SECURED DEMAND PROMISSORY NOTE
                          (PURPOSE/FLOATING RATE)

                                                          November 26, 1997


     For value received, MAXXAM Inc. ("Borrower") hereby unconditionally
promises to pay to Salomon Brothers Inc ("Lender" or "SBI") on Lender's
demand at its office located at 7 World Trade Center, New York, New York
10048, in lawful money of the United States of America in immediately
available funds, Attention:  Finance Desk, the principal sum indicated on
Annex 1 hereto (the "Principal Amount"), or so much thereof as shall not
theretofore have been repaid (such amount as, from time to time, has not
yet been repaid being referred to herein as the "Outstanding Amount") plus
interest thereon as described below.  Without limiting it rights to demand
repayment in full of all Outstanding Amount plus interest thereon at any
time, the Lender intends to declare this Note to be due and payable
immediately in the event that: i) the common stock of Kaiser Aluminum
Corporation ("Kaiser Aluminum") trades on any principal exchange in the
U.S. at $8.50 per share or below (unless Lender, in its sole discretion,
determines to keep the loan evidenced by this Note outstanding but calls
for additional collateral against such loan which Borrower promptly
delivers to Lender in accordance with Lender's instructions) and or ii)
Lender has reasonable grounds for insecurity with respect to the
performance of Borrower with respect to this Note or any other Agreement or
Transaction between Lender or any affiliate of Lender or Borrower or any
Borrower Affiliate (as defined herein) other than pursuant to underwriting,
investment banking and advisory arrangements and related agreements
(collectively, "Non-Credit Arrangements").

     The Principal Amount outstanding hereunder shall not exceed
$25,000,000 (Twenty-Five Million Dollars).  Borrower may make borrowings
hereunder on one Business Day written notice to Lender which notice shall
be addressed to the attention of Salomon Brothers Inc, 7 World Trade
Center, New York, New York 10048, Attention:  Finance Desk, and shall
specify the principal amount to be borrowed and the date on which such
borrowing is requested to be made.

     Borrower further promises to pay interest on the Outstanding Amount
from (and including) the date hereof until (but not including) the date
such Outstanding Amount is paid in full that shall accrue each day at a
rate per annum equal to the sum of (i) the Federal Funds Rate (as defined
below) applicable to such day plus (ii) 150 basis points, as determined by
Lender in good faith.  Interest shall be calculated on the basis of a 360
day year for the actual days elapsed and shall be payable in arrears on
each Interest Payment Date (as defined below).

     "Federal Funds Rate" shall mean with respect to any day, the opening
federal funds rate as quoted on page 5 of Telerate (or such other page as
may replace said page); provided, however, that if no such rate shall
appear for any day, the Federal Funds Rate for such day shall be determined
by the lender in a commercially reasonable manner from any publicly
available source (including any Federal Reserve Bank).

     "Interest Payment Date" means the 10th New York Business Day of each
month; provided however, that the date on which payment is due pursuant to
a demand by Lender shall always be an Interest Payment Date.

     "New York Business Day" means any day on which banks are not
authorized nor required to close in New York City.

     This Note may be repaid in whole or in part by Borrower on any New
York Business Date prior to demand, and all accrued and unpaid interest on
the amount of principal repaid shall be due at the time of such repayment. 
Any payment made to Lender received by Lender after 5:00 p.m. on any New
York Business Day shall be deemed to have been received on the next
succeeding New York Business Day.

     Lender may demand payment in full from Borrower at any time, in full
or in part, of any and all amounts due and owing under this Note or, in
lieu of payment, may demand additional collateralization of Borrower's
obligations hereunder.  Upon receiving any demand notice or request for
additional collateralization, Borrower will be obligated to pay all such
principal and accrued interest amounts or to deliver such additional
collateral to Lender no later than 5:00 p.m. on the second New York
Business Day after Lender makes such demand or request.  Failure to comply
with such demand or request by such time shall constitute an Event of
Default hereunder.

     If the principal amount of this Note, any interest accrued thereon or
any other amount payable by Borrower hereunder is not paid in full when
due, overdue interest shall accrue on such amount or to the extent
permitted by applicable law from and including the date thereof until the
same has been paid in full at the rate per annum equal to the Federal Funds
Rate plus 2.75%, as determined by the Lender in good faith.  Such interest
shall be payable from time to time upon demand by Lender.

     Borrower hereby waives all requirements as to diligence, presentment,
demand of payment, protest and notice of any kind with respect to this
Note.

     All necessary calculations in connection with all matters contemplated
herein shall be made by Lender in a commercially reasonable manner.

