KAC 2001 10-K

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AnMENCkIdfLG9azq3d9sKe7IegMfGlkAnG+Teqy7T7Q80T8tAOk3oFo4UgebDqOa u0Jx0WidKGP0WQChjiaufw== 0000811596-02-000005.txt : 20020416 0000811596-02-000005.hdr.sgml : 20020416 ACCESSION NUMBER: 0000811596-02-000005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020412 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KAISER ALUMINUM CORP CENTRAL INDEX KEY: 0000811596 STANDARD INDUSTRIAL CLASSIFICATION: PRIMARY PRODUCTION OF ALUMINUM [3334] IRS NUMBER: 943030279 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09447 FILM NUMBER: 02609113 BUSINESS ADDRESS: STREET 1: KAISER ALUMINUM & CHEMICAL CORP STREET 2: 5847 SAN FELIPE ST STE 2600 CITY: HOUSTON STATE: TX ZIP: 77057 BUSINESS PHONE: 7132673777 MAIL ADDRESS: STREET 1: KAISER ALUMINUM & CHEMICAL CORP STREET 2: 5847 SAN FELIPE ST STE 2600 CITY: HOUSTON STATE: TX ZIP: 77057 FORMER COMPANY: FORMER CONFORMED NAME: KAISERTECH LTD DATE OF NAME CHANGE: 19901122 10-K 1 kac_10k-2001.htm KAISER ALUMINUM CORPORATION - 2001 10-K KAC 2001 10-K

- --------------------------------------------------------------------------------

FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 For the fiscal year ended December 31, 2001 Commission file number 1-9447

KAISER ALUMINUM CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 94-3030279
(State of Incorporation) (I.R.S. Employer Identification No.)

5847 SAN FELIPE, SUITE 2600, HOUSTON, TEXAS 77057-3010
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (713) 267-3777

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock, $.01 par value New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /

As of March 15, 2002, there were 80,627,624 shares of the Common Stock of the
registrant outstanding. Based upon the New York Stock Exchange closing price on
March 15, 2002, the aggregate market value of the registrant's Common Stock held
by non-affiliates was $7.6 million.

Documents Incorporated By Reference
None

- --------------------------------------------------------------------------------

NOTE

Kaiser Aluminum Corporation's Report on Form 10-K filed with the Securities and
Exchange Commission includes all exhibits required to be filed with the Report.
Copies of this Report on Form 10-K, including only Exhibit 21 of the exhibits
listed on pages 101 - 110 of this Report, are available without charge upon
written request. The registrant will furnish copies of the other exhibits to
this Report on Form 10-K upon payment of a fee of 25 cents per page. Please
contact the office set forth below to request copies of this Report on Form 10-K
and for information as to the number of pages contained in each of the exhibits
and to request copies of such exhibits:

Corporate Secretary
Kaiser Aluminum Corporation
5847 San Felipe, Suite 2600
Houston, Texas 77057-3010
(713) 267-3777

TABLE OF CONTENTS

PART I

ITEM 1. BUSINESS

ITEM 2. PROPERTIES

ITEM 3. LEGAL PROCEEDINGS

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS

ITEM 6. SELECTED FINANCIAL DATA

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K

SCHEDULE I

SIGNATURES

INDEX OF EXHIBITS

EXHIBIT 21 SUBSIDIARIES

PART I

ITEM 1. BUSINESS

This Annual Report on Form 10-K (the "Report") contains statements which
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements appear in a number of
places in this Report (see, for example, Item 1. "Business - Business
Operations," " - Competition," " - Environmental Matters," and " - Factors
Affecting Future Performance," Item 3. "Legal Proceedings," and Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations"). Such statements can be identified by the use of forward-looking
terminology such as "believes," "expects," "may," "estimates," "will," "should,"
"plans" or "anticipates" or the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy. Readers are cautioned
that any such forward-looking statements are not guarantees of future
performance and involve significant risks and uncertainties, and that actual
results may vary materially from those in the forward-looking statements as a
result of various factors. These factors include the effectiveness of
management's strategies and decisions, general economic and business conditions,
developments in technology, new or modified statutory or regulatory
requirements, and changing prices and market conditions. Certain sections of
this Report identify other factors that could cause differences between such
forward-looking statements and actual results (see Item 1. "Business - Factors
Affecting Future Performance"). No assurance can be given that these are all of
the factors that could cause actual results to vary materially from the
forward-looking statements.

GENERAL

Kaiser Aluminum Corporation (the "Company"), a Delaware corporation organized in
1987, is a subsidiary of MAXXAM Inc. ("MAXXAM"). MAXXAM and one of its wholly
owned subsidiaries together own approximately 62% of the Company's Common Stock,
with the remaining approximately 38% publicly held. The Company, through its
wholly owned subsidiary, Kaiser Aluminum & Chemical Corporation ("KACC"),
operates in all principal aspects of the aluminum industry - the mining of
bauxite, the refining of bauxite into alumina, the production of primary
aluminum from alumina, and the manufacture of fabricated (including
semi-fabricated) aluminum products.

REORGANIZATION PROCEEDINGS

On February 12, 2002, the Company, KACC and 13 of KACC's wholly owned
subsidiaries filed separate voluntary petitions in the United States Bankruptcy
Court for the District of Delaware (the "Court") for reorganization under
Chapter 11 of the United States Bankruptcy Code (the "Code"). On March 15, 2002,
two additional wholly owned subsidiaries of KACC filed petitions. The Company,
KACC and the 15 subsidiaries of KACC that have filed petitions are collectively
referred to herein as the "Debtors" and the Chapter 11 proceedings of these
entities are collectively referred to herein as the "Cases." For purposes of
this Report, the term "Filing Date" shall mean, with respect to any particular
Debtor, the date on which such Debtor filed its Case. The wholly owned
subsidiaries of KACC included in the Cases are: Kaiser Bellwood Corporation,
Kaiser Aluminium International, Inc., Kaiser Aluminum Technical Services, Inc.,
Kaiser Alumina Australia Corporation (and its wholly owned subsidiary, Kaiser
Finance Corporation) and ten other entities with limited balances or activities.
None of KACC's non-U.S. affiliates were included in the Cases. The Cases are
being jointly administered with the Debtors managing their businesses in the
ordinary course as debtors-in-possession subject to the control and supervision
of the Court.

The necessity for filing the Cases was attributable to the liquidity and cash
flow problems of the Company arising in late 2001 and early 2002. The Company
was facing significant near-term debt maturities at a time of unusually weak
aluminum industry business conditions, depressed aluminum prices and a broad
economic slowdown that was further exacerbated by the events of September 11. In
addition, the Company had become increasingly burdened by the asbestos
litigation and growing legacy obligations for retiree medical and pension costs.
The confluence of these factors created the prospect of continuing operating
losses and negative cash flow, resulting in lower credit ratings and an
inability to access the capital markets.

The outstanding principal of, and accrued interest on, all long-term debt of the
Debtors became immediately due and payable as a result of the commencement of
the Cases. However, the vast majority of the claims in existence at the Filing
Date (including claims for principal and accrued interest and substantially all
legal proceedings) are stayed (deferred) while the Company and KACC continue to
manage the businesses. The Court, however, upon motion by the Debtors, has
permitted the Debtors to pay or otherwise honor certain unsecured pre-Filing
Date claims, including employee wages and benefits and customer claims in the
ordinary course of business, subject to certain limitations, and to fund, on an
interim basis pending a final determination on the issue by the Court, its joint
ventures in the ordinary course of business. The Debtors also have the right to
assume or reject executory contracts, subject to Court approval and certain
other limitations. In this context, "assumption" means that the Debtors agree to
perform their obligations and cure certain existing defaults under an executory
contract and "rejection" means that the Debtors are relieved from their
obligations to perform further under an executory contract and are subject only
to a claim for damages for the breach thereof. Any claim for damages resulting
from the rejection of an executory contract is treated as a general unsecured
claim in the Cases.

Generally, pre-Filing Date claims against the Debtors will fall into two
categories: secured and unsecured, including certain contingent or unliquidated
claims. Under the Code, a creditor's claim is treated as secured only to the
extent of the value of the collateral securing such claim, with the balance of
such claim being treated as unsecured. Unsecured and partially secured claims do
not accrue interest after the Filing Date. A fully secured claim, however, may
accrue interest after the Filing Date until the amount due and owing to the
secured creditor, including interest accrued after the Filing Date, is equal to
the value of the collateral securing such claim. The amount and validity of
pre-Filing Date contingent or unliquidated claims, although presently unknown,
ultimately may be established by the Court or by agreement of the parties. As a
result of the Cases, additional pre-Filing Date claims and liabilities may be
asserted, some of which may be significant. No provision has been included in
the accompanying financial statements for such potential claims and additional
liabilities that may be filed on or before a date to be fixed by the Court as
the last day to file proofs of claim.

The following table sets forth certain 2001 financial information for the
Debtors and non-Debtors.

Consolidation/
Elimination
Debtors Non-Debtors Entries Consolidated
---------------- ---------------- -------------- --------------

Net sales $ 1,252.8 $ 592.7 $ (112.8) $ 1,732.7
Operating income 66.0 11.3 (12.4) 64.9
Net income (loss) (445.9) 11.7 (25.2) (459.4)

Current assets $ 607.6 $ 151.6 $ - $ 759.2
Current liabilities 702.0 101.4 - 803.4

Total assets $ 2,449.8 $ 1,654.7 $ (1,360.8) $ 2,743.7
Total liabilities and minority interests 2,890.9 274.2 19.7 3,184.8
Total equity (441.1) 1,380.5 (1,380.5) (441.1)

On February 12, 2002, in order to fund cash requirements during the pendency of
the Cases, the Company and KACC entered into a post-petition credit agreement
with a group of lenders for debtor-in-possession financing (the "DIP Facility")
which provides for a secured, revolving line of credit through the earlier of
February 12, 2004, the effective date of a plan of reorganization or voluntary
termination by the Company. KACC is able to borrow under the DIP Facility by
means of revolving credit advances and letters of credit (up to $125.0 million)
in an aggregate amount equal to the lesser of $300.0 million or a borrowing base
relating to eligible accounts receivable, eligible inventory and eligible fixed
assets reduced by certain reserves, as defined in the DIP Facility agreement.
The DIP Facility is guaranteed by the Company and certain significant
subsidiaries of KACC. Interest on any outstanding balances will bear a spread
over either a base rate or LIBOR, at KACC's option. The Court signed a final
order approving the DIP Facility on March 19, 2002.

The Company's and KACC's objective is to achieve the highest possible recoveries
for all creditors and stockholders, consistent with the Debtors' abilities to
pay and the continuation of their businesses. However, there can be no assurance
that the Debtors will be able to attain these objectives or achieve a successful
reorganization. Further, there can be no assurance that the liabilities of the
Debtors will not be found in the Cases to exceed the fair value of their assets.
This could result in claims being paid at less than 100% of their face value and
the equity of the Company's stockholders being diluted or cancelled. At this
time, it is not possible to predict the outcome of the Cases, in general, or the
effect of the Cases on the businesses of the Debtors or on the interests of
creditors and stockholders.

Two creditors' committees, one representing the unsecured creditors and the
other representing the asbestos claimants, have been appointed as official
committees in the Cases and, in accordance with the provisions of the Code, will
have the right to be heard on all matters that come before the Court. The
Debtors expect that the appointed committees, together with a legal
representative of potential future asbestos claimants to be appointed by the
Court, will play important roles in the Cases and the negotiation of the terms
of any plan or plans of reorganization. The Debtors are required to bear certain
of the committees' costs and expenses, including those of their counsel and
other advisors.

The Debtors anticipate that substantially all liabilities of the Debtors as of
the Filing Date will be resolved under one or more plans of reorganization to be
proposed and voted on in the Cases in accordance with the provisions of the
Code. Although the Debtors intend to file and seek confirmation of such a plan
or plans, there can be no assurance as to when the Debtors will file such a plan
or plans, or that such plan or plans will be confirmed by the Court and
consummated.

As provided by the Code, the Debtors initially have the exclusive right to
propose a plan of reorganization for 120 days following the Filing Date. If the
Debtors fail to file a plan of reorganization during such period or any
extension thereof, or if such plan is not accepted by the requisite numbers of
creditors and equity holders entitled to vote on the plan, other parties in
interest in the Cases may be permitted to propose their own plan(s) of
reorganization for the Debtors.

SUMMARY OF OPERATIONS

KACC sells significant amounts of alumina and primary aluminum in domestic and
international markets in excess of its internal requirements. The following
table sets forth production and third party purchases of bauxite, alumina and
primary aluminum and third party shipments and intersegment transfers of
bauxite, alumina, primary aluminum and fabricated products for the years ended
December 31, 2001, 2000 and 1999:

Sources(3) Uses(3)
------------------------------------ ----------------------------------
Third Party Third Party Intersegment
Production Purchases Shipments Transfers
------------------ ---------------- ----------------- ---------------
(in thousands of tons*)
Bauxite -
2001 5,628.3 1,916.3 1,512.2 4,355.4
2000 4,305.0 2,290.0 2,007.0 2,342.0
1999 5,261.0 2,251.6 1,497.0 3,515.0
Alumina -
2001 2,813.9(1) 115.0 2,582.7 422.8
2000 2,042.9 322.0 1,927.1 751.9
1999 2,524.0 395.0 2,093.9 757.3
Primary Aluminum -
2001 214.3 214.4 437.2(2) -
2000 411.4 206.5 672.4(2) -
1999 426.4 260.1 684.6(2) -

(1) During September 2001, KACC sold an 8.3% interest in Queensland Alumina
Limited ("QAL"). See "Business Operations--Bauxite and Alumina Business
Unit--QAL" below for a discussion of effects of the sale on alumina
production.
(2) Includes both primary aluminum shipments and pounds of aluminum contained
in fabricated aluminum product shipments. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Selected
Operational and Financial Information" for an allocation of shipments
between primary aluminum and pounds of aluminum in fabricated aluminum
products.
(3) Sources and uses will not equal due to the impact of inventory changes and
alumina and primary aluminum swaps.

- ---------------------------

* All references to tons in this Report refer to metric tons of 2,204.6 pounds.

BUSINESS OPERATIONS

KACC conducts its business through its five main business units (Bauxite and
alumina, Primary aluminum, Commodities marketing, Flat-rolled products and
Engineered products), each of which is discussed below.

- - Bauxite and Alumina Business Unit
The following table lists KACC's bauxite mining and alumina refining facilities
as of December 31, 2001:

Annual
Production Total
Capacity Annual
Company Available to Production
Activity Facility Location Ownership the Company Capacity
- ------------------ ------------ -------------- ---------------- ----------------- ----------------
(tons) (tons)

Bauxite Mining KJBC Jamaica 49.0% 4,500,000 4,500,000
Alpart(1) Jamaica 65.0% 2,275,000 3,500,000
----------------- ----------------

6,775,000 8,000,000
================= ================

Alumina Refining Gramercy Louisiana 100.0% 1,250,000 1,250,000
Alpart Jamaica 65.0% 942,500 1,450,000
QAL Australia 20.0%(2) 730,000 3,650,000
----------------- ----------------

2,922,500 6,350,000
================= ================
- ------------
(1) Alumina Partners of Jamaica ("Alpart") bauxite is refined into alumina at
the Alpart refinery.
(2) During September 2001, KACC sold an 8.3% interest in QAL. See discussion
below.

KACC is a major producer of alumina and sells significant amounts of its alumina
production in domestic and international markets. KACC's strategy is to sell a
substantial portion of the alumina available to it in excess of its internal
smelting requirements under multi-year sales contracts with prices linked to the
price of primary aluminum. See "-Competition" and "-Commodity Marketing" in
this Report. During 2001, KACC sold alumina to approximately 12 customers, the
largest and top five of which accounted for approximately 21% and 64%,
respectively, of the business unit's third-party net sales. All of KACC's
third-party sales of bauxite in 2001 were made to one customer, which sales
represent approximately 6% of the business unit's third-party net sales. KACC's
principal customers for bauxite and alumina consist of other aluminum producers,
trading intermediaries who resell raw materials to end-users, and users of
chemical grade alumina.

KJBC. The Government of Jamaica has granted KACC a mining lease for the mining
of bauxite which will, at a minimum, satisfy the bauxite requirements of KACC's
Gramercy, Louisiana, alumina refinery so that it will be able to produce at its
current rated capacity until 2020. Kaiser Jamaica Bauxite Company ("KJBC") mines
bauxite from the land which is subject to the mining lease as an agent for KACC.
Although KACC owns 49% of KJBC, it is entitled to, and generally takes, all of
its bauxite output. A substantial majority of the bauxite mined by KJBC is
refined into alumina at the Gramercy facility and the remainder is sold to one
third-party customer. KJBC's operations have been impacted by the Gramercy
incident (see Gramercy below). The Government of Jamaica, which owns 51% of
KJBC, has agreed to grant KACC an additional bauxite mining lease. The new
mining lease will be effective upon the expiration of the current lease in 2020
and will enable the Gramercy facility to produce at its rated capacity for an
additional ten year period. KACC holds its interest in KJBC through Kaiser
Bauxite Company ("KBC"), a wholly owned subsidiary. Neither KJBC nor KBC filed a
petition for reorganization under the Code. The Debtors currently have the
authority from the Court to continue to fund KJBC's cash requirements in the
ordinary course of business.

Gramercy. Alumina produced by the Gramercy refinery is primarily sold to third
parties. The Gramercy refinery produces two products: smelter grade alumina and
chemical grade alumina (e.g. hydrate). Smelter grade alumina is sold under
long-term contracts typically linked to London Metal Exchange prices ("LME
prices") for primary aluminum. Chemical grade alumina is sold at a premium price
over smelter grade alumina. Production at the Gramercy refinery was completely
curtailed in July 1999 when it was extensively damaged by an explosion in the
digestion area of the plant. Production at the plant remained curtailed until
the middle of December 2000 at which time partial production commenced.
Construction at the facility was substantially completed in the third quarter of
2001. During 2001, the Gramercy facility incurred abnormal related start-up
costs of approximately $64.9 million. These abnormal costs resulted from
operating the plant in an interim and less efficient mode pending the completion
of construction and reaching the plant's intended production rates and
efficiency. During the first nine months of 2001, the plant operated at
approximately 68% of its newly rated estimated annual capacity of 1,250,000
tons. During the fourth quarter of 2001, the plant operated at approximately 90%
of its newly-rated capacity. By the end of February 2002, the plant was
operating at just below 100% of its newly-rated capacity. The facility is now
focusing its efforts on achieving its full operating efficiency. While
production was curtailed, KACC purchased alumina from third parties, in excess
of the amounts of alumina available from other KACC-owned facilities, to supply
major customers' needs as well as to meet intersegment requirements.

Alpart. KACC owns a 65% interest in Alpart, and Hydro Aluminium a.s ("Hydro")
owns the remaining 35% interest. KACC holds its interests in Alpart through two
wholly owned subsidiaries (Kaiser Jamaica Corporation - "KJC" and Alpart Jamaica
Inc. - "AJI") which did not file petitions for reorganization under the Code.
The Debtors currently have the authority from the Court to continue to fund KJC
and AJI and, thus, fund Alpart's cash requirements in the ordinary course of
business. Alpart holds bauxite reserves and owns a 1,450,000 ton per year
alumina plant located in Jamaica. KACC has management responsibility for the
facility on a fee basis. KACC and Hydro have agreed to be responsible for their
proportionate shares of Alpart's costs and expenses. The Government of Jamaica
has granted Alpart a mining lease and has entered into other agreements with
Alpart designed to assure that sufficient reserves of bauxite will be available
to Alpart to operate its refinery, as it may be expanded up to a capacity of
2,000,000 tons per year, through the year 2024. Alpart and JAMALCO, a joint
venture between affiliates of Alcoa Inc. and the Government of Jamaica, have
been operating a bauxite mining operation joint venture that consolidated their
bauxite mining operations in Jamaica since the first half of 2000. The joint
venture agreement also grants Alpart certain rights to acquire bauxite mined
from JAMALCO's reserves with the objective to optimize mining operations and
capital costs. As part of the Company's performance improvement initiative
launched in 2001 (see Note 6 of Notes to Consolidated Financial Statements),
Alpart's annual production capacity is expected to increase to 1,700,000 tons
per year during 2003, which would equate to an increase in KACC's share of
annual production of approximately 160,000 tons per year.

QAL. KACC owns a 20% interest in QAL, after selling an approximate 8.3% interest
in September 2001. KACC holds its interest in QAL through a wholly owned
subsidiary (Kaiser Alumina Australia Corporation - "KAAC") which was one of
KACC's subsidiaries that filed a petition for reorganization under the Code. The
Debtors currently have the authority from the Court to fund QAL's cash
requirements in the ordinary course of business. QAL, which is located in
Queensland, Australia, owns one of the largest and most competitive alumina
refineries in the world. QAL refines bauxite into alumina, essentially on a cost
basis, for the account of its shareholders under long-term tolling contracts.
The shareholders, including KAAC, purchase bauxite from another QAL shareholder
under long-term supply contracts. KAAC has contracted with QAL to take
approximately 614,000 tons per year of alumina or pay standby charges. KAAC is
unconditionally obligated to pay amounts calculated to service its share ($79.4
million at December 31, 2001) of certain debt of QAL, as well as other QAL costs
and expenses, including bauxite shipping costs. KAAC's share of QAL's production
for the first eight months of 2001 was approximately 668,000 tons. Had the sale
of the QAL interest been effective as of the beginning of 2001, KAAC's share of
QAL's production for 2001 would have been reduced by approximately 196,000 tons.
Historically, KACC has sold about half of its share of QAL's production to third
parties and has used the remainder to supply its Northwest smelters, which are
temporarily curtailed. The reduction in KACC's alumina supply associated with
its sale of the QAL interest is expected to be substantially offset by the
return of its Gramercy alumina refinery to full operations at a higher capacity
and by the previously noted planned increase in capacity at its Alpart alumina
refinery in Jamaica. Accordingly, the QAL transaction is not expected to have an
adverse impact on KACC's ability to satisfy existing third-party customer
contracts.

- - Primary Aluminum Business Unit
The following table lists KACC's primary aluminum smelting facilities as of
December 31, 2001:

Annual Rated Total 2001
Capacity Annual Average
Company Available to Rated Operating
Location Facility Ownership the Company Capacity Rate
- ----------------- ---------- ------------ ---------------- ----------- ------------
(tons) (tons)
United States
Washington Mead 100% 200,000 200,000 -(1)
Washington Tacoma 100% 73,000 73,000 -(1)
---------------- -----------
Subtotal 273,000 273,000
---------------- -----------

International
Ghana Valco 90% 180,000 200,000 81%
Wales, United Kingdom Anglesey 49% 66,150 135,000 102%
---------------- -----------
Subtotal 246,150 335,000
---------------- -----------

Total 519,150 608,000
================ ===========

- --------
(1) Production was completely curtailed during 2001. For a discussion of these
matters see "Availability of Affordable Electric Power" below.

KACC uses proprietary retrofit and control technology in all of its smelters.
This technology - which includes the redesign of the cathodes, anodes and bus
that conduct electricity through reduction cells, improved feed systems that add
alumina to the cells, computerized process control and energy management
systems, and furnace technology for baking of anode carbon - has significantly
contributed to increased and more efficient production of primary aluminum and
enhanced KACC's ability to compete more effectively with the industry's newer
smelters.

KACC's principal primary aluminum customers consist of large trading
intermediaries and metal brokers. In 2001, KACC sold its primary aluminum
production not utilized for internal purposes to approximately 96 customers, the
largest and top five of which accounted for approximately 72% and 92%,
respectively, of the business unit's third-party net sales. See "-Competition"
in this Report. Marketing and sales efforts are conducted by personnel located
in Houston, Texas; and Tacoma and Spokane, Washington.

Operations in the United States. During 2001, both the Mead and Tacoma smelters
were completely curtailed and are expected to remain curtailed at least through
early 2003. The Mead facility uses pre-bake technology. The Tacoma facility uses
Soderberg technology and produces primary aluminum and high-grade,
continuous-cast, redraw rod, which currently commands a premium price in excess
of the price of primary aluminum. The business unit maintains specialized
laboratories and a miniature carbon plant in the State of Washington which
concentrate on the development of cost-effective technical innovations such as
equipment and process improvements.

International Operations. KACC manages, and directly owns a 90% interest in, the
Volta Aluminium Company Limited ("Valco") aluminum smelter in Ghana. The Valco
smelter uses pre-bake technology and processes alumina supplied by KACC and the
other participant into primary aluminum under tolling contracts which provide
for proportionate payments by the participants. KACC's share of the primary
aluminum is sold to third parties. Valco's operating level has been subject to
fluctuations resulting from the amount of power it is allocated by the Volta
River Authority ("VRA"). The operating level over the last five years has ranged
from one to four out of a total of five potlines. During 2001 and 2000, Valco
operated an average of four potlines. As of March 31, 2002, Valco was operating
three potlines. See Availability of Affordable Electric Power below.

KACC also owns a 49% interest in the Anglesey Aluminium Limited ("Anglesey")
aluminum smelter at Holyhead, Wales. The Anglesey smelter uses pre-bake
technology. KACC supplies 49% of Anglesey's alumina requirements and purchases
49% of Anglesey's aluminum output. KACC sells its share of Anglesey's output to
third parties.

KACC does not expect Valco's or Anglesey's operations to be adversely affected
as a result of the Cases as the Debtors have received the authority from the
Court to fund Valco's and Anglesey's cash requirements in the ordinary course of
business.

Availability of Affordable Electric Power - Electric power represents an
important production input for KACC at its aluminum smelters and its cost can
significantly affect KACC's profitability.

United States. KACC has historically purchased a significant portion of its
electric power for the Mead and Tacoma, Washington, smelters from the Bonneville
Power Association ("BPA"). Over recent years, the BPA has supplied approximately
half of the electric power for the two plants, with the balance coming from
other suppliers. In response to the unprecedented high market prices for power
in the Pacific Northwest, KACC curtailed primary aluminum production at the
Tacoma and Mead, Washington, smelters during the last half of 2000 and all of
2001. During this same period, as permitted under the BPA contract, KACC sold
the available power that it had under contract through September 30, 2001. As a
result of the curtailments, KACC avoided the need to purchase power on a
variable market price basis and received cash proceeds sufficient to more than
offset the cash impact of the potline curtailments over the period for which the
power was sold.

During October 2000, KACC signed a new power contract with the BPA under which
the BPA, starting October 1, 2001, provides KACC's operations in the State of
Washington with up to approximately 290 megawatts of power through September
2006. The contract provides KACC with sufficient power to fully operate the
Flat-Rolled Products Business Unit's Trentwood facility (which requires up to an
approximate 40 megawatts) as well as approximately 40% of the combined capacity
of KACC's Mead and Tacoma smelting operations. The BPA has announced that it
currently intends to set rates under the contract in six month increments. The
rate for the initial period (from October 1, 2001 through March 31, 2002) was
approximately 46% higher than power costs under the prior contract. Power prices
for the April 2002 through September 2002 period are essentially unchanged from
the prior six-month rate. KACC cannot predict what rates will be charged in
future periods. Such rates will be dependent on such factors as the availability
of and demand for electrical power, which are largely dependent on weather, the
price for alternative fuels, particularly natural gas, as well as general and
regional economic and ecological factors. The contract also includes a
take-or-pay requirement and clauses under which KACC's power allocation could be
curtailed, or its costs increased, in certain instances. Under the contract,
KACC can only remarket its power allocation to reduce or eliminate take-or-pay
requirements. KACC is not entitled to receive any profits from any such
remarketing efforts. During October 2001, KACC and the BPA reached an agreement
whereby: (a) KACC would not be obligated to pay for potential take-or-pay
obligations in the first year of the contract and (b) KACC retained its rights
to restart its smelter operations at any time. In return for the foregoing, KACC
granted the BPA certain limited power interruption rights in the first year of
the contract if KACC is operating its Northwest smelters. The Department of
Energy has acknowledged that capital spending in respect of the Gramercy
refinery was consistent with the contractual provisions of the prior contract
with respect to the use of power sale proceeds. Beginning October 2002, unless
there is a further amendment of KACC's obligations, KACC could be liable for
take-or-pay costs under the BPA contract and such amounts could be significant.
KACC is reviewing its rights and obligations in respect of the BPA contract in
light of the filing of the Cases. See Note 7 of Notes to Consolidated Financial
Statements for additional information regarding the BPA contract.

Subject to the limited interruption rights granted to the BPA (described above),
KACC has sufficient power under contract, and retains the ability, to restart up
to 40% (4.75 potlines) of its Northwest smelting capacity. Were KACC to restart
additional capacity (in excess of 4.75 potlines), it would have to purchase
additional power from the BPA or other suppliers. For KACC to make such a
decision, it would have to be able to purchase such power at a reasonable price
in relation to current and expected market conditions for a sufficient term to
justify its restart costs, which could be significant depending on the number of
lines restarted and the length of time between the shutdown and restart. Given
recent primary aluminum prices and the forward price of power in the Northwest,
it is unlikely that KACC would operate more than a portion of its Northwest
smelting capacity in the near future. Were KACC to restart all or a portion of
its Northwest smelting capacity, it would take between three to six months to
reach the full operating rate for such operations, depending upon the number of
lines restarted. Even after achieving the full operating rate, operating only a
portion of the Northwest capacity would result in production/cost inefficiencies
such that operating results would, at best be breakeven to modestly negative at
long-term primary aluminum prices. However, operating at such a reduced rate
could, depending on prevailing economics, result in improved cash flows as
opposed to remaining curtailed and incurring the Company's fixed and continuing
labor and other costs. This is because KACC is contractually liable for certain
severance, supplemental unemployment benefits and early retirement benefits for
laid-off workers under KACC's contract with the United Steelworkers of America
("USWA") during periods of curtailment. As of December 31, 2001, all such
contractual compensation costs have been accrued for all USWA workers in excess
of those expected to be required to run the Northwest smelters at a rate up to
the above stated 40% smelter operating rate. These costs are expected to be
incurred periodically through September 2002. Costs associated with the USWA
workers that KACC estimates would be required to operate the smelters at an
operating rate of up to 40% have been accrued through early 2003 as KACC does
not currently expect to restart the Northwest smelters prior to that date. If
such workers are not recalled prior to the end of the first quarter of 2003,
KACC could become liable for additional early retirement costs. Such costs could
be significant and could adversely impact the Company's operating results and
liquidity. The present value of such costs could be in the $50.0 to $60.0
million range. However, such costs would likely be paid out over an extended
period.

International. During late 2000, Valco, the Government of Ghana ("GoG") and the
VRA reached an agreement, subject to Parliamentary approval, that would provide
sufficient power for Valco to operate at least three and one-half of its five
potlines through 2017. However, Parliamentary approval has not been received
and, effective March 3, 2002, the GoG reduced Valco's power allocation forcing
Valco to curtail one of its four operating potlines. Valco has objected to the
power curtailment and expects to seek remedies from the GoG. Valco has met with
the GoG and the VRA and anticipates such discussions will continue in respect of
the current and future power situation. Valco currently expects to operate
approximately three potlines during the remainder of 2002. However, no
assurances can be provided that Valco will continue to receive sufficient power
to operate three potlines for the balance of 2002 or thereafter.

During early 2000, Anglesey entered into a new power agreement that provides
sufficient power to sustain its operations at full capacity through September
2009.

- - Commodities Marketing Business Unit
The Company's operating results are sensitive to changes in the prices of
alumina, primary aluminum, and fabricated aluminum products, and also depend to
a significant degree upon the volume and mix of all products sold. Primary
aluminum prices have historically been subject to significant cyclical
fluctuations. Alumina prices, as well as fabricated aluminum product prices
(which vary considerably among products), are significantly influenced by
changes in the price of primary aluminum and generally lag behind primary
aluminum prices by up to three months. From time to time in the ordinary course
of business, KACC enters into hedging transactions to provide risk management in
respect of its net exposure of earnings and cash flow related to primary
aluminum price changes. Given the significance of primary aluminum hedging
activities to the Company and KACC, the Company reports its primary
aluminum-related hedging activities as a separate segment. Primary
aluminum-related hedging activities are managed centrally on behalf of all of
KACC's business segments to minimize transaction costs, to monitor consolidated
net exposures and to allow for increased responsiveness to changes in market
factors.

Because the agreements underlying KACC's hedging positions provided that the
counterparties to the hedging contracts could liquidate KACC's hedging positions
if KACC filed for reorganization, KACC chose to liquidate these positions in
advance of the Filing Date. Gains or losses associated with these liquidated
positions have been deferred and are being recognized over the original hedging
periods as the underlying purchases/sales are still expected to occur. The
Company anticipates that, subject to the approval of the Court and prevailing
economic conditions, it may reinstitute an active hedging program to protect the
interests of its constituents. However, no assurance can be given as to when or
if the appropriate Court approval will be obtained or when or if such hedging
activities will restart.

Hedging activities conducted in respect of the Company's cost exposure to energy
prices and foreign exchange rates are not considered a part of the Commodity
marketing segment. Rather, such activities are included in the results of the
business unit to which they relate.

- - Flat-Rolled Products Business Unit
The Flat-rolled products business unit operates the Trentwood, Washington,
rolling mill. During recent years, the business unit has sold to the aerospace,
transportation and industrial ("ATI") markets (producing heat-treat sheet and
plate products and automotive brazing sheet) and the beverage container market
(producing lid and tab stock), both directly and through distributors.

During 2000, KACC shifted the product mix of its Trentwood rolling mill toward
higher value-added product lines, and exited beverage can body stock, wheel and
common alloy products in an effort to enhance its profitability. The Company
continues to reassess the product mix of its Trentwood rolling mill, and has
concluded that the business unit's profitability can be enhanced by further
focusing resources on its core, heat-treat business and by exiting lid and tab
stock product lines used in the beverage container market and brazing sheet for
the automotive market. As a result of this decision, the Company plans to sell
or idle several pieces of equipment resulting in an impairment charge of
approximately $17.7 million at December 31, 2001. Additional charges are likely
as the Company works through all of the operational impacts of the decision to
exit the lid, tab and brazing sheet product lines.

In 2001, the business unit sold to approximately 101 customers in the ATI
markets, most of which represented heat-treat product shipments to distributors
who sell to a variety of industrial end-users. The largest and top five
customers in the ATI markets for flat-rolled products accounted for
approximately 17% and 35%, respectively, of the business unit's third-party net
sales. The business unit also sold lid and tab stock to beverage container
manufacturing locations in the United States. The largest and top five of such
customers accounted for approximately 9% and 16%, respectively, of the business
unit's third-party net sales. See "-Competition" in this Report. Sales are made
directly to end-use customers and distributors by KACC sales representatives
located in the United States and Europe, and by independent sales agents in
Asia.

- - Engineered Products Business Unit
The Engineered products business unit operates soft-alloy and hard-alloy
extrusion facilities and engineered component (forgings) facilities in the
United States and Canada. Major markets for extruded products are in the ground
transportation industry, to which the business unit sells extruded shapes for
automobiles, light-duty vehicles, heavy duty trucks and trailers, and shipping
containers, and in the distribution, durable goods, defense, building and
construction, ordnance and electrical markets.

Soft-alloy extrusion facilities are located in Los Angeles, California; Sherman,
Texas; Tulsa, Oklahoma; Richmond, Virginia; and London, Ontario, Canada.
Products manufactured at these facilities include rod, bar, tube, shapes and
billet. Hard-alloy extrusion facilities are located in Newark, Ohio, and
Jackson, Tennessee, and produce rod, bar, screw machine stock, redraw rod,
forging stock and billet. The business unit also extrudes seamless tubing in
both hard- and soft-alloys at a facility in Richland, Washington and produces
drawn tube in both hard- and soft-alloys at its operations in Chandler, Arizona,
that it purchased in May 2000. Soft-alloy extruded seamless and drawn tubing is
also produced at the Richmond, Virginia facility.

The business unit sells forged parts to customers in the automotive, heavy-duty
truck, general aviation, rail, machinery and equipment, and ordnance markets.
The high strength-to-weight properties of forged aluminum make it particularly
well-suited for automotive applications. Forging facilities are located in
Oxnard, California, and Greenwood, South Carolina. Through its sales and
engineering office in Southfield, Michigan, the business unit staff works with
automobile makers and other customers and plant personnel to create new
automotive component designs and to improve existing products.

KACC's London, Ontario facility is owned by a wholly owned subsidiary (Kaiser
Aluminum & Chemical of Canada Limited - "KACCL") that did not file a
petition for reorganization under the Code. The Debtors have received the
authority to continue to fund KACCL's cash requirements in the ordinary course
of business. Accordingly, the Company does not believe KACCL's operations will
be adversely affected by the Cases.

In 2001, the Engineered products business unit had approximately 400 customers,
the largest and top five of which accounted for approximately 10% and 24%,
respectively, of the business unit's third-party net sales. See "-Competition"
below. Sales are made directly to end-use customers and distributors by KACC
sales representatives located across the United States.

COMPETITION

KACC competes globally with producers of bauxite, alumina, primary aluminum, and
fabricated aluminum products. Many of KACC's competitors have greater financial
resources than KACC. Primary aluminum and, to some degree, alumina are
commodities with generally standard qualities, and competition in the sale of
these commodities is based primarily upon price, quality and availability.
Aluminum competes in many markets with steel, copper, glass, plastic, and other
materials. KACC competes with numerous domestic and international fabricators in
the sale of fabricated aluminum products. KACC markets fabricated aluminum
products it manufactures in the United States and abroad. Sales are made
directly and through distributors to a large number of customers. Competition in
the sale of fabricated products is based upon quality, availability, price and
service, including delivery performance. KACC concentrates its fabricating
operations on selected products in which it believes it has production
expertise, high-quality capability, and geographic and other competitive
advantages. The Company believes that, assuming the current relationship between
worldwide supply and demand for alumina and primary aluminum does not change
materially, the loss of any one of KACC's customers, including intermediaries,
would not have a material adverse effect on the Company's financial condition or
results of operations.

RESEARCH AND DEVELOPMENT

Net expenditures for research and development activities were $4.0 million in
2001, $5.6 million in 2000, and $11.0 million in 1999. KACC estimates that
research and development net expenditures will be in the range of $3.0 million
to $5.0 million in 2002.

EMPLOYEES

During 2001, the Company and its consolidated affiliates employed an average of
approximately 6,500 persons, compared with an average of approximately 7,800
persons in 2000 and approximately 8,600 persons in 1999. At December 31, 2001,
KACC employed approximately 5,800 persons (excluding approximately 1,100
employees on layoff status), of which approximately 3,100 were employed by the
Debtors and 2,700 were employed by non-Debtors. The foregoing employee counts
for 2000 and 1999 include the USWA workers who were subject to the lockout
imposed by KACC as a result of the labor dispute that was settled in September
2000. During the labor dispute, KACC operated the five affected facilities with
temporary workers who were not included in the employee counts for 2000 and
1999.

The labor agreements with hourly employees at the Los Angeles, California, and
Richmond, Virginia, Engineered products facilities were renewed in 2001. The
labor agreement with the employees at the Valco smelter in Ghana was renewed
during the first quarter of 2002 and the labor agreement with the employees at
the Alpart refinery in Jamaica is expected to be renewed during the second
quarter of 2002.

ENVIRONMENTAL MATTERS

The Company and KACC are subject to a wide variety of international, federal,
state and local environmental laws and regulations. For a discussion of this
subject, see "Factors Affecting Future Performance - KACC's current or past
operations subject it to environmental compliance, clean-up and damage claims
that may be costly" below. During the pendency of the Cases, substantially all
pending litigation, except certain environmental claims and litigation, against
the Debtors is stayed.

FACTORS AFFECTING FUTURE PERFORMANCE

This section discusses certain factors that could cause actual results to vary,
perhaps materially, from the results described in forward-looking statements
made in this Report. Forward-looking statements in this Report are not
guarantees of future performance and involve significant risks and
uncertainties. In addition to the factors identified below, actual results may
vary materially from those in such forward-looking statements as a result of a
variety of other factors including the effectiveness of management's strategies
and decisions, general economic and business conditions, developments in
technology, new or modified statutory or regulatory requirements, and changing
prices and market conditions. This Report also identifies other factors that
could cause such differences. No assurance can be given that these factors are
all of the factors that could cause actual results to vary materially from the
forward-looking statements.

- - The Cases and any plan of reorganization may have adverse consequences on the
Company and its stakeholders and/or our reorganization from the Cases may
not be successful
Our objective is to achieve the highest possible recoveries for all creditors
and stockholders, consistent with our ability to pay and the continuation of our
businesses. However, there can be no assurance that we will be able to attain
these objectives or achieve a successful reorganization and remain a going
concern. The consolidated financial statements included elsewhere in this Report
do not include any adjustments relating to the recoverability and classification
of recorded asset amounts or the amount and classification of liabilities or the
effect on existing stockholders' equity that may result from any plans,
arrangements or other actions arising from the Cases, or the possible inability
of the Company to continue in existence. Adjustments necessitated by such plans,
arrangements or other actions could materially change the consolidated financial
statements included elsewhere in this Report. Further, there can be no assurance
that the rights of, and the ultimate payments to, pre-Filing Date creditors will
not be substantially altered. The interests of holders of the Company's Common
Stock may also be diluted or cancelled under a plan of reorganization. Because
of such possibility, the value of the Common Stock is speculative and any
investment in the Common Stock would pose a high degree of risk.

Additionally, while the Debtors operate their businesses as
debtors-in-possession pursuant to the Code during the pendency of the Cases, the
Debtors will be required to obtain the approval of the Court prior to engaging
in any transaction outside the ordinary course of business. In connection with
any such approval, creditors and other parties in interest may raise objections
to such approval and may appear and be heard at any hearing with respect to any
such approval. Accordingly, the Debtors may be prevented from engaging in
transactions that might otherwise be considered beneficial to the Company. The
Court also has the authority to oversee and exert control over the Debtors'
ordinary course operations.

- - Our earnings are sensitive to a number of variables
Our operating earnings are sensitive to a number of variables over which we have
no direct control. Two key variables in this regard are prices for primary
aluminum and general economic conditions.

The price of primary aluminum significantly affects our financial results.
Primary aluminum prices historically have been subject to significant cyclical
price fluctuations. The Company believes the timing of changes in the market
price of aluminum are largely unpredictable. Since 1993, the Average Midwest
United States transaction price (the "AMT price") has ranged from approximately
$.50 to $1.00 per pound.

Electric power represents an important production input for us at our aluminum
smelters and its cost can significantly affect our profitability. Power
contracts for our smelters have varying contractual terms. See
"Business--Primary Aluminum Business Unit--Availability of Affordable Electric
Power." Our earnings are also sensitive to changes in the prices for natural
gas, fuel oil and diesel oil which are used in our production processes, and to
foreign exchange rates in respect of our cash commitments to our foreign
subsidiaries and affiliates.

Changes in global, regional, or country-specific economic conditions can have a
significant impact on overall demand for aluminum-intensive fabricated products
in the transportation, distribution, and packaging markets. Such changes in
demand can directly affect our earnings by impacting the overall volume and mix
of such products sold. To the extent that these end-use markets weaken, demand
can also diminish for alumina and primary aluminum.

- - We may not have electric power in sufficient amounts and/or at affordable
costs available for our smelting operations Electric power represents an
important production input at our aluminum smelters and its cost can
significantly affect our profitability. Power contracts for our smelters have
varying contractual terms. In March 2002, the GoG reduced the power allocation
for our 90% owned Valco smelter forcing Valco to curtail one of its four
operating potlines. See "Business--Primary Aluminum Business Unit--Availability
of Affordable Electric Power." We cannot provide assurance that electric power
will be available in the future, at affordable prices, for our smelters.

- - The operating rate of our northwest United States smelters is subject to
substantial uncertainty and may subject us to significant costs that could
have an adverse impact on our liquidity
Our smelters in the United States, located in Mead and Tacoma, Washington, have
historically purchased electric power from the BPA, which has supplied
approximately half of the electric power for the two plants over recent years,
and from other suppliers. As a result of unprecedented high market prices for
electric power in the Pacific Northwest, we curtailed primary aluminum
production at the Mead and Tacoma smelters and sold the available power that we
had under contract through September 30, 2001 (the end of the previous contract
period). Both the Mead and Tacoma smelters are expected to remain curtailed
through at least early 2003. We cannot predict when or whether power rates will
improve sufficiently for us to restart this capacity.

Under a new contract, which runs from October 2001 through September 2006, the
BPA will provide KACC with sufficient power to operate its Trentwood facility as
well as approximately 40% of the combined capacity of the Mead and Tacoma
smelters. The BPA has announced that it currently intends to set rates under the
new contract for six month increments. The rate for the initial period (from
October 1, 2001 through March 31, 2002) was approximately 46% higher than power
costs under the prior contract. Power prices for the April 2002 through
September 2002 period are essentially unchanged from the prior six-month rate.
We cannot predict what rates will be charged in future periods. Such rates will
depend on factors such as the availability of and demand for electrical power,
which are largely dependent on weather, the price for alternative fuels,
particularly natural gas, as well as general and regional economic and
ecological factors. Beginning October 2002, unless there is a further amendment
of KACC's obligations, KACC could be liable for take-or-pay costs under the BPA
contract and such amounts could be significant. KACC is reviewing its rights and
obligations in respect of the BPA contract in light of the filing of the Cases.

- - Our profits and cash flows may be adversely impacted by the results of KACC's
hedging programs
From time to time in the ordinary course of business, KACC enters into hedging
transactions to limit its exposure resulting from (1) its anticipated sales of
alumina, primary aluminum, and fabricated aluminum products, net of expected
purchase costs for items that fluctuate with primary aluminum prices, (2) energy
price risk from fluctuating prices for natural gas, fuel oil and diesel oil used
in its production process, and (3) foreign currency requirements with respect to
its cash commitments with foreign subsidiaries and affiliates. To the extent
that the prices for primary aluminum exceed the fixed or ceiling prices
established by KACC's hedging transactions or that energy costs or foreign
exchange rates are below the fixed or floor prices, our profits and cash flow
would be lower than they otherwise would have been.

Hedging activities can also have a temporary impact on our and KACC's liquidity.
KACC may establish credit limits with certain counterparties related to open
forward sales and option contracts. When unrealized gains or losses on open
positions are in excess of such credit lines, KACC would be entitled to receive
margin advances from the counterparties or would be required to make margin
advances to counterparties, as the case may be. For example, during the period
from January 1, 2000, through December 31, 2001, margin advances (or letters of
credit) to counterparties were as high as approximately $63.5 million (which
occurred in January 2000) and margin advances from counterparties have been as
high as $62.1 million (which occurred in November 2001).

Because the agreements underlying KACC's hedging positions at December 31, 2001,
provided that the counterparties to the hedging contracts could liquidate KACC's
hedging positions if KACC filed for reorganization, KACC chose to liquidate
these positions in advance of the Filing Date. The Company anticipates that,
subject to the approval of the Court and prevailing economic conditions, it may
reinstitute an active hedging program to protect the interests of its
constituents. However, no assurance can be given as to when or if the
appropriate Court approvals will be obtained or when or if such hedging
activities will restart.

- - KACC's current or past operations subject it to environmental compliance,
clean-up and damage claims that have been and continue to be costly
The operations of KACC's facilities are regulated by a wide variety of
international, federal, state and local environmental laws. These environmental
laws regulate, among other things, air and water emissions and discharges; the
generation, storage, treatment, transportation and disposal of solid and
hazardous waste; and the release of hazardous or toxic substances, pollutants
and contaminants into the environment. Compliance with these environmental laws
is costly. While legislative, regulatory and economic uncertainties make it
difficult for us to project future spending for these purposes, we currently
anticipate that in the 2002 - 2003 period, KACC's environmental capital spending
will be approximately $6.0 million per year and that KACC's operating costs will
include pollution control costs totaling approximately $16.4 million per year.
However, subsequent changes in environmental laws may change the way KACC must
operate and may force KACC to spend more than we currently project.

Additionally, KACC's current and former operations can subject it to fines or
penalties for alleged breaches of environmental laws and to other actions
seeking clean-up or other remedies under these environmental laws. KACC also may
be subject to damages related to alleged injuries to health or to the
environment, including claims with respect to certain waste disposal sites and
the clean-up of sites currently or formerly used by KACC.

Currently, KACC is subject to certain lawsuits under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"). KACC, along
with certain other companies, has been named as a Potentially Responsible Party
for clean-up costs at certain third-party sites listed on the National
Priorities List under CERCLA. As a result, KACC may be exposed not only to its
assessed share of clean-up but also to the costs of others if they are unable to
pay. Additionally, KACC's Mead, Washington, facility has been listed on the
National Priorities List under CERCLA. KACC and the regulatory authorities
agreed to a plan of remediation in January 2000.

In response to environmental concerns, we have established environmental
accruals representing our estimate of the costs we reasonably expect KACC to
incur in connection with these matters. At December 31, 2001, the balance of our
accruals, which are primarily included in our long-term liabilities, was $61.2
million. We estimate that the annual costs charged to these environmental
accruals will be approximately $1.3 million to $12.2 million per year for the
years 2002 through 2006 and an aggregate of approximately $24.8 million
thereafter. However, we cannot assure you that KACC's actual costs will not
exceed our current estimates. We believe that it is reasonably possible that
costs associated with these environmental matters may exceed current accruals by
amounts that could range, in the aggregate, up to an estimated $27.0 million.
See Note 12 of Notes to Consolidated Financial Statements for additional
information.

- - The net cash outflows with respect to asbestos-related matters could adversely
affect our financial position KACC has been one of many defendants in numerous
lawsuits in which the plaintiffs allege that they have injuries caused by
exposure to asbestos during, and as a result of, their employment or association
with KACC, or exposure to products containing asbestos produced or sold by KACC.
The lawsuits generally relate to products KACC sold more than 20 years ago. Due
to the Cases, existing lawsuits are stayed and new lawsuits cannot be commenced
against us or KACC. However, during the pendency of the Cases, we expect that
additional claims will be filed as part of the claims process.

Our December 31, 2001, balance sheet includes a liability for estimated
asbestos-related costs of $621.3 million. In determining the amount of the
liability, we have included estimates only for the costs of claims for a
ten-year period through 2011 because we do not have a reasonable basis for
estimating costs beyond that period. However, the plan of reorganization process
may require an estimation of KACC's entire asbestos-related liability, which may
go beyond 2011. Additional asbestos-related claims are likely to be filed
against KACC as a part of the Chapter 11 process. Management cannot reasonably
predict the ultimate number of such claims or the amount of the associated
liability. However, it is likely that such amounts could exceed, perhaps
significantly, the liability amounts reflected in the Company's consolidated
financial statements, which (as previously stated) is only reflective of an
estimate of claims over the next ten-year period. KACC's obligations in respect
of the currently pending and future asbestos-related claims will ultimately be
determined (and resolved) as a part of the overall Chapter 11 proceedings. It is
anticipated that resolution of these matters will be a lengthy process.
Management will continue to periodically reassess its asbestos-related
liabilities and estimated insurance recoveries as the Cases proceed. However,
absent unanticipated developments such as asbestos-related legislation, material
developments in other asbestos-related proceedings or in the Company's or KACC's
Chapter 11 proceedings, it is not anticipated that the Company will have
sufficient information to reevaluate its asbestos-related obligations and
estimated insurance recoveries until much later in the Cases. Any adjustments
ultimately deemed to be required as a result of the reevaluation of KACC's
asbestos-related liabilities or estimated insurance recoveries could have a
material impact on the Company's future financial statements.

We believe KACC has insurance coverage for a substantial portion of such
asbestos-related costs. Accordingly, our December 31, 2001, balance sheet
includes a long-term receivable for estimated insurance recoveries of $501.2
million. We believe that recovery of this amount is probable and additional
amounts may be recoverable in the future if additional claims are added.
However, we cannot assure you that all such amounts will be collected. The
timing and amount of future recoveries from KACC's insurance carriers will
depend on the pendency of the Cases and on the resolution of disputes regarding
coverage under the applicable insurance policies. During October 2001, the court
ruled favorably on a number of issues, and during February 2002, an intermediate
appellate court also ruled favorably on an issue involving coverage. The rulings
did not result in any changes to our estimates of current and future
asbestos-related insurance recoveries. Other courts may hear additional issues
from time to time. Given the expected significance of probable future
asbestos-related payments, the receipt of timely and appropriate payments from
KACC's insurers is critical to a successful plan of reorganization and our
long-term liquidity.

- - The outcome of the unfair labor practices ("ULPs") action filed by the USWA
could adversely affect us
In connection with the strike by the USWA and their subsequent lock-out by KACC,
the USWA filed twenty-four allegations of ULPs. Twenty-two of the allegations
were dismissed. A trial before an administrative law judge for the two remaining
allegations concluded in September 2001. A decision is not expected until
sometime after the second quarter of 2002. If this trial eventually results in a
final ruling against KACC, it could be liable for back pay to USWA members at
the five plants affected by the labor dispute for an approximate twenty-month
period (plus interest and minus any wages the USWA workers earned during the
twenty-month period). Such amount could be significant. However, any outcome
from the trial before the administrative law judge would be subject to
additional appeals by the general counsel of the National Labor Relations Board
("NLRB"), the USWA or KACC. This process could take months or years. This matter
is currently not stayed by the Cases. Any liability ultimately determined to
exist in this matter will be dealt with in the overall context of the Debtors'
plan of reorganization.

- - We may not operate profitably in the future
We reported a net loss of $459.4 million for the year ended December 31, 2001,
which included an increase of $505.4 million in the valuation allowances for net
deferred income tax assets, as a result of the Cases, and other material special
items. Even if such increase in the valuation allowances and other special items
were excluded from the results for 2001 (see "Management's Discussion and
Analysis of Financial Condition and Results of Operation - Summary" for a
summary of special items), results for the year ended December 31, 2001 would
have been a net loss. There can be no assurance that we will generate a profit
from recurring operations or that we will operate profitably in future periods.

- - We operate in a highly competitive industry
The production of alumina, primary and fabricated aluminum products is highly
competitive. There are numerous companies who operate in the aluminum industry.
Certain of our competitors are substantially larger, have greater financial
resources than we do and may have other strategic advantages.

- - KACC is subject to political and regulatory risks in a number of countries
KACC operates facilities in the United States and in a number of other
countries, including Australia, Canada, Ghana, Jamaica, and the United Kingdom.
While we believe KACC's relationships in the countries in which it operates are
generally satisfactory, we cannot assure you that future developments or
governmental actions in these countries will not adversely affect KACC's
operations particularly or the aluminum industry generally. Among the risks
inherent in KACC's operations are unexpected changes in regulatory requirements,
unfavorable legal rulings, new or increased taxes and levies, and new or
increased import or export restrictions. KACC's operations outside of the United
States are subject to a number of additional risks, including but not limited to
currency exchange rate fluctuations, currency restrictions, and nationalization
of assets.

ITEM 2. PROPERTIES

The locations and general character of the principal plants, mines, and other
materially important physical properties relating to KACC's operations are
described in Item 1 "-Business Operations" and those descriptions are
incorporated herein by reference. KACC owns in fee or leases all the real estate
and facilities used in connection with its business. Plants and equipment and
other facilities are generally in good condition and suitable for their intended
uses, subject to changing environmental requirements. Although KACC's domestic
aluminum smelters were initially designed early in KACC's history, they have
been modified frequently over the years to incorporate technological advances in
order to improve efficiency, increase capacity, and achieve energy savings. The
Company believes that KACC's plants are cost competitive on an international
basis. However, the long-term viability of KACC's Pacific Northwest smelters
may be adversely impacted if an adequate supply of power at reasonable prices is
not ultimately available.

KACC's obligations under the DIP Facility are secured by, among other things,
mortgages on KACC's major domestic plants. See Note 8 of Notes to Consolidated
Financial Statements for further discussion.

ITEM 3. LEGAL PROCEEDINGS

This section contains statements which constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. See
Item 1 of this Report for cautionary information with respect to such
forward-looking statements.

REORGANIZATION PROCEEDINGS

During the pendency of the Cases, substantially all pending litigation against
the Debtors is stayed. Generally, claims arising from actions or omissions prior
to the Filing Date will be settled in connection with the plan of
reorganization. See Item 1. "Business - Reorganization Proceedings" for a
discussion of the reorganization proceedings. Such discussion is incorporated
herein by reference.

ASBESTOS-RELATED LITIGATION

KACC is a defendant in a number of lawsuits, some of which involve claims of
multiple persons, in which the plaintiffs allege that certain of their injuries
were caused by, among other things, exposure to asbestos during, and as a result
of, their employment or association with KACC or exposure to products containing
asbestos produced or sold by KACC. The lawsuits generally relate to products
KACC has not manufactured for more than 20 years. The portion of Note 12 of
Notes to Consolidated Financial Statements under the heading "Asbestos
Contingencies" is incorporated herein by reference.

LABOR MATTERS

In connection with the USWA strike and subsequent lock-out by KACC, certain
allegations of ULPs were filed by the USWA with the NLRB. Twenty-two of the
twenty-four allegations of ULPs brought against KACC by the USWA have been
dismissed. A trial on the remaining two allegations before an administrative law
judge concluded in September 2001. A decision is not expected until sometime
after the second quarter of 2002. If the outcome of either of these two
allegations eventually results in a final ruling against KACC, it could be
liable for back pay to the USWA members and such amount could be significant.
Any outcome from the trial would be subject to additional appeals by the general
counsel of the NLRB, the USWA or KACC. This process could take months or years.
This matter is currently not stayed by the Cases. Any liability ultimately
determined to exist in this matter will be dealt with in the overall context of
the Debtors' plan of reorganization. The portion of Note 12 of Notes to
Consolidated Financial Statements under the heading "Labor Matters" is
incorporated herein by reference.

GRAMERCY LITIGATION

On July 5, 1999, KACC's Gramercy, Louisiana, alumina refinery was extensively
damaged by an explosion in the digestion area of the plant. A number of
employees were injured in the incident, several of them severely. The incident
resulted in a significant number of individual and class action lawsuits being
filed against KACC and others alleging, among other things, property damage,
business interruption losses by other businesses and personal injury. After
these matters were consolidated, the individual claims against KACC were settled
for amounts which, after the application of insurance, were not material to
KACC. Further, an agreement has been reached with the class plaintiffs for an
amount which, after the application of insurance, is not material to KACC. While
the class settlement remains subject to court approval and while certain
plaintiffs may opt out of the settlement, the Company does not currently believe
that this presents any material risk to KACC. Finally, KACC faces new claims
from certain parties to the litigation regarding the interpretation of and
alleged claims concerning certain settlement and other agreements made during
the course of the litigation. The aggregate amount of damages threatened in
these claims could, in certain circumstances, be substantial. However, KACC does
not currently believe these claims will result in any material liability to the
Company.

OTHER MATTERS

Various other lawsuits and claims are pending against KACC. While uncertainties
are inherent in the final outcome of such matters and it is presently impossible
to determine the actual costs that ultimately may be incurred, management
believes that the resolution of such uncertainties and the incurrence of such
costs should not have a material adverse effect on the Company's consolidated
financial position, results of operations, or liquidity.

See Note 12 of Notes to Consolidated Financial Statements for discussion of
additional litigation. Such discussion under the heading "Dispute with MAXXAM"
is incorporated herein by reference.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security holders of the Company during the
fourth quarter of 2001.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

Through April 2, 2002, the Company's Common Stock was traded on the New York
Stock Exchange under the symbol "KLU." However, on April 2, 2002, the New York
Stock Exchange announced that it was suspending trading of the Company's Common
Stock because the price of the Common Stock had fallen below the New York Stock
Exchange's continued listing standard regarding the average closing price of a
security for a consecutive 30 trading day period. As of April 3, 2002, the
Company's Common Stock began trading on the OTC Bulletin Board under the symbol
"KLUCQ." The number of record holders of the Company's Common Stock at March 31,
2002, was 397. The high and low sales prices for the Company's Common Stock for
each quarterly period of 2001, 2000 and 1999, as reported on the New York Stock
Exchange is set forth in the Quarterly Financial Data on page 66 in this Report
and is incorporated herein by reference. It is possible that, as a part of a
plan of reorganization, the interests of the Company's existing stockholders
could be diluted or cancelled.

The Company has not paid any dividends on its Common Stock during the two most
recent fiscal years. In accordance with the Code and the DIP Facility, the
Company is not permitted to pay any dividends or purchase any of its stock.

See Note 8 of Notes to Consolidated Financial Statements under the heading "Debt
Covenants and Restrictions" and the " Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources
- - Capital Structure" for additional information which are incorporated herein.

ITEM 6. SELECTED FINANCIAL DATA

Selected financial data for the Company is incorporated herein by reference to
the table at page 3 of this Report, to the table at page 16 of Management's
Discussion and Analysis of Financial Condition and Results of Operations, to
Note 2 of Notes to Consolidated Financial Statements, and to the Five-Year
Financial Data on pages 68 - 69 in this Report.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

REORGANIZATION PROCEEDINGS

On February 12, 2002, the Company, KACC and 13 of KACC's wholly owned
subsidiaries, filed separate voluntary petitions in the United States Bankruptcy
Court for the District of Delaware for reorganization under Chapter 11 of the
United States Bankruptcy Code. On March 15, 2002, two additional subsidiaries of
KACC filed petitions. None of KACC's non-U.S. affiliates were included in the
Cases. The Cases are being jointly administered with the Debtors managing their
businesses in the ordinary course as debtors-in-possession subject to the
control and supervision of the Court.

The necessity for filing the Cases was attributable to the liquidity and cash
flow problems of the Company arising in late 2001 and early 2002. The Company
was facing significant near-term debt maturities at a time of unusually weak
aluminum industry business conditions, depressed aluminum prices and a broad
economic slowdown that was further exacerbated by the events of September 11. In
addition, the Company had become increasingly burdened by the asbestos
litigation (see Note 12 of Notes to Consolidated Financial Statements for
additional information) and growing legacy obligations for retiree medical and
pension costs (see Note 10 of Notes to Consolidated Financial Statements for
additional information). The confluence of these factors has created the
prospect of continuing operating losses and negative cash flow, resulting in
lower credit ratings and an inability to access the capital markets.

The Company's and KACC's objective is to achieve the highest possible
recoveries for all creditors and stockholders, consistent with the Debtors'
abilities to pay and the continuation of their businesses. However, there can be
no assurance that the Debtors will be able to attain these objectives or achieve
a successful reorganization. Further, there can be no assurance that the
liabilities of the Debtors will not be found in the Cases to exceed the fair
value of their assets. This could result in claims being paid at less than 100%
of their face value and the equity of the Company's stockholders being diluted
or cancelled. At this time, it is not possible to predict the outcome of the
Cases, in general, or the effect of the Cases on the businesses of the Debtors
or on the interests of creditors and stockholders.

The accompanying financial information of the Company and related discussions of
financial condition and results of operations are based on the assumption that
the Company will continue as a "going concern" which contemplates the
realization of assets and the liquidation of liabilities in the ordinary course
of business; however, as a result of the commencement of the Cases, such
realization of assets and liquidation of liabilities are subject to a
significant number of uncertainties. Financial information for periods ending
after the Filing Date will include adjustments and reclassifications to reflect
the liabilities which have been deferred as a result of the commencement of the
Cases. Specifically, but not all inclusive, the financial information for the
year ended December 31, 2001, contained herein does not present: (a) the
classification of any long-term debt which is in default as a current liability,
(b) the realizable value of assets on a liquidation basis or the availability of
such assets to satisfy liabilities, (c) the amount which will ultimately be paid
to settle liabilities and contingencies which may be allowed in the Cases, or
(d) the effect of any changes which may be made in connection with the Debtors'
capitalizations or operations resulting from a plan of reorganization. Because
of the ongoing nature of the Cases, the discussions and consolidated financial
statements contained herein are subject to material uncertainties.

OVERVIEW

The Company, through its wholly owned subsidiary, KACC, operates in the
following business segments: Bauxite and alumina, Primary aluminum, Flat-rolled
products, Engineered products and Commodities marketing. The Company uses a
portion of its bauxite, alumina, and primary aluminum production for additional
processing at certain of its downstream facilities. The table below provides
selected operational and financial information on a consolidated basis with
respect to the Company for the years ended December 31, 2001, 2000 and 1999. The
following data should be read in conjunction with the Company's consolidated
financial statements and the notes thereto contained elsewhere herein. See Note
15 of Notes to Consolidated Financial Statements for further information
regarding segments. (All references to tons refer to metric tons of 2,204.6
pounds.) Intersegment transfers are valued at estimated market prices.

Year Ended December 31,
-----------------------------------------------
(In millions of dollars, except shipments and prices) 2001 2000 1999
- ------------------------------------------------------------------------- ------------- --------------- --------------
Shipments: (000 tons)
Alumina(1)
Third Party 2,582.7 1,927.1 2,093.9
Intersegment 422.8 751.9 757.3
------------- --------------- --------------
Total Alumina 3,005.5 2,679.0 2,851.2
------------- --------------- --------------
Primary Aluminum(2)
Third Party 244.7 345.5 295.6
Intersegment 2.3 148.9 171.2
------------- --------------- --------------
Total Primary Aluminum 247.0 494.4 466.8
------------- --------------- --------------
Flat-Rolled Products 74.4 162.3 217.9
------------- --------------- --------------
Engineered Products 118.1 164.6 171.1
------------- --------------- --------------
Average Realized Third Party Sales Price:(3)
Alumina (per ton) $ 186 $ 209 $ 176
Primary Aluminum (per pound) $ .67 $ .74 $ .66
Net Sales:
Bauxite and Alumina(1)
Third Party (includes net sales of bauxite) $ 508.3 $ 442.2 $ 395.8
Intersegment 77.9 148.3 129.0
------------- --------------- --------------
Total Bauxite & Alumina 586.2 590.5 524.8
------------- --------------- --------------
Primary Aluminum(2)
Third Party 358.9 563.7 432.9
Intersegment 3.8 242.3 240.6
------------- --------------- --------------
Total Primary Aluminum 362.7 806.0 673.5
------------- --------------- --------------
Flat-Rolled Products 308.0 521.0 591.3
Engineered Products 429.5 564.9 556.8
Commodities Marketing 22.9 (25.4) 18.3
Minority Interests 105.1 103.4 88.5
Eliminations (81.7) (390.6) (369.6)
------------- --------------- --------------
Total Net Sales $ 1,732.7 $ 2,169.8 $ 2,083.6
============= =============== ==============
Operating Income (Loss):
Bauxite & Alumina (4) $ (46.9) $ 57.2 $ (10.5)
Primary Aluminum (5) 5.1 100.1 (4.8)
Flat-Rolled Products .4 16.6 17.1
Engineered Products 4.6 34.1 38.6
Commodities Marketing 5.6 (48.7) 21.3
Micromill - (.6) (11.6)
Eliminations 1.0 .1 6.9
Corporate and Other (68.5) (61.4) (61.8)
Non-recurring Operating Items(6) 163.6 41.9 (24.1)
------------- --------------- --------------
Total Operating Income (Loss) $ 64.9 $ 139.3 $ (28.9)
============= =============== ==============
Net Income (Loss) $ (459.4) $ 16.8 $ (54.1)
============= =============== ==============
Capital Expenditures $ 148.7 $ 296.5 $ 68.4
============= =============== ==============

(1) Net sales for 2001, 2000 and 1999 included approximately 115,000 tons,
322,000 tons and 395,000 tons, respectively, of alumina purchased
from third parties.
(2) Beginning in the first quarter of 2001, as a result of the continuing
curtailment of KACC's Northwest smelters, the Flat-rolled products
business unit began purchasing its own primary aluminum rather than
relying on the Primary aluminum business unit to supply its aluminum
requirements through production or third party purchases. The Engineered
products business unit was already responsible for purchasing the majority
of its primary aluminum requirements. During the years ended December 31,
2001, 2000 and 1999, the Primary aluminum business unit purchased
approximately 27,300 tons, 56,100 tons and 12,000 tons, respectively, of
primary aluminum from third parties to meet existing third party
commitments.
(3) Average realized prices for the Company's Flat-rolled products and
Engineered products segments are not presented as such prices are
subject to fluctuations due to changes in product mix.
(4) Operating income (loss) for 2001, 2000 and 1999 included numerous unusual
items as a result of the Gramercy incident. See Note 3 of Notes
to Consolidated Financial Statements for a recap of the unusual items.
(5) Operating income (loss) for 1999 included potline preparation and restart
costs of $12.8.
(6) See Note 6 of Notes to Consolidated Financial Statements for a detailed
summary of the components of non-recurring operating items and the
business segment to which the items relate.

This section contains statements which constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements appear in a number of places in this section (see "Overview,"
"Results of Operations," "Liquidity and Capital Resources" and "Other Matters").
Such statements can be identified by the use of forward-looking terminology
such as "believes," "expects," "may," "estimates," "will," "should," "plans" or
"anticipates" or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy. Readers are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
significant risks and uncertainties, and that actual results may vary materially
from those in the forward-looking statements as a result of various factors.
These factors include the effectiveness of management's strategies and
decisions, general economic and business conditions, developments in technology,
new or modified statutory or regulatory requirements and changing prices and
market conditions. See Item 1. "Business - Factors Affecting Future
Performance." No assurance can be given that these are all of the factors that
could cause actual results to vary materially from the forward-looking
statements.

SIGNIFICANT ITEMS

Market-related Factors. The Company's operating results are sensitive to changes
in the prices of alumina, primary aluminum, and fabricated aluminum products,
and also depend to a significant degree on the volume and mix of all products
sold and on KACC's hedging strategies. Primary aluminum prices have historically
been subject to significant cyclical price fluctuations. See Notes 2 and 13 of
Notes to Consolidated Financial Statements for a discussion of KACC's hedging
activities.

Changes in global, regional, or country-specific economic conditions can have a
significant impact on overall demand for aluminum-intensive fabricated products
in the transportation, distribution, and packaging markets. Such changes in
demand can directly affect the Company's earnings by impacting the overall
volume and mix of such products sold. To the extent that these end-use markets
weaken, demand can also diminish for what the Company sometimes refers to as the
"upstream" products: alumina and primary aluminum.

During 2001, the Average Midwest United States transaction price ("AMT price")
per pound of primary aluminum began the year at $.75 per pound and then began a
steady decrease ending 2001 at $.64 per pound. During 2000, the average AMT
price was $.75 per pound. During 1999, the AMT price declined to a low of
approximately $.57 per pound in February 1999 and then began a steady increase
ending 1999 at $.79 per pound. At February 28, 2002, the AMT price was
approximately $.66 per pound.

Pension Plans. The assets of the Company sponsored pension plans are, to a
substantial degree, invested in the capital markets and managed by a third
party. Given the performance of the financial markets during 2001, the Company
was required to reflect an additional minimum pension liability of $64.5 million
(net of income tax benefit of $38.0 million) in its 2001 financial statements as
a result of a decline in the value of the assets held by the Company's pension
plans. The Company also anticipates that the decline in the value of the pension
plans' assets will unfavorably impact pension costs reflected in its 2002
operating results and could, over the longer term, increase pension funding
requirements. See Note 10 of Notes to Consolidated Financial Statements for
additional discussions of these matters.

Sale of 8.3% Interest in QAL. In September 2001, KACC sold an approximate 8.3%
interest in QAL and recorded a pre-tax gain of approximately $163.6 million
(included in Other income/(expense) in the Consolidated Statements of Income
(Loss)). As a result of the transaction, KACC now owns a 20% interest in QAL.
See Note 4 of Notes to Consolidated Financial Statements for additional
discussion of the September 2001 sale.

Start-up Related Costs at Gramercy Facility. Initial production at KACC's
Gramercy, Louisiana, alumina refinery, which had been curtailed since July 1999
as a result of an explosion in the digestion area of the plant, commenced during
the middle of December 2000. Construction at the facility was substantially
completed during the third quarter of 2001. During 2001, the Gramercy facility
incurred abnormal related start-up costs of approximately $64.9 million. These
abnormal costs resulted from operating the plant in an interim and less
efficient mode pending the completion of construction and reaching the plant's
intended production rate and efficiency. During the first nine months of 2001,
the plant operated at approximately 68% of its newly-rated estimated capacity of
1,250,000 tons. During the fourth quarter of 2001, the plant operated at
approximately 90% of its newly-rated capacity. By the end of February 2002, the
plant was operating at just below 100% of its newly-rated capacity. The facility
is now focusing its efforts on achieving its full operating efficiency. See Note
3 of Notes to Consolidated Financial Statements for additional discussion of the
incident at the Gramercy facility and the financial statement impact of
Gramercy-related insurance recoveries.

Labor Matters. From September 1998 through September 2000, KACC and the USWA
were involved in a labor dispute as a result of the September 1998 USWA strike
and the subsequent "lock-out" by KACC in February 1999. Although the USWA
dispute has been settled and the workers have returned to the facilities, two
allegations of ULPs in connection with the USWA strike and subsequent lock-out
by KACC remain to be resolved. The Company believes that the remaining charges
made against KACC by the USWA are without merit. See Note 12 of Notes to
Consolidated Financial Statements for additional discussion on the ULP charges.

Pacific Northwest Power Sales and Operating Level. During 2001, KACC kept its
Northwest smelters curtailed and sold the remaining power available that it had
under contract through September 2001. KACC has the right to purchase sufficient
power from the BPA to operate its Trentwood facility as well as approximately
40% of the capacity of its Northwest aluminum smelting operations. Given recent
primary aluminum prices and the forward price of power in the Northwest, it is
unlikely that KACC would operate more than a portion of its Northwest smelting
capacity in the near future. Operating only a portion of the Northwest capacity
would result in production/cost inefficiencies such that operating results
would, at best be breakeven to modestly negative at long-term primary aluminum
prices. However, operating at such a reduced rate could, depending on prevailing
economics, result in improved cash flows as opposed to remaining curtailed and
incurring the Company's fixed and continuing labor and other costs. This is
because KACC is liable for certain severance, supplemental unemployment and
early retirement benefits for the USWA workers at the curtailed smelters. A
substantial portion of such costs have been accrued through early 2003. However,
additional accruals may be required depending on when the USWA workers are
recalled and when the smelting operations are restarted. Such amounts could be
material with a present value in the $50.0 to $60.0 million range. However, most
of such costs would be related to pension and post-retirement medical benefits
and would likely be paid out over an extended period. Additionally, beginning
October 2002, KACC could be liable for certain take-or-pay obligations under the
BPA contract and such amounts could be significant. See Note 7 of Notes to
Consolidated Financial Statements for additional information on the power sales,
KACC's contract rights and obligations and additional detail regarding possible
incremental liabilities with respect to the USWA workers.

Strategic Initiatives. KACC's strategy is to improve its financial results by:
increasing the competitiveness of its existing plants; continuing its cost
reduction initiatives; adding assets to businesses it expects to grow; pursuing
divestitures of its non-core businesses; and strengthening its financial
position by divesting of part or all of its interests in certain operating
assets.

In May 2001, the Company announced that it had launched a performance
improvement initiative (the "program") designed to increase operating cash flow,
generate cash from inventory reduction and improve the Company's financial
flexibility.

The program aims to achieve the following five specific objectives:

- Significant and systemic reductions in unit production costs through the
expanded use of lean manufacturing initiatives at Company-managed
facilities. The Company expects to see the biggest incremental
improvements at the Alpart alumina refinery in Jamaica and the Valco
primary aluminum smelter in Ghana;

- Additional efficiencies at the Gramercy facility that are incremental to
those efficiencies already included in the Company's adjusted first
quarter 2001 annual operating cash flow run rate;

- Increased production at the Alpart alumina refinery through improved
efficiency and de-bottlenecking. Alpart's production is expected to reach
an annualized run rate of more than 1.7 million tons during 2003, up from
the facility's current annual rated capacity of 1.45 million tons. As a
result, KACC's share of Alpart's annual production would increase by more
than 160,000 tons. This would substantially offset the impact of the
September 2001 sale of an 8.3% interest in QAL on alumina available to
KACC for internal use or third party sales;

- A sustained reduction in annualized overhead-related expenses or related
cash outflows at the Corporate office and in the commodities businesses
through redesign of work and consolidation of functions primarily in the
Corporate office; and

- A one-time cash benefit from reduction in inventories, primarily at the
Company's majority-owned, non-U.S. commodity operations, and through
disposition of non-operating properties and equipment.

During 2001, the Company recorded charges of $35.2 million (see Note 6 of Notes
to Consolidated Financial Statements) in connection with the program. Additional
cash and non-cash charges may be required in the future as the program
continues. Such additional charges could be material.

RESULTS OF OPERATIONS

Summary. The Company reported a net loss of $459.4 million, $5.73 of basic loss
per common share, compared to net income of $16.8 million, or $.21 of basic
income per common share, for 2000 and a net loss of $54.1 million, or $.68 of
basic loss per common share, for 1999. However, results for 2001, 2000 and 1999
included material special items as summarized below:

Year Ended December 31,
-----------------------------------------
2001 2000 1999
--------- --------- ---------

As reported, income (loss) per common share $ (5.73) $ .21 $ (.68)
Less material special (gains) losses:
Non-recurring year-end income tax adjustments 6.36 - -
Gain on sale of QAL interest (1.19) - -
Non-recurring operating charges (income) (1.24) (.32) .20
Other (income) expense - special items, net .24 (.05) .29
Abnormal Gramercy start-up and other costs .54 - -
Gramercy business interruption recoveries (.28) - -
Increase in allowance for doubtful accounts receivable .02 - -
Excess overhead and other costs associated with
curtailed Northwest smelting operations .11 - -
LIFO inventory adjustment .06 - -
Gain on involuntary conversion - - (.71)
Operating profit foregone as a result of power sales - .20 -
--------- --------- ---------
$ (1.11) $ .04 $ (.90)
========= ========= =========

Net sales in 2001 totaled $1,732.7 million compared to $2,169.8 million in 2000
and $2,083.6 million in 1999.

2001 AS COMPARED TO 2000

Bauxite and Alumina. Third-party net sales of alumina in 2001 were 15% higher
than in 2000 as a 34% increase in third-party shipments was only partially
offset by an 11% decrease in third-party average realized prices. The increase
in period-over-period shipments resulted primarily from (1) higher third-party
sales due to reduced internal alumina requirements as a result of the
curtailment of the Washington smelters, (2) the restart of production at the
Gramercy refinery in December 2000 and (3) the timing of shipments. The decrease
in average realized prices was due to a decrease in primary aluminum market
prices to which our third-party alumina sales contracts are linked, typically on
a lagged basis of three months.

Intersegment net sales for 2001, decreased 47% as compared to 2000. The decrease
was due to a 44% decrease in the intersegment shipments and a 7% decrease in
intersegment average realized prices. The decrease in shipments was primarily
due to the curtailments of the Company's Washington smelters. The decrease in
the intersegment average realized prices was the result of the decrease in
primary aluminum prices from period to period as intersegment transfers are made
on the basis of primary aluminum market prices on a lagged basis of one month.

Net sales for 2001 and 2000 included approximately 115,000 tons and 322,000
tons, respectively, of alumina purchased from third parties to satisfy third
party sales and transfers to the Primary aluminum business unit.

Segment operating results (excluding non-recurring items) for 2001 were down
significantly from 2000. Increased net shipments only partially offset the
decrease in the average realized sales prices. Additionally, operating income
for 2001 was adversely affected by abnormal Gramercy related start-up costs and
litigation costs of approximately $71.4 million, less than satisfactory bauxite
mining cost performance at KJBC and a LIFO inventory charge of $3.7 million.
These charges were offset in part by $36.6 million of additional insurance
benefits related to the Gramercy incident.

Segment operating income for 2001 discussed above, excludes non-recurring costs
of $15.8 million incurred in connection with the performance improvements
initiative program. Segment operating income for 2000 excludes labor settlement
charges of $2.1 million and three Gramercy-related items: a $7.0 million
non-cash LIFO inventory charge, incremental maintenance spending of $11.5
million and an $.8 million non-cash restructuring charge.

Primary Aluminum. Third party sales of primary aluminum for 2001 decreased
approximately 36% from 2000, reflecting a 29% decrease in third-party shipments
and a 9% decrease in third-party average realized prices. The decrease in
shipments was primarily due to the complete curtailment of the Washington
smelters during 2001, as compared to 2000 when these smelters operated during a
significant portion of the year. The decrease in the average realized prices was
primarily due to the decrease in primary aluminum market prices. Intersegment
net sales of primary aluminum for 2001 decreased significantly compared to 2000
primarily as a result of a substantial decrease in intersegment shipments. This
change resulted primarily from a change in the Company's methodology for
handling aluminum supply logistics for the Flat-rolled products business unit as
a result of the continuing curtailment of the Northwest smelters. Beginning in
the first quarter of 2001, the Flat-rolled products business unit began
purchasing its own primary aluminum rather than relying on the Primary aluminum
business unit to supply its aluminum requirements through production or third
party purchases. The Engineered products business unit was already responsible
for purchasing the majority of its primary aluminum requirements. The
intersegment average realized price for 2001 was approximately the same as 2000
because substantially all of the intersegment shipments occurred in the first
quarter of 2001 when the intersegment average realized price approximated the
2000 intersegment average realized price.

Segment operating income (excluding non-recurring items) for 2001 decreased
significantly versus 2000. The primary reasons for the decrease were the
decreases in the average realized prices and shipments discussed above as well
as overhead and other fixed costs associated with the curtailed Northwest
smelting operations, which totaled approximately $30.0 million during 2001. The
Company believes that approximately half of such costs incurred are "excess" to
the run rate that can be achieved during a prolonged curtailment period. During
the third quarter of 2001, management took actions to minimize the excess
outflows associated with the curtailed operations. These actions should result
in the elimination of most of the excess cost by early 2002. Period-over-period
results were also unfavorably impacted by higher energy costs at the Anglesey
aluminum smelter, resulting from a new power contract entered into by Anglesey
at the end of the first quarter of 2000.

Segment operating income for 2001, discussed above, excludes non-recurring net
power sale gains of $229.2 million. These gains were offset by costs of $7.5
million incurred in connection with the Company's performance improvement
initiative program and contractual labor costs related to the Northwest smelter
curtailment of $12.7 million. Segment operating income for 2000 excludes net
power sale gains of $159.5 million. These gains were offset by a non-cash
smelter impairment charge of $33.0 million, labor settlement charges of $15.9
million and costs related to staff reduction initiatives of $3.1 million.

Flat-Rolled Products. Net sales of flat-rolled products for 2001 decreased by
approximately 41% as compared to 2000 as a 54% decrease in shipments was
partially offset by a 29% increase in average realized prices. The decrease in
shipments was primarily due to reduced shipments of can body stock, as a part of
the planned exit from this product line. Current period shipments were also
adversely affected by the reduced demand for general engineering heat-treat
products and can lid and tab stock, due to a weak market. These decreases were
only modestly offset by a strong aerospace demand during the first nine months
of 2001. However, after the events of September 11, 2001, aerospace demand and
the price for aerospace products declined substantially. The increase in average
realized prices primarily reflects the change in product mix from the can body
stock to heat-treat products, particularly aerospace heat-treat (which have a
higher price and operating margin as compared to other products).

Segment operating income (excluding non-recurring items) for 2001 was down
significantly from 2000. The primary reasons for the decrease were the
substantial decrease in shipments and weakened pricing for heat treat products
as a result of the weaker U.S. economy which were worsened after September 11,
2001 to the point that fourth quarter operating results were a loss. Operating
results were also adversely impacted by increased operating costs, mainly due to
a lag in the ability to scale back costs to reflect the revised product mix and
the substantial volume decline caused by weakened demand. Operating results for
2001 also included a LIFO inventory charge of $3.0 million and higher metal
sourcing costs due to plant curtailments.

Segment operating income for 2001, discussed above, excludes a non-cash
impairment charge of $17.7 million associated with certain equipment that the
Company plans to sell or idle as the result of a planned 2002 exit from the
brazing heat-treat and lid and tab stock for the beverage container market and
non-recurring costs of $10.7 million incurred in connection with the performance
improvement program. Segment operating income for 2000 excludes labor settlement
charges of $18.2 million, an $11.1 million non-cash LIFO inventory charge and
non-cash impairment charges associated with a product line exit of $1.5 million.

Engineered Products. Net sales of engineered products for 2001 decreased by
approximately 24% as a 28% decrease in product shipments was offset by a 6%
increase in average realized prices. The decrease in product shipments was the
result of reduced transportation and electrical product shipments due to weak
U.S. market demand. The increase in average realized prices reflects a shift in
product mix to higher value-added products.

Segment operating income (excluding non-recurring items) for 2001 decreased as
compared to 2000 primarily due to the volume and price factors described above.
The segment's operating results were also adversely impacted by a LIFO inventory
charge of $1.5 million and because cost reduction lagged the substantial volume
decline.

Segment operating income for 2000, discussed above, excludes a non-recurring
non-cash impairment charge associated with product line exit of $5.6 million and
a labor settlement charge of $2.3 million.

Commodities Marketing. Net sales for this segment represent net settlements with
third-party brokers for maturing derivative positions. Operating income
represents the combined effect of such net settlements, any net premium costs
associated with maturing options, as well as net results of internal hedging
activities with our fabricated products segments. The minimum (and maximum)
price of the hedges in any given period is primarily the result of the timing of
the execution of the hedging contracts.

Segment operating income for 2001 increased compared to the comparable period in
2000. This is primarily the result of 2001 hedging positions having higher
minimum prices than the positions in 2000, combined with the fact that 2000
market prices were higher than those experienced in 2001.

Eliminations. Eliminations of intersegment profit vary from period to period
depending on fluctuations in market prices as well as the amount and timing of
the affected segments' production and sales.

Corporate and Other. Corporate operating expenses (excluding non-recurring
items) represent corporate general and administrative expenses which are not
allocated to the Company's business segments. The increase in corporate
operating expenses in 2001, as compared to 2000 was primarily due to higher
medical and pension costs accruals for active and retired employees.

Corporate operating results for 2001, discussed above, exclude costs of $1.2
million incurred in connection with the Company's performance improvement
program. Corporate operating results for 2000 excludes costs related to staff
reduction and efficiency initiatives of $5.5 million.

2000 AS COMPARED TO 1999

Bauxite and Alumina. Third party net sales of alumina were up 12% in 2000 as
compared to 1999 as a 19% increase in third party average realized price was
partially offset by an 8% decrease in third party shipments. The increase in
average realized price was because the sales prices for alumina under the
Company's third-party alumina sales contracts are linked to primary aluminum
prices and primary aluminum prices increased year over year. The decrease in
year-over-year shipments resulted primarily from differences in the timing of
shipments and, to a lesser extent, the net effect of the Gramercy incident,
after considering the 267,000 tons of alumina purchased by KACC in 2000 from
third parties to fulfill third party sales contracts.

Intersegment net sales for 2000 increased 15% as compared to 1999. The increase
was primarily due to a 16% increase in the intersegment average realized price
resulting from increases in primary aluminum prices from period to period as
intersegment transfers are made on the basis of primary aluminum market prices
on a lagged basis of one month. Intersegment shipments were essentially flat.
The favorable impact on intersegment alumina shipments of operating more
potlines at the Company's smelters during the first half of 2000 as compared to
the same period in 1999 was offset by the unfavorable impact of the potline
curtailments at the Company's Washington smelters in the last half of 2000.
Intersegment shipments for 2000 included approximately 55,000 tons of alumina
purchased by KACC from third-parties and transferred to the Primary aluminum
business unit.

Segment operating income (before non-recurring items) for 2000 was up
significantly as compared to 1999 primarily as a result of the factors discussed
above. Segment operating income for 2000 excludes non-recurring labor settlement
charges of $2.1 million and three Gramercy-related items; a $7.0 million
non-cash LIFO inventory charge, incremental maintenance spending of $11.5
million and an $.8 million non-cash restructuring charge. Segment operating
income for 1999 excludes the segment's allocated share of the expense of
insurance deductibles related to the Gramercy incident of $4.0 million.

See Note 3 of Notes to Consolidated Financial Statements for additional
discussion of the effect of the Gramercy incident on the Bauxite and Alumina
business unit's operations.

Primary Aluminum. Third party net sales of primary aluminum were up 30% for 2000
as compared to 1999 as a result of a 17% increase in third party shipments and a
12% increase in third party averaged realized prices. The increase in shipments
was primarily due to the favorable impact of the increased operating rate at the
Valco smelter throughout 2000 and the Washington smelters (during the first six
months of 2000). These shipment increases were offset, in part, by curtailments
of the potlines at the Washington smelters during the second half of 2000, net
of approximately 206,500 tons of primary aluminum purchased from third-parties
to meet third-party and internal commitments. The increase in the average
realized prices reflects the 14% increase in primary aluminum market prices.
Intersegment net sales for 2000 were up modestly when compared to 1999. A 16%
increase in intersegment average realized prices was offset by a 13% decrease in
intersegment shipments. The increase in the intersegment average realized price
was due to higher market prices for primary aluminum as intersegment transfers
are made on the basis of market prices. The decrease in shipments was primarily
due to the potline curtailments at the Washington smelters, the reduced
requirements of the Flat-rolled products segment due to the can body stock exit
and the reduced requirements of the Engineered products segment due to the
softening of the ground transportation and distribution markets.

Segment operating income (before non-recurring items) for 2000 was up
significantly from 1999. The primary reason for the increase was the
improvements in average realized prices and net shipments discussed above.
However, segment operating income for 2000 was adversely affected by increased
alumina prices, higher electric power costs and reduced profitability resulting
from metal purchased and resold to the Flat-rolled products and Engineered
products business units. The increase in alumina costs is the result of higher
primary aluminum prices in 2000 because transfers of alumina from KACC's alumina
business unit are made on a metal-linked basis. Power costs have generally
increased, even after excluding the higher than normal power costs experienced
by the Company in the Pacific Northwest. As previously reported, new agreements
entered into in both Ghana and Wales provide for increased power stability but
at increased costs. The reduced profitability on sales to the Flat-rolled
products and Engineered products segments is due to the lack of a profit margin
on metal that was purchased and resold at cost to the segments versus the profit
margin that would have existed had the metal been produced.

Segment operating income for 2000, discussed above, excludes non-recurring net
power sales gains of $159.5 million. Segment operating income for 2000 also
excludes a non-cash smelter impairment charge of $33.0 million, the segment's
share of the non-recurring labor settlement charge of $15.9 million and costs
related to staff reduction initiatives of $3.1 million. Operating income in 1999
included costs of approximately $12.8 million associated with preparing and
restarting potlines at Valco and the Washington smelters.

Flat-Rolled Products. Net sales of flat-rolled products decreased by 12% in 2000
as compared to 1999 as a 26% decrease in shipments was only partially offset by
a 14% increase in average realized prices. The decrease in shipments was
primarily due to reduced shipments of can body stock as a part of the Company's
planned exit from this product line. Offsetting the reduced can body stock
shipments was a modest year over year improvement in shipments of heat-treat
products. The increase in average realized prices primarily reflects the change
in product mix (resulting from the can body stock exit) as well as the pass
through to customers of increased market prices for primary aluminum.

Segment operating income (before non-recurring items) for 2000 was essentially
flat when compared to 1999 as the increase in price and volume for heat-treat
products offset the impacts of the can body stock exit. Segment operating income
for 2000, discussed above, excludes the segment's share of the non-recurring
labor settlement charge of $18.2 million. Segment operating income also excludes
an $11.1 million non-cash LIFO inventory charge and $1.5 million of non-cash
impairment charges associated with KACC's exit from the can body stock product
line.

Results for 2000 for the Flat-rolled products segment were also adversely
affected late in the year by the Washington smelter curtailments as the business
unit no longer had a supply of hot metal. While the impact of this change was
modest in 2000, the business unit will be adversely affected by this situation
in 2001. The amount of the impact will depend on the cost of acquiring the
necessary metal units and the energy costs incurred to melt the purchased metal.

Engineered Products. Net sales of engineered products for 2000 were essentially
flat as compared to 1999 as a 5% increase in average realized prices was offset
by a 4% decrease in product shipments. The increase in average realized prices
reflects increased prices for soft alloy extrusions, offset, in part, by a shift
in product mix. The decrease in product shipments in 2000 over 1999 reflects a
substantial weakening in ground transportation and distribution markets in the
last half of 2000.

The changes in segment operating income (before non-recurring items) for 2000 as
compared to 1999 were primarily attributable to increased energy costs. Segment
operating income for 2000 excludes a non-recurring non-cash impairment charge
associated with product line exit of $5.6 million and labor settlement charges
of $2.3 million. Segment operating income for 1999 included equity in earnings
of $2.5 million from the Company's 50% interest in AKW L.P., which was sold in
April 1999.

Commodities Marketing. Commodities marketing includes the results of KACC's
aluminum hedging activities. Its hedging activities include: (1) metal hedging
on behalf of the Bauxite and alumina and Primary aluminum business segments with
third-party brokers (other than mark-to-market charges on certain
non-qualifying hedges which are reflected in Other income (expense) - see Notes
2 and 13 of Notes to Consolidated Financial Statements) and (2) internal hedging
with Flat-rolled products and Engineered products business segments so as to
eliminate the commodity price risk on the underlying aluminum whenever these
segments enter into a fixed price contract with a third-party customer.

Net sales for this segment represent net settlements with third-party brokers
for derivative positions. Operating income represents the combined effect of
such net settlements, any net premium costs associated with the purchase or sale
of options, as well as net results of internal hedging activities with KACC's
fabricated products segments. The decrease in net sales as well as a decrease in
operating income in 2000 as compared to 1999 results from the 2000 hedging
positions having lower ceilings than the positions in 1999. This is primarily
the result of the timing of when the hedging position activities were completed.

Corporate and Other. Corporate operating expenses (excluding non-recurring
items) represent corporate general and administrative expenses which are not
allocated to the Company's business segments. Corporate operating results for
2000 exclude costs related to staff reduction and efficiency initiatives of $5.5
million. Corporate operating results for 1999 exclude the expense of insurance
deductibles related to the Gramercy incident allocated to the Corporate segment
of $1.0 million.

LIQUIDITY AND CAPITAL RESOURCES

As a result of the filing of the Cases, claims against the Debtors for principal
and accrued interest on secured and unsecured indebtedness existing on the
Filing Date are stayed while the Debtors continue business operations as
debtors-in-possession, subject to the control and supervision of the Court. See
Note 1 of Notes to Consolidated Financial Statements for additional discussion
of the Cases. At this time, it is not possible to predict the effect of the
Cases on the businesses of the Debtors.

Operating Activities. In 2001, operating activities provided $249.8 million of
cash. This amount compares with 2000 when operating activities provided cash of
$83.1 million and 1999 when operating activities used cash of $89.3 million. The
increase in cash flows from operating activities between 2001 and 2000 resulted
primarily from the impact of improved 2001 operating results, excluding non-cash
items, driven primarily by power sales and a decline in Gramercy-related
receivables. The increase in cash flows from operating activities between 2000
and 1999 resulted primarily from the impact of the improved 2000 operating
results, driven primarily by the 2000 power sales and a decline in inventories,
offset in part by an increase in receivables. The decrease in inventories was
primarily due to improved inventory management and the exit from the can body
product line at the Flat-rolled products business unit. The increase in
receivables was primarily due to power sale proceeds that were received in the
first quarter of 2001 and Gramercy-related items.

Investing Activities. Total consolidated capital expenditures were $148.7,
$296.5 and $68.4 million in 2001, 2000 and 1999, respectively (of which $10.4,
$5.4 and $4.8 million were funded by the minority partners in certain foreign
joint ventures). Capital expenditures in 2001 and 2000 included $78.6 and $239.1
million spent with respect to rebuilding the Gramercy facility. Capital
expenditures in 2000 also included $13.3 million spent with respect to the
purchase of the non-working capital assets of the Chandler, Arizona drawn tube
aluminum fabricating operation. The remaining capital expenditures in 2001 and
2000 and the capital expenditures in 1999 were made primarily to improve
production efficiency, reduce operating costs and expand capacity at existing
facilities. Total consolidated capital expenditures are currently expected to be
between $40.0 and $75.0 million per year in each of 2002 and 2003 (of which
approximately 15% is expected to be funded by the Company's minority partners in
certain foreign joint ventures). Management continues to evaluate numerous
projects, all of which would require substantial capital, both in the United
States and overseas. The level of capital expenditures may be adjusted from time
to time depending on the Company's price outlook for primary aluminum and other
products, KACC's ability to assure future cash flows through hedging or other
means, the Company's financial position and other factors.

Financing Activities and Liquidity. On February 12, 2002, the Company and KACC
entered into the DIP Facility which provides for a secured, revolving line of
credit through the earlier of February 12, 2004, the effective date of a plan of
reorganization or voluntary termination by the Company. KACC is able to borrow
under the DIP Facility by means of revolving credit advances and letters of
credit (up to $125.0) in an aggregate amount equal to the lesser of $300.0 or a
borrowing base relating to eligible accounts receivable, eligible inventory and
eligible fixed assets reduced by certain reserves, as defined in the DIP
Facility agreement. The DIP Facility is guaranteed by the Company and certain
significant subsidiaries of KACC. Interest on any outstanding balances will bear
a spread over either a base rate or LIBOR, at KACC's option. The Court signed a
final order approving the DIP Facility on March 19, 2002.

The Company and KACC believe that the cash and cash equivalents of $153.3
million at December 31, 2001, cash flows from operations and cash available from
the DIP Facility will provide sufficient working capital to allow the Company to
meet its obligations during the pendency of the Cases. At March 31, 2002, there
were no outstanding borrowings under the revolving credit facility and there
were outstanding letters of credit of approximately $54.1 million. As of March
31, 2002, $121.0 million (of which $70.9 million could be used for additional
letters of credit) was available to the Company under the DIP Facility. The
Company expects that the borrowing base amount will increase by approximately
$50.0 million once certain appraisal information is provided to the lenders.

Capital Structure. MAXXAM and one of its wholly owned subsidiaries collectively
own approximately 62% of the Company's Common Stock, with the remaining
approximately 38% of the Company's Common Stock being publicly held. Certain of
the shares of the Company's Common Stock beneficially owned by MAXXAM are
subject to certain pledge agreements. See Note 10 of Notes to Consolidated
Financial Statements for a further description of the pledge agreements. At this
time, it is not possible to predict the outcome of the Cases, in general, or the
effect of the Cases on the interests of the stockholders. However, it is
possible that all or a portion of MAXXAM's interests may be diluted or cancelled
as a part of a plan of reorganization.

Commitments and Contingencies. During the pendency of the Cases, substantially
all pending litigation, except that relating to certain environmental matters,
against the Debtors is stayed. Generally, claims arising from actions or
omissions prior to the Filing Date will be settled in connection with the plan
of reorganization.

The Company and KACC are subject to a number of environmental laws, to fines or
penalties assessed for alleged breaches of the environmental laws, and to claims
and litigation based upon such laws. Based on the Company's evaluation of these
and other environmental matters, the Company has established environmental
accruals of $61.2 million at December 31, 2001. However, the Company believes
that it is reasonably possible that changes in various factors could cause costs
associated with these environmental matters to exceed current accruals by
amounts that could range, in the aggregate, up to an estimated $27.0 million.

KACC is also a defendant in a number of asbestos-related lawsuits that generally
relate to products KACC has not sold for more than 20 years. Based on past
experience and reasonably anticipated future activity, the Company has
established a $621.3 million accrual at December 31, 2001, for estimated
asbestos-related costs for claims filed and estimated to be filed through 2011,
before consideration of insurance recoveries. However, the Company believes that
substantial recoveries from insurance carriers are probable. The Company reached
this conclusion based on prior insurance-related recoveries in respect of
asbestos-related claims, existing insurance policies and the advice of outside
counsel with respect to applicable insurance coverage law relating to the terms
and conditions of these policies. Accordingly, the Company has recorded an
estimated aggregate insurance recovery of $501.2 million (determined on the same
basis as the asbestos-related cost accrual) at December 31, 2001. Although the
Company has settled asbestos-related coverage matters with certain of its
insurance carriers, other carriers have not yet agreed to settlements and
disputes with certain carriers exist. The timing and amount of future recoveries
from these insurance carriers will depend on the pendency of the Cases and on
the resolution of disputes regarding coverage under the applicable insurance
policies.

