LOAN AND PLEDGE AGREEMENT



     AGREEMENT dated as of October 21, 1997, between CUSTODIAL TRUST
COMPANY ("Bank"), a bank and trust company organized and existing under the
laws of the State of New Jersey, and MAXXAM INC. ("Borrower"), a
corporation organized and existing under the laws of the State of Delaware.

     WHEREAS, Borrower wishes to obtain, and Bank is willing to make, loans
in an aggregate principal amount of up to U.S. dollars $25,000,000 from
time to time outstanding;

     NOW, THEREFORE, the parties hereto hereby agree as follows:

     1. DEFINITIONS. The following terms, unless the context otherwise
requires, shall have the following meanings as used herein:

     (a) "Business Day" means any day on which banks in the States of New
Jersey, New York and Texas are open for business.

     (b) "Business Hour" means any hour in a Business Day.

     (c) "Collateral" has the meaning given in Section 8(c) below.

     (d) "Event of Default" has the meaning given in Section 16 below.

     (e) "Excess Collateral" at any time means Pledged Securities having an
Initial Loan Value equal to the difference between (i) the Initial Loan
Value of all Pledged Securities at such time and (ii) the sum of the
outstanding aggregate principal amount of all Loans and the interest
accrued thereon.

     (f) "Guarantee" of or by any Person means any obligation, contingent
or otherwise, of such Person guaranteeing the payment of any Indebtedness
of any other Person in any manner, whether directly or indirectly, and
including any obligation of such Person, direct or indirect, (i) to
purchase (or advance or supply funds for the purchase or payment of) such
Indebtedness or to purchase (or to advance or supply funds for the purchase
of) any security for the payment of such Indebtedness, or (ii) to purchase
property, securities or services for the purpose of assuring the owner of
such Indebtedness of the payment of such Indebtedness; provided, however,
that the term Guarantee shall not include endorsements for collection or
deposit, in either case in the ordinary course of business.

     (g) "Indebtedness" of any Person means, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (iii)
all obligations of such Person upon which interest charges are customarily
paid, but not including such obligations which consist of accounts payable
and other current  liabilities arising in the ordinary course of business,
(iv) all obligations of such Person to repurchase securities under
repurchase agreements and all obligations of such Person issued or assumed
as the deferred purchase price of property or services which under
generally accepted accounting principles would be shown on a balance sheet
of such Person as a liability, but not including such obligations which
consist of (A) accounts payable and other current  liabilities arising in
the ordinary course of business and (B) compensation, pension and other
obligations arising from employee compensation and benefit arrangements,
(v) all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such Person, whether or not
the obligations secured thereby have been assumed, (vi) all Guarantees by
such Person of Indebtedness of others, and (vii) all obligations of such
Person as an account party in respect of letters of credit and bankers'
acceptances.
  
     (h) "Initial Loan Value" means the collateral value assigned to the
Collateral in accordance with Section 8(e) below.

     (i) "Interest Closing Date" with respect to a Loan means the day that
such Loan is repaid in full and, prior to such day, any day next preceding
an Interest Commencement Date for such Loan.

     (j) "Interest Commencement Date" with respect to any Loan means the
date on which such Loan is made and thereafter any February 21, May 21,
August 21 or November 21 occurring while such Loan is outstanding (or if
any such day is not a Business Day, then the next succeeding Business Day).

     (k) "Interest Period" with respect to any Loan means each period from
and including an Interest Commencement Date for such Loan to and including
the next succeeding Interest Closing Date for such Loan. 

     (l) "Kaiser" means Kaiser Aluminum Corporation, a corporation
organized and existing under the laws of the State of Delaware. 

     (m) "Kaiser Common" means the common stock of Kaiser, including any
class thereof issued upon any reclassification or recapitalization of
Kaiser's capital stock.

     (n) "Kaiser Stock" means (i) Kaiser Common, and (ii) any other capital
stock of Kaiser which is listed on a national securities exchange in the
United States and is acceptable to Bank in its sole and absolute
discretion.

     (o) "Lien" means, with respect to any asset, (i) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset or any assignment, hypothecation or other preferential arrangement of
or with respect to such asset, and (ii) any purchase option, call or
similar right of a third party with respect to such asset. 

     (p) "Loan" or "Loans" means any or all of the loans provided for in
Section 2 below, which may be Revolving Loans and the Term Loan.

     (q) "Maintenance Loan Value" means the collateral value assigned to
the Collateral in accordance with Section 8(e) below.
          
     (r) "Market Value" means the value assigned to the Collateral in
accordance with Section 8(f) below.

     (s) "90-day LIBOR" means the three-month London Inter Bank Offered
Rate for U.S. dollars as quoted on Page 3750 on the Telerate Service (or
such other page as may replace Page 3750 on that service or such other
service as may be designated for the time being by the British Bankers'
Association as the information vendor for the purpose of displaying British
Bankers' Association Interest Settlement Rates) as of 11:00 a.m., London
time, on an Interest Commencement Date.

     (t) "Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association,
corporation, government or any agency, court or political division thereof,
or any other entity.

     (u) "Pledge Account" means an account of Bank as pledgee of Borrower,
maintained at Bank and entitled "MAXXAM pledgor/CTC pledgee".

     (v) "Pledged Securities" means all shares of Kaiser Stock and other
securities, which are in the Pledge Account and pledged by Borrower to Bank
as provided in this Agreement, and any securities into which such
securities are converted or for which they are exchanged.
     
     (w) "Revolving Credit Commitment" has the meaning given in Section
2(a) below.

     (x) "Revolving Loan(s)" has the meaning given in Section 2(a) below.

     (y) "SEC Reports" means reports filed by Borrower under the Securities
Exchange Act of 1934.

     (z) "Significant Subsidiary" has the meaning assigned to that term in
Regulation S-X of the Securities Act of 1933, as such Regulation is in
effect on the date hereof.

