PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /x /
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or Section 240.14a-12
MAXXAM Inc.
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(Name of Registrant as Specified In Its Charter)
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<PAGE>
[MAXXAM Logo]
April 27, 1998
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders
(the "Annual Meeting") of MAXXAM Inc. (the "Company") to be held at 9:00
a.m. on Wednesday, May 20, 1998, at the Wyndham Greenspoint Hotel, 12400
Greenspoint Drive, 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, "FOR" the proposal to reapprove the MAXXAM 1994 Executive
Bonus Plan and approve amendments to that plan, and "AGAINST" each of the
two proposals submitted by certain stockholders of the Company. 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 PAUL N. SCHWARTZ
Chairman of the Board and President
Chief Executive Officer
<PAGE>
MAXXAM INC.
5847 SAN FELIPE, SUITE 2600
HOUSTON, TEXAS 77057
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1998
The Annual Meeting of Stockholders (the "Annual Meeting") of
MAXXAM Inc. (the "Company") will be held at the Wyndham Greenspoint Hotel,
12400 Greenspoint Drive, Houston, Texas, on Wednesday, May 20, 1998, at
9:00 a.m., local time, for the following purposes:
1. To elect three (3) directors to serve on the Board of
Directors of the Company, two of whom will be elected
by the holders of Common Stock, voting separately as a
class, to hold office until the 1999 Annual Meeting of
Stockholders or until their successors are elected and
qualified, and one of whom will be elected by holders
of Common Stock and Class A $.05 Non-Cumulative
Participating Convertible Preferred Stock, voting
together as a single class, to hold office until the
2001 Annual Meeting of Stockholders or until his
successor is elected and qualified;
2. To consider and vote upon a proposal to reapprove the
MAXXAM 1994 Executive Bonus Plan and approve amendments
to that plan;
3. To consider and vote on each of the two proposals
submitted by certain stockholders of the Company; and
4. To transact such other business as may be properly
presented to the Annual Meeting or any adjournments or
postponements thereof.
Stockholders of record as of the close of business on March 31, 1998
are entitled to notice of and to vote at the Annual Meeting. A list of
stockholders will be available commencing May 10, 1998, 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
BERNARD L. BIRKEL
Secretary
April 27, 1998
IMPORTANT
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED WHITE 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. ANY
STOCKHOLDER WHO ATTENDS THE ANNUAL MEETING MAY VOTE PERSONALLY ON ALL
MATTERS BROUGHT BEFORE THE ANNUAL MEETING AND, IN THAT EVENT, HIS OR HER
PROXY WILL NOT BE USED.
<PAGE>
MAXXAM INC
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1998
This proxy statement (the "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 Company's Annual Meeting of Stockholders (the "Annual Meeting") to
be held on Wednesday, May 20, 1998, and any adjournments or postponements
thereof, at the time and place and for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. The principal
executive offices of the Company are located at 5847 San Felipe, Suite
2600, Houston, Texas 77057, telephone (713) 975-7600.
This Proxy Statement, the accompanying white proxy card and the
Notice of Annual Meeting of Stockholders are being mailed, commencing on or
about April 27, 1998, to the stockholders of record as of the close of
business on March 31, 1998 (the "Record Date"). Only holders of record of
the 7,000,597 shares of Common Stock (the "Common Stock") and the 668,856
shares of Class A $.05 Non-Cumulative Participating Convertible Preferred
Stock (the "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 Preferred Stock is entitled
to ten votes on such matters as they are entitled to vote and as may
properly come before the Annual Meeting or any adjournments or
postponements thereof. The holders of Common Stock, voting separately as a
class, are entitled to elect two members of the Company's Board of
Directors, and the holders of Common Stock and Preferred Stock, voting
together as a single class, are entitled to elect one member of the
Company's Board of Directors.
We cordially invite you to attend the Annual Meeting. Whether or
not you plan to attend, please complete, date, sign and promptly return the
enclosed white proxy card in the enclosed envelope. The persons authorized
to act as proxies at the Annual Meeting, individually or jointly, as listed
on the white proxy card are Charles E. Hurwitz, Paul N. Schwartz and
Bernard L. Birkel. 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 to the Board of Directors named in this Proxy
Statement, "FOR" the reapproval of the MAXXAM 1994 Executive Bonus Plan and
approval of amendments to that plan, and "AGAINST" each of the two
proposals submitted by certain stockholders of the Company.
All stockholders as of the Record Date, or their duly appointed
proxies, may attend the meeting. Seating, however, is limited. Admission
to the meeting will be on a first-come, first-served basis. Registration
will begin at 8:00 a.m., and seating will be available at approximately
9:00 a.m. Cameras, recording equipment, communication devices or other
similar equipment will not be permitted in the meeting room without the
prior consent of the Company. In addition, posters, placards or other
signs or materials may not be displayed in the meeting room. The meeting
will be conducted in accordance with certain procedures established by the
Company, which will be available or announced at the Annual Meeting.
PLEASE NOTE THAT IF YOU HOLD YOUR SHARES IN "STREET NAME" (THAT
IS, THROUGH A BROKER OR OTHER NOMINEE), YOU WILL NEED TO BRING A COPY OF A
BROKERAGE STATEMENT REFLECTING YOUR STOCK OWNERSHIP AS OF THE RECORD DATE
AND CHECK IN AT THE REGISTRATION DESK IN ORDER TO ENSURE ADMISSION TO THE
ANNUAL MEETING. ALL STOCKHOLDERS, REGARDLESS OF THEIR FORM OF OWNERSHIP,
WILL BE ASKED TO VERIFY THEIR IDENTITY WITH A DRIVER'S LICENSE OR OTHER
APPROPRIATE IDENTIFICATION BEARING A PHOTOGRAPH.
The presence, in person or by proxy, of the holders of shares of
the Company's capital stock entitled to cast a majority of the votes
entitled to be cast at the Annual Meeting is required to constitute a
quorum for the transaction of business at the Annual Meeting. Under
applicable Delaware law, abstentions and broker non-votes are counted for
purposes of determining the presence or absence of a quorum for the
transaction of business. A plurality of the votes present, in person or by
proxy, is necessary for the election of directors. With regard to the
election of directors, votes may be cast in favor or withheld; votes that
are withheld will be excluded entirely from the vote and will have no
effect on the outcome. Abstentions may not be specified on the election of
directors. A stockholder may, with respect to each other matter specified
in the Notice of Annual Meeting of Stockholders, (i) vote "FOR," (ii) vote
"AGAINST" or (iii) "ABSTAIN" from voting. An affirmative vote of a
majority of the shares present in person or by proxy and entitled to vote
at the Annual Meeting is required for approval of the other matters
presented. Shares represented by proxies that are marked "abstain" on such
matters will be counted as shares present for purposes of determining the
presence of a quorum; such shares also will be treated as shares present
and entitled to vote, which will have the same effect as a vote against
such matters. Proxies relating to "street name" shares that are not voted
by brokers on one or more but less than all matters will be treated as
shares present for purposes of determining the presence of a quorum, but
will not be treated as shares present and entitled to vote at the Annual
Meeting as to such matter or matters not voted upon.
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED WHITE PROXY CARD AND
RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED. IF YOUR SHARES ARE HELD IN
"STREET NAME," ONLY YOUR BANK OR BROKER CAN VOTE YOUR SHARES AND ONLY UPON
YOUR SPECIFIC INSTRUCTIONS. PLEASE CONTACT THE PERSON RESPONSIBLE FOR YOUR
ACCOUNT AND INSTRUCT HIM OR HER TO VOTE THE WHITE PROXY CARD AS SOON AS
POSSIBLE.
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides for
three classes of directors (excluding the directors elected by the holders
of Common Stock as discussed below) having staggered terms of office, with
directors of each class to be elected by the holders of the Company's
Common Stock and Preferred Stock, voting together as a single class, for
terms of three years or 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 Preferred Stock are
outstanding, the 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.
All three persons nominated for election to the Board of
Directors at the Annual Meeting are currently members of the Board of
Directors. Two of the nominees, Stanley D. Rosenberg and Robert J.
Cruikshank, have been nominated for election by the holders of Common
Stock, voting separately as a class, to hold office until the 1999 Annual
Meeting of the Stockholders or until their successors have been duly
elected and qualified. The person nominated to stand for election by the
holders of Common Stock and Preferred Stock, voting together as a single
class, to hold office until the 2001 Annual Meeting of Stockholders is Paul
N. Schwartz. 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 Preferred Stock owned beneficially by each
of them as of April 15, 1998. Each of the nominees has consented to serve
as a member of the Board of Directors if elected.
The persons named on the enclosed white proxy card will vote the
shares of Common Stock and Preferred Stock 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 on the enclosed white proxy card will
vote for the election of such other person, if any, as the Board of
Directors may recommend.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF
EACH OF THE THREE NOMINEES NAMED IN THIS PROXY STATEMENT FOR DIRECTOR OF
THE COMPANY.
PROPOSAL TO REAPPROVE THE MAXXAM 1994 EXECUTIVE BONUS PLAN
AND APPROVE CERTAIN AMENDMENTS
The MAXXAM 1994 Executive Bonus Plan (the "Executive Plan"),
first adopted by the Board of Directors and approved by the stockholders of
the Company in 1994, is hereby submitted to the stockholders of the Company
for reapproval in order to continue to secure, to the extent practicable, a
tax deduction by the Company for payments of additional compensation to
each participant. Reapproval of the Executive Plan will also serve as
approval of certain amendments to the Executive Plan as more fully
described below. The purpose of the Executive Plan will continue to be to
provide performance incentives to each participant, who is or may be a
"covered employee" within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as it may be amended from time to time (the "Code"),
while securing a tax deduction for those payments.
Earlier this year, amendments to the Executive Plan were adopted
by the Section 162(m) Compensation Committee (the "Section 162(m)
Committee") and ratified by the Board of Directors, subject to the
reapproval of the Executive Plan as amended by the stockholders. These
amendments (i) lower the base salary required to participate in the
Executive Plan from $600,000 to $500,000, (ii) increase the maximum
aggregate annual award payable under the Executive Plan to any participant
with respect to any fiscal year from $3 million to $12 million, and (iii)
make it clear that the Section 162(m) Committee or any other designated
committee of the Board of Directors has the authority to terminate, suspend
or amend the Executive Plan. These amendments will increase the
flexibility of the Section 162(m) Committee to select participants and
develop performance incentives commensurate with the benefits which may be
realized by the Company from achieving the established performance
criteria. Except as described above, the terms of the Executive Plan have
not changed since it was first adopted and approved. If the Executive Plan
is reapproved by the stockholders, the amendments described above will be
retroactively effective to January 1, 1998.
The Executive Plan is administered by the Section 162(m)
Committee which is composed solely of at least two "outside directors" as
such term is defined or interpreted for purposes of Section 162(m) of the
Code. Pursuant to the terms of the Executive Plan, the Section 162(m)
Committee identifies those performance criteria for which each participant
is largely responsible and the achievement of which would be of significant
benefit to the Company. Prior to the first day of each fiscal year (or
during such subsequent period as may be permitted under applicable
regulations), the Section 162(m) Committee sets 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 one or more specific business development projects identified
by the Section 162(m) Committee, (c) the completion of one transaction or a
series of integrated transactions by the Company or one of its affiliates
involving an acquisition or disposition of securities or assets from or to
nonaffiliated entities 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 and its subsidiaries based upon their respective plans for the
year. For each specific performance goal, a predetermined bonus amount can
be earned by the participant upon achievement of such goal. Pursuant to
existing regulations under Section 162(m) of the Code, the specific goals
are set by the Section 162(m) Committee prior to April 1 of each year.
