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

 Exhibit 10.1
 

 
AGREEMENT
 
THIS AGREEMENT is made by and between The Pension Benefit Guaranty Corporation
(“PBGC”), a United States government corporation, and MAXXAM, Inc. (“MAXXAM”), a
Delaware corporation (collectively, “the Parties”).
 
WITNESSETH:
 
WHEREAS, MAXXAM’s wholly-owned subsidiary, The Pacific Lumber Company (“Palco”),
filed for protection under Chapter 11 of the U.S. Bankruptcy Code on January 19,
2007 (the “Palco Bankruptcy Proceedings”); and
 
WHEREAS, Palco is the Contributing Sponsor (as defined below) of The Palco
Retirement Plan (the “Plan”), a defined benefit pension plan insured by PBGC;
and
 
WHEREAS, the Plan has Unfunded Benefit Liabilities (as defined below), measured
on a termination basis as of April 30, 2007, of approximately $24 million; and
 
WHEREAS, PBGC filed estimated contingent claims in the Palco Bankruptcy
Proceedings against Palco and each of its co-debtors for the Plan’s Unfunded
Benefit Liabilities (as defined below); and
 
WHEREAS, MAXXAM is a member of Palco’s Controlled Group (as defined  below); and
 
WHEREAS, as a member of Palco’s controlled group, MAXXAM is jointly and
severally liable for all required contributions to the Plan and, upon
termination of the Plan, the Plan’s Termination Liability (as defined below),
and the Termination Premium (as defined below); and
 
WHEREAS, the Parties desire that the Plan remain ongoing after Palco emerges
from the Palco Bankruptcy Proceedings;
 
NOW, THEREFORE, in consideration of the mutual covenants contained herein and
for good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Parties agree as follows:
 
Section I
 
Definitions
 
When used herein:
 
“Benefit Liabilities” has the meaning ascribed thereto in ERISA §4001(a)(16),
determined as of a specified date.
 
“Contributing Sponsor” has the meaning ascribed thereto in ERISA §4001(a)(13).
 
 “Controlled Group” has the meaning ascribed thereto in ERISA §4001(a)(14).
 
“Effective Date” means the last date on which a Party signs this Agreement.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
29 U.S.C. §§1001 et seq., and all regulations issued thereunder.  References to
sections of ERISA shall be construed to refer to any successor or substantially
related sections of similar import, and the regulations applicable thereto.
 
“IRC” means the Internal Revenue Code of 1986, as amended, and all regulations
thereunder.  References to sections of the Internal Revenue Code shall be
construed to refer to any successor or substantially related sections of similar
import, and the regulations applicable thereto.
 
“Palco” means The Pacific Lumber Company as Contributing Sponsor (as defined
above) of the Plan or any new entity formed as a result of Palco’s emergence
from protection under Chapter 11 of the U.S. Bankruptcy Code that is a
Contributing Sponsor of the Plan.
 
 “Termination Date” has the meaning ascribed thereto in ERISA §4048.
 
 “Termination Liability” means the liabilities to PBGC described under ERISA
§4062(b).
 
“Termination Premium” means the liability that arises under ERISA §4006(a)(7)
for premiums due and payable by a Contributing Sponsor and each member of its
Controlled Group, upon the termination of a pension plan under circumstances set
forth in ERISA §4006(a)(7)(A).
 
“Unfunded Benefit Liabilities” has the meaning ascribed thereto in ERISA
§4001(a)(18) and its implementing regulations.
 
Section II
 
Obligations & Procedures
 
2.01                      Termination Liability Guaranty and Termination Premium
Guaranty.
 
In the event that the Plan is terminated in a distress termination under ERISA
§4041(c) or in a PBGC-initiated termination under ERISA §4042 during the term of
this Agreement, MAXXAM guarantees to PBGC the payment of the Unrecovered
Termination Liability and the Unrecovered Termination Premium, as described in
sections (a) and (b) below.
 
