Proxy Statement

DEF 14A 1 maxxam_proxy-2003.htm PROXY STATEMENT Proxy Statement

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant /x /
Filed by a Party other than the Registrant / /

Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12

MAXXAM Inc.
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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement if other than the Registrant)

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/x / No fee required.

/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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/ / Fee paid previously with preliminary materials.

/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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April 30, 2003

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 21,
2003, at the Marriott West Loop, 1750 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 and "FOR" the proposal to reapprove and amend the MAXXAM
1994 Executive Bonus Plan. 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.
5847 SAN FELIPE, SUITE 2600
HOUSTON, TEXAS 77057

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 2003

The Annual Meeting of Stockholders of MAXXAM Inc. (the "Company")
will be held on Wednesday, May 21, 2003, at the Marriott West Loop, 1750
West Loop South, Houston, Texas, at 8:30 a.m., local time, for the
following purposes:

1. To elect five 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 2004
annual meeting or until their successors are elected and qualified,
and two 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 2006
annual meeting or until their successors are elected and qualified;

2. To consider and vote upon a proposal to reapprove and amend the
MAXXAM 1994 Executive Bonus Plan; and

3. 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, 2003,
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, 5847 San Felipe, Suite 2600, Houston, Texas, during normal
business hours beginning May 7, 2003 and continuing through the Annual
Meeting.

By Order of the Board of Directors

BERNARD L. BIRKEL
Secretary

April 30, 2003

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
TO BE HELD MAY 21, 2003

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 21, 2003, and any
adjournments or postponements thereof, at the time and place and for the
purposes set forth in the accompanying notice of Annual Meeting. The
principal executive offices of the Company are located at 5847 San Felipe,
Suite 2600, Houston, Texas 77057, telephone (713) 975-7600.

This Proxy Statement, the accompanying proxy card and the Notice of
Annual Meeting of Stockholders are being mailed, commencing on or about May
1, 2003, to the stockholders of record as of the close of business on March
31, 2003 (the "RECORD DATE"). Only holders of record of the 6,527,671
shares of Common Stock (the "COMMON STOCK") and the 668,390 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 two members 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 Paul N. Schwartz, Elizabeth D.
Brumley and Bernard L. Birkel. You may revoke your proxy at any time prior
to its exercise at the Annual Meeting by notice to the Company's Secretary,
by filing a later-dated proxy or, if you attend the Annual Meeting, by
voting your shares of stock in person. Proxies will be voted in accordance
with the directions specified thereon or, in the absence of instructions,
"FOR" the election of the nominees to the Board named in this Proxy
Statement, and "FOR" the proposal to reapprove and amend the MAXXAM 1994
Executive Bonus Plan.

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
866-701-6179 BEFORE THE CLOSE OF BUSINESS ON MAY 16, 2003. 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 &amp; 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, has received no instructions from the persons
entitled to vote such shares, and has appropriately advised the Company
that it lacks voting authority) 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. The affirmative vote of a majority of the
shares present in person or by proxy and voting thereon at the Annual
Meeting is required for approval of the other matters presented. Shares
represented by proxies that are marked "abstain" on such matters and
proxies relating to broker non-votes will 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..................................................................3
Proposal to Reapprove and Amend the MAXXAM 1994 Executive Bonus Plan...................3
The Board of Directors and Its Committees..............................................4
Executive Officers and Directors.......................................................7
Principal Stockholders................................................................10
Executive Compensation................................................................12
Report of the Compensation Committees on Executive Compensation.......................17
Report of the Audit Committee.........................................................19
Principal Accounting Firm Fees........................................................20
Performance Graph.....................................................................21
Certain Transactions..................................................................21
Section 16(a) Beneficial Ownership Reporting Compliance...............................23
Other Business........................................................................24
Other Matters.........................................................................24
Pre-Registration Request......................................................Back Cover

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,
shall be entitled to elect, for terms of one year, at each annual meeting,
the greater of (i) two directors, or (ii) that number of directors which
constitutes 25% of the total number of directors (rounded up to the nearest
whole number) to be in office subsequent to such annual meeting ("COMMON
DIRECTORS"). The Board has nonetheless designated three out of its seven
directors as Common Director nominees.

Five 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 2004 annual
meeting). J. Kent Friedman and Ezra G. Levin have each been nominated by
the Company to stand for election as a General Director (to hold office
until the 2006 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 owned beneficially 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 MESSRS.
FRIEDMAN AND LEVIN AS GENERAL DIRECTORS OF THE COMPANY.

PROPOSAL TO REAPPROVE AND AMEND THE MAXXAM 1994 EXECUTIVE BONUS PLAN

The MAXXAM 1994 Executive Bonus Plan (the "EXECUTIVE PLAN"), first
adopted by the Board and approved by the stockholders of the Company in
1994, and amended and reapproved by the stockholders in 1998, is hereby
submitted to the stockholders of the Company for reapproval in order to
continue to secure, to the extent permitted, a tax deduction by the Company
for payments of compensation thereunder to participants. Reapproval of the
Executive Plan will also serve as approval of certain amendments to the
Executive Plan as more fully described below. The purpose of the Executive
Plan will continue to be to provide performance incentives to each
participant, who is or may be a "covered employee" within the meaning of
Section 162(m) of the Internal Revenue Code of 1986 (the "CODE"), while
securing a tax deduction for those payments.

Earlier this year, amendments to the Executive Plan were adopted by
the Section 162(m) Compensation Committee (the "SECTION 162(M) COMMITTEE"),
subject to the reapproval of the Executive Plan, as amended, by the
stockholders. These amendments (i) make it clear that the Executive Plan is
to be administered by the Section 162(m) Committee, (ii) revise the
definition of "Affiliate" to exclude the Kaiser Aluminum Corporation
affiliated group, (iii) clarify that the Company's earnings release can be
used in the determination of Consolidated Financial Results and Earnings
per Share (as defined in the Executive Plan), (iv) revise the definition of
"Extraordinary Transaction" to clarify the types of transactions which are
subject to the definition and lower the qualifying dollar threshold from
$100 million to $25 million, and (v) clarify that bonuses under the
Executive Plan may be paid in property. These amendments serve to clarify
various provisions of the Executive Plan and to increase the flexibility of
the Section 162(m) Committee to recognize achievements by, and reward, key
personnel for their efforts on behalf of the Company. Except as described
above, the terms of the Executive Plan have not changed since it was
amended and reapproved in 1998. If the Executive Plan is reapproved by the
stockholders, the amendments described above will be retroactively
effective from January 1, 2003.

