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                                                               Exhibit 10(ii)(1)

 
                     [ICF KAISER LETTERHEAD APPEARS HERE]



                     AGREEMENT AND MUTUAL GENERAL RELEASE

     I, David Watson, understand and, of my own free will, enter into this
Agreement and General Release ("Agreement") with ICF Kaiser International, Inc.
and its subsidiaries (the "Company")and, in consideration of a supplemental
separation payment ("Separation Benefit")described herein, agree as follows:

I.      As referred to in this Agreement, the Company includes its parents,
        subsidiaries, affiliates and divisions, their respective successors and
        assigns, and all of their past and present directors, officers,
        representatives, shareholders agents, employees and their respective
        heirs and personal representatives or any of them.

II.     I hereby acknowledge that I resign my position as Executive Vice
        President and President, Engineers and Constructors effective Friday,
        August 7, 1998 at 12 midnight. Effective on that date and at that time I
        will no longer hold myself out as an officer of the Company nor will I
        bind it in any way. My full-time employment with the Company terminates
        at midnight on October 7, 1998. Effective October 8, 1998, I will be a
        part-time employee, paid at a rate of $145.00 per hour for any hours
        that either Keith Price or Richard Leupen approves. I agree to be on
        call and available to the Company through my last day of full-time
        employment.

III.    I acknowledge that Company officers explained the Company's standard
        severance policy for which I am eligible. In recognition of my position
        as President, Engineers and Constructors, the Company will give me an
        increased severance payment, as described in Paragraph IV below, if, and
        only if, I sign this Agreement and comply with its terms. I understand
        that the Company will not be required to provide the additional
        separation benefit until after this Agreement becomes effective.

IV.     The separation benefit that I will consist of the following items:

        A) Severance: I will receive 52 weeks severance, effective from my last
           ---------                 --------   
        day of full-time employment, at my current salary, less deductions
        required by law, and paid in a lump sum on or about October 1, 1998, but
        no later than October 16, 1998.

        B) Restricted Stock: The 45,600 shares of restricted stock that were
           ----------------
        granted to me (6,600 shares on March 20, 1997 and 39,000 shares on March
        9, 1998) will fully vest effective on my last day of my employment. I
        understand that I will be given the certificates for these 45,600 shares
        on the last day of my full-time employment provided that I have
        satisfied all tax withholding obligations related to these shares.

        C) Legal Fees: I will be reimbursed for all legal expenses I incur in
        connection with my termination settlement and this Agreement up to a
        maximum of $2,500.

        D) Use of Club Memberships: The Company will enable me to use its
           -----------------------
        Corporate Membership at Avenel and retain my status as designated
        representative through December 31, 1999. I will be responsible for all
        remaining initiation fees and ongoing membership dues. The club may be
        used by any ICF Kaiser International employee through December 31, 1999.
        Effective January 1, 2000 Avenel will convert ICF Kaiser's Executive
        Business Membership to a Patron Membership classification in my name.

        E) Total Separation Benefit: The supplemental separation benefit
           ------------------------     
        consisting of A), B), C), and D) as described above is in excess of the
        Company's severance policy which provides for a number of weeks' pay
        based on tenure and my Employment Agreement dated December 1, 1996 that
        I would otherwise be eligible to receive.

        F) Final Payment: I will be issued a severance payment as stated in A)
           -------------
        above, less deductions required by law, on a date appropriate with this
        Agreement's Revocation Period. The severance payment is taxed at the
        federal government supplement tax rate (currently 28 percent).

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        G) References: I hereby authorize Keith M. Price and Marcy A. Romm to
           ----------
        provide my only employment references. In providing this authorization,
        I hereby release the Company from any and all claims that may arise out
        of the Company's response to a request for employment reference
        information.

V.      Confidentiality Agreement: I understand that I continue to be bound by
        -------------------------
        the Confidentiality Agreement that I signed upon employment.

VI.     Non-Disparagement: Each of the Company and I covenant and agree that
        -----------------
        following the date of this Agreement neither shall make disparaging
        statements concerning the other, or its officers, directors, affiliates,
        agents and/or employees. For this purpose a disparaging statement shall
        be a statement or statements that, individually or in the aggregate,
        have a materially detrimental effect on the business affairs of the
        Company or me, as the case may be.

VII.    Confidentiality of Agreement: Except as required by law or as necessary
        ----------------------------
        to fulfill the terms of this Agreement or the General Releases
        incorporated herein, or in connection with a party's family, business,
        or tax affairs (in which case disclosure shall be on a confidential
        basis to the extent practicable), neither the Company nor I shall
        disclose the terms or provisions of this Agreement, or the fact of its
        existence, to any person or entity.

