was
additionally responsible for several major projects moving the Company
forward. The first project involved the Company's acquisition of its
interests in and becoming a driving force behind Sam Houston Race Park,
an investment which is expected to bring substantial financial benefit to
the Company. The
<PAGE> 26
second project involved the successful completion of public offerings of
securities aggregating in excess of $1.5 billion during 1993, effectively
restructuring or refinancing most of the Company's debt on terms which
significantly lowered the Company's borrowing costs and extended
maturities. The Committee determined that Mr. Hurwitz should be rewarded
with additional compensation for his efforts on these projects. The
Committee took into consideration various factors to determine what
amount and form such additional compensation should be. Among the
factors considered were (i) the general level of salary and bonuses paid
to Mr. Hurwitz in recent years, (ii) the benefit plans available as a
vehicle for the extra compensation, (iii) whether the additional
compensation should be current or deferred, and (iv) the level of
additional compensation which would serve as an incentive for Mr. Hurwitz
to render similar performances in the future but which would still take
into account the Company's 1993 financial results. After due
consideration, the Committee concluded that it was appropriate to award
Mr. Hurwitz a grant of 50,000 Phantom Share Rights under the Company's
1984 Phantom Rights Plan at an exercise price equal to the closing price
of the Company's Common Stock on the American Stock Exchange on the day
of the meeting, December 9, 1993. Such award was unanimously approved by
the Committee. The Committee also approved a bonus in the amount of
$500,000, with $100,000 of the payment deferred into future years.
Compliance with Internal Revenue Code Section 162(m)
Effective January 1, 1994, Section 162(m) of the Code generally
disallows a tax deduction to public companies for compensation over $1
million paid to the Chief Executive Officer and four other most highly
compensated executive officers of such corporations. Qualifying
performance-based compensation will not be subject to the deduction limit
if certain requirements are met.
On March 30, 1994, the Committee recommended to the Board of
Directors that the MAXXAM 1994 Executive Bonus Plan and the MAXXAM 1994
Omnibus Employee Incentive Plan be adopted and submitted to the
stockholders of the Company for approval at the 1994 Annual Meeting of
Stockholders. Such plans are designed to enable compliance with Section
162(m) of the Code and the proposed regulations thereunder. Prior to
1994 fiscal year-end, the Committee intends to re-evaluate the Company's
compensation structure in light of the status of such proposed
regulations and to act accordingly.
The Company currently intends to structure the performance-
based portion of compensation (which currently consists of stock option
grants and the discretionary annual bonuses described above) in a manner
that complies with the new statute and proposed regulations thereunder
for those executive officers of the Company prior to such fiscal year as
such officers may become subject to such deduction limitation.
Compensation Committee
of the Board of Directors
Robert J. Cruikshank
Ezra G. Levin, Chairman
Stanley D. Rosenberg
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee of the Board of
Directors of the Company was, during the 1993 fiscal year, an officer or
employee of the Company or any of its subsidiaries, or was formerly an
officer of the Company or any of its subsidiaries; however, two members
had relationships requiring disclosure by the Company under Item 404 of
Regulation S-K. Messrs. Levin and Connally served on the Company's
Compensation Committee and Board during 1993. Mr. Levin is also a
partner in the law firm
<PAGE> 27
of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, which provided legal
services for the Company and its subsidiaries during 1993. Mr.
Connally's consulting agreement with the Company's subsidiary, MGI, under
which he received $250,000 in consulting fees annually, was renewed
during 1992 and was effective until June 1993.
During the Company's 1993 fiscal year, no executive officer of
the Company served as (i) a member of the compensation committee (or
other board committee performing equivalent functions) of another entity,
one of whose executive officers served on the Compensation Committee of
the Board of Directors, (ii) a director of another entity, one of whose
executive officers served on the Compensation Committee of the Company,
or (iii) a member of the compensation committee (or other board committee
performing equivalent functions) of another entity, one of whose
executive officers served as a director of the Company.
PERFORMANCE GRAPH
The following performance graph compares the cumulative total
stockholder return on the Company's Common Stock with the cumulative
total returns of the S&P 500 Stock Index and two peer groups consisting
of companies included by S&P in its published indices for the Aluminum
Industry and the Paper and Forest Products Industry for the Company's
last five fiscal years. The graph assumes that the value of the
investment in the Company's Common Stock and each index was $100 at
December 31, 1988, and that all dividends were reinvested. The data
points are calculated as of the last trading day for the year indicated.
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
------------ ------------ ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
MAXXAM Inc. 100 192.82 127.69 120.51 112.82 150.77
S&P 500 Index 100 131.69 127.60 166.47 179.15 197.21
S&P Aluminum Industry Index 100 119.51 107.67 116.22 118.98 121.81
S&P Paper and Forest Products 100 121.28 109.57 138.98 158.91 175.13
Industry Index
</TABLE>
The Company is involved in the real estate industry in addition
to the aluminum and forest product industries. However, the real estate
unit of the Company accounts for less than 5% of the Company's gross
<PAGE> 28
revenues on a consolidated basis and, therefore, a line-of-business index
for such industry is not utilized.
CERTAIN TRANSACTIONS
For periods through June 30, 1993, Kaiser and its subsidiaries
(including KACC) were members of an affiliated group of corporations (an
"Affiliated Group") within the meaning of Section 1504 of the Code of
which the Company is the common parent corporation (the "MAXXAM Tax
Group"). Effective July 1, 1993, Kaiser and its subsidiaries are no
longer members of the MAXXAM Tax Group (the "Deconsolidation") but are
members of a new Affiliated Group of which Kaiser is the common parent
corporation (the "New Kaiser Tax Group"). The taxable income and loss
and tax credits for Kaiser and its subsidiaries for the period January 1
through June 30, 1993 will be included in the 1993 MAXXAM Tax Group
consolidated Federal income tax return (the "MAXXAM 1993 Tax Return").
For periods beginning on or after July 1, 1993 (the "Post Deconsolidation
Periods"), the taxable income and loss and tax credits for Kaiser and its
subsidiaries will be included in the consolidated Federal income tax
returns to be filed for the New Kaiser Tax Group.
As a consequence of the Deconsolidation, the KACC Tax
Allocation Agreement (as defined below) and the Kaiser Tax Allocation
Agreement (as defined below) (collectively, the "Tax Allocation
Agreements") terminated pursuant to their terms, effective with respect
to Post Deconsolidation Periods. The provisions of the Tax Allocation
Agreements will continue to govern taxable periods ending before the date
of the Deconsolidation (the "Pre Deconsolidation Periods"). Therefore,
payments or refunds may still be required by or payable to Kaiser or KACC
under the Tax Allocation Agreements for Pre Deconsolidation Periods due
to the final resolution of audits, amended returns and related matters
with respect to such Pre Deconsolidation Periods. However, Kaiser's and
KACC's bank credit agreement dated as of February 15, 1994 (the "Credit
Agreement") prohibits any payments by KACC to the Company pursuant to the
KACC Tax Allocation Agreement after February 15, 1994, however, the
Company may offset amounts owing to it against amounts owed by it under
the KACC Tax Allocation Agreement, and KACC may make certain payments
that are required as a result of audits of the Company's tax returns and
only to the extent of any amounts paid after February 15, 1994 by the
Company to KACC under the KACC Tax Allocation Agreement. To the extent
the New Kaiser Tax Group generates unused tax losses or tax credits in
Post Deconsolidation Periods, such amounts will not be available to
obtain refunds of amounts paid by Kaiser or KACC to the Company for Pre
Deconsolidation Periods pursuant to the Tax Allocation Agreements. It is
anticipated that such losses and credits will be carried forward to
offset future Federal income taxes payable by the New Kaiser Tax Group.
Any unused tax attribute carryforwards existing as of the date
of the Deconsolidation under the terms of the Tax Allocation Agreements
will be eliminated and will not be available to offset Federal income tax
liabilities of the New Kaiser Tax Group for Post Deconsolidation Periods.
Upon the filing of the MAXXAM 1993 Tax Return, the tax attribute
carryforwards of the MAXXAM Tax Group as of December 31, 1993 will be
apportioned in part to the New Kaiser Tax Group, based upon the
provisions of the relevant consolidated return regulations. It is
anticipated that the amounts of such tax attribute carryforwards
apportioned to the New Kaiser Tax Group will approximate or exceed the
amounts of tax attribute carryforwards eliminated under the Tax
Allocation Agreements. Although the amounts of tax attribute
carryforwards apportioned to the New Kaiser Tax Group will be determined
as of December 31, 1993, they are available, subject to certain
limitations, to reduce Federal income taxes payable by the New Kaiser Tax
Group for Post Deconsolidation Periods.
In 1989, KACC and the Company entered into a tax allocation
agreement (the "KACC Tax Allocation Agreement"). Pursuant to the terms
of the KACC Tax Allocation Agreement, the Company pays any consolidated
Federal income tax liability for the MAXXAM Tax Group. KACC is liable to
the Company
<PAGE> 29
for the Federal income tax liability of KACC and its subsidiaries
(collectively, the "KACC Subgroup") computed as if the KACC Subgroup were
a separate Affiliated Group which was never affiliated with the MAXXAM
Tax Group (taking into account all limitations under the Code and
regulations applicable to the KACC Subgroup), except that the KACC
Subgroup excludes interest income received or accrued on an intercompany
note issued by Kaiser in connection with a financing consummated in
December 1989 (the "KACC Subgroup's Separate Income Tax Liability"). To
the extent such calculation results in a net operating loss or a net
capital loss or credit which the KACC Subgroup could have carried back to
a prior taxable period under the principles of Sections 172 and 1502 of
the Code, the Company pays to KACC an amount equal to the tax refund to
which KACC would have been entitled (but not in excess of the aggregate
net amount previously paid by KACC to the Company for the current year
and the three prior years). If such separately calculated net operating
loss or net capital loss or credit of the KACC Subgroup cannot be carried
back to a prior taxable year of the KACC Subgroup for which the KACC
Subgroup paid its separate tax liability to the Company, the net
operating loss or net capital loss or credit becomes a loss or credit
carryover of the KACC Subgroup to be used in computing the KACC
Subgroup's Separate Income Tax Liability for future taxable years. The
same principles are applied to any consolidated or combined state or
local income tax returns filed by the MAXXAM Tax Group with respect to
KACC and its subsidiaries. Although, under Treasury regulations, all
members of the MAXXAM Tax Group, including the members of the KACC
Subgroup, are severally liable for the MAXXAM Tax Group's Federal income
tax liability for all of 1993 and applicable prior periods, under the
KACC Tax Allocation Agreement, the Company indemnifies each KACC Subgroup
member for all Federal income tax liabilities relating to taxable years
during which such KACC Subgroup member was a member of the MAXXAM Tax
Group, except for payments required under the KACC Tax Allocation
Agreement.
