Exhibit 10.37

MAXXAM INC.
TAX ALLOCATION AGREEMENT WITH
MAXXAM GROUP INC.
OF AUGUST 4, 1993

This Agreement is made as of August 4, 1993, between MAXXAM Inc. ("Parent"), a
Delaware corporation, and MAXXAM Group Inc. ("MGI"), a Delaware corporation.

WHEREAS, MGI is currently a member of the affiliated group within the meaning of
Section 1504(a) of The Internal Revenue Code of 1986, as amended (the "Code") of
which Parent is the common parent corporation (the "Group"); and

WHEREAS, pursuant to a tax allocation agreement dated as of May 21, 1988 (the
"May 88 Agreement"), Parent and certain of its then existing subsidiaries,
including MGI, The Pacific Lumber Company ("Pacific Lumber"), a Delaware
corporation, MAXXAM Properties Inc. ("MPI"), a. Delaware corporation, Yosuba
Farms (“Yosuba”), a California corporation, and KLU Holdings, Inc. (“KLU”), a
Delaware corporation, established a Tax Allocation Method, as hereinafter
defined. As used herein, the term "Tax Allocation Method" shall mean a method
for allocating the consolidated tax liability of a group among its members and
for reimbursing the group's parent for the payment of such liability; and

WHEREAS, pursuant to a tax allocation agreement dated as of July 3, 1990, Parent
and Britt Lumber Co., Inc. ("Britt"), a California corporation, established a
Tax Allocation Method (the "Britt Agreement"); and

WHEREAS, pursuant to a tax allocation agreement dated as of March 23, 1993,
Parent and Pacific Lumber amended the May 88 Agreement with respect to Pacific
Lumber and established a Tax Allocation Method with respect to certain Pacific
Lumber subsidiaries (the "PL Agreement"); and

WHEREAS, on August 4 1993, MGI issued $100,000,000 of its Senior Secured Notes
due 2003 and $126,720,000 of its Senior Secured Discount Notes due 2003
(collectively, the "Notes"); and

WHEREAS, from time to time, MGI or any of its Restricted Subsidiaries (as
hereinafter defined) may incorporate a Restricted Subsidiary which may become a
member of the Group; and

 
 

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WHEREAS, Parent and MGI desire to further amend the May 88 Agreement solely with
respect to MGI consistent with the amendments each agreed to make in connection
with the issuance of the Notes and to establish  a Tax Allocation Method which
includes any newly-formed Restricted Subsidiary, as of the time that it becomes
a member of the Group.  Parent and MGI agreed to make amendments such that MGI
and its subsidiaries, excluding Salmon Creek Corporation, will ultimately pay
Parent Federal income taxes as if they filed on a consolidated basis with
respect to periods post issuance of the Notes, subject to the terms set forth
herein.

NOW, THEREFORE, in consideration of the promises and of the mutual agreements
and covenants contained herein, Parent and MGI hereby agree as follows:

1.             Section 2 of the May 88 Agreement is amended such that MGI shall
cause any Restricted Subsidiary, at the time that it becomes a member of the
Group, to agree to be included in Parent's consolidated Federal income tax
return for all taxable years during which such Restricted Subsidiary is eligible
to be included in Parent's consolidated Federal income tax return.  Restricted
Subsidiary shall mean a Restricted Subsidiary as defined in the indenture dated
as of August 4, 1993 by and between MGI and Shawmut Bank, N.A., as Trustee, for
the Notes (the "Indenture").

2.             Section 3 of the May 88 Agreement is amended such that MGI shall
cause any Restricted Subsidiary which becomes a member of the Group to execute
any consents and other documents as are necessary in connection therewith.

3.             Except with respect to any payments to Parent that are required
under this Agreement, the May 88 Agreement, the Britt Agreement, or the PL
Agreement, Parent shall indemnify MGI and each MGI Subgroup Subsidiary (as
hereinafter defined) and hold them harmless against all Federal income. tax
liabilities relating to taxable years of MGI and each MGI Subgroup Subsidiary
during which MGI and each MGI Subgroup subsidiary is or was a member of the
Group.

4.
(a)
 
For purposes of making the computations described herein, MGI and all lower
(with respect to MGI) tier entities, including newly-formed Restricted
Subsidiaries but excluding Salmon Creek Corporation, Kaiser Aluminum Corporation
and its subsidiaries and corporations formed and distributed to Parent in
connection with the Forest Products Group Formation, (individually and
collectively referred to as "MGI Subgroup Subsidiary" or "MGI Subgroup
Subsidiaries") in which MGI has direct or indirect ownership shall be treated as
an affiliated group of corporations (the "MGI Subgroup"), the common parent of
which is MGI, provided, however, that- the MGI Subgroup shall only include any
MGI Subgroup Subsidiary to the extent that such MGI Subgroup Subsidiary meets
the test of affiliation under Section 1504 of the Code as it would apply to the
MGI Subgroup. MGI and each MGI Subgroup Subsidiary shall sometimes be referred
to as "MGI Subgroup Members".

