PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /x /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/x / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
MAXXAM Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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/x / No fee required.
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and 0-11.
(1) Title of each class of securities to which transaction
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computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
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offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
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(1) Amount Previously Paid:
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[MAXXAM Logo]
April 28, 1999
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 8:30
a.m. on Wednesday, May 19, 1999, at Waterwood National Resort and
Conference Center in Huntsville, Texas. Please see the map on the last
page of this Proxy Statement.
Although you may presently plan to attend the Annual Meeting, we urge
you to indicate your approval in the spaces provided on the enclosed white
proxy card by voting "FOR" the election of the directors named in the
attached proxy statement, "FOR" the reapproval of the MAXXAM 1994 Omnibus
Employee Incentive Plan, and "AGAINST" each of the two proposals submitted
by certain stockholders of the Company. Please then date, sign and
promptly return the white proxy card in the enclosed envelope. Even if you
have previously mailed a proxy card, you may vote in person at the Annual
Meeting by following the procedures described in the attached Proxy
Statement.
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
MAXXAM INC.
5847 SAN FELIPE, SUITE 2600
HOUSTON, TEXAS 77057
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 1999
The Annual Meeting of Stockholders (the "Annual Meeting") of
MAXXAM Inc. (the "Company") will be held on Wednesday, May 19, 1999, at
Waterwood National Resort and Conference Center in Huntsville, Texas at
8:30 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 2000 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 2002 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 Omnibus Employee Incentive Plan;
3. To consider and vote on 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,
1999 are entitled to notice of and to vote at the Annual Meeting. A list
of stockholders will be available commencing May 7, 1999, 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 28, 1999
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 BY FOLLOWING THE PROCEDURES
DESCRIBED IN THE ATTACHED PROXY STATEMENT. IN THAT EVENT, YOUR PROXY WILL
NOT BE USED.
MAXXAM INC.
PROXY STATEMENT
for
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 1999
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 19, 1999, and any adjournments or postponements
thereof, at the time and place and for the purposes set forth in the
accompanying notice of Annual Meeting. 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 29, 1999, to the stockholders of record as of the close of
business on March 31, 1999 (the "Record Date"). Only holders of record of
the 7,000,863 shares of Common Stock (the "Common Stock") and the 668,590
shares of Class A $.05 Non-Cumulative Participating Convertible Preferred
Stock (the "Preferred Stock," together with the Common Stock, the "Capital
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. At the Annual
Meeting, 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, Bernard
L. Birkel and Timothy J. Neumann. 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
Omnibus Employee Incentive 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
is expected to begin at 7:00 a.m., and seating is expected to be available
at approximately 7:30 a.m. Cameras, recording equipment, communication
devices or other similar equipment will not be permitted in the meeting
room without the prior written 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
rules and procedures established by the Company, which will be available or
announced at the Annual Meeting.
IN ORDER TO EXPEDITE YOUR ADMISSION TO THE ANNUAL MEETING, WE
SUGGEST THAT YOU PRE-REGISTER BY COMPLETING AND SUBMITTING THE FORM
INCLUDED WITH THIS PROXY STATEMENT. ALTERNATIVELY, YOU MAY PRE-REGISTER BY
CALLING THE COMPANY'S SHAREHOLDER SERVICES DEPARTMENT AT 1-800-287-6907.
PERSONS WHO PRE-REGISTER FOR THE MEETING WILL BE REQUIRED TO PRESENT PROOF
OF IDENTIFICATION AT THE REGISTRATION TABLE ON THE DATE OF THE MEETING.
PLEASE NOTE THAT IF YOU HOLD YOUR SHARES IN "STREET NAME" (THAT
IS, THROUGH A BROKER, BANK OR OTHER NOMINEE), YOU WILL NEED TO BRING A COPY
OF A BROKERAGE OR SIMILAR STATEMENT REFLECTING YOUR STOCK OWNERSHIP AS OF
THE RECORD DATE. ALL STOCKHOLDERS, OR THEIR DULY APPOINTED PROXIES, WILL
BE REQUIRED TO CHECK IN AT THE REGISTRATION DESK PRIOR TO THE ANNUAL
MEETING. ALL STOCKHOLDERS, REGARDLESS OF THEIR FORM OF OWNERSHIP, AND ALL
PROXIES WILL ALSO BE REQUIRED 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
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 (i.e., shares held in street name as
to which the broker, bank or other nominee has no discretionary power to
vote on a particular matter, has received no instructions from the persons
entitled to vote such shares and has appropriately advised the Company that
it lacks voting authority) are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. Directors
are elected by a plurality of votes. Votes for Directors may be cast in
favor or withheld; votes that are withheld or broker non-votes will be
excluded entirely from the vote and will have no effect on the outcome.
Abstentions may not be specified in the election of directors. A stockholder
may, with respect to each other matter specified in the notice of the meeting,
(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 voting thereon at the Annual Meeting is required for approval of the other
matters presented. Shares represented by proxies that are marked "abstain"
on such matters and proxies relating to broker non-votes will be counted as
shares present for purposes of determining the presence of a quorum.
Such shares, however, will not be treated as shares voting and therefore
will not affect the outcome of the vote.
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED WHITE PROXY CARD AND
RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED. IF YOUR SHARES ARE REGISTERED
IN THE NAME OF A BROKER, BANK OR OTHER NOMINEE, PLEASE CONTACT THE PERSON
RESPONSIBLE FOR YOUR ACCOUNT AND INSTRUCT HIM OR HER TO VOTE THE WHITE
PROXY CARD AS SOON AS POSSIBLE. IF YOU PLAN TO ATTEND THE ANNUAL MEETING
TO VOTE IN PERSON AND YOUR SHARES ARE REGISTERED IN THE NAME OF A BROKER,
BANK OR OTHER NOMINEE, YOU MUST SECURE A PROXY FROM SUCH NOMINEE ASSIGNING
VOTING RIGHTS TO YOU FOR YOUR SHARES.
CERTAIN INFORMATION CONCERNING PARTICIPANTS
The Company and its directors and certain of its executive
officers may be deemed to be "participants," as such term is defined by
regulations promulgated by the Securities and Exchange Commission (the
"SEC"), in connection with the solicitation of proxies being made by this
Proxy Statement. In particular, certain of the Company's executive
officers may participate in the direct solicitation of proxies of certain
of the Company's stockholders. See "Executive Officers and Directors."
The aggregate percentage beneficial ownership of Capital Stock of the
participants to this proxy solicitation, including the members of the Board
of Directors, its nominees and the Company's executive officers, is 38.1%
of the Common Stock, 99.2% of the Preferred Stock and 69.1% of the combined
voting power of the Common Stock and Preferred Stock (see "Principal
Stockholders"). Additional information with respect to the Company and
certain of its directors is set forth in Appendix A to this Proxy
Statement.
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 and until their respective successors have been duly
elected and qualified. The Company's Restated Certificate of Incorporation
also provides that so long as any shares of the 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 by the Company 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 ("Common Directors"), to hold office
until the 2000 Annual Meeting of the Stockholders or until their successors
have been duly elected and qualified. The person nominated by the Company
to stand for election by the holders of Common Stock and Preferred Stock,
voting together as a single class, to hold office until the 2002 Annual
Meeting of Stockholders is Charles E. Hurwitz. Messrs. Rosenberg,
Cruikshank and Hurwitz have extensive experience on the Company's Board of
Directors. 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, 1999. Each of the Company's nominees has consented
to serve as a member of the Board of Directors if elected.
A group calling itself "The Committee of Concerned Maxxam
Shareholders," including the Rose Foundation for Communities and the
Environment, the United Steelworkers of America, Jill Ratner and Thomas
Little, has filed materials with the SEC indicating that it intends to
solicit proxies in support of the two shareholder proposals included in
this proxy statement and for the election of two dissident nominees as
Common Directors. The Board of Directors and management of the Company are
opposing the two shareholder proposals. See the "Statements in Opposition"
included herein. The Board of Directors and management of the Company also
believe that election of the two dissident nominees would not be in the
best interests of the Company.
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 Company's nominees, except where authority has been
withheld as to a particular nominee or as to all such nominees. Should any
of the Company's nominees 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 MESSRS. ROSENBERG, CRUIKSHANK AND HURWITZ FOR DIRECTOR OF THE
COMPANY.
REAPPROVAL OF THE MAXXAM
1994 OMNIBUS EMPLOYEE INCENTIVE PLAN
In the opinion of the Board of Directors, the future success of
the Company depends, in large part, on its ability to maintain a
competitive position in attracting, retaining and motivating key employees
with experience and ability. Under the Company's 1994 Omnibus Employee
Incentive Plan (the "Omnibus Plan"), the Company is authorized to grant
incentive stock options ("ISOs"), nonstatutory stock options, stock
appreciation rights ("SARs"), performance units, performance shares,
restricted stock and unrestricted stock to the middle and executive
management of the Company and its subsidiaries. Up to one million shares
of Common Stock and one million shares of Preferred Stock have been
reserved for awards or for payment of rights granted under the Omnibus Plan
(subject to adjustment in the event of certain changes in the
capitalization of the Company). The Omnibus Plan was adopted by the Board
of Directors and previously approved by the stockholders in 1994. As of
April 15, 1999, grants relating to the purchase of approximately 358,000
shares of Capital Stock have been made under the Omnibus Plan.
Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code") generally disallows a tax deduction to public companies for
certain compensation in excess of $1 million paid to a company's chief
executive officer and the four other most highly compensated executive
officers. Certain compensation, including "performance-based
compensation," is not included in compensation subject to the $1 million
limitation. In particular, income recognized upon the exercise of stock
options, SARs and the other stock-based incentive alternatives issuable
under the Omnibus Plan is not generally subject to the deduction limit.
However, Section 162(m) may require the entire Omnibus Plan to be
reapproved by the stockholders every fifth year. Therefore, in order to
ensure compliance with Section 162(m) of the Code, and to preserve for the
benefit of the Company the deductibility of the awards under the Omnibus
Plan, the stockholders are being asked to reapprove the Omnibus Plan at the
1999 Annual Meeting.
The following summary describes the Omnibus Plan. This summary
is qualified in all respects by reference to the full text of the Omnibus
Plan, a copy of which is available upon request from the Secretary of the
Company.
GENERAL PROVISIONS
The Omnibus Plan is administered by the Section 162(m)
Compensation Committee of the Company's Board of Directors (the "Section
162(m) Committee"). The Omnibus Plan is administered in a manner which
allows for transactions under it to be exempt employee benefit transactions
under Rule 16b-3 in effect from time to time under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Accordingly, no person
serves on the Section 162(m) Committee who has received any grant or award
under the Omnibus Plan within one year prior to his/her appointment, and no
person receives a grant or award under the Omnibus Plan while a member of
the Section 162(m) Committee. Further, the Section 162(m) Committee is
comprised solely of at least two "outside directors" as such term is
defined or interpreted for purposes of Section 162(m) of the Code. The
Section 162(m) Committee selects participants for awards in its sole
discretion, including but not limited to those employees of the Company
recommended by the Chief Executive Officer of the Company. The awards
under the Omnibus Plan are made by the Section 162(m) Committee on an
annual basis, and future awards have not yet been determined.
The Section 162(m) Committee has discretion in making awards
under the Omnibus Plan, choosing from a variety of the stock-based
incentive alternatives mentioned above, and in setting the vesting
schedules of any of such awards. Payments under the Omnibus Plan for other
than direct awards of stock may be made in cash, in stock or partly in
each, at the discretion of the Section 162(m) Committee. If the award
terminates or lapses prior to the expiration or earlier termination of the
Omnibus Plan, the shares of Capital Stock subject to the award will be
available again for award under the Omnibus Plan (except in the case of a
stock option as to which a related SAR has been exercised). The maximum
number of shares of each class of Capital Stock for which awards may be
granted under the Omnibus Plan to any one participant during any three-year
period is 300,000, subject to certain adjustments in capitalization.
The Omnibus Plan expires on December 31, 2003. Awards made under
the Omnibus Plan prior to its termination shall remain in effect until they
shall have been exercised, satisfied or terminated as set forth in the
Omnibus Plan. The Board of Directors may amend, suspend or terminate the
Omnibus Plan at any time prior to its scheduled expiration subject to
stockholder approval in certain circumstances. However, no such amendment,
suspension or termination may adversely impact a previously granted award
made under the Omnibus Plan without consent of the grantee. Stock obtained
under the Omnibus Plan may be subject to restrictions, and recipients are
subject to reporting and disposition restrictions under Section 16 of the
Exchange Act and related insider trading laws.
