exh10_38.htm


    Exhibit
10.38

    


    Amendment
of Tax Allocation Agreement

    Between

    MAXXAM
Inc.

    and

    MAXXAM
Group Inc.

    


    


    


    WHEREAS, MAXXAM Inc. ("MAXXAM") and
MAXXAM Group Inc. ("MGI") executed a tax allocation agreement as of August 4,
1993 covering all taxable years during which MGI is included in MAXXAM's Federal
consolidated income tax returns (the " MGI Tax Allocation Agreement");
and

    


    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 MAXXAM is the common
parent corporation (the "Group"); and

    


    WHEREAS, pursuant to an Amendment of
Tax Allocation Agreement dated as of December 31, 2001, MAXXAM and The Pacific
Lumber Company, a wholly owned indirect subsidiary of MAXXAM, amended a tax
allocation agreement dated as of March 23, 1993 (the "Amended PL Tax Allocation
Agreement"); and

    


    WHEREAS, MAXXAM and MGI desire to amend
the MGI Tax Allocation Agreement in a manner similar to the Amended PL Tax
Allocation Agreement as contemplated herein.

    


    NOW, THEREFORE, MAXXAM and MGI hereby
agree to the following amendments to the MGI Tax Allocation Agreement effective
for periods beginning after February 28, 1999:

    


    
      	
              1.

            	
              The
      first sentence of Section 4(a) is replaced with, and superseded by, the
      following language:

            


    

    


    
      	
               
      

            	
              For
      purposes of making the computations described herein, MGI and all lower
      (with respect to MGI) tier entities, including newly-formed Restricted
      Subsidiaries, in which MGI has direct or indirect ownership (individually
      and collectively referred to as "MGI Subgroup Subsidiary" or "MGI Subgroup
      Subsidiaries") 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.

            


    

    


    
      	
              2.

            	
              Sections
      4(h), (i), and (j) are redesignated as Sections 4(i), (j), and (k),
      respectively.

            


    

    


    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


    
      	
              3.

            	
              Section
      4 is amended by adding the following language as new subsection
      (h):

            


    

    


    
      	
               
      

            	
              For
      purposes of Section 4(c) of this Agreement, net operating losses of MGI
      Subgroup Members arising after August 31, 1993 are available to offset
      Salmon Creek Corporation's 1999 taxable income recognized on the sale of
      its Headwaters timberlands.

            


    

    


    
      	
              4.

            	
              Section
      4(j), as redesignated, is amended by changing the reference contained
      therein from "subsection (h)" to "subsection
  (i)."

            


    

    


    


    IN WITNESS WHEREOF, MAXXAM and MGI have
executed this Amendment of Tax Allocation Agreement by duly authorized officers
thereof as of December 31, 2001.

    


    


    
      	 
      	
              MAXXAM
      Inc.

            
	 
      	 
      
	 
      	
              By:

            	
              /s/
      Paul N. Schwartz

            
	 
      	
              Title:

            	
              President

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              MAXXAM
      Group Holdings Inc.

            
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Gary L. Clark

            
	 
      	
              Title:

            	
              Vice
      President