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                                                                   Exhibit 10.26

                     KAISER ALUMINUM & CHEMICAL CORPORATION
                           KEY EMPLOYEE RETENTION PLAN
                          (EFFECTIVE SEPTEMBER 3, 2002)

            I.       Purpose

         The purpose of the Plan is to establish a retention program for
designated key employees of the Company. The Plan provides retention incentives
to certain key salaried employees who are expected to make substantial
contributions to the success of the ongoing business and/or the restructuring
effort and thereby provides for stability and continuity of operations. The Plan
has been approved by the Compensation Committee of the Company and the Boards of
Directors of the Company and the Corporation. The Plan shall supercede and
replace the Prior Plan in its entirety.

            II.      Definitions

         "Award" means a retention award granted to a Participant pursuant to a
related Retention Agreement. Awards made under the Plan shall be limited to
those Awards pursuant to the budget for the Plan approved by the Bankruptcy
Court on September 3, 2002 and any Awards made pursuant to Section VII.

         "Bankruptcy Committees" means the committees consisting of a statutory
committee of unsecured creditors ("UCC") and a statutory committee of asbestos
claimants ("ACC") , each appointed by the United States trustee for the District
of Delaware on February 25, 2002, pursuant to section 1102 of the Bankruptcy
Code, 11 U.S.C. ss.ss. 101-1330.

         "Bankruptcy Court" means the United States Bankruptcy Court for the
District of Delaware presiding over the Company's proceeding commenced on
February 12, 2002 under Chapter 11 of the Bankruptcy Code (11 U.S.C. ss. 1101,
et seq.).

         "Base Salary" means, as of the date of grant of any Award under this
Plan, a Participant's annual base salary at a rate not less than his or her
annual fixed or base compensation as in effect immediately prior to such date.

         "Board" means the Board of Directors of the Company and/or the
Corporation.

         "Cause" shall have the meaning set forth in a Retention Agreement.

         "CEO" means the Chief Executive Officer of the Company.

         "Committee" means the Compensation Committee of the Board of the
Company. 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 Section XII hereof to receive the amount, if any,
payable under the Plan upon the Participant's death.

         "Disability" or "Disabled" means permanent and total disability as a
result of bodily injury, disease or mental disorder which results in the
Participant's entitlement to long term disability benefits under the Kaiser
Aluminum Self-Insured Welfare Plan or the Kaiser Aluminum Salaried Employees
Retirement Plan.

         "Officer" means an officer of the Company.

         "Participant" means any key employee of the Company designated by the
Committee or the CEO to participate in the Plan.

         "Plan" means the Kaiser Aluminum & Chemical Corporation Key Employee
Retention Plan.

         "Prior Plan" means the Kaiser Aluminum & Chemical Corporation Employee
Retention Program (Effective January 15, 2002) and any other agreement, policy
or program of the Corporation, the Company or otherwise providing the same or
the similar type of benefits available hereunder.

         "Prorating Event" means, except as otherwise set forth in a Retention
Agreement, a Participant's termination of employment due to the Participant's
death, Disability or retirement on or after age 62, or the Company's termination
of the Participant's employment without Cause.

         "Retention Agreement" means an agreement entered into between the
Company and a Participant providing for participation in the Plan.

         "Vesting Date" means each of September 30, 2002, March 31, 2003,
September 30, 2003 and March 31, 2004, which dates constitute the date or dates
on which a Participant will become vested in all or a portion of his or her
Award, except as otherwise provided in a Retention Agreement.

            III.     Eligibility

         Subject to Section VII, Participants in the Plan will be selected 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 the Plan supercedes and
replaces the Prior Plan in its entirety; and provided, further, that any
Retention Agreement may provide for other offsets under the Plan or any other
plan, program or agreement of or with the Corporation or the Company in which a
Participant participates or to which he or she is a party.

            IV.      Administration

         The Plan will be administered by the Committee. Subject to Section VII,
and 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 with the Bankruptcy Court's
approval as further described in Section XV.

            V.       Awards; Vesting

         The Company and each Participant will execute a Retention Agreement
that sets forth the terms and timing of the grant, vesting and payment of an
Award. Subject to the terms of the Retention Agreement, an Award will be earned
by and vested in a Participant based upon continued employment on each Vesting
Date. Awards will not 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.

            VII.     Discretionary Fund

         In addition to the payments of the Awards reflected in the budget
approved by the Bankruptcy Court on September 3, 2002, a Discretionary Fund in
the amount of $1,000,000 is established under the Plan to be available to
provide, if the CEO so decides, additional Awards hereunder, on a case-by-case
basis, to employees of the Company under circumstances that may arise and that
are not otherwise addressed herein. Such payments shall be made in the sole
discretion of the CEO to address specific retention issues and may be used for
new employees, employees not otherwise covered under the Plan and Participants
viewed by the CEO as having a high departure risk. Notwithstanding the foregoing
provisions of this Section, if the CEO proposes to use more than $50,000 from
the Discretionary Fund to provide an Award to an employee who is a Participant,
such Award shall not be made without first obtaining approval of such Award from
the Bankruptcy Committees.

            VIII. Termination of Employment

            (a)   Except as otherwise set forth in a Retention Agreement with
      respect to a Prorating Event, a Participant will be eligible to receive
      payment of his or her Award only if the Participant is employed by the
      Company on the Vesting Date. In the event of a Participant's termination
      of employment with the Company for any reason other than a Prorating
      Event, any Award or portion thereof not yet vested will be immediately
      forfeited.

            (b)   If within ninety (90) days following the payment of any Award,
      a Participant's employment with the Company is terminated for any reason
      other than as a result of a Prorating Event, the Participant must
      immediately return such payment to the Company.

            IX.   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.

            X.       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.

            XI.      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.

            XII.     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.

            XIII.    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.

            XIV.     No Liability of Board or Committee Members or Officers

         No member of the Board or the Committee, any Officer, any employee or
the CEO will be personally liable by reason of any contract or other instrument
related to the Plan executed by such Officer, such employee, the CEO 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, the CEO or a
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.

            XV.      Termination or Amendment of the Plan

         The Plan may only be amended, suspended or terminated upon approval of
the Bankruptcy Court. Without limiting the preceding sentence, 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.
Notwithstanding any other provision of this Plan, no new Awards shall be granted
after March 31, 2004, including, without limitation, pursuant to Section VII of
this Plan.

            XVI.     Establishment of Trust

         A portion of the Company's obligations under the Plan has been secured
by the establishment of a trust for the benefit of two Participants, Messrs.
LaDuc and Bonn. 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.

            XVII.    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.

            XVIII.   Effective Date

         The effective date of the Plan is September 3, 2002.

                                        Kaiser Aluminum & Chemical Corporation

                                        By:  /s/ James E. McAuliffe, Jr.
                                        Name:   James E. McAuliffe, Jr.
                                        Title:  Vice President, Human Resources
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