Document:

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                                                                    EXHIBIT 10.1
                                                                    ============

                             Kaiser Ventures Inc.
                     Long Term Transaction Incentive Plan

          This Long Term Transaction Incentive Plan is hereby adopted by the
Company (certain capitalized terms are defined in the final section of this
Plan).

     1.   Purposes of the Plan.  The purposes of this Plan are:

       .  To retain key personnel,

       .  To provide additional incentives to those personnel, and

       .  To promote the Monetization of the Assets of the Company and maximize
          the distribution of cash to the Company's shareholders.

     2.   Overview. The Plan creates a cash incentive pool for the management of
the Company, whose value will depend upon the amount of cash distributions
available to the Company's shareholders. As further provided herein, the Plan
provides for the creation and payment of an incentive pool equal to the sum of
(i) 5 percent of the amount of any Aggregate Realized Value in excess of
$88,400,000 (approximately $13.00 per share) but less than $107,300,000
(approximately $15.78 per share before payments under this Plan), and (ii) 10%
of the amount of any Aggregate Realized Value in excess of $107,300,000.

     3.   Payment of Incentive Bonuses.

          3.1  Interim Payments. Subject to the terms and conditions of this
Plan, upon any Interim Monetization in which the Realized Value of the Asset
involved is at least 95 percent of that Asset's Target Value, the Company hereby
agrees to pay to each Participant an Incentive Bonus equal to that Participant's
Allocated Percentage at the time of the Interim Monetization times (i) 2.5% of
any Value Realized for that Asset in excess of its Base Value but less than its
Target Value plus (ii) 5% of any Value Realized for that Asset in excess of its
Target Value. For purposes of calculating whether the 95% threshold has been
exceeded, the amount of any contingent payment will be included except to the
extent that there is no reasonable possibility that the Company will meet such
contingency. However, no Interim Payment of less than $5,000 shall be made.

          3.2  Final Payment. Subject to the terms and conditions of this Plan,
upon Final Monetization, the Company hereby agrees to pay to each Participant an
Incentive Bonus equal to that Participant's Allocated Percentage at the time of
the Final Monetization times the total of (i) 5% of any Aggregate Realized Value
in excess of $88,400,000 but less than $107,300,000 plus (ii) 10% of any
Aggregate Realized Value in excess of the Aggregate Target Value, less (iii) any
payments previously made to all Participants under Section 3.1.

          3.3  Payment. The Company may use, in the discretion of the Board, any
one or more of the following approaches to pay an Incentive Bonus: (i) pay in
full the amount due to each Participant based on the Realized Value (whether
received at that time or not) within 30 days of the event, or (ii) pay to each
Participant within 30 days after the Company actually receives any installment
an amount equal to that Participant's Installment Percentage of the installment
or (iii) provide each Participant with an ownership interest (in the form of
securities or interests in any liquidating trust) representing an Installment
Percentage of any securities or interests being distributed to the Shareholders
and other Participants. "Installment Percentage" is calculated by dividing (i)
the amount due to the Participant based on the Realized Value of non-contingent
payments involved by (ii) the total of those non-contingent payments. On
satisfaction of any
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contingency, the Installment Percentage will be recalculated (using the same
Allocation Percentages as before) based on the total non-contingent amounts paid
and to be paid, and any additional amounts due with respect to a prior payment
as a result of any increase in the Installment Percentage shall be promptly paid
to each Participant by the Company.

     4.   Examples. Examples of the calculation and payments of amounts under
this Plan have been made available to each Participant.

     5.   Reporting. The Company shall provide each Participant, at any time at
which a payment is due hereunder, with a statement setting forth its calculation
of the payment(s) then due. Each Participant shall have 30 days to review such
statement, and unless such Participant provides written notice to the Company of
any objections to the calculation within that period, the calculation shall be
final and binding. If a Participant timely objects to the statement, the dispute
will be immediately submitted to a arbitrator agreed by the Company and
Participants holding a majority of the Allocation Percentage with respect to
that statement or, if no such arbitrator is agreed upon within 15 days, the
dispute shall be resolved under the commercial arbitration rules of the American
Arbitration Association. The determination of the arbitrator shall be final,
conclusive and binding on the parties.

     6.   Withholdings. The Company may deduct all federal, state, local and
other taxes or withholdings required by law to be withheld with respect to any
all amounts paid under this Plan.

     7.   Non-Transferability of Rights.

          7.1  No Transfers. No Participant may sell, pledge, assign,
hypothecate, transfer or dispose of any of his or her rights under this Plan in
any manner other than by will or by the laws of descent or distribution, except
that the Company may, if it wishes to do so, allow the spouse of the Participant
to hold and/or exercise rights hereunder pursuant to a qualified domestic
relations order as defined by the Code or Title I of ERISA.

          7.2  Designation of Beneficiary. A Participant may file a written
designation of a beneficiary who is to receive any payments under this Plan in
the event of the Participant's death. If a Participant is married and the
designated beneficiary is not his or her spouse, spousal consent shall be
required for such designation to be effective. A Participant may change such
designation of his or her beneficiary at any time by written notice, subject to
the above spousal consent conditions.

