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                                                                  EXHIBIT 10.5.1

                                FIRST AMENDMENT
                                    TO THE
                             EMPLOYMENT AGREEMENT
                                      OF
                                 TERRY L. COOK


     This FIRST AMENDMENT TO THE EMPLOYMENT AGREEMENT OF TERRY L. COOK ("First
Amendment") is made and entered into as of January 6, 2000, by and between Terry
L. Cook ("Employee") and Kaiser Ventures Inc. ("Kaiser").

                                   Recitals

     A.   Employee is currently employed by Kaiser as Senior Vice President,
General Counsel and Corporate Secretary and has an existing Employment Agreement
with Kaiser dated effective June 17, 1996 (the "Employment Agreement").

     B.   Effective as of January 6, 2000, Kaiser has expanded Employee's duties
and responsibilities by appointing him Executive Vice President - Administration
in addition to his duties as General Counsel and Corporate Secretary of Kaiser.

     C.   Employee and Kaiser desire to amend the Employment Agreement as
provided herein to reflect the change in Employee's duties, an increase in his
annual base salary and the modification of certain other provisions of the
Employment Agreement.

     NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

     1.   Amendment of Section 1 of Employment Agreement. Section 1 of the
Employment Agreement is hereby amended in its entirety to read as follows:

          Employment, Positions and Duties.  Kaiser hereby continues the
          --------------------------------
          employment of Employee upon the terms and conditions set forth in the
          Employment Agreement as amended herein.  Employee's positions with
          Kaiser shall be Executive Vice President - Administration, General
          Counsel and Corporate Secretary.  Employee shall have the
          responsibilities and duties normally incident to such positions,
          including, but not limited to, those duties and responsibilities set
          forth in Exhibit "A" attached hereto and incorporated herein by this
          reference and such other duties and responsibilities as may be
          reasonably assigned to him from time-to-time by Kaiser's President or
          Chief Executive Officer.  Employee agrees to devote his full business
          time and attention to the discharge of his duties and responsibilities
          under this Agreement.

     2.   Amendment of Section 3 of Employment Agreement.  Section 3 of the
Employment Agreement is hereby amended in its entirety to read as follows:

          Base Salary.  Employee's initial annual base salary shall be One
          -----------
          Hundred Ninety Five Thousand Dollars ($195,000) per year.  In the
          event that any restricted stock is issued to Employee as a part of his
          annual base salary, the value of such restricted stock at the time of
          its grant shall be counted as base salary in the calculation of any
          bonus that may be awarded to Employee.  For all other purposes, any
          such stock shall be treated as salary for the calculation of any
          benefits based upon an employee's salary as may be required by law or
          any benefit plan.

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          Prior to the first meeting of the Board of Directors in any calendar
          year, the Human Relations Committee of the Board will review
          Employee's salary and report its recommendations for any revision to
          the full Board at such meeting.

     3.   Amendment of Schedule "A" to Employment Agreement. Schedule "A" to the
Employment Agreement is hereby amended in its entirety to read as set forth in
the Revised Schedule "A" attached hereto and incorporated herein by this
reference.

     4.   1.   Amendment of Paragraph 11 of Employment Agreement. Paragraph 11
of the Employment Agreement is hereby amended as follows:

          (a)  Subparagraph 11.b. Subparagraph 11.b. of the Employment Agreement
               -----------------
     is hereby deleted in its entirety and the following new subparagraph 11.b.
     is substituted therefore:

               "b.  any acquisition of common stock by a person or "group" (as
          defined in section 13(d) of the Securities Exchange Act of 1934),
          resulting in the "beneficial ownership" (as defined in Rule 13d-3
          under the Securities Exchange Act of 1934) by that person or group of
          more than 35% of the capital stock of Kaiser."

          (b)  Subparagraph 11.c.  Subparagraph 11.c of the Employment Agreement
               -----------------
     is hereby deleted in its entirety an the following new subparagraph 11.c.
     is substituted therefore:

               "c.  following the date of this Amendment there has been an
          aggregate of net assets with a cumulative value that exceeds the
          greater of (i) $30,000,000 or (ii) 30% of the net equity of Kaiser at
          the time of the distribution (whether by dividend or repurchase of
          stock) distributed to any one or more Kaiser shareholders."

          (c)  Addition of Subparagraphs 11.d. and 11.e.  Paragraph 11 of the
               ----------------------------------------
     Employment Agreement is amended by the addition of the following new
     subparagraphs:

               "d.  During any period of two consecutive years, the individuals
          who at the beginning of such period constitute the Board of Directors
          of the Company, cease for any reason, to constitute at least a
          majority thereof, unless the election, or the nomination for election
          by the Company's shareholders, of each new director has been approved
          at the time of such election or nomination by a vote of at least two-
          thirds of the directors then still in office who were directors at the
          beginning of the period; or

               e.   The Board of Directors or any designated committee
          determines, in its sole discretion, that any person (such as that
          term is used in Sections 13(d) and 14(d) of the Exchange Act)
          directly or indirectly exercises a controlling influence over the
          management or policies or the Company."

