Document:

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                                                                  EXHIBIT 10.5.1

                                FIRST AMENDMENT
                                    TO THE
                             EMPLOYMENT AGREEMENT
                                      OF
                                 TERRY L. COOK

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

                                   Recitals

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       5<PAGE>

                                                                    EXHIBIT 10.6

                        TRANSITION EMPLOYMENT AGREEMENT
                        ===============================

     This TRANSITION EMPLOYMENT AGREEMENT ("Agreement") is made and entered into
by and between LEE R. REDMOND III ("Executive") and KAISER VENTURES INC. (the
"Company") as of January 6, 2000.

                                    Recitals

     A.   Executive is currently employed with the Company pursuant to the terms
of that certain Employment Agreement between the Company and Executive dated
effective June 17, 1996 (the "1996 Employment Agreement").

     B.   The Company and Executive have mutually agreed to wind-down
Executive's time commitment to the Company, eventually resulting in Executive
terminating his employment with the Company. The Company and Executive have
agreed to terminate and supercede the 1996 Employment Agreement by this
Agreement.

     NOW, THEREFORE, based upon the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Executive and the Company agree as follows:

     1.   Acknowledgment of Recitals.  Executive and the Company agree and
acknowledge that the facts set forth in the Recitals above are true and correct
and are incorporated herein by this reference.

     2.   Employment Position and Duties.  During Executive's employment by the
Company, Executive shall continue to serve as the Company's Sr. Vice President
of Real Estate and shall perform the duties and be responsible for the items
described on Exhibit "A" attached hereto and incorporated herein by this
reference, subject to the limitations that may reasonably arise due to his
reduced time commitment to the Company.

     3.   Time Commitment by Executive.

          (a)  Effective as of January 15, 2000, through the earlier of: (i)
April 30, 2000; or (ii) upon the close of the real estate transaction between
the Company and Ontario Ventures I, LLC pursuant to that certain Purchase and
Sale Agreement and Escrow Instructions dated October 19, 1999, as it may be
amended (the "Ontario Ventures Sale", Executive's time commitment to the Company
shall be reduced to one-half time ("Half-Time Work Period"). During the period
of Executive's half-time commitment to the Company, Executive shall be in and
conduct work out of the Company's corporate offices a minimum of two (2) days
per week, generally on Tuesday and Thursday of each week, or such other mutually
acceptable arrangement for sixteen (16) hours of work in and conducted out of
the Company's corporate offices. Executive need not be in and conduct work out
of the Company's corporate offices for the balance of his reduced time
commitment unless reasonably required to perform his duties.

          (b)  Effective as of May 1, 2000, through the earlier of:  (i) August
31, 2000; or (ii) the close of the Ontario Ventures Sale or the close of a sale
of substantially all the Company's mill site real estate to a party other than
Ontario Ventures I, LLC ("New Party Sale"), Executive's time commitment to the
Company shall be reduced to one-quarter time ("Quarter Time Work Period").
During the period of Executive's Quarter Time commitment to the Company,
Executive shall be in and conduct work out of the Company's corporate offices a
minimum of two (2) half

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days, generally on Tuesday and Thursday of each week, or at the Company's
option, one full day, either a Tuesday, Wednesday or Thursday of each week, or
such other mutually acceptable arrangement for eight (8) hours of work in and
conducted out of the Company's corporate offices. Executive need not be in and
conduct work out of the Company's offices for the balance of his one-quarter
time commitment unless reasonably required to perform his duties.

          (c)  Upon the earlier of:  (i) August 31, 2000; or (ii) the closing of
the Ontario Ventures Sale or a New Party Sale, Executive employment with the
Company shall terminate.  Upon the termination of employment, Executive agrees
that he shall perform consulting services for the Company through December 31,
2000 as more particularly described in Paragraph 8 below.

     When not working for the Company, Executive shall be free to engage in
other employment and business, provided such do not interfere with Executive's
work for the Company as provided in this Agreement.

