Proxy Statement

DEF 14A 1 maxxam_defproxy-2004.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.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

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

Payment of Filing Fee (Check the appropriate box):

/x / No fee required.

/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.

(1) Title of each class of securities to which transaction applies:

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

(2) Aggregate number of securities to which transaction applies:

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

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated ans state how it was determined):

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

(4) Proposed maximum aggregate value of transaction:

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

(5) Total fee paid:

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

/ / 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:

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

(2) Form, Schedule or Registration Statement No.:

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

(3) Filing Party:

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

(4) Date Filed:

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

[MAXXAM Logo]

April 20, 2004

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 19, 2004, at The Power
Center, 12401 South Post Oak, Houston, Texas.

Although you may presently plan to attend the Annual Meeting, we urge you
to indicate your approval in the spaces provided on the enclosed proxy card by
voting "FOR" the election of the directors named in the attached proxy
statement, "FOR" the proposed amendment to the Company's Restated Certificate of
Incorporation, and "FOR" the Amended and Restated Non-Employee Director Stock
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 19, 2004

The Annual Meeting of Stockholders of MAXXAM Inc. (the "Company") will be
held on Wednesday, May 19, 2004, at The Power Center, 12401 South Post Oak,
Houston, Texas, at 8:30 a.m., local time, for the following purposes:

1. To elect four directors to serve on the Board of Directors of the
Company, three of whom will be elected by the holders of Common
Stock, voting separately as a class, to hold office until the 2005
annual meeting or until their successors are elected and qualified,
and one of whom will be elected by holders of Common Stock and Class
A $.05 Non-Cumulative Participating Convertible Preferred Stock,
voting together as a single class, to hold office until the 2007
annual meeting or until his successor is elected and qualified; and

2. To consider and vote upon an amendment to the Company's Restated
Certificate of Incorporation to decrease the number of authorized
shares of Common Stock from 28,000,000 to 13,000,000 and to decrease
the number of authorized shares of Preferred Stock from 12,500,000
to 2,500,000. The Board of Directors reserves the right, even after
stockholder approval, to forego or postpone the filing of this
amendment if it determines that action not to be in the best
interest of the Company and its stockholders. If the reduction in
authorized capital approved by the stockholders at the Annual
Meeting is not implemented before the Company's next Annual Meeting
of Stockholders, the amendment will be deemed abandoned, without any
further effect.

3. To consider and vote upon the Amended and Restated Non-Employee
Director Stock Plan.

4. 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, 2004, 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 5, 2004
and continuing through the Annual Meeting.

By Order of the Board of Directors

BERNARD L. BIRKEL
Secretary

April 20, 2004

IMPORTANT

TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD. RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE PROVIDED FOR YOUR CONVENIENCE AND WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES. ANY STOCKHOLDER OF RECORD WHO ATTENDS THE ANNUAL
MEETING MAY VOTE PERSONALLY ON ALL MATTERS BROUGHT BEFORE THE ANNUAL MEETING BY
FOLLOWING THE PROCEDURES DESCRIBED IN THE ATTACHED PROXY STATEMENT. IN THAT
EVENT, YOUR PROXY WILL NOT BE USED.

MAXXAM INC.

PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS

This proxy statement (the "PROXY STATEMENT") is furnished to stockholders
in connection with the solicitation by the Board of Directors of MAXXAM Inc.
(the "COMPANY" or "MAXXAM"), a Delaware corporation, of proxies for use at the
Company's Annual Meeting of Stockholders (the "ANNUAL MEETING") to be held at
8:30 a.m. on May 19, 2004, 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 April 23,
2004, to the stockholders of record as of the close of business on March 31,
2004 (the "RECORD DATE"). Only holders of record of the 5,976,466 shares of
Common Stock (the "COMMON STOCK") and the 668,195 shares of Class A $.05
Non-Cumulative Participating Convertible Preferred Stock (the "PREFERRED STOCK,"
and together with the Common Stock, the "CAPITAL STOCK") of the Company
outstanding as of the Record Date are entitled to vote at the Annual Meeting.
Each share of Common Stock is entitled to one vote and each share of Preferred
Stock is entitled to ten votes on matters on which they may vote. At the Annual
Meeting, the holders of Common Stock, voting separately as a class, are entitled
to elect three members of the Company's Board of Directors (sometimes referred
to herein as the "BOARD"), and the holders of Common Stock and Preferred Stock,
voting together as a single class, are entitled to elect one member of the
Board.

We cordially invite you to attend the Annual Meeting. Whether or not you
plan to attend, please complete, date, sign and promptly return the enclosed
proxy card in the envelope included herewith. The persons authorized to act as
proxies at the Annual Meeting, individually or jointly, as listed on the proxy
card, are Bernard L. Birkel, Elizabeth D. Brumley and J. Kent Friedman. You may
revoke your proxy at any time prior to its exercise at the Annual Meeting by
notice to the Company's Secretary, by filing a later-dated proxy or, by voting
your shares in person at the Annual Meeting. Proxies will be voted in accordance
with the directions specified thereon or, in the absence of instructions, "FOR"
the election of the nominees to the Board named in this Proxy Statement, "FOR"
the amendment to the Company's Restated Certificate of Incorporation (as
described under "Amendment to Restated Certificate of Incorporation"), and "FOR"
the Amended and Restated Non-Employee Director Stock Plan (as described under
"Amended and Restated Non-Employee Director Stock 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) 364-3702 BEFORE 5:00 P.M., HOUSTON TIME, ON MAY 14, 2004. PERSONS WHO
PRE-REGISTER WILL BE REQUIRED TO VERIFY THEIR IDENTITY AT THE REGISTRATION TABLE
WITH A DRIVER'S LICENSE OR OTHER APPROPRIATE IDENTIFICATION BEARING A
PHOTOGRAPH. THE COMPANY MAY IN ITS DISCRETION ADMIT APPROPRIATELY CREDENTIALED
MEMBERS OF THE MEDIA.

PLEASE NOTE THAT IF YOU HOLD YOUR SHARES IN "STREET NAME" (THAT IS,
THROUGH A BROKER, BANK OR OTHER NOMINEE), YOU WILL NEED TO BRING A COPY OF A
BROKERAGE OR SIMILAR STATEMENT REFLECTING YOUR STOCK OWNERSHIP AS OF THE RECORD
DATE. ALL STOCKHOLDERS, OR THEIR DULY APPOINTED PROXIES, WILL BE REQUIRED TO
CHECK IN AT THE REGISTRATION DESK PRIOR TO THE ANNUAL MEETING. ALL STOCKHOLDERS,
REGARDLESS OF THEIR FORM OF OWNERSHIP, AND ALL PROXIES WILL ALSO BE REQUIRED TO
VERIFY THEIR IDENTITY WITH A DRIVER'S LICENSE OR OTHER APPROPRIATE
IDENTIFICATION BEARING A PHOTOGRAPH.

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

The presence, in person or by proxy, of the holders of shares of Capital
Stock entitled to cast a majority of the votes entitled to be cast at the Annual
Meeting is required to constitute a quorum for the transaction of business at
the Annual Meeting. Under applicable Delaware law, abstentions, broker non-votes
(i.e., shares held in street name as to which the broker, bank or other nominee
has no discretionary power to vote on a particular matter and has received no
instructions from the persons entitled to vote such shares) and withhold
authority designations are counted for purposes of determining the presence or
absence of a quorum for the transaction of business. Directors are elected by a
plurality of votes. Votes for directors may be cast in favor or withheld; votes
that are withheld or broker non-votes will be excluded entirely from the vote
and will have no effect on the outcome. Abstentions may not be specified in the
election of directors. A stockholder may, with respect to each other matter
specified in the notice of the meeting, (i) vote "FOR," (ii) vote "AGAINST" or
(iii) "ABSTAIN" from voting. See the description of specific proposals for the
vote required to adopt each such proposal. Shares represented by proxies that
are marked "abstain" on such matters and proxies relating to broker non-votes
will not be treated as shares voting and therefore will not affect the outcome
of the vote on such matters. If you hold your shares in street name, you must
give your broker specific voting instructions in order for your vote to be
counted regarding the Amended and Restated Non-Employee Director Stock Plan.

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
Amendment to Restated Certificate of Incorporation
Amended and Restated Non-Employee Director Stock Plan
The Board of Directors and Its Committees
Executive Officers and Directors
Principal Stockholders
Executive Compensation
Report of the Compensation Committees on Executive Compensation
Report of the Audit Committee
Principal Accounting Firm Fees
Performance Graph
Certain Transactions
Section 16(a) Beneficial Ownership Reporting Compliance
Other Business
Other Matters
Appendix A--Audit Committee Charter
Pre-Registration Request

ELECTION OF DIRECTORS

The Company's Restated Certificate of Incorporation provides for three
classes of directors (excluding the directors elected by the holders of Common
Stock, as discussed below) having staggered terms of office, with directors of
each class to be elected by the holders of the Company's Common Stock and
Preferred Stock, voting together as a single class, for terms of three years and
until their respective successors have been duly elected and qualified ("GENERAL
DIRECTORS"). The Company's Restated Certificate of Incorporation also provides
that so long as any shares of the Preferred Stock are outstanding, the holders
of Common Stock, voting as a class separately from the holders of any other
class or series of stock, are entitled to elect the greater of (i) two
directors, or (ii) that number of directors which constitutes 25% of the total
number of directors (rounded up to the nearest whole number) to be in office
subsequent to such annual meeting ("COMMON DIRECTORS"). The Board has designated
three out of its seven directors as Common Director nominees. Common Directors
serve one-year terms.

