Document:

ko8k71608ex10-1.htm

    Exhibit
10.1

    

    THE
COCA-COLA COMPANY

    2008
STOCK OPTION PLAN

    STOCK
OPTION AGREEMENT

    

    Merrill
Lynch Account Number:

    

    The
Coca-Cola Company ("KO") hereby grants to the optionee named below options to
purchase KO common stock at the price per share set forth below, subject to the
provisions of this Agreement together with the provisions of The Coca-Cola
Company 2008 Stock Option Plan (the "Plan"):

    

    
      	
               
      

            	
              optionee's
      name:

               

            

    

    
      	
               
      

            	
              number of options
      granted, each for one share of KO common stock:

               

            

    

    
      	
               
      

            	
              option exercise price
      per share:  $

               

            

    

    
      	
               
      

            	
              option grant
      date:

               

            

    

    
      	
               
      

            	
              option expiration
      date:

               

            

    

    
      	
               
      

            	
              vesting
      period:

            

    

     

    Capitalized
terms not otherwise defined in this Agreement shall have the meaning provided in
the Plan.  The Plan is incorporated into, and made a part of, this
Agreement.

    

    
      	
              1.

            	
              When options can be
      exercised.

            

    

    
      	
                     
      (a)

            	
              General
      provisions.

            

    

    
      	
                              (i)

            	
              No
      option may be exercised until it has
vested.

            

    

    
      	
               
      

            	
              (ii)

            	
              No
      option shall vest prior to the first anniversary of the grant date, except
      in the event of a Change in Control, death or
  Disability.

            
	 	(iii)	[Option
      1 – Standard Provision]

    

    The Plan
describes the impact upon vesting and the expiration of options of the following
events:  death, Disability, Retirement, Change in Control, various
types of leaves of absence, termination of employment, change in KO's investment
in the optionee's employer which results in the employer no longer meeting the
definition of a Related Company under the Plan, and transfer of employment to a
Related Company.

    [Option 2 – No Accelerated Vesting at
Retirement]

    The Plan
describes the impact upon vesting and the expiration of options of the following
events:  death, Disability, Change in Control, various types of leaves
of absence, termination of employment, change in KO's investment in the
optionee's employer which results in the employer no longer meeting the
definition of a Related Company under the Plan, and transfer of employment to a
Related Company.  For the purposes of vesting, the treatment of
Retirement as described in the Plan shall not apply to this
grant.  For this grant, there shall be no accelerated vesting at
Retirement.  Upon optionee’s Retirement, only those options that have
vested as described in subsection (b) below may be exercised; the remainder are
forfeited.  The impact of Retirement on the exercise period of vested
options shall be as provided in the Plan.

    
      	
              (iv)    
           

            	
              Once
      an option has vested, it may be exercised until it
      expires.  Unless otherwise provided in the Plan or in this
      Agreement, the options expire on the option expiration date noted
      above.  For individuals located in France, the options will
      expire on the earlier of: (a) six months after the date of the optionee’s
      death, and (b) the option expiration date noted
  above.

            

    

    
      	
              (v)     
           

            	
              Notwithstanding
      any provision to the contrary in the Plan or in this Agreement, in the
      event of the optionee’s violation of Section 5 below, the options will
      expire immediately at the time of such
  violation.

            

    

    
      	
                      (b)

            	
              Specific
      provisions.  Except as otherwise provided in the Plan or
      in this Agreement, one fourth of the number of options covered by this
      Agreement shall vest on the first, second, third and fourth anniversaries
      of
      the grant date.

            	
            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
              2.

