THE SECURITY REPRESENTED BY THIS INSTRUMENT HAS NOT BEEN
     REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
     NEITHER THIS INSTRUMENT NOR ANY INTEREST THEREIN MAY BE
     OFFERED, SOLD, TRANSFERRED, ENCUMBERED OR OTHERWISE
     DISPOSED OF, WITHOUT THE EXPRESS WRITTEN CONSENT OF
     MAXXAM INC.



                   NON-NEGOTIABLE SECURED PROMISSORY NOTE


Principal Amount
US $28,249,375                                         October 19, 1997


     FOR VALUE RECEIVED, MAXXAM INC., a Delaware corporation (the "Maker"),
hereby promises to pay to COMBINED MASTER RETIREMENT TRUST, a trust
organized under the laws of Texas (the "Holder"), at its principal
executive offices, Three Lincoln Centre, Suite 1700, 5430 LBJ Freeway,
Dallas, TX 75240-2697 the principal sum of Twenty-Eight Million Two Hundred
Forty Nine Thousand Three Hundred Seventy Five Dollars ($28,249,375), with
interest thereon, which shall be due and payable as hereinafter provided.

     This Note is being issued and delivered by the Maker to the Holder as
partial consideration for the Maker's purchase of 1,027,250 shares (the
"Shares") of the Maker's common stock, $.50 par value, pursuant and subject
to that certain Stock Purchase Agreement, dated the date hereof between the
Maker and the Holder, and is secured under and subject to the Pledge and
Custody Agreement, dated the date hereof among the Maker, the Holder and
certain other parties (the "Pledge Agreement") in the form annexed hereto
as Exhibit A.  Capitalized terms not defined herein have the meanings given
them in the Pledge Agreement.

     1.        Interest.  (A) Except as provided in Section 1(B) and
subject to the next succeeding sentence, the Maker agrees to pay to the
Holder interest from the date hereof accrued on the unpaid principal amount
of this Note from time to time outstanding at the rate of 10% per annum,
payable quarterly in arrears on December 31, 1997, March 31, 1998 and June
30, 1998 (each a "Payment Date") and upon the final payment in full of all
unpaid principal of this Note; provided that interest in respect of the
first interest period shall accrue as if this Note had been executed on
September 30, 1997.  Any interest due and payable on this Note prior to the
Escrow Release Date (as such term is defined in that certain Escrow
Agreement, dated the date hereof by the Maker, the Holder and certain other
parties; the "Escrow Agreement") shall be paid to, and held by, the Escrow
Agent (as such term is defined in the Escrow Agreement) pursuant to the
terms of the Escrow Agreement.  After the Principal Payment Date (as
hereinafter defined), all past due principal and past due interest owed
under this Note will bear interest at the rate of fifteen percent (15%) per
annum.

          (B)(i)    Pursuant to the Pledge Agreement, the Maker has agreed
that (a) it will, at the Maker's expense, within 210 days after the date of
the Pledge Agreement, use its reasonable best efforts to file the Shelf
Registration Statement, covering the issuance or delivery and resales of
the Pledged Shares, (b) it shall use its reasonable best efforts to cause
such Shelf Registration Statement to be declared effective by the
Securities and Exchange Commission within 300 days after the date of the
Pledge Agreement and (c) it will use its reasonable best efforts to
maintain such Shelf Registration Statement continuously effective under the
Securities Act until the Obligations have been satisfied in full.  If the
Maker fails to file the Shelf Registration Statement within 210 days after
the date of the Pledge Agreement then, at such time, the per annum interest
rate on this Note otherwise payable pursuant to Section 1(A) of this Note
will increase by 100 basis points.  Such increase will remain in effect
until the date on which the Shelf Registration Statement is filed, on which
date the interest rate on this Note will revert to the interest rate
specified in Section 1(A) of this Note plus any increase in such interest
rate pursuant to Section 2(B)(ii).  

          (B)(ii)   If the Shelf Registration Statement is not declared
effective within 300 days after the date of the Pledge Agreement (including
by reason of the Maker's failure to file the Shelf Registration Statement,
then, at such time, the per annum interest rate on this Note (otherwise
payable pursuant to Section 1(A) and 1(B)(i)) will increase by an
additional 100 basis points.  Such increase or increases will remain in
effect until the date on which the Shelf Registration Statement is declared
effective, on which date the interest rate on this Note will revert to the
interest rate specified in Section 1(A) of this Note.  However, if the
Maker fails to keep the Shelf Registration Statement continuously effective
pursuant to Section 7 of the Pledge Agreement, then at such time as the
Shelf Registration Statement is no longer effective and until the earlier
of (i) such date that the Shelf Registration Statement is again deemed
effective or (ii) the Obligations are satisfied in full, the per annum
interest rate on this Note otherwise payable pursuant to Section 1(A) of
this Note will increase by an additional 100 basis points.  The Maker will
be permitted, however, to suspend the use of the Prospectus which forms a
part of the Shelf Registration Statement as provided in the Pledge
Agreement.

