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| 5. | (a) |   | There      shall be computed a Federal income tax liability for each Subsidiary for      any taxable period covered by Section 7 of this Agreement (the "Applicable      Period") as if (i) each Subsidiary had filed a separate return for such      period and all prior Applicable Periods and (ii) each Subsidiary was never      a member of the Group. In calculating such liability the separate returns      shall be prepared by taking into account all inter-company transactions,      including those eliminated by reason of the consolidated return Treasury      Regulations. |
|----|-----|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | If      the foregoing calculation results in a Federal income tax liability for a      Subsidiary with respect to the Applicable Period, then, in that      event, the Subsidiary shall pay such computed income tax liability to      Parent in such amounts and at such times as the Subsidiary would have been      required to pay to the Internal Revenue Service if it were an unaffiliated      corporation making separate estimated payments of tax and filing a      separate tax return. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | (c) | If      the foregoing calculation with respect to the Applicable Period results in      a net operating loss that can be carried back to a prior taxable      period or periods of a Subsidiary with respect to which the      subsidiary previously made payments to Parent pursuant to the preceding      paragraph (b), then, in that event, Parent shall pay the Subsidiary an      amount equal to the tax refund to which the Subsidiary would have been      entitled if it were an unaffiliated corporation that filed separate income      tax returns in respect of all the relevant taxable  periods. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | If      the foregoing calculation with respect to the Applicable Period results in      a net operating loss that cannot be carried back to a prior taxable period      or periods of a Subsidiary with respect to which the Subsidiary previously      made payments to Parent pursuant to the preceding paragraph (b), then, in      that event, such net operating loss shall be a net operating loss      carryover to be used by the Subsidiary in computing its Federal income tax      liability pursuant to the preceding paragraph (a) for future taxable      periods, under the law applicable to net operating loss carryovers in      general. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (e) | Any      adjustment other than a net operating loss carryback described in      paragraph (c) -above,      for whatever reason including, without limitation, audits or amended      returns), to any item affecting a calculation of tax liabilities under      paragraph (a), (b), (c) or (d) above, shall be given effect by      redetermining the amount payable by or due to each Subsidiary pursuant to      this Agreement as if such adjustment was part of the original      determina­tion hereunder and including any interest due to or from the      Internal Revenue Service as a result of such  adjustment. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                     |                        |                                             | MCO      Holdings, Inc. |
|------------------------------------------|-----------------------------|--------------------------------------------------|-------------------------|
|                                     |                        |                                             |                    |   |
|                                     |                        |                                             | By:                     | /s/      James V. Iaco, Jr. |
|                                     |
| Braztah      Corporation                 |                        | TW      Energy Corp.                             |
|                                     |                        |                                             |
| By:                                      | /s/      James V. Iaco, Jr. |                                             | By:                     | /s/      James V. Iaco, Jr. |
|                                     |
| Carbon      Fuel Company                 |                        | MCOP      Advertising, Inc.                      |
|                                     |                        |                                             |                    |   |
| By:                                      | /s/      James V. Iaco, Jr. |                                             | By:                     | /s/      James V. Iaco, Jr. |
|                                     |                        |                                             |                    |   |
| McCulloch      Consolidated Coal Company |                        | Cattleman’s      Title Guarantee Company   |
|                                     |                        |                                             |                    |   |
| By:                                      | /s/      James V. Iaco, Jr. |                                             | By:                     | /s/      James V. Iaco, Jr. |
|                                     |                        |                                             |                    |   |
| MCO      Development, Inc.               |                        | American      Land Realty Services, Incorporated |
|                                     |                        |                                             |                    |   |
| By:                                      | /s/      James V. Iaco, Jr. |                                             | By:                     | /s/      James V. Iaco, Jr. |

