MAXXAM SUPPLEMENTAL SAVINGS PLAN

 

**(Effective as of January 1, 2006)**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note: By a consent instrument dated December 31, 2006, MAXXAM Inc. agreedand consented to the adoption of this Plan by MCO Properties Inc., The PacificLumber Company, Scotia Pacific Company LLC, and Palmas del Mar Properties,Inc.

 

 

 

TABLE OF CONTENTS

Page

 

SECTION I DEFINITIONS

 

SECTION II BENEFITS

 

SECTION III LIABILITY FOR PAYMENTS

 

SECTION IV ADMINISTRATION

 

SECTION V ADMENDMENT AND TERMINATION

 

SECTION VI MISCELLANEOUS

**MAXXAM SUPPLEMENTAL SAVINGS PLAN**

**(Effective as of January 1, 2006)**

 

MAXXAM Inc. has established this Supplemental Savings Plan in order toprovide certain participants in the Savings Plan with certain retirementbenefits they would have received under the Savings Plan were it not for thelimits on benefits imposed by section 415(c) and section 401(a)(17) of theInternal Revenue Code. This Plan is intended to be both an "excess benefit plan"exempt from all of the provisions applicable to employee pension benefit plansunder the Employee Retirement Income Security Act of 1974, as amended ("ERISA")and, with respect to certain benefits, a supplemental employee retirement planthat qualifies as a "top hat" plan exempt from most of the substantiveprovisions of ERISA. 

 

**SECTION I**

**DEFINITIONS**

 

 

**1.1**          **Account****.**Therecord of a Participant's accumulated benefit hereunder that is establishedpursuant to Section 2.1.

**1.2**          **Administrative Committee****.**The Administrative Committee appointed under the Savings Plan.

**1.3**           **Board of Directors****.**  The Board of Directors or Managers, orother person, entity or body performing similar functions, of the Company or anyEmployer, or committee of such Board of Directors delegated the authority to actwith respect to this Plan.

**1.4**          **Code****.**The InternalRevenue Code of 1986, as amended from time to time. References to a specificprovision of the Code shall include such provision, any valid regulation orruling promulgated thereunder, and any comparable provision of future law thatamends, supplements or supersedes such provision.

**1.5**          **Company****.**MAXXAMInc., a Delaware corporation, and any successor thereof by merger, consolidationor otherwise.

**1.6**          **Disability**. Any medically determinablephysical or mental impairment which prevents a Participant from engaging in anysubstantial gainful activity for an Employer, if such condition can be expectedto result in death or can be expected to have a duration of at least 12months.

**1.7**          **Eligible Employees****.**Each participant in the Savings Plan shall automatically be eligible toparticipate in this Plan for purposes of subsection 2.2.1. Participants in theSavings Plan who also are designated as eligible to receive supplementalbenefits in accordance with subsection 2.2.2 for a year shall be eligible toparticipate in this Plan for purposes of subsection 2.2.2. The Company's Boardof Directors can change any such designation for any year by action taken priorto the last day of such year. Designations by the Company's Board of 

Directors with respect to subsection 2.2.2 shall be in its solediscretion, without any obligation to treat similarly-situated individuals thesame. 

**1.8**          **Employer****.**TheCompany and any other corporation, partnership or other entity affiliated withthe Company that has adopted this Plan with the consent of the Company's Boardof Directors.

**1.9**          **Key Employee**. A "specified employee" withinthe meaning of section 409A of the Code and applicable regulations thereunder.

**1.10**       **Participant****.**AnEligible Employee for whom a book-keeping account is maintained by the Companyevidencing an amount owed to such person by his or her Employer under thePlan.

**1.13**       **Valuation Date**. Each December 31 and suchother dates within the calendar year as the Administrative Committee shalldesignate from time to time and with respect to any Participant that hasterminated employment, the date of such termination.

**SECTION II**

**BENEFITS**

 

**2.1**        **Account Established**. The Company shallestablish a memorandum or book-keeping account on its records for eachParticipant to evidence the benefits and earnings accrued under Sections 2.2 and2.3 by each Participant.

**2.2.1**    **Section 415 Excess Benefits**. As of December31 of each year commencing with December 31, 2006, each Eligible Employee shallaccrue an amount equal to what he or she would have been allocated under theSavings Plan as Basic Discretionary Contributions and Transition Contributionsfor the year but for the application of the limit imposed by section 415(c) ofthe Code on the total amount that could be credited as annual additions to suchindividual's Savings Plan account for that year.

