EMPLOYMENT AGREEMENT

     This Agreement (the "Agreement") is made effective for the
period from January 1, 1998 to December 31, 2002, (such term
being hereinafter referred to as the "Employment Period") between
Kaiser Aluminum & Chemical Corporation, a Delaware corporation
("Company"), and Raymond J. Milchovich ("Executive").

     WHEREAS, Executive is currently employed by the Company as a
senior executive; and

     WHEREAS, the Company desires to secure the services of
Executive as President and Chief Operating Officer, and Executive
desires to perform such services for the Company, on the terms
and conditions as set forth herein;

     NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements set forth below, it is mutually agreed
as follows:

     1.   Effective Date, Term and Duties.  The term of 
          --------------------------------
employment of Executive by the Company hereunder shall be deemed
to have commenced on January 1, 1998 and end on December 31,
2002, (the "Employment Period") unless earlier terminated
pursuant to Section 4.

     Executive shall have such duties as the Company may from
time to time prescribe consistent with his position as President
and Chief Operating Officer of the Company (the "Services"). 
Executive shall report directly to the Chief Executive Officer
and Chairman of the Company.  Executive shall devote his full
time, attention, energies and best efforts to the business of the
Company.  The Company shall maintain an office for Executive in
Pleasanton, California.

     2.   Compensation.  The Company shall pay and Executive 
          ------------
shall accept as full consideration for the Services compensation
consisting of the following:

          2.1  Base Salary.  Effective June 1, 1998, $475,000 per 
               -----------
year base salary, payable in installments in accordance with the
Company's normal payroll practices, less such deductions or
withholdings required by law.  Base Salary shall be reviewed
annually by the Compensation Committee of the Company to evaluate
the performance of Executive and his duties hereunder, and in any
event will be adjusted for inflation consistent with the general
program of increases for other executives and management
employees.

                2.2 Annual Bonus.  A target bonus of $270,000 
                    ------------
(adjusted for inflation as determined by the Company's
Compensation Committee) per year ("Target Annual Bonus") shall be
payable based on the attainment by the Company of the Short-Term
Bonus Plan Objectives under the Company's Executive Bonus Plan
for each such year, which such Short-Term Bonus Plan Objectives
shall be agreed upon by the Executive and the Company annually
and shall be consistent with the Company's business plan for the
relevant year. 

                2.3 Long-Term Compensation. During June 1998 
                    ----------------------
Executive shall receive a stock option grant of 635,000 shares
under the Company's Stock Option Plan, which is a grant
equivalent to a value of five times Executive's annual long term
incentive target of $630,000, determined using Black Scholes
methodology and assumptions as described in Schedule A and with
an exercise price of $9.4063.  The options will have an exercise
period of five years from date of grant.  Such options shall be
in lieu of any payment of long-term incentive compensation under
the Company's Executive Bonus Plan ("Plan") for the five year
period beginning January 1, 1998, although Executive shall be
eligible for additional option grants at the discretion of the
Company's Compensation Committee.  The options shall vest at the
rate of 20% per year, beginning on December 31, 1998, unless: 
(i) Executive becomes employed by an affiliate or "spin-out" of
Kaiser Aluminum, in which case a pro rata amount of the options
will vest equal to the percentage of days during the Employment
Period which the Executive has been employed; or (ii) Executive's
service is terminated by the Company for any reason other than
for "Cause, or Executive's employment terminates by the
expiration of the Employment Period without an offer for
continued employment by the Company for a position of
responsibility comparable to that held by Executive at the
beginning of the Employment Period and on substantially the same
or improved terms and conditions, or Executive terminates his
employment for "Good Reason" or in event of a Change in Control,
in which cases vesting of all outstanding options is accelerated
as provided in Section 4.

     Such option grant shall provide that upon exercise of any
option, Executive will be entitled to receive shares pursuant to
the Company's Stock Option Plan but also any securities that have
been distributed in respect to such shares.  For example, if the
Company were to spin off part of its business as a new company
and distribute to its stockholders one share of stock of the new
company for each one share of stock under the Company's Stock
Option Plan, then, upon a subsequent exercise by Executive of the
stock options under the Company's Stock Option Plan, Executive
would also receive one new company share along with one share
under the Company's Stock Option Plan.  All such grants shall be
governed by the Company's Stock Option Plan and by the agreement
executed by the Company and Executive at the time of the option
grant.

                2.4 Indemnification.  In the event Executive is 
                    ---------------
made, or threatened to be made, a party to any legal action or
proceeding, whether civil or criminal, by reason of the fact that
Executive is or was a director or officer of the Company or
serves or served any other corporation fifty percent (50%) or
more owned or controlled by the Company in any capacity at the
Company's request, Executive shall be indemnified by the Company,
and the Company shall pay Executive's related expenses when and
as incurred, all to the fullest extent permitted by law,
provided, however, that the Company shall have the right of
defense to any action or proceeding.