            	
              How to exercise the
      options.  In
      order to exercise an option, it must be vested and must not have expired,
      and the optionee must do the following:

            	
               

            

    

    
      	
                     
      (a)

            	
              Pay the option
      exercise price.  The optionee must pay the option
      exercise price.  The optionee shall be informed of the acceptable
      form and method of payment at or before the time the optionee informs KO
      of his or her intention to exercise the option.  The acceptable
      forms and methods of payment of the option exercise price may include
      payment in cash, pursuant to a cashless exercise authorized by KO, or by
      delivery, through attestation, of shares of KO common stock owned by the
      optionee.  Not all forms and methods of payment are available in
      every country.  The value of the shares delivered to pay the
      option exercise price shall be computed on the basis of the most recent
      reported market price at which a share of KO common stock shall have been
      sold prior to the time of processing the optionee's election to deliver
      shares in payment of the option exercise price, as reported on the New
      York Stock Exchange Composite Transactions
  listing.

            

    

    
      	
                      (b)
      

            	Complete all paperwork. 
      The optionee must complete, sign and
      return any paperwork required by KO or by Merrill Lynch, Pierce, Fenner
      & Smith ("Merrill Lynch"), or such other agent as may administer
      the option program on behalf of KO from time to
  time.

    

    
      	
                      (c)

            	
              Pay applicable taxes
      and fees.  The options are not intended to be, and shall
      not be treated as, incentive stock options, as defined in Section 422 of
      the Internal Revenue Code of 1986, as
amended.

            

    

    
      	
               
      

            	
              The
      optionee must satisfy any tax withholding requirements regarding any
      applicable taxes.  If the optionee is a U.S. taxpayer, he or she
      may elect to satisfy federal, state and local income tax liabilities due
      by reason of the exercise by having shares of KO common stock
      withheld.  The value of withheld shares shall be computed as
      described in paragraph 2(a) above.

            

    

    
      	
               
      

            	
              The
      optionee agrees that, should KO or any Related Company in its reasonable
      judgment determine that tax withholding is required upon exercise of the
      options, and if the optionee has not satisfied such tax obligation(s),
      then KO may instruct Merrill Lynch to withhold and/or sell shares of KO
      common stock acquired by the optionee upon exercise of his or her options,
      or KO may deduct funds equal to the amount of withholding tax (such amount
      to be determined by KO) from the optionee's salary or other funds due to
      the optionee from KO.

            

    

    
      	
               
      

            	
              Irrespective
      of KO’s or a Majority Owned Related Company’s action or inaction with
      respect to taxes or tax withholding, the optionee acknowledges and agrees
      that the ultimate liability for any and all taxes is and remains the
      responsibility and liability of the optionee or the optionee’s
      estate.  For optionees who are International Service Associates,
      all taxes remain the optionee’s responsibility, except as expressly
      provided in KO’s International Service Policy and/or tax equalization
      program.   Optionee acknowledges that KO and any Related
      Company (i) make no representations or undertaking regarding the amount or
      timing of any taxes, and (ii) do not commit to structure the terms of the
      option or any aspect of the transfer of the shares to reduce or eliminate
      the optionee's liability for taxes.

            

    

    The
optionee agrees to pay to Merrill Lynch any costs associated with the sale of
shares of KO common stock acquired upon exercise of the options (whether such
shares are sold to pay the option exercise price, to satisfy tax withholding
requirements or for other reasons).

    For
employees in Switzerland, the optionee agrees that the taxation of the options
will occur at the time the options are exercised.

    
      	
                      
      (d)

            	
              Right of
      set-off.  By accepting this Agreement, the optionee
      agrees that, should KO or any Related Company in its reasonable judgment
      determine that optionee owes KO, any Related Company or any affiliate any
      amount due to any loan, note, obligation or indebtedness, including but
      not limited to amounts owed to KO pursuant to KO’s tax equalization
      program or KO’s policies with respect to travel and business expenses, and
      if the optionee has not satisfied such obligation(s), then KO may instruct
      Merrill Lynch to withhold and/or sell shares of KO common stock acquired
      by the optionee upon exercise of his or her options, or KO may deduct
      funds equal to the amount of such obligation from the optionee's salary or
      other funds due to the optionee from
KO.