In connection with the USWA strike and subsequent lock-out by KACC which was
settled in September 2000, certain allegations of ULPs have been filed with the
NLRB by the USWA. KACC believes that all such allegations are without merit.
Twenty-two of twenty-four allegations of ULPs previously brought against it by
the USWA have been dismissed. A trial before an administrative law judge for the
two remaining allegations concluded in September 2001. A decision is not
expected until sometime after the second quarter of 2002. Any outcome from the
trial before an administrative judge would be subject to additional appeals by
the general counsel of the NLRB, the USWA or KACC. This process could take
months or years. This matter is currently not stayed by the Cases. If these
proceedings eventually resulted in a final ruling against KACC with respect to
either allegation, it could be obligated to provide back pay to USWA members at
the five plants and such amount could be significant. Any liability ultimately
determined to exist in this matter will be dealt with in the overall context of
the Debtors' plan of reorganization.

While uncertainties are inherent in the final outcome of these matters and it is
presently impossible to determine the actual costs that ultimately may be
incurred and insurance recoveries that ultimately may be received, management
currently believes that the resolution of these uncertainties and the incurrence
of related costs, net of any related insurance recoveries, should not have a
material adverse effect on the Company's consolidated financial position or
liquidity. However, amounts paid, if any, in satisfaction of these matters could
be significant to the results of the period in which they are recorded. See Note
12 of Notes to Consolidated Financial Statements for a more detailed discussion
of these contingencies and the factors affecting management's beliefs.

OTHER MATTERS

Income Tax Matters. In light of the Cases, the Company has provided valuation
allowances for all of its net deferred income tax assets as the Company no
longer believes that the "more likely than not" recognition criteria were
appropriate. See Note 9 of Notes to Consolidated Financial Statements for a
discussion of these and other income tax matters.

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are those that are both very important to the
portrayal of the Company's financial condition and results, and require
management's most difficult, subjective, and/or complex judgments. Typically,
the circumstances that make these judgments difficult, subjective and/or complex
have to do with the need to make estimates about the effect of matters that are
inherently uncertain. While the Company believes that all aspect of its
financial statements should be studied and understood in assessing its current
(and expected future) financial condition and results, the Company believes that
the accounting policies that warrant additional attention include-

1. The fact that the consolidated financial statements as of (and for the
year ending) December 31, 2001 have been prepared on a "going concern"
basis and do not include possible impacts arising in respect of the Cases.
See Note 2 of Notes to Consolidated Financial Statements.

2. The Company's judgments and estimates with respect to commitments and
contingencies; in particular: (a) future environmental costs, (b) future
asbestos related costs and obligations as well as estimated insurance
recoveries; and (c) possible liability in respect of claims of ULPs which
were not resolved as a part of the Company's September 2000 labor
settlement. See Note 12 of Notes to Consolidated Financial Statements.

3. The Company's judgments and estimates in respect of ongoing and future
costs and obligations associated with its smelter curtailments in the
State of Washington and any related impacts on the Company's ability to
realize recorded asset values in the ordinary course. See Note 7 of Notes
to Consolidated Financial Statements.

4. The Company's judgments and estimates in respect of its employee benefit
plans. See Note 10 of Notes to Consolidated Financial Statements.

5. The accounting methodologies employed by the Company in respect of
non-recurring items and the impacts of the Gramercy incident. See Notes 3
and 6 of Notes to Consolidated Financial Statements, respectively.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's operating results are sensitive to changes in the prices of
alumina, primary aluminum, and fabricated aluminum products, and also depend to
a significant degree upon the volume and mix of all products sold. As discussed
more fully in Notes 2 and 13 of Notes to Consolidated Financial Statements, KACC
utilizes hedging transactions to lock-in a specified price or range of prices
for certain products which it sells or consumes in its production process and to
mitigate KACC's exposure to changes in foreign currency exchange rates.

SENSITIVITY

Alumina and Primary Aluminum. Alumina and primary aluminum production in excess
of internal requirements is sold in domestic and international markets, exposing
the Company to commodity price opportunities and risks. KACC's hedging
transactions are intended to provide price risk management in respect of the net
exposure of earnings resulting from (i) anticipated sales of alumina, primary
aluminum and fabricated aluminum products, less (ii) expected purchases of
certain items, such as aluminum scrap, rolling ingot, and bauxite, whose prices
fluctuate with the price of primary aluminum. On average, before consideration
of hedging activities, any fixed price contracts with fabricated aluminum
products customers, variations in production and shipment levels, and timing
issues related to price changes, the Company estimates that each $.01 increase
(decrease) in the market price per price-equivalent pound of primary aluminum
increases (decreases) the Company's annual pre-tax earnings by approximately
$10.0 million, based on recent fluctuations in operating levels.

Foreign Currency. KACC enters into forward exchange contracts to hedge material
cash commitments for foreign currencies. KACC's primary foreign exchange
exposure is related to KACC's Australian Dollar (A$) commitments in respect of
activities associated with its 20.0%-owned affiliate, QAL. The Company estimates
that, before consideration of any hedging activities, a US $0.01 increase
(decrease) in the value of the A$ results in an approximate $1.0 - $2.0 million
(decrease) increase in the Company's annual pre-tax operating income.

Energy. KACC is exposed to energy price risk from fluctuating prices for natural
gas, fuel oil and diesel oil consumed in the production process. The Company
estimates that each $1.00 change in natural gas prices (per mcf) impacts the
Company's pre-tax operating results by approximately $20.0 million. Further, the
Company estimates that each $1.00 change in fuel oil prices (per barrel) impacts
the Company's pre-tax operating results by approximately $3.0 million.

HEDGING POSITIONS

Because the agreements underlying KACC's hedging positions provided that the
counterparties to the hedging contracts could liquidate KACC's hedging positions
if KACC filed for reorganization, KACC chose to liquidate these positions in
advance of the February 12, 2002 Filing Date. Proceeds from the liquidation
totaled approximately $42.2 million. Gains or losses associated with these
liquidated positions have been deferred and are being recognized over the
original hedging periods as the underlying purchases/sales are still expected to
occur. The amount of gains/losses deferred are as follows: gains of $30.2
million for aluminum contracts, losses of $5.0 million for Australian dollars
and $1.9 million for energy contracts.

The Company anticipates that, subject to the approval of the Court and
prevailing economic conditions, it may reinstitute an active hedging program to
protect the interests of its constituents. However, no assurance can be given as
to when or if the appropriate Court approval will be obtained or when or if such
hedging activities will restart.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Public Accountants

Consolidated Balance Sheets

Statements of Consolidated Income (Loss)

Statements of Consolidated Stockholders' Equity and Comprehensive Income (Loss)

Statements of Consolidated Cash Flows

Notes to Consolidated Financial Statements

Quarterly Financial Data (Unaudited)

Five-Year Financial Data

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------

To the Stockholders and the Board of Directors of Kaiser Aluminum Corporation:

We have audited the accompanying consolidated balance sheets of Kaiser Aluminum
Corporation (a Delaware corporation) and subsidiaries as of December 31, 2001
and 2000, and the related statements of consolidated income (loss),
stockholders' equity and comprehensive income (loss) and cash flows for each of
the three years in the period ended December 31, 2001. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kaiser Aluminum Corporation and
subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.

The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles applicable to a going
concern which contemplate among other things, realization of assets and payment
of liabilities in the normal course of business. As discussed in Note 1 to the
consolidated financial statements, on February 12, 2002, the Company, its wholly
owned subsidiary, Kaiser Aluminum & Chemical Corporation ("KACC") and certain of
KACC's subsidiaries filed for reorganization under Chapter 11 of the United
States Bankruptcy Code. This action raises substantial doubt about the Company's
ability to continue as a going concern. The consolidated financial statements do
not include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amount and classification of liabilities or the
effects on existing stockholders' equity that may result from any plans,
arrangements or other actions arising from the aforementioned proceedings, or
the possible inability of the Company to continue in existence.

ARTHUR ANDERSEN LLP

Houston, Texas
April 10, 2002

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------

December 31,
--------------------------
(In millions of dollars, except share amounts) 2001 2000
- ------------------------------------------------------------------------------------ ------------ -----------

ASSETS
Current assets:
Cash and cash equivalents $ 153.3 $ 23.4
Receivables:
Trade, less allowance for doubtful receivables of $7.0 and $5.8 124.1 188.7
Other 82.3 241.1
Inventories 313.3 396.2
Prepaid expenses and other current assets 86.2 162.7
------------ -----------

Total current assets 759.2 1,012.1

Investments in and advances to unconsolidated affiliates 63.0 77.8
Property, plant, and equipment - net 1,215.4 1,176.1
Deferred income taxes - 454.2
Other assets 706.1 622.9
------------ -----------

Total $ 2,743.7 $ 3,343.1
============ ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 167.4 $ 236.8
Accrued interest 35.4 37.5
Accrued salaries, wages, and related expenses 88.9 110.3
Accrued postretirement medical benefit obligation - current portion 62.0 58.0
Other accrued liabilities 223.3 288.9
Payable to affiliates 52.9 78.3
Long-term debt - current portion 173.5 31.6
------------ -----------

Total current liabilities 803.4 841.4

Long-term liabilities 919.9 703.7
Accrued postretirement medical benefit obligation 642.2 656.9
Long-term debt 700.8 957.8
Minority interests 118.5 101.1
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01, authorized 125,000,000 shares; issued
and outstanding 80,698,066 and 79,599,557 shares .8 .8
Additional capital 539.1 537.5
Accumulated deficit (913.7) (454.3)
Accumulated other comprehensive income (loss) (67.3) (1.8)
------------ -----------

Total stockholders' equity (441.1) 82.2
------------ -----------

Total $ 2,743.7 $ 3,343.1
============ ===========

The accompanying notes to consolidated financial statements are an
integral part of these statements.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME (LOSS)
- --------------------------------------------------------------------------------

Year Ended December 31,
---------------------------------------
(In millions of dollars, except share amounts) 2001 2000 1999
- --------------------------------------------------------------------------------- ----------- ----------- -----------

Net sales $ 1,732.7 $ 2,169.8 $ 2,083.6
----------- ----------- -----------

Costs and expenses:
Cost of products sold 1,638.4 1,891.4 1,893.5
Depreciation and amortization 90.2 76.9 89.5
Selling, administrative, research and development, and general 102.8 104.1 105.4
Non-recurring operating items (163.6) (41.9) 24.1
----------- ----------- -----------

Total costs and expenses 1,667.8 2,030.5 2,112.5
----------- ----------- -----------

Operating income (loss) 64.9 139.3 (28.9)

Other income (expense):
Interest expense (109.0) (109.6) (110.1)
Gain on sale of interest in QAL 163.6 - -
Gain on involuntary conversion at Gramercy facility - - 85.0
Other - net (32.8) (4.3) (35.9)
----------- ----------- -----------

Income (loss) before income taxes and minority interests 86.7 25.4 (89.9)

(Provision) benefit for income taxes (550.2) (11.6) 32.7

Minority interests 4.1 3.0 3.1
----------- ----------- -----------

Net income (loss) $ (459.4) $ 16.8 $ (54.1)
=========== =========== ===========

Earnings (loss) per share:
Basic/Diluted $ (5.73) $ .21 $ (.68)
=========== =========== ===========

Weighted average shares outstanding (000):
Basic 80,235 79,520 79,336
=========== =========== ===========

Diluted 80,235 79,523 79,336
=========== =========== ===========

The accompanying notes to consolidated financial statements are an
integral part of these statements.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
- --------------------------------------------------------------------------------

(In millions of dollars)
- --------------------------------------------------------------------------------

Accumulated
Other
Common Additional Accumulated Comprehensive
Stock Capital Deficit Income (Loss) Total
---------------- ---------------- -------------- ---------------- -----------

BALANCE, December 31, 1998 $ .8 $ 535.4 $ (417.0) $ - $ 119.2

Net income (loss) - - (54.1) - (54.1)
Minimum pension liability adjustment,
net of income tax benefit of $.7 - - - (1.2) (1.2)
-----------
Comprehensive income (loss) - - - - (55.3)
Stock options exercised - .1 - - .1
Incentive plan accretion - 1.3 - - 1.3
---------------- ---------------- -------------- ---------------- -----------

BALANCE, December 31, 1999 .8 536.8 (471.1) (1.2) 65.3

Net income - - 16.8 - 16.8
Minimum pension liability adjustment,
net of income tax benefit of $.4 - - - (.6) (.6)
-----------
Comprehensive income - - - - 16.2
Incentive plan accretion - .7 - - .7
---------------- ---------------- -------------- ---------------- -----------

BALANCE, December 31, 2000 .8 537.5 (454.3) (1.8) 82.2

Net income (loss) - - (459.4) - (459.4)
Minimum pension liability
adjustment, net of income tax
benefit of $38.0 - - - (64.5) (64.5)
Cumulative effect of accounting
change, net of income tax
provision of $.5 - - - 1.8 1.8
Unrealized net gain on derivative
instruments arising during the
period, net of income tax
provision of $19.4 - - - 33.1 33.1
Less reclassification adjustment for
realized net gain on derivative
instruments included in net
income, net of income tax
benefit of $5.8 - - - (10.9) (10.9)
Adjustment of valuation allowances for
net deferred income tax assets provided
in respect of items reflected in Other
comprehensive income - - - (25.0) (25.0)
-----------
Comprehensive income (524.9)
Incentive plan and restricted stock
accretion - 1.6 - - 1.6
---------------- ---------------- -------------- ---------------- -----------

BALANCE, December 31, 2001 $ .8 $ 539.1 $ (913.7) $ (67.3) $ (441.1)
================ ================ ============== ================ ===========

The accompanying notes to consolidated financial statements are an
integral part of these statements.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
- --------------------------------------------------------------------------------

Year Ended December 31,
-----------------------------------------------
(In millions of dollars) 2001 2000 1999
- --------------------------------------------------------------------------------- -------------- -------------- ------------
Cash flows from operating activities:
Net income (loss) $ (459.4) $ 16.8 $ (54.1)
Adjustments to reconcile net income to net cash (used) provided by
operating activities:
Depreciation and amortization (including deferred financing costs of $5.1,
$4.4 and $4.3) 95.3 81.3 93.8
Non-cash restructuring and impairment charges (Notes 2 and 6) 41.7 63.3 19.1
Gain on involuntary conversion at Gramercy facility - - (85.0)
Gains - sale of QAL interest and real estate in 2001, real estate in 2000,
and interests in AKW L.P. in 1999 (173.6) (39.0) (50.5)
Equity in loss (income) of unconsolidated affiliates, net of distributions 1.1 13.1 (4.9)
Minority interests (4.1) (3.0) (3.1)
Decrease (increase) in trade and other receivables 226.0 (168.8) 21.7
Decrease (increase) in inventories 66.7 125.8 (2.6)
Decrease (increase) in prepaid expenses and other current assets 23.2 20.8 (66.9)
(Decrease) increase in accounts payable (associated with operating activities)
and accrued interest (39.1) (29.7) 58.8
(Decrease) increase in payable to affiliates and other accrued liabilities (48.5) 68.9 19.6
Increase (decrease) in accrued and deferred income taxes 521.8 (10.2) (55.2)
Net cash impact of changes in long-term assets and liabilities (12.5) (69.4) 15.7
Other 11.2 13.2 4.3
-------------- -------------- ------------

Net cash provided (used) by operating activities 249.8 83.1 (89.3)
-------------- -------------- ------------

Cash flows from investing activities:
Capital expenditures (including $78.6, $239.1 and $4.8 related to the Gramercy
facility) (148.7) (296.5) (68.4)
(Decrease) increase in accounts payable - Gramercy-related capital expenditures (34.6) 34.6 -
Gramercy-related property damage insurance recoveries - 100.0 -
Net proceeds from dispositions; primarily QAL interest in 2001, real estate in
2000 and AKW L.P. interests in 1999 171.6 66.9 74.8
Other 2.4 .2 (3.3)
-------------- -------------- ------------

Net cash (used) provided by investing activities (9.3) (94.8) 3.1
-------------- -------------- ------------

Cash flows from financing activities:
(Repayments) borrowings under credit agreement, net (30.4) 20.0 10.4
Repayments of other debt (74.7) (2.9) (.6)
Redemption of minority interests' preference stocks (5.5) (2.8) (1.6)
Incurrence of financing costs - (.4) -
Capital stock issued - - .1
Decrease in restricted cash, net - - .8
-------------- -------------- ------------

Net cash (used) provided by financing activities (110.6) 13.9 9.1
-------------- -------------- ------------

Net increase (decrease) in Cash and cash equivalents during the year 129.9 2.2 (77.1)
Cash and cash equivalents at beginning of year 23.4 21.2 98.3
-------------- -------------- ------------

Cash and cash equivalents at end of year $ 153.3 $ 23.4 $ 21.2
============== ============== ============

Supplemental disclosure of cash flow information:
Interest paid, net of capitalized interest of $3.5, $6.5 and $3.4 $ 106.0 $ 105.3 $ 105.4
Income taxes paid 52.1 19.6 24.1
The accompanying notes to consolidated financial statements are an
integral part of these statements.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------

(In millions of dollars, except share amounts)
- --------------------------------------------------------------------------------

1. REORGANIZATION PROCEEDINGS

On February 12, 2002, Kaiser Aluminum Corporation ("Kaiser" or the "Company"),
its wholly owned subsidiary, Kaiser Aluminum & Chemical Corporation ("KACC")
and 13 of KACC's wholly owned subsidiaries filed separate voluntary petitions in
the United States Bankruptcy Court for the District of Delaware (the "Court")
for reorganization under Chapter 11 of the United States Bankruptcy Code (the
"Code"). On March 15, 2002, two additional wholly owned subsidiaries of KACC
filed petitions. The Company, KACC and the 15 subsidiaries of KACC that have
filed petitions are collectively referred to herein as the "Debtors" and the
Chapter 11 proceedings of these entities are collectively referred to herein as
the "Cases." For purposes of these financial statements, the term "Filing Date"
shall mean with respect to any particular Debtor, the date on which such Debtor
filed its Case. The wholly owned subsidiaries of KACC included in the Cases are:
Kaiser Bellwood Corporation, Kaiser Aluminium International, Inc., Kaiser
Aluminum Technical Services, Inc., Kaiser Alumina Australia Corporation (and its
wholly owned subsidiary, Kaiser Finance Corporation) and ten other entities with
limited balances or activities. None of KACC's non-U.S. affiliates were included
in the Cases. The Cases are being jointly administered with the Debtors managing
their businesses in the ordinary course as debtors-in-possession subject to the
control and supervision of the Court.

The necessity for filing the Cases was attributable to the liquidity and cash
flow problems of the Company arising in late 2001 and early 2002. The Company
was facing significant near-term debt maturities at a time of unusually weak
aluminum industry business conditions, depressed aluminum prices and a broad
economic slowdown that was further exacerbated by the events of September 11. In
addition, the Company had become increasingly burdened by the asbestos
litigation (see Note 12) and growing legacy obligations for retiree medical and
pension costs (see Note 10). The confluence of these factors created the
prospect of continuing operating losses and negative cash flow, resulting in
lower credit ratings and an inability to access the capital markets.

The outstanding principal of, and accrued interest on, all long-term debt of the
Company became immediately due and payable as a result of the commencement of
the Cases. However, the vast majority of the claims in existence at the Filing
Date (including claims for principal and accrued interest and substantially all
legal proceedings) are stayed (deferred) while the Company and KACC continue to
manage the businesses. The Court has, however, upon motion by the Debtors,
permitted the Debtors to pay or otherwise honor certain unsecured pre-Filing
Date claims, including employee wages and benefits and customer claims in the
ordinary course of business, subject to certain limitations, and to fund, on an
interim basis pending a final determination of the issue by the Court, its joint
ventures in the ordinary course of business. The Debtors also have the right to
assume or reject executory contracts, subject to Court approval and certain
other limitations. In this context, "assumption" means that the Debtors agree to
perform their obligations and cure certain existing defaults under an executory
contract and "rejection" means that the Debtors are relieved from their
obligations to perform further under an executory contract and are subject only
to a claim for damages for the breach thereof. Any claim for damages resulting
from the rejection of an executory contract is treated as a general unsecured
claim in the Cases.

Generally, pre-Filing Date claims against the Debtors will fall into two
categories: secured and unsecured, including certain contingent or unliquidated
claims. Under the Code, a creditor's claim is treated as secured only to the
extent of the value of the collateral securing such claim, with the balance of
such claim being treated as unsecured. Unsecured and partially secured claims do
not accrue interest after the Filing Date. A fully secured claim, however, does
accrue interest after the Filing Date until the amount due and owing to the
secured creditor, including interest accrued after the Filing Date, is equal to
the value of the collateral securing such claim. The amount and validity of
pre-Filing Date contingent or unliquidated claims, although presently unknown,
ultimately may be established by the Court or by agreement of the parties. As a
result of the Cases, additional pre-Filing Date claims and liabilities may be
asserted, some of which may be significant. No provision has been included in
the accompanying financial statements for such potential claims and additional
liabilities that may be filed on or before a date to be fixed by the Court as
the last day to file proofs of claim.

The following table sets forth certain 2001 financial information for the
Debtors and non-Debtors.

CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 2001

Consolidation/
Elimination
Debtors Non-Debtors Entries Consolidated
---------------- --------------- ---------------- --------------

Current assets $ 607.6 $ 151.6 $ - $ 759.2
Investments in subsidiaries 1,390.4 33.4 (1,360.8) 63.0
Intercompany receivables (payables) (1,004.0) 1,004.0 - -
Property and equipment, net 825.5 389.9 - 1,215.4
Deferred income taxes (66.6) 66.6 - -
Other assets 696.9 9.2 - 706.1
---------------- --------------- ---------------- --------------
$ 2,449.8 $ 1,654.7 $ (1,360.8) $ 2,743.7
================ =============== ================ ==============

Current liabilities $ 702.0 $ 101.4 $ - $ 803.4
Other long-term liabilities 1,510.2 51.9 - 1,562.1
Long-term debt 678.7 22.1 - 700.8
Minority interests - 98.8 19.7 118.5
Stockholders' equity (441.1) 1,380.5 (1,380.5) (441.1)
---------------- --------------- ---------------- --------------
$ 2,449.8 $ 1,654.7 $ (1,360.8) $ 2,743.7
================ =============== ================ ==============

CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2001

Consolidation/
Elimination
Debtors Non-Debtors Entries Consolidated
---------------- --------------- ---------------- --------------

Net sales $ 1,252.8 $ 592.7 $ (112.8) $ 1,732.7
Costs and expenses:
Operating costs and expenses 1,354.0 577.8 (100.4) 1,831.4
Non-recurring operating items (167.2) 3.6 - (163.6)
---------------- --------------- ---------------- --------------
Operating income 66.0 11.3 (12.4) 64.9
Interest expense (106.5) (2.5) - (109.0)
Other income (expense), net 131.8 (1.0) - 130.8
Benefit (provision) for income tax (548.9) (1.3) - (550.2)
Minority interests - 5.2 (1.1) 4.1
Equity in income of subsidiaries 11.7 - (11.7) -
---------------- --------------- ---------------- --------------
Net income (loss) $ (445.9) $ 11.7 $ (25.2) $ (459.4)
================ =============== ================ ==============

Under the Code, the rights of and ultimate payments to pre-Filing Date creditors
and stockholders may be substantially altered. At this time, it is not possible
to predict the outcome of the Cases, in general, or the effect of the Cases on
the businesses of the Debtors or on the interests of creditors and stockholders.

The Debtors anticipate that substantially all liabilities of the Debtors as of
the date of the Filing will be resolved under one or more plans of
reorganization to be proposed and voted on in the Cases in accordance with the
provisions of the Code. Although the Debtors intend to file and seek
confirmation of such a plan or plans, there can be no assurance as to when the
Debtors will file such a plan or plans, or that such plan or plans will be
confirmed by the Court and consummated.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Going Concern. The consolidated financial statements of the Company have been
prepared on a "going concern" basis which contemplates the realization of assets
and the liquidation of liabilities in the ordinary course of business; however,
as a result of the commencement of the Cases, such realization of assets and
liquidation of liabilities are subject to a significant number of uncertainties.
The financial statements for periods ending after the Filing Date will include
adjustments and reclassifications to reflect the liabilities which have been
deferred as a result of the commencement of the Cases. Specifically, but not all
inclusive, the consolidated financial statements do not present: (a) the
classification of any long-term debt which is in default as a current liability,
(b) the realizable value of assets on a liquidation basis or the availability of
such assets to satisfy liabilities, (c) the amount which will ultimately be paid
to settle liabilities and contingencies which may be allowed in the Cases, or
(d) the effect of any changes which may be made in connection with the Debtors'
capitalizations or operations resulting from a plan of reorganization. Because
of the ongoing nature of the Cases, the discussions and consolidated financial
statements contained herein are subject to material uncertainties.

Future financial statements of the Company and the Debtors will be reported in
accordance with Statement of Position 90-7, Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code ("SOP 90-7"). The more significant
impacts on the Company's future financial reporting (prior to any plan of
reorganization that may be approved by the Court) will be -

- The balance sheet will distinguish between pre-Filing Date liabilities
that are subject to compromise from those that are not (such as fully
secured liabilities that are expected not to be compromised) and
post-Filing Date obligations. (See Note 8 for a break-down of secured vs.
unsecured debt).

- Interest expense will only be reflected for fully secured debt.
Contractual interest expense for debt subject to compromise will be
reported parenthetically on the face of the statement of consolidated
income (loss) but will not be deducted in determining net income.

- Revenues, gains and losses, costs and expenses (including professional
fees) and provisions for losses resulting directly from the Cases will be
separately reported as "Reorganization Items" in the statement of
consolidated income (loss). Interest income earned by the Debtors that
would not have otherwise been earned during the pendency of the Cases will
also be reported as a "reorganization item." The amounts of reorganization
items that will be incurred during the pendency of the Cases cannot be
predicted at this time, but such amounts are expected to be significant.

Principles of Consolidation. The consolidated financial statements include the
statements of the Company and its majority owned subsidiaries. The Company is a
subsidiary of MAXXAM Inc. ("MAXXAM") and conducts its operations through its
wholly owned subsidiary, KACC. KACC operates in all principal aspects of the
aluminum industry-the mining of bauxite (the major aluminum bearing ore), the
refining of bauxite into alumina (the intermediate material), the production of
primary aluminum, and the manufacture of fabricated and semi-fabricated aluminum
products. Kaiser's production levels of alumina, before consideration of the
Gramercy incident (see Note 3), and primary aluminum exceed its internal
processing needs, which allows it to be a major seller of alumina and primary
aluminum to domestic and international third parties (see Note 15).

The preparation of financial statements in accordance with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities known to exist as of the date the financial statements are
published, and the reported amounts of revenues and expenses during the
reporting period. Uncertainties, with respect to such estimates and assumptions,
are inherent in the preparation of the Company's consolidated financial
statements; accordingly, it is possible that the actual results could differ
from these estimates and assumptions, which could have a material effect on the
reported amounts of the Company's consolidated financial position and results of
operation.

Investments in 50%-or-less-owned entities are accounted for primarily by the
equity method. Intercompany balances and transactions are eliminated.

Recognition of Sales. Sales are recognized when title, ownership and risk of
loss pass to the buyer.

Earnings per Share. Basic earnings per share is computed by dividing the
weighted average number of common shares outstanding during the period,
including the weighted average impact of the shares of common stock issued
during the year from the date(s) of issuance. However, earnings per share may
not be meaningful, because as a part of a plan of reorganization, it is possible
that the interests of the Company's existing stockholders could be diluted or
cancelled.

Diluted earnings per share for the year ended December 31, 2000 included the
dilutive effect of outstanding stock options ( 3,000 shares). The impact of
outstanding stock options was excluded from the computation of diluted loss per
share for the years ended December 31, 2001 and 1999, as their effect would have
been antidilutive.

Cash and Cash Equivalents. The Company considers only those short-term, highly
liquid investments with original maturities of 90 days or less to be cash
equivalents.

Inventories. Substantially all product inventories are stated at last-in,
first-out ("LIFO") cost, not in excess of market value. Replacement cost is not
in excess of LIFO cost. Inventories at December 31, 2001, have been reduced by
(a) a $5.6 charge (in non-recurring operating items) to write-down certain
excess operating supplies and repairs and maintenance parts that will be sold,
rather than used in production, as part of the Company's performance improvement
initiative to generate one-time cash and (b) $8.2 of LIFO inventory charges (in
cost of products sold) as reductions of inventory volumes were in inventory
layers with higher costs than current market prices ($3.2 of which was recorded
in the fourth quarter of 2001). Inventories at December 31, 2000, were reduced
by LIFO inventory charges totaling $24.1 ($.6 in cost of products sold and $23.5
in non-recurring operating items). The non-recurring LIFO charges result
primarily from the Washington smelters' curtailment ($4.5), the exit from the
can body stock product line ($11.1) and the delayed restart of the Gramercy
facility ($7.0). Other inventories, principally operating supplies and repair
and maintenance parts, are stated at the lower of average cost or market.
Inventory costs consist of material, labor, and manufacturing overhead,
including depreciation. Inventories consist of the following:

December 31,
----------------------------
2001 2000
- -------------------------------------------------------------------- ------------ -------------
Finished fabricated products $ 30.4 $ 54.6
Primary aluminum and work in process 108.3 126.9
Bauxite and alumina 77.7 88.6
Operating supplies and repair and maintenance parts 96.9 126.1
------------ -------------
$ 313.3 $ 396.2
============ =============

Depreciation. Depreciation is computed principally by the straight-line method
at rates based on the estimated useful lives of the various classes of assets.
The principal estimated useful lives of land improvements, buildings, and
machinery and equipment are 8 to 25 years, 15 to 45 years, and 10 to 22 years,
respectively.

Stock-Based Compensation. The Company applies the intrinsic value method to
account for a stock-based compensation plan whereby compensation cost is
recognized only to the extent that the quoted market price of the stock at the
measurement date exceeds the amount an employee must pay to acquire the stock.
No compensation cost has been recognized for this plan as the exercise price of
the stock options granted in 2001, 2000 and 1999 were at or above the market
price. The pro forma after-tax effect of the estimated fair value of the grants
would be to reduce net income in 2001 by $.3, reduce net income in 2000 by $2.2
and increase the net loss in 1999 by $1.8. The fair value of the 2001, 2000 and
1999 stock option grants were estimated using a Black-Scholes option pricing
model.

Other Income (Expense). Amounts included in other income (expense) in 2001, 2000
and 1999, other than interest expense, gain on sale of QAL interest and gain on
involuntary conversion at the Gramercy facility, included the following pre-tax
gains (losses):

Year Ended December 31,
-------------------------------------------
2001 2000 1999
- ---------------------------------------------------------------- ------------- ------------ --------------
Asbestos-related charges (Note 12) $ (57.2) $ (43.0) $ (53.2)
Gains on sale of real estate (Note 5) 6.9 22.0 -
Mark-to-market gains (losses) (Note 13) 35.6 11.0 (32.8)
Adjustment to environmental liabilities (Note 12) (13.5) - -
MetalSpectrum investment write-off (Note 4) (2.8) - -
Lease obligation adjustment (Note 12) - 17.0 -
Gain on sale of interests in AKW L.P. (Note 4) - - 50.5
------------- ------------ --------------
Special items, net (31.0) 7.0 (35.5)
All other, net (1.8) (11.3) (.4)
------------- ------------ --------------
$ (32.8) $ (4.3) $ (35.9)
============= ============ ==============

Deferred Financing Costs. Costs incurred to obtain debt financing are deferred
and amortized over the estimated term of the related borrowing. Such
amortization is included in Interest expense. As a result of the Cases, the
amortization of the deferred financing costs related to the Debtors' unsecured
debt was discontinued on the Filing Date.

Goodwill. Through the year ended December 31, 2001, the goodwill associated with
the acquisition of the Chandler, Arizona facility (see Note 5) was being
amortized on a straight-line basis over 20 years. Beginning with the first
quarter of 2002, the Company discontinued the amortization of goodwill
consistent with Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets ("SFAS No. 142"). However, the discontinuance of
amortization of goodwill will not have a material effect on the Company's
results of operations or financial condition (the amount of amortization in 2001
was less than $.8). In accordance with SFAS No. 142, which was adopted as of
January 1, 2002, the Company will review goodwill for impairment at least
annually. The adoption of SFAS No. 142 will not have a material impact on the
Company's future operating results. As of December 31, 2001, unamortized
goodwill was approximately $11.4 and was included in Other assets in the
accompanying consolidated balance sheets.

Foreign Currency. The Company uses the United States dollar as the functional
currency for its foreign operations.

Derivative Financial Instruments. Hedging transactions using derivative
financial instruments are primarily designed to mitigate KACC's exposure to
changes in prices for certain of the products which KACC sells and consumes and,
to a lesser extent, to mitigate KACC's exposure to changes in foreign currency
exchange rates. KACC does not utilize derivative financial instruments for
trading or other speculative purposes. KACC's derivative activities are
initiated within guidelines established by management and approved by KACC's and
the Company's boards of directors. Hedging transactions are executed centrally
on behalf of all of KACC's business segments to minimize transaction costs,
monitor consolidated net exposures and allow for increased responsiveness to
changes in market factors.

Pre-2001 Accounting. Accounting guidelines in place through December 31, 2000,
provided that any interim fluctuations in option prices prior to the settlement
date were deferred until the settlement date of the underlying hedged
transaction, at which time they were recorded in net sales or cost of products
sold (as applicable) together with the related premium cost. No accounting
recognition was accorded to interim fluctuations in prices of forward sales
contracts. Hedge (deferral) accounting would have been terminated (resulting in
the applicable derivative positions being marked-to-market) if the level of
underlying physical transactions ever fell below the net exposure hedged. This
did not occur in 1999 or 2000.

Current Accounting. Effective January 1, 2001, the Company began reporting
derivative activities pursuant to Statement of Financial Accounting Standards
("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities.
SFAS No. 133 requires companies to recognize all derivative instruments as
assets or liabilities in the balance sheet and to measure those instruments at
fair value by "marking-to-market" all of their hedging positions at each
period-end (see Note 13). This contrasts with pre-2001 accounting principles,
which generally only required certain "non-qualifying" hedging positions to be
marked-to- market. Changes in the market value of the Company's open hedging
positions resulting from the mark-to-market process represent unrealized gains
or losses. Such unrealized gains or losses will fluctuate, based on prevailing
market prices at each subsequent balance sheet date, until the transaction date
occurs. Under SFAS No. 133, these changes are recorded as an increase or
reduction in stockholders' equity through either other comprehensive income or
net income, depending on the facts and circumstances with respect to the hedge
and its documentation. To the extent that changes in market values of the
Company's hedging positions are initially recorded in other comprehensive
income, such changes reverse out of other comprehensive income (offset by any
fluctuations in other "open" positions) and are recorded in net income (included
in net sales or cost of products sold, as applicable) when the subsequent
physical transactions occur. Additionally, under SFAS No. 133, if the level of
physical transactions ever falls below the net exposure hedged, "hedge"
accounting must be terminated for such "excess" hedges. In such an instance, the
mark-to-market changes on such excess hedges would be recorded in the income
statement rather than in other comprehensive income. This did not occur during
2001.

Differences between comprehensive income and net income, which have historically
been small, may become significant in future periods as a result of SFAS No.
133. In general, SFAS No. 133 will result in material fluctuations in
comprehensive income and stockholders' equity in periods of price volatility,
despite the fact that the Company's cash flow and earnings will be "fixed" to
the extent hedged. This result is contrary to the intent of the Company's
hedging program, which is to "lock-in" a price (or range of prices) for products
sold/used so that earnings and cash flows are subject to reduced risk of
volatility.

SFAS No. 133 requires that, as of the date of the initial adoption, the
difference between the market value of derivative instruments recorded on the
Company's consolidated balance sheet and the previous carrying amount of those
derivatives be reported in net income or other comprehensive income, as
appropriate, as the cumulative effect of a change in accounting principle. Based
on authoritative accounting literature issued during the first quarter of 2001,
it was determined that all of the cumulative impact of adopting SFAS No. 133
should be recorded in other comprehensive income. The cumulative effect amount
was reclassified to earnings during 2001.

Fair Value of Financial Instruments. Given the fact that the fair value of
substantially all of the Company's outstanding indebtedness will be determined
as part of the plan of reorganization, it is impracticable and inappropriate to
estimate the fair value of these financial instruments at December 31, 2001.

New Accounting Pronouncements. Statement of Financial Accounting Standard No.
143, Accounting for Asset Retirement Obligations ("SFAS No. 143"), was issued in
June 2001 and must be first applied to the Company's consolidated financial
statements beginning January 1, 2003, although earlier adoption is permitted. In
general terms, SFAS No. 143 requires the recognition of a liability resulting
from anticipated retirement obligations, offset by an increase in the value of
the associated productive asset for such anticipated costs. Over the life of the
asset, depreciation expense is to include the ratable expensing of the
retirement cost included with the asset value. The statement applies to all
legal obligations associated with the retirement of a tangible long-lived asset
that results from the acquisition, construction, or development and (or) the
normal operation of a long-lived asset, except for certain lease obligations.
Excluded from this statement are obligations arising solely from a plan to
dispose of a long-lived asset and obligations that result from the improper
operation of an asset (i.e. the type of environmental obligations discussed in
Note 12).

The Company's consolidated financial statements already reflect reclamation
obligations by its bauxite mining operations in accordance with accounting
policies consistent with SFAS No. 143. At December 31, 2001, the amount of the
accrued reclamation obligations included in the consolidated financial
statements was approximately $3.1 after considering expenditures in 2001 of
approximately $3.0. The Company is continuing its evaluation of SFAS No. 143.
The Company expects that the costs associated with the accrued reclamation
obligations as of December 31, 2001 will be incurred, in the ordinary course,
during the ensuing 12 to 18 months. At the same time, additional accruals in
respect of future mining will be incurred. A decision as to the formal adoption
of SFAS No. 143 has not been made in respect of any other items that may be
applicable. However, the Company does not currently expect the adoption of SFAS
No. 143 to have a material impact on its future financial statements.

Statement of Financial Accounting Standard No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets ("SFAS No. 144") was issued in
August 2001. In general terms, SFAS No. 144 establishes a single accounting
model for impairment or disposal of long-lived assets, and supersedes prior
rules in this regard. SFAS No. 144 retains the existing accounting requirements
for recognizing impairments on long-lived assets that are to be held and used.
However, it provides additional guidelines such as a "probability-weighted cash
flow estimation" approach to deal with situations where alternative and
undecided courses of action exist. Under SFAS No. 144, long-lived assets to be
disposed of by sale are to be recorded at the lower of their carrying amount or
fair value less cost to sell. SFAS No. 144 must be first applied to the
Company's consolidated financial statements beginning January 1, 2002. The
adoption of SFAS No. 144 did not have a material impact on the Company's
financial statements.

3. INCIDENT AT GRAMERCY FACILITY

In July 1999, KACC's Gramercy, Louisiana alumina refinery was extensively
damaged by an explosion in the digestion area of the plant. A number of
employees were injured in the incident, several of them severely. As a result of
the incident, alumina production at the facility was completely curtailed.
Construction on the damaged part of the facility began during the first quarter
of 2000. Initial production at the plant commenced during the middle of December
2000. However, construction was not substantially completed until the third
quarter of 2001. During the first nine months of 2001, the plant operated at
approximately 68% of its newly-rated estimated capacity of 1,250,000 tons.
During the fourth quarter of 2001, the plant operated at approximately 90% of
its newly-rated capacity. By the end of February 2002, the plant was operating
at just below 100% of its newly-rated capacity. The facility is now focusing its
efforts on achieving its full operating efficiency.

Property Damage. KACC's insurance policies provided that KACC would be
reimbursed for the costs of repairing or rebuilding the damaged portion of the
facility using new materials of like kind and quality with no deduction for
depreciation. In 1999, based on discussions with the insurance carriers and
their representatives and third party engineering reports, KACC recorded a
pre-tax gain of $85.0, representing the difference between the minimum expected
property damage reimbursement amount of $100.0 and the net carrying value of the
damaged property of $15.0. The reimbursement amount was collected in 2000.

Clean-up, Site Preparation and Other Costs/Losses. The following table recaps
clean-up, site preparation and other costs/losses associated with the Gramercy
incident:

1999 2000 2001 Total
- ---------------------------------------------------------- ------------ ------------ ----------- ----------
Clean-up and site preparation $ 14.0 $ 10.0 $ - $ 24.0
Business interruption costs 41.0 110.0 36.6 187.6
Abnormal start-up costs - - 64.9 64.9
Litigation costs - - 6.5 6.5
------------ ------------ ----------- ----------
55.0 120.0 108.0 283.0
Offsetting business interruption insurance recoveries (55.0) (120.0) (36.6) (211.6)
------------ ------------ ----------- ----------
Net impacts reflected in Cost of products sold $ - $ - $ 71.4 $ 71.4
============ ============ =========== ==========

During July 2001, KACC and its insurers reached a global settlement agreement in
respect of all of KACC's business interruption and property damage claims. The
Company does not expect any additional insurance recoveries.

Depreciation expense for the first six months of 1999 was approximately $6.0.
KACC suspended depreciation at the facility starting in July 1999 since
production was completely curtailed. However, in accordance with an agreement
with KACC's insurers, during 2000, the Company recorded a depreciation charge of
$14.3, representing the previously unrecorded depreciation related to the
undamaged portion of the facility for the period from July 1999 through November
2000. However, this charge did not have any impact on the Company's operating
results as the Company had reflected (as a reduction of depreciation expense) an
equal and offsetting insurance receivable (incremental to the amounts discussed
in the preceding paragraph) since the insurers agreed to reimburse the Company
this amount. Since production at the facility was partially restored during
December 2000, normal depreciation commenced in December 2000.

Contingencies. The Gramercy incident resulted in a significant number of
individual and class action lawsuits being filed against KACC and others
alleging, among other things, property damage, business interruption losses by
other businesses and personal injury. After these matters were consolidated, the
individual claims against KACC were settled for amounts which, after the
application of insurance, were not material to KACC. Further, an agreement has
been reached with the class plaintiffs for an amount which, after the
application of insurance, is not material to KACC. While the class settlement
remains subject to court approval and while certain plaintiffs may opt out of
the settlement, the Company does not currently believe that this presents any
material risk to KACC. Finally, KACC faces new claims from certain parties to
the litigation regarding the interpretation of and alleged claims concerning
certain settlement and other agreements made during the course of the
litigation. The aggregate amount of damages threatened in these claims could, in
certain circumstances, be substantial. However, KACC does not currently believe
these claims will result in any material liability to the Company.

KACC currently believes that any amount from unsettled workers' compensation
claims from the Gramercy incident in excess of the coverage limitations will not
have a material effect on the Company's consolidated financial position or
liquidity. However, while unlikely, it is possible that as additional facts
become available, additional charges may be required and such charges could be
material to the period in which they are recorded.

4. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

Summary of combined financial information is provided below for unconsolidated
aluminum investments, most of which supply and process raw materials. The
investees are Queensland Alumina Limited ("QAL") (20.0% owned), Anglesey
Aluminium Limited ("Anglesey") (49.0% owned) and Kaiser Jamaica Bauxite Company
(49.0% owned). The equity in income (loss) before income taxes of such
operations is treated as a reduction (increase) in Cost of products sold. At
December 31, 2001 and 2000, KACC's net receivables from these affiliates were
not material.

In September 2001, KACC sold an approximate 8.3% interest in QAL and recorded a
pre-tax gain of approximately $163.6 (included in Other income/(expense) in the
accompanying consolidated statements of income (loss)). As a result of the
transaction, KACC now owns a 20% interest in QAL. The total value of the
transaction was approximately $189.0, consisting of a cash payment of
approximately $159.0 plus the purchaser's assumption of approximately $30.0 of
off-balance sheet QAL indebtedness guaranteed by KACC prior to the sale. KACC's
share of QAL's production for the first eight months of 2001 and for the years
ended December 31, 2000 and 1999 was approximately 668,000 tons, 1,064,000 tons
and 1,033,000 tons, respectively. Had the sale of the QAL interest been
effective as of the beginning of 1999, KACC's share of QAL's production for
2001, 2000 and 1999 would have been reduced by approximately 196,000 tons,
312,000 tons and 304,000 tons, respectively. Historically, KACC has sold about
half of its share of QAL's production to third parties and has used the
remainder to supply its Northwest smelters, which are temporarily curtailed (see
Note 7). The reduction in KACC's alumina supply associated with this transaction
is expected to be substantially offset by the return of its Gramercy alumina
refinery to full operations during the first quarter of 2002 at a higher
capacity and by planned increases during 2003 in capacity at its Alpart alumina
refinery in Jamaica. The QAL transaction is not expected to have an adverse
impact on KACC's ability to satisfy existing third-party alumina customer
contracts.

In June 2001, KACC wrote-off its investment of $2.8 in MetalSpectrum, LLC, a
start-up, e-commerce entity in which KACC was a founding partner (in 2000).
MetalSpectrum ceased operations during the second quarter of 2001.

In 1999, KACC sold its 50% interest in AKW L.P. ("AKW") to its partner for
$70.4, which resulted in the Company recognizing a net pre-tax gain of $50.5
(included in Other income (expense) - Note 2). The Company's equity in income of
AKW was $2.5 for the year ended December 31, 1999.

Summary of Combined Financial Position

December 31,
---------------------------
2001 2000
- --------------------------------------------------------------------- ----------- -----------

Current assets $ 362.4 $ 350.1
Long-term assets (primarily property, plant, and equipment, net) 345.7 327.3
----------- -----------
Total assets $ 708.1 $ 677.4
=========== ===========

Current liabilities $ 237.6 $ 144.1
Long-term liabilities (primarily long-term debt) 271.2 331.4
Stockholders' equity 199.3 201.9
----------- -----------
Total liabilities and stockholders' equity $ 708.1 $ 677.4
=========== ===========

Summary of Combined Operations

Year Ended December 31,
-----------------------------------
2001 2000 1999
- ----------------------------------------------------------- -------- -------- --------
Net sales $ 633.5 $ 602.9 $ 594.9
Costs and expenses (621.5) (617.1) (582.9)
(Provision) benefit for income taxes (3.9) (4.5) .8
-------- -------- --------
Net income (loss) $ 8.1 $ (18.7) $ 12.8
======== ======== ========

Company's equity in income (loss) $ 1.7 $ (4.8) $ 4.9
======== ======== ========

Dividends received $ 2.8 $ 8.3 $ -
======== ======== ========

The Company's equity in income differs from the summary net income (loss) due to
varying percentage ownerships in the entities and equity method accounting
adjustments. Prior to December 31, 2000, KACC's investment in its unconsolidated
affiliates exceeded its equity in their net assets and such excess was being
amortized to Depreciation and amortization. At December 31, 2000, the excess
investment had been fully amortized. Such amortization was approximately $10.0
for each of the years ended December 31, 2000 and 1999.

The Company and its affiliates have interrelated operations. KACC provides some
of its affiliates with services such as management and engineering. Significant
activities with affiliates include the acquisition and processing of bauxite,
alumina, and primary aluminum. Purchases from these affiliates were $266.0,
$235.7 and $223.7, in the years ended December 31, 2001, 2000 and 1999,
respectively.

5. PROPERTY, PLANT, AND EQUIPMENT

The major classes of property, plant, and equipment are as follows:

December 31,
--------------------------
2001 2000
- ---------------------------------------------------------------------- ---------- ----------

Land and improvements $ 130.9 $ 130.7
Buildings 207.0 197.2
Machinery and equipment 1,881.3 1,702.8
Construction in progress 46.4 130.3
---------- ----------
2,265.6 2,161.0
Accumulated depreciation (1,050.2) (984.9)
---------- ----------
Property, plant, and equipment, net $ 1,215.4 $ 1,176.1
========== ==========

During the period from 1999 to 2001, the Company completed several acquisitions
and dispositions and, based on changes in circumstances, recorded impairment
charges as discussed below:

Acquisition and Disposition Activity -

- - During 2001, as part of its ongoing initiatives to generate cash benefits,
KACC sold certain non-operating real estate for net proceeds totaling
approximately $7.9, resulting in a pre-tax gain of $6.9 (included in Other
income (expense) - see Note 2).

- - During 2000, KACC sold (a) its Pleasanton, California office complex,
because the complex had become surplus to the Company's needs, for net
proceeds of approximately $51.6, which resulted in a net pre-tax gain of
$22.0 (included in Other income (expense) - see Note 2); (b) certain
non-operating properties, in the ordinary course of business, for total
proceeds of approximately $12.0; and (c) the Micromill assets and
technology for a nominal payment at closing and possible future payments
based on subsequent performance and profitability of the Micromill
technology. The sale of the non-operating properties and Micromill assets
did not have a material impact on the Company's 2000 operating results.

- - In May 2000, KACC acquired the assets of a drawn tube aluminum fabricating
operation in Chandler, Arizona. Total consideration for the acquisition was
$16.1 ($1.1 of property, plant and equipment $2.8 of accounts receivables,
inventory and prepaid expenses and $12.2 of goodwill).

Impairment Charges -

- - The Company concluded that the profitability of its Trentwood facility can
be enhanced by further focusing resources on its core, heat-treat business
and by exiting lid and tab stock product lines used in the beverage
container market and brazing sheet for the automotive market. As a result
of this decision, the Company plans to sell or idle several pieces of
equipment resulting in an impairment charge of approximately $17.7 at
December 31, 2001 (which amount was reflected in Non-recurring operating
items - see Note 6). Additional charges are likely as the Company works
through all of the operational impacts of this decision to exit the lid,
tab and brazing sheet product lines.

- - During 2000, KACC evaluated the recoverability of the approximate $200.0
carrying value of its Washington smelters, as a result of the change in the
economic environment of the Pacific Northwest associated with the reduced
power availability and higher power costs for KACC's Washington smelters
under the terms of the contract with the Bonneville Power Administration
("BPA") starting in October 2001 (see Note 7). The Company determined that
the expected future undiscounted cash flows of the Washington smelters were
below their carrying value. Accordingly, KACC adjusted the carrying value
of its Washington smelting assets to their estimated fair value, which
resulted in a non-cash impairment charge of approximately $33.0 (which
amount was reflected in Non-recurring operating items - see Note 6). The
estimated fair value was based on anticipated future cash flows discounted
at a rate commensurate with the risk involved.

- - In 1999, based on negotiations with third parties, KACC concluded to sell
the Micromill assets and technology for less than the then existing
carrying value. Accordingly, the carrying value of the Micromill assets
were reduced by recording an impairment charge of $19.1 in 1999 (see Note
6).

6. NON-RECURRING OPERATING ITEMS

The income (loss) impact associated with non-recurring operating items for 2001,
2000 and 1999 was as follows:

Year Ended December 31,
-----------------------------------------
Business Segment 2001 2000 1999
- ------------------------------------------------- ---------------------------- -------------- ------------ ----------
Net gains from power sales (Note 7) Primary Aluminum $ 229.2 $ 159.5 $ -

Restructuring charges Bauxite & Alumina (15.8) (.8) -
Primary Aluminum (7.5) (3.1) -
Flat-Rolled Products (10.7) - -
Corporate (1.2) (5.5) -
Contractual labor costs related to smelter
curtailments (Note 7) Primary Aluminum (12.7) - -

Labor settlement charge See below - (38.5) -

Impairment charges associated with
product line exits Flat-Rolled Products - (12.6) -
Engineered Products - (5.6) -
Other impairment charges (Note 5):
Trentwood equipment Flat-Rolled Products (17.7) - -
Washington smelters Primary Aluminum - (33.0) -
Micromill Micromill - - (19.1)

Gramercy related items:
Incremental maintenance Bauxite & Alumina - (11.5) -
Insurance deductibles, etc. Bauxite & Alumina - - (4.0)
Corporate - - (1.0)
LIFO inventory charge (Note 2) Bauxite & Alumina - (7.0) -
-------------- ------------ ----------
$ 163.6 $ 41.9 $ (24.1)
============== ============ ==========

During 2001, the Company launched a performance improvement initiative (the
"program") designed to increase operating cash flow, generate benefits and
improve the Company's financial flexibility. The program resulted in
restructuring charges totaling $35.2 which consisted of $17.9 of employee
benefit and related costs for a group of approximately 355 salaried and hourly
job eliminations ($3.8 of costs and job eliminations of 230 in the fourth
quarter of 2001), an inventory charge of $5.6 (see Note 2) and third party
consulting costs of $11.7 ($4.4 in the fourth quarter of 2001). As of December
31, 2001, approximately 340 of the job eliminations had occurred. It is
anticipated that the remaining job eliminations will occur during the first
quarter of 2002 or soon thereafter. Approximately $7.7 of the employee benefit
and related costs were cash costs that have been incurred or will be incurred
during the first quarter of 2002. The balance of the employee benefit and
related costs represent increased pension and post-retirement medical costs that
will be funded over longer periods. Additional cash and non-cash charges may be
required in the future as the program continues. Such additional charges could
be material.

The 2000 restructuring charges were associated with the Primary aluminum and
Corporate segments' ongoing cost reduction initiatives. During 2000, these
initiative resulted in restructuring charges for employee benefit and other
costs for approximately 50 job eliminations at the Company's Tacoma facility and
approximately 50 employee eliminations due to consolidation or elimination of
certain corporate staff functions. At December 31, 2001, all job eliminations
associated with these initiatives had occurred.

From September 1998 through September 2000, KACC and the United Steelworkers of
America ("USWA") were involved in a labor dispute as a result of the September
1998 USWA strike and the subsequent "lock-out" by KACC in February 1999. The
labor dispute was settled in September 2000. Under the terms of the settlement,
USWA members generally returned to the affected plants during October 2000. The
Company recorded a one-time pre-tax charge of $38.5 in 2000 to reflect the
incremental, non-recurring impacts of the labor settlement, including severance
and other contractual obligations for non-returning workers. The allocation of
the labor settlement charge to the business units was: Bauxite and alumina -
$2.1, Primary aluminum - $15.9, Flat-rolled products - $18.2 and Engineered
products - $2.3. At December 31, 2001, approximately $30.0 of such costs had
been paid. It is anticipated that substantially all remaining costs will be
incurred during 2002.

The $12.6 impairment charge reflected by KACC's Flat-Rolled products segment in
2000 included a $11.1 LIFO inventory charge (see Note 2) and a $1.5 charge to
reduce the carrying value of certain assets to their estimated net realizable
value as a result of the segment's decision to exit the can body stock product
line. The $5.6 impairment charge recorded by KACC's Engineered products segment
in 2000 included a $.9 LIFO inventory charge and a $4.7 charge to reduce the
carrying value of certain machining facilities and assets, which were no longer
required as a result of the segment's decision to exit a marginal product line,
to their estimated net realizable value.

The incremental maintenance charge in 2000 consisted of normal recurring
maintenance expenditures for the Gramercy facility that otherwise would have
been incurred in the ordinary course of business over a one to three year
period. The Company chose to incur the expenditures prior to the restart of the
facility to avoid normal operational outages that otherwise would have occurred
once the facility resumed production.

The insurance deductible charges in 1999 consist of deductible and
self-retention provisions under the insurance coverage related to the Gramercy
facility incident. See Note 3.

7. PACIFIC NORTHWEST POWER SALES AND OPERATING LEVEL

Power Sales. In response to the unprecedented high market prices for power in
the Pacific Northwest, KACC (first partially and then fully) curtailed the
primary aluminum production at the Tacoma and Mead, Washington smelters during
the last half of 2000 and all of 2001. As a result of the curtailments, as
permitted under the BPA contract, the Company sold the power that it had under
contract through September 30, 2001 (the end of the contract period). In
connection with such power sales, the Company recorded net pre-tax gains of
approximately $229.2 in 2001 and $159.5 in 2000. Gross proceeds were offset by
employee-related expenses, a non-cash LIFO inventory charge and other fixed
commitments. The resulting net gains have been reflected as Non-recurring
operating items (see Note 6). The net gain amounts were composed of gross
proceeds of $259.5 in 2001 and $207.8 in 2000, of which $347.5 was received in
2001 and $119.8 was received in 2000 (although a portion of such proceeds
represent a replacement of the profit that would have otherwise been generated
through operations).

Future Power Supply and its Impact on Future Operating Rate. During October
2000, KACC signed a new power contract with the BPA under which the BPA,
starting October 1, 2001, was to provide KACC's operations in the State of
Washington with approximately 290 megawatts of power through September 2006. The
contract provides KACC with sufficient power to fully operate KACC's Trentwood
facility (which requires up to an approximate 40 megawatts) as well as
approximately 40% of the combined capacity of KACC's Mead and Tacoma aluminum
smelting operations. The BPA has announced that it currently intends to set
rates under the contract in six month increments. The rate for the initial
period (from October 1, 2001 through March 31, 2002) was approximately 46%
higher than power costs under the prior contract. Power prices for the April
2002 through September 2002 period are essentially unchanged from the prior
six-month rate. KACC cannot predict what rates will be charged in future
periods. Such rates will be dependent on such factors as the availability of and
demand for electrical power, which are largely dependent on weather, the price
for alternative fuels, particularly natural gas, as well as general and regional
economic and ecological factors. The contract also includes a take-or-pay
requirement and clauses under which KACC's power allocation could be curtailed,
or its costs increased, in certain instances. Under the contract, KACC can only
remarket its power allocation to reduce or eliminate take-or-pay requirements.
KACC is not entitled to receive any profits from any such remarketing efforts.
During October 2001, KACC and the BPA reached an agreement whereby: (a) KACC
would not be obligated to pay for potential take-or-pay obligations in the first
year of the contract; and (b) KACC retained its rights to restart its smelter
operations at any time. In return for the foregoing, KACC granted the BPA
certain limited power interruption rights in the first year of the contract if
KACC is operating its Northwest smelters. The Department of Energy acknowledged
that capital spending in respect of the Gramercy refinery was consistent with
the contractual provisions of the prior contract with respect to the use of
power sale proceeds. Beginning October 2002, unless there is a further amendment
of KACC's obligations, KACC could be liable for take-or-pay costs under the BPA
contract, and such amounts could be significant. KACC is reviewing its rights
and obligations in respect of the BPA contract in light of Chapter 11 filings.

Subject to the limited interruption rights granted to the BPA (described above),
or any impact resulting from the Cases, KACC has sufficient power under
contract, and retains the ability, to restart up to 40% (4.75 potlines) of its
Northwest smelting capacity. Were KACC to want to restart additional capacity
(in excess of 4.75 potlines), it would have to purchase additional power from
the BPA or other suppliers. For KACC to make such a decision, it would have to
be able to purchase such power at a reasonable price in relation to current and
expected market conditions for a sufficient term to justify its restart costs,
which could be significant depending on the number of lines restarted and the
length of time between the shutdown and restart. Given recent primary aluminum
prices and the forward price of power in the Northwest, it is unlikely that KACC
would operate more than a portion of its Northwest smelter capacity in the near
future. Were KACC to restart all or a portion of its Northwest smelting
capacity, it would take between three to six months to reach the full operating
rate for such operations, depending upon the number of lines restarted. Even
after achieving the full operating rate, operating only a portion of the
Northwest capacity would result in production/cost inefficiencies such that
operating results would, at best be breakeven to modestly negative at long-term
primary aluminum prices. However, operating at such a reduced rate could,
depending on prevailing economics, result in improved cash flows as opposed to
remaining curtailed and incurring the Company's fixed and continuing labor and
other costs. This is because KACC is contractually liable for certain severance,
supplemental unemployment benefits and early retirement benefits for laid-off
workers under KACC's contract with the USWA during periods of curtailment. As of
December 31, 2001, all such contractual compensation costs have been accrued for
all USWA workers in excess of those expected to be required to run the Northwest
smelters at a rate up to the above stated 40% smelter operating rate. These
costs are expected to be incurred periodically through September 2002. Costs
associated with the USWA workers that KACC estimates would be required to
operate the smelters at an operating rate of up to 40% ($12.7 in 2001; $9.4 of
which was reflected in the fourth quarter) have been accrued through early 2003,
as KACC does not currently expect to restart the Northwest smelters prior to
that date. If such workers are not recalled prior to the end of the first
quarter of 2003, KACC could become liable for additional early retirement costs.
Such costs could be significant and could adversely impact the Company's
operating results and liquidity. The present value of such costs could be in the
$50.0 to $60.0 range. However, such costs would likely be paid out over an
extended period.

8. LONG-TERM DEBT

Long-term debt and its maturity schedule are as follows (before considering any
impacts of the Debtors' Chapter 11 filings in February 2002 as discussed below):

December 31,
----------------
2007
and 2001 2000
2002 2003 2004 2005 2006 After Total Total
- -------------------------------------------------- ------- -------- ------- ------- ------- -------- ------- -------
Secured:
Credit Agreement $ - $ 30.4
Alpart CARIFA Loans - (fixed and variable
rates) due 2007, 2008 $ 22.0 22.0 56.0
7.6% Solid Waste Disposal Revenue Bonds
due 2027 19.0 19.0 19.0
Unsecured:
9 7/8% Senior Notes due 2002, net $ 172.8 172.8 224.8
10 7/8% Senior Notes due 2006, net $ 225.4 225.4 225.5
12 3/4% Senior Subordinated Notes due 2003 $ 400.0 400.0 400.0
Other borrowings (fixed and variable rates) .7 .8 $ .7 $ .8 .8 31.3 35.1 33.7
------- -------- ------- ------- ------- -------- ------- -------

Total $ 173.5 $ 400.8 $ .7 $ .8 $ 226.2 $ 72.3 874.3 989.4
======= ======== ======= ======= ======= ========

Less current portion 173.5 31.6
------- -------
Long-term debt $ 700.8 $ 957.8
======= =======

DIP Facility. On February 12, 2002, the Company and KACC entered into a
post-petition credit agreement with a group of lenders for debtor-in-possession
financing (the "DIP Facility") which provides for a secured, revolving line of
credit through the earlier of February 12, 2004, the effective date of a plan of
reorganization or voluntary termination by the Company. The DIP Facility
contains substantially similar terms and conditions to those that were included
in the Credit Agreement (see below). KACC is able to borrow under the DIP
Facility by means of revolving credit advances and letters of credit (up to
$125.0) in an aggregate amount equal to the lesser of $300.0 or a borrowing base
relating to eligible accounts receivable, eligible inventory and eligible fixed
assets reduced by certain reserves, as defined in the DIP Facility agreement.
The DIP Facility is guaranteed by the Company, the Debtor subsidiaries and two
non-debtor wholly owned subsidiaries, Kaiser Jamaica Corporation and Alpart
Jamaica Inc. Interest on any outstanding balances will bear a spread over either
a base rate or LIBOR, at KACC's option. The Court signed a final order approving
the DIP Facility on March 19, 2002. At March 31, 2002, there were no outstanding
borrowings under the revolving credit facility and there were outstanding
letters of credit of approximately $54.1. As of March 31, 2002, $121.0 (of which
$70.9 could be used for additional letters of credit) was available to the
Company under the DIP Facility. The Company expects that the borrowing base
amount will increase by approximately $50.0 once certain appraisal information
is provided to the lenders.

Credit Agreement. Prior to the February 12, 2002 Filing Date, the Company and
KACC had a credit agreement, as amended (the "Credit Agreement") which provided
a secured, revolving line of credit. The Credit Agreement was secured by, among
other things, (i) mortgages on KACC's major domestic plants (excluding KACC's
Gramercy alumina plant); (ii) subject to certain exceptions, liens on the
accounts receivable, inventory, equipment, domestic patents and trademarks, and
substantially all other personal property of KACC and certain of its
subsidiaries; (iii) a pledge of all the stock of KACC owned by Kaiser; and (iv)
pledges of all of the stock of a number of KACC's wholly owned domestic
subsidiaries, pledges of a portion of the stock of certain foreign subsidiaries,
and pledges of a portion of the stock of certain partially owned foreign
affiliates. The Credit Agreement terminated on the Filing Date and was replaced
by the DIP Facility discussed above. During the last six months of 2001, there
were no borrowings under the Credit Agreement. During the first six months of
2001, month-end borrowings under the Credit Agreement were as high as
approximately $94.0, which occurred in February 2001, primarily as a result of
costs incurred and capital spending related to the Gramercy rebuild, net of
insurance reimbursements. The average amount of borrowings outstanding under the
Credit Agreement during 2001 was approximately $11.8. The average interest rate
on loans outstanding under the Credit Agreement during 2001 was approximately
10.0% per annum. As of the Filing Date, outstanding letters of credit were
approximately $43.3 and there were no borrowings outstanding under the Credit
Agreement.

9 7/8% Notes, 10 7/8% Notes and 12 3/4% Notes. The obligations of KACC with
respect to its 9 7/8% Senior Notes due 2002 (the 9 7/8% Notes), its 10 7/8%
Senior Notes due 2006 (the "10 7/8% Notes") and its 12 3/4% Senior Subordinated
Notes due 2003 (the "12 3/4% Notes") are guaranteed, jointly and severally, by
certain subsidiaries of KACC. Prior to concluding that, as a result of the
events outlined in Note 1, the Company should file the Cases, KACC had purchased
$52.2 of the 9 7/8% Notes. The net gain from the purchase of the notes was less
than $1.1 and has been included in Other income (expense) in the accompanying
statements of consolidated income (loss).

Alpart CARIFA Loans. In December 1991, Alumina Partners of Jamaica ("Alpart")
entered into a loan agreement with the Caribbean Basin Projects Financing
Authority ("CARIFA"). As of December 31, 2001, Alpart's obligations under the
loan agreement were secured by two letters of credit aggregating $23.5. KACC was
a party to one of the two letters of credit in the amount of $15.3 in respect of
its 65% ownership interest in Alpart. Alpart has also agreed to indemnify
bondholders of CARIFA for certain tax payments that could result from events, as
defined, that adversely affect the tax treatment of the interest income on the
bonds.

During the first quarter of 2001, Alpart redeemed $34.0 principal amount of the
CARIFA loans. The redemption had a modest beneficial effect on the unused
availability remaining under the Credit Agreement as the additional Credit
Agreement borrowings of $22.1 required for KACC's share of the redemption were
more than offset by a reduction in the amount of letters of credit outstanding
that supported the loan.

7.6% Solid Waste Disposal Revenue Bonds. The sold waste disposal revenue bonds
are secured by a first mortgage on certain machinery at KACC's Mead smelter.

Debt Covenants and Restrictions. The DIP Facility requires KACC to comply with
certain financial covenants and places restrictions on the Company's and KACC's
ability to, among other things, incur debt and liens, make investments, pay
dividends, undertake transactions with affiliates, make capital expenditures,
and enter into unrelated lines of business. The DIP Facility is secured by,
among other things, (i) mortgages on KACC's major domestic plants; (ii) subject
to certain exceptions, liens on the accounts receivable, inventory, equipment,
domestic patents and trademarks, and substantially all other personal property
of KACC and certain of its subsidiaries; (iii) a pledge of all the stock of KACC
owned by Kaiser; and (iv) pledges of all of the stock of a number of KACC's
wholly owned domestic subsidiaries, pledges of a portion of the stock of certain
foreign subsidiaries, and pledges of a portion of the stock of certain partially
owned foreign affiliates.

The indentures governing the 9 7/8% Notes, the 10 7/8% Notes and the 12 3/4%
Notes (collectively, the "Indentures") restrict, among other things, KACC's
ability to incur debt, undertake transactions with affiliates, and pay
dividends. Further, the Indentures provide that KACC must offer to purchase the
9 7/8% Notes, the 10 7/8% Notes and the 12 3/4% Notes, respectively, upon the
occurrence of a Change of Control (as defined therein).

9. INCOME TAXES

Income (loss) before income taxes and minority interests by geographic area is
as follows:

Total $ 86.7 $ 25.4 $ (89.9)
========== =========== ==========

Income taxes are classified as either domestic or foreign, based on whether
payment is made or due to the United States or a foreign country. Certain income
classified as foreign is also subject to domestic income taxes.

The (provision) benefit for income taxes on income (loss) before income taxes
and minority interests consists of:

Federal Foreign State Total
- -------------------------------------------------------- ------------ ------------ ----------- ----------
2001 Current $ (1.1) $ (40.6) $ - $ (41.7)
Deferred (484.3) .5 (24.7) (508.5)
------------ ------------ ----------- ----------
Total $ (485.4) $ (40.1) $ (24.7) $ (550.2)
============ ============ =========== ==========

2000 Current $ (1.9) $ (35.3) $ (.3) $ (37.5)
Deferred 35.5 (8.9) (.7) 25.9
------------ ------------ ----------- ----------
Total $ 33.6 $ (44.2) $ (1.0) $ (11.6)
============ ============ =========== ==========

1999 Current $ (.5) $ (23.1) $ (.3) $ (23.9)
Deferred 43.8 7.1 5.7 56.6
------------ ------------ ----------- ----------
Total $ 43.3 $ (16.0) $ 5.4 $ 32.7
============ ============ =========== ==========

A reconciliation between the (provision) benefit for income taxes and the amount
computed by applying the federal statutory income tax rate to income (loss)
before income taxes and minority interests is as follows:

Year Ended December 31,
---------------------------------------
2001 2000 1999
- ---------------------------------------------------------------------------------- ------------ ------------ -----------
Amount of federal income tax (provision) benefit based on the statutory rate $ (30.3) $ (8.9) $ 31.2
Increase in valuation allowances and revision of prior years' tax estimates (513.9) (1.8) 1.1
Percentage depletion 4.9 3.0 2.8
Foreign taxes, net of federal tax benefit (9.6) (3.2) (3.2)
Other (1.3) (.7) .8
------------ ------------ -----------
(Provision) benefit for income taxes $ (550.2) $ (11.6) $ 32.7
============ ============ ===========

The components of the Company's net deferred income tax assets are as follows:

December 31,
-----------------------------
2001 2000
- ------------------------------------------------------------------------------------------ ------------ -----------
Deferred income tax assets:
Postretirement benefits other than pensions $ 264.0 $ 267.4
Loss and credit carryforwards 150.0 125.2
Other liabilities 192.7 143.7
Other 170.5 181.5
Valuation allowances (652.7) (122.3)
------------ -----------
Total deferred income tax assets-net 124.5 595.5
------------ -----------

Deferred income tax liabilities:
Property, plant, and equipment (122.3) (105.1)
Other (41.6) (26.2)
------------ -----------
Total deferred income tax liabilities (163.9) (131.3)
------------ -----------

Net deferred income tax assets (liabilities)(1) $ (39.4) $ 464.2
============ ===========

(1) Net deferred income tax assets of $56.0 are included in the Consolidated
Balance Sheets as of December 31, 2000 in the caption entitled Prepaid
expenses and other current assets. Net deferred income tax liabilities of
$39.4 and $46.0 are included in the Consolidated Balance Sheets as of
December 31, 2001 and 2000, respectively, in the caption entitled Long-term
liabilities.

The principal component of the Company's deferred income tax assets is the tax
benefit associated with the accrued liability for postretirement benefits other
than pensions. The future tax deductions with respect to the turnaround of this
accrual will occur over a 30-to-40-year period. If such deductions create or
increase a net operating loss, the Company has the ability to carry forward such
loss for 20 taxable years. Accordingly, prior to the Cases, the Company believed
that a long-term view of profitability was appropriate and had concluded that
the net deferred income tax asset would more likely than not be realized.

However, in light of the Cases, the Company provided additional valuation
allowances of $530.4 during the fourth quarter of 2001 of which $505.4 was
recorded in (Provision) benefit for income taxes in the accompanying statements
of consolidated income (loss) and $25.0 was recorded in Other comprehensive
income (loss) in the accompanying consolidated balance sheet. The additional
valuation allowances were provided as the Company no longer believes that the
"more likely than not" recognition criteria were appropriate given a combination
of factors including: (a) the expiration date of the loss and credit
carryforwards; (b) the possibility that all or a substantial portion of the loss
and credit carryforwards and tax basis of assets could be reduced to the extent
of cancellation of indebtedness occurring as a part of a reorganization plan;
(c) the possibility that all or a substantial portion of the loss and credit
carryforwards could become limited if a change of ownership occurs as a result
of the Debtors reorganization; and (d) due to updated near-term expectations
regarding near-term taxable income. In prior periods, the Company had concluded
that a substantial portion of these items would more likely than not be realized
(to the extent not covered by valuation allowances), based on the cyclical
nature of its business, its history of operating earnings, and its then existing
expectations for future years. The valuation allowances adjustment has no impact
on the Company's or KACC's liquidity, operations or loan compliance and is not
intended, in any way, to be indicative of their long-term prospects or ability
to successfully reorganize.

At December 31, 2001, the Company had certain tax attributes available to offset
regular federal income tax requirements, subject to certain limitations,
including net operating loss and general business credit carryforwards of $60.3
and $1.0, respectively, which expire periodically through 2019 and 2011,
respectively, foreign tax credit ("FTC") carryforwards of $93.6, which expire
primarily from 2004 through 2006, and alternative minimum tax ("AMT") credit
carryforwards of $26.9, which have an indefinite life. The Company also has AMT
net operating loss and FTC carryforwards of $1.0 and $105.0, respectively,
available, subject to certain limitations, to offset future alternative minimum
taxable income, which expire periodically through 2011 and 2006, respectively.

The Company and its domestic subsidiaries file consolidated federal income tax
returns. During the period from October 28, 1988, through June 30, 1993, the
Company and its domestic subsidiaries were included in the consolidated federal
income tax returns of MAXXAM. The tax allocation agreements of the Company and
KACC with MAXXAM terminated pursuant to their terms, effective for taxable
periods beginning after June 30, 1993. However, payments or refunds for periods
prior to July 1, 1993 related to certain jurisdictions could still be required
pursuant to the Company's and KACC's respective tax allocation agreements with
MAXXAM. Any such payments to MAXXAM by KACC would require approval by the DIP
Facility lenders and the Court.

See Note 12 concerning commitments and contingencies.

10. EMPLOYEE BENEFIT AND INCENTIVE PLANS

Pension and Other Postretirement Benefit Plans. Retirement plans are generally
non-contributory for salaried and hourly employees and generally provide for
benefits based on formulas which consider such items as length of service and
earnings during years of service. The Company's funding policies meet or exceed
all regulatory requirements.

The Company and its subsidiaries provide postretirement health care and life
insurance benefits to eligible retired employees and their dependents.
Substantially all employees may become eligible for those benefits if they reach
retirement age while still working for the Company or its subsidiaries. The
Company has not funded the liability for these benefits, which are expected to
be paid out of cash generated by operations. The Company reserves the right,
subject to applicable collective bargaining agreements, to amend or terminate
these benefits. Assumptions used to value obligations at year-end and to
determine the net periodic benefit cost in the subsequent year are:

Weighted-average assumptions as of December 31,
Discount rate 7.25% 7.75% 7.75% 7.25% 7.75% 7.75%
Expected return on plan assets 9.50% 9.50% 9.50% - - -
Rate of compensation increase 4.00% 4.00% 4.00% 4.00% 4.00% 4.00%

In 2001, the average annual assumed rate of increase in the per capita cost of
covered benefits (i.e., health care cost trend rate) is 7.5% for all
participants. The assumed rate of increase is assumed to decline gradually to
5.0% in 2006 for all participants and remain at that level thereafter.

The following table presents the funded status of the Company's pension and
other postretirement benefit plans as of December 31, 2001 and 2000, and the
corresponding amounts that are included in the Company's Consolidated Balance
Sheets. The December 31, 2000, pension benefit amounts in the following table
have been revised from previous disclosures to include the balances of Alumina
Partners of Jamaica ("Alpart") and Kaiser Bauxite Company ("KBC") that were
already fully reflected in the consolidated balance sheet as of December 31,
2000.

Pension Benefits Medical/Life Benefits
-------------------------------- --------------------------------
2001 2000 2001 2000
-------------- -------------- -------------- -------------
Change in Benefit Obligation:
Obligation at beginning of year $ 871.4 $ 840.6 $ 658.2 $ 615.4
Service cost 38.6 20.6 12.1 5.3
Interest cost 63.6 63.4 48.7 45.0
Currency exchange rate change (1.4) (3.4) - -
Plan participants contributions 2.0 1.7 - -
Curtailments, settlements and amendments .3 33.7 (13.3) (33.4)
Actuarial (gain) loss 33.5 12.0 219.3 79.5
Benefits paid (92.4) (97.2) (56.8) (53.6)
-------------- -------------- -------------- -------------
Obligation at end of year 915.6 871.4 868.2 658.2
-------------- -------------- -------------- -------------

Change in Plan Assets:
FMV of plan assets at beginning of year 791.1 890.6 - -
Actual return on assets (48.5) (14.4) - -
Currency exchange rate change (1.1) (2.8) - -
Employer contributions 21.7 14.9 56.8 53.6
Benefits paid (92.4) (97.2) (56.8) (53.6)
-------------- -------------- -------------- -------------
FMV of plan assets at end of year 670.8 791.1 - -
-------------- -------------- -------------- -------------

Obligation in excess of plan assets 244.8 80.3 868.2 658.2
Unrecognized net actuarial gain (loss) (128.4) 25.4 (240.5) (21.6)
Unrecognized prior service costs (39.9) (45.1) 76.5 78.3
Adjustment required to recognize minimum liability 105.5 3.0 - -
Intangible asset and other 40.3 1.8 - -
-------------- -------------- -------------- -------------
Accrued benefit liability $ 222.3 $ 65.4 $ 704.2 $ 714.9
============== ============== ============== =============

The assets of the Company sponsored pension plans, like numerous other
companies' plans, are, to a substantial degree, invested in the capital markets
and managed by a third party. Given the performance of the stock market during
2001, the Company was required to reflect an additional minimum pension
liability of $64.5 (net of income tax benefit of $38.0) in its 2001 financial
statements as a result of a decline in the value of the assets held by the
Company's pension plans. Minimum pension liability adjustments are non-cash
adjustments that are reflected as an increase in pension liability and an
offsetting charge to stockholders' equity (net of income tax) through
comprehensive income (rather than net income). The Company also anticipates that
the decline in the value of the pension plans' assets will unfavorably impact
pension costs reflected in its 2002 operating results. However, absent a
decision by the Company to increase its contributions to the pension plans as a
result of the 2001 asset performance, such asset performance is not expected to
have a material impact on the Company's near-term liquidity as pension funding
requirements generally allow for such impacts to be spread over multiple years.
Increases in post-2002 pension funding requirements could occur, however, if
capital market performance in future periods does not more closely approximate
the long-term rate of return assumed by the Company, and the amount of such
increases could be material.

The aggregate accumulated benefit obligation and fair value of plan assets for
pension plans with accumulated benefit obligation in excess of plan assets were
$856.1 and $634.7, respectively, as of December 31, 2001, and $789.3 and $748.5,
respectively, as of December 31, 2000. The December 31, 2000 net periodic
benefit costs in the following table have been revised from previous disclosures
to include the balances of Alpart and KBC that were fully reflected in the
statement of consolidated income (loss) for the year ended December 31, 2000.
The costs in the table for 1999 were not revised because the amounts were not
material.

Pension Benefits Medical/Life Benefits
--------------------------------- --------------------------------
2001 2000 1999 2001 2000 1999
---------- ----------- ---------- ---------- ---------- ----------
Components of Net Periodic Benefit Costs:
Service cost $ 38.6 $ 20.6 $ 14.6 $ 12.1 $ 5.3 $ 5.2
Interest cost 63.6 63.4 59.7 48.7 45.0 41.5
Expected return on assets (70.9) (80.8) (72.9) - - -
Amortization of prior service cost 5.5 3.9 3.3 (15.1) (12.8) (12.1)
Recognized net actuarial (gain) loss (.5) (1.9) .7 - - -
---------- ----------- ---------- ---------- ---------- ----------
Net periodic benefit cost 36.3 5.2 5.4 45.7 37.5 34.6
Curtailments, settlements, etc. - .1 .4 - - -
---------- ----------- ---------- ---------- ---------- ----------
Adjusted net periodic benefit costs(1) $ 36.3 $ 5.3 $ 5.8 $ 45.7 $ 37.5 $ 34.6
========== =========== ========== ========== ========== ==========

(1) Approximately $24.5 of the $36.3 adjusted net periodic benefit costs in
2001 and $6.1 of the $5.3 adjusted net periodic benefit costs in 2000
related to pension accruals that were provided in respect to headcount
reductions resulting from the performance improvement program (see Note 6)
and the Pacific Northwest power sales (see Note 7).

Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plan. A one-percentage-point change in assumed
health care cost trend rates would have the following effects:

1% Increase 1% Decrease
------------- -------------

Increase (decrease) to total of service and interest cost $ 6.8 $ (5.0)
Increase (decrease) to the postretirement benefit obligation $ 91.6 $ (64.3)

The foregoing medical benefit liability and cost data does not reflect the fact
that in February 2002, KACC notified its salaried retirees that, given the
significant escalation in medical costs and the increased burden it was
creating, KACC was going to require such retirees to fund a portion of their
medical costs beginning May 1, 2002. The impact of such changes will be to
reduce the estimated cash payments by the Company by approximately $10.0 per
year. The financial statement benefits of this change will, however, be
reflected over the remaining employment period of the Company's employees in
accordance with generally accepted accounting principles.

Postemployment Benefits. The Company provides certain benefits to former or
inactive employees after employment but before retirement.

Restricted Common Stock. During 2001, the Company completed an exchange with
certain employees who held stock options to purchase the Company's Common Stock
whereby a total of approximately 3,617,000 options were exchanged (on a fair
value basis) for approximately 1,086,000 restricted shares of the Company's
Common Stock. The fair value of the restricted shares issued is being amortized
to expense over the three-year period during which the restrictions lapse. In
March 2002, approximately 155,000 restricted shares, all of which had not been
vested, were voluntarily forfeited by certain employees.

Incentive Plans. The Company has an unfunded incentive compensation program,
which provides incentive compensation based on performance against annual plans
and over rolling three-year periods. In addition, the Company has a
"nonqualified" stock option plan and KACC has a defined contribution plan for
salaried employees. The Company's expense for all of these plans was $4.5, $5.7
and $6.0 for the years ended December 31, 2001, 2000 and 1999, respectively.

Up to 8,000,000 shares of the Company's Common Stock were reserved for issuance
under its stock incentive compensation plans. At December 31, 2001, 3,573,728
shares of Common Stock remained available for issuance under those plans. Stock
options granted pursuant to the Company's nonqualified stock option program are
granted at or above the prevailing market price, generally vest at a rate of 20
- - 33% per year, and have a five or ten year term. Information concerning
nonqualified stock option plan activity is shown below. The weighted average
price per share for each year is shown parenthetically.

2001 2000 1999
- ------------------------------------------------------------------------ ------------- -------------- -------------

Outstanding at beginning of year ($10.24, $10.24 and $9.98) 4,375,947 4,239,210 3,049,122
Granted ($2.89, $10.23 and $11.15) 874,280 757,335 1,218,068
Exercised ($7.25) - - (7,920)
Expired or forfeited ($10.39, $11.08 and $11.02) (3,689,520) (620,598) (20,060)
------------- -------------- -------------

Outstanding at end of year ($8.37, $10.24 and $10.24) 1,560,707 4,375,947 4,239,210
============= ============== =============

Exercisable at end of year ($9.09, $10.18 and $10.17) 695,183 2,380,491 1,763,852
============= ============== =============

Options exercisable at December 31, 2001 had exercisable prices ranging from
$1.72 to $12.75 and a weighted average remaining contractual life of 2.7 years.

As a part of a plan of reorganization, it is possible that the interests of the
holders of outstanding options could be diluted or cancelled.

11. MINORITY INTERESTS AND PLEDGED SHARES OF COMMON STOCK

Minority Interests. The Company owns a 90% interest in Volta Aluminium Company
Limited ("Valco") and a 65% interest in Alpart. These companies' financial
statements are fully consolidated into the Company's consolidated financial
statements because they are majority-owned. Interests of Alpart's and Valco's
minority shareholders' (included in "Other" in 2000 and 1999 in the table below)
are included in minority interests together with KACC's Redeemable Preference
Stock, which was redeemed in 2001, and KACC's Preference Stock discussed below.
Changes in minority interests were:

2000 1999
--------------------------- ---------------------------
Redeemable Redeemable
Preference Preference
2001 Stock Other Stock Other
- ------------------------------------------ ------------- -------------- ----------- -------------- ----------
Beginning of period balance $ 101.1 $ 19.5 $ 98.2 $ 20.1 $ 103.4
Redeemable preference stock -
Accretion - - - 1.0 -
Stock redemption - (2.0) (.8) (1.6) -
Reclassification (see below) - (17.5) - - -
Minority interests 17.4 - 3.7 - (5.2)
------------- -------------- ----------- -------------- ----------
End of period balance $ 118.5 $ - $ 101.1 $ 19.5 $ 98.2
============= ============== =========== ============== ==========

In 1985, KACC issued certain of its Redeemable Preference Stock with a par value
of $1 per share and a liquidation and redemption value of $50 per share plus
accrued dividends, if any. In connection with the USWA settlement agreement in
September 2000, KACC redeemed all of the remaining Redeemable Preference Stock
(350,872 shares outstanding at December 31, 2000) during March 2001. At December
31, 2000, given the pending redemption, the redemption value of the unredeemed
shares ($17.5) was classified in Other accrued liabilities. The net cash impact
of the redemption on KACC was only approximately $5.5 because approximately
$12.0 of the redemption amount had previously been funded into redemption funds
(included in Prepaid expenses).

KACC has four series of $100 par value Cumulative Convertible Preference Stock
("$100 Preference Stock") outstanding with annual dividend requirements of
between 4 1/8% and 4 3/4% (included in "Other" in the above table). KACC has the
option to redeem the $100 Preference Stock at par value plus accrued dividends.
KACC does not intend to issue any additional shares of the $100 Preference
Stock. The $100 Preference Stock can be exchanged for per share cash amounts
between $69 - $80. KACC records the $100 Preference Stock at their exchange
amounts for financial statement presentation and the Company includes such
amounts in minority interests. At December 31, 2001 and 2000, outstanding shares
of $100 Preference Stock were 8,969 and 9,250, respectively. In accordance with
the Code and DIP Facility, KACC is not permitted to repurchase any of its stock.
Further, as a part of a plan of reorganization, it is possible that the
interests of the holders of the $100 Preference Stock could be diluted or
cancelled.

Pledged Shares. From time to time MAXXAM or certain of its subsidiaries which
own the Company's Common Stock may use such stock as collateral under various
financing arrangements. At December 31, 2001, 23,443,953 shares of the Company's
Common Stock beneficially owned by MAXXAM Group Holdings Inc. ("MGHI"), a wholly
owned subsidiary of MAXXAM, were pledged as security for $88.2 principal amount
of 12% Senior Secured Notes due 2003 issued by MGHI.

12. COMMITMENTS AND CONTINGENCIES

Impact of Reorganization Proceedings. During the pendency of the Cases,
substantially all pending litigation, except certain environmental claims and
litigation, against the Debtors is stayed. Generally, claims arising from
actions or omissions prior to the Filing Date will be settled in connection with
the plan of reorganization.

Commitments. KACC has a variety of financial commitments, including purchase
agreements, tolling arrangements, forward foreign exchange and forward sales
contracts (see Note 13), letters of credit, and guarantees. Such purchase
agreements and tolling arrangements include long-term agreements for the
purchase and tolling of bauxite into alumina in Australia by QAL. These
obligations are scheduled to expire in 2008. Under the agreements, KACC is
unconditionally obligated to pay its proportional share of debt, operating
costs, and certain other costs of QAL. KACC's share of the aggregate minimum
amount of required future principal payments at December 31, 2001, is $79.4
which matures as follows: $30.4 in 2002, $32.0 in 2003 and $17.0 in 2006. KACC's
share of payments, including operating costs and certain other expenses under
the agreements, has ranged between $92.0 - $103.0 over the past three years.
KACC also has agreements to supply alumina to and to purchase aluminum from
Anglesey.

Minimum rental commitments under operating leases at December 31, 2001, are as
follows: years ending December 31, 2002 - $35.9; 2003 - $32.0; 2004 - $29.2;
2005 - $28.2; 2006 - $27.9; thereafter - $44.6. Pursuant to the Code, the
Debtors may elect to reject or assume unexpired pre-petition leases. At this
time, no decisions have been made as to which significant leases will be
accepted or rejected (see Note 1).

Rental expenses were $41.0, $42.5 and $41.1, for the years ended December 31,
2001, 2000 and 1999, respectively.

KACC has a long-term liability, net of estimated subleases income (included in
Long-term liabilities), on a building in which KACC has not maintained offices
for a number of years, but for which it is responsible for lease payments as
master tenant through 2008 under a sale-and-leaseback agreement. The future
minimum rentals receivable under subleases was $104.5 at December 31, 2001.
During 2000, KACC reduced its net lease obligation by $17.0 (see Note 2) to
reflect new third-party sublease agreements which resulted in occupancy and
lease rates above those previously projected.

Environmental Contingencies. The Company and KACC are subject to a number of
environmental laws, to fines or penalties assessed for alleged breaches of the
environmental laws, and to claims and litigation based upon such laws. KACC
currently is subject to a number of claims under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments Reauthorization Act of 1986 ("CERCLA"), and, along with certain other
entities, has been named as a potentially responsible party for remedial costs
at certain third-party sites listed on the National Priorities List under
CERCLA.

Based on the Company's evaluation of these and other environmental matters, the
Company has established environmental accruals, primarily related to potential
solid waste disposal and soil and groundwater remediation matters. During the
year ended December 31, 2001, KACC's ongoing assessment process resulted in KACC
recording charges of $13.5 (of which $4.5 was recorded in the fourth quarter of
2001 and is included in Other income (expense) - see Note 2) to increase its
environmental accrual. Additionally, KACC's environmental accruals were
increased during the year ended December 31, 2001, by approximately $6.0 in
connection with purchase of certain property. The following table presents the
changes in such accruals, which are primarily included in Long-term liabilities,
for the years ended December 31, 2001, 2000 and 1999:

2001 2000 1999
- ----------------------------------------------------------- ------- ------- -------

Balance at beginning of period $ 46.1 $ 48.9 $ 50.7
Additional accruals 23.1 2.6 1.6
Less expenditures (8.0) (5.4) (3.4)
------- ------- -------

Balance at end of period $ 61.2 $ 46.1 $ 48.9
======= ======= =======

These environmental accruals represent the Company's estimate of costs
reasonably expected to be incurred based on presently enacted laws and
regulations, currently available facts, existing technology, and the Company's
assessment of the likely remediation action to be taken. The Company expects
that these remediation actions will be taken over the next several years and
estimates that annual expenditures to be charged to these environmental accruals
will be approximately $1.3 to $12.2 for the years 2002 through 2006 and an
aggregate of approximately $24.8 thereafter.

As additional facts are developed and definitive remediation plans and necessary
regulatory approvals for implementation of remediation are established or
alternative technologies are developed, changes in these and other factors may
result in actual costs exceeding the current environmental accruals. The Company
believes that it is reasonably possible that costs associated with these
environmental matters may exceed current accruals by amounts that could range,
in the aggregate, up to an estimated $27.0. As the resolution of these matters
is subject to further regulatory review and approval, no specific assurance can
be given as to when the factors upon which a substantial portion of this
estimate is based can be expected to be resolved. However, the Company is
currently working to resolve certain of these matters.

The Company believes that KACC has insurance coverage available to recover
certain incurred and future environmental costs and is pursuing claims in this
regard. However, no amounts have been accrued in the financial statements with
respect to such potential recoveries.

While uncertainties are inherent in the final outcome of these environmental
matters, and it is presently impossible to determine the actual costs that
ultimately may be incurred, management currently believes that the resolution of
such uncertainties should not have a material adverse effect on the Company's
consolidated financial position, results of operations, or liquidity.

Asbestos Contingencies. KACC has been one of many defendants in a number of
lawsuits, some of which involve claims of multiple persons, in which the
plaintiffs allege that certain of their injuries were caused by, among other
things, exposure to asbestos during, and as a result of, their employment or
association with KACC or exposure to products containing asbestos produced or
sold by KACC. The lawsuits generally relate to products KACC has not sold for
more than 20 years.

The following table presents the changes in number of such claims pending for
the years ended December 31, 2001, 2000 and 1999.

2001 2000 1999
- --------------------------------------------------------------------------------- ---------- --------- --------
Number of claims at beginning of period 110,800 100,000 86,400
Claims received 34,000 30,600 29,300
Claims settled or dismissed (32,000) (19,800) (15,700)
---------- --------- --------

Number of claims at end of period 112,800 110,800 100,000
========== ========= ========
Number of claims at end of period (included above) covered by agreements under
which KACC expects to settle over an extended period 49,700 66,900 31,900
========== ========= ========
Due to the Cases, holders of asbestos claims are stayed from continuing to
prosecute pending litigation and from commencing new lawsuits against the
Debtors. However, during the pendency of the Cases, KACC expects additional
asbestos claims will be filed as part of the claims process. A separate
creditors' committee representing the interests of the asbestos claimants has
been appointed. The Debtors' obligations with respect to present and future
asbestos claims will be resolved pursuant to a plan of reorganization.

The Company maintains a liability for estimated asbestos-related costs for
claims filed to date and an estimate of claims to be filed over a 10 year period
(i.e., through 2011). The Company's estimate is based on the Company's view, at
each balance sheet date, of the current and anticipated number of
asbestos-related claims, the timing and amounts of asbestos-related payments,
the status of ongoing litigation and settlement initiatives, and the advice of
Wharton Levin Ehrmantraut Klein & Nash, P.A., with respect to the current
state of the law related to asbestos claims. However, there are inherent
uncertainties involved in estimating asbestos-related costs and the Company's
actual costs could exceed the Company's estimates due to changes in facts and
circumstances after the date of each estimate. Further, while the Company does
not presently believe there is a reasonable basis for estimating
asbestos-related costs beyond 2011 and, accordingly, no accrual has been
recorded for any costs which may be incurred beyond 2011, the Company expects
that the plan of reorganization process may require an estimation of KACC's
entire asbestos-related liability, which may go beyond 2011, and that such costs
could be substantial.

The Company believes that KACC has insurance coverage available to recover a
substantial portion of its asbestos-related costs. Although the Company has
settled asbestos-related coverage matters with certain of its insurance
carriers, other carriers have not yet agreed to settlements and disputes with
certain carriers exist. The timing and amount of future recoveries from these
and other insurance carriers will depend on the pendency of the Cases and on the
resolution of any disputes regarding coverage under the applicable insurance
policies. The Company believes that substantial recoveries from the insurance
carriers are probable and additional amounts may be recoverable in the future if
additional claims are added. The Company reached this conclusion after
considering its prior insurance-related recoveries in respect of
asbestos-related claims, existing insurance policies, and the advice of Heller
Ehrman White & McAuliffe LLP with respect to applicable insurance coverage
law relating to the terms and conditions of those policies. During 2000, KACC
filed suit against a group of its insurers, after negotiations with certain of
the insurers regarding an agreement covering both reimbursement amounts and the
timing of reimbursement payments were unsuccessful. During October 2001, the
court ruled favorably on a number of issues, and during February 2002, an
intermediate appellate court also ruled favorably on an issue involving
coverage. The rulings did not result in any changes to the Company's estimates
of its current or future asbestos-related insurance recoveries. Other courts may
hear additional issues from time to time. Moreover, KACC expects to amend its
lawsuit during the second quarter of 2002 to add additional insurers who may
have responsibility to respond for asbestos-related costs. Given the expected
significance of probable future asbestos-related payments, the receipt of timely
and appropriate payments from such insurers is critical to a successful plan of
reorganization and KACC's long-term liquidity.

The following tables present historical information regarding KACC's
asbestos-related balances and cash flows:

December 31,
--------------------------------
2001 2000
- ---------------------------------------------------------------- -------------- --------------
Liability (current portion of $130.0 in both years) $ 621.3 $ 492.4
Receivable (included in Other assets)(1) 501.2 406.3
-------------- --------------

$ 120.1 $ 86.1
============== ==============

(1) The asbestos-related receivable was determined on the same basis as the
asbestos-related cost accrual. However, no assurances can be given that
KACC will be able to project similar recovery percentages for future
asbestos-related claims or that the amounts related to future
asbestos-related claims will not exceed KACC's aggregate insurance
coverage. As of December 31, 2001 and 2000, $33.0 and $36.9, respectively,
of the receivable amounts relate to costs paid. The remaining receivable
amounts relate to costs that are expected to be paid by KACC in the future.

Year Ended December 31, Inception
-------------------------------------------
2001 2000 1999 To Date
------------ ------------ ------------- ---------------
Payments made, including related legal costs................ $ 118.1 $ 99.5 $ 24.6 $ 338.6
Insurance recoveries........................................ 90.3 62.8 6.6 221.6
------------ ------------ ------------- ---------------
$ 27.8 $ 36.7 $ 18.0 $ 117.0
============ ============ ============= ===============

During the pendency of the Cases, all asbestos litigation is stayed. As a
result, the Company does not expect to make any asbestos payments in the near
term. Despite the Cases, the Company continues to pursue insurance collections
in respect of asbestos-related amounts paid prior to the Filing Date.

Management continues to monitor claims activity, the status of lawsuits
(including settlement initiatives), legislative developments, and costs incurred
in order to ascertain whether an adjustment to the existing accruals should be
made to the extent that historical experience may differ significantly from the
Company's underlying assumptions. This process resulted in the Company
reflecting charges of $57.2, $43.0 and $53.2 (included in Other income (expense)
- - see Note 2) in the years ended December 31, 2001, 2000 and 1999, respectively,
for asbestos-related claims, net of expected insurance recoveries, based on
recent cost and other trends experienced by KACC and other companies. Additional
asbestos-related claims are likely to be filed against KACC as a part of the
Chapter 11 process. Management cannot reasonably predict the ultimate number of
such claims or the amount of the associated liability. However, it is likely
that such amounts could exceed, perhaps significantly, the liability amounts
reflected in the Company's consolidated financial statements, which (as
previously stated) is only reflective of an estimate of claims over the next
ten-year period. KACC's obligations in respect of the currently pending and
future asbestos-related claims will ultimately be determined (and resolved) as a
part of the overall Chapter 11 proceedings. It is anticipated that resolution of
these matters will be a lengthy process. Management will continue to
periodically reassess its asbestos-related liabilities and estimated insurance
recoveries as the Cases proceed. However, absent unanticipated developments such
as asbestos-related legislation, material developments in other asbestos-related
proceedings or in the Company's or KACC's Chapter 11 proceedings, it is not
anticipated that the Company will have sufficient information to reevaluate its
asbestos-related obligations and estimated insurance recoveries until much later
in the Cases. Any adjustments ultimately deemed to be required as a result of
the reevaluation of KACC's asbestos-related liabilities or estimated insurance
recoveries could have a material impact on the Company's future financial
statements.

Labor Matters. In connection with the USWA strike and subsequent lock-out by
KACC, which was settled in September 2000, certain allegations of unfair labor
practices ("ULPs") were filed with the National Labor Relations Board ("NLRB")
by the USWA. As previously disclosed, KACC responded to all such allegations and
believes that they were without merit. Twenty-two of twenty-four allegations of
ULPs previously brought against KACC by the USWA have been dismissed. A trial
before an administrative law judge for the two remaining allegations concluded
in September 2001. A decision is not expected until sometime after the second
quarter of 2002. Any outcome from the trial before the administrative law judge
would be subject to additional appeals by the general counsel of the NLRB, the
USWA or KACC. This process could take months or years. This matter is currently
not stayed by the Cases. The Company continues to believe that the charges are
without merit. While uncertainties are inherent in matters such as this and it
is presently impossible to determine the remedy, if any, that may ultimately
arise in connection with this matter, the Company does not believe that the
ultimate outcome of this matter will have a material adverse impact on the
Company's liquidity or financial position. However, no assurances can be given
in this regard. Amounts due, if any, in satisfaction of this matter could be
significant to the results of the period in which they are recorded. If these
proceedings eventually resulted in a final ruling against KACC with respect to
either allegation, it could be liable for back pay to USWA members at the five
plants and such amount could be significant. Any liability ultimately determined
to exist in this matter will be dealt with in the overall context of the
Debtors' plan of reorganization.

Dispute with MAXXAM. In March 2002, MAXXAM filed a declaratory action with the
Court asking the Court to find that it has no further obligations to the Debtors
under the tax allocation agreements discussed in Note 9. MAXXAM asserts that the
agreements are personal contracts and financial accommodations which cannot be
assumed under the Code. At December 31, 2001, the Company had a receivable from
MAXXAM of $35.0 (included in Other assets) outstanding under the tax allocation
agreement in respect of various tax contingencies in an equal amount (reflected
in Long-term liabilities). The Company believes that MAXXAM's position is
without merit and that MAXXAM will be required to satisfy its obligations under
the tax allocation agreements.