     4.   Executive's Base Compensation.  While an employee of the Company, the
Company shall pay Executive based upon his current annual salary of $173,099 as
follows:

          (a)  Through January 15, 2000, Executive shall be paid based upon his
current annual salary;

          (b)  During the Half-Time Work Period, Executive shall be paid based
upon fifty percent (50%) of his current annual salary;

          (c)  During the Quarter-Time Work Period, Executive shall be paid
based upon twenty five percent (25%) of his current annual salary.

          All payments to Executive (including salary, bonus and severance
payments) shall be made in accordance with the Company's normal payroll
procedures and shall be less all appropriate deductions, such as social
security, federal and state income tax withholding, medical and life insurance
premiums.

     5.   Benefits.  Executive will continue to receive his regular auto
allowance benefit through the Half-Time Work Period, but such benefit shall
terminate upon commencement of the Quarter-Time Executive Work Period.  Unless
Executive is terminated for cause, as defined in the Agreement, or unless
Executive voluntarily terminates his employment, Executive will continue to
receive medical, dental, life and disability insurance benefits at the Company's
expense through the earlier of:  (i) one year after termination of employment or
(ii) August 31, 2001, subject to Executive's payment of any necessary premium
participation (currently $90.00 per month) or deductible as applicable to other
employees of the Company; provided, however, Executive shall have the ability to
terminate receipt of any benefit upon written notice to the Company.  It may be
necessary for Executive to elect to receive health benefits pursuant to COBRA.
If a COBRA election is necessary, the Company will pay the necessary COBRA
premiums less Executive's normal monthly premium participation for one year.
After January 15, 2000 Executive will not accrue any vacation.  Upon termination
of employment, Executive will not be able to participate in the Company's
401(k), Money Purchase Pension Plan, and Supplemental Executive Retirement Plan.
All benefits will terminate upon Executive voluntarily terminating his
employment or upon Executive's termination for cause.

     6.   Bonuses.  Executive shall be paid a cash bonus of $86,500 on or about
January 7, 2000 as his 1999 year end bonus.  If the Ontario Ventures Sale or a
New Party Sale is closed on or before May 31, 2000, Executive shall be paid an
additional bonus of $57,500.  After May 31, 2000,

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provided there is a closing of the Ontario Ventures Sale or a New Party Sale,
the bonus shall be reduced by one-seventh (1/7) per month through the month of
the closing, if a closing occurs. For example, if the Ontario Ventures Sale
closes in September 2000, Executive's bonus would be reduced by four-sevenths
(4/7) for the months of May, June, July and August, resulting in a bonus due
Executive of $24,642.80. After December 31, 2000, Executive shall be paid no
additional bonus.

     7.   Severance.  Upon Executive's termination of employment, except for
cause as defined in this Agreement, and except for his voluntary termination of
employment, Executive shall be paid the following as severance benefits:

          (a) any accrued and unused vacation as of January 15, 2000, as per
Kaiser's corporate records; plus

          (b) $243,307.04 (representing one year's annual base salary plus an
amount representing the average percentage bonus over five (5) years ending for
the 1999 bonus year, plus one year's car allowance) if, and only if, the Ontario
Ventures Sale or a New Party Sale is closed on or prior to August 31, 2000; or

          (c) $121,653.52 (representing 50% of the full severance payment
specified in subparagraph 7(b) above) if, and only if, the Ontario Ventures Sale
or a New Party Sale is closed after August 31, 2000, but on or before December
31, 2000.

     If the Ontario Ventures Sale or a New Party Sale does not close on or
before December 31, 2000, Executive shall be paid no cash severance by the
Company, except for any accrued and unused vacation.

     8.   Consulting.  After August 31, 2000, if there has been no closing on
the Ontario Ventures Sale or a New Party Sale, Executive shall, provided the
Company is in compliance with the terms of this Agreement, make himself
available through December 31, 2000, for reasonable periods of time as a
consultant to the Company.  Executive shall be paid at such hourly or daily
rate, plus reimbursement of expenses, as the Company and Executive may agree
upon.