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| MCO      Investments, Inc.                         |                        | Havasu      Development Corporation    |
|----------------------------------------------------|-----------------------------|----------------------------------------|
|                                               |                        |                                   |
| By:                                                | /s/      James V. Iaco, Jr. |                                   | By: | /s/      James V. Iaco, Jr. |
|                                               |
| MCO      Equities, Inc.                            |                        | Holiday      Island Development Co.    |
|                                               |                        |                                   |   |   |
| By:                                                | /s/      James V. Iaco, Jr. |                                   | By: | /s/      James V. Iaco, Jr. |
|                                               |                        |                                   |   |   |
| Fountain      Hills Management Corporation         |                        | MCO      Realty, Inc.                  |
|                                               |                        |                                   |   |   |
| By:                                                | /s/      James V. Iaco, Jr. |                                   | By: | /s/      James V. Iaco, Jr. |
|                                               |                        |                                   |   |   |
| Holiday      Island Realty, Inc.                   |                        | Spring      Creek Recreation Corp.     |
|                                               |                        |                                   |   |   |
| By:                                                | /s/      James V. Iaco, Jr. |                                   | By: | /s/      James V. Iaco, Jr. |
|                                               |                        |                                   |   |   |
| MCO      Real Estate, Inc.                         |                        | Chaparral      City Water Company      |
|                                               |                        |                                   |   |   |
| By:                                                | /s/      James V. Iaco, Jr. |                                   | By: | /s/      James V. Iaco, Jr. |
|                                               |                        |                                   |   |   |
| Pueblo      West Properties, Inc.                  |                        | Westcliff      Development Corporation |
|                                               |                        |                                   |   |   |
| By:                                                | /s/      James V. Iaco, Jr. |                                   | By: | /s/      James V. Iaco, Jr. |
|                                               |                        |                                   |   |   |
| Spring      Creek Corporation                      |                        | Top      of Aspen, Inc.                |
|                                               |                        |                                   |   |   |
| By:                                                | /s/      James V. Iaco, Jr. |                                   | By: | /s/      James V. Iaco, Jr. |
|                                               |                        |                                   |   |   |
| McCulloch      Community Properties of Texas, Inc. |                        | MCO      Communities, Inc.             |
|                                               |                        |                                   |   |   |
| By:                                                | /s/      James V. Iaco, Jr. |                                   | By: | /s/      James V. Iaco, Jr. |
|                                               |                        |                                   |   |   |
| Holly      Development Co.                         |                        | Pueblo      West Storage Co., Inc.     |
|                                               |                        |                                   |   |   |
| By:                                                | /s/      James V. Iaco, Jr. |                                   | By: | /s/      James V. Iaco, Jr. |
|                                               |                        |                                   |   |   |
| Spring      Creek Utilities Co.                    |                        | Pueblo      West Development Co.       |
|                                               |                        |                                   |   |   |
| By:                                                | /s/      James V. Iaco, Jr. |                                   | By: | /s/      James V. Iaco, Jr. |
|                                               |                        |                                   |   |   |
| MCO      Properties Inc.                           |                        | MCO      Consulting, Inc.              |
|                                               |                        |                                   |   |   |
| By:                                                | /s/      James V. Iaco, Jr. |                                   | By: | /s/      James V. Iaco, Jr. |

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| Houston      Holdings, Inc.      |                        | MAXXAM      Group Inc.                      |
|----------------------------------|-----------------------------|---------------------------------------------|
|                             |                        |                                        |
| By:                              | /s/      James V. Iaco, Jr. |                                        | By: | /s/      James V. Iaco, Jr. |
|                             |
| Candelero      Hotel Corporation |                        | Eagle      Creek Country Club, Inc.         |
|                             |                        |                                        |   |   |
| By:                              | /s/      James V. Iaco, Jr. |                                        | By: | /s/      James V. Iaco, Jr. |
|                             |                        |                                        |   |   |
| Eagle      Creek Realty Company  |                        | Eagle      Creek Utility Company            |
|                             |                        |                                        |   |   |
| By:                              | /s/      James V. Iaco, Jr. |                                        | By: | /s/      James V. Iaco, Jr. |
|                             |                        |                                        |   |   |
| Houston      Group Inc.          |                        | KaiserTech      Acquisition Corporation     |
|                             |                        |                                        |   |   |
| By:                              | /s/      James V. Iaco, Jr. |                                        | By: | /s/      James V. Iaco, Jr. |
|                             |                        |                                        |   |   |
| KLU      Holdings, Inc.          |                        | MAXXAM      (Cayman) Corporation            |
|                             |                        |                                        |   |   |
| By:                              | /s/      James V. Iaco, Jr. |                                        | By: | /s/      James V. Iaco, Jr. |
|                             |                        |                                        |   |   |
| MAXXAM      Mortgage Corp.       |                        | MAXXAM      Properties Inc.                 |
|                             |                        |                                        |   |   |
| By:                              | /s/      James V. Iaco, Jr. |                                        | By: | /s/      James V. Iaco, Jr. |
|                             |                        |                                        |   |   |
| MPI      Investments Corp.       |                        | Palmas      Holding Corp.                   |
|                             |                        |                                        |   |   |
| By:                              | /s/      James V. Iaco, Jr. |                                        | By: | /s/      James V. Iaco, Jr. |
|                             |                        |                                        |   |   |
| The      Pacific Lumber Company  |                        | The      Pacific Lumber Company of Illinois |
|                             |                        |                                        |   |   |
| By:                              | /s/      James V. Iaco, Jr. |                                        | By: | /s/      James V. Iaco, Jr. |
|                             |                        |                                        |   |   |
| Palco      Export Company        |                        | Palco,      Inc.                            |
|                             |                        |                                        |   |   |
| By:                              | /s/      James V. Iaco, Jr. |                                        | By: | /s/      James V. Iaco, Jr. |
|                             |                        |                                        |   |   |
| Redwood      Sales Company       |                        | Sangre      de Cristo Timber Corporation    |
|                             |                        |                                        |   |   |
| By:                              | /s/      James V. Iaco, Jr. |                                        | By: | /s/      James V. Iaco, Jr. |
|                             |                        |                                        |   |   |
| Yoshuba      Farms               |                        |                                        |
|                             |                        |                                        |   |   |
| By:                              | /s/      James V. Iaco, Jr. |                                        |   |   |

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