Other Contingencies. The Company or KACC is involved in various other claims,
lawsuits, and other proceedings relating to a wide variety of matters related to
past or present operations. While uncertainties are inherent in the final
outcome of such matters, and it is presently impossible to determine the actual
costs that ultimately may be incurred, management currently believes that the
resolution of such uncertainties and the incurrence of such costs should not
have a material adverse effect on the Company's consolidated financial position,
results of operations, or liquidity.

13. DERIVATIVE FINANCIAL INSTRUMENTS AND RELATED HEDGING PROGRAMS

In conducting its business, KACC uses various instruments, including forward
contracts and options, to manage the risks arising from fluctuations in aluminum
prices, energy prices and exchange rates. KACC enters into hedging transactions
from time to time to limit its exposure resulting from (1) its anticipated sales
of alumina, primary aluminum, and fabricated aluminum products, net of expected
purchase costs for items that fluctuate with aluminum prices, (2) the energy
price risk from fluctuating prices for natural gas, fuel oil and diesel oil used
in its production process, and (3) foreign currency requirements with respect to
its cash commitments with foreign subsidiaries and affiliates.

As KACC's hedging activities are generally designed to lock-in a specified price
or range of prices, gains or losses on the derivative contracts utilized in
these hedging activities (except the impact of those contracts discussed below
which have been marked to market) will generally offset at least a portion of
any losses or gains, respectively, on the transactions being hedged. See Note 2
for a discussion of the effects of the new accounting requirements under SFAS
No. 133, which is being used for reporting results beginning with the first
quarter of 2001.

Because the agreements underlying KACC's hedging positions provided that the
counterparties to the hedging contracts could liquidate KACC's hedging positions
if KACC filed for reorganization, KACC chose to liquidate these positions in
advance of the Filing Date. Proceeds from the liquidation totaled approximately
$42.2. Gains or losses associated with these liquidated positions have been
deferred and are being recognized over the original hedging periods as the
underlying purchases/sales are still expected to occur. The amount of
gains/losses deferred are as follows: gains of $30.2 for aluminum contracts,
losses of $5.0 for Australian dollars and $1.9 for energy contracts. The
following table summarizes KACC's derivative hedging positions at December 31,
2001:

Carrying/
Market
Commodity Period Value
- ------------------------------------------------------------ ---------------- --------------

Aluminum -
Option contracts and swaps 2002 $ 40.8
Option contracts 2003 11.9
Australian dollars - Option contracts 2002 to 2005 4.0
Energy -
Natural gas - Option contracts and swaps 1/02 to 3/02 (1.2)
Fuel Oil - Swaps 1/02 to 3/02 .7

During the first quarter of 2001, the Company recorded a mark-to-market benefit
of $6.8 (included in Other income (expense)) related to the application of SFAS
No. 133. However, starting in the second quarter of 2001, the income statement
impact of mark-to-market changes was essentially eliminated as unrealized gains
or losses resulting from changes in the value of these hedges began being
recorded in other comprehensive income (see Note 2) based on changes in SFAS No.
133 enacted in April 2001.

During late 1999 and early 2000, KACC entered into certain aluminum contracts
with a counterparty. While the Company believed that the transactions were
consistent with its stated hedging objectives, these positions did not qualify
for treatment as a "hedge" under accounting guidelines. Accordingly, the
positions were marked-to-market each period. A recap of mark-to-market pre-tax
gains (losses) for these positions, together with the amount discussed in the
paragraph above, is provided in Note 2. During the fourth quarter of 2001, KACC
liquidated all of the remaining positions. This resulted in the recognition of
approximately $3.3 of additional mark-to-market income during the fourth quarter
of 2001.

As of December 31, 2001, KACC had sold forward substantially all of the alumina
available to it in excess of its projected internal smelting requirements for
2002 and 2003, respectively, at prices indexed to future prices of primary
aluminum.

14. SUBSEQUENT EVENT

Subsequent to December 31, 2001, KACC paid an aggregate of $10.0 into two
separate trusts funds in respect of (a) potential liability obligations of
directors and officers and (b) certain obligations attributable to certain
management compensation agreements. These payments will result in an approximate
$5.0 increase in Other assets and an approximate $5.0 charge to selling,
administrative, research and development, and general expenses in 2002.

15. SEGMENT AND GEOGRAPHICAL AREA INFORMATION

The Company's operations are located in many foreign countries, including
Australia, Canada, Ghana, Jamaica, and the United Kingdom. Foreign operations in
general may be more vulnerable than domestic operations due to a variety of
political and other risks. Sales and transfers among geographic areas are made
on a basis intended to reflect the market value of products.

The Company's operations are organized and managed by product type. The Company
operations include four operating segments of the aluminum industry and its
commodities marketing and corporate segments. The aluminum industry segments
include: Alumina and bauxite, Primary aluminum, Flat-rolled products and
Engineered products. The Alumina and bauxite business unit's principal products
are smelter grade alumina and chemical grade alumina hydrate, a value-added
product, for which the Company receives a premium over smelter grade market
prices. The Primary aluminum business unit produces commodity grade products as
well as value-added products such as rod and billet, for which the Company
receives a premium over normal commodity market prices. The Flat-rolled products
group sells value-added products such as heat treat aluminum sheet and plate
which are used in the aerospace and general engineering markets as well as
selling to the beverage container and specialty coil markets. The Engineered
products business unit serves a wide range of industrial segments including the
automotive, distribution, aerospace and general engineering markets. The Company
uses a portion of its bauxite, alumina and primary aluminum production for
additional processing at its downstream facilities. Transfers between business
units are made at estimated market prices. The Commodities marketing segment
includes the results of KACC's alumina and aluminum hedging activities (see Note
13). The accounting policies of the segments are the same as those described in
Note 2. Business unit results are evaluated internally by management before any
allocation of corporate overhead and without any charge for income taxes,
interest expense or non-recurring charges.

Financial information by operating segment at December 31, 2001, 2000 and 1999
is as follows:

Year Ended December 31,
-----------------------------------------
2001 2000 1999
- --------------------------------------------------------------------------- ----------- ----------- -----------
Net Sales:
Bauxite and Alumina:(1)
Net sales to unaffiliated customers $ 508.3 $ 442.2 $ 395.8
Intersegment sales 77.9 148.3 129.0
----------- ----------- -----------
586.2 590.5 524.8
----------- ----------- -----------
Primary Aluminum:(2)
Net sales to unaffiliated customers 358.9 563.7 432.9
Intersegment sales 3.8 242.3 240.6
----------- ----------- -----------
362.7 806.0 673.5
----------- ----------- -----------
Flat-Rolled Products 308.0 521.0 591.3
Engineered Products 429.5 564.9 556.8
Commodities Marketing 22.9 (25.4) 18.3
Minority Interests 105.1 103.4 88.5
Eliminations (81.7) (390.6) (369.6)
----------- ----------- -----------
$ 1,732.7 $ 2,169.8 $ 2,083.6
=========== =========== ===========
Equity in income (loss) of unconsolidated affiliates:
Bauxite and Alumina $ (2.3) $ (8.4) $ 3.4
Primary Aluminum 4.0 3.6 (1.0)
Engineered Products and Other - - 2.5
----------- ----------- -----------
$ 1.7 $ (4.8) $ 4.9
=========== =========== ===========
Operating income (loss):
Bauxite and Alumina - Note 3 $ (46.9) $ 57.2 $ (10.5)
Primary Aluminum (3) 5.1 100.1 (4.8)
Flat-Rolled Products .4 16.6 17.1
Engineered Products 4.6 34.1 38.6
Commodities Marketing 5.6 (48.7) 21.3
Micromill - (.6) (11.6)
Eliminations 1.0 .1 6.9
Corporate and Other (68.5) (61.4) (61.8)
Non-Recurring Operating Items - Note 6 163.6 41.9 (24.1)
----------- ----------- -----------
$ 64.9 $ 139.3 $ (28.9)
=========== =========== ===========

(1) Net sales for 2001, 2000 and 1999, included approximately 115,000 tons,
322,000 tons and 395,000 tons, respectively, of alumina purchased from
third parties.
(2) Beginning in the first quarter of 2001, as a result of the continuing
curtailment of KACC's Northwest smelters, the Flat-rolled products business
unit began purchasing its own primary aluminum rather than relying on the
Primary aluminum business unit to supply its aluminum requirements through
production or third party purchases. The Engineered products business unit
was already responsible for purchasing the majority of its primary aluminum
requirements. During the years ended December 31, 2001, 2000 and 1999, the
Primary aluminum business unit purchased approximately 27,300 tons, 56,100
tons and 12,000 tons, respectively, of primary aluminum from third parties
to meet existing third party commitments.
(3) Operating income (loss) for 1999 included potline preparation and restart
costs of $12.8.

Year Ended December 31,
-----------------------------------------
2001 2000 1999
- --------------------------------------------------------------------------- ----------- ----------- -----------
Depreciation and amortization:
Bauxite and Alumina - Note 3 $ 37.8 $ 22.2 $ 29.7
Primary Aluminum 21.6 24.8 27.8
Flat-Rolled Products 16.9 16.7 16.2
Engineered Products 12.8 11.5 10.7
Corporate and Other (includes Micromill in 1999) 1.1 1.7 5.1
----------- ----------- -----------
$ 90.2 $ 76.9 $ 89.5
=========== =========== ===========
Capital expenditures:
Bauxite and Alumina - Note 3 $ 117.8 $ 254.6 $ 30.4
Primary Aluminum 8.7 9.6 12.8
Flat-Rolled Products 1.5 7.6 16.6
Engineered Products - Note 5 19.9 23.6 7.8
Corporate and Other .8 1.1 .8
----------- ----------- -----------
$ 148.7 $ 296.5 $ 68.4
=========== =========== ===========

December 31,
--------------------------------
2001 2000
- ---------------------------------------------------------------------- -------------- --------------
Investments in and advances to unconsolidated affiliates:
Bauxite and Alumina - Note 4 $ 43.9 $ 56.0
Primary Aluminum 18.8 19.0
Corporate and Other - Note 4 .3 2.8
-------------- --------------

$ 63.0 $ 77.8
============== ==============
Segment assets:
Bauxite and Alumina $ 922.5 $ 957.0
Primary Aluminum - Note 7 467.0 623.3
Flat-Rolled Products 261.5 337.7
Engineered Products 233.8 232.9
Commodities Marketing 48.4 62.1
Corporate and Other - Note 9 810.5 1,130.1
-------------- --------------

$ 2,743.7 $ 3,343.1
============== ==============

Geographical information for net sales, based on country of origin, and
long-lived assets follows:

Year Ended December 31,
---------------------------------------------
2001 2000 1999
- --------------------------------------------------------- ------------ ------------- ------------
Net sales to unaffiliated customers:
United States $ 1,017.3 $ 1,350.1 $ 1,439.6
Jamaica 219.4 298.5 233.1
Ghana 221.3 237.5 153.2
Other Foreign 274.7 283.7 257.7
------------ ------------- ------------
$ 1,732.7 $ 2,169.8 $ 2,083.6
============ ============= ============

December 31,
-----------------------------
2001 2000
- ------------------------------------------------------- ------------ -------------
Long-lived assets: (1)
United States $ 832.5 $ 809.0
Jamaica 303.8 290.3
Ghana 83.3 80.8
Other Foreign 58.8 73.8
------------ -------------
$ 1,278.4 $ 1,253.9
============ =============

(1) Long-lived assets include Property, plant, and equipment, net and
Investments in and advances to unconsolidated affiliates.

The aggregate foreign currency gain included in determining net income was
immaterial for the years ended December 31, 2001, 2000 and 1999. No single
customer accounted for sales in excess of 10% of total revenue in 2001, 2000 and
1999. Export sales were less than 10% of total revenue during the years ended
December 31, 2001, 2000 and 1999.

Quarter Ended
-------------------------------------------------------------
(In millions of dollars, except share amounts) March 31, June 30, September 30, December 31,
- -------------------------------------------------------- -------------- ---------- -------------- --------------

2001
Net sales $ 480.3 $ 446.8 $ 430.3 $ 375.3
Operating income (loss) 215.4 (27.6) (36.1) (86.8)
Net income (loss) 119.6 (1) (64.1)(2) 68.4 (3) (583.3)(4)
Basic/Diluted Earnings per share 1.50 (1) (.80)(2) .85 (3) (7.23)(4)
Common stock market price:(11)
High 4.44 4.90 4.45 3.34
Low 3.23 3.25 2.57 1.56
2000
Net sales $ 575.7 $ 552.8 $ 545.2 $ 496.1
Operating income 36.9 51.5 2.8 48.1
Net income (loss) 11.7 (5) 11.0 (6) (16.8)(7) 10.9 (8)
Basic/Diluted Earnings (loss) per share .15 (5) .14 (6) (.21)(7) .14 (8)
Common stock market price:(11)
High 8.88 5.13 6.06 5.94
Low 4.13 2.94 3.50 3.50
1999
Net sales $ 490.3 $ 536.2 $ 528.7 $ 528.4
Operating income (loss) (33.0) .7 (12.1) 15.5
Net income (loss) (38.2) (15.7) (39.2)(9) 39.0 (10)
Basic/Diluted Earnings (loss) per share (.48) (.20) (.49)(9) .49 (10)
Common stock market price:(11)
High 6.94 10.13 9.69 8.25
Low 4.75 5.00 6.63 6.00

(1) Includes the following pre-tax items: a gain of $228.2 from the sale of
power and $15.3 of mark-to-market ("MTM") non-operating gains offset by
a non-cash charge of $7.5 for asbestos-related claims, abnormal Gramercy
start-up costs of $19.0 and excess overhead and other costs associated
with curtailed Northwest smelting operations of $6.0. Excluding these
items, results would have been a basic loss per share of approximately
$.12.
(2) Includes the following pre-tax items: a non-cash charge of $45.8 for
asbestos-related claims, a non-cash charge of $8.0 for an adjustment to
environmental liabilities, abnormal Gramercy start-up costs of $22.0 and
certain other net non-recurring charges totaling $12.2 offset by a gain
of $15.2 for Gramercy business interruption recoveries. Excluding these
items, results would have been a basic loss per share of approximately
$.25.
(3) Includes the following pre-tax items: a gain of $163.6 from sale of QAL
interest, $13.9 of MTM non-operating gains and a gain of $21.4 for
Gramercy business interruption recoveries offset by charges of $24.5 for
restructuring, abnormal Gramercy start-up costs of $13.9 and certain
other net non-recurring charges totaling $1.6. Excluding these items,
results would have been a basic loss per share of approximately $.31.
(4) Includes increase in valuation allowances for net deferred income tax
assets of $505.4 and the following pre-tax items: charges for
restructuring of $8.2, abnormal Gramercy start-up and other costs of
$16.5, contract labor costs related to smelter curtailment of $9.4,
impairment charges related to Trentwood equipment of $17.7 and certain
other net non-recurring charges totaling $9.6. Excluding these items,
results would have been basic loss per share of approximately $.43.
(5) Includes the following pre-tax items: MTM non-operating gains of $14.4
offset by a charge of $2.0 for restructuring. Excluding these items,
results would have been basic income per share of approximately $.05.
(6) Includes the following pre-tax items: a gain of $15.8 from the sale of
power offset by certain other non-recurring charges totaling $7.9.
Excluding these items, results would have been basic income per share of
approximately $.08.
(7) Includes the following pre-tax items: a labor settlement charge of
$38.5, a non-cash charge of $43.0 for asbestos-related claims, a charge
of $11.5 for incremental maintenance spending and charges of $18.1 for
non-recurring impairment and restructuring charges offset by a gain of
$40.5 from the sale of power, gains of $39.0 related to real estate
transactions and $.9 of MTM non-operating gains. Excluding these items,
results would have been basic income per share of approximately $.03.
(8) Includes the following pre-tax items: a gain of $103.2 from the sale of
power offset by a non-cash impairment loss of approximately $33.0, a
charge of $26.2 for operating profit foregone as a result of power sales
and certain other net non-operating charges totaling $10.9. Excluding
these items, but giving effect to operating profit foregone as a result
of these power sales, results would have been basic loss per share of
approximately $.19.
(9) Includes the following pre-tax items: a non-cash charge of $19.1 to
reduce the carrying value of the Company's Micromill assets, a non-cash
charge of $15.2 for asbestos-related claims and certain other
non-operating charges totaling $10.9. Excluding these items, results
would have been basic loss per share of approximately $.11.
(10) Includes the following pre-tax items: a gain of $85.0 on involuntary
conversion at Gramercy facility (see Note 3) offset by $12.8 of MTM
non-operating charges. Excluding this item, results would have been
basic loss per share of approximately $.11.
(11) As part of a plan of reorganization, it is possible that the interests
of the Company's existing stockholders could be diluted or cancelled.

FIVE-YEAR FINANCIAL DATA
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------

December 31,
------------------------------------------------------------
(In millions of dollars) 2001 2000 1999 1998 1997
- ----------------------------------------------------------- ----------- ----------- ---------- ----------- ----------
ASSETS (1)
Current assets:
Cash and cash equivalents $ 153.3 $ 23.4 $ 21.2 $ 98.3 $ 15.8
Receivables 206.4 429.8 261.0 282.7 340.2
Inventories 313.3 396.2 546.1 543.5 568.3
Prepaid expenses and other current assets 86.2 162.7 145.6 105.5 121.3
----------- ----------- ---------- ----------- ----------
Total current assets 759.2 1,012.1 973.9 1,030.0 1,045.6

Investments in and advances to unconsolidated affiliates 63.0 77.8 96.9 128.3 148.6
Property, plant, and equipment - net 1,215.4 1,176.1 1,053.7 1,108.7 1,171.8
Deferred income taxes - 454.2 440.0 377.9 330.6
Other assets 706.1 622.9 634.3 346.0 317.3
----------- ----------- ---------- ----------- ----------
Total $ 2,743.7 $ 3,343.1 $ 3,198.8 $ 2,990.9 $ 3,013.9
=========== =========== ========== =========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accruals $ 515.0 $ 673.5 $ 500.3 $ 432.7 $ 457.3
Accrued postretirement medical benefit obligation -
current portion 62.0 58.0 51.5 48.2 45.3
Payable to affiliates 52.9 78.3 85.8 77.1 82.7
Long-term debt - current portion 173.5 31.6 .3 .4 8.8
----------- ----------- ---------- ----------- ----------
Total current liabilities 803.4 841.4 637.9 558.4 594.1

Long-term liabilities 919.9 703.7 727.1 532.9 491.9
Accrued postretirement medical benefit obligation 642.2 656.9 678.3 694.3 720.3
Long-term debt 700.8 957.8 972.5 962.6 962.9
Minority interests 118.5 101.1 117.7 123.5 127.7

Stockholders' equity:
Common stock .8 .8 .8 .8 .8
Additional capital 539.1 537.5 536.8 535.4 533.8
Retained earnings (accumulated deficit) (913.7) (454.3) (471.1) (417.0) (417.6)
Accumulated other comprehensive income (loss) (67.3) (1.8) (1.2) - -
----------- ----------- ---------- ----------- ----------
Total stockholders' equity (441.1) 82.2 65.3 119.2 117.0
----------- ----------- ---------- ----------- ----------
Total $ 2,743.7 $ 3,343.1 $ 3,198.8 $ 2,990.9 $ 3,013.9
=========== =========== ========== =========== ==========

Debt-to-capital ratio(2) 147.9 81.2 81.2 76.9 77.8

(1) Prepared on a "going concern" basis. See Notes 1 and 2 of Notes to
Consolidated Financial Statements for a discussion of the possible impact
of the Cases.

(2) Total of long-term debt - current portion and long-term debt (collectively
"total debt") as a ratio of total debt, deferred income tax liabilities,
minority interests, and stockholders' equity.

FIVE-YEAR FINANCIAL DATA
STATEMENTS OF CONSOLIDATED INCOME (LOSS)
- --------------------------------------------------------------------------------

Year Ended December 31,
-----------------------------------------------------------------
(In millions of dollars, except share amounts) 2001 2000 1999 1998 1997
- ----------------------------------------------------- ------------ ----------- ----------- ----------- -----------
(1)
Net sales $ 1,732.7 $ 2,169.8 $ 2,083.6 $ 2,302.4 $ 2,423.3
------------ ----------- ----------- ----------- -----------

Costs and expenses:
Cost of products sold 1,638.4 1,891.4 1,893.5 1,892.2 2,001.3
Depreciation and amortization 90.2 76.9 89.5 99.1 102.5
Selling, administrative, research and development,
and general 102.8 104.1 105.4 115.5 131.8
Non-recurring operating items (163.6) (41.9) 24.1 105.0 19.7
------------ ----------- ----------- ----------- -----------
Total costs and expenses 1,667.8 2,030.5 2,112.5 2,211.8 2,255.3
------------ ----------- ----------- ----------- -----------

Operating income (loss) 64.9 139.3 (28.9) 90.6 168.0

Other income (expense):
Interest expense (109.0) (109.6) (110.1) (110.0) (110.7)
Gain on sale of interest in QAL 163.6 - - - -
Gain on involuntary conversion at Gramercy facility - - 85.0 - -
Other - net (32.8) (4.3) (35.9) 3.5 3.0
------------ ----------- ----------- ----------- -----------

Income (loss) before income taxes, minority interests 86.7 25.4 (89.9) (15.9) 60.3

(Provision) benefit for income taxes (550.2) (11.6) 32.7 16.4 (8.8)

Minority interests 4.1 3.0 3.1 .1 (3.5)
------------ ----------- ----------- ----------- -----------

Net income (loss) (459.4) 16.8 (54.1) .6 48.0

Preferred stock dividends - - - - (5.5)
------------ ----------- ----------- ----------- -----------
Net income (loss) available to common shareholders $ (459.4) $ 16.8 $ (54.1) $ .6 $ 42.5
============ =========== =========== =========== ===========

Earnings (loss) per share:
Basic/Diluted $ (5.73) $ .21 $ (.68) $ .01 $ .57
============ =========== =========== =========== ===========

Dividends per common share $ - $ - $ - $ - $ -
============ =========== =========== =========== ===========
Weighted average shares outstanding (000):
Basic 80,235 79,520 79,336 79,115 74,221

Diluted 80,235 79,523 79,336 79,156 74,382

(1) Prepared on a "going concern" basis. See Notes 1 and 2 of Notes to
Consolidated Financial Statements for a discussion of the possible impact
of the Cases.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information, as of April 11, 2002, with
respect to the executive officers and directors of the Company and the executive
officers of KACC. All officers and directors hold office until their respective
successors are elected and qualified or until their earlier resignation or
removal.

NAME POSITIONS AND OFFICES WITH THE COMPANY AND KACC*
- ------------------------------ ------------------------------------------------------------------------
Jack A. Hockema President, Chief Executive Officer and Director
Joseph A. Bonn Executive Vice President, Corporate Development
John T. La Duc Executive Vice President and Chief Financial Officer
Harvey L. Perry Executive Vice President of the Company and KACC and President of
Global Commodity Products of KACC
John Barneson Senior Vice President and Chief Administrative Officer
Kris S. Vasan Senior Vice President, Strategic Risk Management
James L. Chapman Vice President of Primary Aluminum Operations**
Robert E. Cole Vice President, Government Affairs**
Edward F. Houff Vice President and General Counsel
Edward A. Kaplan Vice President of Taxes
W. Scott Lamb Vice President, Investor Relations and Corporate Communications
Daniel D. Maddox Vice President and Controller
Daniel J. Rinkenberger Vice President of Economic Analysis and Planning
Kerry A. Shiba Vice President and Treasurer
Robert W. Warnock Vice President, Performance Measurement and Analysis
John Wm. Niemand II Secretary
Robert J. Cruikshank Director
James T. Hackett Director
George T. Haymaker, Jr. Chairman of the Board and Director
Charles E. Hurwitz Director
Ezra G. Levin Director

- ---------------------------
* Except as otherwise indicated, positions are with both the Company and KACC
** KACC only

Jack A. Hockema. Mr. Hockema, age 55, was elected to the position of President
and Chief Executive Officer and as a director of the Company and KACC in October
2001. He previously served as Executive Vice President and President of Kaiser
Fabricated Products of KACC from January 2000 until October 2001 and Executive
Vice President of the Company from May 2000 until October 2001. He served as
Vice President of the Company from May 1997 until May 2000. Mr. Hockema was Vice
President of KACC and President of Kaiser Engineered Products from March 1997
until January 2000. He served as President of Kaiser Extruded Products and
Engineered Components from September 1996 to March 1997. Mr. Hockema served as a
consultant to KACC and acting President of Kaiser Engineered Components from
September 1995 until September 1996. Mr. Hockema was an employee of KACC from
1977 to 1982, working at KACC's Trentwood facility, and serving as plant manager
of its former Union City, California, can plant and as operations manager for
Kaiser Extruded Products. Mr. Hockema left KACC to become Vice President and
General Manager of Bohn Extruded Products, a division of Gulf+Western, and later
served as Group Vice President of American Brass Specialty Products until June
1992. From June 1992 until September 1996, Mr. Hockema provided consulting and
investment advisory services to individuals and companies in the metals
industry.

Joseph A. Bonn. Mr. Bonn, age 58, was elected to the position of Executive Vice
President, Corporate Development of the Company and KACC effective August 2001.
He previously served as Vice President, Commodities Marketing, Corporate
Planning and Development of the Company from May 2000 through August 2001 and of
KACC from September 1999 through August 2001. He served as Vice President,
Planning and Development of KACC from March 1997 through September 1999 and as
Vice President of the Company from May 1997 through May 2000. He served as Vice
President, Planning and Administration of the Company and KACC from February
1992 and July 1989, respectively, through May 1997 and July 1997, respectively.
Mr. Bonn was first elected a Vice President of KACC in April 1987. He served as
Senior Vice President--Administration of MAXXAM from September 1991 through
December 1992. He was also KACC's Director of Strategic Planning from April 1987
until July 1989. From September 1982 to April 1987, Mr. Bonn served as General
Manager of various aluminum fabricating divisions of KACC. Mr. Bonn also serves
as a director of National Refractories Corporation.

John T. La Duc. Mr. La Duc, age 59, was elected Executive Vice President and
Chief Financial Officer of the Company effective September 1998, and of KACC
effective July 1998. Mr. La Duc served as Vice President and Chief Financial
Officer of the Company from June 1989 and May 1990, and was Treasurer of the
Company from August 1995 until February 1996 and from January 1993 until April
1993. He also was Treasurer of KACC from June 1995 until February 1996, and
served as Vice President and Chief Financial Officer of KACC from June 1989 and
January 1990, respectively. He previously served as Senior Vice President of
MAXXAM from September 1990 through December 2001. Until December 2001, Mr. La
Duc also served as a Vice President and a director of MAXXAM Group Holdings
Inc., a wholly owned subsidiary of MAXXAM and parent of MAXXAM's forest products
operations ("MGHI"), as a Vice President and manager on the Board of Managers of
Scotia Pacific Company LLC ("Scopac LLC"), a wholly owned subsidiary of MAXXAM
engaged in forest product operations and successor by merger in July 1998 to
Scotia Pacific Holding Company, and as a director and Vice President of The
Pacific Lumber Company, the parent of Scopac LLC ("Pacific Lumber").

Harvey L. Perry. Mr. Perry, age 47, was elected to the position of Executive
Vice President of the Company and as Executive Vice President and President of
Global Commodity Products of KACC effective August 2001. Prior to joining the
Company, Mr. Perry held a number of operation management positions with Johns
Manville Corporation, a manufacturer of insulation and building products, where
he most recently served as Senior Vice President of the Engineered Products
Group from January 1996 through April 2001.

John Barneson. Mr. Barneson, age 51, was elected to the position of Senior Vice
President and Chief Administrative Officer of the Company and KACC effective
August 2001. He previously served as Vice President and Chief Administrative
Officer of the Company and KACC from December 1999 through August 2001. He
served as Engineered Products Vice President of Business Development and
Planning from September 1997 until December 1999. Mr. Barneson served as
Flat-Rolled Products Vice President of Business Development and Planning from
April 1996 until September 1997. Mr. Barneson has been an employee of KACC since
September 1975 and has held a number of staff and operation management positions
within the flat-rolled and engineered products business units.

Kris S. Vasan. Mr. Vasan, age 52, was elected to the position of Senior Vice
President, Strategic Risk Management of the Company and KACC effective August
2001. In March 2002, he also was appointed Senior Vice President of Strategic
Planning, Energy and Hedging of KACC's commodities business unit. Mr. Vasan
previously served as Vice President, Strategic Risk Management of KACC from June
2000 through August 2001 and of the Company from August 2000 through August
2001. He served as Vice President, Financial Risk Management of KACC from June
1995 through June 2000. Mr. Vasan served as Treasurer of the Company from April
1993 until August 1995 and as Treasurer of KACC from April 1993 until June 1995.
Prior to that, Mr. Vasan served the Company and KACC as Corporate Director of
Financial Planning and Analysis from June 1990 until April 1993. From October
1987 until June 1990, he served as Associate Director of Financial Planning and
Analysis.

James L. Chapman. Mr. Chapman, age 52, was elected to the position of Vice
President of Primary Aluminum Operations of KACC effective July 2000. He served
as special assistant to the Company's and KACC's Chief Executive Officer from
March 2000 through July 2000, served as Northwest Operations Manager from August
1999 through March 2000, and held plant manager positions at the Mead and Newark
plants of KACC from June 1996 through August 1999. Mr. Chapman has been an
employee of KACC for 27 years and has held various operation management
positions within flat-rolled products, engineered products and the commodity
business units.

Robert E. Cole. Mr. Cole, age 55, has been a Vice President of KACC since March
1981. From September 1990 through February 2002, Mr. Cole served as Vice
President--Federal Government Affairs of MAXXAM. From September 1990 until May
2000, Mr. Cole also served as a Vice President of Pacific Lumber. Mr. Cole
currently is a member of the United States Auto Parts Advisory Committee to the
United States Government and is Chairman of the Industry Sector Advisory
Committee on Non-ferrous Ores and Metals to the United States Department of
Commerce and the United States Trade Representative.

Edward F. Houff. Mr. Houff, age 55, was elected to the position of Vice
President and General Counsel of the Company and KACC effective April 2002. He
served as Acting General Counsel of the Company and KACC from February 2002
until April 2002 and Deputy General Counsel for Litigation of the Company and
KACC from October 2001 until February 2002. Mr. Houff was President and Managing
Shareholder of Church & Houff, P.A. in Baltimore, Maryland from April 1989
through September 2001.

Edward A. Kaplan. Mr. Kaplan, age 43, was elected to the position of Vice
President of Taxes of the Company and KACC effective March 2001. Mr. Kaplan
previously served as Director of Taxes of the Company and KACC from October 1999
through February 2001. From July 1997 to September 1999, he served as Director
of Tax Planning of the Company and KACC, and from January 1995 through June
1997, he served as Associate Director of Tax Planning of the Company and KACC.

W. Scott Lamb. Mr. Lamb, age 47, was elected Vice President, Investor Relations
and Corporate Communications of the Company effective September 1998, and of
KACC effective July 1998. Mr. Lamb previously served as Director of Investor
Relations and Corporate Communications of the Company and KACC from June 1997
through July 1998. From July 1995 through June 1997, he served as Director of
Investor Relations of the Company and KACC and from January 1995 through July
1995, he served as Director of Public Relations of the Company and KACC.

Daniel D. Maddox. Mr. Maddox, age 42, was elected to the position of Vice
President and Controller of the Company effective September 1998, and of KACC
effective July 1998. He served as Controller, Corporate Consolidation and
Reporting of the Company and KACC from October 1997 through September 1998 and
July 1998, respectively. Mr. Maddox previously served as Assistant Corporate
Controller of the Company from May 1997 to September 1997 and KACC from June
1997 to September 1997 and Director--External Reporting of KACC from June 1996
to May 1997. Mr. Maddox was with Arthur Andersen LLP from 1982 until joining
KACC in June 1996.

Daniel J. Rinkenberger. Mr. Rinkenberger, age 43, was elected to the position of
Vice President of Economic Analysis and Planning of the Company and KACC
effective February 2002. Mr. Rinkenberger previously served as Vice President,
Planning and Business Development of Kaiser Fabricated Products of KACC from
June 2000 through February 2002. Prior to that, he served as Vice President,
Finance and Business Planning of Kaiser Flat Rolled Products of KACC from
February 1998 to February 2000 and as Assistant Treasurer of the Company and
KACC from January 1995 through February 1998.

Kerry A. Shiba. Mr. Shiba, age 47, was elected to the position of Vice President
and Treasurer of the Company and KACC effective February 2002. Mr. Shiba
previously served as Vice President, Controller and Information Technology of
Kaiser Fabricated Products of KACC from January 2000 to February 2002, and as
Vice President and Controller of Kaiser Engineered Products of KACC from June
1998 through January 2000. Prior to joining the Company, Mr. Shiba was with the
BF Goodrich Company for 16 years, holding various financial positions.

Robert W. Warnock. Mr. Warnock, age 55, was elected to the position of Vice
President, Performance Measurement and Analysis of the Company and KACC
effective September 1999. In October 2001, he also was appointed Vice President
and Chief Administrative Officer of KACC's commodities business unit. He
previously served as Controller, Corporate Operations from October 1997, and
served as Controller of KACC's flat-rolled products business unit from 1993 to
1997. Mr. Warnock has been an employee of KACC since May 1969 and has held
numerous financial positions.

John Wm. Niemand II. Mr. Niemand, age 57, became Secretary of the Company in May
1997 and Secretary of KACC in June 1997. He served as an Assistant Secretary of
the Company and KACC from July 1988 until May 1997 and June 1997, respectively.
Mr. Niemand has served as Senior Assistant General Counsel of the Company and
KACC since February 2000. He previously served as Senior Corporate Counsel of
the Company and KACC from May 1992 through December 1995, and as Assistant
General Counsel of the Company and KACC from January 1996 through January 2000.

Robert J. Cruikshank. Mr. Cruikshank, age 71, has served as a director of the
Company and KACC since January 1994. In addition, Mr. Cruikshank has been a
director of MAXXAM since May 1993. Mr. Cruikshank was a Senior Partner in the
international public accounting firm of Deloitte & Touche from December 1989
until his retirement in March 1993. Mr. Cruikshank served on the board of
directors of Deloitte Haskins & Sells from 1981 to 1985 and as Managing
Partner of the Houston office from June 1974 until its merger with Touche Ross
& Co. in December 1989. Mr. Cruikshank also serves as a director of Reliant
Energy Incorporated (formerly Houston Industries Incorporated), a public utility
holding company with interests in electric and natural gas utilities, coal and
transportation businesses; a director of Texas Biotechnology Incorporated; a
trust manager of Weingarten Realty Investors; and as advisory director of
Compass Bank--Houston.

James T. Hackett. Mr. Hackett, age 48, has been a director of the Company since
May 2000 and of KACC since June 2000. Since January 2000, Mr. Hackett has been
Chairman, President and Chief Executive Officer of Ocean Energy, Inc., a company
engaged in oil and natural gas exploration and production worldwide. From 1990
through 1995, Mr. Hackett worked for NGC Corporation, now known as Dynegy, Inc.,
serving as Senior Vice President and President of the Trident Division in 1995.
From January 1996 until June 1997, Mr. Hackett served as Executive Vice
President of PanEnergy Corporation and was responsible for integrated
international energy development, domestic power operations, and various
corporate staff functions. PanEnergy Corporation merged with Duke Energy
Corporation in June 1997. From June 1997 until September 1998, Mr. Hackett
served as President - Energy Services Group of Duke Energy Corporation, and was
responsible for the non-regulated operations of Duke Energy, including energy
trading, risk management, and international midstream energy infrastructure
development and engineering services. From September 1998 through December 1998,
Mr. Hackett was Chief Executive Officer of Seagull Energy Corporation, a company
that was listed on the New York Stock Exchange, which was engaged primarily in
exploration and production of oil and natural gas. From January 1999 through
March 1999, Mr. Hackett assumed the additional title of Chairman of Seagull
Energy Corporation, and when Seagull Energy Corporation merged with Ocean
Energy, Inc. in March 1999, he was appointed President and Chief Executive
Officer of Ocean Energy, Inc. Mr. Hackett also serves as a director of Temple
Inland Inc., New Jersey Resources Corporation and Fluor Corporation.

George T. Haymaker, Jr. Mr. Haymaker, age 64, was named as non-executive
Chairman of the Board of the Company and KACC effective October 2001. Mr.
Haymaker previously served as Chairman of the Board of the Company and KACC from
January 1, 1994 (non-executive Chairman from January 1, 2000) through May 2001.
He served as Chief Executive Officer of the Company and KACC from January 1994
through December 1999, and served as President of the Company and KACC from May
1996 and June 1996, respectively, through July 1997. From May 1993 to December
1993, Mr. Haymaker served as President and Chief Operating Officer of the
Company and KACC. Mr. Haymaker became a director of the Company in May 1993, and
a director of KACC in June 1993. Mr. Haymaker also is a director of Flowserve
Corporation, a provider of valves, pumps and seals; a director of CII Carbon,
LLC., a producer of calcined coke; and non-executive Chairman of the Board of
Directors of Safelite Glass Corp., a provider of automotive replacement glass.
Since July 1987, Mr. Haymaker has been a director, and from February 1992
through March 1993 was President, of Midamerica Holdings (formerly Metalmark
Corporation), which is in the business of semi-fabrication of aluminum
extrusions.

Charles E. Hurwitz. Mr. Hurwitz, age 61, has served as a director of the Company
and KACC since October and November 1988, respectively. From December 1994 until
April 2002, he served as Vice Chairman of KACC. Mr. Hurwitz has also served as a
member of the Board of Directors and the Executive Committee of MAXXAM since
August 1978 and was elected Chairman of the Board and Chief Executive Officer of
MAXXAM in March 1980. From January 1993 to January 1998, he also served MAXXAM
as President. Mr. Hurwitz was Chairman of the Board and Chief Executive Officer
of Federated Development Company, a Texas corporation, from January 1974 until
its merger in February 2002 into Federated Development, LLC ("FDLLC"), a wholly
owned subsidiary of Giddeon Holdings, Inc. ("Giddeon Holdings"), at which time
Mr. Hurwitz became Chairman of the Board and Chief Executive Officer of FDLLC.
Mr. Hurwitz is the President and Director of Giddeon Holdings, a principal
stockholder of MAXXAM which is primarily engaged in the management of real
estate investments. Mr. Hurwitz has also been, since its formation in November
1996, Chairman of the Board, President and Chief Executive Officer of MGHI.

Ezra G. Levin. Mr. Levin, age 68, has been a director of the Company since July
1991. He has been a director of KACC since November 1988, and a director of
MAXXAM since May 1978. Mr. Levin also served as a director of the Company from
April 1988 to May 1990. Mr. Levin has served as a director of Pacific Lumber
since February 1993, and as a manager on the Board of Managers of Scopac LLC
since June 1998. Mr. Levin is a member of the law firm of Kramer Levin Naftalis
& Frankel LLP. He has held leadership roles in various legal and
philanthropic capacities and also has served as visiting professor at the
University of Wisconsin Law School and Columbia College.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Based solely upon a review of the copies of the Forms 3, 4 and 5 and amendments
thereto furnished to the Company with respect to its most recent fiscal year,
and written representations from reporting persons that no other Forms 5 were
required, the Company believes that all filing requirements were complied with
which were applicable to its officers, directors and greater than 10% beneficial
owners except as to Mr. Milchovich. In 1996, Mr. Milchovich inadvertently
omitted from his May 1996 Form 4 the sale of 5,000 shares of Company Common
Stock on May 6, 1996. Mr. Milchovich filed an amended Form 4 in 2001 reporting
the sale.

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

Although certain plans or programs in which executive officers of the Company
participate are jointly sponsored by the Company and KACC, executive officers of
the Company generally are directly employed and compensated by KACC. The
following table sets forth compensation information, cash and non-cash, for each
of the Company's last three completed fiscal years with respect to each person
who served as the Company's Chief Executive Officer during 2001 and the four
most highly compensated executive officers other than the Chief Executive
Officer for the year 2001 (collectively referred to as the "Named Executive
Officers").

ANNUAL COMPENSATION
--------------------------------------
(A) (B) (C) (D) (E)
OTHER
ANNUAL
COMPENSATION
NAME AND SALARY BONUS ($)(1)
PRINCIPAL POSITION YEAR ($) ($)
- -------------------------- ------ --------- -------------- -------------
Raymond J. Milchovich 2001 547,833 96,022(3) -
Former President and 2000 630,000 987,336 -
Chief Executive Officer 1999 518,502 174,144 -
(Chief Executive Officer
January 2000- October 2001)

Jack A. Hockema 2001 455,390 159,135 -
President and Chief 2000 315,000 250,000 -
Executive Officer 1999 265,000 212,085 -
(Chief Executive Officer
beginning October 2001)

J. Kent Friedman 2001 468,000 324,000 79,878(10)
Former Senior Vice President 2000 450,000 360,000 98,053(10)
and General Counsel(9) 1999 37,500 -0- -

John T. La Duc 2001 387,393 171,000 -
Executive Vice President and 2000 372,493 435,000 -
Chief Financial Officer 1999 358,167 171,928(14) -

Joseph A. Bonn 2001 322,350 126,464 -
Executive Vice President, 2000 296,250 290,716 -
Corporate Development 1999 259,585 78,721 -

James L. Chapman 2001 203,667 143,312 -
Vice President of Primary 2000 177,080 201,699 -
Aluminum Operations 1999 140,917 39,940 -

LONG-TERM COMPENSATION
--------------------------------------
AWARDS PAYOUTS
----------------------- -----------
(A) (F) (G) (H) (I)
SECURITIES
RESTRICTED UNDERLYING
STOCK OPTIONS/ LTIP ALL OTHER
NAME AND AWARD(S) SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION ($) # ($)(2) ($)
- -------------------------- ------------ ---------- ----------- ---------------
Raymond J. Milchovich -0-(4) -0- 7,112 2,122,265(5)(6)
Former President and 117,525(7) 385,000 75,254 31,500(6)
Chief Executive Officer -0- 500,000 134,515 389,520(6)(8)
(Chief Executive Officer
January 2000-October 2001)

Jack A. Hockema 467,104(4) 375,770 887,600 22,770(6)
President and Chief -0- 28,184 235,600 15,750(6)
Executive Officer -0- -0- 165,270 13,250(6)
(Chief Executive Officer
beginning October 2001)

J. Kent Friedman -0-(4) 20,900(11) -0- 29,556(12)
Former Senior Vice President -0- 18,800(11) -0- 14,777(12)
and General Counsel(9) -0- 184,500(13) -0- 47(12)

John T. La Duc -0-(4) -0- 4,628 19,370(6)
Executive Vice President and -0- -0- 59,065 18,625(6)
Chief Financial Officer -0- -0- 120,990 17,908(6)

Joseph A. Bonn -0-(4) -0- 148,829 16,118(6)
Executive Vice President, -0- -0- 44,747 164,813(6)(8)
Corporate Development -0- 163,190 79,760 12,979(6)

James L. Chapman -0-(4) -0- 55,517 19,140(6)(8)
Vice President of Primary -0- -0- 38,623 45,797(6)(8)
Aluminum Operations -0- -0- 9,911 23,463(6)(8)(15)

- ------------------------------------

(1) Excludes perquisites and other personal benefits which in the aggregate
amount do not exceed the lesser of either $50,000 or 10% of the
total of annual salary and bonus reported for the Named Executive Officer.
(2) Amounts reflect the value of the actual payment received during the year
indicated in connection with awards made under the Company's long-term
incentive program for the rolling three-year performance periods
1995-1997, 1996-1998, 1997-1999 and 1998-2000. The awards for the periods
1995-1997, 1996-1998, and 1997-1999 generally were paid in two equal
installments, with the first paid during the year following the end of the
three-year performance period and the second during the next following
year. Awards for the 1998-2000 performance period were either paid in cash
or by the grant of stock options. The cash awards were paid in 2001. For
the performance periods 1995-1997 and 1996-1998, the awards generally were
made 57% in shares of the Company's Common Stock (based on the average
closing price of the Company's Common Stock during the last December of
each such performance period) and 43% in cash. For the 1997-1999
performance period, awards generally were made entirely in shares of
Company Common Stock (based on the average closing price of the Company's
Common Stock during the last December of such performance period for
one-half of the award and on a target price of $15.00 per share for the
other half.) Pursuant to the terms of Mr. Hockema's previous employment
agreement, the full amount of his award for the 1997-1999 performance
period was paid in cash during 2000. The value of shares included in the
above table was determined for each payout by multiplying the number of
shares paid by the average of the high and low market price of a share of
Company Common Stock on the New York Stock Exchange on the date of such
payment.
(3) On each of February 21, 2001 and April 10, 2001, Mr. Milchovich was
awarded a stock bonus of 13,281 shares of Company Common Stock. The value
of such shares included in the above table was determined by multiplying
the number of shares by the closing price of a share of Company Common
Stock on the New York Stock Exchange on the respective award dates.
(4) The restricted shares issued to the Named Executive Officers in connection
with the exchange offer described under "Option/SAR Exercises and Fiscal
Year End Value Table" below are not included in the above table. Effective
June 28, 2001, Mr. Hockema was granted 53,552 restricted shares of Company
Common Stock as part of his annual long-term incentive. In connection with
Mr. Hockema's promotion to President and Chief Executive Officer, he was
granted an additional 146,448 shares of restricted Company Common Stock
effective as of October 31, 2001. The restrictions on 33 1/3% of the
53,552 shares lapsed and such shares vested on December 31, 2001. The
restrictions are scheduled to lapse as to an additional 33 1/3% of such
shares on each of December 31, 2002 and December 31, 2003. The
restrictions on 33 1/3% of the 146,448 shares are scheduled to lapse and
the shares vest on each of October 11, 2002, October 11, 2003 and October
11, 2004. Vesting is subject to Mr. Hockema being an employee of the
Company, KACC or an affiliate or subsidiary of the Company or KACC as of
the applicable vesting date. Vesting may be accelerated under certain
circumstances. Any dividends payable on the shares prior to the lapse of
the restrictions are payable to Mr. Hockema. The above table includes the
value of the restricted shares granted to Mr. Hockema in 2001 and was
determined for each such grant by multiplying the number of such shares in
such grant by the closing market price of a share of the Company's Common
Stock on the New York Stock Exchange on the effective date.
As of December 31, 2001, Messrs. Hockema, Friedman, La Duc, Bonn and
Chapman owned 182,149, 93,894, 34,511, 91,133, and 440 restricted shares
of Company Common Stock, respectively, valued at $295,081, $152,108,
$55,908, $147,635 and $713, respectively, based on the closing price on
the New York Stock Exchange of $1.62 per share. As of December 31, 2001,
Mr. Milchovich owned no restricted shares of Company Common Stock, all of
his restricted shares having been canceled prior to vesting upon his
retirement from the Company in October 2001, in accordance with the terms
of his Restricted Stock Agreements.
(5) Includes a $89,747 payment for accrued vacation through the date of
retirement; a $437,795 lump sum payment from the Kaiser Retirement Plan
(as defined below); and a $1,567,331 benefit payable in semi-annual
installments over a five-year period under the Kaiser Supplemental
Benefits Plan (as defined below).
(6) Includes accruals by KACC of $27,392, $31,500 and $25,925 for Mr.
Milchovich; $22,770, $15,750, and $13,250 for Mr. Hockema; $19,370,
$18,625, and $17,980 for Mr. La Duc; $16,118, $14,813, and $12,979 for Mr.
Bonn; and $10,183, $8,854 and $7,071 for Mr. Chapman under its
Supplemental Savings and Retirement Plan and Supplemental Benefits Plan
for 2001, 2000, and 1999, respectively.
(7) On August 15, 2000, Mr. Milchovich was granted 26,116 shares of restricted
Company Common Stock. The value of such shares included in the above table
was determined by multiplying the number of shares by the closing market
price of a share of the Company's Common Stock on the New York Stock
Exchange on the grant date. Upon Mr. Milchovich's retirement, the shares
were cancelled in accordance with the terms of his Restricted Stock
Agreement with respect to such shares.
(8) Includes moving-related items of $363,595 for Mr. Milchovich for 1999;
$150,000 for Mr. Bonn for 2000; and $8,957, $36,943 and $5,000 for Mr.
Chapman for years 2001, 2000 and 1999, respectively.
(9) Mr. Friedman was an executive officer of the Company from December 1999
through February 2002. During that period, he received his compensation
from MAXXAM and the Company reimbursed MAXXAM for certain allocable costs
associated with his performance of services for the Company. The table
reflects Mr. Friedman's total compensation for the years indicated. For
the years 2001 and 2000, 50% of the amounts in columns (c) and (d) and
approximately 50% of the amounts in columns (e) and (i) with respect to
Mr. Friedman were allocated to the Company.
(10) Includes in each of 2001 and 2000 annual forgiveness of $50,000 of the
outstanding principal balance of the loan made to Mr. Friedman pursuant to
the terms of his employment agreement with MAXXAM. Additional information
with respect to the loan is set forth below in the discussion of Mr.
Friedman's employment agreement under "Employment Contracts, Retention
Plan and Agreements and Termination of Employment and Change-in-Control
Arrangements."
(11) Represents options with tandem stock appreciation rights ("SARs") for
shares of MAXXAM common stock.
(12) Represents matching contributions by MAXXAM during 2001 and 2000 under its
401(k) savings plan of $6,800 and $6,800, respectively; and $22,756,
$7,977 and $47 accrued by MAXXAM for 2001, 2000 and 1999, respectively, in
respect of MAXXAM's Revised Capital Accumulation Plan of 1988, pursuant to
which, in general, benefits vest 10% annually and with respect to
contributions during 1998 or after, are payable upon the earlier of (a)
January 1, 1998 (with respect to participants who were also participants
under a former plan on December 31, 1987), or (b) termination of
employment with MAXXAM.
(13) Represents options for 167,000 shares of Company Common Stock and options
(with tandem SARs) for 17,500 shares of MAXXAM common stock.
(14) Includes $75,000 (paid over a three-year period) for 1999, which has been
reimbursed by MAXXAM.
(15) Includes pay in lieu of vacation of $10,892 and strike pay of $500.

OPTION/SAR GRANTS

The following table sets forth certain information concerning stock options or
SARs granted in fiscal year 2001 to any of the Named Executive Officers:

INDIVIDUAL GRANTS
- ---------------------------------------------------------------------------------------------------------------- ---------------
(A) (B) (C) (D) (E) (F)
# OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTS 2001 ($/SHARE) DATE ($)
- -------------------------------------- ------------------ ---------------- --------------- ------------ ---------------

Jack A. Hockema 306,122(1)(2) 37.6 $ 3.10 10/11/11 $750,000(3)
Jack A. Hockema 69,648(1)(4) 8.5 $ 4.435 5/23/11 $237,500(5)
J. Kent Friedman 20,900(6)(7) 8.9(8) $ 17.95 12/12/11 $180,490(9)
- ------------------------------------

(1) Represents shares of Company Common Stock underlying stock options.
(2) The options generally vest at the rate of 33 1/3% per year, beginning on
October 11, 2002, with an additional 33 1/3% vesting each October 11
thereafter until fully vested. Vesting may be accelerated in certain
circumstances.
(3) Valuation utilizing the Black-Scholes option pricing method with the
following assumptions: 3-year weekly volatility for Company Common Stock,
4.54% risk-free rate (based on U.S. Treasury strip rate on the date of
grant with a term equal to that of the option), no dividend yield and
10-year exercise date. No adjustments were made for non-transferability or
risk of forfeiture.
(4) The options generally vest at the rate of 33 1/3% per year, beginning on
December 31, 2001, with an additional 33 1/3% vesting each December 31
thereafter until fully vested. Vesting may be accelerated in certain
circumstances.
(5) Valuation utilizing the Black-Scholes option pricing method with the
following assumptions: 3-year weekly volatility for Company Common Stock,
5.66% risk-free rate (based on U.S. Treasury strip rate on the date of
grant with a term equal to that of the option), no dividend yield and
10-year exercise date. No adjustments were made for non-transferability or
risk of forfeiture.
(6) Represents shares of MAXXAM common stock underlying stock options with
tandem SARs.
(7) The options generally vest at the rate of 20% per year, beginning on
December 12, 2002, with an additional 20% vesting each December 12
thereafter until fully vested.
(8) Represents the percentage of total options/SARs granted to employees of
MAXXAM.
(9) Valuation utilizing Black-Scholes option pricing method with the following
assumptions: 5-year daily volatility for MAXXAM common stock, 5.016%
risk-free rate (10-year Government Bond as of the grant date), no dividend
yield and 6.59-year exercise date. No adjustments were made for
non-transferability or risk of forfeiture.

The stock options with respect to the Company's Common Stock set forth in the
above table were granted under the Kaiser 1997 Omnibus Stock Incentive Plan (the
"1997 Omnibus Plan") and are exercisable for cash, Company Common Stock or a
combination thereof. The stock options with respect to the MAXXAM common stock
set forth in the above table were granted under the MAXXAM 1994 Omnibus Employee
Incentive Plan and are exercisable for cash, MAXXAM common stock or a
combination thereof, at MAXXAM's discretion.

OPTION/SAR EXERCISES AND FISCAL YEAR END VALUE TABLE

The table below provides information on an aggregated basis concerning each
exercise of stock options (or tandem SARs) and freestanding SARs during the
fiscal year ended December 31, 2001, by each of the Company's Named Executive
Officers, and the 2001 fiscal year-end value of unexercised options and SARs,
including SARs exercisable for cash only.

(A) (B) (C) (D) (E)
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT YEAR END (#) AT FISCAL YEAR-END ($)
----------------------------- -----------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- -------------- -------------- ------------- -------------- -------------- --------------
Jack A. Hockema -0- -0- 23,216(1) 380,738(1) --(2) --(2)
John T. La Duc -0- -0- 187,500(1) 46,875(1) --(2) --(2)
-0- -0- 4,000(3) -0- --(4) -0-
J. Kent Friedman -0- -0- 10,760(5) 46,440(5) --(4) --(4)

- ------------------------------------
(1) Represents stock options for shares of Company Common Stock.
(2) Valued at $1.62, the closing price on the New York Stock Exchange of the
Company's Common Stock on December 31, 2001, less the exercise price. No
value is shown because the exercise price is higher than such closing
price.
(3) Represents SARs relating to MAXXAM common stock. The SARs relating to
MAXXAM common stock set forth in the above table for Mr. La Duc were
granted under MAXXAM's 1984 Phantom Share Plan (the "MAXXAM Phantom
Plan"). All of Mr. La Duc's SARs under the MAXXAM Phantom Plan are
exercisable for cash only.
(4) Valued at $17.50 per share, the closing price on the American Stock
Exchange of MAXXAM common stock on December 31, 2001, less the exercise
price. No value is shown because the exercise price is higher than such
closing price.
(5) Represents stock options (with tandem SARs) for MAXXAM common stock.

In April 2001, the Company and Kaiser made an offer to current employees and
directors to exchange their outstanding options to acquire shares of the
Company's Common Stock for restricted shares of Company Common Stock (the
"Exchange Offer"). Pursuant to the Exchange Offer, Messrs. Milchovich, Friedman,
Bonn and Chapman exchanged all of their then outstanding options to acquire
Company Common Stock (i.e., 1,392,200, 167,000, 171,690 and 2,460 options,
respectively) for 447,940, 93,894, 91,133 and 440 restricted shares of Company
Common Stock, respectively, and Mr. La Duc exchanged approximately 51% of his
outstanding options to acquire Company Common Stock (i.e., 243,575 options) for
34,511 restricted shares of Company Common Stock. The restrictions on 33 1/3% of
the shares issued pursuant to the Exchange Offer generally lapsed and such
shares vested on March 5, 2002. The restrictions are generally scheduled to
lapse and the shares vest as to an additional 33 1/3% of such shares on each of
March 5, 2003 and March 5, 2004, subject to the grantee being an employee of the
Company, KACC or an affiliate or subsidiary of the Company or KACC on the
applicable vesting date. Vesting may be accelerated under certain circumstances.
Any dividends payable on the shares prior to the lapse of the restrictions are
payable to the grantee. As of December 31, 2001, Mr. Milchovich owned no
restricted shares of Company Common Stock, all of his restricted shares having
been canceled prior to vesting upon his retirement from the Company in October
2001, in accordance with the terms of his Restricted Stock Agreements. Prior to
March 5, 2002, Messrs. La Duc, Bonn and Chapman elected to cancel that portion
of their restricted shares issued pursuant to the Exchange Offer for which the
restrictions would have lifted on that date.

LONG-TERM INCENTIVE PLAN AWARDS TABLE

Each of the Company's Named Executive Officers listed below received a
distribution in 2001 under the long-term component of the Company's incentive
compensation program for the 1997-1999 three-year, long-term performance period.
The following table and accompanying footnotes describe the distributions
received by each of such Named Executive Officers in 2001.

ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE BASED PLANS (2)
-------------------------------------------------
(A) (B) (C) (D) (E) (F)
PERFORMANCE OR
OTHER PERIODS UNTIL
NUMBER OF MATURATION
NAME SHARES OR PAYOUT THRESHOLD TARGET MAXIMUM
- ------------------------------ ------------------- ------------------ -------------- --------------- --------------
Raymond J. Milchovich 1,812(1) -- -- -- --
John T. La Duc 1,179(1) -- -- -- --
Joseph A. Bonn 716(1) -- -- -- --

- ------------------------------------
(1) Represents the stock portion of the second installment of long-term
incentive award distributed in February 2001 in connection with the
1997-1999 three-year, long-term performance period. The average closing
price of the Company's Common Stock during December 1999 was $6.809 per
share. The total awards for the 1997-1999 long-term performance period for
Messrs. Milchovich, La Duc, and Bonn were $33,925, $22,081, and $13,395,
respectively.
(2) All payments in connection with the 1997-1999 three-year, long-term
performance period have been made.

The amount of the awards earned for a performance period for which awards are
included in the above table were dependent upon the level of satisfaction of
performance criteria established for that period. During the 1997-1999
performance period, target incentives were based upon earnings per share targets
established in 1997.

DEFINED BENEFIT PLANS

Kaiser Retirement Plan. KACC maintains a qualified, defined-benefit retirement
plan (the "Kaiser Retirement Plan") for salaried employees of KACC and
co-sponsoring subsidiaries who meet certain eligibility requirements. The table
below shows estimated annual retirement benefits payable under the terms of the
Kaiser Retirement Plan to participants with the indicated years of credited
service. These benefits are reflected without reduction for the limitations
imposed by the Internal Revenue Code of 1986, as amended (the "Tax Code") on
qualified plans and before adjustment for the Social Security offset, thereby
reflecting aggregate benefits to be received, subject to Social Security
offsets, under the Kaiser Retirement Plan and the Kaiser Supplemental Benefits
Plan (as defined below).

AVERAGE ANNUAL
REMUNERATION YEARS OF SERVICE
- ------------------ ------------------------------------------------------------------------------------
15 20 25 30 35
------------- --------------- ---------------- ---------------- ---------------

$ 250,000 $ 56,250 $ 75,000 $ 93,750 $ 112,500 $ 131,250
350,000 78,750 105,000 131,250 157,500 183,750
450,000 101,250 135,000 168,750 202,500 236,250
550,000 123,750 165,000 206,250 247,500 288,750
650,000 146,250 195,000 243,750 292,500 341,250
750,000 168,750 225,000 281,250 337,500 393,750
850,000 191,250 255,000 318,750 382,500 446,250
950,000 213,750 285,000 356,250 427,500 498,750
1,050,000 236,250 315,000 393,750 472,500 551,250

The estimated annual retirement benefits shown are based upon the assumptions
that current Kaiser Retirement Plan and Kaiser Supplemental Benefits Plan
provisions remain in effect, that the participant retires at age 65, and that
the retiree receives payments based on a straight-life annuity for his lifetime.
Messrs. Hockema, La Duc, Bonn and Chapman had 9.9, 32.3, 34.5 and 27.1 years of
credited service, respectively, on December 31, 2001. Monthly retirement
benefits, except for certain minimum benefits, are determined by multiplying
years of credited service (not in excess of 40) by the difference between 1.50%
of average monthly compensation for the highest base period (of 36, 48 or 60
consecutive months, depending upon compensation level) in the last 10 years of
employment and 1.25% of monthly primary Social Security benefits. Pension
compensation covered by the Kaiser Retirement Plan and the Kaiser Supplemental
Benefits Plan consists of salary and bonus amounts set forth in the Summary
Compensation Table (column (c) plus column (d) thereof).

Participants are entitled to retire and receive pension benefits, unreduced for
age, upon reaching age 62 or after 30 years of credited service. Full early
pension benefits (without adjustment for Social Security offset prior to age 62)
are payable to participants who are at least 55 years of age and have completed
10 or more years of pension service (or whose age and years of pension service
total 70) and who have been terminated by KACC or an affiliate for reasons of
job elimination or partial disability. Participants electing to retire prior to
age 62 who are at least 55 years of age and who have completed 10 or more years
of pension service (or whose age and years of pension service total at least 70)
may receive pension benefits, unreduced for age, payable at age 62 or reduced
benefits payable earlier. Participants who terminate their employment after five
years or more of pension service, or after age 55 but prior to age 62, are
entitled to pension benefits, unreduced for age, commencing at age 62 or, if
they have completed 10 or more years of pension service, actuarially reduced
benefits payable earlier. For participants with five or more years of pension
service or who have reached age 55 and who die, the Kaiser Retirement Plan
provides a pension to their eligible surviving spouses. Upon retirement,
participants may elect among several payment alternatives including, for most
types of retirement, a lump-sum payment.

In November 2001, Mr. Milchovich received, in connection with his retirement, a
lump sum payment of his benefits from the Kaiser Retirement Plan in the amount
of $437,795.

MAXXAM Pension Plan. All officers who are also employees and other regular
employees of MAXXAM automatically participate in MAXXAM's Pension Plan (the
"MAXXAM Pension Plan"), a noncontributory, defined benefit plan. Benefits equal
the sum of an employee's "past service benefit" and "future service benefit."
Benefits are based on (i) an employee's base salary, including overtime, but
excluding bonuses, commissions and incentive compensation and (ii) an employee's
age and the number of years of service with MAXXAM.

Under the MAXXAM Pension Plan, the annual past service benefit is the greatest
of:

(i) benefits accrued under the plan through December 31, 1986;

(ii) the product of (a) the sum of 0.8% of the participant's Past Service
Compensation Base (as defined), plus 0.8% of the participant's Past
Service Compensation Base in excess of $15,000 and (b) the
participant's credited years of service prior to January 1, 1987; or

(iii) the product of 1.2% of the participant's Past Service Compensation
Base and the participant's credited years of service prior to January
1, 1987.

For 1987 and 1988, the annual future service benefit equaled 1.6% of an
employee's compensation up to two-thirds of the Social Security wage base, plus
2.4% of any remaining compensation. Effective January 1, 1989, the annual future
service benefit equaled 1.75% of an employee's compensation for each year of
participation, plus 0.6% of the employee's compensation in excess of $10,000.
Effective January 1, 1995, the annual future service benefit equals 2.35% of an
employee's compensation for each year of participation.

The amount of an employee's aggregate plan compensation that may be included in
benefit computations under the MAXXAM Pension Plan is limited to $170,000 for
2001. Benefits are generally payable as a lifetime annuity or, with respect to
married employees, as a 50% joint and survivor annuity, or, if the employee
elects (with spousal consent), in certain alternative annuity forms. Benefits
under the MAXXAM Pension Plan are not subject to any deductions for Social
Security or other offsets. The covered compensation for 2001, credited years of
service as of December 31, 2001 for the MAXXAM Pension Plan, and estimated
annual benefit payable upon retirement at normal retirement age for Mr. Friedman
were $170,000, 2 years, and $42,156, respectively.

The projected benefit shown above was computed as a lifetime annuity amount,
payable beginning at age 65. The benefit amount reflects a covered compensation
limit of $200,000 for 2002 and subsequent years under Section 401(a)(17) of the
Tax Code. In addition, the amounts reflects a maximum benefit limit of $140,000
for 2002 and subsequent years (with early retirement reductions where
applicable) that is placed upon annual benefits that may be paid to a
participant in the MAXXAM Pension Plan at retirement under Section 415 of the
Tax Code. Combined plan limits applicable to employees participating in both
defined contribution and defined benefit plans have not been reflected.

Kaiser Supplemental Benefits Plan. KACC maintains an unfunded, non-qualified
Supplemental Benefits Plan (the "Kaiser Supplemental Benefits Plan"), the
purpose of which is to restore benefits which would otherwise be paid from the
Kaiser Retirement Plan or the Supplemental Savings and Retirement Plan, a
qualified Section 401(k) plan (the "Kaiser Savings Plan"), were it not for the
Section 401(a)(17) and Section 415 limitations imposed by the Tax Code.
Participation in the Kaiser Supplemental Benefits Plan includes all employees of
KACC and its subsidiaries whose benefits under the Kaiser Retirement Plan and
Kaiser Savings Plan are likely to be affected by such limitations imposed by the
Tax Code. Eligible participants are entitled to receive the equivalent of the
Kaiser Retirement Plan and Kaiser Savings Plan benefits which they may be
prevented from receiving under those plans because of such Tax Code limitations.

Upon Mr. Milchovich's retirement, he became entitled to a benefit of $1,567,331
under the Kaiser Supplemental Benefits Plan.

MAXXAM Supplemental Executive Retirement Plan. Effective March 8, 1991, MAXXAM
adopted an unfunded non-qualified Supplemental Executive Retirement Plan (the
"MAXXAM SERP"). The MAXXAM SERP provides that eligible participants are entitled
to receive benefits which would have been payable to such participants under the
MAXXAM Pension Plan except for the limitations imposed by the Tax Code.
Participants in the MAXXAM SERP are selected by MAXXAM's Board of Directors. Mr.
Friedman was entitled to receive benefits under the MAXXAM SERP during 2001.

The following projections for Mr. Friedman are based on the same assumptions as
utilized in connection with the MAXXAM Pension Plan projections above. The 2001
qualified plan pay limit ($200,000) and benefit limit ($140,000) are reflected
for all years in the future. In addition, no future increases in Mr. Friedman's
covered compensation amounts from the 2001 levels are assumed.

COVERED COMPENSATION FOR 2001:
Qualified Plan $ 170,000
Nonqualified Plan 298000
-----------------
Total $ 468,000
=================

CREDITED YEARS OF SERVICE AS OF DECEMBER 31, 2001 2

PROJECTED NORMAL RETIREMENT BENEFIT:
Qualified Plan $ 42,156
Nonqualified Plan 57,669
-----------------
Total $ 99,825
=================

Kaiser Termination Payment Policy. Most full-time salaried employees of KACC are
eligible for benefits under an unfunded termination policy if their employment
is involuntarily terminated, subject to a number of exclusions. The policy
provides for lump-sum payments after termination ranging from one-half month's
salary for less than one year of service graduating to eight months' salary for
30 or more years of service. The amounts payable to Messrs. Hockema, La Duc,
Bonn and Chapman under the policy if they had been involuntarily terminated on
December 31, 2001, would have been $152,083, $262,472, $218,400, and $121,338,
respectively.

MAXXAM Severance or Termination Policy. Severance or termination pay is
generally granted to regular full-time employees of MAXXAM who are involuntarily
terminated, subject to certain conditions and a number of exclusions, pursuant
to an unfunded policy. After such termination, the policy provides for payment
in an amount ranging from two weeks' salary for at least one year of service
graduating to a maximum of 104 weeks' salary. The amount payable under the
policy to Mr. Friedman if he had been involuntarily terminated on December 31,
2001 would have been $36,000.

MAXXAM Deferred Compensation Program. Certain executive officers of MAXXAM,
including Mr. Friedman, are eligible to participate in a deferred compensation
program. An eligible executive officer may defer up to 30% of gross salary and
up to 30% of any bonus otherwise payable to such executive officer for any
calendar year. The designated percentage of deferred compensation is credited to
a book account as of the date such compensation would have been paid and is
deemed "invested" in an account bearing interest calculated using one-twelfth of
the sum of the prime rate plus 2% on the first day of each month. Deferred
compensation, including all earnings credited to the book account, will be paid
in cash to the executive or beneficiary as soon as practicable following the
date the executive ceases for any reason to be an employee of MAXXAM, either in
a lump sum or in a specified number of annual installments, not to exceed ten,
at the executive's election.

DIRECTOR COMPENSATION

Each of the directors who is not an employee of the Company, KACC, or MAXXAM,
generally receives an annual base fee for services as a director, a portion of
which is paid in the form of an option to purchase shares of Company Common
Stock, as more fully described below. The base fee for the year 2001 was
$50,000, including $20,000 of value in Company stock options. For the period
prior to the 2001 Annual Meeting of Shareholders (the "2001 Annual Meeting"),
the stock options were granted in arrears. Beginning with the term commencing
immediately after the 2001 Annual Meeting, this practice was amended to provide
for the options to be granted prospectively at the commencement of each one year
term of service. Accordingly, during 2001, stock options were granted to
non-employee directors for the period June 2000 through May 2001 and June 2001
through May 2002. During 2001, in respect of base compensation, Messrs.
Cruikshank, Hackett, and Levin each received $81,909, of which $51,909 of value
was in the form of Company stock options. Mr. Haymaker's compensation, which was
covered for portions of the year by separate agreements with the Company, is
discussed below.

For the year 2001, non-employee directors of the Company and KACC who were
non-employee directors of MAXXAM, also received director or committee fees from
MAXXAM. In addition, the non-employee Chairman of each of the committees was
paid a fee of $3,000 per year for services as Chairman. All non-employee
directors also generally received a fee of $1,500 per day per Board meeting
attended in person, $1,500 per day per committee meeting held in person on a
date other than a Board meeting date, and $500 per formal telephonic meeting of
the Board or a committee. In respect of 2001, Messrs. Cruikshank, Hackett, and
Levin received an aggregate of $23,000, $13,398, and $16,000, respectively, in
such fees from the Company and KACC in the form of cash payments.

Non-employee directors are eligible to participate in the 1997 Omnibus Plan.
During 2001, non-employee directors participated in a program under the 1997
Omnibus Plan pursuant to which each non-employee director was entitled to
receive as part of his annual base fee options valued at $20,000 to purchase
Company Common Stock at a price equal to the average of the high and low market
price of Company Common Stock on the day of the grant, with the number of shares
covered by the options determined using the Black-Scholes option pricing method.
For the one-year period prior to the 2001 Annual Meeting, the annual grant of
stock options was made in arrears. Beginning with the term commencing
immediately after the 2001 Annual Meeting, the program was amended to provide
for the annual grant to be made prospectively at the commencement of each one
year term of service. Accordingly, during 2001, stock options were granted for
the periods June 2000 through May 2001 and June 2001 through May 2002. On May
23, 2001, in respect of services for the period from June 2000 through May 2001,
Messrs. Cruikshank, Levin, and Hackett each received options under the program
to purchase 5,866 shares of Company Common Stock at an exercise price of $4.435
per share. In general, such stock options will become exercisable on May 23,
2002. On June 25, 2001, in respect of services for the period from June 2001
through May 2002, Messrs. Cruikshank, Levin and Hackett each received options
under the program to purchase 7,143 shares of Company Common Stock at an
exercise price of $3.625 per share. In general, such stock options will become
exercisable on May 23, 2002.

Directors are reimbursed for travel and other disbursements relating to Board
and committee meetings, and non-employee directors are provided travel accident
insurance in respect of Company-related business travel. Subject to the approval
of the Chairman of the Board, directors also generally may be paid additional ad
hoc fees for extraordinary services in the amount of $750 per one-half day or
$1,500 per day.

Effective January 2002, the Boards of Directors of the Company and KACC approved
a supplemental compensation arrangement with Mr. Levin for certain advisory
services to be provided to the President and the Boards of the Company and KACC.
Such supplemental compensation will be paid at Mr. Levin's usual hourly rate as
a member of Kramer Levin Naftalis & Frankel LLP, and will be in addition to
amounts otherwise payable to Mr. Levin as a member of the Executive Committees
of the Boards.

The Company and KACC have a deferred compensation program in which all
non-employee directors are eligible to participate. By executing a deferred fee
agreement, a non-employee director may defer all or part of the fees from the
Company and KACC for services in such capacity for any calendar year. The
deferred fees are credited to a book account and are deemed "invested," in 25%
increments, in two investment choices: in phantom shares of Company Common Stock
and/or in an account bearing interest calculated using one-twelfth of the sum of
the prime rate plus 2% on the first day of each month. If deferred, fees,
including all earnings credited to the book account, are paid in cash to the
director or beneficiary as soon as practicable following the date the director
ceases for any reason to be a member of the Board, either in a lump sum or in a
specified number of annual installments not to exceed ten, at the director's
election. With the exception of Mr. Haymaker, who deferred his fees in 2000 and
2001, no deferral elections have been made under this program. Mr. Haymaker
revoked his deferral election effective January 1, 2002, for services rendered
on or after that date.

Fees to directors who are also employees of KACC or MAXXAM are deemed to be
included in their salary. Directors of the Company were also directors of KACC
and received the foregoing compensation for acting in both capacities.

As of January 1, 2000, Mr. Haymaker, the Company and KACC entered into an
agreement concerning the terms upon which he served as a director and
non-executive Chairman of the Boards of the Company and KACC through KACC's 2001
Annual Meeting. Under the agreement, Mr. Haymaker provided consulting services
to the Company and KACC, in addition to acting as a director. The agreement
expired at the end of May 2001. For the period from January 1, 2001 through the
end of May 2001, Mr. Haymaker received base compensation under the agreement of
$104,167, inclusive of his base Director's fee and any Board committee fees
otherwise payable. Compensation under the agreement was paid in cash. As
permitted by the agreement, Mr. Haymaker elected to defer receipt of the
Director fee portion of the compensation in accordance with the deferred
compensation program discussed above.

For the period of June 2001 through October 11, 2001, Mr. Haymaker continued to
serve as a director of the Company and KACC and receive compensation under the
director compensation program discussed above. The cash portion of Mr.
Haymaker's base compensation for this period was $10,806. He also received as
the non-cash portion of his compensation options to purchase 7,143 share of
Company Common Stock, as discussed above with respect to the directors
generally. In addition, Mr. Haymaker received $4,340 in respect of chairman and
attendance fees. Receipt of the cash portion of these amounts was deferred in
accordance with the deferred compensation program discussed above.

On October 11, 2001, Mr. Haymaker, the Company and KACC entered into a new
agreement concerning the terms upon which he would serve as a director and
non-executive Chairman of the Boards of the Company and KACC through December
31, 2002. Under the agreement, Mr. Haymaker provides consulting services to the
Company and KACC, in addition to acting as a director. For the period of October
11, 2001 through December 31, 2001, Mr. Haymaker's base compensation under the
agreement was $88,025, inclusive of his base director's fee and any Board and
committee fees otherwise payable. Receipt of the base director's fee portion of
this amount was deferred in accordance with the deferred compensation program
discussed above. For the year 2002, Mr. Haymaker's base compensation under the
agreement will be $50,000 for services as a director, of which $30,000 will be
payable in cash, and $365,000 for services as non-executive Chairman of the
Boards of the Company and KACC, inclusive of any Board and committee fees
otherwise payable. The agreement also provides for an incentive payment of
$105,000 upon the achievement of certain goals.

EMPLOYMENT CONTRACTS, RETENTION PLAN AND AGREEMENTS AND TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS

Raymond J. Milchovich. Prior to his retirement in October 2001, Mr. Milchovich
was party to an employment agreement with KACC effective June 1, 1999. Pursuant
to the terms of the agreement, Mr. Milchovich was entitled to a base salary of
$692,000 for 2001. Through the date of his retirement, Mr. Milchovich had earned
$547,833 of this amount.

Mr. Milchovich's agreement provided for a target bonus equal to 80% of base
salary per year, payable based on the attainment by KACC of short-term bonus
plan objectives under KACC's executive bonus plan for such year, as agreed upon
annually consistent with KACC's business plan for the relevant year. Pursuant to
the terms of the plan, Mr. Milchovich forfeited any award under the plan for
2001, upon his retirement.

Under the terms of the agreement, Mr. Milchovich received in 1999 and 2000 stock
options to purchase 750,000 shares of the Company's Common Stock under the 1997
Omnibus Plan. Twenty percent (20%) of the options, or 150,000 shares, were
granted with an exercise price of $9.50 per share, forty percent (40%) of the
options, or 300,000 shares, were granted with an exercise price of $12.35 per
share, and forty percent (40%) of the options, or 300,000 shares, were granted
with an exercise price of $14.25 per share. The options were granted in lieu of
any payment of long-term incentive compensation under the executive bonus plan
for the five year period beginning January 1, 2000, although Mr. Milchovich
remained eligible for additional option grants at the discretion of the Section
162(m) Compensation Committee of the Board. The stock options granted to Mr.
Milchovich under the agreement were among those exchanged by him for restricted
shares of Company Common Stock in connection with the Exchange Offer. See
discussion under "Option/SAR Exercises and Fiscal Year End Value Table" for
additional information regarding the Exchange Offer.

Mr. Milchovich's agreement provided that upon the termination by KACC of his
employment for any reason other than termination for cause, his acceptance of
any offer of employment with an affiliate of KACC, or a voluntary termination by
Mr. Milchovich for other than good reason, then Mr. Milchovich would be entitled
to receive the following benefits: (A) an early retirement lump sum payment,
equal to the excess, if any, of the sum of (i) the lump sum benefit from the
Kaiser Retirement Plan that Mr. Milchovich would have been entitled to as of the
date of his actual termination based upon the terms of the Kaiser Retirement
Plan as in effect June 1, 1999, and as if he qualified for a full early
retirement pension, and (ii) the lump sum benefit from the Kaiser Supplemental
Benefits Plan based upon the terms of that Plan as in effect June 1, 1999, and
as if he qualified for a Kaiser Retirement Plan full early retirement pension,
over (iii) an amount equal to the lump sum actuarial equivalent of Mr.
Milchovich's actual benefit payable from the Kaiser Retirement Plan on account
of his actual termination, plus the actual benefit payable from the Kaiser
Supplemental Benefits Plan on account of his actual termination; (B) full health
benefits as if Mr. Milchovich had qualified for an early retirement pension; (C)
a lump sum equal to Mr. Milchovich's base salary as of the date of his
termination for a period equal to the greater of (x) the number of months
remaining in the employment period, or (y) two years, plus an amount equal to
Mr. Milchovich's target annual bonus for the year of termination; and (D) all
unvested stock options held by Mr. Milchovich on the date of such termination
that would have vested during his employment period would immediately vest and
become exercisable in full for the remaining portion of the applicable period.
The agreement further provided that in the event of a change in control, the
terms and conditions of Mr. Milchovich's agreement would continue in full force
and effect during the period that he would continue to provide services;
provided, in the event of a termination of his employment by KACC other than for
cause, or in the event Mr. Milchovich would terminate his employment for any
reason within twelve (12) months following a change in control, the foregoing
benefits would become due and payable.

Jack A. Hockema. Effective January 24, 2000, in connection with Mr. Hockema's
election as Executive Vice President, and President of Kaiser Fabricated
Products, the Section 162(m) Compensation Committee of the Board approved
compensation arrangements for Mr. Hockema for 2000 and 2001 comprised of three
components: base pay, short-term incentive and long-term incentive. The
long-term incentive covers the period 2000-2002 and has two components. The
first component has a target amount of $200,000, with any award under the first
component to be made based on that target amount and on the performance of the
engineered products business unit for the period 2000-2002. The second
component, which was valued at $135,000, was made in 2000 in the form of a grant
of a stock option to purchase 28,184 shares of the Company's Common Stock at
$6.0938 per share. The options generally vest at the rate of 33 1/3% per year,
beginning on February 3, 2001, with an additional 33 1/3% vesting each February
3 thereafter until fully vested, provided that if as of any such vesting date
the Company's Common Stock has not traded at $10.00 or more per share for at
least 20 consecutive trading days during the option period, the vesting date
will be the date such condition has been met or February 3, 2009, whichever is
earlier. Vesting may be accelerated in certain circumstances. Mr. Hockema also
will qualify for a cash bonus of $500,000 in the event of the sale of a
specified portion of the business units under his management on or before July
1, 2002. Payment of such a bonus would be made in three equal annual
installments, with the first payment occurring within 30 days of the closing of
such sale.

Effective October 9, 2001, in connection with Mr. Hockema's election as
President and Chief Executive Officer, Mr. Hockema and KACC entered into an
employment agreement for the period October 9, 2001 through December 31, 2002.
Under the terms of the agreement, Mr. Hockema's compensation will continue to be
composed of base pay, short-term incentive and long-term incentive. His base pay
for 2002 is $730,000. His short-term incentive target for 2002 is $500,000, with
payment to be from 50% to 300% of target based upon attainment of objectives
established by the Board of Directors.

Mr. Hockema's long-term incentive bonus for the term of the agreement was valued
at $1,500,000 and is composed one-half in the form of 241,936 restricted shares
of Company Common Stock and one-half in the form of options to purchase 306,122
shares of Company Common Stock at $3.10 per share. The restricted stock was
granted in two awards, one for 146,448 shares issued effective October 31, 2001,
and the second for 95,488 shares issued effective January 25, 2002. The options
were granted as of October 11, 2002. The restrictions on the shares will
generally lapse and the shares vest at the rate of 33 1/3% per year, beginning
on October 11, 2002, with an additional 33 1/3% vesting on each October 11
thereafter until fully vested. The options also will generally vest at the rate
of 33 1/3% per year beginning on October 11, 2002, with an additional 33 1/3%
vesting on each October 11 thereafter until fully vested. Vesting of the
restricted shares and the options may be accelerated under certain
circumstances.

John T. La Duc. Mr. La Duc and KACC entered into a five-year employment
agreement effective January 1, 1998. Pursuant to the terms of the agreement, Mr.
La Duc currently is entitled to an annual base salary of $393,700. The amount is
reviewed annually to evaluate Mr. La Duc's performance, and in any event will be
adjusted for inflation consistent with the general program of increases for
other executives and management employees. Mr. La Duc's agreement established an
annual target bonus of $200,000 (subject to adjustment for inflation) payable
upon KACC's achieving short-term objectives under its executive bonus plan which
are to be agreed upon annually and be otherwise consistent with KACC's business
plan.

Pursuant to the terms of the agreement, Mr. La Duc received in 1998 a grant
under the 1997 Omnibus Plan of options to purchase 468,750 shares of the
Company's Common Stock at an exercise price of $9.3125 per share. This grant was
intended to have a value at the date of grant equivalent to a value of five
times Mr. La Duc's annual long-term incentive target of $465,000 and to be in
lieu of any payment of long-term incentive compensation under KACC's executive
bonus plan for the five-year period beginning January 1, 1998, although Mr. La
Duc remains eligible for additional option grants. One-half of the options
granted to Mr. La Duc under the agreement were among those exchanged by him for
restricted shares of Company Common Stock in connection with the Exchange Offer.
See "Option/SAR Exercises and Fiscal Year End Value Table" for additional
information regarding the Exchange Offer.

Mr. La Duc's agreement provides that upon the termination of his employment for
any reason other than termination for cause, his acceptance of any offer of
employment with an affiliate of KACC, or a voluntary termination by Mr. La Duc
for other than good reason, or if Mr. La Duc's employment terminates by the
expiration of the employment period under the agreement without an offer for
continued employment by KACC for a position of responsibility comparable to that
held by Mr. La Duc at the beginning of the employment period and on
substantially the same or improved terms and conditions, then Mr. La Duc would
be entitled to receive the following benefits: (A) an early retirement lump sum
payment, equal to the excess, if any, of the sum of (i) the lump sum benefit
from the Kaiser Retirement Plan that Mr. La Duc would have been entitled to as
of the date of his actual termination based upon the terms of the Kaiser
Retirement Plan as in effect January 1, 1998, and as if he qualified for a full
early retirement pension, and (ii) the lump sum benefit from the Kaiser
Supplemental Benefits Plan based upon the terms of that Plan as in effect
January 1, 1998, and as if he qualified for a Kaiser Retirement Plan full early
retirement pension, over (iii) an amount equal to the lump sum actuarial
equivalent of Mr. La Duc's actual benefit payable from the Kaiser Retirement
Plan on account of his actual termination, plus the actual benefit payable from
the Kaiser Supplemental Benefits Plan on account of his actual termination; (B)
full health benefits as if Mr. La Duc had qualified for an early retirement
pension; (C) a lump sum equal to Mr. La Duc's base salary as of the date of his
termination for a period equal to the greater of (x) the number of months
remaining in the employment period, or (y) two years, plus an amount equal to
Mr. La Duc's target annual bonus for the year of termination (but no less than
$200,000); and (D) all unvested stock options held by Mr. La Duc on the date of
such termination that would have vested during his employment period would
immediately vest and become exercisable in full for the remaining portion of the
period of five years from the date of grant. In the event of a change in
control, the terms and conditions of Mr. La Duc's agreement would continue in
full force and effect during the period that he would continue to provide
services; provided, in the event of a termination of his employment by KACC
other than for cause, or in the event Mr. La Duc would terminate his employment
for any reason within twelve (12) months following a change in control, the
foregoing benefits would become due and payable.

J. Kent Friedman. Mr. Friedman and MAXXAM entered into a five-year employment
agreement effective December 1, 1999. Pursuant to the terms of the agreement,
Mr. Friedman currently is entitled to a base salary of $450,000 per year. This
amount is reviewed in accordance with MAXXAM's generally applicable practices;
however, MAXXAM has no obligation under such agreement to increase Mr.
Friedman's base salary. Mr. Friedman's employment agreement also provides that
he receive an annual bonus of not less than $150,000 for each calendar year he
is employed by MAXXAM. Pursuant to the terms of the agreement, Mr. Friedman
received in 1999 a grant under the MAXXAM Omnibus Plan of non-qualified stock
options, with such options having tandem stock appreciation rights, with respect
to 17,500 shares of MAXXAM's common stock, at an exercise price of $45.50 per
share, and a grant under the 1997 Omnibus Plan of options to purchase 167,000
shares of the Company's Common Stock at an exercise price of $9.00 per share.
All options granted pursuant to the terms of Mr. Friedman's agreement generally
vest at the rate of 20% per year, beginning on December 1, 2000, with an
additional 20% vesting each December 1 thereafter until fully vested. The stock
options granted to Mr. Friedman under the agreement to purchase Company Common
Stock were exchanged by him for restricted shares of Company Common Stock in
connection with the Exchange Offer. See "Option/SAR Exercises and Fiscal Year
End Value Table" for additional information regarding the Exchange Offer.

Pursuant to the terms of Mr. Friedman's agreement, Mr. Friedman received a
$250,000 interest-free loan from MAXXAM. Further, contingent upon Mr. Friedman's
continued employment with MAXXAM, beginning on December 1, 2000 and continuing
annually thereafter, $50,000 of the principal of the loan shall be forgiven by
MAXXAM until the principal of the loan has been reduced to zero. Pursuant to the
terms of the agreement, Mr. Friedman also is entitled to participate in all
employee benefit plans and programs which are available to MAXXAM's senior
executive employees. Mr. Friedman's agreement provides that upon the termination
of his employment (either voluntarily by Mr. Friedman or for cause), Mr.
Friedman is entitled to (i) pro rata base salary through the date of such
termination and (ii) any compensation and benefits otherwise due to him pursuant
to the terms of MAXXAM's employee benefit plans. In addition, in the event of
Mr. Friedman's termination under the circumstances described above, any
outstanding principal on the loan referred to above becomes repayable by him
upon such termination.

Kaiser Retention Plan and Agreements. Effective January 15, 2002, KACC adopted
the Kaiser Aluminum & Chemical Corporation Retention Plan (the "Retention
Plan") and in connection therewith entered into retention agreements with
certain key employees, including Messrs. Hockema, Friedman, La Duc, Bonn and
Chapman. Awards under the Retention Plan generally vest and become payable only
if the participant is employed by KACC on the vesting date for payment,
provided, however, that in the event of the death, disability, termination
without cause or resignation with good reason (as such terms are defined in the
plan) of a participant prior to vesting, the award will vest immediately and
generally be payable as soon as practicable.

The awards made in January 2002 contain a basic award, and for Messrs. La Duc
and Bonn an additional special award. Fifteen percent of the basic awards vested
and was paid in January 2002. If a participant's employment is terminated within
90 days following January 15, 2002 for any reason other than death, disability,
termination without cause or resignation for good reason, this payment must be
returned. No special awards have vested yet. The vesting date for the balance of
the basic awards and the special awards is to be determined by the Executive
Committee of the Board of KACC, but in no event is the vesting and payment date
to be later than March 31, 2003. Such payment of the basic award shall be
reduced by any short-term incentive and long-term incentive cash payments earned
by a participant during 2002. Upon their receipt of the special awards, Messrs.
La Duc and Bonn agree to waive any accrued benefit through March 31, 2003 under
the Kaiser Supplemental Benefits Plan. In connection with the establishment of
the Retention Plan, the Company and KACC created and funded an irrevocable
grantor trust for the purpose of paying the special awards to Messrs. La Duc and
Bonn when due.

The total amount of the basic awards granted to Messrs. Hockema, Friedman, La
Duc, Bonn and Chapman under the Retention Plan are $1,095,000, $361,530,
$590,553, $491,400 and $104,000, respectively. The amount of the special awards
to Messrs. La Duc and Bonn are $2,457,000 and $1,507,000, respectively.

Kaiser Enhanced Severance Protection and Change in Control Benefits Program. In
2000, KACC implemented the Enhanced Severance Protection and Change in Control
Benefits Program (the "Program") in order to provide selected executive
officers, including Messrs. Hockema, La Duc, Bonn and Chapman (and prior to his
retirement, Mr. Milchovich), and key employees of KACC (collectively,
"Participants") with appropriate protection in the event of job loss in
connection with a change in control, and for certain Participants, significant
restructuring or other circumstances. The Program replaced the Kaiser Severance
Protection and Change of Control Benefits Program, which expired at December 31,
2000.

The Program benefits consist of severance payments and benefits in the event of
termination. Under the Program, KACC has the sole discretion to determine which
persons will participate in the Program and the level of participation.

Participants are eligible for severance benefits in the event the Participant's
employment terminates or constructively terminates due to a change in control
during a period which commences ninety (90) days prior to the change in control
and ends on either the first, second or third anniversary of the change in
control, depending on the Participant's position. These benefits are not
available if (i) the Participant voluntarily resigns or retires, (ii) the
Participant is discharged for cause, (iii) the Participant's employment
terminates as the result of death or disability, or (iv) the Participant
declines to sign, or subsequently revokes, a designated form of release.

Certain Participants, including the above-mentioned Named Executive Officers,
also are eligible for severance benefits in the event that their employment is
terminated outside of the period described above as a result of the sale or
other disposition of one or more business units to which they provide services.
These Participants will not be entitled to severance payments under this
provision if any of (i) through (iv) above apply or if KACC offers them suitable
employment in a substantially similar capacity at their current level of base
pay and short-term incentive, regardless of whether they accept or reject such
offer.

Certain Participants, including the above-mentioned Named Executive Officers,
also are eligible for severance benefits if they are terminated other than at a
time or for a reason described above. No severance payments will be payable to a
Participant under this provision if any of (i) through (iv) above apply or if
KACC offers the Participant suitable employment and the Participant rejects such
offer.

Severance benefits generally payable under the Program consist of a lump sum
cash payment in an amount ranging from one to three times the sum of the
Participant's base pay and most recent short-term incentive target, plus a
pro-rated portion of the Participant's short- and long-term incentive target for
the year of termination. Participants also will be entitled to continued
medical, dental, life and accidental death and dismemberment benefits, and in
the case of certain Participants, perquisites, for designated periods after
termination. In certain circumstances, a Participant also may be entitled to a
payment in an amount sufficient, after the payment of taxes, to pay any excise
tax due by the Participant under Section 4999 of the Tax Code or any similar
state or local tax.

Severance payments payable to a Participant under the Program are in lieu of any
severance or other termination payments provided for under any other agreement
between the Participant and KACC (including the Kaiser Termination Payment
Policy described above), provided that if the terms of a written employment
agreement conflict with the Program, the provisions more favorable to the
Participant will prevail.

Except as otherwise noted, there are no employment contracts between the Company
or any of its subsidiaries and any of the Company's Named Executive Officers.
Similarly, except as otherwise noted, there are not any compensatory plans or
arrangements which include payments from the Company or any of its subsidiaries
to any of the Company's Named Executive Officers in the event of any such
officer's resignation, retirement or any other termination of employment with
the Company and its subsidiaries or from a change in control of the Company or a
change in the Named Executive Officer's responsibilities following a change in
control.

IMPLICATIONS OF REORGANIZATION PROCEEDINGS ON BENEFIT PLANS AND OTHER EMPLOYMENT
AND COMPENSATORY ARRANGEMENTS

As a result of the filing of the Cases, payments under the Kaiser Termination
Payment Policy in respect of periods prior to the Filing Date generally cannot
be made by KACC. In addition, payments under the Kaiser Supplemental Benefits
Plan may not be permitted. Any such payments that are not made under the Kaiser
Termination Payment Policy or the Kaiser Supplemental Benefits Plan will be
resolved as claims in the overall context of a plan of reorganization, which is
likely to take an extended period of time. Further, the value of distributions,
if any, in respect of such unpaid amounts could be substantially less than the
amounts claimed.

In addition, pursuant to the Code, as debtors-in-possession, the Company and
KACC may have the right, subject to Court approval, to assume or reject their
existing employment, termination and similar contracts noted above, including
the existing consulting agreement with Mr. Haymaker, the existing employment
agreements with Messrs. La Duc and Hockema and the retention agreements entered
into in connection with the Retention Plan. See "Business--Reorganization
Proceedings" for a discussion of assumption or rejection of executory contracts.
The Debtors are in the process of addressing employment and other compensatory
arrangements with key employees and have not yet taken action to assume or
reject any existing employment, termination or similar contract. The Debtors
intend to review their benefit plans generally during the course of the Cases,
and at this time it is unknown which of the benefit plans noted above will be
affected by this review.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of the Compensation Policy Committee or the Section 162(m)
Compensation Committee of the Board was, during the 2001 fiscal year, an officer
or employee of the Company or any of its subsidiaries, or was formerly an
officer of the Company or any of its subsidiaries or, other than Mr. Levin, had
any relationships requiring disclosure by the Company under Item 404 of
Regulation S-K. Mr. Levin served on the Company's Compensation Policy Committee
and Board of Directors during 2001 and is also a member of the law firm of
Kramer Levin Naftalis & Frankel LLP, which provided legal services to the
Company and its subsidiaries during 2001.

During the Company's 2001 fiscal year, no executive officer of the Company
served as (i) a member of the compensation committee (or other board committee
performing equivalent functions) of another entity, one of whose executive
officers served on the Compensation Policy Committee or Section 162(m)
Compensation Committee of the Company, (ii) a director of another entity, one of
whose executive officers served on any of such committees, or (iii) a member of
the compensation committee (or other board committee performing equivalent
functions) of another entity, one of whose executive officers served as a
director of the Company.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OWNERSHIP OF THE COMPANY

The following table sets forth, as of March 29, 2002, unless otherwise
indicated, the beneficial ownership of the Company's Common Stock by (i) those
persons known by the Company to own beneficially more than 5% of the shares of
the Company's Common Stock then outstanding, (ii) each of the directors of the
Company, (iii) each of the Named Executive Officers, and (iv) all directors and
executive officers of the Company and KACC as a group.

NAME OF
BENEFICIAL OWNER TITLE OF CLASS # OF SHARES(1) % OF CLASS
- ------------------------------------------------------ ----------------------- -------------------- ----------------
MAXXAM Inc. Common Stock 50,000,000(2) 62.0
Capital Group International, Inc. and Capital Common Stock 6,046,200(3) 7.5
Guardian Trust Company
Dimensional Fund Advisors Inc. Common Stock 5,569,615(4) 6.9
Wellington Management Company, LLP and Common Stock 6,048,434(5) 7.5
Vanguard Windsor Funds
Joseph A. Bonn Common Stock 121,909(6)(7) *
James L. Chapman Common Stock 24,769(7) *
Robert J. Cruikshank Common Stock 18,607(7)(8) *
J. Kent Friedman Common Stock 93,894(7) *
James T. Hackett Common Stock 14,344(7)(8) *
George T. Haymaker, Jr. Common Stock 186,466(7)(8) *
Jack A. Hockema Common Stock 318,704(7)(8) *
Charles E. Hurwitz Common Stock 34,981(7)(9) *
John T. La Duc Common Stock 346,322(7)(8) *
Ezra G. Levin Common Stock 16,607(7)(8) *
Raymond J. Milchovich Common Stock 88,683(10) *
All directors and executive officers of the Company Common Stock 1,600,828(6)(10)(11) 2.0
as a group (21 persons)

- ------------------------------------
* Less than 1%.
(1) Unless otherwise indicated, the beneficial owners have sole voting and
investment power with respect to the shares listed in the table. Also
includes options exercisable within 60 days of March 29, 2002, to acquire
such shares.
(2) Includes 27,938,250 shares beneficially owned by MGHI. As of March 29,
2002, 23,443,953 of such shares were pledged as security for $71.3 million
principal amount of 12% MGHI Senior Secured Notes due 2003. The address of
MAXXAM is 5847 San Felipe, Suite 2600, Houston, Texas 77057.
(3) Information is based solely on a Schedule 13G filed with the SEC dated
February 9, 2002, by Capital Group International, Inc. ("CGII"), a holding
company for a group of investment management companies, and Capital
Guardian Trust Company ("CGTC"), a bank, reporting their respective
ownership interests in the Company's shares at December 31, 2001. The
Schedule 13G indicates that CGII and CGTC have sole voting power as to
4,629,200 of such shares and sole dispositive power as to 6,046,200 of
such shares. CGII's and CGTC's address is 11100 Santa Monica Blvd., Los
Angeles, California 90025.
(4) Information is based solely on a Schedule 13G filed with the SEC dated
January 30, 2002, by Dimensional Fund Advisors Inc. ("DFA"), a registered
investment advisor, reporting its ownership interest in the Company's
shares at December 31, 2001. The Schedule 13G indicates that DFA has sole
voting and sole dispositive value as to all of such shares, that all such
shares are owned by advisory clients and that DFA disclaims beneficial
ownership to all such shares. DFA's address is 1299 Ocean Avenue, 11th
Floor, Santa Monica, California 90401.
(5) Information is based solely on the Schedules 13G filed with the SEC and
dated February 14, 2002 and February 12, 2002, respectively, by Wellington
Management Company, LLP ("Wellington"), a registered investment advisor,
and Vanguard Windsor Funds - Windsor Fund ("Vanguard"), a registered
investment company, reporting their respective ownership interests in the
Company's shares at December 31, 2001. The Schedule 13G filed by Vanguard
indicates that it has shared dispositive power and sole voting power with
respect to 6,048,434 of such shares. The Schedule 13G filed by Wellington
indicates that it has shared dispositive power and no voting power with
respect to all of such 6,048,434 shares. The Wellington Schedule 13G also
states that all of the shares reported by it are owned of record by other
persons or entities having the right to receive or the power to direct the
receipt of dividends from, or proceeds from the sale of such shares.
Vanguard's address is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.
Wellington's address is 75 State Street, Boston, Massachusetts 02109.
(6) Includes 60,438 shares of Company Common Stock held in trust with respect
to which Mr. Bonn possesses shared voting and investment power with his
spouse.
(7) Includes 60,755, 293, 3,598, 93,894, 1,335, 94,748, 277,637, 34,981,
23,007, and 3,598 restricted shares of Company Common Stock owned by
Messrs. Bonn, Chapman, Cruikshank, Friedman, Hackett, Haymaker, Hockema,
Hurwitz, La Duc and Levin, respectively.
(8) Includes 13,009, 13,009, 7,143, 23,216, 187,500 and 13,009 options
exercisable within 60 days of March 29, 2002 to acquire shares of Company
Common Stock, by Messrs. Cruikshank, Hackett, Haymaker, Hockema, La Duc
and Levin, respectively.
(9) Excludes shares owned by MAXXAM. Mr. Hurwitz may be deemed to hold
beneficial ownership in the Company as a result of his beneficial
ownership in MAXXAM.
(10) Includes 60,309 shares of Company Common Stock held in trust with respect
to which Mr. Milchovich possesses shared voting and investment power with
his spouse.
(11) Excludes shares beneficially owned by Messrs. Friedman and Milchovich,
each of whom were not executive officers of the Company or KACC as of
March 29, 2002. Includes options exercisable within 60 days of March 29,
2002, to acquire 306,943 shares of Company Common Stock. Also includes
2,539 shares of Company Common Stock held by a limited partnership with
respect to which an executive officer possesses shared voting and
investment power with his spouse.