          7.3  Effect of No Designation. If a Participant dies and there is no
living beneficiary validly designated under this Plan, any payments under this
Plan due to the Participant will be made to the executor or administrator of the
estate of the Participant.

          7.4.  Rights of Participants and Beneficiaries. The Company shall pay
all amounts payable hereunder only to the Participant or any beneficiaries
properly designated pursuant to this Plan. The Company shall not be liable for
the debts, contracts or engagements of any Participant or his or her
beneficiaries, and rights to payments under this Plan may not be taken in
execution by attachment or garnishment, or by any other legal or equitable
proceeding, while in the hands of the Company.

          7.5  Additional Participants. If a Participant ceases to work for the
Company on a full time or part time basis, the Board may in its discretion award
any replacement (provided the replacement is not already a Participant) for that
person a number of points up to the number of the
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former Participant, and the replacement executive will thereafter be treated as
a Participant. At no time may the number of points in any month exceed 100.

     8.   No Right to Continued Employment. This Plan shall not confer upon a
Participant any right with respect to continuing the Participant's employment or
consulting relationship with the Company, nor shall it interfere in any way with
the Participant's right or the Company's right to terminate such employment or
consulting relationship at any time, with or without cause. This Plan shall not
affect the rights of the Participants or any other employees to participate
under other plans of the Company.

     9.   Funding; Rights to Payment. This Plan is an unfunded arrangement. To
the extent any Participant acquires a right to receive payments under the Plan,
such rights shall be no greater than the right of any unsecured creditor of the
Company. Nothing contained in this Plan, and no action taken pursuant to its
provisions, shall create or be construed to create a trust of any kind or
fiduciary relationship between the Company and any Participant, which shall
continue to be as it was without reference to this Plan.

     10.  Administration.

          10.1  Administrator.  The Plan shall be administered by (i) the Board
                -------------
or (ii) a Committee of the Board.  Once appointed, any Committee shall
administrate the Plan until otherwise directed by the Board, and all references
in this Plan (other than in this Section 10) to the Board shall mean the
Committee.  The Board may increase the size of the Committee and appoint
additional members, remove members (with or without cause) and substitute new
members, fill vacancies (however caused), and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by applicable laws, and to the extent relevant, the rules for
qualification as "performance-based compensation" under Section 162(m).

          10.2  Powers of Administrator.  Subject to the provisions of the Plan
                -----------------------
and, in the case of a Committee, subject to the specific duties delegated by the
Board to such Committee, the Board and the Committee shall have the authority,
in its discretion to take any action provided in this Plan, including:

          .     to construe and interpret the terms of the Plan;

          .     to prescribe, amend and rescind rules and regulations relating
                to the Plan; and

          .     to make all other determinations deemed necessary or advisable
                for administering the Plan.

          10.3  Effect of Decisions.  The decisions, determinations and
                -------------------
interpretations of the Board and the Committee made in good faith shall be final
and binding on all Participants.

     11.  Amendment and Termination of the Plan. This Plan may be amended or
terminated by the Company, although no amendment or termination of the Plan may
adversely impact the rights of a Participant or affect his or her benefits
hereunder, unless otherwise mutually agreed in writing between the Participant
and the Company as well. The right to earn awards under this Plan will expire on
the earlier of Final Monetization or December 31, 2003.

     12.  Governing Law. The Plan shall be governed by, and construed in
accordance with the laws of the State of California (without giving effect to
conflicts of law principles).
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     13.  Definitions.  As used herein, the following definitions shall apply:

     "Aggregate Realized Value" means the Realized Value of all Assets
(including in each case, any reasonable reserves as determined by the Board in
good faith), (i) less all corporate expenses of the Company after June 30, 2000
not otherwise taken into account in determining Realized Value, (ii) plus all
state and federal income taxes paid by the Company with respect to periods after
June 30, 2000 and (iii) less the amount of state and federal assumed in
determining Realized Value.

     "Asset" means each of the Assets set forth on the schedules provided to the
Participants.

     "Allocated Percentage" means (i) the number of points for each Participant
set forth next to his or her name on Schedule 1, (ii) multiplied by the number
of months that Participant worked for the Company on a full or part time basis
between June 30, 2000 and the Monetization involved and (iii) divided by the
total number of points of all Participants as of the Monetization involved.
However, if a Participant is terminated as an employee by the Company with
Cause, his number of points for all calculations under the Plan after the date
of his departure will be zero (thus, a Participant whose employment terminates
after Cause will not share in any subsequent distributions under the Plan; a
Participant who departs without Cause will continue to share, although his
Allocated Percentage may decline because he will cease to accrue points
thereafter). The aggregate Allocation Percentages of all Participants shall
equal 100%.

     "Base Value" means the value with respect to each Asset assigned by the
Board as a base value in the materials provided to the Participants.

     "Board" means the Board of Directors of the Company.

