AMENDED AND RESTATED
                                         MAXXAM 1994 EXECUTIVE BONUS PLAN


I.    Definitions.

      The following terms have the meanings indicated unless a different meaning
is clearly required by the context.

      1.1 "Affiliate" means, for purposes of Section 1.8 of this Plan, any
member of the MAXXAM Inc. affiliated group for Federal income tax purposes under
section 1504 of the Code.

      1.2 "Board of Directors" means the board of directors of the Company.

      1.3 "Code" means the Internal Revenue Code of 1986, as amended and as may
be amended from time to time.

      1.4 "Committee" means the Compensation Committee of the Board of Directors
or a designated subcommittee thereof.

      1.5 "Company" means MAXXAM Inc., a Delaware corporation.

      1.6 "Consolidated Financial Results" means net income or loss before
cumulative effect of changes in accounting principles as reported for the
Company and its subsidiaries in the Company's annual consolidated statement of
operations prepared in accordance with generally accepted accounting principles.

      1.7 "Earnings per Share" means net income or loss per common and common
equivalent share as reported for the Company and its subsidiaries in the
Company's annual consolidated statement of operations prepared in accordance
with generally accepted accounting principles.

      1.8 "Extraordinary Transaction" means one transaction or a series of
integrated transactions carried out by the Company and/or its Affiliates
involving an acquisition or disposition of securities (including capital stock,
bonds and partnership interests) or other assets from or to nonaffiliated
entities, which securities or assets have an aggregate fair market value greater
than $100 million at the time of the transaction or transactions.

      1.9 "Participant" means an officer of the Company whose base salary is
equal to or in excess of $500,000.

      1.10 "Plan" means this MAXXAM 1994 Executive Bonus Plan.


II.   Purpose.

      The purpose of the Plan is to provide performance incentives to each
Participant, who is or may be a "covered employee" within the meaning of
§162(m) of the Code, while securing, to the extent practicable, a tax
deduction by the Company for payments of additional incentive compensation to
each such Participant. Any bonus compensation which may be earned under this
Plan is in addition to, and in no way affects or supplants, such Participant's
salary and his or her eligibility under the Company's discretionary bonus
program. It is the Committee's intent under this Plan to identify those
performance criteria for which each Participant is largely responsible and the
achievement of which would be of great benefit to the Company, and to award a
bonus for such achievement, such bonus to be in addition to any other
compensation such Participant may be eligible to receive from the Company.

III.  Performance Goals.

      3.1 Prior to the first day of each fiscal year of the Company (or such
later date as may be permitted under regulations under §162(m) of the
Code), the Committee shall set specific performance goals for each Participant
for such year under each of the following overall business criteria:

      (a)   Improvement in Consolidated Financial Results (which may be either a
            decrease in net loss or an increase in net income);

      (b)   The completion, as defined in advance by the Committee, of one or
            more specific business development projects identified by the
            Committee;

      (c)   The completion of an Extraordinary Transaction, completion being
            defined for this purpose to mean the approval or ratification of
            such transaction(s) by resolution of the board of directors of the
            Company or the relevant Affiliate and the execution by all parties
            to such transaction(s) of a binding written agreement in respect
            thereto;

      (d)   Improvement in Earning per Share (which may be either a decrease in
            net loss per share or an increase in net income per share);

      (e)   The achievement of a predetermined level of net income or loss, as
            determined in advance by the Committee, for the principal divisions
            of the Company and its subsidiaries, based upon their respective
            plans for the year.

IV.   Bonus Awards.

      4.1 At the time the annual performance goals are set for each Participant
pursuant to Section 3.1, the Committee shall establish with respect to each such
goal a bonus opportunity for the year that is related to such Participant's base
salary at the start of the year that takes account of the achievement of such
goal; provided, however, that the Committee shall have absolute discretion to
reduce the actual bonus payment(s) that would otherwise be payable to such
Participant on the basis of achievement of any one or more of the performance
goals under any of the five categories set out in Section 3.1 above.

      4.2 The bonuses hereunder for any Participant shall in no event exceed an
aggregate of $12,000,000 with respect to any fiscal year.

      4.3 Bonuses determined under the Plan shall be paid to the Participants in
cash as soon as practicable following the end of the fiscal year; provided,
however, that no such payment shall be made until the Committee has certified in
writing (in the manner prescribed under applicable regulations under the Code)
that the performance goals and any other material terms related to the award
were in fact satisfied.

      4.4 In the event that a Participant retires, takes a leave of absence or
otherwise terminates his employment prior to the end of a fiscal year end, such
Participant shall receive the full amount of any bonuses earned hereunder as of
such termination date, and any bonus amounts not determinable at such
termination date shall be pro-rated to reflect his or her actual term of
service. The Committee, in its sole discretion, may reduce or refuse to pay such
prorated bonus(es).

V.    Administrative Provisions.

      5.1 The Plan shall be administered by the Committee, which shall be
comprised solely of two or more members of the Board of Directors who satisfy
the requirements set forth in applicable regulations under §162(m) of the
Code.

      5.2 The Plan was adopted by the Board of Directors on March 30, 1994,
subject to shareholder approval, and took effect, retroactively beginning with
the fiscal year of the Company that started January 1, 1994. The amendments to
the original Plan reflected herein shall take effect retroactively beginning
with the fiscal year of the Company that starts January 1, 1998. No payments
shall be made under the Plan prior to the time such approval is obtained in
accordance with applicable law. The Board of Directors or any Committee thereof,
may at any time terminate, suspend or amend the Plan, in whole or in part,
including by adoption of amendments deemed necessary or advisable to correct any
defect or supply an omission or reconcile any inconsistency in the Plan so long
as stockholder approval is obtained if required by §162(m) of the Code.

      5.3 The Plan shall be governed by and construed in accordance with the
laws of the state of Texas without regard to principles of choice of laws.