(a)           The Unrecovered Termination Liability is the Plan’s Unfunded
Benefit Liabilities as of the Termination Date, less the Controlled Group
Termination Liability Recovery Amount (as described below), plus Assessable
Interest (as described below), calculated from the date of PBGC’s demand for
payment under section 2.02(b).  The Controlled Group Termination Liability
Recovery Amount means the present value of the amounts, if any, that PBGC
received or arranged to receive from the Contributing Sponsor and each member of
the Contributing Sponsor’s Controlled Group (with the exception of MAXXAM) for
payment of the Plan’s Termination Liability.
 
(b)           The Unrecovered Termination Premium is the total, three-year
Termination Premium due PBGC under ERISA §4006(a)(7), less the Controlled Group
Termination Premium Recovery Amount (as described below), plus Assessable
Interest (as described below), calculated from the date of PBGC’s demand for
payment under section 2.02(b).  The Controlled Group Termination Premium
Recovery Amount shall mean the present value of the amounts, if any, that PBGC
received, or arranged to receive, from the Contributing Sponsor and  each member
of the Contributing Sponsor’s Controlled Group (with the exception of MAXXAM)
for payment of the Plan’s Termination Premium.
 
(c)           Assessable Interest shall arise only after PBGC issues a demand
under section 2.02(b).  Assessable Interest shall be calculated using an annual
rate of interest equal to the annual short-term applicable Federal interest rate
under IRC §1274 in effect on the date PBGC issues its demand under section
2.02(b).
 
(d)           For purposes of calculating the Controlled Group Termination
Liability Recovery Amount and the Controlled Group Termination Premium Recovery
Amount, PBGC shall value any in-kind payments at their fair market value and
shall determine the present value of any deferred payment amounts under any
payment agreements using the same rate PBGC used to determine Benefit
Liabilities for the Plan.  The fair market value of in-kind payments and the
present value of deferred payment amounts shall be established as of the
Termination Date of the Plan.
 
2.02                      Conditions and Procedure for Making a Demand for
Unrecovered Termination Liability and Unrecovered Termination Premium.
 
(a)           Before issuing a demand under paragraph (b) of this section, PBGC
shall provide MAXXAM with:
 
(1)           Notice that PBGC has received a distress termination notice
pursuant to ERISA § 4041 (this notice shall be provided within twenty (20) days
of PBGC’s receipt of the distress termination notice); or
 
(2)           Notice that PBGC has decided in accordance with its administrative
procedures (by issuing a Notice of Determination) to initiate proceedings under
ERISA § 4042 to terminate the Plan (this notice shall be provided within twenty
(20) days after the Notice of Determination has been issued); and
 
(3)           Notice of the proposed Termination Date for the Plan; and
 
(4)           As to each person (with the exception of MAXXAM) described in
ERISA §4062(a) as being liable for the Termination Liability and as to each
person described in ERISA §4007(e) as being liable for the Termination Premium,
evidence that PBGC has either: (i) reached a final agreement resolving each such
person’s Termination Liability and Termination Premium, which said agreement
includes a release of claims for the Termination Liability and the Termination
Premium; or (ii) exhausted all reasonable efforts to obtain payment of the
Termination Liability and Termination Premium.
 
(b)           No later than ninety (90) days after PBGC has met the conditions
set forth in section 2.02(a), PBGC shall issue to MAXXAM a demand for the
Unrecovered Termination Liability and/or the Unrecovered Termination
Premium.  Such demand shall include the following information (as applicable):
 
(1)           The amount of the Termination Liability as of the Termination
Date;
 
(2)           The Unfunded Benefit Liabilities of the Plan;
 
(3)           The Controlled Group Recovery Amount;
 
(4)           The amount of the Unrecovered Termination Liability;
 
(5)           The amount of the Termination Premium as of the Termination Date;
 
(6)           The Controlled Group Termination Premium Recovery Amount;
 
(7)           The amount of the Unrecovered Termination Premium;
 
(8)           The name, address, and contact person for each Contributing
Sponsor, and each member of such sponsor’s controlled group (with the exception
of MAXXAM) as of the Plan’s Termination Date, if known to PBGC; and
 
(9)           If applicable, a description of the manner in which PBGC has
exhausted reasonable efforts to obtain payment of the Termination Liability and
the Termination Premium.
 