During 1992, under the KACC Tax Allocation Agreement, KACC made
a payment to the Company of $28.0 million in respect of the year ended
December 31, 1991. The eighth amendment dated as of January 7, 1993 (the
"Eighth Amendment") to Kaiser's and KACC's former credit agreement (the
"1989 Credit Agreement") prohibited the payment by KACC to the Company of
any additional amounts due under the KACC Tax Allocation Agreement until
December 15, 1994. Therefore, amounts payable by KACC to the Company
with respect to the year ended December 31, 1992 have not yet been paid.
KACC has recorded tax losses and tax credits for the period January 1,
1993 through June 30, 1993, and such losses and credits will be carried
back to prior taxable periods under the terms of the KACC Tax Allocation
Agreement. It is estimated that the Company owes KACC approximately $7.0
million for this period, net of amounts owed by KACC to the Company with
respect to the year ended December 31, 1992.
In 1991, the Company also entered into a tax allocation
agreement with Kaiser (the "Kaiser Tax Allocation Agreement"). Pursuant
to the terms of the Kaiser Tax Allocation Agreement, the Federal income
tax liability of Kaiser and its subsidiaries (collectively, the "Kaiser
Subgroup") is computed using the same principles used in the KACC Tax
Allocation Agreement to determine the KACC Subgroup's income tax
liability. To the extent such tax liability ("Kaiser's Separate Income
Tax Liability") for any applicable period exceeds the KACC Subgroup's
Separate Income Tax Liability for such period, Kaiser is obligated to pay
the amount of such difference to the Company. To the extent that
Kaiser's Separate Income Tax Liability for any applicable period is less
than the KACC Subgroup's Separate Income Tax Liability for such period,
the Company is obligated to pay the amount of such difference to Kaiser
(but not in excess of the aggregate net amount previously paid by Kaiser
and KACC to the Company for the current year and the three prior years).
The foregoing principles are also applied to any consolidated or combined
state or local income tax returns filed by the MAXXAM Tax Group with
respect to Kaiser. While Kaiser is severally liable for the MAXXAM Tax
Group's Federal income tax liability for all of 1993 and applicable prior
periods, pursuant to the Kaiser Tax Allocation Agreement, the Company
indemnifies Kaiser according to the same principles as those applied to
KACC Subgroup members under the KACC Tax Allocation Agreement.
<PAGE> 30
During 1992, under the Kaiser Tax Allocation Agreement, the
Company made a payment to Kaiser of $45,000 in respect of the year ended
December 31, 1991. The Company estimates it owes Kaiser in respect of
the year ended December 31, 1992 and for the period January 1, 1993
through the date of the Deconsolidation approximately $84,000 and
$42,000, respectively.
Under the current consolidated return regulations, the
Deconsolidation caused certain tax basis adjustments and the recognition
of certain types of taxable income (including amounts that were
previously deferred), none of which the Company believes to be material.
On June 30, 1993, Kaiser and KACC entered into a tax allocation
agreement (the "New Tax Allocation Agreement") effective for Post
Deconsolidation periods. The terms of the New Tax Allocation Agreement
are identical in all material respects to those of the KACC Tax
Allocation Agreement except that KACC is liable to Kaiser.
The Company and KACC have an arrangement pursuant to which they
reimburse each other for certain allocable costs associated with the
performance of services by their respective employees, and KACC also pays
to the Company amounts in respect of directors' fees for directors of
KACC who are not employees of KACC and who are directors of the Company.
During 1993, KACC paid a total of approximately $2.0 million to the
Company pursuant to such arrangements and the Company paid approximately
$0.8 million to KACC pursuant to such arrangements.
As a condition to the effectiveness of the Eighth Amendment, a
subsidiary of the Company made a loan to KACC on January 14, 1993 in the
principal amount of $15.0 million evidenced by a promissory note (the
"MAXXAM Note"). On June 30, 1993, the MAXXAM Note was exchanged for
2,132,950 $.65 Depositary Shares of Kaiser. Kaiser made a capital
contribution of the MAXXAM Note to KACC, which resulted in the
extinguishment of the MAXXAM Note.
Kaiser did not declare any dividends on its common stock during
1993.
On December 15, 1992, KACC issued a note (the "PIK Note") to a
subsidiary of the Company in the principal amount of $2.5 million,
representing the entire amount of a dividend received by such subsidiary
in respect of the shares of Kaiser's common stock which it owned. The
PIK Note bears interest, compounded semiannually, at a rate equal to 12%
per annum, and is due and payable, together with accrued interest
thereon, on June 30, 1995. KACC is not required to make any payment of
principal of or interest on the PIK Note prior to June 30, 1995.
However, to the extent not prohibited by the Credit Agreement, KACC may
be required to prepay the PIK Note upon demand. The Credit Agreement
currently prohibits the payment of principal and interest on the PIK Note
except at the maturity thereof.
In April 1989, an action was filed against the Company, MGI,
MAXXAM Properties Inc. ("MPI") and certain of the Company's directors in
the Court of Chancery of the State of Delaware, entitled Progressive
United Corporation v. MAXXAM Inc., et al., Civil Action No. 10785.
Plaintiff purports to bring this action as a stockholder of the Company
derivatively on behalf of the Company and MPI. In May 1989, a second
action containing substantially similar allegations was filed in the
Court of Chancery of the State of Delaware, entitled Wolf v. Hurwitz, et
al. (No. 10846) and the two cases were consolidated (collectively, the
"Zero Coupon Note" actions). The Zero Coupon Note actions relate to a
Put and Call Agreement entered into between MPI and Mr. Charles Hurwitz
(Chairman of the Board of the Company, MGI and MPI), as well as a
predecessor agreement (the "Prior Agreement"). Among other things, the
Put and Call Agreement provided that Mr. Hurwitz had the option (the
"Call") to purchase from MPI certain notes (or the common stock of the
Company into which they were converted) for $10.3 million. In July 1989,
Mr. Hurwitz exercised the Call and acquired 990,400 shares of the
Company's common stock. The Zero Coupon Note actions generally allege
that in entering into the Prior Agreement Mr. Hurwitz usurped a corporate
opportunity belonging to the Company, that the Put and Call Agreement
constituted a waste of corporate
<PAGE> 31
assets of the Company and MPI, and that the defendant directors breached
their fiduciary duties in connection with these matters. Plaintiffs seek
to have the Put and Call Agreement declared null and void, among other
remedies.
In May 1991, a derivative action entitled Progressive United
Corporation v. MAXXAM Inc., et al. (No. 12111) ("Progressive United")
was filed in the Court of Chancery, State of Delaware against the
Company, Federated Development Company ("Federated"), MCO Properties Inc.
("MCOP"), a wholly owned subsidiary of the Company, and the Company's
Board of Directors. The action alleges abuse of control and breaches of
fiduciary obligations based on, and unfair consideration for, the
Company's Agreement in Principle with Federated to (a) forgive payments
of principal and interest of approximately $32.2 million due from
Federated under two loan agreements entered into between MCOP and
Federated in 1987, and (b) grant an additional $11.0 million of
consideration to Federated, in exchange for certain real estate assets
valued at approximately $42.9 million in Rancho Mirage, California, held
by Federated (the "Mirada transactions"). See Note 10 to the
Consolidated Financial Statements for a description of the Exchange to
which this action and the actions referenced below relate. Plaintiff
seeks to have the Agreement in Principle rescinded, an accounting under
the loan agreements, repayment of any losses suffered by the Company or
MCOP, costs and attorneys fees.
The following six additional lawsuits, similar to the
Progressive United case, were filed in Delaware Chancery Court
challenging the now-completed Mirada transactions action has been: NL
Industries, et al. v. MAXXAM Inc., et al. (No. 12353); Kahn, et al. v.
Federated Development Company, et al. (No. 12373); Thistlethwaite, et al.
v. MAXXAM Inc., et al. (No. 12377); Glinert, et al. v. Hurwitz, et al.
(No. 12383); Friscia, et al. v. MAXXAM Inc., et al. (No. 12390); and
Kassoway, et al. v MAXXAM Inc., et al. (No. 12404). The Kahn, Glinert,
Friscia and Kassoway actions have been consolidated with the Progressive
United action into In re MAXXAM Inc./Federated Development Shareholders
Litigation (No. 12111); the NL Industries action has been "coordinated"
with the consolidated actions; the Thistlethwaite action has been stayed
pending the outcome of the consolidated actions. In January 1994, a
derivative action entitled NL Industries, Inc., et al. v. Federated
Development Company, et al. (No. 94-00630) was filed in the District
Court of Dallas County, Texas, against MAXXAM (as nominal defendant) and
Federated. This action contains allegations and seeks relief similar to
that contained in the In re MAXXAM Inc./Federated Development
Shareholders Litigation.
During July 1993, the Schwartz
Family Trust, an affiliate of Mr. Schwartz, purchased an approximate .85%
equity interest in Sam Houston Race Park, Ltd. for $200,000. At the same
time, Mr. Wade purchased an approximate .42% interest in Sam Houston Race
Park, Ltd. for $100,000. The right of Messrs. Schwartz and Wade to
purchase their interests was assigned to them by, and purchased from, a
wholly owned subsidiary of the Company. Their purchases were made at the
same time and at the same price as the Company's purchase of its equity
interest. In connection with Mr. Wade's purchase, the Company advanced
Mr. Wade $50,000 which was repaid within approximately ten days with a
cash payment of $50,000, and loaned Mr. Wade $50,000 evidenced by an
unsecured promissory note, interest on which is payable monthly at an
annual rate of 6%. In December 1993, Mr. Wade repaid $30,000 of the
outstanding principal balance of the note, leaving a balance of $20,000
outstanding. The note is payable upon the earliest to occur of July 20,
1998 or Mr. Wade's termination of employment with the Company.