     "Cause" shall be as defined in each Participant's employment agreement.

     "Committee" means a committee designated by the Board.  To the extent it is
involved in such matters, any Committee must comply with any applicable
requirements for any payments under this Plan to qualify as "performance-based
compensation" under Section 162(m) with respect to "covered employees" within
the meaning of Section 162(m).

     "Company" means Kaiser Ventures Inc.

     "Final Monetization" shall mean the time at which the last Asset shall have
been Monetized.

     "Interim Monetization" shall mean the time at which an Asset (other than
the last Assert) shall have been Monetized.

     "Monetized" means the conversion (through sale, lease or other methods) of
substantially all of the value of an Asset into cash or marketable securities,
or the right to receive to receive future payments of cash or marketable
securities without substantial additional operating risk.  If the Board
determines to hold an Asset on an income producing basis and distribute the cash
received therefrom to the Shareholders of the Company from time to time, the
Board may declare the Asset Monetized.

     "Participants" means the persons set forth on Schedule 1 and any person
added by the Board as provided in Section 2.5.
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     "Plan" means this Long Term Transaction Incentive Plan.

     "Realized Value" means the aggregate of all consideration received by the
Company with regard to an Asset after the date hereof, whether in cash or any
property, net of (i) all expenses directly related to that Asset, whether
operational or transactional  (including brokerage and legal costs), but not
including any overhead charges and (ii) taxes on that amount at the rate assumed
in the Valuation Analysis provided to the Participants.  If the consideration in
a Transaction is paid in whole or in part in the form of securities or other
assets, the value of such securities or other assets shall be fair market value
thereof (based, in the case of securities with an existing public trading
market, on the last sales price for such securities on the last trading day
prior to the event involved). In the event that any property is to be received
in the future with respect to an Asset that has been Monetized, Realized Value
shall include the present value of any such property.  Present values will be
calculated as reasonably determined by the Board.  No discount shall be taken
for future contingencies, although the Board may choose to postpone payment
until money is received.

     "Target Value" means the value with respect to each Asset assigned by the
Board as a target value in the materials provided to the Participants.

                                   Approved
                                   ========

The foregoing Kaiser Ventures Inc. Long Term Transaction Incentive Plan (and
exhibits thereto) was approved by the Board of Directors of Kaiser Ventures Inc.
to be effective as of June 30, 2000.

                              Kaiser Ventures Inc.

                              By: /s/ Todd G. Cole
                                  ----------------
                                  Todd G. Cole
                                  Chairman of Human Relations Committee
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                                  Schedule 1
                            Participants and Points

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                Participant                               Number of Points
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               Rick Stoddard                                    40
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               Terry Cook                                       24
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               Jim Verhey                                       16
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               Anthony Silva                                    12
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               Paul Shampay                                      8
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                                                                    EXHIBIT 10.2
                                                                    ============

                          Second Amended and Restated
                             Employment Agreement
                                      of
                              Richard E. Stoddard

     This SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement") is made
and entered into effective as of September 19, 2000 by and between RICHARD E.
STODDARD ("Employee") and KASIER VENTURES INC. ("Kaiser").

                                   Recitals

     A.   Effective as of January 15, 1996, Employee and Kaiser entered into an
employment agreement (the "Initial Employment Agreement").  The Initial
Employment Agreement was amended and restated as of January 15, 1998 ("First
Amendment and Restated Employment Agreement").  The First Amendment and Restated
Employment Agreement was further amended by that certain First Amendment between
Kaiser and Employee dated effective as of January 6, 2000.

     B.   The intent of this Agreement is to further amend and restate the First
Amendment and Restated Employment Agreement, as amended, and thus to set forth
the current agreement and understanding of Employee and Kaiser with regard to
Employee's continued employment by Kaiser.

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

     1.   Employment, Positions and Duties.  Kaiser hereby continues the
employment of Employee upon the terms and conditions set forth in this
Agreement.  Employee's positions with Kaiser shall be President, Chief Executive
Officer and Chairman of the Board.  Employee shall have the responsibilities and
duties normally incident to such positions, including, but not limited to, those
duties and responsibilities set forth in Schedule "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 Board of
Directors.  Employee agrees to devote his full business time and attention to
the discharge of his duties and responsibilities under this Agreement.

     2.   Term.  Employee's employment under the terms of this Agreement shall
commence as of September 19, 2000 and shall continue until terminated as
provided herein; provided, however, upon Employee's termination, Employee shall
receive the severance compensation provided herein.

     3.   Base Salary.  Employee's current annual base salary shall be Three-
Hundred Fifty Thousand Dollars ($350,000) per year.  Notwithstanding the
foregoing, the Board of Directors may in good faith and in its reasonable
discretion may elect to cause the Corporation to issue to Employee restricted
stock with a value of up to Forty Thousand Dollars ($40,000) per year in lieu of
cash compensation provided that subsequent to the date of this Agreement there
are no material adverse changes in the tax and securities laws during the year
preceding any proposed grant of restricted stock pertaining to or affecting
Employee's receipt, taxation, sale or transfer of restricted stock.  In the
event of any material adverse change in the tax or securities laws pertaining to
Employee's receipt, taxation, sale or transfer of restricted stock as reasonably
determined in good faith by Employee or Kaiser, Employee and Kaiser shall in
good faith discuss any changes that may

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be appropriate or necessary in connection with any grant of restricted stock to
Employee. 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.