2.03                      Payment of Unrecovered Termination Liability and
Unrecovered Termination Premium. 
 
MAXXAM shall pay the Unrecovered Termination Liability and the Unrecovered
Termination Premium within sixty (60) days of receipt of the demand.
 
2.04                      Request For Review of Demand.  Within thirty (30) days
following receipt of a demand under section 2.02(b), MAXXAM may request that
PBGC review any calculation contained in the demand, and request information
supporting or relating to any calculation contained in the demand.  PBGC shall
respond to such a request in writing and provide relevant documents within
thirty (30) days of receipt of the request.  MAXXAM does not have any obligation
to make payment of the Unrecovered Termination Liability or the Unrecovered
Termination Premium during this review process.  Within thirty (30) days
following receipt of PBGC’s response, MAXXAM shall pay PBGC the Unrecovered
Termination Liability and the Unrecovered Termination Premium.
 
In objecting to a demand, MAXXAM shall not question PBGC’s decision to terminate
the Plan or raise issues concerning the Plan’s Termination Date.
 
2.05                      Assumption of the Plan.  If a plan of reorganization
confirmed by the bankruptcy court in the Palco Bankruptcy Proceeding does not
provide for the continuation of the Plan, MAXXAM intends to assume sponsorship
of the Plan.  If a plan of reorganization confirmed by the court does provide
for the continuation of the Plan, MAXXAM may attempt to assume sponsorship of
the Plan at any time thereafter.  PBGC shall not oppose any efforts that MAXXAM
may make to enter into an agreement to assume sponsorship of the Plan.
 
Notwithstanding the above, PBGC does not waive any of its rights under ERISA §
4042 to terminate the Plan or, any of its rights under ERISA and the IRC
generally in the event that MAXXAM assumes sponsorship of the Plan.
 

 
Section III
 
Representations and Warranties
 
3.01                      MAXXAM represents and warrants as to itself as
follows:
 
(a)           That it has full power and authority to enter into this Agreement
and that this Agreement constitutes a legal, valid, and binding obligation,
enforceable against it in accordance with its terms;
 
(b)           That the person executing this Agreement on its behalf has been
duly authorized and empowered to execute and deliver this Agreement on its
behalf;
 
(c)           That the execution, delivery, and performance of this Agreement do
not and will not violate, conflict with, or result in a breach of any of the
terms of any indenture, agreement, or instrument to which it is party or by
which it is bound, or constitute a default thereunder and, to its best
knowledge, do not and will not violate any law, rule, regulation, order, writ,
judgment, injunction, decree, determination, or award currently in effect;
 
(d)           The execution, delivery, and performance of this Agreement do not
and will not violate any of the provisions of any of MAXXAM’s articles of
incorporation or by-laws.
 
3.02                      The PBGC represents and warrants as to itself as
follows:
 
(a)           That it has full power and authority to enter into this Agreement
and that this Agreement constitutes a legal, valid, and binding obligation,
enforceable against it in accordance with its terms;
 
(b)           That the person executing this Agreement on its behalf has been
duly authorized and empowered to execute and deliver this Agreement on its
behalf; and
 
(c)           That the execution, delivery, and performance of this Agreement do
not and will not violate, conflict with, or result in a breach of any of the
terms of any indenture, agreement or instrument to which it is bound, or
constitute a default thereunder, and to its best knowledge do not and will not
violate any law, rule, regulation, order, writ, judgment, injunction, decree,
determination, or award currently in effect.
 
Section IV
Miscellaneous
4.01                      Governing Law.  This Agreement and the rights and
obligations of the parties hereunder shall, except to the extent preempted by
federal law, be governed by and construed in accordance with the laws of the
District of Columbia without giving effect to its conflict of laws principles.
 
4.02                      Enforceability.  Only the Parties may enforce this
Agreement.  This Agreement is for the sole benefit of the Parties, and is not
intended to confer upon any other person any rights or remedies hereunder, to
amend the Plan, or to create any other plan subject to ERISA.
 
4.03                      Entire Agreement; Amendments.  This Agreement
constitutes the entire agreement between the Parties with respect to the subject
matter hereof and shall merge and supersede all previous agreements,
negotiations, commitments, representations, writings, and discussions between
them concerning such subject matter.  This Agreement cannot be changed or
terminated orally and can be modified only upon the written consent of all the
parties to be bound by such modification.
 