The Executive Plan is administered by the Section 162(m) Committee
which is composed solely of at least two "outside directors" as such term
is defined or interpreted for purposes of Section 162(m) of the Code.
Pursuant to the terms of the Executive Plan, the Section 162(m) Committee
identifies those performance criteria for which each participant is largely
responsible and the achievement of which would be of significant benefit to
the Company. The Section 162(m) Committee sets specific performance goals
for each participant under each of the following business criteria (as
amended): (a) improvement in Consolidated Financial Results, (b) the
completion of one or more specific business development projects identified
by the Section 162(m) Committee, (c) the completion of an Extraordinary
Transaction (i.e., an acquisition or disposition of assets or an
acquisition, disposition or issuance of securities which assets or
securities have an aggregate fair market value greater than $25 million),
(d) improvement in Earnings per Share, and (e) the achievement of a
predetermined level of net income or loss for the principal divisions of
the Company and its subsidiaries based upon their respective plans for the
year. For each specific performance goal, a predetermined bonus amount can
be earned by the participant upon achievement of such goal. Pursuant to
existing regulations under Section 162(m) of the Code, the specific goals
are set by the Section 162(m) Committee prior to the 90th day of each year.

Participants in the Executive Plan are limited to those officers of
the Company whose base salary is equal to or in excess of $500,000 and the
bonuses earned by each participant cannot exceed an aggregate of $12
million per fiscal year. The Company's Chief Executive Officer and
President are currently the only participants in the Executive Plan.

Bonuses determined under the Executive Plan by the Section 162(m)
Committee are payable as soon as practicable following such determination,
but in no event until the Section 162(m) Committee has certified in writing
that the performance goals and any other material terms related to the
award were in fact satisfied. The Section 162(m) Committee has absolute
discretion to reduce any bonus amounts earned under the Executive Plan.

The Executive Plan provides that the Board of Directors or any
committee thereof may terminate, suspend or amend the Executive Plan, in
whole or part, at any time, including the adoption of amendments deemed
necessary or advisable provided stockholder approval is obtained if
required by Section 162(m) of the Code.

The foregoing summary is qualified in all respects by reference to
the full text of the Executive Plan, a copy of which is available upon
request to the Secretary of the Company. The benefits that may be paid
under the Executive Plan are not determinable for the 2003 fiscal year. For
a description of compensation under the Executive Plan in respect of 2002,
see "Report of the Compensation Committees on Executive
Compensation--Executive Officer Compensation-- Executive Plan" and
"--Compensation of the Chief Executive Officer for the Last Completed
Fiscal Year."

THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND THAT THE STOCKHOLDERS
OF THE COMPANY VOTE "FOR" REAPPROVAL AND AMENDMENT OF THE EXECUTIVE PLAN.

THE BOARD OF DIRECTORS AND ITS COMMITTEES

The Board held ten meetings and acted by written consent on four
occasions during 2002. In addition, management confers frequently with
directors on an informal basis to discuss Company affairs. During 2002, 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 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.

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 held one meeting during 2002 and did not act by written
consent.

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 has
established and that the Board oversees. 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.
Further, it reviews and appraises the independence and performance of the
Company's independent accountants, and provides an open avenue of
communication among senior management, the independent accountants and the
Board. The Board has adopted a written charter for the Audit Committee
which was filed as Appendix A to the Company's 2001 Proxy Statement.
Messrs. Rosenthal (Chairman), Cruikshank, Levin and Rosenberg served as
members of this committee, which met on seven occasions during 2002 and did
not act by written consent. In addition, one separate meeting was held with
the Chairman of the Audit Committee. The Company has determined that each
member of the Audit Committee is "independent" within the meaning of the
American Stock Exchange's current rules concerning audit committees. See
also "Report of the Audit Committee" below.

The Conflicts and Compliance Committee (i) ensures that appropriate
policies with regard to employee conduct pursuant to legal and ethical
business standards are formulated, maintained, periodically reviewed and
properly implemented and enforced, (ii) reviews possible conflicts of
interest, 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 this
committee, which met on six occasions during 2002 and did not act by
written consent.

The Compensation Policy Committee (the "POLICY COMMITTEE") reviews
and approves proposals concerning or related to (i) the establishment or
change of benefit plans, or material amendments to existing benefit plans,
and (ii) salaries or other compensation, including payments awarded
pursuant to bonus and benefit plans maintained by the Company and its
subsidiaries (excluding Kaiser Aluminum Corporation ("KAISER") and Kaiser
Aluminum & Chemical Corporation ("KACC")) and 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 and awards under the Executive Plan or the MAXXAM 2002
Omnibus Employee Incentive Plan (the "2002 OMNIBUS 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. The Policy Committee met on three
occasions during 2002 and did not act by written consent.

The Section 162(m) Committee has the authority to administer and make
amendments to the Company's Executive Plan and 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
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 2002, 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 $30,000 for the 2002
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 personally attending, or
$500 per day for attending by telephone or other means, each committee
meeting not held in conjunction with a regularly scheduled Board meeting.
Messrs. Cruikshank, Levin, Rosenberg and Rosenthal received an aggregate of
$49,750, $40,000, $41,500 and $43,375, respectively, in payment of such
director and committee chairman/member fees during 2002. No additional
compensation for attending Board or committee meetings was paid to
directors. Directors were reimbursed for travel and other disbursements
relating to Board and committee meetings. Fees to directors who were also
employees of the Company were deemed to be included in their salary.
Non-employee directors of the Company who also served as directors of the
Company's majority-owned subsidiaries, Kaiser and KACC, also received from
Kaiser and KACC additional director or committee fees and were reimbursed
by Kaiser and KACC for expenses pertaining to their services in such
capacities. Messrs. Cruikshank, Hurwitz and Levin received $75,334,
$17,000, and $78,834, respectively, in such director and committee fees
from Kaiser and KACC with respect to their services in 2002. Mr. Levin also
received additional fees in the amount of $15,000 for serving as a manager
of Scotia Pacific Company LLC, a wholly owned subsidiary of the Company
during 2002 ("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
received from the Company for service in such capacity for any calendar
year. The designated percentage of deferred fees are credited to a book
account as of the date such fees would have been paid to the director and
are deemed "invested" in two investment choices, again in 25% increments,
of phantom shares of the Company's Common Stock and/or in an account
bearing interest calculated using one-twelfth of the sum of the prime rate
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 his director's fees, with such fees having been deferred since
September 1994.

