DEF 14A 1 maxxam_proxy2005.htm MAXXAM INC. 2005 PROXY STATEMENT

[MAXXAM Logo]

April 28, 2005

To Our Stockholders:

You are cordially invited to attend the Annual Meeting of Stockholders of
MAXXAM Inc. to be held at 8:30 a.m. on Wednesday, May 25, 2005, at the Sheraton
Suites, 2400 West Loop South, Houston, Texas.

Although you may presently plan to attend the Annual Meeting, we urge you
to indicate your approval in the spaces provided on the enclosed proxy card by
voting "FOR" the election of the directors named in the attached proxy
statement. Please then date, sign and promptly return the 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
Chairman of the Board and
Chief Executive Officer

MAXXAM INC.
1330 Post Oak Boulevard, Suite 2000
Houston, Texas 77056

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 25, 2005

The Annual Meeting of Stockholders of MAXXAM Inc. (the "Company") will be
held on Wednesday, May 25, 2005, at the Sheraton Suites, 2400 West Loop South,
Houston, Texas, at 8:30 a.m., local time, for the following purposes:

1. To elect four directors to serve on the Board of Directors of the
Company, three of whom will be elected by the holders of Common Stock,
voting separately as a class, to hold office until the 2006 annual
meeting 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 2008 annual
meeting or until his successor is elected and qualified; and

2. To transact such other business as may properly come before the Annual
Meeting.

Stockholders of record as of the close of business on March 31, 2005, are
entitled to notice of and to vote at the Annual Meeting. A list of stockholders
will be available for inspection at the offices of the Company, 1330 Post Oak
Boulevard, Suite 2000, Houston, Texas, during normal business hours beginning
May 11, 2005 and continuing through the Annual Meeting.

By Order of the Board of Directors

BERNARD L. BIRKEL
Secretary

April 28, 2005

IMPORTANT

To assure that your shares are represented at the Annual Meeting, please
complete, date and sign the enclosed proxy card. Return it promptly in the
enclosed envelope provided for your convenience and which requires no postage if
mailed in the United States. Any stockholder of record 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

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" or "MAXXAM"), a Delaware corporation, of proxies for use at the
Company's Annual Meeting of Stockholders (the "Annual Meeting") to be held at
8:30 a.m. on May 25, 2005, 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
1330 Post Oak Boulevard, Suite 2000, Houston, Texas 77056, telephone (713)
975-7600.

This Proxy Statement, the accompanying proxy card and the Notice of Annual
Meeting of Stockholders are being mailed, commencing on or about April 28, 2005,
to the stockholders of record as of the close of business on March 31, 2005 (the
"Record Date"). Only holders of record of the 5,976,542 shares of Common Stock
(the "Common Stock") and the 668,119 shares of Class A $.05 Non-Cumulative
Participating Convertible Preferred Stock (the "Preferred Stock," and 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 matters on which they may vote. At the Annual Meeting, the holders
of Common Stock, voting separately as a class, are entitled to elect three
members of the Company's Board of Directors (sometimes referred to herein as the
"Board"), and the holders of Common Stock and Preferred Stock, voting together
as a single class, are entitled to elect one member of the Board.

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
proxy card in the envelope included herewith. The persons authorized to act as
proxies at the Annual Meeting, individually or jointly, as listed on the proxy
card, are Bernard L. Birkel, M. Emily Madison and J. Kent Friedman. 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 by voting
your shares in person at the Annual Meeting. 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 named in this Proxy Statement.

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 approximately 8:00 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 inside the meeting facility. 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 the Pre-Registration Form set forth on the back
cover page of this Proxy Statement and sending it by facsimile to (888) 488-3808
before 5:00 p.m., Houston time, on May 20, 2005. Persons who pre-register will
be required to verify their identity at the registration table with a driver's
license or other appropriate identification bearing a photograph. The Company
may in its discretion admit appropriately credentialed members of the media.

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 Company's Transfer Agent is American Stock Transfer & Trust
Company. All communications concerning accounts of stockholders of record,
including address changes, name changes, inquiries as to requirements to
transfer shares of stock and similar issues, may be handled by contacting them
at (800) 937-5449 or via the Internet at www.amstock.com.

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, 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 and has received no
instructions from the persons entitled to vote such shares) and withhold
authority designations 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. See the description of specific proposals for the
vote required to adopt each such proposal. Shares represented by proxies that
are marked "abstain" on such matters and proxies relating to broker non-votes
will not be treated as shares voting and therefore will not affect the outcome
of the vote on such matters. PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
CARD. 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 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 OBTAIN A PROXY FROM SUCH NOMINEE ASSIGNING VOTING RIGHTS TO YOU.

TABLE OF CONTENTS

Election of Directors
The Board of Directors and Its Committees
Executive Officers and Directors
Principal Stockholders
Executive Compensation
Report of the Compensation Committees on Executive Compensation
Report of the Audit Committee
Principal Accounting Firm Fees
Performance Graph
Certain Transactions
Section 16(a) Beneficial Ownership Reporting Compliance
Other Business
Other Matters
Pre-Registration Request

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 ("General
Directors"). 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, are entitled to elect 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 ("Common Directors"). The Board has designated
three out of its seven directors as Common Director nominees. Common Directors
serve one-year terms.

Four directors will be elected at the Annual Meeting. The Company's three
nominees for Common Director are Robert J. Cruikshank, Stanley D. Rosenberg and
Michael J. Rosenthal (to hold office until the 2006 annual meeting). Charles E.
Hurwitz has been nominated by the Company to stand for election as a General
Director (to hold office until the 2008 annual meeting). Each nominee is
currently a member of, and has extensive experience on, the Board and in other
board and business positions. 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 beneficially owned by each of them as
of the Record Date. Each of these nominees has consented to serve as a member of
the Board if elected.

The persons named on the enclosed proxy card will vote the shares of Common
Stock and Preferred Stock represented thereby for the election of these
nominees, except where authority has been withheld as to a particular nominee or
as to all such nominees. Should any of these nominees decline or be unable to
serve as a director of the Company, which is not anticipated, the persons named
on the enclosed proxy card will vote for the election of such other person, if
any, as the Board may recommend.

The Board of Directors recommends a vote "FOR" the election of Messrs.
Cruikshank, Rosenberg and Rosenthal as Common Directors and Mr. Hurwitz as a
General Director of the Company.

THE BOARD OF DIRECTORS AND ITS COMMITTEES

The Board held four meetings and acted by written consent on four occasions
during 2004. In addition, management confers frequently with directors on an
informal basis to discuss Company affairs. During 2004, no director attended
fewer than 75% of the aggregate number of meetings of the Board and the
committees of the Board on which he served. The Company encourages all of its
directors to attend the Annual Meeting and to facilitate this, schedules a Board
meeting in conjunction with the Annual Meeting. All of the directors attended
the annual meeting last year.

The Board has the following standing committees: Executive, Audit,
Conflicts and Compliance, Compensation Policy, and Section 162(m) Compensation.
The Board does not have a standing nominating committee nor does it have any
committee performing a similar function. See "--Nomination Process" for further
information.

The Executive Committee meets on call and has authority to act on most
matters during the intervals between meetings of the entire Board. Its current
members are Messrs. Hurwitz (Chairman), Levin and Schwartz. The Executive
Committee did not meet or act by written consent during 2004.

The Audit Committee serves as an independent and objective party to oversee
the integrity of the Company's accounting and financial reporting processes and
internal control system, including the Company's system of internal controls
regarding finance and accounting that management and the Board have established.
Consistent with such function, the Audit Committee encourages continuous
improvement of, and fosters adherence to, the Company's policies, procedures and
practices at all levels. The Company's independent accountants are directly
responsible to the Audit Committee, which selects, sets compensation for, and
evaluates the performance and independence of the Company's independent
accountants. The Audit Committee also fosters an open avenue of communication
among senior management, the independent accountants and the Board. The Audit
Committee has adopted a written charter. Messrs. Rosenthal (Chairman),
Cruikshank and Rosenberg currently serve as members of this committee. The Audit
Committee met on six occasions during 2004 and acted by written consent on three
occasions. The Company has determined that each member of the Audit Committee is
"independent" within the meaning of the current requirements of the American
Stock Exchange ("AMEX"). Mr. Levin served on the Audit Committee during a
portion of 2004, but ceased serving in May 2004 in connection with
implementation of revised AMEX independence standards. In addition, the Board
has determined that Mr. Cruikshank is an "audit committee financial expert"
within the meaning of Regulation S-K, Item 401(h). See also "Report of the Audit
Committee" below.