The Executive Plan is a cash-only plan. As previously noted,
participants in the Executive Plan are currently limited to those officers
of the Company whose base salary is equal to or in excess of $600,000 and
the bonuses earned by each participant currently cannot exceed an aggregate
of $3 million per fiscal year. If the Executive Plan is reapproved by the
stockholders, the $600,000 threshold will be reduced to $500,000 and the $3
million limit will be increased to $12 million. In addition, the
Company's President could also become a participant. The Company's Chief
Executive Officer, currently the sole participant in the Executive Plan,
received a $250,000 bonus under the Executive Plan for 1997. For more
information with respect to the bonus paid to the Company's Chief Executive
Officer, please see the Report of the Compensation Committees on Executive
Compensation contained elsewhere in this Proxy Statement.
Bonuses under the Executive Plan are payable as soon as
practicable following the end of the fiscal year, but in no event until the
Section 162(m) Committee has certified in writing that the performance
goals and any other material terms related to the award were in fact
satisfied. The Section 162(m) Committee has absolute discretion to reduce
any bonus payments earned under the Executive Plan.
The Executive Plan provides that the Board of Directors may
terminate, suspend or amend the Executive 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. If reapproved, the amended Executive Plan will make it clear
that the Section 162(m) Committee or any designated subcommittee of the
Board of Directors also has this authority.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS OF THE
COMPANY VOTE "FOR" REAPPROVING THE EXECUTIVE PLAN AND APPROVING THE
AMENDMENTS TO THE EXECUTIVE PLAN.
FIRST STOCKHOLDER PROPOSAL
The Company has been notified that certain stockholders of the
Company intend to present the proposal set forth below for consideration at
the Annual Meeting. The address and stock ownership of each of the
proponents will be furnished by the Secretary of the Company to any person,
orally or in writing as requested, promptly upon receipt of any oral or
written request. Ms. Jill Ratner and Mr. Thomas W. Little, together with
the California Public Employees' Retirement System have submitted the
following proposal:
"RESOLVED: That MAXXAM Inc. shareholders request the
Board of Directors to change the election of all
directors who are elected by the holders of common and
preferred stock voting together (General Directors), by
providing that, at future elections, such new directors
be elected annually and not for staggered terms. This
declassification of General Directors shall not affect
the separate election of Common Directors as provided
in the Articles of Incorporation and shall be phased in
in a manner that does not affect the unexpired terms of
Directors previously elected."
STATEMENT IN SUPPORT
The following statement was also submitted by the stockholders
identified above in support of the foregoing proposal:
"This resolution requests the MAXXAM Inc. Board to end its
staggered board system and instead elect all directors annually."
"Presently, all of the company's General Directors (those
directors who are elected by the holders of common and preferred stock
voting together) are elected for staggered terms: one-third of the Board
is elected each year; each director now serves a three-year term. Annual
elections are held only for the Company's two Common Directors, elected
exclusively by holders of Common Stock."
"Studies by the SEC's Chief Economist have shown that adoption of
staggered terms for directors tends to depress a company's stock price and
may be contrary to shareholder interests."
"Increasingly, institutional investors are calling for the end of
staggered terms for directors, believing boards are less accountable to
shareholders when directors do not stand for annual election. Shareholder
resolutions to end this staggered system of voting have been receiving
ever-larger votes. Many companies have changed this practice, among them
Westinghouse, Chemical Bank, Commonwealth Edison of Chicago, and the
Equitable companies."
"Electing corporate directors is a primary avenue for
shareholders to influence corporate affairs and exert accountability on
management. We strongly believe financial performance is closely linked to
corporate governance procedures and the level of management-accountability
they impose. We believe staggering directors terms prevents shareholders
from annually registering their views on the performance of the board
collectively and each director individually."
"Staggered boards can help insulate directors and senior
executives from the consequence of poor performance by denying shareholders
an opportunity to replace an entire Board if it pursues questionable or
failed policies."
"For many reasons, we believe MAXXAM Inc.'s staggered board terms
should end. If you agree, please vote "yes" on this resolution."
STATEMENT IN OPPOSITION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL
FOR THE FOLLOWING REASONS:
At the Company's 1980 Annual Meeting, holders of a majority of
the shares voted were cast in favor of creating a classified board of
directors. In the late 1980s similar resolutions were passed by the
stockholders of many large domestic corporations for a number of reasons,
including ensuring the continuity of experienced board members. Under the
current structure, two of the Company's five directors are elected each
year by the holders of the Company's Common Stock; the remaining directors
have staggered terms of office, with one director being elected every three
years by the holders of the Company's Common Stock and Preferred Stock
voting together as a single class.
The Board of Directors believes that the Company's Board as
currently structured strikes the right balance between flexibility, by
providing for the annual election of not less than two directors by the
holders of the Company's Common Stock, and continuity and stability, by
generally ensuring that at least two of the remaining directors elected by
the holders of the Company's Common Stock and Preferred Stock voting
together as a single class will have had prior experience in the management
of the Company's business. In addition, the Board of Directors believes
that directors elected for staggered terms are as accountable to
stockholders as they would be if elected annually since the same legal
duties and standards of performance apply regardless of the term of
service. The Company's stockholders may express their satisfaction or
dissatisfaction with the performance of the Board at the annual elections.
Pursuant to Delaware law and the Company's Restated Certificate
of Incorporation, an amendment to the Company's Restated Certificate of
Incorporation to effect the proposed change requires the adoption of an
amendment by the Board of Directors of the Company followed by the
requisite affirmative vote by holders of the outstanding shares of capital
stock of the Company entitled to vote thereon. As a result, the adoption
of this proposal would not in itself eliminate the Company's classified
Board, but would only amount to an advisory recommendation to the Board to
take the necessary steps to achieve a declassified Board.
The Board of Directors continues to believe that the Company's
classified Board is in the best interests of the Company and its
stockholders.
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS RECOMMENDS A
VOTE "AGAINST" THIS PROPOSAL.
SECOND STOCKHOLDER PROPOSAL
The Company has been notified that the following stockholder of
the Company intends to present the proposal set forth below for
consideration at the Annual Meeting. The address and stock ownership of
the proponent will be furnished by the Secretary of the Company to any
person, orally or in writing as requested, promptly upon receipt of any
oral or written request.
PROPOSAL AND STATEMENT IN SUPPORT
The As You Sow Foundation has submitted the following proposal:
"Whereas:
- MAXXAM subsidiary Pacific Lumber Co. owns the last
substantial stands of old-growth redwoods in private hands
anywhere in the world.
- The protection of these cathedral-like groves and the
ecological system upon which they depend has been a focus of
public concern and action.
- The efforts by Pacific Lumber to log old-growth redwood have
resulted in widespread public opposition, extensive negative
publicity for MAXXAM in the national media, and intensified
public scrutiny of all of MAXXAM's operations.
- In February 1997, MAXXAM's second largest institutional
investor, California Public Employees Retirement System,
warned that MAXXAM's stated intention to cut the ancient
redwood will, if acted upon, significantly harm the long
term value of MAXXAM... (P)erhaps the most significant
result will be MAXXAM's resulting reputation in the market;
you will be perceived as a pariah, unable to easily raise
new capital when needed.'
- Public opposition to the logging of old-growth redwood has
led to more than 1000 lumber yards and retailers to agree
not to sell it, including Home Depot, the largest do-it-
yourself retail chain.
- Pacific Lumber's forest practices have attracted litigation.
Since 1988, Pacific Lumber, has faced at least 20 separate
state and federal actions regarding its forest product
operations.
- Pacific Lumber's forest practices have led to increased
scrutiny from regulators. In December 1997, the California
Department of Forestry notified the Company that it was
poised to deny or revoke the company's timber operation
license based on the Company's patterns of violations of
California forestry law.
- We believe current controversies regarding old-growth
logging and forest management policy threaten the Company's
long-term financial success and are of profound financial
and ethical concern to the shareholders. Pacific Lumber
operations constitute only 10.4 % of MAXXAM's total
revenues.
- Should the Company end old-growth logging, it will be left
with ample acreage for future responsible forest management.
Only 14 percent of the Company's 200,000 acres of
forestlands contain old growth trees."
"RESOLVED: That Shareholders request the Company to prepare a
report on strategies for ending all operations that cut, damage,
remove, mill or otherwise involve old-growth trees, while
developing forest management policies supporting sustainable
forests that are based on conservation science and environmental
ethics and which provide a just transition for employees and
their communities."
STATEMENT IN OPPOSITION
THE BOARD OF DIRECTORS AND MANAGEMENT OF THE COMPANY RECOMMEND A
VOTE "AGAINST" THE ADOPTION OF THE ABOVE RESOLUTION.
The Board of Directors and management of the Company are opposed
to the adoption of the proposed resolution. The proposal is aimed at
requiring The Pacific Lumber Company and the Company (collectively, for
purposes of this Statement in Opposition, the "Company") to take certain
adverse actions regarding the management of its timber assets, including
some of the Company's most valuable timber assets. These are matters which
have previously been conducted according to decisions of management of the
Company acting in the ordinary course of business. Considering the myriad
and complicated factors involved in the ownership and management of the
Company's over 200,000 acres of timberland, including a variety of
California and federal laws and regulations dealing with timber harvesting,
threatened and endangered species and habitat for such species, and air and
water quality, the officers, directors and management of the Company are
better positioned and qualified to direct the manner in which these assets
are best used and managed. The Board of Directors and the management of
the Company also believe that the Company's forest management policies
support sustainable forestry, are scientifically based, and are
environmentally sound.
Moreover, the proposal effectively seeks to require the Company
to discontinue production and sale of premium upper grade wood products--
the Company's most valuable lumber product line. Although in fiscal 1997
the volume of shipments of all upper grade redwood and Douglas-fir lumber
comprised only 16% of the Company's total overall lumber shipments, sales
of these products constituted 35% of the Company's overall lumber sales.
The volume-revenue disparity is even greater with respect to the Company's
more premium upper grade products, the substantial portion of which are
derived from old growth trees.
Finally, the Board of Directors and management believe that the
Company has taken significant steps with respect to constructively
resolving the issues surrounding its old growth timberlands. On September
28, 1996, after long and intense negotiations, the Company entered into the
much publicized Headwaters Agreement with representatives of the United
States and California. The Headwaters Agreement would permanently preserve
7,500 acres of forest land, approximately 5,600 acres of which would come
from the Company (including the Headwaters and Elk Head Springs virgin old
growth forests and protective buffer zones). The other approximately 1,900
acres to be preserved would be acquired from a third party. In exchange,
the Company would receive (a) property and other consideration from the
United States and California having an aggregate fair market value of $300
million, and (b) approximately 7,755 acres of adjacent timberlands.
Certain important milestones have been achieved toward completion
of the Headwaters Agreement. In November 1997, President Clinton signed an
appropriations bill which contains authorization for the expenditure of
$250 million of federal funds toward consummation of the Headwaters
Agreement. On February 27, 1998, the Company and representatives of the
United States and California entered into an agreement in principle
regarding certain understandings they had reached with respect to three
conditions to completion of the Headwaters Agreement--approval of a habitat
conservation plan covering multiple species, issuance of a related
incidental take permit, and approval of a long-term sustained yield plan.
While substantial work is yet to be done by all parties to the Headwaters
Agreement to effectuate the transactions contemplated, the Company stands
by the Headwaters Agreement, believing that it maximizes the value of these
assets for the Company's stockholders and serves well the interests of the
Company.