Four directors will be elected at the Annual Meeting. The Company's three
nominees for Common Director are Robert J. Cruikshank, Stanley D. Rosenberg and
Michael J. Rosenthal (to hold office until the 2005 annual meeting). Paul N.
Schwartz has been nominated by the Company to stand for election as a General
Director (to hold office until the 2007 annual meeting). Each nominee is
currently a member of, and has extensive experience on, the Board and in other
board and business positions. See "Executive Officers and Directors" and
"Principal Stockholders" for information concerning each of the nominees and
other directors, including the dates on which they first became directors, their
business experience during the past five years and the number of shares of the
Company's Common Stock and Preferred Stock beneficially owned by each of them as
of the Record Date. Each of these nominees has consented to serve as a member of
the Board if elected.

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

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF MESSRS.
CRUIKSHANK, ROSENBERG AND ROSENTHAL AS COMMON DIRECTORS AND MR. SCHWARTZ AS A
GENERAL DIRECTOR OF THE COMPANY.

AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION

GENERAL

On April 13, 2004, the Board of Directors of the Company adopted,
subject to stockholder approval, an amendment to the Company's Restated
Certificate of Incorporation to decrease the total authorized shares of Common
Stock of the Company from 28,000,000 to 13,000,000 and to decrease the total
authorized shares of Preferred Stock of the Company from 12,500,000 to
2,500,000. Such a decrease in the number of authorized shares of Capital Stock
of the Company would be effected by amending and restating the introductory
paragraph to Article Fourth of the Company's Restated Certificate of
Incorporation to read as follows:

"FOURTH: The total number of shares of all classes of capital stock which
the corporation shall have authority to issue is 15,500,000 (fifteen
million five hundred thousand) shares, consisting of:

(a) 2,500,000 (two million five hundred thousand) shares of the par value
of $.50 per share, which shall be designated Preferred Stock; and

(b) 13,000,000 (thirteen million) shares of the par value of $.50 per
share, which shall be designated Common Stock.

With the exception of the number of authorized shares, the terms of
Preferred Stock and the Common Stock before and after the proposed amendment
will remain the same. As of the Record Date, the Company had 668,195 shares of
Preferred Stock outstanding and 5,976,466 shares of Common Stock outstanding.

If the decrease in authorized shares is approved, the reduction will take
place on the date the Company files a Certificate of Amendment with the Delaware
Secretary of State. The Company's Restated Certificate of Incorporation provides
that the authorized number of shares of Common Stock and of Preferred Stock may
be increased or decreased by the affirmative vote of the holders of a majority
of the stock of the Company entitled to vote, without a class or series vote.
Each share of the Common Stock is entitled to one vote and each share of
Preferred Stock is entitled to ten votes on the proposed amendment. In order to
effect the proposed reduction, the affirmative vote of a majority of the total
number of votes of Capital Stock outstanding on the Record Date must approve the
amendment to the Company's Restated Certificate of Incorporation.

BOARD DISCRETION TO IMPLEMENT THE REDUCTION IN AUTHORIZED CAPITAL

If the reduction in authorized capital is approved at the Annual Meeting,
the Board of Directors may, in its sole discretion, at any time prior to the
Company's next Annual Meeting of Stockholders, file the amendment to the
Company's Restated Certificate of Incorporation.

Notwithstanding the approval by the stockholders of the reduction in
authorized capital at the Annual Meeting, the Board of Directors may, in its
sole discretion, determine not to implement the reduction in authorized capital.
If the Board of Directors does not implement the reduction in authorized capital
before the date of the Company's next Annual Meeting of Stockholders, the
authorization provided to the Board of Directors at this Annual Meeting to
effect such reduction will no longer have any effect. In any such event, the
Board of Directors would need to seek stockholder approval again at a future
date to reduce the authorized capital if it deems a reduction in authorized
capital to be advisable at that time.

The Company's Board of Directors believes the authorization of the Board
of Directors, in its discretion, to amend the Restated Certificate of
Incorporation to effectuate a reduction in authorized capital of the Company,
without further approval or authorization of the Company's stockholders is
advisable and in the best interests of the Company and its stockholders.

PURPOSES AND EFFECTS OF THE AMENDMENT

The decrease in authorized shares of Capital Stock is recommended by the
Board of Directors in order to reduce the franchise taxes that the Company is
required to pay in the State of Delaware, which amount is based, in part, on the
number of the Company's authorized shares. The Company estimates that it will
save up to $90,000 per year in franchise taxes if this amendment is implemented.
The Board of Directors determined to decrease the number of authorized shares of
Common Stock to 13 million, and to decrease the number of authorized shares of
Preferred Stock to 2.5 million shares, because it believes that the reductions
to these levels will provide for the greatest decrease in Delaware franchise
tax, while also ensuring that the number of shares available for future issuance
will be sufficient for general corporate purposes.

As of the Record Date there were an aggregate of 10,699,775 shares
outstanding or potentially issuable, including 1,746,390 preferred shares and
8,953,385 shares of Common Stock. As a result, if the share reduction proposal
is implemented, the Company still will have 4,046,615 authorized shares of
Common Stock and 753,610 authorized preferred shares available that may be
issued from time to time in the future for any corporate purpose. The Company
has no current plans, arrangements or understandings with respect to the
issuance of any additional shares of Capital Stock, and believes that the
proposed levels of authorized shares will be adequate to cover requirements in
the foreseeable future.

One consequence of this proposal is that the Company would be required to
seek stockholder approval for an issuance of shares that would cause the shares
outstanding and potentially issuable to exceed the number of shares available
for issuance. This could limit or delay the Company's ability to issue
additional stock, and the Company could potentially be unable to take advantage
of favorable opportunities or meet business needs as they arise. The Board of
Directors believes that these risks are outweighed by the benefit of the
reduction in authorized shares.

APPROVAL OF THE AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION
REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE COMPANY'S
CAPITAL STOCK. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS OF THE
COMPANY VOTE "FOR" THE AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION.

AMENDED AND RESTATED
NON-EMPLOYEE DIRECTOR STOCK PLAN

GENERAL

On April 13, 2004, the Board approved amendments to the MAXXAM
1994 Non-Employee Director Stock Plan to (a) extend by ten years, until December
31, 2013, the period of time that issuances may be made under the Director Plan,
(b) permit the issuance of stock appreciation rights ("SARS") in tandem with the
non-qualified stock options issuable under the plan (as so amended, the
"DIRECTOR PLAN"), and (c) to make certain technical and clarifying
modifications. The Board is hereby submitting the Director Plan for approval by
the stockholders of the Company. The following description of the Director Plan
is qualified in its entirety by reference to the full text of the Director Plan,
which is available upon request from the Secretary of the Company. The
affirmative vote of a majority of the shares present in person or by proxy and
entitled to vote thereon at the Annual Meeting is required for approval of the
Amended and Restated Non-Employee Director Stock Plan.

The purpose of the Director Plan is to benefit the Company, its
subsidiaries and stockholders by increasing the proprietary interest of
non-employee directors in the success of the Company and its subsidiaries. The
Board also believes that the Director Plan is in the best interests of the
Company as it will facilitate the Company's ability to attract and retain the
services of non-employee directors upon whose judgment, interest and special
effort the successful conduct of its operations is largely dependent. There are
currently four non-employee directors who will be eligible to participate in the
Director Plan.

THE DIRECTOR PLAN

The Director Plan is designed to be a nondiscretionary formula plan and
will be administered by the Board of Directors. Non-qualified stock options to
purchase 500 shares of Common Stock of the Company (with tandem SARs) shall be
granted to each new non-employee director the day following the annual meeting
of stockholders at which such director is first elected or appointed to the
Board. In addition, each eligible non-employee director standing for re-election
shall, the day following each annual meeting of stockholders, receive an option
grant to purchase 600 shares of Common Stock (with tandem SARs). Assuming
stockholder approval of the Director Plan, grants would take place on the day
following the 2004 Annual Meeting.

Under the Director Plan, options are granted for a term of ten years and
become cumulatively exercisable as to 25 percent of the shares underlying the
option on each of the first, second, third and fourth anniversaries of the date
of grant. An option granted under the Director Plan will terminate on the
earlier of the date of expiration or one year after the date the optionee ceases
serving as a director, except that if an optionee dies or otherwise ceases to
serve as a director on or after attaining the age of sixty-five years, any
options granted at least six months prior to such event vest immediately. No
option may be exercised earlier than six months from the date of grant. Options
granted under the Director Plan will not be transferable by the optionee other
than by will or under the laws of descent and distribution and will be
exercisable only by the optionee or his legal guardian or representative during
his lifetime.

The exercise price per share of Common Stock for an option granted under
the Director Plan shall be the fair market value of a share of Common Stock on
the date such option is granted. The option price may be paid either in cash or
by tendering Common Stock having a value equal to the option price. The total
amount of Common Stock with respect to which options may be granted under the
Director Plan may not exceed 35,000 shares (of which 16,800 remain available for
grant). Only non-employee directors of the Company are eligible to participate
in the Director Plan. In the event an option expires or is terminated or
cancelled, the shares of Common Stock allocable to the unexercised portion of
such option may again be subject to award or grant under the Director Plan.