Non-employee directors are also eligible to participate in the
Company's 1994 Non-Employee Director Stock Plan (the "NON-EMPLOYEE DIRECTOR
PLAN"). Pursuant to such plan, each eligible director receives an initial
grant of an option to purchase, at the discretion of the Board or any
committee thereof, at least 500 shares of the Company's Common Stock. The
initial grant takes place on the day following the first annual meeting
after such eligible director is first elected or appointed by the Board to
be a director. Thereafter, each eligible director is granted an option to
purchase 600 shares of Common Stock each year effective the day following
the annual meeting. The exercise price per share of the options is the
closing price of the Common Stock as reported by the American Stock
Exchange on the date the option is granted. Each option granted under the
Non-Employee Director Plan becomes exercisable as to 25% of the shares on
the first, second, third and fourth anniversaries of the date of the grant.
Messrs. Cruikshank, Levin, Rosenberg and Rosenthal each received options to
purchase 600 shares of the Company's Common Stock on May 23, 2002, at an
exercise price of $11.00 per share.

POLICY COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the 2002 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 2002 (the revenues from such services accounting
for less than 1% of such firm's revenues in 2002).

During the Company's 2002 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.

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information as of the Record
Date, 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
Diane M. Dudley Vice President and Chief Personnel Officer
Bernard L. Birkel Secretary
Elizabeth D. Brumley Controller
Robert J. Cruikshank Director
Ezra G. Levin Director
Stanley D. Rosenberg Director
Michael J. Rosenthal Director

Charles E. Hurwitz. Mr. Hurwitz, age 62, 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 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, President and Chief Executive Officer 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. From December 1994 until April 2002,
Mr. Hurwitz served as Vice Chairman of the Board of KACC.

J. Kent Friedman. Mr. Friedman, age 59, 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 is a nominee for
election as a General Director of the Company to serve until the 2006
annual meeting. 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 The Pacific Lumber Company, a subsidiary of MGI engaged in
forest products operations ("PACIFIC LUMBER"), and on the Board of Managers
of Scotia LLC, Pacific Lumber's principal subsidiary. 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 is Co-Chairman of the
Greater Houston Inner City Games, President of the Mickey Leland Kibbutzim
Internship Foundation and served as 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 56, 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 Vice President, Chief Financial Officer and a director of
MGI since May 1987, February 1995 and January 1994, respectively. Mr.
Schwartz is also a member of the Houston Symphony Orchestra Board and
Finance Committee.

Diane M. Dudley. Ms. Dudley, age 62, has served as Vice President and
Chief Personnel Officer of the Company since May 1990. From June 1987 until
May 1990, she was Vice President--Personnel and Administration of the
Company. From December 1983 until June 1987, Ms. Dudley served as Assistant
Vice President--Personnel of the Company. Ms. Dudley has also served as a
Vice President of Pacific Lumber since November 1995.

Bernard L. Birkel. Mr. Birkel, age 53, 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.

Elizabeth D. Brumley. Ms. Brumley, age 44, joined the Company in
August 1996 and was named Controller in January 1999. She has also served
as Controller of MGI since January 1999. Until January 1999, Ms. Brumley
served as Assistant Controller of the Company from December 1997 and MGI
from May 1998. She previously worked for GulfMark Offshore, Inc. (formerly
GulfMark International, Inc.), where she served as Controller from 1990
until joining the Company. Ms. Brumley was a senior auditor with Arthur
Andersen LLP prior to joining GulfMark in December 1987.

Robert J. Cruikshank. Mr. Cruikshank, age 72, 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 2004
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 (until May) of
CenterPoint Energy, Inc. ("CENTERPOINT"), a public utility holding company
with interests in electric and natural gas utilities, and coal and
transportation businesses; as a director of Texas Genco Holdings, Inc., a
wholesale electric power generating company and public company subsidiary
of CenterPoint; as a director of Texas Biotechnology Incorporated, a
pharmaceutical company; as a trust manager of Weingarten Realty Investors;
and as advisory director of Compass Bank--Houston. Mr. Cruikshank has also
served in a leadership capacity at a number of leading academic and health
care organizations including: member of the Board of Directors, Texas
Medical Center (1989 to present), and Regent and Vice Chairman of The
University of Texas System (1989-1995).

Ezra G. Levin. Mr. Levin, age 69, was first elected a director of the
Company in May 1978. He is a nominee for reelection as a General Director
of the Company to serve until the 2006 annual meeting. 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, and is currently the President
of the Jewish Community Relations Council of Greater New York. Mr. Levin
has previously served as a trustee on behalf of the Securities Investor
Protection Corporation, and served as visiting professor at the University
of Wisconsin Law School and at Columbia College.

Stanley D. Rosenberg. Mr. Rosenberg, age 71, 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 2004 annual meeting. Mr. Rosenberg is a
partner in the law firm of Loeffler Jonas & Tuggey 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 59, 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 2004 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 and over the last several years, 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.