     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.
Employee's annual base salary shall be adjusted effective as of January 1 of
each year, commencing January 1, 2001, by the increase in the consumer price
index over the prior applicable year utilizing the Consumer Price Index for
Urban Wage Earners and Clerical Workers, U.S. City Average, All Items, published
by the Bureau of Labor Statistics of the United Stated Department of Labor.  The
entire Board of Directors has final responsibility for the review, approval or
disapproval of any revisions to Employee's annual base salary.

     4.   Bonus Program.

          a.   Annual Performance Bonus. In addition to his base salary,
Employee shall be entitled to participate in the bonus program of Kaiser
applicable to senior executives as it may be amended from time to time. The
timing, size and/or amount of any bonus awarded to Employee during the term of
this Agreement will be determined annually in accordance with the process set
forth in paragraph 3 above for the annual base salary review and based upon the
bonus program developed from time to time by the Human Relations Committee and
approved by the Board of Directors. The annual performance bonus for any year,
if any, will be determined based upon such review. The current annual
performance plan for executive officers of Kaiser was adopted by the Board of
Directors on January 6, 2000, and such plan (as it may be amended from time to
time for years after 2000) is incorporated herein by this reference. The Board
of Directors may award in good faith and in its reasonable discretion up to
fifty percent (50%) of any bonus in restricted stock provided that subsequent to
the date of this Agreement there are no material adverse changes in the tax and
securities laws pertaining to or affecting Employee's receipt, taxation, sale or
transfer of restricted stock. In the event of any material adverse change in the
tax or securities laws during the year preceding any proposed grant of
restricted stock pertaining to Employee's receipt, taxation, sale or transfer of
restricted stock as reasonably determined in good faith by Employee of Kaiser,
Employee and Kaiser shall in good faith discuss any changes that may be
appropriate or necessary in connection with any grant of restricted stock to
Employee.

          b.   Retention Bonus. Provided Employee remains in the employ of
Kaiser through and including June 20, 2003, Kaiser shall pay to Employee a bonus
("Retention Bonus") on that date equal to the sum of (i) one year's annual base
salary (based on Employee's then current annual base salary, but in no event
less than the base salary in effect on the date of this Agreement) plus (ii) an
amount equal 49.6% of the greater of Employee's then current annual base salary
or the base salary in effect on the date of this Agreement (this is equivalent
to one year's average annual bonus (cash and stock, but not including either
stock options or stock grants outside of the annual bonus or the Long Term
Incentive Plan payments as described in 4(c) below) as measured by Employee's
average percentage bonus paid over the five (5) years prior to the date hereof)

          c.   Long Term Incentive Plan. Employee shall be eligible to receive
payments in accordance with the terms of the Long Term Transaction Incentive
Plan adopted by Kaiser on

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September 19, 2000, to be effective as of June 30, 2000 (the "Long Term
Transaction Incentive Plan").

     5.   Stock Options and Other Stock Related Incentives.  Employee shall be
eligible for the grant of incentive stock options, non-qualified stock options
and other forms of stock related incentives from time-to-time in the discretion
of the Stock Option Committee of the Board of Directors.  The timing, size and
amount of any future stock options or other stock related incentives will be
determined generally in accordance with the process used to determine the award
of any bonus to Employee.  The grant and exercise of the stock options and other
stock related incentives shall generally be subject to and governed by the terms
of an approved stock plan, stock option plan or any similar or successor plan.
However, the Stock Option Committee may award stock options, restricted or other
stock related incentives outside an approved plan in its discretion.

     Kaiser acknowledges and agrees that all stock options granted to Employee
prior to the date of this Agreement are fully vested in Employee.

     6.   Other Benefits.  Employee will be entitled to participate in all
benefits provided by Kaiser to its employees and to senior executives in
accordance with and subject to Kaiser's polices and procedures as they may exist
from time-to-time, including, but not limited to, medical and dental insurance,
life insurance, disability insurance, 401(k) savings plan, any pension plan,
deferred compensation plan, education and seminar reimbursement, car allowance,
and reimbursement of reasonable expenses for company business.  These benefits
shall include life insurance for the benefit of Employee with a face amount of
not less than Employee's annual base salary, except that Kaiser may self-insure
if insurance is not available.  Employee shall be entitled to four (4) weeks of
paid vacation per year.

     7.   Restricted Stock.  Any restricted stock issued by Kaiser in lieu of
cash payments in connection with Employee's base salary or any bonus, shall be
subject to the terms and conditions of a mutually agreed upon stock restriction
agreement which may provide, among other things, for the forfeiture of such
stock in phases if Employee should voluntarily terminate his employment with
Kaiser or upon Employee's termination for "cause" as defined herein.