Adjustments will be made under the Director Plan in the number of shares
of Common Stock which are issuable upon exercise of options and in the price per
share thereof to protect the holders of options against dilution in the event of
any subdivision or consolidation of Common Stock or any other capital
adjustment, the payment of a stock dividend, or other increase or decrease in
shares of Common Stock effected without receipt of consideration by the Company.
Adjustments will also be made as necessary in the event of mergers,
consolidations and sales of substantially all of the assets of the Company. In
the event of a transaction pursuant to which the Company will be merged or
consolidated and not be the surviving corporation or the Company will sell
substantially all of its assets and be liquidated, the holders of any options
under the Director Plan shall be entitled to exercise any options granted at
least six months before the agreement setting forth the terms of such
transaction.

The Board of Directors has the power to amend, terminate or suspend the
Director Plan; provided, however, that any amendment that would change the
amount, price or timing of grants shall be made in compliance with Rule 16b-3 of
the Securities Exchange Act of 1934; and further provided that no amendment
shall be effective unless and until it has been duly approved by the Company's
stockholders if failure to obtain such approval would adversely affect the
compliance of the Director Plan with Rule 16b-3 or any other applicable law,
rule or regulation or requirement of any exchange.

NEW PLAN BENEFITS

Benefits under the Director Plan will depend upon a number of factors,
including the fair market value of the Company's Common Stock on future dates.
Consequently, it is not currently possible to determine the benefits that might
be received by participants under the Director Plan.

TAX CONSEQUENCES

The following summary is a general discussion of certain federal income
tax consequences which can affect the Company and participants of the Director
Plan in connection with certain awards granted under the Director Plan. This
discussion is based upon provisions of the Internal Revenue Code of 1986, as
amended (the "CODE"), the regulations, administrative rulings and judicial
decisions in effect at the date of this Proxy Statement, all of which are
subject to change (possibly with retroactive effect) or different
interpretations.

The grant of the non-qualified stock options provided for by the Director
Plan creates no taxable income to a participant. Upon exercise of a
non-qualified stock option, a participant will generally recognize taxable
ordinary income to the extent the fair market value of the stock on the date of
exercise exceeds the option price. When the stock is eventually sold, a
participant recognizes capital gain or loss to the extent the sale price differs
from the fair market value of the stock on the date of exercise. To the extent
that a participant recognizes taxable ordinary income upon the exercise of the
option, the Company will generally receive a corresponding tax deduction. The
grant of SARs creates no taxable income to the participant. Upon the exercise of
the SARs, the amount of cash and/or fair market value of stock received by the
participant will generally be recognized as taxable ordinary income, and the
Company will generally receive a corresponding tax deduction.

APPROVAL OF THE AMENDED AND RESTATED DIRECTOR PLAN REQUIRES THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE COMPANY'S CAPITAL STOCK
REPRESENTED AT THE ANNUAL MEETING. THE BOARD OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS OF THE COMPANY VOTE "FOR" THE AMENDED AND RESTATED DIRECTOR PLAN.

THE BOARD OF DIRECTORS AND ITS COMMITTEES

The Board held four meetings and acted by written consent on four
occasions during 2003. In addition, management confers frequently with directors
on an informal basis to discuss Company affairs. During 2003, no director
attended fewer than 75% of the aggregate number of meetings of the Board and the
committees of the Board on which he served. The Company encourages all of its
directors to attend the Annual Meeting and to facilitate this, schedules a Board
meeting in conjunction with the Annual Meeting. All of the directors attended
the annual meeting last year.

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

The Executive Committee meets on call and has authority to act on most
matters during the intervals between meetings of the entire Board. Its current
members are Messrs. Hurwitz (Chairman), Levin and Schwartz. The Executive
Committee did not meet or act by written consent during 2003.

The Audit Committee serves as an independent and objective party to
oversee the integrity of the Company's accounting and financial reporting
processes and internal control system, including the Company's system of
internal controls regarding finance and accounting that management and the Board
have established. Consistent with such function, the Audit Committee encourages
continuous improvement of, and fosters adherence to, the Company's policies,
procedures and practices at all levels. The Company's independent accountants
are directly responsible to the Audit Committee, which selects, sets
compensation for, and evaluates the performance and independence of the
Company's independent accountants. The Audit Committee also fosters an open
avenue of communication among senior management, the independent accountants and
the Board. Attached hereto as Appendix A is a copy of the Audit Committee's
Charter. Messrs. Rosenthal (Chairman), Cruikshank, Levin and Rosenberg currently
serve as members of this committee. The Audit Committee met on eight occasions
during 2003 and acted by written consent on two occasions. 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" with the
meaning of the current requirements of the American Stock Exchange ("AMEX");
however, it is anticipated that Mr. Levin will not remain on the Audit Committee
past the Annual Meeting (in connection with implementation of revised AMEX
independence standards). In addition, the Board has determined that Mr.
Cruikshank is an "audit committee financial expert" within the meaning of
Regulation S-K, Item 401(h). See also "Report of the Audit Committee" below.

The Conflicts and Compliance Committee (the "CONFLICTS COMMITTEE") (i)
ensures that appropriate policies with regard to employee conduct pursuant to
legal and ethical business standards are formulated, maintained, periodically
reviewed and properly implemented and enforced, (ii) reviews possible conflicts
of interest, and (iii) establishes, maintains, governs and enforces policies
regarding sensitive payments, insider trading with regard to the Company's
equity securities and similar policies. Messrs. Rosenberg (Chairman),
Cruikshank, Friedman, Levin and Rosenthal served as members of the Conflicts
Committee during 2003, which met on three occasions during 2003 and did not act
by written consent. See also "Code of Conduct."

The Compensation Policy Committee (the "POLICY COMMITTEE") reviews and
approves proposals concerning (i) the establishment or change of benefit plans,
or material amendments to existing benefit plans, and (ii) salaries or other
compensation, including payments awarded pursuant to bonus and benefit plans
maintained by the Company and its subsidiaries (excluding Kaiser Aluminum
Corporation ("KAISER") and Kaiser Aluminum & Chemical Corporation ("KACC")), to
all executive officers and other employees of the Company and its non-Kaiser
subsidiaries. However, the Policy Committee is not responsible for the
administration of, amendments to or awards under the MAXXAM 1994 Executive Bonus
Plan, as amended and restated in 2003 (the "EXECUTIVE PLAN"), the MAXXAM 2002
Omnibus Employee Incentive Plan (the "2002 OMNIBUS PLAN"), or the Director Plan
or administration of the MAXXAM 1994 Omnibus Employee Incentive Plan (the "1994
OMNIBUS PLAN"). Messrs. Levin (Chairman), Cruikshank, Rosenberg and Rosenthal
served as members of this committee during 2003. The Policy Committee met on
five occasions during 2003 and did not act by written consent.

The Section 162(m) Compensation Committee (the "162(M) COMMITTEE") has the
authority to administer and make amendments to the Executive Plan and the 2002
Omnibus Plan, and to administer the 1994 Omnibus Plan and such other plans or
programs, if any, as are intended to comply with the provisions of Section
162(m) of the 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 2003, this committee held three 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 2003 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 $40,900, $39,000, $38,000 and $39,000,
respectively, in payment of such director and committee chairman/member fees
during 2003. Directors were reimbursed for travel and other disbursements
relating to Board and committee meetings. Employee directors of the Company do
not receive fees for their Board service. Directors of the Company who also
served as directors of Kaiser and KACC, received from Kaiser and KACC additional
director or committee fees and were reimbursed by Kaiser and KACC for expenses
pertaining to their services in such capacities. Messrs. Cruikshank, Hurwitz and
Levin received $71,000, $65,000, and $75,500, respectively, in such director and
committee fees from Kaiser and KACC with respect to their services in 2003 (see
the "Summary Compensation Table" regarding such fees which were deducted from
Mr. Hurwitz's 2003 bonus). Mr. Levin also received additional fees in the amount
of $15,000 for serving during 2003 as a manager of Scotia Pacific Company LLC, a
wholly owned subsidiary of the Company ("SCOTIA LLC").

All non-employee directors are eligible to participate in a deferred
compensation program. By executing a deferred fee agreement, a non-employee
director may defer all or part, in 25% increments, of the director's fees owed
by the Company for his service in such capacity for any calendar year. The
designated percentage of deferred fees are credited to a book account as of the
date such fees would have been paid to the director and are deemed "invested" in
two investment choices, again in 25% increments, of phantom shares of the
Company's Common Stock and/or in an account bearing interest calculated using
one-twelfth of the sum of the prime rate on the first day of each month plus 2%.
Deferred director's fees, including all earnings credited to the book account,
will be paid in cash to the director or beneficiary as soon as practicable
following the date the director ceases for any reason to be a member of the
Board, either in a lump sum or in a specified number of annual installments not
to exceed ten, at the director's election. Mr. Levin is the only director who
has elected to defer any of his director's fees, with all of such fees having
been deferred from September 1994 through December 2003 and one-half of such
fees being deferred commencing in January 2004.

Non-employee directors are also eligible to participate in the Director
Plan (see "Amended and Restated Non- Employee Director Stock Plan"). Messrs.
Cruikshank, Levin, Rosenberg and Rosenthal each received options to purchase 600
shares of the Company's Common Stock on May 22, 2003, at an exercise price of
$12.15 per share.

POLICY COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the 2003 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 2003 (the revenues from such services accounting for less
than 1% of such firm's revenues in 2003).