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS AND
MANAGEMENT OF THE COMPANY URGE THAT YOU VOTE "AGAINST" THIS PROPOSAL.
OTHER BUSINESS
Neither the Board of Directors nor management intends to bring
before the Annual Meeting any business other than the matters referred to
in the Notice of Annual Meeting of Stockholders and this Proxy Statement.
Nor is any stockholder entitled under the Company's Amended and Restated
By-Laws to bring any such other matter before the Annual Meeting.
Nonetheless, if any other business should properly come before the meeting,
or any postponement or adjournment thereof, the persons named on the
enclosed white proxy card will vote on such matters according to their best
judgment.
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
17 occasions during 1997. In addition, management confers frequently with
directors on an informal basis to discuss Company affairs. During 1997, no
director attended fewer than 75% of the meetings of the Board. With the
exception of Mr. Rosenberg, who was absent from one of the two meetings
held by the Audit Committee, no director attended fewer than 75% of the
aggregate of the meetings of the committees on which he served.
The Board of Directors of the Company has the following standing
committees: Executive, Audit, Conflicts and Compliance, Compensation
Policy, and Section 162(m) Committees. The Board 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 and did not act by written consent
during 1997.
The Audit Committee meets with the appropriate financial and
legal personnel, internal auditors, and independent public accountants and
reviews the internal controls of the Company and the objectivity and
appropriateness of its financial statements and reports. It also reports
to the Board of Directors on the major accounting policies and principles
adopted by the Company and recommends to the Board the appointment and
retention of the independent auditors of the Company. Further, the Audit
Committee supervises and directs the financial reporting, affairs, policies
and procedures of the Company. Messrs. Levin (Chairman) and Rosenberg
served as members of this committee, which met on two occasions during 1997
and did not act by written consent.
The Conflicts and Compliance Committee (i) ensures that
appropriate policies with regard to employee conduct pursuant to legal and
ethical business standards are formulated, maintained, periodically
reviewed and properly implemented and enforced, (ii) reviews possible
conflicts of interest, (iii) establishes, maintains, governs and enforces
policies regarding sensitive payments, insider trading with regard to the
Company's equity securities and similar policies. Messrs. Rosenberg
(Chairman), Cruikshank and Levin served as members of this committee, which
met on three occasions during 1997 and did not act by written consent.
The Compensation Policy Committee (the "Policy Committee")
reviews and approves proposals concerning or related to (i) the
establishment or change of benefit plans, or material amendments to
existing benefit plans, and (ii) salaries or other compensation, including
payments awarded pursuant to bonus and benefit plans maintained by the
Company and its subsidiaries and to all executive officers and other
employees of the Company and its subsidiaries. However, the Policy
Committee is not responsible for the administration of, amendments to and
awards pursuant to the Executive Plan or the 1994 Omnibus Employee
Incentive Plan (the "Omnibus Plan"). Messrs. Cruikshank, Levin (Chairman)
and Rosenberg served as members of this committee. The Policy Committee
met on four occasions and took action by unanimous written consent once
during 1997.
The Section 162(m) Committee has the authority to administer and
make amendments to the Executive Plan and the Omnibus Plan and such other
plans or programs, if any, as are intended to comply with the provision of
Section 162(m) of the Code. The Section 162(m) Committee establishes
criteria to be used in determining awards to be made pursuant to the
Executive Plan, while retaining the right to reduce any such awards through
its power of negative discretion, and approves awards made pursuant to the
Omnibus Plan. Messrs. Cruikshank (Chairman) and Rosenberg served as
members of this committee. During 1997, this committee met on six
occasions and took action by unanimous written consent once.
DIRECTOR COMPENSATION
Each of the directors who were not employees of or consultants to
the Company received a fee of $30,000 for the 1997 calendar year. Non-
employee directors were also entitled to receive an annual fee of $1,500
for each Board committee they chaired. Messrs. Cruikshank, Levin and
Rosenberg received an aggregate of $31,500, $33,000 and $31,500,
respectively, in payment of such director and committee chairman fees
during 1997. No additional compensation for attending Board or committee
meetings was paid to directors. Directors were reimbursed for travel and
other disbursements relating to Board and committee meetings. Fees to
directors who were also employees of the Company were deemed to be included
in their salary. Non-employee directors of the Company who also served as
directors of the Company's majority-owned subsidiaries, Kaiser Aluminum
Corporation ("Kaiser") and/or Kaiser Aluminum & Chemical Corporation
("KACC"), also received from Kaiser and KACC additional director or
committee fees and were reimbursed by Kaiser and KACC for expenses
pertaining to their services in such capacities. During 1997, Messrs.
Cruikshank and Levin received an aggregate $35,500 and $39,500,
respectively, in such director and committee fees from Kaiser and KACC
(excluding any expense reimbursement).
All non-employee directors are eligible to participate in a
deferred compensation program. By executing a Deferred Fee Agreement, a
non-employee director may defer all or part, in 25% increments, of the
director's fees received from the Company for service in such capacity for
any calendar year. The designated percentage of deferred fees are credited
to a book account as of the date such fees would have been paid to the
director and are deemed "invested" in two investment choices, again in 25%
increments, of phantom shares of the Company's Common Stock and/or in an
account bearing interest calculated using one-twelfth of the sum of the
prime rate plus 2% on the first day of each month. Deferred director's
fees, including all earnings credited to the book account, will be paid in
cash to the director or beneficiary as soon as practicable following the
date the director ceases for any reason to be a member of the Board, either
in a lump sum or in a specified number of annual installments not to exceed
ten, at the director's election. Mr. Levin is the only director who has
elected to defer his director's fees, with such fees having been deferred
since September 1, 1994.
Non-employee directors are also eligible to participate in the
Company's 1994 Non-Employee Director Stock Plan (the "Non-Employee Director
Plan") which was amended as of December 11, 1997, to increase the size of
the annual option grants from 300 to 600 shares and provide increased
flexibility with respect to the granting of options to non-employee
directors. Pursuant to such plan, each eligible director receives an
initial grant of an option to purchase, at the discretion of the Board or
any committee thereof, at least 500 shares of Common Stock the day
following the first annual meeting after such eligible director is first
elected or appointed by the Board to be a director. Thereafter, each
eligible director is granted an option to purchase 600 shares of Common
Stock each year the day following the annual meeting. The exercise price
of the options per share is the closing price of the Common Stock as
reported by the American Stock Exchange on the date the option is granted.
Each option granted under the Non-Employee Director Plan becomes
exercisable as to 25% of the shares on the first, second, third and fourth
anniversaries of the date of the grant. Messrs. Cruikshank, Levin and
Rosenberg each received options to purchase 300 shares of the Company's
Common Stock on each of May 23, 1997, at an exercise price of $44.875 per
share, and on December 12, 1997, following the amendment of the Non-
Employee Director Plan, at an exercise price of $41.50 per share.
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information as of April
15, 1998, 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 and Chief Executive
Officer
Paul N. Schwartz Director, President, Chief Operating
Officer and Chief Financial Officer
John T. La Duc Senior Vice President
Robert E. Cole Vice President--Federal Government Affairs
Diane M. Dudley Vice President--Chief Personnel Officer
Robert W. Irelan Vice President--Public Relations
Ronald L. Reman Vice President--Taxes
Bernard L. Birkel Secretary and Managing Counsel--Corporate
Elizabeth D. Brumley Assistant Controller
J. Kent Friedman Acting General Counsel
Robert J. Cruikshank Director
Ezra G. Levin Director
Stanley D. Rosenberg Director
</TABLE>
Charles E. Hurwitz. Mr. Hurwitz, age 57, 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. He also served the Company as
President from January 1993 to January 1998. Since January 1974, Mr.
Hurwitz has also been 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, and a
principal stockholder of the Company. In December 1994, he was appointed
Vice Chairman of the Board of KACC. Mr. Hurwitz has served as a director
of Kaiser since October 1988 and of KACC since November 1988. Since May
1982, he has been Chairman of the Board and Chief Executive Officer, and
since January 1, 1993, President, of MAXXAM Group Inc. ("MGI"), a
subsidiary of the Company engaged in forest products operations. Mr.
Hurwitz has also been, since its formation in November 1996, Chairman of
the Board, President and Chief Executive Officer of MAXXAM Group Holdings
Inc. ("MGHI"), a wholly owned subsidiary of MAXXAM and MGI's parent. From
May 1986 until February 1993 he served as a director of The Pacific Lumber
Company ("Pacific Lumber"). Mr. Hurwitz has also served, since May 1993
and October 1995, respectively, as a director and Chairman of the Board of
SHRP General Partner, Inc. ("SHRP GP"), the managing general partner of Sam
Houston Race Park, Ltd., which operates a horse racing facility in Texas.
Paul N. Schwartz. Mr. Schwartz, age 52, was named a director,
President and Chief Operating Officer of the Company in January 1998, and
has served as Chief Financial Officer of the Company since January 1995.
Mr. Schwartz is a nominee for reelection as a director of the Company to
serve until the 2001 Annual Meeting of Stockholders. He previously served
as Executive Vice President of the Company from January 1995, Senior Vice
President--Corporate Development of the Company from June 1987 until
December 1994, and Vice President--Corporate Development of the Company
from July 1985 to June 1987. Mr. Schwartz has also served as a Vice
President of MGI, Pacific Lumber and Scotia Pacific Holding Company
("Scotia Pacific"), a wholly owned subsidiary of Pacific Lumber, since May
1987, January 1987 and November 1992, respectively, and as Chief Financial
Officer of MGI, Pacific Lumber and Scotia Pacific, since February 1995. He
has served as a director of Pacific Lumber and Scotia Pacific since
February 1993, and as a director of MGI since January 1994. Mr. Schwartz
has also served as Vice President, Chief Financial Officer and director of
MGHI since its formation in November 1996. Since May 1993, he has also
served as a director and a Vice President of SHRP GP. Mr. Schwartz also
serves as Chairman of the Board and sole executive officer of United
Financial Group, Inc. ("UFG"), and is a director of SLM Funding
Corporation, a subsidiary of the Student Loan Marketing Association.
John T. La Duc. Mr. La Duc, age 55, has served as Senior Vice
President of the Company since September 1990. He has also been a Vice
President and director of MGI since October 1990 and January 1994,
respectively. Mr. La Duc served the Company and MGI as Chief Financial
Officer from September 1990 until December 1994 and February 1995,
respectively. He has also served Kaiser as a Vice President since June
1989 and as Chief Financial Officer since May 1990. Mr. La Duc has served
KACC as a Vice President since June 1989 and Chief Financial Officer since
January 1990. He served as Kaiser's Treasurer from August 1995 until
February 1996, and from January 1993 until April 1993, and as KACC's
Treasurer from June 1995 until February 1996, and from January 1993 until
April 1993. Mr. La Duc also currently serves as a director and Vice
President of MGHI, Pacific Lumber and Scotia Pacific. Mr. La Duc
previously served as Chief Financial Officer of Pacific Lumber and of
Scotia Pacific from October 1990 and November 1992, respectively, until
February 1995.
Robert E. Cole. Mr. Cole, age 51, has served the Company as Vice
President--Federal Government Affairs since September 1990. Since March
1981, he 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 is currently Chairman of the
United States Auto Parts Advisory Committee to the United States Congress.
Diane M. Dudley. Ms. Dudley, age 57, has served as Vice
President--Chief Personnel Officer of the Company since May 1990. Since
November 1995, Ms. Dudley has also served as a Vice President of Pacific
Lumber. 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 61, has served the Company as
Vice President--Public Relations since September 1990. He has also served
as Vice President--Public Relations of MGI and Pacific Lumber since
September 1990. Mr. Irelan served as Vice President--Public Relations of
KACC from February 1988 until his retirement from KACC on March 31, 1997.