          (C)  Notwithstanding Sections 1(A) and 1(B), in no event shall
the rate of interest exceed the maximum rate permitted by applicable usury
laws.

     2.        Principal Payment.  The Maker agrees to pay to the Holder
the principal amount of this Note then outstanding, together with all
unpaid interest accrued to that date, on the first anniversary date hereof
(the "Principal Payment Date").

     3.        Business Day.  If the Principal Payment Date or any other
Payment Date is not a business day, the payment due on that date shall be
made on the next succeeding day that is a business day.  For the purposes
of this Note, the phrase "business day" means any day other than a
Saturday, a Sunday or a day on which banking institutions in Texas are
authorized or required by law to be closed.

     4.        Optional Prepayments.  The Maker may, at its option, prepay
the principal amount of this Note at any time in whole, or from time to
time in such part as the Maker shall elect, with accrued interest on the
amount prepaid to the date of prepayment, in each case without penalty or
premium therefor.  All prepayments shall be first applied to accrued and
unpaid interest and then to principal.

     5.        Methods of Payment.  All payments of principal and interest
on this Note shall be made in lawful money of the United States of America.

     6.        Defaults.  Any of the following shall constitute an Event of
Default hereunder:

          (a)  The Maker shall fail to pay any principal or interest due
hereunder, which failure shall remain uncured for a period of five (5)
business days after the same is due;

          (b)  If any voluntary proceeding shall be commenced by the Maker
under any chapter of the Federal Bankruptcy Code (the "Bankruptcy Code") or
other law relating to bankruptcy, bankruptcy reorganization, insolvency or
relief of debtors, or if the Maker has a proceeding commenced against it
under the provisions of the Bankruptcy Code, which proceeding is not
dismissed within ninety (90) days from the date on which it is commenced.

          (c)  If the Maker admits in writing its inability to pay its
debts as they become due or makes a general assignment for the benefit of
its creditors;

          (d)  The dissolution or other winding up of the Maker; or

          (e)  The failure of Maker to perform in any material respect any
of its obligations as Pledgor under the Pledge Agreement and the
continuance of such failure for a period of (i) more than five (5) business
days in the event of its obligations under Sections 4(b) and 8 of the
Pledge Agreement, and (ii) more than twenty (20) business days in the event
of any of its other obligations under the Pledge Agreement, after written
notice is given to the Maker by the Holder, specifying such failure and
requesting that it be remedied; provided, however, that with respect to any
provision of the Pledge Agreement for which the Pledgor's performance is
specified to occur on a stated day or within a stated number of days (other
than Section 4(a) of the Pledge Agreement), then such day or number of days
specified in the Pledge Agreement shall apply without enlargement by the
grace periods provided in this Section 6(e).

          If any of the foregoing Events of Default shall occur and shall
not have been remedied, the Holder may, at the sole option of the Holder,
declare this Note to become immediately due and payable.  The failure of
the Holder to exercise the option described in the preceding sentence at
any time shall not constitute a waiver of the Holder's right to exercise
such option at any other time.

     7.        Waiver of Notices, etc.  The Maker hereby waives
presentment, notice of demand for payment, protest, notice of dishonor and
any other notice of any kind with respect to nonpayment of this Note.

     8.        Governing Law.  This Note shall be governed by and construed
in accordance with the internal laws of the State of Delaware, without
giving effect to the conflict of laws provisions thereof.

     9.        Binding Effect; Assignment.  All of the covenants,
obligations, promises and agreements contained in this Note made by the
Maker shall be binding upon its successors and assigns; notwithstanding the
foregoing, neither the Holder nor the Maker shall assign, transfer,
encumber or otherwise dispose of this Note or any portion thereof without
the prior written consent of the other.

     10.       Costs of Collection.  In the event the Holder incurs costs
in collecting on this Note, this Note is placed in the hands of any
attorney for collection, suit is filed on this Note or if proceedings are
had in bankruptcy, receivership, reorganization or other legal or judicial
proceedings for collection, the Maker agrees to pay on demand to the Holder
all reasonable expenses and costs of collection, including, but not limited
to, reasonable attorneys' fees incurred in connection with any such
collection, suit or proceeding, in each case to the extent that the Holder
prevails in any such action for collection, suit or proceeding which is
final and not subject to appeal or other reconsideration.

     IN WITNESS WHEREOF, the Maker has caused this instrument to be duly
executed as of the day and year set forth above.

                                   MAXXAM INC.



                                   By:  /S/ Paul N. Schwartz
                                        Name:  Paul N. Schwartz
                                        Title:  Executive Vice President