The Conflicts and Compliance Committee (the "Conflicts 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, and (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, Friedman, Levin and Rosenthal served as members of the Conflicts
Committee during 2004, which met on two occasions during 2004 and did not act by
written consent. See also "Code of Conduct."

The Compensation Policy Committee (the "Policy Committee") reviews and
approves proposals concerning (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 (excluding Kaiser Aluminum
Corporation ("Kaiser") and Kaiser Aluminum & Chemical Corporation ("KACC")),
to all executive officers and other employees of the Company and its non-Kaiser
subsidiaries. However, the Policy Committee is not responsible for the
administration of, amendments to or awards under the MAXXAM 1994 Executive Bonus
Plan, as amended and restated in 2003 (the "Executive Plan"), the MAXXAM 2002
Omnibus Employee Incentive Plan (the "2002 Omnibus Plan"), the MAXXAM 1994
Non-Employee Director Stock Plan, as amended and restated in 2004 (the "Director
Plan"), or administration of the MAXXAM 1994 Omnibus Employee Incentive Plan
(the "1994 Omnibus Plan"). Messrs. Levin (Chairman), Cruikshank, Rosenberg and
Rosenthal served as members of this committee during 2004. The Policy Committee
met on four occasions during 2004 and acted by written consent on two occasions.

The Board is responsible for administering the Director Plan. The Section
162(m) Compensation Committee (the "162(m) Committee") has the authority to
administer and make amendments to the Executive Plan and the 2002 Omnibus Plan,
and to administer the 1994 Omnibus Plan and such other plans or programs, if
any, as are intended to comply with the provisions of Section 162(m) of the
Internal Revenue Code (the "Code"). The Section 162(m) Committee also
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 2002
Omnibus Plan. Messrs. Cruikshank (Chairman), Rosenberg and Rosenthal served as
members of this committee. During 2004, this committee held six meetings and did
not act by written consent.

Director Compensation

Non-employee directors of the Company (Messrs. Cruikshank, Levin, Rosenberg
and Rosenthal) each received a fee of $36,000 for the 2004 calendar year.
Non-employee directors were also entitled to receive an annual fee of $1,500 for
each Board committee they chaired and $1,000 for each Board committee on which
they served as a member. Further, non-employee directors received $1,500 per day
for each meeting attended in person and not held in conjunction with a regularly
scheduled Board meeting, and $1,500 for each formal telephonic meeting not held
in conjunction with a regularly scheduled Board meeting. Messrs. Cruikshank,
Levin, Rosenberg and Rosenthal received an aggregate of $53,500, $47,500,
$51,000 and $53,500, respectively, in payment of such director and committee
chairman/member fees during 2004. Directors were reimbursed for travel and other
disbursements relating to Board and committee meetings. Employee directors of
the Company do not receive fees for their Board service. Directors of the
Company who also served as directors of Kaiser and KACC, 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. Messrs.
Cruikshank, Hurwitz and Levin received $69,500, $65,000, and $78,500,
respectively, in such director and committee fees from Kaiser and KACC with
respect to their services in 2004 (see the "Summary Compensation Table"
regarding such fees which were deducted from Mr. Hurwitz's 2004 bonus). Mr.
Levin also received additional fees in the amount of $3,000 for serving during
2004 as a director of The Pacific Lumber Company, a wholly owned subsidiary of
the Company engaged in forest products operations ("Pacific Lumber"), and
$15,000 for serving as a manager of Palco's wholly owned subsidiary, Scotia
Pacific Company LLC ("Scotia LLC").

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 owed
by the Company for his 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 on the first day of each month plus 2%.
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 any of his director's fees, with all of such fees having
been deferred from September 1994 through December 2003 and one-half of such
fees being deferred commencing in January 2004.

Non-employee directors are also eligible to participate in the Director
Plan. Messrs. Cruikshank, Levin, Rosenberg and Rosenthal each received options
to purchase 600 shares of the Company's Common Stock on May 20, 2004, at an
exercise price of $24.90 per share.

Policy Committee Interlocks and Insider Participation

During the 2004 fiscal year, no member of the Policy Committee or the
162(m) 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, the law firm of Kramer Levin Naftalis & Frankel LLP,
of which Mr. Levin is a member, provided legal services for the Company and its
subsidiaries during 2004 (the revenues from such services accounting for less
than 1% of such firm's revenues in 2004).

During the Company's 2004 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 or the 162(m) Committee, (ii) a director
of another entity, one of whose executive officers served on the Policy
Committee or the 162(m) 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.

Nomination Process

The Company is a "controlled company" as such term is defined in the rules
of the AMEX (due to the ownership of Mr. Hurwitz) and does not have a standing
nominating committee as it believes this is unnecessary. The Company's Board of
Directors is not particularly large and believes it is sufficient to rely on the
expertise of the Board as a whole in choosing its director candidates. The
Company's directors are familiar with each other as they have served on the
Board for several years. Each of the directors is also highly experienced and
knowledgeable in board and business affairs. The nominees named in this proxy
statement were unanimously recommended by the full Board for submission to the
stockholders as the Company's nominees. Should the Company or the Board
determine in the future that additional or other Board nominees are advisable,
it is likely that a variety of sources would be consulted for possible
candidates, including the directors of the Company, various advisors to the
Company, and possibly one or more director search firms. Appropriate
consideration also would be given to nominees for director suggested by
stockholders of the Company. The process by which a stockholder of the Company
may suggest a nominee for director of the Company can be found under
"Stockholder Proposals for the 2006 Annual Meeting."

Code of Conduct

All of the Company's employees, officers (including senior executive,
financial and accounting officers) and directors are held accountable for
adherence to the Company's Code of Business Conduct and related compliance
manuals (collectively, the "Code of Conduct"). The Code of Conduct is intended
to promote compliance with applicable governmental laws and regulations and help
assure adherence to the highest ethical standards of conduct and that persons
subject to the Code of Conduct act as responsible citizens. The Code of Conduct
covers a variety of areas, including conflicts of interest, financial reporting
and disclosure and internal controls, protection of Company assets and
confidentiality, antitrust requirements, political participation, protection of
the environment, insider trading, and discrimination and harassment. Employees
have an obligation to promptly report any known or suspected violation of the
Code of Conduct and retaliation is prohibited.

Copies of the Code of Conduct may be obtained by any stockholder upon
request without charge by writing to MAXXAM Inc., c/o Corporate Secretary, 1330
Post Oak Boulevard, Suite 2000, Houston, Texas 77056.

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information as of the Record Date
(except as otherwise indicated), with respect to the executive officers,
directors and director nominees of the Company. All officers and directors hold
office until their respective successors are elected and qualified or until
their earlier resignation or removal.

Name Positions and Offices with the Company
--------------------------- --------------------------------------------------
Charles E. Hurwitz Chairman of the Board and Chief Executive Officer
J. Kent Friedman Vice Chairman of the Board and General Counsel
Paul N. Schwartz Director, President and Chief Financial Officer
M. Emily Madison Vice President, Finance
Bernard L. Birkel Secretary
Robert J. Cruikshank Director
Ezra G. Levin Director
Stanley D. Rosenberg Director
Michael J. Rosenthal Director

Charles E. Hurwitz. Mr. Hurwitz, age 64, has served as a member of the
Board 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. Mr. Hurwitz is a nominee for election as a General Director of the
Company to serve until the 2008 meeting. He also served the Company as President
from January 1993 to January 1998. Mr. Hurwitz is the President and Director of
Giddeon Holdings, Inc., a principal stockholder of the Company which is
primarily engaged in the management of investments ("Giddeon Holdings"). Mr.
Hurwitz has also been, since May 1982, Chairman of the Board of MAXXAM Group
Inc. ("MGI"), a wholly owned subsidiary of the Company which is engaged in
forest products operations. He has served as a director of Kaiser since October
1988, and KACC since November 1988.