     (aa) "Term Loan" has the meaning given in Section 2(c) below.

     2. LOANS. (a) Subject to the terms and conditions of this Agreement,
Bank shall make loans to Borrower from the date of this Agreement to but
not including the first anniversary of such date (each, a "Revolving Loan",
and, collectively, the "Revolving Loans"), at such times within such period
of time and in such amounts as Borrower may request, which amounts may be
borrowed, repaid and reborrowed, provided that the Revolving Loans shall
not exceed $25,000,000 in aggregate principal amount at any one time
outstanding (the "Revolving Credit Commitment").

     (b) Borrower shall request each Revolving Loan by notice to Bank,
specifying (i) the date (which shall be a Business Day) for the making of
such Revolving Loan, (ii) the principal amount of such Revolving Loan,
which shall not be less than $500,000, (iii) the Collateral for such
Revolving Loan, and (iv) such information about the use of the proceeds
from such Revolving Loan as Bank may from time to time require. Such notice
shall be received by Bank at least one Business Day prior to the date for
the making of such Revolving Loan.

     (c) Subject to the terms and conditions of this Agreement, Bank shall
make a loan to Borrower on the first anniversary of the date of this
Agreement (the "Term Loan") in a principal amount equal to the aggregate
principal amount of all Revolving Loans then outstanding.

     (d) The Loans shall be evidenced by the Pledge Account and the records
made therein by Bank, which shall be conclusive, absent manifest or
demonstrable error, as to the amount of the Loans and the interest and
payments thereon. Any failure so to record or any error in doing so shall
not limit or otherwise affect the obligation of Borrower under this
Agreement to pay any amount owing with respect to the Loans.

     3. CONDITIONS PRECEDENT. (a) The obligation of Bank to make any Loan
shall be subject to the fulfillment of each of the following conditions
precedent:  (i) that on the date of the making of such Loan no event has
occurred and is continuing which constitutes an Event of Default under this
Agreement or which, upon the giving of notice, the lapse of time, or both,
would constitute an Event of Default, (ii)  that the representations and
warranties of Borrower in Sections 10, 11 and 12 below are correct and
accurate in all material respects on the date of the making of such Loan as
though made on such date, (iii) that Borrower has fulfilled, to the
satisfaction of Bank, Borrower's obligation with respect to such Loan as
set forth in Section 8(a) below, (iv) if such Loan is a Revolving Loan,
that after giving effect to the making of such Loan and any pledge of
Collateral therefor, the Collateral then held by Bank has an Initial Loan
Value equal to the sum of the principal amount of such Loan and the
aggregate principal amount of all other Loans then outstanding plus the
accrued interest thereon, (v) if such Loan is the Term Loan, that after
giving effect to the making of such Loan and any pledge of Collateral
therefor, the Collateral then held by Bank has an Initial Loan Value equal
to the principal amount of such Loan, and (vi) that after giving effect to
the making of such Loan and the pledge of Collateral therefor, the
representation and warranty of Borrower in Section 12(a) below continues to
be correct and accurate in all material respects, and (vii) that Bank has
received from Borrower such documents as Bank may have reasonably
requested.

     (b) The obligation of Bank to make the first Revolving Loan  shall be
subject to the fulfillment of the condition precedent that on or prior to
the date of the making of such Loan, Bank shall have received from Borrower
(i) a balance sheet and the related income statement for Borrower's most
recent quarterly fiscal period for which such financials are available as
well as audited financials for Borrower's most recent fiscal year for which
such audited financials are available, (ii) if requested by Bank, a
Statement of Purpose (Federal Reserve Form U-1) duly completed and signed
by Borrower, and (iii) such other documents as Bank may have reasonably
requested.

     4. TERMS OF REPAYMENT; WAIVERS. (a) Borrower may repay any Revolving
Loan in its entirety or in part at any time prior to the first anniversary
of the date of this Agreement, without premium and without notice of any
kind but together with all accrued but unpaid interest thereon.

     (b) Borrower shall repay all Revolving Loans in their entirety on the
first anniversary of the date of this Agreement. Forthwith upon the making
of the Term Loan, Bank shall apply the proceeds thereof on behalf of
Borrower to such repayment of all Revolving Loans then outstanding. 

     (c) Borrower shall repay the Term Loan in its entirety on the second
anniversary of the date of this Agreement.

     (d) Any Loan may also become repayable by Borrower, in whole or in
part, as provided in Section 8(d) below, and shall become repayable by
Borrower in its entirety as provided in Section 16 below upon the
occurrence of an Event of Default.

     (e) Borrower hereby waives presentment and protest of any instrument
and notice thereof, notice of default and, to the extent permitted by
applicable law, all other notices (except notices required by the terms of
this Agreement) to which Borrower might otherwise be entitled. 

     5. INTEREST AND OTHER CHARGES. (a) Borrower shall pay Bank interest on
the principal amount of each Loan from the date on which such Loan is made
pursuant to Section 2 above until (but not including) the date such Loan is
due under this Agreement, at a rate per annum during each Interest Period
equal to 90-day LIBOR on the Interest Commencement Date of such Interest
Period, plus two percent (200 basis points). Such interest shall be payable
monthly in arrears on the 10th day of each month (or, if the 10th day is
not a Business Day, on the next succeeding Business Day), upon repayment of
such Loan in full, and as otherwise provided in this Agreement.

     (b) Borrower shall pay Bank interest on any amount not paid by
Borrower when due under this Agreement, from the date payment of such
amount was due until the date such amount is paid, at a rate per annum
during each Interest Period equal to 90-day LIBOR on the Interest
Commencement Date of such Interest Period, plus four percent (400 basis
points). Such interest shall be payable on demand made by Bank from time to
time.