            

    

    
      	
                        (e)

            	
              Comply with additional
      restrictions.  The optionee agrees that the Committee, or
      its designee, may, in the exercise of its sole and absolute discretion at
      or before the time the optionee informs KO of his or her intention to
      exercise the option, establish any additional conditions or restrictions
      with respect to the exercise of the option, including, but not limited to,
      restrictions on the acceptable form or method of payment of the option
      exercise price and restrictions for failing to
      promptly submit to KO, any Related Company or any affiliate thereof, a tax
      organizer, or such other tax-related documents reasonably requested by KO
      or optionee’s employer, pursuant to KO’s tax equalization program (if
      optionee is a participant in such program).  The optionee shall
      be informed of such restrictions.  The optionee agrees to comply
      with any such additional conditions or
  restrictions.

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	 3.	Options are not
      transferable.  The optionee may not transfer the options;
      provided that upon the optionee's death
      the options may be transferred by will or by the laws of descent and
      distribution.  During the lifetime of the
      optionee, the options shall be exercisable only by the optionee personally
      or, in the event of the optionee's Disability
      if a legal representative has been appointed to act on behalf of the
      optionee, then by the optionee's legal
      representative.
	
              4.

            	
              [Agreement to retain
      net shares until separation.  The optionee expressly
      agrees as a condition of this grant that optionee will not sell any shares
      obtained upon exercise of the options until after the optionee ceases to
      be employed by the Company or a Related Company, except to pay optionee’s
      taxes related to the options.  For this purpose, “taxes” means
      all federal, state and local income taxes, all social security, Medicare
      and other mandatory social taxes, and wealth taxes.  Nothing in this
      paragraph shall be construed to limit the optionee’s ability to execute a
      cashless exercise.] – [Optional Provision if Required by Compensation
      Committee]

            

    

    
      	
              5.   

            	
               Forfeiture
      of options and option gain .  In the event optionee
      shall engage in a “Prohibited Activity” (as defined on Schedule A hereto),
      at any time during the term of the options, or within one year after
      termination of optionee’s employment from KO or any Related Company, or
      within one year after exercise of all or any portion of the options,
      whichever occurs latest, this option shall be rescinded and, if
      applicable, any gain associated with any exercise of this option shall be
      forfeited and repaid to KO.  Accordingly, if the optionee
      engages in a Prohibited Activity,
then:

            

    

    
      	
                       (a)

            	
              as
      of the date that the optionee participates in such Prohibited Activity,
      all unexercised portions of this option immediately and automatically
      shall terminate, be forfeited, and shall cease to be exercisable (unless
      such option has been terminated sooner by operation of another term or
      condition of the Plan or this Agreement);
and

            

    

    
      	
                       (b)

            	
              within
      ten days after receiving from KO written notice of the termination of this
      option, the optionee shall pay to KO any and all gains associated with the
      exercise of all or any portion of this option, plus interest calculated
      from the time of such notice through the date of repayment to
      KO.  The gain associated with the exercise of any portion of
      this option shall be the closing price per share on the date of the
      exercise thereof, as reported on the New York Stock Exchange Composite
      Transactions listing, less the option exercise price per share shown
      above, multiplied by the number of options exercised.  Interest
      shall be calculated using the weighted prime rate at SunTrust Bank,
      Atlanta.

            

    

    Optionee
may be released from the effects of this Section 5 if the Committee determines
in its sole discretion that such action is in the best interest of KO and its
stockholders.

    Optionee
expressly acknowledges and affirms that the foregoing provisions of this Section
4 are material and important terms of this Agreement, and optionee expressly
agrees that if all or any part or application of the foregoing provisions of
this Section 5 are held or determined to be invalid or unenforceable for any
reason whatsoever by a court of competent jurisdiction in an action between
optionee and KO, KO shall be entitled to receive from optionee, in exchange for
the exercise price per share shown above, all shares of KO common stock acquired
by optionee upon exercise of any portion of the option and held by
optionee.  If optionee has sold, transferred or otherwise disposed of
any shares of KO common stock acquired by optionee upon exercise of any portion
of the option, KO shall be entitled to receive from optionee the gain associated
with such sale, transfer or disposal, plus interest calculated through the date
of payment to KO.  The gain associated with the sale, transfer or
other disposal of any share of KO common stock acquired by optionee upon
exercise of any portion of the option shall be the closing price per share on
the date of such sale, transfer or disposal, as reported on the New York Stock
Exchange Composite Transactions listing, less the option exercise price per
share shown above, multiplied by the number of shares of KO common stock sold,
transferred or disposed of.  Interest shall be calculated using the
weighted prime rate at SunTrust Bank, Atlanta.