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)
------------------------------------------- ------------------ ------------------------- ---------- --------------
Dimensional Fund Advisors Inc. Common Stock 445,425(3) 6.8 3.4
FMR Corp. Common Stock 607,500(4) 9.3 4.6
Gilda Investments, LLC(5) Common Stock 2,503,121(6)(7) 38.2 18.9
The Stockholder Group(5) Common Stock 3,061,104(6)(7)(8)(9) 45.5 74.0
Preferred Stock 752,441(10)(11) 99.2
Bernard L. Birkel Common Stock 4,800(12) * *
Robert J. Cruikshank Common Stock 4,800(13) * *
Diane M. Dudley Common Stock 4,033(14) * *
J. Kent Friedman Common Stock 22,200(15) * *
Charles E. Hurwitz(5) (16) Common Stock 3,061,104(6)(7)(8)(9) 45.5 74.0
Preferred Stock 752,441(10)(11) 99.2
Ezra G. Levin Common Stock 4,800(13) * *
Stanley D. Rosenberg Common Stock 5,800(13) * *
Michael J. Rosenthal Common Stock 825(17) * *
Paul N. Schwartz Common Stock 67,663(18) * *
All directors, nominees for director and Common Stock 3,178,104(6)(7)(8)(9)(19) 46.6
executive officers of the Company as a Preferred Stock 752,441(10)(11) 99.2(19) 74.3
group (10 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 SARs (excluding SARs payable in cash
only) exercisable within 60 days of such date if such rights had been
paid solely in shares of Common Stock. Also includes the number of
shares of Common Stock credited to such person's 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) Information based solely on a Schedule 13G (the "DIMENSIONAL 13G")
filed with the Securities and Exchange Commission ("SEC") on February
13, 2003 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 445,425 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.
(4) Information based solely on a Schedule 13G (the "FMR 13G") filed with
the SEC on February 13, 2003 by FMR Corp., and its wholly owned
subsidiary, Fidelity Management & Research Company ("FIDELITY"), as
well as Fidelity Low Priced Stock Fund, Edward C. Johnson 3d, the
Chairman and 12% owner of the outstanding voting stock of FMR Corp.,
and Abigail P. Johnson, a Director and 24.5% owner of the outstanding
voting stock of FMR Corp. Members of the Edward C. Johnson 3d family
and trusts for their benefit are the predominant owners of the Class
B shares of common stock of FMR Corp., representing approximately 49%
of the voting power of FMR Corp. Fidelity is a registered investment
advisor. The address of FMR Corp. is 82 Devonshire Street, Boston,
Massachusetts 02109.
(5) 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., the
Hurwitz 1992 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 5847 San Felipe, Suite 2600, Houston, Texas
77057. The address of the Stockholder Group is Giddeon Holdings,
Inc., 5847 San Felipe, Suite 2600, Houston, Texas 77057.
(6) 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.
(7) Includes options to purchase 21,029 shares of Common Stock held by
Gilda.
(8) Includes (a) 2,422,092 shares of Common Stock owned by Gilda as to
which Mr. Hurwitz indirectly possesses voting and investment power,
(b) 78,784 shares of Common Stock separately owned by Mr. Hurwitz's
spouse and as to which Mr. Hurwitz disclaims beneficial ownership,
(c) 46,500 shares of Common Stock owned by the Hurwitz Investment
Partnership L.P., a limited partnership controlled by Mr. Hurwitz and
his spouse, 23,250 of which shares were separately owned by Mr.
Hurwitz's spouse prior to their transfer to such limited partnership
and as to which Mr. Hurwitz disclaims beneficial ownership, (d) 4,049
shares of Common Stock owned by the Hurwitz 1992 Investment
Partnership L.P., of which 2,024 shares are owned by Mr. Hurwitz's
spouse as separate property and as to which Mr. Hurwitz disclaims
beneficial ownership, and (e) 248,750 shares of Common Stock held
directly by Mr. Hurwitz.
(9) Includes options held by Mr. Hurwitz to purchase 179,900 shares of
Common Stock and exercisable within 60 days of the Record Date.
(10) Includes 662,441 shares of Preferred Stock held directly by Mr.
Hurwitz.
(11) Includes options held by Mr. Hurwitz to purchase 90,000 shares of
Preferred Stock and exercisable within 60 days of the Record Date.
(12) Relates to options to purchase 4,800 shares of Common Stock and
exercisable within 60 days of the Record Date.
(13) Includes options to purchase 3,800 shares of Common Stock and
exercisable within 60 days of the Record Date.
(14) Includes options to purchase 3,020 shares of Common Stock and
exercisable within 60 days of the Record Date.
(15) Includes options to purchase 22,200 shares of Common Stock and
exercisable within 60 days of the Record Date.
(16) 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.
(17) Relates to options to purchase 825 shares of Common Stock and
exercisable within 60 days of the Record Date.
(18) Includes options to purchase 53,060 shares of Common Stock
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.
(19) Mr. Hurwitz beneficially owns 3,061,104 of such shares. The remaining
shares consist of 19,655 shares of Common Stock, and options
exercisable within 60 days of the Record Date to purchase 97,345
shares of Common Stock, held by the other directors and officers of
the Company. Of the 19,655 shares of Common Stock, the applicable
directors and officers have sole voting and investment power with
respect to 8,906 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, 2002:

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, 2002 809,412 435,233(2) -- -0-(3) 124,600 142,361(4)(5)
CHAIRMAN OF THE BOARD AND 2001 785,836 919,531(6) -- -0-(3) 124,600 142,284(4)(5)
CHIEF EXECUTIVE OFFICER 2000 755,612 604,490(7) -- -0- 116,200 140,794(4)(5)

J. KENT FRIEDMAN, 2002 482,040 259,200 70,754(8) -0-(3) 20,900 38,979(4)(5)
VICE CHAIRMAN AND 2001 468,000 324,000 79,878(8) -0-(3) 20,900 29,556(4)(5)
GENERAL COUNSEL 2000 450,000 360,000 98,053(8) -0- 18,800 14,777(4)(5)

PAUL N. SCHWARTZ, 2002 579,305 361,501 -- -0- 25,100 101,889(4)(5)
DIRECTOR, PRESIDENT AND 2001 562,432 464,376 -- -0- 25,100 103,061(4)(5)
CHIEF FINANCIAL OFFICER 2000 540,800 432,640 -- -0- 22,600 103,061(4)(5)

BERNARD L. BIRKEL, 2002 191,884 85,000 -- -0- 5,100 -0-(5)
SECRETARY 2001 186,294 105,000 -- -0- 5,100 6,645(5)
2000 179,300 120,000 -- -0- 5,700 5,723(5)

DIANE M. DUDLEY, 2002 172,010 80,000 -- -0- 3,800 30,253(4)(5)
VICE PRESIDENT AND 2001 167,000 100,000 -- -0- 3,800 34,961(4)(5)
CHIEF PERSONNEL OFFICER 2000 160,600 110,000 -- -0- 3,400 34,669(4)(5)

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

(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) Payment made in 2003 with respect to 2002.
(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 which would
have vested on March 5, 2002. Messrs. Hurwitz and Friedman both
elected to cancel the portions of their restricted shares which would
have vested on March 5, 2003. As of December 31, 2002, Messrs.
Hurwitz and Friedman owned 34,981 and 62,596 restricted shares of
Kaiser common stock valued at $2,029 and $3,631, respectively, based
on the closing price on the OTC Bulletin Board of $.058 per share. As
of December 31, 2002, Mr. Hurwitz beneficially owned 256,808 shares
of restricted Common Stock of the Company (including the dividend
rights in respect thereof) valued at $2,388,314 based on the closing
price of $9.30 per share on the American Stock Exchange.
(4) Includes the following aggregate amounts accrued for 2002, 2001 and
2000, 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-- $142,361, $135,735 and $134,497; Mr.
Friedman--$38,979, $22,756 and $7,977; Mr. Schwartz--$101,889, 97,147
and $96,261; and Ms. Dudley--$30,253, 28,845 and $28,585.
(5) These amounts include matching contributions by the Company under its
401(k) savings plan for 2001 and 2000, respectively, as follows: Mr.
Hurwitz--$6,549 and $6,297; Mr. Friedman--$6,800 and $6,800; Mr.
Schwartz--$6,800 and $6,800; Mr. Birkel--$6,645 and $5,723; and Ms.
Dudley--$6,116 and $6,084. There were no matching contributions by
the Company for 2002 for these persons.
(6) Includes payments totalling $544,041 made in 2002 with respect to
2001.
(7) Includes payments totalling $375,490 made in 2001 with respect to
2000.
(8) Of such amount, $50,000 consists of forgiveness of a portion of a
loan made to Mr. Friedman by the Company. See "--Employment
Contracts."