During 1993, the Company and certain of its subsidiaries shared
certain administrative and general expenses with Federated. Under these
arrangements, Federated's obligation to the Company and its subsidiaries
was approximately $49,464.
During 1993, Federated and the Company shared office space
leased by the Company. The obligations of Federated relating to 1993
under such sharing arrangement amounted to $15,156.
<PAGE> 32
Mr. Levin, a director of the Company, is a partner in the law
firm of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, which provides
legal services for the Company and its subsidiaries. The Company has
been billed by such firm an aggregate of approximately $2,831,000 for
fees and approximately $235,000 for disbursements and other charges with
respect to legal services rendered by such firm during 1993 for the
Company and its subsidiaries. As a matter of practice, Mr. Levin pays to
such firm all directors' and committee fees received by him, and the firm
credits such fees against its charges for services rendered to the
Company and its subsidiaries.
In August 1990, two real estate ventures holding unimproved
real property in which Mr. Rosenberg was a general partner filed
voluntary petitions for bankruptcy under Chapter 11 of the Code in the
United States Bankruptcy Court for the Western Division of Texas. One
plan was successfully confirmed and implemented. In the second filing, a
plan has been confirmed.
On November 30, 1991, the Company reached an agreement with one
of its wholly owned subsidiaries, Bering Holdings, Inc. ("Bering
Holdings"), a Texas registered Investment Advisor. The agreement
provides for an annual management fee equal to 1% of the average value of
the accounts under management except for certain managed short-term
investments for which Bering Holdings receives 1/2 of 1% per annum. The
agreement also provides for an annual performance fee equal to 10% of the
net gain in certain of the accounts. Bering Holdings also manages
Federated investments pursuant to a similar arrangement. Management and
performance fees accrued to be paid by Federated for 1993 were
approximately $53,318 and $82,716, respectively.
In January 1994, the Company entered into a commercial guaranty
of payment (the "Guaranty") of a promissory note dated January 28, 1994,
in the original principal amount of $150,000 issued by Mr. Anthony R.
Pierno, Senior Vice President and General Counsel of the Company, to
Charter National Bank--Houston. The Guaranty is subject to an agreement
between the Company and Mr. Pierno that any payment by the Company under
the Guaranty shall be offset in like amount plus interest at 12% per
annum from the date of payment on the Guaranty to the date of payment to
the Company by Mr. Pierno. Such offset may be made from any payments due
Mr. Pierno from the Company that lawfully may be the subject of such
offset, including any payment under any compensation arrangement or
employee benefit plan. The Guaranty was entered into by the Company for
the convenience of Mr. Pierno and replaces a previous guaranty with
substantially the same terms entered into in February 1993 in respect of
a promissory note dated January 28, 1993.
Pursuant to the terms of Mr. Pierno's employment agreement with
the Company, his personal loans outstanding on the date of the agreement
are forgiven at the rate of $15,000 per year beginning March 8, 1991,
with any remaining balance being due and payable upon Mr. Pierno's
termination of employment. At the time of the agreement, the Company had
loaned an aggregate of $150,000 at 6% interest to Mr. Pierno. The
current principal balance on such loans as of March 15, 1994 was $90,000.
Such loans are payable on demand, require monthly interest payments and
are secured by real estate owned by Mr. Pierno. The agreement also
provided for up to an additional $200,000 in loans to Mr. Pierno bearing
interest at 6% per annum, with interest being payable monthly and
principal being due December 15, 1994 (with prepayments due upon the
exercise by Mr. Pierno of any SARs granted pursuant to the agreement or
employee benefit plan). All of such amount has been borrowed by
Mr. Pierno.
Pursuant to the terms of Mr. Schwartz's employment agreement,
his personal loans outstanding on the date of the agreement are forgiven
at the rate of $20,000 per year beginning March 8, 1991, with any
remaining balance being due and payable upon Mr. Schwartz' termination of
employment. The agreement also provided for additional loans to
Mr. Schwartz, all of which were received by Mr. Schwartz in 1990.
Mr. Schwartz currently has $195,000 in principal amount of loans
outstanding at 6% interest, which interest is payable monthly. $70,000
of principal on such loans is payable on demand (unless forgiven as
indicated above). In December 1993, Mr. Schwartz repaid $75,000 of the
outstanding principal balance of a loan,
<PAGE> 33
leaving a balance of $125,000 outstanding which is payable on
December 15, 1994 (with prepayments due upon the exercise of certain
SARs). The loans are secured by real estate owned by Mr. Schwartz.
The Company or its subsidiaries have made loans to certain of
the executive officers of the Company in addition to the loans described
above. As of December 31, 1993, two executive officers of the Company
not named in the Summary Compensation Table have such loans outstanding
in the aggregate amount of $161,000 at annual rates ranging from 6% to
8.63%. Generally, each such loan requires annual interest payments, is
secured by real estate owned by the officer and the principal is payable
on demand.
The Company believes that each of the transactions described
herein under "Certain Transactions" are on terms as favorable to the
Company as would have been available from unrelated parties.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Based solely upon a review of such copies of Forms 3, 4 and
5 and any amendments thereto furnished to the Company with respect to its
most recent fiscal year, and written representations from certain
reporting persons that no Forms 5 were required, the Company believes
that all filing requirements were complied with applicable to its
officers, directors and greater than ten percent beneficial owners.
OTHER MATTERS
Independent Public Accountants
The Company has appointed Arthur Andersen & Co. as its
independent public accountants through the conclusion of the audit with
respect to the Company's 1993 fiscal year. Representatives of Arthur
Andersen & Co. plan to attend the Annual Meeting of Stockholders and will
be available to answer appropriate questions. Such representatives will
also have an opportunity to make a statement at the meeting, if they so
desire.
Stockholder Proposals for the 1995 Annual Meeting of Stockholders
Stockholder proposals intended to be presented at the 1995
Annual Meeting of Stockholders must be received at the Company's
executive offices at 5847 San Felipe, Suite 2600, Houston, Texas 77057 by
January 1, 1995 in order to be included in the Company's proxy statement
and form of proxy relating to that meeting.
Other Matters
The cost of soliciting proxies in connection with the Annual
Meeting will be borne by the Company. The Company will, if requested,
reimburse banks, brokerage houses and other custodians, nominees and
certain fiduciaries for their reasonable expenses incurred in mailing
proxy material to their principals. Proxies may be solicited by
directors, officers and employees of the Company without special
remuneration. The Company has retained Corporate Investor
Communications, Inc. to assist in the distribution of proxies at an
estimated cost of approximately $4,300 (including expenses). In addition
to the use of mails, proxies may be solicited by personal interviews,
telephone or telegraph.
The persons designated to vote shares covered by management
proxies intend to exercise their judgment in voting such shares on other
matters that may properly come before the meeting. Management knows of
no matters which will be presented for action at the meeting other than
as referred to in this proxy statement.
By Order of the Board of Directors
BYRON L. WADE
Secretary
April 29, 1994
Houston, Texas
<PAGE>
Table of Contents
Notice of Annual Meeting of Stockholders
Proxy Statement
Election of Directors . . . . . . . . . . . . . . . . . . . . . . 1
The Board of Directors and
its Committees . . . . . . . . . . . . . . . . . . . . . . . 3
Proposal to Approve the MAXXAM
1994 Omnibus Employee
Incentive Plan and the
MAXXAM Non-Employee
Director Plan . . . . . . . . . . . . . . . . . . . . . . . . 4
Proposal to Approve the
MAXXAM 1994 Executive
Bonus Plan . . . . . . . . . . . . . . . . . . . . . . . . 10
Executive Officers and Directors . . . . . . . . . . . . . . . . 12
Principal Stockholders . . . . . . . . . . . . . . . . . . . . . 15
Executive Compensation . . . . . . . . . . . . . . . . . . . . . 17
Compensation Committee Report
Executive Compensation . . . . . . . . . . . . . . . . . . 23
Performance Graph . . . . . . . . . . . . . . . . . . . . . . . 27
Certain Transactions . . . . . . . . . . . . . . . . . . . . . . 28
Compliance with Section 16(a)
of the Exchange Act . . . . . . . . . . . . . . . . . . . . 33
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . 33
[MAXXAM Inc. logo]
Notice of 1994 Annual Meeting
and
Proxy Statement
Important
Please sign and date your proxy card
and promptly return it in the enclosed envelope.
<TABLE>
<S>
1. ELECTION OF DIRECTORS (a) FOR nominee listed / / WITHHOLD AUTHORITY / / Ezra G. Levin (for term expiring in 1997)
to vote for nominee
<S> <S> <S>
2. Approval of the MAXXAM 1994 Omnibus 3. Approval of the MAXXAM 1994 Non-Employee 4. Approval of the MAXXAM 1994 Executive
Employee Incentive Plan. Director Plan. Bonus Plan.
FOR / / AGAINST / / ABSTAIN / / FOR / / AGAINST / / ABSTAIN / / FOR / / AGAINST / / ABSTAIN / /
<S>
5. In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournments
or postponements thereof, hereby revoking any proxy or proxies hereto-
fore given by the undersigned. FOR / / AGAINST / / ABSTAIN / /
Address Change
PROXY DEPARTMENT and/or Comments / /
New York, N.Y. 10203-0254
Please sign exactly as your name appears at left.
If stock is held in the name of more than one person, EACH person should
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign
in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Signature
Signature if held jointly
Votes MUST be indicated
Please complete, sign and return the proxy card promptly, using the enclosed envelope. /x/ in Black or Blue ink. / /
<PAGE>
PREFERRED STOCK
MAXXAM INC.