**2.2.2**     **SupplementalBenefits**. As of December 31 of each year commencingwith December 31, 2006, each Eligible Employee who is designated as eligible forsupplemental benefits under this subsection 2.2.2 for the year shall accrue anamount equal to the Basic Discretionary Contributions and TransitionContributions that such Eligible Employee would have been allocated under theSavings Plan for that year on eligible compensation for the year (as defined inthe Savings Plan but disregarding references to section 401(a)(17) of the Code)in excess of the compensation limit for that year under section 401(a)(17) ofthe Code (but without duplication of any amounts credited to such Participant'sAccount pursuant to subsection 2.2.1). 

**2.3**          **Earnings Credited To Accounts**. Effective asof the close of business on each Valuation Date, earnings shall be credited toeach Participant's Account for the period since the last Valuation Date inaccordance with uniform rules established by the Administrative Committee usingthe prime rate in effect at the end of the month preceding the month containingsuch Valuation Date as reported by the Wall Street Journal (the "Prime Rate") orsuch other rate as shall be determined by the Company's Board of Directors inits sole discretion.

**2.4**          **Time and Form of Payment of Vested Benefits****.**The vested balance of a Participant's Accountshall be paid to or on behalf of the Participant following his termination ofemployment in accordance with this Section 2.4. 

**2.4.1**    **Vesting**. The percentage of a Participant'sAccount under the Plan that is vested shall be the same percentage as hisaccount under the Savings Plan as of the same date.

**2.4.2**    **Time and Form of Payment to Participant**. AParticipant's vested Account balance shall be paid to him in a single cashpayment on the fifteenth (15th) day of the month following the monthin which he terminates employment with the Employer, provided, however, if theParticipant is a Key Employee and his termination of employment was not onaccount of death or Disability, payment shall be delayed for six months afterthe date of the Participant's termination of employment. If payment of aParticipant's vested Account balance is delayed for six months, interest shallbe credited to such Participant's vested Account balance, through the date ofexpiration of the six-month period, at the rate that would have applied ifpayment had not been delayed, and such delayed payment shall be made fifteen(15) days following expiration of the six-month waiting period.

**2.4.3**    **Death Benefits**. If a Participant dies beforereceipt of payment from the Plan, payment of the Participant's vested Accountbalance shall be made instead to his beneficiary or beneficiaries (as defined inSection 2.5 below). Such payment(s) shall be made at the same time and in thesame form as payment would have been made to the Participant, except that if theParticipant had been waiting for payment as a result of the six-month delayapplicable to Key Employees , payment to the beneficiar(y)(ies) shall be madethirty (30) days after the Participant's death and additional earnings shallcease to be credited to the Participant's vested Account balance as of the dateof the Participant's death. Notwithstanding the foregoing, if there is a disputeor other uncertainty regarding a Participant's beneficiary or beneficiaries,such payment(s) shall be made thirty (30) days after such dispute or uncertaintyis fully and finally resolved.

**2.4.4**    **Payment Grace Period**. Any payment made aftera specified payment date provided for herein, but within the applicable graceperiod permitted by section 409A of the Code, shall be considered payment on thespecified payment date for all purposes under the Plan.

**2.5**          **Beneficiary****.**Thebeneficiary or beneficiaries to whom amounts are payable under this Plan afterthe death of the Participant shall be the same as the beneficiary orbeneficiaries to whom amounts are payable (in the same proportions) under theSavings Plan after the death of the Participant.

**SECTION III**

**LIABILITY FOR PAYMENTS**

 

**3.1**          **In General****.**Benefits payable under this Plan shall be the liability of the Employerthat employed the Participant with respect to whom benefits are payable. If aParticipant is entitled to benefits under this Plan attributable to periods ofemployment with more than one Employer, the Company shall determine theapportionment of liability among such Employers, such apportionment to bedetermined based upon the aggregate accruals for the Participant under Sections2.2 and 2.3 during the Participant's term of employment with eachEmployer.

**3.2**          **Unfunded Plan****.**While this Plan refers to the crediting of amounts to a Participant'sAccount from time to time, all Accounts maintained under the Plan arebook-entry, memorandum accounts only, and do not represent an interest in anytrust, fund or specific asset or property. Any obligation of an Employer to paybenefits hereunder shall be an unsecured promise, and any right to enforce suchobligation shall be solely as a general creditor of the Employer.

**SECTION IV**

**ADMINISTRATION**

 

The Administrative Committee shall administer the Plan. TheAdministrative Committee shall have full discretionary authority to determineall questions arising in connection with the Plan, including its interpretationand the determination of eligibility for benefits, and may adopt proceduralrules and employ and rely upon such legal counsel, actuaries, accountants andagents as it may deem advisable to assist in the administration of the Plan.Absent manifest error, the decisions of the Administrative Committee shall beconclusive and binding on all persons.