STOCK OPTIONS
The Section 162(m) Committee may grant options to purchase shares
of Capital Stock. Such options may be nonstatutory or nonqualified stock
options and ISOs pursuant to Section 422 of the Code. As of April 15,
1999, options to purchase approximately 198,000 shares of Capital Stock
have been granted under the Omnibus Plan.
The option price for any option may not be less than the par value of
Capital Stock, and ISOs granted under the Omnibus Plan may not utilize an
exercise price which is less than the fair market value of Capital Stock on
the date of the grant. The option price may be paid in cash, in previously
acquired Capital Stock held for at least six (6) months and with a fair
market value on the date of exercise equal to the option price, or by
combination of cash and Capital Stock. The Section 162(m) Committee may
also approve other forms of payment.
STOCK APPRECIATION RIGHTS
The Section 162(m) Committee may grant SARs in conjunction with,
or apart from, stock options. An SAR entitles the grantee to receive a
payment from the Company equal to the excess of the fair market value of a
share of Capital Stock at the date of exercise over a specified price fixed
by the Section 162(m) Committee. The Section 162(m) Committee may
establish a maximum appreciation value when granting SARs. Payment upon
exercise of SARs may be made in cash, Capital Stock, or a combination
thereof, at the discretion of the Section 162(m) Committee. As of April
15, 1999, approximately 160,000 SARs (including those issued in tandem with
related stock options) have been granted under the Omnibus Plan.
RESTRICTED STOCK
The Section 162(m) Committee may also grant shares of restricted
Capital Stock under the Omnibus Plan. The Section 162(m) Committee may
make the vesting of restricted stock subject to various conditions
including the participant remaining employed by the Company for a number of
years. Participants holding shares of restricted stock may exercise full
voting rights with respect to those shares but shall not be entitled to
receive dividends and other distributions paid, if any, with respect to
those shares during the period of restriction. A holder of restricted
stock may not sell or otherwise transfer the Capital Stock until the
restrictions have lapsed or have been removed. As of April 15, 1999, no
shares of Restricted Stock have been granted under the Omnibus Plan.
PERFORMANCE UNITS AND PERFORMANCE SHARES
The Section 162(m) Committee may also grant performance units and
performance shares under the Omnibus Plan. In such event, the Section
162(m) Committee will establish a performance period over which corporate,
business unit or individual performance goals set by the Section 162(m)
Committee will be measured. At the end of the performance period, the
performance units or performance shares will be paid out at their initial
established values, increased or decreased, as the case may be, based upon
performance above or below target levels. Payment may be made in cash,
Capital Stock, or a combination thereof as determined by the Section 162(m)
Committee. Payment may be made in a lump sum or in installments at the
Section 162(m) Committee's discretion. In the event payment is deferred,
interest or dividend equivalents may be paid to participants. As of April
15, 1999, no performance units or performance shares have been granted
under the Omnibus Plan.
UNRESTRICTED STOCK
Unrestricted shares of Capital Stock also may be awarded under
the Omnibus Plan, as well as upon the exercise of stock options, in
connection with distributions due on the exercise of SARs or as payment on
performance units or performance shares. As of April 15, 1999, no shares of
unrestricted Capital Stock have been awarded under the Omnibus Plan.
CERTAIN FEDERAL TAX CONSEQUENCES
The following summary is a general discussion of certain Federal
income tax consequences which can affect the Company and participants of
the Omnibus Plan in connection with certain awards granted under the
Omnibus Plan. This discussion is based upon provisions of the Code, the
regulations, administrative rulings and judicial decisions in effect at the
date of this Proxy Statement, all of which are subject to change (possibly
with retroactive effect) or different interpretations.
The grant of a nonstatutory stock option creates no taxable
income to a participant. Upon exercise of a nonstatutory stock option, a
participant will generally recognize taxable ordinary income to the extent
the fair market value of the stock on the date of exercise exceeds the
option price. When the stock is eventually sold, a participant recognizes
capital gain or loss to the extent the sale price differs from the fair
market value of the stock on the date of exercise. To the extent that a
participant recognizes taxable ordinary income, the Company will generally
receive a corresponding tax deduction.
The grant and the exercise of an ISO generally creates no regular
taxable income to a participant. When the stock is eventually sold, a
participant recognizes capital gain to the extent the sale price exceeds
the option price, provided the participant has held the stock for at least
two years from the date of the grant of the stock option and at least one
year from the date of its exercise. If the holding period requirements are
not met, a participant recognizes taxable ordinary income in an amount
equal to the lesser of (i) the fair market value of the stock on the date
of exercise over the option price, or (ii) the amount realized on
disposition over the option price. Any excess of the sale price over the
fair market value of the stock on the date of exercise is taxed as capital
gain to the participant. The Company generally receives a corresponding
tax deduction to the extent the gain recognized by the participant is
treated as ordinary income. The excess of the fair market value of the
stock on the date of exercise over the option price is included in
alternative minimum taxable income, possibly subjecting a participant to
alternative minimum tax.
The grant of performance units or performance shares creates no
taxable income to the participant. Upon payment of such awards, the amount
of cash and/or the fair market value of stock received by the participant
will generally be recognized as taxable ordinary income, and the Company
will generally receive a corresponding tax deduction.
The grant of SARs creates no taxable income to the participant.
Upon the exercise of the SARs, the amount of cash and/or the fair market
value of stock received by the participant will generally be recognized as
taxable ordinary income, and the Company will generally receive a
corresponding tax deduction.
Restricted stock is generally not taxable to a participant until
the restricted stock is no longer subject to restrictions or to a
substantial risk of forfeiture. A participant may elect under Section
83(b) of the Code, however, to have an amount equal to the difference
between the fair market value of the stock on the date of grant and the
participant's cost, if any, taxed as ordinary income at the time of the
grant, with any future appreciation taxed as capital gain. In the absence
of such an election, upon lapse of the restrictions or a substantial risk
of forfeiture, a participant recognizes taxable ordinary income to the
extent that the fair market value of the stock on the date the restrictions
lapse exceeds the participant's cost, if any. Subsequent appreciation in
the value of the restricted stock is taxable as capital gain to the
participant when recognized. To the extent that a participant recognizes
taxable ordinary income, the Company will generally receive a corresponding
tax deduction.
Unrestricted stock is generally taxable to a participant upon
receipt in an amount equal to the difference between the fair market value
of the stock on the date of grant and the participant's cost, if any. Any
such amount is taxed as ordinary income at the time of the grant, with any
future appreciation taxed as capital gain when recognized. The Company
generally receives a tax deduction in the amount of taxable ordinary income
recognized by the participant.
REAPPROVAL OF THE OMNIBUS PLAN REQUIRES THE AFFIRMATIVE VOTE OF
THE HOLDERS OF A MAJORITY OF THE COMPANY'S CAPITAL STOCK REPRESENTED AT THE
ANNUAL MEETING. THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND THAT THE
STOCKHOLDERS OF THE COMPANY VOTE "FOR" REAPPROVAL OF THE OMNIBUS PLAN.
FIRST STOCKHOLDER PROPOSAL
The California Public Employees's Retirement System, a
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. The proposal is as follows:
"RESOLVED, MAXXAM Inc. shareholders request that the Board of
Directors 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 Board 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 the Incorporation and shall be phased 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 stockholder
identified above in support of the foregoing proposal:
"Is accountability by the board of directors important to
shareholders? As a trust fund with more than 1 million
participants, and as the owner of approximately 229,800 shares of
the Company's common stock, the California Public Employees'
Retirement System (CalPERS) thinks accountability is of paramount
importance. This is why we are sponsoring this proposal which,
if passed, would encourage the board to reorganize itself so that
each General Director stands before the shareholders for re-
election this year. We hope to eliminate the Company's so-called
"classified board", whereby the General Directors are divided
into three classes, each serving a three-year term. Under the
current structure, shareholders can only vote on one-third of the
board at any given time.
By classifying itself, a board insulates its members from
immediate challenge. Insularity may have made sense in the past
(e.g., during the takeover frenzy of the 1980s). But now, we
believe that insularity works primarily to hamper accountability.
A classified board can prevent shareholders from mounting a
successful opposition to the entire board, because only one-third
of the directors are up for election in any given year. By way of
contrast, a declassified board would mean that each General
Director would stand for election every year.
CalPERS believes that corporate governance procedures and
practices, and the level of accountability they impose, are
closely related to financial performance. It is intuitive that,
when directors are accountable for their actions, they perform
better.
At the 1998 MAXXAM annual meeting, more than 14% of the
votes cast supported the above resolution calling for annual
election of the General Directors. This represented nearly half
of all the votes cast by shareholders not directly affiliated
with the Company's CEO. We hope for even greater support this
year as we continue to focus the Company on its responsibilities
to all of its shareholders.
If the board acts on our proposal, shareholders would have
the opportunity to register their views at each annual meeting -
on performance of the board as a whole, and of each director as
an individual.
CalPERS urges you to join us in VOTING TO DE-STAGGER the
terms of election, as a powerful tool for management incentive
and accountability. We urge your support FOR this proposal."
STATEMENT IN OPPOSITION
THE BOARD OF DIRECTORS AND MANAGEMENT OF THE COMPANY RECOMMEND 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. Indeed, they are not alone in this regard. According to a
1997 National Association of Corporate Directors survey of Chief Executive
Officers, over one-half of the respondents had a classified Board of
Directors.
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS AND
MANAGEMENT OF THE COMPANY URGE THAT YOU VOTE "AGAINST" THIS PROPOSAL.
SECOND STOCKHOLDER PROPOSAL
The Rose Foundation, together with the As You Sow Foundation,
Jill Ratner and Thomas Little, John Harrington, Nell Minow and Dr. Brent
Blackwelder, all of whom are 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. The
proposal is as follows:
"The stockholders request that the Board of Directors take steps
to provide for cumulative voting in the election of those Directors elected
by holders of Common stock. Cumulative voting means that each holder of
Common Stock may cast as many votes as equal the number of shares held,
multiplied by the number of Common Directors to be elected. A Shareholder
may cast all such cumulated votes for a single candidate or split votes
between multiple candidates, as that shareholder sees fit."
STATEMENT IN SUPPORT
The following statement was also submitted by the stockholders
identified above in support of the foregoing proposal:
"Cumulative voting allows a significant group of stockholders to
elect a Director or Directors of its choice--safeguarding minority
shareholder interests and bringing independent perspectives to Board
decisions.
In our view, cumulative voting for MAXXAM's Common Directors is
needed because MAXXAM's two-tier stock structure, with preferred stock
outvoting common ten to one, allows MAXXAM's CEO and his affiliates to
effectively control Board elections and policy based on majority holdings
of preferred stock.
We believe MAXXAM suffers from excessive CEO control of Board
affairs. In December 1997, Business Week named MAXXAM's Board the 10th
worst in America, citing CEO domination. We believe subsequent events
demonstrate increasing need for a minority shareholder voice on the Board.
- MAXXAM reported net losses of more than $30 million in the
first nine months of 1998--$3.86 per share.
- Twice in 12 months, California suspended the operating
license of MAXXAM's Pacific Lumber division citing serious
violations of state forestry laws.
- These violations and suspensions may have placed at risk
$480 million in Company revenue--approximately $48 per
share--from public purchases of forest lands in the
Headwaters area that depend on government approval of
Company logging and conservation plans.
- Company forestry practices, including extensive old-growth
logging and clear cutting, attract expensive litigation and
public criticism. Large timber companies like MacMillan
Bloedel are moving away from these practices. Thirteen
Fortune 500 companies have pledged to forego using old-
growth wood products.
- In October, 1998, the federal government rested its case
seeking $500 million in restitution from CEO Hurwitz,
MAXXAM, and others, related to the failure of a savings and
loan MAXXAM allegedly controlled. We believe management has
failed to aggressively pursue opportunities to settle this
case using forest lands with low commercial, but high
environmental, value. MAXXAM has paid $40 million in this
and related litigation, including all CEO Hurwitz' expenses.
- MAXXAM has been embroiled in a major labor dispute resulting
in a costly (and, we believe, avoidable) strike against the
Kaiser Aluminum division, the longest in Kaiser's history.