     (c) Interest payable hereunder shall be calculated by Bank on the
basis of a 360-day year and for the actual number of days elapsed. Each
determination of an interest rate by Bank pursuant to this Agreement shall
be conclusive and binding on Borrower in the absence of manifest or
demonstrable error. 
 
     (d) In no event whatsoever shall the interest rate and other charges
charged hereunder exceed the highest rate permissible under any law which a
court of competent jurisdiction shall, in a final determination, deem
applicable hereto.  In the event that a court determines, in a final
determination, that Bank has received interest and other charges hereunder
in excess of such highest rate, Bank shall promptly refund such excess
amount to Borrower, and the provisions hereof shall be deemed amended to
provide for such permissible rate.

     6. COMMITMENT FEE. Borrower shall pay to Bank a commitment fee
computed (on the basis of a 360-day year and for the actual number of days
elapsed) at a rate of one-quarter of one percent (25 basis points) per
annum on the average daily unused amount of the Revolving Credit
Commitment. Such commitment fee shall accrue from the date of this
Agreement to and including the first anniversary of such date, and shall be
payable on the last Business Day of each calendar month up to and including
the calendar month during which the first anniversary of the date of this
Agreement occurs. 

     7. PLACE AND MANNER OF PAYMENT. Borrower shall make all payments
required to be made by it under this Agreement (whether of principal,
interest or any other amount) prior to 11:00 A.M. New York time on the date
such payment is due, at such address in the United States of America as
Bank shall from time to time indicate to Borrower, in U.S. dollars and in
immediately available funds. 

     8. COLLATERAL SECURITY, PLEDGE AND LIMITATION ON COLLATERAL. (a) On or
before the date of the making of any Loan, Borrower shall deliver to the
Pledge Account shares of Kaiser Stock and/or other securities (which other
securities shall be acceptable to Bank in its sole and absolute
discretion), accompanied by stock powers signed in blank and having on the
date of the making of such Loan (i) an aggregate Initial Loan Value of no
less than the principal amount of such Loan, or (ii) if there is Excess
Collateral in the Pledge Account on such date, an aggregate Initial Loan
Value of no less than the difference between (A) the principal amount of
such Loan and (B) the Initial Loan Value of such Excess Collateral on such
date.
 
     (b) If shares of Kaiser Common are delivered to the Pledge Account
pursuant to Section 8(a) above after a reclassification or recapitalization
of Kaiser Common into two or more classes of shares, then the shares so
delivered shall at all times consist of (i) a number of shares from each of
such classes that bears the same proportion to all of the shares so
delivered as (ii) the total number of shares of such class that were issued
solely by reason of such reclassification or recapitalization bears to the
total number of shares of all classes of Kaiser Common issued solely by
reason of such reclassification or recapitalization.

     (c) To secure the due and punctual payment of each Loan, all accrued
interest thereon and all other amounts from time to time payable by
Borrower under this Agreement, and the performance by Borrower of all its
obligations and covenants under this Agreement, Borrower hereby pledges,
hypothecates, assigns, transfers and sets over to Bank, and grants to Bank
a continuing security interest in and lien upon, (i) all Pledged Securities
at any time in the Pledge Account, (ii) all other property of Borrower now
or at any time hereafter in Bank's actual possession including, but not
limited to, all other securities, monies, claims and credit balances, and
(iii) all proceeds, products and profits derived from any of the foregoing
(including proceeds of any insurance policies and all cash, securities,
dividends and other property at any time and from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or
all of the foregoing securities), and copies of all books and records
related to any of the foregoing (all of the foregoing Pledged Securities
and other property, together with all other property in which Borrower may
hereafter grant to Bank a lien and security interest, being herein
collectively referred to as the "Collateral").

     (d) At all times while any Loan is outstanding, Borrower shall
maintain Collateral with Bank consisting of Pledged Securities having an
aggregate Maintenance Loan Value of not less than the aggregate principal
amount of all Loans outstanding hereunder and all accrued interest thereon.
Forthwith upon demand made to Borrower by Bank, Borrower shall, at its
option, either (i) deliver to Bank such shares of Kaiser Stock or such
other securities which are acceptable to Bank in its sole and absolute
discretion, all accompanied by stock powers signed in blank, or (ii) repay
so much of the aggregate principal amount of all Loans outstanding as, in
either case, may be necessary for the aggregate Maintenance Loan Value of
all Pledged Securities to be no less than the aggregate principal amount of
all Loans outstanding hereunder and all accrued interest thereon. 

     (e) The Initial Loan Value and the Maintenance Loan Value of any of
the Pledged Securities or other item of Collateral are each an amount
representing a percentage of the Market Value of such Pledged Security or
other item of Collateral and shall be determined (i) in accordance with
Schedule A hereto if the percentages required for such determination are
set forth therein or (ii) from time to time by Bank in its sole and
absolute discretion if such percentages are not set forth therein,
provided, however, that in no event shall Kaiser Common, irrespective of
its Market Value, be accorded a Maintenance Loan Value higher than $7.50
per share of Kaiser Common.

     (f) If and for so long as any Pledged Securities are listed on a
national securities exchange in the United States of America, their Market
Value shall be determined for all purposes by the last sales price for such
Pledged Securities on any such exchange on the Business Day next preceding
the date of determination or, if there was no sale on that Business Day, by
the last sales price for such Pledged Securities on the next preceding
Business Day on which there was a sale thereof on any such exchange, all as
quoted on the Consolidated Tape or, if not quoted on the Consolidated Tape,
then as quoted by any such exchange. The Market Value of any other item of
Collateral, and the Market Value of such Pledged Securities if they are no
longer listed on any such exchange, shall be determined by Bank for all
purposes (i) based upon the prices bid (on the Business Day next preceding
the date of determination) by banks and broker/dealers which regularly
quote prices on property of the same type as such item of Collateral or
(ii) if no such quotations are available for such Business Day, based upon
such factors as Bank, in its sole and reasonable judgment, shall determine
and communicate to Borrower. Market Value, in the case of interest-bearing
Collateral, shall include accrued interest to the date on which such Market
Value is determined. 