From June 1985 to February 1988, he served as Divisional Vice President--
Corporate Public Relations of KACC, and from 1968 to June 1985 Mr. Irelan
served KACC and certain affiliated companies in a variety of positions.
Ronald L. Reman. Mr. Reman, age 40, has served as Vice
President--Taxes of the Company since September 1992. Mr. Reman served the
Company as Director of Taxes from October 1986 until September 1992. From
July 1984 until October 1986, Mr. Reman was a Senior Manager in the Tax
Department of the New York office of Price Waterhouse after having served
seven years with the New York office of Coopers & Lybrand. Mr. Reman also
serves as Vice President--Taxes of MGHI, MGI, Scotia Pacific, Pacific
Lumber and certain other subsidiaries of the Company, and as Assistant
Treasurer of Kaiser and KACC.
Bernard L. Birkel. Mr. Birkel, age 48, was named Secretary of
the Company in May 1997, and has served MGHI, MGI, Scotia Pacific, Pacific
Lumber and SHRP GP in such capacity since May 1997. He has also served as
Managing Counsel--Corporate of the Company since May 1997. Prior to that,
Mr. Birkel was Assistant Secretary of the Company and MGI from May 1991,
Scotia Pacific from November 1992 and MGHI from November 1996. He served
as Senior Corporate Counsel of the Company from August 1992 until May 1997.
Prior to joining the Company as Corporate Counsel in August 1990, Mr.
Birkel was a partner in the Houston law firm of Woodard, Hall & Primm, P.C.
Elizabeth D. Brumley. Ms. Brumley, age 39, joined the Company in
August 1996 and was named Assistant Controller in December 1997. Prior to
joining the Company, Ms. Brumley worked for GulfMark International, Inc.,
where she served as Controller from 1990 until joining the Company. Ms.
Brumley was a senior auditor with Arthur Andersen LLP prior to joining
GulfMark in December 1987.
J. Kent Friedman. Mr. Friedman, age 54, was appointed Acting
General Counsel of the Company as of March 5, 1998. Mr. Friedman has been
a partner of Mayor, Day, Caldwell & Keeton, L.L.P., a Houston law firm,
since 1982. Prior to such time Mr. Friedman was a partner at Butler &
Binion, also a Houston law firm. Mr. Friedman has also served as a
director of SHRP GP since October 1995.
Robert J. Cruikshank. Mr. Cruikshank, age 67, has served as a
director of the Company since May 1993. Mr. Cruikshank is a nominee for
reelection as a director of the Company to serve until the 1999 Annual
Meeting of Stockholders. In addition, he has served as a director of
Kaiser and KACC since January 1994. Mr. Cruikshank was a Senior Partner in
the international public accounting firm of Deloitte & Touche from December
1989 until his retirement from that firm in March 1993. Mr. Cruikshank
served on the board of directors of Deloitte Haskins & Sells from 1981 to
1985 and as Managing Partner from June 1974 until its merger with Touche
Ross & Co. in December 1989. Mr. Cruikshank also serves as a director and
on the Compensation Committee of Houston Industries Incorporated, a public
utility holding company with interests in electric utilities, coal and
transportation businesses; as a director of Texas Biotechnology
Incorporated; as a trust manager of Weingarten Realty Investors; as a
director of American Residential Services, Inc.; and as advisory director
of Compass Bank--Houston.
Ezra G. Levin. Mr. Levin, age 64, was first elected a director
of the Company in May 1978. He has served as a director of Kaiser and KACC
since July 1991 and November 1988, respectively, and also served as a
director of Kaiser from April 1988 to May 1990. Since February 1993, Mr.
Levin has served as a director of Pacific Lumber and Scotia Pacific. From
January 1974 through December 1995, he served as a trustee of Federated.
From May 1982 through December 1993, he also served as a director of MGI.
Mr. Levin is a partner in the law firm of Kramer, Levin, Naftalis &
Frankel.
Stanley D. Rosenberg. Mr. Rosenberg, age 66, was first elected
to the Board of Directors of the Company in June 1981 and is a nominee for
reelection as a director of the Company to serve until the 1999 Annual
Meeting of Stockholders. Mr. Rosenberg is a partner in the law firm of
Rosenberg, Tuggey, Agather, Rosenthal & Rodriquez. Mr. Rosenberg was a
partner in the law firm of Oppenheimer, Rosenberg & Kelleher, Inc. from its
inception in 1971 until February 1990, from which time he served as Of
Counsel to that firm through June 1993.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of April 15, 1998, unless
otherwise indicated, the beneficial ownership of the Company's Common Stock
and Preferred Stock by (i) those persons known by the Company to own
beneficially more than 5% of the shares of any class then outstanding, (ii)
each of the executive officers named in the Summary Compensation Table,
(iii) each of the directors or nominees for director, and (iv) all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Combined
Name of Number % of % of Voting
Beneficial Owner Title of Class of Shares(1) Class Power(2)
------------------------------------------------ ------------------------- -------------------------- ------------ ------------
<S> <C> <C> <C> <C>
Federated Development Inc.(3) Common Stock 1,750,480(4)(5) 24.9 61.0
Preferred Stock 661,377 98.9
The Stockholder Group(3) Common Stock 2,685,698(4)(5)(6)(7) 38.2 68.8
Preferred Stock 703,074(8) 99.1
BankAmerica Corporation Common Stock 483,200(9) 6.9 3.5
David M. Knott Common Stock 359,100(10) 5.1 2.6
Robert J. Cruikshank Common Stock 1,950(7) * *
Charles E. Hurwitz(11) Common Stock 2,683,396(4)(5)(6)(12) 38.2 68.8
Preferred Stock 702,941(8)(13) 99.1
John T. La Duc -- -- -- --
Ezra G. Levin Common Stock 1,950(7)(12) * *
Ronald L. Reman Common Stock 549(14) * *
Stanley D. Rosenberg Common Stock 2,950(7) * *
Paul N. Schwartz Common Stock 30,584(15) * *
Byron L. Wade Common Stock 646 * *
All directors and executive officers of the Common Stock 2,725,678(4)(6)(16) 38.7 69.0
Company as a group (13 persons) Preferred Stock 702,941(8)(13) 99.1
<FN>
- ---------------
* Less than 1%.
(1) Unless otherwise indicated, the beneficial owners have sole voting and
investment power with respect to the shares listed in
the table. Includes the number of shares such persons would have
received on April 15, 1998, if any, for their exercisable stock
appreciation rights ("SARs") (excluding SARs payable in cash only)
exercisable within 60 days of such date if such rights had been paid
solely in shares of Common Stock. Also includes the number of shares
of Common Stock credited to such person's stock fund account under the
Company's 401(k) savings plan as of February 28, 1998.
(2) The Company's Preferred Stock is generally entitled to ten votes per
share on matters presented to a vote of the Company's stockholders.
(3) Federated Development Inc. ("FDI") is a wholly owned subsidiary of
Federated. FDI, Federated, Federated Development Investments, LLC
("FDILLC"), the Hurwitz Investment Partnership L.P., the Hurwitz 1992
Investment Partnership L.P., Messrs. Hurwitz and Levin, and Mr. James
H. Paulin, Jr., Secretary and Treasurer of Federated, may be deemed a
"group" (the "Stockholder Group") within the meaning of Section 13(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The address of FDI is 5847 San Felipe, Suite 2600, Houston,
Texas 77057. The address of the Stockholder Group is c/o Ezra G.
Levin, Esq., Kramer, Levin, Naftalis & Frankel, 919 Third Avenue, New
York, New York 10022.
(4) Includes 60,000 shares owned by FDILLC. FDILLC is a Texas limited
liability company which is owned 79% by FDI and 21% by Mr. Hurwitz,
and of which FDI is the managing member.
(5) Includes options to purchase 21,029 shares of Common Stock held by
FDI.
(6) Includes (a) 1,669,451 shares of Common Stock owned by FDI as to which
Mr. Hurwitz indirectly possesses voting and investment power, (b)
30,201 shares of Common Stock separately owned by Mr. Hurwitz's spouse
and as to which Mr. Hurwitz disclaims beneficial ownership, (c) 46,500
shares of Common Stock owned by the Hurwitz Investment Partnership
.P., 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, (d) 101,214 shares of
Common Stock owned by the 1992 Hurwitz Investment Partnership L.P., of
which 50,607 shares are owned by Mr. Hurwitz's spouse as separate
property and as to which Mr. Hurwitz disclaims beneficial ownership,
and (e) 755,001 shares of Common Stock held directly by Mr. Hurwitz.
(7) Includes options exercisable within 60 days of April 15, 1998 to
purchase 950 shares of Common Stock.
(8) Includes options exercisable within 60 days of April 15, 1998 to
purchase 40,500 shares of Preferred Stock held by Mr. Hurwitz.
(9) Information is based solely on Amendment No. 7 to the Schedule 13D
filed with the SEC dated December 3, 1997 (the "BankAmerica 13D"), on
behalf of BankAmerica Corporation ("BAC") and Bayview Holdings, Inc.
("Bayview Holdings"), Robertson, Stephens & Company Investment
Management, L.P. ("Investment Advisor"), and Robertson, Stephens &
Company Investment Management Co. ("Robertson Parent"), each of which
are subsidiaries of BAC. The BankAmerica 13D provides that it relates
to the direct beneficial ownership in 480,900 of such shares by The
Contrarian Fund, The Robertson Stephens Orphan Fund, The Robertson
Stephens Orphan Offshore Fund, The Robertson Stephens Partners Fund,
and The Robertson Stephens Global Natural Resources Fund
(collectively, the "Funds"), and the indirect beneficial ownership of
Bayview Investors, Ltd. ("Bayview"), Investment Advisor, Robertson,
Stephens & Company Private Equity Group, L.L.C. ("Private Equity
Group"), Bayview Holdings, BAC and Robertson Parent in the shares of
the Company held by the Funds. The BankAmerica 13D also includes
shares held in the Bank of America 401K Mid Cap Stock Fund. BAC is
the direct and indirect parent of Robertson Parent and Bayview
Holdings, respectively. Bayview Holdings directly and indirectly
controls the general partners and investment advisors for each of the
Funds. The business address of each of the Funds, Bayview,
Investment Advisor, Bayview Holdings, and the Private Equity
Group is is 555 California Street, San Francisco, California 94104.
The business address of BAC and Robertson Parent is
Corporate Secretary's Office #13018, 555 California Street, San
Francisco, California 94104.
(10) Information is based solely on Schedule 13D filed with the SEC on
February 11, 1998 (the "D.M. Knott 13D"). The D.M. Knott 13D was
filed by Mr. David M. Knott, the General Partner of Knott Partners,
L.P. (the "Partnership"), a New Jersey limited partnership that
invests in securities that are sold in the public markets. The D.M.
Knott 13D indicates that Mr. Knott has sole voting and dispositive
power with respect to 206,000 of such shares and shared voting and
dispositive power with respect to 153,100 of such shares. The D.M.
Knott 13D also indicates that 153,100 of such shares are owned on
behalf of other persons or entities having the right to receive and
the power to direct the receipt of dividends from, and proceeds from
the sale of, such shares. The business address of Mr. Knott is 485
Underhill Boulevard, Suite 205, Syosset, New York 11791-3419.
(11) Mr. Hurwitz serves as a trustee of Federated, and 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,
membership on the Company's Executive Committee and Chairman of the
Board, President and Chief Executive Officer of Federated. By reason
of the foregoing and his relationship with the members of the
Stockholder Group, Mr. Hurwitz may be deemed to possess shared voting
and investment power with respect to the shares held by the
Stockholder Group.