    
      
        	6.	  Notices .  Each
      notice relating to the option or its exercise shall be in
      writing.  Requests and other notices regarding
      the exercise of options shall be delivered (whether by overnight delivery
      or by mail) as follows:

      

       

    

    Merrill
Lynch, Pierce, Fenner & Smith at Merrill Lynch Group Employee
Services

    Attention:  The Coca-Cola
Company Stock Option Plan Unit

    1400
Merrill Lynch Drive

    Mail Stop
04-BS-PRO

    Pennington,
New Jersey 08534, USA

    

          All
notices to KO shall be addressed as
follows:      Director, Executive
Compensation

    The Coca-Cola Company

    One Coca-Cola Plaza

    Atlanta, Georgia 30313,
USA

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	 	All notices to the
      optionee shall be addressed to the principal address of the optionee on
      file with KO.  Either KO
      or the optionee may designate a different address by written notice to the
      other.  Written notice to these addresses
      shall be effective to bind KO, the optionee and the optionee's successors
      and assigns.

    

    
      
        	
                7.

              	 Administrative
      matters .  The optionee hereby agrees that the
      Committee may, subject to the provisions of the Plan, establish such rules
      and regulations as it deems necessary or advisable for the
      proper administration of the
      Plan, and may make determinations and may take such other action in
      connection with or in relation to the Plan
      as it deems necessary or advisable.  Each determination or other
      action made or taken pursuant to the Plan, including
      interpretation of the Plan and the specific conditions and provisions of
      this Agreement and the options, shall
      be final and conclusive for all purposes and upon all persons including,
      but without limitation, KO, the Related Companies, the Committee, the KO
      Board of Directors, officers and the affected employees of KO, and the
      optionees and their respective successors in interest.

                When the issuance or transfer of KO common stock
      pursuant to the exercise of an option may, in the opinion of KO,
      conflict or be inconsistent with any applicable law or regulation of any
      governmental agency having jurisdiction,
      KO reserves the right to refuse to issue or transfer that KO common
      stock.

              

      

    

    
      	
              8.   

            	
               Consent
      for accumulation and transfer of data .  The optionee
      consents to the accumulation and transfer of data  concerning
      him or her and the options to and from KO and Merrill Lynch, or such other
      agent as may administer the option program on behalf of KO from time to
      time.  In addition, the optionee understands that KO holds
      certain personal information about the optionee, including but not limited
      to his or her name, home address, telephone number, date of birth, social
      security number, salary, nationality, job title, and details of all
      options awarded, vested, unvested, or expired (the “personal
      data”).  Certain personal data may also constitute “sensitive
      personal data” within the meaning of applicable local law.  Such
      data include but are not limited to the information provided above and any
      changes thereto and other appropriate personal and financial data about
      the optionee.  The optionee hereby provides explicit consent to
      KO to process any such personal data and sensitive personal
      data.  The optionee also hereby provides explicit consent to KO
      to transfer any such personal data and sensitive personal data outside the
      country in which the optionee is employed, and to the United
      States.  The legal persons for whom such personal data are
      intended are KO, Merrill Lynch and any company providing services to KO in
      connection with compensation planning purposes or the administration of
      the Plan.