OPTION/SAR GRANTS TABLE

The following table sets forth certain information concerning stock
options or SARs granted in fiscal year 2002 to any of the named executive
officers:

GRANT
INDIVIDUAL GRANTS DATE VALUE
---------------------------------------------------------------------------------------------------- ----------------------
(A) (B) (C) (D) (E) (F)

NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION GRANT DATE
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE PRESENT VALUE ($)(2)
----------------------------- ------------ ------------- ----------- ----------- ----------------------

Charles E. Hurwitz 124,600 57.7 9.40 12/20/12 582,941
J. Kent Friedman 20,900 9.7 9.40 12/20/12 97,781
Paul N. Schwartz 25,100 11.6 9.40 12/20/12 117,430
Bernard L. Birkel 5,100 2.4 9.40 12/20/12 23,860
Diane M. Dudley 3,800 1.8 9.40 12/20/12 17,778

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

(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 4.05%, a dividend yield of 0%, an expected stock price volatility
of 42.6%, and an expected life of 6.75 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.

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, 2002 by each of the named
executive officers, and the 2002 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- 90,000(1) -0- --(2) -0-
-0- -0- 163,400(3) 317,000(3) --(2) --(2)
J. Kent Friedman -0- -0- 22,500(3) 55,900(3) --(2) --(2)
Paul N. Schwartz -0- -0- 96,060(3) 71,740(3) --(2) --(2)
Bernard L. Birkel -0- -0- 9,600(3) 13,600(3) --(2) --(2)
Diane M. Dudley -0- -0- 6,220(3) 9,480(3) --(2) --(2)

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

(1) Represents underlying shares of Preferred Stock.
(2) Valued based upon the $9.30 closing price of the Company's Common
Stock on December 31, 2002. No value is shown because the exercise
price is higher than such closing price.
(3) Represents underlying shares of Common Stock.

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth information, as of December 31, 2002,
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 FOR
FUTURE ISSUANCE UNDER
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE EQUITY COMPENSATION
BE ISSUED UPON EXERCISE EXERCISE PRICE OF PLANS (EXCLUDING
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED IN
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS COLUMN (A))
----------------------------------------------- ----------------------- -------------------- -----------------------
EQUITY COMPENSATION PLANS APPROVED BY
SECURITY HOLDERS (1):
Common Stock 918,450 $ 24.37 503,350
Preferred Stock 90,000 39.61 70,000

EQUITY COMPENSATION PLANS NOT APPROVED BY
SECURITY HOLDERS - - -
----------------------- -------------------- -----------------------
TOTAL 1,008,450 $ 25.73 573,350
======================= ==================== =======================

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

(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.

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. 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
$200,000 for 2002. 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 2002 and credited years of service as of December 31, 2002 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: $200,000--22 years--$138,773; Mr. Friedman: $200,000--3
years--$42,193; Mr. Schwartz: $200,000--22 years--$125,465; Mr. Birkel:
$191,884--12 years--$91,992; and Ms. Dudley: $172,010--22 years-- $66,622.

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 $200,000 for 2003 and subsequent years under Section
401(a)(17) of the Code. In addition, the amounts reflect a maximum benefit
limit of $160,000 for 2003 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 2002.

The following projections are based on the same assumptions as
utilized in connection with the Pension Plan projections above. The 2003
qualified plan pay limit ($200,000) and benefit limit ($160,000) are
reflected for all years in the future. In addition, no future increases in
the participants' covered compensation amounts from the 2002 levels are
assumed.

HURWITZ FRIEDMAN SCHWARTZ
------------- ------------- -------------

COVERED COMPENSATION FOR 2002:
Qualified Plan $ 200,000 $ 200,000 $ 200,000
Nonqualified Plan 609,412 282,040 379,305
------------- ------------- -------------
Total $ 809, 412 $ 482,040 $ 579,305
============= ============= =============

CREDITED YEARS OF SERVICE AS OF DECEMBER 31, 2002 22 3 22

PROJECTED NORMAL RETIREMENT BENEFIT:
Qualified Plan $ 138,773 $ 42,193 $ 125,465
Nonqualified Plan 181,968 59,979 129,852
------------- ------------- -------------
Total $ 320,741 $ 102,172 $ 255,317
============= ============= =============

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 had been
involuntarily terminated on December 31, 2002 would have been as follows:
Mr. Hurwitz--$1,618,822; Mr. Friedman--$0; Mr. Schwartz-- $1,158,610; Mr.
Birkel--$369,008; and Ms. Dudley--$334,020.

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

Mr. Friedman and the Company entered into a five-year employment
agreement effective December 1, 1999. Pursuant to the terms of the
agreement, Mr. Friedman is currently entitled to a base salary of $450,000
per year. This amount is reviewed in accordance with the Company's
generally applicable practices; however, the Company has no obligation
under such agreement to increase Mr. Friedman's base salary. Mr. Friedman's
employment agreement also provides that he receive an annual bonus of not
less than $150,000 for each calendar year during the term of the agreement.
Mr. Friedman at that time 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."

Pursuant to the terms of Mr. Friedman's agreement, Mr. Friedman
received a $250,000 interest-free loan from the Company. Further,
contingent upon Mr. Friedman's continued employment with the Company,
beginning on December 1, 2000 and continuing annually thereafter, $50,000
of the principal of the loan shall be forgiven by the Company until the
principal of the loan has been reduced to zero. Pursuant to the terms of
the agreement, Mr. Friedman is also entitled to participate in all employee
benefit plans and programs which are available to the Company's senior
executive employees. Mr. Friedman's agreement provides that upon the
termination of his employment (either voluntarily by Mr. Friedman or for
cause), Mr. Friedman is entitled to (i) pro rata base salary through the
date of such termination and (ii) any compensation and benefits otherwise
due to him pursuant to the terms of the Company's employee benefit plans.
In the event of termination due to due to death or permanent disability,
Mr. Friedman or his estate is entitled to the above benefits plus a
prorated bonus and partial benefits in respect of the Capital Accumulation
Plan, the Pension Plan and the SERP. In addition, in the event of Mr.
Friedman's termination under the circumstances described above, any
outstanding principal on the loan referred to above becomes payable by him
upon such termination. In the event of termination of Mr. Friedman's
employment for any other reason (including a termination within 12 months
of a Change of Control, as defined, of the Company), any amount on Mr.
Friedman's loan would be forgiven, and he would be entitled to (i) salary,
bonus and benefits under the Pension Plan and the SERP as if he had
remained employed by the Company through December 31, 2004, and (ii) any
compensation and benefits otherwise due to him pursuant to the Company's
employee benefit plans.

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 2002.