     8.   Death Benefits.  In the event of Employee's death, Kaiser shall pay to
Employee's personal representative or his estate, Employee's salary and benefits
through the end of the month in which the death occurred plus a ratable portion
of Employee's anticipated bonus for the year through the date of Employee's
death.  Employee's anticipated bonus shall be calculated by multiplying
Employee's average percentage bonus paid over the prior five years by Employee's
then annual base salary.  If a bonus has been earned by Employee for the
preceding fiscal year but has not yet been paid prior to the death of Employee,
Employee's estate or personal representative shall be paid the full amount of
the earned but unpaid bonus.  In addition, Kaiser shall pay, from time to time,
any payment that is due under the terms of the Long Term Transaction Incentive
Plan as provided in Paragraph 4(c) of this Agreement.  The proceeds from any
life insurance shall be for the sole benefit of Employee's designated
beneficiaries or if there are no designated beneficiaries, Employee's estate.
Upon Employee's death, all restricted stock issued to Employee for past services
(e.g. bonus stock), shall immediately vest and all restricted stock initially
issued for anticipated future services (e.g. salary stock) will vest ratably
through the date of death.  Employee's estate or personal representative shall
have at least one (1) year after the date of Employee's death while in the
employment of Kaiser in which to exercise all vested Stock Options.

                                       3
<PAGE>

     9.   Disability Benefits.  In the event of the disability of Employee for
any reason, Kaiser shall continue to pay to Employee his salary and benefits
less short-term disability payments until long-term disability payments are made
to Employee but in no event shall such salary and benefit payments continue for
longer than six (6) months from the date of disability.  In addition, upon
permanent disability, the vesting of all retirement and deferral compensation
plans and all outstanding options, restricted stock or other stock related
incentives shall continue to occur for a period of two (2) years after the date
of disability in the same manner as if Employee were still employed by Kaiser
during that period.

     10.  Deductions.  Applicable federal and state income taxes, social
security contributions (FICA), Medicare contributions, medical insurance
premiums and any other appropriate or customary deductions shall be withheld
from any compensation paid to Employee by Kaiser.

     11.  Constructive Termination.  Employee shall be deemed to have been
constructively discharged upon the occurrence of any of the following events:

          a.   The assignment to Employee of duties materially and adversely
inconsistent with Employee's positions as of the effective date of this
Agreement. This includes a change in reporting responsibilities, authority
including title, or responsibilities; provided, however, a lateral transfer
within Kaiser or to an Affiliate shall not be deemed a constructive termination;

          b.   Any requirement that Employee permanently relocate to an office
more than 50 miles from the then location to which he is assigned as of the
effective date of this Agreement; and/or

          c.   Any failure to provide Employee with compensation and benefits in
the aggregate on terms that are not materially less favorable than those enjoyed
by Employee under this Agreement, or the subsequent taking of any action that
would materially reduce any of Employee's compensation and benefits in effect at
the time of this Agreement.

     then, at Employee's option, exercisable within ninety (90) days of the date
Employee knew, or should have known exercising reasonable care, of the
occurrence of any of the foregoing events and the expiration of any applicable
cure period, Employee shall have the right to terminate his employment by
written notice to Kaiser, and on the date of such termination Kaiser will pay
Employee the compensation and benefits described in Paragraph 12 below.

     12.  Compensation Payable Upon Actual or Constructive Termination.  In the
event Employee is terminated by Kaiser for any reason (including a constructive
termination) except for death, permanent disability or for cause, as defined
below, Kaiser shall pay to Employee the following compensation and Employee
shall receive the following benefits as severance benefits:

          a.   if the termination is effective after March 31 of any year, an
amount equal to the pro rata portion of the annual performance bonus that
Employee would have been eligible to earn for the year of termination calculated
by multiplying Employee's average percentage bonus paid over the prior five
years by Employee's then annual base salary;

          b.   an amount equal to the greater of Employee's then current annual
base salary or his base salary in effect on the date of this Agreement;

                                       4
<PAGE>

          c.   an amount equal to one year's average annual bonus (cash and
stock, but not including stock options or stock grants outside of the annual
bonus) calculated by multiplying Employee's average percentage bonus paid over
the prior five years by the greater of Employee's then current base salary or
his base salary in effect on the date of this Agreement);

          d.   the Retention Bonus due Employee under Paragraph 4(b) of this
Agreement shall be immediately paid as if Employee had continued to be employed
by Kaiser through June 20, 2003; and

          e.   any payments that become due Employee under the terms of the Long
Term Transaction Incentive Plan (which payments can continue to be made to
Employee beyond the date of Employee's termination in accordance with the terms
of the Long Term Transaction Incentive Plan);

          f.   Kaiser shall continue to provide and pay its portion of all of
Employee's health, welfare, insurance and other benefits for a period of twenty
four (24) months following the date of termination, including Kaiser's portion
of any retirement and deferred compensation plan such as Kaiser's 401(k) plan.
After such termination, Employee shall be entitled, for a period of three years
to exercise his stock options as to any then vested, including any options
vesting within one year of termination as provided in the next sentence,
notwithstanding any other applicable provision contained in any option
agreement. In addition to the foregoing related to stock options, with respect
to any restricted stock or other stock related incentives, Employee shall
continue to vest in such securities for a period of one-year following
termination; and

          g.   Employee shall have the right to participate proportionately in
stock buyback or dividend distribution in proportion to shares owned together
with all other shareholders.