5847 SAN FELIPE, SUITE 2600
HOUSTON, TEXAS 77057
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Charles E. Hurwitz and Anthony R. Pierno as proxies (each with power to act alone
and with power of substitution) to vote as designated on the reverse side, all shares of Class A $.05 Non-Cumulative
Participating Convertible Preferred Stock the undersigned is entitled to vote at the Annual Meeting of Stockholders of
MAXXAM Inc. to be held on May 25, 1994, and at any and all adjournments or postponements thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY THE UNDERSIGNED. IF NO CHOICE IS SPECIFIED, THE PROXY
WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES TO THE BOARD OF DIRECTORS, "FOR" THE APPROVAL OF THE MAXXAM 1994 OMNIBUS
EMPLOYEE INCENTIVE PLAN, "FOR" THE APPROVAL OF THE MAXXAM 1994 NON-EMPLOYEE DIRECTOR PLAN AND "FOR" THE APPROVAL OF THE MAXXAM
1994 EXECUTIVE BONUS PLAN, AS SET FORTH IN THE PROXY STATEMENT.
(Continued and to be signed on the reverse side)
</TABLE>
<TABLE>
<S>
1. ELECTION OF DIRECTORS (a) FOR nominee listed / / WITHHOLD AUTHORITY / / (a) Stanley D. Rosenberg (for term expiring
to vote for nominee in 1995)
(b) FOR nominee listed / / WITHHOLD AUTHORITY / / (b) Ezra G. Levin (for term expiring in 1997)
to vote for nominee
<S> <S> <S>
2. Approval of the MAXXAM 1994 Omnibus 3. Approval of the MAXXAM 1994 Non-Employee 4. Approval of the MAXXAM 1994 Executive
Employee Incentive Plan. Director Plan. Bonus Plan.
FOR / / AGAINST / / ABSTAIN / / FOR / / AGAINST / / ABSTAIN / / FOR / / AGAINST / / ABSTAIN / /
<S>
5. In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournments
or postponements thereof, hereby revoking any proxy or proxies hereto-
fore given by the undersigned. FOR / / AGAINST / / ABSTAIN / /
Address Change
PROXY DEPARTMENT and/or Comments / /
New York, N.Y. 10203-0254
Please sign exactly as your name appears at left.
If stock is held in the name of more than one person, EACH person should
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign
in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated: 1994
Signature
Signature if held jointly
Votes MUST be indicated
Please complete, sign and return the proxy card promptly, using the enclosed envelope. /x/ in Black or Blue ink. / /
<PAGE>
COMMON STOCK
MAXXAM INC.
5847 SAN FELIPE, SUITE 2600
HOUSTON, TEXAS 77057
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Charles E. Hurwitz and Anthony R. Pierno as proxies (each with power to act alone and
with power of substitution) to vote as designated on the reverse side, all shares of Common Stock the undersigned is entitled t
vote at the Annual Meeting of Stockholders of MAXXAM Inc. to be held on May 25, 1994, and at any and all adjournments or
postponements thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY THE UNDERSIGNED. IF NO CHOICE IS SPECIFIED, THE PROXY
WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES TO THE BOARD OF DIRECTORS, "FOR" THE APPROVAL OF THE MAXXAM 1994 OMNIBUS
EMPLOYEE INCENTIVE PLAN, "FOR" THE APPROVAL OF THE MAXXAM 1994 NON-EMPLOYEE DIRECTOR PLAN AND "FOR" THE APPROVAL OF THE MAXXAM
1994 EXECUTIVE BONUS PLAN, AS SET FORTH IN THE PROXY STATEMENT.
(Continued and to be signed on the reverse side)
</TABLE>
MAXXAM 1994 EXECUTIVE BONUS PLAN
I. Definitions.
The following terms have the meanings indicated unless a different
meaning is clearly required by the context.
1.1 "Affiliate" means, for purposes of Section 1.8 of this Plan,
any member of the MAXXAM Inc. or Kaiser Aluminum Corporation affiliated
groups for Federal income tax purposes under section 1504 of the Code.
1.2 "Board of Directors" means the board of directors of the
Company.
1.3 "Code" means the Internal Revenue Code of 1986, as amended and
as may be amended from time to time.
1.4 "Committee" means the Compensation Committee of the Board of
Directors or a designated subcommittee thereof.
1.5 "Company" means MAXXAM Inc., a Delaware corporation.
1.6 "Consolidated Financial Results" means net income or loss
before cumulative effect of changes in accounting principles as reported
for the Company and its subsidiaries in the Company's annual consoli-
dated statement of operations prepared in accordance with generally
accepted accounting principles.
1.7 "Earnings per Share" means net income or loss per common and
common equivalent share as reported for the Company and its subsidiaries
in the Company's annual consolidated statement of operations prepared in
accordance with generally accepted accounting principles.
1.8 "Extraordinary Transaction" means one transaction or a series
of integrated transactions carried out by the Company and/or its
Affiliates involving an acquisition or disposition of securities
(including capital stock, bonds and partnership interests) or other
assets from or to nonaffiliated entities, which securities or assets
have an aggregate fair market value greater than $100 million at the
time of the transaction or transactions.
1.9 "Participant" means an officer of the Company whose base
salary is equal to or in excess of $600,000.
1.10 "Plan" means this MAXXAM 1994 Executive Bonus Plan.
<PAGE>
II. Purpose.
The purpose of the Plan is to provide performance incentives to
each Participant, who is or may be a "covered employee" within the
meaning of Section 162(m) of the Code, while securing, to the extent
practicable, a tax deduction by the Company for payments of additional
incentive compensation to each such Participant. Any bonus compensa-
tion which may be earned under this Plan is in addition to, and in no
way affects or supplants, such Participant's salary and his or her
eligibility under the Company's discretionary bonus program.
It is the Committee's intent under this Plan to identify
those performance criteria for which each Participant is largely
responsible and the achievement of which would be
of great benefit to the Company, and to award a bonus for such
achievement, such bonus to be in addition to any other compensation
such Participant may be eligible to receive from the Company.
III. Performance Goals.
3.1 Prior to the first day of each fiscal year of the Company
(or such later date as may be permitted under regulations under
Section 162(m) of the Code), the Committee shall set specific
performance goals for each Participant for such year under
each of the following overall business criteria:
(a) Improvement in Consolidated Financial Results (which may be
either a decrease in net loss or an increase in net income);
(b) The completion, as defined in advance by the Committee, of
one or more specific business development projects identified by the
Committee;
(c) The completion of an Extraordinary Transaction, completion
being defined for this purpose to mean the approval or ratification of
such transaction(s) by resolution of the board of directors of the
Company or the relevant Affiliate and the execution by all parties to
such transaction(s) of a binding written agreement in respect thereto;
(d) Improvement in Earnings per Share (which may be either a
decrease in net loss per share or an increase in net income per
share);
(e) The achievement of a predetermined level of net income or
loss, as determined in advance by the Committee, for the principal
divisions of the Company and its subsidiaries, based upon their
respective plans for the year.
IV. Bonus Awards.
4.1 At the time that annual performance goals are set for each
Participant pursuant to Section 3.1, the Committee shall establish
with respect to each such goal a bonus opportunity for the year that
is related to such Participant's base salary at the start of the year
that takes account of the achievement of such goal; provided, however,
that the Committee shall have absolute discretion to reduce the actual
bonus payment(s) that would otherwise be payable to
<PAGE>
such Participant on the basis of achievement of any one or more of the
performance goals under any of the five categories set out in Section
3.1 above.
4.2 The bonuses hereunder for any Participant shall in no event
exceed an aggregate of $3,000,000 with respect to any fiscal year.
4.3 Bonuses determined under the Plan shall be paid to the
Participants in cash as soon as practicable following the end of the
fiscal year; provided, however, that no such payment shall be made
until the Committee has certified in writing (in the manner prescribed
under applicable regulations under the Code) that the performance
goals and any other material terms related to the award were in fact
satisfied.
4.4 In the event that a Participant retires, takes a leave of
absence or otherwise terminates his employment prior to the end of a
fiscal year end, such Participant shall receive the full amount of any
bonuses earned hereunder as of such termination date, and any bonus
amounts not determinable at such termination date shall be pro-rated
to reflect his or her actual term of service. The Committee, in its
sole discretion, may reduce or refuse to pay such prorated bonus(es).
V. Administrative Provisions.
5.1 The Plan shall be administered by the Committee, which
shall be comprised solely of two or more members of the Board of
Directors who satisfy the requirements set forth in applicable
regulations under 162(m) of the Code.
5.2 The Plan was adopted by the Board of Directors on March 30,
1994, subject to shareholder approval, and shall take effect
retroactively beginning with the fiscal year of the Company that
starts January 1, 1994. No payments shall be made under the Plan
prior to the time such approval is obtained in accordance with
applicable law. The Board of Directors may at any time terminate,
suspend or amend the Plan, in whole or part, including by adoption
of amendments deemed necessary or advisable to correct any defect or
supply an omission or reconcile any inconsistency in the Plan
so long as stockholder approval is obtained if required by Section
162(m) of the Code.
5.3 The Plan shall be governed by and construed in accordance
with the laws of the state of Texas without regard to principles of
choice of laws.