(12) Does not include shares owned by other members of the Stockholder
Group.
(13) Includes 661,377 shares of Preferred Stock owned by FDI as to which
Mr. Hurwitz possesses voting and investment power and 1,064 shares of
Preferred Stock held directly by Mr. Hurwitz.
(14) Consists of 549 shares of Common Stock, which is the number of shares
Mr. Reman would have received on April 15, 1998 for 2,000 SARs
exercisable within 60 days of such date, if such SARs had been paid
solely in shares of Common Stock.
(15) Includes 1,099 shares of Common Stock, which is the number of shares
Mr. Schwartz would have received on April 15, 1998 for 4,000 SARs
exercisable within 60 days of such date, if such SARs had been paid
solely in shares of Common Stock. Also includes options to purchase
15,000 shares of Common Stock exercisable within 60 days of April 15,
1998, and 10,749 shares of Common Stock owned by a trust of which Mr.
Schwartz and his spouse are trustees.
(16) The Stockholder Group beneficially owns 2,685,698 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 (i) 10,749 owned by a trust of which an officer and his spouse
are trustees, (ii) options exercisable within 60 days of April 15,
1998 to purchase 38,879 shares of Common Stock, and (iii) 4,148 shares
of Common Stock which would have been received on April 15, 1998 for
11,000 SARs exercisable within 60 days of such date, if such SARs had
been paid solely in shares of Common Stock.
</TABLE>
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, 1997:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------------ ------------------------- ----------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
OTHER RESTRICTED
NAME AND ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($)(1) ($)(2) (#) ($) ($)
- --------------------- ---------- -------------- -------------- ------------ ------------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles E. Hurwitz, 1997 671,736 450,000 -- -0- 32,500 -0- 107,160(3)
Chief Executive 1996 645,900 450,000 -- -0- 22,500 -0- 102,885(3)
Officer and 1995 633,235 450,000 -- -0- 22,500 -0- 100,985(3)
Chairman of the
Board
Paul N. Schwartz, 1997 338,000 275,000 -- -0- 15,000 -0- 56,333(3)
Director, 1996 325,000 250,000 -- -0- -0- -0- 54,750(3)
President, Chief 1995 290,850 218,307(4) -- -0- 10,000 -0- 48,476(3)
Operating
Officer and
Chief Financial
Officer
John T. La Duc,(5) 1997 260,000 184,000(6) -- -0- -0- 44,236(7) 13,000(8)
Senior Vice 1996 260,000 83,200(6) -- -0- -0- -0-(7) 5,200(8)
President 1995 248,333 130,000(6) -- -0- -0- -0- 12,417(8)
Byron L. Wade,(9) 1997 257,589 175,000 -- -0- 17,500 -0- 45,038(3)
Senior Vice 1996 214,200 165,000 -- -0- -0- -0- 38,130(3)
President and 1995 196,660 128,355 -- -0- 5,000 -0- 35,499(3)
Chief Legal
Officer
Ronald L. Reman 1997 175,008 157,500 -- -0- 5,000 -0- 32,650(3)
Vice President-- 1996 159,120 150,000 -- -0- -0- -0- 29,868(3)
Taxes 1995 156,000 132,500 -- -0- 5,000 -0- 29,380(3)
<FN>
- ---------------
(1) 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.
(2) No named executive officer held restricted stock of the Company or
Kaiser at fiscal year end 1997.
(3) Includes the following aggregate amounts accrued for 1997, 1996 and
1995, respectively, in respect of the MAXXAM Inc. Revised Capital
Accumulation Plan of 1988, pursuant to which, in general, benefits
vest 10% annually and are payable upon the earlier of (i) January 1,
1998 (with respect to participants who were also participants under a
former plan on December 31, 1987), and (ii) termination of employment
with the Company: Mr. Hurwitz--$100,760, $96,885, and $94,985; Mr.
Schwartz--$50,700, $48,750, and $43,628; Mr. Wade--$38,638, $32,130,
and $29,499; and Mr. Reman--$26,250, $23,868, and $23,400.
Additionally, these amounts include matching contributions by the
Company under its 401(k) savings plan for 1997, 1996, and 1995,
respectively, as follows: Mr. Hurwitz--$6,400, $6,000, and $6,000;
Mr. Schwartz--$5,633, $6,000, and $4,848; Mr. Wade--$6,400, $6,000,
and $6,000; and Mr. Reman--$6,400, $6,000, and $5,980.
(4) Pursuant to Mr. Schwartz's former employment agreement, his personal
loan from the Company outstanding on the date of the agreement was
forgiven in the amount of $20,000 in 1995, which amount is included
here as additional bonus compensation.
(5) Mr. La Duc received his compensation for all three years principally
from KACC; however, the Company reimbursed KACC for certain allocable
costs associated with the performance of services for the Company by
Mr. La Duc. The table reflects Mr. La Duc's total compensation,
rather than any allocated part of such compensation.
(6) Includes $50,000 per year (to be paid over two-year periods) awarded
for 1997, 1996 and 1995, for which the Company reimburses KACC.
(7) The long-term component of KACC's incentive compensation program
provides incentive compensation based on performance against goals
over rolling three-year periods. The first installment for the 1994-
1996 period was distributed in March 1997 and the amount shown in the
table reflects the market value of the stock portion of the grant on
the date of distribution. The second installment was distributed in
March 1998. The total award for the 1995-1997 period for Mr. La Duc
was $164,900. The first installment for the 1995-1997 period was paid
in March 1998. Additional information with respect to the long-term
component of KACC's incentive compensation program is set forth below
under the caption "Long-Term Incentive Plan Awards Table."
(8) Amount represents contributions under the KACC 401(k) savings plan and
the KACC Supplemental Benefits Plan by KACC.
(9) Mr. Wade resigned from the Company effective March 31, 1998. Mr.
Friedman is currently serving as Acting General Counsel of the Company
until a permanent successor is named.
</TABLE>
OPTION/SAR GRANTS TABLE
The following table sets forth certain information concerning
stock options or SARs granted in fiscal year 1997 to any of the named
executive officers:
<TABLE>
<CAPTION>
Grant
Individual Grants Date Value
----------------------------------------------------------------------------------------------------------- --------------------
(a) (b) (c) (d) (e) (f)
% of Total
# of Options/
Securities SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration Grant Date
Name Grants(1) 1997 ($/Share) Date Present Value ($)
------------------------------- ----------------- ------------------ ----------------- ----------------- --------------------
<S> <C> <C> <C> <C> <C>
Charles E. Hurwitz 32,500 35.7 41.500 12/12/07 624,880(2)
Paul N. Schwartz 15,000 16.5 41.500 12/12/07 288,406(2)
Ronald L. Reman 5,000 5.5 41.500 12/12/07 96,135(2)
Byron L. Wade 10,000 11.0 42.625 04/21/07 206,797(3)
7,500 8.2 41.500 12/12/07 144,203(2)
<FN>
- ---------------
(1) Represents shares of Common Stock underlying SARs, except with respect
to Mr. Hurwitz whose amount represents shares of Common Stock
underlying an option.
(2) Valuation utilizing Black-Scholes Option Price Model with the
following assumptions: 5-year daily volatility for Common Stock,
5.77% risk-free rate (10-year Government Bond as of the grant date),
no dividend yield and 6.59-year exercise date. No adjustments were
made for non-transferability or risk of forfeiture.
(3) Valuation utilizing Black-Scholes Option Price Model with the
following assumptions: 5-year daily volatility for Common Stock,
6.82% risk-free rate (10-year Government Bond as of the grant date),
no dividend yield and 6.59-year exercise date. No adjustments were
made for non-transferability or risk of forfeiture.
</TABLE>
The stock options and SARs set forth in the above table were
granted under the Omnibus Plan at the closing price on the date of the
grant and vest with respect to 20% on the first anniversary date of the
grant and an additional 20% on each anniversary date thereafter until fully
vested. SARs under the Omnibus Plan are exercisable for cash, Common
Stock or a combination thereof at the discretion of the Company's Board.
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, 1997 by each of the named
executive officers, and the 1997 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 ($)
------------------------------- --------------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------------- --------------- --------------- --------------- --------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Charles E. Hurwitz -0- -0- 36,000(1) 54,000(1) 357,750(2) 238,500(2)
-0- 652,219 -0- 32,500(3) --(2) 69,063(2)
-0- -0- 187,500(4) 62,500(4) --(5) --(5)
Paul N. Schwartz -0- 323,750 30,000(3) 31,000(3) 370,625(2) 164,375(2)
John T. La Duc -0- 64,750 8,000(3) -0- 125,000(2) --(2)
-0- -0- 6,900(4) 2,300(4) --(5) --(5)
Ronald L. Reman -0- -0- 2,000(3) 8,000(3) --(2) 10,625(2)
Byron L. Wade -0- -0- 17,000(3) 20,500(3) 234,375(2) 25,938(2)
<FN>
- ---------------
(1) Represents underlying shares of Preferred Stock.
(2) Valued at $43.625 per share, the closing price of the Company's Common
Stock on December 31, 1997, less exercise price.
(3) Represents underlying shares of Common Stock.
(4) Represents underlying shares of Kaiser common stock.
(5) Valued at $8.875 per share, the closing price of Kaiser common stock
on December 31, 1997, less exercise price. No value is shown because
the exercise price is higher than such closing price.
</TABLE>
LONG-TERM INCENTIVE PLAN AWARDS TABLE
Mr. La Duc received an award in 1997 in respect of the long-term
component of KACC's long-term incentive compensation program for the 1994-
1996 three-year, long-term performance period. The following table and
accompanying footnotes describe the award received by Mr. La Duc in 1997
and the criteria applied in determining the amount payable.
<TABLE>
<CAPTION>
(A) (B) (C)
PERFORMANCE
NUMBER OF OR OTHER
SHARES, UNITS PERIODS UNTIL
OR OTHER MATURATION OR
NAME RIGHTS (#) PAYOUT
------------- ------------- ---------------
<S> <C> <C>
John T. La Duc 2,104(1) -- (2)
<FN>
- ---------------
(1) Represents the stock portion of the first installment of long-term
incentive award distributed in March 1997 to Mr. La Duc in connection
with the 1994-1996 three year, long-term performance period. Payments
under the long-term component of the program are generally made 57% in
shares of Kaiser common stock and 43% in cash and are paid in two
installments; the first installment during the year following the end
of the three-year period and the second installment during the second
year following the end of the three-year period. The aggregate number
of shares distributed was based on the average closing price of Kaiser
common stock during the last December of the long-term performance
period. The average closing price of Kaiser common stock during
December 1996 was $11.375 per share. Mr. La Duc's total award for the
1994-1996 long-term performance period was $84,000.
(2) Payment of the second installment for the 1994-1996 long-term
performance period was conditioned on Mr. La Duc's continued
employment through the end of the fiscal year following the end of the
performance period. If a participant voluntarily terminates his or
her employment for any reason other than death, disability or
retirement prior to the beginning of the fiscal year, the payment is
to be made; any unmade payments are forfeited. Mr. La Duc was
employed by KACC on January 1, 1998, and the second installment was
distributed in March 1998.