     (g) Subject to Section 8(i) below, Bank shall promptly pay over to
Borrower (i) any and all cash dividends and interest paid on any of the
Collateral and received by Bank, and (ii) any other cash received by Bank
on account of the Collateral (whether upon the repayment, redemption or
exchange of any thereof or otherwise) unless, after giving effect to such
payment of cash dividends or interest or other cash to Borrower, the
aggregate Maintenance Loan Value of all Collateral then held by Bank would
be less than the sum of the aggregate principal amount of all outstanding
Loans and the interest accrued thereon, in which case Bank shall promptly
apply the amount of such cash to the repayment of such aggregate principal
amount and the payment of such interest. Any and all non-cash distributions
of property (including stock dividends) made for any reason whatsoever on
or in respect of any of the Collateral, which are received by Bank, shall
be retained by Bank and held by it as part of the Collateral subject to
this Agreement. 

     (h) Subject to Section 8(i) below, Borrower shall be entitled to
exercise, for any purpose not inconsistent with the terms of this
Agreement, any and all voting and/or consensual rights and powers relating
or pertaining to the Collateral. In furtherance of such exercise, Bank
shall deliver to Borrower all notices of meetings, proxy materials (other
than proxies) and other materials which it receives regarding (i) Pledged
Securities from the issuers thereof or, in the case of tender, exchange or
similar offers for Pledged Securities, from the party (or its agent) making
the offer, and (ii) Pledged Securities or any other item of Collateral from
any court having jurisdiction over (or from any Person who is a party to)
reorganization, liquidation or other similar proceedings for the issuer of
such Pledged Securities or the obligor on such other item of Collateral.
Whenever Bank or any of its agents receives a proxy with respect to
securities in the Pledge Account, Bank shall promptly request instructions
from Borrower on how such securities are to be voted, and shall give such
proxy, or cause it to be given, in accordance with such instructions. If
Borrower timely informs Bank that Borrower wishes to vote any such
securities in person, Bank shall promptly seek to have a legal proxy
covering such securities issued to Borrower.  
 
     (i) If an Event of Default occurs and for so long as it continues,
Borrower shall cease to be entitled (i) to exercise any and all voting
and/or consensual rights and powers relating or pertaining to any of the
Collateral, and (ii) to receive any cash dividends and interest, or other
cash, payable on or on account of any of the Collateral; and Bank shall
have the sole and exclusive right and authority to exercise such voting
and/or consensual rights and powers and to receive and retain such
dividends and interest and other cash. Any money or other property received
by Bank pursuant to this Section 8(i) shall be retained by Bank as
additional Collateral and applied as required in Section 17(a) below.

     (j) If the aggregate Initial Loan Value of the Collateral at any time
exceeds the aggregate principal amount of all then outstanding Loans and
the interest accrued thereon, and provided that no Event of Default has
occurred and is continuing, Borrower may designate to Bank, in writing,
Pledged Securities which have an aggregate Initial Loan Value no greater
than such excess, and Bank, promptly upon such designation, shall release
such designated Pledged Securities from the lien and security interest
granted in Section 8(c) above and deliver and transfer them pursuant to
such instructions as Borrower may have given to Bank, provided that,
immediately after giving effect to such delivery and transfer, the
aggregate Initial Loan Value of all remaining Collateral is not less than
the aggregate principal amount of all such Loans and the interest accrued
thereon.

     (k) Upon the payment in full of all the Loans, all accrued interest
thereon and all other amounts from time to time payable by Borrower under
this Agreement, the security interest and lien granted in Section 8(c)
above in and upon the Collateral shall terminate, and all of Bank's rights
hereunder to the Collateral shall revert to Borrower. Upon such
termination, Bank shall deliver and transfer the Collateral in the Pledge
Account to Borrower, together with all instruments and documents evidencing
the Collateral and such other documents as Borrower shall reasonably
request to evidence such termination.  

     9. PROTECTION OF SECURITY INTEREST. (a) Borrower shall, at its expense
and from time to time, perform all steps reasonably requested by Bank at
any time to perfect, maintain, protect and enforce Bank's security interest
in and lien upon the Collateral, including, without limitation, (i)
executing and filing financing or continuation statements and amendments
thereto, in form and substance satisfactory to Bank, and (ii) obtaining
such consents and registrations of transfer, providing such endorsements
and executing and delivering such other documents as may be required for
any sale, transfer or other disposition thereof by Bank in accordance with
the provisions of this Agreement. From time to time, Borrower shall, upon
Bank's written request, promptly execute and deliver confirmatory written
instruments pledging the Collateral to Bank, but any failure by Borrower to
do so shall not affect or limit Bank's security interest in, lien upon or
other rights in and to the Collateral.  Until payment in full of all the
Loans, all accrued interest thereon and all other amounts from time to time
payable by Borrower under this Agreement, Bank's security interest in the
Collateral shall continue in full force and effect.

