MAXXAM INC.
TAX ALLOCATION AGREEMENT WITH
MAXXAM GROUP INC.
THE PACIFIC LUMBER COMPANY and
BRITT LUMBER CO., INC.
OF FEBRURAY 9, 2004
This Agreement is made as of February 9, 2004, between MAXXAM Inc.
("Parent"), a Delaware corporation, MAXXAM Group Inc. ("MGI"), a
Delaware
corporation, The Pacific Lumber Company ("Pacific Lumber"), a
Delaware
corporation and Britt Lumber Co., Inc. ("Britt"), a California
corporation.
WHEREAS, Pacific Lumber and Britt are currently members, for
federal
income tax purposes, of the affiliated group within the meaning of
Section
1504(a) of The Internal Revenue Code of 1986, as amended (the
"Code") of which
Parent is the common parent corporation (the "Group"); and
WHEREAS, Pacific Lumber and Britt are currently members of a
combined
unitary reporting group for Arizona and California income tax
purposes of which
MGI is the common parent corporation (the "Forest Products Group");
and
WHEREAS, pursuant to a tax allocation agreement dated as of May 21,
1988 (the "May 88 Agreement"), Parent and Pacific Lumber
established a Tax
Allocation Method, as hereinafter defined. As used herein, the term
"Tax
Allocation Method" shall mean a method for allocating the
consolidated tax
liability of a group among its members and for reimbursing the
group's parent
for the payment of such liability; and
WHEREAS, on March 23, 1993, the May 88 Agreement was amended as
between
Parent and Pacific Lumber to establish a Tax Allocation Method for
Pacific
Lumber that included Scotia Pacific Holding Company ("Scotia") and
Salmon Creek
Corporation ("Salmon Creek"), then-existing subsidiaries of Pacific
Lumber (the
"March 93 Agreement"); and
WHEREAS, Scotia, which was a wholly owned subsidiary of Pacific
Lumber,
ceased to be a member of the Group as a result of being merged into
a newly
formed wholly owned subsidiary of Pacific Lumber, Scotia Pacific
Company LLC
("Scotia LLC") on July 20, 1998; and
WHEREAS, Salmon Creek, which was a wholly owned subsidiary of
Pacific
Lumber, ceased to be a member of the Group as a result of being
converted into a
newly formed wholly owned subsidiary of Pacific Lumber, Salmon
Creek LLC
("Salmon Creek LLC") on December 7, 1999; and
WHEREAS, Scotia LLC and Salmon Creek LLC are not members of the
Group
since each entity is a single member limited liability company
which has not
elected to be treated as an association taxable as a corporation
and, therefore,
is treated as a division of Pacific Lumber pursuant to Treasury
Regulation
ss.301.7707-3(b)(1); and
WHEREAS, on December 31, 2001, the March 93 Agreement was further
amended (the "Amended March 93 Agreement") as between Parent and
Pacific Lumber
to clarify the treatment of Scotia LLC and Salmon Creek LLC as
members of the PL
Subgroup, as that term is defined in the Amended March 93
Agreement; and
WHEREAS, pursuant to a Tax Allocation Agreement dated July 3, 1990
(the
"July 90 Agreement"), Parent and Britt established a Tax Allocation
Method; and
WHEREAS, as of even date herewith, the stock of Britt was acquired
by
Pacific Lumber; and
WHEREAS, Parent and Pacific Lumber recognize that the May 88 and
Amended March 93 Agreements are no longer reflective of Pacific
Lumber and its
subsidiaries' relationship with Parent; and
WHEREAS, Parent and Britt recognize that the July 90 Agreement is
no
longer reflective of Britt's relationship with Parent; and
WHEREAS, Parent and Pacific Lumber desire to establish a Tax
Allocation
Method which includes Britt and any other Pacific Lumber subsidiary
in the
computation of Pacific Lumber's income tax liability to Parent; and
WHEREAS, Pacific Lumber and Britt desire to establish a Tax
Allocation
Method which reflects Britt's subsidiary relationship to Pacific
Lumber.
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements and covenants contained herein, Parent, MGI, Pacific
Lumber and Britt
hereby agree as follows:
1.
Parent and Pacific Lumber agree to terminate the May 88 Agreement,
as
it pertains to their relationship, and the Amended March 93
Agreement
with respect to taxable periods beginning on and after January 1,
2004.
2.
Parent and Britt agree to terminate the July 90 Agreement with
respect
to taxable periods beginning on or after January 1, 2004.
3.
Pacific Lumber and its subsidiaries, either as of the date of this
Agreement or at the time that the subsidiary becomes eligible to
become
a member of the group, agree to be included in, and Parent agrees
to
file a consolidated Federal income tax return for all taxable years
in
which Parent and Pacific Lumber are eligible to file consolidated
returns as an affiliated group of corporations as such term is
defined
in Section 1504 of the Code.
4.
All elections relating to the filing of a consolidated Federal
income
tax return which are required or are available in the computation
of
the consolidated Federal income tax liability of the Group shall be
made by Parent. Pacific Lumber shall cause any subsidiary that
becomes
a party to this Agreement to execute such consents and other
documents
as are necessary in connection therewith.
5.
Except with respect to any payments to Parent that are required
under
this Agreement, the May 88 Agreement, the Amended March 93
Agreement,
or the July 90 Agreement, or any payment that Britt is required to
make
to Pacific Lumber under this Agreement, Parent shall indemnify
Pacific
Lumber and each Pacific Lumber Subgroup Subsidiary (as hereinafter
defined) and hold them harmless against all Federal income tax
liabilities relating to taxable years of Pacific Lumber and each
Pacific Lumber Subgroup Subsidiary during which Pacific Lumber and
each
Pacific Lumber Subgroup Subsidiary is or was a member of the Group.
6.
(a)
There shall be computed a Federa