     3.   Benefits during Employment Period.  Employee will be 
          ---------------------------------
eligible to participate in the Company's employee benefit plans
of general application, including, without limitation, those
plans covering medical, disability and life insurance in
accordance with the rules established for individual
participation in any such plan and under applicable law. 
Employee will be eligible for vacation and sick leave in
accordance with the policies in effect during the term of this
Agreement and will receive such other benefits as the Company
generally provides to its other employees of comparable position
and experience.

     4.   Benefits Upon Termination.  Notwithstanding anything in 
          -------------------------
the Agreement to the contrary, if (i) Executive's employment is
terminated during the Employment Period for any reason other than
(a) termination by the Company for "Cause" (as defined in
Subsection 4.1), (b) acceptance by Executive of an offer of
employment with an affiliate of the Company, or (c) a voluntary
termination by Executive for other than "Good Reason"; or (ii)
Executive's employment terminates by the expiration of the
Employment Period without an offer for continued employment by
the Company for a position of responsibility comparable to that
held by Executive at the beginning of the Employment Period and
on substantially the same or improved terms and conditions, then
Executive will be entitled to receive the following benefits:

               (A) An Early Retirement Lump Sum Payment by the
Company as described below:

               The Early Retirement Lump Sum Payment by the
Company shall be equal to the excess, if any, of the sum of (i)
plus (ii) less the amount computed in accordance with (iii).

                  (i) The lump sum benefit from the Kaiser
Aluminum Salaried Employees Retirement Plan (KRP) that the
Executive would have been entitled to as of the date of his
actual termination calculated, for this purpose, as if the terms
of KRP in effect on such date were identical to the terms of KRP
in effect on the effective date of this Agreement (except for
such changes required to maintain the qualified status of KRP),
and as if the Executive qualified for a KRP Full Early Retirement
Pension; provided, however, in calculating such amount, his
actual age, credited service, social security benefits and final
average monthly compensation in effect on the date of his actual
termination shall be used as well as the daily yields on longer
term treasury issues and the PBGC applicable interest rates in
effect on such date.

                  (ii) The lump sum benefit from the Kaiser
Aluminum Supplemental Benefits Plan (KASBP) based on KRP
limitations, that the Executive would have been entitled to as of
the date of his actual termination calculated, for this purpose,
as if (i) the terms of KASBP in effect on such date were
identical to the terms of KASBP in effect on the effective date
of this Agreement, (ii) the Executive qualified for a KRP Full
Early Retirement Pension, and (iii) the other assumptions set
forth in "(i)" above including interest rates were in effect in
calculating the benefits under Section C-2(a) and (b) of KASBP.

                  (iii) An amount equal to the lump sum actuarial
equivalent of (a) the Executive's actual benefit payable from KRP
on account of his actual termination, plus (b) the Executive's
actual benefit payable from KASBP based on KRP limitations on
account of his actual termination.

     (B)  Full health benefits as if the Executive had qualified
for an Early Retirement Pension.

     (C)  A lump sum amount equal to Executive's base salary as
of the date of Executive's termination for a period equal to the
greater of (i) the number of months remaining in the Employment
Period or (ii) two years.  In addition, Executive shall be
entitled to receive Executive's Target Annual Bonus for the year
of termination (but no less than $270,000) in one lump sum
payment.  Such salary and Target Annual Bonus payments shall be
referred to as "Termination Pay".  Such Termination Pay shall be
in lieu of any claims Executive may have had with respect to
termination benefits.

     (D)  All of the unvested stock options held by Executive on
the date of such termination that would have vested during the
Employment Period shall immediately vest and become exercisable
in full for the remaining portion of the period of five years
from date of grant.

          4.1  Circumstances Under Which Termination Benefits 
               -----------------------------------------------
Would Not Be Paid.  The Company shall not be obligated to pay 
-----------------
Executive the termination benefits pursuant to Section 4 if the
Executive's employment is terminated for Cause.  For purposes of
this Agreement, "Cause" shall be limited to (1) Executive's gross
misconduct or fraud, in the performance of his employment; (2)
Executive's conviction or guilty plea with respect to any felony
(except for motor vehicle violations); or (3) Executive's
material breach of this Agreement after written notice delivered
to Executive of such breach and a reasonable opportunity to cure
such breach.