VIII.   Non-Competition: I agree that for a period of one year from the date of
        ---------------
        this Agreement I will not engage or participate, directly or indirectly,
        as principal, agent, employee, employer, consultant, stockholder,
        partner or in any other individual capacity whatsoever, in the planning,
        conduct, or management of, or own any stock or any other equity
        investment in or debt of, any business which is competitive with any
        business conducted by the Company.

IX.     Non-Solicitation of Employees: I agree that for a period of one year
        -----------------------------        
        from the date of this Agreement, I will not, for my own benefit or for
        the benefit of any person or entity, actively solicit any officer,
        director, executive, or employee to leave the Company's employment.

X.      Legal Compliance:
        -----------------

        A.  I understand that this Agreement does not constitute an admission by
            the Company of any: (a) violation of any statute, law or regulation;
            (b) breach of contract, actual or implied; or (c) commission of any
            tort.

        B.  The terms and provisions of the Agreement shall be governed by and
            interpreted in accordance with the laws of the Commonwealth of
            Virginia and of the United States of America, without giving effect
            -------- 
            to the doctrine of conflict of laws.

            I realize there are many laws and regulations prohibiting employment
            discrimination or otherwise regulating employment or claims related
            to employment pursuant to which I may have rights or claims. These
            include Title VII of the Civil Rights Act of 1964, as amended; the
            Age of Discrimination in Employment Act of 1967, as amended (the
            "ADEA"); the Americans with Disabilities Act of 1990; the National
            Labor Relations Act, as amended; the Employee Retirement Income
            Security Act of 1974, as amended; the Civil Rights Act of 1991; the
            Workers Adjustment and Retraining Notification Act of 1988; 42
            U.S.C. (S) 1981 and federal, state and local human rights, fair
            employment and other laws. I also understand there are other
            statutes and laws of contract and tort otherwise relating to my
            employment. I intend to and do hereby waive and release any rights I
            may have under these and other laws.

        C.  In exchange for my receipt of the separation benefit, on behalf of
            myself, my heirs and personal representatives, I hereby release and
            discharge the Company from any and all charges, claims and actions
            arising out of my employment or the termination of my employment
            with the Company. I will immediately withdraw with prejudice any
            such charges, claims and actions that I have brought before signing
            this Agreement, and I will not bring any such charges, claims and


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            actions against the Company in the future, except a charge, claim or
            action based upon rights or claims that may arise under the ADEA
            after the date that I sign this Agreement.

        D.  In consideration of my agreements set forth herein, the Company
            hereby releases and discharges me from any and all charges, claims
            and actions arising out of my employment or the termination of my
            employment with the Company, other than charges, claims and actions
            arising under this Agreement. The Company has not brought, and will
            not bring, any such charges, claims and actions in the future,
            except a charge, claim or action based upon its rights or claims
            that may arise under this Agreement.

        E.  Should any provision of this Agreement be determined to be
            unenforceable or prohibited by any applicable law, such provision
            shall be ineffective to the extent, and only to the extent, of such
            unenforceability or prohibition without invalidating the balance of
            such provision or any other provision of this Agreement, and any
            such unenforceability or prohibition in any jurisdiction shall not
            invalidate or render unenforceable such provision in any other
            jurisdiction.

XI.     Agreement Review Period: I was given a copy of this Agreement on August
        -----------------------
        7, 1998. I have had an opportunity to consult an attorney before signing
        it and was given a period of at least twenty-one (21) days, or until
        August 28, 1998, to consider this Agreement. I acknowledge that in
        signing this Agreement, I have relied only on the promises written in
        this Agreement and not on any other promise made by the Company.
                           ---

XII.    Agreement Revocation Period: I have seven (7) days to revoke this
        ---------------------------
        Agreement after I sign it. The Agreement does not become effective or
        enforceable until: (i) the Company has received a copy signed by me; and
        (ii) the seven (7) day revocation period has ended. Severance payment
        will be made on the Company's scheduled payday that follows the date of
        this Agreement.

XIII.   Agreement Modification or Change: This Agreement may not be modified or
        --------------------------------        
        changed orally. Any modifications and changes must be made by the
        signature of Marcy A. Romm, Senior Vice President and Director of Human
        Resources.

        I have read this Agreement and General Release and I understand all of
its terms. I enter into and sign this Agreement knowingly and voluntarily, with
full knowledge of what it means.


    /s/ David Watson                               Date: August 17, 1998
   ----------------------                                -----------------
   David Watson


ICF KAISER INTERNATIONAL, INC.

By: /s/ Marcy A. Romm                              Date: August 17, 1998
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   Marcy A. Romm
   Senior Vice President and Director 
     of Human Resources
   ICF Kaiser International, Inc.