EXECUTIVE OFFICER COMPENSATION

The Policy Committee generally approves the policies under which
compensation is paid or awarded to the Company's executive officers.
Occasionally, the Chief Executive Officer of the Company exercises his
authority to make a particular payment, award or adjustment. Among the
factors the Policy Committee takes into consideration in its decisions on
executive compensation are the diversified and multifaceted financial and
managerial skills required to effectively manage the Company's complex
structure. For instance, the Company consists of units operating in wholly
separate industries and many of the Company's executives also serve in
executive capacities in some or all of its operating subsidiaries in these
industries. In addition, the Company continues to position itself to
respond when growth opportunities become available. Accordingly, the Policy
Committee looks not only to the Company's annual earnings, enhanced
stockholder value, and the business development efforts of its existing
business units when making executive compensation decisions but also
recognizes the particular talents required to build the Company's asset
base through acquisitions and expansion into new business segments. The
Policy Committee also recognizes and takes into account the role of the
Company's executive officers in financial structuring, refinancing and
reorganizations on behalf of its operating units. Additional factors
considered by the Policy Committee are the public relations, regulatory and
litigation related challenges the Company presents for its executive
officers. All of these factors present a particular challenge in
determining appropriate approaches to executive compensation.

The primary elements of compensation for executive officers of the
Company are base salaries and annual discretionary bonuses. From time to
time, the Policy Committee also recommends or approves bonus compensation
awards under additional incentive compensation programs such as the
Company's 2002 Omnibus Plan. The 2002 Omnibus Plan was recommended and
approved by the Section 162(m) Committee, adopted by the Board and approved
by the stockholders of the Company in 2002. The 2002 Omnibus Plan replaces
the 1994 Omnibus Plan, which is no longer available for awards (although
previous grants thereunder remain outstanding). From time to time, certain
eligible executive officers may participate in the Company's Executive
Plan, although to date only the Chief Executive Officer and the President
have met the criteria for participation. Except for Mr. Friedman, 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 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. However, given the difficult year experienced in 2002, no
across-the- board base salary increases for executive officers were
recommended for the 2003 fiscal year, although one executive officer did
receive a base salary increase.

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. Bonus amounts
paid by the Company to executive officers in December 2002 were generally
20% less than the bonuses paid for 2001. These bonuses were proposed (other
than with respect to himself) by the Chief Executive Officer, subject to
review and approval by the Policy Committee.

Additional Incentive Awards
Awards under the 2002 Omnibus Plan are stock-based and any
compensation which could arise from the awards would normally be tied to
stock price appreciation. In 2002, five executive officers were granted
non-qualified stock options, with such options having tandem stock
appreciation rights, with respect to 57,500 shares of Common Stock under
the 2002 Omnibus Plan. 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 124,600 shares of the Company's
Common Stock.

Executive Plan
The Executive Plan 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 goals are pre-established and based on general
business standards or are narrowly fact-specific to a given fiscal year or,
in some instances with respect to longer term objectives, multiple fiscal
years. The Chief Executive Officer and the Company's President were the
only executive officers eligible under the Executive Plan for 2002 (with
the President receiving no compensation thereunder and the Chief Executive
Officer receiving the compensation described in the following section).

Compensation of the Chief Executive Officer for the Last Completed Fiscal Year
The compensation of Charles E. Hurwitz, Chairman of the Board and
Chief Executive Officer, generally consists of the same elements as for
other executive officers. However, the Policy Committee recognizes the
special entrepreneurial talents of Mr. Hurwitz, which have provided 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 provide future opportunities. In December 2002, the Policy
Committee approved a discretionary bonus of $150,000 for Mr. Hurwitz but
did not approve a base salary increase for 2003.

As described above, Mr. Hurwitz participates in the Executive Plan.
The performance goals established for 2002 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 industry segments of their 2002 business
plans. Based on the Company's 2002 results and performance in relation to
the foregoing goals and criteria, Mr. Hurwitz was entitled to receive at
least $404,706 under the Executive Plan. This amount was based upon the
completion of two acquisitions. The Section 162(m) Committee exercised its
negative discretion and awarded Mr. Hurwitz an aggregate bonus of $285,233
in respect of his services during 2002.

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 29, 2003
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 generally accepted auditing standards,
including those described in Statement on Auditing Standards No. 61, as
amended, "Communication with Audit Committees," and, with and without
management present, discussed and reviewed the results of the independent
auditors' examination of the financial statements.

The Audit Committee reviewed the audited financial statements of the
Company as of and for the year ended December 31, 2002, with management and
the independent auditors. 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.

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, 2002, which was filed
with the Securities and Exchange Commission on March 28, 2003.

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 the fiscal
year ended December 31, 2002 by the Company's principal accounting firm,
Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and
their respective affiliates ("DELOITTE") for services rendered:

Audit fees $ 777,300(1)
Financial information systems design and implementation fees --(2)
All other fees 400,547(3)(4)
-----------------
Total $ 1,177,847
=================

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

(1) Consists of professional services rendered for the audit of the annual
financial statements of the Company and certain subsidiaries for the
fiscal year ended December 31, 2002 and for the review of the 2002
quarterly financial statements of the Company and certain subsidiaries.
(2) There were no such professional services rendered by Deloitte during the
2002 fiscal year.
(3) These fees consisted of audit-related services of $61,137 and other
services of $339,410. Audit-related services consisted primarily of fees
for consent, accounting consultation, and audit of the benefit plans of
the Company and certain subsidiaries. Other services consisted primarily
of tax planning and tax compliance services.
(4) The Audit Committee has considered whether the provision of these services
is compatible with maintaining the principal accountant's independence.

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,
1997, and that all dividends were reinvested. The data points are calculated as of the last trading day for the year
indicated.

[GRAPHIC OMITTED]

1998 1999 2000 2001 2002
MAXXAM Inc. 131.52 98.28 34.81 40.11 21.32
S&P 500 Index 128.58 155.63 141.46 124.65 97.1
Forest Products 103.3 151.16 104.03 112.66 105.73

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 11.0% and 7.0%,
respectively, of the Company's 2002 consolidated net sales. Accordingly, a
line-of-business index for each such industry is therefore not utilized.
The Aluminum Industry index used in prior years has been eliminated due to
the deconsolidation of Kaiser upon its Chapter 11 filing in February 2002.
See "Certain Transactions--Other Matters."

CERTAIN TRANSACTIONS

LITIGATION MATTERS

USAT Matters
On December 26, 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, Federated Development
Company (the predecessor of Giddeon Holdings; "FEDERATED") and Mr. Hurwitz
(collectively, the "RESPONDENTS") and others with respect to the failure of
United Savings Association of Texas ("USAT"). At the time of receivership
in 1988, the Company owned approximately 13% of USAT's parent company. The
OTS sought damages ranging from $326.6 million to $821.3 million under
various theories, civil money penalties and a removal from, and prohibition
against the Company and the other remaining Respondents engaging in, the
banking industry.

