1
EXHIBIT 10.54
THE PACIFIC LUMBER AND
BRITT LUMBER COMPANIES
MANAGEMENT
INCENTIVE COMPENSATION PLAN
1995
A. PURPOSE
1. The intent of the plan is to encourage outstanding performance
by key executives related to successful and profitable
operations of The Pacific Lumber Company and Britt Lumber
Company (the "Company") for calendar year 1995.
2. The plan is designed to act as a major motivating force in
influencing a significantly higher level of sales and income
and to provide an equitable means of reward for individual
contributions to such improvement.
B. PARTICIPANTS
Participants are selected and approved from among The Pacific Lumber
and Britt Lumber management group (excluding the lumber sales group)
by the president of The Pacific Lumber Company. The plan has two
levels of participation (i) Tier I with a target range for payout from
ten percent to 80 percent of base salary and (ii) Tier II with a
target range for payout from six percent to 45 percent of base salary.
C. INCENTIVE COMPENSATION
There are two components to the total award:
1. 50 percent of the total award will be based upon achieving the
Company's 1995 operating income before depletion,
depreciation, amortization and corporate administration
charges ("adjusted Company operating income") of $112.6
million. No incentive compensation based on adjusted Company
operating income will be earned unless 75 percent of the
target is achieved. Incentive compensation will be calculated
as a
2
percentage of the annual base salary of eligible participants as of
January 1, 1995, adjusted for months worked during the year, based on
the following table (interpolated as necessary):
Actual adjusted 1995
annual operating Percent of 01-01-95
income annual salary
--------------------- -----------------------
% of plan ($ millions) Tier I Tier II
--------- ------------ ------ -------
75 84.45 5.0 3.0
80 90.08 12.5 7.0
85 95.71 15.0 8.5
90 101.34 27.5 15.0
95 106.97 32.5 17.5
100 112.60 (1995 plan) 37.5 20.0
105 118.23 40.0 (max.) 22.5
2. 50 percent of the total award will be based upon achieving
critical performance objectives during the year. The award for
each participant will be determined by the president on a
discretionary basis, based upon his evaluation of relative
contributions. For 1995, the following objectives are
targeted:
a. Development and implementation of a THP management
plan such that THP submissions for 1995 total at
least 425 gross MMBF and unlitigated THP approvals at
year end 1995 constitute a balance equal to 100
percent of the 1996 requirements for logs to mill.
b. Attainment of net lumber production goal of 379
MMBF(PALCO/Britt).
c. Produce and ship 32 MMBF of PALCO-Loc in 1995.
d. Net lumber sales of $247.1 million for 1995.
e. Implementation of the 1995 capital budget at less
than 110 percent of approved expenditures.
f. Continue downward trend in lost-time injuries.
3
g. Development and implementation of a
marketing/distribution plan as outlined in
the Sales Incentive Compensation Plan
(paragraph C.2.a-f).
These Company goals will be individualized for each participant as appropriate
and outlined in an attached memorandum.
Incentive compensation will be paid in accordance with achieving the above
objectives as follows:
Percent of 01-01-95
annual salary
--------------------------------
Achievement of objectives Tier I Tier II
---------------------------- ---------- ------------
15% 5.0 3.0
30% 12.5 7.0
45% 15.0 8.5
60% 27.5 15.0
75% 32.5 17.5
90% 37.5 20.0
100% 40.0 (max.) 22.5
D. PAYMENT PROVISIONS
1. The allocation of the incentive compensation must be approved
by the president of The Pacific Lumber Company and the
Compensation Committee of MAXXAM Inc.
2. As soon as practicable after December 31, 1995, the amount of
incentive compensation will be calculated by the vice
president finance and administration. The final number will be
available in January.
3. Incentive compensation will be paid in cash as soon as
practicable after December 31, 1995.
4
4. A participant whose employment is discontinued, for any
reason other than normal retirement, total disability, or
death before the end of the plan period, shall automatically
forfeit any claim to incentive compensation for the period.
There are no rights vested in any employee during the plan
period.
5. A participant who retires, suffers total disability, or dies
during the course of 1995 will receive incentive compensation
prorated through the date of retirement, total disability, or
death. The incentive payment will be issued after the close of
the year along with all other payments from the plan.
6. In the event of the death of a participant following the end
of the plan year but before payment of any incentive
compensation which may be due, 100 percent of the applicable
incentive compensation shall be paid to the participant's
designated beneficiary, if one has been named, or else to the
participant's estate as outlined in the plan.
E. ADMINISTRATION
1. All provisions of the plan shall be subject to the approval of
the president of The Pacific Lumber Company.
2. The vice president - finance and administration of The Pacific
Lumber Company shall be responsible for general administration
of the plan.
3. Final decisions on all questions of computations, policy, or
interpretations of provisions of the plan shall be made by the
president of The Pacific Lumber Company.