Non-negotiable Intercompany Note 12/23/96

NON-NEGOTIABLE INTERCOMPANY NOTE


December 23, 1996


FOR VALUE RECEIVED, the undersigned, MAXXAM Inc., a Delaware corporation (the "Company"), HEREBY PROMISES TO PAY to the order of MAXXAM Group Holdings Inc., a Delaware corporation (the "Payee"), the principal sum of ONE HUNDRED TWENTY-FIVE MILLION DOLLARS ($125,000,000) on August 1, 2003.


1. The Company shall pay interest on the outstanding principal amount of this Note at the rate of 11% per annum (computed on the basis of a 360-day year of twelve 30-day months), semiannually on February 1 and August 1 of each year, commencing on February 1, 1997; provided, however, that the Company may, at its option, defer the payment of interest on this Note on any interest payment date to the extent that the Payee has sufficient available funds to satisfy its obligations on the Payee Notes (as hereinafter defined) on such date. Any such deferred interest will be automatically added to the principal amount of this Note (as of the interest payment date on which such interest would otherwise have been payable) and be payable at the maturity hereof. As used in this Note, the term "Payee Notes" means the Payee's 12% Senior Secured Notes due 2003, as amended, restated, restructured, renewed, extended, or otherwise modified, in whole or in part, from time to time, issued pursuant to the Indenture dated as of December 23, 1996, among the Payee (as Issuer), the Company (as Guarantor) and First Bank National Association, as Trustee (the "Trustee"), as such Indenture may be amended, supplemented or otherwise modified from time to ...