            

    

    9.   Additional
consents.  The optionee consents and acknowledges
that:

    
      	
                    (a)

            	
              the
      Plan is discretionary in nature, and KO can amend, cancel or terminate it
      at any time;

            

    

    
      	
                    (b)

            	
              the
      grant of options under the Plan is voluntary and occasional and does not
      create any contractual or other right to receive future grants of any
      options, or benefits in lieu of any options, even if options have been
      granted repeatedly in the past;

            

    

    
      	
                    (c)

            	
              all
      determinations with respect to any such future awards, including, but not
      limited to, the times when options shall be granted, the option price, and
      the time or times when each right shall be exercisable, will be at the
      sole discretion of the Committee;

            

    

    
      	
                    (d)

            	
              participation
      in the Plan is voluntary and may be
occasional;

            

    

    
      	
                    (e)

            	
              the
      value of the options is an extraordinary item of compensation, which is
      outside the scope of the optionee’s employment contract, if
      any;

            

    

    
      	
                    (f)

            	
              the
      options or any income derived therefrom are not part of normal or expected
      compensation or salary for any purposes, including, but not limited to,
      calculating any termination, severance, resignation, redundancy, end of
      service payments, bonuses, long-service awards, life or accident insurance
      benefits, pension or retirement benefits or similar
    payments;

            

    

    
      	
                    (g)

            	
              except
      as is otherwise explicitly provided in this Agreement and the Plan,
      non-vested options are forfeited immediately following termination of
      employment for any reason, and vested options expire the earlier of: a)
      six months following termination of employment for any reason, and b) the
      expiration date noted in the
option;

            

    

    
      	
                    (h)

            	
              in
      the event of involuntary termination of the optionee’s employment, the
      optionee’s eligibility to receive options under the Plan, if any, will
      terminate effective as of the date that the optionee is no longer actively
      employed regardless of any reasonable notice period mandated under local
      law; furthermore, in the event of involuntary termination of employment,
      the optionee’s ability to exercise options under the Plan will be measured
      by the date of termination of the optionee’s active employment pursuant to
      the terms of the Plan and will not be extended by any reasonable notice
      period mandated under local law;

            

    

    
      	
               
      

            	
              (i)

            	
              the
      future value of the shares purchased under the Plan is unknown and cannot
      be predicted with certainty;

            

    

    
      	
               
      

            	
              (j)

            	
              (for
      individuals other than employees of KO) the options have been granted to
      the optionee in his or her status as an employee of his or her employer
      and can in no event be understood or interpreted to mean that KO is his or
      her employer or that he or she has an employment relationship with
      KO;

            

    

    
      	
                   (k)

            	
              no
      claim or entitlement to compensation or damages arises from the
      termination of the options or diminution in value of the options or shares
      purchased under the Plan, and the optionee irrevocably releases KO and his
      or her employer, if different from KO, from any such claim that may
      arise;

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
               
      

            	
                
      (l)

            	
              participation
      in the Plan shall not create a right to further employment with the
      optionee’s employer and shall not interfere with the ability of the
      optionee’s employer to terminate the optionee’s employment relationship at
      any time, with or without cause;

            

    

    
      	
                    (m)

            	
              the
      terms of the optionee’s employment with KO do not include the grant of
      stock options; and

            

    

    
      	
                    (n)

            	
              if
      all or any part or application of the provisions of this Agreement are
      held or determined to be invalid or unenforceable for any reason
      whatsoever by a court of competent jurisdiction in an action between
      optionee and KO, each and all of the other provisions of this Agreement
      shall remain in full force and
effect.

            

    

    10. 
Governing
law.  This Agreement has been made in and shall be construed
under and in accordance with the laws
of the State of Delaware, USA.

    11. 
Headings.  Paragraph
headings are included for convenience and shall not affect the meaning or
interpretation of
this Agreement.

    

    THE
COCA-COLA COMPANY

    By:  The
Committee

    

    

                                                                      

    Authorized Signature

    

    Using
the Merrill Lynch voice response system or other available means, the optionee
must accept the above options to purchase shares of KO common stock in
accordance with and subject to the terms and conditions of this Agreement and
the Plan, acknowledge that he or she has read this Agreement and the Plan, and
agree to be bound by this Agreement, the Plan and the actions of the
Committee.  If he or she does not do so prior to [Date], then KO may
declare the option grant null and void at any time. Also, in the unfortunate
event that death occurs before this Agreement has been accepted, this option
grant will be voided, which means the options will terminate automatically and
cannot be transferred to the optionee's heirs pursuant to the optionee's will or
the laws of descent and distribution.