Threshold, target and maximum amounts for the long-term portion
of KACC executive compensation are based upon Kaiser performance. During
the 1994-1996 performance period target incentives were based on the return
on assets employed in the business. Minimum performance criteria must be
met before the threshold amount is earned. In addition, when incentive
awards are determined at the end of each performance period, an additional
30% of the incentive target based on the achievement of goals or other
accomplishments not reflected in the return on assets is added to the
incentive payment amount. Finally, while KACC's Section 162(m)
Compensation Committee cannot increase the incentive payment, it may
decrease the payment by up to 60% of the target incentive. Additional
information with respect to Mr. La Duc's long-term incentive compensation
is set forth above in the Summary Compensation Table.
DEFINED BENEFIT PLANS
MAXXAM Pension Plan
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 qualified 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, but excluding bonuses, commissions and incentive 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 the participant's Past Service
Compensation Base in excess of $15,000 multiplied by
(b) the participant's credited years of service prior
to January 1, 1987; or
(iii) the product of 1.2% of the participant's Past
Service Compensation Base multiplied by the
participant's 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 equaled 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. Effective January 1, 1995, the annual
future service benefit equals 2.35% of an employee's compensation for each
year of participation.
The amount of an employee's aggregate plan compensation that may
be included in benefit computations under the Pension Plan is limited to
$160,000 for 1997. 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. The covered compensation for 1997 and
credited years of service as of December 31, 1997 for the Pension Plan and
estimated annual benefits payable upon retirement at normal retirement age
for the named executive officers (other than Mr. La Duc, who does not
participate in this Pension Plan) were as follows: Mr. Hurwitz: $160,000-
- -17 years--$121,333; Mr. Schwartz: $160,000--17 years--$114,872; and Mr.
Reman: $160,000--11 years--$112,667. Mr. Wade resigned effective as of
March 31, 1998. Based on Mr. Wade's service and earnings through the
effective date of his resignation, the annual benefit payable to Mr. Wade
under the Pension Plan beginning at age 65 is $45,228.
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 $160,000 for 1998 and subsequent years
under Section 401(a)(17) of the Code. In addition, the amounts reflect a
maximum benefit limit of $130,000 for 1998 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.
Kaiser Retirement Plan
KACC maintains a qualified, defined-benefit Retirement Plan (the
"Kaiser Retirement Plan") for salaried employees of KACC and participating
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. These benefits are reflected without reduction for the
limitations imposed by the Code on qualified plans and before adjustment
for the Social Security offset, thereby reflecting aggregate benefits to be
received, subject to Social Security offsets, under the Kaiser Retirement
Plan and the Kaiser Supplemental Benefit Plan (as defined below).
</TABLE>
<TABLE>
<CAPTION>
YEARS OF SERVICE
ANNUAL ---------------------------------------------------------------------
REMUNERATION 15 20 25 30 35
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$ 250,000 56,250 75,000 93,750 112,500 131,250
300,000 67,500 90,000 112,500 135,000 157,500
350,000 78,750 105,000 131,250 157,500 183,750
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
</TABLE>
The estimated annual retirement benefits shown are based upon the
assumptions that current Kaiser Retirement Plan and Kaiser Supplemental
Benefit 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 28.3 years of credited service on
December 31, 1997. 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 ten years of
employment and 1.25% of monthly primary Social Security benefits. Pension
compensation covered by the Kaiser Retirement Plan and the Kaiser
Supplemental Benefits Plan consists of salary and bonus amounts 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 ten 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 ten 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, if they have completed ten or more years of
pension service, 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 eligible 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 the SERP are
selected by the Company's Board of Directors. Three executive officers of
the Company, Messrs. Hurwitz, Schwartz and Wade, were entitled to receive
benefits under the SERP during 1997.
The following projections are based on the same assumptions as
utilized in connection with the Pension Plan projections above. The 1998
qualified plan pay limit ($160,000) and benefit limit ($130,000) are
reflected for all years in the future. In addition, no future increases in
the participants' covered compensation amounts from the 1997 levels are
assumed.
<TABLE>
<CAPTION>
HURWITZ SCHWARTZ WADE
------------ ------------- -------------
<S> <C> <C> <C>
COVERED COMPENSATION FOR 1997:
Qualified Plan $ 160,000 $ 160,000 $ 160,000
Nonqualified Plan 511,736 178,000 97,589
------------ ------------- -------------
Total $ 671,736 $ 338,000 $ 257,589
============ ============= =============
CREDITED YEARS OF SERVICE AS 17 17 17
OF DECEMBER 31, 1997 ============ ============= =============
PROJECTED NORMAL RETIREMENT
BENEFIT:
Qualified Plan $ 121,333 $ 114,872 $ 45,228
Nonqualified Plan 182,045 69,622 5,395
------------ ------------- -------------
Total $ 303,378 $ 184,494 $ 50,623
============ ============= =============
</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 Section
401(a)(17) and Section 415 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 be affected by such limitations imposed by the
Code. Eligible participants, including Mr. La Duc, are entitled to receive
the equivalent of the Kaiser Retirement Plan and Kaiser Savings Plan
benefits which they may be prevented from receiving under those plans
because of such Code limitations.
MAXXAM Severance or Termination Policy
Severance or termination pay is generally granted to regular
full-time employees who are involuntarily terminated, subject to certain
conditions and a number of exclusions, pursuant to an unfunded policy.
After such termination, the policy provides for payment in an amount
ranging from two weeks' salary for at least one year of service graduating
to a maximum of 104 weeks' salary. The amounts payable under the policy if
the named executive officers had been involuntarily terminated on December
31, 1997 would have been as follows: Mr. Hurwitz-- $1,343,472; Mr.
Schwartz--$676,000; Mr. Wade--$550,000; and Mr. Reman--$302,884.
Kaiser Termination Payment 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 graduating 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, 1997 would have been $151,666.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
There are no employment contracts between the Company and any of
its named executive officers. Except as set forth above under "MAXXAM
Severance or Termination Policy" and "Kaiser Termination Payment Policy,"
there are not any compensatory plans or arrangements which include payments
from the Company or any of its subsidiaries to any of the named executive
officers in the event of any such officer's resignation, retirement or any
other termination of employment with the Company and its subsidiaries or
from a change in control of the Company or any of its subsidiaries or a
change in the named executive officer's responsibilities following a change
in control.
All executive officers are eligible to participate in a deferred
compensation program. An executive officer may defer up to 30% of gross
salary and up to 30% of any bonus otherwise payable to such executive
officer for any calendar year. The designated percentage of deferred
compensation is credited to a book account as of the date such compensation
would have been paid and is deemed "invested" in an account bearing
interest calculated using one-twelfth of the sum of the prime rate plus 2%
on the first day of each month. Deferred compensation, including all
earnings credited to the book account, will be paid in cash to the
executive or beneficiary as soon as practicable following the date the
executive ceases for any reason to be an employee of the Company, either in
a lump sum or in a specified number of annual installments, not to exceed
ten, at the executive's election.
REPORT OF THE COMPENSATION COMMITTEES
ON
EXECUTIVE COMPENSATION
Two compensation committees administer the Company's compensation
plans, the Policy Committee and the Section 162(m) Committee. The Policy
Committee administers and establishes overall compensation policies except
to the extent that such authority has been delegated by the Board of
Directors to the Section 162(m) Committee. The Section 162(m) Committee
administers and approves amendments to the Company's plans or programs
which are intended to comply with the provisions of Section 162(m) of the
Code. Each of the committees reports directly to the full Board of
Directors and together they have furnished the following report on
executive compensation for fiscal year 1997.
EXECUTIVE OFFICER COMPENSATION
The Policy Committee generally approves the policies under which
compensation is paid or awarded to the Company's executive officers.
Occasionally, the Chief Executive Officer of the Company exercises his
authority to make a particular payment, award or adjustment. Among the
factors the Policy Committee takes into consideration in its decisions on
executive compensation are the diversified and multifaceted financial and
managerial skills required to effectively manage the Company's complex
structure. For instance, the Company consists of units operating in wholly
separate industries and many of the Company's executives also serve in
executive capacities in some or all of its operating subsidiaries in these
industries. In addition, the Company continues to position itself to
respond when growth opportunities become available. Accordingly, the
Policy Committee looks not only to the Company's annual earnings, enhanced
stockholder value, and the business development efforts of its existing
business units when making executive compensation decisions but also
recognizes the particular talents required to build the Company's asset
base through expansions into new business segments and acquisitions. The
Policy Committee also recognizes and takes into account the role of the
Company's executive officers in financial structuring, refinancing and
reorganizations on behalf of its operating units. Additional factors
considered by the Policy Committee are the public relations, regulatory and
litigation related challenges the Company presents for its executive
officers. All of these factors present a particular challenge in
determining appropriate approaches to executive compensation.
The primary elements of compensation for executive officers of
the Company are base salaries and annual discretionary bonuses. In
addition, from time to time, the Policy Committee or the Section 162(m)
Committee recommend or approve bonus compensation awards under additional
incentive compensation programs such as the Company's Omnibus Plan or
deferred compensation program. See "Executive Compensation--Employment
Contracts and Termination of Employment and Change-in-Control Arrangements"
above for a description of these programs. From time to time, certain
eligible executive officers may participate in the Company's Executive
Plan, although to date only the Chief Executive Officer has met the
criteria. See "--Compensation for the Chief Executive Officer for the Last
Completed Fiscal Year" below. There are no longer any employment
agreements governing the compensation of any of the executive officers of
the Company. However, the base salaries and the incentive amounts set in
pre-existing employment agreements still serve as benchmarks and may be
reviewed in determining compensation decisions for executives who at one
time had employment agreements.
Base Salary
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 the industries in which it operates allow them to be key
contributors to the administration, management and operations of the
Company. Specific determinations are based primarily on individual
attributes and the specific duties or responsibilities of each executive.
Base salaries are generally adjusted annually according to cost of living
information. In December 1997, base salaries for executive officers
(except those principally compensated by KACC) were reviewed individually
and recommendations as to increases for the coming fiscal year were made by
the Policy Committee. Among the factors considered by the Policy Committee
in determining the amount of the base salary increases were the Consumer
Price Index and the national average increases. For the most part, across-
the-board base salary increases for key employees of the Company were 4%.
Annual Discretionary Bonus
Company policy requires that a significant portion of an
executive officer's compensation be at-risk compensation paid through an
annual discretionary bonus. This policy enables the Policy Committee to
focus on each executive officer's individual efforts and contribution to
the Company during the year in the context of both the Company's
performance and the particular responsibilities and projects undertaken by
the executive during the year, and award bonus compensation accordingly.
Specific determinations are based primarily on the level of achievement of
the Company's corporate objectives, the individual's contribution to the
achievement of those objectives and the assumption of additional duties or
responsibilities. The Company also recognizes particular challenges faced
by executives in efforts to strengthen some of its less profitable or
marginal operations. The Policy Committee believes that this approach best
serves both the short- and long-term interests of the Company and its
stockholders by significantly compensating executive officers
retrospectively for services they have performed that can be both
quantitatively and qualitatively analyzed as opposed to compensating
executive officers prospectively through larger base salaries. Bonus
compensation is typically awarded in December of each fiscal year and
principally paid in cash. Bonus amounts paid by the Company to its
executive officers in December 1997 did not vary significantly from bonuses
paid for 1996. These bonuses were proposed (other than with respect to
himself) by the Chief Executive Officer, subject to review and approval by
the Policy Committee.
Additional Incentive Awards
Awards under the Omnibus Plan are stock-based and compensation
arising from the awards, if any, is usually tied to stock price
appreciation. In 1997, six executive officers were granted a total of
48,500 stock appreciation rights ("SARs") under the Omnibus Plan. In
addition, the Chief Executive Officer, whose compensation is discussed
below, was granted options under the Omnibus Plan to acquire shares of the
Company's capital stock.