     Security Interest.  In order to secure the prompt and full payment and
performance by Borrower of all of Borrower's present and future obligations
to Lender in respect of this Note and to Lender and its affiliates under
any other agreements (other than pursuant to Non-Credit Arrangements),
Borrower hereby grants to Lender and its affiliates a continuing first-
priority security interest in and right of setoff against (i) all assets
in Borrower's "customer account" at Lender (the "Account"), including
400,000 shares of the common stock of Kaiser Aluminum for each $1,000,000
of principal lent by Lender to Borrower hereunder, which Borrower covenants
to deliver to the Account at Lender together with stock powers, executed in
blank, relating thereto, and (ii) all other securities, money or other
property, and all proceeds of any of the foregoing, now or hereafter
delivered by or on behalf of Borrower to Lender or any of Lender's
affiliates (collectively, the "Collateral").  Except in the event that all
amounts outstanding under this Note to the extent secured by particular
Collateral are paid in full (it being understood that Borrower shall be
obligated to have posted as collateral with Lender for every $1,000,000 in
principal borrowed, 400,000 shares of Kaiser Aluminum common stock covered
by an effective registration statement under the Securities Act of 1933
pursuant to which Lender could, upon foreclosure, sell such shares and, it
being understood that in the event of a request by Lender for additional
collateral (such as in connection with exercise of its demand rights or as
a result of its need for Adequate Assurances, as such term is defined
below) such amount may be higher and may include different types of
Collateral) Lender shall be under no obligation to return any Collateral to
Borrower; provided, however, so long as no event of default or event that
upon the giving of notice would become an event of default has occurred,
Borrower shall be entitled to exercise voting rights in respect of equity
securities held in the Account and to receive all cash dividends and other
cash distributions in respect of any securities held in the Account.

     Borrower agrees that until this Note is repaid in full, it will
maintain in the Account at all times per each $1,000,000 of Outstanding
Amount, 400,000 shares of common stock of Kaiser Aluminum, each of which is
covered by an effective registration statement with respect to which no
stop order is in effect, authorizing sale by SBI and its affiliates,
successors and assigns of such shares upon foreclosure as well as any
greater amount of collateral and other type of collateral that SBI from
time to time shall request as security for the loan evidenced hereby (as
described above in connection with Lender's exercise of its demand right or
pursuant to its demand for Adequate Assurances).  Borrower shall not
pledge, transfer, sell or hypothecate, nor shall it permit to be pledged,
transferred, sold or hypothecated any Collateral except as collateral
security for this Note and except for sales made in accordance with the
terms of this Note, the letter agreement, dated the same date, between
Lender and Borrower (the "Letter Agreement") and the Customer Agreement,
dated this same date, between Borrower and Lender (the "Customer
Agreement").  Borrower shall use its best efforts to maintain for the
Lender:  (i) the Lender's perfected first-priority security interest in all
of the Collateral and (ii) an effective registration statement, with
respect to which no stop order is in effect, covering the shares of common
stock of Kaiser Aluminum pledged as collateral authorizing the sale of SBI
and its affiliates, successors and assigns of such shares upon foreclosure
and which registration statement, including the prospectus contained
therein, is accurate and complete in all material respects.

     Events of Default.  It shall be an "Event of Default" if:

     (a)  an Act of Insolvency (as defined below) occurs with respect to
Borrower or any Borrower Affiliate (as defined below);

     (b)  Borrower fails to perform any covenant or obligation required to
be performed by it under any provision of this Note or any other agreement
entered into in connection herewith;

     (c)  any representation made herein or in the Letter Agreement shall
at any time be false;

     (d)  Borrower or any company or other entity or person controlled by
Borrower (a "Borrower Affiliate") defaults or fails to perform with respect
to any indebtedness to Lender or any affiliate of Lender or any other
agreement or transaction between Lender or any affiliate of Lender and
Borrower or any Borrower Affiliate, now existing or hereafter arising,
other than pursuant to Non-Credit Arrangements; or 

     (e)  Lender shall not have a perfected first-priority security
interest in any of the Collateral.

"Act of Insolvency" shall mean (i) the filing of a petition by or in the
name of Borrower, any Borrower Affiliate or Kaiser Aluminum for relief
under any bankruptcy or insolvency law or (ii) the entry of any order with
respect to Borrower, any Borrower Affiliate or Kaiser Aluminum by a court
of competent jurisdiction appointing a custodian or similar official,
approving a petition for relief under any bankruptcy or insolvency law or
ordering its dissolution, winding-up or liquidation or (iii) the occurrence
of any other event giving protection to Borrower, any Borrower Affiliate or
Kaiser Aluminum hereto under any bankruptcy or insolvency.