During the Company's 2003 fiscal year, no executive officer of the Company
served as (i) a member of the compensation committee (or other board committee
performing equivalent functions) of another entity, one of whose executive
officers served on the Policy Committee or the 162(m) Committee, (ii) a director
of another entity, one of whose executive officers served on the Policy
Committee or the 162(m) Committee, or (iii) a member of the compensation
committee (or other board committee performing equivalent functions) of another
entity, one of whose executive officers served as a director of the Company.

NOMINATION PROCESS

The Company is a "controlled company" as such term is defined in the rules
of the AMEX (due to the ownership of Mr. Hurwitz) and does not have a standing
nominating committee as it believes this is unnecessary. The Company's Board of
Directors is not particularly large and believes it is sufficient to rely on the
expertise of the Board as a whole in choosing its director candidates. The
Company's directors are familiar with each other as they have served on the
Board for several years. Each of the directors is also highly experienced and
knowledgeable in board and business affairs. The nominees named in this proxy
statement were unanimously recommended by the full Board for submission to the
stockholders as the Company's nominees. Should the Company or the Board
determine in the future that additional or other Board nominees are advisable,
it is likely that a variety of sources would be consulted for possible
candidates, including the directors of the Company, various advisors to the
Company, and possibly one or more director search firms. Appropriate
consideration also would be given to nominees for director suggested by
stockholders of the Company. The process by which a stockholder of the Company
may suggest a nominee for director of the Company can be found under
"Stockholder Proposals for the 2005 Annual Meeting."

CODE OF CONDUCT

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

Copies of the Code of Conduct may be obtained by any stockholder upon
request without charge by writing to MAXXAM Inc., c/o Corporate Secretary, 5847
San Felipe, Houston, Texas 77057.

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
Elizabeth D. Brumley Vice President and Controller
Bernard L. Birkel Secretary
Robert J. Cruikshank Director
Ezra G. Levin Director
Stanley D. Rosenberg Director
Michael J. Rosenthal Director

Charles E. Hurwitz. Mr. Hurwitz, age 63, 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.

J. Kent Friedman. Mr. Friedman, age 60, was elected a director and
appointed Vice Chairman of the Company in May 2000, and has served as General
Counsel of the Company since December 1999. He served as Acting General Counsel
of the Company from March 1998 until his appointment as General Counsel. Mr.
Friedman was a partner of Mayor, Day, Caldwell & Keeton, L.L.P., a Houston law
firm, from 1982 through December 1999, and he was the Managing Partner of that
firm from 1982 through 1992. He has also served since September 1999 as a
director of The Pacific Lumber Company, a subsidiary of MGI engaged in forest
products operations ("PACIFIC LUMBER"), and on the Board of Managers of Scotia
LLC, a subsidiary of Pacific Lumber. In addition, he has served as a director of
MGI since May 2000. From December 1999 until February 2002, Mr. Friedman also
served as Senior Vice President and General Counsel of Kaiser and KACC. Mr.
Friedman also serves on the Board of the Harris County-Houston Sports Authority
and is President of the Mickey Leland Kibbutzim Internship Foundation. He
previously served as Co-Chairman of the Greater Houston Inner City Games (1998
to 2003), a member of the Board of Regents of Texas Southern University (1987 to
1990) and as a member of the Executive Committee of the Board of Directors of
the Houston Symphony (1984 to 1999).

Paul N. Schwartz. Mr. Schwartz, age 57, 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 is a nominee for election as a General Director
of the Company to serve until the 2007 annual meeting. 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 63, 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.

Elizabeth D. Brumley. Ms. Brumley, age 45, joined the Company in August
1996 and was named a Vice President in December 2003. She has also served as
Controller of the Company and 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.

Bernard L. Birkel. Mr. Birkel, age 54, was named Secretary of the Company
in May 1997, and has served MGI and Pacific Lumber in such capacity since May
1997 and Scotia LLC since June 1998. He served as Managing Counsel--Corporate of
the Company from May 1997 to February 2000, when he was appointed Senior
Assistant General Counsel. Mr. Birkel was Assistant Secretary of the Company and
MGI from May 1991 to May 1997. He served as Senior Corporate Counsel of the
Company from August 1992 until May 1997. Prior to joining the Company as
Corporate Counsel in August 1990, Mr. Birkel was a partner in the Houston law
firm of Woodard, Hall & Primm, P.C.

Robert J. Cruikshank. Mr. Cruikshank, age 73, 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 2005 annual meeting. He has
also served as a director of Kaiser and KACC since January 1994. Mr. Cruikshank
was a Senior Partner in the international public accounting firm of Deloitte &
Touche LLP from December 1989 until his retirement from that firm in March 1993.
Mr. Cruikshank served on the board of directors of Deloitte Haskins & Sells from
1981 to 1985 and as Managing Partner from June 1974 until its merger with Touche
Ross & Co. in December 1989. Mr. Cruikshank also serves as a director of Texas
Genco Holdings, Inc., a wholesale electric power generating company and public
company subsidiary of CenterPoint Energy, Inc.; as a director of Encysive
Pharmaceuticals, Inc., a pharmaceutical company; as a trust manager of
Weingarten Realty Investors; and as advisory director of Compass Bank--Houston.
Mr. Cruikshank has also served in a leadership capacity at a number of leading
academic and health care organizations including: member of the Board of
Directors, Texas Medical Center ( since 1989), and Regent and Vice Chairman of
The University of Texas System (1989-1995).

Ezra G. Levin. Mr. Levin, age 70, was first elected a director of the
Company in May 1978. He has served as a director of Kaiser and KACC since July
1991 and November 1988, respectively, and also served as a director of Kaiser
from April 1988 to May 1990. He has served as a director of Pacific Lumber since
February 1993, and as a manager on the Board of Managers of Scotia LLC since
June 1998. Mr. Levin is a member and co-chair of the New York and Paris law firm
of Kramer Levin Naftalis & Frankel LLP. He has held leadership roles in various
legal and philanthropic capacities, 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 72, 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 2005 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 60, 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 2005 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)
------------------------------------------- ------------------ ------------------------ ------------ -------------
The Stockholder Group(3) Common Stock 3,140,684(4)(5)(6) 50.1 77.1
Preferred Stock 752,441(7) 99.2
Gilda Investments, LLC(3) Common Stock 2,485,343(4) 41.4 19.6
Christian Leone Common Stock 642,680(8) 10.8 5.1
Dimensional Fund Advisors Inc. Common Stock 343,825(9) 5.8 2.7
Scion Capital, LLC Common Stock 343,400(10) 5.7 2.7
Bernard L. Birkel Common Stock 8,480(11) * *
Robert J. Cruikshank Common Stock 5,400(12) * *
Diane M. Dudley Common Stock 6,533(13) * *
J. Kent Friedman Common Stock 37,820(14) * *
Charles E. Hurwitz(3) (15) Common Stock 3,098,201(4)(5)(16) 49.5 76.8
Preferred Stock 752,441(7) 99.2
Ezra G. Levin Common Stock 5,400(12) * *
Stanley D. Rosenberg Common Stock 6,400(12) * *
Michael J. Rosenthal Common Stock 1,400(17) * *
Paul N. Schwartz Common Stock 84,223(18) 1.4 *
All directors, nominees for director and Common Stock 3,257,636(19) 50.9
executive officers of the Company as a Preferred Stock 752,441(7) 99.2 77.1
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) Gilda Investments, LLC ("GILDA") is a wholly owned subsidiary of Giddeon
Holdings. Gilda, Giddeon Holdings, Giddeon Portfolio LLC ("GIDDEON
PORTFOLIO"), the Hurwitz Investment Partnership L.P. and Mr. Hurwitz may
be deemed a "group" (the "STOCKHOLDER GROUP") within the meaning of
Section 13(d) of the Securities Exchange Act of 1934, as amended. The
address of Gilda is 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.

(4) Includes options to purchase 21,029 shares of Common Stock held by Gilda.
Also includes 60,000 shares owned by Giddeon Portfolio. Giddeon Portfolio
is a Texas limited liability company which is owned 79% by Gilda and 21%
by Mr. Hurwitz, and of which Gilda is the managing member.

(5) Includes (a) 2,404,314 shares of Common Stock owned by Gilda as to which
Mr. Hurwitz indirectly possesses voting and investment power, (b) 80,808
shares of Common Stock separately owned by Mr. Hurwitz's spouse and as to
which Mr. Hurwitz disclaims beneficial ownership, (c) 268,553 shares of
Common Stock held directly by Mr. Hurwitz, and (d) options held by Mr.
Hurwitz to purchase 259,480 shares of Common Stock and exercisable within
60 days of the Record Date.

(6) Includes 46,500 shares of Common Stock owned by the Hurwitz Investment
Partnership L.P., a limited partnership in which Mr. Hurwitz and his
spouse each hold a 4.32% interest as General Partner. The remaining
interests in such limited partnership are held by trusts for the benefit
of Mr. Hurwitz's adult children.

(7) Includes 662,441 shares of Preferred Stock held directly by Mr. Hurwitz.
Also includes options held by Mr. Hurwitz to purchase 90,000 shares of
Preferred Stock and exercisable within 60 days of the Record Date.