 

**SECTION V**

**AMENDMENT AND TERMINATION**

 

The Company may waive, modify or amend, in whole or in part, any or allof the provisions of the Plan, or suspend or terminate the Plan entirely at anytime; provided, that any such waiver, modification, amendment, suspension ortermination is permitted by section 409A of the Code; and further provided thatno such modification, amendment, suspension or termination shall reduce thebenefits accrued by the Participant (including earnings credited to his Accountas of the most recent Valuation Date) up to the date of the modification,amendment, suspension or termination. Any such action by the Company shall bebinding on all Employers. Any participating Employer (other than the Company)may withdraw from the Plan by action of its Board of Directors and by giving atleast 20 business days advance written notice to the Company unless the Companywaives such notice or agrees on any shorter period of advance notice. As of theeffective date of such withdrawal, the Plan shall be deemed to be frozen withrespect to the withdrawing Employer, and no additional benefits (includingcredited earnings) shall accrue with respect to individuals employed by suchEmployer after that date. 

**SECTION VI**

**MISCELLANEOUS**

 

**6.1**          **No Employment Rights****.**The establishment of the Plan shall not be construed as conferring anyrights upon any employee or any person for a continuation of his employment, norshall it be construed as limiting in any way the right of any Employer todischarge any employee or to treat him without regard to the effect which suchtreatment might have upon him as a Participant under the Plan.

**6.2**          **Forfeiture for Cause****.**Notwithstanding any provision of this Plan to the contrary, if aParticipant or former Participant is found guilty (by a court of competentjurisdiction) of any act of fraud or dishonesty against an Employer, then allrights which the Participant or his beneficiary may have under this Plan shallbe retroactively forfeited, any obligation of an Employer to make accruals orpayments hereunder shall terminate, any accruals or payments made hereundershall be considered null and void, and any such payments shall be recoverable bythe Employer(s).

**6.3**          **Non-Alienation of Benefits**. Except asotherwise provided by law, no benefit, interest, or payment under the Plan shallbe subject in any manner to anticipation, alienation, sale, transfer,assignment, pledge, encumbrance or charge, whether voluntary or involuntary, andno attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumberor charge the same shall be valid, nor shall any such benefit, interest, orpayment be in any way liable for or subject to the debts, contracts,liabilities, engagements or torts of the person entitled to such benefit,interest, or payment or be subject to attachment, garnishment, levy, executionor other legal or equitable process.

**6.4**          **Binding Effect****.**This Agreement shall inure to the benefit of and be binding upon thesuccessors and assigns of participating Employers and the heirs, administrators,executors and personal representatives of the Participant.

**6.5**          **Liability Limited and Indemnification****.**No member of the Administrative Committee or of theBoard of Directors of an Employer shall be personally liable for any act oromission done or failed to be done by such member in the course of administeringor otherwise acting with respect to this Plan, except as provided by law or thein articles of incorporation, bylaws, or other organizational documents of anEmployer. Moreover, each member of the Administrative Committee and the Board ofDirectors of each Employer shall be indemnified to the fullest extent providedfor in the applicable Employer's articles of incorporation, bylaws, or otherorganizational documents, from any expense, liability or loss incurred orsuffered by any of such persons as a result of administering or otherwise actingwith respect to this Plan.

**6.6**         **Withholding****.**Benefit payments hereunder shall be subject to withholding, to the extentrequired by applicable tax or other laws, or an order of a court of competentjurisdiction.

**6.7**          **Separability****.**Ifany provision of this Plan is held invalid or unenforceable, to the extentnecessary to effectuate the purposes of this Plan, its invalidity orunenforceability shall not affect any other provisions of the Plan and the Planshall be construed and enforced as if such provisions had not been includedtherein.

**6.8**          **Captions****.**Exceptfor the definitions in Section I, the captions contained herein and the table ofcontents prefixed hereto are inserted only as a matter of convenience and forreference, and in no way define, limit, enlarge or describe the scope or intentof this Plan nor in any way shall affect the Plan or the construction of anyprovision thereof.

**6.9**          **Usage****.**Wheneverapplicable, the masculine gender, when used in the Plan, shall include thefeminine or neuter gender, and the singular shall include the plural.

**6.10**       **Governing Laws****.**The Plan shall be governed by and construed and administered under theinternal laws of the State of Texas (without regard to any provisions relatingto conflict of laws), except to the extent that such laws are preempted byFederal law.

 

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