MAXXAM 1994 OMNIBUS EMPLOYEE INCENTIVE PLAN
Contents of MAXXAM 1994 Employee Incentive Plan
Section 1. Establishment, Purpose, and Legal Compliance
1.1 Establishment
1.2 Purpose
1.3 Compliance Intention
Section 2. Definitions
2.1 Definitions of Certain Terms
Section 3. Eligibility
3.1 Eligibility for Awards
3.2 No Right to Participate
Section 4. Administration
4.1 Administration
4.2 Committee Membership
4.3 Non-Uniform Determinations
4.4 Authority to Direct Issuance of Stock
4.5 Evidence of Committee Action
Section 5. Stock Subject to Plan; Types and Nature of Awards
5.1 Maximum Grant Limitations
5.2 Minimum Pricing
5.3 Lapsed Awards
5.4 Adjustment in Capitalization
5.5 Types of Awards Under Plan
5.6 Evidence of Awards
5.7 Nature of Payments
5.8 Other Payments or Awards
Section 6. Effective Date and Plan Life
6.1 Effective Date
6.2 Plan Life
Section 7. Stock Options
<PAGE>
7.1 Grant of Options
7.2 Option Price
7.3 Duration of Options
7.4 Exercise of Options
7.5 Payment
7.6 Restrictions on Stock Transferability
7.7 Termination of Employment
Section 8. Stock Appreciation Rights
8.1 Grant of Stock Appreciation Rights
8.2 Value of SARs
8.3 Effect of Exercise
8.4 Exercise of SARs
8.5 Limit on Appreciation
8.6 Rule 16b-3 Requirements
8.7 Termination of Employment
Section 9. Performance Units and Performance Shares
9.1 Grant of Performance Units or Performance Shares
9.2 Value of Performance Units and Performance Shares
9.3 Form and Timing of Payment
9.4 Termination of Employment
Section 10. Restricted Stock
10.1 Grant of Restricted Stock
10.2 Transferability
10.3 Other Restrictions
10.4 Rights of Grantee
10.5 Termination of Employment
Section 11. Unrestricted Stock
11.1 Grant of Unrestricted Stock
Section 12. Beneficiary Designation
12.1 Beneficiary Designation
Section 13. Rights of Employees
13.1 Employment
Section 14. Amendment, Modification, and Termination of Plan
<PAGE>
14.1 Amendment, Modification, and Termination of Plan
14.2 Amendment of Plan Agreements
14.3 Rights of Grantees
Section 15. Tax Withholding
15.1 Tax Withholding
Section 16. Required Notifications by Grantee
16.1 Notification by Grantee of Election Under Section 83(b) of
the Code
16.2 Notification by Grantee Upon Disqualifying Disposition
Prior to Expiration of Holding Periods Under Section 421(b) of the
Code
Section 17. Indemnification
17.1 Indemnification
Section 18. Nonassignability
18.1 Nonassignability
Section 19. Requirements of Law; Consents
19.1 Requirements of Law
19.2 Consents to Plan Actions
19.3 Nature of Consents
19.4 Governing Law
<PAGE>
MAXXAM 1994 OMNIBUS EMPLOYEE INCENTIVE PLAN
Section 1. Establishment, Purpose, and Legal Compliance.
1.1 Establishment. MAXXAM Inc., a Delaware corporation (the
"Company"), hereby establishes the "MAXXAM 1994 OMNIBUS EMPLOYEE
INCENTIVE PLAN" (the "Plan"). The Plan permits the grant of certain
rights in respect of or measured by the value of the Stock of the
Company, including stock options, stock appreciation rights,
performance units, performance shares, restricted stock, or
unrestricted stock, to certain officers and selected key employees
of the Company and its subsidiaries.
1.2 Purpose. The purpose of the Plan is to advance the
interests of the Company, by encouraging and providing for the
acquisition of equity interests (or rights measured by the market
value of the equity) in the success of the Company by key employees,
by providing additional incentives and motivation toward enhancing
the long-term performance of the Company, and by enabling the
Company to attract and retain the services of key employees upon
whose judgment, interest, skills and special efforts the successful
conduct of its operations is largely dependent.
1.3 Compliance Intention. In formulating and adopting the Plan,
in submitting it for approval of the stockholders of the Company
and in the administration of the Plan, it is the intention of the
Board of Directors of the Company that the Plan comply with the
provisions of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 (hereafter "Rule 16b-3") as it may apply to
any Grantee, and that certain Awards may be structured so that
they comply with Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"). It is also the intention
of the Board that grants identified as "Incentive Stock Options" shall
qualify for treatment as "incentive stock options" under the
provisions of Section 422 of the Code.
Section 2. Definitions.
2.1 Definitions of Certain Terms. Whenever used herein, the
following terms shall have the respective meanings set forth below
unless the context clearly requires otherwise:
(a) "Award" means any Option, Stock Appreciation Right,
Performance Unit, Performance Share, Restricted Stock, or Unrestricted
Stock granted under this Plan. An Award may also be called a "Grant."
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Compensation Committee, or designated
subcommittee thereof, of the Board, from time to time serving.
(e) "Common Stock" means the Common Stock, par value $0.50 per
share, of the Company.
<PAGE>
(f) "Company" means MAXXAM Inc., a Delaware corporation.
(g) "Disability" means disability as defined in the Company's
pension plan for salaried employees.
(h) "Employee" means a regular full time salaried employee
(including an officer or director who is also an employee other than a
director who serves on the Committee) of the Company or a subsidiary
(other than Kaiser Aluminum Corporation and its subsidiaries).
(i) "Fair Market Value" means the closing price of the Common
Stock or Preferred Stock, as the case may be, as reported by the
American Stock Exchange on a particular date. In the event
that there are no transactions in such Stock on such date, the Fair
Market Value shall be determined as of the immediately preceding
date on which there were such transactions, provided that such
date is not more than ten (10) business days preceding the
applicable date. If there were no such transactions within such
period, the Fair Market Value shall be determined by the
Committee.
(j) "Grant" shall have the same meaning as "Award."
(k) "Grantee" means an individual who holds an Award that has
not expired or been exercised or cancelled.
(l) "Option" means the right to purchase Stock at a stated price
for a specified period of time. For purposes of the Plan an Option
may be either (i) an "incentive stock option" within the meaning of
Section 422 of the Code (herein called an "Incentive Stock Option")
or (ii) a nonstatutory or non-qualified stock option.
(m) "Participant" shall have the same meaning as "Grantee."
(n) "Performance Unit" means a right to receive a payment
related to the performance of the Company, as determined by the
Committee.
(o) "Performance Share" means a right, related to the
performance of the Company, to receive a payment equal to the value
of a share of Stock, as determined by the Committee.
(p) "Period of Restriction" means the period during which
shares of Restricted Stock are restricted pursuant to Section 10.2
or 10.3 of the Plan.
(q) "Restricted Stock" means Stock granted to a Participant
pursuant to Section 10.1 of the Plan.
<PAGE>
(r) "Retirement" (including "Early Retirement" and "Normal
Retirement") means termination of employment for retirement under the
terms of the Company's pension plan for salaried employees.
(s) "Rule 16b-3" means the rule thus designated as promulgated
under the Securities Exchange Act of 1934.
(t) "Stock" means the capital stock of the Company, consisting
of the Common Stock and Class A $.05 Non Cumulative Participating
Convertible Preferred Stock ("Preferred Stock"), of which there
were at December 31, 1993 28,000,000 and 12,500,000 shares authorized
and approximately 8,698,464 and 678,239 shares outstanding,
respectively.
(u) "Stock Appreciation Right" and "SAR" mean the right to
receive a payment in respect of the appreciation on a stated number
of shares of Stock, as more fully set forth in Section 8.
(v) "Unrestricted Stock" means Common Stock sold or granted to a
Participant which, although its resale may be subject to legal
restrictions or reporting requirements, is free of any legend on its
face and is not subject to transfer restrictions imposed by the
Company.
Section 3. Eligibility.
3.1 Eligibility for Awards. Grants or Awards under the Plan may be
made to such Employees (including directors who are Employees, other than
Committee members) as may be selected by the Committee in its sole
discretion, including but not limited to, from among those Employees who
may be from time to time recommended for an Award by the Chief Executive
Officer of the Company.
3.2 No Right to Participate. No Employee, regardless of position
or responsibility, shall have any entitlement or right to cause any Award
or Grant under this Plan to be made to such Employee. The making of an
Award or Grant to an Employee under this Plan shall not entitle such
Employee to any subsequent or additional Award or Grant. No member of
the Committee shall be eligible for participation in the Plan.
Section 4. Administration.
4.1 Administration. The Committee shall be responsible for the
administration of the Plan. The Committee, by majority action thereof, is
authorized to interpret the Plan, to prescribe, amend, and rescind rules
and regulations relating to the Plan, to provide for conditions and
assurances deemed necessary or advisable to protect the interests of the
Company, and to make all other determinations necessary or advisable for
the administration of the Plan, but only to the extent not contrary to
the express provisions of the Plan (except that the Committee may correct
any defect, supply any omission and reconcile any inconsistency in the
Plan). Determinations, interpretations, or other actions made or taken
by the Committee
<PAGE>
pursuant to the provisions of the Plan shall be final and binding and
conclusive for all purposes and upon all persons whomsoever. The Board,
from which the Committee derives its authority hereunder, may act as to
any matter concerning the Plan, in the place of the Committee at any
time.
4.2 Committee Membership. The Committee shall consist of at least
three members of the Board (or such smaller number as may be permitted
under Rule 16b-3) appointed by and serving at the pleasure of the Board.
To the extent necessary for compliance with Rule 16b-3, members of the
Committee shall be "disinterested" within the meaning thereof. To the
extent necessary for compliance with section 162(m)(4)(C) of the Code,
members of the Committee shall be "outside directors" within the meaning
thereof.
4.3 Non-Uniform Determinations. The Committee's determinations
under the Plan need not be uniform and may be made by it selectively
among persons who receive, or are eligible to receive, Awards under the
Plan (whether or not such persons are similarly situated). Without
limiting the generality of the foregoing, the Committee shall be
entitled, among other things, to make non-uniform and selective
determinations, and to enter into non-uniform and selective Plan
agreements, as to (a) the persons to receive Awards under the Plan or (b)
the terms and provisions of Awards under the Plan.
4.4 Authority to Direct Issuance of Stock. By their adoption of
this Plan, the Board does authorize and direct the Committee to issue the
Stock pursuant to the terms of such Grants and Awards as may be made
under this Plan.
4.5 Evidence of Committee Action. Any action of the Committee may
be taken by a writing signed by a majority of the Committee members. Any
such written action shall be as effective as if taken at a meeting of the
Committee by resolution duly adopted upon a vote of the Committee.
<PAGE>
Section 5. Stock Subject to Plan; Types and Nature of Awards.
5.1 Maximum Grant Limitations. The total number of shares of Stock
subject to issuance in respect of Awards under the Plan may not exceed
1,000,000 shares of Common Stock and 1,000,000 shares of Preferred Stock
subject to adjustment upon occurrence of any of the events indicated in
Section 5.4. Of this total number of shares, up to an aggregate of
500,000 shares of each class may be subject to issuance in connection
with exercise of Incentive Stock Options. The shares to be delivered
under the Plan may consist, in whole or in part, of shares reserved for
issuance under this Plan or authorized but unissued shares not reserved
for any other purpose or stock acquired by the Company for purposes of
the Plan.