     For the purposes of this Agreement, "average percentage bonus paid over the
prior five years" shall mean the average percentage bonus (cash and stock, but
not including either (i) stock options or stock grants outside of the annual
bonus or (ii) amounts paid under the Long Term Incentive Plan as described in
4(c) below) received by Employee for the five years preceding the year of
termination (or for such lesser period in which bonus payments were received)
compared to his base salary in each of those years..

     Except for payments made pursuant to the Long Term Transaction Incentive
Plan and the benefits due Employee under Paragraph 4(f) above, all amounts due
Employee shall be payable in one lump sum or, at Employee's option, over such
period of time not to exceed twelve (12) months.  Employee shall have no duty to
seek other employment during this period of time and there shall be no offset
for any compensation paid to Employee from any other source; provided, however,
if Employee is paid a consulting fee or receives compensation from Kaiser or an
Affiliate of Kaiser for services actually rendered during a one (1) year period
from the date of termination, unless otherwise agreed in writing, such amount
shall be offset against the payments made or due Employee.

                                       5
<PAGE>

     13.  Possible Reduction in Certain Benefits.

          a.   Except as provided in Paragraph 13(b) below, Employee shall in no
circumstances receive "payments in the nature of compensation" from Kaiser which
would result in "excess parachute payments" (as that term is defined in Sections
280G and 4999 of the Internal Revenue Code of 1954, as amended, or any
equivalent or analogous term as shall in the future be defined in any law or
regulation governing the amount of severance compensation that may be paid
without penalty to an officer of a company upon a change in control of Kaiser).
In the event either Employee or Kaiser shall be advised in writing by his or its
counsel that Employee would receive excess parachute payments if all payments
under all contacts between Employee and Kaiser were made, such opinion shall be
confidentially disclosed to the other party. If it is mutually determined that
such payments would trigger the excess parachute payments provisions, Employee
shall receive only such compensation and benefits under his contracts with
Kaiser (not to exceed those permitted without constituting excess parachute
payments) which he, in his sole discretion, has designated in written notice to
Kaiser. Employee shall have a minimum of thirty (30) days in which to make such
written designation. In the event of a disagreement between the counsel of the
respective parties as to whether a payment would result in excess parachute
payments, such counsel shall jointly designate an independent tax counsel (whose
fees shall be paid by Kaiser) within 10 days who shall promptly make a
conclusive determination of the matter.

          b.   Notwithstanding anything else to the contrary, in the event
Employee is terminated pursuant to Paragraph 12 above, Employee shall have the
right, in his sole discretion, to elect to receive all or any part of the
compensation payable to him upon termination (or which would have been due under
Paragraph 12 but for a previous election under Paragraph 13(a)) without regard
to whether any such amounts may constitute "excess parachute payments."  If
Employee fails to provide Kaiser a written designation within thirty (30) days,
he shall be presumed to have elected to receive all compensation and benefits
due him without regard to whether any such compensation or benefits shall
constitute "excess parachute payments."

          c.   Nothing in this Paragraph 13 shall be construed or deemed to be a
forfeiture of any compensation or benefits that Employee may elect not to
accelerate due to any concern about the receipt of "excess parachute payments."

     14.  Termination for Cause.  If Kaiser elects to terminate Employee's
employment for cause (as defined Paragraph 15 below), Employee's employment will
terminate on the date fixed for termination by Kaiser and thereafter Kaiser will
not be obligated to pay Employee any additional compensation, other than the
compensation due and owing up to the date of termination.  After such
termination, Employee shall be entitled, for a period of one hundred and twenty
(120) days, to exercise any stock options or other stock related incentives that
are vested as of the date of termination.

     15.  Definition of "Cause."  "Cause" for the purposes of this Agreement
shall mean any of the following:

          a.   Willful breach by Employee of any provision of this Agreement,
provided, however, if the breach is not a material breach, Kaiser shall give
Employee written notice of such breach and Employee shall have thirty (30) days
in which to cure such breach. No written notice or cure period shall be required
in the event of a willful and material breach of this Agreement by Employee;

                                       6
<PAGE>

          b.   Gross negligence or dishonesty in the performance of Employee's
duties or responsibilities hereunder;

          c.   Engaging in conduct or activities or holding any position that
materially conflicts with the interest of, or materially interferes with
Employee's duties and responsibilities to Kaiser or its Affiliates; or

          d.   Engaging in conduct which is materially detrimental to the
business of Kaiser or its affiliates.