J. Kent Friedman. Mr. Friedman, age 61, was elected a director and
appointed Vice Chairman of the Company in May 2000, and has served as General
Counsel of the Company since December 1999. He served as Acting General Counsel
of the Company from March 1998 until his appointment as General Counsel. Mr.
Friedman was a partner of Mayor, Day, Caldwell & Keeton, L.L.P., a Houston
law firm, from 1982 through December 1999, and he was the Managing Partner of
that firm from 1982 through 1992. He has also served since September 1999 as a
director of Pacific Lumber, a subsidiary of MGI engaged in forest products
operations, and on the Board of Managers of Scotia LLC. In addition, he has
served as a director of MGI since May 2000. From December 1999 until February
2002, Mr. Friedman also served as Senior Vice President and General Counsel of
Kaiser and KACC. Mr. Friedman also serves as Vice Chairman of the Board of the
Harris County-Houston Sports Authority and is President of the Mickey Leland
Kibbutzim Internship Foundation. He previously served as Co-Chairman of the
Greater Houston Inner City Games (1998 to 2003), a member of the Board of
Regents of Texas Southern University (1987 to 1990) and as a member of the
Executive Committee of the Board of Directors of the Houston Symphony (1984 to
1999).

Paul N. Schwartz. Mr. Schwartz, age 58, was named a director and President
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 from January 1995 until January 1998, 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 on the Board of
Managers and as a Vice President of Scotia LLC. He has also served as a director
of Pacific Lumber since February 1993. He has also served as a director of MGI
since January 1994. Mr. Schwartz is also a member of the Board of Trustees of
the Houston Symphony Society.

M. Emily Madison. Ms. Madison, age 36, joined the Company in April 2005 as
Vice President, Finance. Ms. Madison was a partner of Ernst & Young LLP from
May 2002 until April 2005 and a partner of Arthur Andersen LLP from September
2001 until May 2002. From 1990 to 2001, Ms. Madison held various positions with
Arthur Andersen LLP. She is a Certified Public Accountant and a member of the
American Institute of Certified Public Accountants.

Bernard L. Birkel. Mr. Birkel, age 55, was named Secretary of the Company
in May 1997, and has served MGI and Pacific Lumber in such capacity since May
1997 and Scotia LLC since June 1998. He served as Managing Counsel--Corporate of
the Company from May 1997 to February 2000, when he was appointed Senior
Assistant General Counsel. Mr. Birkel was Assistant Secretary of the Company and
MGI from May 1991 to May 1997. 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.

Robert J. Cruikshank. Mr. Cruikshank, age 74, has served as a director of
the Company since May 1993. Mr. Cruikshank is a nominee for reelection as a
Common Director of the Company to serve until the 2006 annual meeting. He has
also 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 LLP 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 of Encysive Pharmaceuticals, Inc., a pharmaceutical company; as a trust
manager of Weingarten Realty Investors; and as advisory director of Compass
Bank--Houston. Until December 2004, he was also a director of Texas Genco
Holdings, Inc., a wholesale electric power generating company and public company
subsidiary of CenterPoint Energy, Inc. 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
( since 1989), and Regent and Vice Chairman of The University of Texas System
(1989-1995).

Ezra G. Levin. Mr. Levin, age 71, 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. He has served as a director of Pacific Lumber since
February 1993, and as a manager on the Board of Managers of Scotia LLC since
June 1998. Mr. Levin is a member and co-chair of the New York and Paris law firm
of Kramer Levin Naftalis & Frankel LLP. He has held leadership roles in
various legal and philanthropic capacities. Mr. Levin has previously served as a
trustee on behalf of the Securities Investor Protection Corporation, and taught
as a visiting professor at the University of Wisconsin Law School and at
Columbia College.

Stanley D. Rosenberg. Mr. Rosenberg, age 73, was first elected to the Board
in June 1981. He is a nominee for reelection as a Common Director of the Company
to serve until the 2006 annual meeting. Mr. Rosenberg is a partner in the law
firm of Loeffler Tuggey Pauerstein Rosenthal LLP. He was a partner in the law
firm of Arter & Hadden LLP from April 1999 until May 2001, and was a partner
in the law firm of Rosenberg, Tuggey, Agather, Rosenthal & Rodriguez from
February 1990 through April 1999. He 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).

Michael J. Rosenthal. Mr. Rosenthal, age 61, was elected a director of the
Company in May 2000. He is a nominee for reelection as a Common Director of the
Company to serve until the 2006 annual meeting. Since 1986, Mr. Rosenthal has
served as Chairman and President of M. J. Rosenthal and Associates, Inc., an
investment and consulting company. From 1984 to 1986, Mr. Rosenthal served as a
partner and a Managing Director of Wesray Capital Corporation, an investment
company, and prior to that was Senior Vice President and Managing Director of
the Mergers and Acquisitions Department of Donaldson, Lufkin & Jenrette,
Inc., an investment banking firm. Mr. Rosenthal also serves as a director and
Treasurer of the Horticultural Society of New York. Over the last several years,
Mr. Rosenthal has also served as Chairman, a director and/or Chief Executive
Officer of a number of companies including: American Vision Centers, Inc.,
Northwestern Steel & Wire Company, Star Corrugated Box Co., Inc., Vector
Distributors, Inc., Western Auto Supply Company and Wilson Sporting Goods
Company. In September 2004, he was appointed a director of Nobel Learning
Communities, Inc., a for profit provider of education and school management
services.

PRINCIPAL STOCKHOLDERS

The following table sets forth, as of the Record Date, 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 set forth below, (iii) each of
the directors or nominees for director, and (iv) all directors and executive
officers of the Company as a group.

Combined
Name Of Number % of % of Voting
Beneficial Owner Title of Class of Shares(1) Class Power(2)
-------------------------------------------- ------------------ ------------------ ----------- -------------
The Stockholder Group(3)(14) Common Stock 3,233,700(4)(5)(6) 50.9 76.5
Preferred Stock 707,441(7) 99.2
Gilda Investments, LLC(3) Common Stock 2,485,343(4) 41.4 19.6
Christian Leone Common Stock 687,480(8) 11.5 5.4
Dimensional Fund Advisors Inc. Common Stock 341,025(9) 5.7 2.7
Scion Capital, LLC Common Stock 527,000(10) 8.8 4.2
Bernard L. Birkel Common Stock 11,956(11) * *
Robert J. Cruikshank Common Stock 5,500(12) * *
J. Kent Friedman Common Stock 56,784(13) * *
Charles E. Hurwitz(3)(14) Common Stock 3,233,700(4)(5)(6) 50.9 76.5
Preferred Stock 707,441(7) 99.2
Ezra G. Levin Common Stock 5,500(12) * *
Stanley D. Rosenberg Common Stock 6,500(12) * *
Michael J. Rosenthal Common Stock 2,000(15) * *
Paul N. Schwartz Common Stock 81,799(16) 1.4 *
All directors, nominees for director and Common Stock 3,403,739(17) 52.4
executive officers of the Company as a Preferred Stock 707,441(7) 99.2 76.9
group (8 persons)