     9.   Death Benefits.  In the event of Executive's death, the Company shall
pay to Executive's personal representative or his estate, Executive's salary and
benefits through the end of the month in which the death occurs.  Executive's
estate or personal representative shall have at least one (1) year after the
date of Executive's death while in the employment of the Company in which to
exercise all vested Stock Options.

     10.  Disability Benefits.  In the event of the disability of Executive for
any reason, the Company shall continue to pay to Executive his salary and
benefits as provided herein, less short-term disability payments until long-term
disability payments are made to Executive, but in no event shall such salary and
benefit payments continue for longer than six (6) months from the date of
disability.

     11.  Stock Options.  Executive holds options to purchase common stock of
the Company as listed in Exhibit "B" attached hereto and incorporated herein by
this reference (collectively the "Stock Options").  All of Executive's Stock
Option are vested.  All Stock Options held by Executive shall be exercisable for
a period of two years after Executive's termination of employment with the
Company (i.e., the last possible exercise date would be August 31, 2002, if
Executive's employment does not terminate earlier than its scheduled date of
August 31, 2000).  The Company makes no representation to Executive that any of
the Stock Options qualify as "Incentive Stock Options".

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     12.  401(k) Loan.  At the time of the termination of Executive's
employment, Executive and the Company shall determine the manner in which
Executive desires to repay his existing 401(k) loan.  Executive acknowledges
that the failure to repay the 401(k) loan will result in the principal amount of
the loan being deemed a distribution to Executive.  In such an event, Executive
acknowledges and understands that he will be responsible for the payment of all
income taxes and penalties on the amount of such distribution.

     13.  Indemnification.  The Company shall continue to indemnify Executive in
accordance with the standards, terms and limitations of:  (i) the Company's
Restated Certificate of Incorporation as in effect on the date hereof to the
same extent as if Executive had remained an officer of the Company; (ii) the
Company's Bylaws in effect on the date hereof to the same extent as if Executive
had remained an officer; and (iii) the Indemnification Agreement dated effective
June 27, 1994 between the Company and Executive.

     14.  Surrender of Company Property.  Upon termination of his employment,
Executive shall immediately return to the Company equipment, materials, credit
cards, and other items belonging to the Company.

     15.  General Release.  Upon the termination of Executive's employment, he
and the Company shall execute and deliver the general release and agreement
attached hereto as Exhibit "C".

     16.  Independent Judgment Made by Executive.  Executive represents and
acknowledges that in executing this Agreement he does not rely and has not
relied upon any representation or statement of the Company or by any of the
Company's employees, agents, representatives, or attorneys with regard to the
subject matter, basis or effect of this Agreement.

     17.  Conduct.  Executive agrees that he will not speak disparagingly of any
of the Company, its employees and duties, and the Company agrees it will not
speak disparagingly about Executive.  If requested by Executive, the Company
will provide Executive a reference letter as mutually determined by the
Company's President and Chief Executive Officer and Executive.

     18.  General Confidentiality.

          a.  Executive's Obligations.  Executive agrees that (a) except as
              -----------------------
provided in this Agreement Executive shall maintain the confidential nature of
any Proprietary Information received or acquired by him, and (b) Executive 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 Company 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 Executive which
contain or reflect such information.  After termination of employment upon
demand of the Company, Executive agrees to return or destroy any and all
materials containing any Proprietary Information.

          b.  The Company's Obligations.  The Company agrees that it shall
              -------------------------
maintain and provide information regarding Executive in accordance with
generally accepted industry and business practices.

          c.  Limitations on Confidential Obligations and Use Restrictions.  The
              ------------------------------------------------------------
restrictions in Paragraph 18(a) above do not apply to information which the
Executive can demonstrate (i) is

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<PAGE>

then in the public domain by acts not attributable to Executive or (ii) is
hereafter received on an unrestricted basis by such Executive from a third party
source who, to Executive's knowledge after due inquiry, is not and was not bound
by confidentiality obligations to the Company or any Affiliate thereof. In
addition, Executive and the Company are permitted to disclose any Proprietary
Information that is necessary in the defense or prosecution of any legal action.

          d.  Actions if Disclosure Required.  If Executive 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 protected 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 18, and hereby agrees to
the granting of injunctive relief without proof of actual damage.

