8-K

FORM 8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (date of earliest event reported): February 11, 2005

KAISER ALUMINUM & CHEMICAL CORPORATION

(Exact name of Registrant as Specified in its Charter)

Delaware
(State of incorporation) 1-3605
(Commission File Number) 94-0928288
(I.R.S. Employer Identification Number)

5847 San Felipe, Suite 2500
Houston, Texas
(Address of Principal Executive Offices) 77057-3268
(Zip Code)

(713) 267-3777
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement

As previously reported, Kaiser Aluminum & Chemical Corporation (the “Company”) and its parent company, Kaiser Aluminum Corporation (“Kaiser”), signed a commitment letter and filed a motion with the United States Bankruptcy Court for the District of Delaware (the “Court”) seeking approval to enter into a new financing agreement (the “New Facility”). Information in respect of the New Facility agreement is included in the Company’s Current Report on Form 8-K dated as of January 14, 2005.

The New Facility, which was approved by the Court, closed on February 11, 2005. A copy of the New Facility agreement is attached hereto as Exhibit 99.1 and is incorporated herein by reference. A copy of the press release issued on February 11, 2005 announcing the Court’s approval and the closing of the New Facility is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

The New Facility provides for a secured, revolving line of credit through the earlier of February 11, 2006, the effective date of a plan of reorganization or voluntary termination by the Company. Under the New Facility, the Company, Kaiser and certain subsidiaries of the Company are able to borrow amounts by means of revolving credit advances and to have issued letters of credit (up to $60.0 million) in an aggregate amount equal to the lesser of $200.0 million or a borrowing base comprised of eligible accounts receivable, eligible inventory and certain eligible machinery, equipment and real estate, reduced by certain reserves, as defined in the New Facility agreement. The amount available under the New Facility shall be reduced by $20.0 million if net borrowing availability falls below $40.0 million.

The New Facility is secured by substantially all of the assets of the Company, Kaiser and the Company’s subsidiaries other than certain amounts related to four commodity-related subsidiaries (Alpart Jamaica Inc., Kaiser Jamaica Corporation, Kaiser Alumina Australia Corporation and Kaiser Finance Corporation) whose assets are, subject to approval by the Court of certain liquidating plans of reorganization further described below, expected to be distributed to the creditors of those subsidiaries. The Company and all of the Company’s material domestic subsidiaries, other than the four commodity-related subsidiaries mentioned above, are guarantors of the New Facility.

Amounts owed under the New Facility may be accelerated under various circumstances more fully described in the Facility, including but not limited to, the failure to make principal or interest payments due under the New Facility, breaches of certain covenants, representations and warranties set forth in the New Facility, and certain events having a material adverse effect on the business, assets, operations or condition of the Company taken as a whole.

The New Facility also places restrictions on the Company’s, Kaiser’s and the Company’s subsidiaries’ ability to, among other things, incur debt, create liens, make investments, pay dividends, sell assets, undertake transactions with affiliates, and enter into unrelated lines of business.

Interest on any outstanding borrowings will bear a spread over either a base rate or LIBOR, at the Company’s option.

Item 2.03  Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information provided in Item 1.01 of this Current Report regarding the new Facility is incorporated into this Item 2.03 by reference.

Item 8.01 Other Events

On November 1, 2004, the Company announced that two of its subsidiaries (Alpart Jamaica Inc. and Kaiser Jamaica Corporation — “AJI/KJC”) had filed a joint plan of liquidation and a disclosure statement with the Court. On November 16, 2004, the Company announced that two additional subsidiaries (Kaiser Alumina Australia Corporation and Kaiser Finance Corporation - “KAAC/KFC”) had filed a joint plan of liquidation and a disclosure statement with the Court. Information in respect of the AJI/KJC and KAAC/KFC joint plans of liquidation and disclosure statements is included in the Company’s Current Reports on Form 8-K dated as of October 28, 2004 and November 15, 2004, respectively.

On February 11, 2005, each of AJI/KJC and KAAC/KFC filed amended joint plans of liquidation and amended disclosure statements with the Court. Copies of the amended joint plans of liquidation and amended disclosure statements are attached hereto as Exhibits 99.3, 99.4, 99.5 and 99.6 and are incorporated herein by reference.

Bankruptcy law does not permit solicitation of acceptances of the amended plans until the Court approves the applicable amended disclosure statements relating to the amended plans. Accordingly, this announcement is not intended to be, nor should it be construed as, a solicitation for a vote on the amended plans. The amended plans will become effective if and when they receive the requisite stakeholder approval and are confirmed by the Court. The Company refers to the limitations and qualifications included in the amended disclosure statements. In addition, the Company notes that all information contained in the amended disclosure statements is subject to change, whether as a result of amendments to the amended plans, as a result of the actions of third parties or otherwise.

Item 9.01 Financial Statements and Exhibits

     (c) Exhibits

*99.1	Financing Agreement dated February 11, 2005
*99.2	Press Release dated February 11, 2005
*99.3	Amended Joint Plan of Liquidation for Alpart Jamaica Inc. and Kaiser Jamaica Corporation
*99.4	Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code with Respect to the Amended Joint Plan of Liquidation for Alpart Jamaica Inc. and Kaiser Jamaica Corporation
*99.5	Amended Joint Plan of Liquidation for Kaiser Alumina Australia Corporation and Kaiser Finance Corporation
*99.6	Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code with Respect to the Amended Joint Plan of Liquidation for Kaiser Alumina Australia Corporation and Kaiser Finance Corporation

* Included with this filing. Schedules are omitted from the financing agreement filed as Exhibit 99.1; however, the Company will furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	KAISER ALUMINUM & CHEMICAL CORPORATION (Registrant)
	By:	/s/ Daniel D. Maddox
Dated: February 16, 2005		Daniel D. Maddox
		Vice President and Controller

EXHIBIT INDEX

Exhibit 99.1	Financing Agreement dated February 11, 2005*
Exhibit 99.2	Press Release dated February 11, 2005*
Exhibit 99.3	Amended Joint Plan of Liquidation for Alpart Jamaica Inc. and Kaiser Jamaica Corporation*
Exhibit 99.4	Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code with Respect to the Amended Joint Plan of Liquidation for Alpart Jamaica Inc. and Kaiser Jamaica Corporation*
Exhibit 99.5	Amended Joint Plan of Liquidation for Kaiser Alumina Australia Corporation and Kaiser Finance Corporation*
Exhibit 99.6	Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code with Respect to the Amended Joint Plan of Liquidation for Kaiser Alumina Australia Corporation and Kaiser Finance Corporation*

* Included with this filing. Schedules are omitted from the financing agreement filed as Exhibit 99.1; however, the Company will furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request.

EX-99.1

Exhibit 99.1

$200,000,000

SECURED SUPER-PRIORITY DEBTOR-IN-POSSESSION REVOLVING CREDIT
AND GUARANTY AGREEMENT

Among

KAISER ALUMINUM & CHEMICAL CORPORATION,
KAISER ALUMINUM CORPORATION,
AND EACH OF THEIR RESPECTIVE SUBSIDIARIES LISTED AS BORROWERS ON
THE SIGNATURE PAGES HERETO
each a Debtor and a Debtor-in-Possession under Chapter 11 of the Bankruptcy Code,

as Borrowers

and

THE SUBSIDIARIES OF THE BORROWERS LISTED AS GUARANTORS ON THE
SIGNATURE PAGES HERETO

as Guarantors

and

THE LENDERS PARTY HERETO,

and

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION

as Administrative Agent and Documentation Agent

J.P. MORGAN SECURITIES INC.,
as Lead Arranger, Sole Bookrunner
and
Syndication Agent

and

THE CIT GROUP/BUSINESS CREDIT, INC.
as Co-Arranger

Dated as of February 11, 2005

TABLE OF CONTENTS

	Page
SECTION 1. DEFINITIONS		6
SECTION 1.01. Defined Terms		6
SECTION 1.02. Terms Generally		35
SECTION 1.03. The Company As Agent For Borrowers		35
SECTION 1.04. The Term “Borrower” or “Borrowers”		35
SECTION 1.05. Obligations Not Affected		35
SECTION 2. AMOUNT AND TERMS OF CREDIT		36
SECTION 2.01. The Facility		36
SECTION 2.02. Revolving Loans		36
SECTION 2.03. Loans and Borrowings		36
SECTION 2.04. Requests for Borrowings		37
SECTION 2.05. Protective Advances		37
SECTION 2.06. Swingline Loans		38
SECTION 2.07. Letters of Credit		39
SECTION 2.08. Funding of Borrowings		44
SECTION 2.09. Interest Elections		45
SECTION 2.10. Termination of Commitments		46
SECTION 2.11. Repayment of Loans; Evidence of Debt		47
SECTION 2.12. Prepayment of Loans		48
SECTION 2.13. Fees		49
SECTION 2.14. Interest		50
SECTION 2.15. Alternate Rate of Interest		51
SECTION 2.16. Increased Costs		51
SECTION 2.17. Break Funding Payments		53
SECTION 2.18. Taxes		53
SECTION 2.19. Payments Generally; Allocation of Proceeds; Sharing of Set-offs		55
SECTION 2.20. Mitigation Obligations; Replacement of Lenders		57
SECTION 2.21. Indemnity for Returned Payments		58
SECTION 2.22. Priority and Liens		58
SECTION 2.23. Right of Set-Off		59
SECTION 2.24. Security Interest in Letter of Credit Account		60
SECTION 2.25. Payment of Obligations		60
SECTION 2.26. No Discharge; Survival of Claims		60
SECTION 3. REPRESENTATIONS AND WARRANTIES		60
SECTION 3.01. Organization and Authority		60
SECTION 3.02. Due Execution		61
SECTION 3.03. Statements Made		61
SECTION 3.04. Financial Statements		62
SECTION 3.05. Ownership		62
SECTION 3.06. Liens		62
SECTION 3.07. Compliance with Law		62