- Serious accidents and worker compensation claims have
skyrocketed at Kaiser--from an average of 4 serious injuries
per month at the Mead, WA plant in 1997, to 29 in two weeks
in October, 1998.
Safeguard your investment. Vote FOR cumulative voting."
STATEMENT IN OPPOSITION
THE BOARD OF DIRECTORS AND MANAGEMENT OF THE COMPANY RECOMMEND A
VOTE "AGAINST" THE ADOPTION OF THE ABOVE PROPOSAL AS IT IS CONTRARY TO THE
INTERESTS OF THE COMPANY AS A WHOLE.
The proponents of the proposal assert that cumulative voting will
safeguard minority stockholder interests. The Company believes that
cumulative voting would have a much different effect.
The Company believes cumulative voting will create an environment
in which special interest stockholders will be able to pool their
respective voting powers to attempt to elect single issue directors. These
directors may come to believe that they are under an obligation to advance
agendas that benefit a minority of stockholders rather than the majority.
Moreover, the Company believes it could lead to partisanship among
directors that could undermine the ability of the directors to work
together effectively in advancing the Company's interests.
Evidence of the significant potential problems with this proposal
can be seen in the list of "events" the proponents cite. These "events"
are primarily focused on a narrow set of environmental and labor issues
that, while important to the Company, do not reflect the full range of
issues in the Company's businesses that its Board of Directors must assess
and oversee on a regular basis.
The Board of Directors believes that the current system of voting
for the election of directors at stockholders' meetings better serves the
interests of all stockholders. Such practice is common at leading public
companies and should remain the practice of the Company.
Also note that as with the above proposal to declassify the
Board, this proposal is advisory and its adoption would not in itself
effectuate cumulative voting. If adopted, both the Company's Board of
Directors and its stockholders would have to adopt an amendment to the
Company's Restated Certificate of Incorporation to effect this proposal.
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 six meetings and acted by written consent on
five occasions during 1998. In addition, management confers frequently
with directors on an informal basis to discuss Company affairs. During
1998, no director attended fewer than 75% of the aggregate number of
meetings of the Board of Directors and the committees of the Board 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). 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 acted by written consent on
one occasion during 1998.
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), Cruikshank and
Rosenberg served as members of this committee, which met on two occasions
during 1998 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 two occasions during 1998 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 MAXXAM 1994 Executive Bonus Plan (the "Executive
Plan") or the Omnibus Plan. Messrs. Levin (Chairman), Cruikshank and
Rosenberg served as members of this committee. The Policy Committee met on
three occasions and took action by written consent once during 1998.
The Section 162(m) Committee has the authority to administer and
make amendments to the Company's Executive Plan and the Omnibus Plan and
such other plans or programs, if any, as are intended to comply with the
provisions 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 1998, this committee met on six
occasions and did not act by written consent.
DIRECTOR COMPENSATION
Each of the directors who were not employees of or consultants to
the Company received a fee of $30,000 for the 1998 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 1998. 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 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 1998, Messrs. Cruikshank and Levin
received an aggregate $60,000 and $60,500, respectively, in such director
and committee fees from Kaiser and KACC (including $10,000 of which was
paid to each of Messrs. Cruikshank and Levin in the form of an option to
purchase shares of Kaiser common stock, but 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"), as amended. 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 600 shares of the Company's
Common Stock on May 21, 1998, at an exercise price of $60.9375 per share.
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information as of April
15, 1999, 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
J. Kent Friedman Acting General Counsel
Robert E. Cole Vice President--Federal Government Affairs
Diane M. Dudley Vice President--Chief Personnel Officer
Ronald L. Reman Vice President--Taxes
Bernard L. Birkel Secretary and Managing Counsel--Corporate
Elizabeth D. Brumley Controller
Robert J. Cruikshank Director
Ezra G. Levin Director
Stanley D. Rosenberg Director
</TABLE>
Charles E. Hurwitz. Mr. Hurwitz, age 58, 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. 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 the Company and parent of the
Company's forest products operations. Mr. Hurwitz has also served as a
director and Chairman of the Board of SHRP General Partner, Inc. ("SHRP
GP") since May 1993 and October 1995, respectively. SHRP GP is the
managing general partner of Sam Houston Race Park, Ltd., a Texas limited
partnership which operates a horse racing facility in Texas and in which
the Company holds a 98.2% equity interest.
Paul N. Schwartz. Mr. Schwartz, age 52, was named a director,
the President and Chief Operating Officer of the Company in January 1998,
and has served as Chief Financial Officer of the Company since January
1995. He previously served as Executive Vice President of the Company
since 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. Since June 1998,
Mr. Schwartz has also served as manager of the Board of Managers and a Vice
President of Scotia Pacific Company LLC ("Scopac LLC"), a wholly owned
indirect subsidiary of the Company engaged in forest products operations
and successor by merger in July 1998 to Scotia Pacific Holding Company.
Mr. Schwartz has also served as a director of The Pacific Lumber Company,
the parent of Scopac LLC ("Pacific Lumber"), since February 1993, and as
Vice President since January 1987. Mr. Schwartz has also served as Vice
President, Chief Financial Officer and a director of MGHI since its
formation. 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., a Delaware
corporation.
John T. La Duc. Mr. La Duc, age 56, has served as Senior Vice
President of the Company since September 1990. Mr. La Duc served the
Company as Chief Financial Officer from September 1990 until December 1994.
He has also served Kaiser as Executive Vice President since September 1998
and as Chief Financial Officer since May 1990. Mr. La Duc has served KACC
as Executive Vice President since July 1998 and Chief Financial Officer
since January 1990. He served as a Vice President of Kaiser from June 1989
to September 1998. Mr. La Duc served as Kaiser's Treasurer from August
1995 until February 1996, and as KACC's Treasurer from June 1995 until
February 1996. He also currently serves as a director and Vice President
of MGHI, as a director and Vice President of Pacific Lumber, and as a Vice
President and manager on the Board of Managers of Scopac LLC.
J. Kent Friedman. Mr. Friedman, age 55, was appointed Acting
General Counsel of the Company in March 1998. He 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 E. Cole. Mr. Cole, age 52, 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 and since
September 1990, as a Vice President of Pacific Lumber. He is currently
Chairman of the United States Auto Parts Advisory Committee to the United
States Congress.
Diane M. Dudley. Ms. Dudley, age 58, has served as Vice
President--Chief Personnel Officer of the Company since May 1990. From
June 1987 until May 1990, she was Vice President--Personnel and
Administration of the Company. From December 1983 until June 1987, Ms.
Dudley served as Assistant Vice President--Personnel of the Company. Ms.
Dudley has also served as a Vice President of Pacific Lumber since November
1995.
Ronald L. Reman. Mr. Reman, age 41, has served as Vice
President--Taxes of the Company since September 1992. Prior to September
1992, he had served the Company as Director of Taxes since joining the
Company in October 1986. From July 1984 until October 1986, Mr. Reman was
a Senior Manager in the Tax Department of the New York office of Price
Waterhouse after having served seven years with the New York office of
Coopers & Lybrand, both of which were accounting firms. Mr. Reman also
serves as Vice President--Taxes of MGHI, Pacific Lumber, Scopac LLC and
certain other subsidiaries of the Company, Vice President--Taxes of Kaiser
and KACC and as Assistant Treasurer of certain subsidiaries of Kaiser and
KACC.
Bernard L. Birkel. Mr. Birkel, age 49, was named Secretary of
the Company in May 1997, and has served MGHI, Pacific Lumber and SHRP GP in
such capacity since May 1997 and Scopac LLC since June 1998. 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 from May 1991
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 40, joined the Company in
August 1996 and was named Controller in January 1999. She has also served
as Controller of MGHI and SHRP GP since January 1999. Until January 1999,
Ms. Brumley served as Assistant Controller of the Company from December
1997, MGHI from May 1998, and SHRP GP from January 1998. She previously
worked for GulfMark Offshore, Inc. (formerly 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.
Robert J. Cruikshank. Mr. Cruikshank, age 68, 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 2000 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 and natural gas
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. Mr. Cruikshank has also served
in a leadership capacity at a number of leading academic and health care
organizations including: member of the Board of Directors, Texas Medical
Center (1989 to present), and Regent and Vice Chairman of The University of
Texas System (1989 - 1995).
Ezra G. Levin. Mr. Levin, age 65, 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. Mr. Levin has served as a
director of Pacific Lumber since February 1993, and as a manager on the
Board of Managers of Scopac LLC since June 1998. From January 1974 through
December 1995, he served as a trustee of Federated. Mr. Levin is a partner
in the law firm of Kramer, Levin, Naftalis & Frankel LLP.
Stanley D. Rosenberg. Mr. Rosenberg, age 67, was first elected
to the Board of Directors of the Company in June 1981. He is a nominee for
reelection as a director of the Company to serve until the 2000 Annual
Meeting of Stockholders. Mr. Rosenberg is a partner in the law firm of
Rosenberg, Tuggey, Agather, Rosenthal & Rodriguez. 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. Mr. Rosenberg has also held
leadership roles in various legal and philanthropic capacities including:
Committee Chairman--State Bar of Texas Task Force on Title Companies (1984
to 1990); Member, University of Texas Graduate School of Business Advisory
Council (1991 to 1992); Member of the Board of Visitors, University of
Texas Law School (1992 to 1994); and, Director, University of Texas Health
Science Center Development Board (1994 to present).
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of April 15, 1999, 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 either 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 2,647,648(4)(5)(6)(7)(8) 37.6 68.9
Preferred Stock 721,074(9) 99.2
David M. Knott Common Stock 399,000(10) 5.7 2.9
Bernard L. Birkel Common Stock 374(11) * *
Robert J. Cruikshank Common Stock 2,400(8) * *
Charles E. Hurwitz(3)(12) Common Stock 2,644,896(4)(5)(6)(7)(14) 37.6 68.9
Preferred Stock 720,941(9)(13) 99.2
John T. La Duc -- -- -- --
Ezra G. Levin(3) Common Stock 2,400(8)(14) * *
Ronald L. Reman Common Stock 886(15) * *
Stanley D. Rosenberg Common Stock 3,400(8) * *
Paul N. Schwartz Common Stock 37,609(16) * *
All directors and executive officers of Common Stock 2,695,604(4)(5)(6)(7)(17) 38.1 69.1
the Company as a group (12 persons) Preferred Stock 720,941(9)(13) 99.2
<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, 1999, if any, for their exercisable 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, 1999.
(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., may be deemed a "group" (the "Stockholder Group")
within the meaning of Section 13(d) of 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 LLP, 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)
34,845 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
L.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) 91,926 shares of
Common Stock owned by the 1992 Hurwitz Investment Partnership L.P., of
which 45,963 shares are owned by Mr. Hurwitz's spouse as separate
property and as to which Mr. Hurwitz disclaims beneficial ownership,
and (e) 704,645 shares of Common Stock held directly by Mr. Hurwitz.
(7) Includes options held by Mr. Hurwitz to purchase 16,500 shares of
Common Stock and exercisable within 60 days of April 15, 1999.
(8) Includes options to purchase 1,400 shares of Common Stock and
exercisable within 60 days of April 15, 1999.
(9) Includes options held by Mr. Hurwitz to purchase 58,500 shares of
Preferred Stock and exercisable within 60 days of April 15, 1999.
(10) Information is based solely on a Schedule 13G filed with the SEC on
February 10, 1999 (the "D.M. Knott 13G"). The D.M. Knott 13G 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 13G indicates that Mr. Knott has sole voting and dispositive
power with respect to 216,200 of such shares, shared voting power with
respect to 182,500 of such shares, and shared voting and dispositive
power with respect to 182,800 of such shares. The D.M. Knott 13G also
indicates that 182,500 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) Relates to the number of shares Mr. Birkel would have received on
April 15, 1999 for 1,500 SARs exercisable within 60 days of such date,
if such SARs had been paid solely in shares of Common Stock.
(12) 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.
(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) Does not include shares owned by other members of the Stockholder
Group.
(15) Relates to the number of shares Mr. Reman would have received on April
15, 1999 for 4,000 SARs exercisable within 60 days of such date, if
such SARs had been paid solely in shares of Common Stock.