(8) Information based solely on Schedule 13G/A (the "LEONE 13G") filed with
the SEC on November 20, 2003, on behalf of Christian Leone, LCG Holdings,
LLC ("LCGH"), Luxor Capital Group, LLC ("LCG"), Luxor Capital Partners, LP
("LCP"), Luxor Management, LLC ("LM"), Luxor Capital Holdings, LP ("LCH"),
and Luxor Capital Partners Offshore, Ltd. ("LCPO"). The Leone 13G
indicates that Mr. Leone is the sole manager and member of LCGH; LCGH is
the sole manager and member of LCG and LM; LCG is the general partner and
control person of LCP; LM is the general partner of LCH; LCH is the
investment manager of LCPO; and LCP and LCPO directly own the shares
reported in the Leone 13G. The business address of the filers of the Leone
13G is 599 Lexington Avenue, 35th Floor, New York, New York 10022.

(9) Information based solely on Schedule 13G/A (the "DIMENSIONAL 13G") filed
with the Securities and Exchange Commission ("SEC") on February 6, 2004,
by Dimensional Fund Advisors Inc. ("DIMENSIONAL"), a Delaware corporation
which is a registered investment advisor. The Dimensional 13G indicates
that Dimensional has sole voting and dispositive power with respect to
343,825 shares and that all of such shares are owned by other persons or
entities having the right to receive and the power to direct the receipt
of dividends from, and proceeds from the sale of, such shares. The
business address of Dimensional is 1299 Ocean Avenue, 11th Floor, Santa
Monica, California 90401.

(10) Information based solely on Schedule 13G/A (the "SCION 13G") filed with
the SEC on November 21, 2003, on behalf of Scion Capital, LLC ("SCION").
The Scion 13G indicates that serves as investment manager to Scion Value
Fund, a Series of Scion Funds, LLC, and Scion Qualified Value Fund, a
Series of Scion Qualified Funds, LLC, both of which are private investment
companies (the "FUNDS"). All shares reported in the Scion 13G are owned by
the Funds, and Scion disclaims beneficial ownership of such shares. The
business address of Scion is 1731 Technology Drive, Suite 550, San Jose,
CA 95110.

(11) Relates to options to purchase 8,480 shares of Common Stock and
exercisable within 60 days of the Record Date.

(12) Includes options to purchase 4,400 shares of Common Stock and exercisable
within 60 days of the Record Date.

(13) Includes options to purchase 5,520 shares of Common Stock and exercisable
within 60 days of the Record Date.

(14) Relates to options to purchase 37,820 shares of Common Stock and
exercisable within 60 days of the Record Date.

(15) 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.

(16) Includes 4,017.6 shares of Common Stock owned by the Hurwitz Investment
Partnership, L.P., a limited partnership in which Mr. Hurwitz and his
spouse each have a 4.32% general partnership interest, 2,008.8 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.

(17) Relates to options to purchase 1,400 shares of Common Stock and
exercisable within 60 days of the Record Date.

(18) Includes options to purchase 69,620 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 3,098,201 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 139,780 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, 2003:

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, 2003 809,412 389,523(2) 65,000(2) -0-(3) 99,680 146,823(4)(5)
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
2002 809,412 435,233(6) -- -0-(3) 124,600 142,361(4)(5)
2001 785,836 544,041(7) -- -0-(3) 124,600 142,284(4)(5)

J. KENT FRIEDMAN, 2003 482,040 298,080 67,657(8) -0-(3) 16,720 58,828(4)(5)
VICE CHAIRMAN AND
GENERAL COUNSEL
2002 482,040 259,200 70,754(8) -0-(3) 20,900 38,979(4)(5)
2001 468,000 324,000 79,878(8) -0-(3) 20,900 29,556(4)(5)

PAUL N. SCHWARTZ, 2003 579,305 358,226 -- -0- 20,080 105,083(4)(5)
DIRECTOR, PRESIDENT AND
CHIEF FINANCIAL OFFICER
2002 579,305 361,501 -- -0- 25,100 101,889(4)(5)
2001 562,432 464,376 -- -0- 25,100 103,061(4)(5)

BERNARD L. BIRKEL, 2003 191,884 100,000 -- -0- 4,080 -0-(5)
SECRETARY
2002 191,884 85,000 -- -0- 5,100 -0-(5)
2001 186,294 105,000 -- -0- 5,100 6,645(5)

DIANE M. DUDLEY, 2003 172,010 95,000 -- -0- 3,040 31,202(4)(5)
VICE PRESIDENT AND
CHIEF PERSONNEL OFFICER
2002 172,010 80,000 -- -0- 3,800 30,253(4)(5)
2001 167,000 100,000 -- -0- 3,800 34,961(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) The column (d) amount excludes a payment of $435,233 made in 2003 with
respect to a bonus awarded in 2002. The Section 162(m) Committee awarded a
bonus of $454,523 with respect to 2003, but the amount actually paid was
reduced by $65,000, the amount of fees Mr. Hurwitz earned in 2003 as a
director of Kaiser and KACC. Column (e) reflects the Kaiser and KACC
directors' fees.

(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 and March 5, 2004. As of December 31, 2003, Messrs. Hurwitz
and Friedman owned 17,490 and 31,298 restricted shares of Kaiser common
stock valued at $1,487 and $2,660 respectively, based on the closing price
on the OTC Bulletin Board of $0.085 per share. Messrs. Hurwitz and
Friedman cancelled all such shares prior to their vesting on March 5,
2004. As of December 31, 2003, Mr. Hurwitz beneficially owned 256,808
shares of restricted Common Stock of the Company (including the dividend
rights in respect thereof) valued at $4,866,512 based on the closing price
of $18.95 per share on the AMEX.

(4) Includes the following aggregate amounts accrued for 2003, 2002 and 2001,
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--$146,823, $142,361 and
$135,735; Mr. Friedman--$55,828, $38,979 and $22,756; Mr.
Schwartz--$105,083, $101,889 and $97,147; and Ms. Dudley--$31,202, $30,253
and $28,845.

(5) These amounts include matching contributions by the Company under its
401(k) savings plan for 2001 as follows: Mr. Hurwitz-- $6,549; Mr.
Friedman--$6,800; Mr. Schwartz--$5,914; Mr. Birkel--$6,645; and Ms.
Dudley--$6,116. There were no matching contributions by the Company in
either 2003 or 2002 for these persons.

(6) Reflects bonus awarded in 2002, although such bonus was paid in 2003.

(7) Reflects bonus awarded in 2001, although such bonus was paid in 2002.
Excludes a payment of $375,490 made in 2001 with respect to a bonus
awarded in 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 2003 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 99,680 56.6 19.72 12/10/13 985,197
J. Kent Friedman 16,720 9.5 19.72 12/10/13 165,254
Paul N. Schwartz 20,080 11.4 19.72 12/10/13 198,463
Bernard L. Birkel 4,080 2.3 19.72 12/10/13 40,325
Diane M. Dudley 3,040 1.7 19.72 12/10/13 30,046

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

(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 4.318%, a
dividend yield of 0%, an expected stock price volatility of 42.76%, and an
expected life of 6.67 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, 2003 by each of the named executive officers, and
the 2003 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- 252,980(3) 327,100(3) 502,215(2) 1,169,630(2)
J. Kent Friedman -0- -0- 37,820(3) 57,000(3) 77,325(2) 191,580(2)
Paul N. Schwartz -0- -0- 119,620(3) 68,260(3) 92,898(2) 230,102(2)
Bernard L. Birkel -0- -0- 13,280(3) 14,000(3) 20,588(2) 47,895(2)
Diane M. Dudley -0- -0- 8,720(3) 10,020(3) 14,031(2) 34,814(2)

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

(1) Represents underlying shares of Preferred Stock.

(2) Valued based upon the $18.95 closing price of the Company's Common Stock
on December 31, 2003. No value is shown where 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, 2003,
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 1,073,590 $ 22.99 324,710 (2)
Preferred Stock 90,000 39.61 70,000

EQUITY COMPENSATION PLANS NOT APPROVED BY
SECURITY HOLDERS - - -
======================= =======================
TOTAL 1,163,590 24.28 378,910

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

(1) Does not include securities issuable pursuant to the Executive Plan as
there are no securities set aside for issuance thereunder. However, it is
possible that securities of the Company could in the future be issued
pursuant to the Executive Plan.

(2) Includes the additional 16,800 shares of Common Stock which would be
issuable were the Amended and Restated Non-Employee Director Stock Plan to
be approved.

RETIREMENT PLANS

MAXXAM Pension Plan
All officers who are also employees and other regular employees of the
Company automatically participate in the Company's Pension Plan (the "PENSION
PLAN"), a noncontributory, defined benefit plan. Retirement benefits equal the
sum of an employee's "past service benefit" and "future service benefit."
Benefits are based on (i) an employee's base salary, including overtime, but
excluding bonuses, commissions and incentive compensation and (ii) an employee's
age and the number of years of service with the Company.

Under the Pension Plan, the annual past service benefit is the greatest of:

(i) benefits accrued under the plan through December 31, 1986;

(ii) the product of (a) the sum of 0.8% of the participant's Past Service
Compensation Base (as defined), plus 0.8% of the participant's Past
Service Compensation Base in excess of $15,000 and (b) the
participant's credited years of service prior to January 1, 1987; or

(iii) the product of 1.2% of the participant's Past Service Compensation
Base and the participant's credited years of service prior to
January 1, 1987.