OWNERSHIP OF MAXXAM

As of March 29, 2002, MAXXAM owned, directly and indirectly, approximately 62.0%
of the issued and outstanding Common Stock of the Company. The following table
sets forth, as of March 29, 2002, unless otherwise indicated, the beneficial
ownership of the common stock and Class A $.05 Non-Cumulative Participating
Convertible Preferred Stock ("MAXXAM Preferred Stock") of MAXXAM by the
directors of the Company, each of the Named Executive Officers, and by the
directors and the executive officers of the Company and KACC as a group:

NAME OF % % OF COMBINED
BENEFICIAL OWNER TITLE OF CLASS # OF SHARES(1) OF CLASS VOTING POWER (2)
- ------------------------------------------ -------------------- --------------------- ---------- -----------------
Charles E. Hurwitz Common Stock 2,989,944(3)(4) 44.9 73.8
Preferred Stock 752,441(4)(5)(6) 99.2
Robert J. Cruikshank Common Stock 4,200(7) * *
J. Kent Friedman Common Stock 10,760(8) * *
Ezra G. Levin Common Stock 4,200(7) * *
All directors and executive officers as a Common Stock 3,001,254(4)(9) 45.0 73.9
group (21 persons) Preferred Stock 752,441(4)(5)(6) 99.2

- ------------------------------------
* Less than 1%.
(1) Unless otherwise indicated, beneficial owners have sole voting and
investment power with respect to the shares listed in the table. Includes
the number of shares such persons would have received on March 29, 2002,
if any, for their exercisable SARs (excluding SARs payable in cash only)
exercisable within 60 days of such date if such rights had been paid
solely in shares of MAXXAM common stock. Also includes the number of
shares of MAXXAM common stock credited to such persons stock fund account
under MAXXAM's 401(k) savings plan.
(2) MAXXAM Preferred Stock is generally entitled to ten votes per share on
matters presented to a vote of MAXXAM's stockholders.
(3) Includes 1,669,451 shares of MAXXAM common stock owned by Gilda
Investments, LLC ("Gilda"), a wholly owned subsidiary of Giddeon Holdings,
as to which Mr. Hurwitz indirectly possesses voting and investment power.
Mr. Hurwitz serves as the sole director of Giddeon Holdings, and together
with members of his immediate family and trusts for the benefit thereof,
owns all of the voting shares of Giddeon Holdings. Also includes (a)
78,784 shares of MAXXAM common stock separately owned by Mr. Hurwitz's
spouse and as to which Mr. Hurwitz disclaims beneficial ownership, (b)
46,500 shares of MAXXAM common stock owned by the Hurwitz Investment
Partnership L.P., a limited partnership controlled by Mr. Hurwitz and his
spouse, 23,250 of which shares were separately owned by Mr. Hurwitz's
spouse prior to their transfer to such limited partnership and as to which
Mr. Hurwitz disclaims beneficial ownership, (c) 4,049 shares of MAXXAM
common stock owned by the 1992 Hurwitz Investment Partnership L.P., of
which 2,024 shares are owned by Mr. Hurwitz's spouse as separate property
and as to which Mr. Hurwitz disclaims beneficial ownership, (d) 1,001,391
shares of MAXXAM common stock held directly by Mr. Hurwitz, including
256,808 shares of MAXXAM common stock with respect to which Mr. Hurwitz
possesses sole voting power and which have certain transfer and other
restrictions that generally lapse in December 2014, (e) 60,000 shares of
MAXXAM common stock owned by Giddeon Portfolio, LLC, which is owned 79% by
Gilda and 21% by Mr. Hurwitz, and of which Gilda is the managing member
("Giddeon Portfolio"), (f) options to purchase 21,029 shares of MAXXAM
common stock held by Gilda, and (g) options held by Mr. Hurwitz to
purchase 108,740 shares of MAXXAM common stock exercisable within 60 days
of March 29, 2002.
(4) Gilda, Giddeon Holdings, Giddeon Portfolio, the Hurwitz Investment
Partnership L.P., the 1992 Hurwitz Investment Partnership L.P. and Mr.
Hurwitz may be deemed a "group" (the "Stockholder Group") within the
meaning of Section 13(d) of the Securities Exchange Act of 1934, as
amended. As of March 29, 2002, in the aggregate, the members of the
Stockholder Group owned 2,989,944 shares of MAXXAM common stock and
752,281 shares of MAXXAM Preferred Stock, aggregating approximately 73.8%
of the total voting power of MAXXAM. By reason of his relationship with
the members of the Stockholder Group, Mr. Hurwitz may be deemed to possess
shared voting and investment power with respect to the shares held by the
Stockholder Group. The address of Gilda is 5847 San Felipe, Suite 2600,
Houston, Texas 77057. The address of the Stockholder Group is c/o Timothy
J. Neumann, Esq., Giddeon Holdings, Inc., 5847 San Felipe, Suite 2600,
Houston, Texas 77057.
(5) Includes 661,377 shares of MAXXAM Preferred Stock owned by Gilda as to
which Mr. Hurwitz possesses voting and investment power and 1,064 shares
of MAXXAM Preferred Stock held directly.
(6) Includes options exercisable within 60 days of March 29, 2002, to acquire
90,000 shares of MAXXAM Preferred Stock. (7) Includes options exercisable
within 60 days of March 29, 2002, to acquire 3,200 shares of MAXXAM common
stock. (8) Represents options exercisable within 60 days of March 29, 2002
to acquire 10,760 shares of MAXXAM common stock. (9) Includes options
exercisable within 60 days of March 29, 2002, to acquire 136,929 shares of
MAXXAM common stock.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During the period from October 28, 1988 through June 30, 1993, the Company and
its domestic subsidiaries were included in the federal consolidated income tax
returns of MAXXAM. The tax allocation agreements of the Company and KACC with
MAXXAM terminated pursuant to their terms, effective for taxable periods
beginning after June 30, 1993. Payments or refunds for periods prior to July 1,
1993 related to foreign jurisdictions could still be required pursuant to the
Company's and KACC's respective tax allocation agreements with MAXXAM. Any such
payments to MAXXAM by KACC would require approval by the DIP Facility lenders
and the Court. While the Company and KACC are severally liable for the MAXXAM
tax group's federal income tax liability for all of 1993 and applicable prior
periods pursuant to the tax allocation agreements, MAXXAM indemnifies the
Company and KACC to the extent the tax liability exceeds amounts payable by the
Company under such agreements. See the portion of Note 12 of Notes to
Consolidated Financial Statements entitled "Dispute with MAXXAM" for information
concerning the declaratory action filed by MAXXAM asking the Court to find that
MAXXAM has no further obligations under the agreements.

KACC and MAXXAM have an arrangement pursuant to which they reimburse each other
for certain allocable costs associated with the performance of services by their
respective employees. KACC paid a total of approximately $3.8 million to MAXXAM
pursuant to such arrangements and MAXXAM paid approximately $2.0 million to KACC
pursuant to such arrangements in 2001. Generally, KACC and MAXXAM endeavor to
minimize the need for reimbursement by ensuring that employees are employed by
the entity to which the majority of their services are rendered.

Mr. Levin, a director of the Company and KACC, is a member of the law firm of
Kramer Levin Naftalis & Frankel LLP, which provides legal services to the
Company and its subsidiaries, including KACC.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

1. Financial Statements

Report of Independent Public Accountants

Consolidated Balance Sheets

Statements of Consolidated Income (Loss)

Statements of Consolidated Stockholders' Equity and
Comprehensive Income (Loss)

Statements of Consolidated Cash Flows

Notes to Consolidated Financial Statements

Quarterly Financial Data (Unaudited)

Five-Year Financial Data

2. Financial Statement Schedules

Report of Independent Public Accountants

Schedule I - Condensed Balance Sheets - Parent Company,
Condensed Statements of Income - Parent Company,
Condensed Statements of Cash Flows - Parent Company, and
Notes to Condensed Financial Statements - Parent Company

All other schedules are inapplicable or the required
information is included in the Consolidated Financial
Statements or the Notes thereto.

3. Exhibits

Reference is made to the Index of Exhibits immediately
preceding the exhibits hereto (beginning on page 101), which
index is incorporated herein by reference.

(b) REPORTS ON FORM 8-K

No Report on Form 8-K was filed by the Company during the last
quarter of the period covered by this Report.

Reference is made to the Index of Exhibits immediately preceding
the exhibits hereto (beginning on page 101), which index is
incorporated herein by reference.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of Kaiser Aluminum Corporation:

We have audited in accordance with auditing standards generally accepted in the
United States, the financial statements included in Kaiser Aluminum Corporation
and Subsidiary Companies' annual report to shareholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated April 10,
2002. Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule I listed in the index at Item
14(a)2. above is the responsibility of the Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not a required part of the basic financial statements. This schedule has
been subjected to the auditing procedures applied in our audit of the basic
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.

Schedule I has been prepared in accordance with generally accepted accounting
principles applicable to a going concern which contemplate among other things,
realization of assets and payment of liabilities in the normal course of
business As discussed in Note 1 to Schedule I, on February 12, 2002, the
Company, its wholly owned subsidiary, Kaiser Aluminum & Chemical Corporation
("KACC") and certain of KACC's subsidiaries filed for reorganization under
Chapter 11 of the United States Bankruptcy Code. This action raises substantial
doubt about the Company's ability to continue as a going concern. Schedule I
does not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amount and classification of
liabilities or the effects on existing stockholders' equity that may result from
any plans, arrangements or other actions arising from the aforementioned
proceedings, or the possible inability of the Company to continue in existence.

ARTHUR ANDERSEN LLP

Houston, Texas
April 10, 2002

SCHEDULE I
CONDENSED BALANCE SHEETS - PARENT COMPANY

(In millions of dollars, except share amounts)

December 31,
-------------------------
2001 2000
----------- ----------
ASSETS
Investment in KACC $ 1,734.0 $ 2,122.2
----------- ----------

Total $ 1,734.0 $ 2,122.2
=========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ - $ -

Intercompany note payable to KACC, including accrued interest 2,175.1 2,040.0

Stockholders' equity:
Common stock, par value $.01, authorized 125,000,000 shares; issued and
outstanding 80,698,066 and 79,599,557 shares .8 .8
Additional capital 539.1 537.5
Accumulated deficit (913.7) (454.3)
Accumulated other comprehensive income (loss) (67.3) (1.8)
----------- ----------

Total stockholders' equity (441.1) 82.2
----------- ----------

Total $ 1,734.0 $ 2,122.2
=========== ==========

The accompanying notes to condensed financial statements are an
integral part of these statements.

SCHEDULE I
CONDENSED STATEMENTS OF INCOME (LOSS) - PARENT COMPANY

(In millions of dollars)

December 31,
-----------------------------------------
2001 2000 1999
--------- --------- ---------
Equity in (loss) income of KACC $ (324.0) $ 144.3 $ 65.1
Administrative and general expense (.3) (.4) (.3)
Interest expense on intercompany note (135.1) (127.1) (118.9)
--------- --------- ---------
Net income (loss) $ (459.4) $ 16.8 $ (54.1)
========= ========= =========

The accompanying notes to condensed financial statements are an
integral part of these statements.

SCHEDULE I
CONDENSED STATEMENTS OF CASH FLOWS - PARENT COMPANY

(In millions of dollars)

December 31,
------------------------------------------
2001 2000 1999
----------- ----------- ----------
Cash flows from operating activities:
Net income (loss) $ (459.4) $ 16.8 $ (54.1)
Adjustments to reconcile net income to net cash used for
operating activities:
Equity in loss (income) of KACC 324.0 (144.3) (65.1)
Accrued interest on intercompany note payable to KACC 135.1 127.1 118.9
----------- ----------- ----------

Net cash used by operating activities (.3) (.4) (.3)
----------- ----------- ----------
Cash flows from investing activities:
Investment in KACC - - (.1)
----------- ----------- ----------

Net cash used by investing activities - - (.1)
----------- ----------- ----------
Cash flows from financing activities:
Capital stock issued - .1
Operating cost advances from KACC .3 .4 .3
----------- ----------- ----------
Net cash provided by financing activities .3 .4 .4
----------- ----------- ----------

Net (decrease) increase in cash and cash equivalents during the year - - -
Cash and cash equivalents at beginning of year - - -
----------- ----------- ----------
Cash and cash equivalents at end of year $ - $ - $ -
=========== =========== ==========

Supplemental disclosure of non-cash investing activities:
Non-cash (decrease) increase in investment in KACC $ - $ - $ (.1)

The accompanying notes to condensed financial statements are an
integral part of these statements.

SCHEDULE I
NOTES TO CONDENSED FINANCIAL STATEMENTS - PARENT COMPANY

1. REORGANIZATION PROCEEDINGS

On February 12, 2002, the Company, KACC and 13 of KACC's wholly owned
subsidiaries filed separate voluntary petitions in the United States Bankruptcy
Court for the District of Delaware for reorganization under Chapter 11 of the
United States Federal Bankruptcy Code. On March 15, 2002, two additional
subsidiaries of KACC filed petitions. The Company, KACC and the 15 subsidiaries
of KACC are collectively referred to herein as the "Debtors" and the Chapter 11
proceedings of these entities are collectively referred to herein as the
"Cases." For purposes of these financial statements, the term "Filing Date"
shall mean, with respect to any particular Debtor, the date on which such Debtor
filed its Case. None of KACC's non-U.S. affiliates were included in the Cases.
The Cases are being jointly administered with the Debtors managing their
businesses in the ordinary course as debtors-in-possession subject to the
control and supervision of the Court.

The necessity for filing the Cases was attributable to the liquidity and cash
flow problems of the Company arising in late 2001 and early 2002. The Company
was facing significant near-term debt maturities at a time of unusually weak
aluminum industry business conditions, depressed aluminum prices and a broad
economic slowdown that was further exacerbated by the events of September 11. In
addition, the Company had become increasingly burdened by the asbestos
litigation and growing legacy obligations for retiree medical and pension costs.
The confluence of these factors has created the prospect of continuing operating
losses and negative cash flow, resulting in lower credit ratings and an
inability to access the capital markets.

For additional information on the reorganization proceedings, see Note 1 of
Kaiser's Consolidated Financial Statements.

2. BASIS OF PRESENTATION

The Company is a holding company and conducts its operations through its wholly
owned subsidiary, KACC, which is reported herein using the equity method of
accounting. The accompanying parent company condensed financial statements of
the Company should be read in conjunction with Kaiser's 2001 Consolidated
Financial Statements.

3. INTERCOMPANY NOTE PAYABLE

The Intercompany Note to KACC, as amended, provides for a fixed interest rate of
6 5/8% and matures on December 21, 2020. Interest and principal payments are
payable over a 15-year term pursuant to a predetermined schedule starting
December 21, 2006.

4. RESTRICTED NET ASSETS

Prior to the Filing Date, the investment in KACC was substantially unavailable
to the Company pursuant to the terms of certain debt instruments. Subsequent to
the Filing Date, the obligations of KACC in respect of the credit facilities
under the DIP Facility are guaranteed by the Company and by certain significant
subsidiaries of KACC. See Note 8 of Notes to Kaiser's Consolidated Financial
Statements.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

KAISER ALUMINUM CORPORATION
Date: April 11, 2002 By: /S/ Jack A. Hockema
Jack A. Hockema
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Date: April 11, 2002 /S/ Jack A. Hockema
Jack A. Hockema
President, Chief Executive Officer and
Director
(Principal Executive Officer)

Date: April 11, 2002 /S/ John T. La Duc
John T. La Duc
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)

Date: April 11, 2002 /S/ Daniel D. Maddox
Daniel D. Maddox
Vice President and Controller
(Principal Accounting Officer)

Date: April 11, 2002 /S/ George T. Haymaker, Jr.
George T. Haymaker, Jr.
Chairman of the Board and Director

Date: April 11, 2002 /S/ Robert J. Cruikshank
Robert J. Cruikshank
Director

Date: April 11, 2002 /S/ James T. Hackett
James T. Hackett
Director

Date: April 11, 2002 /S/ Charles E. Hurwitz
Charles E. Hurwitz
Director

Date: April 11, 2002 /S/ Ezra G. Levin
Ezra G. Levin
Director

INDEX OF EXHIBITS

Exhibit
Number Description
- ---------- ----------------------------------------------------------------

3.1 Restated Certificate of Incorporation of Kaiser Aluminum
Corporation ("KAC"), dated February 18, 2000 (incorporated by
reference to Exhibit 3.1 to the Report on Form 10-K for the
period ended December 31, 1999, filed by KAC, File No. 1-9447).

3.2 Certificate of Retirement of KAC, dated October 24, 1995
(incorporated by reference to Exhibit 3.2 to the Report on Form
10-K for the period ended December 31, 1995, filed by KAC, File
No. 1-9447).

3.3 Certificate of Retirement of KAC, dated February 12, 1998
(incorporated by reference to Exhibit 3.3 to the Report on Form
10-K for the period ended December 31, 1997, filed by KAC, File
No. 1-9447).

3.4 Certificate of Elimination of KAC, dated July 1, 1998
(incorporated by reference to Exhibit 3.4 to the Report on Form
10-Q for the quarterly period ended June 30, 1999, filed by KAC,
File No. 1-9447).

3.5 Certificate of Amendment of the Restated Certificate of
Incorporation of KAC, dated January 10, 2000 (incorporated by
reference to Exhibit 3.5 to the Report on Form 10-K for the
period ended December 31, 1999, filed by KAC, File No. 1-9447).

3.6 Amended and Restated By-Laws of KAC, dated October 1, 1997
(incorporated by reference to Exhibit 3.3 to the Report on Form
10-Q for the quarterly period ended September 30, 1997, filed by
KAC, File No. 1-9447).

4.1 Indenture, dated as of February 1, 1993, among Kaiser Aluminum
& Chemical Corporation ("KACC"), as Issuer, Kaiser Alumina
Australia Corporation, Alpart Jamaica Inc., and Kaiser Jamaica
Corporation, as Subsidiary Guarantors, and The First National
Bank of Boston, as Trustee, regarding KACC's 12 3/4% Senior
Subordinated Notes Due 2003 (incorporated by reference to
Exhibit 4.1 to Form 10-K for the period ended December 31, 1992,
filed by KACC, File No. 1-3605).

4.2 First Supplemental Indenture, dated as of May 1, 1993, to the
Indenture, dated as of February 1, 1993 (incorporated by
reference to Exhibit 4.2 to the Report on Form 10-Q for the
quarterly period ended June 30, 1993, filed by KACC, File No.
1-3605).

4.3 Second Supplemental Indenture, dated as of February 1, 1996, to
the Indenture, dated as of February 1, 1993 (incorporated by
reference to Exhibit 4.3 to the Report on Form 10-K for the
period ended December 31, 1995, filed by KAC, File No. 1-9447).

4.4 Third Supplemental Indenture, dated as of July 15, 1997, to the
Indenture, dated as of February 1, 1993 (incorporated by
reference to Exhibit 4.1 to the Report on Form 10-Q for the
quarterly period ended June 30, 1997, filed by KAC, File No.
1-9447).

4.5 Fourth Supplemental Indenture, dated as of March 31, 1999, to
the Indenture, dated as of February 1, 1993, (incorporated by
reference to Exhibit 4.1 to the Report on Form 10-Q for the
quarterly period ended March 31, 1999, filed by KAC, File No.
1-9447).

4.6 Indenture, dated as of February 17, 1994, among KACC, as Issuer,
Kaiser Alumina Australia Corporation, Alpart Jamaica Inc.,
Kaiser Jamaica Corporation, and Kaiser Finance Corporation, as
Subsidiary Guarantors, and First Trust National Association, as
Trustee, regarding KACC's 9 7/8% Senior Notes Due 2002
(incorporated by reference to Exhibit 4.3 to the Report on Form
10-K for the period ended December 31, 1993, filed by KAC, File
No. 1-9447).

4.7 First Supplemental Indenture, dated as of February 1, 1996, to
the Indenture, dated as of February 17, 1994 (incorporated by
reference to Exhibit 4.5 to the Report on Form 10-K for the
period ended December 31, 1995, filed by KAC, File No. 1-9447).

4.8 Second Supplemental Indenture, dated as of July 15, 1997, to the
Indenture, dated as of February 17, 1994 (incorporated by
reference to Exhibit 4.2 to the Report on Form 10-Q for the
quarterly period ended June 30, 1997, filed by KAC, File No.
1-9447).

4.9 Third Supplemental Indenture, dated as of March 31, 1999, to the
Indenture, dated as of February 17, 1994 (incorporated by
reference to Exhibit 4.2 to the Report on Form 10-Q for the
quarterly period ended March 31, 1999, filed by KAC, File No.
1-9447).

4.10 Indenture, dated as of October 23, 1996, among KACC, as Issuer,
Kaiser Alumina Australia Corporation, Alpart Jamaica Inc.,
Kaiser Jamaica Corporation, Kaiser Finance Corporation, Kaiser
Micromill Holdings, LLC, Kaiser Sierra Micromills, LLC, Kaiser
Texas Micromill Holdings, LLC and Kaiser Texas Sierra
Micromills, LLC, as Subsidiary Guarantors, and First Trust
National Association, as Trustee, regarding KACC's 10 7/8%
Series B Senior Notes Due 2006 (incorporated by reference to
Exhibit 4.2 to the Report on Form 10-Q for the quarterly period
ended September 30, 1996, filed by KAC, File No. 1-9447).

4.11 First Supplemental Indenture, dated as of July 15, 1997, to the
Indenture, dated as of October 23, 1996 (incorporated by
reference to Exhibit 4.3 to the Report on Form 10-Q for the
quarterly period ended June 30, 1997, filed by KAC, File No.
1-9447).

4.12 Second Supplemental Indenture, dated as of March 31, 1999, to
the Indenture, dated as of October 23, 1996 (incorporated by
reference to Exhibit 4.3 to the Report on Form 10-Q for the
quarterly period ended March 31, 1999, filed by KAC, File No.
1-9447).

4.13 Indenture, dated as of December 23, 1996, among KACC, as Issuer,
Kaiser Alumina Australia Corporation, Alpart Jamaica Inc.,
Kaiser Jamaica Corporation, Kaiser Finance Corporation, Kaiser
Micromill Holdings, LLC, Kaiser Sierra Micromills, LLC, Kaiser
Texas Micromill Holdings, LLC, and Kaiser Texas Sierra
Micromills, LLC, as Subsidiary Guarantors, and First Trust
National Association, as Trustee, regarding KACC's 10 7/8%
Series D Senior Notes due 2006 (incorporated by reference to
Exhibit 4.4 to the Registration Statement on Form S-4, dated
January 2, 1997, filed by KACC, Registration No. 333-19143).

4.14 First Supplemental Indenture, dated as of July 15, 1997, to the
Indenture, dated as of December 23, 1996 (incorporated by
reference to Exhibit 4.4 to the Report on Form 10-Q for the
quarterly period ended June 30, 1997, filed by KAC, File No.
1-9447).

4.15 Second Supplemental Indenture, dated as of March 31, 1999, to
the Indenture, dated as of December 23, 1996 (incorporated by
reference to Exhibit 4.4 to the Report on Form 10-Q for the
quarterly period ended March 31, 1999, filed by KAC, File No.
1-9447).

4.16 Credit Agreement, dated as of February 15, 1994, among KAC,
KACC, the financial institutions a party thereto, and
BankAmerica Business Credit, Inc., as Agent (incorporated by
reference to Exhibit 4.4 to the Report on Form 10-K for the
period ended December 31, 1993, filed by KAC, File No. 1-9447).

4.17 First Amendment to Credit Agreement, dated as of July 21, 1994,
amending the Credit Agreement, dated as of February 15, 1994,
among KAC, KACC, the financial institutions party thereto, and
BankAmerica Business Credit, Inc., as Agent (incorporated by
reference to Exhibit 4.1 to the Report on Form 10-Q for the
quarterly period ended June 30, 1994, filed by KAC, File No.
1-9447).

4.18 Second Amendment to Credit Agreement, dated as of March 10,
1995, amending the Credit Agreement, dated as of February 15,
1994, as amended, among KAC, KACC, the financial institutions
party thereto, and BankAmerica Business Credit, Inc., as Agent
(incorporated by reference to Exhibit 4.6 to the Report on Form
10-K for the period ended December 31, 1994, filed by KAC, File
No. 1-9447).

4.19 Third Amendment to Credit Agreement, dated as of July 20, 1995,
amending the Credit Agreement, dated as of February 15, 1994, as
amended, among KAC, KACC, the financial institutions a party
thereto, and BankAmerica Business Credit, Inc., as Agent
(incorporated by reference to Exhibit 4.1 to the Report on Form
10-Q for the quarterly period ended June 30, 1995, filed by KAC,
File No. 1-9447).

4.20 Fourth Amendment to Credit Agreement, dated as of October 17,
1995, amending the Credit Agreement, dated as of February 15,
1994, as amended, among KAC, KACC, the financial institutions a
party thereto, and BankAmerica Business Credit, Inc., as Agent
(incorporated by reference to Exhibit 4.1 to the Report on Form
10-Q for the quarterly period ended September 30, 1995, filed by
KAC, File No. 1-9447).

4.21 Fifth Amendment to Credit Agreement, dated as of December 11,
1995, amending the Credit Agreement, dated as of February 15,
1994, as amended, among KAC, KACC, the financial institutions a
party thereto, and BankAmerica Business Credit, Inc., as Agent
(incorporated by reference to Exhibit 4.11 to the Report on Form
10-K for the period ended December 31, 1995, filed by KAC, File
No. 1-9447).

4.22 Sixth Amendment to Credit Agreement, dated as of October 1,
1996, amending the Credit Agreement, dated as of February 15,
1994, as amended, among KAC, KACC, the financial institutions a
party thereto, and BankAmerica Business Credit, Inc., as Agent
(incorporated by reference to Exhibit 4.1 to the Report on Form
10-Q for the quarterly period ended September 30, 1996, filed by
KAC, File No. 1-9447).

4.23 Seventh Amendment to Credit Agreement, dated as of December 17,
1996, amending the Credit Agreement, dated as of February 15,
1994, as amended, among KAC, KACC, the financial institutions a
party thereto, and BankAmerica Business Credit, Inc., as Agent
(incorporated by reference to Exhibit 4.18 to the Registration
Statement on Form S-4, dated January 2, 1997, filed by KACC,
Registration No. 333-19143).

4.24 Eighth Amendment to Credit Agreement, dated as of February 24,
1997, amending the Credit Agreement, dated as of February 15,
1994, as amended, among KACC, KAC, the financial institutions a
party thereto, and BankAmerica Business Credit, Inc., as Agent
(incorporated by reference to Exhibit 4.16 to the Report on Form
10-K for the period ended December 31, 1996, filed by KAC, File
No. 1-9447).

4.25 Ninth Amendment to Credit Agreement, dated as of April 21, 1997,
amending the Credit Agreement, dated as of February 15, 1994, as
amended, among KACC, KAC, the financial institutions a party
thereto, and BankAmerica Business Credit, Inc., as Agent
(incorporated by reference to Exhibit 4.5 to the Report on Form
10-Q for the quarterly period ended June 30, 1997, filed by KAC,
File No. 1-9447).

4.26 Tenth Amendment to Credit Agreement, dated as of June 25, 1997,
amending the Credit Agreement, dated as of February 15, 1994, as
amended, among KACC, KAC, the financial institutions a party
thereto, and BankAmerica Business Credit, Inc., as Agent
(incorporated by reference to Exhibit 4.6 to the Report on Form
10-Q for the quarterly period ended June 30, 1997, filed by KAC,
File No. 1-9447).

4.27 Eleventh Amendment to Credit Agreement, dated as of October 20,
1997, amending the Credit Agreement, dated as of February 15,
1994, as amended, among KACC, KAC, the financial institutions a
party thereto, and BankAmerica Business Credit, Inc., as Agent
(incorporated by reference to Exhibit 4.7 to the Report on Form
10-Q for the quarterly period ended September 30, 1997, filed by
KAC, File No. 1-9447).

4.28 Twelfth Amendment to Credit Agreement, dated as of January 13,
1998, amending the Credit Agreement, dated as of February 15,
1994, as amended, among KACC, KAC, the financial institutions a
party thereto, and BankAmerica Business Credit, Inc., as Agent
(incorporated by reference to Exhibit 4.24 to the Report on Form
10-K for the period ended December 31, 1997, filed by KAC, File
No. 1-9447).

4.29 Thirteenth Amendment to Credit Agreement, dated as of July 20,
1998, amending the Credit Agreement, dated as of February 15,
1994, as amended, among KACC, KAC, the financial institutions
party thereto, and BankAmerica Business Credit, Inc., as Agent
(incorporated by reference to Exhibit 4 to the Report on Form
10-Q for the quarterly period ended June 30, 1998, filed by KAC,
File No. 1-9447).

4.30 Fourteenth Amendment to Credit Agreement, dated as of December
11, 1998, amending the Credit Agreement, dated as of February
15, 1994, as amended, among KACC, KAC, the financial
institutions party thereto, and BankAmerica Business Credit,
Inc., as Agent (incorporated by reference to Exhibit 4.26 to the
Report on Form 10-K for the period ended December 31, 1998,
filed by KAC, File No. 1-9447).

4.31 Fifteenth Amendment to Credit Agreement, dated as of February
23, 1999, amending the Credit Agreement, dated as of February
15, 1994, as amended, among KACC, KAC, the financial
institutions party thereto, and BankAmerica Business Credit,
Inc., as Agent (incorporated by reference to Exhibit 4.27 to the
Report on Form 10-K for the period ended December 31, 1998,
filed by KAC, File No. 1-9447.)

4.32 Sixteenth Amendment to Credit Agreement, dated as of March 26,
1999, amending the Credit Agreement, dated as of February 15,
1994, as amended, among KACC, KAC, the financial institutions
party thereto, and BankAmerica Business Credit, Inc., as Agent
(incorporated by reference to Exhibit 4.28 to the Report on Form
10-K for the period ended December 31, 1998, filed by KAC, File
No. 1-9447).

4.33 Seventeenth Amendment to Credit Agreement, dated as of September
24, 1999, amending the Credit Agreement, dated as of February
15, 1994, as amended, among KACC, KAC, the financial
institutions party thereto, and Bank of America, N.A. (successor
to BankAmerica Business Credit, Inc.), as Agent (incorporated by
reference to Exhibit 4.1 to the Report on Form 10-Q for the
quarterly period ended September 30, 1999, filed by KAC, File
No. 1-9447).

4.34 Eighteenth Amendment to Credit Agreement, dated as of February
11, 2000, amending the Credit Agreement, dated as of February
15, 1994, as amended, among KACC, KAC, the financial
institutions party thereto, and Bank of America, N.A. (successor
to BankAmerica Business Credit, Inc.), as Agent (incorporated by
reference to Exhibit 4.34 to the Report on Form 10-K for the
period ended December 31, 1999, filed by KAC, File No. 1-9447).

4.35 Nineteenth Amendment to Credit Agreement, dated as of December
27, 2000, amending the Credit Agreement, dated as of February
15, 1994, as amended, among KACC, KAC, the financial
institutions party thereto, and Bank of America, N.A. (successor
to BankAmerica Business Credit, Inc.), as Agent (incorporated by
reference to Exhibit 4.35 to the Report on Form 10-K for the
period ended December 31, 2000, filed by KAC, File No. 1-9447).

4.36 Twentieth Amendment to Credit Agreement, dated as of January 26,
2001, amending the Credit Agreement, dated as of February 15,
1994, as amended, among KACC, KAC, the financial institutions
party thereto, and Bank of America, N.A. (successor to
BankAmerica Business Credit, Inc.), as Agent (incorporated by
reference to Exhibit 4.36 to the Report on Form 10-K for the
period ended December 31, 2000, filed by KAC, File No. 1-9447).

4.37 Twenty-First Amendment to Credit Agreement and Consent, dated as
of July 18, 2001, amending the Credit Agreement, dated as of
February 15, 1994, as amended, among KACC, KAC, the financial
institutions party thereto, and Bank of America, N.A. (successor
to BankAmerica Business Credit, Inc.), as Agent (incorporated by
reference to Exhibit 4.1 to the Report on Form 10-Q for the
quarterly period ended June 30, 2001, filed by KAC, File No.
1-9447).

4.38 Twenty-Second Amendment to Credit Agreement, dated as of October
16, 2001, amending the Credit Agreement, dated as of February
15, 1994, as amended, among KACC, KAC, the financial
institutions party thereto, and Bank of America, N.A. (successor
to BankAmerica Business Credit, Inc.), as Agent (incorporated by
reference to Exhibit 10.1 to the Report on Form 10-Q for the
quarterly period ended September 30, 2001, filed by KAC, File
No. 1-9447).

4.39 Twenty-Third Amendment to Credit Agreement, dated as of October
24, 2001, amending the Credit Agreement, dated as of February
15, 1994, as amended, among KACC, KAC, the financial
institutions party thereto, and Bank of America, N.A. (successor
to BankAmerica Business Credit, Inc.), as Agent (incorporated by
reference to Exhibit 10.2 to the Report on Form 10-Q for the
quarterly period ended September 30, 2001, filed by KAC, File
No. 1-9447).

*4.40 Twenty-Fourth Amendment to Credit Agreement, dated as of
November 15, 2001, amending the Credit Agreement, dated as of
February 15, 1994, as amended, among KACC, KAC, the financial
institutions party thereto, and Bank of America, N.A. (successor
to BankAmerica Business Credit, Inc.), as Agent.

4.41 Limited Waiver Regarding Repayment of CARIFA Bonds, dated
February 17, 2000, among KAC, KACC, the financial institutions
party thereto and Bank of America, N.A., as Agent (incorporated
by reference to Exhibit 4.35 to the Report on Form 10-K for the
period ended December 31, 1999, filed by KAC, File No. 1-9447).

4.42 Agreement dated August 18, 2000, among KAC, KACC, the financial
institutions party to the Credit Agreement dated as of February
15, 1994, as amended, and Bank of America, N.A., as agent,
regarding the Sale of the Center for Technology (incorporated by
reference to Exhibit 4.1 to the Report on Form 10-Q for the
quarterly period ended September 30, 2000, filed by KAC, File
No. 1-9447).

*4.43 Waiver and Consent Agreement, dated as of January 29, 2002,
among KACC, KAC, the financial institutions party to the Credit
Agreement dated as of February 15, 1994, as amended, and Bank of
America, N.A., as Agent.

*4.44 Post-Petition Credit Agreement, dated as of February 12, 2002,
among KACC, KAC, certain financial institutions and Bank of
America, N.A., as Agent.

*4.45 First Amendment to Post-Petition Credit Agreement and
Post-Petition Pledge and Security Agreement and Consent of
Guarantors, dated as of March 21, 2002, amending the
Post-Petition Credit Agreement dated as of February 12, 2002,
among KACC, KAC, certain financial institutions and Bank of
America, N.A., as Agent, and amending a Post-Petition Pledge and
Security Agreement dated as of February 12, 2002, among KACC,
KAC, certain subsidiaries of KAC and KACC, and Bank of America,
N.A., as Agent.

*4.46 Second Amendment to Post-Petition Credit Agreement and Consent
of Guarantors, dated as of March 21, 2002, amending the
Post-Petition Credit Agreement dated as of February 12, 2002,
among KACC, KAC, certain financial institutions and Bank of
America, N.A., as Agent.

4.47 Intercompany Note between KAC and KACC (incorporated by
reference to Exhibit 10.10 to the Report on Form 10-K for the
period ended December 31, 1996, filed by MAXXAM Inc. ("MAXXAM"),
File No. 1-3924).

4.48 Confirmation of Amendment of Non-Negotiable Intercompany Note,
dated as of October 6, 1993, between KAC and KACC (incorporated
by reference to Exhibit 10.11 to the Report on Form 10-K for the
period ended December 31, 1996, filed by MAXXAM, File No.
1-3924).

4.49 Amendment to Non-Negotiable Intercompany Note, dated as of
December 11, 2000, between KAC and KACC (incorporated by
reference to Exhibit 4.41 to the Report on Form 10-K for the
period ended December 31, 2000, filed by KAC, File No. 1-9447).

4.50 Senior Subordinated Intercompany Note between KAC and KACC dated
February 15, 1994 (incorporated by reference to Exhibit 4.22 to
the Report on Form 10-K for the period ended December 31, 1993,
filed by KAC, File No. 1-9447).

4.51 Senior Subordinated Intercompany Note between KAC and KACC dated
March 17, 1994 (incorporated by reference to Exhibit 4.23 to the
Report on Form 10-K for the period ended December 31, 1993,
filed by KAC, File No. 1-9447).

KAC has not filed certain long-term debt instruments not being
registered with the Securities and Exchange Commission where the
total amount of indebtedness authorized under any such
instrument does not exceed 10% of the total assets of KAC and
its subsidiaries on a consolidated basis. KAC agrees and
undertakes to furnish a copy of any such instrument to the
Securities and Exchange Commission upon its request.

10.1 Form of indemnification agreement with officers and directors
(incorporated by reference to Exhibit (10)(b) to the
Registration Statement of KAC on Form S-4, File No. 33-12836).

10.2 Tax Allocation Agreement, dated as of December 21, 1989, between
MAXXAM and KACC (incorporated by reference to Exhibit 10.21 to
Amendment No. 6 to the Registration Statement on Form S-1, dated
December 14, 1989, filed by KACC, Registration No. 33-30645).

10.3 Amendment of Tax Allocation Agreement, dated as of March 12,
2001, between MAXXAM and KACC, amending the Tax Allocation
Agreement dated as of December 21, 1989 (incorporated by
reference to Exhibit 10.3 to the Report on Form 10-K for the
period ended December 31, 2000, filed by KAC, File No. 1-9447).

10.4 Tax Allocation Agreement, dated as of February 26, 1991, between
KAC and MAXXAM (incorporated by reference to Exhibit 10.23 to
Amendment No. 2 to the Registration Statement on Form S-1, dated
June 11, 1991, filed by KAC, Registration No. 33-37895).

10.5 Tax Allocation Agreement, dated as of June 30, 1993, between
KACC and KAC (incorporated by reference to Exhibit 10.3 to the
Report on Form 10-Q for the quarterly period ended June 30,
1993, filed by KACC, File No. 1-3605).

Executive Compensation Plans and Arrangements
[Exhibits 10.6 - 10.40, inclusive]

10.6 Kaiser 1993 Omnibus Stock Incentive Plan (incorporated by
reference to Exhibit 10.1 to the Report on Form 10-Q for the
quarterly period ended June 30, 1993, filed by KACC, File No.
1-3605).

10.7 Kaiser 1997 Omnibus Stock Incentive Plan (incorporated by
reference to Appendix A to the Proxy Statement, dated April 29,
1997, filed by KAC, File No. 1-9447).

10.8 Time-Based Stock Option Grant pursuant to the Kaiser 1997
Omnibus Stock Incentive Plan to George T. Haymaker, Jr.,
effective January 1, 1998 (incorporated by reference to Exhibit
10.18 to the Report on Form 10-K for the period ended December
31, 1998, filed by KAC, File No. 1-9447).

10.9 Agreement among George T. Haymaker, Jr., KAC and KACC amending
Time-Based Stock Option Grant (incorporated by reference to
Exhibit 10.12 to the Report on Form 10-K for the period ended
December 31, 2000, filed by KAC, File No. 1-9447).

10.10 Performance-Accelerated Stock Option Grant pursuant to the
Kaiser 1997 Omnibus Stock Incentive Plan to George T. Haymaker,
Jr., effective January 1, 1998 (incorporated by reference to
Exhibit 10.19 to the Report on Form 10-K for the period ended
December 31, 1998, filed by KAC, File No. 1-9447).

10.11 Agreement among George T. Haymaker, Jr., KAC and KACC amending
Performance-Accelerated Stock Option Grant (incorporated by
reference to Exhibit 10.14 to the Report on Form 10-K for the
period ended December 31, 2000, filed by KAC, File No. 1-9447).

10.12 Letter Agreement, dated January 1995, between KAC and Charles E.
Hurwitz, granting Mr. Hurwitz stock options under the Kaiser
1993 Omnibus Stock Incentive Plan (incorporated by reference to
Exhibit 10.17 to the Report on Form 10-K for the period ended
December 31, 1994, filed by KAC, File No. 1-9447).

10.13 Employment Agreement, dated as of June 1, 1999, between KACC and
Raymond J. Milchovich (incorporated by reference to Exhibit 10.1
to the Report on Form 10-Q for the quarterly period ended June
30, 1999, filed by KAC, File No. 1-9447).

10.14 Time-Based Stock Option Grant pursuant to the Kaiser 1997
Omnibus Stock Incentive Plan to Raymond J. Milchovich, effective
July 2, 1998 (incorporated by reference to Exhibit 10.4 to the
Report on Form 10-Q for the quarterly period ended September 30,
1998, filed by KAC, File No. 1-9447).

10.15 Agreement among Raymond J. Milchovich, KAC and KACC amending
1998 Time-Based Stock Option Grant (incorporated by reference to
Exhibit 10.18 to the Report on Form 10-K for the period ended
December 31, 2000, filed by KAC, File No. 1-9447).

10.16 Time-Based Stock Option Grant pursuant to the Kaiser 1997
Omnibus Stock Incentive Plan to Raymond J. Milchovich
(incorporated by reference to Exhibit 10.4 to the Report on Form
10-Q for the period ended September 30, 2000, filed by KAC, File
No. 1-9447).

10.17 Agreement among Raymond J. Milchovich, KAC and KACC amending
1999 Time-Based Stock Option Grant (incorporated by reference to
Exhibit 10.20 to the Report on Form 10-K for the period ended
December 31, 2000, filed by KAC, File No. 1-9947).

10.18 Restricted Stock Agreement between Raymond J. Milchovich, KAC
and KACC pursuant to the Kaiser 1997 Omnibus Stock Incentive
Plan (incorporated by reference to Exhibit 10.2 to the Report on
Form 10-Q for the quarterly period ended September 30, 2000,
filed by KAC, File No. 1-9447).

10.19 Employment Agreement between KACC and John T. La Duc made
effective for the period from January 1, 1998, to December 31,
2002 (incorporated by reference to Exhibit 10.5 to the Report on
Form 10-Q for the quarterly period ended September 30, 1998,
filed by KAC, File No. 1-9447).

10.20 Time-Based Stock Option Grant pursuant to the Kaiser 1997
Omnibus Stock Incentive Plan to John T. La Duc, effective July
10, 1998 (incorporated by reference to Exhibit 10.6 to the
Report on Form 10-Q for the quarterly period ended September 30,
1998, filed by KAC, File No. 1-9447).

10.21 Time-Based Stock Option Grant pursuant to the Kaiser 1997
Omnibus Stock Incentive Plan to Joseph A. Bonn, effective
September 9, 1999 (incorporated by reference to Exhibit 10.1 to
the Report on Form 10-Q for the period ended June 30, 2000,
filed by KAC, File No. 1-9447).

10.22 Executive Employment Agreement, effective December 1, 1999,
between MAXXAM and J. Kent Friedman (incorporated by reference
to Exhibit 10.52 to the Report on Form 10-K for the period ended
December 31, 1999, filed by MAXXAM, File No. 1-3924).

10.23 Time-Based Stock Option Grant pursuant to the Kaiser 1997
Omnibus Stock Incentive Plan to J. Kent Friedman, effective
December 1, 1999 (incorporated by reference to Exhibit 10.2 to
the Report on Form 10-Q for the quarterly period ended June 30,
2000, filed by KAC, File No. 1-9447).

*10.24 Chief Executive Officer Agreement made and entered into as of
October 11, 2001, by and between KACC and Jack A. Hockema.

*10.25 Non-Executive Chairman of the Boards Agreement, dated October
11, 2001, among KAC, KACC and George T. Haymaker, Jr.

10.26 Description of compensation arrangements among KACC, KAC, and
Jack A. Hockema (incorporated by reference to Exhibit 10.27 to
the Report on Form 10-K for the period ended December 31, 1999,
filed by KAC, File No. 1-9447).

10.27 Stock Option Grant pursuant to the Kaiser 1997 Omnibus Stock
Incentive Plan to Jack A. Hockema (incorporated by reference to
Exhibit 10.1 to the Report on Form 10-Q for the quarterly period
ended September 30, 2000, filed by KAC, File No. 1-9447).

10.28 Form of letter agreement with persons granted stock options
under the Kaiser 1993 Omnibus Stock Incentive Plan to acquire
shares of KAC Common Stock (incorporated by reference to Exhibit
10.18 to the Report on Form 10-K for the period ended December
31, 1994, filed by KAC, File No. 1-9447).

10.29 Form of Enhanced Severance Agreement between KACC and key
executive personnel (incorporated by reference to Exhibit 10.3
to the Report on Form 10-Q for the quarterly period ended
September 30, 2000, filed by KAC, File No. 1-9447).

10.30 Form of Non-Employee Director Stock Option Agreement pursuant to
the Kaiser 1997 Omnibus Stock Incentive Plan (incorporated by
reference to Exhibit 10.3 to the Report on Form 10-Q for the
quarterly period ended June 30, 2000, filed by KAC, File No.
1-9447).

10.31 Form of Deferred Fee Agreement between KAC, KACC, and directors
of KAC and KACC (incorporated by reference to Exhibit 10 to the
Report on Form 10-Q for the quarterly period ended March 31,
1998, filed by KAC, File No. 1-9447).

10.32 Form of Non-Employee Director Stock Option Grant for options
issued commencing January 1, 2001 under the 1997 Kaiser Omnibus
Stock Incentive Plan (incorporated by reference to Exhibit 10.1
to the Report on Form 10-Q for the quarterly period ended June
30, 2001, filed by KAC, File No. 1-9447).

10.33 Form of Stock Option Grant for options issued commencing January
1, 2001 under the 1997 Kaiser Omnibus Stock Incentive Plan
(incorporated by reference to Exhibit 10.2 to the Report on Form
10-Q for the quarterly period ended June 30, 2001, filed by KAC,
File No. 1-9447).

10.34 Form of Restricted Stock Agreement for restricted shares issued
commencing January 1, 2001 under the 1997 Kaiser Omnibus Stock
Incentive Plan (incorporated by reference to Exhibit 10.3 to the
Report on Form 10-Q for the quarterly period ended June 30,
2001, filed by KAC, File No. 1-9447).

*10.35 The Kaiser Aluminum & Chemical Corporation Retention Plan,
dated January 15, 2002.

*10.36 Form of Retention Agreement for the Kaiser Aluminum &
Chemical Corporation Retention Plan.

*10.37 Retention Agreement for the Kaiser Aluminum & Chemical
Corporation Retention Plan, dated January 15, 2002, between KACC
and Joseph A. Bonn.

*10.38 Retention Agreement for the Kaiser Aluminum & Chemical
Corporation Retention Plan, dated January 15, 2002, between KACC
and John T. La Duc.

*21 Significant Subsidiaries of KAC.

*23.1 Consent of Independent Public Accountants.

*23.2 Consent of Wharton Levin Ehrmantraut Klein & Nash, P.A.

*23.3 Consent of Heller Ehrman White & McAuliffe LLP.

*99.1 Confirmation of receipt of letter to the Company from Arthur
Andersen LLP required by the Securities and Exchange Commission.

- ----------------
* Filed herewith

Principal Arizona South Carolina
Domestic Chandler Greenwood
Operations Engineered Products Engineered Products
and California Tennessee
Administrative Laguna Niguel Jackson
Offices Administrative Offices Engineered Products
(Partial List) Los Angeles (City of Commerce) Texas
Engineered Products Houston
Oxnard Corporate Headquarters
Engineered Products Sherman
San Ramon Engineered Products
Administrative Offices Virginia
Florida Richmond
Clearwater Engineered Products
Alumina Washington
Louisiana Mead
Baton Rouge Primary Aluminum,
Alumina Business Unit Offices Northwest Engineering Center
Gramercy Richland
Alumina Engineered Products
Michigan Tacoma
Detroit (Southfield) Primary Aluminum
Automotive Product Development Trentwood
and Sales Flat-Rolled Products
Ohio
Newark
Engineered Products
Oklahoma
Tulsa
Engineered Products

- --------------------------------------------------------------------------------

Principal Australia Jamaica
Worldwide Queensland Alumina Limited (20%) Alumina Partners of Jamaica (65%)
Operations Alumina Bauxite, Alumina
(Partial List) Canada Kaiser Jamaica Bauxite Company (49%)
Kaiser Aluminum & Chemical of Bauxite
Canada Limited (100%) Wales, United Kingdom
Engineered Products Anglesey Aluminium Limited (49%)
Ghana Primary Aluminum
Volta Aluminium Company Limited (90%)
Primary Aluminum

EX-4 3 ex_440-2001.htm EXHIBIT 4.40 TO 2001 10-K Exhibit 4.40 to 2001 10-K

                                                                    Exhibit 4.40


                                                                  EXECUTION COPY

                   TWENTY-FOURTH AMENDMENT TO CREDIT AGREEMENT


              THIS TWENTY-FOURTH AMENDMENT TO CREDIT AGREEMENT (this
"Amendment"), dated as of November 15, 2001, is by and between KAISER ALUMINUM
& CHEMICAL CORPORATION, a Delaware corporation (the "Company"), KAISER
ALUMINUM CORPORATION, a Delaware corporation (the "Parent Guarantor"), the
various financial institutions that are or may from time to time become parties
to the Credit Agreement referred to below (collectively, the "Lenders" and,
individually, a "Lender"), and Bank of America, N.A. (successor to BankAmerica
Business Credit, Inc., a Delaware corporation), as agent (in such capacity,
together with its successors and assigns in such capacity, the "Agent") for the
Lenders. Capitalized terms used, but not defined, herein shall have the meanings
given to such terms in the Credit Agreement, as amended hereby.

                              W I T N E S S E T H:

              WHEREAS, the Company, the Parent Guarantor, the Lenders and the
Agent are parties to the Credit Agreement, dated as of February 15, 1994, as
amended by the First Amendment to Credit Agreement, dated as of July 21, 1994,
the Second Amendment to Credit Agreement, dated as of March 10, 1995, the Third
Amendment to Credit Agreement and Acknowledgement, dated as of July 20, 1995,
the Fourth Amendment to Credit Agreement, dated as of October 17, 1995, the
Fifth Amendment to Credit Agreement, dated as of December 11, 1995, the Sixth
Amendment to Credit Agreement, dated as of October 1, 1996, the Seventh
Amendment to Credit Agreement, dated as of December 17, 1996, the Eighth
Amendment to Credit Agreement, dated as of February 24, 1997, the Ninth
Amendment to Credit Agreement and Acknowledgment, dated as of April 21, 1997,
the Tenth Amendment to Credit Agreement and Assignment, dated as of June 25,
1997, the Eleventh Amendment to Credit Agreement and Limited Waivers, dated as
of October 20, 1997, the Twelfth Amendment to Credit Agreement, dated as of
January 13, 1998, the Thirteenth Amendment to Credit Agreement, dated as of July
20, 1998, the Fourteenth Amendment to Credit Agreement, dated as of December 11,
1998, the Fifteenth Amendment to Credit Agreement, dated as of February 23,
1999, the Sixteenth Amendment to Credit Agreement, dated as of March 26, 1999,
the Seventeenth Amendment to Credit Agreement, dated as of September 24, 1999,
the Eighteenth Amendment to Credit Agreement, dated as of February 11, 2000, the
Nineteenth Amendment to Credit Agreement and Limited Waiver, dated as of
December 27, 2000, the Twentieth Amendment to Credit Agreement, dated as of
January 26, 2001, the Twenty-First Amendment to Credit Agreement and Consent,
dated as of July 18, 2001, the Twenty-Second Amendment to Credit Agreement,
dated as of October 16, 2001, and the Twenty-Third Amendment to Credit
Agreement, dated as of October 24, 2001 (the "Credit Agreement"); and

              WHEREAS, the undersigned Lenders have acquired 100% of the
Revolving Commitments; and

              WHEREAS, the parties hereto have agreed to amend the Credit
Agreement as herein provided; and

              WHEREAS, Lenders have agreed to extend the Revolving Commitment
Termination Date to August 1, 2002;

              NOW, THEREFORE, the parties hereto agree as follows:

              Section 1. Amendments to Credit Agreement

              1.1 Amendment to Article I: Definitions and Accounting Terms

                  A. Section 1.1 of the Credit Agreement is hereby amended by
deleting the reference to "December 15, 2001" each time it appears in the
definitions of "Revolving Commitment Termination Date" and "Stated Maturity
Date" contained therein and substituting a reference to "August 1, 2002"
therefor.

                  B. Section 1.1 of the Credit Agreement is hereby further
amended by deleting the definition of the term "Minimum Net Worth."

              1.2 Amendment to Article II: Commitments and Borrowing Procedures

                  A. Section 2.1.1(b) of the Credit Agreement is hereby amended
by deleting the reference to "$300,000,000" contained therein and substituting a
reference to "$214,000,000" therefor.

              1.3 Amendment to Article V: Letters of Credit

                  A. Section 5.1 of the Credit Agreement is hereby amended by
deleting the reference to "December 15, 2001" contained in clause (b)(iii)
thereof and substituting a reference to "August 1, 2002" therefor.

              1.4 Amendments to Article IX: Covenants

                  A. Section 9.1.13 of the Credit Agreement is hereby amended by
deleting the reference to "December 15, 2001" contained therein and substituting
a reference to "August 1, 2002" therefor.

                  B. Section 9.2.4(a) of the Credit Agreement is hereby amended
to read in its entirety as follows:

            "Net Worth. The Company shall not permit Net Worth as of the end of
      any Fiscal Quarter to be less than the sum of: (i) $515,000,000, plus (ii)
      50% of all Net Income (but not loss) for each Fiscal Quarter ending after
      November 15, 2001; provided that for purposes of this Section 9.2.4(a),
      the calculation of Net Worth shall exclude (i) the effect of any non-cash
      charges, up to an aggregate amount of $19,000,000, in respect of the
      Micromill project, including (without limitation) any write-down of
      Micromill project assets located at the Center for Technology in
      Pleasanton, California, and at the Micromill facility near Reno, Nevada,
      (ii) the net cumulative effect of any mark-to-market gains or losses
      incurred after December 31, 1998, up to an aggregate net amount of
      $50,000,000 of losses, on aluminum hedging agreements of the Company and
      its Subsidiaries that do not qualify for hedging treatment under GAAP,
      (iii) the net cumulative effect of any gains or losses, up to an aggregate
      net amount of $50,000,000 of losses, in respect of adjustments to the net
      cost basis of the assets of the Gramercy, Louisiana facility as a result
      of the explosion at such facility, and (iv) the effect of any non-cash
      charges, up to an aggregate amount of $40,000,000, in respect of the
      write-down of the carrying value of the Tacoma and Mead facilities, all of
      the above adjustments to be reflected on the relevant Compliance
      Certificate.

                  C. Section 9.2.4(b) of the Credit Agreement is hereby amended
to read in its entirety as follows:

            "The Company shall not permit the Interest Coverage Ratio (i) for
      the four Fiscal Quarter period ending September 30, 2001 to be less than
      1.0 to 1.0, (ii) for the Fiscal Quarter period ending December 31, 2001,
      no test shall apply, (iii) for the one Fiscal Quarter period ending March
      31, 2002 to be less than 1.5 to 1.0, and (iv) for the two Fiscal Quarter
      period ending June 30, 2002 to be less than 1.5 to 1.0; provided that for
      purposes of calculating the Interest Coverage Ratio under this Section
      9.2.4(b), (i) EBITDA shall exclude (A) the effect of any non-cash charges,
      up to an aggregate amount of $19,000,000, in respect of the Micromill
      project, including (without limitation) any write-down of Micromill
      project assets located at the Center for Technology in Pleasanton,
      California, and at the Micromill facility near Reno, Nevada, (B) the net
      cumulative effect of any mark-to-market gains or losses, for the relevant
      period, up to an aggregate net amount of $50,000,000 of losses, on
      aluminum hedging agreements of the Company and its Subsidiaries that do
      not qualify for hedging treatment under GAAP, and (C) the net cumulative
      effect of any gains or losses, up to an aggregate net amount of
      $50,000,000 of losses, in respect of adjustments to the net cost basis of
      the assets of the Gramercy, Louisiana facility as a result of the
      explosion at such facility, all of the above adjustments to be reflected
      on the relevant Compliance Certificate; and (ii) Adjusted Capital
      Expenditures shall not be subtracted from EBITDA."

               1.5      Amendment to Percentages.

               Bank of America, N.A., Congress Financial Corporation
(Western) and The CIT Group/Business Credit, Inc. (collectively the "Continuing
Lenders") have acquired the Commitments formerly held by LaSalle Bank National
Association, Transamerica Business, Capital Corporation and Heller Financial,
Inc. (collectively the "Former Lenders"). The Former Lenders shall no longer
continue to be parties to the Credit Agreement and the Percentages of the
Continuing Lenders shall be, and the Percentages set forth opposite the Lenders'
names on the signature pages of the Credit Agreement are hereby amended to read,
as follows:

              "Bank of America, N.A.                               50.9345794%
              Congress Financial Corporation (Western)             35.0467290%
              The CIT Group/Business Credit, Inc.                  14.0186916%"

              Section 2. Conditions to Effectiveness

              This Amendment shall become effective as of the date hereof only
when the following conditions shall have been satisfied and notice thereof shall
have been given by the Agent to the Parent Guarantor, the Company and each
Lender (the date of satisfaction of such conditions and the giving of such
notice being referred to herein as the "Twenty-Fourth Amendment Effective
Date"):

                  A. The Agent shall have received for each Lender counterparts
hereof duly executed on behalf of the Parent Guarantor, the Company, the Agent
and each of the Continuing Lenders.

                  B. The Agent shall have received:

                  (1) Resolutions of the Board of Directors or of the Executive
            Committee of the Board of Directors of the Company and the Parent
            Guarantor approving and authorizing the execution, delivery and
            performance of this Amendment, certified by their respective
            corporate secretaries or assistant secretaries as being in full
            force and effect without modification or amendment as of the date of
            execution hereof by the Company or the Parent Guarantor, as the case
            may be;

                  (2) A signature and incumbency certificate of the officers of
            the Company and the Parent Guarantor executing this Amendment;

                  (3) For each Lender, an opinion, addressed to the Agent and
            each Lender, from Kramer Levin Naftalis & Frankel LLP, in form
            and substance satisfactory to the Agent;

                  (4) Such other information, approvals, opinions, documents or
            instruments as the Agent may reasonably request; and

                  (5) For the benefit of the Lenders, a fee in the amount of
            $356,667 to be divided among the Lenders as follows:


                      Bank of America, N.A.                       $181,667
                      Congress Financial Corporation (Western)    $125,000
                      The CIT Group/Business Credit, Inc.         $ 50,000

              Section 3. Company's Representations and Warranties.

              In order to induce the Lenders and the Agent to enter into this
Amendment and to amend the Credit Agreement in the manner provided herein, the
Parent Guarantor and the Company represent and warrant to each Lender and the
Agent that, as of the Twenty-Fourth Amendment Effective Date, after giving
effect to the effectiveness of this Amendment, the following statements are true
and correct in all material respects:

                  A. Authorization of Agreements. The execution and delivery of
this Amendment by the Company and the Parent Guarantor and the performance of
the Credit Agreement as amended by this Amendment (the "Amended Agreement") by
the Company and the Parent Guarantor are within such Obligor's corporate powers
and have been duly authorized by all necessary corporate action on the part of
the Company and the Parent Guarantor, as the case may be.

                  B. No Conflict. The execution and delivery by the Company and
the Parent Guarantor of this Amendment and the performance by the Company and
the Parent Guarantor of the Amended Agreement do not:

                  (1) contravene such Obligor's Organic Documents;

                  (2) contravene the Senior Indenture, the New Senior Indenture,
            the Additional New Senior Indenture, or the Subordinated Indenture
            or contravene any other contractual restriction where such a
            contravention has a reasonable possibility of having a Materially
            Adverse Effect or contravene any law or governmental regulation or
            court decree or order binding on or affecting such Obligor or any of
            its Subsidiaries; or

                  (3) result in, or require the creation or imposition of, any
            Lien on any of such Obligor's properties or any of the properties of
            any Subsidiary of such Obligor, other than pursuant to the Loan
            Documents.

                  C. Binding Obligation. This Amendment has been duly executed
and delivered by the Company and the Parent Guarantor and this Amendment and the
Amended Agreement constitute the legal, valid and binding obligations of the
Company and the Parent Guarantor, enforceable against the Company and the Parent
Guarantor in accordance with their respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally and by general principles of equity.

                  D. Governmental Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or any other Person is required for the due
execution, delivery or performance of this Amendment by the Company or the
Parent Guarantor.

                  E. Incorporation of Representations and Warranties from Credit
Agreement. Each of the statements set forth in Section 7.2.1 of the Credit
Agreement is true and correct.

              Section 4. Acknowledgement and Consent.

              The Company is a party to the Company Collateral Documents, in
each case as amended through the date hereof, pursuant to which the Company has
created Liens in favor of the Agent on certain Collateral to secure the
Obligations. The Parent Guarantor is a party to the Parent Collateral Documents,
in each case as amended through the date hereof, pursuant to which the Parent
Guarantor has created Liens in favor of the Agent on certain Collateral and
pledged certain Collateral to the Agent to secure the Obligations of the Parent
Guarantor. Certain Subsidiaries of the Company are parties to the Subsidiary
Guaranty and/or one or more of the Subsidiary Collateral Documents, in each case
as amended through the date hereof, pursuant to which such Subsidiaries have (i)
guarantied the Obligations and/or (ii) created Liens in favor of the Agent on
certain Collateral. The Company, the Parent Guarantor and such Subsidiaries are
collectively referred to herein as the "Credit Support Parties", and the Company
Collateral Documents, the Parent Collateral Documents, the Subsidiary Guaranty
and the Subsidiary Collateral Documents are collectively referred to herein as
the "Credit Support Documents".

              Each Credit Support Party hereby acknowledges that it has reviewed
the terms and provisions of the Credit Agreement as amended by this Amendment
and consents to the amendment of the Credit Agreement effected as of the date
hereof pursuant to this Amendment.

              Each Credit Support Party acknowledges and agrees that any of the
Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect. Each Credit Support Party hereby confirms
that each Credit Support Document to which it is a party or otherwise bound and
all Collateral encumbered thereby will continue to guaranty or secure, as the
case may be, the payment and performance of all obligations guaranteed or
secured thereby, as the case may be.

              Each Credit Support Party (other than the Company and the Parent
Guarantor) acknowledges and agrees that (i) notwithstanding the conditions to
effectiveness set forth in this Amendment, such Credit Support Party is not
required by the terms of the Credit Agreement or any other Loan Document to
consent to the amendments to the Credit Agreement effected pursuant to this
Amendment and (ii) nothing in the Credit Agreement, this Amendment or any other
Loan Document shall be deemed to require the consent of such Credit Support
Party to any future amendments to the Credit Agreement.

              Section 5. Miscellaneous.

                  A. Reference to and Effect on the Credit Agreement and the
Other Loan Documents.

                  (1) On and after the Twenty-Fourth Amendment Effective Date,
            each reference in the Credit Agreement to "this Agreement",
            "hereunder," "hereof," "herein" or words of like import referring to
            the Credit Agreement, and each reference in the other Loan Documents
            to the "Credit Agreement," "thereunder," "thereof" or words of like
            import referring to the Credit Agreement shall mean and be a
            reference to the Amended Agreement.

                  (2) Except as specifically amended by this Amendment, the
            Credit Agreement and the other Loan Documents shall remain in full
            force and effect and are hereby ratified and confirmed.

                  B. Applicable Law. THIS AMENDMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO SUCH LAWS RELATING TO CONFLICTS OF LAWS.

                  C. Headings. The various headings of this Amendment are
inserted for convenience only and shall not affect the meaning or interpretation
of this Amendment or any provision hereof.

                  D. Counterparts. This Amendment may be executed by the parties
hereto in several counterparts and by the different parties on separate
counterparts, each of which shall be deemed to be an original and all of which
shall constitute together but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.

                  E. Severability. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Amendment
or affecting the validity or enforceability of such provisions in any other
jurisdiction.

                  IN WITNESS WHEREOF, this Amendment has been duly executed and
delivered as of the day and year first above written.

KAISER ALUMINUM CORPORATION               KAISER ALUMINUM & CHEMICAL
                                          CORPORATION


By:  /S/ David A. Cheadle                 By:  /S/ David A. Cheadle
Name Printed:  David A. Cheadle           Name Printed:  David A. Cheadle
Its:  Assistant Treasurer                 Its:  Assistant Treasurer



BANK OF AMERICA, N.A. (successor to       BANK OF AMERICA, N.A. (successor to
BankAmerica Business Credit, Inc.),       BankAmerica Business Credit, Inc.)
as Agent


By:  /S/ Michael J. Jasaitis              By:  /S/ Michael J. Jasaitis
Name: Michael J. Jasaitis                 Name: Michael J. Jasaitis
Its: Vice President                       Its: Vice President


THE CIT GROUP/BUSINESS
CREDIT, INC.


By:  /S/ Grant Weiss
Name Printed: Grant Weiss
Its:  Vice President

CONGRESS FINANCIAL CORPORATION
(WESTERN)


By:  /S/ Gary D. Cassianni
Name Printed:  Gary D. Cassianni
Its:  Vice President


ACKNOWLEDGED AND AGREED TO:

AKRON HOLDING CORPORATION                 KAISER ALUMINUM & CHEMICAL
                                          INVESTMENT, INC.

By:  /S/ David A. Cheadle                 By:  /S/ David A. Cheadle
Name Printed:  David A. Cheadle           Name Printed:  David A. Cheadle
Its:  Assistant Treasurer                 Its:  Assistant Treasurer


KAISER ALUMINUM PROPERTIES,               KAISER ALUMINUM TECHNICAL
INC.                                      SERVICES, INC.

By:  /S/ David A. Cheadle                 By:  /S/ David A. Cheadle
Name Printed:  David A. Cheadle           Name Printed:  David A. Cheadle
Its:  Assistant Treasurer                 Its:  Assistant Treasurer


OXNARD FORGE DIE COMPANY, INC.            KAISER ALUMINIUM
                                          INTERNATIONAL, INC.

By:  /S/ David A. Cheadle                 By:  /S/ David A. Cheadle
Name Printed:  David A. Cheadle           Name Printed:  David A. Cheadle
Its:  Assistant Treasurer                 Its:  Assistant Treasurer


KAISER ALUMINA AUSTRALIA                  KAISER FINANCE CORPORATION
CORPORATION

By:  /S/ David A. Cheadle                 By:  /S/ David A. Cheadle
Name Printed:  David A. Cheadle           Name Printed:  David A. Cheadle
Its:  Assistant Treasurer                 Its:  Assistant Treasurer


ALPART JAMAICA INC.                       KAISER JAMAICA CORPORATION

By:  /S/ David A. Cheadle                 By:  /S/ David A. Cheadle
Name Printed:  David A. Cheadle           Name Printed:  David A. Cheadle
Its:  Assistant Treasurer                 Its:  Assistant Treasurer


KAISER BAUXITE COMPANY                    KAISER EXPORT COMPANY

By:  /S/ David A. Cheadle                 By:  /S/ David A. Cheadle
Name Printed:  David A. Cheadle           Name Printed:  David A. Cheadle
Its:  Assistant Treasurer                 Its:  Assistant Treasurer


KAISER MICROMILL HOLDINGS, LLC            KAISER SIERRA MICROMILLS, LLC

By:  /S/ David A. Cheadle                 By:  /S/ David A. Cheadle
Name Printed:  David A. Cheadle           Name Printed:  David A. Cheadle
Its:  Assistant Treasurer                 Its:  Assistant Treasurer


KAISER TEXAS SIERRA MICROMILLS,           KAISER TEXAS MICROMILL
LLC                                       HOLDINGS, LLC

By:  /S/ David A. Cheadle                 By:  /S/ David A. Cheadle
Name Printed:  David A. Cheadle           Name Printed:  David A. Cheadle
Its:  Assistant Treasurer                 Its:  Assistant Treasurer


KAISER BELLWOOD CORPORATION

By:  /S/ David A. Cheadle
Name Printed:  David A. Cheadle
Its:  Assistant Treasurer

EX-4 4 ex_443-2001.htm EXHIBIT 4.43 TO 2001 10-K Exhibit 4.43 to 2001 10-K

                                                                    Exhibit 4.43

                                                                  EXECUTION COPY

                          WAIVER AND CONSENT AGREEMENT


                  THIS WAIVER AND CONSENT AGREEMENT (this "Agreement") is made
and entered into as of the 29th day of January, 2002, by and among Kaiser
Aluminum & Chemical Corporation, a Delaware corporation (the "Company"),
Kaiser Aluminum Corporation, a Delaware corporation (the "Parent Guarantor"),
the various financial institutions that are or may from time to time become
parties to the Credit Agreement referred to below (collectively, the "Lenders"
and, individually, a "Lender"), and Bank of America, N. A. (successor to
BankAmerica Business Credit, Inc., a Delaware corporation), as agent (in such
capacity, together with its successors and assigns in such capacity, the
"Agent") for the Lenders. Capitalized terms used, but not defined, herein shall
have the meanings given to such terms in the Credit Agreement (defined below).

                  WHEREAS, the Company, the Parent Guarantor, the Lenders, and
the Agent are parties to the Credit Agreement, dated as of February 15, 1994, as
amended by the First Amendment to Credit Agreement, dated as of July 21, 1994,
the Second Amendment to Credit Agreement, dated as of March 10, 1995, the Third
Amendment to Credit Agreement and Acknowledgement, dated as of July 20, 1995,
the Fourth Amendment to Credit Agreement, dated as of October 17, 1995, the
Fifth Amendment to Credit Agreement, dated as of December 11, 1995, the Sixth
Amendment to Credit Agreement, dated as of October 1, 1996, the Seventh
Amendment to Credit Agreement, dated as of December 17, 1996, the Eighth
Amendment to Credit Agreement, dated as of February 24, 1997, the Ninth
Amendment to Credit Agreement and Acknowledgment, dated as of April 21, 1997,
the Tenth Amendment to Credit Agreement and Assignment, dated as of June 25,
1997, the Eleventh Amendment to Credit Agreement and Limited Waivers, dated as
of October 20, 1997, the Twelfth Amendment to Credit Agreement, dated as of
January 13, 1998, the Thirteenth Amendment to Credit Agreement, dated as of July
20, 1998, the Fourteenth Amendment to Credit Agreement, dated as of December 11,
1998, the Fifteenth Amendment to Credit Agreement, dated as of February 23,
1999, the Sixteenth Amendment to Credit Agreement, dated as of March 26, 1999,
the Seventeenth Amendment to Credit Agreement, dated as of September 24, 1999,
the Eighteenth Amendment to Credit Agreement, dated as of February 11, 2000, the
Nineteenth Amendment to Credit Agreement and Limited Waiver, dated as of
December 27, 2000, the Twentieth Amendment to Credit Agreement, dated as of
January 26, 2001, the Twenty-First Amendment to Credit Agreement and Consent,
dated as of July 18, 2001, the Twenty-Second Amendment to Credit Agreement,
dated as of October 16, 2001, the Twenty-Third Amendment to Credit Agreement,
dated as of October 24, 2001, and the Twenty-Fourth Amendment to Credit
Agreement, dated as of November 15, 2001 (the "Credit Agreement"); and

                  WHEREAS, the Parent Guarantor and the Company acknowledge that
there currently exist or there may hereafter exist during the Waiver Period (as
hereinafter defined) the Defaults and/or Events of Default set forth on Schedule
A to this Agreement (collectively, the "Scheduled Defaults"); and

                  WHEREAS, during the Waiver Period, the Company may not be able
to satisfy certain of the conditions precedent to Credit Extensions contained in
the Credit Agreement; and

                  WHEREAS, the Lenders and the Agent have agreed, during the
Waiver Period, to waive the Scheduled Defaults and to waive certain of the
conditions precedent to Credit Extensions, on the terms and conditions set forth
in this Agreement; and

                  WHEREAS, pursuant to Section 9.1.13 of the Credit Agreement,
funds are held in Account No. 876636 (the "Cash Collateral Account") maintained
by the Company with Bank of America, N.A.; and

                  WHEREAS, the Lenders have consented and agreed that the
Company may withdraw all funds in the Cash Collateral Account; and

                  WHEREAS, the Parent Guarantor and/or the Company may establish
one or more Employee Trusts (as defined below);

                  NOW THEREFORE, in consideration of the premises, and in
reliance thereon, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

                  SECTION 1. LIMITED WAIVER. Subject to the terms hereof and in
reliance on the representations and warranties of the Company here in contained,
the Lenders hereby waive the Scheduled Defaults during the period (the "Waiver
Period") commencing on the date hereof and ending on the earliest to occur of
(a) August 1, 2002, (b) the date on which any payment of interest or principal
on the Subordinated Debt, the Senior Debt, the New Senior Debt or the Additional
New Senior Debt is made or set apart, (c) the occurrence of any Event of Default
(other than the Scheduled Defaults), (d) the acceleration of the maturity of any
Indebtedness of the Parent Guarantor, the Company or any of their Subsidiaries
or for which any of them is contingently liable having an aggregate principal
amount in excess of $10,000,000, (e) the commencement of any litigation or
administrative proceeding against the Parent Guarantor, the Company or any of
their Subsidiaries by any holder or holders of any Indebtedness of the Parent
Guarantor, the Company or any of their Subsidiaries or for which any of them is
contingently liable seeking to enforce the payment of interest or principal
aggregating in excess of $20,000,000 on any such Indebtedness, and (f) the
failure of the Company to comply with any of the provisions of this Agreement.
Without limiting the generality of the provisions of Section 12.1 of the Credit
Agreement, the waiver set forth in this Section 1 shall be limited precisely as
written and relates solely to the noncompliance by Company with the provisions
of Sections 10.1.6, 10.1.10(a), 9.2.4, 8.15 and 9.1.1(b) of the Credit Agreement
in the manner and to the extent described in Schedule A to this Agreement, and
nothing in this Section 1 shall be deemed to (a) constitute a waiver of
compliance by Company (i) with respect to such Sections of the Credit Agreement
in any other instance or (ii) any other term, provision or condition of the
Credit Agreement or any other instrument or agreement referred to therein or (b)
prejudice any right or remedy that Agent or any Lender may now have or may have
in the future (except to the extent such right or remedy is based upon the
Scheduled Defaults which, upon giving effect to this Agreement, will be deemed
not to exist during the Waiver Period) under or in connection with the Credit
Agreement or any other instrument or agreement referred to therein.

                  SECTION 2. PERMITTED BORROWINGS DURING THE WAIVER PERIOD. The
Lenders and the Agent hereby waive the conditions precedent to Credit Extensions
set forth in Section 7.2 of the Credit Agreement during the Waiver Period to the
extent provided in Schedule B to this Agreement; provided that (a) all other
conditions precedent to any requested Credit Extension are satisfied, (b) the
Revolving Credit Outstandings at any time during the Waiver Period do not exceed
the lesser of (i) $100,000,000 and (ii) the Borrowing Base then in effect, (c)
the Revolving Commitment Availability is not less than $40,000,000 at any time,
(d) no Default (other than the Scheduled Defaults) shall have occurred and be
continuing, (e) no cash Credit Extensions shall be permitted unless the
unrestricted cash balances of the Parent Guarantor, the Company and their
Subsidiaries (other than VALCO and ALPART) at the time of such Credit Extension
shall be less than $25,000,000, and (f) as part of every Borrowing Request, the
Company represents that the requested funds will not be used to make any
principal or interest payments on the Senior Debt, the New Senior Debt, the
Additional New Senior Debt, or the Subordinated Debt.

                  SECTION 3. ACKNOWLEDGMENT AND AGREEMENT. The Company and the
Parent Guarantor acknowledge and agree that the Scheduled Defaults have or may
occur and that absent the waivers set forth herein such Scheduled Defaults would
(or, subject to any applicable notice requirements or grace or cure periods,
would) constitute Events of Default that would entitle the Lenders to declare
the Obligations immediately due and payable and to take action to collect the
Obligations. Subject only to the terms of this Agreement and any applicable
notice, grace or cure period, the Agent and the Lenders may exercise any right
or remedy available to them pursuant to the Loan Documents or by applicable law
or in equity, including, without limitation, as the result of an Event of
Default other than a Scheduled Default, and nothing herein shall operate to
restrict, inhibit or prohibit the Agent or the Lenders from exercising any such
right or remedy or from the prosecution or continued prosecution of any action
or proceeding in furtherance of the foregoing. The Company and the Parent
Guarantor acknowledge that neither the Agent nor any of the Lenders have made
any commitment as to how the Scheduled Defaults will be resolved upon the
termination of the Waiver Period. The Company and the Parent Guarantor
acknowledge and agree that at any time on or after the termination of the Waiver
Period any and all Scheduled Defaults will (if then existing) immediately
constitute Events of Default entitling the Lenders, to the extent permitted by
applicable law and in accordance with the Loan Documents, to exercise any and
all of their rights and remedies (including rights and remedies based on the
Scheduled Defaults), whether under the Credit Agreement, the Loan Documents, at
law or in equity, without further notice or demand.

                  SECTION 4. CONSENT.

                  A. The Lenders hereby consent and agree that, so long as no
Default exists other than the Scheduled Defaults, the Company may withdraw all
funds in the Cash Collateral Account.

                  B. Notwithstanding anything to the contrary contained herein,
in the Credit Agreement or in any other Loan Document, the establishment,
existence, funding and operation of one or more trusts to secure and fund (i)
certain indemnification obligations for certain directors, officers, employees
and agents of the Parent Guarantor, the Company or their Subsidiaries and other
similar Persons and (ii) certain retention obligations for certain directors,
officers and employees of the Parent Guarantor, the Company or their
Subsidiaries (the "Employee Trusts") shall not be deemed to violate any
provision of the Credit Agreement or of any other Loan Document, provided that
the amount transferred by the Parent Guarantor, the Company and their
Subsidiaries to the Employee Trusts, together with any amounts paid by the
Parent Guarantor, the Company, or their Subsidiaries for fees and expenses in
connection with the establishment and operation of the Employee Trusts, does not
exceed $10,000,000 in the aggregate.

                  SECTION 5. CONDITIONS TO EFFECTIVENESS. This Agreement shall
become effective as of the date hereof only when the following conditions shall
have been satisfied and notice thereof shall have been given by the Agent to the
Parent Guarantor, the Company and each Lender (the date of satisfaction of such
conditions and the giving of such notice being referred to herein as the
"Agreement Effective Date"):

                  A. The Agent shall have received for each Lender counterparts
hereof duly executed on behalf of the Parent Guarantor, the Company, the Agent
and each of the Lenders (or notice of the approval of this Agreement by the
Lenders satisfactory to the Agent shall have been received by the Agent).

                  B. The Agent shall have received:

                     (1) Resolutions of the Board of Directors or of the
Executive Committee of the Board of Directors of the Company and the Parent
Guarantor approving and authorizing the execution, delivery and performance of
this Agreement, certified by their respective corporate secretaries or assistant
secretaries as being in full force and effect without modification or amendment
as of the date of execution hereof by the Company or the Parent Guarantor, as
the case may be;

                     (2) A signature and incumbency certificate of the officers
of the Company and the Parent Guarantor executing this Agreement;

                     (3) For each Lender, an opinion, addressed to the Agent and
each Lender, from Kramer Levin Naftalis & Frankel LLP, in form and substance
satisfactory to the Agent;

                     (4) Such other information, approvals, opinions, documents
or instruments as the Agent may reasonably request;

                     (5) An amount equal to the unpaid legal fees owed to
Agent's counsel; and

                     (6) For the pro rata benefit of the Lenders, a fee in the
amount of $1,000,000; provided, however, that if any Lender is a party to any
debtor in possession facility entered into by the Company within six months
after the date hereof, one half of the fee received by such Lender hereunder
shall be applied to reduce the fee payable to such Lender in respect of such
financing.

                  SECTION 6. COMPANY'S REPRESENTATIONS AND WARRANTIES. In order
to induce the Lenders and the Agent to enter into this Agreement, the Parent
Guarantor and the Company represent and warrant to each Lender and the Agent
that, as of the Agreement Effective Date, after giving effect to the
effectiveness of this Agreement, the following statements are true and correct
in all material respects:

                  A. Authorization of Agreements. The execution, delivery and
performance of this Agreement by the Company and the Parent Guarantor are within
such Obligor's corporate powers and have been duly authorized by all necessary
corporate action on the part of the Company and the Parent Guarantor, as the
case may be.

                  B. No Conflict. The execution, delivery and performance by the
Company and the Parent Guarantor of this Agreement do not:

                     (1)  contravene such Obligor's Organic Documents;

                     (2)  contravene the Senior Indenture, the New Senior
Indenture, the Additional New Senior Indenture, or the Subordinated Indenture or
contravene any other contractual restriction where such a contravention has a
reasonable possibility of having a Materially Adverse Effect or contravene any
law or governmental regulation or court decree or order binding on or affecting
such Obligor or any of its Subsidiaries; or

                     (3)  result in, or require the creation or imposition of,
any Lien on any of such Obligor's properties or any of the properties of any
Subsidiary of such Obligor, other than pursuant to the Loan Documents.

                  C. Binding Obligation. This Agreement has been duly executed
and delivered by the Company and the Parent Guarantor and this Agreement
constitutes the legal, valid and binding obligation of the Company and the
Parent Guarantor, enforceable against the Company and the Parent Guarantor in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally and by general principles of equity.

                  D. Governmental Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or any other Person is required for the due
execution, delivery or performance of this Agreement by the Company or the
Parent Guarantor.

                  E. Incorporation of Representations and Warranties from Credit
Agreement. Each of the statements set forth in Section 7.2.1 of the Credit
Agreement (except insofar as such statements relate to Sections 8.6(b), 8.7 and
8.15 of the Credit Agreement) is true and correct.

                  SECTION 7. ACKNOWLEDGEMENT AND CONSENT. The Company is a party
to the Company Collateral Documents, in each case as amended through the date
hereof, pursuant to which the Company has created Liens in favor of the Agent on
certain Collateral to secure the Obligations. The Parent Guarantor is a party to
the Parent Collateral Documents, in each case as amended through the date
hereof, pursuant to which the Parent Guarantor has created Liens in favor of the
Agent on certain Collateral and pledged certain Collateral to the Agent to
secure the Obligations of the Parent Guarantor. Certain Subsidiaries of the
Company are parties to the Subsidiary Guaranty and/or one or more of the
Subsidiary Collateral Documents, in each case as amended through the date
hereof, pursuant to which such Subsidiaries have (i) guarantied the Obligations
and/or (ii) created Liens in favor of the Agent on certain Collateral. The
Company, the Parent Guarantor and such Subsidiaries are collectively referred to
herein as the "Credit Support Parties", and the Company Collateral Documents,
the Parent Collateral Documents, the Subsidiary Guaranty and the Subsidiary
Collateral Documents are collectively referred to herein as the "Credit Support
Documents".

                  Each Credit Support Party hereby acknowledges that it has
reviewed the terms and provisions of the Credit Agreement and this Agreement and
consents to the execution and delivery of this Agreement.

                  Each Credit Support Party acknowledges and agrees that any of
the Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect. Each Credit Support Party hereby confirms
that each Credit Support Document to which it is a party or otherwise bound and
all Collateral encumbered thereby will continue to guaranty or secure, as the
case may be, the payment and performance of all obligations guaranteed or
secured thereby, as the case may be.

                  Each Credit Support Party (other than the Company and the
Parent Guarantor) acknowledges and agrees that (i) notwithstanding the
conditions to effectiveness set forth in this Agreement, such Credit Support
Party is not required by the terms of the Credit Agreement or any other Loan
Document to consent to the execution and delivery of this Agreement and (ii)
nothing in the Credit Agreement, this Agreement or any other Loan Document shall
be deemed to require the consent of such Credit Support Party to any future
amendments to, or waivers or consents under, the Credit Agreement.

                  SECTION 8. MISCELLANEOUS.

                  A. Effect on the Credit Agreement and the Other Loan
Documents. Except as specifically set forth herein, the terms, provisions and
conditions of the Credit Agreement and the other Loan Documents shall remain in
full force and effect and are hereby ratified and confirmed.

                  B. Applicable Law. THIS AGREEMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO SUCH LAWS RELATING TO CONFLICTS OF LAWS.

                  C. Headings. The various headings of this Agreement are
inserted for convenience only and shall not affect the meaning or interpretation
of this Agreement or any provision hereof.

                  D. Counterparts. This Agreement may be executed by the parties
hereto in several counterparts and by the different parties on separate
counterparts, each of which shall be deemed to be an original and all of which
shall constitute together but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.

                  E. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provisions in any other
jurisdiction.

                  IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered as of the day and year first above written.



KAISER ALUMINUM CORPORATION                KAISER ALUMINUM & CHEMICAL
                                                         CORPORATION


By:   /S/ David A. Cheadle                 By:    /S/ David A. Cheadle
Name Printed:  David A. Cheadle            Name Printed:  David A. Cheadle
Its:  Assistant Treasurer                  Its:  Assistant Treasurer


BANK OF AMERICA, N.A. (successor to        BANK OF AMERICA, N.A. (successor to
BankAmerica Business Credit, Inc.),        BankAmerica Business Credit, Inc.)
as Agent


By:   /S/ Michael J. Jasaitis              By:  /S/ Michael J. Jasaitis
Name Printed:  Michael J. Jasaitis         Name Printed:  Michael J. Jasaitis
Its:  Vice President                       Its:  Vice President


THE CIT GROUP/BUSINESS
CREDIT, INC.


By:  /S/ Neal T. Legan
Name Printed:  Neal T. Legan
Its:  VP - Regional Credit Manager

CONGRESS FINANCIAL CORPORATION
(WESTERN)


By:  /S/ Gary D. Cassianni
Name Printed:  Gary D. Cassianni
Its:  Vice President


ACKNOWLEDGED AND AGREED TO:


AKRON HOLDING CORPORATION                       KAISER ALUMINUM & CHEMICAL
                                                INVESTMENT, INC.


By:  /S/ David A. Cheadle                       By:  /S/ David A. Cheadle
Name Printed:  David A. Cheadle                 Name Printed:  David A. Cheadle
Its:  Assistant Treasurer                       Its:  Assistant Treasurer


KAISER ALUMINUM PROPERTIES, INC.                KAISER ALUMINUM TECHNICAL
                                                SERVICES, INC.


By:  /S/ David A. Cheadle                       By:  /S/ David A. Cheadle
Name Printed:  David A. Cheadle                 Name Printed:  David A. Cheadle
Its:  Assistant Treasurer                       Its:  Assistant Treasurer


OXNARD FORGE DIE COMPANY, INC.                  KAISER ALUMINIUM
                                                INTERNATIONAL, INC.


By:  /S/ David A. Cheadle                       By:  /S/ David A. Cheadle
Name Printed:  David A. Cheadle                 Name Printed:  David A. Cheadle
Its:  Assistant Treasurer                       Its:  Assistant Treasurer


KAISER ALUMINA AUSTRALIA                        KAISER FINANCE CORPORATION
CORPORATION


By: /S/ David A. Cheadle                        By:  /S/ David A. Cheadle
Name Printed:  David A. Cheadle                 Name Printed:  David A. Cheadle
Its:  Assistant Treasurer                       Its:  Assistant Treasurer


ALPART JAMAICA INC.                             KAISER JAMAICA CORPORATION


By:  /S/ David A. Cheadle                       By:  /S/ David A. Cheadle
Name Printed:  David A. Cheadle                 Name Printed:  David A. Cheadle
Its:  Assistant Treasurer                       Its:  Assistant Treasurer


KAISER BAUXITE COMPANY                          KAISER EXPORT COMPANY


By:  /S/ David A. Cheadle                       By:  /S/ David A. Cheadle
Name Printed:  David A. Cheadle                 Name Printed:  David A. Cheadle
Its:  Assistant Treasurer                       Its:  Assistant Treasurer


KAISER MICROMILL HOLDINGS, LLC                  KAISER SIERRA MICROMILLS, LLC


By:  /S/ David A. Cheadle                       By:  /S/ David A. Cheadle
Name Printed:  David A. Cheadle                 Name Printed:  David A. Cheadle
Its:  Assistant Treasurer                       Its:  Assistant Treasurer


KAISER TEXAS SIERRA MICROMILLS,                 KAISER TEXAS MICROMILL
LLC                                             HOLDINGS, LLC

By:  /S/ David A. Cheadle                       By:  /S/ David A. Cheadle
Name Printed:  David A. Cheadle                 Name Printed:  David A. Cheadle
Its:  Assistant Treasurer                       Its:  Assistant Treasurer


KAISER BELLWOOD CORPORATION


By:  /S/ David A. Cheadle
Name Printed:  David A. Cheadle
Its:  Assistant Treasurer



                                   SCHEDULE A

                               SCHEDULED DEFAULTS

         1. Any Default or Event of Default described in Section 10.1.6 of the
Credit Agreement arising out of (a) any default in the payment when due of
interest or principal payable on or in respect of the Subordinated Debt
Instruments, the Senior Debt Instruments, the New Senior Debt Instruments,
and/or the Additional New Senior Debt Instruments and/or (b) any default with
respect to the Subordinated Debt, the Senior Debt, the New Senior Debt and/or
the Additional New Senior Debt if the effect of such default is to permit the
holder or holders of any such Indebtedness, or any trustee or agent for such
holders, to cause any such Indebtedness to become due or payable prior to its
expressed maturity.

         2. Any Event of Default described in clause (a) of Section 10.1.10 of
the Credit Agreement.

         3. Any failure to comply with Section 9.2.4 of the Credit Agreement.

         4. Any breach of the representations and warranties set forth in
Section 8.15 of the Credit Agreement.

         5. Any failure to comply with Section 9.1.1(b) of the Credit Agreement
arising out of the delivery by the Company of an audit report by Arthur Andersen
LLP with respect to the 2001 Fiscal Year containing an Impermissible
Qualification.


                                   SCHEDULE B

         1. The condition in Section 7.2.1(a) of the Credit Agreement in respect
the truth and correctness of certain representations and warranties insofar as
such condition relates to the representations and warranties in Sections 8.6(b),
8.7 and/or 8.15 of the Credit Agreement.

         2. The condition in Section 7.2.1(c) of the Credit Agreement that no
Default shall have occurred and be continuing insofar as such condition would
not be satisfied by reason of the existence of any or all of the Scheduled
Defaults.

EX-4 5 ex_444-2001.htm EXHIBIT 4.44 TO 2001 10-K Exhibit 4.44 to 2001 10-K

                                                                    Exhibit 4.44

                                                                    MASTER
                                                               EXECUTION COPY








                                  $300,000,000

                         POST-PETITION CREDIT AGREEMENT

                          dated as of February 12, 2002

                                      among

                   KAISER ALUMINUM & CHEMICAL CORPORATION,
                          KAISER ALUMINUM CORPORATION,
                     each as Debtor and Debtor-In-Possession

                         CERTAIN FINANCIAL INSTITUTIONS,

                                       and

                             BANK OF AMERICA, N.A.,

                                    as Agent

                         Banc of America Securities LLC,
                       Sole Lead Arranger and Book Manager




                                TABLE OF CONTENTS
                                                                            PAGE

ARTICLE I DEFINITIONS AND ACCOUNTING TERMS.....................................2
         Section 1.1. Defined Terms............................................2
         Section 1.2. Use of Defined Terms....................................36
         Section 1.3. Cross-References........................................36
         Section 1.4. Accounting and Financial Determinations and Other
             Terms............................................................36

ARTICLE II COMMITMENTS AND BORROWING PROCEDURES...............................36
         Section 2.1. Commitments.............................................36
         Section 2.1.1. Revolving Commitment..................................37
         Section 2.1.2. Swingline Commitment..................................37
         Section 2.1.3. Lenders Not Required To Make Loans or Issue Letters
             of Credit........................................................38
         Section 2.1.4. Borrowing Base Determinations.........................39
         Section 2.2. Reduction of Revolving Commitment Amount................40
         Section 2.3. Borrowing Procedure.....................................41
         Section 2.4. Agent's Books and Records; Monthly Statements...........42
         Section 2.5. Priority and Security...................................43
         Section 2.6. Bank Products...........................................43

ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST, AND FEES.......................44
         Section 3.1. Repayments..............................................44
         Section 3.2. Voluntary Prepayments...................................44
         Section 3.3. Mandatory Prepayments...................................45
         Section 3.3.1. Prepayment Under, or Cash Collateralization of,
             Revolving Commitment.............................................45
         Section 3.3.2. Cash Dominion.........................................46
         Section 3.3.3. Acceleration..........................................47
         Section 3.4. Interest Provisions.....................................47
         Section 3.4.1. Rates.................................................47
         Section 3.4.2. Continuation and Conversion Elections.................47
         Section 3.4.3. Funding...............................................48
         Section 3.4.4. Default Rates.........................................48
         Section 3.4.5. Interest Payment Dates................................49
         Section 3.5. Fees....................................................49
         Section 3.5.1. Commitment Fee........................................49
         Section 3.5.2. Audit Fees............................................50
         Section 3.5.3. Other Fees............................................50

ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS.............................51
         Section 4.1. Illegality..............................................51
         Section 4.2. Deposits Unavailable....................................51
         Section 4.3. Increased Costs, etc....................................52
         Section 4.4. Funding Losses..........................................52
         Section 4.5. Increased Capital Costs.................................53
         Section 4.6. Taxes, etc..............................................54
         Section 4.7. Payments, Computations, etc.............................56
         Section 4.8. Sharing of Payments.....................................58
         Section 4.9. Setoff..................................................59
         Section 4.10. Use of Proceeds........................................59
         Section 4.11. Change of Lending Office, Replacement of Lender, etc...60
         Section 4.12. Computation of Additional Amounts Due..................61

ARTICLE V LETTERS OF CREDIT...................................................62
         Section 5.1. Requests................................................62
         Section 5.2. Issuance and Extensions.................................63
         Section 5.3. Fees and Expenses.......................................64
         Section 5.4. Other Lenders' Participation............................65
         Section 5.5. Disbursements...........................................66
         Section 5.6. Reimbursement...........................................66
         Section 5.7. Mandatory Payment to Agent of Letter of Credit
             Outstandings.....................................................67
         Section 5.8. L/C Collateral Account..................................67
         Section 5.8.1. Deposit...............................................67
         Section 5.8.2. Investment............................................67
         Section 5.8.3. Application of Funds..................................68
         Section 5.8.4. Fees..................................................68
         Section 5.9. Nature of Reimbursement Obligations.....................68
         Section 5.10. Indemnification by Lenders.............................69

ARTICLE VI PARENT GUARANTOR...................................................70
         Section 6.1. Parent Guaranty.........................................70
         Section 6.2. Renewal, etc. of Obligations; Waiver....................70
         Section 6.3. No Impairment, etc......................................71
         Section 6.4. Reinstatement; Subrogation..............................71

ARTICLE VII CONDITIONS TO EXTENSIONS OF CREDIT................................71
         Section 7.1. Initial Credit Extension................................71
         Section 7.1.1. Resolutions, etc......................................72
         Section 7.1.2. Insurance.............................................72
         Section 7.1.3. Payment of Outstanding Indebtedness; Existing
             Letters of Credit................................................72
         Section 7.1.4. Loan Documents........................................73
         Section 7.1.5. Opinions of Counsel...................................73
         Section 7.1.6. [Intentionally Omitted.]..............................73
         Section 7.1.7. Closing Fees, Expenses, etc...........................73
         Section 7.1.8. Availability..........................................73
         Section 7.1.9. Cash Management Arrangements..........................73
         Section 7.1.10. Bankruptcy-Related Conditions to Initial Credit
             Extension........................................................73
         Section 7.2. Financial Statements; Forecasts.........................74
         Section 7.3. No Material Litigation..................................74
         Section 7.4. All Credit Extensions...................................75
         Section 7.4.1. Compliance with Warranties, No Default, etc...........75
         Section 7.4.2. Credit Request; Borrowing Base Certificate............77
         Section 7.4.3. Satisfactory Legal Form...............................77
         Section 7.4.4. Bankruptcy Related Conditions to All Credit
             Extensions.......................................................78
         Section 7.5. Conditions Subsequent...................................78

ARTICLE VIII REPRESENTATIONS AND WARRANTIES...................................78
         Section 8.1. Organization, etc.......................................79
         Section 8.2. Due Authorization, Non-Contravention, etc...............79
         Section 8.3. Government Approval, Regulation, etc....................79
         Section 8.4. Validity, etc...........................................80
         Section 8.5. Financial Information...................................80
         Section 8.6. No Material Adverse Effect..............................82
         Section 8.7. Absence of Default or Violation of Law..................82
         Section 8.8. Litigation, etc.........................................82
         Section 8.9. Subsidiaries............................................83
         Section 8.10. Ownership of Properties................................83
         Section 8.11. Taxes..................................................83
         Section 8.12. Pension and Welfare Plans..............................84
         Section 8.13. Environmental Warranties...............................85
         Section 8.14. Regulations U and X....................................86
         Section 8.15. [Intentionally Omitted]................................86
         Section 8.16. [Intentionally Omitted]................................87
         Section 8.17. Accuracy of Information................................87
         Section 8.18. Joint Venture Contingent Liabilities...................87
         Section 8.19. Encumbered Property....................................87

ARTICLE IX COVENANTS..........................................................87
         Section 9.1. Affirmative Covenants...................................87
         Section 9.1.1. Financial Information, Reports, Notices, etc..........87
         Section 9.1.2. Compliance with Laws, etc.............................92
         Section 9.1.3. Maintenance of Properties.............................92
         Section 9.1.4. Insurance.............................................94
         Section 9.1.5. Books and Records; Audits; Confidentiality............95
         Section 9.1.6. Environmental Covenant................................99
         Section 9.1.7. Performance of Instruments............................99
         Section 9.1.8. Maintenance of Collateral............................100
         Section 9.1.9. Collateral Reporting.................................100
         Section 9.1.10. Delivery; Further Assurances........................101
         Section 9.1.11. Real Property; Title Policies; Surveys..............102
         Section 9.1.12. Intercompany Demand Notes...........................103
         Section 9.1.13. [Intentionally Omitted].............................104
         Section 9.1.14. Management Consultant...............................104
         Section 9.1.15. Ghana Opinion.......................................104
         Section 9.1.16. Anglesey Shareholder Consent........................104
         Section 9.1.17. Senior Indebtedness.................................104
         Section 9.2. Negative Covenants.....................................104
         Section 9.2.1. Business Activities..................................105
         Section 9.2.2. Indebtedness.........................................105
         Section 9.2.3. Liens................................................110
         Section 9.2.4. Minimum EBITDA.......................................115
         Section 9.2.5. Investments..........................................117
         Section 9.2.6. Restricted Payments, etc.............................119
         Section 9.2.7. Capital Expenditures.................................121
         Section 9.2.8. Rental Obligations...................................122
         Section 9.2.9. Take or Pay Contracts................................122
         Section 9.2.10. Consolidation, Merger, etc..........................122
         Section 9.2.11. Asset Dispositions..................................123
         Section 9.2.12. Sale or Discount of Receivables.....................125
         Section 9.2.13. Restrictions on Actions under Certain Agreements....126
         Section 9.2.14. Transactions with Affiliates........................126
         Section 9.2.15. Negative Pledges, etc...............................128
         Section 9.2.16. Sale-Leaseback Transactions.........................128
         Section 9.2.17. Change of Location or Name..........................128
         Section 9.2.18. Intercompany Transfers of Property..................129
         Section 9.2.19. Inconsistent Agreements.............................131
         Section 9.2.20. Additional Investments in Persons other than Debtors131
         Section 9.2.21. Currency Hedge Agreements...........................131
         Section 9.2.22. Chapter 11 Claims...................................132
         Section 9.2.23. Orders..............................................132
         Section 9.2.24. Company Investment or Distribution to Parent
             Guarantor.......................................................132

ARTICLE X EVENTS OF DEFAULT..................................................132
         Section 10.1. Listing of Events of Default..........................132
         Section 10.1.1. Non-Payment of Obligations..........................132
         Section 10.1.2. Breach of Warranty..................................132
         Section 10.1.3. Non-Performance of Certain Covenants and
             Obligations.....................................................133
         Section 10.1.4. Non-Performance of Certain Covenants and
             Obligations.....................................................133
         Section 10.1.5. Non-Performance of Other Covenants and
             Obligations.....................................................133
         Section 10.1.6. Default on Other Indebtedness.......................133
         Section 10.1.7. Judgments...........................................134
         Section 10.1.8. Pension Plans.......................................134
         Section 10.1.9. Impairment of Certain Documents.....................134
         Section 10.1.10. Bankruptcy Cases...................................135
         Section 10.2. Action if Other Event of Default......................136

ARTICLE XI THE ADMINISTRATIVE AGENT..........................................138
         Section 11.1. Appointment; Actions..................................138
         Section 11.2. Funding Reliance, etc.................................140
         Section 11.3. Exculpation...........................................141
         Section 11.4. Successors............................................142
         Section 11.5. Credit Extensions by the Agent........................143
         Section 11.6. Credit Decisions......................................143
         Section 11.7. Copies, etc...........................................143
         Section 11.8. Designation of Additional Agents......................143
         Section 11.9. Certain Releases......................................145
         Section 11.10. Approval of Loan Documents...........................145

ARTICLE XII MISCELLANEOUS PROVISIONS.........................................147
         Section 12.1. Waivers, Amendments, etc..............................147
         Section 12.2. Notices...............................................148
         Section 12.3. Payment of Costs and Expenses.........................149
         Section 12.4. Indemnification.......................................150
         Section 12.5. Survival..............................................151
         Section 12.6. Severability..........................................151
         Section 12.7. Headings..............................................151
         Section 12.8. Execution in Counterparts, Effectiveness, etc.........151
         Section 12.9. Governing Law; Submission to Jurisdiction.............152
         Section 12.10. Successors and Assigns...............................154
         Section 12.11. Sale and Transfer of Credit Extensions and
             Commitments; Participations in Credit Extensions and
             Commitments.....................................................155
         Section 12.11.1. Assignments........................................155
         Section 12.11.2. Participations.....................................156
         Section 12.12. Other Transactions...................................157
         Section 12.13. Waiver of Jury Trial.................................157
         Section 12.14. Final Agreement, etc.................................158


                                    EXHIBITS

Exhibit A-1(a)             Borrowing Request - Revolving Loan Borrowing
Exhibit A-1(b)             Borrowing Request - Swingline Borrowings
Exhibit A-2                Continuation/Conversion Notice
Exhibit B                  Revolving L/C Request
Exhibit C-1                [Intentionally Omitted]
Exhibit C-2                [Intentionally Omitted]
Exhibit D-1                Borrowing Base Certificate
Exhibit D-2                Compliance Certificate
Exhibit E                  Interim Order

                                    SCHEDULES

Schedule I                 [Intentionally Omitted]
Schedule II                Encumbered Real Property
Schedule III               [Intentionally Omitted]
Schedule IV                [Intentionally Omitted]
Schedule V                 [Intentionally Omitted]
Schedule VI                [Intentionally Omitted]
Schedule VII               [Intentionally Omitted]
Schedule VIII              [Intentionally Omitted]
Schedule IX                Existing Letters of Credit
Schedule X                 [Intentionally Omitted]
Schedule XI                Other Material Subsidiaries
Schedule XII               Existing Investments
Schedule XIII              [Intentionally Omitted]
Schedule XIV               Loan Documents
Schedule XV                Conditions Subsequent


                         POST-PETITION CREDIT AGREEMENT


                  THIS POST-PETITION CREDIT AGREEMENT, dated as of February 12,
2002 (this "Agreement"), is among KAISER ALUMINUM & CHEMICAL CORPORATION, a
Delaware corporation, as debtor and debtor-in-possession under Chapter 11 of the
Bankruptcy Code (the "Company"), KAISER ALUMINUM CORPORATION, a Delaware
corporation, as debtor and debtor-in-possession under Chapter 11 of the
Bankruptcy Code (the "Parent Guarantor"), the various financial institutions
that are or may from time to time become parties hereto pursuant to the terms
hereof (collectively, the "Lenders" and, individually, a "Lender"), and BANK OF
AMERICA, N.A., as agent (in such capacity, together with its successors and
assigns in such capacity, the "Agent") for the Lenders.