     16.  Voluntary Termination.  Employee's employment by Kaiser may be
terminated at any time upon the parties' mutual written agreement.  In the event
of a mutual written agreement, Employee's severance benefits shall be as set
forth in such agreement.  Upon termination of Employee by Kaiser for any reason
(including a constructive termination) except for death, permanent disability or
for cause, Employee shall receive the compensation and benefits set forth in
Paragraph 12 of this Agreement.  In the event of Employee's voluntary
termination of employment, Kaiser shall not be obligated to pay Employee any
additional compensation, other than the compensation due and owing as through
the date of termination and as may be required by law, as well as any payments
that become due Employee under the terms of Kaiser's Long Term Transaction
Incentive Plan (which payments can continue to be made to Employee beyond the
date of Employee's termination in accordance with the terms of the Long Term
Transaction Incentive Plan).  After such termination, Employee shall be entitled
for a period of hundred and twenty (120) days to exercise any stock options or
other stock related incentives that are vested as of the date of termination.

     17.  Confidentiality.

          a.   Employee's Obligations. Employee agrees that (a) except as
provided in this Agreement Employee shall maintain the confidential nature of
any Proprietary Information received or acquired by him, and (b) Employee shall
use such Proprietary Information solely for the purpose of meeting his
obligations under this Agreement and not in connection with any other business
or activity. "Proprietary Information" means all oral, written or recorded
information about or related to the Kaiser or any of its Affiliates or its or
their technology, assets, liabilities, or business, whether acquired before or
after the date hereof, and regardless of the manner in which it is acquired,
together with any documents or other materials prepared by Employee which
contain or reflect such information. After termination of employment upon demand
of Kaiser, Employee agrees to return or destroy any and all materials containing
any Proprietary Information.

          b.   Kaiser's Obligations. Kaiser agrees that it shall maintain and
provide information regarding Employee in accordance with generally accepted
industrial and business practices.

          c.   Limitations on Confidential Obligations and Use Restrictions. The
restrictions in Paragraphs 17(a) and (b) above do not apply to information which
the disclosing party can demonstrate (i) is then in the public domain by acts
not attributable to such disclosing party or (ii) is hereafter received on an
unrestricted basis by such disclosing party from a third party source who, to
such disclosing party's knowledge after due inquiry, is not and was not bound by
confidentiality obligations to Kaiser or any Affiliate thereof (in the case of
Paragraph 19(a)) or to Employee (in the case of Paragraph 19(b)). In addition,
Employee and Kaiser are permitted to disclose any Proprietary Information as
necessary in the defense or prosecution of any legal action.

                                       7
<PAGE>

          d.   Actions if Disclosure Required. If Employee is required by law to
make any disclosure otherwise prohibited hereunder, such party shall use its
best efforts to provide the other with prompt prior notice where possible so
that (a) the other party (with the reasonable cooperation of the party required
to make such disclosure) may seek an appropriate protection order or other
remedy and/or (b) the parties can seek in good faith to agree on the appropriate
scope and approach to disclosure. If a protective order or other remedy is not
obtained, the party required to make such disclosure may furnish only that
portion of information protection hereby which it is legally compelled to
disclose and shall use its reasonable efforts to obtain confidential treatment
for all information so disclosed.

          e.   Injunction. Each party agrees that remedies at law may be
inadequate to protect against breach of this Paragraph 17, and hereby agrees to
the granting of injunctive relief without proof of actual damage.

     18.  Arbitration of Disputes.  If Employee and Kaiser cannot resolve a
dispute (whether arising in contract or tort or any other legal theory, whether
based on federal, state or local statute or common law and regardless of the
identities of any other defendants) that in any way relates to or arises out of
this Agreement, the termination of Employee's employment relationship with
Kaiser or any Affiliate thereof, (without limiting the generality of any other
Paragraph herein), then such dispute shall be settled as follows:

          a.   Kaiser and Employee agree to jointly select a judicial officer
who is affiliated with the Judicial Arbitration and Mediation Service, or such
other equivalent organization as Kaiser and Employee may mutually select, to act
as the trier of fact and judicial officer in such dispute resolution;

          b.   If Kaiser and Employee are unable to agree upon a particular
judicial officer, then the decision shall be made by the chief executive officer
of the Judicial Arbitration and Mediation Service, after consulting with Kaiser
and Employee;

          c.   Kaiser and Employee shall have the same rights of discovery as if
the dispute were being resolved in the Superior Court of the State of
California. However, the judicial officer shall, on his own motion, or the
request of either Kaiser or Employee, have the authority to extend or reduce the
time periods therefore; and,

          d.   The judicial officer serving hereunder shall be designated as a
referee under the provisions of Title VIII, Chapter 6 of the California Code of
Civil Procedure (Sections 638 through 645. 1, inclusive). Payment for the
services of the judicial officer and the rights and procedure of appeal, and/or
other review of the decision, shall be made as provided in such sections.