The Respondents claimed that none of them had any liability in this
matter. Following 110 days of proceedings before an administrative law
judge during 1997-1999, the hearing on the merits of the case concluded on
March 1, 1999. Following 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. The OTS agreed to drop its administrative
action and not pursue any further legal action against the Respondents with
regard to the OTS action. The Company agreed that it would not pursue legal
action against the OTS or its employees as part of the FDIC counterclaim
(see below). The Respondents also agreed to accept for three years certain
restrictions with respect to insured financial institutions (including not
becoming a controlling shareholder or otherwise serving as an
institution-affiliated party). The Company does not believe that these
restrictions are significant as it has no present or contemplated intention
to engage in any of these activities.

On August 2, 1995, the Federal Deposit Insurance Corporation ("FDIC")
filed a civil action entitled Federal Deposit Insurance Corporation, as
manager of the FSLIC Resolution Fund v. Charles E. Hurwitz (the "FDIC
ACTION") in the U.S. District Court for the Southern District of Texas (No.
H-95-3956). The original complaint was against Mr. Hurwitz and alleged
damages in excess of $250.0 million based on the allegation that Mr.
Hurwitz was a controlling shareholder, de facto senior officer and director
of USAT, and was involved in certain decisions which contributed to the
insolvency of USAT. As a result of the settlement of the OTS action, the
FDIC and Mr. Hurwitz have stipulated to a dismissal of the FDIC action.
This stipulation does not affect the FDIC counterclaim or motion for
sanctions described in the following paragraph.

On May 31, 2000, the Respondents filed a counterclaim to the FDIC
action (the "FDIC COUNTERCLAIM") in U.S. District Court in Houston, Texas
(No. H95-3956). The FDIC counterclaim states that the FDIC illegally paid
the OTS to bring claims against the Respondents. The plaintiffs are seeking
reimbursement of attorneys' fees and damages from the FDIC. As of March 31,
2003, such fees were in excess of $39 million. On November 8, 2002, the
Respondents filed an amended counterclaim and an amended motion for
sanctions. The Respondents are pursuing this claim vigorously.

In September 1997, the Company filed suit against a group of its
insurers after unsuccessful negotiations with certain of the insurers
regarding coverage, under the terms of certain directors and officers
liability policies, of expenses incurred in connection with the OTS and
FDIC actions. The insurers requested arbitration and as a result the
lawsuit was dismissed in April 1998. Binding arbitration with the primary
carrier was held in October 2002. On February 20, 2003, the arbitration
panel determined that the insurer should pay the Company approximately $6.5
million (plus interest). The Company and the insurer subsequently agreed to
settle this matter for $8.0 million, and the Company has received such
amount. As the limits of the primary policy were not reached by the
arbitration panel's award, the Company does not expect to be able to
recover any amounts from the other insurers.

On January 16, 2001, an action was filed against the Company,
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 FDIC and
OTS 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 FDIC and OTS 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 FDIC and OTS 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
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
submitted false information to the California Department of Forestry in
violation of California's business and professions code and the
Racketeering Influence and Corrupt Practices Act. 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 $122,385 for 2002. At December 31, 2002,
Giddeon Holdings owed the Company $70,365 for certain general and
administrative expenses, which amount was subsequently paid in 2003.

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. Kaiser has not yet filed a plan of
reorganization. For further information regarding the status of Kaiser's
Chapter 11 proceedings and certain related matters, see Notes 1 and 4 to
the Consolidated Financial Statements of the Company contained in its
Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (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 2002).

Shawn Hurwitz, the son of Mr. Hurwitz, is also Chief Executive
Officer of the Company's real estate operations, and during 2002 received
an aggregate of $385,093 in salary and bonus and a grant of 8,200 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 certain reporting persons
that no Forms 5 were required, the Company believes that all filing
requirements were complied with which were applicable to its officers,
directors and greater than ten percent beneficial owners.

OTHER 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 & Touche LLP ("D&T"), the Company's independent public
accountants, has completed its audit with respect to the Company's 2002
fiscal year. Representatives of D&T 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.

The Audit Committee annually considers and recommends to the Board
the selection of the Company's independent public accountants. As
recommended by the Audit Committee, the Board on April 30, 2002, decided to
no longer engage Arthur Andersen LLP ("ANDERSEN") as the Company's
independent public accountants and to engage D&T to serve as the Company's
independent public accountants effective immediately.

Andersen's reports on the Company's consolidated financial statements
for the years ended December 31, 2001 and 2000 did not contain an adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles. During the Company's
fiscal years ended December 31, 2001 and 2000, there were no disagreements
with Andersen on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure which, if
not resolved to Andersen's satisfaction, would have caused them to make
reference to the subject matter in connection with their reports on the
Company's consolidated financial statements and schedule for such year; and
there were no reportable events, as listed in Item 304(a)(1)(v) of
Regulation S-K.

During the Company's fiscal years ended December 31, 2001 and 2000,
the Company did not consult Andersen with respect to the application of
accounting principles to a specified transaction, either completed or
proposed, or the type of the audit opinion that might be rendered on the
Company's consolidated financial statements, or any other matters or
reportable events listed in Items 304(a)(2)(i) and (ii) of Regulation S-K.

STOCKHOLDER PROPOSALS FOR THE 2004 ANNUAL MEETING

Proposals which stockholders intend to present at the 2004 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, 2004
to be presented at the meeting. Proposals pursuant to Rule 14a-8 of the
proxy rules must also be received by January 2, 2004 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 22, 2004 (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 5847 San Felipe, Suite
2600, Houston, Texas 77057 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 21, 2003, at the Marriott West
Loop, 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 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, 2003). 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
866-701-6179 BEFORE 5:00 P.M., HOUSTON TIME, ON MAY 16, 2003.

( )I plan to attend OR ( ) I will send my proxy to attend the Company's Annual
Meeting of Stockholders on May 21, 2003.

Please print your response to the following:

Name:
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Proxy's Name (if applicable):
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Street:
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City:
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State: ZIP Code:
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Daytime Telephone Number (including area code):
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(recycled logo) Printed on recycled paper.

MAXXAM SAVINGS PLAN
MAXXAM INC.

TO ALL PARTICIPANTS:

A proxy statement setting forth the business to be transacted at the Annual
Meeting of Stockholders of MAXXAM Inc. to be held on May 21, 2003 is enclosed.

As a participant in the MAXXAM Savings Plan (the "Plan"), you can give the
Trustee confidential instructions as to how you wish to vote the Common Stock of
MAXXAM Inc. credited or contingently credited to your account. Through use of
this Voting Instruction Form, you are entitled to one vote for each full share
of such Common Stock credited to your account on March 31, 2003. For your
information, such shares cannot be voted at the meeting by individual employees
because the shares are registered on our stock records in the Trustee's name.