Executive Plan
The Executive Plan provides performance incentives to each
participant while securing, to the extent practicable, a tax deduction by
the Company for payments of additional incentive compensation. Under the
Executive Plan, the executive officers who are or will be eligible to
participate are the only executive officers of the Company to which the
deduction limitation is likely to apply. In general, the Section 162(m)
Committee meets before March 31 of each year to identify current areas,
factors or transactions involving the Company's business where the Section
162(m) Committee believes it would be beneficial to provide an incentive
for a participant's performance. As a result, objective performance goals
are pre-established and based on general business standards or are narrowly
fact-specific to a given fiscal year or, in some instances with respect to
longer-term objectives, multiple fiscal years.
As described elsewhere in the Proxy Statement in which this
report is contained, in February 1998, the Section 162(m) Committee adopted
amendments to the Executive Plan which (i) lower the base salary required
to participate in the Executive Plan from $600,000 to $500,000, (ii)
increase the maximum aggregate annual award payable under the Executive
Plan to any participant with respect to any fiscal year from $3 million to
$12 million, and (iii) make it clear that the Section 162(m) Committee or
any other designated committee of the Board of Directors has the authority
to terminate, suspend or amend the Executive Plan. These amendments were
ratified by the Board of Directors and, if approved by the stockholders in
connection with the reapproval of the Executive Plan, will be retroactively
effective to January 1, 1998. If approved, these amendments will increase
the flexibility of the Section 162(m) Committee to select participants and
to develop performance incentives commensurate with the benefits which may
be realized by the Company from achieving the established performance
criteria and the performance of each participant. The Company's Chief
Executive Officer is currently the only participant in the Executive Plan,
however, the Company's President could also become a participant if the
foregoing amendments are approved.
Compensation of the Chief Executive Officer for the Last
Completed Fiscal Year
The compensation of Charles E. Hurwitz, Chairman of the Board and
Chief Executive Officer, generally consists of the same elements as for
other executive officers. However, the Policy Committee recognizes the
entrepreneurial talents of Mr. Hurwitz, which have provided special
benefits to the Company from time to time. Accordingly, the Policy
Committee has occasionally awarded extraordinary compensation to Mr.
Hurwitz in recognition of his role in providing such benefits and as an
incentive to provide future opportunities. In December 1997, the Policy
Committee approved a base salary increase for 1998 of 4% for Mr. Hurwitz.
This was the same percentage of increase generally provided during the same
period to the Company's executive officers and other key employees.
As described above, Mr. Hurwitz participated in the Executive
Plan. The performance goals established for 1997 by the Section 162(m)
Committee for Mr. Hurwitz under the Executive Plan were based upon specific
projects consisting of (i) two major subsidiaries committing to certain new
business ventures, (ii) KACC's Micromill(TM) facility reaching certain
operational objectives, (iii) the execution of a binding written agreement
in connection with one or more extraordinary transactions as defined in the
Executive Plan, and (iv) the resolution of Headwaters forest issues
pertaining to the rights of the Company and Pacific Lumber. Other criteria
consisted of improved consolidated financial results as compared to 1996
results, improvements in earnings per share as compared to 1996 earnings
per share, and the achievement of the 1997 business plans by the Company's
industry segments. Based on the Company's 1997 results and performance in
relation to the foregoing goals and criteria, Mr. Hurwitz was entitled to
receive approximately $2.1 million under the Executive Plan. This amount
was based upon (i) the satisfaction of the operational objectives by KACC's
Micromill(TM) facility in 1997, (ii) the completion of an extraordinary
transaction in respect of an issue of securities, (iii) improvements in the
Company's 1997 consolidated financial results and earnings per share, and
(iv) the achievement of 1997 annual business plans by two operating units
of the Company. However, the Section 162(m) Committee exercised its
negative discretion as permitted under the Executive Plan and awarded Mr.
Hurwitz a bonus amount of $250,000 thereunder, or approximately 11.9% of
his entitlement under the Executive Plan, in respect of his services during
1997. Separately from the Executive Plan, the Policy Committee awarded
Mr. Hurwitz a bonus of $200,000 under the Company's annual discretionary
bonus policies applicable to all of its executive officers as discussed
above.
The 162(m) Committee also gave Mr. Hurwitz a choice between two
alternative awards under the Omnibus Plan of either options to purchase (i)
29,500 shares of Preferred Stock or (ii) 32,500 shares of Common Stock,
both at an exercise price of $41.50 per share, the closing price for the
Company's Common Stock on December 12, 1997, the date of the grant. Mr.
Hurwitz chose the options to purchase shares of Common Stock. The options
will vest in 20% increments each year on the anniversary date of the grant
until fully vested and will expire ten years from the date of grant.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
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 companies. Qualifying performance-based compensation will not be
subject to the deduction limit if certain requirements are met. The
Executive Plan and the Omnibus Plan, each of which has been approved by the
stockholders of the Company, are performance-based and designed to enable
compliance with Section 162(m) of the Code and the regulations thereunder.
For purposes of Section 162(m) of the Code, the Section 162(m) Committee
was composed of "outside directors" as such term is defined or interpreted
for purposes of Section 162(m) of the Code during 1997.
COMPENSATION BY KACC
One of the Company's executive officers, Mr. La Duc, was
compensated during 1997 principally by KACC, a majority-owned subsidiary of
the Company, 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, or where an executive officer of
both the Company and KACC is compensated by the Company, 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 their respective
subsidiaries.
Section 162(m) Compensation Compensation Policy Committee
Committee of the Board of Directors of the Board of Directors
Robert J. Cruikshank
Robert J. Cruikshank, Chairman Ezra G. Levin, Chairman
Stanley D. Rosenberg Stanley D. Rosenberg
POLICY COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Policy Committee was, during the 1997 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,
one member had a relationship requiring disclosure by the Company under
Item 404 of Regulation S-K. Mr. Levin served on the Policy Committee and
on the Board of Directors during 1997. Mr. Levin is also a partner in the
law firm of Kramer, Levin, Naftalis & Frankel, which provided legal
services to the Company and its subsidiaries during 1997.
During the Company's 1997 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 Policy Committee, (ii) a director of
another entity, one of whose executive officers served on the Policy
Committee, 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, 1992,
and that all dividends were reinvested. The data points are calculated as
of the last trading day for the year indicated.
[Line graph containing the following data points appears here]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
MAXXAM Inc. 100 133.64 112.27 128.18 173.18 158.64
S&P 500 Index 100 110.08 111.53 153.45 188.68 251.63
Paper and Forest Products 100 110.21 114.84 126.44 139.86 149.97
Aluminum 100 102.38 125.55 154.72 177.69 180.6
</TABLE>
The Company is involved in the real estate and horse racing
industries in addition to the aluminum and forest products industries.
However, the real estate and horse racing units of the Company account for
less than 5% of the Company's gross revenues on a consolidated basis and,
therefore, a line-of-business index for each such industry is not utilized.
CERTAIN TRANSACTIONS
LITIGATION MATTERS
USAT Matters
In October 1994, the Company learned that the United States
Department of Treasury's Office of Thrift Supervision ("OTS") had commenced
an investigation into UFG and the insolvency of its wholly owned
subsidiary, United Savings Association of Texas ("USAT"). In December
1988, the Federal Home Loan Bank Board ("FHLBB") placed USAT into
receivership and appointed the Federal Savings & Loan Insurance Corp. as
receiver. At the time of the receivership, the Company owned approximately
13% of the voting stock of UFG.
On December 26, 1995, the OTS initiated a formal administrative
proceeding (the "OTS action") against the Company and others by filing a
Notice of Charges (No. AP 95-40; the "Notice"). The Notice alleges, among
other things, misconduct by the Company, Federated, Mr. Hurwitz and others
(the "respondents") with respect to the failure of USAT. The Notice claims
that the Company was a savings and loan holding company, that with others
it controlled USAT, and that, as a result of such status, it was obligated
to maintain the net worth of USAT. The Notice makes numerous other
allegations against the Company and the other respondents, including that
through USAT it was involved in prohibited transactions with Drexel,
Burnham, Lambert Inc. ("Drexel"). The OTS, among other things, seeks
unspecified damages of approximately $560 million from the Company and
Federated for restitution and reimbursement against loss for their pro rata
portion (allegedly 35%) of the amount of USAT's capital deficiency and all
imbedded losses as of the date of USAT's receivership (allegedly $1.6
billion). The OTS also seeks civil money penalties and a removal from, and
prohibition against the Company and the other respondents engaging in, the
banking industry. The hearing on the merits of this matter commenced on
September 22, 1997, adjourned on December 19, 1997, and is scheduled to
recommence on June 16, 1998. It is impossible to predict the ultimate
outcome of the foregoing matter or its potential impact on the Company's
consolidated financial position, results of operations or liquidity. See
also the description of the FDIC action and the Martel action below.
On August 2, 1995, the Federal Deposit Insurance Corporation
("FDIC") filed a civil action entitled Federal Deposit Insurance
Corporation, as manager of the FSLIC Resolution Fund v. Charles E. Hurwitz
(the "FDIC action") in the U.S. District Court for the Southern District of
Texas (No. H-95-3956). The original complaint was against Mr. Hurwitz and
alleged damages in excess of $250.0 million based on the allegation that
Mr. Hurwitz was a controlling shareholder, de facto senior officer and
director of USAT, and was involved in certain decisions which contributed
to the insolvency of USAT. The original complaint further alleged, among
other things, that Mr. Hurwitz was obligated to ensure that UFG, Federated
and the Company maintained the net worth of USAT. In January 1997, the
FDIC filed an amended complaint which seeks, conditioned on the OTS
prevailing in the OTS action, unspecified damages from Mr. Hurwitz relating
to amounts the OTS does not collect from the Company and Federated with
respect to their alleged obligations to maintain USAT's net worth. On
February 6, 1998, Mr. Hurwitz filed a motion seeking dismissal of this
action. It is impossible to predict the ultimate outcome of the foregoing
matter or its potential impact on the Company's consolidated financial
position, results of operations or liquidity.
In January 1995, an action entitled U.S., ex rel., Martel v.
Hurwitz, et al. (the "Martel action") was filed in the U.S. District Court
for the Northern District of California (No. C950322), which named as
defendants the Company, Mr. Hurwitz, MGI, Federated, UFG and a former
director of the Company. This action is purportedly brought by plaintiff on
behalf of the U.S. government; however, the U.S. government has declined to
participate in the suit. The suit alleges that defendants made false
statements and claims in violation of the Federal False Claims Act in
connection with USAT. Plaintiff alleges, among other things, that
defendants used the federally insured assets of USAT to acquire junk bonds
from Michael Milken and Drexel and that, in exchange, Mr. Milken and Drexel
arranged financing for defendants' various business ventures, including the
acquisition of Pacific Lumber. Plaintiff alleges that as a result of
USAT's insolvency the defendants should be required to pay $1.6 billion
(subject to trebling) to cover USAT's losses. The Company's alleged
portion of such damages has not been specified. Plaintiff seeks, among
other things, that the Court impose a constructive trust upon the fruits of
the alleged improper use of USAT funds. In August 1996, the Court
transferred this matter (No. 96-CV-1164) to the court handling the FDIC
action. On February 6, 1998, defendants' motion to dismiss was taken under
submission by the Court.
Rancho Mirage Litigation Settlement
On December 8, 1997, the Delaware Chancery Court approved the
settlement of certain shareholder derivative actions brought on behalf of
the Company and its wholly owned subsidiary, MCO Properties Inc. ("MCOP"),
against Federated and certain of the Company's directors, including Mr.