--------------------------
* 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 the Record Date,
if any, for their stock appreciation rights ("SARs") exercisable within 60
days of such date if such SARs had been paid solely in shares of Common
Stock (excluding SARs payable in cash only). Also includes the number of
shares of Common Stock credited to such person's account under the MAXXAM
Stock Fund of the Company's 401(k) savings plan.
(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) Gilda Investments, LLC ("Gilda") is a wholly owned subsidiary of Giddeon
Holdings. Gilda, Giddeon Holdings, Giddeon Portfolio LLC ("Giddeon
Portfolio"), the Hurwitz Investment Partnership L.P. and Mr. Hurwitz may be
deemed a "group" (the "Stockholder Group") within the meaning of Section
13(d) of the Securities Exchange Act of 1934, as amended. The address of
Gilda is 1330 Post Oak Boulevard, Suite 2000, Houston, Texas 77056. The
address of the Stockholder Group is Giddeon Holdings, Inc., 1330 Post Oak
Boulevard, Suite 2000, Houston, Texas 77056.
(4) Includes options to purchase 21,029 shares of Common Stock held by Gilda.
Also includes 60,000 shares owned by Giddeon Portfolio. Giddeon Portfolio
is a Texas limited liability company which is owned 79% by Gilda and 21% by
Mr. Hurwitz, and of which Gilda is the managing member.
(5) Includes (a) 2,404,314 shares of Common Stock owned by Gilda (including the
options reflected in note (4)) as to which Mr. Hurwitz indirectly possesses
voting and investment power, (b) 46,277 shares of Common Stock separately
owned by Mr. Hurwitz's spouse and as to which Mr. Hurwitz disclaims
beneficial ownership, (c) 303,084 shares of Common Stock held directly by
Mr. Hurwitz, and (d) options held by Mr. Hurwitz to purchase 352,496 shares
of Common Stock (including those exercisable within 60 days of the Record
Date).
(6) Includes 46,500 shares of Common Stock owned by the Hurwitz Investment
Partnership L.P., a limited partnership in which Mr. Hurwitz and his spouse
each hold a 4.32% interest as General Partner. The remaining interests in
such limited partnership are held by trusts for the benefit of Mr.
Hurwitz's adult children.
(7) Includes 662,441 shares of Preferred Stock held directly by Mr. Hurwitz.
Also includes options held by Mr. Hurwitz to purchase 45,000 shares of
Preferred Stock and exercisable within 60 days of the Record Date.
(8) Information based solely on Schedule 13G/A (the "Leone 13G") filed with the
Securities and Exchange Commission ("SEC") on February 11, 2005, on behalf
of Christian Leone, LCG Holdings, LLC ("LCGH"), Luxor Capital Group, LP
("LCG"), Luxor Capital Partners, LP ("LCP"), Luxor Management, LLC ("LM"),
and Luxor Capital Partners Offshore, Ltd. ("LCPO"). The Leone 13G indicates
that Mr. Leone is the managing member of LCGH and LM; LCGH is the general
partner of LCP; LM is the general partner of LCG; LCG is the investment
manager of LCP and LCPO; and LCP and LCPO directly own the shares reported
in the Leone 13G. The business address of the filers of the Leone 13G is
599 Lexington Avenue, 35th Floor, New York, New York 10022.
(9) Information based solely on Schedule 13G/A (the "Dimensional 13G") filed
with the SEC on February 9, 2005, by Dimensional Fund Advisors Inc.
("Dimensional"), a Delaware corporation which is a registered investment
advisor. The Dimensional 13G indicates that Dimensional has sole voting and
dispositive power with respect to 343,825 shares and that all of such
shares are owned by 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 Dimensional is 1299 Ocean
Avenue, 11th Floor, Santa Monica, California 90401.
(10) Information based solely on Schedule 13G/A (the "Scion 13G") filed with the
SEC on February 9, 2005, on behalf of Scion Capital, LLC ("Scion"). The
Scion 13G indicates that Scion serves as investment manager to Scion Value
Fund, a Series of Scion Funds, LLC, and Scion Qualified Value Fund, a
Series of Scion Qualified Funds, LLC, both of which are private investment
companies (the "Funds"). All shares reported in the Scion 13G are owned by
the Funds, and Scion disclaims beneficial ownership of such shares. The
business address of Scion is 20400 Stevens Creek Blvd., Suite 840,
Cupertino, CA 95114.
(11) Relates to options to purchase 11,956 shares of Common Stock (including
those exercisable within 60 days of the Record Date).
(12) Includes options to purchase 4,500 shares of Common Stock (including those
exercisable within 60 days of the Record Date).
(13) Relates to options to purchase 56,784 shares of Common Stock (including
those exercisable within 60 days of the Record Date).
(14) Mr. Hurwitz serves as the sole director of Giddeon Holdings, and together
with members of his immediate family and trusts for the benefit thereof,
owns all of the voting shares of Giddeon Holdings. 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
and President of Giddeon Holdings. 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.
(15) Relates to options to purchase 2,000 shares of Common Stock (including
those exercisable within 60 days of the Record Date).
(16) Includes options to purchase 67,196 shares of Common Stock (including those
exercisable within 60 days of the Record Date), and 10,749 shares of Common
Stock owned by a trust of which Mr. Schwartz and his spouse are trustees
and share voting and investment power with respect to such shares.
(17) Mr. Hurwitz beneficially owns 3,233,700 of such shares. The remaining
shares consist of 18,603 shares of Common Stock, and options to purchase
151,436 shares of Common Stock (including those exercisable within 60 days
of the Record Date), held by the other directors and officers of the
Company. Of the 18,603 shares of Common Stock, the applicable directors and
officers have sole voting and investment power with respect to 7,854 of
such shares.

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, 2004:

Long-Term Compensation
------------------------------
Annual Compensation Awards
----------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (i)
Securities
Other Restricted Underlying
Annual Stock Options/ All Other
Name and Salary Bonus Compensation Award(s) SARs Compensation
Principal Position Year ($) ($) ($)(1) ($) (#) ($)
------------------------ ------------------- ---------------------------------------- ------------ ----------------

Charles E. Hurwitz, 2004 833,694 85,000(2) 65,000(2) -0-(3) 57,000 168,054(4)
Chairman of the Board 2003 809,412 389,523(5) 65,000(5) -0-(3) 99,680 146,823(4)
and
Chief Executive Officer 2002 809,412 435,233(6) -- -0-(3) 124,600 142,361(4)

J. Kent Friedman, 2004 496,501 300,000 69,589(7) -0-(3) 11,400 80,517(4)
Vice Chairman and 2003 482,040 298,080 67,657(7) -0-(3) 16,720 58,828(4)
General Counsel 2002 482,040 259,200 70,754(7) -0-(3) 20,900 38,979(4)

Paul N. Schwartz, 2004 596,684 360,000 -- -0- 13,700 120,510(4)
Director, President 2003 579,305 358,226 -- -0- 20,080 105,083(4)
and
Chief Financial Officer 2002 579,305 361,501 -- -0- 25,100 101,889(4)

Bernard L. Birkel, 2004 195,000 80,000 -- -0- 2,800 3,250(4)
Secretary 2003 191,884 100,000 -- -0- 4,080 -0-
2002 191,884 85,000 -- -0- 5,100 -0-

Diane M. Dudley, 2004 175,000 95,000 -- -0- -0- 387,839(4)(8)
Former Vice President 2003 172,010 95,000 -- -0- 3,040 31,202(4)
and
Chief Personnel Officer 2002 172,010 80,000 -- -0- 3,800 30,253(4)