For 1987 and 1988, the annual future service benefit equaled 1.6% of an
employee's compensation up to two-thirds of the Social Security wage base, plus
2.4% of any remaining compensation. Effective January 1, 1989, the annual future
service benefit equaled 1.75% of an employee's compensation for each year of
participation, plus 0.6% of the employee's compensation in excess of $10,000.
Effective January 1, 1995, the annual future service benefit equals 2.35% of an
employee's compensation for each year of participation.

The amount of an employee's aggregate plan compensation that may be
included in benefit computations under the Pension Plan is limited to $200,000
for 2003. 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 2003 and credited years of service
as of December 31, 2003 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--23 years--$139,008; Mr.
Friedman: $200,000--4 years--$42,781; Mr. Schwartz: $200,000--23
years--$126,288; Mr. Birkel: $191,884--13 years--$91,992; and Ms. Dudley:
$172,010--23 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 $205,000 for 2004 and subsequent years under Section
401(a)(17) of the Code. In addition, the amounts reflect a maximum benefit limit
of $165,000 for 2004 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 2003.

The following projections are based on the same assumptions as utilized in
connection with the Pension Plan projections above. The 2004 qualified plan pay
limit ($205,000) and benefit limit ($165,000) are reflected for all years in the
future. In addition, no future increases in the participants' covered
compensation amounts from the 2003 levels are assumed.

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

COVERED COMPENSATION FOR 2003:
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, 2003 23 4 23

PROJECTED NORMAL RETIREMENT BENEFIT:
Qualified Plan $ 139,008 $ 42,781 $ 126,288
Nonqualified Plan 181,733 59,391 129,029
------------- ------------- -------------
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, 2003 would have been as follows: Mr.
Hurwitz--$1,618,824; Mr. Friedman--$74,160; Mr. Schwartz-- $1,158,610; Mr.
Birkel--$376,388; 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 is
required to 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 2003.

EXECUTIVE OFFICER COMPENSATION

The Policy Committee generally approves the policies and criteria under
which compensation is paid or awarded to the Company's executive officers.
Occasionally, the Chief Executive Officer of the Company exercises his authority
to make a particular payment, award or adjustment. Among the factors the Policy
Committee takes into consideration in its decisions on executive compensation
are the diversified and multifaceted financial and managerial skills required to
effectively manage the Company's complex structure. For instance, the Company
consists of units operating in wholly separate industries and 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 executive officers and business units when making executive compensation
decisions but also recognizes the particular talents required to build the
Company's asset base through 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 Policy Committee or Section 162(m) Committee may on
occasion engage outside consultants in connection with particular compensation
issues.

The primary elements of compensation for executive officers of the Company
are base salaries and annual discretionary bonuses. The Policy Committee also
recommends or approves bonus compensation awards from time to time under
additional incentive compensation programs such as the 2002 Omnibus Plan.
Certain executive officers may also become eligible to participate in the
Company's Executive Plan, although to date only the Chief Executive Officer and
the President 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 performance and
the executive officers' specific duties, responsibilities and qualifications.
Base salaries are generally adjusted annually based on a variety of factors,
including cost of living information and industry trends. Following a year in
which executive officer salaries were frozen, in December 2003, executive
officers received salary increases of approximately 3.0% or less in respect of
2004 (although one executive officer did receive a larger increase in connection
with a promotion).

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. The bonuses awarded in
December 2003 increased somewhat from the prior year's awards, but were still
less than 2001 levels. These bonuses were proposed by the Chief Executive
Officer or President (other than in respect of themselves), subject to review
and approval by the Policy Committee.

Additional Incentive Awards
Awards under the 2002 Omnibus Plan are stock-based and any compensation
which could arise from the awards would normally be tied to stock price
appreciation. In 2003, five executive officers were granted non-qualified stock
options, with such options having tandem stock appreciation rights, with respect
to 46,000 shares of Common Stock. In addition to those grants, the Chief
Executive Officer was granted non-qualified options, with such options having
tandem stock appreciation rights, with respect to 99,680 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. In 2003, the Section 162(m)
Committee adopted certain amendments to the Executive Plan, subject to
reapproval of the Executive Plan by the stockholders. These amendments included
revising the definition of "Affiliate" to exclude the Kaiser affiliated group,
lowering the qualifying dollar threshold for "Extraordinary Transactions" from
$100 million to $25 million, and various clarifying changes. The stockholders of
the Company subsequently reapproved the Executive Plan. Under the Executive
Plan, the executive officers who are or will be eligible to participate are the
only executive officers of the Company to which the deduction limitation of
Section 162(m) of the Code is likely to apply. The Section 162(m) Committee
meets prior to the 90th day of each year to identify current areas, factors or
transactions involving the Company's business where the Section 162(m) Committee
believes it would be beneficial to provide an incentive for a participant's
performance. As a result, objective performance criteria are pre-established and
based on general business standards or are narrowly fact-specific to a given
fiscal year or, in some instances with respect to longer term objectives,
multiple fiscal years. The Chief Executive Officer and the Company's President
were the only executive officers eligible under the Executive Plan for 2003
(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 2003, the Policy Committee approved a base salary
increase of approximately 3.0% for Mr. Hurwitz, but no discretionary bonus for
2003.

As described above, Mr. Hurwitz participates in the Executive Plan. The
performance criteria established for 2003 by the Section 162(m) Committee for
Mr. Hurwitz under the Executive Plan were based upon (i) improved consolidated
financial results, (ii) certain subsidiaries committing to specified new
business ventures, (iii) extraordinary transactions by certain subsidiaries,
(iv) improvement in earnings per share and (v) the achievement by the Company's
operating segments of their 2003 business plans. Based on these performance
criteria, Mr. Hurwitz was entitled as of December 2003 to receive at least
$454,523 under the Executive Plan, and the Section 162(m) Committee awarded such
amount. Additional criteria were subsequently satisfied by virtue of the
Company's financial performance in 2003 that would entitle Mr. Hurwitz to an
additional award of up to $882,259; however, the 162(m) Committee exercised its
negative discretion and did not approve any additional award.

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 8, 2004
To the Board of Directors of MAXXAM Inc.:

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

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

The Audit Committee reviewed with management and the independent auditors
the quarterly reports on Form 10-Q of the Company for each of the three quarters
in the nine-month period ended September 30, 2003 and the annual report on Form
10-K for the year ended December 31, 2003. Management has the responsibility for
the preparation of the Company's financial statements, and the independent
auditors have the responsibility for the examination of those statements. The
Audit Committee discussed with Messrs. Hurwitz and Schwartz, the Company's Chief
Executive and Chief Financial Officers, their certifications of such reports.

Based on the above-mentioned reviews and discussions with management and
the independent auditors, the Audit Committee recommended to the Board that the
Company's audited financial statements be included in its Annual Report on Form
10-K for the year ended December 31, 2003, which was filed with the Securities
and Exchange Commission on March 30, 2004.

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

PRINCIPAL ACCOUNTING FIRM FEES

The following table sets forth the aggregate fees billed to the Company
and its consolidated subsidiaries (excluding Kaiser) for professional services
provided in 2002 and 2003 by Deloitte & Touche LLP ("DELOITTE"), the Company's
independent auditor and principal accounting firm:

YEARS ENDED DECEMBER 31,
---------------------------------
2003 2002
---------------- ----------------

Audit Fees(1).............................................$ 974,910 $ 777,300
Audit-Related Fees(2)..................................... 48,552 61,137
Tax Fees(3)............................................... 627,462 339,410
All Other Fees(4)......................................... -- --
---------------- ----------------
Total..............................................$ 1,650,924 $ 1,177,847
================ ================

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

(1) Consists of professional services rendered for the audit of the annual
financial statements of the Company and certain subsidiaries and for the
review of the quarterly financial statements of the Company and certain
subsidiaries.

(2) Consists of fees for the audits of the benefit plans of the Company and
certain subsidiaries and fees for accounting and financial reporting
consultations.

(3) Consists of fees for tax planning and tax compliance services.

(4) Consists of fees for permitted non-audit services.

The Audit Committee has responsibility for appointing, setting
compensation and overseeing the independence and work of the independent
auditor. In recognition of this responsibility, the Audit Committee's Charter
requires pre- approval by the Audit Committee of all audit and non-audit
services to be furnished by the independent auditor to the Company and its
subsidiaries (see Section III.8 of Appendix A for additional details).
Pre-approval is waived in those instances permitted by applicable SEC regulation
so long as the Audit Committee subsequently approves such services within any
applicable deadline. None of the foregoing services were approved by the Audit
Committee pursuant to the provisions of Section 2-01(c)(7)(i)(C) of SEC
Regulation S-X.

PERFORMANCE GRAPH

The following performance graph compares the cumulative total stockholder return
on the Company's Common Stock with the cumulative total returns of the S&P 500
Stock Index and a peer group consisting of companies included by S&P in its
published indices for the Forest Products Industry for the Company's last five
fiscal years. The graph assumes that the value of the investment in the
Company's Common Stock and each index was $100 at December 31, 1998, and that
all dividends were reinvested. The data points are calculated as of the last
trading day for the year indicated.

[GRAPHIC OMITTED]

Base
Period
Company/Index Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03
----------------------- ------- ------- ------- ------- ------- -------
MAXXAM Inc. 100 74.73 26.47 30.50 16.21 33.03
S&P 500 Index 100 121.04 110.02 96.95 75.52 97.18
S&P 500 Forest Products 100 146.32 100.71 109.06 102.35 143.79

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 25% and 15%, respectively, of the
Company's 2003 consolidated revenues. Accordingly, a line-of-business index for
each such industry is therefore not utilized.

