EMPLOYMENT AGREEMENT

This Agreement (the "Agreement") is made effective for the
period from June 1, 1999 to December 31, 2004, (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 Chief Operating Officer; and

WHEREAS, the Company desires to secure the services of
Executive as Chief Executive Officer effective as of January 1,
2000, 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 commence
effective as of January 1, 2000 and end on December 31, 2004,
(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 Chief
Executive Officer of the Company (the "Services").  Executive
shall report directly to the Board of Directors.  Executive shall
devote his full time, attention, energies and best efforts to the
business of the Company.  The Executive shall relocate his office
to Houston, Texas.

     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 upon announcement of the
               -----------
promotion, $550,000 per year base salary, payable in installments
in accordance with the Company's normal payroll practices, less
such deductions or withholdings required by law.  On January 1,
2000, an increase to no less than $630,000 per year will be
effective which will subsequently increase to no less than
$692,000 on January 1, 2001 and no less than $750,000 on January
1, 2002.  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 on and
after January 1, 2003 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 equal to 80% of base
               ------------
salary 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.  Upon execution hereof
               ----------------------
Executive shall receive a stock option grant of 750,000 shares
under the Company's Stock Option Plan.  Twenty percent (20%) or
150,000 of the stock options will be granted at $9.50, 40% or
300,000 of the options will be granted with an exercise price of
$12.35, and the remaining 40% or 300,000 of the options will have
an exercise price of $14.25. The schedule in Exhibit A
illustrates the value of the new stock option grant and 60% of
the 1998 stock option grant at various strike prices.  The new
(750,000) options will have an exercise period of ten 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,
2000, although Executive shall be eligible for additional option
grants at the discretion of the Company's Compensation Committee.
The existing grant will continue to vest as scheduled and the new
grant shall vest at the rate of 20% per year, beginning on
January 1, 2001, 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 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 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", 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 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 applicable period.

          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 on and
after January 1, 2000 Executive no longer serves as Chief
Executive Officer reporting to the Board of Directors, 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, after
Executive's relocation to Houston, Texas.

          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 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 constitute "parachute payments" within the meanings
of Section 28OG of the Internal Revenue Code of 1986, as amended
(the "Code"), either alone or in conjunction with other payments,
Executive has the right to receive either directly or indirectly
from the Company (the "Total Payments"), that would constitute an
excess parachute payment under Section 28OG of the Code.  Company
agrees to pay Executive an amount (the "Gross-up Payment"), such
that after payment by Executive of all taxes, including interest
and penalties imposed with respect to such taxes, including any
excise tax imposed by Section 4999 of the Code, (the "Excise
Tax") Executive retains an amount of the Gross-up Payment equal
to the Excise Tax imposed upon the Total Payments.

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 28OG and 4999 of the Code.  The Company
and Executive shall fumish 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
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.  Executive and Company agree
that in any dispute resolution proceedings arising out of this
Agreement, the Company shall be responsible for all reasonable
attorney's fees and costs incurred by Executive, not to exceed
$10,000 in connection with the resolution of the dispute in
addition to any other relief granted.

     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 an Employee Invention and Confidential
Information Agreement executed by Executive on October 28, 1996
will continue in effect.

     9.   Non-Competition.  Executive agrees that a
          ---------------
Noncompetition Agreement shall be executed by Executive and
attached hereto as Exhibit B shall continue in effect.

     10.  General.
          -------

          10.1  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.

          10.2 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.

         10.3  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.

         10.4  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 at 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.

         10.5  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.

         10.6  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 effective June 1, 1998.  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.

         10.7  Governing Law.  This Agreement shall be governed
               -------------
by the law of the State of Texas.

         10.8  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             EXECUTIVE
CORPORATION

By:   /s/ George T. Haymaker, Jr.      /s/ Raymond J. Milchovich
    ------------------------------     -----------------------
                                       Raymond J. Milchovich
Name: George T. Haymaker, Jr.
    ------------------------------

Title: Chairman and Chief
       Executive Officer
    ------------------------------

EXHIBIT B
AGREEMENT REGARDING NON-COMPETITION



This Agreement is by and between the employer, Kaiser Aluminum &
Chemical Corporation ("Company") and Raymond J. Milchovich
("Executive").  In consideration of the Company's employment of
Executive, the compensation paid for Executive's services in the
course of such employment, and the training (internal and
external, formal and informal) received by Executive in the
course of such employment, Executive agrees as follows:

1.   NON-COMPETITION.  During the term of employment and for a
period of two (2) years after the termination of employment,
Executive agrees that he will not knowingly, for any person or
entity other than the Company or its affiliates, directly or
indirectly, own, manage, operate, join, control or participate
in, be compensated by or be connected with as an officer,
employee, agent, consultant, partner, stockholder, or otherwise,
any Competitive Business anywhere within which the Company
conducts business.