     5.   Amendment of Paragraph 12 of the Employment Agreement.  Subparagraph
12.c. of the Employment Agreement is hereby deleted in its entirety, except for
that portion of the paragraph commencing with "then, at Employee's option---"
and ending with the words "Paragraph 13 below," and the following new portion of
Subparagraph 12.c. is substituted therefor:

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               "c.  Any failure to provide Employee with compensation and
          benefits in the aggregate on terms that are materially less favorable
          than those enjoyed by Employee under this Agreement immediately prior
          to a Material Change, or the subsequent taking of any action that
          would materially reduce Employee's compensation and benefits in effect
          at the time of the Material Change."

     6.   Amendment of Paragraph 13 of the Employment Agreement. Paragraph 13 of
the Employment Agreement is hereby amended as follows:

          (a)  Subparagraph 13.a.  The phrase "as measured by the preceding
               -----------------
     year's bonus" in subparagraph 13.a. is hereby deleted in its entirety and
     the following new phrase is substituted therefore in Subparagraph 13.a.:
     "as measured by Employee's average percentage bonus over the past five
     years (or such lesser period of time during which Employee was eligible to
     receive a bonus)."

          (b)  Subparagraph 13.b.  The phrase in Subparagraph 13.b. "averaged
               -----------------
     over the two (2) immediately preceding years" is hereby deleted and
     replaced with the phrase "as measured by Employee's average percentage
     bonus over the past five years (or such lesser period of time during which
     Employee was eligible to receive a bonus)."

          (c)  Subparagraph 13.c. The word "will" in Subparagraph 13.c is hereby
               -----------------
     deleted and replaced with the word "with," such that the end of
     Subparagraph 13.c reads "in proportion to shares owned together with all
     other shareholders."

          (d)  Additional Paragraph. Paragraph 13 of the Employment Agreement is
               --------------------
     hereby amended by the addition of the following paragraph at the end of the
     current Paragraph 13.

               "For purposes of this Agreement, "average percentage bonus over
          the past five years" shall mean the average percentage bonus received
          by Employee for the five years preceding the year of termination (or
          for such lesser period in which bonus payments were received) as
          applied to the Employee's current annual base salary."

     7.   Amendment of Paragraph 16. Paragraph 16 of the Employment Agreement is
hereby amended by deleting the reference to "ninety (90) days" and substituting
therefore "one hundred twenty (120) days."

     8.   Amendment of Paragraph 18. Paragraph 18 of the Employment Agreement is
hereby amended by deleting the reference to "ninety (90) days" and substituting
therefore "one hundred twenty (120) days."

     9.   Ratification of Employment Agreement as Amended. The Employment
Agreement is not amended in any respect except as expressly provided herein, and
the Employment Agreement as amended by this First Amendment is hereby ratified
and approved in all respects

     10.  Governing Law. This First Amendment shall be governed by and construed
in accordance with the laws of the State of California.

     IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
to the Employment Agreement to be effective as of the day and year first written
above not withstanding the actual date of signature.

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"Employee"                         "Kaiser"
Terry L. Cook                      Kaiser Ventures Inc.


/s/ Terry L. Cook                  By:  /s/ Richard E. Stoddard
----------------------                  -------------------------------------
Terry L. Cook                           Richard E. Stoddard, Chairman of the
                                        Board, Chief Executive Officer and
                                        President


                                   By:  /s/ Todd G. Cole
                                        -------------------------------------
                                        Todd C. Cole, Chairman,
                                        Human Relations Committee

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                                    Revised
                                    =======
                                 SCHEDULE "A"
                                 ============

                                 TERRY L. COOK
   Executive Vice President - Administration, General Counsel and Corporate
                                   Secretary


     These positions report to the Board of Directors, Chief Executive Officer
and Chief Operating Officer, as appropriate.

Responsibilities. Legal services, business insights, and technical assistance
in the following areas, among others:

     .    General legal and business advice;
     .    All contractual relations, including joint ventures, leases,
          partnership agreements, purchase and sale agreements, collection of
          receivables, tenant disputes, etc.;
     .    Due diligence investigations and legal evaluation of acquisition
          targets, plus assistance in preparation, review and closing of
          acquisition agreements;
     .    Legal risk analysis;
     .    Corporate legal strategy;
     .    Personnel administration and related issues;
     .    All SEC compliance matters (other than financial statements and
          related information which you will coordinate with the Chief Financial
          Officer), including preparation of reports on Forms 10-K, 10-Q, 8-K,
          Form 3 & 4 filings, oversight of Company policies on insider trading
          and confidential information, proxy materials, and shareholder
          meetings;
     .    Advise the Board of Directors regarding procedures, legal issues, and
          legal positions;
     .    Corporate governance matters, such as corporate minutes, Board of
          Director resolutions and special matters, by-laws and articles of
          incorporation, annual corporate filings, tradenames, maintenance of
          corporate subsidiaries, etc. for both Kaiser and MRC;
     .    Supervision of litigation matters;
     .    Development of defense strategies involved in defending Kaiser against
          lawsuits;
     .    Regulatory and agency issues;
     .    Resolution of outstanding bankruptcy reorganization matters;
     .    Providing legal assistance to subsidiaries of Kaiser, as appropriate;
     .    Participate in major negotiations involving all phases of corporate
          transactions;
     .    Corporate, public and media relations;
     .    Community and agency relations;
     .    Charitable and political donations;
     .    Overall lobbying strategy;
     .    Supervision of environmental compliance and remediation;
     .    Contract administration; and
     .    Tenant, vendor and consultant matters.

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