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	Page
SECTION 3.08. Insurance		62
SECTION 3.09. Use of Proceeds		62
SECTION 3.10. Litigation		63
SECTION 3.11. Investment and Holding Company Status		63
SECTION 3.12. Taxes		63
SECTION 3.13. ERISA		63
SECTION 3.14. Disclosure		63
SECTION 3.15. Material Agreements		64
SECTION 3.16. Reportable Transaction		64
SECTION 3.17. Capitalization and Subsidiaries		64
SECTION 3.18. Common Enterprise		64
SECTION 3.19. Location of Bank Accounts		64
SECTION 3.20. Labor Disputes		65
SECTION 3.21. Subordinated Indenture		65
SECTION 3.22. Environmental Matters		65
SECTION 4. CONDITIONS OF LENDING		67
SECTION 4.01. Conditions Precedent to Initial Loans and Initial Letters of Credit		67
SECTION 4.02. Conditions Precedent to Each Loan and Each Letter of Credit		70
SECTION 5. AFFIRMATIVE COVENANTS		71
SECTION 5.01. Financial Statements, Reports, etc		71
SECTION 5.02. Corporate Existence		75
SECTION 5.03. Insurance		75
SECTION 5.04. Obligations and Taxes		76
SECTION 5.05. Notice of Event of Default, etc		76
SECTION 5.06. Access to Books and Records		76
SECTION 5.07. Borrowing Base Certificate		76
SECTION 5.08. Collateral Monitoring and Review		76
SECTION 5.09. Business Plan		77
SECTION 5.10. Maintenance of Properties and Intellectual Property Rights		77
SECTION 5.11. Compliance with Laws		77
SECTION 5.12. Use of Proceeds and Letters of Credit		77
SECTION 5.13. Additional Collateral; Further Assurances		77
SECTION 5.14. Environmental Covenant		78
SECTION 5.15. Post Closing Deliveries		79
SECTION 6. NEGATIVE COVENANTS		79
SECTION 6.01. Liens		79
SECTION 6.02. Merger, etc		80
SECTION 6.03. Indebtedness		80
SECTION 6.04. Guarantees and Other Liabilities		80
SECTION 6.05. Chapter 11 Claims		80
SECTION 6.06. Dividends; Capital Stock		81
SECTION 6.07. Transactions with Affiliates		81
SECTION 6.08. Investments, Loans and Advances		81
SECTION 6.09. Creation of Subsidiaries		82
SECTION 6.10. Disposition of Assets		82

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	Page
SECTION 6.11. Nature of Business		82
SECTION 6.12. Restrictive Agreements		82
SECTION 6.13. Prepayment of Indebtedness; Subordinated Indebtedness		83
SECTION 7. EVENTS OF DEFAULT		83
SECTION 7.01. Events of Default		83
SECTION 8. THE AGENT		87
SECTION 8.01. Administration by Agent		87
SECTION 8.02. Advances and Payments		87
SECTION 8.03. Collateral; Collateral Reporting		88
SECTION 8.04. Agreement of Required Lenders		89
SECTION 8.05. Liability of Agent		89
SECTION 8.06. Reimbursement and Indemnification		89
SECTION 8.07. Rights of Agent		90
SECTION 8.08. Independent Lenders		90
SECTION 8.09. Notice of Transfer		90
SECTION 8.10. Successor Agent		90
SECTION 8.11. Syndication Agent, Bookrunner, Etc		91
SECTION 9. GUARANTY		91
SECTION 9.01. Guaranty		91
SECTION 9.02. No Impairment of Guaranty		92
SECTION 9.03. Subrogation		92
SECTION 10. CASH MANAGEMENT		92
SECTION 10.01. Cash Management		92
SECTION 10.02. Cash Dominion		93
SECTION 11. MISCELLANEOUS		93
SECTION 11.01. Notices		93
SECTION 11.02. Survival of Agreement, Representations and Warranties, etc		94
SECTION 11.03. Successors and Assigns		94
SECTION 11.04. Confidentiality		96
SECTION 11.05. Expenses		97
SECTION 11.06. Indemnity		97
SECTION 11.07. CHOICE OF LAW		97
SECTION 11.08. No Waiver		97
SECTION 11.09. Extension of Maturity		98
SECTION 11.10. Amendments, etc		98
SECTION 11.11. Severability		99
SECTION 11.12. Headings		99
SECTION 11.13. Execution in Counterparts		99
SECTION 11.14. Prior Agreements		99
SECTION 11.15. USA Patriot Act		100
SECTION 11.16. Further Assurances		100
SECTION 11.17. Lender Reporting		100
SECTION 11.18. WAIVER OF JURY TRIAL		100

iii 

ANNEX A	-	Commitment Amounts
ANNEX B	-	Agent Notice Information
EXHIBIT A	-	Form of Order
EXHIBIT B	-	Form of Security and Pledge Agreement
EXHIBIT C	-	Form of Opinion of Counsel
EXHIBIT D	-	Form of Assignment and Assumption
EXHIBIT E	-	Form of Borrowing Base Certificate
EXHIBIT F	-	Form of Joinder Agreement
EXHIBIT G	-	Form of Borrowing Request
EXHIBIT H	-	Form of Mortgage

SCHEDULE 1.01(a)	-	Filing Dates
SCHEDULE 3.05	-	Subsidiaries
SCHEDULE 3.06	-	Liens
SCHEDULE 3.07	-	Compliance with Laws
SCHEDULE 3.10	-	Litigation
SCHEDULE 3.12	-	Taxes
SCHEDULE 3.15	-	Material Agreements
SCHEDULE 3.17	-	Capitalization and Subsidiaries
SCHEDULE 3.19	-	Location of Bank Accounts
SCHEDULE 3.20	-	Labor Disputes
SCHEDULE 3.22	-	Environmental Matters
SCHEDULE 4.01(i)	-	Material Consents
SCHEDULE 4.01(j)	-	Cash Management
SCHEDULE 6.08	-	Existing Investments
SCHEDULE 6.10	-	Disposition of Assets
SCHEDULE 6.12	-	Restrictive Agreements
SCHEDULE 11.01	-	Notice Parties

iv 

SECURED SUPER-PRIORITY DEBTOR-IN-POSSESSION REVOLVING CREDIT AND GUARANTY AGREEMENT

     SECURED SUPER-PRIORITY DEBTOR-IN-POSSESSION REVOLVING CREDIT AND GUARANTY AGREEMENT, dated as of February 11, 2005, among KAISER ALUMINUM & CHEMICAL CORPORATION, a Delaware corporation as a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code (the “Company”), KAISER ALUMINUM CORPORATION, a Delaware corporation and a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code (the “Parent”) and each of their respective subsidiaries listed as “Borrowers” on the signature pages hereto (the “Subsidiary Borrowers”, and together with the Company and the Parent, each a “Borrower” and collectively, the “Borrowers”), certain of the direct or indirect subsidiaries of the Borrowers listed as “Guarantors” on the signature pages hereto (each a “Guarantor” and collectively, the “Guarantors”), each of the Borrowers and the Guarantors referred to in this paragraph is a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code (the cases of the Borrowers and the Guarantors, each a “Case” and collectively, the “Cases”), JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, a national banking association organized under the laws of the United States (“JPMorgan Chase”), THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation (“CIT”) and each of the other financial institutions from time to time party hereto (together with JPMorgan Chase, the “Lenders”) and JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, as administrative agent (in such capacity, the “Agent”) for the Lenders.

INTRODUCTORY STATEMENT

     On February 12, 2002, certain of the Borrowers and certain of the Guarantors filed voluntary petitions for relief with the Bankruptcy Court initiating the Cases. On March 15, 2002 certain of the other Borrowers and Guarantors filed voluntary petitions for relief under the Bankruptcy Code. On January 14, 2003 the remaining Borrowers and Guarantors filed petitions for relief under the Bankruptcy Code. The Borrowers’ and the Guarantors’ Cases have been consolidated for procedural purposes only and are being administered jointly.

     The Borrowers, the Guarantors, certain other subsidiaries of the Borrowers, the Existing Lenders and Bank of America, N.A. are parties to the Post-Petition Credit Agreement, dated as of February 12, 2002 (as amended, restated or otherwise modified, the “Existing Credit Agreement”) pursuant to which the Borrowers and the Guarantors obtained extensions of credit.

     The Borrowers have applied to the Lenders for a revolving credit, letter of credit and swingline loan facility in an aggregate principal amount not to exceed $200,000,000, all of the Borrowers’ Obligations hereunder are to be guaranteed by the Guarantors.

     The proceeds of the Loans will be used for (i) refinancing of the outstanding Obligations under the Existing Credit Agreement, (ii) working capital, letters of credit and capital expenditures; (iii) other general corporate purposes of the Borrowers and the Guarantors; (iv) payment of any related transaction costs, fees and expenses; and (v) the costs of administration of the Cases.

     To provide guarantees and security for the repayment of the Loans, the reimbursement of any draft drawn under a Letter of Credit and the payment of the other Obligations of the Borrowers and the Guarantors hereunder and under the other Loan Documents (including, without limitation, Banking Services Obligations and Swap Obligations owing to any Lender to the extent included in Obligations) the Borrowers and the Guarantors will provide to the Agent and the Lenders the following (each as more fully described herein):

          (a) a guaranty from each of the Guarantors of the due and punctual payment and performance of the Obligations of the Borrowers hereunder;

          (b) with respect to the Obligations, a joint and several allowed administrative expense claim in each of the Cases pursuant to Section 364(c)(1) of the Bankruptcy Code having priority over all administrative expenses of the kind specified in Sections 503(b) and 507(b) of the Bankruptcy Code;

          (c) a perfected first-priority Lien, pursuant to Section 364(c)(2) of the Bankruptcy Code, upon all tangible and intangible property of each Borrower’s and Guarantor’s estate in the Cases that was not subject to valid, perfected and non-avoidable Liens as of the applicable Filing Date of each such Borrower or Guarantor and on all cash and cash equivalents in the Letter of Credit Account provided that following the Termination Date, amounts in the Letter of Credit Account shall not be subject to the Carve-Out hereinafter referred to;

          (d) a perfected junior Lien, pursuant to Section 364(c)(3) of the Bankruptcy Code, upon all tangible and intangible property of each Borrower’s and Guarantor’s estate in the Cases that was subject to valid, perfected and non-avoidable Liens in existence on the applicable Filing Date of each such Borrower or Guarantor or that was subject to valid Liens in existence on such Filing Date that were perfected subsequent to such Filing Date as permitted by Section 546(b) of the Bankruptcy Code, junior to all such valid, perfected and non-avoidable Liens; and

     All of the claims and the Liens granted hereunder in the Cases to the Agent and the Lenders shall be subject to the Carve-Out to the extent provided in Section 2.22.

     Accordingly, the parties hereto hereby agree as follows:

SECTION 1. DEFINITIONS

     SECTION 1.01. Defined Terms.

     “ABR Borrowing” shall mean a Borrowing comprised of ABR Loans.

     “ABR Loan” shall mean any Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Section 2.

     “Account” shall mean “account” as defined in Article 9 of the Uniform Commercial Code as in effect from time to time in the State of New York, or when the context implies, the Uniform Commercial Code as in effect from time to time in any other applicable jurisdiction.

6

     “Account Debtor” shall mean any Person obligated on an Account.