                              W I T N E S S E T H:

                  WHEREAS, the Company, the Parent Guarantor and the Secured
Guarantors, each of which is a debtor and debtor-in-possession (collectively,
the "Debtors") in a case pending under Chapter 11 of the Bankruptcy Code (the
cases of the Debtors each, a "Bankruptcy Case" and, collectively the "Bankruptcy
Cases"), have requested the Lenders to make available to the Company a revolving
line of credit for loans and letters of credit in an amount not to exceed
$300,000,000, and which extensions of credit the Company will use for the
purposes permitted hereunder;

                  WHEREAS, on the Petition Date, the Debtors filed voluntary
petitions with the Bankruptcy Court initiating the Bankruptcy Cases;

                  WHEREAS, the Debtors have continued in possession of their
assets and in the management of their business as debtors-in-possession pursuant
to sections 1107 and 1108 of the Bankruptcy Code;

                  WHEREAS, the Company, a direct Subsidiary of the Parent
Guarantor, is engaged, directly and through its various Subsidiaries and Joint
Venture Affiliates, in the business of the mining of bauxite, the refining of
bauxite into alumina, the production of primary aluminum and semi-fabricated and
fabricated aluminum products, and the sale of bauxite, alumina, primary
aluminum, and semi-fabricated and fabricated aluminum products to direct
customers and distributors;

                  WHEREAS, the Company desires to obtain Commitments from the
Lenders pursuant to which Loans and other Credit Extensions, in a maximum
aggregate principal amount at any one time outstanding not to exceed
$300,000,000, will be made to or for the account of the Company from time to
time prior to the Revolving Commitment Termination Date and may request Bank of
America to provide Bank Products;

                  WHEREAS, each Lender and Agent, severally and for itself
alone, is willing, on the terms and subject to the conditions hereinafter set
forth (including Article VII), to extend its Commitments and make its Loans and
other Credit Extensions to or for the account of the Company;

                  WHEREAS, the proceeds of any Loans made on the Initial
Borrowing Date will be applied by the Company, together with other funds, to
make payment in full of all Indebtedness of the Company under the Existing
Credit Agreement (other than with respect to the Existing Letters of Credit) and
to pay certain other liabilities of the Debtors as authorized by the First Day
Orders, provided that any letters of credit issued under the Existing Credit
Agreement and any obligations to Bank of America or its affiliates for Bank
Products shall constitute Letters of Credit and Bank Products outstanding under
this Agreement;

                  WHEREAS, in order to induce the Agent and the Lenders to enter
into this Agreement and to extend their respective Commitments and make the
Loans and other Credit Extensions, the Parent Guarantor and the other Guarantors
have agreed to unconditionally guarantee all obligations of the Company
hereunder and under the other Loan Documents; and

                  WHEREAS, to provide security for the repayment of the Loans
and Letters of Credit made available pursuant hereto and payment of the other
Obligations of the Company, the Secured Guarantors have agreed to provide the
Agent and the Secured Lenders (upon and after the entry of the Interim Order)
with respect to the Obligations of the Company and the Secured Guarantors
hereunder and under the other Loan Documents, an allowed superpriority
administrative expense claim in each of the Bankruptcy Cases pursuant to section
364(c)(1) of the Bankruptcy Code having priority over all administrative
expenses of the kind specified in, or arising or ordered under, any sections of
the Bankruptcy Code, including without limitation, sections 105, 326, 328, 330,
331, 503(b), 506(c), 507(a), 507(b), 546(c), 726 or 1114 of the Bankruptcy Code
(subject only to the Carve-Out) and Liens and Security Interests on all assets
of the Company and the Secured Guarantors (other than Excluded Assets) with
priority under section 364(c)(2) and section 364(c)(3) of the Bankruptcy Code
(subject only to the Carve-Out), as applicable;

NOW, THEREFORE, the parties hereto agree as follows:

                                   ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

         SECTION 1.1. DEFINED TERMS. The following terms when used in this
Agreement, including its preamble and recitals, shall, except where the context
otherwise requires, have the following meanings (such meanings to be equally
applicable to the singular and plural forms thereof):

         "Account" means, with respect to any Person, all of such Person's now
owned or hereafter acquired or arising accounts, as defined in the Uniform
Commercial Code, including any rights to payment for the sale or lease of goods
or rendition of services, whether or not they have been earned by performance.

         "Account Debtor" means each Person obligated in any way on an Account.

         "ACH Transactions" means any cash management or related services,
including the automatic clearing house transfer of funds by Bank of America for
the account of the Company or any other Obligor pursuant to agreement or
overdrafts.

         "Additional New Senior Debt" means Indebtedness of the Company or any
of its Subsidiaries under the Additional New Senior Notes, the Additional New
Senior Indenture, or any guaranty of such Indebtedness.

         "Additional New Senior Debt Instruments" means the Additional New
Senior Notes, the Additional New Senior Indenture, and all other Instruments and
agreements executed and delivered by the Company or any of its Subsidiaries in
connection therewith.

         "Additional New Senior Indenture" means the indenture dated as of
December 23, 1996, between the Company, the Subsidiaries of the Company party
thereto as guarantors, and the trustee named therein, pursuant to which the
Additional New Senior Notes were issued, as supplemented prior to the date
hereof and as the same may be further amended, supplemented, restated, or
otherwise modified from time to time in accordance with the terms of any such
indenture and this Agreement.

         "Additional New Senior Notes" means the 10-7/8% Senior Notes due
October 2006, in the principal amount of $50,000,000, issued by the Company
pursuant to the Additional New Senior Indenture, as amended, supplemented,
restated, or otherwise modified from time to time in accordance with the terms
of the Additional New Senior Indenture and this Agreement and all other
promissory notes accepted from time to time in substitution therefor or renewal
thereof in accordance with the terms of the Additional New Senior Indenture and
this Agreement.

         "Adjusted Capital Expenditures" means, for any period, Capital
Expenditures for such period (exclusive of capitalized interest) plus any
amounts advanced by any Debtor (without duplication) to any Subsidiary (other
than a Debtor) or to any Joint Venture Affiliate, which advances are intended
for Capital Expenditures by such Subsidiary or Joint Venture Affiliate, provided
that Adjusted Capital Expenditures shall not include up to $9,000,000 advanced
to QAL for Capital Expenditures in Fiscal Year 2002 and up to $14,000,000
advanced to QAL for Capital Expenditures in Fiscal Year 2003.

         "Adjusted Net Earnings from Operations" means, with respect to any
fiscal period of the Company, the Company's consolidated net income after
provision for income taxes for such fiscal period, as determined in accordance
with GAAP and reported on the financial statements for such period, excluding
the consolidated impact of any and all of the following included in such
consolidated net income (without duplication): (a) gain or loss in an amount
greater than $150,000 arising from the sale of any capital assets; (b) gain
arising from any write-up in the book value of any asset; (c) earnings of any
Person, substantially all the assets of which have been acquired in any manner,
to the extent realized by such other Person prior to the date of acquisition;
(d) earnings of any Person (other than a Subsidiary of the Company) in which the
Company or any of its Subsidiaries has an ownership interest to the extent that
such earnings exceed the sum of (i) the amount received in cash by the Company
and its Subsidiaries and (ii) $3,000,000, (e) earnings of any Person to which
assets of the Company shall have been sold, transferred or disposed of, or into
which the Company shall have been merged, or which has been a party with the
Company to any consolidation or other form of reorganization, prior to the date
of such transaction; (f) gain arising from the acquisition of debt or equity
securities of the Company from cancellation or forgiveness of Indebtedness; (g)
gain arising from extraordinary items, as determined in accordance with GAAP, or
from any other non-recurring transaction resulting in gain in an amount greater
than $150,000; (h) any gain that arises from the reversal of expenses in respect
of power payments to the extent reflected in the Financial Forecast; and (i) any
non-cash expenses resulting from any writeoff due to the outsourcing of mining
activities to the extent reflected in the Financial Forecast.

         "Affected Lender" is defined in Section 4.11(b).

         "Affiliate" means, with respect to any Person, any other Person which,
directly or indirectly, controls, is controlled by, or is under common control
with such Person (excluding any trustee under, or any committee with
responsibility for administering, any Plan). A Person shall be deemed to be
"controlled by" any other Person if such other Person possesses, directly or
indirectly, power to

               (a) vote 20% or more of the securities (on a fully diluted
         basis) having ordinary voting power for the election of a majority
         of directors or managing general partners;

                (b) vote sufficient securities of any class to control the
         election of one or more directors or managing general partners; or

                (c) direct or cause the direction of the management and policies
         of such Person, whether by contract or otherwise.

         "Agent" means Bank of America, solely in its capacity as Agent for the
Lenders, and any successor agent appointed in accordance with this Agreement.

         "Agreement" means, on any date, this Post-Petition Credit Agreement as
originally in effect on the Effective Date and as thereafter from time to time
amended, supplemented, amended and restated, or otherwise modified and in effect
on such date.

         "AJI" means Alpart Jamaica Inc., a Delaware corporation.

         "Akron" means Akron Holding Corporation, an Ohio corporation, as debtor
and debtor-in-possession under Chapter 11 of the Bankruptcy Code.

         "ALPART" means Alumina Partners of Jamaica, a Delaware general
partnership.

         "Alwis" means Alwis Leasing LLC., a Delaware limited liability company.

         "Anglesey" means Anglesey Aluminium Limited, a United Kingdom corporation.

         "Asset Disposition" means any sale, transfer, lease which is accounted
for as a sale under GAAP, contribution, conveyance, or other disposition (other
than the grant of a Lien), in any case made after the Initial Borrowing Date, of
any Property of the Parent Guarantor, the Company or any of its Subsidiaries to
any Person.

         "Assignee Lender" is defined in Section 12.11.1.

         "Authorized Officer" means, with respect to any Obligor, those of its
officers whose signatures and incumbency shall have been certified to the Agent
and the Lenders pursuant to Section 7.1.1(a).

         "Availability Reserve" means a reserve against availability under the
Borrowing Base in an amount equal to $35,000,000 at all times.

         "Bank of America" means Bank of America, N.A., a national banking
association, in its individual capacity.

         "Bank of America Rate" is defined in "Reference Rate".

         "Bank Product Obligations" means all liabilities and obligations
(monetary or otherwise) of the Company or any other Obligor under any Bank
Product, including without limitation Cash Management Obligations, Currency
Hedge Obligations and Hedging Obligations in connection with Bank Products,
which liabilities and obligations are secured hereunder.

         "Bank Product Reserve" means all reserves which the Agent from time to
time establishes in its reasonable discretion for the Bank Products then
provided or outstanding.

         "Bank Products" means any one or more of the following types of
services or facilities extended to the Company or any other Obligor by Bank of
America, or any affiliate of Bank of America for which Bank of America has
agreed to reimburse or indemnify such affiliate if the Obligor fails to pay or
perform its Bank Product Obligations: (i) credit cards; (ii) ACH Transactions;
(iii) cash management, including controlled disbursement services and other Cash
Management Services; (iv) Hedging Agreements; and (v) Currency Hedge Agreements.

         "Bankruptcy Case(s)" means the Chapter 11 cases filed by the Company,
the Parent Guarantor and the Secured Guarantors on the Petition Date.

         "Bankruptcy Code" means Title 11 of the United States Code (11
U.S.C. Sections 101 et seq.), as amended.

         "Bankruptcy Court" means the United States Bankruptcy Court for the
District of Delaware, or any other court having jurisdiction over the Bankruptcy
Cases from time to time, including, without limitation, the United States
District Court for the District of Delaware if and to the extent it withdraws
the reference with respect to the Bankruptcy Cases, any part thereof, or any
matter or proceeding therein.

         "Borrowing" means the Revolving Loans made by all Lenders on the same
Business Day pursuant to the same Borrowing Request in accordance with Section
2.1.1 or the Swingline Loan made by the Agent pursuant to a Borrowing Request in
accordance with Section 2.1.2.

         "Borrowing Base" means, at any time (without duplication),

              (a)      an amount equal to 85% of the Net Amount of Eligible
         Accounts as at such time

plus

              (b)      the lesser of (i) $175,000,000 and (ii) 65% of all
         Eligible Inventory as at such time

plus

              (c)      the lesser of (i) $100,000,000, reducing each month
         commencing in February 2003 on a seven year straight line amortization
         and (ii) 50% of the OLV In-Place Value of Eligible Fixed Assets (such
         lesser number, the "PPE Subcomponent"); provided that until the Agent
         shall have received and approved the appraisals and environmental
         reports required under the Loan Documents, the PPE Subcomponent shall
         be $50,000,000, which amount shall reduce to zero on the 60th day
         following the Effective Date and, thereafter, until the Agent shall
         have received and approved such appraisals and environmental reports;

minus

              (d)      Reserves;

provided, however, that (i) the Net Amount of Eligible Accounts of KAII owed by
Foreign Account Debtors included in the Borrowing Base shall at no time exceed
30% of the Net Amount of all Eligible Accounts included in the Borrowing Base,
(ii) the Net Amount of Eligible Accounts of the Company and Kaiser Bellwood owed
by Foreign Account Debtors included in the Borrowing Base shall at no time
exceed 5% of the Net Amount of Eligible Accounts of the Company and Kaiser
Bellwood included in the Borrowing Base and (iii) Convertor Inventory that is
located on the premises of a third party included in the Borrowing Base shall at
no time exceed 5% of Eligible Inventory included in the Borrowing Base.

         "Borrowing Base Calculation Date" means, with respect to the delivery
date of any Borrowing Base Certificate, (a) if no Event of Cash Dominion exists,
the last day of the preceding month or the last day of the next preceding month,
as the case may be, and in addition (b) if an Event of Cash Dominion exists and
is continuing, the last Business Day of the preceding week or, at the election
of the Company, the preceding day.

         "Borrowing Base Certificate" means a certificate duly executed on
behalf of the Company by a Financial Authorized Officer of the Company in
substantially the form of Exhibit D-1 attached hereto, with such changes therein
as the Agent and the Company may from time to time agree upon for purposes of
monitoring the Borrowing Base.

         "Borrowing Request" means a loan request and certificate duly executed
by an Authorized Officer of the Company, (a) in respect of any Borrowing of
Revolving Loans, in substantially the form of Exhibit A-1(a) attached hereto, or
(b) in respect of any Borrowing of Swingline Loans, in substantially the form of
Exhibit A-1(b) attached hereto.

         "Business Day" means any day which is

              (a)      neither a Saturday or Sunday nor a legal holiday on which
         banks are authorized or required to be closed in New York, New York or
         in Charlotte, North Carolina; and

              (b)      relative to the making, continuing, converting,
         prepaying, or repaying of any LIBO Rate Loans, also a day on which
         dealings in Dollars are carried on in the London interbank market.

         "Canadian Subsidiaries" means Kaiser Aluminum & Chemical Canada
Investment Limited, an Ontario corporation, and Kaiser Canada.

         "Capital Expenditures" means, for any period, the aggregate
expenditures of the Company and its Subsidiaries on a consolidated basis for
fixed or capital assets made during such period which, in accordance with GAAP,
would be classified as capital expenditures (including the aggregate amount of
all Capitalized Lease Liabilities incurred during such period).

         "Capitalized Lease Liabilities" means all monetary obligations of the
Company or any of its Subsidiaries under any leasing or similar arrangement
which, in accordance with GAAP, would be classified as a capitalized lease, and,
for purposes of this Agreement and each other Loan Document, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP, and the stated maturity thereof shall be the date of the last payment
of rent or any other amount due under such lease prior to the first date upon
which such lease may be terminated by the lessee without payment of a penalty.

         "Carve-Out" has the meaning specified in the Interim Order until entry
of the Final Order, and thereafter in the Final Order.

         "Carve-Out Event" means the occurrence and continuance of an Event of
Default and the delivery by the Agent to the Company, the Bankruptcy Court and
each Committee of written notice of such Event of Default and the triggering of
the Carve-Out.

         "Carve-Out Reserve" means an amount at all times equal to (i)
$4,000,000 plus (ii) an amount equal to the Agent's estimate as of the
applicable Borrowing Base Calculation Date of the amounts of (A) unpaid
professional fees and disbursements incurred by the professionals retained,
pursuant to Sections 327 or 1103(a) of the Bankruptcy Code, by the Debtors and
up to two statutory committees appointed in the Bankruptcy Cases, and approved
and allowed by the Bankruptcy Court pursuant to Sections 330 and 331 of the
Bankruptcy Code (except for ordinary course professionals) and (B) the unpaid
expenses of any member of such statutory committees allowed under Section
503(b)(3)(e) of the Bankruptcy Code (the "Professional Fees") less (iii) the
amount of Professional Fees which have been allowed by the Bankruptcy Court and
paid by the Company. For the first 3 months after the Petition Date, the amount
of clause (ii) shall be deemed to be $500,000 per month, and thereafter the
Agent's estimate of the amounts specified in clause (ii) above will be based on
the amounts of the pending and prior fee applications filed with the Bankruptcy
Court by such professionals and committee members. The amount included in the
Carve-Out Reserve pursuant to clause (ii) above may be increased or decreased by
the Agent, after consultation with the Company, if the Agent, in its
commercially reasonable discretion, determines that such estimate does not
accurately reflect the actual amount of such unpaid Professional Fees, provided
that at no time shall such amount be reduced to less than $500,000.

         "Cash Equivalent Investment" means, at any time:

              (a)   any evidence of Indebtedness, maturing not more than one
         year after such time, issued or guaranteed by the United States
         Government or issued by any of the following Federal agencies: the
         Federal Home Loan Mortgage Corporation, the Federal Home Loan Bank
         System, the Farm Credit System (including, but not limited to, the Farm
         Credit Banks and Banks for Cooperatives), and the Federal National
         Mortgage Association;

              (b)   any certificate of deposit or bankers' acceptance, maturing
         not more than one year after such time, which is issued or accepted by
         either

                      a commercial banking institution that is operating in
               the United States and has a combined capital and surplus and
               undivided profits of not less than $500,000,000;

                      any Lender; or

                      with respect to certificates of deposit that do not
               exceed $10,000,000 in the aggregate outstanding at any time,
               any other commercial banking institution;

              (c)   commercial paper rated A-1 or better by Standard &
         Poor's Corporation or Prime-1 or better by Moody's Investors Service,
         Inc.;

              (d)   repurchase agreements with respect to any of the foregoing,
         with any bank or trust company referred to above in clause (b) or with
         any nationally recognized securities dealer having total capital and
         surplus and undivided profits of not less than $500,000,000;

              (e)   investments in the Goldman, Sachs & Co. Institutional
         Liquid Assets fund and other money market funds; or

              (f)   investments in and through any Sweep Account.

         "Cash Management Obligations" means, with respect to the Company or any
Guarantor, all liabilities and obligations (monetary or otherwise) of the
Company or such Guarantor arising in connection with Cash Management Services,
which liabilities and obligations, to the extent arising in connection with Cash
Management Services unrelated to a Bank Product, are not secured hereunder.

         "Cash Management Services" means any one or more of the following types
of services or facilities extended to the Company or any Guarantor by a provider
of such services: (a) credit cards; and (b) any cash management or related
services including automatic clearing house transfer of funds by a provider for
the account of the Company or such Guarantor pursuant to agreement or
overdrafts.

         "CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended or otherwise modified from time to time.

         "CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.

         "Chapter 11 Plan" means a plan of reorganization under Chapter 11 of
the Bankruptcy Code.

         "Code" means the Internal Revenue Code of 1986, as amended, reformed,
or otherwise modified from time to time.

         "Collateral" means all Property and rights on or in which a Lien is
granted to the Agent (or to any agent, trustee, or other Person acting on the
Agent's behalf) pursuant to this Agreement, any of the Collateral Documents, the
Interim Order, the Final Order or any other Instruments provided for herein or
therein or delivered or to be delivered hereunder or thereunder or in connection
herewith or therewith, as any of the foregoing may be amended, supplemented,
restated, or otherwise modified from time to time in accordance with the
provisions hereof or thereof; provided, however, that, anything in this
Agreement, any of the Collateral Documents, the Interim Order, the Final Order
or any other Instrument to the contrary notwithstanding, in no event shall the
Collateral include, nor shall the Agent (nor any agent, trustee, or other Person
acting on the Agent's behalf) have a Lien on, any Excluded Assets, whether now
or hereafter existing, owned or acquired.

         "Collateral Documents" means, collectively, the Security Agreement, the
Interim Order, the Final Order, each Mortgage, the Collection Bank Agreement,
the Concentration Bank Agreement, and each other Instrument or document pursuant
to which a Lien is granted to the Agent (or perfected in favor of the Agent) (or
to or in favor of any agent, trustee, or other Person acting on the Agent's
behalf) as security for any of the Obligations, as any of the foregoing may be
amended, supplemented, restated, or otherwise modified from time to time in
accordance with the provisions hereof or thereof. Anything in this Agreement or
in any other Loan Document to the contrary notwithstanding, the Obligations
secured under each Collateral Document shall be deemed to include all
Obligations with respect to Bank Products, including all Bank Product
Obligations.

         "Collection Bank" means any bank at which the Company maintains a
collection or lockbox account or other similar collection arrangement.

         "Collection Bank Agreement" means any agreement between the Company,
the Agent, and any Collection Bank, in form and substance reasonably
satisfactory to the Agent, as any such agreement may be amended, supplemented,
restated, or otherwise modified from time to time in accordance with the
provisions hereof or thereof.

         "Collection Deposit Account" means any collection deposit account,
lockbox account or similar account with a Collection Bank.

         "Commitment" means, as the context may require, a Lender's Revolving
Commitment, or the Agent's Swingline Commitment.

         "Committee" means any official committee(s) appointed in the Bankruptcy
Cases.

         "Company" is defined in the preamble.

         "Compliance Certificate" means a certificate of the Company duly
executed by a Financial Authorized Officer of the Company, in substantially the
form of Exhibit D-2 attached hereto, with such changes as the Agent and the
Company may from time to time agree upon for purposes of monitoring the
Company's compliance herewith.

         "Concentration Account" is defined in the Concentration Bank Agreement.

         "Concentration Bank Agreement" means an agreement between the Company,
the Agent, and Bank of America, as concentration bank, in form and substance
reasonably satisfactory to the Agent, as amended, supplemented, restated, or
otherwise modified from time to time in accordance with the provisions hereof or
thereof.

         "Confidential Information" is defined in clause (c) of Section 9.1.5.

         "Contingent Liability" means any agreement, undertaking, or arrangement
by which any Person guarantees, endorses, agrees to purchase, or otherwise
becomes or is contingently liable upon (by direct or indirect agreement,
contingent or otherwise, to provide funds for payment, to supply funds to, or
otherwise to invest in, a debtor, or otherwise to assure a creditor against
loss) the debt, obligation, or other liability of any other Person (other than
by endorsements of Instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person.
The amount of any Person's obligation under any Contingent Liability shall
(subject to any limitation set forth therein) be deemed to be the outstanding
principal amount (or maximum outstanding principal amount, if larger) of the
debt, obligation, or other liability guaranteed thereby.

         "Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of the
Company, in substantially the form of Exhibit A-2 attached hereto.

         "Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Company, are treated as a single employer under Section 414(b) or 414(c) of the
Code or Section 4001 of ERISA.

         "Convertor Inventory" means raw materials, work-in-process or other
goods delivered to a third party pursuant to a bailment arrangement with such
third party under which such Inventory is to be processed, improved or otherwise
altered by such third party; provided, however, that as long as (a) an Agreement
Regarding Processing Arrangement, substantially in the form attached to the
Existing Credit Agreement is in effect between the Agent and Alutek, Inc., (b)
if the Agent so requires, an appropriate financing statement reflecting the
Company's interest in such Inventory has been filed and is effective and (c) the
Agent is satisfied that no creditor of Alutek, Inc. has an interest in any such
raw materials, work-in-progress, or other goods or Inventory of the Company that
the Agent in its sole discretion deems significant, Convertor Inventory shall
not mean or include any raw materials, work-in-process or other goods or
Inventory of the Company located at the plant of Alutek, Inc. at N. 3401
Tschirley Road, Spokane, Washington.

         "Credit Extension" means

              (a)   any disbursement of Revolving Loans by the Lenders;

              (b)   any disbursement of Swingline Loans by Agent; or

              (c)   any issuance or extension by an Issuer Bank of a Letter of
         Credit (including the continuance of the Existing Letters of Credit as
         Letters of Credit outstanding hereunder as approved by the Interim
         Order).

         "Credit Request" means any Borrowing Request or Revolving L/C Request.

         "Currency Hedge Agreement" means any currency swap agreement, currency
cap agreement, currency collar agreement, currency floor agreement, foreign
exchange agreement, foreign exchange option agreement or other similar agreement
or arrangement entered into by the Company or any Guarantor and the provider
thereunder.

         "Currency Hedge Obligations" means, with respect to the Company or any
Guarantor, all liabilities and obligations (monetary or otherwise) of the
Company or such Guarantor arising under or in connection with Currency Hedge
Agreements, which liabilities and obligations, to the extent arising from a
Currency Hedge Agreement not constituting a Bank Product, are not secured by the
Collateral.

         "Debtor" means each of the Company and each Secured Guarantor, as
debtor and debtor-in-possession in the Bankruptcy Cases, and "Debtors" means all
of them collectively.

         "Deconsolidation Tax Allocation Agreement" means the Tax Allocation
Agreement dated June 30, 1993 between the Company and the Parent Guarantor a
copy of which has been delivered to the Agent prior to the date hereof, as
amended from time to time with the written consent of the Agent.

         "Default" means any Event of Default or any condition, occurrence, or
event which, after notice or lapse of time or both, would constitute an Event of
Default.

         "Disbursement" means any payment or disbursement made under a Letter of
Credit by the Issuer Bank thereof to the beneficiary thereunder.

         "Disbursement Date" is defined in clause (a) of Section 5.5.

         "Disclosure Schedule" means the Disclosure Schedule dated as of
February 12, 2002 delivered by the Company to the Agent and each Lender prior to
the execution and delivery of this Agreement, as it may be amended,
supplemented, or otherwise modified from time to time by the Company with the
prior written consent of the Agent.

         "Distributions" is defined in clause (a) of Section 9.2.6.

         "Dollar" and the sign "$" mean lawful money of the United States.

         "Dollar Equivalents", with respect to any Currency Hedge Agreement,
means Dollars or, with respect to any other currency, an equivalent amount of
Dollars determined using the forward rate, or, in the case of cap agreements,
collar agreements and floor agreements, the strike price, agreed to by the
parties and specified in such Currency Hedge Agreement.

         "Domestic Office" means, with respect to any Lender, the office of such
Lender designated as such below its signature hereto, or designated in the
Assignee Agreement to be Bound pursuant to which such Lender became a party
hereto, or such other office of a Lender (or any successor or assign of such
Lender) within the United States as may be designated from time to time by
written notice from such Lender, as the case may be, to each other Person party
hereto.

         "Domestic Subsidiary" means a Subsidiary that is created or organized
in or under the laws of the United States, any state thereof, or the District of
Columbia.

         "EBITDA" means, with respect to any fiscal period of the Company, (A)
Adjusted Net Earnings from Operations, plus, (i) to the extent deducted in the
determination of Adjusted Net Earnings from Operations for that fiscal period,
interest expenses, Federal, state, local and foreign income taxes, depreciation
and amortization and plus (ii) up to $10,000,000 of non-cash expenses incurred
during such fiscal period regardless of when such expenses were incurred during
such fiscal period minus (B) that portion of the amount represented by clause
(A) above attributable to (i) the proportionate direct or indirect ownership of
Persons other than the Company and its Subsidiaries of the voting stock of, or
partnership interest in, any Subsidiary or (ii) if the economic burden of any of
the components of EBITDA set forth above is borne or to be borne by minority
owners of such Subsidiary (other than the Company and its Subsidiaries) in a
proportion other than the proportion of their direct or indirect ownership of
the voting stock of, or partnership interest in, such Subsidiary, the
proportionate share of the economic burden of such amounts borne or to be borne
by such minority owners.

         "Effective Date" means February 13, 2002.

         "Eligible Account" means, at any time, all Accounts of the Company,
Kaiser Bellwood and KAII that are not ineligible as the basis for Credit
Extensions, based on the following criteria and on such other criteria as the
Agent may, after consultation with the Company, from time to time establish in
its commercially reasonable discretion. Without intending to limit the Agent's
discretion to establish other criteria of eligibility pursuant to the preceding
sentence, Eligible Accounts shall not include any Account:

              (a) which, except in the case of Product Swaps, does not
         represent a bona fide sale or lease and delivery of goods of or
         rendition of services by the Company, Kaiser Bellwood or KAII in the
         ordinary course of the Company's, Kaiser Bellwood's or KAII's
         business, as the case may be, or which is not for a liquidated
         amount payable by the Account Debtor thereon on the terms set forth
         in the invoice therefor;

              (b) which represents a Progress Billing;

              (c) which represents a sale on a bill-and-hold, guaranteed
         sale, sale and return, sale on approval, consignment, repurchase or
         return basis, other than, in each case, a Product Swap or an Account
         that represents the balance of an Account Debtor's minimum annual
         purchase commitment to the Company, Kaiser Bellwood or KAII provided
         that the documents relating to such Account provide that title to
         the Inventory purchased by the Account Debtor and held by the
         Company, Kaiser Bellwood or KAII has passed to the Account Debtor;

              (d) which is evidenced by a promissory note or other
         instrument or by chattel paper;

              (e) with respect to which more than 90 days, in the case of an
         Account as to which Century Aluminum is the Account Debtor, have
         elapsed since the date of the original invoice therefor or with
         respect to which more than 65 days, in the case of all other
         Accounts, have elapsed since the date of the original invoice
         therefor;

              (f) which is not evidenced by an invoice rendered to the
         Account Debtor, which is evidenced by an invoice dated more than 60
         days after the date of shipment to the Account Debtor or which is
         evidenced by an invoice dated more than 60 days after the date of
         performance of the relevant service for the Account Debtor;

              (g) owed by an Account Debtor which is a director, officer,
         shareholder, employee or Affiliate of the Company, Kaiser Bellwood
         or KAII;

              (h) if the aggregate dollar amount of all Accounts owed by the
         Account Debtor thereon exceeds 5% (15% in respect of Accounts owed
         by the Account Debtors identified in Item 11 ("Major Account
         Debtors") of the Disclosure Schedule, as such Item may be amended
         from time to time by the Agent, in its commercially reasonable
         judgment, after consultation with the Company, to add or delete
         Account Debtors) of the aggregate amount of all Accounts at such
         time, but only to the extent of such excess;

              (i) which is owed by an Account Debtor which, at the time of
         any determination of Eligible Accounts, owes any amount with respect
         to any Account that has been outstanding more than 60 days past the
         due date, other than amounts which in total do not exceed 20% of the
         aggregate of all Accounts owing by such Account Debtor and which are
         the subject of bona fide disputes between such Account Debtor and
         the Company, Kaiser Bellwood or KAII;

              (j) which are owed by the government of the United States of
         America, or any department, agency, public corporation, or other
         instrumentality thereof, unless the Federal Assignment of Claims Act
         of 1940, as amended, and any other steps necessary to perfect the
         Agent's Security Interest therein, have been complied with to the
         Agent's reasonable satisfaction with respect to such Account;

              (k) which is owed by any state, municipality, or other
         political subdivision of the United States of America, or any
         department, agency, public corporation, or other instrumentality
         thereof and as to which the Agent determines that the Agent's
         Security Interest therein is not or cannot be perfected;

              (l) except as provided in clause (j) above, as to which either
         the perfection, enforceability, or validity of the Security Interest
         in such Account, or the Agent's right or ability to obtain direct
         payment to the Agent of the Proceeds of such Account, is governed by
         any federal, state, or local statutory requirements other than those
         of the Uniform Commercial Code or the Bankruptcy Code;

              (m) with respect to which, in whole or in part, a check,
         promissory note, draft, trade acceptance or other instrument for the
         payment of money has been received, presented for payment and
         returned uncollected for any reason;

              (n) which is owed by an Account Debtor to which the Company,
         Kaiser Bellwood or KAII is indebted in any way unless the Account
         Debtor has entered into an agreement acceptable to the Agent in its
         commercially reasonable judgment to waive setoff rights; or if the
         Account Debtor thereon has disputed liability, asserted a right of
         setoff or made any claim with respect to such Account; but in each
         such case only to the extent of such indebtedness, setoff, dispute,
         or claim;

              (o) as to which any one or more of the following events has
         occurred with respect to the Account Debtor on such Account: death
         or judicial declaration of incompetency of an Account Debtor who is
         an individual; the filing by or against the Account Debtor of a
         request or petition in a proceeding that is then pending for
         liquidation, reorganization, arrangement, adjustment of debts,
         adjudication as a bankrupt, winding-up, or other relief under the
         bankruptcy, insolvency, or similar laws of the United States, any
         state or territory thereof, or any foreign jurisdiction, now or
         hereafter in effect; the making of any general assignment by the
         Account Debtor for the benefit of creditors in a proceeding that is
         then pending; the appointment of a receiver or trustee for the
         Account Debtor or for any of the assets of the Account Debtor,
         including the appointment of or taking possession by a "custodian,"
         as defined in the Bankruptcy Code in a proceeding that is then
         pending; the institution by or against the Account Debtor of any
         other type of insolvency proceeding (under the bankruptcy laws of
         the United States or otherwise) or of any formal or informal
         proceeding for the dissolution or liquidation of, settlement of
         claims against, or winding up of affairs of, the Account Debtor in a
         proceeding that is then pending; the nonpayment generally by the
         Account Debtor of its debts as they become due; or the cessation of
         the business of the Account Debtor as a going concern;

              (p) if the Agent believes in its commercially reasonable
         judgment that the prospect of collection of such Account is impaired
         or that the Account may not be paid by reason of the Account
         Debtor's financial inability to pay;

              (q) which is owed by an Account Debtor which the Agent, in its
         commercially reasonable judgment, otherwise deems to be
         uncreditworthy;

              (r) which is owed by a Foreign Account Debtor, except to the
         extent that such Account (i) is secured or payable by a letter of
         credit or acceptance, (ii) is insured under foreign credit
         insurance, on terms and conditions satisfactory to the Agent in its
         commercially reasonable discretion, or (iii) is owed by an Account
         Debtor identified in Item 12 ("Major Foreign Account Debtors") of
         the Disclosure Schedule, as such Item may be amended from time to
         time by the Agent, in its commercially reasonable judgment, after
         consultation with the Company, to add or delete Account Debtors;

              (s) which is not payable in the United States other than
         Accounts in an aggregate amount not to exceed $2,000,000 payable in
         the United Kingdom;

              (t) which is not payable in Dollars, other than Accounts in an
         aggregate amount not to exceed $2,000,000 payable in Pounds
         Sterling, unless the Company, Kaiser Bellwood or KAII has executed
         an appropriate Hedging Agreement or Currency Hedge Agreement
         acceptable to the Agent with respect thereto;

              (u) which represents a rebilling of an Account Debtor for a
         discount or other adjustment inappropriately applied to an Account
         by such Account Debtor;

              (v) which has arisen from Inventory which, at the time of the
         determination of Eligible Accounts, constituted Eligible Inventory;
         and

              (w) upon which the Agent does not have a first priority
         perfected Security Interest.

         "Eligible Assignee" is defined in Section 4.11(b).

         "Eligible Fixed Assets" means machinery and Equipment owned by the
Company or Kaiser Bellwood, located in the United States of America, installed
in a manufacturing facility acceptable to Agent in operating condition and upon
which the Agent has a perfected first priority Security Interest, subject only
to Liens described in clauses (e) - (w) (but not clauses (q), (u) and (v)) of
Section 9.2.3, and as to which an OLV In-Place Value has been determined by the
Agent.

         "Eligible Inventory" means, at any time, any Inventory of the Company,
KAII or Kaiser Bellwood arising in the ordinary course of business, valued at
the lower of cost or market (on a first-in, first-out basis) that:

              (a) is not, in the reasonable opinion of the Agent, obsolete
         or unmerchantable;

              (b) is located in the United States or in route to the United
         States; provided that such Inventory is insured in accordance with
         the Company's, KAII's or Kaiser Bellwood's normal practice and to
         the reasonable satisfaction of the Agent, title to such Inventory
         has passed to the Company, KAII or Kaiser Bellwood and, in the case
         of Inventory in route to the United States, is evidenced by a
         negotiable bill of lading in which the Agent has a valid and
         perfected Security Interest;

              (c) upon which the Agent has a first priority perfected
         Security Interest;

              (d) is not stores Inventory, Tolling Inventory, repair and
         maintenance Inventory, or Inventory delivered to the Company, KAII
         or Kaiser Bellwood on consignment;

              (e) is not ineligible as the basis for Credit Extensions based
         on such other criteria as the Agent may, after consultation with the
         Company, from time to time establish in its commercially reasonable
         discretion;

              (f) has not given rise to any Account which, at the time of
         the determination of Eligible Inventory, constituted an Eligible
         Account; and

              (g) is not Inventory located at the idled portion of the Mead
         or Tacoma plants which constitutes work-in-process.

         "Environmental Compliance Reserve" means any reserve which the Agent
establishes after consultation with the Company in its commercially reasonable
discretion from time to time for amounts that are reasonably likely to be
expended by the Company and its Subsidiaries in order for the Company and its
Subsidiaries and their respective operations and property (a) to comply with
Environmental Laws in all material respects, or (b) to correct in all material
respects any such non-compliance with Environmental Laws or any Release.

         "Environmental Laws" means all applicable federal, state, or local
statutes, laws, ordinances, codes, rules, regulations, requirements, and
guidelines (including consent decrees and administrative orders to which the
Company, any of its Subsidiaries, or any Obligor is subject) relating to
protection of the environment or human health or imposing liability or standards
of conduct concerning any Hazardous Material, as any of the foregoing may be
from time to time amended or supplemented.

         "Environmental Reports" means the "Environmental Assessments" report,
dated January, 1994, prepared by Kennedy/Jenks/Chilton, copies of which have
been delivered to the Agent prior to the date hereof.

         "Equipment" means, with respect to any Person, all of such Person's now
owned and hereafter acquired machinery, equipment, furniture, furnishings,
fixtures, and other tangible personal property (except Inventory), including
embedded software, motor vehicles with respect to which a certificate of title
has been issued, aircraft, dies, tools, jigs, molds and office equipment, as
well as all of such types of property leased by such Person and all of such
Person's rights and interests with respect thereto under such leases (including,
without limitation, options to purchase); together with all present and future
additions and accessions thereto, replacements therefor, component and auxiliary
parts and supplies used or to be used in connection therewith, and all
substitutes for any of the foregoing, and all manuals, drawings, instructions,
warranties and rights with respect thereto, wherever any of the foregoing is
located.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections.

         "Event of Cash Dominion" means (a) the occurrence of an Event of
Default or (b) the occurrence of any of the following events and the delivery by
the Agent as required under Section 11.1(c) of written notice thereof to the
Company: (i) the Revolving Commitment Availability is less than $40,000,000 at
any time or (ii) the Revolving Commitment Availability is less than $50,000,000
for three consecutive Business Days. An Event of Cash Dominion shall terminate,
provided no Default shall have occurred and be continuing, if the Revolving
Commitment Availability is greater than $50,000,000 for each Business Day during
a period of three consecutive months and the Agent delivers written notice as
required under Section 11.1(c) of such termination to the Company.

         "Event of Default" is defined in Section 10.1.

         "Excluded Assets" means (i) the stock of VALCO, unless and until the
Company receives an opinion of Ghana counsel to the effect that the grant of a
Lien to Agent is permitted under the laws of Ghana and the agreements and other
documents relating to the formation, organization, financing, construction,
supply, operation, ownership or management of VALCO and would not trigger rights
of first refusal under the laws of Ghana or the agreements and other documents
relating to the formation, organization, financing, construction, supply,
operation, ownership or management of VALCO and any Security Interest granted in
the stock of VALCO shall be subject to such matters as may be described in such
opinion of Ghana counsel, (ii) the stock of Anglesey unless and until the
Company receives written confirmation from the other shareholder of Anglesey
that the grant of a Lien to Agent would not constitute a "transfer" within the
meaning of Clause 8 of the Anglesey Shareholders' Agreement, would not trigger
rights of first refusal under such Clause 8 or give rise to any other rights
under such Shareholders' Agreement which such other shareholder would have in
the event of a "transfer" within the meaning of such Clause 8 and Agent confirms
to such other shareholder that any transfer of the shares of Anglesey pursuant
to any exercise of remedies under the Loan Documents would be subject to such
other shareholder's right of first refusal and other rights set forth in such
Shareholders' Agreement that such shareholder would have if a "transfer" were
made by the Company; (iii) more than 55% of the total outstanding equity
interests in VALCO, (iv) more than 65% of the total outstanding equity interests
in Kaiser Aluminum & Chemical Canada Investment Limited or Trochus, (v) more
than 17.4% of the total outstanding equity interests in Kaiser Canada, (vi) any
equity interests in any Unsecured Guarantor, KAAC, QAL, KJBC or the Mining JV
(but not including the cash or other proceeds of the disposition of such equity
interests except to the extent that such proceeds constitute Excluded Assets);
(vii) any agreements directly related to the formation, organization, financing,
construction, supply, operation, ownership or management of QAL, Anglesey, KJBC,
the Mining JV, VALCO, ALPART, or any of their Subsidiaries (but any agreement
(x) to which none of QAL, Anglesey, KJBC, VALCO, ALPART, the Mining JV or any of
their Subsidiaries is a party and (y) pursuant to which the Company or any of
its Subsidiaries agrees to sell products purchased from, or produced by, QAL,
Anglesey, KJBC, VALCO, ALPART, the Mining JV or any of their Subsidiaries shall
not be Excluded Assets) and any agreements (but any Accounts arising from the
sale of Inventory by the Company or any of its Subsidiaries shall not be
Excluded Assets) to which any of QAL, Anglesey, KJBC, the Mining JV, VALCO,
ALPART, or any of their Subsidiaries are a party; (viii) all foreign government
permits and licenses to the extent that such permits or licenses would be
violated (or the Company or any of its Subsidiaries would lose any rights in
respect thereof) if such permits or licenses were subject to the Agent's Liens;
(ix) any goods (as defined in the Uniform Commercial Code) now or hereafter
located in Australia or Jamaica (but any Equipment and Inventory owned by the
Company or any of its Subsidiaries on the Initial Borrowing Date that is located
or used on the Initial Borrowing Date at a facility located in the United States
that is owned, leased, occupied or used by the Company or any of its
Subsidiaries as of the Initial Borrowing Date shall not be Excluded Assets) and
all Tolling Inventory and (x) more than 65% of the total equity interest in any
foreign entity not otherwise identified in this paragraph.

         "Executive Officers" means, with respect to any corporation, such
corporation's chairman, president, chief financial officer, treasurer, any vice
president, any attorney in the office of the Company's general counsel, and any
officer who performs a similar policy-making function for such corporation.

         "Existing Credit Agreement" means the Credit Agreement dated as of
February 15, 1994 among the Parent Guarantor, the Company, certain financial
institutions and Bank of America, N.A., as agent, as amended, supplemented or
otherwise modified prior to the Petition Date.

         "Existing Letters of Credit" means the letters of credit listed on
Schedule IX hereto.

         "Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal (for each day during such period) to

              (a) the weighted average of the rates on overnight federal
         funds transactions with members of the Federal Reserve System
         arranged by federal funds brokers, as published for such day (or, if
         such day is not a Business Day, for the next preceding Business Day)
         by the Federal Reserve Bank of New York; or

              (b) if such rate is not so published for any day which is a
         Business Day, the average of the quotations for such day on such
         transactions received by Bank of America from three federal funds
         brokers of recognized standing selected by it.

         "Fee Letter" means the letter dated February 12, 2002, among the Agent,
the Company and the Parent Guarantor.

         "Final Order" has the meaning specified in Section 7.4.4.

         "Financial Forecast" has the meaning specified in Section 7.2.

         "Financial Authorized Officer" means, with respect to any Obligor,
those of its Authorized Officers who occupy the offices of chief financial
officer, chief accounting officer, controller, assistant controller, treasurer,
or assistant treasurer.

         "First Day Orders" means those orders of the Bankruptcy Court, in form
and substance satisfactory to the Agent, which are entered in response or
relating to applications or motions made or filed by the Company and the Secured
Guarantors on the Petition Date.

         "Fiscal Quarter" means any quarter of a Fiscal Year.

         "Fiscal Year" means any period of twelve consecutive calendar months
ending on the last day of December; references to a Fiscal Year with a number
corresponding to any calendar year (e.g., the "2002 Fiscal Year") refer to the
Fiscal Year ending on the last day of December of such calendar year. The
current fiscal year of the Company will end on December 31, 2002.

         "Foreign Account Debtor" means an Account Debtor which (i) does not
maintain its chief executive office and principal place of business in the
United States or Canada (other than the Province of Newfoundland); or (ii) is
not organized under the laws of the United States or any state thereof or
Canada; or (iii) is the government of any foreign country or sovereign state, or
of any state, province, municipality, or other political subdivision thereof, or
of any department, agency, public corporation, or other instrumentality thereof.

         "F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.

         "Fundamental Loan Documents" means this Agreement, the Collateral
Documents and the Subsidiary Guaranty.

         "GAAP" means generally accepted accounting principles as set forth in
the opinions and pronouncements of the Securities and Exchange Commission and
the Accounting Principles Board of the American Institute of Certified Public
Accountants and the statements and pronouncements of the Financial Accounting
Standards Board and in such other statements and pronouncements by such other
Person as may be approved by a significant segment of the accounting profession
and concurred in by the independent certified public accountants certifying the
relevant audited financial statement.

         "Guarantors" means, collectively, the Secured Guarantors and the
Unsecured Guarantors.

         "Hazardous Material" means

              (a) any "hazardous substance", as defined by CERCLA;

              (b) any "hazardous waste", as defined by the Resource
         Conservation and Recovery Act, as amended;

              (c) any petroleum product; or

              (d) any pollutant or contaminant or hazardous, dangerous, or
         toxic chemical, material, or substance regulated under or within the
         meaning of any other Environmental Law.

         "Hedging Agreement" means (a) any interest rate swap, cap, or collar
agreement or similar arrangement entered into by any Person and any financial
institution to protect such Person against interest rate risk and (b) any
agreement or arrangement (other than a Currency Hedge Agreement constituting a
Bank Product) entered into by any Person and any financial institution to
protect such Person against fluctuations in currency exchange rates.

         "Hedging Obligations" means, with respect to any Person, all
liabilities of such Person under any Hedging Agreement or other interest rate or
currency swap agreements, interest rate or currency cap agreements, and interest
rate or currency collar agreements, and all other agreements or arrangements
designed to protect such Person against interest rate risk or fluctuations in
currency exchange rates, which liabilities and obligations, to the extent
arising from a Hedging Agreement not constituting a Bank Product, are not
secured by the Collateral.

         "herein", "hereof", "hereto", "hereunder", and similar terms contained
in this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document, as the case may be, as a whole and not to any particular
Section, paragraph, or provision of this Agreement or such other Loan Document.

         "Impermissible Qualification" means, with respect to the opinion or
certification of any independent public accountant as to any financial statement
of any Obligor, any qualification, emphasis point, or exception to such opinion
or certification

              (a) which relates to the limited scope of examination of
         matters relevant to such financial statement; or

              (b) which relates to the treatment or classification of any
         item in such financial statement and which, as a condition to its
         removal, would require an adjustment to such item the effect of
         which would be to cause such Obligor to be in default of any of its
         obligations under Section 9.2.4 or 9.2.7.

         "including" means including without limiting the generality of any
description preceding such term, and, for purposes of this Agreement and each
other Loan Document, the parties hereto agree that the rule of ejusdem generis
shall not be applicable to limit a general statement which is followed by or
referable to an enumeration of specific matters to matters similar to the
matters specifically mentioned.

         "Indebtedness" means, with respect to any Person, without duplication:

              (a) all obligations of such Person in respect of principal for
         borrowed money, all obligations of such Person in respect of
         principal (including the principal amount of any obligation incurred
         in lieu of the cash payment of interest) evidenced by bonds,
         debentures, notes, or other similar instruments and, except with
         respect to Indebtedness incurred prior to the Petition Date, all
         obligations of such Person in respect of interest on borrowed money
         or obligations evidenced by bonds, debentures, notes, or other
         similar instruments to the extent accrued and unpaid for a period
         exceeding seven months;

              (b) all obligations, contingent or otherwise, relative to the
         face or stated amount (as reduced from time to time) of all letters
         of credit (including the Letters of Credit), whether or not drawn,
         and bankers' acceptances issued and outstanding for the account of
         such Person;

              (c) all obligations of such Person as lessee under leases
         which have been or should be, in accordance with GAAP, recorded as
         Capitalized Lease Liabilities;

              (d) net liabilities of such Person in respect of Hedging
         Obligations and Currency Hedge Obligations which, in accordance with
         GAAP, would be included as liabilities on the liability side of the
         balance sheet of such Person as of the date at which Indebtedness is
         to be determined;

              (e) all obligations of such Person to pay the deferred
         purchase price of Property (except trade accounts payable and other
         current liabilities arising in the ordinary course of business);

              (f) all obligations listed in clauses (a) through (e) secured
         by a Lien on Property owned or being purchased by such Person
         (including Indebtedness arising under conditional sales or other
         title retention agreements), whether or not such Indebtedness shall
         have been assumed by such Person or is limited in recourse;

              (g) any Redeemable Stock issued by such Person;

              (h) all Contingent Liabilities of such Person in respect of
         any Indebtedness of any other Person; and

              (i) all advance payments to such Person of more than
         $5,000,000 in the aggregate from any single customer of such Person
         relating to the delivery of goods or the performance of services by
         such Person (other than advance payments to the extent held in
         segregated accounts), but only to the extent that such payments
         originally were received more than six months before the date on
         which such Person was required to deliver such goods or perform such
         services, and which have not yet been earned by such delivery or
         performance;

provided, however, the obligations of any Person arising from the honoring by a
bank or other financial institution of a check, draft, or similar Instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business shall not constitute
Indebtedness; provided that such obligations are extinguished within two
Business Days of their incurrence (or, in the case of foreign overdrafts, within
five Business Days of their incurrence) unless covered by an overdraft credit
line.

         "Indemnified Liability" and "Indemnified Liabilities" are defined in
Section 12.4.

         "Indemnified Parties" is defined in Section 12.4.

         "Indemnified Persons" is defined in clause (b) of Section 11.1.

         "Initial Borrowing Date" means the date on which the initial Credit
Extensions are made.

         "Instrument" means any contract, agreement, indenture, mortgage,
document, or writing (whether by formal agreement, letter or otherwise) under
which any obligation is evidenced, assumed, or undertaken, or any Lien (or right
or interest therein) is granted or perfected.

         "Intercompany Demand Note" means an intercompany demand revolving note,
in form and substance reasonably satisfactory to Agent, in each case, endorsed,
pledged, and delivered by the Person in whose favor such promissory note was
written to the Agent, on behalf of the Secured Lenders, as each such promissory
note may be amended, endorsed, or otherwise modified from time to time in
accordance with the provisions hereof, and also means any other promissory note
accepted from time to time in substitution therefor or renewal thereof, in
accordance with the provisions hereof.

         "Interest Period" means, with respect to any LIBO Rate Loan, the period
beginning on (and including) the date on which such LIBO Rate Loan is made or
continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.3 or
3.4.2 and ending on (but excluding, for purposes of determining accrued
interest) the day which numerically corresponds to such date one, two, three or
six months thereafter (or, if such month has no numerically corresponding day,
on the last Business Day of such month), as the Company may select in its
relevant notice pursuant to Section 2.3 or 3.4.2; provided, however, that

              (a) no more than seven different Interest Periods may be in
         effect at one time with respect to all Revolving Loans;

              (b) if such Interest Period would otherwise end on a day which
         is not a Business Day, such Interest Period shall end on the next
         following Business Day (unless such next following Business Day is
         the first Business Day of a calendar month, in which case such
         Interest Period shall end on the Business Day next preceding such
         numerically corresponding day); and

              (c) no Interest Period may end later than the Stated Maturity
         Date.

         "Interim Order" has the meaning specified in Section 7.1.10(c).

         "Inventory" means goods (whether consisting of whole goods, spare parts
or components), merchandise, and other personal property, wherever located, to
be furnished under any contract of service or held for sale or lease, all raw
materials, work-in-process, finished goods, returned goods, and materials and
supplies of any kind, nature or description which are or might be used or
consumed in the Company's, Kaiser Bellwood's or KAII's business or used in
connection with the manufacture, packing, shipping, advertising, selling, or
finishing of such goods, merchandise, and such other personal property, and all
documents of title or other documents representing them.

         "Investment" means, with respect to any Person,

              (a) any loan or advance made by such Person to any other
         Person (excluding commission, travel, relocation, and similar
         advances) and any purchase or other acquisition made by such Person
         of any bond, debenture, note, or similar instrument of any other
         Person; and

              (b) any ownership or similar interest held by such Person in
         any other Person.

The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if made by
the transfer or exchange of Property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such Property.

         "Issuer Bank" means any Affiliate, office, branch, or agency of Bank of
America, or any other Lender, which has agreed to issue and has issued one or
more Letters of Credit at the request (such request to be made with the consent
of the Company, which consent shall not be unreasonably delayed or withheld) of
the Agent.

         "Issuer Party" and "Issuer Parties" are defined in Section 5.10.

         "Joint Venture Affiliate" means QAL, KJBC, Anglesey, Alwis (but only at
such time as Alwis is not a Subsidiary of the Company and is an Affiliate of the
Company), and any other Person (a) which is not a Subsidiary of the Company, (b)
in which the Company or its Subsidiaries own an equity interest of more than 5%
(and in which no Restricted Affiliate has an equity interest, other than through
a direct or indirect ownership interest in the Company), and (c) which supplies
or processes bauxite, alumina, or aluminum to or for the Company or any of its
Subsidiaries or sells to third parties bauxite, alumina, aluminum or aluminum
products purchased from the Company or any of its Subsidiaries.

         "KAAC" means Kaiser Alumina Australia Corporation, a Delaware
corporation, as debtor and debtor-in-possession under Chapter 11 of the
Bankruptcy Code.

         "KACI" means Kaiser Aluminum & Chemical Investment, Inc., a
Delaware corporation, as debtor and debtor-in-possession under Chapter 11 of the
Bankruptcy Code.

         "KAII" means Kaiser Aluminium International, Inc., a Delaware
corporation, as debtor and debtor-in-possession under Chapter 11 of the
Bankruptcy Code.

         "KAP" means Kaiser Aluminum Properties, Inc., a Delaware corporation,
as debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code.

         "KATSI" means Kaiser Aluminum Technical Services, Inc., a California
corporation, as debtor and debtor-in-possession under Chapter 11 of the
Bankruptcy Code.

         "KBC" means Kaiser Bauxite Company, a Nevada corporation.

         "KEC" means Kaiser Export Company, a Delaware corporation.

         "KFC" means Kaiser Finance Corporation, a Delaware corporation, as
debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code.

         "KJBC" means Kaiser Jamaica Bauxite Company, a Jamaica partnership.

         "KJC" means Kaiser Jamaica Corporation, a Delaware corporation.

         "KMH" means Kaiser Micromill Holdings, LLC, a limited liability company
organized under the laws of Delaware, as debtor and debtor-in-possession under
Chapter 11 of the Bankruptcy Code.

         "KSM" means Kaiser Sierra Micromills, LLC, a limited liability company
organized under the laws of Delaware, as debtor and debtor-in-possession under
Chapter 11 of the Bankruptcy Code.

         "KT Note means the promissory note dated December 21, 1989, as amended
by Amendment dated as of July 1, 1993, executed by the Parent Guarantor and
delivered to the Company, a copy of which has been delivered to the Agent and
each Lender prior to the date hereof, and endorsed, delivered, and pledged to
the Agent, on behalf of the Secured Lenders, as such promissory note may be
amended, endorsed, or otherwise modified from time to time in accordance with
the provisions hereof, and also means any other promissory note accepted from
time to time in substitution therefor or renewal thereof, in accordance with the
provisions hereof.

         "Kaiser Bellwood" means Kaiser Bellwood Corporation, a corporation
organized under the laws of Delaware, as debtor and debtor-in-possession under
Chapter 11 of the Bankruptcy Code.

         "Kaiser Canada" means Kaiser Aluminum & Chemical of Canada Limited,
an Ontario corporation.

         "L/C Collateral Account" is defined in Section 5.8.1.

         "Lenders" is defined in the preamble.

         "Letter of Credit" is defined in Section 5.1 and includes the Existing
Letters of Credit.

         "Letter of Credit Outstandings" means, at any time, an amount equal to
the sum of

              (a) the then aggregate amount which is undrawn and available
         under all issued and outstanding Letters of Credit

plus

              (b) the then aggregate amount of all unpaid and outstanding
         Reimbursement Obligations with respect to issued and outstanding
         Letters of Credit.

         "LIBO Rate" means, relative to any Borrowing of a LIBO Rate Loan, the
rate per annum appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two Business Days prior to the first day of the Interest
Period for such LIBO Rate Loan for a term comparable to such Interest Period. If
for any reason such rate is not available, the LIBO Rate shall be, for any
Interest Period, the rate per annum appearing on Reuters Screen LIBO Page as the
London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period; provided, however, if more
than one rate is specified on Reuters Screen LIBO Page, the applicable rate
shall be the arithmetic mean of all such rates. If for any reason none of the
foregoing rates is available, the LIBO Rate shall be, for any Interest Period,
the rate per annum determined by Agent as the rate of interest at which dollar
deposits in the approximate amount of the LIBO Rate Loan comprising such
Borrowing would be offered by the Bank of America's London Branch to major banks
in the offshore dollar market at their request at or about 11:00 a.m. (London
time) two Business Days prior to the first day of such Interest Period for a
term comparable to such Interest Period; and

         "LIBO Rate Loan" means all or any portion of a Loan bearing interest,
at all times during an Interest Period applicable to such Loan or portion
thereof, at a fixed rate determined by reference to the LIBO Rate (Reserve
Adjusted).

         "LIBO Rate (Reserve Adjusted)" means, relative to any Interest Period,
a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
determined pursuant to the following formula:

               LIBO Rate    =                  LIBO Rate
                                     -------------------------------
          (Reserve Adjusted)         1.00 - LIBOR Reserve Percentage

         The LIBO Rate (Reserve Adjusted) for each LIBO Rate Loan to which such
Interest Period applies will be determined by the Agent.

         "LIBOR Office" means, with respect to any Lender, the office, if any,
of such Lender designated as such below its signature hereto, or designated in
the Assignee Agreement to be Bound pursuant to which such Lender became a party
hereto, or such other office of a Lender as designated from time to time by
written notice from such Lender to the Company and the Agent, whether or not
outside the United States, which shall be making or maintaining LIBO Rate Loans
of such Lender hereunder.

         "LIBOR Reserve Percentage" means, relative to any Interest Period, a
percentage (expressed as a decimal) equal to the daily average during such
Interest Period of the percentages in effect on each day of such Interest
Period, as prescribed by the F.R.S. Board, for determining the maximum aggregate
reserve requirements (including any emergency, supplemental, or other marginal
reserve requirement) applicable to "Eurocurrency Liabilities" pursuant to
Regulation D or any other applicable regulation issued from time to time by the
F.R.S. Board which prescribes reserve requirements applicable to "Eurocurrency
Liabilities" as currently defined in Regulation D having a term approximately
equal or comparable to such Interest Period.

         "Lien" means any security interest, mortgage, pledge, hypothecation,
assignment for security purposes, deposit arrangement for security purposes,
encumbrance, lien (statutory or other), or other similar arrangement of any kind
or nature.

         "Loan" means, as the context may require, a Revolving Loan of any type,
or a Swingline Loan.

         "Loan Document" means this Agreement, the Interim Order, the Final
Order, all Letters of Credit, each Credit Request, the Subsidiary Guaranty, the
Collateral Documents, the Fee Letter, and each other agreement, document, or
Instrument executed and delivered or to be executed and delivered by the Parent
Guarantor, the Company, or any Subsidiary of the Parent Guarantor or the Company
in connection with this Agreement, the Interim Order or the Final Order, as any
and all of the foregoing may be amended, supplemented, restated, or otherwise
modified from time to time in accordance with the provisions hereof or thereof,
but excluding, however, the Intercompany Demand Notes and the KT Note.

         "Materially Adverse Effect" means, relative to any occurrence of
whatever nature (including any adverse determination in any litigation,
arbitration, or governmental investigation or proceeding), a materially adverse
effect on:

              (a) the assets of or the then-existing or projected business,
         revenues, financial condition, or operations of the Parent
         Guarantor, the Company, any other Obligor which is a Significant
         Subsidiary, any Joint Venture Affiliate (other than KJBC), ALPART,
         or VALCO; or

              (b) the ability of the Parent Guarantor, the Company, or any
         other Obligor which is a Significant Subsidiary to perform any of
         its payment or other material obligations under this Agreement or
         any other Loan Document to which it is a party.

         "MAXXAM" means MAXXAM Inc., a Delaware corporation (formerly known as
MCO Holdings, Inc.).

         "Maximum Letter of Credit Amount' means $125,000,000.

         "Mining JV" means the Mining Joint Venture between ALPART, Jamalco and
certain other parties.

         "Mortgage" means any deed of trust or mortgage executed and delivered
by any Obligor pursuant to Section 7.5, each in form and substance reasonably
satisfactory to the Agent, as amended, supplemented, restated, or otherwise
modified from time to time in accordance with the provisions hereof or thereof.

         "Net Amount of Eligible Accounts" means the gross amount of Eligible
Accounts less the sum of (a) all returns, discounts, claims, credits, and
allowances of any nature at any time issued in respect thereof, (b) all
unapplied advance payments or deposits in respect thereof, and (c) all credits
relating to Accounts of Century Aluminum with respect to which more than 90 days
have elapsed since the date of the original issuance of the credit memo therefor
and all credits relating to Accounts of all other Account Debtors with respect
to which more than 65 days have elapsed since the date of the original issuance
of the credit memo therefor.

         "Net Disposition Proceeds" means, with respect to any Asset
Disposition, the excess of

              (a) the sum of

                      (i) the gross cash proceeds received by the Parent
                  Guarantor, the Company or such Subsidiary from such
                  disposition

plus

                      immediately upon receipt thereof by the Parent
                  Guarantor, the Company or such Subsidiary, the gross cash
                  proceeds in respect of principal from or in respect of any
                  promissory note or deferred payment obligations or other
                  security taken in connection with such disposition (including
                  as a result of any sale or other disposition of any such
                  note, obligations, or security, or as a result of any
                  financing with respect thereto)

minus

              (b) the sum of

                      (i) all legal, consulting, brokerage, investment banking,
                  and accounting fees and disbursements and all governmental
                  fees incurred (or reasonably expected to be incurred) in
                  connection with such sale that, in any case, except for
                  payments for legal fees and expenses to a law firm of which an
                  Affiliate of the Company is a member, are not payable to
                  Affiliates of the Company

plus

                      (ii) all taxes actually paid or to be paid in connection
                  with such sale

plus

                      (iii) to the extent the proceeds described in clause
                  (a) are applied (or to be applied with reasonable promptness)
                  in payment thereof, all Indebtedness secured, directly or
                  indirectly (i.e., such disposition is permitted by the terms
                  of the Instruments evidencing or applicable to such
                  Indebtedness, or by the terms of a consent granted thereunder,
                  only on the condition that the proceeds of such disposition be
                  applied to such Indebtedness), by such Property.

         "New Senior Debt" means Indebtedness of the Company or any of its
Subsidiaries under the New Senior Notes, the New Senior Indenture, or any
guaranty of such Indebtedness.

         "New Senior Debt Instruments" means the New Senior Notes, the New
Senior Indenture, and all other Instruments and agreements executed and
delivered by the Company or any of its Subsidiaries in connection therewith.

         "New Senior Indenture" means the indenture dated October 23, 1996,
between the Company, the Subsidiaries of the Company party thereto as
guarantors, and the trustee named therein, pursuant to which the New Senior
Notes were issued, as supplemented prior to the date hereof and as the same may
be further amended, supplemented, restated, or otherwise modified from time to
time in accordance with the terms of such indenture and this Agreement.

         "New Senior Notes" means the 10-7/8% Senior Notes due October 2006 in
the principal amount of $175,000,000, issued by the Company pursuant to the New
Senior Indenture, as supplemented prior to the date hereof and as the same may
be further amended supplemented, restated, or otherwise modified from time to
time in accordance with the terms of the New Senior Indenture and this Agreement
and all other promissory notes accepted from time to time in substitution
therefor or renewal thereof in accordance with the terms of the New Senior
Indenture and this Agreement.

         "Nonrecourse Indebtedness" means, with respect to any Person,
Indebtedness that is nonrecourse to the credit of such Person.

         "Non-United States Person" means a Person who is not (a) a citizen or
resident of the United States, (b) a corporation, partnership, or other entity
created or organized under the laws of the United States, or (c) an estate or
trust the income of which is subject to United States federal income taxation
regardless of its source.

         "Obligations" means (a) all obligations (monetary, hedging,
indemnification or otherwise) of the Company and each other Obligor arising
under or in connection with this Agreement, the Letters of Credit (including the
Existing Letters of Credit), and each other Loan Document, and (b) all Bank
Product Obligations.

         "Obligor" means the Company and each of the Guarantors.

         "101 Account" is defined in the Concentration Bank Agreement.

         "OLV In-Place Value" means the appraised value of the Eligible Fixed
Assets reduced by such an Environmental Compliance Reserve as the Administrative
Agent, after consultation with the Company, deems appropriate in its
commercially reasonable discretion.

         "Organic Document" means, with respect to any Obligor, its articles or
certificate of incorporation and its bylaws (in the case of an Obligor that is a
corporation), its articles of organization or certificate of formation and its
regulations or limited liability company agreement (in the case of an Obligor
that is a limited liability company), and all shareholder agreements, voting
trusts, and similar arrangements applicable to any of its authorized shares of
capital stock (in the case of an Obligor that is a corporation) or other equity
interests (in the case of an Obligor that is a limited liability company).

         "Oxnard" means Oxnard Forge Die Company, Inc., a California
corporation, as debtor and debtor-in-possession under Chapter 11 of the
Bankruptcy Code

         "Parent Guarantor" is defined in the preamble.

         "Parent Guaranty" is defined in Section 6.1.

         "Participant" is defined in Section 12.11.2.

         "PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.

         "Pension Plan" means a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in section 4001(a)(3) of ERISA), of which the
Company or any corporation, trade, or business that is, along with the Company,
a member of a Controlled Group, is a contributing sponsor, as such term is
defined in section 4001(a)(13) of ERISA, or to which any Controlled Group member
has a reasonable possibility of any liability by reason of having been a
substantial employer within the meaning of section 4063 of ERISA at any time
during the preceding five years, or by reason of being deemed to be a
contributing sponsor under section 4069 of ERISA.

         "Percentage" means, with respect to any Lender, the percentage set
forth opposite its name on the signature pages of this Agreement, or set forth
in the Assignee Agreement to be Bound pursuant to which such Lender became a
party hereto, as such percentage may be adjusted from time to time pursuant to
Assignee Agreement(s) to be Bound executed by such Lender and its Assignee
Lender(s) and delivered pursuant to Section 12.11.1.

         "Person" means any natural person, corporation, firm, association,
government, governmental agency, or any other entity, whether acting in an
individual, fiduciary, or other capacity.

         "Petition Date" means the date on which the Bankruptcy Cases were filed
with the Bankruptcy Court.

         "Plan" means any Pension Plan or Welfare Plan.

         "Preferred Stock (USWA)" means shares of the Company's Cumulative (1985
Series A) Preference Stock and shares of the Company's Cumulative (1985 Series
B) Preference Stock which have been or may in the future be issued in connection
with the Kaiser Aluminum USWA Employee Stock Ownership Plan or the Kaiser
Aluminum Salaried Employee Stock Ownership Plan.

         "Proceeds" means all products and proceeds (as defined in the Uniform
Commercial Code) of any Collateral, and all proceeds of such proceeds and
products, including all cash and credit balances, all payments under any
indemnity, warranty, or guaranty payable with respect to any Collateral, all
awards for taking by eminent domain, all proceeds of fire or other insurance,
and all money and other Property obtained as a result of any claims against
third parties or any legal action or proceeding with respect to any Collateral.

         "Product Swap" means an agreement by the Company, Kaiser Bellwood or
KAII to deliver bauxite, alumina or aluminum products to or on behalf of an
Account Debtor in exchange for (i) an agreement by such Account Debtor to
deliver like or related products to or on behalf of the Company, Kaiser Bellwood
or KAII, as the case may be, and (ii) the payment of cash in the ordinary course
of business on ordinary trade terms.

         "Progress Billing" means any invoice for goods sold or leased or
services rendered under a contract or agreement pursuant to which the Account
Debtor's obligation to pay such invoice is conditioned upon the completion of
any further performance by the Company, Kaiser Bellwood or KAII under the
contract or agreement.

         "Property" means any interest in any kind of property or asset, whether
real, personal or mixed or tangible or intangible.

         "QAL" means Queensland Alumina Limited, a Queensland, Australia
corporation.

         "Real Estate" means, with respect to any Person, all of such Person's
now or hereafter owned or leased estates in real property, including, without
limitation, all fees, leaseholds and future interests, together with all of such
Person's now or hereafter owned or leased interests in the improvements thereon,
the fixtures attached thereto and the easements appurtenant thereto.

         "Redeemable Stock" means any equity security or option or warrant
related thereto that by its terms or otherwise is required to be purchased or
redeemed, or is redeemable at the option of the holder thereof, in either case
at any time prior to the Stated Maturity Date.

         "Reference Rate" means the higher of (a) the Federal Funds Rate plus
one-half of one percent (1/2%) and (b) the rate of interest (the "Bank of
America Rate") publicly announced from time to time by Bank of America in
Charlotte, North Carolina, as its reference rate. The Bank of America Rate is a
rate set by Bank of America based upon various factors including Bank of
America's cost and desired return, general economic conditions, and other
factors, and is used as a reference point for pricing some loans, which loans
may be priced at, above, or below the Bank of America Rate. Any change in the
Bank of America Rate shall take effect at the opening of business on the day
specified in the public announcement of such change.

         "Reference Rate Loan" means all or any portion of a Loan bearing
interest at a fluctuating rate determined by reference to the Reference Rate.

         "Reimbursement Obligation" is defined in Section 5.6.

         "Release" means a "release", as such term is defined in CERCLA.

         "Required Lenders" means, at any time, Lenders having at least 67% of
the Revolving Commitments or if the Revolving Commitments have terminated, at
least 67% of the Revolving Credit Outstandings.

         "Reserves" means, collectively (without duplication) the Availability
Reserve, the Bank Product Reserve, any Environmental Compliance Reserve (except
to the extent that such Reserve reduces the OLV In-Place Value of Eligible Fixed
Assets) and all other reserves deducted in calculation of the Borrowing Base,
including any reserves for sales, excise or similar taxes in respect of Eligible
Accounts and any reserves for rental expenses, processing fees or other expenses
relating to Eligible Inventory located at premises not owned by the Company,
Kaiser Bellwood or KAII, which the Agent, after consultation with the Company,
in its commercially reasonable discretion deems necessary or desirable to
maintain with respect to the Company's account, including any amounts which the
Agent may be obligated to pay in the future for the account of the Company.

         "Restated Certificate of Incorporation" means the restated certificate
of incorporation of the Company dated July 25, 1989.

         "Restricted Affiliate" means the Parent Guarantor, MAXXAM, and any
Affiliate of either thereof (in each case other than the Company, its
Subsidiaries which are not Restricted Subsidiaries, any Joint Venture Affiliate,
and any Subsidiary of a Joint Venture Affiliate in which neither the Parent
Guarantor, MAXXAM, nor any Affiliate of either thereof (other than the Company,
its Subsidiaries which are not Restricted Subsidiaries, or any Joint Venture
Affiliate) has any equity interest other than through a direct or indirect
ownership interest in the Company).

         "Restricted Subsidiary" means any Subsidiary of the Company in which a
Restricted Affiliate has an interest, other than through such Restricted
Affiliate's direct or indirect ownership interest in the Company.

         "Revolving Commitment" is defined in clause (b) of Section 2.1.1.

         "Revolving Commitment Amount" is defined in clause (b) of Section
2.1.1.

         "Revolving Commitment Availability" means (without duplication), at any time, the excess of

              (a) (i) the lesser of (x) the Revolving Commitment Amount at
         such time and (y) the Borrowing Base as in effect at such time,
         minus (ii) the amount of the Carve-Out Reserve.

over

              (b) the Revolving Credit Outstandings at such time.

         "Revolving Commitment Termination Date" means the earliest of

              (a) February 22, 2002 (unless the Initial Borrowing Date shall
         have occurred before the close of business, San Francisco time, on
         such date);

              (b) the Stated Maturity Date;

              (c) the date that is 45 days after the Petition Date if the
         Final Order has not been entered on or prior to such date;

              (d) the substantial consummation (as defined in Section 1101
         of the Bankruptcy Code) of a Chapter 11 Plan of the Company and the
         Secured Guarantors that is confirmed pursuant to a final,
         non-appealable order entered by the Bankruptcy Court, but in no
         event shall such date be later than the effective date of such
         Chapter 11 Plan;

              (e) the date of the voluntary termination of the Revolving
         Commitments by the Company; and

              (f) the termination of the Revolving Commitments in accordance
         with the terms of the Loan Documents.

Upon the occurrence of any event described in clause (a), (b), (c), (d), (e) or
(f), the Revolving Commitment of each Lender and the Swingline Commitment of the
Agent shall terminate automatically and without any further action.

         "Revolving Credit Outstandings" means, at any time, the sum of (a) the
aggregate outstanding principal amount of all Revolving Loans at such time, (b)
the aggregate outstanding principal amount of all Swingline Loans at such time,
and (c) the Letter of Credit Outstandings at such time.

         "Revolving L/C Request" means a request and certificate, duly executed
by an Authorized Officer of the Company, in substantially the form of Exhibit B
attached hereto, which request shall include a duly completed application for
the issuance or extension of a standby or commercial letter of credit in the
form specified from time to time by the proposed Issuer Bank of a Letter of
Credit, as such application may be amended, supplemented, restated, or otherwise
modified from time to time. Each Revolving L/C Request shall specify, among
other things, the date on which the proposed Letter of Credit is to be issued
and whether such Letter of Credit shall be transferable in whole or in part. All
Revolving L/C Requests and all documents submitted by the Company in support of
Revolving L/C Requests shall be in form and substance satisfactory to the
relevant Issuer Bank.

         "Revolving Loans" is defined in clause (a)(i) of Section 2.1.1.

         "Security Agreement" means the Post-Petition Pledge and Security
Agreement dated as of the date hereof, by and among the Company, the Secured
Guarantors and the Agent.

         "Secured Guarantor" means each of Kaiser Bellwood, KAII, Parent
Guarantor, Akron, KAAC, KACI, KAP, KATSI, KFC, KMH, KSM, Oxnard, Texas Holdings
and Texas Sierra, and "Secured Guarantors" means all of them, collectively.

         "Secured Lenders" means the Agent, each Lender, the Issuer Bank and
each provider under a Bank Product, together with any successors and assigns
thereto.

         "Security Interest" means, collectively, the Liens granted to the
Agent, on behalf of the Secured Lenders, in the Collateral pursuant to the Loan
Documents.

         "Senior Debt" means Indebtedness of the Company or any of its
Subsidiaries under the Senior Notes, the Senior Indenture, or any guaranty of
such Indebtedness.

         "Senior Debt Instruments" means the Senior Notes, the Senior Indenture,
and all other Instruments and agreements executed and delivered by the Company
or any of its Subsidiaries in connection therewith.

         "Senior Indenture" means the indenture dated as of February 17, 1994
between the Company, the Subsidiaries of the Company party thereto as
guarantors, and First Trust National Association, as trustee, pursuant to which
the Senior Notes were issued, as supplemented prior to the date hereof and as
the same may be further amended, supplemented, restated, or otherwise modified
from time to time in accordance with the terms of such indenture and this
Agreement.

         "Senior Notes" means the 9-7/8% Senior Notes due 2002 in a principal
amount not exceeding $225,000,000 issued by the Company pursuant to the Senior
Indenture, as amended, supplemented, restated or otherwise modified from time to
time in accordance with the terms of the Senior Indenture and this Agreement and
all other promissory notes accepted from time to time in substitution therefor
or renewal thereof in accordance with the terms of the Senior Indenture and this
Agreement.

         "Significant Subsidiary" means each Subsidiary of the Company that

              (a) is designated with an asterisk in Item 2 ("Existing
         Subsidiaries") of the Disclosure Schedule;

              (b) accounted for at least 5% of consolidated revenues of the
         Company and its Subsidiaries from sales to third parties for the
         four Fiscal Quarters of the Company ending on the last day of the
         last Fiscal Quarter of the Company immediately preceding the date as
         of which any such determination is made; or

              (c) has assets (other than assets which are eliminated in
         consolidation) which represent at least 5% of the consolidated
         assets of the Company and its Subsidiaries as of the last day of the
         last Fiscal Quarter of the Company immediately preceding the date as
         of which any such determination is made,

all of which, with respect to clauses (b) and (c), shall be as included in the
consolidated financial statements of the Company for the period, or as of the
date, in question.

         "Stated Amount" of each Letter of Credit means the "stated amount" or
"face amount" (or other similar term) of such Letter of Credit, as defined
therein.

         "Stated Expiry Date" is defined in clause (b)(iii) of Section 5.1.

         "Stated Maturity Date" means February 13, 2004.

         "Subordinated Debt" means Indebtedness of the Company or any of its
Subsidiaries under the Subordinated Notes, the Subordinated Indenture, or any
guaranty of such Indebtedness.

         "Subordinated Debt Instruments" means the Subordinated Notes, the
Subordinated Indenture, and all other Instruments and agreements executed and
delivered by the Company or any of its Subsidiaries in connection therewith.

         "Subordinated Indenture" means the indenture dated as of February 1,
1993 between the Company, and the Subsidiaries of the Company parties thereto as
Subsidiary Guarantors, and The First National Bank of Boston, as trustee,
pursuant to which the Subordinated Notes were issued, as supplemented prior to
the date hereof, and as the same may be further amended, supplemented, restated,
or otherwise modified from time to time in accordance with the terms of such
indenture and this Agreement.

         "Subordinated Notes" means the 12-3/4% Senior Subordinated Notes due
2003 in a principal amount not exceeding $400 million issued by the Company
pursuant to the Subordinated Indenture, as amended, supplemented, restated, or
otherwise modified from time to time in accordance with the terms of the
Subordinated Indenture and this Agreement and all other promissory notes
accepted from time to time in substitution therefor or renewal thereof in
accordance with the terms of the Subordinated Indenture and this Agreement.

         "Subsidiary" means, with respect to any Person, any corporation of
which more than 50% of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency), or any other entity of which more than 50% of the equity
securities or other ownership interest, is or are at the time directly or
indirectly owned by such Person, by such Person and one or more other
Subsidiaries of such Person, or by one or more other Subsidiaries of such
Person. Any determination of whether a Subsidiary is directly or indirectly
"wholly-owned" by any Person shall be made after disregarding (a) any shares of
such Subsidiary held by the officers, employees, or directors of such Subsidiary
and (b) any shares of such Subsidiary held by Restricted Affiliates.

         "Subsidiary Guaranty" means the guaranty executed and delivered by any
Subsidiary of the Company on the Effective Date or pursuant to Section 9.1.10,
as amended, supplemented, restated, or otherwise modified from time to time in
accordance with the provisions hereof or thereof.

         "Superpriority Claims" is defined in Section 2.5.

         "Supporting Letter of Credit" has the meaning set forth in the Uniform
Commercial Code.

         "Sweep Account" means an account or other arrangement maintained with
any Lender into which funds on deposit in the Concentration Account or the 101
Account are automatically swept at the end of each business day, invested
overnight and automatically returned to the Concentration Account or 101
Account, as the case may be, on the next business day.

         "Swingline Commitment" is defined in Section 2.1.2.

         "Swingline Loans" is defined in Section 2.1.2.

         "Tax Allocation Agreement" means the Tax Allocation Agreement dated
December 21, 1989, as amended prior to the date hereof between the Company and
MAXXAM, a copy of which has been delivered to the Agent prior to the date
hereof, as further amended from time to time with the prior written consent of
the Agent.

         "Taxes" is defined in clause (a) of Section 4.6.

         "Texas Holdings" means Kaiser Texas Micromill Holdings, LLC, a limited
liability company organized under the laws of Texas, as debtor and
debtor-in-possession under Chapter 11 of the Bankruptcy Code.

         "Texas Sierra" means Kaiser Texas Sierra Micromills, LLC, a limited
liability company organized under the laws of Texas, as debtor and
debtor-in-possession under Chapter 11 of the Bankruptcy Code.

         "Tolling Inventory" means raw materials, work-in-process or other goods
delivered to the Company or Kaiser Bellwood by a third person pursuant to a
bailment arrangement with the Company or Kaiser Bellwood under which such
Inventory is to be processed, improved, or otherwise altered by the Company or
Kaiser Bellwood.

         "Transfer Agreement" means the Transfer Agreement dated as of December
21, 1989, between the Parent Guarantor and the Company, a copy of which has been
delivered to the Agent prior to the date hereof, as amended, supplemented,
restated, or otherwise modified from time to time with the prior written consent
of the Agent.

         "Trigger Event" has the meaning specified in Section 9.2.4(b).

         "Trochus" means Trochus Insurance Company, Ltd., a Bermuda entity.

         "type" means, relative to any Revolving Loan, the portion thereof, if
any, being maintained as a Reference Rate Loan or a LIBO Rate Loan.

         "Uniform Commercial Code" means the Uniform Commercial Code (or any
successor statute) of the State of New York or, to the extent relevant to the
perfection or enforcement of security interests, the Uniform Commercial Code (or
any successor statute) of any other state, the laws of which are required by
Sections 9-301, 9-304, 9-305 or 9-306 to be applied in connection with the issue
of perfection, priority or enforcement of security interests.

         "United States" or "U.S." means the United States of America, its fifty
States, and the District of Columbia.

         "Unsecured Guarantor" means each of AJI and KJC and "Unsecured
Guarantors" means both of them, collectively.

         "VALCO" means Volta Aluminium Company Limited, a Ghanaian corporation.

         "Welfare Plan" means a "welfare plan", as such term is defined in
section 3(1) of ERISA.

         SECTION 1.2. USE OF DEFINED TERMS. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and in
each Credit Request, Continuation/Conversion Notice, Borrowing Base Certificate,
Compliance Certificate, Loan Document, notice, and other communication delivered
from time to time in connection with this Agreement or any other Loan Document.

         SECTION 1.3. CROSS-REFERENCES. Unless otherwise specified, references
in this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and, unless otherwise specified, references in any
Article, Section, or definition to any clause are references to such clause of
such Article, Section, or definition.

         SECTION 1.4. ACCOUNTING AND FINANCIAL DETERMINATIONS AND OTHER TERMS.
Unless otherwise specified, all accounting terms used herein or in any other
Loan Document shall be interpreted, all accounting determinations and
computations hereunder or thereunder shall be made, and all financial statements
required to be delivered hereunder or thereunder shall be prepared in accordance
with GAAP applied on a basis consistent with those used in the preparation of
the financial statements for the period ended December 31, 2001 to be furnished
to the Lenders under this Agreement; provided, however, that if there is any
change in GAAP subsequent to December 31, 2001, the Agent and the Company shall
each have the right to notify the other party that the Required Lenders or the
Company, as the case may be, wish to incorporate the effect of any such change
in GAAP on the operation of any covenant contained in Article IX or on the
Borrowing Base, or any other provision hereof. In the event that the party
receiving such notice agrees with such request to incorporate the effect of any
such change, thereafter the Company's compliance with such covenant, the
Borrowing Base, and all other calculations in respect of any other provision
hereof will be determined on the basis of GAAP including such change.

                                   ARTICLE II

                      COMMITMENTS AND BORROWING PROCEDURES

         SECTION 2.1. COMMITMENTS. On the terms and subject to the conditions of
this Agreement (including Article VII), each Lender, severally and for itself
alone, agrees to make Revolving Loans and other Credit Extensions, and Agent
agrees to make Swingline Loans, pursuant to the Commitments described in this
Section 2.1.

         SECTION 2.1.1. REVOLVING COMMITMENT.

         (a) From time to time on any Business Day occurring during the period
commencing on the Initial Borrowing Date, and continuing to (but not including)
the Revolving Commitment Termination Date, each Lender will

                      (i) make Loans (relative to such Lender, its
             "Revolving Loans") to the Company equal to such Lender's
             Percentage of the aggregate amount of Revolving Loans
             requested by the Company pursuant to Section 2.3(a) to be made
             on such Business Day, and

                      (ii) (A) in the case of any Issuer Bank, issue
             Letters of Credit for the account of the Company, for the
             benefit of the Company or any Subsidiary of the Company, (B)
             in the case of each other Lender, participate in such Letters
             of Credit, in each case in accordance with Article V.

         (b) The Revolving Credit Outstandings at any time shall not exceed (i)
the lesser of (x) $300,000,000 (such amount, as it may be reduced from time to
time pursuant to Section 2.2, being herein called the "Revolving Commitment
Amount") and (y) the Borrowing Base as then in effect, minus (ii) the amount of
the Carve-Out Reserve. The Commitment of each Lender to make Revolving Loans and
to issue or participate in Letters of Credit is herein referred to as its
"Revolving Commitment".

         (c) On the terms and subject to the conditions hereof, the Company may
from time to time (i) borrow, prepay, and reborrow Revolving Loans and (ii)
request the issuance of Letters of Credit, allow Letters of Credit to expire
undrawn or, if drawn upon, repay Reimbursement Obligations relative thereto and
request the issuance of new Letters of Credit.

         SECTION 2.1.2. SWINGLINE COMMITMENT.

         (a) From time to time on any Business Day occurring during the period
commencing on the Initial Borrowing Date, and continuing to (but not including)
the Revolving Commitment Termination Date, Agent will make a portion of the
Revolving Commitment available to the Company by making Loans ("Swingline
Loans") to the Company in an aggregate amount not to exceed $25,000,000
outstanding at any one time, notwithstanding the fact that such Borrowings may
exceed Agent's Revolving Commitment. The Commitment of Agent to make Swingline
Loans from time to time is herein referred to as its "Swingline Commitment."

         (b) Agent at any time in its sole and absolute discretion may require
each other Lender on one Business Day's notice to make a Revolving Loan in an
amount equal to such Lender's Percentage of the aggregate amount of Swingline
Loans outstanding on the date notice is given. In the event that Revolving Loans
are made by Lenders other than Agent under the immediately preceding sentence,
each such Lender shall deposit with the Agent same day funds in an amount equal
to such Lender's Percentage of such Revolving Loans. Such deposit will be made
to an account which the Agent shall specify from time to time by written notice
to the Lenders. The proceeds of such Revolving Loans shall be immediately
applied to repay the outstanding Swingline Loans and the Company authorizes the
Agent to charge its account with Bank of America (up to the amount available in
such account) in order to immediately pay Agent the amount of such Swingline
Loans to the extent amounts received from other Lenders are not sufficient to
repay in full the outstanding Swingline Loans. If any portion of any such amount
paid to Agent should be recovered by or on behalf of the Company from Agent in
bankruptcy, by assignment for the benefit of creditors, or otherwise, the loss
of the amount so recovered shall be ratably shared among all Lenders in the
manner contemplated by Section 4.8.

         (c) Each Lender's obligation to make the Revolving Loans referred to in
clause (b) shall be absolute and unconditional and shall not be affected by any
circumstance, including (i) any set-off, counterclaim, recoupment, defense or
other right which such Lender may have against Agent, the Company, or any other
Person for any reason whatsoever; (ii) the occurrence or continuance of a
Default; (iii) any adverse change in the condition (financial or otherwise) of
the Company; (iv) any breach of this Agreement by the Company or any other
Lender; or (v) any other circumstance, happening, or event whatsoever, whether
or not similar to any of the foregoing.

         (d) Interest on each Swingline Loan shall accrue to Agent from the date
of making such Swingline Loan to and including the earlier of (i) the date prior
to the day on which payment of such Swingline Loan is made by the Company or
(ii) the date prior to the day of receipt by the Agent from any Lender of its
Percentage of any Revolving Loans made to repay such Swingline Loan; provided
that, from and after the date of the making of any such Revolving Loans,
interest shall accrue on such Lender's Percentage of any such Revolving Loans
for the account of such Lender.

         SECTION 2.1.3. LENDERS NOT REQUIRED TO MAKE LOANS OR ISSUE LETTERS OF
CREDIT.

         (a) No Lender shall be required to make any Revolving Loan or issue (in
the case of the relevant Issuer Bank) any Letter of Credit and Agent shall not
be required to make any Swingline Loan, if, after giving effect thereto, the
Revolving Credit Outstandings would exceed (i) the lesser of (x) the Borrowing
Base as then in effect and (y) the Revolving Commitment Amount as then in
effect, minus (ii) the amount of the Carve-Out Reserve; and

         (b) the Issuer Bank shall not be required to issue any Letter of Credit
if, after giving effect thereto, the Letter of Credit Outstandings would exceed
the Maximum Letter of Credit Amount.

         SECTION 2.1.4. BORROWING BASE DETERMINATIONS.

         (a) Except during the continuance of an Event of Cash Dominion, the
Company will furnish to the Agent, on or before the 12th Business Day of each
month and on the date of the delivery of (i) any Borrowing Request requesting
the making of Revolving Loans, or (ii) any Revolving L/C Request, a Borrowing
Base Certificate setting forth the Company's calculation of the Borrowing Base
(with supporting calculations in reasonable detail) as of the last day of the
preceding calendar month (or, if the Credit Request described in clause (i) or
(ii) is delivered on or after the first day of any month but before the 12th
Business Day of such month (or, if earlier, the date the Borrowing Base
Certificate required to be delivered during such month is actually delivered),
as of the last day of the next preceding calendar month) and certifying

                  (A) that the information contained in such Borrowing Base
            Certificate is true and complete in all material respects,

                  (B) that, except as is disclosed in such Borrowing Base
            Certificate, the Company has no reason to believe that there has
            been a material reduction in the Borrowing Base from the Borrowing
            Base Calculation Date for such Borrowing Base Certificate to the
            date on which such Borrowing Base Certificate is delivered,

                  (C) if a Credit Request is being delivered in connection with
            the delivery of such Borrowing Base Certificate, that as of the date
            of such Borrowing Base Certificate, the Revolving Credit
            Outstandings do not (and, after giving effect to the making of all
            Loans, or the issuance of all Letters of Credit, if any, being
            requested in conjunction with the delivery of such Borrowing Base
            Certificate, will not) exceed the Borrowing Base which was in effect
            on the Borrowing Base Calculation Date for such Borrowing Base
            Certificate, and

                  (D) as to such other matters as the Agent may reasonably
            request.

         (b) During the continuance of an Event of Cash Dominion, the Company
will furnish to the Agent a Borrowing Base Certificate at least weekly, on or
before the third Business Day of each week, subject to such changes in form as
are approved by Agent in its reasonable discretion. During the continuance of an
Event of Cash Dominion, the Borrowing Base will be determined by the Agent,
after consultation with the Company, each day on the basis of such relevant
information as the Agent deems appropriate to consider in calculating the actual
Borrowing Base, including the collateral summary reports and such other
information regarding the Accounts of the Company, Kaiser Bellwood and KAII and
the Inventory of the Company, Kaiser Bellwood and KAII as the Agent shall obtain
from the Company, Kaiser Bellwood and KAII pursuant to Section 9.1.9 or
otherwise.

         (c) For the period up to (but not including) March 31, 2002, a
Borrowing Base Certificate as of February 11, 2002, shall be sufficient for
purposes of determining the Borrowing Base; provided that thereafter the
foregoing clauses (a) and (b) of this Section 2.1.4 shall control.

         SECTION 2.2. REDUCTION OF REVOLVING COMMITMENT AMOUNT. The Company may,
from time to time on any Business Day occurring after the Initial Borrowing
Date, voluntarily reduce the unutilized portion of the Revolving Commitment
Amount; provided, however, that (a) all such reductions that involve prepayments
of LIBO Rate Loans shall require at least three Business Days prior notice to
the Agent, (b) all other reductions, including any such reductions that involve
prepayments of Reference Rate Loans, shall require at least one Business Day
prior notice to the Agent, (c) each such reduction shall be permanent, and (d)
any such partial reduction of the Revolving Commitment Amount that involves
prepayments of LIBO Rate Loans shall be in an amount of not less than
$5,000,000. All notices referred to in the foregoing sentence shall be given
prior to 10:00 a.m., San Francisco time, on the day of such notice.

         SECTION 2.3. BORROWING PROCEDURE.

         (a) By delivering a Borrowing Request to the Agent on or before 10:00
a.m., San Francisco time, on a Business Day, the Company, on advance notice of
at least (i) three Business Days, in the case of any disbursement of LIBO Rate
Loans, or (ii) one Business Day, in the case of any disbursement of Reference
Rate Loans, but in no case more than five Business Days, may from time to time
request that the Lenders make a disbursement of Revolving Loans. Each request
for a disbursement of Reference Rate Loans shall specify an aggregate principal
amount of at least $1,000,000 and integral multiples of $1,000,000 in excess
thereof, and each request for a disbursement of LIBO Rate Loans shall specify an
aggregate principal amount of at least $5,000,000 and integral multiples of
$1,000,000 in excess thereof. On the terms and subject to the conditions of this
Agreement, each Borrowing shall be comprised of the Loans of the type(s) and
Interest Period(s) specified in such Borrowing Request and shall be made on the
Business Day specified in such Borrowing Request. The Agent shall promptly
notify each Lender by telephone (promptly confirmed in writing) of any such
Borrowing Request on the day such Borrowing Request is received by the Agent.
Subject to Section 2.1.3, prior to 9:30 a.m., San Francisco time, on the
Business Day specified in such Borrowing Request, each Lender shall deposit with
the Agent same day funds in an amount equal to such Lender's Percentage of the
requested Borrowing. Such deposit will be made to an account which the Agent
shall specify from time to time by written notice to the Lenders. To the extent
funds are received from the Lenders by 9:30 a.m., San Francisco time, on any
Business Day, the Agent shall deposit such funds into the Company's account
number 12339 11101 at Bank of America, or such other account at Bank of America
as the Company shall notify the Agent from time to time, not later than 10:30
a.m., San Francisco time, on such Business Day. No Lender's obligation to make
any Loan shall be affected by any other Lender's failure to make any Loan.

         (b) By delivering a Borrowing Request to the Agent on or before 3:00
p.m., San Francisco time, on a Business Day, the Company may from time to time
request that Agent make a disbursement of a Swingline Loan. Each request for a
disbursement of a Swingline Loan shall specify an aggregate principal amount of
at least $500,000 and integral multiples of $10,000 in excess thereof. All
Swingline Loans shall be Reference Rate Loans and no Swingline Loan may be
outstanding for more than seven calendar days. Agent shall deposit same day
funds in an amount equal to the requested Swingline Loan into the Company's
account number 12339 11101 at Bank of America, or such other account at Bank of
America as the Company shall notify the Agent from time to time, not later than
3:00 p.m., San Francisco time, on such Business Day.