"Borrower Affiliate" shall mean:  (i) Charles Hurwitz; (ii) Federated
Development Company or any of its various subsidiaries; (iii) Kaiser
Aluminum; or (iv) any "Significant Subsidiary" of Borrower, as such term is
defined in Regulation S-X of the Securities and Exchange Commission.

     Remedies in Event of Default.  Upon the occurrence of any event that
constitutes an Event of Default hereunder, all amounts outstanding under
this Note shall become immediately due and payable, along with all accrued
and unpaid interest hereon.  In addition, Lender and any affiliate of
Lender shall be entitled to (i) close out and liquidate any transaction
under any other agreement or transaction (other than Non-Credit
Arrangements) between or among Lender and/or any affiliate of Lender and
Borrower or Borrower Affiliate without prior notice to Borrower or any
Borrower Affiliate or any other party, whereupon Borrower or the Borrower
Affiliate, as the case may be, shall be liable to Lender or the affiliate
of Lender, as the case may be, for any resulting loss, damage, cost and
expense, including loss equal to the amount Lender or the affiliate of
Lender, as the case may be, would have to pay to enter into replacement
transactions (whether or not Lender or the affiliate of Lender, as the case
may be, enters any such replacement transactions) and any damages resulting
to Lender or any affiliate of Lender from entering into or terminating
hedge transaction, with respect thereto as well as the costs incurred by
Lender or any of its affiliates in enforcing this provision or any other
provision of this Note; (ii) set off any obligation under any transaction
under any agreement between Lender or any affiliate of Lender and Borrower
(including any transaction under or contemplated by this Note), including
any payment or delivery obligation, of Lender or the affiliate of Lender,
as the case may be, to Borrower against any obligation under any
transaction under any agreement between Lender or any affiliate of Lender
and Borrower (including any transaction under or contemplated by this
Note), including any payment or delivery obligation, of Borrower to Lender
or the affiliate of Lender, as the case may be; and (iii) set off any
obligations under any transaction or under any agreement between Lender or
any affiliate of Lender and any Borrower Affiliate, including any payment
or delivery obligations of Lender or any affiliate of Lender and the
Borrower Affiliate, including any payment or the delivery obligation, of
the Borrower Affiliate to Lender or the affiliate of Lender, as the case
may be.  Borrower shall be liable to Lender and its affiliates and their
agents for all costs, damages and losses incurred by any of them in
collecting any and all amounts payable under this Note (including, without
limitation, the cost of enforcing this provision).

     Representations.  Borrower represents and warrants (which
representations and warranties shall be deemed repeated as of each date
Collateral is transferred to Lender) that (i) it owns all Collateral free
and clear of all liens, claims or encumbrances other than the lien of
Lender hereunder, and (ii) the lien of Lender constitutes a perfected
security interest in such Collateral enforceable against and having
priority over any claim or interest of any third party.

     Borrower represents and warrants to Lender that (i) it is duly
authorized to execute and deliver this Note, the Customer Agreement and the
Letter Agreement and to perform its obligations hereunder and thereunder
and has taken all necessary action to authorize such execution, delivery
and performance, (ii) it has entered into, and is bound to perform its
obligations under, this Note as principal, (iii) the person signing this
Note on its behalf is duly authorized to do so on its behalf, (iv) it has
obtained all authorizations of any governmental body required in connection
with this Note and such authorizations are in full force and effect, (v)
the execution, delivery and performance of this Note, the Customer
Agreement and the Letter Agreement will not violate any law, ordinance,
charter, by-law or rule applicable to it or any agreement by which it is
bound or by which any of its assets are affected and (vi) its obligations
under this Note, the Customer Agreement and the Letter Agreement constitute
its legal, valid and binding obligations, enforceable in accordance with
their respective terms (subject to applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).

     Borrower hereby further represents and warrants that, subject to any
applicable restrictions set forth in Rule 144 under the Securities Act of
1933, Lender may sell or otherwise apply or realize upon, now or at any
time in the future, without restriction (legal or otherwise) any Collateral
pledged hereunder or any other property in possession of Lender or its
affiliates upon the Borrower's default under this Note so long as same is
conducted in a commercially reasonable fashion.  This shall be a continuing
representation throughout the life of this Note.

     Further Assurances; Financial Information.  Borrower agrees that it
will, within one business day of Lender's request, execute and deliver such
further instruments or documents and do such further acts as Lender may
request in order to further the intent of this Note and to create, perfect,
preserve and protect the security interest of Lender intended to be created
hereunder.  Borrower agrees to provide financial information reasonably
requested by Lender regarding itself and regarding Kaiser Aluminum, and
Borrower understands that an investigation may be conducted pertaining to
its credit standing and to its business.  With respect to Kaiser Aluminum,
Borrower agrees to cause Kaiser Aluminum to provide Salomon with a
reasonable opportunity to conduct due diligence prior to resale as well as
to carry out related obligations, including providing an accountants'
comfort letter and opinion of independent counsel for Kaiser Aluminum, all
as set forth in the Letter Agreement.  In addition, Borrower agrees to
indemnify Lender in connection with Lender's resale of Kaiser Aluminum
common stock pursuant to a registration statement to the same extent as is
customary for issuers to indemnify underwriters in connection with an
underwritten offering of any such issuer's securities.