     19.  Expenses.  It is further agreed for the above consideration that
Executive and the Company will bear their own costs, expenses and attorneys'
fees in connection with the negotiation and execution on this Agreement and all
the events and circumstances which form the basis for execution of this
Agreement.

     20.  Opportunity to Consult with Attorney.  Executive hereby warrants that
prior to the execution of this Agreement, he was given the opportunity to
consult with an attorney of his own choosing and review the contents and legal
effect of this Agreement with an attorney and is executing this Agreement
voluntarily, with full and complete knowledge of the legal and binding effect of
this Agreement.

     21.  No Admission of Liability.  This Agreement shall not in any way be
construed as an admission by either the Company or Executive that they
respectively have acted wrongfully or have any rights whatsoever against each
other except as expressly provided herein.

     22.  Severability.  The provisions of this Agreement are severable, and if
any part of it is found to be unenforceable, all other provisions shall remain
fully valid and enforceable.

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

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

          a.  Willful breach by Executive of any provision of this Agreement,
provided, however, if the breach is not a material breach, the Company shall
give Executive written notice of such breach and Executive shall have thirty
(30) days in which to cure such breach.  No written

                                   Page 5-7
<PAGE>

notice or cure period shall be required in the event of a willful and material
breach of this Agreement by Executive;

          b.  Gross negligence or dishonesty in the performance of Executive'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
Executive's duties and responsibilities to the Company or its Affiliates; or

          d.  Engaging in conduct which is materially detrimental to the
business of the Company or its Affiliates.

     25.  Voluntary Termination.  In the event of Executive's voluntary
termination of employment, the Company shall not be obligated to pay Executive
any additional compensation, other than the compensation due and owing as
through the date of termination and as may be required by law.  After such
termination, Executive shall be entitled for a period of one hundred twenty
(120) days to exercise any stock options or other stock related incentives that
are vested as of the date of termination.

     26.  Entire Agreement.  This Agreement, the exhibits hereto, and all other
documents referred to herein, (including, but not limited to, the agreements for
the Stock Options and the stock option or stock plans covering the Stock
Options, the Indemnification Agreement, the Company's 401(k) Plan, the Company's
Money Purchase Plan, and the Company's Supplemental Executive Retirement Plan)
sets forth the entire agreement between the parties hereto, with respect to the
subject matters covered by this Agreement, and the prevailing party shall be
reimbursed for all reasonable costs incurred in such legal action, including
reasonable attorneys' fees in such action.

     27.  Employment Agreement Termination. The 1996 Employment Agreement is
terminated and superceded by this Agreement.

     28.  Headings. The headings throughout this Agreement are for convenience
and reference only and they shall not be construed to add to or limit the
meaning of any provision of this Agreement.

     29.  Definition of the Company. For purpose of this Agreement, all
references to the Company shall be deemed to include all affiliates and
subsidiaries of the Company.

     30.  Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.

     31.  Arbitration of Disputes. If Executive and the Company 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 Executive's employment relationship with the
Company or any Affiliate thereof, (without limiting the generality of any other
Paragraph herein), then such dispute shall be settled as follows:

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

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<PAGE>

          b.   If the Company and Executive 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 the Company and Executive;

          c.   The Company and Executive 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 the Company and Executive, have the authority to extend or
reduce the time periods therefor; 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.

     IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the day and year written above notwithstanding the actual date
of signature.

PLEASE READ CAREFULLY. THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN OR UNKNOWN
CLAIMS.

Executed at Ontario, California.                Executed at Ontario, California.

Dated:                                          Dated:
        -------------------------------                 ------------------------

"Executive"                                     "COMPANY"
Lee R. Redmond III                              Kaiser Ventures Inc.