     (b) Subject to the terms of this Agreement, Borrower hereby
irrevocably appoints Bank its true and lawful attorney in its name, place
and stead, and at its expense, in connection with the preservation and
enforcement of Bank's rights and remedies under this Agreement if an Event
of Default occurs and is continuing (i) to receive, endorse and collect all
checks and other orders for the payment of money made payable to Borrower
representing any dividend, interest or other distribution payable or
distributable in respect of any of the Collateral and to give full
discharge for the same, (ii) to give all notices, obtain all consents,
effectuate all registrations in Bank's name or that of a proposed purchaser
or other transferee and make all transfers of all or any part of the
Collateral which are necessary or appropriate in connection with any sale,
transfer or other disposition thereof pursuant to this Agreement, (iii) to
execute and deliver for value all necessary or appropriate assignments and
other instruments in connection with any such sale, transfer or other
disposition, and (iv) to execute and deliver all other documents, and do
all other acts and things, which Bank reasonably deems appropriate in such
connection. Borrower hereby ratifies and confirms all that Bank, as
Borrower's attorney, may lawfully do hereunder and pursuant hereto, but,
nevertheless, at Bank's request or that of the purchaser or other
transferee in question, Borrower shall ratify and confirm any sale,
transfer or other disposition of Collateral pursuant to this Agreement in
such manner as Bank or such purchaser or other transferee may reasonably
specify in such request.      

     10. OTHER LIENS. Borrower represents and warrants to Bank that all
Collateral consisting of Pledged Securities and other items of Collateral
is, and Borrower covenants that it will continue to be, owned by Borrower
free and clear of all Liens (except for (i) Liens in favor of Bank, (ii)
Liens for taxes not delinquent or being contested in good faith and in
appropriate proceedings, (iii) Liens in connection with workers'
compensation, unemployment insurance, social security or similar
obligations, and (iv) mechanics', workmen's, materialmen's, landlords',
carriers' or other like liens arising in the ordinary course of business
with respect to obligations which are not due or which are being contested
in good faith).

     11. USE OF PROCEEDS. Borrower represents and warrants to Bank that
each Loan is a commercial loan the proceeds of which will be used in the
business of Borrower which is, by various means (including the purchase or
repurchase of securities issued by Borrower) to invest in, hold, acquire,
sell or divest, operate or otherwise act with respect to businesses and
business interests of various kinds, including the businesses described in
Borrower's annual report on Securities and Exchange Commission Form 10-K
for its fiscal year ended December 31, 1996.

     12. OTHER REPRESENTATIONS AND WARRANTIES. Borrower further represents
and warrants to Bank that:

     (a) at no time shall the Collateral include Pledged Securities, or any
class of Pledged Securities, in an amount such that solely by reason of
such Pledged Securities, either upon exercising its rights under Section 17
below or otherwise, Bank would become a holder of 10% or more of any class
of Pledged Securities or would become (or be presumed to be) an affiliate
of the issuer of such Pledged Securities (as such term "affiliate" is
defined for purposes of the Securities Act of 1933);

     (b) Borrower has, for purposes of Rule 144 under the Securities Act of
1933, been the beneficial owner of the shares of Kaiser Common or other
Kaiser Stock pledged (or to be pledged) to Bank under this Agreement at all
times since May 15, 1993 or earlier; 

     (c) Borrower (i) is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, (ii) is qualified
to do business and is in good standing in all states in which qualification
and good standing are necessary in order for it to conduct its business and
own its property, except where the failure to so qualify or to be in good
standing could not reasonably be expected to have a material adverse effect
on the financial condition, operations or business of Borrower and its
subsidiaries considered as one enterprise and (iii) has all requisite
corporate power and authority to conduct its business, to own its property
and to execute and deliver this Agreement and to perform its obligations
hereunder;

     (d) it has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement, and such
authorization, delivery and performance do not (i) violate its corporate
charter or by-laws or any material law, rule, regulation, order, judgment,
injunction, decree, determination or award presently in effect and
applicable to it, (ii) require any consent or result in a breach of or
constitute a default under any material agreement, lease or instrument to
which it is a party or by which it or any of its assets may be bound or
affected, or (iii) result in or require the creation or imposition of any
Lien (other than in favor of Bank pursuant to this Agreement) upon or with
respect to any shares of Kaiser Common or other Kaiser Stock owned by
Borrower or any material portion of Borrower's other properties;

     (e) this Agreement has been duly and validly executed and delivered by
Borrower and constitutes a legal, valid and binding obligation of Borrower,
enforceable against it in accordance with its terms, subject, as to
enforceability of remedies (i) to bankruptcy, insolvency and other laws
affecting creditors' rights generally, and (ii) to the application of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law);

     (f) as of the date hereof, no recording, order, authorization,
consent, license, registration, approval, exemption, filing, notice or
other similar action by or with any governmental body, governmental
official or other regulatory authority (except such as have been obtained,
made or given and copies or confirmations of which have been delivered by
Borrower to Bank) is or will be required to be obtained, made or given by
Borrower in order to (i) ensure the legality, validity, binding effect or
enforceability of this Agreement, (ii) permit the performance by Borrower
of its obligations under this Agreement in accordance with the terms
thereof, or (iii) enable Bank to enforce its rights and remedies pursuant
to the terms of this Agreement, including any sale, transfer or other
disposition by Bank of all or any part of the Collateral, except such as
may be required under the Securities Act of 1933, the regulations
promulgated thereunder and State securities laws or by any national
securities exchange;
     
     (g) Borrower is not in default with respect to any Indebtedness of
Borrower in a principal amount greater than $500,000;

     (h) except as disclosed by it in SEC Reports or otherwise disclosed in
writing by Borrower to Bank, there is no litigation or other proceeding
pending or, to its knowledge, threatened against or affecting Borrower
which could reasonably be expected to have a material adverse effect (i) on
its financial condition, operations or business, or (ii) on any of the
Collateral; and 

     (i) the consolidated balance sheet of Borrower and its consolidated
subsidiaries as of December 31, 1996, and the related consolidated income
statement for the twelve-month period then ended and the consolidated
balance sheet of Borrower and its consolidated subsidiaries as of June 30,
1997 and the related consolidated income statement for the six-month period
then ended, copies of all of which have heretofore been delivered to Bank
by Borrower, present fairly, in all material respects, the consolidated
financial condition of Borrower and its consolidated subsidiaries as at the
dates thereof and their consolidated results of operations for the periods
then ended, and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis; since the date of
Borrower's most recent, publicly available periodic report filed with the
Securities and Exchange Commission under the Securities Exchange Act of
1934, which has been delivered by it to Bank, there have been no material
adverse changes in the assets or liabilities or financial condition of
Borrower or of any of its Significant Subsidiaries; and neither Borrower
nor any of its Significant Subsidiaries has entered into any commitment or
contract, or incurred any other liability, which is not reflected in said
balance sheets and could reasonably be expected to have a material adverse
effect upon its financial condition, operations or business.
          