(16) Includes 1,914 shares of Common Stock, which is the number of shares
Mr. Schwartz would have received on April 15, 1999 for 14,000 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
20,000 shares of Common Stock exercisable within 60 days of April 15,
1999, and 10,749 shares of Common Stock owned by a trust of which Mr.
Schwartz and his spouse are trustees.
(17) The directors and executive officers of the Company included in the
Stockholder Group beneficially own 2,647,296 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,
1999 to purchase 22,800 shares of Common Stock, and (iii) 6,848 shares
of Common Stock which would have been received on April 15, 1999 for
25,300 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, 1998:
<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, 1998 698,605 450,000 -0- 50,000 -0-
Chief Executive Officer and 111,191(3)(4)(5)
Chairman of the Board 1997 671,736 450,000 -- -0- 32,500 -0- 107,160(3)(4)
1996 645,900 450,000 -- -0- 22,500 -0- 102,885(3)(4)
Paul N. Schwartz, 1998 500,000 400,000(6) -0- 25,000 -0- 81,250(3)(4)(5)
Director, President, Chief 1997 338,000 275,000 -- -0- 15,000 -0- 56,333(3)(4)
Operating Officer and Chief 1996 325,000 250,000 -- -0- -0- -0- 54,750(3)(4)
Financial Officer
John T. La Duc,(7) 1998 320,000 220,000(8) -- -0- 468,750(9) 124,356(10) 16,000(11)
Senior Vice President 1997 260,000 184,000(8) -- -0- -0- 44,236(10) 13,000(11)
1996 260,000 83,200(8) -- -0- -0- -0-(10) 5,200(11)
Ronald L. Reman 1998 182,000 163,800 -0- -0- -0- 33,700(3)(4)(5)
Vice President--Taxes 1997 175,008 157,500 -- -0- 5,000 -0- 32,650(3)(4)
1996 159,120 150,000 -- -0- -0- -0- 29,868(3)(4)
Bernard L. Birkel, 1998 156,000 125,000 -0- -0- -0- 6,240(4)
Secretary and Managing 1997 141,929 100,000 -- -0- 6,000 -0- 5,677(4)
Counsel--Corporate 1996 120,950 93,333 -- -0- -0- -0- 4,838(4)
<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 1998.
(3) Includes the following aggregate amounts accrued for 1998, 1997 and
1996, respectively, in respect of the MAXXAM Inc. Revised Capital
Accumulation Plan of 1988 (the "Capital Accumulation Plan"), pursuant
to which, in general, benefits vest 10% annually and (i) with respect
to contributions made for 1988-1997, were paid in January 1998; or
(ii) with respect to contributions made during 1998 or after, are
payable upon the earlier of (a) January 1, 2008 (with respect to
participants who were also participants under a former plan on
December 31, 1987), or (b) termination of employment with the Company:
Mr. Hurwitz--$104,791, $100,760 and $96,885; Mr. Schwartz--$75,000,
$50,700 and $48,750; and Mr. Reman--$27,300, $26,250 and $23,868.
(4) These amounts include matching contributions by the Company under its
401(k) savings plan for 1998, 1997 and 1996, respectively, as follows:
Mr. Hurwitz--$6,400, $6,400 and $6,000; Mr. Schwartz--$6,250, $5,633
and $6,000; Mr. Reman--$6,400, $6,400 and $6,000; and Mr. Birkel--
6,240, $5,677 and $4,838.
(5) Does not include the January 1998 payouts under the Capital
Accumulation Plan, which were as follows: Mr. Hurwitz--$1,201,702,
Mr. Schwartz--$529,480, and Mr. Reman--$96,763.
(6) Includes a single payment of $325,000 in December 1998, and three
annual payments, commencing December 1999, of $25,000 each, so long as
Mr. Schwartz continues to be employed by the Company on each payment
date.
(7) 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.
(8) Includes $50,000 per year (to be paid over two-year periods) awarded
for 1998, 1997 and 1996, for which the Company reimburses KACC.
(9) Represents options for shares of Kaiser common stock.
(10) The long-term component of Kaiser's incentive compensation program in
effect for the periods covered above provides incentive compensation
based on performance against goals over rolling three-year periods.
Payments are generally made 57% in shares of Kaiser common stock and
43% in cash and are paid in two equal installments; the first during
the year following the end of the three-year period and the second
during the following year. The amounts indicated reflect the value of
the actual payment received under the program during the year
indicated with the stock portion of each amount being based on the
market value on the date of distribution. No payments were made under
the program in 1996. Total awards to Mr. La Duc for the 1994-1996,
1995-1997 and 1996-1998 periods were $84,000, $164,900 and $120,000,
respectively. Additional information with respect to the long-term
component of Kaiser's incentive compensation program is set forth
below in the Long-Term Incentive Plan Awards Table.
(11) Amount represents contributions under the KACC 401(k) savings plan and
the KACC Supplemental Benefits Plan (each as defined below) by KACC.
</TABLE>
OPTION/SAR GRANTS TABLE
The following table sets forth certain information concerning
stock options or SARs granted in fiscal year 1998 to any of the named
executive officers:
<TABLE>
<CAPTION>
GRANT
INDIVIDUAL GRANTS DATE VALUE
----------------------------------------------------------------------------------------------------------- --------------------
(a) (b) (c) (d) (e) (f)
% OF TOTAL
# OF OPTIONS/
SECURITIES SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION GRANT DATE
NAME GRANTS 1998 ($/SHARE) DATE PRESENT VALUE ($)
------------------------------- ----------------- ------------------ ----------------- ----------------- --------------------
<S> <C> <C> <C> <C> <C>
Charles E. Hurwitz 50,000(1) 62.9 50.5000 02/17/08 1,138,930(2)
Paul N. Schwartz 25,000(1) 31.4 44.5000 01/16/08 508,055(3)
John T. La Duc 468,750(4) 20.8(5) 9.3125 07/10/03 2,325,000(6)
<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,
5.44% 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,
5.51% 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.
(4) Represents shares of Kaiser common stock underlying options.
(5) Represents the percentage of total options granted to employees of
KACC in 1998.
(6) Valuation utilizing Black-Scholes Option Price Model with the
following assumptions: 3-year monthly volatility for Kaiser common
stock, 5.8% risk-free rate (based on estimated 5-year T-Bond as of the
grant date), no dividend yield and 5-year exercise date. No
adjustments were made for non-transferability or risk of forfeiture.
</TABLE>
The stock options and SARs with respect to the Company's Common
Stock 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. The stock options granted with respect
to Kaiser common stock set forth in the above table were granted under the
Kaiser 1997 Omnibus Stock Incentive Plan, vest with respect to 20% on
December 31, 1998 and an additional 20% on each December 31 thereafter
until fully vested, and are exercisable for cash, Kaiser common stock or a
combination thereof. Additional information with respect to the terms of
the grant to Mr. La Duc are set forth below under the caption "Employment
Contracts and Termination of Employment and Change-in-Control
Arrangements."
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, 1998 by each of the named
executive officers, and the 1998 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 ON VALUE
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------------- ---------------- --------------- --------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Charles E. Hurwitz -0- -0- 54,000(1) 36,000(1) 1,125,675(2) 473,513(2)
-0- -0- 6,500(3) 76,000(3) 103,188(2) 756,500(2)
-0- -0- 250,000(4) -0- --(5) --(5)
Paul N. Schwartz -0- 379,500 29,000(3) 46,000(3) 660,975(2) 696,275(2)
John T. La Duc -0- 134,250 4,000(3) -0- 117,500(2) --(2)
-0- -0- 102,950(4) 375,000(4) --(5) --(5)
Ronald L. Reman -0- -0- 4,000(3) 6,000(3) 52,550(2) 87,950(2)
Bernard L. Birkel -0- 19,015 900(3) 5,400(3) 13,193(2) 80,835(2)
<FN>
- ---------------
(1) Represents underlying shares of Preferred Stock.
(2) Valued at $57.375 per share, the closing price of the Company's Common
Stock on December 31, 1998, less exercise price.
(3) Represents underlying shares of Common Stock.
(4) Represents underlying shares of Kaiser common stock.
(5) Valued at $4.875 per share, the closing price of Kaiser common stock
on December 31, 1998, 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 1998 in respect of the long-term
component of Kaiser's long-term incentive compensation program for the
1994-1996 and 1995-1997 three-year, long-term performance periods. The
following table and accompanying footnotes describe the awards received by
Mr. La Duc in 1998 and the criteria applied in determining the amount
payable for each of the 1994-1996 and 1995-1997 performance periods.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE-BASED
PLANS(4)
-------------------------------------------
(A) (B) (C) (D) (E) (F)
PERFORMANCE
NUMBER OF OR OTHER
SHARES, UNITS PERIODS UNTIL
OR OTHER MATURATION OR
NAME RIGHTS (#) PAYOUT THRESHOLD TARGET MAXIMUM
-------------------- ----------------- ----------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
John T. La Duc 2,104(1) -- -- -- --
4,957(2) --(3) -- -- --
<FN>
- ---------------
(1) Represents the stock portion of the second installment of long-term
incentive award distributed in March 1998 in connection with the 1994-
996 three-year, long-term performance period. The average closing
price of Kaiser common stock during December 1996 was $11.375 per
share. The total award for the 1994-1996 long-term performance period
for Mr. La Duc was $84,000.
(2) Represents the stock portion of the first installment of long-term
incentive award distributed in March 1998 in connection with the 1995-
1997 three-year, long-term performance period. The average closing
price of Kaiser common stock during December 1997 was $9.48 per share.
The total award for the 1995-1997 long-term performance period for Mr.
La Duc was $164,900.
(3) As more fully described below, payment of the second installment for
the 1995-1997 long-term performance period was conditioned on
continued employment through December 31, 1998. Mr. La Duc was
employed by KACC on January 1, 1999, and the second installment was
distributed in April 1999.
(4) All payments in connection with the 1994-1996 and 1995-1997 three-
year, long-term performance periods have been made. The total award
for the 1996-1998 three-year, long-term performance period has been
determined to be $120,000. The first installment was distributed in
April 1999 and the second installment will, subject to certain
conditions, be distributed in 2000.
</TABLE>
Kaiser Long-Term Incentive Plan
Threshold, target and maximum dollar amounts for the long-term
portion of Kaiser executive compensation are based upon Kaiser's
performance. Minimum performance criteria must be met before the threshold
amount is earned. Payments under the long-term portion of the program are
generally made 57% in shares of Kaiser common stock and 43% in cash. The
aggregate number of shares distributed is based on the average closing
price of Kaiser common stock during the last December of the performance
period.
Awards are paid in two equal installments; the first during the
year following the end of the three-year period and the second during the
following year. Payment of the second installment is generally conditioned
on 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.
During the 1994-1996 and 1995-1997 performance periods, target
incentives were based on the return on assets employed in the business.
When incentive awards are determined at the end of each performance period,
up to an additional 30% of each individual's incentive target, based on the
achievement of goals or other accomplishments not reflected in the return
on assets, may be added to the incentive payment amount. Although Kaiser's
Section 162(m) Committee cannot increase the incentive payment, it may
decrease the payment by up to 60% of the target incentive. Additional
information with respect to long-term incentive compensation awarded to Mr.
La Duc, including information with respect to the 1996-1998 performance
period, is set forth 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, defined benefit plan. Benefits equal
the sum of an employee's "past service benefit" and "future service
benefit." Benefits are based on (i) an employee's base salary, including
overtime, but excluding bonuses, commissions and incentive compensation and
(ii) an employee's age and the number of years of service with the Company.
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 1998. 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 1998 and
credited years of service as of December 31, 1998 for the Pension Plan and
estimated annual benefits payable upon retirement at normal retirement age
for the named executive officers (other than those compensated by KACC who
do not participate in this Pension Plan) were as follows: Mr. Hurwitz:
$160,000--18 years--$121,333; Mr. Schwartz: $160,000--18 years--$115,987;
Mr. Reman: $160,000--12 years--$112,667; and Mr. Birkel: $156,000--8
years--$80,416.
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 1999 and subsequent years
under Section 401(a)(17) of the Code. In addition, the amounts reflect a
maximum benefit limit of $130,000 for 1999 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>
<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
350,000 78,750 105,000 131,250 157,500 183,750
450,000 101,250 135,000 168,750 202,500 236,250
550,000 123,750 165,000 206,250 247,500 288,750
</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 29.3 years of credited service on
December 31, 1998. 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.