     “Adjusted LIBO Rate” shall mean, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to the LIBO Rate for such interest period multiplied by the Statutory Reserve Rate.

     “Affiliate” shall mean, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person (excluding any trustee under, or any committee with responsibility for administering, any Plan).

     “Agent” shall have the meaning set forth in the first paragraph of this Agreement.

     “Aggregate Credit Exposure” shall mean, at any time, the sum of the aggregate Revolving Credit Exposure of all Lenders.

     “Agreement” shall mean this Secured Super-priority Debtor-in-Possession Revolving Credit and Guaranty Agreement, as the same may be amended, restated, modified or supplemented from time to time.

     “Alternate Base Rate” shall mean, for any day, a rate per annum (rounded, if necessary, to the nearest 1/100 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 0.50%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

     “Applicable Commitment Fee Rate” means, at any time, with respect to the Commitment Fees payable hereunder, the applicable rate per annum set forth below under the caption “Commitment Fee Rate” based upon the Borrowers’ average daily Aggregate Credit Exposure for the most recently ended calendar month:

Average Daily Aggregate Credit Exposure	Commitment Fee Rate
< $75,000,000	0.35%
$75,000,000 < x < $125,000,000	0.25%
>$125,000,000	0.20%

provided, however, that for the period commencing on the Closing Date and ending one month thereafter, the Applicable Commitment Fee Rate shall be 0.35%.

     Adjustments, if any, to the Applicable Commitment Fee Rate shall be effective as of the first day of each calendar month based upon the Borrowers’ average daily Aggregate Credit Exposure for the most recently ended calendar month.

     “Applicable Margin” shall mean (a) 0.50%, in the case of ABR Loans and (b) 2.25%, in the case of Eurodollar Loans.

     “Assignment and Assumption” shall mean an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by

7

Section 11.03(b)), and accepted by the Agent, substantially in the form of Exhibit D or any other form approved by the Agent.

     “Availability” shall mean, at any time, an amount equal to (a) the lesser of (i) the Total Commitment minus the Liquidity Reserve from and after the occurrence and during the continuance of a Liquidity Trigger Event and (ii) the Borrowing Base, minus (b) the Aggregate Credit Exposure of all Lenders.

     “Availability Period” shall mean the period from and including the Closing Date to but excluding the Termination Date.

     “Banking Services” shall mean each and any of the following bank services provided to any Borrower or Guarantor by JPMorgan Chase or any of its Affiliates: (a) commercial credit cards, (b) stored value cards, (c) purchasing cards and (d) treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services).

     “Banking Services Obligations” shall mean, with respect to any Borrower or any Guarantor, any and all obligations of the Borrowers and the Guarantors, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) in connection with Banking Services.

     “Banking Services Reserves” means all Reserves which the Agent from time to time establishes in its Permitted Discretion for Banking Services then provided or outstanding.

     “Bankruptcy Code” shall mean The Bankruptcy Reform Act of 1978, as heretofore and hereafter amended, and codified as 11 U.S.C. Section 101 et seq.

     “Bankruptcy Court” shall mean the United States Bankruptcy Court for the District of Delaware or any other court having jurisdiction over the Cases from time to time.

     “Board” shall mean the Board of Governors of the Federal Reserve System of the United States.

     “Borrowers” shall have its meaning as set forth in the first paragraph of this Agreement.

     “Borrowers’ Agent” shall mean the Company, in its capacity as agent for the Borrowers and the Guarantors, as more fully described in Section 1.03.

     “Borrowing” shall mean (a) Revolving Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect, (b) a Swingline Loan or (c) a Protective Advance.

     “Borrowing Base” shall mean, at any time, an amount that is equal to the sum of:

   (i) 85% of Eligible Accounts Receivable; plus

8

   (ii) the lesser of (a) 65% of Eligible Inventory (valued at the lower of cost or market value, determined on a first-in, first-out basis), and (b) 85% of the Net Recovery Percentage (based upon the most recent Inventory appraisal delivered to the Agent in accordance with the terms hereof) of Eligible Inventory (valued at the lower of cost or market value, determined on a first-in, first-out basis); plus

   (iii) the Real Property Percentage multiplied by 65% of the appraised Fair Market Value of Eligible Real Estate; plus

   (iv) the Equipment Percentage multiplied by 80% of the appraised Net Orderly Liquidation Value of Eligible Equipment; minus

   (v) the Carve-Out Reserve; minus

   (vi) immediately upon the occurrence and at all times during the continuance of a Liquidity Trigger Event, the Liquidity Reserve; minus

   (vii) Reserves (other than the Carve-Out Reserve and the Liquidity Reserve).

     The maximum amount of Eligible Equipment and Eligible Real Estate that may be included in the Borrowing Base is $50,000,000. The Agent retains the right to, from time to time, in its Permitted Discretion, establish additional standards of eligibility and reserves against eligibility and to reduce advance rates, with any changes in such standards to be effective upon delivery of notice thereof to the Borrowers’ Agent.

     “Borrowing Base Certificate” shall mean a certificate substantially in the form of Exhibit E together with all supporting documentation required to be delivered as specified in Schedule 1 to Exhibit E (with such changes therein from time to time as may be required by the Agent in its Permitted Discretion to reflect the components of and reserves against the Borrowing Base as provided for hereunder from time to time), executed and certified by a Financial Officer of the Borrowers’ Agent.

     “Business Day” shall mean any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

     “Canadian Subsidiaries” shall mean Texada Mines, Kaiser Canada Investment Limited, Kaiser Canada and Refractories Engineering.

     “Capital Expenditures” shall mean, without duplication, any actual cash expenditure for any purchase or other acquisition of any asset which would be classified as a fixed or capital asset on a consolidated balance sheet of the Company and its Subsidiaries prepared in accordance with GAAP.

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     “Capital Lease” shall mean, with respect to any Person, any agreement pursuant to which such Person obtains the right to use any real or personal property which is required to be classified and accounted for as a capital lease on the balance sheet of such Person under GAAP.

     “Capital Lease Obligations” shall mean, with respect to any Person, the obligations of such Person to pay rent or other amounts under any Capital Lease and, for purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.

     “Carve-Out” shall have the meaning set forth in Section 2.22.

     “Carve-Out Reserve” shall mean an amount at all times equal to $4,000,000.

     “Cases” shall have the meaning set forth in the first paragraph of this Agreement.

     “Cash Collateralization” shall have the meaning given such term in Section 2.07(j).

     “Cash Management Accounts” shall mean those bank accounts of each Borrower, each Guarantor, and their Significant Subsidiaries (excluding any foreign Subsidiary and all Excluded Subsidiaries) listed on Schedule 3.19 that are maintained at one or more Cash Management Banks listed on Schedule 3.19.

     “Cash Management Bank” shall have the meaning given such term in Section 10.01(a).

     “CERCLA” shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended or otherwise modified from time to time.

     “CERCLIS” shall mean the Comprehensive Environmental Response Compensation Liability Information System List.

     “Change in Law” shall mean (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.16(b), by any lending office of such Lender or by such Lender’s or the Issuing Bank’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

     “Change of Control” shall mean (i) the acquisition after the date hereof of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof), of shares representing more than 30% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Parent; (ii) the occupation of a majority of the seats (other than vacant seats) on the Board of Directors of any Borrower by Persons who were neither (A) nominated by the Board of Directors

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of the Parent nor (B) appointed by directors so nominated or (iii) the acquisition of direct or indirect Control of any of the Borrowers by any Person or group.

     “Closing Date” shall mean the date on which this Agreement has been executed and the conditions precedent to the making of the initial Loans set forth in Section 4.01 have been satisfied or waived, which date shall occur as soon as practical following the of entry of the Order but in no event later than February 11, 2005.

     “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

     “Collateral” shall mean any and all property owned, leased or operated by a Person granted as security for the Obligations pursuant to any other Loan Document and any and all other property of any Borrower or any Guarantor, now existing or hereafter acquired, that may at any time be or become subject to a security interest or Lien in favor of the Agent, on behalf of itself and the Lenders, to secure the Obligations.

     “Collateral Access Agreement” shall mean any landlord waiver or other agreement, in form and substance reasonably satisfactory to the Agent, between the Agent, for the benefit of the Agent and the Lenders, and any third party (including any bailee, consignee, customs broker, or other similar Person) in possession of any Collateral or any landlord of any Borrower or Guarantor for any real Property where any Collateral is located and pursuant to which such third party, among other things, waives or subordinates any Lien such third party may have in respect of the Collateral, as such landlord waiver or other agreement may be amended, restated, supplemented or otherwise modified from time to time.

     “Collateral Monitoring Fees” shall have the meaning set forth in Section 5.08.

     “Commitment” shall mean, with respect to any Lender, the commitment of such Lender to make Revolving Loans and to acquire participations in Letters of Credit and Swingline Loans hereunder, as such commitment may be (a) reduced from time to time pursuant to the terms hereof and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 11.03(b). The initial amount of each Lender’s Commitment is set forth on the Annex A – Commitment Schedule or, if applicable, in the Assignment and Assumption pursuant to which such Lender shall have assumed its Commitment. The initial aggregate amount of all of the Lenders’ Commitments is $200,000,000.

     “Commitment Fee” shall have the meaning set forth in Section 2.13.

     “Commitment Letter” shall mean that certain Commitment Letter, dated January 14, 2005, among the Agent, JPMSI, CIT, the Parent and the Company.

     “Commitment Percentage” shall mean, with respect to any Lender, (a) with respect to Revolving Loans, Letter of Credit Exposure or Swingline Loans, a portion thereof equal to a fraction the numerator of which is such Lender’s Commitment and the denominator of which is the Total Commitment (if the Commitments have terminated or expired, the Commitment Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments), (b) with respect to Protective Advances or with respect

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to the Aggregate Credit Exposure prior to the Termination Date, a portion thereof equal to a fraction the numerator of which is such Lender’s Commitment and the denominator of which is the Total Commitment, and (c) with respect to Protective Advances or with respect to the Aggregate Credit Exposure after the Termination Date, a portion thereof equal to a fraction the numerator of which is such Lender’s Revolving Credit Exposure and the denominator of which is the Aggregate Credit Exposure.

     “Commodity Swap Agreement” shall mean any Swap Agreement involving or settled by reference to one or more commodities.

     “Consummation Date” shall mean the date of the substantial consummation (as defined in Section 1101 of the Bankruptcy Code and which for purposes of this Agreement shall be no later than the effective date of a Reorganization Plan) of a Reorganization Plan that is confirmed pursuant to an order of the Bankruptcy Court.

     “Control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

     “Default” shall mean any event or condition which constitutes an Event of Default or which upon notice, lapse of time, or both would, unless cured or waived, constitute an Event of Default.