4.04                      Successors and Assigns.  This Agreement shall be
binding upon and inure to the benefit of the respective successors and assigns
of each of the Parties.  No Party may, without the written consent of the Party
affected, assign any of its rights or obligations under this Agreement, directly
or indirectly, whether by operation of law or otherwise.
 
4.05                      Notices to Parties.  All notices and other
communications hereunder shall be in writing and shall be delivered to the
intended recipient at the address so specified below or at such other address as
shall be designated by any of them in a notice to each other party set forth
therein.  Notices shall be effective three (3) days after mailing by certified
mail and when received if sent by any other means.
 
Addresses for Notices:
 
           To MAXXAM:
 
1330 Post Oak Boulevard
Attention Legal Department/Corporate Secretary
Suite 2000
Houston, Texas 77056

 
To PBGC:
 
Pension Benefit Guaranty Corporation
 
1200 K Street, N.W.
 
Washington, DC  20005
 
Attn:  Director, Department of Insurance Supervision & Compliance
 
Fax:  (202) 842-2643
 
With a copy to:
 
Pension Benefit Guaranty Corporation
 
1200 K Street, N.W.
 
Washington, DC  20005
 
Attn:  Chief Counsel, Office of the Chief Counsel
 
Fax:  (202) 326-4112
 

 
4.06                      Headings.  The titles and headings of the sections of
this Agreement are for convenience of reference only and will not control or
affect in any way the scope, intent, or interpretation of any of the provisions
of this Agreement.
 
4.07                      Counterparts.  This Agreement may be executed in one
or more counterparts, all of which taken together shall constitute one and the
same instrument.
 
4.08                      Press Releases & Disclosure.  PBGC shall not issue any
press release in connection with the existence, execution, or effectiveness of
this Agreement or knowingly disclose the existence, execution, or effectiveness
of this Agreement unless PBGC is required by law or public policy to do so, or
unless PBGC is expressly asked about the existence of this Agreement, or unless
PBGC believes that failure to disclose would be detrimental to PBGC’s ability to
carry out its statutory mission and functions.  In the event of any such
disclosure, PBGC will make every effort to provide Maxxam with advance written
notice of such disclosure, but in any event, PBGC will provide written notice to
MAXXAM as soon as practicable after making such disclosure.
 
4.09                       PBGC Release.  Except in connection with any rights
provided PBGC under this Agreement, in return for the promises, duties, and
obligations of MAXXAM set forth herein, PBGC hereby releases MAXXAM, as of the
date Maxxam ceases to be a member of the Controlled Group that includes the
Contributing Sponsor of the Plan, from any claims, causes of action,
obligations, liabilities, payments, expenses, fees, and costs (including
attorneys’ fees), relating to the termination of the Plan.
 
4.10                      Agreement Survives MAXXAM’s Membership in Palco’s
Controlled Group.  MAXXAM hereby acknowledges that it is currently a member of
Palco’s Controlled Group.  This Agreement will survive and remain binding in its
entirety upon the Parties should MAXXAM cease to be a member of Palco’s
Controlled Group for any reason, except as specified in section 4.11.
 
4.11                      Term.  This Agreement shall terminate on the earliest
of (i) the fifth (5th) anniversary of the Effective Date, (ii) the date the Plan
is assumed by MAXXAM, (iii) the date the Plan is terminated under the standard
termination procedures set forth in ERISA § 4041(b), or (iv) the date the Plan
is properly merged into another plan in accordance with ERISA and the IRC.
 
 
                IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered as of the day and year first set forth above.
 
PENSION BENEFIT GUARANTY CORPORATION
 

 
By:                            /s/ Robert D. Bacon
 
Name:                      Robert D. Bacon
 
Title:                       Deputy Director, Department of Insurance
Supervision & Compliance
 
MAXXAM INC.
 

 
By:                           /s/ Emily Madison
 
Name:                      Emily Madison
 
Title:                       Chief Financial Officer, MAXXAM, Inc.

 

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