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, Reman and Schwartz, were entitled to receive
benefits under the SERP during 1998.
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 1998 levels are
assumed.
<TABLE>
<CAPTION>
Hurwitz Schwartz Reman
------- --------- ----------
<S> <C> <C> <C>
Covered Compensation for 1998:
Qualified Plan $160,000 $ 160,000 $ 160,000
Nonqualified Plan 538,605 340,000 22,000
-------- --------- ----------
Total $698,605 $ 500,000 $ 182,000
======== ========= ==========
Credited Years of Service as of
December 31, 1998 18 18 12
======== ========= ==========
Projected Normal Retirement Benefit:
Qualified Plan $121,333 $ 115,987 $ 112,667
Nonqualified Plan 186,676 119,113 25,869
-------- --------- ----------
Total $308,009 $ 235,100 $ 138,536
======== ========= ==========
</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, 1998 would have been as follows: Mr. Hurwitz--$1,397,210; Mr.
Schwartz--$1,000,001; Mr. Reman--$336,000; and Mr. Birkel--$54,000.
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, 1998 would have been $204,167.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Mr. La Duc and KACC entered into a five-year employment agreement
effective January 1, 1998. Pursuant to the terms of the agreement, Mr. La
Duc is currently entitled to a base salary of $350,000 per year. This
amount is reviewed annually to evaluate Mr. La Duc's performance, and in
any event adjusted for inflation consistent with the general program of
increases for other executives and management employees. Mr. La Duc's
agreement also establishes an annual target bonus of $200,000 (subject to
adjustment for inflation) payable upon KACC achieving short-term objectives
under its executive bonus plan which are to be agreed upon annually and
otherwise consistent with KACC's business plan.
Pursuant to the terms of the agreement, Mr. La Duc received a
grant under the Kaiser 1997 Omnibus Stock Incentive Plan of options to
purchase 468,750 shares of Kaiser common stock at an exercise price of
$9.3125 per share. This grant was intended to have a value at the date of
grant equivalent to a value of five times Mr. La Duc's annual long-term
incentive target of $465,000 and to be in lieu of any payment of long-term
incentive compensation under KACC's executive bonus plan for the five-year
period beginning January 1, 1998, although Mr. La Duc remains eligible for
additional option grants. The options granted pursuant to the terms of Mr.
La Duc's agreement generally vest at the rate of 20% per year, beginning on
December 31, 1998, with an additional 20% vesting each December 31,
thereafter until fully vested.
Mr. La Duc's agreement provides that upon the termination of his
employment (other than for cause, by reason of his acceptance of an offer
of employment with an affiliate or under certain circumstances in which Mr.
La Duc is adversely affected), Mr. La Duc is entitled to a lump sum payment
equal to the sum of (i) the benefit he would have received under the Kaiser
Retirement Plan and Kaiser Supplemental Benefits Plan as if he had
qualified for a fully early pension, (ii) an amount equal to his base
salary as of the date of termination for a period equal to the greater of
(a) the number of months remaining in the term of his agreement or (b) two
years, and (iii) his annual target bonus for the year of termination (but
not less than the initial target established by the agreement). In
addition, in the event of Mr. La Duc's termination under the circumstances
described above, all of the unvested stock options held by Mr. La Duc on
the date of termination that would have vested during the term of his
agreement immediately vest and become exercisable in full. Upon a change
of control, the benefits described above are also payable upon either the
subsequent termination of Mr. La Duc's employment by KACC other than for
cause or the subsequent termination of employment by Mr. La Duc for any
reason within twelve months following a change of control.
Certain executive officers are eligible to participate in a
deferred compensation program. An eligible 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 1998.
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. From time
to time, the Policy Committee also recommends or approves 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 and the President have met the criteria. Except
for executive officers principally compensated by KACC, 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 sometimes 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 based on a variety of
factors, including cost of living information and industry trends. In
December 1998, 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 executive
officers (other than the Chief Executive Officer and executive officers
principally compensated by KACC) in December 1998 did not vary
significantly from bonuses paid for 1997. 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 1998, one executive officer was granted a total of 25,000
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. The Chief Executive Officer
and the Company's President were the only executive officers eligible under
the Executive Plan for 1998.
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
special 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 1998, the Policy
Committee approved a base salary increase for 1999 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 1998 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) the completion of restructuring of indebtedness of
certain affiliates and (iii) the negotiations regarding the Headwaters
forest. Other criteria included the achievement of their 1998 business
plans by the Company's industry segments. Based on the Company's 1998
results and performance in relation to the foregoing goals and criteria,
Mr. Hurwitz was entitled to receive approximately $4.6 million under the
Executive Plan. This amount was based upon (i) the completion of an
extraordinary transaction in respect of an issue of securities and (ii)
the achievement of their 1998 annual business plans by two operating units
of the Company. However, the Section 162(m) Committee exercised its
negative discretion permitted under the Executive Plan and awarded Mr.
Hurwitz a bonus amount of $250,000 thereunder, or approximately 5.4% of his
entitlement under the Executive Plan, in respect of his services during
1998. 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)
45,000 shares of Preferred Stock or (ii) 50,000 shares of Common Stock,
both at an exercise price of $50.50, the closing price for the Company's
Common Stock on February 17, 1998, 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 1998.
COMPENSATION BY KACC
One of the Company's executive officers, Mr. La Duc, was
compensated during 1998 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 respective subsidiaries.
Section 162(m) Compensation Compensation Policy Committee
Committee of the Board of Directors of the Board of Directors
Robert J. Cruikshank, Chairman Robert J. Cruikshank
Stanley D. Rosenberg Ezra G. Levin, Chairman
Stanley D. Rosenberg
POLICY COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the 1998 fiscal year, no member of the Policy Committee
was 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 1998. Mr. Levin is also a partner in the
law firm of Kramer Levin Naftalis & Frankel LLP, which provided legal
services for the Company and its subsidiaries during 1998.
During the Company's 1998 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, 1993,
and that all dividends were reinvested. The data points are calculated as
of the last trading day for the year indicated.
[data points are substituted for the performance graph which appears here]
<TABLE>
<CAPTION>
Base
Period
Company/Index Dec. 93 Dec. 94 Dec. 95 Dec. 96 Dec. 97 Dec. 98
-------------- ------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
MAXXAM Inc. 100 84.01 95.92 129.59 118.71 156.12
S&P 500 Index 100 101.32 132.40 171.40 228.59 293.91
Paper & Forest
Products 100 104.20 114.72 126.90 136.07 138.77
Aluminum 100 122.62 151.12 173.56 176.40 180.97
</TABLE>
The Company is involved in the real estate and racing industries
in addition to the aluminum and forest product industries. However, the
real estate and 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's pre-hearing statement alleged
unspecified damages in excess of $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 concluded March
1, 1999. Post trial briefing is expected to continue at least through
November 1999. A recommended decision by the administrative law judge is
not expected any sooner than late 1999. A final agency decision would be
issued by the OTS Director thereafter. Such decision would then be subject
to appeal by any of the parties to the federal appellate court and, if
adverse to the respondents, subject to bonding. On February 10, 1999, the
OTS and the FDIC settled with all of the respondents except Mr. Hurwitz,
the Company and Federated for $1.0 million and limited cease and desist
orders. 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 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. On November 2, 1998, Mr. Hurwitz filed a supplement to his motion
to dismiss and on December 9, 1998, Mr. Hurwitz filed a supplemental motion
for sanctions against the FDIC. On March 12, 1999, the Court held a
hearing on pending motions including the motion to dismiss, and on March
15, 1999, the Court confirmed that it had taken the motion to dismiss under
advisement. 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.
Indemnification of Directors and Officers
Certain present and former directors and officers of the Company
are parties 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 $122,000 for 1998. At December 31, 1998, Federated owed
the Company $25,000 for certain general and administrative expenses, which
amount was subsequently paid in 1999.
Effective January 1, 1999, the Company's wholly owned
subsidiary, Bering Holdings, Inc. ("Bering Holdings"), ceased operations
and the investment management activities which were previously conducted by
Bering Holdings were assumed by a third party investment manager.
Mr. Levin, a director of the Company, is a partner in the law
firm of Kramer Levin Naftalis & Frankel LLP, 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 MCO Properties Inc., a
wholly owned subsidiary of the Company, 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. The Bankruptcy Court granted a final decree
with respect to the UFG bankruptcy petition on February 8, 1999.
On April 17, 1995, Sam Houston Race Park, Ltd., 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. Mr. Schwartz has
served as Vice President of SHRP Acquisition, Inc. and as a director and
Executive Vice President of SHRP Capital Corp.; and Mr. Hurwitz has served
as director and President of SHRP Acquisition, Inc., and as a director,
Chairman of the Board and President of SHRP Capital Corp.
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 ten percent beneficial owners.
OTHER MATTERS
SOLICITATION OF PROXIES
The cost of this proxy solicitation, the total amount of which is
estimated to be $125,000, will be borne by the Company. Such estimate does
not include costs represented by the amount normally expended for a
solicitation for an election of directors in the absence of a contest, and
costs represented by salaries and wages of regular employees and officers.
The total expenditures to date are approximately $20,000.
In addition to solicitations by mail, solicitations also may be
made by advertisement, telephone, telegram, facsimile transmission or other
electronic media, and personal meetings and interviews. In addition to
solicitation services to be provided by MacKenzie Partners, Inc.
("MacKenzie") as described below, proxies may be solicited by the Company
and its directors, executive 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 MacKenzie at an estimated fee of $20,000, plus reasonable out-of-
pocket expenses, to assist in the solicitation of proxies (which amount is
included in the estimate of total expenses above). It is anticipated that
approximately forty employees of MacKenzie may solicit proxies.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, the Company's independent public
accountants, has completed its audit with respect to the Company's 1998
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 2000 ANNUAL MEETING OF STOCKHOLDERS
Proposals which stockholders intend to present at the 2000 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 19, 2000, and
no later than March 20, 2000 to be presented at the meeting. Proposals
pursuant to Rule 14a-8 of the Proxy Rules must be received by December 30,
1999, 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 28, 1999
Houston, Texas
APPENDIX A
BUSINESS ADDRESSES
Unless otherwise indicated below, the business address of each
member of the Board of Directors is the address of the Company's principal
executive offices:
Robert J. Cruikshank
Robert J. Cruikshank Personal Investments
Compass Bank Building
2001 Kirby Dr., Box 106
Houston, Texas 77019
Ezra G. Levin
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue, 40th Floor
New York, New York 10022
Stanley D. Rosenberg
Rosenberg, Tuggey, Agather, Rosenthal & Rodriguez
140 E. Houston St., Suite 220
San Antonio, Texas 78205
PURCHASES AND SALES OF STOCK OF THE COMPANY
The table below sets forth all shares of Common Stock purchased by the
Company within the past two years:
<TABLE>
<CAPTION>
Number of Number of
Date Shares Date Shares
-------------- ------------ ------------ ------------
<S> <C> <C> <C>
04/01/97 10,400 05/29/97 15,900
04/24/97 27,200 06/03/97 20,500
04/25/97 21,200 06/10/97 4,600
04/28/97 2,100 06/18/97 22,500
04/29/97 1,100 06/20/97 5,700
04/30/97 7,900 06/26/97 35,200
05/02/97 20,300 07/02/97 25,000
05/05/97 2,100 07/07/97 45,000
05/12/97 1,600 07/09/97 25,000
05/13/97 5,100 07/15/97 33,500
05/14/97 6,500 10/17/97 1,277,250
05/28/97 11,900
</TABLE>
There were no shares of Common Stock sold by the Company within
the past two years.
The following table sets forth all shares of Common Stock or
Preferred Stock purchased or sold within the past two years by each of the
members of the Board of Directors of the Company:
<TABLE>
<CAPTION>
Name Date Class Amount Transaction
----------------- -------- -------- -------- ---------------------------
<S> <C> <C> <C> <C>
Charles E. Hurwitz 11/23/98 Common 5,000 Sold on Open Market
11/24/98 Common 2,900 Sold on Open Market
11/25/98 Common 2,100 Sold on Open Market
4/5/99 Common 2,500 Sold on Open Market
4/6/99 Common 5,600 Sold on Open Market
4/7/99 Common 1,900 Sold on Open Market
</TABLE>
There were no shares of Common Stock or Preferred Stock purchased
by any of the members of the Board of Directors within the past two years.