         (c) In lieu of delivering the above-described Borrowing Requests, the
Company may give the Agent telephone notice by the required time of any proposed
Borrowing; provided that such notice shall be promptly confirmed in writing by
delivery of a Borrowing Request on or prior to the proposed borrowing date. Each
telephone request for a Revolving Loan or a Swingline Loan shall be conclusively
presumed to be made by a Person authorized by the Company to do so and crediting
a Revolving Loan or a Swingline Loan to the Company's deposit account shall
conclusively establish the obligation of the Company to repay such Revolving
Loan or Swingline Loan as provided herein.

         SECTION 2.4. AGENT'S BOOKS AND RECORDS; MONTHLY STATEMENTS. The Agent
will charge all Revolving Loans, Swingline Loans and, as and when they become
due and payable, other monetary Obligations to a loan account of the Company
maintained by the Agent. All fees, commissions, costs, expenses, and other
charges under or pursuant to the Loan Documents not paid when due may, at the
Agent's option, be charged as Revolving Loans to the Company's loan account as
of the date due from the Company or the date paid or incurred by the Agent, as
the case may be. The Company agrees that the Agent's books and records showing
the monetary Obligations and the transactions pursuant to this Agreement and the
other Loan Documents shall be admissible in any action or proceeding arising
therefrom, and shall constitute prima facie proof thereof, irrespective of
whether any Obligation is also evidenced by a promissory note or other
instrument. The Agent will provide to the Company a monthly statement of Loans,
payments, and other transactions pursuant to this Agreement. Such statement
shall be deemed correct, accurate, and binding on the Company and as an account
stated (except for reversals and reapplications of payments made as provided in
Section 4.7 and corrections of errors discovered by the Agent), unless the
Company notifies the Agent in writing to the contrary within 60 days after such
statement is rendered. In the event a timely written notice of objection is
given by the Company, only the items to which exception is expressly made will
be considered to be disputed by the Company.

         SECTION 2.5. PRIORITY AND SECURITY. On and after entry of the Interim
Order, all Obligations will, at all times:

         (a) Pursuant to section 364(c)(1) of the Bankruptcy Code, constitute
allowed super-priority administrative expense claims of the Secured Lenders in
the Bankruptcy Cases, having priority over all administrative expenses of the
kind specified in sections 503(b) and 507(b) of the Bankruptcy Code and any and
all expenses and claims of the Debtors, whether heretofore or hereafter
incurred, including but not limited to the kind specified in Sections 105, 326,
328, 330, 331, 503(b), 506(c), 507(a), 507(b), 546(c), 726 or 1114 of the
Bankruptcy Code ("Superpriority Claims"), subject to the Carve-Out;

         (b) Pursuant to section 364(c)(2) of the Bankruptcy Code, be secured by
a perfected, first-priority security interest in and Lien (subject to Liens
permitted pursuant to Section 9.2.3. hereof other than Liens securing
Indebtedness) on all Property of the Debtors (other than any Excluded Assets)
and their estates of every kind or type whatsoever, tangible, intangible, real,
personal and mixed, whether now owned or hereafter acquired or arising, wherever
located, and including without limitation, all property of the estates of each
of the Debtors within the meaning of section 541 of the Bankruptcy Code and all
proceeds, rents and products of the foregoing and all distributions thereon that
are not otherwise encumbered by valid, perfected and unavoidable Liens in
existence on the Petition Date or to valid Liens in existence on the Petition
Date that are perfected subsequent to such commencement as permitted by section
546(b) of the Bankruptcy Code subject to the Carve-Out;

         (c) Pursuant to section 364(c)(3) of the Bankruptcy Code, be secured by
a perfected junior security interest and Lien (subject to Liens permitted
pursuant to Section 9.2.3 hereof) on all property of the Debtors that is subject
to valid, perfected and unavoidable Liens in existence on the Petition Date or
to valid Liens in existence on the Petition Date that are perfected subsequent
to such commencement as permitted by section 546(b) of the Bankruptcy Code, (i)
excluding the following (A) the Excluded Assets and (B) any property subject to
Liens permitted pursuant to Section 9.2.3 hereof to the extent that the
agreements granting or providing for the grant of such Liens would be violated
if such property was subject to such junior security interest and lien and such
prohibition is enforceable after the Petition Date; and (ii) subject to the
Carve-Out; and

         (d) The Superpriority Claims and Liens referred to in subsections (a),
(b) and (c) of this Section 2.5 shall be subject to the Carve-Out.

         SECTION 2.6. BANK PRODUCTS. The Company may request and the Agent may,
in its sole and absolute discretion, arrange for the Company to obtain from Bank
of America or its Affiliates Bank Products although the Company is not required
to do so. If Bank Products are provided by an Affiliate of Bank of America, the
Company agrees to indemnify and hold the Agent, Bank of America and the Lenders
harmless from any and all costs and obligations now or hereafter incurred by the
Agent, Bank of America or any of the Lenders which arise from any indemnity or
reimbursement agreement given by the Agent to its Affiliates related to an
Obligor's failure to pay or perform such Bank Product Obligations; provided,
however, nothing contained herein is intended to limit the Company's rights,
with respect to Bank of America or its Affiliates, if any, which arise as a
result of the execution of documents by and between the Company and Bank of
America which relate to Bank Products. The agreement contained in this Section
2.6 shall survive termination of this Agreement. The Company acknowledges and
agrees that the obtaining of Bank Products from Bank of America or its
Affiliates (a) is in the sole and absolute discretion of Bank of America or its
Affiliates, and (b) is subject to all rules and regulations of Bank of America
or its Affiliates.

                                   ARTICLE III

                   REPAYMENTS, PREPAYMENTS, INTEREST, AND FEES

         SECTION 3.1. REPAYMENTS. The Company shall repay in full the unpaid
principal amount of each Loan upon the Stated Maturity Date therefor.

         SECTION 3.2. VOLUNTARY PREPAYMENTS. Prior to repayment in full of each
Loan pursuant to Section 3.1, and except during the continuance of an Event of
Cash Dominion, the Company may, from time to time on any Business Day, make a
voluntary prepayment, in whole or in part, without premium or penalty (except as
may be required by Section 4.4), of the outstanding principal amount of the
Loans; provided, however, that

         (a) if any such prepayment of any LIBO Rate Loan is made on any day
other than the last day of the Interest Period for such Loan, the Company shall
comply with the provisions of Section 4.4;

         (b) all such voluntary partial prepayments of LIBO Rate Loans (i) shall
be in an aggregate amount of not less than $5,000,000 and integral multiples of
$1,000,000 in excess thereof, unless such prepayment is a prepayment of the
entire outstanding principal amount of LIBO Loans of all Lenders, and (ii) shall
be applied pro rata to such LIBO Rate Loans of all Lenders;

         (c) all such voluntary partial prepayments of Reference Rate Loans
shall be, in the case of Revolving Loans, in an aggregate amount of not less
than $1,000,000 and integral multiples of $1,000,000 in excess thereof, unless
such prepayment is a prepayment of the entire outstanding principal amount of
Reference Rate Loans of all Lenders, and, in the case of Swingline Loans, in an
aggregate amount of not less than $250,000 and integral multiples of $10,000 in
excess thereof, unless such prepayment is a prepayment of the entire outstanding
principal amount of Swingline Loans;

         (d) all such voluntary partial prepayments of Reference Rate Loans
shall be applied first to Swingline Loans and then pro rata to the Reference
Rate Loans of all Lenders;

         (e) all such voluntary prepayments of LIBO Rate Loans shall require at
least five Business Days prior written notice to the Agent;

         (f) all such voluntary prepayments of Reference Rate Loans that are
Revolving Loans shall require at least one but no more than five Business Days
prior written notice to the Agent; and

         (g) all such voluntary prepayments of Reference Rate Loans that are
Swingline Loans may be made without any prior written notice.

         SECTION 3.3. MANDATORY PREPAYMENTS. Prior to repayment in full of each
Loan pursuant to Section 3.1, the Company shall make mandatory prepayments,
without premium or penalty (except as may be required by Section 4.4), in
accordance with this Section 3.3.

         SECTION 3.3.1. PREPAYMENT UNDER, OR CASH COLLATERALIZATION OF,
REVOLVING COMMITMENT. Except during the continuance of an Event of Cash
Dominion, the Company shall, on the second Business Day after the date of
delivery of any Borrowing Base Certificate indicating that the Revolving Credit
Outstandings on the date of such Borrowing Base Certificate exceed the Borrowing
Base less the amount of Carve-Out Reserve as shown on such Certificate, make a
mandatory prepayment of the then aggregate outstanding principal amount of all
Swingline Loans and, if all Swingline Loans have been prepaid, shall make a
mandatory prepayment of the then aggregate outstanding principal amount of all
Revolving Loans (or a repayment of outstanding Reimbursement Obligations with
respect to Letters of Credit), and, if all Revolving Loans and such
Reimbursement Obligations have been prepaid or repaid, shall furnish cash
collateral with respect to undrawn and outstanding Letters of Credit, in an
aggregate amount equal to such excess. If the Company shall fail to deliver a
Borrowing Base Certificate when due hereunder and the Agent determines that the
Revolving Credit Outstandings on the date such Borrowing Base Certificate was
due exceeded the Borrowing Base, less the amount of the Carve-Out Reserve as of
the last day of the preceding month, the Company shall on the second Business
Day after receipt of notice from the Agent, make a mandatory prepayment of the
then aggregate outstanding principal amount of all Swingline Loans and, if all
Swingline Loans have been prepaid, shall make a mandatory prepayment of the then
aggregate outstanding principal amount of all Revolving Loans (or a repayment of
outstanding Reimbursement Obligations with respect to Letters of Credit), and,
if all Revolving Loans have been prepaid, shall furnish cash collateral with
respect to Letters of Credit, in an aggregate amount equal to such excess. On
the terms and subject to the conditions hereof, the Company may reborrow amounts
applied to the prepayment of Swingline Loans and Revolving Loans pursuant to
this Agreement.

         SECTION 3.3.2. CASH DOMINION. During the continuance of an Event of
Cash Dominion (a) all collected funds on deposit in the Concentration Account
pursuant to the Concentration Bank Agreement shall be applied on a daily basis
to the prepayment of the then aggregate outstanding principal amount of all
Swingline Loans and, if all Swingline Loans have been prepaid, to the prepayment
of the then aggregate outstanding principal amount of all Revolving Loans; (b)
on any day on which Revolving Credit Outstandings exceed the Borrowing Base as
calculated as of such date less the amount of the Carve-Out Reserve, the Company
shall make a mandatory prepayment of the then aggregate outstanding principal
amount of all Swingline Loans, and, if all Swingline Loans have been prepaid,
shall make a mandatory prepayment of the then aggregate outstanding principal
amount of all Revolving Loans (or a repayment of outstanding Reimbursement
Obligations with respect to Letters of Credit), and, if all Revolving Loans have
been prepaid, shall furnish cash collateral with respect to Letters of Credit,
in an aggregate amount equal to such excess; and (c) the Company shall deposit,
or cause to be deposited in, the Concentration Account (unless deposited in a
Collection Deposit Account or remitted or paid directly to the Agent) (i) all
remittances and payments received by the Company in respect of Accounts (except
Accounts payable by Subsidiaries and Joint Venture Affiliates paid by accounting
entries), Instruments (other than Intercompany Demand Notes), and sales of
Inventory for cash and all prepayments, deposits, and other advance payments in
respect of sales of Inventory; (ii) all Net Disposition Proceeds received from
any Asset Disposition; and (iii) all tax refunds, insurance proceeds and other
amounts received from third parties. On the terms and subject to the conditions
hereof, the Company may reborrow amounts applied to the prepayment of Swingline
Loans and Revolving Loans pursuant to this Agreement.

         SECTION 3.3.3. ACCELERATION. The Company shall, immediately upon any
acceleration of the Stated Maturity Date of any Loans pursuant to Section 10.2,
repay all Loans which are so accelerated.

         SECTION 3.4. INTEREST PROVISIONS. Interest on the outstanding principal
amount of Loans shall accrue and be payable in accordance with this Section 3.4,
in each case computed on the basis of the actual number of days elapsed in a
360-day year.

         SECTION 3.4.1. RATES. The Company shall pay interest on the unpaid
principal amount of each Revolving Loan and Swingline Loan made to the Company
from time to time outstanding as follows:

         (a) if any portion of the unpaid principal amount of such Loan is a
Reference Rate Loan, the Company shall pay interest on such portion at a rate
per annum equal to the sum of (i) the Reference Rate from time to time in effect
and (ii) a margin of 1-1/2%; and

         (b) if any portion of the unpaid principal amount of such Loan is a
LIBO Rate Loan, during each Interest Period applicable thereto, the Company
shall pay interest on such portion at a rate per annum equal to the sum of (i)
the LIBO Rate (Reserve Adjusted) for such Interest Period and (ii) a margin of
3-1/4%.

         All LIBO Rate Loans shall bear interest from (and including) the first
day of the applicable Interest Period to (but excluding) the last day of such
Interest Period at the interest rate determined as applicable to such LIBO Rate
Loan.

         SECTION 3.4.2. CONTINUATION AND CONVERSION ELECTIONS. By delivering a
Continuation/Conversion Notice to the Agent on or before 10:00 a.m., San
Francisco time, on a Business Day, the Company may from time to time irrevocably
elect, on

         (a) not less than three nor more than five Business Days notice (in the
case of continuations of or conversions into LIBO Rate Loans), or

         (b) not less than one nor more than five Business Days notice (in the
case of conversions into Reference Rate Loans)

that all or any portion of any outstanding Revolving Loan be (i) converted into
a LIBO Rate Loan, (ii) converted into a Reference Rate Loan, or (iii) continued
as a LIBO Rate Loan. All conversions of Revolving Loans that are Reference Rate
Loans shall be made pro rata among all such Reference Rate Loans of all Lenders.
All conversions or continuations of Revolving Loans that are LIBO Rate Loans
shall be made pro rata among all such LIBO Rate Loans of all Lenders. In the
absence of delivery of a Continuation/Conversion Notice with respect to any LIBO
Rate Loan within the time periods specified above before the last day of the
then current Interest Period with respect thereto, such LIBO Rate Loan shall, on
such last day, automatically convert to a Reference Rate Loan. No portion of the
outstanding principal amount of any Revolving Loan may be continued as, or be
converted into, a LIBO Rate Loan during the continuation of any Event of
Default. No Swingline Loans may be converted into a LIBO Rate Loan.

         SECTION 3.4.3. FUNDING. Each Lender may, if it so elects, fulfill its
obligation to make, continue, or convert any LIBO Rate Loan hereunder by causing
one of its foreign branches or Affiliates (or an international banking facility
created by such Lender) to make or maintain such LIBO Rate Loan; provided,
however, that such LIBO Rate Loan shall nonetheless be deemed to have been made
and to be held by such Lender, and the obligation of the Company to repay such
LIBO Rate Loan shall nevertheless be to such Lender for the account of such
foreign branch, Affiliate, or international banking facility. In addition, the
Company hereby consents and agrees that, for purposes of any determination to be
made for purposes of Section 4.2, 4.3, or 4.4, it shall be conclusively assumed
that each Lender elected to fund all LIBO Rate Loans by purchasing Dollar
deposits in the London interbank eurodollar market.

         SECTION 3.4.4. DEFAULT RATES. During the continuation of any Event of
Default,

         (a) the Company shall pay interest (after as well as before judgment)
on the principal amount of all Loans outstanding to it at a rate per annum which
is determined by increasing each of the interest rates set forth in clauses (a)
and (b) of Section 3.4.1 by 2% per annum;

         (b) the letter of credit fees payable pursuant to clause (a)(ii) of
Section 5.3 shall be increased by 2% per annum for all Letters of Credit; and

         (c) the Company shall pay interest on any other Obligations which are
then due and payable (other than Reimbursement Obligations which are accruing
interest pursuant to Section 5.5) to the extent permitted by applicable law, at
a rate per annum equal to the Reference Rate plus 3-1/2%.

         SECTION 3.4.5. INTEREST PAYMENT DATES. Interest accrued on each Loan
shall be payable

         (a) with respect to Reference Rate Loans, in arrears on the first day
of each month;

         (b) with respect to LIBO Rate Loans, in arrears on the first day of
each month; and

         (c) on that portion of any Loan the Stated Maturity Date of which is
accelerated pursuant to Section 10.2, immediately upon such acceleration.

Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount is due and
payable (whether on the Stated Maturity Date, upon acceleration or otherwise)
shall be payable upon demand.

         SECTION 3.5. FEES. The Company and the Parent Guarantor, jointly and
severally, agree to pay the fees set forth in this Section 3.5.

         SECTION 3.5.1. COMMITMENT FEE. The Company and the Parent Guarantor,
jointly and severally, agree to pay to the Agent for the account of each Lender,
for the period (including any portion thereof when any of its Commitments are
suspended by reason of the Company's inability to satisfy any condition of
Article VII) commencing on the Effective Date and continuing through the
Revolving Commitment Termination Date, a commitment fee at the rate of 1/2 of 1%
per annum on such Lender's Percentage of the sum of the average daily unused
portion of the Revolving Commitment Amount. Such commitment fees shall be
payable by the Company monthly in arrears on the first day of each month, and on
the Revolving Commitment Termination Date.

         SECTION 3.5.2. AUDIT FEES. The Company and the Parent Guarantor,
jointly and severally, agree to pay to the Agent for expenses for up to 4 audits
per year at an audit fee equal to $750 per day per auditor (whether or not such
auditor is an employee of the Agent) for each audit of the Collateral undertaken
pursuant to Section 9.1.5 and to pay all out-of-pocket expenses of each auditor
incurred in connection with such Collateral audits.

         SECTION 3.5.3. OTHER FEES. The Company and the Parent Guarantor,
jointly and severally, agree to pay to the Agent for its own account certain
fees as set forth in the Fee Letter.

                                   ARTICLE IV

                     CERTAIN LIBO RATE AND OTHER PROVISIONS

         SECTION 4.1. ILLEGALITY.

         (a) If any Lender shall determine (which determination shall, upon
written notice thereof to the Company and the other Lenders, be conclusive and
binding on the Company) that the introduction of or any change in (or in the
interpretation of) any law makes it unlawful, or any central bank or other
governmental authority asserts that it is unlawful, for such Lender to make,
continue, or maintain any Loan as, or to convert any Loan into, a LIBO Rate
Loan, the obligations of all Lenders to make, continue, maintain, or convert any
such Loans shall, upon such determination, forthwith be suspended until such
Lender shall notify the Agent that the circumstances causing such suspension no
longer exist, and all LIBO Rate Loans shall automatically convert into Reference
Rate Loans at the end of the then current Interest Periods with respect thereto
or sooner, if required by such law or assertion.

         (b) If any Lender shall determine (which determination shall, upon
written notice thereof to the Company and the other Lenders, be conclusive and
binding on the Company) that the introduction of or any change in (or in the
interpretation of) any law makes it unlawful, or any central bank or other
governmental authority asserts that it is unlawful, for such Lender to issue or
amend (in the case of an Issuer Bank) or to participate in (in the case of each
other Lender) any additional Letters of Credit, the obligations of all Lenders
so to issue, amend, or participate in additional Letters of Credit shall, upon
such determination, forthwith terminate, and the Agent shall, by written notice
to the Company and each Lender, declare that such obligations have so
terminated. If circumstances subsequently change so that such affected Lender
shall determine that it is no longer so affected, such obligations shall, upon
such determination (and telephonic notice thereof immediately confirmed in
writing to the Agent, each other Lender, and the Company), forthwith be
reinstated, and the Agent shall, by written notice to the Company and each
Lender, declare that such obligations have been so reinstated.

         SECTION 4.2. DEPOSITS UNAVAILABLE. If the Agent shall have reasonably
determined that

         (a) Dollar deposits in the relevant amount and for the relevant
Interest Period are not available to Bank of America in the relevant market; or

         (b) by reason of circumstances affecting Bank of America's relevant
market, adequate means do not exist for ascertaining the interest rate
applicable hereunder to LIBO Rate Loans,

then, upon written notice from the Agent to the Company and the Lenders, the
obligations of all Lenders under Section 2.3 and Section 3.4.2 to make or
continue any Loans as, or to convert any Loans into, LIBO Rate Loans shall
forthwith be suspended until the Agent shall notify the Company and the Lenders
that the circumstances causing such suspension no longer exist.

         SECTION 4.3. INCREASED COSTS, ETC. The Company agrees to reimburse each
Lender for any increase in the cost to such Lender of, or any reduction in the
amount of any sum receivable by such Lender in respect of, issuing, maintaining,
or participating in the Letters of Credit, or making, continuing, or maintaining
(or of its obligation to make, continue, or maintain) any Loans as, or of
converting (or of its obligation to convert) any Loans into, LIBO Rate Loans.
Such Lender shall promptly notify the Agent and the Company in writing of the
occurrence of any such event, such notice to state, in reasonable detail, the
reasons therefor and the additional amount required fully to compensate such
Lender for such increased cost or reduced amount as well as the calculation of
such additional amount. Such additional amounts shall be payable by the Company
directly to such Lender within 15 days of its receipt of such notice, and such
notice shall, in the absence of manifest error, be conclusive and binding on the
Company.

         SECTION 4.4. FUNDING LOSSES. In the event any Lender shall incur any
loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to make, continue, or maintain any portion of the principal amount of any Loan
as, or to convert any portion of the principal amount of any Loan into, a LIBO
Rate Loan) as a result of

         (a) any conversion or repayment or prepayment of the principal amount
of any LIBO Rate Loans on a date other than the scheduled last day of the
Interest Period applicable thereto, whether pursuant to Section 3.1, 3.2, 3.3,
or 3.4.2 or otherwise,

         (b) any Loans not being made as LIBO Rate Loans in accordance with the
Borrowing Request therefor (other than as a result of a determination pursuant
to Section 4.1 or 4.2), or

         (c) any Loans not being continued as, or converted into, LIBO Rate
Loans in accordance with the Continuation/ Conversion Notice therefor (other
than as a result of a determination pursuant to Section 4.1 or 4.2),

then, upon the written notice of such Lender to the Company (with a copy to the
Agent), the Company shall, within 15 days of its receipt thereof, pay directly
to such Lender such amount as will (in the reasonable determination of such
Lender) reimburse such Lender for such loss or expense. Such written notice
(which shall include calculations in reasonable detail) shall, in the absence of
manifest error, be conclusive and binding on the Company.

         SECTION 4.5. INCREASED CAPITAL COSTS. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation, or
phase-in of, any law or regulation, directive, guideline, decision, or request
(whether or not having the force of law) of any court, central bank, regulator,
or other governmental authority affects or would affect the amount of capital
required or expected to be maintained by any Lender or any Person controlling
such Lender, and such Lender determines (in its sole and absolute discretion)
that the rate of return on its or such controlling Person's capital as a
consequence of its Commitments or the Credit Extensions (including the
disbursement of Loans and the issuance of or participation in Letters of Credit)
made by such Lender is reduced to a level below that which such Lender or such
controlling Person could have achieved but for the occurrence of any such
circumstance, then, in any such case upon written notice from time to time by
such Lender to the Company, with a copy to the Agent, the Company shall, within
15 days of its receipt of such notice, pay directly to such Lender additional
amounts sufficient to compensate such Lender or such controlling Person for such
reduction in rate of return. A statement of such Lender as to any such
additional amount or amounts (including calculations thereof in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding on
the Company. In determining such amount, such Lender may use any method of
averaging and attribution that it (in its sole and absolute discretion) shall
deem applicable, subject in each case to Section 4.12.

         SECTION 4.6. TAXES, ETC.

         (a) All payments by the Company and each other Obligor to the Agent or
any Lender in respect of any Obligation shall be made without any setoff or
counterclaim, and free and clear of and without deduction or withholding for or
on account of, any present or future Taxes now or hereafter imposed on the Agent
or any Lender with respect to such payments by any governmental or other
authority, except to the extent that such deduction or withholding is compelled
by law. As used herein, the term "Taxes" shall include all excise and other
taxes of whatever nature imposed on the Agent or any Lender with respect to, or
arising out of, such payments or the transactions contemplated hereby (other
than taxes generally assessed on the net income of the Agent or any Lender, as
the case may be, by the government of the country, or any political subdivision
or taxing authority thereof or therein, in which the Agent or such Lender is
incorporated or in which such Lender's Domestic Office or such Lender's LIBOR
Office is located) as well as all levies, imposts, duties, charges, or fees of
whatever nature. If any Obligor is compelled by law to make any such deduction
or withholding it will:

                  (i) pay to the relevant authorities the full amount required
            to be so withheld or deducted;

                  (ii) (except to the extent that such deduction or withholding
            results from the breach, by the recipient of a payment, of its
            agreement contained in clause (b) below, or would not be required if
            such recipient's representation and warranty contained in clause (b)
            below were true) pay such additional amounts as may be necessary in
            order that the net amount received by the Agent and each Lender,
            after such deduction or withholding (including any required
            deduction or withholding on such additional amounts) shall equal the
            amount such payee would have received had no such deduction or
            withholding been made; and

                  (iii) promptly forward to the Agent (for delivery to such
            payee) an official receipt or other documentation satisfactory to
            the Agent evidencing such payment to such authorities.

         Moreover, if any Taxes are directly asserted against the Agent or any
         Lender with respect to any payment made in respect of, or arising out
         of, any Obligation, such payee may pay such Taxes, and each Obligor
         which is obligated to pay such Obligation agrees promptly to pay such
         additional amount (including any penalties, interest or expenses) as
         may be necessary in order that the net amount received by such payee
         after the payment of such taxes (including any Taxes on such additional
         amount) shall equal the amount such payee would have received had no
         such Taxes been asserted (except to the extent that such Taxes result
         from the breach, by such payee, of its agreement contained in clause
         (b) below or would not be asserted if such payee's representation and
         warranty contained in clause (b) below were true). For purposes of this
         Section 4.6, a distribution hereunder by the Agent or any Lender to or
         for the account of any Lender shall be deemed to be a payment by the
         applicable Obligor.

         (b) Each Lender which is a Non-United States Person agrees (to the
extent it is permitted to do so under the laws and any applicable double
taxation treaties of the United States, the jurisdiction of such Lender's
incorporation, and the jurisdictions in which such Lender's Domestic Office and
such Lender's LIBOR Office are located) to execute and deliver to the Agent for
delivery to the Company, before the first scheduled payment date in each year,
either (i) three United States Internal Revenue Service Forms 1001 or (ii) three
United States Internal Revenue Service Forms 4224 together with three United
States Internal Revenue Service Forms W-9, or any successor forms, as
appropriate, properly completed and claiming complete or partial, as the case
may be, exemption from withholding and deduction of United States federal Taxes.
Each Lender which is a Non-United States Person represents and warrants to each
Obligor and to the Agent that, at the date of this Agreement, (i) its Domestic
Office and its LIBOR Office are entitled to receive payments of principal,
interest, Reimbursement Obligations, and fees hereunder and under the other Loan
Documents without deduction or withholding for or on account of any Taxes
imposed by the United States or any political subdivision thereof and (ii) it is
permitted to take the actions described in the preceding sentence under the laws
and any applicable double taxation treaties of the jurisdictions specified in
the preceding sentence. Each Lender which is a Non-United States Person further
agrees that, to the extent any form claiming complete or partial exemption from
withholding and deduction of United States federal Taxes delivered under this
clause (b) is found to be incomplete or incorrect in any material respect, such
Lender shall (to the extent it is permitted to do so under the laws and any
double taxation treaties of the United States, the jurisdiction of its
incorporation, and the jurisdictions in which its Domestic Office and its LIBOR
Office are located) execute and deliver to the Agent a complete and correct
replacement form.

         (c) Each Lender agrees to use reasonable efforts to change its Domestic
Office or LIBOR Office to avoid or to minimize any amounts otherwise payable
under clause (a) of this Section 4.6, in each case solely if such change can be
made in a manner so that such Lender, in its sole determination, suffers no
legal, economic, or regulatory disadvantage.

         SECTION 4.7. PAYMENTS, COMPUTATIONS, ETC.

         (a) Unless otherwise expressly provided, all payments by the Company
pursuant to this Agreement or any other Loan Document shall be made by the
Company to the Agent for the pro rata account of the Lenders entitled to receive
such payment. Except for Proceeds received directly by the Agent, all such
payments required to be made to the Agent shall be made, without setoff,
deduction or counterclaim, not later than 9:30 a.m., San Francisco time, or,
with respect to payments which are to be funded by other Credit Extensions,
10:30 a.m., San Francisco time, in either case on the date due, in same day or
immediately available funds, to such account as the Agent shall specify from
time to time by written notice to the Company. Funds received after that time
shall be deemed to have been received by the Agent on the next succeeding
Business Day. The Agent shall promptly remit to each Lender such Lender's share,
if any, of such payments received by the Agent not later than 9:30 a.m., San
Francisco time, or 10:30 a.m., San Francisco time, as applicable, for the
account of such Lender in same day funds on the day received. If the Agent fails
so to remit such funds to such Lender, the Agent shall pay to such Lender
interest on the amount of such Lender's share of such payments at the daily
average Federal Funds Rate for the first day on which such failure continues and
thereafter at the rate then applicable to the payment being made, excluding the
day on which such remittance is made. All interest and commitment fees shall be
computed on the basis of the actual number of days (including the first day but
excluding the last day) occurring during the period for which such interest or
fee is payable over a year comprised of 360 days. Whenever any payment to be
made shall otherwise be due on a day which is not a Business Day, such payment
shall (except as otherwise required by clause (b) of the definition of the term
"Interest Period" with respect to LIBO Rate Loans) be made on the next
succeeding Business Day and such extension of time shall be included in
computing interest, if any, in connection with such payment.

         (b) If after receipt of any payment of, or Proceeds applied to the
payment of, all or any part of the Obligations, the Lenders, the Issuer Bank, or
the Agent is for any reason compelled to surrender such payment or Proceeds to
any Person, because such payment or Proceeds is invalidated, declared
fraudulent, set aside, determined to be void or voidable as a preference,
impermissible set off, or a diversion of trust funds, or for any other reason,
the Obligations or part thereof intended to be satisfied shall be revived and
continue and this Agreement shall continue in full force as if such payment or
Proceeds had not been received by the Lenders, the Issuer Bank, or the Agent;
and the Company shall be liable to the Lenders, the Issuer Bank, and the Agent,
and hereby does indemnify the Lenders, the Issuer Bank, and the Agent and hold
the Lenders, the Issuer Bank, and the Agent harmless for, the amount of such
payment or Proceeds surrendered. The provisions of this Section 4.7 shall be and
remain effective notwithstanding any contrary action which may have been taken
by the Lenders, the Issuer Bank, and the Agent in reliance upon such payment or
Proceeds, and any such contrary action so taken shall be without prejudice to
the rights of the Lenders, the Issuer Bank, and the Agent under this Agreement
and shall be deemed to have been conditioned upon such payment or Proceeds
having become final and irrevocable.

         SECTION 4.8. SHARING OF PAYMENTS. If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
setoff, or otherwise) on account of any Letter of Credit it has issued or in
which it is a participant, or on account of any Loan (other than pursuant to the
terms of Sections 4.3, 4.4, 4.5, and 4.6) in each case in excess of its pro rata
share of payments then or therewith obtained by all Lenders, such Lender shall
purchase from the other Lenders such participations in the Letters of Credit in
which they have participated or they have issued, or in Loans made by them, as
the case may be, as shall be necessary to cause such purchasing Lender to share
the excess payment or other recovery ratably with each of them; provided,
however, that if all or any portion of the excess payment or other recovery is
thereafter recovered from such purchasing Lender, the purchase shall be
rescinded and each Lender which has sold a participation to the purchasing
Lender shall repay to the purchasing Lender the purchase price to the ratable
extent of such recovery together with an amount equal to such selling Lender's
ratable share (according to the proportion of

         (a) the amount of such selling Lender's required repayment to the
purchasing Lender

to

         (b) the total amount so recovered from the purchasing Lender)

of any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Company agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 4.8 may,
to the fullest extent permitted by law, exercise all its rights of payment
(including pursuant to Section 4.9) with respect to such participation as fully
as if such Lender were the direct creditor of the Company in the amount of such
participation. If under any applicable bankruptcy, insolvency, or other similar
law, any Lender receives a secured claim in lieu of a setoff to which this
Section 4.8 applies, such Lender shall, to the extent practicable, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of the Lenders entitled under this Section 4.8 to share in the benefits of any
recovery on such secured claim.

         SECTION 4.9. SETOFF. Subject to the terms of the Interim Order and the
Final Order, as applicable, each Lender shall, with the prior written consent of
the Required Lenders, during the continuance of any Event of Default, have the
right to appropriate and apply to the payment of the Obligations owing to it
(whether or not then due), and (as security for such Obligations) the Company
hereby grants to each Lender a continuing security interest in, any and all
balances, credits, deposits, accounts, or moneys of the Company then or
thereafter maintained with such Lender, excluding any specifically designated
trust account; provided, however, that any such appropriation and application
shall be subject to the provisions of Section 4.8. Each Lender agrees promptly
to notify the Company and the Agent after any such setoff and application made
by such Lender; provided, however, that the failure to give such notice shall
not affect the validity of such setoff and application. The rights of each
Lender under this Section 4.9 are in addition to other rights and remedies
(including other rights of setoff under applicable law or otherwise) which such
Lender may have.

         SECTION 4.10. USE OF PROCEEDS. The Company shall apply the proceeds of
each Loan and shall use each Letter of Credit in accordance with the seventh
recital and for general corporate and working capital purposes of the Company
and its Subsidiaries. No proceeds of any Loan and no Letter of Credit will be
used to purchase or carry (a) any equity security not issued by the Company of a
class which is registered pursuant to Section 12 of the Securities Exchange Act
of 1934, or (b) any "margin stock", as defined in F.R.S. Board Regulation U. The
Company shall enter into Currency Hedge Agreements solely for the purpose of
protecting the Company and its Subsidiaries against fluctuations in currency
exchange rates.

         SECTION 4.11. CHANGE OF LENDING OFFICE, REPLACEMENT OF LENDER, ETC.

         (a) Each Lender agrees that, upon the occurrence of any event giving
rise to the operation of Section 4.1, 4.3, or 4.5 with respect to such Lender,
it will, if requested by the Company and to the extent permitted by law or by
the relevant governmental authority, in consultation with the Agent, for a
period of thirty days use reasonable efforts in good faith to avoid the
illegality or to avoid or minimize the increase in costs or reduction in
payments resulting from such event (including using reasonable efforts to change
its Domestic Office or LIBOR Office); provided that such avoidance or
minimization can be made in such a manner so that such Lender, in its sole
determination, suffers no legal, economic, or regulatory disadvantage.

         (b) If any Lender (an "Affected Lender") shall make a determination
under Section 4.1 or shall make a demand for payment under Section 4.3, 4.5, or
4.6, and the Company shall find a Lender or other entity capable of being an
Assignee Lender under Section 12.11.1 (an "Eligible Assignee") which offers in
writing to

                  (i) purchase all, but not less than all, Loans of and
            Reimbursement Obligations owed (directly or by way of participation)
            to such Affected Lender,

                  (ii) purchase a 100% participation in all obligations of such
            Affected Lender in respect of all Letters of Credit issued or
            participated in by such Affected Lender, and

                  (iii) assume all the Commitments of such Affected Lender,

         in each case without recourse for the full amount thereof on a
         specified date, together with accrued and unpaid interest and
         commitment fees thereon to the date of purchase, and all other amounts
         owing to such Affected Lender hereunder and under the other Loan
         Documents, and such Eligible Assignee tenders the purchase price of
         such amounts on such specified date, and if, in the sole determination
         of such Affected Lender, its acceptance of such offer would be
         permitted by law and all relevant governmental authorities and would
         not result in any legal, economic, or regulatory disadvantage to such
         Affected Lender, then the Company shall be excused from the payment of
         any increased costs claimed by such Affected Lender under any of such
         Sections accruing after the first interest payment date pursuant to
         Section 3.4.5 for each Loan of such Affected Lender on or following
         such specified date, if the Affected Lender demanding payment under any
         such Section declines such purchase offer. If such Affected Lender
         shall accept such purchase offer, upon consummation of such purchase in
         accordance with Section 12.11.1, such Affected Lender shall cease to be
         a Lender hereunder. Any reasonable expenses actually incurred by such
         Affected Lender or the Agent under this Section 4.11 shall be paid by
         the Company upon delivery to the Company of a certificate as to the
         amount of such expenses, which certificate shall in the absence of
         manifest error be conclusive and binding.

         SECTION 4.12. COMPUTATION OF ADDITIONAL AMOUNTS DUE. In determining any
additional amounts due from the Company under Section 4.3, 4.4, or 4.5 hereof,
each Lender shall act reasonably and in good faith and will, to the extent that
the increased costs or reductions in amounts received or receivable relate to
such Lender's loans generally and are not specifically attributable to the Loans
hereunder, use averaging and attribution methods which are reasonable and
equitable and which cover all loans similar to the Loans made by such Lender
whether or not the loan documentation for such other loans permits such Lender
to receive increased costs of the type described in such Sections of this
Agreement.

                                   ARTICLE V

                                LETTERS OF CREDIT

         SECTION 5.1. REQUESTS.

         (a) By delivering to the Agent and the relevant Issuer Bank one or more
Revolving L/C Requests on or before 10:00 a.m., San Francisco time, at least
three (or such shorter period as may be agreed among the Company, the Agent, and
such Issuer Bank), but not more than eight, Business Days before the proposed
date of issuance, the Company may request that such Issuer Bank issue, on any
Business Day on or after the Initial Borrowing Date and prior to the Revolving
Commitment Termination Date, irrevocable standby or commercial letters of credit
for its account (each such letter of credit (including each Existing Letter of
Credit), as it may be amended, supplemented, extended, restated, or modified
from time to time, a "Letter of Credit"). Each Letter of Credit and Revolving
L/C Request shall be acceptable as to form, substance, beneficiary, and purpose
to the Agent and such Issuer Bank in their sole and absolute discretion, and
each Letter of Credit shall be used by the Company in each case solely for the
purposes described in Section 4.10.

         (b) Upon receipt of a Revolving L/C Request under clause (a), the Agent
shall promptly notify the Lenders in writing thereof. The Issuer Bank is under
no obligation to issue any Letter of Credit if

                  (i) any order, judgment or decree of any governmental
            authority shall by its terms purport to enjoin or restrain the
            Issuer Bank from issuing such Letter of Credit; or any law
            applicable to the Issuer Bank or any request or directive from any
            governmental authority with jurisdiction over the Issuer Bank shall
            prohibit or request that the Issuer Bank refrain from the issuance
            of letters of credit generally or such Letter of Credit in
            particular;

                  (ii) the Stated Amount thereof, when added to the Letter of
            Credit Outstandings immediately prior to the issuance of such Letter
            of Credit, would exceed the Maximum Letter of Credit Amount;

                  (iii) such Letter of Credit is not stated to expire on a date
            (its "Stated Expiry Date") no later than the fifth day immediately
            preceding the Stated Maturity Date and none shall have a term of
            more than one year (except in the case of the Letters of Credit
            relating to the loan agreement between ALPART and the Caribbean
            Basin Projects Financing Authority);

                  (iv) such Letter of Credit requires the Issuer Bank thereof to
            make payment to any beneficiary thereof prior to the third Business
            Day after a conforming demand for payment is made thereunder; or

                  (v) such Letter of Credit does not provide for the
            presentation of drafts payable at sight.

         (c) The Issuer Bank will make available to the beneficiary thereunder
(with a copy to the Agent) the original of each Letter of Credit which it issues
in accordance with the Revolving L/C Request therefor and will notify the
beneficiary thereof (with a copy to the Agent) of any extension of the Stated
Expiry Date thereof pursuant to Section 5.2.

         (d) On the Initial Borrowing Date, the Existing Letters of Credit shall
automatically be deemed to be Letters of Credit and shall be subject to all the
terms and conditions of this Agreement and the Company's reimbursement
obligations in respect of the Existing Letters of Credit shall automatically be
deemed to have been satisfied by the incurrence of its reimbursement
obligations, pursuant to this Article V, in respect of such Letters of Credit.

         SECTION 5.2. ISSUANCE AND EXTENSIONS.

         (a) Subject to the terms and conditions of this Agreement (including
Article VII), each Issuer Bank shall issue Letters of Credit in accordance with
the Revolving L/C Requests made therefor. By delivery to an Issuer Bank and the
Agent of a Revolving L/C Request at least three Business Days but not more than
45 days prior to the Stated Expiry Date of any Letter of Credit, the Company may
request such Issuer Bank to extend the Stated Expiry Date of such Letter of
Credit for an additional period. Unless otherwise directed by the Agent in
accordance with Section 7.4, no Issuer Bank shall issue, or extend the Stated
Expiry Date of, any Letter of Credit if it shall have received from any Obligor,
the Agent, or any Lender actual notice of a then-continuing Default or of any
other failure to satisfy any of the conditions precedent to Credit Extensions
set forth in Article VII.

         (b) Notwithstanding any provision of any Revolving L/C Request to the
contrary, it is understood that in the event of any conflict between the terms
of any such Revolving L/C Request and the terms of this Agreement, the terms of
this Agreement shall control with respect to events of default, representations
and warranties, and covenants, except that such Revolving L/C Request may
provide for further warranties and covenants relating specifically to the
transaction or affairs underlying the relevant Letter of Credit. The terms and
conditions of this Agreement shall be deemed to be incorporated by reference
into each Revolving L/C Request regardless of whether expressly so stated in
such Revolving L/C Request.

         SECTION 5.3. FEES AND EXPENSES.

         (a) The Company agrees to pay to the Agent with respect to each Letter
of Credit,

                  (i) for the account of the Issuer Bank, a fronting fee equal
            to 0.375% per annum on the average daily aggregate Letter of Credit
            Outstandings (excluding, however, in the case of fees payable under
            this clause (a)(i), that portion of Letter of Credit Outstandings
            constituting Reimbursement Obligations accruing interest pursuant to
            Section 5.5), and

                  (ii) for the account of the Lenders, pro rata according to
            their respective Percentages, a letter of credit fee of 3.25% per
            annum (subject to adjustment as provided in Section 3.4.1 and 3.4.4)
            on the average daily aggregate Letter of Credit Outstandings
            (excluding, however, in the case of fees payable under this clause
            (a)(ii), that portion of Letter of Credit Outstandings constituting
            Reimbursement Obligations accruing interest pursuant to Section 5.5)
            under or with respect to all Letters of Credit accruing, as to each
            Letter of Credit (other than the Existing Letters of Credit), from
            and including the date of issuance thereof to and excluding the
            earlier of the date such Letter of Credit is drawn in full, expires,
            or is terminated and the Revolving Commitment Termination Date and,
            as to each Existing Letter of Credit, from and including the Initial
            Borrowing Date to and excluding the earlier of the date such
            Existing Letter of Credit is drawn in full, expires, or is
            terminated and the Revolving Commitment Termination Date.

         (b) Such fronting and letter of credit fees shall be computed for the
actual number of days elapsed on the basis of a 360-day year and shall be
payable monthly in arrears on the first day of each month for the period ending
on (but excluding) such date and on the Revolving Commitment Termination Date.
The Company further agrees to pay to the Agent for the account of each Issuer
Bank all customary administrative fees and expenses of such Issuer Bank in
connection with the issuance and maintenance of each Letter of Credit issued by
it.

         SECTION 5.4. OTHER LENDERS' PARTICIPATION. Concurrently with the
issuance of each Letter of Credit in accordance with the terms and conditions of
this Agreement, and on the Initial Borrowing Date with respect to the Existing
Letters of Credit, the Issuer Bank thereof shall be deemed to have sold and
transferred to each other Lender, and each other Lender shall be deemed
irrevocably and unconditionally to have purchased and received from such Issuer
Bank, without recourse, representation, or warranty, an undivided interest and
participation, to the extent of such other Lender's Percentage, in such Letter
of Credit and the Company's Reimbursement Obligations with respect thereto, and
each Lender shall, to the extent of its Percentage, be entitled to receive from
the Agent a ratable portion of the letter of credit fees received by the Agent
pursuant to clause (a)(ii) of Section 5.3 with respect to each Letter of Credit.
Each Lender shall, to the extent of its Percentage, be responsible to reimburse
promptly such Issuer Bank for Reimbursement Obligations which have not been
reimbursed by the Company in accordance with Section 5.5. Each Lender's
obligation to reimburse the Issuer Bank under this Section shall be absolute and
unconditional under any and all circumstances and irrespective of any setoff,
counterclaim or other right which such Lender may have against the Issuer Bank,
the Company or any other Person or, subject to Section 7.4, the occurrence or
continuance of a Default or an Event of Default; provided, however, that nothing
herein shall adversely affect the right of any Lender to commence any proceeding
against an Issuer Bank for any wrongful Disbursement made by such Issuer Bank
under a Letter of Credit as a result of acts or omissions constituting gross
negligence or willful misconduct on the part of the Issuer Bank.

         SECTION 5.5. DISBURSEMENTS.

         (a) Each Issuer Bank will notify the Company and the Agent in writing
promptly of the presentment of any demand for payment under any Letter of Credit
issued by such Issuer Bank, together with notice of the date (the "Disbursement
Date") such payment shall be made. On the terms and subject to the conditions of
such Letter of Credit and this Agreement, the Issuer Bank shall make such
payment to the beneficiary (or its designee) of such Letter of Credit. Prior to
10:30 a.m., San Francisco time, on the Disbursement Date, the Company will
reimburse such Issuer Bank for all amounts which it has disbursed or is required
to disburse under such Letter of Credit on such Disbursement Date. To the extent
such Issuer Bank is not reimbursed in full in accordance with the foregoing
sentence of this clause (a), the Company's Reimbursement Obligation shall accrue
interest at a rate per annum equal to the interest rate for Reference Rate Loans
following an Event of Default.

         (b) Upon notice by the Issuer Bank to the Company of any Disbursement
pursuant to clause (a) of this Section 5.5, the Lenders (including such Issuer
Bank) shall, upon satisfaction by the Company of the conditions in Section 7.4
or the waiver of the conditions of Section 7.4 by the Agent as permitted
therein, and to the extent that the Revolving Commitment is then available, fund
the Reimbursement Obligation therefor by making Revolving Loans as provided in
Section 2.1.1 (without giving effect to such Reimbursement Obligation for
purposes of determining the Revolving Commitment Availability).

         SECTION 5.6. REIMBURSEMENT. The Company's obligation (a "Reimbursement
Obligation") under Section 5.5 to reimburse an Issuer Bank with respect to each
Disbursement (including interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim, or
defense to payment which the Company may have or have had against a beneficiary
or transferee of any Letter of Credit (or any Person or Persons for whom any
such transferee may be acting) or against the Agent or any Lender, including any
defense based upon the failure of any Disbursement to conform to the terms of
the applicable Letter of Credit (if, in the Issuer Bank's good faith opinion,
such Disbursement is determined to be appropriate) or any non-application or
misapplication by the beneficiary of the proceeds of such Disbursement or the
legality, validity, form, regularity, or enforceability of such Letter of
Credit; provided, however, that nothing herein shall adversely affect the right
of the Company to commence any proceeding against an Issuer Bank for any
wrongful Disbursement made by such Issuer Bank under a Letter of Credit as a
result of acts or omissions constituting gross negligence or willful misconduct
on the part of such Issuer Bank.

         SECTION 5.7. MANDATORY PAYMENT TO AGENT OF LETTER OF CREDIT
OUTSTANDINGS. The Company agrees that, upon the occurrence of any event
described in Section 10.1 or any termination of the Commitments pursuant to
Section 10.2, it will immediately, upon written notice from the Agent, acting at
the direction of the Required Lenders, pay to the Agent in Dollars and in
immediately available funds an amount equal to the then aggregate Letter of
Credit Outstandings. Any amounts so received by the Agent pursuant to the
provisions of the foregoing sentence, after application against outstanding
Reimbursement Obligations, shall be deposited by the Agent into the L/C
Collateral Account pursuant to Section 5.8.1.

         SECTION 5.8. L/C COLLATERAL ACCOUNT.

         SECTION 5.8.1. DEPOSIT. The Agent shall deposit all funds paid by the
Company to the Agent pursuant to Section 3.3.1 as cash collateral and Section
5.7 (to the extent required to be deposited in the L/C Collateral Account) to
the credit of a deposit account owned by the Agent (the "L/C Collateral
Account"). As security for the payment of all Obligations, the Company hereby
grants, conveys, assigns, pledges, sets over, and transfers to the Agent, and
creates in the Agent's favor a lien on and security interest in, all money,
instruments, and securities at any time held in or acquired in connection with
the L/C Collateral Account, together with all proceeds thereof, for the benefit
of the Secured Lenders. The Company shall not have any right to withdraw or to
cause the Agent to withdraw any funds deposited in the L/C Collateral Account.
At any time and from time to time, upon the Agent's request, the Company
promptly shall execute and deliver any and all such further instruments and
documents (including financing statements and bond powers executed in blank) as
may be necessary, appropriate, or desirable in the Agent's judgment to obtain
the full benefits (including perfection and priority) of the security interest
created or intended to be created by this Section 5.8.1 and of the rights and
powers herein granted. The Company shall not create or suffer to exist any Lien
on any amounts or investments held in the L/C Collateral Account other than the
Lien granted under this Section 5.8.1.

         SECTION 5.8.2. INVESTMENT. The Company, no more than three times in any
calendar month, may direct the Agent to invest the funds held in the L/C
Collateral Account (so long as the aggregate amount of such funds exceeds any
relevant minimum investment requirement) in one or more certificates of deposit
issued by the Person which is then acting as Agent or by Bank of America, with
such maturities as the Company may specify, pending application of such funds on
account of Reimbursement Obligations or on account of other Obligations, as the
case may be. In the absence of any such direction from the Company, the Agent
shall invest the funds held in the L/C Collateral Account in one or more
certificates of deposit issued by the Person which is then acting as Agent or by
Bank of America with maturities not to exceed 30 days, unless the aggregate
amount of such funds which are not then otherwise invested is less than the
smallest certificate of deposit offered by such Person, in which case the Agent
shall have no obligation to invest such funds. All such investments shall be
made in the Agent's name. The Company recognizes that any losses or taxes with
respect to such investments shall be borne solely by the Company, and the
Company agrees to hold the Agent and the Lenders harmless from any such losses
or taxes. Unless the Company otherwise makes direct payment, the Agent shall
liquidate any investment held in the L/C Collateral Account in order to apply
the proceeds of such investment on account of Reimbursement Obligations (or on
account of other Obligations, as the case may be) without regard to whether such
investment has matured and without liability for any penalties or other fees
incurred (with respect to which the Company hereby fully indemnifies the Agent)
as a result of such application.

         SECTION 5.8.3. APPLICATION OF FUNDS. The Agent shall apply funds in the
L/C Collateral Account (a) on account of Reimbursement Obligations when the same
become due and payable if and to the extent that the Company fails directly to
pay such Reimbursement Obligations, (b) if there are Letter of Credit
Outstandings, and the balance of the L/C Collateral Account exceeds the
aggregate Letter of Credit Outstandings for five consecutive Business Days, on
account of the Obligations (other than Reimbursement Obligations and Bank
Products) in such order as the Agent may elect to the extent of such excess on
the day of application, and (c) after the date on which all Letters of Credit
shall have expired and the Company finally shall have paid in full all
outstanding Reimbursement Obligations, on account of the other Obligations
(other than Bank Products) in such order as the Agent may elect if the Agent
shall have received actual notice of the occurrence of an Event of Default on or
before such date which is continuing on such date and, after all such
Obligations have been paid in full, on account of any Bank Products. Except in
the case described in clause (c) above, the Agent shall release all funds and
transfer all investments remaining in the L/C Collateral Account to the Company
within five Business Days after the date on which all Letters of Credit shall
have expired and the Company finally shall have paid in full all outstanding
Reimbursement Obligations. If the Agent resigns, the outgoing Agent and the new
Agent shall effect a transfer to the new Agent of all of the outgoing Agent's
right, title, and interest in and to the L/C Collateral Account concurrently
with the effectiveness of such resignation.

         SECTION 5.8.4. FEES. The Company shall pay to the Agent fees
customarily charged by the Agent with respect to the maintenance of
accounts similar to the L/C Collateral Account.

         SECTION 5.9. NATURE OF REIMBURSEMENT OBLIGATIONS. The Company shall
assume all risks of the acts, omissions, or misuse of any Letter of Credit by
the beneficiary thereof. Neither any Issuer Bank nor the Agent or any Lender
(except to the extent of its own gross negligence or willful misconduct) shall
be responsible for:

         (a) the form, validity, sufficiency, accuracy, genuineness, or legal
effect of any Letter of Credit or any document submitted by any party in
connection with the application for and issuance of a Letter of Credit, even if
it should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent, or forged;

         (b) the form, validity, sufficiency, accuracy, genuineness, or legal
effect of any Instrument transferring or assigning or purporting to transfer or
assign a Letter of Credit or the rights or benefits thereunder or proceeds
thereof in whole or in part, which may prove to be invalid or ineffective for
any reason;

         (c) failure of the beneficiary to comply fully with conditions required
in order to demand payment under a Letter of Credit;

         (d) errors, omissions, interruptions, or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise; or

         (e) any loss or delay in the transmission or otherwise of any document
or draft required in order to make a Disbursement under a Letter of Credit or of
the proceeds thereof.

None of the foregoing shall affect, impair, or prevent the vesting of any of the
rights or powers granted any Issuer Bank, the Agent, or any Lender hereunder. In
furtherance and extension and not in limitation or derogation of any of the
foregoing, any action taken or omitted to be taken by such Issuer Bank in good
faith shall be binding upon the Company and each Lender and shall not put such
Issuer Bank under any resulting liability to the Company or any Lender, except
to the extent incurred by such Issuer Bank's gross negligence or willful
misconduct.

         SECTION 5.10. INDEMNIFICATION BY LENDERS. The Lenders severally agree
to indemnify each Issuer Bank (acting in its capacity as such) and each officer,
director, employee, agent, and Affiliate of each Issuer Bank (collectively, the
"Issuer Parties" and individually, an "Issuer Party"), ratably according to
their respective Percentages, to the extent not reimbursed by the Company, from
and against any and all actions, causes of action, suits, losses, liabilities,
damages, and expenses which may at any time (including at any time following the
payment of any of the Reimbursement Obligations) be imposed on, incurred by, or
asserted against such Issuer Party in any way relating to or arising out of the
issuance of, transfer of, or payment or failure to pay under any Letter of
Credit issued in accordance with the terms of this Agreement or the use of
proceeds of any payment made under any Letter of Credit issued in accordance
with the terms of this Agreement; provided, that no Lender shall be liable for
the payment to such Issuer Party of any portion of such actions, causes of
action, suits, losses, liabilities, damages, and expenses which have arisen by
reason of such Issuer Party's gross negligence or willful misconduct.

                                   ARTICLE VI

                                PARENT GUARANTOR

         SECTION 6.1. PARENT GUARANTY. In consideration for the Lenders
extending the Commitments, the Parent Guarantor hereby unconditionally
guarantees, as primary obligor and not merely as surety, the due and punctual
payment and performance of all Obligations of the Company when due according to
their terms (whether by required prepayment, declaration, demand, or otherwise).
The foregoing guaranty is herein referred to as the "Parent Guaranty".

         SECTION 6.2. RENEWAL, ETC. OF OBLIGATIONS; WAIVER. The Parent Guarantor
agrees that the Obligations of the Company may be extended or renewed, in whole
or in part, without notice to or further assent from the Parent Guarantor and
that it will remain bound upon the Parent Guaranty notwithstanding any
extension, renewal, or other alteration of any Obligation. The Parent Guarantor
waives presentation to, demand of, payment from, and protest of any Obligation
to the Company and also waives notice of protest for nonpayment. The obligations
of the Parent Guarantor under the Parent Guaranty shall not be affected by

         (a) the failure of the Agent, any Lender, any Issuer Bank, or any other
holder of any Obligation of the Company:

                  (i) to assert any claim or demand, or to enforce any right or
            remedy against the Company under the provisions of this Agreement or
            any other Loan Document or otherwise; or

                  (ii) to exercise any right or remedy against any other
            guarantor of any Obligations;

         (b) any extension or renewal of any thereof;

         (c) any rescission, waiver, amendment, or modification of any of the
terms or provisions of this Agreement or any other Loan Document; or

         (d) the release of any of the security held by any Lender for any
Obligations.

The Parent Guarantor further agrees that the Parent Guaranty constitutes a
guaranty of payment when due and not of collection and waives any right to
require that any resort be had by the Agent, any Lender, any Issuer Bank, or any
other holder of any Obligation of the Company to any of the security held for
payment of any Obligation or to any balance of any deposit account or credit on
its books in favor of the Company or any other Person.

         SECTION 6.3. NO IMPAIRMENT, ETC. The obligations of the Parent
Guarantor under the Parent Guaranty shall not be subject to any reduction,
limitation, impairment, or termination for any reason, including any claim of
waiver, release, surrender, alteration, or compromise, and shall not be subject
to any defense or setoff, counterclaim, recoupment, or termination whatsoever by
reason of the invalidity, illegality, or unenforceability of the Obligations of
the Company or otherwise. Without limiting the generality of the foregoing, the
obligations of the Parent Guarantor under the Parent Guaranty shall not be
discharged or impaired or otherwise affected by the failure of the Agent, any
Lender, or any other holder of any Obligation of the Company to assert any claim
or demand or to enforce any remedy under this Agreement or any other Loan
Document, by any waiver or modification of any thereof, by any default, failure,
or delay, willful or otherwise, in the performance of the Obligations, or by any
other act or thing or omission or delay to do any other act or thing which may
or might in any manner or to any extent vary the risk of the Parent Guarantor,
or would otherwise operate as a discharge of the Parent Guarantor as a matter of
law or equity.

         SECTION 6.4. REINSTATEMENT; SUBROGATION. The Parent Guarantor agrees
that the Parent Guaranty shall continue to be effective or be reinstated, as the
case may be, if, at any time payment, or any part thereof, of principal of or
interest on any Obligation is rescinded or must otherwise be restored by the
Agent, any Lender, or any other holder of any Obligation of the Company upon the
bankruptcy or reorganization of any Obligor or otherwise. The Parent Guarantor
hereby expressly waives, to the fullest extent permitted by law, all rights of
the Parent Guarantor against the Company, arising out of any payment by the
Parent Guarantor under the Parent Guaranty, or any exercise of remedies under
the Security Agreement or any other Loan Document, whether arising by way of any
right of subrogation, contribution, reimbursement, indemnity, or otherwise and
agrees that, if, and to the extent that, any such rights may not be waived under
applicable law, it will contribute such rights to the Company as a capital
contribution concurrently with the arising of such rights.

                                  ARTICLE VII

                       CONDITIONS TO EXTENSIONS OF CREDIT

         SECTION 7.1. INITIAL CREDIT EXTENSION. The obligations of the Lenders
and the Issuer Bank to make Credit Extensions (including the continuance of the
Existing Letters of Credit) on the Initial Borrowing Date shall be subject to
the prior or concurrent satisfaction of each of the conditions precedent set
forth in this Section 7.1.

         SECTION 7.1.1. RESOLUTIONS, ETC. The Agent shall have received from
each Obligor:

         (a) a certificate, in form and substance satisfactory to the Agent and
the Lenders, dated the Initial Borrowing Date, of its Secretary or Assistant
Secretary as to

                  (i) resolutions of its Board of Directors then in full force
            and effect authorizing the execution, delivery and performance of
            this Agreement and each other Loan Document to be executed by it;

                  (ii) the incumbency and signatures of those of its officers
            authorized to act with respect to this Agreement, and each other
            Loan Document to be executed by it; and

                  (iii) each of its Organic Documents, certified in a manner
            satisfactory to the Agent,

         upon which certificate the Agent and each Lender may conclusively rely
         until it shall have received a further certificate of the Secretary or
         Assistant Secretary of such Obligor canceling or amending such prior
         certificate;

         (b) a good standing certificate (or other equivalent document or
certificate satisfactory to the Agent and the Lenders) certified by the
secretary of state (or other appropriate government official) in the
jurisdiction of such Obligor's incorporation; and

         (c) such other documents (certified, if requested) as the Agent or any
Lender (acting through the Agent) may reasonably request with respect to any
Organic Document.

         SECTION 7.1.2. INSURANCE. The Agent shall have received satisfactory
evidence that all insurance policies and coverages required pursuant to any Loan
Document are in effect, together with certificates of insurance in form and
substance satisfactory to the Agent, including evidence satisfactory to the
Agent that the Agent has been named as loss payee under such policies as and to
the extent required by the Loan Documents and the insurance coverage described
in such certificates shall be satisfactory to the Agent.

         SECTION 7.1.3. PAYMENT OF OUTSTANDING INDEBTEDNESS; EXISTING LETTERS OF
CREDIT. All Obligations of the Company under the Existing Credit Agreement
(other than its Obligations with respect to the Existing Letters of Credit, but
including any fees related thereto) shall have been paid in full.

         SECTION 7.1.4. LOAN DOCUMENTS. The Agent shall have received all other
Loan Documents and all instruments and agreements set forth on Schedule XIV
hereto, duly executed by the applicable Obligor.

         SECTION 7.1.5. OPINIONS OF COUNSEL. The Agent shall have received
opinions, dated the Initial Borrowing Date and addressed to the Agent and all
Lenders, in form and substance satisfactory to the Agent from

         (a) Kramer Levin Naftalis & Frankel LLP, special outside counsel to
the Obligors;

         (b) John Donnan, Assistant General Counsel to the Company and the
Guarantors; and

         (c) Jones, Day, Reavis & Pogue, special New York and Ohio counsel
to the Company and the Guarantors.

         SECTION 7.1.6. [INTENTIONALLY OMITTED.]

         SECTION 7.1.7. CLOSING FEES, EXPENSES, ETC. The Agent shall have
received for its own account all fees, costs, and expenses due and payable
pursuant to Sections 3.5.3 and 12.3, if then invoiced.

         SECTION 7.1.8. AVAILABILITY. On the Initial Borrowing Date, the
Revolving Commitment Availability (calculated as though the Existing Letters of
Credit were issued on such date) shall be at least $100,000,000.

         SECTION 7.1.9. CASH MANAGEMENT ARRANGEMENTS. The Agent and the Company
shall have entered into cash management arrangements reasonably acceptable to
the Agent, and such arrangements shall have been approved pursuant to the First
Day Orders.

         SECTION 7.1.10. BANKRUPTCY-RELATED CONDITIONS TO INITIAL CREDIT
EXTENSION.

         (a) The Bankruptcy Cases shall have been commenced by the Debtors, and
each of the Company and each Secured Guarantor shall be debtors and
debtors-in-possession.

         (b) All motions and other documents filed or to be filed with the
Bankruptcy Court in connection with the Loan Documents, all First Day Orders and
all other orders entered in the Bankruptcy Cases shall be in form and substance
reasonably satisfactory to the Agent and its counsel.

         (c) The Agent shall have received a signed copy of the interim order
(the "Interim Order") of the Bankruptcy Court (promptly upon entry thereof but
no later than fifteen (15) days after the Petition Date) in substantially the
form of Exhibit E hereto authorizing and approving the transactions contemplated
hereby and by the other Loan Documents and the granting of the Superpriority
Claims and Security Interests described in Section 2.5 and the Interim Order.
The Interim Order (i) shall be in form and substance satisfactory to the Agent,
(ii) shall be certified by the Clerk of the Bankruptcy Court as having been duly
entered, (iii) shall have authorized Credit Extensions by the Lenders in
aggregate amounts up to $100,000,000, (iv) shall approve the payment by the
Company and the Parent Guarantor of all of the fees set forth in this Agreement
and the Fee Letter, and (v) shall be in full force and effect and shall not have
been vacated, reversed, modified, amended or stayed.

         SECTION 7.2. FINANCIAL STATEMENTS; FORECASTS. The Lenders shall have
received (i) audited financial statements of the Company and its Subsidiaries on
a consolidated basis for the Fiscal Year ended December 31, 2000, (ii) interim
unaudited quarterly financial statements of the Company and its Subsidiaries on
a consolidated basis through the Fiscal Quarter ended September 30, 2001, (iii)
preliminary unaudited financial statements of the Company and its Subsidiaries
on a consolidated basis for the Fiscal Year ended December 31, 2001, and (iv)
the Company's business plan, which shall include a financial forecast on a
monthly basis for the fiscal period ending December 31, 2002 and on a quarterly
basis for the Fiscal Year ending December 31, 2003 prepared by the Company's
management and in the form dated February 5, 2002 and previously delivered to
the Agent (the "Financial Forecast").

         SECTION 7.3. NO MATERIAL LITIGATION. Except as reflected or disclosed
in the Company's Annual Report on Form 10-K for the year ended December 31,
2000, and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001,
June 30, 2001 and September 30, 2001, filed with the Securities and Exchange
Commission or as otherwise disclosed to the Lenders in writing prior to the date
hereof, there shall exist no unstayed action, suit, investigation, litigation or
proceeding (other than the Bankruptcy Cases) pending or, to the knowledge of the
Company, threatened in any court or before any arbitrator or governmental
instrumentality that (i) has a reasonable probability of having a material
adverse effect on the business, financial condition, operations, performance, or
properties of the Company and the Guarantors, taken as a whole, or (ii)
restrains, prevents or imposes or can reasonably be expected to impose
materially adverse conditions upon the Credit Extensions under this Agreement
and the Loan Documents or the transactions contemplated thereby.

         SECTION 7.4. ALL CREDIT EXTENSIONS. The obligation of each Lender to
fund any Loan on the occasion of any Credit Extension (including the initial
Credit Extension), the obligation of Agent to fund any Swingline Loan, and the
obligation of any Issuer Bank to issue any Letter of Credit, as the case may be,
shall, except as provided in Sections 2.1.2(b) and (c), be subject to the prior
or concurrent satisfaction (or waiver) of each of the conditions precedent set
forth in this Section 7.4. Notwithstanding the foregoing, the Lenders
acknowledge and agree that during the continuance of an Event of Cash Dominion,
unless and until the Agent receives written instructions from the Required
Lenders during the continuance of an Event of Cash Dominion to cease making
Swingline Loans and Revolving Loans and instructing Issuer Banks to issue
Letters of Credit (a) the Agent, acting in its sole and absolute discretion,
pursuant to Section 12.1(b), may waive the conditions of this Section 7.4 and
continue to make Revolving Loans and Swingline Loans, provided that the
Revolving Credit Outstandings after giving effect to such Loans do not exceed
the Borrowing Base less the Carve-Out Reserve, and instruct the applicable
Issuer Bank to issue Letters of Credit notwithstanding the existence of a
Default and (b) if the Agent, acting in its sole and absolute discretion, has
determined that it is in the best interests of the Lenders to continue to fund,
the Lenders shall be obligated to continue to make Revolving Loans and to
reimburse the Agent for Swingline Loans and shall be deemed to have purchased
and received an undivided interest in Letters of Credit made or issued.

         SECTION 7.4.1. COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC. Both
immediately before and immediately after giving effect to any Credit Extension
(but, if any default of the nature referred to in Section 10.1.5 shall have
occurred with respect to any other Indebtedness, without giving effect to the
application, directly or indirectly, of the proceeds of such Credit Extension)
the following statements shall be true and correct:

         (a) the representations and warranties set forth in Article VIII
(excluding, however, in the case of Credit Extensions other than the Credit
Extensions made on the Initial Borrowing Date, those contained in Sections 8.8
and 8.13 and the last sentence of Section 8.12) and in each of the other Loan
Documents shall be true and correct in all material respects with the same
effect as if then made (unless stated to relate solely to an earlier date, in
which case such representations and warranties shall be true and correct in all
material respects as of such earlier date), except that after the Initial
Borrowing Date, for purposes of this clause (a), the words "has a reasonable
possibility of having a Materially Adverse Effect" which appear in Sections 8.7
and 8.10 shall be deemed to read "could reasonably be expected to have a
Materially Adverse Effect" and the words "has no reasonable possibility of
having a Materially Adverse Effect" which appear in Section 8.1 shall be deemed
to read "could not reasonably be expected to have a Materially Adverse Effect";

         (b) except as disclosed by the Company to the Agent and the Lenders in
Item 3 ("Litigation") or Item 8 ("Environmental Matters") of the Disclosure
Schedule or in the Environmental Reports;

                  (i) no labor controversy, litigation, arbitration, or
            governmental proceeding, or governmental investigation known to the
            Company's Executive Officers (including any litigation or
            governmental proceeding or such governmental investigation with
            respect to any environmental matter) shall be pending or, to the
            knowledge of the Company's Executive Officers, after due inquiry,
            threatened against the Parent Guarantor, the Company, or any of
            their Subsidiaries which has a reasonable possibility of having a
            Materially Adverse Effect or which purports to affect the legality,
            validity, or enforceability of this Agreement, or any other Loan
            Document; and

                  (ii) no development shall have occurred in any labor
            controversy, litigation, arbitration, or governmental proceeding, or
            governmental investigation known to the Company's Executive Officers
            (including any litigation or governmental proceeding or such
            governmental investigation with respect to any environmental matter)
            disclosed in Item 3 ("Litigation") or Item 8 ("Environmental
            Matters") of the Disclosure Schedule or in the Environmental Reports
            which has a reasonable possibility of having a Materially Adverse
            Effect;

         provided, however, that after the Initial Borrowing Date, the words
         "has a reasonable possibility of having a Materially Adverse Effect"
         which appear in clauses (i) and (ii) of this clause (b) shall be deemed
         to read "could reasonably be expected to have a Materially Adverse
         Effect";

         (c) no Default shall have then occurred and be continuing; and neither
the Parent Guarantor, the Company, any of their Subsidiaries, nor any other
Obligor shall be in violation of any law, governmental regulation, or court
order or decree where such violation has a reasonable possibility of having a
Materially Adverse Effect; provided, however, that after the Initial Borrowing
Date, the words "has a reasonable possibility of having a Materially Adverse
Effect" which appear in this clause (c) shall be deemed to read "could
reasonably be expected to have a Materially Adverse Effect";

         (d) the making of such Loan (or the issuance of such Letter of Credit)
shall not violate any requirement of law and shall not be enjoined, temporarily,
preliminarily or permanently; and

         (e) except as disclosed in writing to the Agent and the Lenders as of
such date and approved by the Required Lenders, there shall have occurred no
material adverse change in the business, financial condition, operations,
performance, or properties of the Company and the Guarantors, taken as a whole,
since the Petition Date (other than those which could reasonably be expected to
occur as a result of events leading up to and following the commencement of a
case under Chapter 11 of the Bankruptcy Code and as set forth in the Financial
Forecast).

         SECTION 7.4.2. CREDIT REQUEST; BORROWING BASE CERTIFICATE. The Agent
shall have received a Credit Request, and, in connection with any request for
any Revolving Loan or the issuance of any Letter of Credit other than during the
continuance of an Event of Cash Dominion, a Borrowing Base Certificate delivered
pursuant to Section 2.1.4 for such Credit Extension. The delivery of a Credit
Request and the acceptance by the Company of the proceeds of such Credit
Extension shall constitute a representation and warranty by the Company that, on
the date of such Credit Extension (both immediately before and after giving
effect to such Credit Extension and the application of the proceeds thereof),
except as contemplated by the last sentence of Section 7.4, the statements made
in Section 7.4.1 are true and correct.

         SECTION 7.4.3. SATISFACTORY LEGAL FORM. All documents executed or
submitted pursuant hereto by or on behalf of the Parent Guarantor, the Company,
any of the Company's Subsidiaries, or any other Obligor shall be reasonably
satisfactory in form and substance to the Agent and its counsel and the Agent
and its counsel shall have received all information, approvals, opinions,
documents, or instruments as the Agent or its counsel may reasonably request.

         SECTION 7.4.4. BANKRUPTCY RELATED CONDITIONS TO ALL CREDIT EXTENSIONS.

         (a) None of the Bankruptcy Cases shall have been dismissed or converted
to a case under Chapter 7 of the Bankruptcy Code, no Debtor shall have filed an
application for an order dismissing its Bankruptcy Case or converting its
Bankruptcy Case to a case under chapter 7 of the Bankruptcy Code, and no trustee
under Chapter 7 or Chapter 11 of the Bankruptcy Code shall have been appointed
in any of the Bankruptcy Cases.

         (b) No order shall have been entered by the Bankruptcy Court approving
(and no application shall have been filed by any Debtor for the approval of) any
other Lien or superpriority administrative claim in any Bankruptcy Case which is
pari passu with or senior to the Liens and Superpriority Claims of the Agent
and/or any Secured Lender granted pursuant to the Interim Order and, if
applicable, the Final Order (and, other than the Carve-Out, no such claim or
Lien has arisen).

         (c) The Bankruptcy Court shall have entered an Interim Order and, if
such proposed funding date is more the 45 days after the commencement of the
Bankruptcy Cases, a final order (the "Final Order") each in form and substance
satisfactory to the Agent, entered on notice to such parties as may be
satisfactory to the Agent, (i) authorizing and approving this Agreement and the
other Loan Documents and the transactions contemplated thereby, including,
without limitation, the granting of the super-priority status, Security
Interests and Liens, and the payment of all fees, referred to herein or in the
Fee Letter and (ii) lifting the automatic stay to permit the Debtors to perform
their obligations and the Agent and the Lenders to exercise their rights and
remedies with respect to the Loan Documents, which Interim Order or Final Order,
as the case may be, shall be in full force and effect, shall not have been
reversed, vacated or stayed and shall not have been amended, supplemented or
otherwise modified without the prior written consent of the Agent.

         SECTION 7.5. CONDITIONS SUBSEQUENT. The Parent Guarantor and the
Company shall, and cause each of the Obligor to, take such actions as are set
forth in Schedule XV hereto promptly, and in any event, within the time set
forth on such Schedule.

                                  ARTICLE VIII

                         REPRESENTATIONS AND WARRANTIES

                  In order to induce the Lenders and the Agent to enter into
this Agreement, and to induce the Lenders to extend their Commitments and to
make Credit Extensions hereunder, the Parent Guarantor represents and warrants
(and the Company, to the extent that any such representation and warranty shall
be applicable to the Company, its Subsidiaries, or any of its or their
Properties, also represents and warrants) unto the Agent and each Lender as set
forth in this Article VIII, subject to the entry by the Bankruptcy Court of the
Interim Order or the Final Order, as applicable.

         SECTION 8.1. ORGANIZATION, ETC. Each of the Obligors, the Canadian
Subsidiaries, VALCO, QAL, Anglesey, ALPART, KJBC, and each other Significant
Subsidiary of the Company is a corporation, partnership, or other entity validly
organized and existing and (in the case of non-Domestic Subsidiaries and Joint
Venture Affiliates, to the extent that "good standing" is recognized under
applicable law) in good standing under the laws of the jurisdiction of its
incorporation or organization, as the case may be; is duly qualified to do
business and (in the case of non-Domestic Subsidiaries and Joint Venture
Affiliates, to the extent that "good standing" is recognized under applicable
law) in good standing as a foreign corporation, partnership, or other entity in
each jurisdiction where the nature of its business or activities requires such
qualification; and has full corporate, partnership, or other organizational
power and authority and holds all requisite governmental licenses, permits, and
other approvals to own, lease, and operate its Properties and to conduct its
business substantially as now being operated and conducted, except where the
failure to be so qualified and in good standing or to have such power,
authority, licenses, permits, and other approvals has no reasonable possibility
of having a Materially Adverse Effect. The Parent Guarantor, the Company, each
Subsidiary of the Company, and each Obligor (a) has full corporate power and
authority to enter into and perform its respective obligations under this
Agreement, and the other Loan Documents and (b) holds all requisite governmental
licenses, permits, and other approvals to enter into and perform its respective
obligations under this Agreement, and the other Loan Documents.

         SECTION 8.2. DUE AUTHORIZATION, NON-CONTRAVENTION, ETC. The execution,
delivery, and performance by each Obligor of the Loan Documents to which such
Obligor is a party are within such Obligor's corporate powers, have been duly
authorized by all necessary corporate action, and do not

         (a) contravene such Obligor's Organic Documents;

         (b) contravene any contractual restriction entered into after the
Petition Date where such a contravention has a reasonable possibility of having
a Materially Adverse Effect, or contravene any law or governmental regulation or
court decree or order binding on or affecting such Obligor; or

         (c) result in, or require the creation or imposition of, any Lien on
any of such Obligor's properties, other than pursuant to the Loan Documents.

         SECTION 8.3. GOVERNMENT APPROVAL, REGULATION, ETC. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person (other than the Bankruptcy Court)
is required for the due execution, delivery, or performance by any Obligor of
any Loan Document to which it is a party, except for the entry of the Interim
Order and the Final Order, any actions required outside of the United States
(with respect to Collateral located outside of the United States or Collateral
consisting of stock of foreign issuers), and actions required under the Federal
Assignment of Claims Act of 1940 in order to perfect the security interests of
the Agent in the Collateral. None of the Parent Guarantor, the Company, or any
of their Subsidiaries is subject to regulation as an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or is a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as amended.

         SECTION 8.4. VALIDITY, ETC. This Agreement, and all other Loan
Documents executed by the Company will, on the due execution and delivery hereof
and thereof by all parties hereto and thereto and upon entry of the Interim
Order and the Final Order, constitute the legal, valid, and binding obligations
of the Company enforceable against the Company in accordance with their
respective terms; this Agreement and each other Loan Document executed by the
Parent Guarantor will, on the due execution hereof and thereof by all parties
hereto and thereto and upon entry of the Interim Order and the Final Order,
constitute the legal, valid, and binding obligations of the Parent Guarantor
enforceable against the Parent Guarantor in accordance with their respective
terms; and each Loan Document executed pursuant hereto by each other Obligor
will, on the due execution and delivery thereof by such Obligor and by all other
parties thereto and upon entry of the Interim Order and the Final Order,
constitute the legal, valid, and binding obligation of such Obligor enforceable
against such Obligor in accordance with its terms.

         SECTION 8.5. FINANCIAL INFORMATION.

         (a) The consolidated balance sheet of the Company and its Subsidiaries
as of December 31, 2000 and the related statements of consolidated income and
consolidated cash flows for the Fiscal Year then ended present fairly the
financial position of the Company and its Subsidiaries at December 31, 2000 and
the results of their operations and their cash flows for the Fiscal Year then
ended in conformity with GAAP. The consolidated balance sheet of the Company and
its Subsidiaries as of September 30, 2001 and the related statements of
consolidated income and consolidated statement of cash flows for the nine months
then ended present fairly (subject to normal year-end adjustments) the financial
position of the Company and its Subsidiaries at September 30, 2001 and the
results of their operations and their cash flows for the nine months then ended
in conformity with GAAP for interim financial information.

         (b) The consolidated balance sheet of the Parent Guarantor and its
Subsidiaries as of December 31, 2000 and the related statements of consolidated
income and consolidated cash flows for the Fiscal Year then ended present fairly
the financial position of the Parent Guarantor and its Subsidiaries at December
31, 2000 and the results of their operations and their cash flows for the Fiscal
Year then ended in conformity with GAAP. The consolidated balance sheet of the
Parent Guarantor and its Subsidiaries as of September 30, 2001 and the related
statements of consolidated income and consolidated statement of cash flows for
the nine months then ended present fairly (subject to normal year-end
adjustments) the financial position of the Parent Guarantor and its Subsidiaries
at September 30, 2001 and the results of their operations and their cash flows
for the nine months then ended in conformity with GAAP for interim financial
information.

         (c) The Financial Forecast was prepared on the basis of the estimates
and assumptions stated therein and represented, at February 5, 2002, the
Company's good faith forecasts and projections of its future financial
performance prepared after duly diligent investigations; and such Financial
Forecast, if prepared as of the date of this Agreement, would contain estimates
of the future financial performance of the Company and its Subsidiaries which
would not materially and adversely differ from the respective estimates
contained in the Financial Forecast. As of the date hereof and, in connection
with the initial Credit Extension, as of the Initial Borrowing Date, no material
developments have occurred since February 5, 2002, which would lead the Company
to believe that such Financial Forecast, taken as a whole, is not reasonably
attainable, subject to the uncertainties and approximations inherent in any
projections. It is understood by the Agent and the Lenders that all of the
estimates and assumptions on which such Financial Forecast is based may not
prove to be correct, that actual future financial performance may vary from that
projected, and that nothing contained in this clause (c) shall be construed as a
warranty, or guarantee, of future financial performance.

         SECTION 8.6. NO MATERIAL ADVERSE EFFECT.

         (a) For purposes of Credit Extensions to be made on the Initial
Borrowing Date, no event or events have occurred since September 30, 2001 which,
individually or in the aggregate, have had or have a reasonable possibility of
having a Materially Adverse Effect (other than those which could reasonably be
expected to occur as a result of events leading up to and following the
commencement of a case under Chapter 11 of the Bankruptcy Code and as set forth
in the Financial Forecast).

         (b) For purposes of Credit Extensions requested to be made after the
Initial Borrowing Date, no event or events have occurred since the Initial
Borrowing Date which, individually or in the aggregate, have had or could
reasonably be expected to have a Materially Adverse Effect (other than those
which could reasonably be expected to occur as a result of events leading up to
and following the commencement of a case under Chapter 11 of the Bankruptcy Code
and as set forth in the Financial Forecast).

         SECTION 8.7. ABSENCE OF DEFAULT OR VIOLATION OF LAW. No Obligor nor any
Subsidiary thereof is (a) in default in the payment of (or in the performance of
any material obligation applicable to) any Indebtedness which default has a
reasonable possibility of having a Materially Adverse Effect unless such
enforcement of remedies with respect to such default is stayed or, as to
Indebtedness incurred after the Petition Date, any Indebtedness outstanding in a
principal amount exceeding $10,000,000 or (b) in violation of any law,
governmental regulation, or court decree or order where such violation has a
reasonable possibility of having a Materially Adverse Effect.

         SECTION 8.8. LITIGATION, ETC. Other than the Bankruptcy Cases, there is
no pending or, to the knowledge, after due inquiry, of the Executive Officers of
the Parent Guarantor or the Company, threatened labor controversy, litigation,
action, or proceeding affecting the Parent Guarantor, the Company, or any of
their Subsidiaries or Joint Venture Affiliates, or any of their respective
Properties, or revenues, which has a reasonable possibility of having a
Materially Adverse Effect which has not been stayed or which purports to affect
the legality, validity, or enforceability of this Agreement, or any other Loan
Document, except as disclosed in Item 3 ("Litigation") or Item 8 ("Environmental
Matters") of the Disclosure Schedule or in the Environmental Reports.

         SECTION 8.9. SUBSIDIARIES.

         (a) The Parent Guarantor has no Subsidiaries except the Company and its
Subsidiaries. The Company has no Subsidiaries, except those Subsidiaries which
are identified in Item 2 ("Existing Subsidiaries") of the Disclosure Schedule.

         (b) Other than as set forth in Schedule XI hereto, as of the Initial
Borrowing Date neither the Parent Guarantor nor the Company has any Subsidiaries
having total assets greater than $1,000,000 (exclusive of assets eliminated in
consolidation) other than those Subsidiaries that are Guarantors.

         SECTION 8.10. OWNERSHIP OF PROPERTIES.

         (a) The Parent Guarantor, the Company, and each of their Subsidiaries
owns good title to all of its Properties, of any nature whatsoever, which are
material to the Parent Guarantor, the Company, and their Subsidiaries as a whole
or which, in the case of Properties owned by the Company or any of its
Significant Subsidiaries, are material to the Company or such Significant
Subsidiary, in each case free and clear of all Liens or material claims except
for "Permitted Exceptions" (as defined in the Company Mortgages and Company
Deeds of Trust (as defined in the Existing Credit Agreement)) or as permitted
pursuant to Section 9.2.3.

         (b) The Parent Guarantor, the Company and each of their Subsidiaries
owns (or is licensed to use) and possesses all such patents, trademarks, trade
names, service marks, and copyrights as the Parent Guarantor and the Company
consider necessary for the conduct of its business and the business of its
Subsidiaries as now conducted without, individually or in the aggregate, any
infringement or alleged infringement upon rights of other Persons which has a
reasonable possibility of having a Materially Adverse Effect.

         SECTION 8.11. TAXES. The Parent Guarantor, the Company, and each of
their Domestic Subsidiaries and their other Significant Subsidiaries have filed
all federal, state, and all other material tax returns and reports required by
law to have been filed by it and have paid or caused to be paid all material
taxes and governmental charges thereby shown to be owing, except any such taxes
or charges which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP have been
set aside on its books.

         SECTION 8.12. PENSION AND WELFARE PLANS. During the
twelve-consecutive-month period prior to the date of the execution and delivery
of this Agreement and prior to the date of each Credit Extension hereunder, no
actions have been taken by the Parent Guarantor, the Company, any member of
their Controlled Groups, or any other Person (with the requisite authority to
act) to terminate any Pension Plan that has insufficient assets to satisfy all
benefit liabilities thereunder (within the meaning of section 4001(a)(16) of
ERISA), which termination is sufficient to give rise to a Lien on assets of any
Controlled Group member under section 4068 of the ERISA unless such Lien is
subordinate to the Agent's Security Interest and no contribution failure has
occurred with respect to any Pension Plan sponsored or maintained by any
Controlled Group member sufficient to give rise to a Lien on assets of any
Controlled Group member under section 302(f) of ERISA, which failure has not
been cured within 30 days of the applicable due date unless such Lien is
subordinate to the Agent's Security Interest. Item 7 ("Employee Benefit Plans")
of the Disclosure Schedule lists all Welfare Plans of the Parent Guarantor, the
Company, or any of their Domestic Subsidiaries.

         SECTION 8.13. ENVIRONMENTAL WARRANTIES. Except as set forth in Item 8
("Environmental Matters") of the Disclosure Schedule or in the Environmental
Reports:

         (a) all facilities and Property (including underlying groundwater)
owned, operated, or leased by the Parent Guarantor, the Company, or any of their
Subsidiaries have been, and continue to be, owned, operated, or leased by the
Parent Guarantor, the Company, and their Subsidiaries in material compliance
with all Environmental Laws;

         (b) there are no pending or, to the knowledge of the Parent Guarantor's
or the Company's Executive Officers, after due inquiry, threatened

                  (i) claims, complaints, notices, or requests for information
            received by the Parent Guarantor, the Company, or any of their
            Subsidiaries, from any federal, state, or local governmental agency
            or authority, or from any Person which has commenced a legal
            proceeding against the Parent Guarantor, the Company, or any of
            their respective Subsidiaries, with respect to any alleged violation
            of any Environmental Law, or

                  (ii) complaints, notices, or inquiries to the Parent
            Guarantor, the Company, or any of their Subsidiaries, from any
            federal, state, or local governmental agency or authority, or from
            any Person which has commenced a legal proceeding against the Parent
            Guarantor, the Company, or any of their respective Subsidiaries,
            regarding potential liability under any Environmental Law;

         (c) there have been no Releases of Hazardous Materials at, on, into or
under any Property now or previously owned, operated, or leased by the Parent
Guarantor, the Company, or any of their Subsidiaries that, singly or in the
aggregate, have a reasonable possibility of having a Materially Adverse Effect;

         (d) the Parent Guarantor, the Company, and their Subsidiaries have been
issued and are in material compliance with all permits, certificates, approvals,
licenses, and other authorizations relating to environmental matters and
necessary for their businesses;

         (e) no Property now or previously owned, operated, or leased by the
Parent Guarantor, the Company, or any of their Subsidiaries is listed or, to the
knowledge of the Parent Guarantor's or the Company's Executive Officers, after
due inquiry, proposed for listing (with respect to owned Property only) on the
National Priorities List pursuant to CERCLA or on the CERCLIS or, to the best
knowledge and belief of the Parent Guarantor's and the Company's Executive
Officers, on any similar state list of sites requiring investigation or
clean-up;

         (f) there are no underground storage tanks (as defined in 40 C.F.R.
Section 280.1, as the same may be amended, modified, supplemented, or replaced
from time to time), active or abandoned, including petroleum storage tanks, on
or under any Property now or previously owned or leased by the Parent Guarantor,
the Company, or any of their Subsidiaries that, singly or in the aggregate, have
a reasonable possibility of having a Materially Adverse Effect;

         (g) none of the Parent Guarantor, the Company, or any of their
Subsidiaries has, to the best knowledge and belief of each Executive Officer of
the Company, transported or arranged for the transportation of any Hazardous
Material to any location which is listed or proposed for listing on the National
Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list
or which is the subject of federal, state, or local enforcement actions or other
investigations which has a reasonable possibility of leading to material claims
against the Parent Guarantor, the Company or such Subsidiary thereof for any
remedial work, damage to natural resources, or personal injury, including claims
under CERCLA; and

         (h) there are no polychlorinated biphenyls or friable asbestos present
at any real property now or previously owned or leased by the Parent Guarantor,
the Company, or any of their Subsidiaries that, singly or in the aggregate, have
a reasonable possibility of having a Materially Adverse Effect.

         SECTION 8.14. REGULATIONS U AND X. No Obligor is engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock, and no proceeds of any Credit Extension will be used for a purpose which
violates, or would be inconsistent with, F.R.S. Board Regulation U or X. Terms
for which meanings are provided in F.R.S. Board Regulation U or X or any
regulations substituted therefor, as from time to time in effect, are used in
this Section 8.14 with such meanings.

         SECTION 8.15. [INTENTIONALLY OMITTED].

         SECTION 8.16. [INTENTIONALLY OMITTED].

         SECTION 8.17. ACCURACY OF INFORMATION. All factual information
heretofore or contemporaneously furnished by or on behalf of any Obligor in
writing to the Agent or any Lender for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all other such factual
information hereafter furnished in writing by or on behalf of any Obligor to the
Agent or any Lender pursuant to or in connection with any Loan Document will be,
true and accurate in every material respect on the date as of which such
information is dated or certified, and such information is not, or shall not be,
as the case may be, incomplete by omitting to state any material fact necessary
to make such information not misleading in light of the circumstances then
prevailing.

         SECTION 8.18. JOINT VENTURE CONTINGENT LIABILITIES. Item 10 ("Joint
Venture Contingent Liabilities") of the Disclosure Schedule contains a fair
summary of the types of the material Contingent Liabilities of the Company and
its Subsidiaries in respect of the businesses, operations, and financial
obligations of VALCO, ALPART, Anglesey, KJBC and QAL.

         SECTION 8.19. ENCUMBERED PROPERTY. The real property and improvements
thereon in which a Security Interest is granted to the Agent pursuant to the
Loan Documents includes, as of the date of this Agreement, all of the real
property and improvements owned or leased by the Company or any of the Secured
Guarantors which comprise, or are part of, or are used in the operations of, or
are located contiguous to, the respective plants of the Company and Kaiser
Bellwood which are located at the locations listed on Schedule II hereto.

                                   ARTICLE IX

                                    COVENANTS

         SECTION 9.1. AFFIRMATIVE COVENANTS. The Parent Guarantor agrees (and
the Company, to the extent that any such agreement of the Parent Guarantor shall
be applicable to the Company, any of its Subsidiaries, or any of its or their
properties, also agrees) with the Agent and each Lender that, until all
Commitments have terminated, no Letters of Credit are outstanding, and all
outstanding monetary Obligations have been paid in full:

         SECTION 9.1.1. FINANCIAL INFORMATION, REPORTS, NOTICES, ETC. The
Company will furnish, or will cause to be furnished, to the Agent, for itself
and for delivery to the Lenders, copies of the following financial statements,
reports, notices, and information:

         (a) within 30 days after month end (commencing with the month ending
March 31, 2002 for the period from and including the Petition Date to March 31,
2002), monthly, internally prepared unaudited consolidated financial statements
of the Company and its subsidiaries, including balance sheet, income statement
and cash flow statement certified (subject to normal year-end adjustments) on
behalf of the Company by a Financial Authorized Officer and, if the financial
covenant set forth in Section 9.2.4 is then being tested on a monthly basis,
together with a Compliance Certificate, executed on behalf of the Company by a
Financial Authorized Officer of the Company, showing (in reasonable detail and
with appropriate calculations and computations in all respects satisfactory to
the Agent) compliance with the financial covenant set forth in Section 9.2.4;

         (b) within 50 days after the end of each of the first three Fiscal
Quarters of each Fiscal Year of the Company, consolidated and consolidating
balance sheets of the Company and its Subsidiaries as of the end of such Fiscal
Quarter and consolidated and consolidating statements of income of the Company
and its Subsidiaries for such Fiscal Quarter and for the period commencing at
the end of the previous Fiscal Year and ending with the end of such Fiscal
Quarter and a consolidated statement of cash flows of the Company and its
Subsidiaries for the period commencing at the end of the previous Fiscal Year
and ending with the end of such Fiscal Quarter, certified (subject to normal
year-end adjustments) on behalf of the Company by a Financial Authorized Officer
of the Company, and if the financial covenant set forth in Section 9.2.4 is then
being tested on a quarterly basis, together with a Compliance Certificate,
executed on behalf of the Company by a Financial Authorized Officer of the
Company, showing (in reasonable detail and with appropriate calculations and
computations in all respects satisfactory to the Agent) compliance with the
financial covenant set forth in Section 9.2.4;

         (c) within 95 days after the end of each Fiscal Year of the Company,
(i) a copy of the annual audit report for such Fiscal Year for the Company and
its Subsidiaries, including therein a consolidated balance sheet as at the close
of such Fiscal Year, and related consolidated statements of income and cash
flows for such Fiscal Year, of the Company and its Subsidiaries, in each case
audited (without any Impermissible Qualification) by Arthur Andersen LLP or
other independent public accountants acceptable to the Agent and the Required
Lenders, (ii) a consolidating balance sheet at the close of such Fiscal Year,
and a related consolidating statement of income for such Fiscal Year, of the
Company and its Subsidiaries, certified on behalf of the Company by a Financial
Authorized Officer of the Company, and (iii) a report from the accountants
referred to in clause (i) of this clause (c), containing a computation prepared
by the Company of the financial covenant contained in Section 9.2.4 as at the
end of such Fiscal Year which report shall specify that it has been prepared
using the procedures specified in the letter dated February 14, 1994 from Arthur
Andersen & Co. to the Agent, a copy of which has been delivered to Agent,
and reporting that, in making the audit necessary for the signing of such annual
report by such accountants, they have not become aware of any material
miscomputation by the Company of such financial covenant, or of any Default or
Event of Default that has occurred and is continuing, or, if they have become
aware of such miscomputation, Default, or Event of Default, describing such
miscomputation, Default, or Event of Default;

         (d) as soon as available and in any event within 50 days (or, in the
case of the fourth Fiscal Quarter of any Fiscal Year, 95 days) after the end of
each Fiscal Quarter, (i) a Compliance Certificate, executed on behalf of the
Company by a Financial Authorized Officer of the Company, showing (in reasonable
detail and with appropriate calculations and computations in all respects
satisfactory to the Agent) the remaining Dollar amount (or the Dollar Equivalent
thereof) of all currency payments that the Company is obligated to make under
all Currency Hedge Agreements and the remaining term of all Currency Hedge
Agreements as of the last day of such Fiscal Quarter and (ii) a detailed
schedule of Inventory by site (in substantially the form currently produced by
the Company, with such changes as to which the Agent may consent, such consent
not to be unreasonably withheld);

         (e) as soon as possible and in any event within three Business Days
after an Executive Officer of the Parent Guarantor or the Company shall have
become aware of the occurrence of

                  (i) any Default, a statement on behalf of the Company by the
            chief financial Authorized Officer of the Company setting forth
            details of such Default and the action which the Company and/or the
            relevant other Obligor has taken and proposes to take with respect
            thereto, or

                  (ii) any

                                    (A) default or event of default (however
                           denominated) under any Indebtedness incurred after
                           the Petition Date in a principal amount in excess of
                           $10,000,000, or

                                    (B) default or event of default (however
                           denominated) under any agreement relating to any
                           Joint Venture Affiliate, ALPART, or VALCO or any
                           other material document or agreement to which the
                           Company or any of its Subsidiaries is a party, in
                           each case where such a default or event of default
                           has a reasonable possibility of having a Materially
                           Adverse Effect,

                  notice and a description in reasonable detail thereof;

         (f) as soon as possible and in any event within three Business Days
after (i) the occurrence of any material adverse development with respect to any
labor controversy, litigation, action, or proceeding described in Section 8.8 or
(ii) the commencement of any labor controversy, litigation, action, or
proceeding of the type described in Section 8.8, written notice thereof and
copies of all material documentation relating thereto;

         (g) promptly after the sending or filing thereof, copies of all
publicly available reports which the Parent Guarantor or the Company sends to
any of its security holders, and all publicly available reports and registration
statements which the Parent Guarantor or the Company or any of their
Subsidiaries files with the Securities and Exchange Commission or any national
securities exchange;

         (h) as soon as possible and in any event within three Business Days
after an Executive Officer of the Parent Guarantor or the Company shall have
become aware of the taking of any action by the Company or any other Person to
terminate any Pension Plan that has insufficient assets to satisfy all benefit
liabilities thereunder (within the meaning of Section 4001(a)(16) of ERISA), or
the failure to make a required contribution to any Pension Plan if such failure
is sufficient to give rise to a Lien against assets of any Controlled Group
member under section 302(f) of ERISA, or the taking of any action with respect
to a Pension Plan which could reasonably be expected to result in the
requirement that the Company or any Controlled Group member furnish a bond or
other security to the PBGC or such Pension Plan, or the occurrence of any event
relating to any Pension Plan with respect to which there is a reasonable
possibility of the incurrence by the Company, the Parent Guarantor or any of
their Subsidiaries of any liability, fine, or penalty which would have a
Materially Adverse Effect, or any material increase in the contingent liability
of the Company with respect to any post-retirement Welfare Plan benefit
excluding liabilities occurring solely by operation of any generally applicable
law enacted after the date of this Agreement, written notice thereof and copies
of all material documentation relating thereto;

         (i) (i) promptly upon receipt thereof, a copy of all notices,
documents, or other Instruments received by any Obligor pursuant to any
Subordinated Debt Instrument, any New Subordinated Debt Instrument, any New
Senior Debt Instrument, any Additional New Senior Debt Instrument or any Senior
Debt Instrument and not otherwise required to be delivered hereunder and (ii)
concurrently with the delivery thereof, a copy of all notices, documents, or
other Instruments delivered by any Obligor pursuant to any Subordinated Debt
Instrument, any New Senior Debt Instrument, any Additional New Senior Debt
Instrument or any Senior Debt Instrument and not otherwise required to be
delivered hereunder;

         (j) no later than five Business Days after the approval thereof by the
Company's Board of Directors, a copy of the annual business plan, budget, and
updated business projections of the Company and its Subsidiaries, and upon the
delivery to the Agent of any financial statements relating to a Fiscal Quarter
included in such plan, budget, or projections, a summary comparing the Company's
actual financial performance during such Fiscal Quarter to that provided in such
plan, budget, or projections;

         (k) such other information respecting the condition or operations,
financial or otherwise, of the Parent Guarantor, the Company, or any of their
Subsidiaries as any Lender (acting through the Agent) may from time to time
reasonably request; and

         (l) promptly upon the filing of each motion, application or similar
filing relating to one or more of the Bankruptcy Cases and promptly upon the
entry of each order, decree or judgment relating to one or more of the
Bankruptcy Cases, the Company shall provide the Agent's counsel with a copy of
each such motion, application, filing, order, decree or judgment.

         SECTION 9.1.2. COMPLIANCE WITH LAWS, ETC. The Parent Guarantor and the
Company will, and will cause each of their Subsidiaries to, comply in all
respects with all applicable laws, rules, regulations, and orders (except for
such noncompliance which could not reasonably be expected to have a Materially
Adverse Effect), including (and subject to the foregoing exception):

         (a) subject to Section 9.2.10, the maintenance and preservation of its
corporate or other organizational existence under the laws of its jurisdiction
of incorporation or organization, as the case may be, and its qualification as a
foreign corporation, partnership, or other entity in each jurisdiction where the
nature of its business requires such qualification; and

         (b) the payment, before the same become delinquent, of all taxes,
assessments, and governmental charges imposed upon it or upon its Property,
except to the extent being contested in good faith by appropriate proceedings
and for which adequate reserves in accordance with GAAP have been set aside on
its books, or to the extent that enforcement of such taxes has been stayed and
any tax Liens are subordinate to the Agent's Security Interest.