The maximum number of shares of each class of Stock for which
Options or Stock Appreciation Rights may be granted under this Plan to
any one Participant during any three-year period is 300,000, subject to
adjustments in accordance with the provisions of Section 5.4 hereof.
5.2 Minimum Pricing. No Award or Grant of any Option, SAR, share,
unit, or other rights made pursuant to this Plan may establish a price
for the Stock (including but not limited to an Option exercise price, a
SAR appreciation base, or a valuation of the Stock for payout purposes)
which is less than the par value of the Stock.
5.3 Lapsed Awards. Subject to the provisions of Section 5.1 above,
if any Award granted under the Plan terminates, expires or lapses for any
reason, any shares subject to such Award again shall be available for the
grant of an Award.
5.4 Adjustment in Capitalization. In the event of any change in
the outstanding shares of Stock that occurs after ratification of the
Plan by the stockholders of the Company by reason of a Stock dividend or
split, recapitalization, merger, consolidation, combination, exchange of
shares, or other similar corporate change, the number of shares of Stock
available for issuance hereunder in the aggregate and subject to each
outstanding Award, the individual maximum set forth in Section 5.1, and
the exercise or base price of each outstanding Award, shall be equitably
adjusted (provided, however, that fractional shares shall be rounded to
the nearest whole share) by the Committee as appropriate to reflect such
changed capitalization. The Committee's determination shall be
conclusive. In the event of any such adjustment in capitalization, the
number and type of shares of Restricted Stock or Unrestricted Stock
subject to Grants then outstanding under the Plan shall be subject to the
same changes and adjustments, if any, as affect other holders of the
Company's Stock.
5.5 Types of Awards Under Plan. Awards may be made under the Plan
in the form of (a) Incentive Stock Options, (b) nonstatutory or
nonqualified Stock Options, (c) Stock Appreciation Rights or SARs, (d)
Performance Units or Performance Shares, (e) Restricted Stock and (f)
Unrestricted Stock.
5.6 Evidence of Awards. Each Award or Grant made under the Plan
shall be evidenced by a writing ("Plan Agreement") in the form of an
agreement with the Grantee which shall set forth the number of shares of
Stock subject to the Award, the restrictions, vesting rate or
<PAGE>
schedule, exercise or base price, and such other conditions or terms of
the Award as the Committee may in its sole discretion deem necessary or
desirable. By acceptance of an Award, the Grantee thereby agrees to such
terms and conditions and to the terms of this Plan thereto pertaining.
5.7 Nature of Payments. Any and all Grants or Awards and issuances
of shares of Stock under the Plan shall be in consideration of services
performed for the Company by the Grantee. All such Grants and issuances
shall constitute a special incentive payment to the Grantee and shall not
be taken into account in computing the amount of salary or compensation
of the Grantee for the purpose of determining any benefits under any
pension, retirement, supplemental retirement, bonus, life insurance or
other benefit plan of the Company or under any agreement between the
Company and the Grantee, unless such plan or agreement specifically
provides otherwise.
5.8 Other Payments or Awards. Nothing contained in the Plan shall
be deemed in any way to limit or restrict the Company from making any
award or payment to any person under any other plan, arrangement or
understanding, whether now existing or hereafter in effect.
Section 6. Effective Date and Plan Life.
6.1 Effective Date and Effectiveness of Initial Grants. The Plan
was adopted by the Board as of March 30, 1994, subject to approval by the
Company's stockholders. All Awards made under the Plan prior to such
approval are subject in their entirety to such approval. If stockholder
approval is not obtained within one year from adoption by the Board, the
Plan shall terminate on such date and no Awards shall be deemed to have
been made under the Plan. In such event, to the extent provided in the
applicable Plan Agreement an award may be deemed to have been made as an
ad hoc grant by the Board.
6.2 Plan Life. The Plan shall remain in effect, subject to the
right of the Board to earlier terminate the Plan pursuant to Section 15
hereof, until December 31, 2003, and no Grant or Award hereunder may
thereafter be made. Notwithstanding the termination of the Plan, all
Awards made under the Plan prior to its termination shall remain in
effect until such Awards shall have been exercised, satisfied or
terminated in accordance with the terms and provisions of the Plan and
the terms of such Awards as set forth in the applicable Plan Agreements
evidencing the Awards.
Section 7. Stock Options.
7.1 Grant of Options. Options may be granted to Participants at
any time and from time to time as shall be determined by the Committee.
The Committee shall have complete discretion in determining the number of
Options granted to any Participant and the terms thereof, subject to the
provisions of the Plan. The Committee may grant any type of Option to
purchase Stock that is permitted by law at the time of grant. However,
no Incentive Stock Options shall be granted to any person who owns,
directly or indirectly, Stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company
except as provided in Section 422(c)(5) of the Code. To the extent that
the aggregate Fair Market Value
<PAGE>
(determined as of the time the Option is granted) of the stock with
respect to which Incentive Stock Options are first exercisable by any
Employee during any calendar year shall exceed $100,000, or such higher
amount as may be permitted from time to time under section 422 of the
Code, such options shall be treated as nonqualified stock options.
Nothing in this Section 7 of the Plan shall be deemed to prevent the
Grant of nonstatutory or non-qualified stock options in amounts which
exceed the maximum established by Section 422 of the Code.
7.2 Option Price. No Incentive Stock Option shall be granted
pursuant to the Plan at an option price that is less than the Fair Market
Value of the Stock on the date the Incentive Stock Option is granted.
7.3 Duration of Options. Each Option shall expire at such time as
the Committee shall determine at the time it is granted, provided,
however, that no Incentive Stock Option shall be exercisable later than
ten years from the date of grant.
7.4 Exercise of Options. Options granted under the Plan shall vest
and become exercisable at such times and be subject to such restrictions
and conditions as the Committee shall in each instance approve, which
need not be the same for all Participants. However, no portion of any
Option shall vest before the first anniversary of the date of grant.
Each Option which is intended to qualify as an Incentive Stock Option
shall comply with the applicable provisions of the Code pertaining to
such Options.
7.5 Payment. Any written notice of exercise of an Option shall be
accompanied by payment for the shares being purchased. Such payment
shall be made: (a) by certified or official bank check (or the
equivalent thereof acceptable to the Company) for the full option
exercise price; or (b) with the consent of the Committee, by delivery of
shares of Common Stock acquired at least six months prior to the option
exercise date and having a Fair Market Value (determined as of the
exercise date) equal to all or part of the Option exercise price and a
certified or official bank check (or the equivalent thereof acceptable to
the Company) for any remaining portion of the full Option exercise
price; or (c) at the discretion of the Committee and to the extent
permitted by law, by such other provision, consistent with the terms of
the Plan, as the Committee may from time to time prescribe. Shares of
Stock owned through employee benefit plans of the Company may be used to
make purchase payments if no adverse tax consequences to either the
Company or such plans would result. The proceeds from payment of Option
exercise prices shall be added to the general funds of the Company and
shall be used for general corporate purposes.
7.6 Restrictions on Stock Transferability. The Committee may
impose such restrictions on any shares of Stock acquired pursuant to the
exercise of an Option under the Plan as it shall deem advisable, which
may be in addition to any such restrictions required by law.
7.7 Termination of Employment. In the event the employment of a
Participant is terminated for cause, any Option held by such Participant
shall terminate immediately. In the event employment terminates for any
other reason, the exercisability of any Option held by the Participant
shall be governed by the applicable Plan Agreement, subject to the
Committee's authority to amend such Agreement as set forth in Section
14.2. If an Incentive Stock Option
<PAGE>
is not exercised within the period prescribed in Section 422 of the Code,
it shall be treated and honored by the Company as a nonstatutory stock
option for the remainder of its allowable exercise period.
Section 8. Stock Appreciation Rights.
8.1 Grant of Stock Appreciation Rights. Stock Appreciation Rights
("SARs") may be granted to Participants at any time and from time to time
as shall be determined by the Committee. The Committee shall have
complete discretion in determining the number of SARs granted to any
Participant and the terms thereof, subject to the provisions of the Plan.
A SAR may be granted at the discretion of the Committee either in
connection with or independently of a grant of Options, including in
connection with previously awarded Options to which SARs did not relate
at the time of grant.
8.2 Value of SARs. The Grantee of a SAR shall have the right,
subject to the terms of the Plan and the applicable Plan Agreement, to
receive from the Company an amount equal to (a) the excess of the Fair
Market Value of a share of Stock on the date of exercise of the SAR over
(b) the Fair Market Value of a share of Stock on the date of grant (or
over the Option exercise price if the Stock Appreciation Right is granted
in connection with an Option), multiplied by (c) the number of shares of
Stock with respect to which the SAR is exercised. The Committee in its
discretion shall determine whether payment upon exercise of a SAR will be
made in cash or Stock, or in a combination thereof.
8.3 Effect of Exercise. Upon the exercise of a SAR granted in
connection with an Option, the number of shares subject to the Option
shall be reduced by the number of shares with respect to which the SAR is
exercised. Upon the exercise of an Option in connection with which a SAR
has been granted, the number of shares subject to the SAR shall be
reduced by the number of shares with respect to which the Option is
exercised.
8.4 Exercise of SARs. SARs granted in connection with Options may
be exercised for all or part of the shares of Stock subject to the
related Option. The SAR may be exercised only with respect to the shares
of Stock for which its related Option is then exercisable. Option shares
with respect to which the SAR shall have been exercised, shall not be
deemed to have lapsed and may not be subject again to an Award under this
Plan. SARs granted independent of Options may be exercised upon whatever
terms and conditions the Committee, in its sole discretion, imposes upon
each grant; provided, however, that no SAR may be exercisable wholly or
in part before the first anniversary of the date of grant.
8.5 Limit on Appreciation. At the time of Grant, but not
thereafter, the Committee may establish in its sole discretion, a maximum
amount per share which will be payable upon exercise of a SAR.