[MAP GIVING DIRECTIONS TO WATERWOOD]
Waterwood National Resort and Conference Center is located approximately 85
miles from Houston's Bush Intercontinental Airport. From Bush
Intercontinental Airport, travel west on Beltway 8 toward I-45
(approximately 8 miles). Proceed north on I-45 (approximately 57 miles) to
Huntsville, Texas. At Highway 190 in Huntsville, proceed east
(approximately 13 miles) to Waterwood Parkway. Turn left at Waterwood
Parkway and proceed to the Conference Center (approximately 7 miles).
Table of Contents
Notice of Annual Meeting of
Stockholders
Proxy Statement
Election of Directors 3
Reapproval of the MAXXAM
1994 Omnibus Employee
Incentive Plan 3
First Stockholder Proposal 6
Second Stockholder Proposal 8
Other Business 10
The Board of Directors and
its Committees 10
Executive Officers and
Directors 12
Principal Stockholders 15
Executive Compensation 17
Report of the Compensation
Committees on
Executive Compensation 23
Performance Graph 27
Certain Transactions 27
Section 16(a) Beneficial
Ownership Reporting
Compliance 29
Other Matters 29
Appendix A A-1
[MAXXAM Logo]
NOTICE OF 1999 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.
MAXXAM Inc.
Pre-Registration Form
If you plan to attend the Annual Meeting of Stockholders at 8:30 a.m.,
local time, on Wednesday, May 19, 1999, at Waterwood National Resort and
Conference Center in Huntsville, Texas, you may use this form to pre-
register and expedite your admission to the meeting. If you choose to pre-
register, you will only need to supply proof of identification to enter the
meeting. If you are a record holder, please complete this form and send it
to the address set forth below; or call the toll-free number listed below
and provide your information. If you hold your shares through your broker,
bank or other nominee, please complete and return this form accompanied by
your brokerage or similar statement (demonstrating that you owned shares of
Capital Stock as of the close of business on March 31, 1999) in order to
pre-register. All stockholders will need to follow the rules and
procedures set forth in the Proxy Statement and at the Annual Meeting in
order to vote their shares.
PLEASE RETURN THIS PRE-REGISTRATION FORM, TOGETHER WITH PROOF OF CAPITAL
STOCK OWNERSHIP AS OF THE RECORD DATE, IF NECESSARY, TO: MAXXAM INC., 5847
SAN FELIPE, SUITE 2600, HOUSTON, TEXAS 77057, ATTENTION: STOCKHOLDER
MEETING PRE-REGISTRATION OR BY FACSIMILE TO (713) 267-0007. FOR FURTHER
INFORMATION, YOU MAY CALL TOLL-FREE 1-800-287-6907.
( ) I plan to attend OR ( ) I will send my proxy to attend the
Company's Annual Meeting of
Stockholders on May 19, 1999.
Name:______________________________________________________________________
Proxy's Name (if applicable):______________________________________________
STREET:____________________________________________________________________
City:______________________________________________________________________
State:_____________________________ ZIP Code: ___________________________
Daytime Telephone Number (including area code):____________________________
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,
Bernard L. Birkel and Timothy J. Neumann as proxies (each with power to act
alone and with power of substitution) to vote as designated below, 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 19, 1999,
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 OMNIBUS EMPLOYEE INCENTIVE 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
1. ELECTION OF DIRECTORS Nominees: Robert J. Cruikshank and Stanley D.
Rosenberg (for terms expiring in 2000), Charles E. Hurwitz (for term
expiring in 2002)
/ / FOR all nominees listed / / WITHHOLD AUTHORITY to vote
above, except as specified below for all nominees listed above
To withhold authority to vote for any individual nominee, write that
nominee's name below:
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2. Proposal to reapprove the MAXXAM 1994 Omnibus Employee Incentive Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. Proposal submitted by certain stockholders of the Company to declassify
the Company's Board of Directors.
/ / FOR / / AGAINST / / ABSTAIN
4. Proposal submitted by certain stockholders of the Company regarding
cumulative voting.
/ / FOR / / AGAINST / / ABSTAIN
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 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: ,1999
--------------------
---------------------------------
Signature
---------------------------------
Signature if held jointly
Please complete, sign, date and return the proxy card promptly,
using the enclosed envelope.
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,
Bernard L. Birkel and Timothy J. Neumann as proxies (each with power to act
alone and with power of substitution) to vote as designated below, 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 19, 1999, 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 OMNIBUS EMPLOYEE INCENTIVE 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
1. ELECTION OF DIRECTORS Nominee: Charles E. Hurwitz (for term
expiring in 2002)
/ / FOR nominee / / WITHHOLD AUTHORITY
listed above to vote for nominee
listed above
2. Proposal to reapprove the MAXXAM 1994 Omnibus Employee Incentive Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. Proposal submitted by certain stockholders of the Company to declassify
the Company's Board of Directors.
/ / FOR / / AGAINST / / ABSTAIN
4. Proposal submitted by certain stockholders of the Company regarding
cumulative voting.
/ / FOR / / AGAINST / / ABSTAIN
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 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: ,1999
--------------------
---------------------------------
Signature
---------------------------------
Signature if held jointly
Please complete, sign, date and return the proxy card promptly,
using the enclosed envelope.
MAXXAM 1994 OMNIBUS EMPLOYEE INCENTIVE PLAN
Contents of MAXXAM 1994 Employee Incentive Plan
Section 1. Establishment, Purpose, and Legal Compliance
1.1 Establishment
1.2 Purpose
1.3 Compliance Intention
Section 2. Definitions
2.1 Definitions of Certain Terms
Section 3. Eligibility
3.1 Eligibility for Awards
3.2 No Right to Participate
Section 4. Administration
4.1 Administration
4.2 Committee Membership
4.3 Non-Uniform Determinations
4.4 Authority to Direct Issuance of Stock
4.5 Evidence of Committee Action
Section 5. Stock Subject to Plan; Types and Nature of Awards
5.1 Maximum Grant Limitations
5.2 Minimum Pricing
5.3 Lapsed Awards
5.4 Adjustment in Capitalization
5.5 Types of Awards Under Plan
5.6 Evidence of Awards
5.7 Nature of Payments
5.8 Other Payments or Awards
Section 6. Effective Date and Plan Life
6.1 Effective Date
6.2 Plan Life
Section 7. Stock Options
7.1 Grant of Options
7.2 Option Price
7.3 Duration of Options
7.4 Exercise of Options
7.5 Payment
7.6 Restrictions on Stock Transferability
7.7 Termination of Employment
Section 8. Stock Appreciation Rights
8.1 Grant of Stock Appreciation Rights
8.2 Value of SARs
8.3 Effect of Exercise
8.4 Exercise of SARs
8.5 Limit on Appreciation
8.6 Rule 16b-3 Requirements
8.7 Termination of Employment
Section 9. Performance Units and Performance Shares
9.1 Grant of Performance Units or Performance Shares
9.2 Value of Performance Units and Performance Shares
9.3 Form and Timing of Payment
9.4 Termination of Employment
Section 10. Restricted Stock
10.1 Grant of Restricted Stock
10.2 Transferability
10.3 Other Restrictions
10.4 Rights of Grantee
10.5 Termination of Employment
Section 11. Unrestricted Stock
11.1 Grant of Unrestricted Stock
Section 12. Beneficiary Designation
12.1 Beneficiary Designation
Section 13. Rights of Employees
13.1 Employment
Section 14. Amendment, Modification, and Termination of Plan
14.1 Amendment, Modification, and Termination of Plan
14.2 Amendment of Plan Agreements
14.3 Rights of Grantees
Section 15. Tax Withholding
15.1 Tax Withholding
Section 16. Required Notifications by Grantee
16.1 Notification by Grantee of Election Under Section 83(b)
of the Code
16.2 Notification by Grantee Upon Disqualifying Disposition
Prior to Expiration of Holding Periods Under Section
421(b) of the Code
Section 17. Indemnification
17.1 Indemnification
Section 18. Nonassignability
18.1 Nonassignability
Section 19. Requirements of Law; Consents
19.1 Requirements of Law
19.2 Consents to Plan Actions
19.3 Nature of Consents
19.4 Governing Law
MAXXAM 1994 OMNIBUS EMPLOYEE INCENTIVE PLAN
Section 1. Establishment, Purpose, and Legal Compliance.
1.1 Establishment. MAXXAM Inc., a Delaware corporation
(the "Company"), hereby establishes the "MAXXAM 1994 OMNIBUS EMPLOYEE
INCENTIVE PLAN" (the "Plan"). The Plan permits the grant of certain rights
in respect of or measured by the value of the Stock of the Company,
including stock options, stock appreciation rights, performance units,
performance shares, restricted stock, or unrestricted stock, to certain
officers and selected key employees of the Company and its subsidiaries.
1.2 Purpose. The purpose of the Plan is to advance the
interests of the Company, by encouraging and providing for the acquisition
of equity interests (or rights measured by the market value of the equity)
in the success of the Company by key employees, by providing additional
incentives and motivation toward enhancing the long-term performance of the
Company, and by enabling the Company to attract and retain the services of
key employees upon whose judgment, interest, skills and special efforts the
successful conduct of its operations is largely dependent.
1.3 Compliance Intention. In formulating and adopting the
Plan, in submitting it for approval of the stockholders of the Company
and in the administration of the Plan, it is the intention of the Board of
Directors of the Company that the Plan comply with the provisions of Rule
16b-3 promulgated under the Securities Exchange Act of 1934 (hereafter
"Rule 16b-3") as it may apply to any Grantee, and that certain Awards may
be structured so that they comply with Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). It is also the intention
of the Board that grants identified as "Incentive Stock Options" shall
qualify for treatment as "incentive stock options" under the provisions of
Section 422 of the Code.
Section 2. Definitions.
2.1 Definitions of Certain Terms. Whenever used herein,
the following terms shall have the respective meanings set forth below
unless the context clearly requires otherwise:
(a) "Award" means any Option, Stock Appreciation Right,
Performance Unit, Performance Share, Restricted Stock, or Unrestricted
Stock granted under this Plan. An Award may also be called a "Grant."
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Committee" means the Compensation Committee, or
designated subcommittee thereof, of the Board, from time to time serving.
(e) "Common Stock" means the Common Stock, par value $0.50
per share, of the Company.
(f) "Company" means MAXXAM Inc., a Delaware corporation.
(g) "Disability" means disability as defined in the
Company's pension plan for salaried employees.
(h) "Employee" means a regular full time salaried employee
(including an officer or director who is also an employee other than a
director who serves on the Committee) of the Company or a subsidiary
(other than Kaiser Aluminum Corporation and its subsidiaries).
(i) "Fair Market Value" means the closing price of the
Common Stock or Preferred Stock, as the case may be, as reported by the
American Stock Exchange on a particular date. In the event that there are
no transactions in such Stock on such date, the Fair Market Value shall be
determined as of the immediately preceding date on which there were such
transactions, provided that such date is not more than ten (10) business
days preceding the applicable date. If there were no such transactions
within such period, the Fair Market Value shall be determined by the
Committee.
(j) "Grant" shall have the same meaning as "Award."
(k) "Grantee" means an individual who holds an Award that
has not expired or been exercised or cancelled.
(l) "Option" means the right to purchase Stock at a stated
price for a specified period of time. For purposes of the Plan an Option
may be either (i) an "incentive stock option" within the meaning of
Section 422 of the Code (herein called an "Incentive Stock Option")
or (ii) a nonstatutory or non-qualified stock option.
(m) "Participant" shall have the same meaning as "Grantee."
(n) "Performance Unit" means a right to receive a payment
related to the performance of the Company, as determined by the Committee.
(o) "Performance Share" means a right, related to the
performance of the Company, to receive a payment equal to the value
of a share of Stock, as determined by the Committee.
(p) "Period of Restriction" means the period during which
shares of Restricted Stock are restricted pursuant to Section 10.2 or 10.3
of the Plan.
(q) "Restricted Stock" means Stock granted to a Participant
pursuant to Section 10.1 of the Plan.
(r) "Retirement" (including "Early Retirement" and "Normal
Retirement") means termination of employment for retirement under the
terms of the Company's pension plan for salaried employees.