          4.2  Constructive Termination.  Notwithstanding 
               ------------------------
anything in this Section 4 or Section 5 to the contrary, the
Employment Period will be deemed to have been terminated (a
"Constructive Termination") and Executive will be deemed to have
Good Reason for voluntary termination of the Employment Period
("Good Reason"), if there should occur:

          (A)  a material adverse change in Executive's position
causing it to be of materially less stature or responsibility
without Executive's written consent, and such a materially
adverse change shall in all events be deemed to occur if
Executive no longer serves as President and Chief Operating
Officer reporting to the Chief Executive Officer, unless
Executive consents in writing to such change;

          (B) a reduction, without Executive's written consent,
in his level of base compensation (including base salary and
fringe benefits) by more than ten percent (10%) or a reduction by
more than ten percent (10%) in his Target Annual Bonus under the
CEO Bonus Plan; or

          (C)  a relocation of his principal place of employment
by more than 50 miles without Executive's consent.

          4.3  Termination by Reason of Death or Disability.  In 
               --------------------------------------------
the event of Employee's death during the Employment Period, the
Company shall pay to Employee or Employee's estate Employee's
Target Annual Bonus for the Company's fiscal year in which death
occurred or, if no such Target Annual Bonus has been scheduled,
an amount equal to the Target Annual Bonus paid to Employee for
the Company's fiscal year immediately preceding the year in which
death occurred.  In addition, Employee's estate will receive
payment for all salary, bonuses and unpaid vacation accrued as of
the date of Employee's death and any other benefits payable under
the Company's then existing benefit plans and policies in
accordance with such plans and policies in effect on the date of
death and in accordance with applicable law.  In the event that,
during the term of this Agreement, Employee is unable to perform
his job due to disability (as determined under the Company's
long-term disability insurance program) for six (6) months in any
twelve (12) month period, the Company may, at its election,
terminate Employee's employment with the Company and such
termination shall be deemed to be a termination by the Company
other than for Cause and Employee shall be entitled to receive
the benefits set forth in Section 4 hereof.

     5.   Change in Control
          -----------------

          Should there occur a Change in Control (as defined
below), then the following provisions shall become applicable:

          (A)  During the period (if any) following a Change in
Control that Executive shall continue to provide the Services,
then the terms and provisions of this Agreement shall continue in
full force and effect, and Executive shall continue to vest in
all of his unvested stock options; or

          (B)  In the event of (x) a termination of the
employment by the Company other than for Cause or (y) a
termination of employment by Executive for any reason within
twelve (12) months following such Change in Control, the benefits
listed in Section 4 shall become due and payable:

          For purposes of this Section 5, a Change of Control
shall be deemed to occur upon:

          (I)  the sale, lease, conveyance or other disposition
of all or substantially all of the Company's assets as an
entirety or substantially as an entirety to any person, entity or
group of persons acting in concert other than in the ordinary
course of business; 

          (II) any transaction or series of related transactions
(as a result of a tender offer, merger, consolidation or
otherwise) that results in any Person (as defined in Section
13(h)(8)(E) under the Securities Exchange Act of 1934) becoming
the beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of more
than 50% of the aggregate voting power of all classes of common
equity of the Company, except if such Person is (A) a subsidiary
of the Company, (B) an employee stock ownership plan for
employees of the Company or (C) a company formed to hold the
Company's common equity securities and whose shareholders
constituted, at the time such company became such holding
company, substantially all the shareholders of the Company; or

          (III)     a change in the composition of the Company's
Board of Directors over a period of thirty-six (36) consecutive
months or less such that a majority of the then current Board
members ceases to be comprised of individuals who either (a) have
been Board members continuously since the beginning of such
period, or (b) have been elected or nominated for election as
Board members during such period by at least a majority of the
Board members described in clause (a) who were still in office at
the time such election or nomination was approved by the Board.

     In the event that the severance and other benefits provided
to Executive (i) constitute "parachute payments" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code") and (ii) but for this Section 5, such
severance and benefits would be subject to the excise tax imposed
by Section 4999 of the Code, then Executive's severance benefits
under this Section 5 shall be payable either:

          (a)  in full,

          (b)  as to such lesser amount which would result in no
portion of such severance and other benefits being subject to
excise tax under Section 4999 of the Code, whichever of the
foregoing amounts, taking into account the applicable federal,
state and local income taxes and the excise tax imposed by
Section 4999, results in the receipt by Executive on an after-tax
basis, of the greatest amount of severance benefits under Section
5.  Unless the Company and Executive otherwise agree in writing,
any determination required under this Section 5 shall be made in
writing by independent public accountants agreed to by the
Company and Executive (the "Accountants"), whose determination
shall be conclusive and binding upon Executive and the Company
for all purposes.  For purposes of making the calculations
required by this Section 5, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and
may rely on reasonable, good faith interpretations concerning the
application of Sections 280G and 4999 of the Code.  The Company
and Executive shall furnish to the Accountants such information
and documents as the Accountants may reasonably request in order
to make a determination under this Section 5.  The Company shall
bear all costs the Accountants may reasonably incur in connection
with any calculations contemplated by this Section 5.