     “Default Notice Period” shall have the meaning given to such term in Section 7.01.

     “Defaulting Lender” shall have the meaning given to such term in Section 2.08(b).

     “Departing Lender” shall have the meaning given to such term in Section 2.20(b).

     “Dollars” and “$” shall mean lawful money of the United States of America.

     “Dominion Period” shall have the meaning given to such term in Section 10.02.

     “Dominion Release Event” shall mean, as of any date following the occurrence of a Dominion Trigger Event, the first date upon which both of the following conditions have been satisfied: (i) Availability has exceeded $65,000,000 for each day during the ninety (90) consecutive calendar day period ending on such date after the immediately preceding Dominion Trigger Event and (ii) at least 365 days have elapsed since the date of the last Dominion Release Event, if any.

     “Dominion Trigger Event” shall mean any date on which Availability has been less than $50,000,000 for any period of five (5) consecutive Business Days ending on such date.

     “Eligible Accounts Receivable” shall mean, at any time, all Accounts of the Company, KAII and Kaiser Bellwood unless such Account is excluded from “Eligible Accounts

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Receivable” in accordance with the following provisions of this definition. Without limiting the Agent’s Permitted Discretion provided herein, Eligible Accounts Receivable shall not include any Account: (i) which is not subject to a perfected first-priority security interest in favor of the Agent, (ii) which is subject to any Lien other than (a) a Lien in favor of the Agent and (b) a Permitted Lien or other Lien permitted under this Agreement in each case, which does not have priority over the Lien in favor of the Agent; (iii) with respect to which more than ninety (90) days have elapsed since the date of the original invoice therefor; (iv) owing by an Account Debtor as to which 25% or more of the dollar amount of all accounts owing by such Account Debtor are more than ninety (90) days past the date of the original invoice for such accounts; (v) to any one Account Debtor or group of affiliated Account Debtors that are in excess of 15% of total Eligible Accounts Receivable; (vi) with respect to which any covenant, representation, or warranty contained in this Agreement or in the Security Agreement has been breached in any material respect or is not true in all material respects; (vii) which does not arise from the sale of goods or performance of services in the ordinary course of the applicable Borrower’s business; (viii) which is not evidenced by an invoice or other documentation reasonably satisfactory to the Agent which has been sent to the Account Debtor; (ix) which is contingent upon the completion of any further performance by any Borrower, Guarantor, or Affiliate of any Borrower or Guarantor (other than alumina purchase or sales agreements and product returns in the ordinary course of business); (x) owing by a director, officer, employee or Affiliate of any Borrower or Guarantor; (xi) for which the goods giving rise to such Account have not been shipped to the Account Debtor or for which the services giving rise to such Account have not been performed by the applicable Borrower (other than bill and hold Accounts which satisfy the requirements set forth in clause (xxiii) below); (xii) which is owed by an Account Debtor which has (a) applied for, suffered, or consented to the appointment of any receiver, custodian, trustee, or liquidator of its assets, (b) had possession of all or a material part of its property taken by any receiver, custodian, trustee or liquidator, (c) filed, or had filed against it, any request or petition for liquidation, reorganization, arrangement, adjustment of debts, adjudication as bankrupt, winding-up, or voluntary or involuntary case under any state or federal bankruptcy laws, (d) admitted in writing its inability, or is generally unable to, pay its debts as they become due, (e) become insolvent, or (f) ceased operation of its business, provided, however, that in each case of clauses (a) through (f) above the Agent may determine, in its Permitted Discretion, that post-petition Accounts owning by a debtor-in-possession under Chapter 11 of the Bankruptcy Code shall not be deemed ineligible; (xiii) which is owed by any Account Debtor which has sold all or substantially all of its assets; (xiv) which is owed by (a) the government (or any department, agency, public corporation, or instrumentality thereof) of any country other than the U.S. unless such Account is backed by a Letter of Credit acceptable to the Agent which is in the possession of the Agent, or (b) the government of the United States of America, or any department, agency, public corporation, or instrumentality thereof, unless the Federal Assignment of Claims Act of 1940, as amended (31 U.S.C. § 3727 et seq. and 41 U.S.C. § 15 et seq.), and any other steps necessary to perfect the Lien of the Agent in such Account have been complied with to the Agent’s satisfaction; (xv) which is owed by an Account Debtor which (a) does not maintain its chief executive office in the U.S., the United Kingdom or Canada (other than the Canadian province of Quebec) or (b) is not organized under applicable law of the U.S., any state of the U.S., the United Kingdom, Canada, or any province of Canada (other than the Canadian province of Quebec) unless such Account is either (x) backed by a Letter of Credit acceptable to the Agent which is in the possession of the Agent or (y) owed by an Account Debtor (not otherwise

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described in (a) or (b) above) specified by the Agent in its Permitted Discretion, provided, however, such Accounts of Account Debtors under this clause (y) shall not exceed 20% of the total Eligible Accounts Receivable; (xvi) which is or is reasonably likely to be subject to any counterclaim, deduction, defense, setoff or dispute and then only to the extent of such counterclaim, deduction, defense, setoff or dispute; (xvii) which is evidenced by any promissory note, chattel paper or instrument; (xviii) which is owed by an Account Debtor located in any jurisdiction which requires filing of a “Notice of Business Activities Report” or other similar report in order to permit the applicable Borrower to seek judicial enforcement in such jurisdiction of payment of such Account, unless such Borrower has filed such report or is qualified to do business in such jurisdiction; (xix) with respect to which any Borrower, Guarantor, or Affiliate of any Borrower or Guarantor has made any agreement with the Account Debtor for any reduction thereof, other than discounts and adjustments given in the ordinary course of business; (xx) which the Agent determines in its Permitted Discretion may not be paid by reason of the Account Debtor’s inability to pay or which the Agent otherwise determines in its Permitted Discretion is unacceptable for any reason whatsoever; (xxi) that is payable in any currency other than Dollars; (xxii) which is a guaranteed sale, sale and return, sale on approval, consignment, cash-on-delivery or other repurchase or return basis (excluding Accounts that are subject to returns in the ordinary course of business); (xxiii) that is the subject of a bill and hold or for which the goods have not been shipped (provided that such Account will be deemed eligible if the Account Debtor with respect to such Account has delivered an agreement (in form and substance acceptable to the Agent) between the Account Debtor, the applicable Borrower and the Agent pursuant to which such Account Debtor unconditionally agrees to accept delivery of such goods and waives any rights of off-set with respect to such Account or such Account Debtor unconditionally agrees to pay in cash for such Account in the event such Account Debtor elects not to take delivery); (xxiv) which represents a progress billing; (xxv) with respect to which an invoice has not been sent to the applicable Account Debtor; and (xvi) such other categories as may be established by the Agent in its Permitted Discretion. Notwithstanding the foregoing, any domestic Account which would otherwise be deemed ineligible may be deemed eligible by the Agent in its Permitted Discretion if such Account is supported by a letter of credit in form and substance acceptable to the Agent.

     “Eligible Assignee” shall mean (i) a commercial bank having total assets in excess of $1,000,000,000; (ii) a finance company, insurance company or other financial institution or fund, in each case reasonably acceptable to the Agent and, so long as no Default has occurred and is continuing, the Borrowers’ Agent (such consent by the Borrowers’ Agent not to be unreasonably withheld, conditioned or delayed), which in the ordinary course of business extends credit of the type contemplated herein and has total assets in excess of $200,000,000 and whose becoming an assignee would not constitute a prohibited transaction under Section 4975 of ERISA; (iii) a Lender Affiliate of the assignor Lender; and (iv) any other financial institution satisfactory to the Agent and, so long as no Default has occurred and is continuing, the Borrowers’ Agent (such consent by the Borrowers’ Agent not to be unreasonably withheld, conditioned or delayed).

     “Eligible Equipment” shall mean machinery, equipment and rolling stock (collectively, “Equipment”) owned by the Company, KAII and Kaiser Bellwood and located in the United States, which satisfies each of the following requirements: (i) the applicable Borrower has good and marketable title to the Equipment; (ii) the full purchase price for the Equipment has

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been paid by the applicable Borrower; (iii) the Equipment is located on premises owned or leased by the applicable Borrower (provided that with respect to Equipment that is located at a leased facility, the Agent shall have received a Collateral Access Agreement in form and substance acceptable to the Agent or the Agent shall have implemented Reserves in an amount equal to three (3) months rent for such leased facility, but without duplication of any Reserves for rent pursuant to any other provision of this Agreement); (iv) the Equipment is in good repair and working order; (v) the Equipment is not subject to any agreement which restricts the ability of the applicable Borrower to use, sell, transport or dispose of the Equipment or which restricts the Agent’s ability to take possession of, sell or otherwise dispose of the Equipment; (vi) the Equipment does not constitute “fixtures” under the applicable laws of the jurisdiction in which the Equipment is located; (vii) the Agent has received an appraisal report with respect to the Equipment from an independent appraiser reasonably satisfactory to the Agent setting forth the Net Orderly Liquidation Value of the Equipment; (viii) the Agent has a perfected first-priority Lien on the Equipment subject to no other Liens, except Liens permitted under Section 6.01 hereof that are subordinate and junior to the Lien in favor of the Agent; and (ix) the Agent has not determined, in its Permitted Discretion that such Equipment is ineligible.