By:  /s/ Lee R. Redmond                         By: /s/ Richard E. Stoddard
     ----------------------------------             ----------------------------
                                                    Richard E. Stoddard
                                                    President & CEO

                                                Dated:
                                                       -------------------------

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

                                   Page 7-7
<PAGE>

                                  Exhibit "A"
                                  ===========

                              LEE R. REDMOND III
                      Senior Vice President - Real Estate

     This position reports to the Chief Executive Officer and the Chief
Operating Officer of the Corporation.

Responsibilities

     This position has responsibility for all facets of the development and
redevelopment of the primary real estate assets in Fontana, and ultimately the
development for the Eagle Mountain Townsite and Lake Tamarisk.  This involves
primary oversight of all interim land use activities, property management
functions, coordination with joint venture partners involved in the real estate,
and a lead role in overall development, remediation, permitting, infrastructure
development, financing and marketing.

     .    Participate in the investigation and decision making process in using
          our land to enter new business opportunities.
     .    Primary responsibility for dealing with County, City and State
          regulatory agencies, i.e., County Planning Department, City and County
          redevelopment agencies and the DTSC.
     .    Assist senior management in analyzing, evaluating and pursuing
          business and growth opportunities.

                                      A-1
<PAGE>

                                  Exhibit "B"
                                  ===========

                                 Stock Options

     Grant Date                   Exercise $                  # Of Shares
     ----------                   ----------                  -----------

     06/10/94                       11.625                       26,000
     01/15/96                       12.000                       25,000
     06/17/96                       10.500                       75,000

                                      B-1
<PAGE>

                                  Exhibit "C"
                                  ===========

                           General Release Agreement

     This GENERAL RELEASE AGREEMENT ("Agreement") is made and entered into the
____ day of _________, 2000, by and between KAISER VENTURES INC. (the "Company")
and LEE R. REDMOND III ("Executive").

     1.   Executive represents that he has not filed any complaints, or charges
or lawsuits against the Company with any governmental agency or any court, and
that he will not do so at any time hereinafter; provided, however, this shall
not limit Executive from commencing legal action in arbitration for the sole
purpose of enforcing Executive's rights under this Agreement and the Transition
Employment Agreement between Executive and the Company dated as of January 6,
2000 (the "Employment Agreement"), and the other agreements referenced in
Paragraph 26 of the Employment Agreement, or from seeking unemployment
compensation.

     2.  General Release by Executive.  As a material inducement to this
Agreement, Executive, individually, and his successors, assigns, heirs, and
agents, and each and all of them, agree to fully and forever release and
discharge the Company, its subsidiaries, and affiliates, and each of their
respective officers, directors, stockholders, employees, agents, and attorneys
(collectively "Releasees"), or any of them, from any and all charges,
complaints, claims, liabilities, obligations, promises, agreements,
controversies, damages, actions, causes of action, suits, rights, demands,
costs, losses, debts and expenses (including whatsoever, known or unknown,
suspected or unsuspected, including, but not limited to, rights under federal,
state or local laws prohibiting age or other forms of discrimination, claims
growing out of any legal restrictions on the Company's right to terminate its
employees, including, but not limited to, Executive's employment with the
Company, the termination of or separation from that employment ("Claim" or
"Claims"), which Executive now has, owns or holds, or claims to have, own or
hold, or which Executive at any time heretofore had, owned or held, or claims to
have, own or had, or which Executive at any time hereinafter may have, own or
hold, or claim to have, own or hold against each or any of the Releasees.
Notwithstanding the foregoing, Executive reserves all rights arising out of any
breach of this Agreement, the Employment Agreement and the other agreements,
referenced herein as described in Paragraph 26 of the Employment Agreement.