CERTAIN TRANSACTIONS

LITIGATION MATTERS

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

In 1995, the Federal Deposit Insurance Corporation ("FDIC") filed a civil
action entitled Federal Deposit Insurance Corporation, as manager of the FSLIC
Resolution Fund v. Charles E. Hurwitz (the "FDIC ACTION") in the U.S. District
Court for the Southern District of Texas (No. H-95-3956). The original complaint
was against Mr. Hurwitz and alleged damages in excess of $250.0 million based on
the allegation that Mr. Hurwitz was a controlling shareholder, de facto senior
officer and director of USAT, and was involved in certain decisions which
contributed to the insolvency of USAT. The FDIC action has been dismissed as a
result of the settlement of the OTS action. This dismissal does not affect the
FDIC counterclaim or the Sanctions Motion 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). On November 8, 2002, the Respondents filed an amended counterclaim
and an amended motion for sanctions (collectively, the "SANCTIONS MOTION"). The
Sanctions Motion states that the FDIC illegally paid the OTS to bring claims
against the Respondents and that the FDIC illegally sued for an improper
purpose. The Respondents are seeking as a sanction to be made whole for the
attorneys' fees they have paid (plus interest) in connection with the OTS and
FDIC actions. As of December 31, 2003, such fees were in excess of $40 million.
The Respondents are pursuing this claim vigorously.

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 OTS and FDIC actions, and the Company's advancement of
fees and expenses on behalf of Federated and certain of the Company's directors
in connection with these actions. It alleges that the defendants have breached
their fiduciary duties to the Company, and have wasted corporate assets, by
allowing the Company to bear all of the costs and expenses of Federated and
certain of the Company's directors related to the OTS and FDIC actions. The
plaintiff seeks to require Federated and certain of the Company's directors to
reimburse the Company for all costs and expenses incurred by the Company in
connection with the OTS and FDIC actions, and to enjoin the Company from
advancing to Federated or certain of the Company's directors any further funds
for costs or expenses associated with these actions. The parties have agreed to
an indefinite extension of the defendants' obligations to respond to the
plaintiffs' claims.

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

Indemnification of Directors and Officers
Certain present and former directors and officers of the Company are
parties in certain of the actions described above. The Company's Amended and
Restated By-Laws provide for indemnification of its officers and directors to
the fullest extent permitted by Delaware law. The Company is obligated to
advance defense costs to its officers and directors, subject to the individual's
obligation to repay such amount if it is ultimately determined that the
individual was not entitled to indemnification. In addition, the Company's
indemnity obligation can under certain circumstances include amounts other than
defense costs, including judgments and settlements.

OTHER MATTERS

The Company and certain of its subsidiaries share certain administrative
and general expenses with Giddeon Holdings. Under these arrangements, Giddeon
Holdings' obligation to the Company and its subsidiaries was approximately
$51,184 for 2003. At December 31, 2003, Giddeon Holdings owed the Company $7,024
for certain general and administrative expenses, which amount was subsequently
paid in 2004.

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 12 to the Consolidated Financial Statements of the Company contained in
its Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (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 2003).

Shawn Hurwitz, the son of Mr. Hurwitz, is also Chief Executive Officer of
the Company's real estate operations, and during 2003 received an aggregate of
$485,000 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 the reporting persons, the Company
believes that all filing requirements were complied with which were applicable
to its officers, directors and beneficial owners holding greater than ten
percent.

OTHER BUSINESS

Neither the Board nor management intends to bring before the Annual
Meeting any business other than the matters referred to in the Notice of Annual
Meeting of Stockholders and this Proxy Statement, nor is any stockholder
entitled under the Company's Amended and Restated By-Laws to bring any such
other matter before the Annual Meeting. Nonetheless, if any other business
should properly come before the meeting, or any postponement or adjournment
thereof, the persons named on the enclosed proxy card will vote on such matters
according to their best judgment.

OTHER MATTERS

SOLICITATION OF PROXIES

The cost of mailing and soliciting proxies in connection with the Annual
Meeting will be borne by the Company. In addition to solicitations by mail,
proxies may also be solicited by the Company and its directors, officers and
employees (who will receive no compensation therefor beyond their regular
salaries or fees). Arrangements also will be made with brokerage houses and
other custodians, nominees and fiduciaries to forward solicitation materials to
the beneficial owners of the Common Stock and Preferred Stock of the Company,
and such entities will be reimbursed for their expenses.

INDEPENDENT PUBLIC ACCOUNTANTS

Deloitte has completed its audit with respect to the Company's 2003 fiscal
year. The Company also anticipates that Deloitte will conduct the 2004 audit,
although the Audit Committee has not yet commenced the selection process with
respect to the 2004 audit. Representatives of Deloitte plan to attend the Annual
Meeting and will be available to answer questions. Such representatives will
also have an opportunity to make a statement at the Annual Meeting if they so
desire.

As recommended by the Audit Committee (in accordance with the Audit
Committee charter then in effect), 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 Deloitte 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 COMMUNICATIONS WITH DIRECTORS

Due to the small number of communications from stockholders received by
the Company, the Board has not adopted a formal process for receiving
communications from stockholders. However, a stockholder may contact the Board,
or any individual director, by sending a written communication to Board of
Directors, MAXXAM Inc., c/o Corporate Secretary, 5847 San Felipe, Suite 2600,
Houston, Texas 77057. A stockholder's letter should indicate that he or she is a
MAXXAM stockholder. The Corporate Secretary will either (a) distribute such
communication to the Board, or a member or members thereof, as appropriate
depending upon the facts and circumstances described in the communication
received; or (b) determine that the communication should not be forwarded to the
Board or any of its members because, in the Secretary's judgment, (i) the
communication is primarily commercial in nature and relates to the Company's
ordinary business or otherwise relates to matters that are not relevant to the
Board; or (ii) the Company's management can adequately handle the stockholder
inquiry or request, in which case the inquiry or request will be forwarded to
the appropriate individual for action.

STOCKHOLDER PROPOSALS FOR THE 2005 ANNUAL MEETING

Proposals which stockholders intend to present at the 2005 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 December 22, 2004, to be presented at
the meeting. Proposals pursuant to Rule 14a-8 of the proxy rules must also be
received by December 22, 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 20, 2005 (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.

APPENDIX A

MAXXAM INC.

CHARTER OF THE
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

I. AUDIT COMMITTEE PURPOSE

The Audit Committee (the "Committee") of MAXXAM Inc. (the "Corporation")
is appointed by the Board of Directors (the "Board") to aid the Board in
fulfilling its oversight responsibilities. The Committee's primary duties
and responsibilities are to:

o Serve as an independent and objective party to oversee the integrity
of the Corporation's accounting and financial reporting processes
and internal control system, including the Corporation's systems of
internal controls regarding finance and accounting, that management
and the Board have established. Consistent with this function, the
Committee should encourage continuous improvement of, and should
foster adherence to, the Corporation's policies, procedures and
practices at all levels.

o Review and appraise the independence and performance of the
Corporation's independent accountants and the performance of the
Corporation's internal auditing department or other body performing
that function on behalf of the Corporation (the "Internal Audit
Group").

o Provide an open avenue of communication among senior management, the
independent accountants, the Internal Audit Group, and, as
necessary, the Board.

The purpose of this Charter is to outline the duties and responsibilities
of the Committee. Neither the existence nor the provisions of this Charter
may be relied upon by any person as a basis for asserting any liability
against anyone serving as a member of the Committee at any time or against
any person or entity providing services to or on behalf of the Committee.

The Committee shall have the authority to engage independent counsel and
other advisers as it determines necessary to carry out its duties. The
Committee shall also have, and the Board by ratification of this Charter
grants to the Committee, the appropriate funding, as determined by the
Committee, in its capacity as a committee of the Board, for payment of (a)
compensation to any registered public accounting firm engaged for the
purpose of preparing or issuing an audit report or performing other audit,
review or attest services for the Corporation or any of its subsidiaries,
(b) compensation to any advisers employed by the Committee, and (c)
ordinary administrative expenses of the Committee that are necessary or
appropriate in carrying out its duties.

II. AUDIT COMMITTEE COMPOSITION AND MEETINGS

The size and composition of the Committee and the qualification of its
members shall meet the requirements of all laws, rules and regulations,
including those of any exchange on which the Corporation's securities are
listed (i.e. on such matters as having an Audit Committee Financial Expert
and having members who satisfy requisite independence and financial
literacy standards). Committee members may enhance their familiarity with
finance and accounting by participating in educational programs conducted
by the Corporation, an outside consultant or other third party.

The members of the Committee shall be elected by the Board annually (by
written consent or at a regular or special meeting of the Board). The
Chairman of the Committee shall be selected in accordance with the
procedures established in the Corporation's By-laws.

The Committee shall meet at least four times annually, on a quarterly
basis, and shall meet more frequently if circumstances dictate. In
addition, the Committee (or at least its Chairman) shall meet with
management and the independent accountants quarterly to review the
Corporation's financial statements, consistent with Section III.3. below.
As part of its duty to foster open communication, the Committee shall meet
as it deems necessary with management, including the chief financial,
legal and accounting officers, with the director of the Internal Audit
Group, and with the independent accountants in separate executive sessions
to discuss any matters that the Committee or any of these persons or
groups believe should be discussed privately.