8.6 Rule 16b-3 Requirements. Notwithstanding any other provision
of the Plan, the Committee may impose such conditions on exercise of a
SAR (including, without limitation, by limiting the time of exercise to
specified periods) as may be required to satisfy any requirement, from
time to time existing, of Rule 16b-3 (or any successor rule).
<PAGE>
8.7 Termination of Employment. In the event the employment of a
Participant is terminated for cause, any SAR held by such Participant
shall terminate immediately. In the event employment terminates for any
other reason (including retirement), the exercisability of any SAR held
by the Participant shall be governed by the applicable Plan Agreement,
subject to Section 8.4 and to the Committee's authority to amend such
Agreement as set forth in Section 14.2.
Section 9. Performance Units and Performance Shares.
9.1 Grant of Performance Units or Performance Shares. Performance
Units or Performance Shares may be granted to Participants at any time
and from time to time as shall be determined by the Committee. The
Committee shall have complete discretion in determining the number of
Performance Units or Performance Shares granted to any Participant and
the terms thereof, subject to the provisions of the Plan.
9.2 Value of Performance Units and Performance Shares. Each
Performance Unit shall have such initial value, if any, as may be
specified by the Committee at the time the grant is made and each
Performance Share initially shall represent one share of Stock or such
other unit or value provided by the Committee at the time the Performance
Share is awarded. The Committee shall set performance goals in its
discretion which, depending on the extent to which they are met, will
determine the ultimate value of the Performance Unit or Performance Share
to the Participant. The time period during which the performance goals
must be met shall be called a performance period, and also is to be
determined by the Committee. After a performance period has ended, the
holder of a Performance Unit or Performance Share shall be entitled to
receive the value thereof as determined by the extent to which such
performance goals have been met.
9.3 Form and Timing of Payment. Payment pursuant to Section 9.2
shall be in cash, Stock (restricted or unrestricted), or a combination
thereof as determined by the Committee. Payment may be made in a lump
sum or installments as prescribed by the Committee at the time of grant.
If any payment is to be made on a deferred basis, the Committee may
provide for the accrual of dividend equivalents or interest during the
deferral period.
9.4 Termination of Employment. In the event the employment of a
Participant is terminated for cause, any Performance Unit or Performance
Share held by such Participant shall terminate immediately. In the event
employment terminates for any other reason, the exercisability of any
Performance Unit or Performance Share held by the Participant shall be
governed by the applicable Plan Agreement, subject to the Committee's
authority to amend such Agreement as set forth in Section 14.2.
Section 10. Restricted Stock.
10.1 Grant of Restricted Stock. The Committee, at any time and
from time to time, may grant shares of Restricted Stock under the Plan to
such Participants and in such amounts as it shall determine. The
Committee shall have complete discretion in determining the number of
such shares granted to any Participant and the terms of such Grant,
subject to the provisions
<PAGE>
of the Plan. In the event that the shares granted are newly issued, the
Participant shall pay to the Company an amount no less than the par value
thereof.
10.2 Transferability. The shares of Restricted Stock granted
hereunder may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated prior to the passage of such period of time, or
the satisfaction of such conditions, as may be specified by the Committee
in its sole discretion and set forth in the applicable Plan Agreement.
10.3 Other Restrictions. The Committee may impose such other
restrictions on any shares of Restricted Stock granted pursuant to the
Plan as it may deem advisable including, without limitation, restrictions
intended to comply with applicable Federal or state securities law, and
may legend the certificates representing Restricted Stock to give
appropriate notice of such restrictions. Unless the Committee shall
otherwise determine, any certificate evidencing shares of Restricted
Stock shall be held by the Company until such shares are free of all
restrictions specified in the applicable Plan Agreement.
10.4 Rights of Grantee. A Grantee of Restricted Stock shall have
the rights of a stockholder with respect thereto, subject to the
nontransferability and forfeiture provisions set forth in the applicable
Plan Agreement; provided, however, that any ordinary dividends which
become payable during the Period of Restriction shall be paid to the
Company.
10.5 Termination of Employment. In the event the employment of a
Participant is terminated for cause, any shares of Restricted Stock held
by such Participant shall be forfeited and returned to the Company
immediately. In the event employment terminates for any other reason,
the vesting of shares of Restricted Stock held by the Participant shall
be governed by the applicable Plan Agreement, subject to the Committee's
authority to amend such Agreement as set forth in Section 14.2. Upon the
forfeiture of any Restricted Shares, the Company shall repay to the
Participant any amount paid for such shares.
<PAGE>
Section 11. Unrestricted Stock.
11.1 Grant of Unrestricted Stock. The Committee may grant (either
directly, as a payout medium for other rights granted under the Plan or
in exchange for other rights relinquished by a Participant) shares of
Stock free of restrictions under the Plan, to such Participants and in
such amounts as the Committee shall determine in its sole discretion. In
the event that the shares granted are newly issued, the Participant shall
pay to the Company an amount no less than the par value thereof.
Section 12. Beneficiary Designation.
12.1 Beneficiary Designation. Each Participant under the Plan may
name, from time to time, any beneficiary or beneficiaries (who may be
named contingently or successively) to whom any benefit under the Plan is
to be paid in case of his/her death before he/she receives any or all of
such benefit. Each designation will revoke all prior designations by the
same Participant, shall be in a form prescribed by the Committee, and
will be effective only when filed by the Participant in writing with the
Company during his/her lifetime. In the absence of any such designation,
benefits remaining unpaid at the Participant's death shall be paid to
his/her estate.
Section 13. Rights of Employees.
13.1 Employment. Nothing in the Plan shall interfere with or limit
in any way the right of the Company to terminate any Participant's
employment at any time, nor confer upon any Participant any right to
continue in the employ of the Company.
Section 14. Amendment, Modification, and Termination of Plan.
14.1 Amendment, Modification, and Termination of Plan. The Board
at any time may suspend, discontinue or terminate, and from time to time
may amend, revise or modify the Plan, provided, however, stockholder
approval shall be required to the extent necessary for compliance with
Rule 16b-3 or with Section 162(m) or 422 of the Code.
14.2 Amendment of Plan Agreements. The Committee may amend any
outstanding Plan Agreement, including, without limitation, by amendment
which would (a) accelerate the time or times at which an Award becomes
unrestricted or may be exercised, or (b) waive or amend any goals,
restrictions or conditions set forth in the Agreement, or (c) extend the
scheduled expiration date of the Award.
14.3 Rights of Grantees. No amendment, revision, modification,
suspension, discontinuance or termination of the Plan shall in any manner
adversely affect any Award theretofore granted under the Plan, without
the consent of the Grantee.
Section 15. Tax Withholding.
<PAGE>
15.1 Tax Withholding. The Company shall have the power to
withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local withholding tax
requirements on any Award under the Plan. To the extent permissible
under applicable tax, securities, and other laws, the Committee may, in
its sole discretion, permit the Participant to satisfy a tax withholding
requirement by directing the Company to apply shares of Stock to which
the Participant is entitled pursuant to an Award. The Committee may
impose such conditions on such withholding (including, without
limitation, by limiting the time of exercise to specific periods) as may
be necessary to satisfy the requirements of Rule 16b-3.
Section 16. Required Notifications by Grantee.
16.1 Notification by Grantee of Election Under Section 83(b) of the
Code. If any Grantee shall, in connection with an Award, make an
election permitted under Section 83(b) of the Code (i.e., an election to
include in gross income in the year of transfer the amounts specified in
Section 83(b) of the Code), such Grantee shall notify the Company of such
election within 10 days of filing such election with the Internal Revenue
Service, in addition to any filing and notification required pursuant to
regulations issued under the authority of Code Section 83.
16.2 Notification by Grantee Upon Disqualifying Disposition Prior
to Expiration of Holding Periods Under Section 421(b) of the Code. Each
Plan Agreement with respect to an Incentive Stock Option shall require
the Grantee to notify the Company of any disposition of shares of Common
Stock issued pursuant to the exercise of such Option under the
circumstances described in Section 421(b) of the Code (relating to
certain disqualifying dispositions of shares acquired by exercise of the
Option before expiration of the applicable holding periods), within 10
days of such disposition.
<PAGE>
Section 17. Indemnification.
17.1 Indemnification. Each person who is or shall have been a
member of the Committee or of the Board shall be indemnified and held
harmless by the Company against and from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by him/her in
connection with or resulting from any claim, action, suit, or proceeding
to which he/she may be a party or in which he/she may be involved by
reason of any action taken or failure to act under the Plan and against
and from any and all amounts paid by him/her in settlement thereof, with
the Company's approval, or paid by him/her in satisfaction of any
judgment in any such action, suit, or proceeding against him/her,
provided he/she shall give the Company an opportunity, at its own
expense, to handle and defend the same before he/she undertakes to handle
and defend it on his/her own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's
Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or
any power that the Company may have to indemnify them or hold them
harmless.
Section 18. Nonassignability.
18.1 Nonassignability. To the extent necessary to comply with Rule
16b-3 and with Section 422 of the Code, no Award or right granted to any
person under the Plan or under any Plan Agreement shall be assignable or
transferable other than by will or by the laws of descent and
distribution. All rights granted under the Plan or any Plan Agreement
shall be exercisable during the life of the Grantee only by the Grantee
or the Grantee's legal representative.
Section 19. Requirements of Law; Consents.
19.1 Requirements of Law. The granting of Awards and the issuance
of shares of Stock upon the exercise of an Option shall be subject to all
applicable laws, rules, and regulations, such approvals by any
governmental agencies or national securities exchanges as may be
required.
19.2 Consents to Plan Actions. If the Committee shall at any time
determine that any Consent (as hereinafter defined) is necessary or
desirable as a condition of, or in connection with, the granting of any
Award under the Plan, the issuance or purchase of shares or other rights
thereunder, or the taking of any other action thereunder (each such
action being hereinafter referred to as a "Plan Action"), then such Plan
Action shall not be taken, in whole or in part, unless and until such
Consent shall have been effected or obtained to the full satisfaction of
the Committee.