    
      
        
           

        

         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
A

    Prohibited
Activities

    

    For
purposes of this Agreement, the term “Prohibited Activity” shall include any and
all of the following:

    

    
      	
              (a)  

            	
              Non-Disparagement –
      making any statement, written or verbal, in any forum or media, or taking
      any action in disparagement of KO or any Related Company or affiliate
      thereof, including but not limited to negative references to KO or its
      products, services, corporate policies, or current or former officers or
      employees, customers, suppliers, or business partners or
      associates;

            

    

    
      	
              (b)  

            	
              No Publicity –
      publishing any opinion, fact, or material, delivering any lecture or
      address, participating in the making of any film, radio broadcast or
      television transmission, or communicating with any representative of the
      media relating to confidential matters regarding the business or affairs
      of KO which optionee was involved with during optionee’s
      employment;

            

    

    
      	
              (c)  

            	
              Non-Disclosure of Trade
      Secrets – failure to hold in confidence all Trade Secrets of KO
      that came into optionee’s knowledge during optionee’s employment by KO or
      any Related Company, or disclosing, publishing, or making use of at any
      time such Trade Secrets, where the term "Trade Secret" means any technical
      or non-technical data, formula, pattern, compilation, program, device,
      method, technique, drawing, process, financial data, financial plan,
      product plan, list of actual or potential customers or suppliers or other
      information similar to any of the foregoing, which (i) derives economic
      value, actual or potential, from not being generally known to and not
      being readily ascertainable by proper means by, other persons who can
      derive economic value from its disclosure or use, and (ii) is the subject
      of efforts that are reasonable under the circumstances to maintain its
      secrecy;

            

    

    
      	
              (d)  

            	
              Non-Disclosure of Confidential
      Information – failure to hold in confidence all Confidential
      Information of KO that came into optionee’s knowledge during optionee’s
      employment by KO or any Related Company, or disclosing, publishing, or
      making use of such Confidential Information, where the term "Confidential
      Information" means any data or information, other than Trade Secrets, that
      is valuable to KO and not generally known to the public or to competitors
      of KO;

            

    

    
      	
              (e)  

            	
              Return of Materials –
      failure of optionee, in the event of optionee’s termination of
      employment for any reason, promptly to deliver to KO all memoranda, notes,
      records, manuals or other documents, including all copies of such
      materials and all documentation prepared or produced in connection
      therewith, containing Trade Secrets or Confidential Information regarding
      KO's business, whether made or compiled by optionee or furnished to
      optionee by virtue of optionee’s employment with KO or a Related Company,
      or failure promptly to deliver to KO all vehicles, computers, credit
      cards, telephones, handheld electronic devices, office equipment, and
      other property furnished to optionee by virtue of optionee’s employment
      with KO or a Related Company;

            

    

    
      	
              (f)  

            	
              Non-Compete – rendering
      services for any organization which, or engaging directly or indirectly in
      any business which, in the sole judgment of the Committee or the Chief
      Executive Officer of KO or any senior officer designated by the Committee,
      is or becomes competitive with KO;

            

    

    
      	
              (g)  

            	
              Non-Solicitation
      –soliciting or attempting to solicit for employment for or on behalf of
      any corporation, partnership, or other business entity any employee of the
      Company with whom optionee had professional interaction during the last
      twelve months of optionee’s employment with KO;
  or

            

    

    
      	
              (h)  

            	
              Violation of KO Policies
      – violating any written policies of KO or optionee’s employer
      applicable to optionee, including without limitation, KO’s insider trading
      policy.

            

    

    

    

    

    

    

    Nothing
in this Agreement is intended to or shall be interpreted as diminishing or
otherwise limiting KO’s right under applicable state law or any prior agreement
I have signed or made with KO regarding trade secrets, confidential information,
or intellectual property.agreement.htm

    
      
 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.

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