     The judicial officer shall have the right to grant injunctive relief,
specific performance and other equitable remedies.

                                       8
<PAGE>

     19.  Miscellaneous.

          a.   Entire Agreement; Amendments. This Agreement states the entire
understanding and agreement between the parties with respect to its subject
matter as of the date of this Agreement, and may only be amended by a written
instrument duly executed by Employee and Kaiser.

          b.   Assignment. This Agreement and the rights and obligations of
Employee may not be sold, transferred, assigned, pledged or hypothecated by
Employee.

          c.   Non-Waiver. Failure to insist upon strict compliance with any
provision of this Agreement or the waiver of any specific event of non-
compliance shall not be deemed to be or operate as a waiver of such provision or
any other provision hereof or any other event of non-compliance.

          d.   Binding Effect. This Agreement shall be binding upon and inure to
the benefit of Kaiser, its successors and assigns and, Employee's heirs,
successors, and legal or personal representatives.

          e.   Headings. The headings throughout this Agreement are for
convenience only and shall in no way be deemed to define, limit, or add to the
meaning of any provision of this Agreement.

          f.   Context. Whenever required by the context, the singular shall
include the plural, the plural the singular, and one gender such other gender as
is appropriate.

          g.   Notices. All notices, request, demands, consents and other
communications hereunder shall be transmitted in writing and shall be deemed to
have been duly given when hand delivered or sent by certified United States
mail, postage prepaid, with return by certified requested, addressed to the
parties as follows:

               Kaiser Ventures Inc.
               3633 E. Inland Empire Blvd., Suite 850
               Ontario, CA  91764

               Richard E. Stoddard
               6500 Mansfield Ave. Villa #40
               Denver, CO  80235

          h.   Costs. In any action taken to enforce the provisions of this
Agreement, the prevailing party shall be reimbursed all costs incurred in such
legal action including reasonable attorney's fees in such action.

          i.   Severability. If any provision or clause of this Agreement, as
applied to any party or circumstances shall be adjudged by a court to be invalid
or unenforceable, said adjudication shall in no manner effect any other
provision of this Agreement, the application of such provision to any other
circumstances or the validity or enforceability of this Agreement.

          j.   Definition of Affiliate. The term "Affiliate" for purposes of
this Agreement shall mean any person or entity now or hereafter in control,
controlled by or in common

                                       9
<PAGE>

control with Kaiser. It shall also include any direct or indirect subsidiary of
such Corporation and any company in which Kaiser has more than a ten percent
(10%) ownership interest.

          k.   Acknowledgment Regarding ISO's. Employee acknowledges that he is
responsible for the tax consequences of all severance compensation he may
receive and that certain actions may need to be taken by Employee within limited
periods of time to preserve the tax status of any incentive stock options.
Kaiser makes no representation or warranty that any past or future grant of a
stock option to Employee qualifies as an incentive stock option.

          l.   Governing Law. This Agreement 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 Employment
Agreement and January 15, 1998, to be effective as of the day and year first
written above not withstanding the actual date of signature.

"Employee"                             "Kaiser"
Richard E. Stoddard                    Kaiser Ventures Inc.

/s/ Richard E. Stoddard                By: /s/ Terry L. Cook
-----------------------                   ----------------------
Richard E. Stoddard                       Terry L. Cook
                                          Executive Vice President -
                                          Administration

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

                                       10
<PAGE>

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

                              RICHARD E. STODDARD
    Chairman of the Board of Directors, Chief Executive Officer & President

     This position shall report directly to the Board of Directors.

Responsibilities:

     This position has total responsibility for every facet of the strategy,
planning, operation, project implementation, performance and direction of Kaiser
Ventures Inc. and all its subsidiaries.

     Within this framework of ultimate responsibility, Mr. Stoddard has
delegated certain operational and implementation duties to the Executive Vice
President.  Shown below are strategic functions which will remain under the
direct control of Mr. Stoddard as Chairman, CEO, and President:

     .    Corporate planning and strategy.

     .    Determination of the direction and goals of Kaiser.

     .    Future growth opportunity decisions.

     .    Development of all projects exit strategies.

     .    Major corporate financial or other resource commitments.

     .    All phases of investor relations.

     .    Relationships with major shareholders.

     .    All phases of the corporation's legal strategy, including compliance
          with laws and regulations.

     .    Outside auditor performance and relationship.

     .    Corporate accounting policies and financial reporting
          responsibilities.

     .    Corporate financing strategy and fiscal accountability.

     .    Major joint venture partner relations.

     .    Major negotiations on behalf of the corporation.

     .    Financial analysis and modeling of corporate opportunities.

     .    Political lobbying at the federal, State and local levels.

     .    Public relations and corporate participation policy.

     .    Agency relations and communications.

     .    Mine Reclamation Corporation Management.

     .    Establishment of policies for the conduct Kaiser's business.

     .    Oversee the implementation of corporate policy.

     .    As chairman, conduct the meetings and business of the Board of
          Directors.

     .    Implement the decisions of the Board of Directors.

                                       11

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