| 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 | The      first sentence of Section 4(a) is replaced with, and superseded by, the      following language: |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. |
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| 2. | Sections      4(h), (i), and (j) are redesignated as Sections 4(i), (j), and (k),      respectively. |
|----|------------------------------------------------------------------------------------------------------|

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| 3. | Section      4 is amended by adding the following language as new subsection      (h): |
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|   | 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)." |
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|   | MAXXAM      Inc.                |
|--------|---------------------------------|
|   |                            |
|   | By:                             | /s/      Paul N. Schwartz |
|   | Title:                          | President |
|   |                            |   |
|   |                            |   |
|   | MAXXAM      Group Holdings Inc. |
|   |                            |   |
|   | By:                             | /s/      Gary L. Clark |
|   | Title:                          | Vice      President |
|   |                            |   |

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