Please exercise your voting rights by indicating your instructions, dating,
signing, detaching and sending the Voting Instruction Form to the Trustee under
the Plan, using the enclosed envelope.

In order that the Trustee may carry out your instructions, it must receive this
information by May 16, 2003. If no instructions are received by that date, the
Trustee will not vote your stock.

Those of you who own MAXXAM Inc. Common Stock outside of the Plan will, of
course, receive separate proxies for those shares, which may be returned in the
usual manner.

Very truly yours,

MAXXAM INC.

Paul N. Schwartz, Chairman
MAXXAM Inc. Savings Plan Investment Committee

Diane M. Dudley, Chairman
MAXXAM Inc. Savings Plan Administrative
Committee

MAXXAM INC.
CONFIDENTIAL VOTING INSTRUCTIONS

These confidential voting instructions are to Fidelity Management Trust
Company, as Trustee for the MAXXAM Savings Plan (the "Plan"), and are solicited
on behalf of the Board of Directors for the Annual Meeting of Stockholders of
MAXXAM Inc. to be held on May 21, 2003.

The undersigned, as a participant of the Plan, hereby directs the Trustee
to vote (in person or by proxy) the number of shares of MAXXAM Inc. Common Stock
credited to the undersigned's account under the Plan at the Annual Meeting of
Stockholders to be held on May 21, 2003, and at any adjournment(s) or
postponement(s) thereof, upon all subjects that may properly come before the
meeting, including the matters described in the proxy statement furnished
herewith, subject to any directions indicated on the reverse side of the card.
In the Trustee's discretion, it may vote upon such other matters as may properly
come before the meeting.

(CONTINUED AND SIGNATURE REQUIRED ON REVERSE SIDE)

ANNUAL MEETING OF STOCKHOLDERS OF
MAXXAM INC.

May 21, 2003

Confidential Voting Instructions

Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.

Please detach and mail in the envelope provided.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS
AND "FOR" PROPOSAL 2. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE /X/

1. ELECTION OF DIRECTORS
NOMINEES
/ / FOR ALL NOMINEES / / Robert J. Cruikshank (for term expiring in 2004)
/ / Stanley D. Rosenberg (for term expiring in 2004)
/ / WITHHOLD AUTHORITY / / Michael J. Rosenthal (for term expiring in 2004)
FOR ALL NOMINEES / / J. Kent Friedman (for term expiring in 2006)
/ / Ezra G. Levin (for term expiring in 2006)
/ / FOR ALL EXCEPT
(See instructions below)

INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you
wish to withhold, as shown here: / /

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To change the address on your account, please check the box at right and indicate
your new address in the address space above. Please note that changes to the
registered name(s) on the account may not be submitted via this method. / /
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2. Proposal to reapprove and amend the MAXXAM 1994 Executive Bonus Plan.
/ / FOR / / AGAINST / / ABSTAIN

3. In its discretion, the Trustee is authorized to vote upon such other
matters as may properly come before the meeting or any adjournments or
postponements thereof, hereby revoking any instructions heretofore
given by the undersigned.

Your vote is confidential. The Trustee is directed to vote as specified
hereon. If no directions are given, or if this form is not signed and returned,
your shares will not be voted. You cannot vote your shares in person at the
Annual Meeting; the Trustee is the only one who can vote your shares.

ALTHOUGH THE TRUSTEE TAKES NO STAND, MAXXAM'S BOARD OF DIRECTORS RECOMMENDS A
VOTE "FOR" ALL NOMINEES HEREON AND "FOR" THE PROPOSAL TO APPROVE THE MAXXAM
1994 EXECUTIVE BONUS PLAN.

Signature of Stockholder: _____________________________ Date: _________________

NOTE: This proxy must be signed exactly as the name appears hereon. When shares
are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as
such. If the signer is a corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person.

MAXXAM INC.
5847 SAN FELIPE, SUITE 2600
HOUSTON, TEXAS 77057

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Paul N. Schwartz, Elizabeth D. Brumley and
Bernard L. Birkel as proxies (each with power to act alone and with power of
substitution) to vote as designated below, all shares of Preferred Stock the
undersigned is entitled to vote at the Annual Meeting of Stockholders of MAXXAM
Inc. to be held on May 21, 2003, and at any adjournments or postponements
thereof.

WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY THE
UNDERSIGNED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" THE
ELECTION OF THE NOMINEES TO THE BOARD OF DIRECTORS INDICATED ON THE REVERSE AND
"FOR" THE PROPOSAL TO REAPPROVE AND AMEND THE MAXXAM 1994 EXECUTIVE BONUS PLAN.

(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)

ANNUAL MEETING OF STOCKHOLDERS OF
MAXXAM INC.

May 21, 2003

Preferred Stock

Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.

Please detach and mail in the envelope provided.

1. ELECTION OF DIRECTORS
NOMINEES
/ / FOR ALL NOMINEES / / J. Kent Friedman (for term expiring in 2006)
/ / Ezra G. Levin (for term expiring in 2006)
/ / WITHHOLD AUTHORITY
FOR ALL NOMINEES

/ / FOR ALL EXCEPT
(See instructions below)

INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you
wish to withhold, as shown here: / /

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2. Proposal to reapprove and amend the MAXXAM 1994 Executive Bonus Plan.
/ / FOR / / AGAINST / / ABSTAIN

3. In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournments or
postponements thereof, hereby revoking any proxy or proxies heretofore
given by the undersigned.

PLEASE COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.

Signature of Stockholder: _____________________________ Date: _________________

MAXXAM INC.
5847 SAN FELIPE, SUITE 2600
HOUSTON, TEXAS 77057

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Paul N. Schwartz, Elizabeth D. Brumley and
Bernard L. Birkel as proxies (each with power to act alone and with power of
substitution) to vote as designated below, all shares of Common Stock the
undersigned is entitled to vote at the Annual Meeting of Stockholders of MAXXAM
Inc. to be held on May 21, 2003, and at any adjournments or postponements
thereof.

(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)

ANNUAL MEETING OF STOCKHOLDERS OF
MAXXAM INC.

May 21, 2003

Common Stock

Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.

Please detach and mail in the envelope provided.

INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you
wish to withhold, as shown here: / /

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2. Proposal to reapprove and amend the MAXXAM 1994 Executive Bonus Plan.
/ / FOR / / AGAINST / / ABSTAIN

3. In their discretion, the proxies are is authorized to vote upon such other
matters as may properly come before the meeting or any adjournments or
postponements thereof, hereby revoking any proxy or proxies heretofore
given by the undersigned.

PLEASE COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.

Signature of Stockholder: _____________________________ Date: _________________