     13. REITERATION OF REPRESENTATIONS. The representations in Sections
10, 11 and 12 above shall be deemed to be repeated by Borrower each time a
Loan is made.

     14. REPORTING. (a) As soon as available, and in any event within 60
days after the close of each of the first three quarters of each fiscal
year of Borrower, commencing with the quarter ending on September 30, 1997,
Borrower shall deliver to Bank the consolidated balance sheet of Borrower
and its consolidated subsidiaries at the end of such quarter and the
related consolidated income statement for the portion of the fiscal year
ending on the last day of such quarter, all in reasonable detail and
stating in comparative form the figures for the corresponding date and
period in the previous fiscal year, prepared in accordance with generally
accepted accounting principles applied on a consistent basis, subject,
however, to year-end audit adjustments, and unless delivered to Bank as
part of Borrower's quarterly report on Securities and Exchange Commission
Form 10-Q, certified by Borrower's chief financial or accounting officer.

     (b) As soon as available, and in any event within 120 days after the
close of each fiscal year of Borrower, Borrower shall deliver to Bank the
consolidated balance sheet of Borrower and its consolidated subsidiaries as
at the close of such fiscal year and the related consolidated income
statement for such fiscal year, all in reasonable detail and stating in
comparative form the figures as at the close of and for the previous fiscal
year, audited by certified public accountants satisfactory to Bank and
accompanied by a report thereon, satisfactory to Bank, issued by such
accountants.

     15. OTHER COVENANTS. Borrower covenants with Bank that until the
payment in full of all Loans, all accrued interest thereon and all other
amounts from time to time payable by Borrower under this Agreement, it
shall: 

     (a) maintain and preserve its existence and all rights, privileges,
approvals and other authority adequate for the conduct of its business;

     (b) promptly notify Bank in writing of any violation by Borrower of
any law, statute, regulation or ordinance of any governmental entity, or of
any agency thereof, applicable to it which would likely materially and
adversely affect the Collateral or the financial condition, operations or
business of Borrower and its subsidiaries considered as one enterprise; 

     (c) notify Bank in writing within five (5) Business Days of any
default by Borrower with respect to any of its Indebtedness in a principal
amount of more than $1,000,000;

     (d) promptly notify Bank in writing of any change in the control of
Borrower or the control of Kaiser;

     (e) deliver to Bank (i) promptly after the same are available copies
of all financial statements and other reports and documents that Borrower
distributes to its shareholders or otherwise makes publicly available, and
(ii) such other documents as Bank may from time to time reasonably request,
including such Statements of Purpose (Federal Reserve Form U-1's) with
regard to any Pledged Securities as may be required under Regulation U of
the Board of Governors of the Federal Reserve System; and

     (f) not create, incur, assume or permit to exist any Lien on any
shares of Kaiser Common, shares of other Kaiser Stock or any other
securities equivalent to Kaiser Common or other Kaiser Stock, whether such
shares or other securities are now owned or hereafter acquired by it, other
than (i) Liens for taxes not delinquent or being contested in good faith
and in appropriate proceedings; (ii) Liens in connection with workers'
compensation, unemployment insurance, social security or similar
obligations; (iii) mechanics', workmen's, materialmen's, landlords',
carriers' or other like liens arising in the ordinary course of business
with respect to obligations which are not due or which are being contested
in good faith; (iv) Liens granted prior to the date of this Agreement to
secure the 12-1/4% Senior Secured Discount Notes due 2003 and/or the
11-1/4% Senior Secured Notes due 2003 of MAXXAM Group Inc. and the 12%
Series B Senior Secured Notes due 2003 of MAXXAM Group Holdings Inc.; (v)
Liens granted after the date of this Agreement on no more than 10,000,000
shares of Kaiser Common, in the aggregate, to secure Indebtedness for money
borrowed of Borrowers or any of its affiliates; (vi) Liens in favor of
Bank; and (vii) such other Liens as Bank and Borrower may from time to time
agree upon in writing.

     16. EVENTS OF DEFAULT. It shall constitute an Event of Default
hereunder (and, upon the occurrence thereof, all of Bank's obligations
hereunder to make any Loan shall terminate and the then outstanding
principal amount of each Loan, all accrued but unpaid interest thereon and
all accrued but unpaid commitment fee shall become immediately due and
payable, without demand, presentment or notice of any kind, all of which
are hereby expressly waived) if at any time:

     (a) Borrower fails to pay in full the principal amount of any Loan
when due; or

     (b) Borrower fails to make or pay when due any interest payment,
charge or other amount required to be made or paid by it under this
Agreement, and such failure continues for five Business Days after the date
on which the making of such payment or the payment of such charge or other
amount was due; or

     (c) Borrower fails to deliver Collateral to Bank in accordance with
Section 8(d) above upon demand therefor made by Bank in writing at the
address for notices to Borrower specified in Section 22 below, and such
failure continues for five Business Days after the date of the making of
such demand; or

     (d) Borrower fails to perform or observe in any material respect any
other term, covenant or condition to be performed or observed by it under
this Agreement, and such failure continues for a period in excess of 10
Business Days after the earlier of (i) the date an executive officer of
Borrower obtains knowledge of such failure or (ii) the date on which
written notice thereof is given by Bank to Borrower; or 