2.   SOLICITATION.  As part of the consideration for the
compensation and benefits to be paid to Executive thereunder, in
keeping with Executive's duties as a fiduciary, and in order to
protect Company's interest in the trade secrets of Company, and
as an additional incentive for Company to enter into this
Agreement, Executive agrees that Executive will not, directly or
indirectly, for Executive or for others, knowingly induce any
employee of Company or any of its affiliates to terminate his or
her employment with Company or its affifiates, or knowingly hire
or assist in the hiring of any such employee by any person,
association, or entity not affiliated with Company.  The
obligations in this Section shall extend throughout the Term of
this Agreement and for a period of two (2) years after the
termination of the employment relationship between Company and
Executive.

3.   ENFORCEABILITY.  Executive acknowledges that money damages
would not be sufficient remedy for any breach of this Agreement
by Executive, and Company shall be entitled to specific
performance and injunctive relief as remedies for such breach or
any threatened breach.  Such remedies shall not be deemed the
exclusive remedies for a breach, but shall be in addition to all
remedies available at law or in equity to Company, including,
without limitation, the recovery of damages from Executive and
his agents involved in such breach.  If any provision of this
Agreement is invalid or unenforceable, the remaining provisions
shall continue in effect.

4.   CONSTRUCTION.  The terms of this Agreement may not be
modified orally and may only be modified by a written instrument
executed by the parties hereto.  This Agreement shall be governed
by and construed in accordance with the laws of the state of
Texas.

5.   SURVIVAL.  The provisions of Sections 1 through 4
hereinabove shall give the termination of Executive's employment
with the Company.

6.   DUPLICATE ORIGINALS.  This Agreement has been executed in
duplicate originals.

KAISER ALUMINUM & CHEMICAL             EXECUTIVE
CORPORATION

By:   /s/ George T. Haymaker, Jr.      /s/ Raymond J. Milchovich
    ------------------------------     -----------------------
                                       Raymond J. Milchovich
Name: George T. Haymaker, Jr.
    ------------------------------

Title: Chairman and Chief
       Executive Officer
    ------------------------------


<TABLE>

Kaiser Aluminum & Chemical Corporation
Recommended Stock Option Grant

Assume that fair market value is considered to be $9.50

Five Year LTI Target                            $5,308,000
B-S Value of Previous Award                     $3,149,600
60% of Previous Grant as Offset to Target       $1,889,760

Target New Grant Expected Value                 $3,418,240

Assume Option Awards Have a 10 Year Term(1)

                  Option
        Number of Strike                                              Option Gains at Various Share Prices
  (2)    Options  Price      $12        $15      $16.20       $17        $19        $21         $23         $25         $30
         -------  -----      ---        ---      ------       ---        ---        ---         ---         ---         ---

<S>      <C>     <C>    <C>        <C>        <C>        <C>        <C>        <C>         <C>         <C>         <C>
Options  150,000 $ 9.50 $  375,000 $  825,000 $1,005,000 $1,125,000 $1,425,000 $ 1,725,000 $ 2,025,000 $ 2,325,000 $ 3,075,000
Issued
at FMV

Options  300,000 $12.35 $    -     $  795,000 $1,155,000 $1,395,000 $1,995,000 $ 2,595,000 $ 3,195,000 $ 3,795,000 $ 5,295,000
Issued
at 130%
of FMV

Options  300,000 $14.25 $    -     $  225,000 $  585,000 $  825,000 $1,425,000 $ 2,025,000 $ 2,625,000 $ 3,225,000 $ 4,725,000
Issued
at 150%
of FMV

Total    750,000        $  375,000 $1,845,000 $2,745,000 $3,345,000 $4,845,000 $ 6,345,000 $ 7,845,000 $ 9,345,000 $13,095,000
Value
of New
Award

Value    381,000 $ 9.41 $  986,790 $2,129,790 $2,586,990 $2,891,790 $3,653,790 $ 4,415,790 $ 5,177,790 $ 5,939,790 $ 7,844,790
of 60%
of Previous
Award

GRAND                   $1,361,790 $3,974,790 $5,331,990 $6,236,790 $8,498,790 $10,760,790 $13,022,790 $15,284,790 $20,939,790
TOTAL

(1)  The term of the new grant is ten years, but the options vest 20% per year beginning on January 1, 2001.

(2)  The columns indicating the Black-Scholes values were eliminated because the approach is based on a targeted
     gain at the achievement of a stock price goal, rather than a Black-Scholes valuation methodology.

</TABLE>