Hurwitz, in connection with an exchange between Federated and MCOP of
certain real estate assets in Rancho Mirage, California. In connection
with the settlement, which was completed in January 1998, MCOP received
approximately $7.5 million in cash and a 23.7 acre commercial development
property owned by a subsidiary of Federated and paid the plaintiff's
counsel $5.5 million for attorneys fees and expenses. In addition, a
subsidiary of Federated transferred to MCOP approximately $3.9 million
(liquidation value) of MCOP preferred stock while retaining the right to
purchase certain shares of Common Stock at a price of approximately $55 per
share and canceled rights to purchase Common Stock valued at approximately
$1.0 million. The transactions provided for in the settlement were
reflected in the Company's financial statements for the year ended December
31, 1997.
Indemnification of Directors and Officers
Certain present and former directors and officers of the Company
are defendants in certain of the actions described above. The Company's
Amended and Restated By-Laws provide for indemnification of its officers
and directors to the fullest extent permitted by Delaware law. The Company
is obligated to advance defense costs to its officers and directors,
subject to the individual's obligation to repay such amount if it is
ultimately determined that the individual was not entitled to
indemnification. In addition, the Company's indemnity obligation can under
certain circumstances include amounts other than defense costs, including
judgments and settlements.
OTHER MATTERS
The Company and certain of its subsidiaries share certain
administrative and general expenses with Federated. Under these
arrangements, Federated's obligation to the Company and its subsidiaries
was approximately $128,000 for 1997. Federated and the Company also share
office space leased by the Company. The obligations of Federated relating
to 1997 under such office space sharing arrangement amounted to
approximately $12,000. At December 31, 1997, Federated owed the Company
$38,000 for shared office space and certain general and administrative
expenses.
The Company's wholly owned subsidiary, Bering Holdings Inc.
("Bering Holdings"), is a Texas registered investment adviser which has an
agreement with Federated whereby Bering Holdings manages an investment
portfolio for Federated on substantially the same terms as provided to
other persons. The agreement provides for an annual management fee equal
to 1% of the average value of the portfolio, except for certain short-term
investments for which the management fee is 1/2 of 1% per annum. The
agreement also provides for an annual performance fee equal to 10% of the
net gain in certain portfolios. Bering Holdings has accrued management and
performance fees for the year ended December 31, 1997 of approximately
$79,000 and $270,000, respectively. At December 31, 1997, Federated owed
Bering Holdings $278,000 in respect of such fees.
Mr. Levin, a director of the Company, is a partner in the law
firm of Kramer, Levin, Naftalis & Frankel, and Mr. Friedman, the Company's
Acting General Counsel, is a partner in the law firm of Mayor, Day,
Caldwell & Keeton, L.L.P. Each of these firms provides legal services to
the Company and its subsidiaries.
On January 14, 1997, UFG filed a voluntary petition under Chapter
11 of the United States Bankruptcy Code. UFG's bankruptcy plan was
confirmed by the Bankruptcy Court on March 31, 1997, and the transactions
contemplated by the bankruptcy plan were substantially consummated on July
18, 1997. Prior to such date, the Company and MCOP owned approximately
38.5% of the outstanding common shares of UFG. Mr. Schwartz was President
and a Director of UFG prior to the substantial consummation of the
bankruptcy plan and serves as the sole director and executive officer of
the reorganized UFG. Pursuant to the plan, all outstanding shares of UFG
were canceled and a single new share was issued to the sole member of the
Board of Directors, who will hold such share in trust for the benefit of
the holders of allowed claims.
On April 17, 1995, Sam Houston Race Park, Ltd. (the
"Partnership"), SHRP Acquisition, Inc. and SHRP Capital Corp. filed
voluntary petitions under Chapter 11 of the United States Bankruptcy Code.
Their bankruptcy reorganization plan has since been confirmed and the
transactions contemplated by the bankruptcy plan were consummated on
October 6, 1995. Since July 1993, Mr. Schwartz has served as a director
and Executive Vice President of both SHRP, Inc., the Partnership's sole
general partner prior to the Partnership's bankruptcy reorganization, and
of SHRP Capital Corp., a subsidiary of the Partnership, which was dissolved
effective December 31, 1997; and Mr. Hurwitz has served as a director and
Chairman of the Board of SHRP, Inc., and as a director, Chairman of the
Board and President of SHRP Capital Corp. Mr. Wade served as a director,
Vice President and Secretary of SHRP, Inc. from July 1993 until his
resignation in March 1998, and of SHRP Capital Corp. from July 1993 until
December 31, 1997.
On October 17, 1997, the Company repurchased 1,277,250 shares of
its Common Stock, consisting of 250,000 shares owned by NL Industries, Inc.
("NL") and 1,027,250 shares owned by NL's affiliate, The Combined Master
Retirement Trust. The aggregate purchase price for these combined holdings
was approximately $70.2 million, or $55 per share, and was paid one-half in
cash and one-half in one-year notes bearing interest at ten percent (10%)
per annum and prepayable without penalty.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 which were applicable to its officers,
directors and greater than 10% beneficial owners.
OTHER MATTERS
SOLICITATION OF PROXIES
The cost of mailing and soliciting proxies in connection with the
Annual Meeting will be borne by the Company. In addition to solicitations
by mail, proxies may also be solicited by the Company and its directors,
officers and employees (who will receive no compensation therefor in
addition to their regular salaries or fees). Arrangements also will be
made with brokerage houses and other custodians, nominees and fiduciaries
to forward solicitation materials to the beneficial owners of the Common
Stock and Preferred Stock of the Company, and such entities will be
reimbursed for their expenses. The Company has retained Corporate Investor
Communications at an estimated cost of $7,500, plus reasonable out-of-
pocket expenses, to assist in the distribution and solicitation of proxies
(which amount is included in the estimate of total expenses above).
INDEPENDENT PUBLIC ACCOUNTANTS
The Company appointed Arthur Andersen LLP as its independent
public accountants through the conclusion of the audit with respect to the
Company's 1997 fiscal year. Representatives of Arthur Andersen LLP 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 1999 ANNUAL MEETING OF STOCKHOLDERS
Proposals which stockholders intend to present at the 1999 annual
meeting of stockholders (other than those submitted for inclusion in the
Company's proxy material pursuant to Rule 14a-8 of the Proxy Rules of the
SEC) must be received by the Company no earlier than February 20, 1999, and
no later than March 23, 1999 to be presented at the meeting. Proposals
pursuant to Rule 14a-8 of the Proxy Rules must be received by December 31,
1998, to be eligible for inclusion in the proxy material for that meeting.
Any such stockholder proposals must be sent to the Company's Secretary at
its executive offices at 5847 San Felipe, Suite 2600, Houston, Texas 77057.
By Order of the Board of Directors
BERNARD L. BIRKEL
Secretary
April 27, 1998
Houston, Texas
<PAGE>
Table of Contents
Notice of Annual Meeting of Stockholders Proxy Statement
Election of Directors 3
Proposal to Reapprove the MAXXAM 1994 Executive
Bonus Plan and Approve Certain Amendments 3
First Stockholder Proposal 5
Second Stockholder Proposal 6
Other Business 8
The Board of Directors and its Committees 9
Executive Officers and Directors 11
Principal Stockholders 14
Executive Compensation 16
Report of the Compensation Committees on Executive
Compensation 22
Performance Graph 26
Certain Transactions 27
Section 16(a) Beneficial Ownership Reporting
Compliance 29
Other Matters 29
NOTICE OF 1998 ANNUAL MEETING
AND
PROXY STATEMENT
IMPORTANT
PLEASE SIGN AND DATE YOUR WHITE
PROXY CARD
AND PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE.
Printed on recycled paper.
<PAGE>
APPENDIX A
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, Paul N. Schwartz
and Bernard L. Birkel 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 to vote at the Annual
Meeting of Stockholders of MAXXAM Inc. to be held on May 20, 1998, 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 PROPOSAL TO
REAPPROVE THE MAXXAM 1994 EXECUTIVE BONUS PLAN AND APPROVE AMENDMENTS TO
THAT PLAN, AND "AGAINST" EACH OF THE TWO PROPOSALS SUBMITTED BY CERTAIN
STOCKHOLDERS OF THE COMPANY, ALL AS SET FORTH IN THE PROXY STATEMENT.
(Continued and signature required on the reverse side)
MAXXAM INC.
C/O CORPORATE ELECTION SERVICES
P.O. BOX 3230
PITTSBURGH, PA 15230
<PAGE>
1. ELECTION OF DIRECTORS
FOR all nominees /X/ WITHHOLD AUTHORITY to vote /X/ *EXCEPTIONS /X/
listed below for all nominees listed below
Nominees: Stanley D. Rosenberg and Robert J. Cruikshank (for terms
expiring in 1999), Paul N. Schwartz (for term expiring in 2001)
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, MARK THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE
SPACE PROVIDED BELOW.)
*Exceptions ___________________________________________________________
2. Proposal to reapprove the MAXXAM 1994 Executive Bonus Plan and approve
amendments to that plan.
FOR /X/ AGAINST /X/ ABSTAIN /X/
3. Proposal submitted by certain stockholders of the Company to declassify
the Company's Board of Directors.
FOR /X/ AGAINST /X/ ABSTAIN /X/
4. Proposal submitted by certain stockholders of the Company regarding its
operations and forest management policies.
FOR /X/ AGAINST /X/ ABSTAIN /X/
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 heretofore
given by the undersigned.
Please note change of address /X/
or comments to the left and,
if so noted, please mark here
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.
Date:________________________,1998
_________________________________
Signature
_________________________________
Signature if held jointly
VOTES MUST BE INDICATED /X/
(X) IN BLACK OR BLUE INK.
Please complete, sign, date and return the proxy card promptly,
using the enclosed envelope.
<PAGE>
APPENDIX B
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, Paul N. Schwartz
and Bernard L. Birkel 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 20, 1998, 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 PROPOSAL TO
REAPPROVE THE MAXXAM 1994 EXECUTIVE BONUS PLAN AND APPROVE AMENDMENTS TO
THAT PLAN, AND "AGAINST" EACH OF THE TWO PROPOSALS SUBMITTED BY CERTAIN
STOCKHOLDERS OF THE COMPANY, ALL AS SET FORTH IN THE PROXY STATEMENT.
(Continued and signature required on the reverse side)
MAXXAM INC.
C/O CORPORATE ELECTION SERVICES
P.O. BOX 3230
PITTSBURGH, PA 15230
<PAGE>
1. ELECTION OF DIRECTORS
FOR nominee /X/ WITHHOLD AUTHORITY /X/
listed below to vote for nominee
Nominees: Paul N. Schwartz (for term expiring in 2001)
2. Proposal to reapprove the MAXXAM 1994 Executive Bonus Plan and approve
amendments to that plan.
FOR /X/ AGAINST /X/ ABSTAIN /X/
3. Proposal submitted by certain stockholders of the Company to declassify
the Company's Board of Directors.
FOR /X/ AGAINST /X/ ABSTAIN /X/
4. Proposal submitted by certain stockholders of the Company regarding its
operations and forest management policies.
FOR /X/ AGAINST /X/ ABSTAIN /X/
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 heretofore
given by the undersigned.
Please note change of address /X/
or comments to the left and,
if so noted, please mark here
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.
Date:________________________,1998
_________________________________
Signature
_________________________________
Signature if held jointly
VOTES MUST BE INDICATED /X/
(X) IN BLACK OR BLUE INK.
Please complete, sign, date and return the proxy card promptly,
using the enclosed envelope.
<PAGE>
APPENDIX C
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.
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 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 Section 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.