(s) "Rule 16b-3" means the rule thus designated as
promulgated under the Securities Exchange Act of 1934.
(t) "Stock" means the capital stock of the Company,
consisting of the Common Stock and Class A $.05 Non Cumulative
Participating Convertible Preferred Stock ("Preferred Stock"), of which
there were at December 31, 1993 28,000,000 and 12,500,000 shares authorized
and approximately 8,698,464 and 678,239 shares outstanding, respectively.
(u) "Stock Appreciation Right" and "SAR" mean the right to
receive a payment in respect of the appreciation on a stated number of
shares of Stock, as more fully set forth in Section 8.
(v) "Unrestricted Stock" means Common Stock sold or granted
to a Participant which, although its resale may be subject to legal
restrictions or reporting requirements, is free of any legend on its
face and is not subject to transfer restrictions imposed by the Company.
Section 3. Eligibility.
3.1 Eligibility for Awards. Grants or Awards under the Plan
may be made to such Employees (including directors who are Employees, other
than Committee members) as may be selected by the Committee in its sole
discretion, including but not limited to, from among those Employees who
may be from time to time recommended for an Award by the Chief Executive
Officer of the Company.
3.2 No Right to Participate. No Employee, regardless of
position or responsibility, shall have any entitlement or right to cause
any Award or Grant under this Plan to be made to such Employee. The making
of an Award or Grant to an Employee under this Plan shall not entitle such
Employee to any subsequent or additional Award or Grant. No member of
the Committee shall be eligible for participation in the Plan.
Section 4. Administration.
4.1 Administration. The Committee shall be responsible for
the administration of the Plan. The Committee, by majority action thereof,
is authorized to interpret the Plan, to prescribe, amend, and rescind rules
and regulations relating to the Plan, to provide for conditions and
assurances deemed necessary or advisable to protect the interests of the
Company, and to make all other determinations necessary or advisable for
the administration of the Plan, but only to the extent not contrary to
the express provisions of the Plan (except that the Committee may correct
any defect, supply any omission and reconcile any inconsistency in the
Plan). Determinations, interpretations, or other actions made or taken
by the Committee pursuant to the provisions of the Plan shall be final and
binding and conclusive for all purposes and upon all persons whomsoever.
The Board, from which the Committee derives its authority hereunder, may
act as to any matter concerning the Plan, in the place of the Committee at
any time.
4.2 Committee Membership. The Committee shall consist of at
least three members of the Board (or such smaller number as may be
permitted under Rule 16b-3) appointed by and serving at the pleasure of the
Board. To the extent necessary for compliance with Rule 16b-3, members of
the Committee shall be "disinterested" within the meaning thereof. To the
extent necessary for compliance with section 162(m)(4)(C) of the Code,
members of the Committee shall be "outside directors" within the meaning
thereof.
4.3 Non-Uniform Determinations. The Committee's
determinations under the Plan need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, Awards
under the Plan (whether or not such persons are similarly situated).
Without limiting the generality of the foregoing, the Committee shall be
entitled, among other things, to make non-uniform and selective
determinations, and to enter into non-uniform and selective Plan
agreements, as to (a) the persons to receive Awards under the Plan or (b)
the terms and provisions of Awards under the Plan.
4.4 Authority to Direct Issuance of Stock. By their adoption
of this Plan, the Board does authorize and direct the Committee to issue
the Stock pursuant to the terms of such Grants and Awards as may be made
under this Plan.
4.5 Evidence of Committee Action. Any action of the Committee
may be taken by a writing signed by a majority of the Committee members.
Any such written action shall be as effective as if taken at a meeting of
the Committee by resolution duly adopted upon a vote of the Committee.
Section 5. Stock Subject to Plan; Types and Nature of Awards.
5.1 Maximum Grant Limitations. The total number of shares of
Stock subject to issuance in respect of Awards under the Plan may not
exceed 1,000,000 shares of Common Stock and 1,000,000 shares of Preferred
Stock subject to adjustment upon occurrence of any of the events indicated
in Section 5.4. Of this total number of shares, up to an aggregate of
500,000 shares of each class may be subject to issuance in connection
with exercise of Incentive Stock Options. The shares to be delivered
under the Plan may consist, in whole or in part, of shares reserved for
issuance under this Plan or authorized but unissued shares not reserved
for any other purpose or stock acquired by the Company for purposes of
the Plan.
The maximum number of shares of each class of Stock for which
Options or Stock Appreciation Rights may be granted under this Plan to
any one Participant during any three-year period is 300,000, subject to
adjustments in accordance with the provisions of Section 5.4 hereof.
5.2 Minimum Pricing. No Award or Grant of any Option, SAR,
share, unit, or other rights made pursuant to this Plan may establish a
price for the Stock (including but not limited to an Option exercise price,
a SAR appreciation base, or a valuation of the Stock for payout purposes)
which is less than the par value of the Stock.
5.3 Lapsed Awards. Subject to the provisions of Section 5.1
above, if any Award granted under the Plan terminates, expires or lapses
for any reason, any shares subject to such Award again shall be available
for the grant of an Award.
5.4 Adjustment in Capitalization. In the event of any change
in the outstanding shares of Stock that occurs after ratification of the
Plan by the stockholders of the Company by reason of a Stock dividend or
split, recapitalization, merger, consolidation, combination, exchange of
shares, or other similar corporate change, the number of shares of Stock
available for issuance hereunder in the aggregate and subject to each
outstanding Award, the individual maximum set forth in Section 5.1, and
the exercise or base price of each outstanding Award, shall be equitably
adjusted (provided, however, that fractional shares shall be rounded to
the nearest whole share) by the Committee as appropriate to reflect such
changed capitalization. The Committee's determination shall be
conclusive. In the event of any such adjustment in capitalization, the
number and type of shares of Restricted Stock or Unrestricted Stock
subject to Grants then outstanding under the Plan shall be subject to the
same changes and adjustments, if any, as affect other holders of the
Company's Stock.
5.5 Types of Awards Under Plan. Awards may be made under the
Plan in the form of (a) Incentive Stock Options, (b) nonstatutory or
nonqualified Stock Options, (c) Stock Appreciation Rights or SARs, (d)
Performance Units or Performance Shares, (e) Restricted Stock and (f)
Unrestricted Stock.
5.6 Evidence of Awards. Each Award or Grant made under the
Plan shall be evidenced by a writing ("Plan Agreement") in the form of an
agreement with the Grantee which shall set forth the number of shares of
Stock subject to the Award, the restrictions, vesting rate or schedule,
exercise or base price, and such other conditions or terms of the Award as
the Committee may in its sole discretion deem necessary or desirable. By
acceptance of an Award, the Grantee thereby agrees to such terms and
conditions and to the terms of this Plan thereto pertaining.
5.7 Nature of Payments. Any and all Grants or Awards and
issuances of shares of Stock under the Plan shall be in consideration of
services performed for the Company by the Grantee. All such Grants and
issuances shall constitute a special incentive payment to the Grantee and
shall not be taken into account in computing the amount of salary or
compensation of the Grantee for the purpose of determining any benefits
under any pension, retirement, supplemental retirement, bonus, life
insurance or other benefit plan of the Company or under any agreement
between the Company and the Grantee, unless such plan or agreement
specifically provides otherwise.
5.8 Other Payments or Awards. Nothing contained in the Plan
shall be deemed in any way to limit or restrict the Company from making any
award or payment to any person under any other plan, arrangement or
understanding, whether now existing or hereafter in effect.
Section 6. Effective Date and Plan Life.
6.1 Effective Date and Effectiveness of Initial Grants. The
Plan was adopted by the Board as of March 30, 1994, subject to approval by
the Company's stockholders. All Awards made under the Plan prior to such
approval are subject in their entirety to such approval. If stockholder
approval is not obtained within one year from adoption by the Board, the
Plan shall terminate on such date and no Awards shall be deemed to have
been made under the Plan. In such event, to the extent provided in the
applicable Plan Agreement an award may be deemed to have been made as an
ad hoc grant by the Board.
6.2 Plan Life. The Plan shall remain in effect, subject to
the right of the Board to earlier terminate the Plan pursuant to Section 15
hereof, until December 31, 2003, and no Grant or Award hereunder may
thereafter be made. Notwithstanding the termination of the Plan, all
Awards made under the Plan prior to its termination shall remain in
effect until such Awards shall have been exercised, satisfied or
terminated in accordance with the terms and provisions of the Plan and
the terms of such Awards as set forth in the applicable Plan Agreements
evidencing the Awards.
Section 7. Stock Options.
7.1 Grant of Options. Options may be granted to Participants
at any time and from time to time as shall be determined by the Committee.
The Committee shall have complete discretion in determining the number of
Options granted to any Participant and the terms thereof, subject to the
provisions of the Plan. The Committee may grant any type of Option to
purchase Stock that is permitted by law at the time of grant. However,
no Incentive Stock Options shall be granted to any person who owns,
directly or indirectly, Stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company
except as provided in Section 422(c)(5) of the Code. To the extent that
the aggregate Fair Market Value (determined as of the time the Option is
granted) of the stock with respect to which Incentive Stock Options are
first exercisable by any Employee during any calendar year shall exceed
$100,000, or such higher amount as may be permitted from time to time under
section 422 of the Code, such options shall be treated as nonqualified
stock options. Nothing in this Section 7 of the Plan shall be deemed to
prevent the Grant of nonstatutory or non-qualified stock options in amounts
which exceed the maximum established by Section 422 of the Code.
7.2 Option Price. No Incentive Stock Option shall be granted
pursuant to the Plan at an option price that is less than the Fair Market
Value of the Stock on the date the Incentive Stock Option is granted.
7.3 Duration of Options. Each Option shall expire at such
time as the Committee shall determine at the time it is granted, provided,
however, that no Incentive Stock Option shall be exercisable later than
ten years from the date of grant.
7.4 Exercise of Options. Options granted under the Plan shall
vest and become exercisable at such times and be subject to such
restrictions and conditions as the Committee shall in each instance
approve, which need not be the same for all Participants. However, no
portion of any Option shall vest before the first anniversary of the date
of grant. Each Option which is intended to qualify as an Incentive Stock
Option shall comply with the applicable provisions of the Code pertaining
to such Options.
7.5 Payment. Any written notice of exercise of an Option
shall be accompanied by payment for the shares being purchased. Such
payment shall be made: (a) by certified or official bank check (or the
equivalent thereof acceptable to the Company) for the full option
exercise price; or (b) with the consent of the Committee, by delivery of
shares of Common Stock acquired at least six months prior to the option
exercise date and having a Fair Market Value (determined as of the
exercise date) equal to all or part of the Option exercise price and a
certified or official bank check (or the equivalent thereof acceptable to
the Company) for any remaining portion of the full Option exercise
price; or (c) at the discretion of the Committee and to the extent
permitted by law, by such other provision, consistent with the terms of
the Plan, as the Committee may from time to time prescribe. Shares of
Stock owned through employee benefit plans of the Company may be used to
make purchase payments if no adverse tax consequences to either the
Company or such plans would result. The proceeds from payment of Option
exercise prices shall be added to the general funds of the Company and
shall be used for general corporate purposes.
7.6 Restrictions on Stock Transferability. The Committee may
impose such restrictions on any shares of Stock acquired pursuant to the
exercise of an Option under the Plan as it shall deem advisable, which
may be in addition to any such restrictions required by law.
7.7 Termination of Employment. In the event the employment of
a Participant is terminated for cause, any Option held by such Participant
shall terminate immediately. In the event employment terminates for any
other reason, the exercisability of any Option held by the Participant
shall be governed by the applicable Plan Agreement, subject to the
Committee's authority to amend such Agreement as set forth in Section
14.2. If an Incentive Stock Option is not exercised within the period
prescribed in Section 422 of the Code, it shall be treated and honored by
the Company as a nonstatutory stock option for the remainder of its
allowable exercise period.
Section 8. Stock Appreciation Rights.
8.1 Grant of Stock Appreciation Rights. Stock Appreciation
Rights ("SARs") may be granted to Participants at any time and from time to
time as shall be determined by the Committee. The Committee shall have
complete discretion in determining the number of SARs granted to any
Participant and the terms thereof, subject to the provisions of the Plan.
A SAR may be granted at the discretion of the Committee either in
connection with or independently of a grant of Options, including in
connection with previously awarded Options to which SARs did not relate
at the time of grant.