--------------------------

(1) Excludes perquisites and other personal benefits which in the aggregate do
not exceed the lesser of either $50,000 or 10% of the total of annual
salary and bonus reported for the named executive officer.
(2) The column (d) amount excludes a payment of $389,523 made in 2004 with
respect to a bonus awarded in 2003. The Section 162(m) Committee awarded a
bonus of $150,000 with respect to 2004, but the amount actually paid was
reduced by $65,000, the amount of fees Mr. Hurwitz earned in 2004 as a
director of Kaiser and KACC. Column (e) reflects the Kaiser and KACC
directors' fees.
(3) In April 2001, Kaiser made an offer to current employees and directors to
exchange their outstanding options to acquire shares of Kaiser common stock
for restricted shares of Kaiser common stock (the "Kaiser Exchange Offer").
Pursuant to the Kaiser Exchange Offer, Messrs. Hurwitz and Friedman
exchanged all of their then-outstanding options to acquire Kaiser common
stock (i.e., 250,000 and 167,000 options, respectively) for 52,472 and
93,894 restricted shares of Kaiser common stock, respectively. The
restrictions were scheduled to lapse on one-third of the shares issued
pursuant to the Kaiser Exchange Offer and for such shares to vest on each
of March 5, 2002, 2003 and 2004, subject to the grantee being an employee
of Kaiser or KACC (or an affiliate or subsidiary of either) on the
applicable vesting date (with any dividends payable on the shares prior to
the lapse of the restrictions to be payable to the grantee). Mr. Hurwitz
elected to cancel the portion of his restricted shares that would have
vested on March 5, 2002. Messrs. Hurwitz and Friedman both elected to
cancel the portions of their restricted shares that would have vested on
March 5, 2003 and March 5, 2004. As of December 31, 2004, Messrs. Hurwitz
and Friedman owned no restricted shares of Kaiser common stock. As of
December 31, 2004, Mr. Hurwitz beneficially owned 256,808 shares of
restricted Common Stock of the Company (including the dividend rights in
respect thereof) valued at $8,423,302 based on that day's closing price of
$32.80 per share on the AMEX.
(4) Includes the following aggregate amounts accrued for 2004, 2003 and 2002,
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--$164,159,$146,823, and
$142,361: Mr. Friedman--$76,417, $55,828 and $38,979; Mr.
Schwartz--$117,491, $105,083 and $101,889; and Ms. Dudley--$34,560, $31,202
and $30,253. 2004 amounts include the following matching contributions by
the Company under its 401(k) savings plan: Mr. Hurwitz--$3,895; Mr.
Friedman--$4,100; Mr. Schwartz--$3,019; Mr. Birkel--$3,250; and Ms.
Dudley--$3,292.There were no matching contributions by the Company in
either 2003 or 2002 for these persons.
(5) The column (d) excludes a payment of $435,233 made in 2003 with respect to
a bonus awarded in 2002. The Section 162(m) Committee awarded a bonus of
$454,523 with respect to 2003, but the amount actually paid was reduced by
$65,000, the amount of fees Mr. Hurwitz earned in 2003 as a director of
Kaiser and KACC. Column (e) reflects the Kaiser and KACC directors' fees.
(6) Reflects bonus awarded in 2002, although such bonus was paid in 2003.
(7) Of such amount, $50,000 consists of forgiveness of a portion of a loan made
to Mr. Friedman by the Company. See "--Employment Contracts and Termination
of Employment."
(8) Ms. Dudley resigned from her position as Vice President and Chief Personnel
Officer on December 31, 2004. Reflects a $349,987 severance payment Ms.
Dudley received in connection with her departure.

Option/SAR Grants Table

The following table sets forth certain information concerning stock options
or SARs granted in fiscal year 2004 to any of the named executive officers:

Grant
Individual Grants Date Value

(a) (b) (c) (d) (e) (f)
Number of
Name Securities % of Total
Underlying Options/SARS
Options/SARs Granted to Exercise or Grant Date
Granted(1) Employees in Base Price Expiration Present Value
Fiscal Year ($/Share) Date ($)(2)

Charles E. Hurwitz 57,000 51.2 33.00 12/20/14 914,183
J. Kent Friedman 11,400 10.2 33.00 12/20/14 182,837
Paul N. Schwartz 13,700 12.2 33.00 12/20/14 219,725
Bernard L. Birkel 2,800 2.5 33.00 12/20/14 44,907
Diane M. Dudley(3) -0- -0- -0- -0- -0-

--------------------------
(1) Represents shares of Common Stock underlying stock options with tandem
SARs.
(2) The Grant Date Present Value is a hypothetical value determined by
utilizing a Black-Scholes option pricing model. The following assumptions
were used in the calculation: a risk-free interest rate of 4.306%, a
dividend yield of 0%, an expected stock price volatility of 40.95%, and an
expected life of 6.63 years for each option/SAR. No adjustments were made
for non-transferability or risk of forfeiture. The actual value, if any,
that a grantee realizes will depend on the excess of the stock price over
the exercise price on the date the option/SAR is exercised. There can be no
assurance that the value realized will be at or near the hypothetical value
set forth in the table.
(3) During 2004, there were no stock options or tandem SARs granted to Ms.
Dudley.

The stock options with respect to the Company's Common Stock set forth in
the above table were granted under the 2002 Omnibus Plan at the closing price on
the date of the grant, and vest 20% on the first anniversary date of the grant
and an additional 20% on each anniversary date thereafter until fully vested.

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, 2004 by each of the named executive officers, and
the 2004 fiscal year-end value of unexercised options and SARs, including SARs
exercisable for cash only.

(a) (b) (c) (d) (e)
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs in-the-Money Options/SARs
at Fiscal Year-End (#) at Fiscal Year-End ($)

Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable

Charles E. Hurwitz -0- -0- 45,000(1) -0- - (2) -0-
-0- -0- 352,496(3) 284,584(3) 4,110,553(2) 3,925,897(2)
J. Kent Friedman -0- -0- 56,784(3) 49,436(3) 672,615(2) 654,298(2)
Paul N. Schwartz -0- -0- 117,196(3) 59,384(3) 808,070(2) 785,856(2)
Bernard L. Birkel 1,020(4) 18,870(5) 16,756(3) 12,304(3) 154,880(2) 163,316(2)
Diane M. Dudley 3,560(4) 44,687(5) 8,268(3) -0- 65,976(2) -0-

--------------------------
(1) Represents underlying shares of Preferred Stock.
(2) Valued based upon the $32.80 closing price of the Company's Common Stock on
December 31, 2004, minus the exercise price. No value is shown where the
exercise price is higher than such closing price.
(3) Represents underlying shares of Common Stock.
(4) Represents number of shares with respect to which options/SARs were
exercised in 2004.
(5) Fair market value on date of exercise minus the exercise price of
options/SARs.

Equity Compensation Plan Information

The following table sets forth information, as of December 31, 2004,
concerning securities which have been, or are available to be, issued under the
various equity compensation plans of the Company.

(a) (b) (c)
Number of Securities
Remaining Available
Number of Securities for Future Issuance
to be Issued upon Weighted-Average under Equity
Exercise of Exercise Price of Compensation Plans
Outstanding Options, Outstanding Options, Excluding Securities
Plan Category Warrants and Rights Warrants and Rights Reflected in Column (a))
---------------------------------------------------------------------- ---------------------------------------------
Equity compensation plans approved by security
holders (1):
Common Stock 1,141,388 $ 23.91 218,832(2)
Preferred Stock 45,000 48.84 70,000(2)

Equity compensation plans not approved by
security holders - - -
---------------------- -----------------------
Total 1,186,388 24.86 288,832
====================== =======================
--------------------------
(1) Does not include securities issuable pursuant to the Executive Plan as
there are no securities set aside for issuance thereunder. However, it is
possible that securities of the Company could in the future be issued
pursuant to the Executive Plan.
(2) Includes 202,932 shares of Common Stock and 70,000 shares of Preferred
Stock available for issuance under the 2002 Omnibus Plan. Awards under the
2002 Omnibus Plan may be made in the form of incentive or non-qualified
stock options, stock appreciation rights, performance units or shares, and
restricted and unrestricted stock.

Retirement 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. Retirement 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 and (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 and 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 $205,000
for 2004. Benefits are generally payable as a lifetime annuity or, with respect
to married employees, as a 50% joint and survivor annuity, or, if the employee
elects (with spousal consent), in certain alternative annuity forms. Benefits
under the Pension Plan are not subject to any deductions for Social Security or
other offsets. The covered compensation for 2004 and credited years of service
as of December 31, 2004 for the Pension Plan and estimated annual benefits
payable upon retirement at normal retirement age for the named executive
officers were as follows: Mr. Hurwitz: $205,000--24 years--$139,126; Mr.
Friedman: $205,000--5 years--$43,231; Mr. Schwartz: $205,000--24
years--$127,209; Mr. Birkel: $195,000--14 years--$92,772; and Ms. Dudley:
$175,000--24 years--$66,781.

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 $210,000 for 2005 and subsequent years under Section
401(a)(17) of the Code. In addition, the amounts reflect a maximum benefit limit
of $170,000 for 2005 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.