     “Eligible Inventory” means, at any time, the Inventory of the Company, KAII, and Kaiser Bellwood unless such Inventory is excluded from the definition of Eligible Inventory in accordance with the following provisions of this definition. Without limiting the Agent’s Permitted Discretion provided herein, Eligible Inventory shall not include any Inventory: (i) which is not subject to a first-priority perfected security interest in favor of the Agent, (ii) which is subject to any Lien other than (a) a Lien in favor of the Agent and (b) a Lien permitted under Section 6.01 hereof which Lien is subordinate and junior to the Lien in favor of the Agent; (iii) which is, in the Agent’s opinion, applying its Permitted Discretion, slow moving, obsolete, unmerchantable, defective, unfit for sale, not salable at prices approximating at least the cost of such Inventory in the ordinary course of business or unacceptable due to age, type, category and/or quantity; (iv) with respect to which any covenant, representation, or warranty contained in this Agreement or the Security Agreement has been breached in any material respect or is not true in all material respects; (v) which does not conform in all material respects to all standards imposed by any governmental authority; (vi) located outside of the United States and Canada or located in the Canadian province of Quebec; (vii) that is in transit except for Inventory in transit between locations controlled by a Borrower or a Guarantor; (viii) which is located in any location not owned or operated by a Borrower or a Guarantor or is in the possession of a bailee unless the owner of such property, the bailee, and any other applicable party has delivered to the Agent a Collateral Access Agreement and such other documentation as the Agent may in its Permitted Discretion require (provided, however, that $4,000,000 of such Inventory may be included in the Borrowing Base even if Collateral Access Agreements and such other documentation as the Agent may require have not been obtained for such Inventory); (ix) which is located in any location not owned by a Borrower or a Guarantor but is operated by such Borrower or such Guarantor, unless the owner of such property and any other applicable party has delivered to the Agent a Collateral Access Agreement and such other documentation as the Agent may in its Permitted Discretion require or the Agent shall have implemented Reserves equal to three months rent for such facility, but without duplication of any Reserves for rent pursuant to any other provision of this Agreement; (x) which contains or bears any intellectual property rights licensed from any party other than a Borrower or a Guarantor unless the Agent is satisfied, in its Permitted Discretion, that it may sell or otherwise dispose of such Inventory

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without (a) infringing the rights of such licensor, (b) violating any contract with such licensor, or (c) incurring any liability with respect to payment of royalties other than royalties incurred pursuant to sale of such Inventory under the current licensing agreement; (xi) which is not reflected in the books and records of the applicable Borrower; (xii) that is held by any Borrower on consignment or which any Borrower has placed on consignment with another Person (other than a Person that is a third party processor of such Inventory (in which case such Inventory shall be included as Eligible Inventory to the extent provided in clause (viii) above)); (xiii) that consists of display items or packing or shipping materials or stores, provided that such stores may be deemed eligible in the Agent’s Permitted Discretion upon receipt of an inventory appraisal with respect to such stores, which appraisal shall be done in a manner acceptable to the Agent by an appraiser acceptable to the Agent; (xiv) which is bill-and-hold goods, returned or repossessed goods, or goods which are not of a type held for sale in the ordinary course of the applicable Borrower’s business; (xv) which is perishable; (xvi) such other categories as may be established by the Agent in its Permitted Discretion.

     “Eligible Real Estate” shall mean any real Property which meets all of the following specifications:

          (a) the applicable Borrower is the record owner of and has good fee title to such real Property;

          (b) the applicable Borrower has the right to subject such real Property to a Lien in favor of the Agent for the ratable benefit of the Lenders; such real Property is subject to a perfected first-priority Lien in favor of the Agent for the ratable benefit of the Lenders and is free and clear of all other Liens (except for Permitted Liens acceptable to the Agent in its Permitted Discretion), unless such real Property is otherwise acceptable to the Agent and a Mortgage has been recorded in the appropriate jurisdiction and filing office to perfect such Lien;

          (c) such real Property is not subject to any contractual restriction on the Agent’s ability to sell or otherwise dispose of such real Property;

          (d) the Agent shall have received Phase I (and, if necessary, Phase II) environmental reports delivered with respect to such real Property together with letters from the environmental engineering firms reasonably satisfactory to Agent providing that Agent and the Lenders may rely upon such reports, each in form and substance reasonably acceptable to Agent.

          (e) with respect to such real Property, such surveys or surveyor certificates as the Agent may reasonably require;

          (f) the Agent shall have received evidence reasonably acceptable to the Agent as to whether such real Property is located in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards and requiring either the applicable Borrower or Guarantor that is the owner of the real Property or the Agent to purchase special flood insurance and, if so required, evidence that the applicable Borrower or Guarantor that owns such real Property has obtained flood hazard insurance as required by law and as reasonably acceptable to Agent;

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          (g) the Agent shall have received an ALTA loan title insurance policies or an unconditional commitments therefor with extended coverage, including insurance over matters that would be disclosed by an accurate survey, issued by a title company reasonably satisfactory to Agent insuring the Agent, for the benefit of the Agent and the Lenders, that the applicable Mortgage insured thereby creates a valid first lien on such real Property, in an amount not less than the appraised fair market value of such real Property and insuring that fee simple title to such Property is vested in the applicable Borrower or Guarantor, subject only to any exceptions as may be reasonably acceptable to the Agent and which appear as exceptions on Schedule B to the applicable title insurance loan policy, which policy shall include endorsements, including a comprehensive lender’s endorsement and any other legally available endorsements, assurances or affirmative coverage reasonably requested by the Agent;

          (h) the Agent shall have received copies of all recorded documents listed as exceptions to title or otherwise referred to in such title insurance loan policy and any other such documents as Agent shall reasonably request;

          (i) the Agent shall have received appraisals, together with reliance letters where applicable, concerning such real Property from one or more independent real estate appraisers reasonably satisfactory to the Agent, which appraisals shall set forth the Fair Market Value of such real Property and be in form, scope and substance reasonably satisfactory to the Agent and shall satisfy the requirements of any applicable laws and regulation; and

          (j) the Agent has not determined, in its Permitted Discretion, that such real Property is ineligible.

     “Environmental Compliance Reserve” shall mean any reserve which the Agent establishes in its Permitted Discretion from time to time for amounts that are reasonably likely to be expended by the Borrowers, the Guarantors and their Subsidiaries in order for the Borrowers, the Guarantors and their Subsidiaries and their respective operations and property (a) to comply with Environmental Laws in all material respects, (b) to correct in all material respects any such non-compliance with Environmental Laws or (c) to satisfy any Environmental Liability.

     “Environmental Laws” shall mean all applicable federal, state, local or foreign statutes, laws, regulations, ordinances, codes, rules, requirements and guidelines (including consent decrees and administrative orders to which any Borrower, any Guarantor, or any of their Subsidiaries, is subject) relating to protection of human health or the environment or imposing liability or standards of conduct concerning any Hazardous Material, as any of the foregoing may be from time to time amended or supplemented.

     “Environmental Liability” shall mean any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrowers, the Guarantors or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual

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arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

     “Environmental Lien” shall mean a Lien in favor of any Governmental Authority for (i) any liability under Environmental Laws, or (ii) damages arising from or costs incurred by such Governmental Authority in response to a release or threatened release of a hazardous or toxic waste, substance or constituent, or other substance into the environment.

     “Equipment” shall mean (a) any machinery or equipment and (b) any other Property classified as “equipment” under the UCC.

     “Equipment Percentage” shall mean, as of any date, the percentage equal to one hundred percent (100%) minus the percentage obtained by dividing the number of full calendar months elapsed since the Closing Date by eighty-four (84).

     “Equity Interests” shall mean shares of capital stock in a corporation, partnership interests in a partnership, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any of the foregoing.

     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

     “ERISA Affiliate” shall mean each person (as defined in Section 3(9) of ERISA) which together with any Borrower or Guarantor or any Subsidiary of any Borrower or Guarantor would be deemed to be a single employer within the meaning of Section 414(b), (c), (m), or (o) of the Code.

     “Eurodollar Borrowing” shall mean a Borrowing comprised of Eurodollar Loans.

     “Eurodollar Loan” shall mean any Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate in accordance with the provisions of Section 2.

     “Event of Default” shall have the meaning given such term in Section 7.

     “Excluded Subsidiaries” shall mean Alpart Jamaica Inc., a Delaware corporation, Kaiser Jamaica Corporation, a Delaware corporation, Kaiser Alumina Australia Corporation, a Delaware corporation, Kaiser Bauxite Company, a Nevada corporation, and Kaiser Finance Corporation, a Delaware corporation. Under no circumstances will an Excluded Subsidiary be, or be deemed to be, a Significant Subsidiary or a Subsidiary hereunder.

     “Excluded Taxes” shall mean, with respect to the Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrowers hereunder, (a) Taxes imposed on or measured by its overall net income or its overall gross income (other than withholding taxes) and franchise Taxes imposed in lieu thereof by the United States of America or by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its lending office or principal executive office is located, (b) any branch profits Taxes imposed by the United States of America or any

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similar Tax imposed by any other jurisdiction in which such lending office or principal executive office is located and (c) in the case of a Lender, any withholding Tax that is imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Lender’s failure to comply with Section 2.18(e), except to the extent that such Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding Tax pursuant to Section 2.18(a).

     “Existing Credit Agreement” shall have meaning given such term in Introductory Statement.

     “Existing Lenders” shall mean the financial institutions from time to time party to the Existing Credit Agreement.

     “Extraordinary Receipts” means any Net Proceeds received by any Borrower or Guarantor not in the ordinary course of business, including, without limitation, (i) foreign, United States, state or local tax refunds, (ii) pension plan reversions, (iii) judgments, proceeds of settlements or other consideration of any kind in connection with any cause of action, (iv) indemnity payments, (v) any purchase price adjustment received in connection with any purchase agreement, and (vi) any proceeds from any escrow; provided, however, that such indemnity payments or proceeds shall not include proceeds from any insurance for asbestos claims and demands, silica claims and demands, coal tar pitch volatile claims and demands and noise induced hearing loss claims in escrow as of the date hereof or later received.

     “Fair Market Value” shall mean, with respect to real Property of any Person, the fair market value thereof as determined in the most recent appraisal received by the Agent in accordance with the terms hereof, which appraisal shall be done in a manner acceptable to the Agent by an appraiser acceptable to the Agent.

     “Federal Funds Effective Rate” shall mean, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it.

     “Fees” shall collectively mean the Commitment Fees, Letter of Credit Fees, the Collateral Monitoring Fees, other fees referred to in Section 2.13, and all other fees referred to in any Loan Document.

     “Filing Date” shall mean with respect to each Borrower and each Guarantor, the date set forth opposite such Person’s name on Schedule 1.01(a).

     “Financial Officer” shall mean, with respect to any Person, the chief financial officer, principal accounting officer, treasurer, assistant treasurer or controller of such Person or any other Person who performs a function similar to any of the foregoing and has been identified in writing to the Agent as a “Financial Officer” hereunder.

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     “Fiscal Month” means any of the monthly accounting periods of the Borrower and its Subsidiaries.

     “Fiscal Quarter” means any of the quarterly accounting periods of the Borrower and its Subsidiaries, ending on March 31, June 30, September 30 and December 31 of each year.

     “Fiscal Year” means any of the annual accounting periods of the Borrower and its Subsidiaries ending on December 31 of each year.

     “Fixtures” shall mean any Property classified as “fixtures” under the UCC.

     “Funding Account” shall have the meaning set forth in Section 4.01(q).

     “GAAP” shall mean generally accepted accounting principles in the United States of America as in effect from time to time applied in accordance with Section 1.02.

     “Governmental Authority” shall mean the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

     “Guarantee” shall mean, with respect to any Person (such Person, a “guarantor”), any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (ii) to purchase or lease property, securities or services for the primary purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (iii) to advance funds to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (iv) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.

     “Guarantor” shall have the meaning set forth in the first paragraph of this Agreement.