 
 

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(b)
The computation of the Federal income tax liability of MGI under Section 5 of
the May 88 Agreement shall be amended effective January 1, 1993, as per the
provisions of this section 4, such that the payment required of MGI shall be
equal to MGI's Tentative Tax Liability (as hereinafter defined) minus the
aggregate tax amounts computed for each MGI Subgroup Subsidiary under the May 88
Agreement, the Britt Agreement, the PL Agreement and this Agreement (the
"Aggregate Amounts").  For purposes of this Section, any amounts paid to MGI
Subgroup Subsidiaries by Parent as a consequence of net operating loss or other
carrybacks to post 1992 taxable periods shall be given effect by treating such
amounts as a negative payment to be included in the Aggregate Amounts.

 
(c)
The computation of the Federal income tax liability of MGI shall take into
account the taxable income, loss, credits and other tax attributes of each MGI
Subgroup Subsidiary as if MGI filed a consolidated return solely with each MGI
Subgroup Subsidiary (taking into account all applicable limitations under the
Code) ("MGI's Tentative Tax Liability"). In calculating such liability, all
intercompany transactions between MGI Subgroup Members shall be treated
consistent with the consolidated return Treasury Regulations. Taxable income of
any MGI Subgroup Subsidiary recognized on or before August 4, 1993, shall not be
offset by losses, other than those generated by such MGI Subgroup Subsidiary.

 
(d)
To the extent that MGI's Tentative Tax Liability is less than the Aggregate
Amounts, Parent shall pay the amount of such difference to MGI.

 
(e)
Any gain recognized by MGI, MPI or KLU under Section 311(b) of the Code
resulting from distributions made contemporaneously with, or subsequent to, the
offering of the. Notes to effectuate the Forest Products Group Formation, as
discussed in the prospectus dated July 28, 1993. for the Notes, shall not be
taken into account.

 
(f)
For purposes of Section 4(c) of this Agreement, MGI's separate company net
operating loss carryforwards existing under the May 88 Agreement as of December
31, 1992 shall be available only to offset taxable income of GI. This limitation
shall also 1apply to MGI's losses incurred in 1993 through August 4, 1993.

 
(g)
For purposes of Section 4(c) of this Agreement, net operating loss carryforwards
of any MGI Subgroup Subsidiary existing under its respective tax allocation
agreement as of December 31, 1992 shall be available only to offset taxable
income of such MGI Subgroup Subsidiary. This limitation shall also apply to
losses incurred in 1993 through August 4, 1993.

 
 

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(h)
If the calculation of MGI's Tentative Tax Liability in Section 4(c) results in a
net operating loss that can be carried back to a prior taxable period or periods
with respect to which MGI Subgroup Members made payments to Parent under their
respective tax allocation agreements, then, in that event, Parent shall pay MGI
an amount equal to the tax refund to which the MGI Subgroup would have been
entitled consistent with this Section 4. For this purpose, any loss which is
otherwise available for a carryback to offset income recognized on or before
August 4, 1993, shall only be available to offset income of the entity which
generated the loss.

 
(i)
If the calculation of MGI's Tentative Tax Liability in Section 4(c) results in a
net operating loss that cannot be carried back pursuant to the preceding
subsection (h), then, in that event, such net operating loss shall be a net
operating loss carryover to be used by the MGI Subgroup in computing its Federal
income tax liability pursuant to the preceding subsection (c) for future taxable
periods, under the law applicable to net operating loss carryovers in general.

 
(j)
The tax computation under this Section for 1993 is intended to approximate the
tax computation that would have resulted had an interim closing of the books and
records occurred on the date the Notes were issued.

 
5.             Except with respect to section 4(b) with respect to any
Restricted Subsidiary, this Agreement shall be effective for the Group's 1993
taxable period and all subsequent taxable periods (excluding any period of time
prior to the date upon which such Restricted Subsidiary joined the Group) until
the date on which (i) such Restricted Subsidiary ceases to be a member of the
Group, (ii) the Group no longer remains in existence within the meaning of
Treasury Regulation §1.1502-75(a), or (iii) the Group is no longer eligible to
file, or is no longer eligible to join in the filing of, a consolidated return
for Federal income tax purposes. Prior to or upon termination of this Agreement,
the parties may enter into a new agreement, consistent with the provisions of
this Agreement, taking into account, among other things, to the extent
applicable, the manner in which such Restricted Subsidiary ceased to be a member
of the Group, the reason that the Group is no longer in existence, or the reason
that Parent and or such Restricted Subsidiary can no longer join in the same
consolidated return.

6.             This Agreement is entered into by the parties solely in
recognition of the mutual benefits resulting from filing a Federal (or state or
other local) consolidated or combined tax return. The respective amounts of tax
liability allocated to each MGI Subgroup Member for purposes of computing such
corporation's earnings and profits for Federal (or any other) income tax
purposes may differ from those determined in accordance with this Agreement.
Furthermore, any amount treated for Federal (or state or other local) income tax
purposes, on account of such a difference, as a contribution to capital or a
distribution with respect to stock, or a combination thereof, as the case may
be, shall be treated as a contribution to capital, a distribution with respect
to stock, or a combination thereof, solely for Federal (or state or other local)
income tax purposes.
 
7.             This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.

 
 

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IN WITNESS WHEREOF,  Parent and MGI have executed this Agreement by authorized
officers thereof as of the date first above written.

MAXXAM Inc.
         
By:
/s/ John T. LaDuc
                   
MAXXAM GroupInc.
         
By:
/s/ Ronald L. Reman
   

 
 

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