     (e) any representation or warranty made by Borrower in Sections 10, 11
and 12 above proves to have been incorrect in any material respect on any
of the dates as of which made or deemed to have been repeated; or

     (f) Borrower defaults in the payment when due, whether at stated
maturity or when otherwise due (which shall include any applicable grace
period), of any of its Indebtedness (other than Indebtedness under this
Agreement) in a principal amount of more than $2,000,000, whether now or
hereafter existing; or 

     (g) Borrower fails (within the applicable grace period, if any) to
perform any term, covenant or agreement on its part to be performed under
any agreement or instrument (other than this Agreement) evidencing or
securing any of its Indebtedness (whether now or hereafter existing) in a
principal amount of more than $2,000,000, or any event occurs or condition
exists (and such event or condition is not remedied within the applicable
grace period, if any), if the effect of such failure, event or condition is
to cause, or to permit the holder or holders of such Indebtedness (with or
without the giving of notice, lapse of time or both) to 
cause, such Indebtedness to become due prior to its stated maturity; or

     (h) (i) Borrower as debtor commences a case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar
law, or seeks the appointment of a receiver, trustee, custodian or similar
official for itself or any substantial part of its property, (ii) any such
case or proceeding is commenced against it, or another seeks such an
appointment, which (A) is consented to or not timely contested by it, (B)
results in the entry of an order for relief, such an appointment, or the
entry of an order having a similar effect, or (C) is not dismissed within
90 days, (iii) it makes a general assignment for the benefit of creditors,
or (iv) it admits in writing its inability to pay its debts as they become
due; or

     (i) one or more judgments or orders for the payment of money in an
aggregate amount in excess of $10,000,000 are rendered against Borrower and
(A) the same remain undischarged for a period of 30 or more consecutive
days during which execution thereof is not effectively stayed upon appeal
or otherwise or (B) any proceeding by a creditor to enforce the same is
pending and not effectively stayed by appeal or otherwise.

     17. BANK'S RIGHTS AND REMEDIES. (a) If an Event of Default occurs and
is then continuing, Bank shall promptly apply to the payment of the
principal of, and accrued but unpaid interest on, the Loans and of any
other amounts payable by Borrower under this Agreement (in such order as
Bank in its sole and absolute discretion may determine) any cash held by
Bank as part of the Collateral pursuant to Section 8(i) above.

     (b) In addition to its obligation under Section 17(a) above, if an
Event of Default occurs and is then continuing, Bank shall have the right
to exercise with respect to any or all of the Collateral any rights and
remedies available to a secured creditor under applicable law and, in
addition, (without being required to give any notice to Borrower except as
may be required in Section 17(d) below) to sell any or all of such
Collateral, publicly or privately, at a place of Bank's choosing, and (in
such order as Bank in its sole and absolute discretion may determine) to
apply the proceeds of such sale to the payment of the principal of, and
accrued but unpaid interest on, the Loans and of any other amounts payable
by Borrower under this Agreement.

     (c) If any Pledged Securities forming part of the Collateral are, in
whole or in part, actually convertible into or exchangeable for other
securities, then Bank shall have the right, in its discretion, instead of
selling such Pledged Securities as provided in Section 17(b) above, to
convert or exchange them pursuant to their terms, to apply any cash
received by Bank in such conversion or exchange to the payment of the
principal of, and accrued but unpaid interest on, the Loans and of any
other amounts payable by Borrower under this Agreement, and to sell as
provided in Section 17(b) above any securities it receives in such
conversion or exchange.
 
     (d) The Pledged Securities at any time forming part of the Collateral
are of a type customarily sold on recognized markets and no notification to
Borrower of any public sale thereof by Bank is required, provided, however,
that if any such notice is required by applicable law with respect to any
such sale, then one Business Day's notice thereof shall be reasonable
notification to Borrower. Bank shall give Borrower five Business Days'
prior notice of any private sale of the Pledged Securities.

     18. NO WAIVER. No failure by Bank to exercise any right, power or
remedy under this Agreement, and no delay by Bank in exercising any such
right, power or remedy, shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise by Bank of any other
right, power or remedy. The rights and remedies of Bank provided for in
this Agreement are cumulative and not exclusive of any remedies provided at
law or in equity.

     19. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement of the parties with respect to the Loans, and, except as provided
in Section 5(d) above, no amendment, modification, termination or waiver of
any provision hereof or consent to a departure herefrom by Borrower shall
be effective unless the same is in writing and signed by both Bank and
Borrower. 

     20. SUCCESSORS AND ASSIGNS. (a) This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
representatives, successors and assigns, provided, however, that except as
provided in Section 20(b) below it may not be assigned by either party
hereto without the prior written consent of the other party hereto, and any
purported assignment in violation of this provision shall be null and void.

     (b) Section 20(a) above notwithstanding, Bank may from time to time,
in its sole and absolute discretion and without Borrower's further consent
(i) assign this Agreement and any Loan to any affiliate of Bank, or (ii)
sell participations in any Loan to any Person, provided, however, that in
the case of any such sale of participations Bank's obligations under this
Agreement shall remain unchanged and it shall remain solely responsible to
Borrower for its performance thereof.
   
     21. GOVERNING LAW AND JURISDICTION. (a) This Agreement shall be
governed by and construed in accordance with the laws of the State of New
York, without regard to the conflict of law principles thereof.

     (b) Any suit, action or proceeding with respect to this Agreement or
any Loan may be brought in the Supreme Court of the State of New York,
County of New York, or in the United States District Court for the Southern
District of New York, and the parties hereto hereby submit to the non-
exclusive jurisdiction of such courts for the purpose of any such suit,
action or proceeding, and hereby waive for such purpose any other
preferential jurisdiction by reason of their present or future domicile or
otherwise.  
          