     “Hazardous Materials” shall mean any “hazardous substance,” as defined by CERCLA; any “hazardous waste,” as defined by the Resource Conservation and Recovery Act, as amended; any petroleum product; or any pollutant or contaminant or hazardous, dangerous, or toxic chemical, material, or substance regulated under or within the meaning of any other Environmental Law.

     “Indebtedness” shall mean, at any time and with respect to any Person, without duplication, (i) all indebtedness of such Person for borrowed money or with respect to deposits

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or advances of any kind; (ii) all indebtedness of such Person for the deferred purchase price of property or services (other than property, including inventory, and services purchased, and expense accruals and deferred compensation items arising, in the ordinary course of business); (iii) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments (other than performance, surety and appeal bonds arising in the ordinary course of business); (iv) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property); (v) all Capital Lease Obligations of such Person; (vi) all reimbursement, payment or similar obligations of such Person, contingent or otherwise, under acceptance, letter of credit or similar facilities; (vii) all Swap Obligations (and the amount of Indebtedness under any Swap Obligation shall be deemed the Net Mark-to-Market Exposure thereunder); (viii) all Guarantees by such Person of Indebtedness of others; (ix) all Indebtedness referred to in clauses (i) through (viii) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; (x) obligations under any liquidated earn-out and (xi) obligations of such Person to purchase securities or other property arising out of or in connection with the sale of the same or substantially similar securities or property or any other Off-Balance Sheet Liability. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.

     “Indemnified Party” shall have the meaning given to such term in Section 11.06.

     “Indemnified Taxes” shall mean Taxes other than Excluded Taxes.

     “Insufficiency” shall mean, with respect to any Plan, its “amount of unfunded benefit liabilities” within the meaning of Section 4001(a)(18) of ERISA, if any.

     “Interest Election Request” shall mean a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.09.

     “Interest Expense” shall mean, with reference to any period, the interest expense of the Borrowers and its their Subsidiaries calculated on a consolidated basis in conformity with GAAP for such period.

     “Interest Payment Date” shall mean (i) as to any Eurodollar Loan, the last day of each applicable Interest Period, and, in the case of any Interest Period longer than three months, on each successive date three months after the first day of such Interest Period and (ii) as to all ABR Loans, the last calendar day of each month in arrears and the date on which any ABR Loans are refinanced with Eurodollar Loans pursuant to Section 2.09.

     “Interest Period” shall mean, as to any Borrowing of Eurodollar Loans, the period commencing on the date of such Borrowing (including as a result of a refinancing of ABR

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Loans) or on the last day of the preceding Interest Period applicable to such Borrowing and ending on the numerically corresponding day (or if there is no corresponding day, the last day) in the calendar month that is one, two, three or six months thereafter, as the Borrowers’ Agent may elect in the related notice delivered pursuant to Sections 2.04 or 2.09; provided, however, that (i) if any Interest Period would end on a day which shall not be a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the immediately preceding Business Day, and (ii) no Interest Period shall end later than the Maturity Date.

     “Inventory” shall mean “inventory” as defined in Article 9 of the Uniform Commercial Code as in effect from time to time in the State of New York, or when the context implies, the Uniform Commercial Code as in effect from time to time in any other applicable jurisdiction.

     “Investments” shall have the meaning given such term in Section 6.08.

     “Issuing Bank” means (i) JPMorgan Chase, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.07. The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

     “JPMorgan Chase” shall have the meaning set forth in the first paragraph of this Agreement.

     “JPMSI” shall mean J.P. Morgan Securities Inc.

     “KAII” shall mean Kaiser Aluminium International, Inc., a Delaware corporation, as debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code.

     “Kaiser Bellwood” shall mean Kaiser Bellwood Corporation, a Delaware corporation, as debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code.

     “Kaiser Canada” shall mean Kaiser Aluminum & Chemical of Canada Limited, an Ontario corporation as debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code.

     “Kaiser Canada Investment Limited” shall mean Kaiser Aluminum & Chemical Canada Investment Limited, an Ontario corporation, as debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code.

     “Lender Affiliate” shall mean, (a) with respect to any Lender, (i) an Affiliate of such Lender or (ii) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in Lender loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an Affiliate of such Lender and (b) with respect to any Lender that is a fund which invests in Lender loans and similar extensions of credit, any other fund that invests in Lender

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loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

     “Lenders” shall have the meaning set forth in the first paragraph of this Agreement.

     “Letter of Credit” shall mean any irrevocable letter of credit issued pursuant to Section 2.07, which letter of credit shall be (i) a letter of credit, (ii) issued for purposes that are consistent with the ordinary course of business of any Borrower, or for such other purposes as are reasonably acceptable to the Agent, (iii) denominated in Dollars and (iv) otherwise in such form as may be reasonably approved from time to time by the Agent and the applicable Issuing Bank.

     “Letter of Credit Account” shall mean the account established by the Borrowers under the sole and exclusive control of the Agent maintained at the office of the Agent at 270 Park Avenue, New York, New York 10017 designated as the “Kaiser Letter of Credit Account” that shall be used solely for the purposes set forth in Section 2.07(j).

     “Letter of Credit Disbursement” shall mean a payment made by the Issuing Bank pursuant to a Letter of Credit.

     “Letter of Credit Exposure” shall mean, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time and (b) the aggregate amount of all Letter of Credit Disbursements that have not yet been reimbursed by or on behalf of the Borrowers at such time. The Letter of Credit Exposure of any Lender at any time shall be its Commitment Percentage of the total Letter of Credit Exposure at such time.

     “Letter of Credit Fees” shall mean the fees payable in respect of Letters of Credit pursuant to Section 2.13.

     “Letter of Credit Shortfall Amount” shall mean an amount equal to the difference of (x) the amount of Letter of Credit Exposure at such time, less (y) the amount on deposit in the Letter of Credit Account at such time which is free and clear of all rights and claims of third parties and has not been applied against the Obligations.

     “LIBO Rate” shall mean, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Page 3750 of the Dow Jones Market Service (or on any successor page or any successor to such service or any substitute page or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by the Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits (for delivery on the first day of such period) with a term equivalent to such Interest Period. In the event that such rate is not available at such time for any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing for such Interest Period shall be the rate at which dollar deposits of comparable size and for a maturity comparable to such Interest Period are offered by the principal London office of the Agent in immediately

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available funds in the London interbank market at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period.

     “Lien” shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest of any kind whatsoever in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, Capital Lease or title retention agreement (or any financing having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

     “Liquidity Release Event” shall mean, as of any date following the occurrence of a Liquidity Trigger Event, the first date upon which both of the following conditions have been satisfied: (i) Availability has exceeded $50,000,000 for each day during the ninety (90) consecutive calendar day period ending on such date and after the immediately preceding Liquidity Trigger Event and (ii) at least 365 days have elapsed since the date of the last Liquidity Trigger Event, if any.

     “Liquidity Reserve” shall mean an amount at all times equal to $20,000,000.

     “Liquidity Trigger Event” shall mean, any date on which, either before or after giving effect to Borrowings requested or deemed requested on such date, Availability is less than $40,000,000. A Liquidity Trigger Event shall be deemed to have occurred and be continuing from the occurrence of such Liquidity Trigger Event up to but not including the first date upon which a Liquidity Release Event occurs following such Liquidity Trigger Event.

     “Loan” shall mean any loan or advance made by the Lenders pursuant to this Agreement including, without limitation, Revolving Loans, unreimbursed Letter of Credit Disbursements, Swingline Loans and Protective Advances.

     “Loan Documents” shall mean this Agreement, the Letters of Credit, the Security and Pledge Agreement, the Mortgages, the Order and any other instrument or agreement executed and delivered to the Agent or any Lender in connection herewith (including, without limitation, applications for Letters of Credit and related reimbursement agreements), in each case, as the same may be amended, modified, supplemented, extended or restated from time to time.

     “Material Adverse Effect” shall mean a material adverse effect on (a) the business, assets, operations, prospects or condition, financial or otherwise, of the Borrowers and the Guarantors taken as a whole, (b) the ability of any Borrower or any Guarantor to perform any of its obligations under the Loan Documents to which it is a party, (c) the Collateral, or the Agent’s Liens (on behalf of itself and the Lenders) on the Collateral or the priority of such Liens, or (d) the rights of or benefits available to the Agent or the Lenders hereunder or under any other Loan Document.

     “Material Indebtedness” means any Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Swap Agreements either arising after the applicable Filing Date, if any, or that is secured, of any one or more of the Borrowers, Guarantors, and the Subsidiaries of any Borrower or Guarantor in an aggregate principal amount

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exceeding $10,000,000. For purposes of determining Material Indebtedness, the “obligations” of any Borrower, Guarantor, or Subsidiary of any Borrower or Guarantor in respect of any Swap Agreement at any time shall be the Net Mark-to-Market Exposure that such Borrower, Guarantor or Subsidiary would be required to pay if such Swap Agreement were terminated at such time.

     “Maturity Date” shall mean February 11, 2006.

     “Mortgage” shall mean any mortgage, deed of trust or other agreement which conveys or evidences a Lien in favor of the Agent, for the benefit of the Agent and the Lenders, on any real Property owned or leased by a Borrower or Guarantor, including any amendment, modification or supplement thereto.

     “Multiemployer Plan” shall mean a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA, which is maintained or contributed to by (or to which there is an obligation to contribute of) any Borrower or Guarantor or a Subsidiary of any Borrower or Guarantor or an ERISA Affiliate, and each such plan for the five-year period immediately following the latest date on which any Borrower, Guarantor or a Subsidiary of any Borrower or Guarantor or an ERISA Affiliate maintained, contributed to or had an obligation to contribute to such plan.

     “Multiple Employer Plan” shall mean a Single Employer Plan, which (i) is maintained for employees of any Borrower or Guarantor or an ERISA Affiliate and at least one person (as defined in Section 3(9) of ERISA) other than any Borrower or Guarantor and its ERISA Affiliates or (ii) was so maintained and in respect of which any Borrower Guarantor or an ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such Plan has been or were to be terminated.

     “National Priorities List” shall mean the list established pursuant to Section 105 of CERCLA, as amended, modified, supplemented, or replaced from time to time.

     “Net Income” shall mean, with reference to any period, the net income (or loss) of the Borrowers and their Subsidiaries calculated on a consolidated basis for such period.

     “Net Mark-to-Market Exposure” shall mean, with respect to any Person, as of any date of determination, the excess (if any) of all unrealized losses over all unrealized profits of such Person arising from Swap Agreement transactions. As used in this definition, “unrealized losses” means the fair market value of the cost to such Person of replacing such Swap Agreement transactions as of the date of determination (assuming the Swap Agreement transactions were to be terminated as of that date), and “unrealized profits” means the fair market value of the gain to such Person of replacing such Swap Agreement transactions as of the date of determination (assuming such Swap Agreement transactions were to be terminated as of that date).