     6.   Dispute Resolution.  The Company and Executive agree 
          ------------------
that any dispute regarding the interpretation or enforcement of
this Agreement shall be decided by confidential, final and
binding arbitration conducted by Judicial Arbitration and
Mediation Services ("JAMS") under the then-existing JAMS rules,
rather than by litigation in court, trial by jury, administrative
proceeding, or in any other forum.

     7.   Cooperation with the Company After Termination of the 
          -----------------------------------------------------
Employment Period.  Following termination of the Employment 
------------------
Period by Executive, Executive shall fully cooperate with the
Company in all matters relating to the winding up of his pending
work on behalf of the Company and the orderly transfer of any
such pending work to other employees of the Company as may be
designated by the Company.

     8.   Confidentiality; Return of Property.  Executive 
          -----------------------------------
acknowledges that the Employee Invention and Confidential
Information Agreement executed by Executive on October 28, 1996 
shall continue in effect.

     9.   General.
          -------

          9.1  Waiver.  Neither party shall, by mere lapse of 
               ------
time, without giving notice or taking other action hereunder, be
deemed to have waived any breach by the other party of any of the
provisions of this Agreement.  Further, the waiver by either
party of a particular breach of this Agreement by the other shall
neither be construed as, nor constitute a, continuing waiver of
such breach or of other breaches by the same or any other
provision of this Agreement.

          9.2  Severability.  If for any reason a court of 
               ------------
competent jurisdiction or arbitrator finds any provision of this
Agreement to be unenforceable, the provision shall be deemed
amended as necessary to conform to applicable laws or
regulations, or if it cannot be so amended without materially
altering the intention of the parties, the remainder of the
Agreement shall continue in full force and effect as if the
offending provision were not contained herein.

          9.3  No Mitigation. Executive shall have no duty to 
               -------------
mitigate the Company's obligation with respect to the termination
payments set forth in Sections 4 or 5 by seeking other employment
following termination of his employment, nor shall such
termination payments be subject to offset or reductions by reason
of any compensation received by Executive from such other
employment.  The Company's obligations to make payments under
Sections 4 or 5 shall not terminate in the event executive
accepts other full time employment.

          9.4  Notices.  All notices and other communications 
               -------
required or permitted to be given under this Agreement shall be
in writing and shall be considered effective upon personal
service or upon depositing such notice in the U.S. Mail, postage
prepaid, return receipt requested and addressed to the Chairman
of the Board of the Company as its principal corporate address,
and to Executive at his most recent address shown on the
Company's corporate records, or at any other address which he may
specify in any appropriate notice to the Company.

          9.5  Counterparts.  This Agreement may be executed in 
               ------------
any number of counterparts, each of which shall be deemed an
original and all of which taken together constitutes one and the
same instrument and in making proof hereof it shall not be
necessary to produce or account for more than one such
counterpart.

          9.6  Entire Agreement.  The parties hereto acknowledge 
               ----------------
that each has read this Agreement, understands it, and agrees to
be bound by its terms.  The parties further agree that this
Agreement and the referenced stock option agreement constitute
the complete and exclusive statement of the agreement between the
parties and supersedes all proposals (oral or written),
understandings, representations, conditions, covenants, and all
other communications between the parties relating to the subject
matter hereof.  The parties further agree that this Agreement
supersedes the employment agreement between the Company and
Executive dated October 28, 1996.  Notwithstanding anything to
the contrary, Sections 4 and 5 of this Agreement shall govern all
options issued to Executive by the Company prior to and after the
effective date of this Agreement. 

          9.7  Governing Law.  This Agreement shall be governed 
               -------------
by the law of the State of California.

          9.8  Assignment and Successors.  The Company shall have 
               --------------------------
the right to assign its rights and obligations under this
Agreement to an entity which acquires substantially all of the
assets of the Company.  The rights and obligation of the Company
under this Agreement shall inure to the benefit and shall be
binding upon the successors and assigns of the Company.

     IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.


KAISER ALUMINUM & CHEMICAL
CORPORATION

By:/s/ George T. Haymaker, Jr.
    --------------------------
Name: George T. Haymaker, Jr.
      -----------------------
Title: Chief Executive Officer
       -----------------------

EXECUTIVE
 /s/ Raymond J. Milchovich
------------------------------
Raymond J. Milchovich


                           Schedule A
                                
             Assumptions in Calculation of Options
     
     
Option Value:       $4.96
Stock Price:        $9.4063
Risk Free Rate:     5.80% (The risk-free interest rate based on
                    estimated 5-year T-Bond rate.)
Term of Option:     5 years from Grant Date (1825 days)
Volatility Rate:    42.86% (Stock volatility derived from 3 years
                    of monthly data: 2/95-2/98)
Annual Dividend:    $0.00
As a result, to grant $3,150,000 of value, the number of options
necessary will be 635,000.