     Adequate Assurance of Performance.  If at any time Lender or any
affiliate of Lender has reasonable grounds for insecurity with respect to
the performance of Borrower or any Borrower Affiliate of its obligations
with respect to this Note or any other agreement or transaction between
Lender or any affiliate of Lender and Borrower or any Borrower Affiliate
(other than pursuant to Non-Credit Arrangements), Lender may demand
adequate assurance ("Adequate Assurances") of due performance by Borrower
within a reasonable time (and for this purpose a period of 1 business day
shall in no event be deemed unreasonable, and nothing herein shall be
deemed to preclude a shorter period if reasonable under the circumstances)
and may demand repayment in full of principal and interest thereon. 
Adequate assurance of performance that may be demanded by Lender may
include, but shall not be limited to, the delivery by Borrower to Lender of
initial or additional Collateral as security for the obligations of
Borrower hereunder.  For purposes of this Note, the phrase "reasonable
grounds for insecurity with respect to the performance" means that there
must exist sufficient evidence that the obligor in question will not or
will not be able to perform his/her obligations hereunder when due (which
evidence may include, without limitation, any Event of Default hereunder,
any Act of Insolvency in respect of the obligor hereunder or any event,
such as the actions taken by Borrower or any Borrower Affiliate in
preparation for a bankruptcy filing, which are reasonably likely to result
in an Act of Insolvency) such that a reasonable person would conclude that
he or she should take the actions described in this subparagraph in order
to obtain Adequate Assurances.

     Sale of Collateral.  Any sale of Collateral by Lender hereunder shall
be conducted in all respects in a commercially reasonable fashion.

     Reasonable Reliance by Lender.  Lender shall be entitled to rely, and
shall be fully protected in relying, upon any note (including this Note),
writing resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telex, fax or teletype message, statement, order or
other document or conversation reasonably believed by it to be genuine and
correct and to have been signed, sent or made by Borrower.

     Conflicting Provisions.  In the event of inconsistency between the
Customer Agreement and the Letter Agreement, the Letter Agreement will
govern.  In the event of inconsistency between this Note and the Letter
Agreement and/or the Customer Agreement, this Note will govern.

     No Waiver.  No provision of this Note shall in any respect be waived,
altered, modified or amended unless such waiver, alteration, modification
or amendment is effected by a signed writing of Lender and Borrower.

     Assignment.  Borrower may not assign this Note or any transaction or
obligation hereunder or contemplated hereby without the prior written
consent of Lender, and any purported assignment absent such consent will be
void and of no force or effect.  This Note and the transactions
contemplated hereby may be assigned in whole or in part by Lender at any
time to any of its affiliates and, upon an Event of Default, to any person,
without prior notice to or consent from Borrower.

     Notices.  Notices concerning this Note shall be sent to Borrower at
its address or fax number given below, or at such other address or fax
number as Borrower may hereafter give to Lender in writing.  Notices sent
to Lender shall be sent to Lender at its address as set forth in the first
paragraph of this Note (fax number:  212-783-2311) or at such other address
and fax number as Lender may hereafter give to Borrower in writing.  All
communications so sent, whether by mail, telegraph, messenger, fax or
otherwise, shall be deemed given, whether actually received or not;
provided that the party giving notice shall confirm every notice sent by
facsimile or telex by hard copy sent by courier to the other party for
delivery on the next New York Business Day.

     GOVERNING LAW; JURY TRIAL WAIVER; SUBMISSION TO JURISDICTION.  THIS
NOTE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.  BORROWER WAIVES ANY
RIGHT TO JURY TRIAL.  THE PARTIES HEREBY CONSENT TO THE JURISDICTION OF A
STATE OR FEDERAL COURT SITUATED IN NEW YORK CITY, NEW YORK IN CONNECTION
WITH ANY DISPUTE ARISING HEREUNDER.



MAXXAM INC.


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


     Address:  5847 SAN FELIPE, SUITE 2600
               HOUSTON, TEXAS  77057
               Attention:  Treasury Department
               Facsimile No.: (713) 267-3704

               with a copy to:
               Attention: Corporate Secretary
               Facsimile No.: (713) 267-3702
               Attention: Corporate Secretary
               Facsimile No.: (713) 267-3702