     3.   Scope of Executive's Release.  Executive understands and agrees that
the foregoing Paragraph 2 is a release and discharge of all claims (except for
those relating to any breach by the Company of this Agreement, the Employment
Agreement and the other agreements referenced herein as described in Paragraph
26 of the Employment Agreement) including, but not limited to:

          (a) all causes of action of any nature or kind including, but not
limited to, all claims or charges of wrongful discharge, infliction of emotional
distress, breach of contract, or discrimination or harassment on the basis of
race, sex, age, religion, national origin, handicap, marital status or any other
protected classification under federal, state and/or local law; and

                                      C-1
<PAGE>

          (b) all claims of every nature and kind, known or unknown, suspected
or unsuspected.  Executive acknowledges that he may hereafter discover facts
different from, or in addition to, or those which he knows or believes to be
true with respect to his employment with the Company or this Agreement, and
agrees that this Agreement and the release contained herein shall be and remain
effective and binding in all respects notwithstanding such difference or
additional facts or the discovery thereof.

     4.   Waiver of Certain Rights.  Executive expressly waives or relinquishes
all rights and benefits afforded by section 1542 of the Civil Code of the State
                                                        -----------------------
of California, and does so understanding and acknowledging the significance of
-------------
such specific waiver of Section 1542.  Section 1542 of the Civil Code of the
                                                           -----------------
State of California states as follows:
-------------------

     "A general release does not extend to claims which the creditor does not
     know or suspect to exist in his favor at the time of executing the release,
     which if known by his must have materially affected his settlement with the
     debtor."

     Thus, notwithstanding the provisions of Section 1542, and for the purpose
of implementing a full and complete release and discharge of the Releasees,
Executive expressly acknowledges that this Agreement is intended to include in
its effect, without limitation, all Claims which Executive does not know or
suspect to exist in his favor, at the time of execution hereof, and that this
Agreement and contemplates the extinguishment of any such Claim or Claims,
except as expressly reserved in Paragraphs 2 and 3 above.

     5.   General Release by the Company. Subject to the terms and conditions of
this Agreement, the Company, its successors, assigns, subsidiaries, affiliates
and each of their respective officers, directors, stockholders, employees,
agents and attorneys, and each and all of them, agree to fully and forever
release and discharge Executive, individually, and his successors, heirs and
agents, and attorneys (collectively "Executive Releasees"), or any of them, from
any and all charges, complaints, claims, liabilities, obligations, promises,
agreements, controversies, damages, actions, causes of action, suits, rights,
demands, costs, losses, debts and expenses (including whatsoever, known or
unknown, suspected or unsuspected, ("Claim" or "Claims"), which the Company now
has, owns or holds, or claims to have, own or hold, or which the Company at any
time heretofore had, owned or held, or claims to have, own or had, or which the
Company at any time hereinafter may have, own or hold, or claim to have, own or
hold against each or any of the Executive Releasees.  Notwithstanding the
foregoing, the Company reserves all rights arising out of any breach by
Executive of this Agreement, the Employment Agreement, the Indemnification
Agreement, and any other agreement referenced herein as described in Paragraph
26 of the Employment Agreement, or as a result of any criminal or fraudulent
misconduct by Executive.

     6.   Waiver of Certain Rights by the Company.  The Company expressly waives
or relinquishes all rights and benefits afforded by section 1542 of the Civil
                                                                        -----
Code of the State of California, and does so understanding and acknowledging the
-------------------------------
significance of such specific waiver of Section 1542.  Section 1542 of the Civil
                                                                           -----
Code of the State of California states as follows:
-------------------------------

     "A general release does not extend to claims which the creditor does not
     know or suspect to exist in his favor at the time of executing the release,

                                      C-2
<PAGE>

     which if known by his must have materially affected his settlement with the
     debtor."

     Thus, notwithstanding the provisions of Section 1542, and for the purpose
of implementing a full and complete release and discharge of the Releasees, the
Company expressly acknowledges that this Agreement is intended to include in its
effect, without limitation, all Claims which the Company does not know or
suspect to exist in its favor, at the time of execution hereof, and that this
Agreement and contemplates the extinguishment of any such Claim or Claims,
except as expressly reserved in Paragraph 15 above.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the day and year first above written.

"Executive"                                     the "Company"
                                                Kaiser Ventures Inc.

By:___________________________                  By:________________________
   Lee R. Redmond III                              Richard E. Stoddard
                                                   CEO & President

                                      C-3

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