8.2 Value of SARs. The Grantee of a SAR shall have the right,
subject to the terms of the Plan and the applicable Plan Agreement, to
receive from the Company an amount equal to (a) the excess of the Fair
Market Value of a share of Stock on the date of exercise of the SAR over
(b) the Fair Market Value of a share of Stock on the date of grant (or
over the Option exercise price if the Stock Appreciation Right is granted
in connection with an Option), multiplied by (c) the number of shares of
Stock with respect to which the SAR is exercised. The Committee in its
discretion shall determine whether payment upon exercise of a SAR will be
made in cash or Stock, or in a combination thereof.
8.3 Effect of Exercise. Upon the exercise of a SAR granted in
connection with an Option, the number of shares subject to the Option
shall be reduced by the number of shares with respect to which the SAR is
exercised. Upon the exercise of an Option in connection with which a SAR
has been granted, the number of shares subject to the SAR shall be
reduced by the number of shares with respect to which the Option is
exercised.
8.4 Exercise of SARs. SARs granted in connection with Options
may be exercised for all or part of the shares of Stock subject to the
related Option. The SAR may be exercised only with respect to the shares
of Stock for which its related Option is then exercisable. Option shares
with respect to which the SAR shall have been exercised, shall not be
deemed to have lapsed and may not be subject again to an Award under this
Plan. SARs granted independent of Options may be exercised upon whatever
terms and conditions the Committee, in its sole discretion, imposes upon
each grant; provided, however, that no SAR may be exercisable wholly or
in part before the first anniversary of the date of grant.
8.5 Limit on Appreciation. At the time of Grant, but not
thereafter, the Committee may establish in its sole discretion, a maximum
amount per share which will be payable upon exercise of a SAR.
8.6 Rule 16b-3 Requirements. Notwithstanding any other
provision of the Plan, the Committee may impose such conditions on exercise
of a SAR (including, without limitation, by limiting the time of exercise
to specified periods) as may be required to satisfy any requirement, from
time to time existing, of Rule 16b-3 (or any successor rule).
8.7 Termination of Employment. In the event the employment of
a Participant is terminated for cause, any SAR held by such Participant
shall terminate immediately. In the event employment terminates for any
other reason (including retirement), the exercisability of any SAR held
by the Participant shall be governed by the applicable Plan Agreement,
subject to Section 8.4 and to the Committee's authority to amend such
Agreement as set forth in Section 14.2.
Section 9. Performance Units and Performance Shares.
9.1 Grant of Performance Units or Performance Shares.
Performance Units or Performance Shares may be granted to Participants at
any time and from time to time as shall be determined by the Committee.
The Committee shall have complete discretion in determining the number of
Performance Units or Performance Shares granted to any Participant and
the terms thereof, subject to the provisions of the Plan.
9.2 Value of Performance Units and Performance Shares. Each
Performance Unit shall have such initial value, if any, as may be
specified by the Committee at the time the grant is made and each
Performance Share initially shall represent one share of Stock or such
other unit or value provided by the Committee at the time the Performance
Share is awarded. The Committee shall set performance goals in its
discretion which, depending on the extent to which they are met, will
determine the ultimate value of the Performance Unit or Performance Share
to the Participant. The time period during which the performance goals
must be met shall be called a performance period, and also is to be
determined by the Committee. After a performance period has ended, the
holder of a Performance Unit or Performance Share shall be entitled to
receive the value thereof as determined by the extent to which such
performance goals have been met.
9.3 Form and Timing of Payment. Payment pursuant to Section
9.2 shall be in cash, Stock (restricted or unrestricted), or a combination
thereof as determined by the Committee. Payment may be made in a lump
sum or installments as prescribed by the Committee at the time of grant.
If any payment is to be made on a deferred basis, the Committee may
provide for the accrual of dividend equivalents or interest during the
deferral period.
9.4 Termination of Employment. In the event the employment of
a Participant is terminated for cause, any Performance Unit or Performance
Share held by such Participant shall terminate immediately. In the event
employment terminates for any other reason, the exercisability of any
Performance Unit or Performance Share held by the Participant shall be
governed by the applicable Plan Agreement, subject to the Committee's
authority to amend such Agreement as set forth in Section 14.2.
Section 10. Restricted Stock.
10.1 Grant of Restricted Stock. The Committee, at any time and
from time to time, may grant shares of Restricted Stock under the Plan to
such Participants and in such amounts as it shall determine. The
Committee shall have complete discretion in determining the number of
such shares granted to any Participant and the terms of such Grant,
subject to the provisions of the Plan. In the event that the shares
granted are newly issued, the Participant shall pay to the Company an
amount no less than the par value thereof.
10.2 Transferability. The shares of Restricted Stock granted
hereunder may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated prior to the passage of such period of time, or
the satisfaction of such conditions, as may be specified by the Committee
in its sole discretion and set forth in the applicable Plan Agreement.
10.3 Other Restrictions. The Committee may impose such other
restrictions on any shares of Restricted Stock granted pursuant to the
Plan as it may deem advisable including, without limitation, restrictions
intended to comply with applicable Federal or state securities law, and
may legend the certificates representing Restricted Stock to give
appropriate notice of such restrictions. Unless the Committee shall
otherwise determine, any certificate evidencing shares of Restricted
Stock shall be held by the Company until such shares are free of all
restrictions specified in the applicable Plan Agreement.
10.4 Rights of Grantee. A Grantee of Restricted Stock shall
have the rights of a stockholder with respect thereto, subject to the
nontransferability and forfeiture provisions set forth in the applicable
Plan Agreement; provided, however, that any ordinary dividends which
become payable during the Period of Restriction shall be paid to the
Company.
10.5 Termination of Employment. In the event the employment
of a Participant is terminated for cause, any shares of Restricted Stock
held by such Participant shall be forfeited and returned to the Company
immediately. In the event employment terminates for any other reason,
the vesting of shares of Restricted Stock held by the Participant shall
be governed by the applicable Plan Agreement, subject to the Committee's
authority to amend such Agreement as set forth in Section 14.2. Upon the
forfeiture of any Restricted Shares, the Company shall repay to the
Participant any amount paid for such shares.
Section 11. Unrestricted Stock.
11.1 Grant of Unrestricted Stock. The Committee may grant
(either directly, as a payout medium for other rights granted under the
Plan or in exchange for other rights relinquished by a Participant) shares
of Stock free of restrictions under the Plan, to such Participants and in
such amounts as the Committee shall determine in its sole discretion. In
the event that the shares granted are newly issued, the Participant shall
pay to the Company an amount no less than the par value thereof.
Section 12. Beneficiary Designation.
12.1 Beneficiary Designation. Each Participant under the Plan
may name, from time to time, any beneficiary or beneficiaries (who may be
named contingently or successively) to whom any benefit under the Plan is
to be paid in case of his/her death before he/she receives any or all of
such benefit. Each designation will revoke all prior designations by the
same Participant, shall be in a form prescribed by the Committee, and
will be effective only when filed by the Participant in writing with the
Company during his/her lifetime. In the absence of any such designation,
benefits remaining unpaid at the Participant's death shall be paid to
his/her estate.
Section 13. Rights of Employees.
13.1 Employment. Nothing in the Plan shall interfere with or
limit in any way the right of the Company to terminate any Participant's
employment at any time, nor confer upon any Participant any right to
continue in the employ of the Company.
Section 14. Amendment, Modification, and Termination of Plan.
14.1 Amendment, Modification, and Termination of Plan. The
Board at any time may suspend, discontinue or terminate, and from time to
time may amend, revise or modify the Plan, provided, however, stockholder
approval shall be required to the extent necessary for compliance with
Rule 16b-3 or with Section 162(m) or 422 of the Code.
14.2 Amendment of Plan Agreements. The Committee may amend
any outstanding Plan Agreement, including, without limitation, by amendment
which would (a) accelerate the time or times at which an Award becomes
unrestricted or may be exercised, or (b) waive or amend any goals,
restrictions or conditions set forth in the Agreement, or (c) extend the
scheduled expiration date of the Award.
14.3 Rights of Grantees. No amendment, revision,
modification, suspension, discontinuance or termination of the Plan shall
in any manner adversely affect any Award theretofore granted under the
Plan, without the consent of the Grantee.
Section 15. Tax Withholding.
15.1 Tax Withholding. The Company shall have the power to
withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local withholding tax
requirements on any Award under the Plan. To the extent permissible
under applicable tax, securities, and other laws, the Committee may, in
its sole discretion, permit the Participant to satisfy a tax withholding
requirement by directing the Company to apply shares of Stock to which
the Participant is entitled pursuant to an Award. The Committee may
impose such conditions on such withholding (including, without
limitation, by limiting the time of exercise to specific periods) as may
be necessary to satisfy the requirements of Rule 16b-3.
Section 16. Required Notifications by Grantee.
16.1 Notification by Grantee of Election Under Section 83(b)
of the Code. If any Grantee shall, in connection with an Award, make an
election permitted under Section 83(b) of the Code (i.e., an election to
include in gross income in the year of transfer the amounts specified in
Section 83(b) of the Code), such Grantee shall notify the Company of such
election within 10 days of filing such election with the Internal Revenue
Service, in addition to any filing and notification required pursuant to
regulations issued under the authority of Code Section 83.
16.2 Notification by Grantee Upon Disqualifying Disposition
Prior to Expiration of Holding Periods Under Section 421(b) of the Code.
Each Plan Agreement with respect to an Incentive Stock Option shall require
the Grantee to notify the Company of any disposition of shares of Common
Stock issued pursuant to the exercise of such Option under the
circumstances described in Section 421(b) of the Code (relating to
certain disqualifying dispositions of shares acquired by exercise of the
Option before expiration of the applicable holding periods), within 10
days of such disposition.
Section 17. Indemnification.
17.1 Indemnification. Each person who is or shall have been a
member of the Committee or of the Board shall be indemnified and held
harmless by the Company against and from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by him/her in
connection with or resulting from any claim, action, suit, or proceeding
to which he/she may be a party or in which he/she may be involved by
reason of any action taken or failure to act under the Plan and against
and from any and all amounts paid by him/her in settlement thereof, with
the Company's approval, or paid by him/her in satisfaction of any
judgment in any such action, suit, or proceeding against him/her,
provided he/she shall give the Company an opportunity, at its own
expense, to handle and defend the same before he/she undertakes to handle
and defend it on his/her own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's
Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or
any power that the Company may have to indemnify them or hold them
harmless.
Section 18. Nonassignability.
18.1 Nonassignability. To the extent necessary to comply with
Rule 16b-3 and with Section 422 of the Code, no Award or right granted to
any person under the Plan or under any Plan Agreement shall be assignable
or transferable other than by will or by the laws of descent and
distribution. All rights granted under the Plan or any Plan Agreement
shall be exercisable during the life of the Grantee only by the Grantee
or the Grantee's legal representative.
Section 19. Requirements of Law; Consents.
19.1 Requirements of Law. The granting of Awards and the
issuance of shares of Stock upon the exercise of an Option shall be subject
to all applicable laws, rules, and regulations, such approvals by any
governmental agencies or national securities exchanges as may be
required.
19.2 Consents to Plan Actions. If the Committee shall at any
time determine that any Consent (as hereinafter defined) is necessary or
desirable as a condition of, or in connection with, the granting of any
Award under the Plan, the issuance or purchase of shares or other rights
thereunder, or the taking of any other action thereunder (each such
action being hereinafter referred to as a "Plan Action"), then such Plan
Action shall not be taken, in whole or in part, unless and until such
Consent shall have been effected or obtained to the full satisfaction of
the Committee.
19.3 Nature of Consents. The term "Consent" as used herein
with respect to any Plan action means (a) any and all listings,
registrations or qualifications in respect thereof upon any securities
exchange or under any Federal, state or local law, rule or regulation, (b)
any and all written agreements and representations by the Grantee with
respect to the disposition of shares, or with respect to any other matter,
which the Committee shall deem necessary or desirable to comply with the
terms of any such listing, registration or qualification or to obtain an
exemption from the requirement that any such listing, qualification or
registration be made and 9(c) any and all consents, clearances and
approvals in respect of a Plan action by any governmental or other
regulatory bodies.
19.4 Governing Law. The Plan, and all agreements hereunder,
shall be construed in accordance with and governed by the laws of the State
of Texas.