19.3 Nature of Consents. The term "Consent" as used herein with
respect to any Plan action means (a) any and all listings, registrations
or qualifications in respect thereof upon any securities exchange or
under any Federal, state or local law, rule or regulation, (b) any and
all written agreements and representations by the Grantee with respect to
the disposition of shares, or with respect to any other matter, which the
Committee shall deem necessary or desirable to comply with the terms of
any such listing, registration or qualification or to obtain an exemption
from the requirement that any such listing, qualification or registration
be made and 9(c) any and
<PAGE>
all consents, clearances and approvals in respect of a Plan action by any
governmental or other regulatory bodies.
19.4 Governing Law. The Plan, and all agreements hereunder, shall
be construed in accordance with and governed by the laws of the State of
Texas.
MAXXAM INC.
1994 Non-Employee Director Stock Plan
1. Purpose. The 1994 Non-Employee Director Stock Plan (the
"Plan") is intended to benefit MAXXAM Inc. (the "Company") by offering
non-employee directors of the Company (the "Eligible Directors") an
opportunity to become owners of the Common Stock, $ .50 par value, of the
Company (the "Stock") and thereby to increase their proprietary interest
in the success of the Company.
2. Administration. The terms of the stock options to be awarded
under the Plan (the "Options") are set forth herein and may not be varied
other than by amendment of the Plan in accordance with Paragraph 16. To
the extent that any administrative action is required in connection with
the Plan, such action shall be taken by the Board of Directors of the
Company (the "Board").
3. Available Shares. The total amount of the Stock with respect
to which Options may be granted under this Plan shall not exceed 35,000
shares, subject to adjustment in accordance with the provisions of
Paragraph 15 hereof. Such shares of Stock may be treasury shares or
authorized but unissued shares of Stock. In the event that any
outstanding Option for any reason shall expire or is terminated or
cancelled, the shares of Stock allocable to the unexercised portion of
such Option may again be subject to Options under the Plan.
4. Eligibility for Stock Options. Options shall be granted under
the Plan to every individual who is an Eligible Director and shall not be
granted to any other individual. No Options shall be granted under the
Plan subsequent to December 31, 2003.
5. Option Grant Size and Grant Dates.
(a) Initial Grants. An Option to purchase 500 shares of Stock
(as adjusted pursuant to Paragraph 15) shall be granted to each Eligible
Director the day following the later of the Annual Meeting at which this
Plan is approved by stockholders of the Company or the first Annual
Meeting after such Eligible Director is first elected or appointed by the
Board to be a director (an "Initial Grant"); provided, that if an
Eligible Director who previously received an Initial Grant terminates
service as a director and is subsequently elected or appointed to the
Board, such director shall not be eligible to receive a second Initial
Grant, but shall be eligible to receive only Annual Grants as provided in
Paragraph 5(b), beginning with the Annual Meeting held during the fiscal
year immediately following the year in which such director is elected or
appointed.
(b) Annual Grants. - An Option to purchase 300 shares (as
adjusted pursuant to Paragraph 15) shall be granted each year, the day
following the Annual Meeting, to each director who is an Eligible
Director at such time (except as provided in Paragraph 5(a)) and who is
not then receiving an Initial Grant (each, an "Annual Grant").
<PAGE>
6. Option Price; Fair Market Value. The price at which shares of
Stock may be purchased pursuant to an Option (the "Option Price") shall
be the fair market value of the shares of Stock on the date the Option is
granted. For all purposes of this Plan, the "fair market value" of the
Stock shall be the closing price of the Stock as reported by the American
Stock Exchange for the date of the grant. In the event that there are no
Stock transactions on such date, the fair market value shall be
determined as of the immediately preceding date on which there were
Stock transactions.
7. Duration of Options. The term of each Option shall be ten
years, and no Option shall be exercisable after the expiration of ten
years from the date such Option is granted.
8. Amount Exercisable. Each Option granted under the Plan shall
become cumulatively exercisable as to 25 percent of the shares of Stock
subject thereto on each of the first, second, third and fourth
anniversaries of the date of grant. In the event that an optionee's
service as a director of the Company terminates on account of death, or
terminates for any other reason on or after his sixty-fifth birthday, any
Option that was granted to him at least six months prior to the date of
such termination of service shall become fully vested as of such date.
An Option may be exercised from time to time for all or any part of the
shares as to which it is then exercisable.
9. Exercise of Options. Options shall be exercised by the
delivery of written notice to the Secretary of the Company setting forth
the number of shares of Stock with respect to which the Option is to be
exercised, together with payment of the Option Price of such shares of
Stock in the form of cash, wire transfer, certified check, bank draft or
postal or express money order payable to the order of the Company (the
"Acceptable Funds"), or at the election of the optionee, by delivery of
shares of Stock owned by the optionee for at least six months prior to
the exercise date and having a fair market value (determined in
accordance with Paragraph 6, as of the date of exercise) equal to part or
all of the Option Price together with Acceptable Funds for any remaining
portion of the Option Price. Whenever payment is made by delivery of
shares of Stock theretofore owned by the optionee, the optionee shall
deliver to the Company certificates registered in the name of such
optionee representing shares of Stock legally and beneficially owned by
such optionee, free of all liens, claims, and encumbrances of every kind,
accompanied by stock powers duly endorsed in blank. Notice of exercise
may be delivered in person or may be sent by mail, in which case delivery
shall be deemed made on the date such notice is received. As promptly as
practicable after receipt of such written notification and payment, the
Company shall deliver to the optionee certificates for the number of
shares with respect to which the Option has been so exercised, issued in
the optionee's name.
10. Transferability of Options. Options shall not be transferable
by the optionee other than by will or under the laws of descent and
distribution, and shall be exercisable, during the optionee's lifetime,
only by the optionee or his legal guardian or representative.
11. Termination of Directorship of Optionee. If, before the
scheduled expiration date of an Option, the optionee ceases to be a
director of the Company for any reason (including
<PAGE>
death), such Option shall terminate on the earlier of the scheduled
expiration date or the first anniversary of the date the optionee ceases
to be a director. Prior to such termination of the Option, it may be
exercised (by the optionee or, after his death, by his executor or
administrator or other person then having the right of exercise) to the
extent that it was exercisable at the time the optionee ceased to be a
director of the Company, determined pursuant to Paragraph 8.
12. Requirements of Law. The Company shall not be required to sell
any shares of Stock under any Option if such sale would constitute a
violation by the optionee or the Company of any provision of law.
13. No Rights as Stockholder. No optionee shall have rights as a
stockholder with respect to shares covered by any Option until the date
of issuance of a stock certificate for such shares; and, except as
otherwise provided in Paragraph 15 hereof, no adjustment for dividends,
or otherwise, shall be made if the record date thereof is prior to the
date of issuance of such certificate.
14. No Employment or Nomination Obligation. Neither the adoption
of the Plan nor the grant of any Option shall impose upon the Company or
the Board any obligation to continue to nominate any optionee for
election as a director of the Company.
15. Changes in the Company's Capital Structure. The existence of
outstanding Options shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's
capital structure or its business, or any merger or consolidation of the
Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all
or any part of its assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise. If the Company
shall effect a subdivision or consolidation of shares or other capital
readjustment, the payment of a stock dividend, or other increase or
reduction of the number of shares of the Stock outstanding, without
receiving compensation therefor in money, services or property, then (i)
the number, class, and per share price of shares of Stock subject to
outstanding Options hereunder shall be appropriately adjusted in such a
manner as to entitle an optionee to receive upon exercise of an Option,
for the same aggregate cash consideration, an equivalent total number and
class of shares as he would have received had he exercised his Option in
full immediately prior to the event requiring the adjustment; and (ii)
the number and class of shares then reserved for issuance under the Plan
shall be adjusted by substituting for the total number and class of
shares of Stock then reserved that Stock that would have been received by
the owner of an equal number of outstanding shares of each class of Stock
as the result of the event requiring the adjustment.
After a merger of one or more corporations into the Company, or
after a consolidation of the Company and one or more corporations in
which the Company shall be the surviving corporation, each holder of an
outstanding Option shall, at no additional cost, be entitled upon
exercise of such Option to receive (subject to any required action by
stockholders) in lieu of the
<PAGE>
number and class of shares as to which such Option would have been so
exercisable in the absence of such event, the number and class of shares
of stock or other securities to which such holder would have been
entitled pursuant to the terms of the agreement of merger or
consolidation if, immediately prior to such merger or consolidation, such
holder had been the holder of record of the number and class of shares of
Stock equal to the number and class of shares as to which such Option
shall be so exercised. If the Company is merged into or consolidated
with another corporation under circumstances where the Company is not the
surviving corporation, or if the Company sells or otherwise disposes of
substantially all its assets to another corporation and is liquidated,
all Options granted at least six months prior to the date of any
agreement regarding such merger, consolidation, or sale and liquidation,
as the case may be (the "Agreement Date"), shall become exercisable in
full as of the Agreement Date.
Except as herein before expressly provided, the issue by the Company
of shares of stock of any class, or securities convertible into shares of
stock of any class, for cash or property, or for labor or services either
upon direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the
number, class or price of shares of Stock then subject to outstanding
Options.
16. Termination and Amendment of Plan. The Board may amend,
terminate or suspend the Plan at any time, in its sole and absolute
discretion; provided, however, that any amendment that would change the
amount, price or timing of the Initial and Annual Grants shall be made in
compliance with Rule 16b-3 promulgated under the Securities Exchange Act
of 1934; and further provided that no amendment shall be effective unless
and until it has been duly approved by the Company's stockholders if
failure to obtain such approval would adversely affect the compliance of
the Plan with Rule 16b-3 or any other applicable law, rule or regulation.
17. Written Agreement. Each Option granted hereunder shall be
evidenced by a written agreement, which shall be subject to the terms and
conditions prescribed above and shall be signed by the Eligible Director
and by the Chairman of the Board, the Vice Chairman, the President or any
Vice President of the Company for and in the name and on behalf of the
Company.
18. Adoption, Approval and Effective Date of Plan. The Plan shall
be considered adopted and shall become effective on the date the Plan is
approved by the stockholders of the Company.
19. Governing Law. This Plan and all determinations made and
actions taken pursuant hereto shall be governed by the laws of the State
of Texas without regard to principles of conflict of laws, and shall be
construed accordingly.