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 Board. Three
executive officers of the Company, Messrs. Hurwitz, Friedman and Schwartz, were
entitled to receive benefits under the SERP during 2004. The following
projections are based on the same assumptions as utilized in connection with the
Pension Plan projections above. The 2005 qualified plan pay limit ($210,000) and
benefit limit ($170,000) are reflected for all years in the future. In addition,
no future increases in the participants' covered compensation amounts from the
2004 levels are assumed.

Hurwitz Friedman Schwartz
--------------------------------------

Covered Compensation for 2004:
Qualified Plan $205,000 $205,000 $205,000
Nonqualified Plan 628,694 291,501 391,684
--------------------------------------
Total $833,694 $496,501 $596,684
======================================

Credited Years of Service as of December 31, 2004 24 5 24

Projected Normal Retirement Benefit:
Qualified Plan $139,126 $43,231 $127,209
Nonqualified Plan 182,489 60,620 131,183
-------------------------------------
Total $321,615 $103,851 $258,392
======================================

MAXXAM Severance Plan

Severance 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 plan. The plan provides for payment after
such termination 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 plan if the named executive officers who remain at the Company
had been involuntarily terminated on December 31, 2004 would have been as
follows: Mr. Hurwitz--$1,667,388; Mr. Friedman--$95,477; Mr.
Schwartz--$1,193,368; and Mr. Birkel--$390,000.

Deferred Compensation Program

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. None of the Company's executive
officers currently participates in this program.

Employment Contracts and Termination of Employment

Ms. Madison and the Company entered into an Executive Employment Agreement
effective April 1, 2005. The agreement has a three-year term and provides that
Ms. Madison shall be Vice President, Finance with a base salary of $228,600 per
year (such base salary to be reviewed in accordance with the Company's generally
applicable practices). Ms. Madison is also to receive an annual bonus of not
less that $50,000 during the term of the agreement, and was granted
non-qualified stock options, with tandem SARs, in respect of 5,000 shares of the
Common Stock (at an exercise price of $28.65 per share). She also received a
one-time signing bonus of $37,500, is entitled to an annual automobile allowance
of $15,000 and became eligible to participate in the Capital Accumulation Plan.
Ms. Madison is entitled to participate in all general employee benefit plans and
programs which are available to the Company's senior executive employees.

Ms. Madison's agreement provides that upon termination of her employment
for cause or due to death, long-term disability or voluntary termination by her,
she is entitled to pro rata base salary through the date of such termination and
any compensation and benefits otherwise due her pursuant to the Company's
employee benefit plans. In the event of termination of Ms. Madison's employment
for any other reason she is entitled to (i) salary through April 1, 2008,
determined at the highest rate in effect within the one-year period ending the
date of termination, and (ii) bonus at the rate in effect for the last full year
of employment.

On December 30, 2004, the Company and Diane M. Dudley, former Vice
President and Chief Personnel Officer, entered into a one-year consulting
agreement. This agreement commenced January 1, 2005 and provides that the
Company may generally assign Ms. Dudley with projects involving not more than 80
hours service per month at an hourly rate of $95.00. The Company has agreed to
indemnify Ms. Dudley against her costs and losses resulting from proceedings
arising by reason of the fact that Ms. Dudley during her service as consultant
is alleged to have served the Company in an officer or similar such capacities.

Mr. Friedman and the Company were parties to a five-year employment
agreement which expired on December 1, 2004. The agreement provided for a base
salary of no less than $450,000 per year and an annual bonus of not less than
$150,000. Under the agreement, Mr. Friedman also received a grant of
non-qualified stock options with tandem SARs, with respect to 17,500 shares of
the Common Stock at an exercise price of $45.50 per share, and a grant of
options to purchase 167,000 shares of Kaiser common stock at an exercise price
of $9.00 per share. The stock options granted to Mr. Friedman under the
agreement relating to Kaiser common stock were exchanged by him for restricted
shares of Kaiser common stock in connection with the Kaiser Exchange Offer. See
Note 3 to "Summary Compensation Table". Mr. Friedman also received a $250,000
interest-free loan, under which $50,000 of the principal of the loan was
required to be forgiven by the Company on each December 1 through 2004.

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 2004.

Executive Officer Compensation

The Policy Committee generally approves the policies and criteria 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 certain of the
Company's executives serve or have oversight responsibility with respect to
certain 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 improvement
efforts of its executive officers and business units when making executive
compensation decisions but also recognizes the particular talents required to
build the Company's asset base through expansion of its existing businesses,
acquisitions and expansion into new business areas. 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's
operations present for its executive officers. All of these factors present a
particular challenge in determining appropriate approaches to executive
compensation. The Policy Committee or Section 162(m) Committee may on occasion
engage outside consultants in connection with particular compensation issues.

The primary elements of compensation for executive officers of the Company
are base salaries and annual discretionary bonuses. The Policy Committee also
recommends or approves bonus compensation awards from time to time under
additional incentive compensation programs such as the 2002 Omnibus Plan.
Certain executive officers may also become eligible to participate in the
Company's Executive Plan, although to date only the Chief Executive Officer and
the President, and more recently the Company's Vice Chairman and General
Counsel, have met the criteria for participation. Except for Ms. Madison, none
of the Company's executive officers have an employment agreement.

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 performance and
the executive officers' specific duties, responsibilities and qualifications.
Base salaries are generally adjusted annually based on a variety of factors,
including cost of living information and industry trends. Following a year in
which executive officer salaries were frozen, in December 2003, executive
officers received salary increases of approximately 3.0% or less in respect of
2004 (although one executive officer did receive a larger increase in connection
with a promotion). In December 2004, executive officer salary increases ranged
from less than 1% to approximately 3%.

Annual Discretionary Bonus
Company policy requires that a significant portion of an executive
officer's compensation be at-risk and 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. After
bonus awards were significantly decreased in December 2002 (generally 20% less
than the prior year), the bonuses awarded in December 2003 increased somewhat
from the prior year's awards. December 2004 bonuses ranged from a decrease of
25% to an increase of approximately 14% from the 2003 amounts. These bonuses
were proposed by the Chief Executive Officer or President (other than in respect
of themselves), subject to review and approval by the Policy Committee.

Additional Incentive Awards
Awards under the 2002 Omnibus Plan are stock-based and any compensation
which could arise from the awards would normally be tied to stock price
appreciation. In 2004, four executive officers were granted non-qualified stock
options, with such options having tandem stock appreciation rights, with respect
to 29,400 shares of Common Stock. In addition to those grants, the Chief
Executive Officer was granted non-qualified options, with such options having
tandem stock appreciation rights, with respect to 57,000 shares of the Company's
Common Stock.

Executive Plan
The Executive Plan, which was amended in 2003 (including obtaining
stockholder approval), provides performance incentives to each participant while
securing, to the extent permitted, 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 of Section 162(m) of
the Code is likely to apply. The Section 162(m) Committee meets prior to the
90th day 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 criteria 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 criteria are also tailored to the executive's specific
responsibilities. The Chief Executive Officer and the Company's President were
the only executive officers eligible under the Executive Plan for 2004 (with the
President receiving no compensation thereunder and the Chief Executive Officer
receiving the compensation described in the following section). The Company's
Vice Chairman and General Counsel has become an eligible participant in respect
of 2005.

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 the Company's
other executive officers. However, the Policy Committee recognizes the special
entrepreneurial talents of Mr. Hurwitz, which have provided unique 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 pursue future
opportunities. In December 2004, the Policy Committee approved a base salary
increase of less than 1% for Mr. Hurwitz, and a discretionary bonus of $150,000
(although such amount was reduced by $65,000, the amount of fees Mr. Hurwitz
earned in 2004 as a director of Kaiser and KACC). Such decisions, and the
negative discretion exercised by the Section 162(m) Committee (as described
below), were not based upon any specific criteria, but rather the evaluation of
the Policy Committee and the Section 162(m) Committee as to the overall
performance of the Company's business and its various segments.