     “Net Orderly Liquidation Value” shall mean, with respect to Inventory or Equipment of any Person, the orderly liquidation value thereof as determined in the most recent appraisal received by the Agent in accordance with the terms hereof, which appraisal shall be done in a manner acceptable to the Agent by an appraiser acceptable to the Agent, net of all costs of liquidation thereof.

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     “Net Proceeds” shall mean, if in connection with (a) an asset disposition, cash proceeds received by any Borrower or Guarantor net of (i) commissions, attorneys’ fees, accountants’ fees, investment banking fees and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by such Borrower or Guarantor in connection therewith (in each case, paid to non-Affiliates of such Borrower or Guarantor), (ii) taxes actually payable in respect thereof and reasonable estimates of taxes actually payable with respect to such transaction in the tax year of such transaction or in the following tax year, (iii) amounts payable to holders of senior Liens on such asset (to the extent such Liens constitute Permitted Liens or other Liens permitted under Section 6.01 hereunder), if any, (iv) an appropriate reserve for income taxes in accordance with GAAP established in connection therewith, and (v) amounts escrowed or reserved against indemnification, obligations or purchase price adjustments, or (b) the issuance or incurrence of Indebtedness, cash proceeds net of attorneys’ fees, investment banking fees, accountants’ fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith, (c) an equity issuance, cash proceeds net of underwriting discounts and commissions and other reasonable costs paid to non-Affiliates in connection therewith, or (d) Extraordinary Receipts received by any Borrower or Guarantor, the amount of cash proceeds received (directly or indirectly) from time to time by or on behalf of such Borrower or Guarantor or any of their Subsidiaries after deducting therefrom only (i) expenses related thereto incurred by such Person or such Subsidiary in connection therewith, (ii) transfer taxes paid by such Person or such Subsidiary in connection therewith, (iii) net income taxes to be paid in connection therewith (after taking into account any tax credits or deductions and any tax sharing arrangements), and (iv) that portion of the cash proceeds received which the applicable Borrower is legally obligated pursuant to an order of the Bankruptcy Court or any agreement binding on the applicable Borrower entered into prior to the date hereof to pay to another Person.

     “Net Recovery Percentage” shall mean the fraction, expressed as a percentage, (a) the numerator of which is the amount estimated to be recoverable in respect of the Net Orderly Liquidation Value of Eligible Inventory and (b) the denominator of which is the aggregate original cost of the Eligible Inventory subject to such appraisal.

     “Non-Consenting Lender” shall have the meaning specified in Section 11.10(b).

     “Notice Parties” shall have the meaning specified in Section 11.01.

     “Obligations” shall mean all unpaid principal of and accrued and unpaid interest on the Loans, all Letter of Credit Exposure, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the Borrowers and the Guarantors to the Lenders or to any Lender, the Agent, the Issuing Bank or any Indemnified Party arising under the Loan Documents. Obligations shall also include (i) all Banking Services Obligations; and (ii) all Swap Obligations (other than Swap Obligations incurred in connection with, arising out of, or relating to a Commodity Swap Agreement) owing to one or more Lenders or their respective Affiliates; provided, that Swap Obligations entered into with a Lender or any of such Lender’s Affiliates (other than JPMorgan Chase or its Affiliates) shall only constitute an “Obligation” if prior to entering into the transaction giving rise to the Swap Obligation, the Lender (or its Affiliate) party thereto (other than JPMorgan Chase or its Affiliates) shall have delivered written notice to the Agent that such transaction has been entered into and that it constitutes an

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Obligation entitled to the benefits of the Security and Pledge Agreement, the Mortgages and any other security document. Nothing in this definition of Obligations shall permit the Borrowers, the Guarantors or their Significant Subsidiaries to incur or permit to exist any Indebtedness not otherwise permitted pursuant to the terms hereof.

     “Off-Balance Sheet Liability” shall mean, with respect to any Person, (a) any repurchase obligation or liability for the principal amount thereof of such Person with respect to accounts or notes receivable sold by such Person, (b) any indebtedness, liability or obligation under any sale and leaseback transaction which is not a Capital Lease Obligation and under which such Person retains ownership of the Property so leased for Federal income tax purposes, other than any lease under which such Person is the lessor, or (c) any indebtedness, liability or obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheets of such Person, but excluding from this clause (c) operating leases and Capital Lease Obligations.

     “Order” shall have the meaning given such term in Section 4.01(c).

     “Other Taxes” shall mean any and all present or future stamp or documentary Taxes or any other excise or property Taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.

     “PBGC” shall mean the Pension Benefit Guaranty Corporation, or any successor agency or entity performing substantially the same functions.

     “Pension Plan” shall mean a defined benefit plan (as defined in Section 414(j) of the Code and Section 3(35) of ERISA) which meets and is subject to the requirements of Section 401(a) of the Code.

     “Permitted Commodity Swap Agreement” shall mean any Commodity Swap Agreement that (i) involves or is settled with respect to electricity, natural gas, alumina, bauxite or other mineral or metal used in the business of the Borrowers, the Guarantors or their Significant Subsidiaries, and (ii) is entered into in the ordinary course of business to hedge against fluctuations in the price of alumina, bauxite or other minerals or metals used in the business of the Borrowers, the Guarantors or their Significant Subsidiaries and not for speculative purposes.

     “Permitted Discretion” shall mean a determination by the Agent made in good faith and in the exercise of reasonable (from the perspective of a secured asset based lender making a loan to a debtor-in-possession under the Bankruptcy Code) business judgment.

     “Permitted Investments” shall mean:

          (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within twelve months from the date of acquisition thereof;

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          (b) without limiting the provisions of paragraph (d) below, investments in commercial paper maturing within six months from the date of acquisition thereof and having, at such date of acquisition, a rating of at least “A-2” or the equivalent thereof from Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. or of at least “P-2” or the equivalent thereof from Moody’s Investors Service, Inc.;

          (c) investments in certificates of deposit, bankers acceptances and time deposits (including Eurodollar time deposits) maturing within six months from the date of acquisition thereof issued or guaranteed by or placed with (i) any domestic office of the Agent or the bank with whom the Borrowers and the Guarantors maintain their cash management system, provided that if such bank is not a Lender hereunder, such Lender shall have entered into an agreement with the Agent pursuant to which such Lender shall have waived all rights of setoff and confirmed that such Lender does not have, nor shall it claim, a security interest therein or (ii) any domestic office of any other commercial bank of recognized standing organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $250,000,000 and is the principal Banking Subsidiary of a bank holding company having a long-term unsecured debt rating of at least “A-2” or the equivalent thereof from Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. or at least “P-2” or the equivalent thereof from Moody’s Investors Service, Inc.;

          (d) investments in commercial paper maturing within six months from the date of acquisition thereof and issued by (i) the holding company of the Agent or (ii) the holding company of any other commercial bank of recognized standing organized under the laws of the United States of America or any State thereof that has (A) a combined capital and surplus in excess of $250,000,000 and (B) commercial paper rated at least “A-2” or the equivalent thereof from Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. or of at least “P-2” or the equivalent thereof from Moody’s Investors Service, Inc.;

          (e) investments in repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (a) above entered into with any office of a bank or trust company meeting the qualifications specified in clause (c) above; and

          (f) investments in money market funds substantially all the assets of which are comprised of securities of the types described in clauses (a) through (e) above.

     “Permitted Liens” shall mean (i) Liens imposed by law (other than Environmental Liens and any Lien imposed under ERISA) for taxes, assessments or charges of any Governmental Authority for claims not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (ii) Liens of landlords and Liens of carriers, warehousemen, workmen, repairmen, vendors, consignors, mechanics, materialmen and other Liens (other than Environmental Liens and any Lien imposed under ERISA) in existence on the applicable Filing Date or thereafter imposed by law and created in the ordinary course of business; (iii) Liens (other than any Lien imposed under ERISA) incurred or deposits made in the ordinary course of business (including, without limitation, surety bonds and appeal bonds) in connection with workers’ compensation, unemployment insurance and other types of social

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security benefits or governmental insurance or to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations or arising as a result of progress payments under government contracts; (iv) easements (including, without limitation, reciprocal easement agreements and utility agreements), rights-of-way, covenants, consents, reservations, mineral leases, encroachments, variations and zoning laws, ordinances, other restrictions and rights reserved to or vested in any municipality or government or proper authority to control or regulate any Property of the Company or its Subsidiaries, charges or encumbrances (whether or not recorded) and interest of ground lessors, minor defects and irregularities in the title to any Property, which do not interfere materially with the ordinary conduct of the business of the Borrowers or any Guarantor, as the case may be, and which do not materially detract from the value of the property to which they attach or materially impair the use thereof to the Borrowers or any Guarantor, as the case may be; (v) purchase money Liens (including capital leases) upon or in any property acquired or held in the ordinary course of business to secure the purchase price of such property solely for the purpose of financing the acquisition of such property to the extent such purchase money Liens secure Indebtedness in accordance with Section 6.03(iv); (vi) pledges or deposits in the ordinary course to secure leases entered into in the ordinary course of business; (vii) Liens covering portions of the proceeds of dispositions of assets permitted under this Agreement which are held in escrow in connection with such dispositions; (viii) pledges and deposits of cash and Permitted Investments with a commodity broker or dealer for the purpose of margining or securing the obligations of any Borrower, Guarantor or Significant Subsidiary under a Permitted Commodity Swap Agreement; (ix) any interest of a consignor in goods held by any Borrower, Guarantor or Significant Subsidiary on consignment provided that such goods are held on consignment in the ordinary course of business consistent with past practices; (x) Permitted PBGC Liens; and (xi) extensions, renewals or replacements of any Lien referred to in paragraphs (i) through (x) above, provided that the principal amount of the obligation secured thereby is not increased and that any such extension, renewal or replacement is limited to the property originally encumbered thereby.

     “Permitted PBGC Liens” shall mean Liens, if any, imposed under ERISA or the Code on assets of the Borrowers or Guarantors (to the extent and for so long as such Lien is unperfected and junior in priority to Liens of the Agent under the Order and the Security and Pledge Agreement) or any ERISA Affiliate which is not a Borrower or Guarantor (whether or not perfected) as a result of (i) the failure to make minimum funding contributions to any pension plan other than a plan that is a Terminated Plan prior to the later of (A) the day that is 31 days after the effective date of the Settlement and Release Agreement and (B) the date when such contributions are due, (ii) the imposition of federal, state or local taxes in connection with the failure described in clause (i) above, or (iii) the termination of any Plan that is a Terminated Plan.