     22. NOTICES. Unless otherwise specified, any notice, demand or other
communication required hereunder shall be sent, delivered or transmitted to
the recipient at the address (or, in the case of facsimile transmission,
the telephone number) set forth after its name hereinbelow:


          IF TO BANK, AT:

               Custodial Trust Company
               101 Carnegie Center
               Princeton, NJ 08540-6231
               Attention: Vice President -
                          Loan Compliance   
               Telephone: (609) 951-2313
               Facsimile: (609) 951-2317


          IF TO BORROWER, AT:

               MAXXAM Inc.
               5847 San Felipe, Ste 2600
               Houston, Texas 77057
               Attention: Paul N. Schwartz
               Telephone: (713) 267-3685
               Facsimile: (713) 267-3703

          AND

               Attention: Treasury Department
               Telephone: (713) 267-3619
               Facsimile: (713) 267-3704


or to such other address or telephone number as each party may designate
for itself by like notice. All notices, demands and other communications to
be given or delivered hereunder shall be in writing and shall be deemed to
have been given or delivered when personally delivered (including by
Federal Express or other reputable courier service) or sent by facsimile
transmission. A confirming copy of any facsimile transmission shall be sent
by next day delivery via Federal Express or other reputable courier
service.

     23. EXPENSES. Borrower shall pay or, at the election of Bank, shall
reimburse Bank for paying (a) all reasonable costs, fees and expenses
(including reasonable attorneys' fees) incurred by Bank in connection with
the enforcement of this Agreement and Bank's security interest in the
Collateral, and (b) all transfer, stamp, documentary or other similar
taxes, assessments or charges levied by any tax or other governmental
authority in respect of this Agreement or any Loan (other than in respect
of transactions permitted by Section 20(b) above).

     24. SEVERABILITY. If any provision of this Agreement is invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions  of this Agreement (and the
validity, legality and enforceability of such provision in any other
jurisdiction) shall not be affected or impaired thereby. 

     25. MISCELLANEOUS. (a) For the avoidance of doubt, it is hereby
expressly understood that Borrower as defined in this Agreement means
MAXXAM INC. considered individually and does not refer to any subsidiary
thereof, whether accounted for on a consolidated basis with Borrower or
not, and that the rights and obligations of Borrower under this Agreement
are not rights and obligations of any such subsidiary.

     (b) All agreements, representations and warranties contained in this
Agreement shall survive the execution and delivery of this Agreement and
the making of any Loan.

     (c) Bank shall be held to the exercise of reasonable care in the
custody and preservation of the Collateral in its possession, and shall be
deemed to have exercised such care if such Collateral is accorded treatment
substantially equal to that which Bank accords to its own property.

     (d) Except to the extent that pursuant to Section 25(c) above Bank may
be liable to Borrower for Bank's negligence in the custody and preservation
of Collateral in Bank's possession, and except as may be otherwise provided
in the matter of collateral by applicable provisions of the Uniform
Commercial Code as in effect in the State of New York, Bank shall be
without liability to Borrower for any loss, damage, cost, expense,
liability or claim which does not arise from willful misfeasance, bad faith
or gross negligence on the part of Bank in taking or omitting to take any
action under this Agreement.

     (e) Bank shall have the continuing and exclusive right to apply any
and all payments to any portion of the Loans.  All payments by Borrower to
Bank pursuant to this Agreement shall be made without set-off, and none of
such payments shall be subject to any counterclaim by Borrower. To the
extent that Borrower makes a payment or Bank receives any payment or
proceeds of the Collateral for Borrower's benefit, which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or
required to be repaid to a trustee, debtor in possession, receiver or any
other party under any bankruptcy, reorganization or insolvency law, common
law or equitable cause, then, to such extent, the obligation hereunder of
Borrower which was to have been satisfied by such payment shall be revived
and continue as if such payment had not been received by Bank.

     (f) Bank shall maintain, and shall cause its officers, directors,
employees and affiliates under its control to maintain, the confidentiality
of all information provided by Borrower to Bank pursuant to this Agreement
except to the extent that such information (i) is available in SEC Report
or otherwise becomes generally available to the public other than as a
result of disclosure by Bank, (ii) is required to be provided by Bank to
regulatory authorities or Bank's auditors, (iii) is required to be provided
pursuant to court process, provided that Bank shall promptly notify
Borrower of such process so that Borrower may seek a protective order in
connection therewith, or (iv) needs to be disclosed in connection with the
exercise, preservation and enforcement of Bank's rights and remedies under
this Agreement. 

     (g) The headings of sections in this Agreement are for convenience of
reference only and shall not affect the meaning or construction of any
provision of this Agreement.

     (h) This Agreement may be executed in one or more counterparts and by
the parties hereto on separate counterparts, each of which shall be deemed
an original but all of which taken together shall constitute but one and
the same instrument.

     IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed in its name and on its behalf by its representative thereunto
duly authorized, all as of the day and year first above written.


                                        MAXXAM INC.



                                        By:     /S/ PAUL N. SCHWARTZ
                                        Name:  Paul N. Schwartz
                                        Title: Executive Vice President

                                        CUSTODIAL TRUST COMPANY



                                        By:     /S/ RONALD D. WATSON
                                        Name:  Ronald D. Watson
                                        Title: President

                                                            SCHEDULE A

<TABLE>
<CAPTION>

                                        Loan Value
                                        (percentages are 
Collateral Type                         % of Market Value) 
---------------                         ------------------

                                        Initial    Maintenance
                                        -------    -----------
<S>                                     <C>        <C>


Common Stock of Kaiser
     Aluminum Corporation               33-1/3%    lower of 50%
                                                   or $7.50 per
                                                   share

Cash or cash equivalents                100%       100%

</TABLE>