As described above, Mr. Hurwitz participates in the Executive Plan. The
performance criteria established for 2004 by the Section 162(m) Committee for
Mr. Hurwitz under the Executive Plan were based upon (i) improved consolidated
financial results, (ii) certain subsidiaries committing to specified new
business ventures, (iii) extraordinary transactions by certain subsidiaries,
(iv) improvement in earnings per share and (v) the achievement by the Company's
operating segments of their 2004 business plans. Based on these performance
criteria, Mr. Hurwitz was entitled to receive at least $208,423 under the
Executive Plan in respect of 2004 (as a result of the real estate business
segment fulfilling its business plan); however, the Section 162(m) Committee
exercised its negative discretion and did not award any of such amount. The 2005
performance criteria established for Mr. Hurwitz by the 162(m) Committee are
generally similar to his 2004 criteria.

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 the four other most highly compensated executive officers of such companies.
Qualifying performance-based compensation is not subject to the deduction limit
if certain requirements are met. The Executive Plan and the 2002 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 is composed of "outside directors" as such term is
defined or interpreted for purposes of Section 162(m) of the Code.

Section 162(m) Compensation Committee Compensation Policy 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
Michael J. Rosenthal Stanley D. Rosenberg
Michael J. Rosenthal

REPORT OF THE AUDIT COMMITTEE

The following Report of the Audit Committee does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933 or the Securities Exchange
Act of 1934, except to the extent the Company specifically incorporates this
Report by reference therein.

April 28, 2005
To the Board of Directors of MAXXAM Inc.:

In discharging its oversight responsibility as to the audit process, the
Audit Committee obtained from Deloitte & Touche LLP, the Company's
independent auditors, a formal written statement describing all relationships
between the auditors and the Company that might bear on the auditors'
independence consistent with Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees," as amended; discussed with the
auditors any relationships that may impact their objectivity and independence;
and satisfied itself as to the auditors' independence. The Audit Committee also
discussed with management and the independent auditors the quality and adequacy
of the Company's internal controls. The Audit Committee reviewed with the
independent auditors their audit plans, audit scope and identification of audit
risks.

The Audit Committee discussed and reviewed with Deloitte & Touche LLP
all communications required by Rule 2-07 of SEC Regulation S-X and, with and
without management present, discussed and reviewed the results of the
independent auditors' examination of the financial statements.

The Audit Committee reviewed with management and the independent auditors
the quarterly reports on Form 10-Q of the Company for each of the three quarters
in the nine-month period ended September 30, 2004 and the annual report on Form
10-K for the year ended December 31, 2004. Management has the responsibility for
the preparation of the Company's financial statements, and the independent
auditors have the responsibility for the examination of those statements. The
Audit Committee discussed with Messrs. Hurwitz and Schwartz, the Company's Chief
Executive and Chief Financial Officers, their certifications of such reports.

Based on the above-mentioned reviews and discussions with management and
the independent auditors, the Audit Committee recommended to the Board that the
Company's audited financial statements be included in its Annual Report on Form
10-K for the year ended December 31, 2004, which was filed with the Securities
and Exchange Commission on March 16, 2005.

Audit Committee of the Board of Directors
Michael J. Rosenthal, Chairman
Robert J. Cruikshank
Ezra G. Levin
Stanley D. Rosenberg

PRINCIPAL ACCOUNTING FIRM FEES

The following table sets forth the aggregate fees billed to the Company and
its consolidated subsidiaries (excluding Kaiser) for professional services
provided in 2003 and 2004 by Deloitte & Touche LLP ("Deloitte"), the
Company's independent auditor and principal accounting firm:

Years Ended December 31,
----------------------------------
2004 2003
----------------------------------

Audit Fees(1) $ 2,227,125 $ 974,910
Audit-Related Fees(2) 42,000 48,552
Tax Fees(3) 718,753 627,462
All Other Fees(4) -- --
----------------------------------
Total $ 2,987,878 $1,650,924
==================================
--------------------------
(1) Consists of professional services rendered for the audit of the annual
financial statements of the Company and certain subsidiaries and for the
review of the quarterly financial statements of the Company and certain
subsidiaries.
(2) Consists of fees for the audits of the benefit plans of the Company and
certain subsidiaries and fees for accounting and financial reporting
consultations.
(3) Consists of fees for tax planning and tax compliance services.
(4) Consists of fees for permitted non-audit services.

The Audit Committee has responsibility for appointing, setting compensation
and overseeing the independence and work of the independent auditor. In
recognition of this responsibility, the Audit Committee's Charter requires
pre-approval by the Audit Committee of all audit and non-audit services to be
furnished by the independent auditor to the Company and its subsidiaries.
Pre-approval is waived in those instances permitted by applicable SEC regulation
so long as the Audit Committee subsequently approves such services within any
applicable deadline. None of the foregoing services were approved by the Audit
Committee pursuant to the provisions of Section 2-01(c)(7)(i)(C) of SEC
Regulation S-X.

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 a peer group consisting of companies included by
S&P in its published indices for the 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,
1999, and that all dividends were reinvested. The data points are calculated as
of the last trading day for the year indicated.

[GRAPHIC OMITTED]

----------------------------------------------------------------------------------------------------
INDEXED RETURNS
----------------------------------------------------------------------------------------------------
Base
Period Years Ending
----------------------------------------------------------------------------------------------------
Company / Index Dec99 Dec00 Dec01 Dec02 Dec03 Dec04
----------------------------------------------------------------------------------------------------
MAXXAM INC 100 35.42 40.82 21.69 44.20 76.50
S&P 500 INDEX 100 90.90 80.09 62.39 80.29 89.03
S&P 500 FOREST PRODUCTS 100 68.82 74.53 69.95 98.27 111.02

In addition to its forest products operations, the Company is involved in
the real estate and racing industries. However, the real estate and racing units
of the Company accounted for less than 30% and 15%, respectively, of the
Company's 2004 consolidated revenues. Accordingly, a line-of-business index for
each such industry is therefore not utilized.

CERTAIN TRANSACTIONS

Litigation Matters

USAT Matters
In 1995, the United States Department of Treasury's Office of Thrift
Supervision ( "OTS") initiated a formal administrative proceeding (the "OTS
action") against the Company and others alleging, among other things, misconduct
by the Company, Mr. Hurwitz and a company controlled by Mr. Hurwitz
(collectively, the "Respondents") and others with respect to the failure of
United Savings Association of Texas (" USAT"). The OTS sought damages ranging
from $326.6 million to $821.3 million under various theories. Following 110 days
of proceedings before an administrative law judge during 1997-1999, and over two
years of post-trial briefing, on September 12, 2001, the administrative law
judge issued a recommended decision in favor of the Respondents on each claim
made by the OTS. On October 17, 2002, the OTS action was settled for $0.2
million and with no admission of wrongdoing on the part of the Respondents.

As a result of the dismissal of the OTS Action, a related civil action,
alleging damages in excess of $250 million, was subsequently dismissed. This
action, 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 was originally filed in August 1995
against Mr. Hurwitz by the Federal Deposit Insurance Corporation ("FDIC").

On May 31, 2000, the Respondents filed a counterclaim to the FDIC action in
U.S. District Court in Houston, Texas (No. H95-3956). On November 8, 2002, the
Respondents filed an amended counterclaim and an amended motion for sanctions
(collectively, the "Sanctions Motion"). The Sanctions Motion states that the
FDIC illegally paid the OTS to bring claims against the Respondents and that the
FDIC illegally sued for an improper purpose (i.e. in order to acquire
timberlands held by a subsidiary of the Company). The Respondents are seeking as
a sanction to be made whole for the attorneys' fees they have paid (plus
interest) in connection with the OTS and FDIC actions. As of December 31, 2004,
such fees were in excess of $40.4 million. The Respondents are pursuing this
claim vigorously.