         SECTION 9.1.3. MAINTENANCE OF PROPERTIES. The Parent Guarantor and the
Company will, and will cause each of their Subsidiaries to, maintain, preserve,
protect, and keep (a) their material properties in good repair, working order,
and condition (ordinary wear and tear excepted), and make necessary and proper
repairs, renewals, and replacements so that their business carried on in
connection therewith may be properly conducted at all times and (b) all licenses
and permits, and trade names, trademarks, patents and other intellectual
property necessary to the conduct of the respective business of each as
presently conducted or contemplated unless, in each case, the Parent Guarantor
or the Company determines in the exercise of its good faith business judgment
that the continued maintenance of any such properties is no longer economically
desirable.

         SECTION 9.1.4. INSURANCE.

         (a) The Company will, and will cause each of its Subsidiaries to,
maintain or cause to be maintained with financially sound and reputable
insurance companies (including, consistent with past practice, insurance
companies affiliated with the Company), insurance with respect to their
Properties and business (including business interruption insurance, fire
insurance and public liability insurance) in such amounts, of such character and
against such risks as are usually maintained by companies engaged in the same or
similar business or having comparable properties, and in any case having a
coverage which is not materially less than the insurance of such type maintained
by the Company and its Subsidiaries on the date of this Agreement, provided,
that to the extent that any of the insurance required by this clause (a) ceases
to be available at commercially reasonable rates, the Company may effect
substitute insurance coverage therefor in accordance with prudent standards then
being followed by other companies engaged in the same or similar business or
having comparable properties. In addition, the Company will maintain flood
insurance on each Real Property set forth on Schedule II hereto in which a
Security Interest is granted to the Agent to the extent such Real Property is
eligible for the National Flood Insurance Program. In the event that the Company
wishes to effect substitute coverage pursuant to the foregoing proviso, it will
(i) notify the Agent of such intent as soon as reasonably practicable, and (ii)
in any event not less than three Business Days prior to the termination of the
coverage for which substitution is to be made, furnish the Agent with a report
of the Company describing in reasonable detail the nature of such substitute
coverage and the reasons why the Company believes that such substitute coverage
is appropriate.

         (b) The Company will cause:

                  (i) the Agent and the Lenders to be named as an additional
            insured, for a total coverage of $10,000,000 for all such Persons,
            under the public liability policies of the Company and its
            Subsidiaries; and

                  (ii) the Agent to be named as loss payee under all insurance
            policies of the Company and its Subsidiaries that have executed the
            Security Agreement covering loss of or damage to Property (pursuant
            to loss payable clauses satisfactory to the Agent),

            and will,

                            (A) as soon as practicable after effecting
                   any insurance policies of the Company or any of its
                   Subsidiaries (other than ALPART or VALCO) (and, with
                   respect to any such policies which are replacements
                   for other insurance policies which are required
                   hereby, and which are terminating, in any event
                   within three Business Days after such termination),
                   furnish the Agent with an insurance broker's
                   certificate or binder in respect of such policies or
                   replacement policies;

                            (B) if a replacement insurance policy for an
                   insurance policy which is required hereby and which
                   is terminating has not been effected prior to the
                   third Business Day before such termination, furnish
                   the Agent on such third Business Day a report of the
                   Company describing in reasonable detail the status of
                   such replacement policies;

                            (C) upon request of the Agent, furnish to
                   the Agent copies of all insurance policies at any
                   time maintained by the Parent Guarantor, the Company
                   and each Subsidiary of the Company executing the
                   Security Agreement and furnish to the Agent with
                   copies for each Lender, on or prior to the 15th day
                   of July of each year, a certificate of an Authorized
                   Officer of the Company setting forth the nature and
                   extent of all insurance maintained by the Company,
                   the Parent Guarantor and such Subsidiaries in
                   accordance with this Section 9.1.4 (and which, in the
                   case of a certificate of a broker, were placed
                   through such broker); and

                            (D) furnish to the Agent with copies for
                   each Lender, on or prior to the 15th day of July of
                   each year, a letter dated as of a recent date from
                   the Company's insurance broker or brokers comparing
                   the insurance coverage then maintained by the Parent
                   Guarantor, the Company and its Subsidiaries to the
                   insurance coverage described in the most recent such
                   letter delivered pursuant to this clause (D).

         SECTION 9.1.5. BOOKS AND RECORDS; AUDITS; CONFIDENTIALITY.

         (a) Each of the Parent Guarantor and the Company will, and will cause
each of its Subsidiaries to, maintain at all times proper and complete (in all
material respects) books, records and accounts, in which complete and timely (in
all material respects) entries are made, which reflect all of its business
affairs and transactions in accordance with GAAP. The Company will and will
cause each Secured Guarantor to maintain at all times books and records
pertaining to the Collateral in such detail, form and scope as the Agent shall
reasonably require, including records, to the extent normally maintained in
accordance with accepted accounting principles, of (i) all payments received and
all credits and extensions granted with respect to the Accounts, (ii) the
return, rejection, repossession, stoppage in transit, loss, damage or
destruction of any Inventory, and (iii) all other dealings affecting the
Collateral.

         (b) Each of the Parent Guarantor, the Company and each other Obligor
will permit the Agent, and any Lender who wishes to accompany the Agent, or any
representatives thereof, at all reasonable times and intervals (and at any time
during the continuance of an Event of Default or an Event of Cash Dominion), on
reasonable notice during ordinary business hours, to have access to such
Obligor's records, files, and books of account and, with respect to the Company
and the Secured Guarantors, the Collateral, and to discuss each such Obligor's
affairs with the officers and management and the independent public accountant
for such Obligor (and each Obligor hereby authorizes such independent public
accountant to discuss such Obligor's financial matters with the Agent and with
each Lender or its representatives). The Company will, and will cause each
Obligor to, deliver to the Agent, to the extent reasonably requested, any
instrument necessary for the Agent to obtain records from such Obligor. The
Agent may, at the Company's expense, make copies of all of any Obligor's books
and records, or require the Company or any Obligor to deliver such copies to the
Agent. The Agent may, without expense to the Agent, use such of the Company's or
any Secured Guarantor's personnel, supplies, and premises as may be reasonably
necessary for maintaining or enforcing the Security Interest. In addition,
subject to the provisions of Section 3.5.2, the Parent Guarantor and the Company
shall pay the reasonable fees of any independent public accountant incurred in
connection with the Agent's exercise of its rights pursuant to this Section
9.1.5.

         (c) Subject to the provisions of the next paragraph, the Agent, each
Lender, and each prospective purchaser of or participant in any part of any
Loan, Commitment, or any other interest under this Agreement, each severally and
for itself alone, agrees to maintain all Confidential Information (as defined
below) obtained by it in connection with its rights under this Agreement or the
other Loan Documents, including its rights of access contained in this Section
9.1.5 and information supplied pursuant to Section 9.1.1, confidential and not
disclose the same to any Person who is not an officer, director, employee, legal
counsel, or authorized agent or advisor of the Agent, or any such Lender or any
purchaser or prospective purchaser of or participant in all or any part of any
Loan, Commitment, or any other interest under this Agreement pursuant to the
provisions of Section 12.11.2 who shall agree to be bound by the provisions of
this clause (c). The Agent, each Lender, and each other Person bound hereby
shall not use any Confidential Information except for purposes relating to this
Agreement, the other Loan Documents, or otherwise in connection with its status
as a creditor or potential creditor of the Company pursuant to the transactions
contemplated hereby or thereby. The term "Confidential Information" shall mean
information specifically labelled or identified as "Confidential" furnished by
or on behalf of the Company to the Agent, any Lender, or other Person exercising
rights hereunder and any information or documents (whether or not specifically
labeled or identified as "Confidential") obtained pursuant to Section 9.1.5(b)
by the Agent, any Lender or other Person exercising rights hereunder, but shall
not include any such information which (a) has become or hereafter becomes
available to the public other than as a result of a disclosure by the Agent, any
Lender, or other Person exercising rights hereunder or required to be bound
hereby, or (b) was or became available to the Agent, any Lender, or other Person
exercising rights hereunder or required to be bound hereby on a non-confidential
basis prior to its disclosure by the Company, its representatives, or its
agents, or (c) becomes available to the Agent, any Lender, or other Person
exercising rights hereunder or required to be bound hereby on a non-confidential
basis from a source other than the Company, its representatives, or its agents
or another Lender or other Person exercising rights hereunder or required to be
bound hereby.

                  The restrictions set forth in the preceding paragraph shall
         not prevent the disclosure by the Agent, any Lender, or any other
         Person required to be bound hereby of any such information

                  (i) with the prior written consent of the Company or as
            expressly contemplated by this Agreement or any other Loan Document;

                  (ii) required to be disclosed to the Bankruptcy Court and upon
            order of any other court or administrative agency of competent
            jurisdiction, to the extent required by such order and not
            effectively stayed on appeal or otherwise, or as otherwise required
            by law;

                  (iii) in connection with any litigation or other legal
            proceeding at law, in equity, or in bankruptcy to which the Parent
            Guarantor or the Company or any Subsidiary of either thereof and the
            Agent, such Lender, or other Person are parties; or

                  (iv) to any Affiliate of any Lender who shall agree, to be
            bound by the provisions of this clause (c);

         provided, however, that, in the case of any intended disclosure under
         clause (ii), the Agent, the relevant Lender, or other Person shall
         (unless otherwise required by applicable law) give the Company not less
         than five Business Days prior notice (or such shorter period as may be
         reasonable or required by any court or agency under the circumstances),
         specifying the Confidential Information involved and stating such
         Person's intention to disclose such Confidential Information (including
         the manner and extent of such disclosure) in order to allow the Company
         an opportunity to seek an appropriate protective order.

         SECTION 9.1.6. ENVIRONMENTAL COVENANT. The Parent Guarantor and the
Company will, and will cause each of their Subsidiaries to,

         (a) use and operate all of their respective facilities and properties
in material compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates, licenses, and other authorizations relating to
environmental matters in effect and remain in material compliance therewith, and
handle all Hazardous Materials in material compliance with all applicable
Environmental Laws;

         (b)      (i) as soon as possible and in any event no later than 15
            Business Days after an Executive Officer of the Company shall have
            become aware of the receipt thereof, notify the Agent and provide
            copies of all written claims, complaints, notices, or inquiries by a
            governmental or regulatory authority, or any Person which has
            commenced a legal proceeding against the Parent Guarantor, the
            Company, or any of their Subsidiaries, relating to compliance by the
            Company or its Subsidiaries with, or potential liability of the
            Company or its Subsidiaries under, Environmental Laws; and

                  (ii) with reasonable diligence cure all environmental defects
            and conditions which are the subject of any actions and proceedings
            against the Parent Guarantor, the Company, or any of their
            Subsidiaries relating to compliance with Environmental Laws, except
            to the extent that such actions and proceedings (or the obligation
            of the Parent Guarantor, the Company, or any such Subsidiary to cure
            such defects and conditions) are stayed or are being contested by
            the Parent Guarantor, the Company or any of their Subsidiaries in
            good faith by appropriate proceedings; and

         (c) provide such information, access, and certifications which the
Agent may reasonably request from time to time to evidence compliance with this
Section 9.1.6.

         SECTION 9.1.7. PERFORMANCE OF INSTRUMENTS. Each of the Parent Guarantor
and the Company will, and will cause each of their Subsidiaries to, perform
promptly and faithfully all of their Obligations under each Loan Document to
which it is or is to be a party, subject to any applicable grace periods.

         SECTION 9.1.8. MAINTENANCE OF COLLATERAL. The Parent Guarantor and the
Company will, and will cause their Subsidiaries having an interest in any
Property which is, or is intended to be, Collateral to,

         (a) acquire and maintain such Property in a manner that will enable the
Parent Guarantor, the Company, or such Subsidiary, as the case may be, to cause
such Property to be subject to the Liens of the Collateral Documents; and

         (b) obtain the consent or approval of any Person whose consent or
approval is required for the grant of Liens by the Parent Guarantor, the
Company, or any such Subsidiary in any such Property.

         SECTION 9.1.9. COLLATERAL REPORTING. Except during the continuance of
an Event of Cash Dominion, the Company will, and will cause KAII and Kaiser
Bellwood to, provide the Agent with the following documents, in form and scope
satisfactory to the Agent, on a monthly basis: (a) an accounts receivable
summary aging report together with a reconciliation to the previous month's
accounts receivable summary aging report; (b) a reconciliation of the account
receivable summary aging report to the accounts receivable general ledger; (c) a
monthly listing of delinquent accounts in excess of $100,000 that are thirty
days past the due date or sixty-five days past the invoice date; (d) monthly
inventory summary reports by category in respect of the Inventory of the
Company, KAII and Kaiser Bellwood; (e) monthly inventory summary reports by
location in respect of the Inventory of the Company, KAII and Kaiser Bellwood;
and (f) certificates of an officer of the Company certifying on behalf of the
Company as to the foregoing. During the continuance of an Event of Cash
Dominion, the Company will, and will cause KAII and Kaiser Bellwood to, continue
to provide the Agent with the documents described in clauses (a) through (f)
above. In addition, the Company will, and will cause KAII and Kaiser Bellwood
to, provide the Agent with the following documents immediately upon any written
request therefor by the Agent: (a) copies of shipping and delivery documents;
(b) copies of invoices, customer statements, credit memos, remittance advises
and reports, and deposit slips; (c) copies of purchase orders, invoices, and
delivery documents for Inventory of the Company, KAII and Kaiser Bellwood
acquired by the Company; and (d) such other reports as to the Collateral as the
Agent shall request from time to time. If any of the Company's, Kaiser
Bellwood's or KAII's records or reports of the Collateral are prepared by an
accounting service or other agent, the Company hereby authorizes such service or
agent to deliver such records, reports, and related documents to the Agent.

         SECTION 9.1.10. DELIVERY; FURTHER ASSURANCES. The Parent Guarantor and
the Company will, and will cause each of their wholly owned Subsidiaries to, at
the expense of the Company,

         (a) without any request by the Agent, within 10 Business Days after the
receipt thereof, deliver or cause to be delivered to the Agent, in due form for
transfer (i.e., endorsed in blank or, if appropriate, accompanied by duly
executed blank stock or bond powers), all equity securities having a value, and
all debt instruments having face amounts, in excess of $100,000, at any time
representing all or any of the Collateral, in due form for transfer (i.e.,
endorsed in blank or, if appropriate, accompanied by duly executed blank bond
powers);

         (b) upon forming or acquiring any Subsidiary which is permitted
hereunder, immediately notify the Agent of such formation or acquisition, and if
requested by the Agent at the request of the Required Lenders, unless such
Subsidiary is acquired or formed by a Subsidiary of the Company which is not a
Domestic Subsidiary,

                  (i) pledge and deliver to the Agent certificates evidencing
            all of the issued and outstanding capital stock of such Subsidiary
            owned directly or indirectly by the Company (or, if such Subsidiary
            is not a Domestic Subsidiary, 65% of such capital stock) accompanied
            by undated stock powers duly executed in blank or pledge to the
            Agent all of the Company's or such Subsidiary's general or limited
            partnership interest or limited liability company interests or other
            equity interests in such Subsidiary;

                  (ii) if such pledgor is a Subsidiary of the Company, cause
            such pledgor to execute and deliver to the Agent a counterpart of
            the Subsidiary Guaranty and such other items of documentation as
            shall be necessary in order for such pledgor to assume the
            obligations under the Subsidiary Guaranty; and

                  (iii) cause such Subsidiary to deliver to the Agent such
            evidence of due execution, and such other information with respect
            to its Organic Documents and contractual obligations, and as to the
            Collateral in which it has an interest, as the Agent may request,
            and to take all action necessary or as the Agent may request to
            create, preserve, perfect, confirm, and validate the Liens created
            or purported to be created by such Collateral Documents;

         (c) if any Subsidiary of the Company is required to grant a Lien to the
Agent over any interest in Real Property pursuant to Section 9.1.11, and if
requested by the Agent at the request of the Required Lenders,

                  (i) cause such Subsidiary to execute and deliver to the Agent
            a counterpart of the Subsidiary Guaranty and such other items of
            documentation as shall be necessary in order for such Subsidiary to
            assume the obligations under the Subsidiary Guaranty,

                  (ii) cause such Subsidiary to execute and deliver to the Agent
            counterparts of the Security Agreement, and such other items of
            documentation as shall be necessary in order for such Subsidiary to
            assume the obligations under the Security Agreement, and

                  (iii) cause such Subsidiary to deliver to the Agent such
            evidence of due execution, and such other information with respect
            to its Organic Documents and contractual obligations, and as to the
            Collateral in which it has an interest, as the Agent may request,
            and to take all action necessary or as the Agent may request to
            create, preserve, perfect, confirm, and validate the Liens created
            or purported to be created by such Collateral Documents;

         (d) upon the opening of any account for investment in Cash Equivalent
Investments permitted hereunder by the Company or any Secured Guarantor promptly
notify the Agent thereof and, except in the case of a Sweep Account with Agent
or any Affiliate of Agent, promptly deliver a Control Agreement (as defined in
the Security Agreement);

         (e) upon request of the Agent, furnish or cause to be furnished to the
Agent such opinions of counsel, and other documents with respect to the
Collateral as the Agent may reasonably specify; and

         (f) upon request of the Agent, forthwith execute and deliver or cause
to be executed and delivered to the Agent, in due form for filing or recording
(and pay the cost of filing or recording the same in all public offices deemed
necessary by the Agent), such assignments, security agreements, pledge
agreements, consents, waivers, financing statements, stock or bond powers, and
other documents, and do such other acts and things, all as the Agent may from
time to time request, to establish and maintain to the satisfaction of the Agent
valid perfected Liens in all Collateral (free of all other Liens, claims, and
rights of third parties whatsoever, except for Liens, claims, and rights
permitted by Section 9.2.3 or by the Security Agreement), provided, that the
Company shall not be required to register itself in Ghana or the United Kingdom
for this purpose.

         SECTION 9.1.11. REAL PROPERTY; TITLE POLICIES; SURVEYS.

                  As further security for the payment of the Obligations, the
Parent Guarantor and the Company will, and will cause their Subsidiaries to,
within forty-five (45) Business Days after the date of entry of the Interim
Order (or such later date as the Agent may permit), as to the Real Property
listed on Schedule II hereto and separately identified by the Agent as subject
to this clause Section 9.1.11, within 20 Business Days after the date hereof,
and concurrently with or promptly after the purchase or acquisition by the
Company or any such Subsidiary of, or the formation or acquisition by the
Company or any such Subsidiary of any Subsidiary with an interest in, any Real
Property (including all improvements) which is located in the United States and
which is structurally related to, or which is located contiguous to, Real
Property listed on Schedule II hereto,

                  (i) execute, acknowledge, and deliver to the Agent a Mortgage
            (or, if appropriate, an amendment or supplement to an existing
            Mortgage), in such form and substance, and in such number of
            counterparts, as the Agent may reasonably require, mortgaging and
            granting a security interest in such interest in such real property
            as the Agent may direct; provided that the Agent may determine,
            after consultation with the Company, not to require a Mortgage if
            the Agent obtains title insurance required by clause (ii) after
            entry of the Interim Order;

                  (ii) obtain, with respect to each such interest in Real
            Property, a title insurance policy (in amounts reasonably
            satisfactory to the Agent) and as reasonably required by the Agent
            and a survey of, and such other documents relating to, such Real
            Property, in each case in form and substance reasonably satisfactory
            to Agent and its counsel;

                  (iii) cause each such Mortgage to be duly recorded or filed to
            create a valid, perfected, first-priority mortgage or deed of trust
            Lien on, and security interest in the property purported to be
            covered thereby, and pay all fees, taxes, and other expenses in
            connection therewith; and

                  (iv) deliver to the Agent such other items of documentation
            with respect to any of the foregoing as the Agent shall reasonably
            request (including certificates as to incumbency, resolutions, and
            opinions of counsel in all relevant jurisdictions).

At the request of the Agent, the Company will cause (and, in any event, the
Company shall be permitted to cause) any Real Property which is required to be
mortgaged pursuant to this Section 9.1.11 and which is owned by a Subsidiary of
the Company, to be transferred to the Company prior to the execution and
delivery of such Mortgage. The Agent and the Required Lenders shall have the
right, in their sole and absolute discretion, to accept or reject any such Real
Property interest offered pursuant to this Section 9.1.11.

         SECTION 9.1.12. INTERCOMPANY DEMAND NOTES. If requested by Agent or the
Required Lenders, within 60 days after the last day of any Fiscal Quarter as of
which the aggregate outstanding Indebtedness of the Company to any wholly owned
Domestic Subsidiary of the Company which is not a Secured Guarantor exceeds
$10,000,000, the Company will, if the same has not previously been done, (a)
execute and deliver to such Subsidiary an Intercompany Demand Note payable to
such Subsidiary, and (b) cause such Subsidiary to execute to pledge such note to
the Agent pursuant to the Security Agreement or such other pledge agreement as
may be reasonably satisfactory in form and substance to the Agent.

         SECTION 9.1.13. [INTENTIONALLY OMITTED]

         SECTION 9.1.14. MANAGEMENT CONSULTANT. At the request of the Required
Lenders, Agent or its counsel may hire a management consultant, and the Parent
Guarantor and the Company jointly and severally agree to pay the reasonable fees
and out-of-pocket expenses of such consultant, which fees and expenses shall be
part of the Obligations and secured by the Collateral.

         SECTION 9.1.15. GHANA OPINION. Within thirty (30) days after the
Initial Borrowing Date, the Company shall seek an opinion of Ghana counsel to
the effect set forth in clause (i) of the definition of Excluded Assets.

         SECTION 9.1.16. ANGLESEY SHAREHOLDER CONSENT. Within thirty (30) days
after the Initial Borrowing Date, the Company shall seek to obtain the written
confirmation from the other shareholder of Anglesey set forth in clause (ii) of
the definition of Excluded Assets.

         SECTION 9.1.17. SENIOR INDEBTEDNESS. The Company shall designate the
Obligations of AJI and KJC under the Loan Documents consisting of payments of
principal, interest and Reimbursement Obligations with respect to Letters of
Credit as "Senior Indebtedness" under (and as defined in) the Subordinated
Indenture pursuant to clause (ii) of such definition, and written notice of the
Company's compliance with this Section 9.1.17 shall be delivered to the Agent
within ten (10) Business Days after the Effective Date.

         SECTION 9.2. NEGATIVE COVENANTS. The Parent Guarantor agrees (and the
Company, to the extent that any such agreement of the Parent Guarantor shall be
applicable to the Company, any of its Subsidiaries, or any of its or their
properties, also agrees) with the Agent and each Lender that, until all
Commitments have terminated, no Letters of Credit are outstanding, and all
outstanding monetary Obligations have been paid in full:

         SECTION 9.2.1. BUSINESS ACTIVITIES. The Parent Guarantor will not
engage in any other business activity other than ownership of the Company and
such activities as may be incidental or related thereto including the offering
and sale of securities of the Parent Guarantor. The Company will not, and will
not permit any of its Subsidiaries to, engage in any business activity, except
those described in the recitals hereto in which the Company, its Subsidiaries
and Joint Venture Affiliates are engaged on the Effective Date, and such
activities as may be incidental or related thereto or reasonably related
extensions thereof.

         SECTION 9.2.2. INDEBTEDNESS. The Parent Guarantor and the Company will
not (or apply to the Bankruptcy Court to do so), and will not permit any of
their Subsidiaries to (or permit their Subsidiaries to apply to the Bankruptcy
Court to), create, incur, assume, or suffer to exist or otherwise become or be
liable in respect of any Indebtedness, other than the following:

         (a) In the case of the Parent Guarantor, the Company, and their
Subsidiaries,

                  (i) Indebtedness in respect of this Agreement and the other
            Loan Documents;

                  (ii) Indebtedness under the Existing Credit Agreement,
            provided that the conditions set forth in Section 7.1.3 in respect
            of payment of such Indebtedness shall be satisfied on the Initial
            Borrowing Date; and

                  (iii) Indebtedness existing as of the Effective Date which is
            identified in Item 4 ("Ongoing Indebtedness") of the Disclosure
            Schedule.

         (b) In the case of the Company and its Subsidiaries, subject to
compliance with Sections 9.2.20 and 9.2.7,

                  (i) [INTENTIONALLY OMITTED]

                  (ii) subject to Section 9.2.18, Indebtedness owing from (A)
            the Company to any wholly-owned Subsidiary of the Company (other
            than KAAC or Alwis) which (if required by Section 9.1.12) is
            evidenced by an Intercompany Demand Note which has been pledged to
            the Agent, (B) any wholly-owned Subsidiary of the Company (other
            than Alwis) to the Company, provided that such Indebtedness is not
            evidenced by any instrument, (C) any wholly-owned Subsidiary of the
            Company (other than Alwis) to any other wholly-owned Subsidiary of
            the Company, provided that with respect to any such Indebtedness to
            KFC or any such Indebtedness of KFC to KAAC, if required by Section
            9.1.12, such Indebtedness is evidenced by an Intercompany Demand
            Note which has been pledged to the Agent, and provided, further,
            that with respect to any such Indebtedness other than to KFC (or of
            KFC to KAAC), such Indebtedness is not evidenced by any instrument,
            (D) VALCO or ALPART to the Company, its Subsidiaries, or Persons
            (other than the Company, its Subsidiaries or any Restricted
            Affiliate) having an equity interest in VALCO or ALPART, as the case
            may be, (E) the Company or its Subsidiaries to VALCO or ALPART, or
            (F) the Company to KAAC, provided that any such Indebtedness (other
            than Indebtedness in respect of accounts payable and other current
            liabilities, in each case arising in the ordinary course of business
            out of the purchase by the Company of alumina from KAAC) shall, if
            required by Section 9.1.12, be evidenced by an Intercompany Demand
            Note which has been pledged to the Agent and Indebtedness in respect
            of such accounts payable and other current liabilities shall not be
            evidenced by any instrument;

                  (iii) Indebtedness of the Company, KJC, AJI, KAAC, ALPART and
            VALCO (including, without duplication, Contingent Liabilities in
            respect of Indebtedness) in an aggregate amount (excluding the
            amount of any such Indebtedness identified in Item 4 ("Ongoing
            Indebtedness") of the Disclosure Schedule to the Existing Credit
            Agreement) not to exceed $150,000,000 in respect of ALPART,
            $75,000,000 in respect of QAL and $25,000,000 in respect of VALCO;
            provided, however, that for purposes of calculating the aggregate
            amount of Indebtedness of the Company and its Subsidiaries
            outstanding pursuant to this clause (b)(iii), there shall be
            subtracted from the total amount of Indebtedness of non-wholly-owned
            Subsidiaries an amount equal to (A) that portion of such
            Indebtedness attributable to the proportionate direct or indirect
            ownership of Persons other than the Company and its Subsidiaries of
            the voting stock of, or partnership interest in, such Subsidiary or
            (B) if the economic burden of such Indebtedness is borne or to be
            borne by minority owners of such Subsidiary (other than the Company
            and its Subsidiaries) in a proportion other than the proportion of
            their direct or indirect ownership of the voting stock of, or
            partnership interest in, such Subsidiary, the proportionate share of
            the economic burden of such Indebtedness borne or to be borne by
            such minority owners;

                  (iv) Indebtedness incurred by the Company in connection with
            the purchase, redemption, retirement, or other acquisition by the
            Company of the Preferred Stock (USWA) outstanding on the date hereof
            (plus additional shares of such Preferred Stock (USWA) issued as
            dividends thereon or on such shares issued as dividends) to the
            extent the purchase, redemption, retirement, or acquisition thereof
            is required by the Code and such Indebtedness is issued to the then
            holders of or beneficial owners of such shares of Preferred Stock
            (USWA);

                  (v) Indebtedness of the Company in an amount not exceeding
            $5,000,000 at any time outstanding in respect of the guaranty by the
            Company of the obligations of National Refractories & Minerals
            Corporation under the Revolving Credit and Term Loan Agreement dated
            as of April 30, 1985 (as the same has been and may hereafter be
            amended, modified, supplemented, restated, confirmed or replaced
            from time to time) among Congress Financial Corporation (Western),
            National Refractories & Minerals Corporation, National
            Refractories & Minerals, Inc. and National Refractories Holding
            Co.;

                  (vi) the obligation of the Company to make advances not
            exceeding $2,500,000 to National Refractories & Minerals
            Corporation under the Standby Revolving Credit and Security
            Agreement and Guaranty dated as of April 30, 1985 (as the same has
            been and may hereafter be amended, modified, supplemented, restated,
            confirmed or replaced from time to time) among the Company, National
            Refractories & Minerals Corporation, National Refractories &
            Minerals, Inc. and National Refractories Holding Co.;

                  (vii) the guaranty by the Company of the payment of certain
            shutdown, supplemental unemployment, pension, and retiree health and
            life insurance benefits as provided under the Agreement dated
            February 2, 1989 (as the same has been or may be amended,
            supplemented, restated, modified, confirmed, or replaced from time
            to time) between the Company and the United Steelworkers of America
            relating to the sale by the Company of its smelter and rolling mill
            in Ravenswood, West Virginia, to Ravenswood Acquisition Corporation;

                  (viii) the obligations of the Company and any of its
            Subsidiaries to purchase or sell goods, services, or technology
            utilized in their bauxite, alumina, and aluminum business and
            related extensions thereof, including on a take-or-pay basis,
            pursuant to agreements entered into the ordinary course of business
            consistent with past practice;

                  (ix) the obligations of QAL in respect of charters of vessels;

                  (x) Indebtedness of the Company or the respective Obligor in
            respect of (1) unsecured Hedging Obligations; (2) secured Hedging
            Obligations (to the extent such obligations are permitted to be
            secured pursuant to Section 9.2.3(v); (3) Currency Hedge
            Obligations, provided the remaining Dollar amount (or the Dollar
            Equivalent thereof) of all currency payments the Company or, without
            duplication, such Obligor is obligated to make under all such
            Currency Hedge Agreements (including any payments that would be
            payable by the Company following the exercise of any foreign
            exchange option sold by the Company but excluding, during the period
            prior to the date of exercise, any payments that would be payable by
            the Company following the exercise of any foreign exchange option
            purchased by the Company) does not exceed $500,000,000, in the
            aggregate, at any time; (4) Cash Management Obligations; and (5)
            without duplication, Bank Product Obligations;

                  (xi) Indebtedness of the Company and its Subsidiaries (other
            than KAAC, AJI, KJC, Kaiser Bellwood and KAII) in respect of letters
            of credit (including any such letters of credit identified in Item 4
            ("Ongoing Indebtedness") of the Disclosure Schedule) in an aggregate
            amount not to exceed $15,000,000 at any one time outstanding issued
            for the account of the Company or any of its Subsidiaries in support
            of certain self-insurance and reinsurance obligations;

                  (xii) Indebtedness of the Company in respect of the Redeemable
            Stock referred to in clause (i) of Section 9.2.6(a);

                  (xiii) [INTENTIONALLY OMITTED];

                  (xiv) Nonrecourse Indebtedness of Subsidiaries of the Company
            that are not Obligors, the proceeds of which are used to finance the
            construction, acquisition or retrofitting of aluminum smelters,
            alumina refineries, or fabrication plants, including, in either
            case, related facilities or interests therein;

                  (xv) Indebtedness of KAAC in the form of Liens on assets of
            KAAC and its Subsidiaries (other than any Collateral or any equity
            interests in QAL) securing the obligations of QAL;

                  (xvi) other Indebtedness of the Company and its Subsidiaries
            (other than KAAC, AJI, KJC and KAII) in an aggregate principal
            amount not to exceed $30,000,000 outstanding at any one time;
            provided, however, that no Indebtedness incurred by Alwis pursuant
            to this Section 9.2.2(b)(xvi) may be guaranteed by the Company or
            any of its Subsidiaries; and provided, further, that Indebtedness of
            Kaiser Bellwood incurred pursuant to this Section 9.2.2(b)(xvi)
            shall not exceed $10,000,000 at any time outstanding and shall be
            incurred solely for the purpose of making Capital Expenditures;

         (xvii) [INTENTIONALLY OMITTED];

                  (xviii) Indebtedness of Alwis to the Company and its
            Subsidiaries; provided that the aggregate principal amount of such
            Indebtedness plus the aggregate amount of Investments in Alwis
            (without duplication) under Section 9.2.5(n) does not exceed
            $250,000 in the aggregate at any one time outstanding.

         (c) In the case of the Parent Guarantor, Indebtedness arising under the
KT Note and Contingent Liabilities of the Parent Guarantor in respect of any
Indebtedness of the Company incurred pursuant to clause (b) above.

         SECTION 9.2.3. LIENS. The Parent Guarantor will not (or apply to the
Bankruptcy Court to do so) create, incur, assume, or suffer to exist any Lien
over any of its Properties, revenues, or assets, whether now owned or hereafter
acquired, except for Liens of the type described in clauses (a), (b), (e), and
(h) of this Section 9.2.3. The Company will not (or apply to the Bankruptcy
Court to do so), and will not permit any of its Subsidiaries to (or permit its
Subsidiaries to apply to the Bankruptcy Court to), create, incur, assume, or
suffer to exist any Lien upon any of its Properties, revenues, or assets,
whether now owned or hereafter acquired, other than the following:

         (a) Liens securing payment of the Obligations granted pursuant to any
Loan Document;

         (b) Liens securing payment of Indebtedness of the type permitted and
described in clause (a)(ii) of Section 9.2.2;

         (c) Liens granted prior to the Effective Date and identified in Item 5
("Ongoing Liens") of the Disclosure Schedule to the extent such Liens are valid,
perfected and unavoidable Liens in existence on the Petition Date or are valid
Liens in existence on the Petition Date that are perfected subsequent to such
date as permitted by Section 546(b) of the Bankruptcy Code;

         (d) Liens granted to secure payment of Indebtedness permitted by clause
(b)(xvi) of Section 9.2.2 on any Property (other than Accounts, Inventory and
Eligible Fixed Assets) created at the time of the acquisition of such Property
in order to secure payment of the purchase price thereof or in order to secure
any loan incurred for the purpose of financing such acquisition, and any Lien to
which any Property is subject at the time of its acquisition (including Property
of a Subsidiary at the time it becomes a Subsidiary), provided that the
principal amount of the Indebtedness secured by any such Lien does not exceed
80% of the cost of such Property (except in the case of Liens on the Property of
a Subsidiary at the time it becomes a Subsidiary) and that no such Lien may
extend to other property, together with refundings or extensions of the
foregoing for amounts not exceeding the principal amount of the Indebtedness so
refunded or extended and secured only by the Property theretofore securing the
same;

         (e) Liens for taxes, assessments, or other governmental charges or
levies to the extent that payment thereof shall not at the time be required in
accordance with the provisions of Section 9.1.2;

         (f) Liens of carriers, warehousemen, mechanics, workmen, repairmen,
vendors, materialmen, and landlords and other similar Liens incurred in the
ordinary course of business for sums not overdue or being contested in good
faith by appropriate proceedings, and deposits or Liens to obtain the release of
any such Lien;

         (g) Liens and deposits incurred or made in the ordinary course of
business in connection with worker's compensation, unemployment insurance, or
other forms of governmental insurance or benefits, or in connection with, or to
secure performance of, bids, tenders, statutory obligations, and leases (other
than, in each of such cases, for borrowed money or the obtaining of advances or
credit) entered into in the ordinary course of business, or to secure
obligations on surety or appeal bonds, and other Liens and deposits for purposes
of like nature in the ordinary course of business;

         (h) judgment Liens or similar awards in existence less than 15 days
after the entry thereof or with respect to which execution has been stayed, or
the payment of which is covered (subject to a customary deductible) by
insurance;

         (i) mineral leases, easements, covenants, restrictions, exceptions, or
reservations in any Real Property of the Company or any Subsidiary of the
Company which do not materially impair the use of such Real Property for the
purposes for which it is held;

         (j) zoning laws and ordinances, and rights reserved to or vested in any
municipality or government or proper authority to control or regulate any
Property of the Company or its Subsidiaries, or to use such Property in any
manner which does not materially impair the use of such Property for the
purposes for which it is held by the Company or such Subsidiary;

         (k) undetermined or inchoate Liens incident to construction,
maintenance, or current operations and Liens and charges incident to such
construction, maintenance, or operations which (i) have been filed of record but
which are being contested in good faith by appropriate proceedings and (ii)
individually, or in the aggregate, do not exceed $1,000,000 at any time;

         (l) Liens reserved in leases for rent and to assure compliance with the
lease terms covering solely Property kept at the leased premises and rights of
lessees to Property being leased from the Company or any of its Subsidiaries;

         (m) Liens on any Property in which the Company or any of its
Subsidiaries has a leasehold estate, easement, right of way, or similar interest
and to which such interest is or may become subject, and the rights reserved to
the lessors or grantors thereof, and to their successors and assigns, under
applicable law or the instrument creating such interest;

         (n) Liens on the Company's or any of its Subsidiary's rights under
agreements with respect to spot, forward, future and option transactions,
entered into in the ordinary course of business, involving (or, in the case of
futures and options, for or relating to) the purchase and sale of aluminum,
alumina, bauxite, energy or other commodities used in the production process or
on the transaction accounts in which such transactions are effected securing the
Company's or such Subsidiary's obligations under such agreements;

         (o) minor defects and irregularities in the title to any Property which
do not in the aggregate materially impair the value or, in the aggregate, the
use of such Property for the purposes for which it is held;

         (p) Liens on Property of ALPART securing Indebtedness in respect of
ALPART permitted by clause (b)(iii) of Section 9.2.2 and Liens on Property of
VALCO securing Indebtedness in respect of VALCO permitted by clause (b)(iii) of
Section 9.2.2;

         (q) Liens on Property of KAAC or its Subsidiaries (other than any
Collateral or any equity interests in QAL) securing Indebtedness of KAAC in
respect of QAL permitted by clause (b)(iii) of Section 9.2.2;

         (r) [INTENTIONALLY OMITTED];

         (s) Liens on cash securing letters of credit in an amount not to exceed
$15,000,000 at any one time outstanding;

         (t) Liens covering portions of the proceeds of Asset Dispositions,
which are held in escrow in connection with such Asset Dispositions;

         (u) Liens on Property (other than Accounts and Inventory and Eligible
Fixed Assets) of the Company securing Indebtedness permitted by clause (b)(v) of
Section 9.2.2;

         (v) Liens (i) securing the obligations of the Company under Currency
Hedge Agreements, provided (1) the remaining Dollar amount (or the Dollar
Equivalent thereof) of all currency payments the Company is obligated to make
under all such Currency Hedge Agreements (including any payments that would be
payable by the Company following the exercise of any foreign exchange option
sold by the Company but excluding, during the period prior to the date of
exercise, any payments that would be payable by the Company following the
exercise of any foreign exchange option purchased by the Company) does not
exceed $500,000,000, in the aggregate, at any time, (2) with respect to Currency
Hedge Agreements constituting Bank Products, all Property which is subject to
any such Lien constitutes Collateral and (3) with respect to Currency Hedge
Agreements not constituting Bank Products, (x) all Property (other than cash)
which is subject to any such Lien shall not constitute Collateral, (y) such
Property shall be limited to cash collateral and (z) such cash collateral shall
not exceed $10,000,000, in the aggregate, at any time; (ii) securing Bank
Products, provided all Property which is subject to any such Lien constitutes
Collateral; or (iii) securing Hedging Obligations arising from Hedging
Agreements constituting Bank Products, provided that all Property which is
subject to any such Lien constitutes Collateral;

         (w) other Liens on Property (other than Accounts, Inventory and
Eligible Fixed Assets) of the Company and its Subsidiaries incidental to the
conduct of the business of the Company and its Subsidiaries or the ownership of
their Property which were not incurred in connection with borrowed money or the
obtaining of advances or credit and which do not in the aggregate materially
detract from the value of their Property or materially impair the use thereof in
the operation of their business and which, in any event, do not secure
obligations aggregating in excess of $5,000,000; and

         (x) any interest of a consignor in goods held by the Company or any of
its Subsidiaries on consignment, provided that the aggregate value of goods so
held by the Company and its Subsidiaries on consignment at any one time shall
not exceed $25,000,000, and such goods shall be segregated from the Company's or
such Subsidiary's Inventory.

         SECTION 9.2.4. MINIMUM EBITDA.

         (a) The Company and its Subsidiaries, on a consolidated basis, shall
have a minimum EBITDA of not less than the following amounts, measured as of the
last day of each Fiscal Quarter for the periods specified below:


                            Period                               EBITDA
                            ------                               ------
         Petition Date to 6/30/02                             $ (45,000,000)
         Petition Date to 9/30/02                               (48,000,000)
         Petition Date to 12/31/02                              (37,000,000)
         4 Fiscal Quarters ending 3/31/03                         2,000,000
         4 Fiscal Quarters ending 6/30/03                        60,000,000
         4 Fiscal Quarters ending 9/30/03                       105,000,000
         4 Fiscal Quarters ending 12/31/03                      160,000,000

         (b) If at any time during any month for a period of three (3)
consecutive Business Days (i) the Revolving Credit Outstandings exceed
$100,000,000 or (ii) Revolving Commitment Availability is less than $75,000,000
(each condition in clause (i) and (ii), a "Trigger Event") then for that month
and each month thereafter in which a Trigger Event occurs, the Company and its
Subsidiaries, on a consolidated basis, shall have a minimum EBITDA of not less
than the following amounts, measured as of the last day of each month for the
period specified below:


                        Period
         Petition Date to 06/30/02                             (45,000,000)
         Petition Date to 07/31/02                             (48,000,000)
         Petition Date to 08/30/02                             (48,000,000)
         Petition Date to 09/30/02                             (48,000,000)
         Petition Date to 10/31/02                             (48,000,000)
         Petition Date to 11/30/02                             (48,000,000)
         Petition Date to 12/31/02                             (37,000,000)
         Petition Date to 01/31/03                             (24,000,000)
         Petition Date to 02/28/03                             (11,000,000)
         12 months ending 03/31/03                               2,000,000
         12 months ending 04/30/03                              21,000,000
         12 months ending 05/31/03                              40,000,000
         12 months ending 06/30/03                              60,000,000
         12 months ending 07/31/03                              75,000,000
         12 months ending 08/31/03                              90,000,000
         12 months ending 09/30/03                             105,000,000
         12 months ending 10/31/03                             120,000,000
         12 months ending 11/30/03                             135,000,000
         12 months ending 12/31/03                             160,000,000
         12 months ending 01/31/04                             160,000,000
         12 months ending 02/28/04                             160,000,000

         SECTION 9.2.5. INVESTMENTS. The Parent Guarantor will not (or apply to
the Bankruptcy Court to do so) make, incur, assume, or suffer to exist any
Investment except for its ownership or purchase of the shares of capital stock
of the Company and Cash Equivalent Investments. The Company will not (or apply
to the Bankruptcy Court to do so), and will not permit any of its Subsidiaries
to (or apply to the Bankruptcy Court to do so), make, incur, assume, or suffer
to exist any Investment in any other Person, other than the following, but
subject to compliance with Section 9.2.20:

         (a) Investments existing on the Effective Date and identified in Item 6
("Ongoing Investments") of the Disclosure Schedule;

         (b) Cash Equivalent Investments, provided, any Investment which when
made complies with the requirements of the definition of Cash Equivalent
Investment may continue to be held notwithstanding that such Investment if made
thereafter would not comply with such requirements;

         (c) subject to Section 9.2.18, without duplication, Indebtedness which
is an Investment permitted by clause (b)(ii) of Section 9.2.2;

         (d) Investments made pursuant to the arrangements described in clauses
(b)(v) and (b)(vi) of Section 9.2.2, and deposits permitted by clause (g) of
Section 9.2.3;

         (e) subject to Section 9.2.18, Investments in the ordinary course of
business in the Company and its Subsidiaries (other than Investments made prior
to October 1, 1993 by any Obligor (other than KBC and KEC) in KBC, KEC or any
Subsidiary of the Company that is not an Obligor and other than Investments in
Alwis);

         (f) provided no Default or Event of Default under Section 10.1.1 shall
have occurred and be continuing, Investments made in the ordinary course of
business in QAL, Anglesey and KJBC;

         (g) Investments which are Capital Expenditures permitted by Section
9.2.7;

         (h) Investments of cash held in escrow accounts required pursuant to
the terms of any contract or agreement between the Parent Guarantor, the
Company, or any of its Subsidiaries and any Person as in effect on the Effective
Date (including escrows in existence on the Effective Date) which are listed on
Schedule XII hereto;

         (i) Investments received in connection with Asset Dispositions, and
Investments in escrows established in connection with Asset Dispositions which
are permitted hereby;

         (j) trade credit extended in the ordinary course of business (including
such credit represented by any bond, note, debenture, or similar instrument) and
advance payments, made in the ordinary course of business, under contracts for
the purchase of goods or the receipt of services;

         (k) Investments in the form of advance payments in connection with (i)
Hedging Obligations, (ii) Currency Hedge Obligations, and (iii) spot, forward,
future and option transactions, entered into in the ordinary course of business,
involving (or, in the case of futures and options, for or relating to) the
purchase and sale of aluminum, alumina, bauxite, energy or other commodities
used in the production process;

         (l) Investments acquired in the settlement or other resolution of
disputes with any Person or of debts;

         (m) Investments of any Person which are in existence at the time such
Person becomes a Subsidiary of the Company (to the extent permitted hereunder)
and which, in the case of any such Investments which would breach any provision
of this Agreement if made directly by the Company,

                  (i) were not entered into in contemplation of such Person
            becoming a Subsidiary of the Company, and

                  (ii) do not constitute more than 20% of the assets of such
            Person at the time such Person becomes a Subsidiary of the Company;

         (n) Investments in Alwis and Investments (other than Investments in
MAXXAM, any Affiliate of MAXXAM (other than the Company, its Subsidiaries which
are not Restricted Subsidiaries, or any Joint Venture Affiliate)), not otherwise
permissible hereunder; provided that the aggregate amount of all Investments
(without duplication) under this Section 9.2.5(n) does not exceed $20,000,000 at
any one time outstanding, and provided further that the aggregate amount of
Investments under this Section 9.2.5(n) in Alwis does not exceed $250,000 in the
aggregate at any one time outstanding;

         (o) [INTENTIONALLY DELETED]

         (p) extensions and renewals of Investments permitted by clauses (a),
(h), (i), (j), (l) and (m) of this Section 9.2.5, provided that the principal
amount thereof is not increased; and

         (q) Indebtedness which is an Investment permitted by clause (b)(xviii)
of Section 9.2.2.

         SECTION 9.2.6. RESTRICTED PAYMENTS, ETC.

         (a) The Company and the Parent Guarantor will not (or apply to the
Bankruptcy Court to do so) declare, pay, or make any dividend or distribution
(in cash, Property, or obligations) on any shares of any class of capital stock
(now or hereafter outstanding) of the Company or the Parent Guarantor or on any
warrants, options, or other rights with respect to any shares of any class of
capital stock (now or hereafter outstanding) of the Company or the Parent
Guarantor (excluding dividends or distributions payable in its common stock
(other than Redeemable Stock) or warrants to purchase its common stock or
splitups or reclassifications of its common stock into additional or other
shares of its common stock) or apply, or permit any of their respective
Subsidiaries to apply, any of its funds, or Property to the purchase,
redemption, sinking fund, or other retirement, or agree, or permit any of their
respective Subsidiaries to agree, to purchase or redeem, any shares of any class
of capital stock (now or hereafter outstanding) of the Company or the Parent
Guarantor, or warrants, options, or other rights with respect to any shares of
any class of capital stock (now or hereafter outstanding) of the Company or the
Parent Guarantor (all of the foregoing non-excluded dividends, distributions,
application of funds or Property, purchases, redemption and similar payments
collectively being herein called "Distributions") except that

                  (i) the Company shall be permitted to purchase, redeem,
            retire, or otherwise acquire and to declare, pay, or make dividends
            or other distributions on its 4-1/8% Preference Stock, par value
            $100 per share, 4-3/4% Preference Stock (1957 Series), par value
            $100 per share, 4-3/4% Preference Stock (1959 Series), par value
            $100 per share, and 4-3/4% Preference Stock (1966 Series), par value
            $100 per share, in each case only in accordance with the terms of
            the Restated Certificate of Incorporation, and in each case unless
            (A) an Event of Default shall have occurred and be continuing and
            (B) the Company shall have been instructed by the Agent in writing
            not to make any such Distribution;

                  (ii) the Company shall be permitted to purchase, redeem,
            retire, or otherwise acquire and to declare, pay, or make dividends
            or other distributions on any shares of the Preferred Stock (USWA),
            in each case unless (A) an Event of Default shall have occurred and
            be continuing and (B) the Company shall have been instructed by the
            Agent in writing not to make any such Distribution;

                  (iii) the Company shall be permitted to pay for the benefit
            of, or to reimburse, the Parent Guarantor for the reasonable
            out-of-pocket expenses actually incurred (and documented as such) by
            the Parent Guarantor for services rendered to the Parent Guarantor
            by Persons who are not Affiliates or employees of the Parent
            Guarantor, MAXXAM, the Company or any of their respective
            Subsidiaries (provided that payments of legal fees and expenses to a
            law firm of which an Affiliate of the Company is a member shall be
            permitted) in connection with the registration, issuance or sale (or
            the proposed registration, issuance or sale) of securities of the
            Parent Guarantor to the extent that the net proceeds of such
            issuance or sale are (or, in the case of a proposed registration,
            issuance or sale, are proposed to be) used by the Parent Guarantor
            to make a loan or capital contribution to, or purchase securities
            of, the Company; and

                  (iv) the Company shall be permitted to make Distributions to
            the Parent Guarantor of all or a portion of the KT Note and accrued
            interest thereon.

         (b) Except as provided in the First-Day Orders, the Company will not,
and will not permit any of the Secured Guarantors to voluntarily prepay or
repay, redeem, purchase or otherwise satisfy prior to its scheduled maturity any
Indebtedness (or apply to the Bankruptcy Court to do so) other than (i) the
Company may repay or prepay the Obligations and (ii) any Subsidiary of the
Company may repay or prepay any Indebtedness owing to the Company or any
Guarantor; and

         (c) The Company and the Parent Guarantor will not, and will not permit
any of their respective Subsidiaries to, make any deposit for any of the
foregoing purposes.

         SECTION 9.2.7. CAPITAL EXPENDITURES. The Company will not (or apply to
the Bankruptcy Court to do so), and will not permit any of its Subsidiaries to,
make Adjusted Capital Expenditures in any Fiscal Year set forth below in an
aggregate amount in excess of the sum of (a) the Base Amount set forth below
opposite such Fiscal Year plus (b) in the case of Fiscal Year 2003 the Carryover
Amount applicable to such Fiscal Year:

                  Fiscal Year                       Base Amount
                  -----------                       -----------
                       2002                         $75,000,000
                       20                           $40,000,000

Notwithstanding the foregoing, not more than $31,000,000 in the aggregate of
Capital Expenditures in respect of ALPART during Fiscal Year 2002 and Fiscal
Year 2003 may be financed, directly or funded indirectly, by the Obligors;
provided that the foregoing shall not be deemed to limit clause (ii) of Section
9.2.20. The `Carryover Amount' applicable to Fiscal Year 2003 is equal to (i)
the Base Amount applicable to 2002 Fiscal Year minus (ii) the aggregate amount
of Adjusted Capital Expenditures which were actually made by the Company and its
Subsidiaries during the 2002 Fiscal Year; provided, however, that the Carryover
Amount shall not exceed $25,000,000.

         SECTION 9.2.8. RENTAL OBLIGATIONS. The Company will not (or apply to
the Bankruptcy Court to do so), and will not permit any of its Subsidiaries to
(or permit any of its Subsidiaries to apply to the Bankruptcy Court to do so),
enter into at any time any arrangement which does not create a Capitalized Lease
Liability and which involves the leasing by the Company or any of its
Subsidiaries for terms which exceed, or when added to the term of any extension
which may be made at the sole option of the Company or any such Subsidiary might
exceed, one year from any lessor of any Property (or any interest therein),
except such arrangements which, together with all other such arrangements which
shall then be in effect, will not require the payment of an aggregate amount of
rentals by the Company and its Subsidiaries on a consolidated basis (excluding
escalations resulting from a rise in the consumer price or similar index) in
excess, for any Fiscal Year of $45,000,000; provided, however, that any
calculation made for purposes of this Section 9.2.8 shall exclude any amounts
required to be expended for maintenance and repairs, insurance, taxes,
assessments, and other similar charges.

         SECTION 9.2.9. TAKE OR PAY CONTRACTS. The Company will not (or apply to
the Bankruptcy Court to do so), and will not permit any of its Subsidiaries to
(or permit any of its Subsidiaries to apply to the Bankruptcy Court to), enter
into or be a party to any arrangement for the purchase of materials, supplies,
other Property, or services if such arrangement by its express terms requires
that payment be made by the Company or such Subsidiary regardless of whether
such materials, supplies, other Property, or services are delivered or furnished
to it, except those set forth in Item 9 ("Take or Pay and Similar Contracts") of
the Disclosure Schedule.

         SECTION 9.2.10. CONSOLIDATION, MERGER, ETC. The Parent Guarantor and
the Company will not (or apply to the Bankruptcy Court to do so), and will not
permit any of their Subsidiaries to (or permit any of its Subsidiaries to apply
to the Bankruptcy Court to), liquidate or dissolve, consolidate with, or merge
into or with, any other corporation, except that if no Default or Event of
Default shall occur and be continuing or shall exist at the time of any such
merger or consolidation or immediately thereafter and after giving effect
thereto,

         (a) any Subsidiary of the Company may liquidate or dissolve into or may
merge or consolidate with or into the Company if the Company is the surviving
corporation;

         (b) any Subsidiary of the Company may liquidate or dissolve into or may
merge or consolidate with or into any wholly-owned Subsidiary of the Company
that is an Obligor if the Obligor is the surviving corporation;

         (c) any Subsidiary of the Company that is not an Obligor may liquidate
or dissolve or merge or consolidate with or into any other Subsidiary of the
Company that is not an Obligor;

         (d) the Parent Guarantor may, with the prior written consent of the
Required Lenders, merge with and into the Company and, provided that the Parent
Guarantor shall assume all of the Obligations of the Company under this
Agreement and the other Loan Documents, the Company may, with the prior written
consent of the Required Lenders, merge with and into the Parent Guarantor; and

         (e) the Company and its Subsidiaries may engage in Asset Dispositions
permitted by Section 9.2.11.

Notwithstanding the foregoing, neither the Company nor any Subsidiary may engage
in any such transaction unless at least five (or, in the case of any such
transaction involving the Company or any other Obligor, 30) Business Days prior
thereto, or such shorter period as shall be acceptable to the Agent, the Company
shall have delivered to the Agent a description of the proposed transaction, in
reasonable detail, and a certificate signed by an Authorized Officer certifying
that such transaction will not result in a Default or an Event of Default.

         SECTION 9.2.11. ASSET DISPOSITIONS. The Parent Guarantor and the
Company will not (or apply to the Bankruptcy Court to do so), and will not
permit any of their Subsidiaries to (or permit any of its Subsidiaries to apply
to the Bankruptcy Court to), make any Asset Disposition, other than the
following:

         (a) the Company and its Subsidiaries may dispose of cash or Cash
Equivalent Investments;

         (b) subject to Section 9.2.18 and Section 9.2.20, the Company or any
wholly-owned Subsidiary of the Company may dispose of its assets to the Company
or any wholly-owned Subsidiary of the Company;

         (c) the Company and its Subsidiaries may dispose of Inventory in the
ordinary course of business;

         (d) the Company and its Subsidiaries may license technology or know-how
on a nonexclusive basis in the ordinary course of business;

         (e) ALPART or VALCO may dispose of any of their respective assets for
fair value;

         (f) the Company and its Subsidiaries may dispose of assets with a fair
market value of less than $250,000 (in a single transaction or related series of
transactions) in the ordinary course of business;

         (g) the Company or any of its Subsidiaries may dispose of any of its
assets in connection with the leaseback of such assets by the Company or any of
its Subsidiaries, provided that such leaseback is otherwise permitted hereunder
and such Asset Disposition occurs not later than twelve months after such assets
are placed in service;

         (h) transfers of Property permitted by Section 9.2.12 and Section
9.2.18;

         (i) if no Default or Event of Default shall have occurred and be
continuing or shall occur after giving effect thereto, the Company and its
Subsidiaries may dispose of assets, in addition to those dispositions permitted
in clauses (a) through (h) above; provided the fair market value of the assets
disposed of pursuant to this Section 9.2.11(i) does not exceed $25,000,000 in
any Fiscal Year;

Notwithstanding the foregoing, the Company will not, and will not permit any of
its Subsidiaries to, take any action which would require an "Asset Sale Offer"
(under and as defined in the Subordinated Indenture) to be made pursuant to
Section 5.16(b) of the Subordinated Indenture or to violate the provisions of
Section 5.12 of the Subordinated Indenture, any similar provisions of the New
Subordinated Indentures, any similar provision of the New Senior Indenture or
the Additional New Senior Indentures or Section 4.12 of the Senior Indenture. In
addition, notwithstanding the foregoing, the Company will not, and will not
permit any of its Subsidiaries, to make any Asset Disposition of Accounts (other
than pursuant to Section 9.2.12) or any Asset Disposition of any other Property
if, after giving effect to such Asset Disposition, the Revolving Credit
Outstandings immediately following such Asset Disposition will exceed the
Borrowing Base.

         SECTION 9.2.12. SALE OR DISCOUNT OF RECEIVABLES. The Company will not
(or apply to the Bankruptcy Court to do so), and will not permit any of its
Subsidiaries to (or permit any of its Subsidiaries to apply to the Bankruptcy
Court to), directly or indirectly, sell, sell with recourse, discount or
otherwise sell for less than the face value thereof, any of its notes or
accounts receivable; provided, however, that the Company and its Subsidiaries
may sell, sell with recourse, discount or otherwise sell for less than the face
value thereof, to any Lender or Lenders, (a) any accounts receivable arising in
connection with any sale of product for delivery outside the United States which
accounts receivable are secured by a letter of credit provided the discount on
such accounts receivable secured by a letter of credit is not greater than that
necessary to reflect the time value of money and (b) any notes or accounts
receivable arising in connection with any sale of product for delivery in the
Commonwealth of Independent States provided the aggregate amount of all such
accounts receivable does not exceed $10,000,000 in any calendar month.

         SECTION 9.2.13. RESTRICTIONS ON ACTIONS UNDER CERTAIN AGREEMENTS.
Neither the Parent Guarantor nor the Company will

         (a) consent to any amendment, supplement, or other modification of any
of the terms or provisions contained in, or applicable to, any document or
instrument evidencing or governing any Subordinated Debt, any New Senior Debt,
any Additional New Senior Debt or any Senior Debt;

         (b) designate any other Indebtedness as "Specified Senior Debt" under
the Subordinated Indenture or the New Subordinated Indentures or designate or
permit any Subsidiary of the Company to designate any other Indebtedness of such
Subsidiary as "Guarantor Specified Senior Debt" under the Subordinated Indenture
or the New Subordinated Indentures;

         (c) take, or permit any of its Subsidiaries to take any action, or
permit, or allow any of its Subsidiaries to permit, to exist any condition,
which in any such case would require (i) the Company to cause any of its present
or future Subsidiaries (other than KAAC, AJI, KMH, KSM, Texas Holdings, Texas
Sierra, Kaiser Bellwood, KFC, and KJC, and except as otherwise provided in
clauses (b) and (c) of Section 9.1.10), or which would directly require any such
Subsidiary, to guarantee or otherwise become liable in respect of any
Subordinated Debt, New Senior Debt, Additional New Senior Debt or Senior Debt,
or (ii) the Company or any Subsidiary of the Company to provide collateral
security in respect of any Subordinated Debt, New Senior Debt, Additional New
Senior Debt or Senior Debt;

         (d) make any offer to prepay, redeem, defease or repurchase any
Subordinated Debt, New Senior Debt, Additional New Senior Debt or Senior Debt;
and

         (e) consent to any amendment, supplement or other modification of any
of the terms or provisions contained in, or applicable to, any document or
instrument evidencing or governing the Parent Guarantor Preferred Stock (or
depositary shares in respect thereof) if such amendment, supplement or other
modification would have a Materially Adverse Effect.

         SECTION 9.2.14. TRANSACTIONS WITH AFFILIATES. The Company will not, and
will not permit any of its Subsidiaries to, enter into, or cause, suffer, or
permit to exist any transaction, arrangement, or contract with any Affiliate of
the Company (other than the Company, its Subsidiaries which are not Restricted
Subsidiaries, Joint Venture Affiliates, and any Subsidiary of a Joint Venture
Affiliate in which neither the Parent Guarantor, MAXXAM nor any Affiliate of
either thereof (other than the Company, its Subsidiaries which are not
Restricted Subsidiaries, or any Joint Venture Affiliate) has any equity interest
other than through a direct or indirect ownership interest in the Company)
requiring, constituting or involving any payments or other transfers of Property
to be made by the Company or any Subsidiary to or for the benefit of, or
pursuant to which the Company or any of its Subsidiaries incurs a Contingent
Liability in respect of any obligation of, or incurs a contractual obligation
for the benefit of, any Affiliate of the Company (other than Persons described
in the previous parenthetical of this sentence).

         Notwithstanding the foregoing provisions of this Section 9.2.14, to the
extent permitted by the Bankruptcy Code or orders of the Bankruptcy Court and,
to the extent applicable, Section 9.2.20, (a) directors, officers, and employees
of the Company and its Subsidiaries may render services to the Company and its
Subsidiaries which are not Restricted Subsidiaries for compensation and other
benefits comparable to those generally paid by corporations engaged in the same
or similar businesses for the same or similar services; (b) the transactions
provided for in, and the loan evidenced by, the KT Note shall be permitted; (c)
the performance of the Tax Allocation Agreement, the Deconsolidation Tax
Allocation Agreement and the Transfer Agreement shall be permitted, except that
the Company shall not be permitted to make any cash payments to MAXXAM or any
other Affiliate pursuant to the Tax Allocation Agreement but MAXXAM may offset
amounts owing to it under the Tax Allocation Agreement against amounts owed by
MAXXAM under the Tax Allocation Agreement and the Company may make cash payments
to MAXXAM pursuant to the Tax Allocation Agreement if such payments are required
as a result of any audit of the tax returns of MAXXAM and such payments do not
exceed the payments made by MAXXAM to the Company, subsequent to the date
hereof, pursuant to the Tax Allocation Agreement; (d) the Company may make
payments to MAXXAM for any Fiscal Year in respect of (i) services actually
rendered to the Company during such Fiscal Year by employees of MAXXAM, and (ii)
the Company's allocable share of MAXXAM's overhead expenses during such Fiscal
Year which are attributable to employees of the Company who are located at
MAXXAM's corporate headquarters, provided that the charges for such services are
fully documented and that the aggregate amount of such payments made by the
Company to MAXXAM for any Fiscal Year does not exceed the aggregate amount of
payments made to the Company by MAXXAM for similar purposes for any Fiscal Year
by more than $2,250,000; (e) subject to Section 9.2.10, a merger or other
combination between the Company and the Parent Guarantor shall be permitted; (f)
Distributions permitted by Section 9.2.6 shall be permitted; (g) transactions
between ALPART or VALCO and Persons who own an equity interest in ALPART or
VALCO shall be permitted; (h) continuation of performance under agreements
entered into with Persons who were not then Affiliates shall be permitted (but
excluding, however, any renegotiation, extension, or modification of such
agreements after such Person has become, or is anticipated to become, an
Affiliate), provided that such agreement was not entered into in connection with
or in anticipation of such Person becoming an Affiliate of the Company; (i)
payments of legal fees and expenses to a law firm of which an Affiliate of the
Company is a member shall be permitted; (j) the Company may provide services and
facilities to the Parent Guarantor in connection with activities of the Parent
Guarantor that are permitted by the first sentence of Section 9.2.1 in exchange
for payment of its actual costs (allocated in good faith where appropriate) of
providing such services and facilities; and (k) any amendment to the KT Note
that extends the maturity thereof or reduces the interest rate thereon shall be
permitted.

         For purposes of this Section 9.2.14, the term "Affiliate" shall not be
deemed to include employee benefit plans, and trusts in connection therewith,
for the benefit of employees of the Company and its Subsidiaries.

         SECTION 9.2.15. NEGATIVE PLEDGES, ETC. The Parent Guarantor and the
Company will not (or apply to the Bankruptcy Court to do so), and will not
permit any of their Subsidiaries (other than ALPART and VALCO) to (or permit any
of its Subsidiaries to apply to the Bankruptcy Court to), enter into any
agreement (excluding this Agreement, any other Loan Document, and any agreement
governing any Indebtedness permitted either by clause (a)(iii) of Section 9.2.2
as in effect on the Effective Date, or by clause (b)(xvi) of Section 9.2.2 as to
the assets financed with the proceeds of such Indebtedness) (a) prohibiting the
creation or assumption of any Lien securing the Obligations of the Company and
its Subsidiaries upon its Properties, revenues, or assets which constitute
Collateral, or over any properties, revenues, or assets which, if acquired after
the Effective Date would be required to be subjected to a Lien in favor of the
Agent pursuant to Section 9.1.10 or 9.1.11 or over any other real property owned
in fee by the Company or any such Subsidiary on the Effective Date, or (b)
specifically prohibiting the Parent Guarantor, the Company, or any other Obligor
from amending or otherwise modifying this Agreement or any other Loan Document
to which it is a party.

         SECTION 9.2.16. SALE-LEASEBACK TRANSACTIONS. The Company will not (or
apply to the Bankruptcy Court to do so), and will not permit any of its
Subsidiaries to (or permit any of its Subsidiaries to apply to the Bankruptcy
Court to), directly or indirectly, become liable as lessee or guarantor or other
surety with respect to any lease (whether an operating or capital lease) of any
Property, whether now owned or hereafter acquired, (a) which the Company or any
of its Subsidiaries has sold or transferred or is to sell or transfer to any
other Person or (b) which the Company or any of its Subsidiaries intends to use
for substantially the same purpose as any other Property which has been or is to
be sold or transferred by the Company or such Subsidiary to any Person in
connection with such lease, except (i) any Capitalized Lease Liabilities
permitted under Section 9.2.2 or (ii) any consolidated lease expense resulting
therefrom that would be permitted under Section 9.2.8.

         SECTION 9.2.17. CHANGE OF LOCATION OR NAME. Each of the Parent
Guarantor and the Company will not (or apply to the Bankruptcy Court to do so),
nor will either permit any Secured Guarantor to (nor will either permit any
Secured Guarantor to apply to the Bankruptcy Court to), change

         (a) the location of its principal place of business, chief executive
office, major executive office, chief place of business, or its records
concerning its business and financial affairs; or

         (b) its name or the name under or by which it conducts its business, or

         (c) its jurisdiction of organization;

in each case without first giving the Agent at least 30 days, or such shorter
period as shall be acceptable to the Agent, prior written notice thereof and
taking any and all actions which the Agent may request to maintain and preserve
all Liens in favor of the Agent granted pursuant to the Collateral Documents;
provided, however, that notwithstanding the foregoing, each of the Parent
Guarantor and the Company will not, and will not permit any such Secured
Guarantor to, change the location of its principal place of business, chief
executive office, chief place of business, or its records concerning its
business and financial affairs

                  (i) to Louisiana or Tennessee, or

                  (ii) from the contiguous continental United States to any
            place outside the contiguous continental United States.

         SECTION 9.2.18. INTERCOMPANY TRANSFERS OF PROPERTY. The Parent
Guarantor and the Company will not (or apply to the Bankruptcy Court to do so),
and will not permit any Obligor to (or permit any Obligor to apply to the
Bankruptcy Court to), transfer or cause to be transferred, in one or a series of
related transactions any Property of the Parent Guarantor, the Company or any
Obligor to any Subsidiary of the Company or to any Joint Venture Affiliate
except, subject to compliance with Sections 9.2.20 and 9.2.7,:

                  (i) any Obligor may transfer, and pay for, goods, services,
            working capital and technology (other than Accounts) to Subsidiaries
            of the Company and Joint Venture Affiliates in the ordinary course
            of business and may license technology or know-how to Subsidiaries
            of the Company and Joint Venture Affiliates in the ordinary course
            of business; provided, in each case, that after giving effect to
            such transfer the Revolving Credit Outstandings immediately
            following such transfer will not exceed the Borrowing Base;

                  (ii) any Obligor may transfer Property (other than cash and
            Accounts and Eligible Fixed Assets) to Subsidiaries and Joint
            Venture Affiliates, provided that such transfer is made in exchange
            for cash in an amount equal to the fair market value of such
            Property;

                  (iii) any Obligor may transfer Property (other than Accounts)
            to (a) the Company or any Secured Guarantor or (b) to an Obigor to
            the extent permitted by Sections 9.2.7 or 9.2.20.;

                  (iv) the use of the proceeds of Indebtedness incurred by the
            Company, KJC, AJI and KAAC by ALPART, QAL and VALCO pursuant to
            Section 9.2.2(b)(iii);

                  (v) transfers of capital stock or other equity interests to
            the issuer of such capital stock or other equity interests such that
            immediately after giving effect to such transfer and related
            transfers, the proportional beneficial ownership by the transferor
            of the class of capital stock or equity interests so transferred is
            not reduced;

                  (vi) Investments permitted by Sections 9.2.5(f), 9.2.5(n) and
            9.2.5(q);

                  (vii) other transfers of Property (other than Accounts);
            provided that the aggregate amount thereof (if other than cash, such
            amount shall be the fair market value of such asset at the time of
            such transfer), less the aggregate amount of such Property returned
            to the Company or any Obligor (if returned other than in cash, the
            amount of such Property shall be the fair market value thereof at
            the time so returned), does not exceed, in the aggregate
            $25,000,000; and

                  (viii) the Company and its wholly-owned Subsidiaries may
            transfer the capital stock or other ownership interest of any of
            their respective wholly-owned Subsidiaries to the Company or any of
            its wholly-owned Subsidiaries; provided, however, that (a) the
            capital stock or other ownership interest of an Obligor shall be
            transferred only to the Company or a Secured Guarantor, (b) the
            capital stock or other ownership interest of a Domestic Subsidiary
            of the Company shall be transferred only to the Company or another
            Secured Guarantor and (c) the capital stock or other ownership
            interest of a Subsidiary that is pledged to the Agent on behalf of
            the Lenders shall be transferred only to the Company or a Secured
            Guarantor.

         SECTION 9.2.19. INCONSISTENT AGREEMENTS. The Parent Guarantor and the
Company will not, and will not permit any of its Subsidiaries to, enter into any
material agreement containing any provision which would be violated or breached
by any Credit Extension or by the performance by the Parent Guarantor or the
Company or any other Obligor of its obligations hereunder or under any Loan
Document.

         SECTION 9.2.20. ADDITIONAL INVESTMENTS IN PERSONS OTHER THAN DEBTORS.
Notwithstanding anything to the contrary contained in Sections 9.2.2, 9.2.5 and
9.2.18 hereof, the Company and the Parent Guarantor shall not (or apply to the
Bankruptcy Court to do so), and will not permit any Guarantor to (or permit any
Guarantor to apply to the Bankruptcy Court to), make any cash Investments in, or
incur any Contingent Liabilities to pay the Indebtedness of, any Person other
than a Debtor except (i) Investments and Contingent Liabilities to the extent
reflected in the Financial Forecast, (ii) other Investments made in, or
Contingent Liabilities incurred on behalf of, QAL, ALPART, Anglesey or VALCO in
an amount not to exceed $10,000,000 per annum (so long as, after giving effect
to any Investment made or Contingent Liability incurred pursuant to this clause
(ii), an Event of Cash Dominion shall not have occurred and be continuing by
reason thereof), and (iii) Investments in or Contingent Liabilities in respect
of Kaiser Aluminum and Chemical of Canada Limited for the purpose of Capital
Expenditures not to exceed $5,000,000 per annum, in each case to the extent
permitted under Section 9.2.7.

         SECTION 9.2.21. CURRENCY HEDGE AGREEMENTS. Other than a Currency Hedge
Agreement constituting a Bank Product, the Company will not enter into any
Currency Hedge Agreement containing any provision that permits the provider
thereunder to terminate the Currency Hedge Agreement, or to liquidate or
close-out any obligations thereunder, solely as a result of the occurrence of
any Default under this Agreement unless the Agent, as a result of such Default
and upon the direction of the Required Lenders, shall have declared all of the
outstanding principal amount of the Loans and other Obligations under the Credit
Agreement and the other Loan Documents to be due and payable.

         SECTION 9.2.22. CHAPTER 11 CLAIMS. Neither the Parent Guarantor nor the
Company nor any Secured Guarantor shall incur, create, assume, suffer to exist
or permit any administrative expense, unsecured claim, or other Superpriority
Claim or lien which is pari passu with or senior to the claims, as the case may
be, of the Agent and the Lenders against the Company and the Secured Guarantors
hereunder, or apply to the Bankruptcy Court for authority so to do, except for
the Carve-Out.

         SECTION 9.2.23. ORDERS. Neither the Parent Guarantor, the Company nor
any Secured Guarantor shall at any time seek, consent to or suffer to exist any
modifications, stay, vacation or amendment of the Interim Order or the Final
Order except for any modifications and amendments agreed to in writing by Agent,
with the consent of the Required Lenders.

         SECTION 9.2.24. COMPANY INVESTMENT OR DISTRIBUTION TO PARENT GUARANTOR.
Notwithstanding anything to the contrary contained herein, the Company shall be
permitted to make Investments in, or Distributions to, the Parent Guarantor in
an aggregate amount not to exceed $550,000 in each Fiscal Year.

                                   ARTICLE X

                                EVENTS OF DEFAULT

         SECTION 10.1. LISTING OF EVENTS OF DEFAULT. Each of the following
events or occurrences described in this Section 10.1 shall constitute an "Event
of Default".

         SECTION 10.1.1. NON-PAYMENT OF OBLIGATIONS. The Company shall default
in the payment or prepayment when due of any principal of or interest on any
Loan or Reimbursement Obligation; or the Company shall default (and such default
shall continue unremedied for a period of five days) in the payment when due of
any commitment or letter of credit fee payable hereunder.

         SECTION 10.1.2. BREACH OF WARRANTY. Any representation, warranty, or
certification of the Parent Guarantor, the Company, or any other Obligor made or
deemed to be made hereunder or in any other Loan Document to which it is or is
to become a party or any other writing or certificate furnished by or on behalf
of the Parent Guarantor, the Company, or any other Obligor to the Agent or any
Lender for the purposes of or in connection with this Agreement or any such
other Loan Document (including any certificates delivered pursuant to Article
VII) is or shall be incorrect when made in any material respect.

         SECTION 10.1.3. NON-PERFORMANCE OF CERTAIN COVENANTS AND OBLIGATIONS.
The Parent Guarantor, the Company, or any Obligor shall default in the due
performance and observance of any of its respective obligations under Sections
3.3.2(b) and (c), 9.2.2(b)(x), 9.2.4, 9.2.6, 9.2.7 of this Agreement; or the
Parent Guarantor, the Company or any Obligor shall default in the due
performance and observance of any of its respective obligations under Section
9.2.20 and such default shall continue unremedied for a period of five days.

         SECTION 10.1.4. NON-PERFORMANCE OF CERTAIN COVENANTS AND OBLIGATIONS.
The Parent Guarantor, the Company, or any other Obligor shall default in the due
performance and observance of any of its respective obligations under

         (a) Section 9.2 (other than Sections 9.2.2(b)(x), 9.2.4, 9.2.6, 9.2.7
and 9.2.20), 9.1.4, or 9.1.9 or clause (a) of Section 9.1.5 of this Agreement,
or

         (b) Section 6(e), 7(h), 7(i), 7(j), 7(l), 7(r), 7(u), 7(v), 7(w) or 12
of the Security Agreement,

and such default shall continue unremedied for a period of five days after
written notice thereof shall have been given by the Agent to the Company.

         SECTION 10.1.5. NON-PERFORMANCE OF OTHER COVENANTS AND OBLIGATIONS. Any
Obligor shall default in the due performance and observance of any other
agreement contained herein, or in any other Loan Document, any Hedging Agreement
constituting a Bank Product or any Currency Hedge Agreement constituting a Bank
Product to which it is or is to become a party, and such default shall continue
unremedied for a period of 30 days after written notice thereof shall have been
given by the Company to the Agent or to the Company by the Agent.

         SECTION 10.1.6. DEFAULT ON OTHER INDEBTEDNESS. A default shall occur in
the payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness (other than Indebtedness
described in Section 10.1.1) of the Guarantors, the Company, any of their
Subsidiaries, or any Joint Venture Affiliate having an aggregate principal
amount in excess of $20,000,000 or, in the case of Indebtedness of Joint Venture
Affiliates, having an aggregate principal amount for which the Guarantors, the
Company, or any of their Subsidiaries is contingently liable in excess of
$20,000,000 and which Indebtedness in the case of the Guarantors, the Company or
any of their Subsidiaries is incurred after the Petition Date; or a default
shall occur in the performance or observance of any obligation or condition with
respect to any such Indebtedness if the effect of such default is to accelerate
the maturity of any such Indebtedness or to permit the holder or holders
thereof, or any trustee or agent for such holders, to cause such Indebtedness to
become due and payable prior to its expressed maturity; provided that any
acceleration of Indebtedness of a Joint Venture Affiliate incurred prior to the
Petition Date but outstanding thereafter will not constitute an Event of Default
hereunder to the extent the amount of such accelerated Indebtedness is reflected
in the Financial Forecast and is either repaid or the repayment thereof is
stayed by the Bankruptcy Court.

         SECTION 10.1.7. JUDGMENTS. A final judgment which, together with other
outstanding final judgments against the Company and its Subsidiaries, exceeds an
aggregate of $20,000,000 (to the extent such judgments are not covered by valid
and collectible insurance from solvent unaffiliated insurers) shall be entered
against the Company and/or any of its Subsidiaries and (a) within 30 days after
entry thereof, judgments exceeding such amount shall not have been discharged,
settled, bonded or execution thereof stayed pending appeal or, within 30 days
after the expiration of any such stay, such judgments exceeding such amount
shall not have been discharged, settled, bonded or execution thereof stayed or
(b) an enforcement proceeding shall have been commenced (and not discharged,
settled, bonded or execution thereof stayed) by any creditor upon judgments
exceeding such amount.

         SECTION 10.1.8. PENSION PLANS. A contribution failure occurs with
respect to any Pension Plan sufficient to give rise to a Lien against assets of
any Controlled Group member under section 302(f) of ERISA in an amount in excess
of $1,000,000, which failure has not been completely cured within 30 days of the
applicable due date, unless such Lien is subordinate to the Agent's Security
Interest.

         SECTION 10.1.9. IMPAIRMENT OF CERTAIN DOCUMENTS. Except as otherwise
expressly permitted in any Loan Document, any of the Fundamental Loan Documents
shall terminate or cease in whole or in part to be the legally valid, binding,
and enforceable obligation of the relevant Obligor, or such Obligor or any
Person acting for or on behalf of such Obligor contests such validity, binding
effect, or enforceability, or purports to revoke any Fundamental Loan Document,
or any asset or item of Property purported to be secured by any Collateral
Document ceases to be so secured and continues not to be secured for ten
Business Days after written notice thereof has been given to such Obligor by the
Agent.

         SECTION 10.1.10. BANKRUPTCY CASES.

         (a) Any of the Bankruptcy Cases shall be dismissed or converted to a
case under chapter 7 of the Bankruptcy Code, or any Debtor shall file an
application for an order dismissing any Bankruptcy Case or converting any
Bankruptcy Case to a case under chapter 7 of the Bankruptcy Code; or an
application shall be filed by any Debtor for the approval of any other
superpriority administrative claim or Lien in any Bankruptcy Case (other than
the Carve-Out) which is pari passu with or senior to the Superpriority Claims or
Liens of the Agent and/or any Lender against any Debtor, or there shall arise
any such pari passu or senior superpriority administrative claim or lien (other
than the Carve-Out).

         (b) The Bankruptcy Court shall enter an order or orders that are not
vacated, reversed, rescinded or stayed pending appeal granting relief from the
automatic stay applicable under Section 362 of the Bankruptcy Code to the holder
or holders of any Lien to permit foreclosure (or the granting of a deed in lieu
of foreclosure or the like) in any assets of the Company or any other Debtor
with a value equal to or in excess of $5,000,000; or an order shall be entered
by the Bankruptcy Court granting relief from the automatic stay applicable under
Section 362 of the Bankruptcy Code to permit the creation, perfection or
enforcement of any judgment, Lien, levy or attachment based on any judgment,
whether or not such judgment arises from or gives rise to a pre-petition or
post-petition claim with a value equal to or in excess of $5,000,000; or an
order shall be entered by the Bankruptcy Court that is not stayed pending appeal
otherwise granting relief from the automatic stay to any creditor of any Debtor
(other than the Agent and the Lenders in their capacities as such) with respect
to any claim with a value equal to or in excess of $5,000,000; provided,
however, that it shall not be an Event of Default if relief from the automatic
stay is lifted solely for the purpose of (i) allowing such creditor to determine
the liquidated amount of its claim against any Debtor; or (ii) seeking payment
from a source other than any of any Debtor or any of their assets.

         (c) Any Debtor shall propose a Plan of Reorganization in any of the
Bankruptcy Cases which does not include a provision for termination of the
Revolving Commitments and indefeasible payment in full in cash of all
Obligations hereunder and under the other Loan Documents (including the
cancellation and return of all Letters of Credit, delivery of cash collateral
with respect to such Letters of Credit or the deposit with the Agent of a
Supporting Letter of Credit, in either case in an amount equal to the aggregate
undrawn amount of such Letters of Credit) on or before the effective date of
such Plan of Reorganization.

         (d) An order by the Bankruptcy Court shall be entered, or any Debtor
shall file an application for an order, dismissing any Bankruptcy Case which
does not require a provision for termination of the Revolving Commitments and
indefeasible payment in full in cash of all Obligations hereunder and under the
other Loan Documents (including the cancellation and return of all Letters of
Credit, delivery of cash collateral with respect to such Letters of Credit or
the deposit with the Agent of a Supporting Letter of Credit, in either case in
an amount equal to the aggregate undrawn amount of such Letters of Credit) prior
to any such dismissal.

         (e) An order by the Bankruptcy Court shall be entered in or with
respect to any of the Bankruptcy Cases or any Debtor shall file an application
for an order with respect to any Bankruptcy Case, to revoke, reverse, stay,
rescind, modify, vacate, supplement or amend the Interim Order or the Final
Order;

         (f) An application for any of the orders described in any or all of
clauses (a), (b), (c), (d) or (e) above shall be made by a Person other than a
Debtor and such application is not contested by the Company and/or the Secured
Guarantors, as applicable, in good faith or the relief requested is granted in
an order that is not vacated, reversed, rescinded or stayed pending appeal; or

         (g) (i) The Interim Order shall cease to be in full force and effect
and the Final Order shall not have been entered prior to such cessation, or (ii)
the Final Order shall not have been entered by the Bankruptcy Court on or before
the 45th day following the Petition Date, or (iii) from and after the date of
entry thereof, the Final Order shall cease to be in full force and effect, or
(iv) a Debtor shall fail to comply in all material respects with the terms of
the Interim Order or the Final Order, or (v) the Interim Order or the Final
Order shall be amended, supplemented, stayed, reversed, vacated or otherwise
modified (or a Debtor shall apply for authority to do so); or

         (h) The Bankruptcy Court shall enter an order appointing a trustee in
any of the Bankruptcy Cases or appointing a responsible officer or an examiner
with powers beyond the duty to investigate and report, as set forth in section
1106(a)(3) and (4) of the Bankruptcy Code, in any of the Bankruptcy Cases.

         SECTION 10.2. ACTION IF OTHER EVENT OF DEFAULT. If any Event of Default
shall occur for any reason, whether voluntary or involuntary, and be continuing,
subject to compliance with any requirements of the Interim Order or the Final
Order, as applicable,

         (a) the Agent shall, upon the direction of the Required Lenders,
without further order of, or application to, the Bankruptcy Court,

                  (i) by written notice to the Company declare the Commitments
            terminated, whereupon the Commitments of each Lender will thereupon
            terminate immediately and any fees payable hereunder shall become
            due and payable without notice of any kind;

                  (ii) by written notice to the Company declare all or any
            portion of the outstanding principal amount of the Loans and other
            Obligations to be due and payable, whereupon the full unpaid amount
            of such Loans and other Obligations which shall be so declared due
            and payable shall be and become immediately due and payable, without
            further notice, demand, or presentment and the Company shall pay to
            the Agent in Dollars and immediately available funds an amount equal
            to the then aggregate Letter of Credit Outstandings in accordance
            with Section 5.7; or

                  (iii) terminate any Letter of Credit which may be terminated
            in accordance with its terms; and

         (b) the Agent shall, upon the direction of the Required Lenders, and
may, in its sole and absolute discretion, without further order of, or
application, to the Bankruptcy Court,

                  (i) reduce the Revolving Commitment Availability or one or
            more of the elements thereof; and

                  (ii) decline to permit the issuance of additional Letters of
            Credit or the extension of the Stated Expiry Date of any outstanding
            Letter of Credit.

         (c) subject only to any limitations in the Interim Order or Final
Order, as applicable, all stays and injunctions, including the automatic stay
pursuant to Bankruptcy Code section 362, shall be vacated and terminated to the
extent necessary to permit the Agent and the Lenders full exercise of all of
their rights and remedies, including, without limitation, all of their rights
and remedies with respect to the Debtors' property under all applicable
bankruptcy and non-bankruptcy law.

Each and every right, power, and remedy provided herein or in any other Loan
Document shall be cumulative and shall be in addition to every other right,
power, and remedy provided herein or in any other Loan Document or provided
under applicable law.

                                   ARTICLE XI

                            THE ADMINISTRATIVE AGENT

         SECTION 11.1. APPOINTMENT; ACTIONS.

         (a) Each Lender hereby appoints Bank of America as its Agent under and
for purposes of this Agreement, each of the other Loan Documents and the
Collateral Documents. Each Lender irrevocably authorizes, and each assignee of
any Lender shall be deemed to authorize, the Agent to act on behalf of such
Lender under this Agreement, each of the other Loan Documents and the Collateral
Documents and, in the absence of other written instructions received from time
to time by the Agent from the Required Lenders or, as required by the Credit
Agreement, the Required Lenders or all of the Lenders (with which instructions
the Agent agrees that it will comply, except as otherwise provided in this
Section 11.1), each Lender irrevocably authorizes the Agent to take such actions
on its behalf and to exercise such powers hereunder and thereunder as are in
each case specifically delegated to or required of the Agent by the terms hereof
or thereof, together with such powers as may be reasonably incidental thereto.
Each Lender agrees that no Lender shall have any right individually to seek to
realize upon the security granted by or any guaranty provided by any Collateral
Document, it being understood and agreed that such rights and remedies may be
exercised solely by the Agent for the benefit of the Lenders in accordance with
the terms of this Agreement and the Collateral Documents.

         (b) The Agent shall not have by reason of this Agreement or any other
Loan Document a fiduciary relationship in respect of any Lender; and nothing in
this Agreement or any other Loan Document, expressed or implied, is intended to
or shall be so construed as to impose upon the Agent any obligations in respect
of this Agreement or any other Loan Document except as expressly set forth
herein or therein. Notwithstanding the foregoing, the Lenders acknowledge that
the Agent is authorized to exercise its discretion in taking certain actions and
exercising certain powers under this Agreement, including determining which
Accounts and Inventory constitute Eligible Accounts and Eligible Inventory, and
which assets constitute Eligible Fixed Assets, determining the Revolving
Commitment Availability pursuant to Section 10.2, and during the continuance of
an Event of Cash Dominion, continuing to make Credit Extensions in accordance
with and subject to the provisions of Section 7.4. Each Lender hereby
irrevocably indemnifies and agrees to indemnify (which indemnity shall survive
any termination of this Agreement) the Agent, and each of its officers,
directors, employees and agents (collectively, the "Indemnified Persons"), pro
rata according to such Lender's Percentage, from and against any and all
liabilities, demands, judgments, obligations, losses, damages, claims, costs, or
expenses of any kind or nature whatsoever (including those relating to the
preparation, execution, delivery, administration, modification, amendment, or
enforcement (whether through negotiations, legal proceedings, or otherwise) of
this Agreement, and the other Loan Documents) which may at any time be imposed
on, incurred by, or asserted against, any of the Indemnified Persons in any way
relating to or arising out of this Agreement, or any other Loan Document,
including reasonable attorneys' fees and allocated costs of in-house counsel,
and as to which the Agent is not reimbursed by the Company; provided, however,
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, claims, costs, or expenses of any
Indemnified Person which have resulted from such Indemnified Person's gross
negligence or willful misconduct. The Agent shall not be required to take any
action, make any inquiry, or request any document hereunder, or under any other
Loan Document, or to prosecute or defend any suit in respect of this Agreement,
or any other Loan Document, unless (i) if it has requested instructions from the
Lenders as to such action, it shall have received such instructions from the
Required Lenders (or, if required by this Agreement, all the Lenders or the
Required Lenders, as the case may be) and (ii) it is indemnified hereunder to
its satisfaction. If any indemnity in favor of the Agent shall be or become
inadequate, in the determination of the Agent, the Agent may call for additional
indemnification from the Lenders and cease to do the acts indemnified against
hereunder until such additional indemnity is given. The agreements in this
clause (c) shall survive the termination of the Commitments and the Letters of
Credit and the repayment of the Loans and other Obligations.

         (c) The Agent hereby agrees that it will promptly give the Company
notice of the occurrence of any of the following events: (i) the Revolving
Commitment Availability is less than $40,000,000 at any time; (ii) the Revolving
Commitment Availability is less than $50,000,000 for three consecutive Business
Days and (iii) provided no Default shall have occurred and be continuing, at any
time after the giving of notice under clause (i) or (ii), the Revolving
Commitment Availability is greater than $50,000,000 for each Business Day during
a period of three consecutive months. In addition, the Agent hereby agrees to
advise the other Lenders on or prior to the notification of the other Lenders by
the Agent of any Borrowing Request delivered during the continuance of an Event
of Default in the event that it has determined to waive any of the conditions of
Section 7.4 during the continuance of such Event of Default.

         SECTION 11.2. FUNDING RELIANCE, ETC.

         (a) Unless the Agent shall have been notified by telephone and such
notice shall have been confirmed in writing by any Lender by 5:00 p.m., San
Francisco time, on the Business Day prior to a Borrowing that such Lender will
not make available the amount which would constitute its Percentage of such
Borrowing on the date specified therefor, the Agent may assume that such Lender
has made such amount available to the Agent and, in reliance upon such
assumption, make available to the Company a corresponding amount. If and to the
extent that such Lender shall not have made such amount available to the Agent,
such Lender and the Company severally agree to repay the Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date the Agent made such amount available to the Company to the date
such amount is repaid to the Agent, at the interest rate(s) applicable at the
time to Loans comprising such Borrowing in the case of the Company and at the
daily average Federal Funds Rate in the case of any Lender.

         (b) Unless the Agent shall have been notified by telephone and such
notice shall have been confirmed in writing by the Company by 5:00 p.m., San
Francisco time, on the day prior to the due date of any Obligation, that any
Obligor will not make the full amount of all payments scheduled to be made by it
on such due date, the Agent may assume that such Obligor has made such amount
available to the Agent and, in reliance upon such assumption, make available to
the Lenders their respective pro rata shares of such amount. If the Agent makes
any such amount available to any Lender, but such amount was not in fact made
available by or on behalf of such Obligor to the Agent on such due date, such
Lender shall pay to the Agent on demand the amount previously made available to
such Lender, together with interest on such amount at the daily average Federal
Funds Rate for the number of days from and including the date on which such
Lender received such amount to the date on which such amount becomes immediately
available to the Agent, and together with such other compensatory amounts as may
be required to be paid by such Lender to the Agent pursuant to the Rules for
Interbank Compensation of the Council on International Banking or the
Clearinghouse Compensation Committee, as the case may be, as in effect from time
to time. A statement of the Agent submitted to any Lender with respect to any
amounts owing under this paragraph shall be conclusive, in the absence of
manifest error. If such amount is not in fact made available to the Agent by
such Lender within two Business Days after the date on which such Lender is (i)
informed by the Agent that such amount was not made available to the Agent by or
on behalf of such Obligor, and (ii) requested by the Agent to refund such amount
to the Agent, then the Agent shall be entitled to recover on demand an amount
calculated in the manner specified in the second preceding sentence of this
clause (b) after substituting the term "Reference Rate" for the term "Federal
Funds Rate".

         SECTION 11.3. EXCULPATION.

         (a) No Indemnified Person shall be liable to any Lender for any action
taken or omitted to be taken by such Indemnified Person under this Agreement or
any other Loan Document or in connection herewith or therewith (except for such
Indemnified Person's own willful misconduct or gross negligence), nor
responsible for any recitals, statements, representations or warranties herein
or therein, nor for the effectiveness, genuineness, enforceability, validity, or
due execution of this Agreement or any other Loan Document, nor for the
creation, perfection, or priority of any Liens purported to be created by any of
the Loan Documents, or the validity, genuineness, enforceability, existence,
condition, value, or sufficiency of any collateral security, nor to make any
inquiry respecting the performance by any Obligor of its obligations hereunder
or under any other Loan Document. Each Indemnified Person shall be entitled to
rely upon advice of counsel concerning legal matters and upon any notice,
consent, certificate, statement, or writing which such Indemnified Person
believes to be genuine and to have been presented by a proper Person, and shall
not be liable to any Lender or any Obligor for the consequences of such
reliance.

         (b) The Agent shall be deemed not to have knowledge of the occurrence
of a Default or an Event of Default (other than, in the case of the Agent, an
Event of Default arising under Section 10.1.1), or any breach of any of the Loan
Documents unless, in each case, it shall have received written notice thereof
from a Lender or from the Company. No Indemnified Person shall be responsible or
liable for any shortage, discrepancy, damage, loss, or destruction of any part
of the Collateral, wherever the same may be located and regardless of the cause
thereof, unless the same shall happen through its own gross negligence or
willful misconduct. No Indemnified Person shall, under any circumstances or any
event whatsoever, have any liability for any error or omission or delivery of
any kind made in the settlement, collection, or payment of any of the Collateral
or of any instrument received in payment therefor or for any damage resulting
therefrom other than as a result of its own gross negligence or willful
misconduct.

         SECTION 11.4. SUCCESSORS. The Agent may resign as such at any time upon
at least 30 days' prior written notice to the Company and all Lenders. If the
Agent at any time shall resign, the Required Lenders may appoint another Lender
or a commercial banking institution organized under the laws of the United
States (or any state thereof) or a United States branch or agency of a foreign
commercial banking institution, and having a combined capital and surplus of at
least $500,000,000 as a successor Agent which shall thereupon become the Agent
hereunder. If no successor Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Agent's giving notice of resignation, then the retiring Agent may, on
behalf of the Lenders, appoint a successor Agent which shall be one of the
Lenders or one of such commercial banking institutions. Upon the acceptance of
any appointment as Agent hereunder by a successor Agent, such successor Agent
shall be entitled to receive from the retiring Agent such documents of transfer
and assignment as such successor Agent may reasonably request, and shall
thereupon succeed to and become vested with all rights, powers, privileges, and
duties of the retiring Agent and the retiring Agent shall be discharged from any
further duties and obligations under or in connection with this Agreement and
any Loan Document. In addition, in the event that Bank of America resigns as the
Agent, Bank of America shall be discharged from any duties and obligations under
or in connection with this Agreement and any Loan Documents that were delegated
to Bank of America by Business Credit in its capacity as Agent. After the
resignation hereunder of a retiring Agent, the provisions of

         (a) this Article XI shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was the Agent under this Agreement; and

         (b) Sections 12.3 and 12.4 shall continue to inure to its benefit.

         SECTION 11.5. CREDIT EXTENSIONS BY THE AGENT. Bank of America and its
successor as Agent shall have the same rights and powers with respect to (a) the
Loans made by it or any of its Affiliates and (b) Letters of Credit issued (or
participated in) by it or any of its Affiliates as any other Lender and may
exercise the same as if it were not the Agent. The terms "Lender" and "Lenders"
as used herein shall include the Agent in its individual capacity.

         SECTION 11.6. CREDIT DECISIONS. Each Lender acknowledges that it has,
independently of the Agent, and each other Lender, and based on such Lender's
review of the financial information of the Company and such other documents,
information, and investigations as such Lender has deemed appropriate, made its
own credit decision to extend its Commitments. Each Lender also acknowledges
that it will, independently of the Agent, and each other Lender, and based on
such other documents, information, and investigations as it shall deem
appropriate at any time, continue to make its own credit decisions as to
exercising or not exercising from time to time any rights and privileges
available to it under this Agreement or any other Loan Document.

         SECTION 11.7. COPIES, ETC. The Agent shall give prompt written notice
to each Lender of each notice or request required or permitted to be given to
the Agent by any Obligor pursuant to the terms of this Agreement or any other
Loan Document (unless concurrently delivered to the Lenders by or on behalf of
such Obligor pursuant to the terms hereof). The Agent will promptly distribute
to each Lender each document or instrument received for its account and copies
of all other communications received by the Agent from the Company for
distribution to the Lenders by the Agent in accordance with the terms of this
Agreement and the other Loan Documents.

         SECTION 11.8. DESIGNATION OF ADDITIONAL AGENTS. Whenever the Agent
shall deem it necessary or prudent in order either to conform to any law of any
jurisdiction in which all or any part of the Collateral shall be situated or to
make any claim or bring any suit with respect to the Collateral or the
Collateral Documents, or in the event that the Agent shall have been requested
to do so by the Required Lenders, the Agent and to the extent necessary, the
Parent Guarantor and the Company, shall (and the Company shall cause each other
Obligor to) execute and deliver a supplemental agreement and all other
instruments and agreements necessary or proper to constitute another bank or
trust company, or one or more Persons approved by the Agent, either to act as
Agent or agents with respect to all or any part of the Collateral, in any such
case with such powers of the Agent as may be provided in such supplemental
agreement, and to vest in such bank, trust company or Person as such Agent or
separate trustee, as the case may be, any Property, title, right, or power of
the Agent deemed necessary or advisable by the Agent.

         SECTION 11.9. CERTAIN RELEASES.

         (a) To the extent that the Agent becomes concerned that the exercise of
any remedies or any action taken or omitted to be taken by it in connection with
any Collateral shall subject it to the possibility of any liability, cost, or
expense which it deems to be significant, arising under any law, rules, or
regulations relating to hazardous or toxic wastes or materials, the Agent may,
without liability to any Lender or other party to this Agreement or any other
Loan Document, or any other Person, decline to accept, abandon, forfeit, or
release such Collateral regardless of any effect such declination, abandonment,
forfeiture, or release may have upon the Lenders, or otherwise, if either (i)
the Agent is requested to decline to accept, abandon, forfeit, or release such
Collateral by the Required Lenders or (ii) the Agent is not, within 30 days
after making a specific proposal therefor, specifically indemnified to its
satisfaction by the Required Lenders or insured to its satisfaction by a third
party or parties for any liability, costs, and expenses which might result
therefrom.

         (b) In addition, if the Agent becomes concerned that the inclusion of
certain Property in the Collateral is not in the best interests of the Agent or
the Lenders, either because of potential adverse legal implications (including
the potential effects of California's "one form of action", "anti-deficiency"
and related rules of law which may apply in connection with real property
located in California) or potential liabilities, costs, or expenses which the
Agent deems to be significant that may be imposed upon a Person secured by such
Collateral, the Agent may, without liability to any Lender or other party to
this Agreement or any other Loan Document, or any other Person, decline to
accept, abandon, forfeit, or release such Collateral regardless of any effect
such declination, abandonment, forfeiture, or release may have upon the Lenders
or otherwise unless (i) the Agent is requested to do otherwise by the Required
Lenders and (ii) the Agent is, within 30 days after making a specific proposal
therefor, specifically indemnified to its satisfaction by the Required Lenders
or insured to its satisfaction by a third party or parties for any liability,
costs, and expenses which might result therefrom.