III. COMMITTEE RESPONSIBILITIES AND DUTIES

General

1. Review and reassess the adequacy of this Charter at least annually
and update it as conditions dictate. Submit this Charter to the
Board for approval whenever the Committee recommends any changes,
but (whether or not changes are recommended) at least annually. Have
the Corporation publish this Charter and provide any requisite
certification in accordance with any applicable Securities and
Exchange Commission, stock exchange or other requirements.

2. Establish regular and separate systems of reporting to the Committee
by each of management and the independent accountants regarding any
significant judgments made in management's preparation of the
financial statements and the view of each as to appropriateness of
such judgments.

3. Review with financial management and the independent accountants the
Corporation's annual and quarterly financial statements prior to
their issuance. The Committee may designate the Chairman to
represent the entire Committee for purposes of the review of the
quarterly (other than year-end) financial statements.

4. Consider and approve, if appropriate, major changes to the
Corporation's auditing, accounting, and internal control principles
and practices as suggested by management, the independent
accountants, or the Internal Audit Group, and subsequently review
with such persons, as appropriate, the extent to which such changes
have been implemented.

Independent Accountants

5. Advise the independent accountants that: (a) they are directly
accountable to the Committee, as representatives of the
Corporation's shareholders; and (b) the Committee has sole authority
and responsibility to select, evaluate, and, where appropriate,
replace the independent accountants.

6. Confer with the independent accountants concerning the scope of
their examinations of the books and records of the Corporation and
its subsidiaries; review and approve the independent accountants'
annual engagement letter; direct the attention of the independent
accountants to specific matters or areas deemed by the Committee to
be of special significance; and authorize the independent
accountants to perform such supplemental reviews or audits as the
Committee may deem desirable.

7. Approve the fees and other compensation to be paid to the
independent accountants taking into account all appropriate factors,
including the range and cost of audit and non-audit services
performed by the independent accountants.

8. The Committee shall pre-approve all audit and non-audit services to
be furnished by the independent accountants to the Corporation or
its subsidiaries; provided that (a) the Chairman (or, in the absence
of the Chairman, another Committee member) may pre-approve such
services on an emergency basis so long as the Committee subsequently
ratifies this action, and (b) pre-approval is waived in those
instances permitted by applicable SEC regulation so long as the
Committee subsequently approves such services within any applicable
deadline. The Committee may not approve the performance by the
independent accountants of any non-audit services listed under
Section 201(a) of the Sarbanes-Oxley Act of 2002 ("S-Ox Act") or
Section (c)(4) of Rule 2-01 of SEC Regulation S-X ("Rule 2-01"). In
assessing whether other non-audit services may be performed, the
Committee shall focus on whether such services would be consistent
with the provisions of Rule 2-01.

9. At least annually, review with management and the independent
accountants any significant risks and exposures to the Corporation
and its subsidiaries and the steps that management has taken to
monitor and control such risks and exposures.

10. Review with management and the independent accountants the audit
activities and significant audit findings of the independent
accountants.

11. At least annually, consult with the independent accountants out of
the presence of management about internal controls and the quality
and appropriateness of the Corporation's accounting principles as
applied in its financial statements.

12. On an annual basis, prior to the issuance of the independent
accountants' opinion on the Corporation's financial statements, the
Committee shall (a) receive from the independent accountants the
report required by Rule 2-07 of SEC Regulation S-X (critical
accounting policies and practices to be used, alternative GAAP
treatments which have been discussed with management, and material
written communications between the firm and management), and (b)
obtain a formal written statement from the independent accountants
delineating all relationships between the independent accountants
and the Corporation consistent with Independence Standards Board
Standard 1 "Independence Discussions with Audit Committees." The
Committee shall review the statement and actively engage in a
dialogue with the independent accountants with respect to any
disclosed relationships or services that may impact the objectivity
and independence of the accountants. The Committee shall take
appropriate action to monitor and oversee the independence of the
independent accountants.

13. Following completion of the annual audit, (a) review separately with
each of management and the independent accountants any significant
difficulties encountered during the course of the audit, including
any restrictions on the scope of work or access to required
information, and (b) review any significant disagreement among
management and the independent accountants or the Internal Audit
Group.

14. At least annually, inquire of management and the independent
accountants as to whether they are aware of any consultations with
other independent accountants regarding accounting and auditing
matters that would have a material effect on the Corporation's
financial statements.

15. The Committee shall monitor and review the performance of the
independent accountants.

Internal Audit Group

16. Confer with the Internal Audit Group concerning the focus of the
work to be performed during the year.

17. Direct the special attention of the Internal Audit Group to specific
matters or areas deemed by the Committee to be of special
significance, and authorize the Internal Audit Group to perform such
supplemental reviews or audits as the Committee may deem desirable.

18. Review an executive summary of the internal reports to management
prepared by the Internal Audit Group and management's response.

19. Review and appraise the performance of the Corporation's Internal
Audit Group.

Whistleblower Procedures

20. The Committee shall review and reassess, at least annually, the
procedures for (a) the receipt, retention and treatment of
complaints received by the Corporation regarding accounting,
internal accounting controls, or auditing matters, and (b) the
confidential anonymous submission by employees regarding
questionable accounting or auditing matters, as required by the S-Ox
Act. The Committee shall update such procedures as conditions
dictate.

Other Audit Committee Responsibilities

21. Perform any other activities consistent with this Charter, the
Corporation's By-laws and governing law, as the Committee or the
Board deems necessary or appropriate.

22. Report to the Board periodically, but at least annually, concerning
the activities of the Committee.

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 19, 2004, at The Power Center, Houston,
Texas, you may use this form to pre- register and expedite your admission to the
meeting. Should you pre-register, you will only need to supply proof of
identification (containing a photograph) to enter the meeting. If you hold your
shares of record, please complete and return this form in order to pre-register.
If you hold your shares through your broker, bank or other nominee, please
complete and return this form accompanied by your brokerage or similar statement
(demonstrating that you owned shares of Capital Stock as of the close of
business on March 31, 2004). 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) 364-3702
BEFORE 5:00 P.M., HOUSTON TIME, ON MAY 14, 2004.

( ) I plan to attend OR ( ) I will send my proxy to attend the Company's
Annual Meeting of Stockholders on May 19,
2004.

Please print your response to the following:

Name:
---------------------------------------------------------------------------

Proxy's Name (if applicable):
---------------------------------------------------

Street:
-------------------------------------------------------------------------

City:
---------------------------------------------------------------------------

State: ZIP Code:
-------------------------------------- ------------------------

Daytime Telephone Number (including area code):
-------------------------------

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 19, 2004 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, 2004. 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 17, 2004. 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 19, 2004.

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 19, 2004, 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 19, 2004

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" ALL NOMINEES FOR ELECTION AS
DIRECTORS, "FOR" PROPOSAL 2 AND "FOR" PROPOSAL 3. 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 2005)
/ / Stanley D. Rosenberg (for term expiring in 2005)
/ / WITHHOLD AUTHORITY / / Michael J. Rosenthal (for term expiring in 2005)
FOR ALL NOMINEES / / Paul N. Schwartz (for term expiring in 2007)

/ / 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: / /

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

--------------------------------------------------------------------------------
To change the address on your account, please check the box at right and indicate
your new address in the space above. Please note that changes to the registered
name(s) on the account may not be submitted via this method. / /
--------------------------------------------------------------------------------

2. Proposal to amend the Company's Restated Certificate of Incorporation.
/ / FOR / / AGAINST / / ABSTAIN

3. Proposal to adopt an Amended and Restated Non-Employee Director Stock Plan.
/ / FOR / / AGAINST / / ABSTAIN

4. 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, "FOR" THE PROPOSAL TO AMEND THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION AND "FOR" THE PROPOSAL TO ADOPT AN
AMENDED AND RESTATED NON-EMPLOYEE DIRECTOR STOCK 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 Bernard L. Birkel, Elizabeth D. Brumley
and J. Kent Friedman 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 19, 2004, 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 NOMINEE TO THE BOARD OF DIRECTORS INDICATED ON THE REVERSE,
"FOR" THE PROPOSAL TO AMEND THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION,
AND "FOR" THE AMENDED AND RESTATED NON-EMPLOYEE DIRECTOR STOCK PLAN.

(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)

ANNUAL MEETING OF STOCKHOLDERS OF
MAXXAM INC.

May 19, 2004

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 / / Paul N. Schwartz (for term expiring in 2007)

/ / 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: / /

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

2. Proposal to amend the Company's Restated Certificate of Incorporation.
/ / FOR / / AGAINST / / ABSTAIN

3. Proposal to adopt an Amended and Restated Non-Employee Director Stock Plan.
/ / FOR / / AGAINST / / ABSTAIN

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 Bernard L. Birkel, Elizabeth D. Brumley
and J. Kent Friedman 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 19, 2004, 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,
"FOR" THE PROPOSAL TO AMEND THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION,
AND "FOR" THE AMENDED AND RESTATED NON-EMPLOYEE DIRECTOR STOCK PLAN.

(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)

ANNUAL MEETING OF STOCKHOLDERS OF
MAXXAM INC.

May 19, 2004

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.

/ / 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: / /

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

2. Proposal to amend the Company's Restated Certificate of Incorporation.
/ / FOR / / AGAINST / / ABSTAIN

3. Proposal to adopt an Amended and Restated Non-Employee Director Stock Plan.
/ / FOR / / AGAINST / / ABSTAIN

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

Signature of Stockholder: _____________________________ Date: _________________

0073PXS4.MLB.WPD