On January 16, 2001, an action was filed against the Company, Federated
Development Company (a predecessor of Giddeon Holdings; "Federated") and certain
of the Company's directors in the Court of Delaware Chancery Court entitled Alan
Russell Kahn v. Federated Development Co., MAXXAM Inc., et. al., Civil Action
18623NC (the "Kahn lawsuit"). The plaintiff purports to bring this action as a
stockholder of the Company derivatively on behalf of the Company. The lawsuit
concerns the OTS and FDIC actions, and the Company's advancement of fees and
expenses on behalf of Federated and certain of the Company's directors in
connection with these actions. It alleges that the defendants have breached
their fiduciary duties to the Company, and have wasted corporate assets, by
allowing the Company to bear all of the costs and expenses of Federated and
certain of the Company's directors related to the OTS and FDIC actions. The
plaintiff seeks to require Federated and certain of the Company's directors to
reimburse the Company for all costs and expenses incurred by the Company in
connection with the OTS and FDIC actions, and to enjoin the Company from
advancing to Federated or certain of the Company's directors any further funds
for costs or expenses associated with these actions. The parties have agreed to
an indefinite extension of the defendants' obligations to respond to the
plaintiffs' claims.

Cook and Cave lawsuits
Similar actions entitled Alan Cook, et al. v. Gary Clark, et al. (No.
DR020718) (the "Cook action") and Steve Cave, et al. v. Gary Clark, et al. (No.
DR0220719) (the "Cave action") have been filed in the Superior Court of Humboldt
County, California. The defendants in these actions include the Company and
certain of its subsidiaries, Federated, and Mr. Hurwitz and certain other
current and former officers of the Company and the subsidiaries. On April 4,
2003, the plaintiffs filed amended complaints and served the defendants with
notice of the actions. The Cook action alleges, among other things, that
defendants' logging practices have contributed to an increase in flooding along
Freshwater Creek (which runs through Pacific Lumber's timberlands), resulting in
personal injury and damages to the plaintiffs' properties. Plaintiffs further
allege that in order to have timber harvest plans approved in the affected
areas, the defendants engaged in certain unfair business practices. The
plaintiffs seek, among other things, compensatory and exemplary damages,
injunctive relief, and appointment of a receiver to ensure the watershed is
restored. The Cave action contains similar allegations and requests similar
relief with respect to the Elk River watershed (a portion of which is contained
on Pacific Lumber's timberlands).

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 Giddeon Holdings. Under these arrangements, Giddeon
Holdings' obligation to the Company and its subsidiaries was approximately
$48,648 for 2004. At December 31, 2004, Giddeon Holdings owed the Company
$12,848 for certain general and administrative expenses, which amount was
subsequently paid in 2005.

On February 12, 2002, Kaiser, its principal operating subsidiary, KACC, and
a number of KACC's subsidiaries, filed for reorganization under Chapter 11 of
the U.S. Bankruptcy Code. Additional Kaiser subsidiaries filed for Chapter 11
protection in the first quarter of 2003. The Company and its subsidiary, MAXXAM
Group Holdings Inc., collectively own approximately 62% of Kaiser. For further
information regarding the status of Kaiser's Chapter 11 proceedings and certain
related matters, see Notes 1 and 11 to the Consolidated Financial Statements of
the Company contained in its Annual Report on Form 10-K for the fiscal year
ended December 31, 2004 (the "Form 10-K"). Mr. Hurwitz has served as a director
of Kaiser since October 1988 and KACC since November 1988. Mr. Friedman served
as Senior Vice President and General Counsel of Kaiser and KACC from December
1999 until February 2002. Mr. Cruikshank has served as a director of Kaiser and
KACC since January 1994. Mr. Levin has served as a director of Kaiser and KACC
since July 1991 and November 1988, respectively.

Mr. Levin, a director of the Company, is a member of the law firm of Kramer
Levin Naftalis & Frankel LLP, which provides legal services to the Company
and its subsidiaries (the revenues from such services accounting for less than
1% of such firm's revenues in 2004).

Shawn Hurwitz, the son of Mr. Hurwitz, is also Chief Executive Officer of
the Company's real estate operations, and during 2004 received an aggregate of
$600,000 in salary and bonus and a grant of 10,000 Common Stock options with
underlying SARs pursuant to the 2002 Omnibus Plan (at an exercise/base price
equal to the closing price of the Company's Common Stock on the date of grant).

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 the reporting persons, the Company
believes that all filing requirements were complied with which were applicable
to its officers, directors and beneficial owners holding greater than ten
percent.

OTHER BUSINESS

Neither the Board 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 proxy card will vote on such matters according to their
best judgment.

OTHER MATTERS

Solicitation of Proxies

The cost of mailing and soliciting proxies in connection with the Annual
Meeting will be borne by the Company. In addition to solicitations by mail,
proxies may also be solicited by the Company and its directors, officers and
employees (who will receive no compensation therefor beyond 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.

Independent Public Accountants

Deloitte has completed its audit with respect to the Company's 2004 fiscal
year. The Company also anticipates that Deloitte will conduct the 2005 audit,
although the Audit Committee has not yet commenced the selection process with
respect to the 2005 audit. Representatives of Deloitte plan to attend the Annual
Meeting and will be available to answer questions. Such representatives will
also have an opportunity to make a statement at the Annual Meeting if they so
desire.

Stockholder Communications with Directors

Due to the small number of communications from stockholders received by the
Company, the Board has not adopted a formal process for receiving communications
from stockholders. However, a stockholder may contact the Board, or any
individual director, by sending a written communication to Board of Directors,
MAXXAM Inc., c/o Corporate Secretary, 1330 Post Oak Boulevard, Suite 2000,
Houston, Texas 77056. A stockholder's letter should indicate that he or she is a
MAXXAM stockholder. The Corporate Secretary will either (a) distribute such
communication to the Board, or a member or members thereof, as appropriate
depending upon the facts and circumstances described in the communication
received; or (b) determine that the communication should not be forwarded to the
Board or any of its members because, in the Secretary's judgment, (i) the
communication is primarily commercial in nature and relates to the Company's
ordinary business or otherwise relates to matters that are not relevant to the
Board; or (ii) the Company's management can adequately handle the stockholder
inquiry or request, in which case the inquiry or request will be forwarded to
the appropriate individual for action.

Stockholder Proposals for the 2006 Annual Meeting

Proposals which stockholders intend to present at the 2006 annual meeting
(other than those submitted for inclusion in the Company's proxy material
pursuant to Rule 14a-8 of the proxy rules of the SEC or director nominees) must
be received by the Company no later than January 2, 2006, to be presented at the
meeting. Proposals pursuant to Rule 14a-8 of the proxy rules must also be
received by January 2, 2006 to be eligible for inclusion in the proxy material
for that meeting. Finally, stockholder submissions of director nominees must be
made to the Company by no later than March 27, 2006 (by delivery or first
class mail) to be presented at the meeting. Any such stockholder communications
must be sent to the Company's Secretary at its executive offices at 1330 Post
Oak Boulevard, Suite 2000, Houston, Texas 77056 via any method which provides
evidence of delivery, other than facsimile or any other form of electronic
communication.

Pre-Registration Request

If you plan to attend the MAXXAM Inc. Annual Meeting of Stockholders at 8:30
a.m., local time, on Wednesday, May 25, 2005, at The Sheraton Suites, Houston,
Texas, you may use this form to pre-register and expedite your admission to the
meeting. Should you pre-register, you will only need to supply proof of
identification (containing a photograph) to enter the meeting. If you hold your
shares of record, please complete and return this form in order to pre-register.
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, 2005). By pre-registering and furnishing proof of
identification you will be able to gain admittance to the meeting. You will
still need to follow the rules and procedures set forth in the Proxy Statement
and at the Annual Meeting in order to vote your shares.

Please return this pre-registration form, together with proof of Capital Stock
ownership as of the Record Date, if necessary, by facsimile to (888) 488-3808
before 5:00 p.m., Houston time, on May 20, 2005.

( ) I plan to attend OR ( ) I will send my proxy to attend the Company's
Annual Meeting of Stockholders on May 25, 2005.

Please print your response to the following:

Name:

Proxy's Name (if applicable):

Street:

City:

State: ZIP Code:
Daytime Telephone Number (including area code):

(recycled) Printed on recycled paper.
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