         SECTION 11.10. APPROVAL OF LOAN DOCUMENTS. Each of the Lenders hereby
approves the forms of the Security Agreement and the Subsidiary Guaranty and
hereby authorizes the Agent on its behalf to accept from the Company and the
other Obligors, as the case may be, and, authorizes the Agent to execute and
deliver as Agent, such Collateral Documents in such forms, with such changes,
additions, or deletions as the Agent, in its sole and absolute discretion, may
approve as necessary or appropriate to accomplish the purposes of such Loan
Documents. Each of the Lenders also authorizes the Agent to accept, or execute
and deliver, such additional documents, in form and substance satisfactory to
the Agent in its sole and absolute discretion, in connection with the initial
Borrowing or any subsequent Borrowing as the Agent, in its sole and absolute
discretion, may approve as necessary or appropriate to accomplish the purposes
of the Loan Documents. Each of the Lenders further authorizes the Agent, in its
sole and absolute discretion, to approve the form and content of all
certificates, opinions, collateral, financing statements, and other documents
delivered to it at or in connection with the initial Borrowing or any subsequent
Borrowing as the Agent, in its sole and absolute discretion, may deem necessary
or appropriate. Whenever the Agent is permitted to consent to any matter
hereunder, the Agent shall have the right, in its sole discretion, to consult
with any or all of the other Lenders prior to providing or refraining from
providing any such consent.

                                  ARTICLE XII

                            MISCELLANEOUS PROVISIONS

         SECTION 12.1. WAIVERS, AMENDMENTS, ETC.

         (a) The provisions of this Agreement and of each other Loan Document
may from time to time be amended or modified, if such amendment or modification
is in writing and consented to by the Company or the Obligor(s) party thereto
(as the case may be) and the Required Lenders; and the provisions of this
Agreement may be waived by the Required Lenders or by the Agent acting with the
consent of the Required Lenders; provided, however, that no such amendment,
modification, or waiver which would:

                  (i) modify this Section 12.1, change the definition of
            "Required Lenders", increase any Revolving Commitment Amount,
            decrease the Availability Reserve or modify any requirement
            hereunder that any particular action be taken by all the Lenders, or
            the Required Lenders shall be effective unless consented to by each
            Lender;

                  (ii) increase the Percentage of any Lender, reduce any fees
            described in Article III payable to any Lender, or extend any
            Lender's Commitment Termination Date shall be made without the
            consent of such Lender;

                  (iii) extend the due date for, or reduce the amount of, any
            scheduled repayment of principal of or interest on any Loan or any
            Reimbursement Obligation, or reduce the principal amount of or rate
            of interest on any Loan or reduce the amount of any Reimbursement
            Obligation, shall be made without the consent of the Lender which
            made such Loan or participated in such Letter of Credit, or each
            Lender which issued or is participating in the Letter of Credit with
            respect to which such Reimbursement Obligation is owed, as the case
            may be;

                  (iv) release all, substantially all, or any material portion
            of the Collateral (except for releases in connection with
            dispositions of assets which are permitted hereunder or under any
            Loan Document, and releases which are required by the Collateral
            Documents) without the consent of Lenders holding at least 100% of
            the then aggregate outstanding principal amount of the Revolving
            Credit Outstandings or, if no such principal amount is then
            outstanding, Lenders having at least 100% of the Revolving
            Commitments;

                  (v) affect adversely the interests, rights, or obligations of
            the Agent qua Agent, shall be made without the consent of the
            Agent; or

                  (vi) modify any Letter of Credit or any Revolving L/C Request
            without the consent of the relevant Issuer Bank.

         (b) Notwithstanding the foregoing, during the continuance of an Event
of Cash Dominion, the Agent may, at any time thereafter, in its sole and
absolute discretion, continue to make Revolving Loans and Swingline Loans and
instruct the applicable Issuer Bank to issue Letters of Credit in accordance
with and subject to the provisions of Section 7.4.

         (c) No failure or delay on the part of the Agent, any Lender, any
Issuer Bank, or the holder of any of the Obligations in exercising any power,
right, or remedy under this Agreement or any other Loan Document shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power,
right, or remedy preclude any other or further exercise thereof or the exercise
of any other power, right, or remedy. No notice to or demand on the Company or
any Obligor in any case shall entitle it to any notice or demand in similar or
other circumstances. No waiver or approval by the Agent, any Lender, any Issuer
Bank, or the holder of any of the Obligations under this Agreement or any other
Loan Document shall, except as may be otherwise stated in such waiver or
approval, be applicable to subsequent transactions. No waiver or approval
hereunder shall require any similar or dissimilar waiver or approval thereafter
to be granted hereunder.

         (d) Each of the Parent Guarantor and the Company hereby waives demand,
presentment for payment, protest, notice of protest, notice of acceleration
(except as otherwise provided herein), or of intention to accelerate the
maturity of any of the Loans, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments, or any changes in any of the terms, provisions, and
covenants of this Agreement, or any other Loan Document, or any releases or
substitutions of any security, or any delay, indulgence, or other act of any
trustee or any other Person under or in connection with this Agreement, or any
other Loan Document whether before or after maturity.

         SECTION 12.2. NOTICES. Except as otherwise provided herein or in any
other Loan Document, all notices and other communications provided to any party
hereto under this Agreement or any other Loan Document shall be in writing or by
telex or by facsimile (followed promptly thereby by mailing of such notice or
communication) and addressed, delivered, or transmitted to such party at its
address, telex, or facsimile number set forth below its signature hereto, or set
forth in the Assignee Agreement to be Bound pursuant to which such party became
a party hereto, or at such other address, telex, or facsimile number as may be
designated by such party in a notice to the other parties. Any notice, if
delivered by hand or if sent by mail or by overnight courier properly addressed
with postage prepaid, shall be deemed given when received; any notice, if
transmitted by telex or facsimile, shall be deemed given when transmitted
(answerback confirmed in the case of telexes).

         SECTION 12.3. PAYMENT OF COSTS AND EXPENSES. The Parent Guarantor and
the Company, jointly and severally, agree to pay on demand all expenses of the
Agent (including the reasonable fees and out-of-pocket expenses of counsel to
the Agent and of local counsel, if any, who may be retained by counsel to the
Agent and the allocated costs of in-house counsel) in connection with

         (a) the negotiation, preparation, execution, and delivery of this
Agreement and of each other Loan Document, including schedules and exhibits, and
any amendments, waivers, consents, supplements, or other modifications to this
Agreement or any other Loan Document as may from time to time hereafter be
required, whether or not the transactions contemplated hereby are consummated,

         (b) the filing, recording, refiling, and rerecording of the Collateral
Documents (including financing statements or similar documentation) and all
amendments, supplements, and modifications to any thereof and any and all other
documents or instruments of further assurance required to be filed, recorded,
refiled, or rerecorded by the terms hereof or of the Collateral Documents, and
(c) the preparation and review of the form of any document or instrument
relevant to this Agreement or any other Loan Document.

The Parent Guarantor and the Company, jointly and severally, further agree to
pay, and to save the Agent and the Lenders harmless from all liability for, any
stamp, recording, or similar taxes which may be payable in connection with the
execution or delivery of this Agreement, the Credit Extensions hereunder, the
issuance of the Letters of Credit, or the execution and delivery of any other
Loan Documents. The Parent Guarantor and the Company, jointly and severally,
also agree to reimburse the Agent and each Lender upon demand for all reasonable
out-of-pocket expenses (including attorneys' fees and legal expenses) incurred
by the Agent or such Lender (as well as all allocated costs of in-house counsel
incurred by the Agent) in connection with the enforcement of any Obligations and
to reimburse the Agent upon demand for all reasonable out-of-pocket expenses
(including attorneys' fees and legal expenses) and allocated costs of in-house
counsel incurred by the Agent in connection with the negotiation of any
restructuring or "work-out," whether or not consummated, of any Obligations. The
Parent Guarantor and Company shall jointly and severally reimburse Agent for the
reasonable fees and out-of-pocket expenses related to a management consultant
representing the Lenders, if the Required Lenders instruct the Agent to engage a
consultant and for an appraisal of the Inventory, if the Required Lenders
require such appraisal.

         SECTION 12.4. INDEMNIFICATION. In consideration of the execution and
delivery of this Agreement by the Agent and each Lender, and the extension of
the Commitments, the Company hereby indemnifies, exonerates, and holds the Agent
(in its capacity as the Agent) and each Lender and each of their respective
officers, directors, employees, and agents (collectively, the "Indemnified
Parties") free and harmless from and against any and all actions, causes of
action, suits, losses, costs, liabilities, and damages, and expenses incurred in
connection therewith (irrespective of whether any such Indemnified Party is a
party to the action for which indemnification hereunder is sought), including
reasonable attorneys' fees and disbursements (collectively, the "Indemnified
Liabilities" and, individually, an "Indemnified Liability"), incurred by the
Indemnified Parties or any of them as result of, arising out of, or relating to

         (a) any transaction or goods financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Credit Extension;

         (b) the entering into, issuance, acceptance, or performance of or
participation in this Agreement and any other Loan Document by any of the
Indemnified Parties (including any unsuccessful action brought by or on behalf
of the Company or any other Obligor as the result of any determination by the
Required Lenders pursuant to Article VII not to make any Credit Extension);

         (c) any investigation, litigation, or proceeding related to any
acquisition or proposed acquisition by the Parent Guarantor, the Company, or any
of their Subsidiaries or Joint Venture Affiliates of all or any portion of the
stock or assets of any Person, whether or not such Indemnified Party is party
thereto;

         (d) any investigation, litigation, or proceeding related to any
environmental cleanup, audit, compliance, or other matter relating to the
protection of the environment or the Release by the Parent Guarantor, the
Company or any of their Subsidiaries or Joint Venture Affiliates of any
Hazardous Material; or

         (e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging, or releases from, any real property
owned or operated by the Parent Guarantor, the Company, or any of their
Subsidiaries or Joint Venture Affiliates of any Hazardous Material (including
any losses, liabilities, damages, injuries, costs, expenses, or claims asserted
or arising under any Environmental Law), regardless of whether caused by, or
within the control of, the Company or such Subsidiary,

except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or willful misconduct, and if and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Company hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law. Each
Indemnified Party, as soon as reasonably practicable, shall notify the Agent of
the commencement of any legal proceeding by any third Person under which any
Indemnified Liability might arise. The Agent shall notify the Company of any
such commencement promptly after the Agent receives its notice. The Company
shall have the option to participate in the defense of all claims under which
any Indemnified Liability might arise, but the Company shall not have the option
to compel any Indemnified Party to employ counsel of the Company's choosing.

         SECTION 12.5. SURVIVAL. The obligations of the Company under Sections
4.3, 4.4, 4.5, 4.6, 4.7, 12.3, and 12.4, and the obligations of the Lenders
under Sections 4.8, 11.1 and 11.2, shall in each case survive any termination of
this Agreement. The representations and warranties made by each Obligor in this
Agreement and in each other Loan Document shall survive the execution and
delivery of this Agreement and each such other Loan Document notwithstanding any
investigation.

         SECTION 12.6. SEVERABILITY. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.

         SECTION 12.7. HEADINGS. The various headings of this Agreement and of
each other Loan Document are inserted for convenience only and shall not affect
the meaning or interpretation of this Agreement or such other Loan Document or
any provisions hereof or thereof.

         SECTION 12.8. EXECUTION IN COUNTERPARTS, EFFECTIVENESS, ETC. This
Agreement may be executed by the parties hereto in several counterparts and by
the different parties on separate counterparts, each of which shall be deemed to
be an original and all of which shall constitute together but one and the same
agreement. This Agreement shall become effective on the date (the "Effective
Date") when counterparts hereof executed on behalf of the Parent Guarantor, the
Company, the Agent, and each Lender (or notice thereof satisfactory to the
Agent) shall have been received by the Agent and notice thereof shall have been
given by the Agent to the Parent Guarantor, the Company, and each Lender.

         SECTION 12.9. GOVERNING LAW; SUBMISSION TO JURISDICTION.

         (a) IN THE EVENT OF A CONFLICT BETWEEN THE TERMS OF THIS AGREEMENT AND
THE FINAL ORDER OR INTERIM ORDER, AS APPLICABLE, THE FINAL ORDER OR INTERIM
ORDER, AS APPLICABLE, SHALL CONTROL. THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT
(EXCEPT TO THE EXTENT THAT SUCH OTHER LOAN DOCUMENT CONTAINS A CONTRARY EXPRESS
CHOICE OF LAWS PROVISION) SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
SUCH LAWS RELATING TO CONFLICTS OF LAWS TO THE EXTENT NOT PREEMPTED BY FEDERAL
BANKRUPTCY LAWS, PROVIDED THAT THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS
ARISING UNDER FEDERAL LAW.

         (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE BANKRUPTCY COURT OR, IF A
BANKRUPTCY CASE IS DISMISSED, OR WITH RESPECT TO ANY DEBTOR WHICH IS NO LONGER
SUBJECT TO THE JURISDICTION OF THE BANKRUPTCY COURT, IN THE FEDERAL DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, EACH OF THE DEBTORS, THE AGENT AND THE LENDERS CONSENTS, FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE JURISDICTION OF SUCH COURTS. EACH
OF THE DEBTORS, THE AGENT AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO.

         (c) UNTIL SUCH TIME AS THE AGENT AND THE LENDERS SHALL HAVE RECEIVED
FINAL PAYMENT OF THE FULL AMOUNT OF ALL OBLIGATIONS AND PERFORMANCE OF ALL
OBLIGATIONS, AND ALL LETTERS OF CREDIT SHALL HAVE EXPIRED, THE PARENT GUARANTOR
AND THE COMPANY HEREBY IRREVOCABLY DESIGNATE AND APPOINT KRAMER LEVIN, NAFTALIS
& FRANKEL LLP CURRENTLY LOCATED AT 919 THIRD AVENUE, NEW YORK, NEW YORK
10022 (ATTENTION: HOWARD A. SOBEL), AS THEIR AGENT TO ACCEPT AND ACKNOWLEDGE ON
THEIR BEHALF ANY AND ALL PROCESS WHICH MAY BE SERVED IN CONNECTION WITH ANY
SUIT, ACTION, OR PROCEEDING OF THE NATURE REFERRED TO IN THE PRECEDING
PARAGRAPH. THE PARENT GUARANTOR AND THE COMPANY EACH HEREBY ACKNOWLEDGE THAT, TO
THE FULLEST EXTENT PERMITTED BY LAW, SUCH SERVICE SHALL BE EFFECTIVE AND BINDING
SERVICE ON IT IN EVERY RESPECT REGARDLESS OF WHETHER IT SHALL BE DOING OR SHALL
HAVE AT ANY TIME DONE BUSINESS IN THE STATE OF NEW YORK.

         (d) THE PARENT GUARANTOR AND THE COMPANY HEREBY AGREE TO TAKE ANY AND
ALL ACTION THAT MAY BE NECESSARY TO ENSURE THAT AT ALL TIMES DURING THE TERM OF
THIS AGREEMENT THERE SHALL BE AN AGENT IN NEW YORK DESIGNATED AND APPOINTED BY
THEM FOR THE PURPOSE DESCRIBED ABOVE, TO MAINTAIN SUCH DESIGNATION AND
APPOINTMENT OF SUCH AGENT IN FULL FORCE AND EFFECT FOR THE TERM OF THIS
AGREEMENT, AND TO DELIVER PROMPTLY TO THE AGENT AT SUCH TIMES AS THE AGENT MAY
REQUEST EVIDENCE IN WRITING OF SUCH AGENT'S ACCEPTANCE OF SUCH APPOINTMENT.

         (e) THE PARENT GUARANTOR AND THE COMPANY HEREBY CONSENT TO PROCESS
BEING SERVED IN ANY SUIT, ACTION, OR PROCEEDING OF THE NATURE REFERRED TO ABOVE
EITHER (I) BY THE MAILING OF A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO ITS RESPECTIVE ADDRESS SHOWN BELOW
ITS SIGNATURE HERETO OR (II) BY SERVING A COPY THEREOF UPON THE PERSON SPECIFIED
ABOVE AS THE AUTHORIZED AGENT FOR SERVICE OF PROCESS FOR THE PARENT GUARANTOR
AND THE COMPANY (TO THE EXTENT PERMITTED BY APPLICABLE LAW, REGARDLESS OF
WHETHER THE APPOINTMENT OF SUCH AGENT FOR SERVICE OF PROCESS FOR ANY REASON
SHALL PROVE TO BE INEFFECTIVE OR SUCH AGENT FOR SERVICE OF PROCESS SHALL ACCEPT
OR ACKNOWLEDGE SUCH SERVICE); PROVIDED, HOWEVER, THAT, TO THE EXTENT LAWFUL AND
PRACTICABLE, WRITTEN NOTICE OF SAID SERVICE UPON SAID AGENT SHALL BE MAILED BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO THE
PARENT GUARANTOR OR THE COMPANY, AS APPLICABLE, AT ITS RESPECTIVE ADDRESS SHOWN
BELOW ITS SIGNATURE HERETO. THE PARENT GUARANTOR AND THE COMPANY AGREE THAT SUCH
SERVICE, TO THE FULLEST EXTENT PERMITTED BY LAW, (I) SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON IT IN ANY SUCH SUIT, ACTION, OR
PROCEEDING AND (II) SHALL BE TAKEN AND HELD TO BE VALID PERSONAL SERVICE UPON
AND PERSONAL DELIVERY TO IT. NOTHING HEREIN SHALL AFFECT EITHER THE AGENT'S OR
ANY BANK'S RIGHT TO SERVE PROCESS IN OR TO BRING PROCEEDINGS AGAINST THE PARENT
GUARANTOR OR THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION.

         SECTION 12.10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that:

         (a) neither the Parent Guarantor nor the Company may assign or transfer
their rights or obligations hereunder without the prior written consent of the
Agent and all Lenders; and

         (b) the rights of sale, assignment, and transfer of the Lenders are
subject to Section 12.11.

         SECTION 12.11. SALE AND TRANSFER OF CREDIT EXTENSIONS AND COMMITMENTS;
PARTICIPATIONS IN CREDIT EXTENSIONS AND COMMITMENTS. Each Lender may assign, or
sell participations in, its Credit Extensions and Commitments to one or more
other Persons in accordance with this Section 12.11.

         SECTION 12.11.1. ASSIGNMENTS. Any Lender,

         (a) with the written consents of the Agent (which consent shall not be
unreasonably delayed or withheld) may at any time assign and delegate to one or
more Affiliates of such Lender (if such Lender is not to remain liable for the
performance of its Affiliate's obligations hereunder or under any other
applicable Loan Document),

         (b) with the written consent of the Agent (which consent may be
withheld for any reason) may at any time assign and delegate to one or more
other banks, savings and loan associations, commercial finance companies and
other similar financial institutions, and

         (c) with written notice to the Company and the Agent, but without the
consent of the Company or the Agent, may assign and delegate to any other Lender
or to one or more Affiliates of such Lender (if such Lender remains liable for
the performance of its Affiliate's obligations hereunder and under any other
applicable Loan Document)

(each Person described in either of the foregoing clauses as being the Person to
whom such assignment and delegation is to be made, being hereinafter referred to
as an "Assignee Lender"), all or any fraction of such Lender's total Credit
Extensions and Revolving Commitment (which assignment and delegation shall be of
a constant, and not a varying, percentage of all the assigning Lender's Credit
Extensions and Commitments); provided, however, that the aggregate principal
amount of the portion of the Revolving Commitment so assigned to any Assignee
Lender shall be not less than $10,000,000, unless such assignment covers all of
such Lender's interests and obligations hereunder and under the Loan Documents;
and provided, further, that any such Assignee Lender will comply, if applicable,
with the provisions contained in clause (b) of Section 4.6; and provided,
further, that the Parent Guarantor, the Company, each other Obligor and the
Agent shall be entitled to continue to deal solely and directly with such
assigning Lender in connection with the interests so assigned and delegated to
an Assignee Lender until

                  (i) written notice of such assignment and delegation, together
            with payment instructions, addresses, and related information with
            respect to such Assignee Lender, shall have been given to the
            Company and the Agent by such Lender and such Assignee Lender,

                  (ii) such Assignee Lender shall have executed and delivered to
            the Company and the Agent an Assignee Agreement to be Bound,
            accepted by the Agent, and

                  (iii) the processing fees described below shall have been
            paid.

From and after the date that the Agent accepts such Assignee Agreement to be
Bound (subject to clauses (a) and (b) above), (A) the Assignee Lender thereunder
shall be deemed automatically to have become a party hereto and to the extent
that rights and obligations hereunder have been assigned and delegated to such
Assignee Lender pursuant to such Assignee Agreement to be Bound, shall have the
rights and obligations of a Lender hereunder and under the other Loan Documents,
and (B) the assigning Lender, to the extent that rights and obligations
hereunder have been assigned and delegated by it pursuant to such Assignee
Agreement to be Bound, shall be released from its obligations which are not then
due and payable hereunder and under the other Loan Documents. Accrued interest,
and accrued fees, in respect of the rights and obligations that have been
assigned, shall be paid as provided in the Assignee Agreement to be Bound.
Accrued interest and accrued fees shall be paid at the same time or times
provided in this Agreement. Such assigning Lender or such Assignee Lender must
also pay a processing fee to the Agent upon delivery of any Assignee Agreement
to be Bound in the amount of $3500. Any attempted assignment and delegation not
made in accordance with this Section 12.11.1 shall be null and void.

         SECTION 12.11.2. PARTICIPATIONS. Any Lender may at any time sell to one
or more financial institutions (each of such financial institutions being herein
called a "Participant") participating interests in any of the Credit Extensions,
Commitments, or other interests or obligations of such Lender hereunder;
provided, however, that

         (a) no participation contemplated in this Section 12.11.2 shall relieve
such Lender from its Commitments or its other obligations hereunder or under any
other Loan Document,

         (b) such Lender shall remain solely responsible for the performance of
its Commitments and such other obligations,

         (c) the Parent Guarantor, the Company, each other Obligor, and the
Agent shall continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement and each of the
other Loan Documents, and

         (d) no Participant, unless such Participant is an Affiliate of such
Lender, or is itself a Lender, shall be entitled to require such Lender to take
or refrain from taking any action hereunder or under any other Loan Document.

         SECTION 12.12. OTHER TRANSACTIONS. Nothing contained herein shall
preclude the Agent or any Lender from engaging in any debt or equity
transaction, in addition to those contemplated by this Agreement or any other
Loan Document, with the Company or any of its Affiliates in which the Company or
such Affiliate is not restricted hereby from engaging with any other Person.

         SECTION 12.13. WAIVER OF JURY TRIAL. THE AGENT, THE LENDERS, THE PARENT
GUARANTOR, AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN), OR OTHER ACTIONS OF THE AGENT, THE LENDERS, THE
PARENT GUARANTOR, OR THE COMPANY IN CONNECTION WITH OR RELATED TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT. THE PARENT GUARANTOR AND THE COMPANY EACH
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION
FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO
WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN
DOCUMENT. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTATION, OR MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.

         SECTION 12.14. FINAL AGREEMENT, ETC. This written loan agreement,
together with the other Loan Documents, represents the final agreement between
the parties with respect to the subject matter hereof and may not be
contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties. There are no unwritten oral agreements between the
parties with respect to the subject matter hereof. The inclusion in this
Agreement or any Loan Document of provisions not included in, or the deletion of
provisions previously included in, prior drafts of this Agreement or such other
Loan Document shall not be considered in interpreting the final executed version
of this Agreement or such other Loan Document.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.

                                    BORROWER

                                    KAISER ALUMINUM & CHEMICAL
                                    CORPORATION


                                    By  /S/ John T. La Duc
                                    Name Printed:  John T. La Duc
                                    Title:   EUP and CFO

                                    Address:
                                    Kaiser Aluminum & Chemical Corporation
                                    5847 San Felipe, Suite 2600
                                    Houston, Texas 77057
                                    Attention:  Treasurer
                                    Telephone No.:  (713) 267-3857
                                    Facsimile No.:   (713) 267-3869

                                    With a copy to:

                                    Kaiser Aluminum & Chemical Corporation
                                    5847 San Felipe, Suite 2600
                                    Houston, Texas 77057
                                    Attention: General Counsel
                                    Telephone No.:  (713) 267-2698
                                    Facsimile No.:   (713) 267-3702


                                    PARENT GUARANTOR

                                    KAISER ALUMINUM CORPORATION


                                    By   /S/ John T. La Duc
                                    Name Printed:  John T. La Duc
                                    Title:  EUP and CFO

                                    Address:
                                    Kaiser Aluminum Corporation
                                    5847 San Felipe, Suite 2600
                                    Houston, Texas 77057
                                    Attention: General Counsel
                                    Telephone No.:  (713) 267-2698
                                    Facsimile No.:   (713) 267-3702



PERCENTAGE                          LENDERS

                                    BANK OF AMERICA, N.A.




                                    By   /S/ Richard Burke
                                    Name Printed:   Richard Burke
                                    Title:  Sr. Vice President

                                    Domestic:
                                    Bank of America, N.A.
                                    55 South Lake Avenue, Suite 900
                                    Pasadena, California 91101
                                    Attention:  Richard Burke
                                    Telephone No.:         (626) 578-6000
                                    Facsimile No.:         (626) 578-6069




                                    LIBOR
                                    Office:




                                    Address for
                                    payments:






                                    Attention:

                                    Ref:


                                    AGENT

                                    BANK OF AMERICA, N.A.



                                    By  /S/ Richard Burke
                                    Name Printed:  Richard Burke
                                    Title:  Sr. Vice President

                                    Office:

                                    Bank of America, N.A.
                                    55 South Lake Avenue, Suite 900
                                    Pasadena, California 91101
                                    Attention:  Richard Burke
                                    Telephone No.:         (626) 578-6000
                                    Facsimile No.:         (626) 578-6069

EX-4 6 ex_445-2001.htm EXHIBIT 4.45 TO 2001 10-K Exhibit 4.45 to 2001 10-K

                                                                    Exhibit 4.45

                               FIRST AMENDMENT TO
           POST-PETITION CREDIT AGREEMENT AND POST-PETITION PLEDGE AND
                               SECURITY AGREEMENT
                            AND CONSENT OF GUARANTORS


                  This FIRST AMENDMENT TO POST-PETITION CREDIT AGREEMENT AND
POST-PETITION PLEDGE AND SECURITY AGREEMENT AND CONSENT OF GUARANTORS (this
"Amendment") is dated as of March 21, 2002 and entered into by and among KAISER
ALUMINUM CORPORATION, a Delaware corporation, as debtor and debtor-in-possession
(the "Parent Guarantor"), KAISER ALUMINUM & CHEMICAL CORPORATION, a Delaware
corporation, as debtor and debtor-in-possession (the "Borrower"), the banks and
other financial institutions signatory hereto that are parties as Lenders to the
Credit Agreement referred to below (the "Lenders"), BANK OF AMERICA, N.A., as
administrative agent and collateral agent (in such capacity, the "Agent") for
the Lenders, GENERAL ELECTRIC CAPITAL CORPORATION ("GE Capital") as
Documentation Agent, THE CIT GROUP/BUSINESS CREDIT, INC. ("CIT"), as
Co-Syndication Agent, and FOOTHILL CAPITAL CORPORATION ("Foothill"), as
Co-Syndication Agent (GE Capital, CIT and Foothill, collectively, the
"Co-Agents").

                                    RECITALS

                  WHEREAS, the Parent Guarantor, the Borrower, the Lenders, and
the Agent have entered into that certain Post-Petition Credit Agreement dated as
of February 12, 2002 (the "Credit Agreement"; capitalized terms used in this
Amendment without definition shall have the meanings given such terms in the
Credit Agreement); and

                  WHEREAS, the Agent has appointed the Co-Agents to serve in the
capacities set forth above; and

                  WHEREAS, the parties hereto wish to amend the Credit
Agreement, on the terms and conditions set forth in this Amendment;

                  NOW THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, the Parent Guarantor, the Borrower, the Lenders,
and the Agent agree as follows:

                  1.  AMENDMENTS TO CREDIT AGREEMENT. Subject to the conditions
and upon the terms set forth in this Amendment, the Credit Agreement is hereby
amended as follows:

                      1.1 AMENDMENTS TO SECTION 1.1 (DEFINITIONS). (a) The
following definition is added to Section 1.1 of the Credit Agreement in proper
alphabetical order:

                  "Stores Inventory" means all goods (purchased, manufactured,
or transferred in) in the nature of supply items which are not directly used in
the manufacturing (production) or shipping (distribution) process and which are
classified by the Debtors as "stores" consistent with past practice and the
Debtors' Controller's Policy Manual.

                  (b) The definition of "Borrowing Base" is amended to add the
following before the final semicolon of clause (c) of such definition:

                  "; provided further that, so long as the Company has by March
31, 2002 (i) approved the engagement by the Agent of an appraiser to perform
such appraisals and (ii) provided to the Agent such information regarding
Hazardous Materials and other environmental matters as the Agent requires in
order to initially establish an Environmental Compliance Reserve with respect to
the OLV In-Place Value (as contemplated under the definition thereof) of
Eligible Fixed Assets, the PPE Subcomponent shall not be reduced to zero (as a
result of the failure to deliver and approve such appraisals and environmental
reports) until July 1, 2002".

                  (c) The definition of "Collateral" is amended to add the
following at the end of such definition: "The proceeds of any disposition of any
equity interests in any Unsecured Guarantor, KAAC, QAL, KJBC, or the Mining JV,
except to the extent noncash proceeds constitute Excluded Assets, shall
constitute Collateral, even though the equity interests themselves are not
Collateral."

                  (d) The definition of "Eligible Account" is amended to add
"and each Lender" in the first sentence thereof after the words "after
consultation with the Company".

                  (e) The definition of "Eligible Inventory" is amended to
delete clause (d) and to replace it with the following: "(d) is not Stores
Inventory, Tolling Inventory, or Inventory delivered to the Company, KAII or
Kaiser Bellwood on consignment;"

                      1.2   AMENDMENT TO SECTION 2.1.2(A).  Section 2.1.2(a) of
the Credit Agreement is amended to delete the first sentence and to replace it
with the following:

                  "From time to time on any Business Day occurring during the
period commencing on the Initial Borrowing Date and continuing to (but not
including) the Revolving Commitment Termination Date, (i) so long as no Default
or Event of Default has occurred and is continuing, Agent will make a portion of
the Revolving Credit Commitment available to the Company by making Loans to the
Company in an aggregate amount not to exceed $25,000,000 outstanding at any time
and (ii) if a Default or Event of Default has occurred and is continuing, the
Agent may, subject to Section 7.4, make a portion of the Revolving Credit
Commitment available to the Company by making Loans to the Company in an
aggregate amount not to exceed $15,000,000 outstanding at any time (Loans made
under this Section 2.1.2(a)(i) and (ii) "Swingline Loans"), in each case
notwithstanding the fact that such Swingline Loans may exceed the Agent's
Revolving Credit Commitment; provided, however, that the Agent shall not make
any Swingline Loan in an amount that would exceed the Revolving Commitment
Availability. The Commitment of the Agent to make Swingline Loans from time to
time under clause (i) above is herein referred to as its "Swingline
Commitment"."

                      1.3 AMENDMENT TO SECTION 2.1.3. Section 2.1.3 of the
Credit Agreement is amended to add after the phrase "Agent shall not be required
to make" the parenthetical "(and may not make)".

                      1.4 AMENDMENT TO SECTION 2.5(A).  Section 2.5(a) of the
Credit Agreement is amended to add the following proviso at the end of such
Section:

                  "provided that the Agent and the Lenders shall seek payment of
         the Obligations from proceeds of any preferences, fraudulent
         conveyances, and other avoidance powers, claims and recoveries arising
         under Section 544, 545, 546, 547, 548, 549, 550 or 553 of the
         Bankruptcy Code only after all Collateral proceeds and other funds of
         the Obligors available for the payment of the Obligations have been
         exhausted;"

                      1.5 AMENDMENT TO SECTION 2.5(C). Section 2.5(c) of the
Credit Agreement is amended to delete the phrase "all property of the Debtors"
and to replace it with "all Property of the Debtors and their estates of every
kind or type whatsoever, tangible, intangible, real, personal and mixed, whether
now owned or hereafter acquired or arising, wherever located, and including
without limitation, all property of the estates of each of the Debtors within
the meaning of section 541 of the Bankruptcy Code and all proceeds, rents and
products of the foregoing and all distributions thereon,".

                      1.6 AMENDMENT TO SECTION 3.3.  Section 3.3 of the Credit
Agreement is amended to add a new Section 3.3.4 as follows:

                      "SECTION 3.3.4. APPLICATION OF PAYMENTS. Except as
required by Section 3.3.1 or 3.3.2 (and notwithstanding any other provision in
any other Loan Document governing the application of proceeds of Collateral, at
any time during the continuance of an Event of Default), all amounts received by
the Agent in respect of the Obligations, other than in respect of (i) principal
of or interest then due on the Loans, (ii) reimbursements of Reimbursement
Obligations, or (iii) specific fees or expenses or other amounts then due to the
Agent and Lenders, shall be applied first, to pay any fees, indemnities or
expense reimbursements then due to the Agent, costs and expenses of any
realization on the Collateral and payments of advances made by the Agent in
accordance with the Loan Documents; second, to pay any fees, indemnities or
expense reimbursements then due to the Lenders from the Borrower; third, to pay
interest then due in respect of Swingline Loans and Revolving Loans; fourth, to
pay or prepay Swingline Loans; fifth, to pay or prepay principal of Revolving
Loans and unpaid Reimbursement Obligations; sixth, to the extent required by
Section 5.7, deposited in the L/C Collateral Account; and seventh, to the
payment of all other Obligations, including Bank Product Obligations. Payments
made to, or deposits in, the Concentration Account or other deposit accounts of
Borrower maintained with Bank of America shall not constitute payments received
by the Agent for purposes of this Section 3.3.4. If an Event of Cash Dominion
has occurred and is continuing, but only so long as no Event of Default has
occurred and is continuing, this Section 3.3.4 shall not apply and Section 3.3.2
shall be applicable; provided, however, that this Section 3.3.4 shall apply at
all times during the continuance of an Event of Default."

                      1.7 AMENDMENT TO SECTION 4.7(A). Section 4.7(a) of the
Credit Agreement is amended to delete the first clause in the fifth sentence and
to replace it with "If the Agent fails to remit such funds to such Lender due to
an inadvertent delay of no more than 3 Business Days,".

                      1.8 AMENDMENT TO SECTION 7.4. Section 7.4 of the Credit
Agreement is amended to delete the second sentence thereof and to replace it
with the following:

                  "Notwithstanding the foregoing, the Lenders acknowledge and
         agree that during the continuance of a Default, unless and until the
         Agent receives written instructions from the Required Lenders during
         the continuance of a Default to cease making Swingline Loans and
         Revolving Loans and to cease instructing Issuer Banks to issue Letters
         of Credit, (a) if the Agent has determined, in the exercise of its
         reasonable business judgment, that it is in the best interests of the
         Lenders to continue to make Loans or issue Letters of Credit for the
         account of the Borrower, the Agent may waive the conditions of this
         Section 7.4 (other than 7.4.4) and continue to make Swingline Loans and
         instruct the applicable Issuer Bank to issue Letters of Credit
         notwithstanding the existence of a Default; provided, however, that the
         Agent may not make any Swingline Loan or cause to be issued any Letter
         of Credit in an amount that would exceed the Revolving Commitment
         Availability and that the Swingline Loans made and the Letters of
         Credit issued while such Default exists shall not exceed $15,000,000 at
         any time outstanding and (b) the Lenders shall be obligated to continue
         to make Revolving Loans and to reimburse the Agent for Swingline Loans
         made in accordance with clause (a) and shall be deemed to have
         purchased and received an undivided interest in Letters of Credit
         issued in accordance with clause (a)."

                      1.9 AMENDMENTS TO SECTION 9.1.3. Section 9.1.3 of the
Credit Agreement is amended to add the following at the end of such Section:

                      "; provided, however, that if the Borrower or any of
         its Subsidiaries fails to maintain its assets, as required by clause
         (a) (without giving effect to the three lines preceding this proviso),
         the condition of such assets may be taken into consideration in
         determining the OLV in Place Value of Eligible Fixed Assets for
         purposes of determining the PPE Subcomponent of the Borrowing Base or
         the establishment of Reserves with respect thereto (but only to the
         extent that such assets have been included in the PPE Subcomponent of
         the Borrowing Base), as the Agent determines in its commercially
         reasonable judgment."

                      1.10 AMENDMENT TO SECTION 9.2.2(B), SECTION 9.2.2(B) is
amended to delete clause (i) and to replace it with the following:

                  "(i) Indebtedness of a Debtor in an aggregate amount for all
         Debtors not to exceed $30,000,000, such Indebtedness to have terms and
         conditions satisfactory to the Required Lenders in their sole
         discretion and to be subordinated to the Obligations on terms
         satisfactory to the Required Lenders in their sole discretion;"

                      1.11 AMENDMENT TO SECTION 9.2.3, SECTION 9.2.3 is amended
to delete clause (r) and to replace it with the following:

                  "(r) Liens on Property of a Debtor (other than Excluded
         Assets) securing Indebtedness permitted under Section 9.2.2(b)(i),
         provided that any such Liens which encumber the Collateral shall be
         subordinated on terms satisfactory to the Required Lenders in their
         sole discretion to the Liens granted pursuant to the Loan Documents and
         shall be subject to intercreditor arrangements on terms satisfactory to
         the Required Lenders in their sole discretion;"

                      1.12 AMENDMENT TO SECTION 9.2.6. Section 9.2.6 of the
Credit Agreement is amended to add the following after the words "except that"
at the end of the introduction to clause (a):

                  "to the extent permitted under the Bankruptcy Code or by order
         of the Bankruptcy Court"

                      1.13 AMENDMENT TO SECTION 9.2.11. Section 9.2.11 of the
Credit Agreement is amended to add the following sentence at the end of such
Section:

                  "Further, notwithstanding the foregoing, or the provisions of
Sections 9.2.10 or 9.2.18, the Company will not, and will not permit AJI or KJC
to, sell any of the assets of AJI or KJC, including any partnership interests in
ALPART, or liquidate, or dissolve AJI or KJC, or consolidate or merge AJI or KJC
with any other entity, nor will it permit AJI or KJC or ALPART to sell any of
the assets of ALPART, other than sales of Inventory in the ordinary course of
business or liquidate or dissolve ALPART or merge or consolidate ALPART with any
other entity."

                      1.14 AMENDMENT TO SECTION 10.1. Section 10.1 of the Credit
Agreement is amended to add the following as Section 10.1.11:

         "SECTION 10.1.11. ACTIONS AGAINST UNSECURED GUARANTORS. Any creditor of
any Unsecured Guarantor takes any action to collect or otherwise enforce any
Indebtedness of any Unsecured Guarantor, or any rights, remedies or obligations
under any documents creating or evidencing such Indebtedness, at law or in
equity, including without limitation, making any demand for payment, bringing
suit in any court or before any tribunal, seeking to attach property, perfect
Liens or otherwise assert any security interests, Liens or claims (by setoff or
otherwise), filing any involuntary petition against any Unsecured Guarantor
under the Bankruptcy Code or taking any equivalent action under any other law
affecting the rights of creditors, seeking to attach any assets of any Unsecured
Guarantor, exercising any right of offset, or seeking any injunction under
applicable laws."

                      1.15 ADDITION OF SECTION 11.11. A new Section 11.11 is
added to the Credit Agreement to read as follows:

                  "SECTION 11.11. THE CO-AGENTS. None of the Co-Agents shall
have any right, power, obligation, liability, responsibility or duty under this
Agreement other than those applicable to all Lenders in their capacities as
Lenders hereunder. Without limiting the foregoing, none of the Co-Agents shall
be deemed to have a fiduciary relationship with any Lender or the Agent. Each
Lender which becomes a party to this Agreement acknowledges that it has not
relied, and will not rely, on any of the Co-Agents in deciding to enter into
this Agreement or in taking or not taking action hereunder."

                      1.11 DELETION OF SECTION 12.1(B). Section 12.1(b) of the
Credit Agreement is deleted in its entirety.

                  2.  AMENDMENTS TO SECURITY AGREEMENT.  Subject to the
conditions and upon the terms set forth in this Amendment, the Security
Agreement is hereby amended as follows:

                      2.1 AMENDMENT TO SECTION 14(A)(III). Section 14(a)(iii) of
the Security Agreement is hereby amended to delete paragraph "Third" and to
replace it with the following:

                  "Third, toward the satisfaction of the Secured Obligations
         (not including Bank Product Obligations) in respect of principal and
         Reimbursement Obligations, including the deposit of available funds in
         an amount equal to the then aggregate Letter of Credit Outstandings in
         the L/C Collateral Account in accordance with the Credit Agreement;"

                  3.  REPRESENTATIONS AND WARRANTIES OF PARENT GUARANTOR AND THE
BORROWER.  Each of the Parent Guarantor and the  Borrower represents and
warrants to each Lender and the Agent that the following statements are true,
correct and complete:

                      3.1 POWER AND AUTHORITY. Each of the Parent Guarantor,
Borrower and each other Obligor has all corporate or other organizational power
and authority to enter into this Amendment and, as applicable, the Consent of
Guarantors attached hereto (the "Consent"), and to carry out the transactions
contemplated by, and to perform its obligations under or in respect of, the
Credit Agreement, as amended hereby.

                      3.2 DUE AUTHORIZATION, NON-CONTRAVENTION. The execution,
delivery and performance by the applicable Obligor of this Amendment and the
Consent and the performance of the obligations of each Obligor under or in
respect of the Credit Agreement as amended hereby have been duly authorized by
all necessary corporate or other organizational action, and do not (a)
contravene such Obligor's Organic Documents, (b) contravene any contractual
restriction entered into after the Petition Date where such a contravention has
a reasonable possibility of having a Materially Adverse Effect, or contravene
any law or governmental regulation or court order binding on or affecting such
Obligor, or (c) result in, or require the creation or imposition of, any Lien on
any of such Obligor's properties.

                      3.3 EXECUTION, DELIVERY AND ENFORCEABILITY. This Amendment
and the Consent have been duly executed and delivered by each Obligor which is a
party thereto and constitute the legal, valid and binding obligations of such
Obligor, enforceable in accordance with their terms.

                      3.4 NO DEFAULT OR EVENT OF DEFAULT. No event has occurred
and is continuing or will result from the execution and delivery of this
Amendment or the Consent that would constitute a Default or an Event of Default.

                      3.5 REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties contained in the Loan Documents is and will be
true and correct in all material respects on and as of the date hereof and as of
the effective date of this Amendment, except to the extent that such
representations and warranties specifically relate to an earlier date, in which
case they were true, correct and complete in all material respects as of such
earlier date.

                  4. CONDITIONS TO EFFECTIVENESS OF THIS AMENDMENT. This
Amendment shall be effective only if and when signed by, and when counterparts
hereof shall have been delivered to the Agent (by hand delivery, mail or
telecopy) by, the Parent Guarantor, the Borrower and the Required Lenders, and
counterparts of the Consent have been delivered to the Agent by the Parent
Guarantor and each Subsidiary Guarantor and this Amendment has been approved by
the Bankruptcy Court in the Chapter 11 Cases, if such approval is required.

                  5. EFFECT OF AMENDMENT; RATIFICATION. This Amendment is a Loan
Document. From and after the date on which this Amendment becomes effective, all
references in the Loan Documents to the Credit Agreement or the Security
Agreement shall mean the Credit Agreement or the Security Agreement, as
applicable, each as amended hereby. Except as expressly amended hereby, the
Credit Agreement and the other Loan Documents, including the Liens granted
thereunder, shall remain in full force and effect, and all terms and provisions
thereof are hereby ratified and confirmed. Each of the Parent Guarantor and the
Borrower confirms that as amended hereby, each of the Loan Documents is in full
force and effect.

                  6. APPLICABLE LAW. THE VALIDITY, INTERPRETATIONS AND
ENFORCEMENT OF THIS AMENDMENT AND ANY DISPUTE ARISING OUT OF OR IN CONNECTION
WITH THIS AMENDMENT, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE,
SHALL BE GOVERNED BY THE INTERNAL LAWS AND DECISIONS OF THE STATE OF NEW YORK;
PROVIDED THAT THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER
FEDERAL LAW.

                  7. COMPLETE AGREEMENT. This Amendment sets forth the complete
agreement of the parties in respect of any amendment to any of the provisions of
any Loan Document. The execution, delivery and effectiveness of this Amendment
do not constitute a waiver of any Default or Event of Default, amend or modify
any provision of any Loan Document except as expressly set forth herein or
constitute a course of dealing or any other basis for altering the Obligations
of any Obligor.

                  8. CAPTIONS; COUNTERPARTS. The catchlines and captions herein
are intended solely for convenience of reference and shall not be used to
interpret or construe the provisions hereof. This Amendment may be executed by
one or more of the parties to this Amendment on any number of separate
counterparts (including by telecopy), all of which taken together shall
constitute but one and the same instrument.

                  IN WITNESS WHEREOF, each of the undersigned has duly executed
this First Amendment to Post-Petition Credit Agreement and Post-Petition Pledge
and Security Agreement and Consent of Guarantors as of the date set forth above.

"PARENT GUARANTOR"                 KAISER ALUMINUM CORPORATION




                                   By:  /S/ David A. Cheadle
                                   Name:  David A. Cheadle
                                   Title:   Assistant Treasurer

"BORROWER"                         KAISER ALUMINUM & CHEMICAL
                                   CORPORATION


                                   By:  /S/ David A. Cheadle
                                   Name:  David A. Cheadle
                                   Title:  Assistant Treasurer


                                   BANK OF AMERICA, N.A.,
                                   as the Agent and a Lender


                                   By:  /S/ Richard Burke
                                   Name:  Richard Burke
                                   Title:  Sr. V.P.


                                   GENERAL ELECTRIC CAPITAL
                                   CORPORATION, as a Lender


                                   By:  /S/  Thomas G. Sullivan
                                   Name:  Thomas G. Sullivan
                                   Title:  Duly Authorized Signatory



                                   FOOTHILL CAPITAL CORPORATION,
                                   as a Lender


                                   By:  /S/ Sanat Amladi
                                   Name:  Sanat Amladi
                                   Title:  AVP



                                   THE CIT GROUP/BUSINESS CREDIT, INC.,
                                   as a Lender


                                   By:  /S/ Grant Weiss
                                   Name:  Grant Weiss
                                   Title:   Vice President


                              CONSENT OF GUARANTORS


Each of the undersigned is a Guarantor of the Obligations of the Borrower under
the Credit Agreement and each other Loan Document and hereby (a) consents to the
foregoing Amendment, (b) acknowledges that notwithstanding the execution and
delivery of the foregoing Amendment, the obligations of each of the undersigned
Guarantors are not impaired or affected and the Parent Guaranty and the
Subsidiary Guaranty continue in full force and effect, and (c) ratifies the
Parent Guaranty or the Subsidiary Guaranty, as applicable, and each of the Loan
Documents to which it is a party and further ratifies the Security Interests
granted by it to the Agent for its benefit and the benefit of the Secured
Parties.

         IN WITNESS WHEREOF, each of the undersigned has executed and delivered
this CONSENT OF GUARANTORS as of the date first set forth above.

                                   AKRON HOLDING CORPORATION



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   ALPART JAMAICA INC.



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER ALUMINA AUSTRALIA CORPORATION



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER BELLWOOD CORPORATION



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER ALUMINUM & CHEMICAL
                                   INVESTMENT, INC.


                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER ALUMINIUM INTERNATIONAL, INC.



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer




                                   KAISER ALUMINUM PROPERTIES, INC.



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER ALUMINUM TECHNICAL
                                   SERVICES, INC.



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER FINANCE CORPORATION



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER JAMAICA CORPORATION



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER MICROMILL HOLDINGS, LLC



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER SIERRA MICROMILLS, LLC



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER TEXAS SIERRA MICROMILLS, LLC



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer


                                   KAISER TEXAS MICROMILL HOLDINGS, LLC




                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer


                                   OXNARD FORGE DIE COMPANY, INC.



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer

                                   KAISER ALUMINUM CORPORATION



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer

EX-4 7 ex_446-2001.htm EXHIBIT 4.46 TO 2001 10-K Exhibit 4.46 to 2001 10-K

                                                                    Exhibit 4.46

                               SECOND AMENDMENT TO
                         POST-PETITION CREDIT AGREEMENT
                            AND CONSENT OF GUARANTORS


                  This SECOND AMENDMENT TO POST-PETITION CREDIT AGREEMENT AND
CONSENT OF GUARANTORS (this "Amendment") is dated as of March 21, 2002 and
entered into by and among KAISER ALUMINUM CORPORATION, a Delaware corporation,
as debtor and debtor-in-possession (the "Parent Guarantor"), KAISER ALUMINUM
& CHEMICAL CORPORATION, a Delaware corporation, as debtor and
debtor-in-possession (the "Borrower"), the banks and other financial
institutions signatory hereto that are parties as Lenders to the Credit
Agreement referred to below (the "Lenders"), and BANK OF AMERICA, N.A., as
administrative agent and collateral agent (in such capacity, the "Agent") for
the Lenders.

                                    RECITALS

                  WHEREAS, the Parent Guarantor, the Borrower, the Lenders, and
the Agent have entered into that certain Post-Petition Credit Agreement dated as
of February 12, 2002, as amended by that certain First Amendment to
Post-Petition Credit Agreement and Post-Petition Pledge and Security Agreement
and Consent of Guarantors (the "First Amendment") dated as of even date herewith
(as so amended, the "Credit Agreement"; capitalized terms used in this Amendment
without definition shall have the meanings given such terms in the Credit
Agreement); and

                  WHEREAS, the Bankruptcy Court in the Chapter 11 Cases, in
connection with the entry of the Final Order, has approved the First Amendment;
and

                  WHEREAS, the terms of the Final Order permit the parties
hereto to make "non-material modifications" to the Loan Documents, including the
Credit Agreement, without further order of the Bankruptcy Court, and the parties
hereto wish to so amend Section 9.2.11 of the Credit Agreement to clarify the
provisions thereof, all on the terms and conditions set forth in this Amendment;
and

                  WHEREAS, the parties hereto desire that this Amendment be
entered into after the First Amendment but that the effectiveness of both the
First Amendment and this Amendment be deemed to occur simultaneously;

                  NOW THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, the Parent Guarantor, the Borrower, the Lenders,
and the Agent agree as follows:

                  1. AMENDMENTS TO CREDIT AGREEMENT. Subject to the conditions
and upon the terms set forth in this Amendment, the Credit Agreement is hereby
amended as follows:

                      1.1  AMENDMENT TO SECTION 9.2.11.  Section 9.2.11 of the
Credit Agreement is amended to delete the final sentence thereof and to replace
it with the following:

"Further, notwithstanding the foregoing, or the provisions of Sections 9.2.10 or
Section 9.2.18, the Company will not, and will not permit AJI, KJC or ALPART to,
liquidate or dissolve AJI, KJC or ALPART, or consolidate or merge AJI, KJC or
ALPART with any other entity, nor will it permit AJI, KJC or ALPART to sell any
of their respective assets, other than sales of Inventory and other assets in
the ordinary course of business consistent with past practice; provided that in
no event will AJI or KJC be permitted to sell any of their partnership interests
in ALPART; provided further that, for the avoidance of doubt, the foregoing
shall not prevent AJI, KJC or ALPART from (i) disposing of bauxite reserves,
properties, lands and rights which are mined out or otherwise no longer useful
in the conduct of their respective businesses, or (ii) selling, abandoning or
otherwise disposing of items of machinery, equipment or facilities that are worn
out, obsolete or no longer useful."

                  2.  REPRESENTATIONS AND WARRANTIES OF PARENT GUARANTOR AND THE
BORROWER. Each of the Parent Guarantor and the Borrower represents and warrants
to each Lender and the Agent that the following statements are true, correct and
complete:

                      2.1 POWER AND AUTHORITY. Each of the Parent Guarantor,
Borrower and each other Obligor has all corporate or other organizational power
and authority to enter into this Amendment and, as applicable, the Consent of
Guarantors attached hereto (the "Consent"), and to carry out the transactions
contemplated by, and to perform its obligations under or in respect of, the
Credit Agreement, as amended hereby.

                      2.2 DUE AUTHORIZATION, NON-CONTRAVENTION. The execution,
delivery and performance by the applicable Obligor of this Amendment and the
Consent and the performance of the obligations of each Obligor under or in
respect of the Credit Agreement as amended hereby have been duly authorized by
all necessary corporate or other organizational action, and do not (a)
contravene such Obligor's Organic Documents, (b) contravene any contractual
restriction entered into after the Petition Date where such a contravention has
a reasonable possibility of having a Materially Adverse Effect, or contravene
any law or governmental regulation or court order binding on or affecting such
Obligor, or (c) result in, or require the creation or imposition of, any Lien on
any of such Obligor's properties.

                      2.3 EXECUTION, DELIVERY AND ENFORCEABILITY. This Amendment
and the Consent have been duly executed and delivered by each Obligor which is a
party thereto and constitute the legal, valid and binding obligations of such
Obligor, enforceable in accordance with their terms.

                      2.4 NO DEFAULT OR EVENT OF DEFAULT. No event has occurred
and is continuing or will result from the execution and delivery of this
Amendment or the Consent that would constitute a Default or an Event of Default.

                      2.5 REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties contained in the Loan Documents is and will be
true and correct in all material respects on and as of the date hereof and as of
the effective date of this Amendment, except to the extent that such
representations and warranties specifically relate to an earlier date, in which
case they were true, correct and complete in all material respects as of such
earlier date.

                  3. CONDITIONS TO EFFECTIVENESS OF THIS AMENDMENT. This
Amendment shall be effective only if and when signed by, and when counterparts
hereof shall have been delivered to the Agent (by hand delivery, mail or
telecopy) by, the Parent Guarantor, the Borrower and the Required Lenders, and
counterparts of the Consent have been delivered to the Agent by the Parent
Guarantor and each Subsidiary Guarantor.

                  4. EFFECT OF AMENDMENT; RATIFICATION. This Amendment is a Loan
Document. From and after the date on which this Amendment becomes effective, all
references in the Loan Documents to the Credit Agreement shall mean the Credit
Agreement as amended hereby. Except as expressly amended hereby, the Credit
Agreement and the other Loan Documents, including the Liens granted thereunder,
shall remain in full force and effect, and all terms and provisions thereof are
hereby ratified and confirmed. Each of the Parent Guarantor and the Borrower
confirms that as amended hereby, each of the Loan Documents is in full force and
effect.

                  5. APPLICABLE LAW. THE VALIDITY, INTERPRETATIONS AND
ENFORCEMENT OF THIS AMENDMENT AND ANY DISPUTE ARISING OUT OF OR IN CONNECTION
WITH THIS AMENDMENT, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE,
SHALL BE GOVERNED BY THE INTERNAL LAWS AND DECISIONS OF THE STATE OF NEW YORK;
PROVIDED THAT THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER
FEDERAL LAW.

                  6. COMPLETE AGREEMENT. This Amendment sets forth the complete
agreement of the parties in respect of any amendment to any of the provisions of
any Loan Document. The execution, delivery and effectiveness of this Amendment
do not constitute a waiver of any Default or Event of Default, amend or modify
any provision of any Loan Document except as expressly set forth herein or
constitute a course of dealing or any other basis for altering the Obligations
of any Obligor.

                  7. CAPTIONS; COUNTERPARTS. The catchlines and captions herein
are intended solely for convenience of reference and shall not be used to
interpret or construe the provisions hereof. This Amendment may be executed by
one or more of the parties to this Amendment on any number of separate
counterparts (including by telecopy), all of which taken together shall
constitute but one and the same instrument.

                  IN WITNESS WHEREOF, each of the undersigned has duly executed
this Second Amendment to Post-Petition Credit Agreement and Consent of
Guarantors as of the date set forth above.

"PARENT GUARANTOR"                 KAISER ALUMINUM CORPORATION



                                   By:  /S/ David A. Cheadle
                                   Name:  David A. Cheadle
                                   Title:  Assistant Treasurer


"BORROWER"                         KAISER ALUMINUM & CHEMICAL
                                   CORPORATION


                                   By:  /S/ David A. Cheadle
                                   Name:  David A. Cheadle
                                   Title:  Assistant Treasurer


                                   BANK OF AMERICA, N.A.,
                                   as the Agent and a Lender


                                   By:  /S/ Richard Burke
                                   Name:  Richard Burke
                                   Title:  Sr. V.P.


                                   GENERAL ELECTRIC CAPITAL
                                   CORPORATION, as a Lender


                                   By:  /S/ Thomas G. Sullivan
                                   Name:  Thomas G. Sullivan
                                   Title:  Duly Authorized Signatory


                                   FOOTHILL CAPITAL CORPORATION,
                                   as a Lender


                                   By:  /S/ Sanat Amladi
                                   Name:  Sanat Amladi
                                   Title:  AVP


                                   THE CIT GROUP/BUSINESS CREDIT, INC.,
                                   as a Lender


                                   By:  /S/ Grant Weiss
                                   Name:  Grant Weiss
                                   Title:  Vice President



                              CONSENT OF GUARANTORS


Each of the undersigned is a Guarantor of the Obligations of the Borrower under
the Credit Agreement and each other Loan Document and hereby (a) consents to the
foregoing Amendment, (b) acknowledges that notwithstanding the execution and
delivery of the foregoing Amendment, the obligations of each of the undersigned
Guarantors are not impaired or affected and the Parent Guaranty and the
Subsidiary Guaranty continue in full force and effect, and (c) ratifies the
Parent Guaranty or the Subsidiary Guaranty, as applicable, and each of the Loan
Documents to which it is a party and further ratifies the Security Interests
granted by it to the Agent for its benefit and the benefit of the Secured
Parties.

         IN WITNESS WHEREOF, each of the undersigned has executed and delivered
this CONSENT OF GUARANTORS as of the date first set forth above.

                                   AKRON HOLDING CORPORATION



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   ALPART JAMAICA INC.



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER ALUMINA AUSTRALIA CORPORATION



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER BELLWOOD CORPORATION



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER ALUMINUM & CHEMICAL
                                   INVESTMENT, INC.


                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER ALUMINIUM INTERNATIONAL, INC.



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER ALUMINUM PROPERTIES, INC.



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER ALUMINUM TECHNICAL
                                   SERVICES, INC.



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER FINANCE CORPORATION



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER JAMAICA CORPORATION



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER MICROMILL HOLDINGS, LLC



                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER SIERRA MICROMILLS, LLC


                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER TEXAS SIERRA MICROMILLS, LLC


                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer



                                   KAISER TEXAS MICROMILL HOLDINGS, LLC


                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer


                                   OXNARD FORGE DIE COMPANY, INC.


                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer


                                   KAISER ALUMINUM CORPORATION


                                   By  /S/ David A. Cheadle
                                   Title:  Assistant Treasurer

EX-10 8 ex_1024-2001.htm EXHIBIT 10.24 TO 2001 10-K Exhibit 10.24 to 2001 10-K

                                                                   Exhibit 10.24

                                October 11, 2001


Mr. Jack A. Hockema
Kaiser Aluminum & Chemical Corporation
5847 San Felipe, Suite 2600
Houston, Texas 77057

         Re:      Chief Executive Officer Agreement

Dear Jack:

         On behalf of the Board of Directors of Kaiser Aluminum & Chemical
Corporation (the "Company") this letter agreement will confirm the terms of our
offer to you to become the President and Chief Executive Officer of the Company.

         The terms of our offer are as follows:

- -        POSITION: The Company agrees to employ you in the position of President
         and Chief Executive Officer of the Company. In this position you will
         perform the duties and responsibilities commensurate with the position
         of Chief Executive Officer and such other duties as may be determined
         and assigned by the Board.
- -        TERM: The term of this agreement is for the period October 9, 2001
         through December 31, 2002.
- -        BASE SALARY RATE: Your annual base salary rate will be $730,000,
         payable in accordance with the Company's standard payroll schedule.
- -        SHORT TERM INCENTIVE: Your Short Term Incentive Bonus target ("STI") is
         $500,000. Payment will be from 50% to 300% of target based upon
         attainment of written objectives established by the Board after
         consultation with you for the calendar year 2002, and at target on a
         pro-rata basis for the period remaining in 2001. As to 2002, the Board
         shall determine whether any STI has been earned and its decision will
         be final and binding. Such determination will be made on or before
         January 31, 2003, and will be paid not later than 90 days thereafter.
         You will have no right to any portion of the STI Bonus should your
         employment be terminated for cause or if you choose to end your
         employment with the Company prior to December 31, 2002.
- -        LONG TERM INCENTIVE: Your Long Term Incentive Bonus ("LTI") opportunity
         is valued at $1,500,000 for the term of this agreement. The LTI will be
         granted one-half in the form of Restricted Stock, and one-half in the
         form of Stock Options. The Restricted Stock grant will be made in two
         separate grants, one in 2001 and the other in 2002. The grants will be
         made in accordance with the Company's standard pricing, vesting, and
         term conditions.
- -        WORK LOCATION: The primary work location is the Company headquarters in
         Houston, Texas and you will be required to spend 80 % or more of your
         office based work time at this location.
- -        TEMPORARY LIVING: The Company will reimburse you for your reasonable
         temporary housing expenses while in Houston, Texas during this
         assignment. The Chairman of the Board will have the discretion to
         approve these amounts. You will be allowed to submit reasonable airline
         travel expenses for you and your spouse under the company's expense
         reimbursement program.
- -        BENEFITS: You will remain eligible for Company sponsored benefits,
         other than as set forth above, as provided to you by the Company.
- -        TERMINATION: Although your employment remains terminable at will
         (subject to the terms of the Enhanced Severance Agreement), if, in the
         sole discretion of the Board, it terminates your assignment as
         President and CEO, the parties agree that you will be returned to the
         position of President, Fabricated Products at the compensation level of
         the Chief Executive Officer position for the balance of the term, and
         thereafter, at the following compensation level effective January 1,
         2003: annual base salary rate $400,000.00; Short Term Incentive
         $210,000.00; and Long Term Incentive $500,000.00 per your preexisting
         incentive compensation terms.

         Jack, the Board and I are excited about the prospect of you serving as
the Company's President and Chief Executive Officer and bolstering our
performance. We look forward to working with you.

         If the terms of this offer are acceptable please sign in the space
provided below and return this Letter Agreement to me.


                                            Very truly yours,

                                            /S/ George T. Haymaker, Jr.
                                            George T. Haymaker, Jr.
                                            Chairman of the Board


Agreed to and accepted by:

/S/ Jack A. Hockema
Jack A. Hockema

October 11, 2001

EX-10 9 ex_1025-2001.htm EXHIBIT 10.25 TO 2001 10-K Exhibit 10.25 to 2001 10-K

                                                                   Exhibit 10.25

                                October 11, 2001


Mr. George T. Haymaker, Jr.
Kaiser Aluminum & Chemical Corporation
5847 San Felipe, Suite 2600
Houston, Texas 77057

         Re:      Non-Executive Chairman of the Boards Agreement

Dear George:

         On behalf of the Boards of Directors (the "Boards") of Kaiser Aluminum
Corporation ("KAC") and Kaiser Aluminum & Chemical Corporation ("KACC") this
letter agreement confirms the terms of our offer to you to become the
non-executive Chairman of the Boards of KAC and KACC.

         The terms of our offer are as follows:

         1. POSITION: The Boards offer to, and upon your acceptance of this
agreement do hereby, engage you in the position of non-executive Chairman of the
Boards of KAC and KACC. Including your duties as a Director of the Boards, you
are committed to make available up to an average of eighty (80) hours each
calendar month for devotion to the affairs of KAC and KACC as directed by the
Chief Executive Officer or by the Boards, with particular focus on assisting
with implementation of the strategic plans that have been developed (or will be
developed) for KAC and KACC, including but not limited to, the three (3) matters
listed below in Paragraph 3.(c) of this letter agreement.

         2. TERM: The term of this agreement is for the period October 11, 2001,
through December 31, 2002. The parties have no obligation to renew this
agreement at the end of the term. This agreement may be terminated earlier (i)
at the sole discretion of the Boards, (ii) by your death or disability (as
defined in KAC's Long Term Disability Plan that covers executives and directors
of KAC, (iii) for cause (as defined below), (iv) the mutual agreement of the
parties hereto, or (v) by you, with sixty days notice to the Boards unless
shorter notice is agreed in the sole discretion of the Boards.

         For purposes of this letter agreement, the term "cause" shall mean:

         (a)      Your conviction for, or plea of nolo contendere to, a felony;
                  or

         (b)      Your commission of an act involving fraud or intentional
                  dishonesty, which act is intended to result in substantial
                  personal enrichment at the expense of KAC or any of
                  its subsidiaries; or

         (c)      Your breach of any material provision of this letter agreement
                  which remains uncorrected for 30 days after written notice
                  from the Boards or the Chief Executive Officer and an
                  opportunity to correct; or

         (d)      Your knowing and willful misconduct in the performance of your
                  duties, which continues for 30 days after written notice from
                  the Boards or the Chief Executive Officer and which results in
                  material injury to the reputation, business or operation of
                  KAC or any of its subsidiaries.

The existence of "cause" shall be determined by an affirmative vote of not less
than two-thirds of the members of each of the Boards. If the requisite
affirmative vote by two-thirds of the members of each of the Boards is not
obtained, this letter agreement may not be terminated for cause.

         3.  COMPENSATION:

         (a)      Your annual base compensation as a Director of $50,000,
                  $30,000 of which is payable in cash quarterly in arrears,
                  shall continue unmodified.  Some or all of the cash portion
                  of such compensation may be deferred at your option into a
                  "phantom stock" and/or interest-bearing account to the same
                  extent as other Directors of KAC and KACC are permitted an
                  election to do so pursuant to the Deferred Fee Agreement.
                  Amounts which otherwise would be payable to you during the
                  term of this letter agreement under KAC's and KACC's
                  Directors' compensation policies for attendance at meetings of
                  the Boards and committees thereof and for service as Chairman
                  or a member of such committees shall be deemed to be included
                  in the compensation payable under Paragraph 3.(b) of this
                  letter agreement.

         (b)      Your base compensation for services as non-executive Chairman
                  of both Boards will be computed at the rate of $365,000 per
                  year, which shall be payable in cash, quarterly in arrears, in
                  the first week of the first month following the completion of
                  each calendar quarter in which such compensation is earned.
                  For the period October 11, 2001, through December 31, 2001,
                  the amount to be earned is the pro-rata amount of $81,331.52,
                  and for each calendar quarter during 2002, the amount to be
                  earned is $91,250.00.

         (c)      You will earn an incentive payment of $105,000 (the
                  "Incentive") if, on or before December 31, 2002, the following
                  strategic objectives are accomplished during the term of this
                  agreement:

                  (1)      KACC is successful either in establishing a new
                           long-term revolving credit agreement or in extending
                           and renewing its existing revolving credit agreement
                           (excluding short-term, interim renewals) for a term,
                           with an aggregate revolving commitment amount, and
                           with other provisions, satisfactory to and approved
                           by the Boards; and

                  (2)      KACC is successful in consummating its offer to
                           exchange new Secured Second Priority Senior
                           Subordinated Notes Due 2006 for its existing 12 3/4%
                           Senior Subordinated Notes Due 2003 and in
                           consummating a related solicitation of consents to
                           the amendment of the indenture related to such Senior
                           Subordinated Notes Due 2003, or KACC is successful in
                           consummating such other transactions in lieu of the
                           foregoing transactions in a manner consistent with an
                           approved strategy of the Boards; and

                  (3)      Jack A. Hockema or another Chief Executive Officer of
                           KAC and KACC acceptable to the Boards has been
                           elected for a term of office that extends beyond 2002
                           and Jack A. Hockema or such other Chief Executive
                           Officer has agreed to serve for such term.

                  The Incentive will be paid only if all of these strategic
                  objectives are achieved as determined by the Boards in their
                  sole discretion. The parties agree that determinations of the
                  Boards concerning incentive compensation, if any, shall be
                  final and binding. You will have no right to any portion of
                  the Incentive (a) if all of the foregoing strategic objectives
                  are not timely achieved, (b) if your engagement as non-
                  executive Chairman of the Boards is terminated for cause (as
                  defined above), or (c) if you choose to end your engagement as
                  non-executive Chairman of the Boards prior to December 31,
                  2002, without having met all of the foregoing strategic
                  objectives. The Incentive, if earned, shall be paid in cash in
                  the calendar month following the month in which you cease to
                  serve as non-executive Chairman of the Boards.

         You shall be solely liable and responsible for complying with all laws,
rules and regulations regarding timely payment of applicable taxes including,
without limitation, federal and state income, self-employment and/or disability
taxes that may apply to such compensation.

         4. INDEPENDENT CONTRACTOR: The relationship between the parties shall
be that of independent contracting parties and shall not constitute or be deemed
for any purpose to be that of employer and employee. The Boards and KAC and KACC
expressly acknowledge and agree that neither shall have the right to direct you
with respect to the means or manner in which you fulfill your obligations and
responsibilities under his letter agreement. The Boards and KAC and KACC are
solely interested in the results obtained by you in connection with your
performance of services required hereunder.

         5. TERMINATION: Although your engagement as non-executive Chairman of
the Boards is terminable at the sole discretion of the Boards, if your
engagement as non-executive Chairman of the Boards is terminated by KAC and KACC
without cause (as defined above), you will continue to receive the compensation
specified under Paragraph 3.(b) of this agreement for the balance of the term of
the agreement and, if all three of the strategic matters listed in Paragraph
3.(c) of this agreement have been achieved at the time of such termination, you
will be paid the incentive compensation specified in such Paragraph 3.(c).
However, if your engagement as non-executive Chairman of the Boards is
terminated for cause (as defined above) then, notwithstanding Paragraph 3.(c)
hereof, you will have no right to any portion of the incentive compensation
specified in such Paragraph 3.(c), whether or not it is otherwise earned, and
you will have no right to any compensation under Paragraph 3.(b) of this
agreement with respect to any period of time after the date of such termination.
You will continue to receive the fees paid for service as a Director of KAC and
KACC so long as you remain such a Director.

         6. AMENDMENT; BENEFIT: This letter agreement may not be amended,
modified, or supplemented in any respect except by a subsequent written
agreement between all of the parties hereto. This letter agreement shall be
binding upon, and shall inure to the benefit of, KAC and its successors and
assigns, KACC and its successors and assigns, and you and your heirs, executors,
administrators, and personal representatives.

         7.  GOVERNING LAW:  This letter agreement shall be governed and
construed in accordance with the laws of the State of Texas, without regard to
principles of choice of law.

         George, the Boards are very pleased that you are willing to resume the
duties of non-executive Chairman of the Boards. We look forward to working with
you.

         If the terms of this offer are acceptable, please sign in the space
provided below and return this letter agreement to me.


                                               Very truly yours,

                                               /S/ J. Kent Friedman
                                               J. Kent Friedman
                                               Senior Vice President and
                                               General Counsel


The foregoing is agreed to and accepted
effective as of October 11, 2001


/S/  George T. Haymaker, Jr.
George T. Haymaker, Jr.

EX-10 10 ex_1035-2001.htm EXHIBIT 10.35 TO 2001 10-K Exhibit 10.35 to 2001 10-K

                                                                   Exhibit 10.35

                 THE KAISER ALUMINUM & CHEMICAL CORPORATION
                                 RETENTION PLAN

         I.   Purpose

         The purpose of the Plan is to establish a retention program for
designated key employees of the Company. The Plan provides incentives,
contingent upon continued employment, to certain key salaried employees who are
expected to make substantial contributions to provide stability and continuity
of operations. The Plan has been approved by the Boards of Directors of the
Company and the Corporation.

         II.  Definitions

         "Award" means a retention award as determined by the Committee, to be
granted to a Participant, based upon that Participant's continued employment
with the Company.

         "Board" means the Board of Directors of the Company.

         "Cause" means (1) the Participant's gross misconduct or fraud in the
performance of his employment, or (2) the Participant's conviction or guilty
plea with respect to any felony (except for motor vehicle violations).

         "Committee" means the Executive Committee of the Board. The Committee
may delegate any of its powers, duties and responsibilities and any of its
discretionary authorities under the Plan to any Officer.

         "Company" means Kaiser Aluminum & Chemical Corporation.

         "Corporation" means Kaiser Aluminum Corporation.

         "Designated Beneficiary" means the beneficiary or beneficiaries
designated in accordance with Article XI hereof to receive the amount, if any,
payable under the Plan upon the Participant's death.

         "Disability" or "Disabled" means, except as otherwise defined in an
existing employment agreement, permanent and total disability under the
Company's long term disability plan, as determined by the Committee.

         "Good Reason" means, without the Participant's written consent, a
reduction in his base compensation, or eligibility for participation in the
Company's benefit plans, that is not commensurate with a similar reduction among
similarly situated employees or executives at the Participant's salary grade
level.

         "Officer" means an officer of the Company.

         "Participant" means any key employee of the Company designated by the
Board, the Committee or an Officer to participate in the Plan.

         "Payment Date" means the date or series of dates on which an Award or
portion of an Award is payable, as provided in Section VI.

         "Plan" means Kaiser Aluminum & Chemical Corporation Retention Plan.

         "Retention Agreement" means an agreement entered into between the
Company and a Participant providing for participation in the Plan.

         "Vesting Date" means the date or dates on which Participant becomes
vested in all or a portion of his or her Award.

         III. Eligibility

         Participants in the Plan will be selected by the Board, the Committee
and Officers from those key employees of the Company whose efforts are expected
to contribute materially to the efforts and success of the Company. No employee
will be a Participant until he or she has executed a Retention Agreement. No
employee will at any time have the right to be selected as a Participant. Awards
made under the Plan are not in lieu of any other benefits a Participant may be
entitled to receive from the Company; provided, however, that any Retention
Agreement may provide that an Award will be reduced and offset, dollar per
dollar, by any short term incentive and long term incentive cash payments earned
during calendar year 2002.

         IV.  Administration

         The Plan will be administered by the Committee. The Committee, in its
sole discretion, will determine eligibility for participation, and establish the
Award which may be earned by each Participant (which may be expressed in terms
of dollar amount, percentage of salary or any other measurement).

         Except as otherwise expressly provided herein, full power and authority
to construe, interpret, and administer the Plan will be vested in the Committee,
including the power to amend or terminate the Plan as further described in
Article XIV. The Committee may at any time adopt such rules, regulations,
policies, or practices as, in its sole discretion, it determines to be necessary
or appropriate for the administration of, or the performance of its
responsibilities under, the Plan. The Committee may at any time amend, modify,
suspend, or terminate such rules, regulations, policies, or practices.

         V.   Awards; Vesting

         The Company will execute a retention agreement (the "Agreement") that
sets forth the terms and timing of the grant, vesting and payment of an Award.
Subject to the terms of the Agreement, an Award will be earned by and vested in
a Participant based upon continued employment on each Vesting Date. Except as
provided in the terms of the Agreement, Awards will be considered compensation
for purposes of the Company's pension and welfare benefit plans, programs and
arrangements.

         VI.  Payment of Awards

         Awards earned and vested will become payable as provided in the
Retention Agreement. Awards are solely based upon a Participant's continued
employment with the Company and will vest and become payable if the Participant
is employed by the Company on the Vesting Date associated with such payment.

         VII. Termination of Employment

         (a)  In General.

              A Participant will be eligible to receive payment of his or her
Award or portion thereof so long as the Participant is employed by the Company
on the Vesting Date associated with such payment.

         (b)  Death, Disability, Resignation with Good Reason or Termination by
              the Company Without Cause.

              In the event of a Participant's termination of employment with the
Company due to (i) death, (ii) Disability, (iii) the Participant's resignation
with Good Reason, or (iv) termination by the Company without Cause prior to the
vesting and/or payment of an Award, the balance of such Award will immediately
vest in full and become payable as soon as practicable in a lump sum to the
Participant or to the Participant's Designated Beneficiary or, if there is none
living, to the estate of the Participant.

         (c)  For Cause; Voluntary Termination Without Good Reason.

              In the event of a Participant's termination of employment with the
Company for any reason other than (i) death, (ii) Disability, (iii) the
Participant's resignation with Good Reason, or (iv) termination by the Company
without Cause, the portion of any Award to the Participant not yet vested will
be immediately forfeited.

         (d)  Repayment of Award.

              If, within ninety (90) days following the initial Vesting Date of
January 15, 2002, a Participant voluntarily terminates employment with the
Company (other than with Good Reason), or is terminated by the Company with
Cause, the Participant will be required to repay to the Company the portion of
his or her Award received in connection with such initial Vesting Date.

         VIII. Non-Alienation of Benefits

         A Participant may not assign, sell, encumber, transfer or otherwise
dispose of any rights or interests under the Plan except by will or the laws of
descent and distribution. Any attempted disposition in contravention of the
preceding sentence will be null and void.

         IX.  No Claim or Right to Plan Participation

         No employee or other person will have any claim or right to be selected
as a Participant under the Plan. Neither the Plan nor any action taken pursuant
to the Plan will be construed as giving any employee any right to be retained in
the employ of the Company.

         X.   Taxes

         The Company will deduct from all amounts paid under the Plan all
federal, state, local and other taxes required by law to be withheld with
respect to such payments.

         XI.  Designation and Change of Beneficiary

         Each Participant may designate one or more persons as the Designated
Beneficiary who will be entitled to receive the amount, if any, payable under
the Plan upon the death of the Participant. Such designation will be in writing
to the Committee. A Participant may, from time to time, revoke or change his or
her Designated Beneficiary without the consent of any prior Designated
Beneficiary by filing a written designation with the Committee. The last such
designation received by the Committee will be controlling; provided, however,
that no designation, or change or revocation thereof, will be effective unless
received by the Committee prior to the Participant's death, and in no event will
it be effective as of a date prior to such receipt.

         XII. Payments to Persons Other Than the Participant

         If the Committee finds that any person to whom any amount is payable
under the Plan is unable to care for his or her affairs because of illness or
accident, or is a minor, or has died, then any payment due to such person or his
or her estate (unless a prior claim therefor has been made by a duly appointed
legal representative) may, if the Committee so directs, be paid to his or her
spouse, a child, a relative, an institution maintaining or having custody of
such person, or any other person deemed by the Committee, in its sole
discretion, to be a proper recipient on behalf of such person otherwise entitled
to payment. Any such payment will be a complete discharge of the liability of
the Company therefor.

         XIII. No Liability of Board or Committee Members or Officers

         No member of the Board or the Committee or any Officer will be
personally liable by reason of any contract or other instrument related to the
Plan executed by such Officer or by such member or on his or her behalf in his
or her capacity as a member of the Board or the Committee, nor for any mistake
of judgment made in good faith, and the Company will indemnify and hold harmless
each employee, Officer, or director of the Company to whom any duty or power
relating to the administration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including legal fees, disbursements and
other related charges) or liability (including any sum paid in settlement of a
claim with the approval of the Board of Directors) arising out of any act or
omission to act in connection with the Plan unless arising out of such person's
own fraud or bad faith.

         XIV. Termination or Amendment of the Plan

         The Committee may amend, suspend or terminate the Plan at any time;
provided, however, the Plan may not be amended in any way to reduce the benefits
payable hereunder to a Participant or otherwise to impair his or her ability to
receive any amount due hereunder, without the prior written consent of the
Participant. The Plan will automatically terminate when all benefits payable
hereunder have been paid.

         XV.  Establishment of Trust

         The Company's obligations under the Plan may be secured for one or more
Participants by the establishment of a trust for the benefit of one or more
Participants. Such Participants may be paid the Awards from the trust, but if
the trust has insufficient funds, then the balance of the Awards will be paid by
the Company.

         The Plan is not intended to be subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").

         XVI. Governing Law

         The terms of the Plan and all rights thereunder will be governed by and
construed in accordance with the laws of the State of Texas, without reference
to principles of conflict of laws.

         XVII. Effective Date

         The effective date of the Plan is January 15, 2002.


                                      Kaiser Aluminum & Chemical Corporation


                                      By: /S/ John Barneson
                                      Title:___________________________

EX-10 11 ex_1036-2001.htm EXHIBIT 10.36 TO 2001 10-K Exhibit 10.36 to 2001 10-K

                                                                   Exhibit 10.36

                       RETENTION AGREEMENT FOR THE KAISER
               ALUMINUM & CHEMICAL CORPORATION RETENTION PLAN


         THIS AGREEMENT (the "Agreement") is made, effective as of the 15th day
of January, 2002, between Kaiser Aluminum & Chemical Corporation, a Delaware
corporation (the "Company"), and _______________________________ (hereinafter
called the "Participant").

                                R E C I T A L S:

         WHEREAS, the Company has adopted The Kaiser Aluminum & Chemical
Corporation Retention Plan (the "Plan"), which Plan is incorporated herein by
reference and made a part of this Agreement. Capitalized terms not otherwise
defined herein will have the same meanings as in the Plan; and

         WHEREAS, the Committee has determined that it would be in the best
interests of the Company to grant the retention award provided for herein (the
"Award") to the Participant pursuant to the Plan and the terms set forth herein.

         NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties hereto agree as follows:

                  1.  Grant of the Award. Subject to the terms and conditions of
the Plan and the additional terms and conditions set forth in this Agreement,
the Company hereby grants to the Participant an Award of $_________________,
payable subject to the Participant's continued employment with the Company.

                  2.  Vesting and Payment.

                  (a) Subject to the Participant's continued employment with the
Company and the terms of the Plan and this Agreement, the Award will vest and
become payable as follows:

                      (i)  fifteen percent (15%) of the Award will vest and
become payable on January 15, 2002; and

                      (ii) the balance of the Award will vest and become payable
as determined by the Committee, but in no case will the Award balance vest and
become payable any later than March 31, 2003.

                  (b) If the Participant's employment with the Company is
terminated prior to any Vesting Date for any reason other than as a result of
(i) death, (ii) Disability, (iii) the resignation of the Participant with Good
Reason, or (iv) termination by the Company without Cause, the portion of the
Award not yet vested will be forfeited by the Participant without consideration.

                  (c) If the Participant's employment with the Company is
terminated prior to any Vesting Date as a result of (i) death, (ii) Disability,
(iii) the resignation of the Participant with Good Reason, or (iv) termination
by the Company without Cause, the Award will vest in full and all amounts will
become payable as a lump sum as soon as practicable thereafter.

                  (d) Except as provided in Section 2(c), a vested Award will be
paid to the Participant in cash as soon as practicable following each Vesting
Date.

                  (e) Anything in the Plan or this Agreement to the contrary
notwithstanding, any payment made pursuant to Section 2(a)(ii) of this Agreement
will be reduced and offset, dollar per dollar, by any short term incentive and
long term incentive cash payments earned during calendar year 2002.

                  (f) If the Participant's employment with the Company is
terminated within ninety (90) days following the initial Vesting Date of January
15, 2002, for any reason other than as a result of (i) death, (ii) Disability,
(iii) the resignation of the Participant with Good Reason, or (iv) termination
by the Company without Cause, the payment made in connection with such initial
Vesting Date must be immediately returned to the Company by the Participant.

                  3.   No Right to Continued Employment. Neither the Plan nor
this Agreement will be construed as giving the Participant the right to be
retained in the employ of the Company. Further, the Company may at any time
dismiss the Participant, free from any liability or any claim under the Plan or
this Agreement, except as otherwise expressly provided therein or herein.

                  4. Transferability. The Award may not, at any time, be
assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by the Participant and any such purported assignment, alienation,
pledge, attachment, sale, transfer or encumbrance will be void and unenforceable
against the Company; provided that the designation of a beneficiary will not
constitute an assignment, alienation, pledge, attachment, sale, transfer or
encumbrance. No such permitted transfer to heirs or legatees of the Participant
will be effective to bind the Company unless the Committee will have been
furnished with written notice thereof and a copy of such evidence as the
Committee may deem necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and conditions hereof.

                  5. Withholding. The Company will deduct from each payment all
applicable federal, state, local and other taxes required by law to be withheld
with respect to such payments.

                  6. Choice of Law. THE INTERPRETATION, PERFORMANCE AND
ENFORCEMENT OF THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

                  7. Award Subject to Plan. By entering into this Agreement the
Participant agrees and acknowledges that the Participant has received and read a
copy of the Plan. The Award is subject to the Plan. The terms and provisions of
the Plan as it may be amended from time to time are hereby incorporated herein
by reference. In the event of a conflict between any term or provision contained
herein and a term or provision of the Plan, the applicable terms and provisions
of the Plan will govern and prevail.

                  8. Confidentiality. Except as otherwise required by law or in
connection with tax and personal planning and family matters, the Participant
agrees to keep participation in the Plan and the amount of the Award
confidential.

                  9. Signature in Counterparts. This Agreement may be signed in
counterparts, each of which will be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement.

                                     Kaiser Aluminum & Chemical Corporation

                                     By:______________________________

                                     Title:___________________________

                                     Date: ___________________________





                                     _________________________________
                                     Participant

                                     Date: ___________________________

EX-10 12 ex_1037-2001.htm EXHIBIT 10.37 TO 2001 10-K Exhibit 10.37 to 2001 10-K

                                                                   Exhibit 10.37

                       RETENTION AGREEMENT FOR THE KAISER
                 ALUMINUM & CHEMICAL CORPORATION RETENTION PLAN


         THIS AGREEMENT (the "Agreement") is made, effective as of the 15th day
of January, 2002, between Kaiser Aluminum & Chemical Corporation, a Delaware
corporation (the "Company"), and Joseph A. Bonn (hereinafter called the
"Participant").

                                R E C I T A L S:

         WHEREAS, the Company has adopted The Kaiser Aluminum & Chemical
Corporation Retention Plan (the "Plan"), which Plan is incorporated herein by
reference and made a part of this Agreement. Capitalized terms not otherwise
defined herein will have the same meanings as in the Plan; and

         WHEREAS, the Committee has determined that it would be in the best
interests of the Company to grant the retention award provided for herein (the
"Award") to the Participant pursuant to the Plan and the terms set forth herein.

         NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties hereto agree as follows:

                  1.   Grant of the Award.

                  (a) Basic Award. Subject to the terms and conditions of the
Plan and the additional terms and conditions set forth in this Agreement, the
Company hereby grants to the Participant an Award (the "Basic Award") of
$491,400.00, payable subject to the Participant's continued employment with the
Company.

                  (b) Special Award. Subject to the terms and conditions of the
Plan and the additional terms and conditions set forth in this Agreement, the
Company hereby grants to the Participant an Award (the "Special Award") of
$1,507,000.00, payable subject to the Participant's continued employment with
the Company.

                  2.   Vesting and Payment.

                  (a) Subject to the Participant's continued employment with the
Company and the terms of the Plan and this Agreement, the Award will vest and
become payable as follows:

                      (i)  fifteen percent (15%) of the Award will vest and
become payable on January 15, 2002; and

                      (ii) the balance of the Basic Award and the Special Award
will vest and become payable as determined by the Committee, but in no case will
the Basic Award balance and the Special Award vest and become payable any later
than March 31, 2003.

                  (b) If the Participant's employment with the Company is
terminated prior to any Vesting Date for any reason other than as a result of
(i) death, (ii) Disability, (iii) the resignation of the Participant with Good
Reason, or (iv) termination by the Company without Cause, the unvested portion
of the Basic Award and the Special Award will be forfeited by the Participant
without consideration.

                  (c) If the Participant's employment with the Company is
terminated prior to any Vesting Date as a result of (i) death, (ii) Disability,
(iii) the resignation of the Participant with Good Reason, or (iv) termination
by the Company without Cause, the Basic Award and the Special Award will vest in
full and all amounts will become payable as a lump sum and will be paid within
30 calendar days.

                  (d) Except as provided in Section 2(c), a vested Award will be
paid to the Participant in cash within 30 calendar days following each vesting
date.

                  (e) Anything in the Plan or this Agreement to the contrary
notwithstanding, any Basic Award payment made pursuant to Section 2(a)(ii) of
this Agreement will be reduced and offset, dollar per dollar, by any short term
incentive and long term incentive cash payments earned during calendar year
2002. Upon receipt of payment of the Special Award, the Participant waives his
accrued benefit through March 31, 2003 under the Company's Supplemental Benefits
Plan, and agrees to provide the Company with an appropriate release to that
effect.

                  (f) If the Participant's employment with the Company is
terminated within ninety (90) days following the initial Vesting Date of January
15, 2002, for any reason other than as a result of (i) death, (ii) Disability,
(iii) the resignation of the Participant with Good Reason, or (iv) termination
by the Company without Cause, the payment made in connection with such initial
Vesting Date must be immediately returned to the Company by the Participant.

                  3.   No Right to Continued Employment. Neither the Plan nor
this Agreement will be construed as giving the Participant the right to be
retained in the employ of the Company. Further, the Company may at any time
dismiss the Participant, free from any liability or any claim under the Plan or
this Agreement, except as otherwise expressly provided therein or herein.

                  4.   Transferability. The Awards may not, at any time, be
assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by the Participant and any such purported assignment, alienation,
pledge, attachment, sale, transfer or encumbrance will be void and unenforceable
against the Company; provided that the designation of a beneficiary will not
constitute an assignment, alienation, pledge, attachment, sale, transfer or
encumbrance. No such permitted transfer to heirs or legatees of the Participant
will be effective to bind the Company unless the Committee will have been
furnished with written notice thereof and a copy of such evidence as the
Committee may deem necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and conditions hereof.

                  5.  Withholding. The Company will deduct from each payment all
applicable federal, state, local and other taxes required by law to be withheld
with respect to such payments.

                  6.  Choice of Law. THE INTERPRETATION, PERFORMANCE AND
ENFORCEMENT OF THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

                  7.  Awards Subject to Plan. By entering into this Agreement
the Participant agrees and acknowledges that the Participant has received and
read a copy of the Plan. The Awards are subject to the Plan. The terms and
provisions of the Plan as it may be amended from time to time are hereby
incorporated herein by reference. In the event of a conflict between any term or
provision contained herein and a term or provision of the Plan, the applicable
terms and provisions of the Plan will govern and prevail.

                  8.  Confidentiality. Except as otherwise required by law or in
connection with tax and personal planning and family matters, the Participant
agrees to keep participation in the Plan and the amount of the Awards
confidential.

                  9.  Signature in Counterparts. This Agreement may be signed in
counterparts, each of which will be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement.

                                   Kaiser Aluminum & Chemical Corporation

                                   By:  /S/ John Barneson

                                   Title: S.V.P., C.A.O.

                                   Date: 1/15/02





                                   /S/ Joseph A. Bonn
                                   Participant

                                   Date: 1/15/02

EX-10 13 ex_1038-2001.htm EXHIBIT 10.38 TO 2001 10-K Exhibit 10.38 to 2001 10-K

                                                                   Exhibit 10.38

                       RETENTION AGREEMENT FOR THE KAISER
                 ALUMINUM & CHEMICAL CORPORATION RETENTION PLAN


         THIS AGREEMENT (the "Agreement") is made, effective as of the 15th day
of January, 2002, between Kaiser Aluminum & Chemical Corporation, a Delaware
corporation (the "Company"), and John T. La Duc (hereinafter called the
"Participant").

                                R E C I T A L S:

         WHEREAS, the Company has adopted The Kaiser Aluminum & Chemical
Corporation Retention Plan (the "Plan"), which Plan is incorporated herein by
reference and made a part of this Agreement. Capitalized terms not otherwise
defined herein will have the same meanings as in the Plan; and

         WHEREAS, the Committee has determined that it would be in the best
interests of the Company to grant the retention award provided for herein (the
"Award") to the Participant pursuant to the Plan and the terms set forth herein.

         NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties hereto agree as follows:

              1.   Grant of the Award.

              (a)  Basic Award. Subject to the terms and conditions of the Plan
and the additional terms and conditions set forth in this Agreement, the Company
hereby grants to the Participant an Award (the "Basic Award") of $590,553.00,
payable subject to the Participant's continued employment with the Company.

              (b)  Special Award. Subject to the terms and conditions of the
Plan and the additional terms and conditions set forth in this Agreement, the
Company hereby grants to the Participant an Award (the "Special Award") of
$2,457,000.00, payable subject to the Participant's continued employment with
the Company.

              2.   Vesting and Payment.

              (a)  Subject to the Participant's continued employment with the
Company and the terms of the Plan and this Agreement, the Award will vest and
become payable as follows:

                   (i)  fifteen percent (15%) of the Award will vest and become
payable on January 15, 2002; and

                   (ii) the balance of the Basic Award and the Special Award
will vest and become payable as determined by the Committee, but in no case will
the Basic Award balance and the Special Award vest and become payable any later
than March 31, 2003.

              (b)  If the Participant's employment with the Company is
terminated prior to any Vesting Date for any reason other than as a result of
(i) death, (ii) Disability, (iii) the resignation of the Participant with Good
Reason, or (iv) termination by the Company without Cause, the unvested portion
of the Basic Award and the Special Award will be forfeited by the Participant
without consideration.

              (c)  If the Participant's employment with the Company is
terminated prior to any Vesting Date as a result of (i) death, (ii) Disability,
(iii) the resignation of the Participant with Good Reason, or (iv) termination
by the Company without Cause, the Basic Award and the Special Award will vest in
full and all amounts will become payable as a lump sum and will be paid within
30 calendar days.

              (d)  Except as provided in Section 2(c), a vested Award will be
paid to the Participant in cash within 30 calendar days following each vesting
date.

              (e)  Anything in the Plan or this Agreement to the contrary
notwithstanding, any Basic Award payment made pursuant to Section 2(a)(ii) of
this Agreement will be reduced and offset, dollar per dollar, by any short term
incentive and long term incentive cash payments earned during calendar year
2002. Upon receipt of payment of the Special Award, the Participant waives his
accrued benefit through March 31, 2003 under the Company's Supplemental Benefits
Plan, and agrees to provide the Company with an appropriate release to that
effect.

              (f)  If the Participant's employment with the Company is
terminated within ninety (90) days following the initial Vesting Date of January
15, 2002, for any reason other than as a result of (i) death, (ii) Disability,
(iii) the resignation of the Participant with Good Reason, or (iv) termination
by the Company without Cause, the payment made in connection with such initial
Vesting Date must be immediately returned to the Company by the Participant.

              3.   No Right to Continued Employment. Neither the Plan nor this
Agreement will be construed as giving the Participant the right to be retained
in the employ of the Company. Further, the Company may at any time dismiss the
Participant, free from any liability or any claim under the Plan or this
Agreement, except as otherwise expressly provided therein or herein.

              4.   Transferability. The Awards may not, at any time, be
assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by the Participant and any such purported assignment, alienation,
pledge, attachment, sale, transfer or encumbrance will be void and unenforceable
against the Company; provided that the designation of a beneficiary will not
constitute an assignment, alienation, pledge, attachment, sale, transfer or
encumbrance. No such permitted transfer to heirs or legatees of the Participant
will be effective to bind the Company unless the Committee will have been
furnished with written notice thereof and a copy of such evidence as the
Committee may deem necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and conditions hereof.

              5.   Withholding. The Company will deduct from each payment all
applicable federal, state, local and other taxes required by law to be withheld
with respect to such payments.

              6.   Choice of Law.  THE INTERPRETATION, PERFORMANCE AND
ENFORCEMENT OF THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

              7.   Awards Subject to Plan. By entering into this Agreement the
Participant agrees and acknowledges that the Participant has received and read a
copy of the Plan. The Awards are subject to the Plan. The terms and provisions
of the Plan as it may be amended from time to time are hereby incorporated
herein by reference. In the event of a conflict between any term or provision
contained herein and a term or provision of the Plan, the applicable terms and
provisions of the Plan will govern and prevail.

              8.   Confidentiality.  Except as otherwise required by law or in
connection with tax and personal planning and family matters, the Participant
agrees to keep participation in the Plan and the amount of the Awards
confidential.

              9.   Signature in Counterparts.  This Agreement may be signed in
counterparts, each of which will be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement.

                                    Kaiser Aluminum & Chemical Corporation

                                    By:  /S/ John Barneson

                                    Title:  Senior V.P., CAO

                                    Date: 1/15/02





                                    /S/ John T. La Duc
                                    Participant

                                    Date: 1/15/02

EX-21 14 kacex_21.htm EXHIBIT 21 TO 2001 10-K Exhibit 21 to 2001 10-K

                                                                      Exhibit 21

                                  SUBSIDIARIES

Listed below are the principal subsidiaries of Kaiser Aluminum Corporation, the
jurisdiction of their incorporation or organization, and the names under which
such subsidiaries do business. Certain subsidiaries are omitted which,
considered in the aggregate as a single subsidiary, would not constitute a
significant subsidiary.


                                                                       Place of
                                                                       Incorporation
         Name                                                          or Organization

         Alpart Jamaica Inc. .......................................   Delaware
         Alumina Partners of Jamaica (partnership)..................   Delaware
         Anglesey Aluminium Limited.................................   United Kingdom
         Kaiser Alumina Australia Corporation(1)....................   Delaware
         Kaiser Aluminium International, Inc.(1)....................   Delaware
         Kaiser Aluminum & Chemical Corporation(1)..............   Delaware
         Kaiser Aluminum & Chemical of Canada Limited...........   Ontario
         Kaiser Bauxite Company.....................................   Nevada
         Kaiser Bellwood Corporation(1).............................   Delaware
         Kaiser Finance Corporation(1) .............................   Delaware
         Kaiser Jamaica Bauxite Company (partnership)...............   Jamaica
         Kaiser Jamaica Corporation.................................   Delaware
         Queensland Alumina Limited.................................   Queensland
         Volta Aluminium Company Limited............................   Ghana

- ---------------------------

(1)      Filed a petition for reorganization under the Code.

EX-23 15 kacex_231.htm EXHIBIT 23.1 TO 2001 10-K Exhibit 23.1 to 2001 10-K

                                                                    Exhibit 23.1

                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


         As independent public accountants, we hereby consent to the
incorporation of our reports included and incorporated by reference in this Form
10-K, into the Company's previously filed Registration Statements File No.'s
333-71, 33-16239, 333-36202 and 33-49889.




ARTHUR ANDERSEN LLP
/S/ Arthur Andersen LLP


Houston, Texas
April 10, 2002

EX-23 16 kacex_232.htm EXHIBIT 23.2 TO 2001 10-K Exhibit 23.2 to 2001 10-K

                                                                    Exhibit 23.2


         We hereby consent to (i) any references to our firm, or (ii) any
references to advice rendered by our firm contained in Kaiser Aluminum
Corporation's Annual Report on Form 10-K for the year ended December 31, 2001,
which is incorporated into the Company's previously filed Registration
Statements on Form S-3 No.'s 33-16239 and 333-71 and Registration Statements on
Form S-8 No.'s 33-49889 and 333-36202.


                                            WHARTON LEVIN EHRMANTRAUT &
                                                KLEIN, P.A.

                                                /S/ Jack L. Harvey

April 8, 2002

EX-23 17 kacex_233.htm EXHIBIT 23.3 TO 2001 10-K Exhibit 23.3 to 2001 10-K

                                                                    Exhibit 23.3



         With respect to the Registration Statements on Form S-3 No.'s 33-16239
and 333-71 and Registration Statements on Form S-8 No.'s 33-49889 and 333-36202
filed by Kaiser Aluminum Corporation, a Delaware corporation (the "Registration
Statements"), we hereby consent to the use of our name, and to references to
advice rendered by our firm, incorporated by reference into the Registration
Statements from Kaiser Aluminum Corporation's Annual Report on Form 10-K for the
year ended December 31, 2001, under the headings (i) Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources - Commitments and Contingencies, and (ii) Note 12 of Notes to
the Consolidated Financial Statements.


                                    HELLER EHRMAN WHITE & McAULIFFE

                                /S/ Heller Ehrman White & McAuliffe

April 8, 2002

EX-99 18 kacex_99-2001.htm EXHIBIT 99 TO 2001 10-K Exhibit 99.1 to 2001 10-K

                                                                    Exhibit 99.1


To the U.S. Securities and Exchange Commission


Arthur Andersen LLP ("Andersen") has represented to Kaiser Aluminum Corporation
that the audit of its consolidated financial statements as of December 31, 2001
and for the year then ended was subject to Andersen's quality control system for
the U.S. accounting and auditing practice to provide reasonable assurance that
the engagement was conducted in compliance with professional standards and that
there was appropriate continuity of Andersen personnel working on audits,
availability of national office consultation and availability of personnel at
foreign affiliates of Andersen to conduct the relevant portions of the audit.

-----END PRIVACY-ENHANCED MESSAGE-----