     “Person” shall mean any natural person, corporation, division of a corporation, limited liability company, partnership, trust, joint venture, association, company, estate, unincorporated organization, Governmental Authority or other entity.

     “Plan” shall mean a Single Employer Plan or a Multiemployer Plan.

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          “Pre-Petition Payment” shall mean a payment (by way of adequate protection or otherwise) of principal or interest or otherwise on account of any pre-petition Indebtedness or trade payables (including, without limitation, in respect of reclamation claims) or other pre-petition claims against the Borrowers or any Guarantor.

          “Prime Rate” shall mean the rate of interest per annum publicly announced from time to time by the Agent as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective on the date such change is publicly announced.

          “Projections” shall have the meaning assigned such to term in Section 5.01(e).

          “Property” shall mean any interest in any kind of property or asset, whether real, personal or mixed, tangible or intangible.

          “Protective Advance” shall have the meaning assigned to such term in Section 2.05.

          “QAL” shall mean Queensland Alumina Limited, a Queensland, Australia corporation.

          “QAL Purchase Agreement” shall mean the Purchase Agreement, dated as of October 28, 2004, among Alumina & Bauxite Company Ltd., a British Virgin Islands company, the Company, and Kaiser Alumina Australia Corporation, a Delaware corporation (“KAAC”); provided, however, that if the Purchase Agreement, dated October 28, 2004, among Alumina & Bauxite Company Ltd., the Company, and KAAC is terminated for any reason and the Company and KAAC elect to sell their interests in QAL (the “QAL Interests”) to Pegasus Queensland Acquisition Pty Limited (“Pegasus”), then the term “QAL Purchase Agreement” shall mean the purchase agreement entered into among Pegasus, the Company and KAAC on substantially the same terms as the purchase agreement submitted by Pegasus as its bid for the QAL Interests at the auction for the QAL Interests held on October 28, 2004 and accepted by the Company and KAAC as the Backup Bid (as defined in the Bidding and Auction Procedures (as defined in the QAL Purchase Agreement)).

          “Real Property Percentage” shall mean, as of any date, the percentage equal to one hundred percent (100%) minus the percentage obtained by dividing the number of full calendar months elapsed since the Closing Date by one hundred twenty (120).

          “Register” shall have the meaning set forth in Section 11.03(d).

          “Related Parties” shall mean, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

          “Release” shall mean any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Materials into the indoor or outdoor environment (including, without limitation, the abandonment or disposal of any barrels, containers or other closed receptacles containing any

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Hazardous Materials), or into or out of any property, including the movement of any Hazardous Material through the air, soil, surface water, groundwater or property.

          “Reorganization Plan” shall mean a plan of reorganization in any of the Cases.

          “Report” shall mean any report prepared by the Agent or another Person showing the results of appraisals, field examinations or audits pertaining to the assets of any Borrower or any Guarantor from information furnished by or on behalf of the Borrowers and the Guarantors, which Reports may be distributed to the Lenders by the Agent.

          “Required Lenders” shall mean, at any time, Lenders holding Loans representing not less than 51% of the aggregate principal amount of such Loans outstanding or, if no Loans are outstanding, Lenders having Commitments representing not less than 51% of the Total Commitment.

          “Refractories Engineering” shall mean Refractories Engineering and Supplies Limited, a federal corporation of Canada.

          “Reserves” shall mean, collectively, any and all reserves which the Agent deems necessary, in its Permitted Discretion, to maintain (including, without limitation, Banking Services Reserves, Environmental Compliance Reserves, the Carve-out Reserve, the Liquidity Reserve, reserves for rent at locations leased by any Borrower or Guarantor and for consignee’s, warehousemen’s and bailee’s charges, reserves for dilution of Accounts, reserves for Inventory shrinkage, reserves for customs charges and shipping charges related to any Inventory in transit, reserves for Swap Obligations, reserves for contingent liabilities of any Borrower or Guarantor, reserves for uninsured losses of any Borrower or Guarantor, reserves for uninsured, underinsured, unidemnified or underindemnified liabilities or potential liabilities with respect to any litigation and reserves for taxes, fees, assessments, and other governmental charges) with respect to the Collateral or any Borrower or Guarantor.

          “Revolving Credit Exposure” shall mean, with respect to any Lender at any time, the sum of (a) the outstanding principal amount of such Lender’s Revolving Loans and its Letter of Credit Exposure plus (b) an amount equal to its Commitment Percentage of the aggregate principal amount of Swingline Loans at such time, plus (c) an amount equal to its Commitment Percentage of the aggregate principal amount of Protective Advances outstanding at such time.

          “Revolving Loan” shall mean any Loan made pursuant to Section 2.02.

          “Security and Pledge Agreement” shall have the meaning set forth in Section 4.01(c).

          “Settlement” has the meaning assigned to such term in Section 2.06(c).

          “Settlement and Release Agreement” shall mean that certain Settlement and Release Agreement dated as of October 5, 2004 between the Borrowers, the Guarantors, and their debtor affiliates and the Official Committee of Unsecured Creditors in the Cases, as amended from time to time;

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          “Settlement Agreement” shall mean the agreement reached with the PBGC and approved by the Bankruptcy Court on January 24, 2005.

          “Settlement Date” shall have the meaning assigned to such term in Section 2.06(c).

          “Significant Subsidiary” shall mean (other than an Excluded Subsidiary) each Subsidiary of the Company that

               (a) is designated with an asterisk in Schedule 3.05 — Subsidiaries;

               (b) accounted for at least 5% of consolidated revenues of the Company and its Subsidiaries from sales to third parties for the four Fiscal Quarters of the Company ending on the last day of the last Fiscal Quarter of the Company immediately preceding the date as of which any such determination is made; or

               (c) has assets (other than assets which are eliminated in consolidation) which represent at least 5% of the consolidated assets of the Company and its Subsidiaries as of the last day of the last Fiscal Quarter of the Company immediately preceding the date as of which any such determination is made,

all of which, with respect to clauses (b) and (c), shall be as included in the consolidated financial statements of the Company for the period, or as of the date, in question.

          “Single Employer Plan” shall mean a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (i) is maintained for employees of any Borrower or Guarantor or an ERISA Affiliate or (ii) was so maintained and in respect of which any Borrower or Guarantor could have liability under Title IV of ERISA in the event such Plan has been or were to be terminated.

          “Statutory Reserve Rate” shall mean a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal as in effect on any date of determination and established by the Board to which the Agent is subject with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

          “Subordinated Indenture” shall mean the indenture dated as of February 1, 1993 between the Company, and the Subsidiaries of the Company parties thereto as Subsidiary Guarantors, and The First National Bank of Boston, as trustee, pursuant to which the Subordinated Notes were issued, as supplemented prior to the date hereof.

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          “Subordinated Notes” shall mean the 12-3/4% Senior Subordinated Notes due 2003 in a principal amount not exceeding $400 million issued by the Company pursuant to the Subordinated Indenture, as amended, supplemented, restated, or otherwise modified from time to time prior to the date hereof.

          “Subsidiary” shall mean, with respect to any Person (herein referred to as the “parent”), any corporation, association or other business entity (whether now existing or hereafter organized) of which at least a majority of the securities or other ownership interests having ordinary voting power for the election of directors is, at the time as of which any determination is being made, owned or controlled by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

          “Super-majority Lenders” shall have the meaning given such term in Section 11.10(b).

          “Super-priority Claim” shall mean a claim against any Borrower in any of the Cases which is an administrative expense claim having priority over any or all administrative expenses of the kind specified in Sections 503(b) or 507(b) of the Bankruptcy Code.

          “Supporting Letter of Credit” shall mean a standby letter of credit, in form and substance satisfactory to the Agent, issued by an issuer satisfactory to the Agent, in a stated amount equal to 105% of the Letter of Credit Shortfall Amount.

          “Swap Agreement” shall mean any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of any Borrower, any Guarantor or any of their Subsidiaries shall be a Swap Agreement.

          “Swap Obligations” shall mean, with respect to any Person, any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (a) any and all Swap Agreements, and (b) any and all cancellations, buy backs, reversals, terminations or assignments of any Swap Agreement transaction.

          “Swingline Lender” shall mean JPMorgan Chase, in its capacity as lender of Swingline Loans hereunder.

          “Swingline Loan” shall have the meaning assigned to such term in Section 2.06(a).

          “Tax” or “Taxes” shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

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          “Tax Related Person” means any Person (including, without limitation, a beneficial owner of an interest in a pass-through entity) whose income is realized through or determined by reference to the Agent, Issuing Bank or any Participant or any Tax Related Person of any of the foregoing.

          “Texada Mines” shall mean Texada Mines Ltd., a British Columbia corporation, as debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code.

          “Terminated Plans” shall mean (i) the Kaiser Aluminum Salaried Employees Retirement Plan, terminated by the PBGC effective December 17, 2003; (ii) the Kaiser Aluminum Pension Plan, terminated by the PBGC effective April 30, 2004; and (iii) the Kaiser Aluminum Inactive Pension Plan, terminated by the PBGC effective June 30, 2004.

          “Termination Date” shall mean the earliest to occur of (i) the Maturity Date, (ii) the Consummation Date and (iii) the acceleration of the Loans and the termination of the Total Commitment in accordance with the terms hereof.

          “Termination Event” shall mean (i) a “reportable event”, as such term is described in Section 4043(c) of ERISA (other than a “reportable event” as to which the 30-day notice is waived) or an event described in Section 4068 of ERISA and excluding (a) events which would not be reasonably likely (as reasonably determined by the Agent) to have a material adverse effect on the financial condition, operations, business, properties or assets of the Borrower and the Guarantors taken as a whole; (b) any reportable event or other event related to a missed funding or contribution requirement prior to the day that is 31 days after the effective date of the Settlement and Release Agreement; or (c) any reportable event or other event related to a plan termination of the Terminated Plans; or (ii) the withdrawal of the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a “substantial employer,” as such term is defined in Section 4001(a)(2) of ERISA, the incurrence of liability by the Borrower or any ERISA Affiliate under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, or the imposition of Withdrawal Liability.

          “Total Commitment” shall mean, at any time, the sum of the Commitments at such time.

          “Trochus” means Trochus Insurance Company, Ltd., a Bermuda entity.

          “Type” when used in respect of any Loan or Borrowing shall refer to the Rate of interest by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, “Rate” shall mean the Adjusted LIBO Rate or the Alternate Base Rate, as applicable.

          “Unused Total Commitment” shall mean, with respect to all Lenders, at any time, (i) the Total Commitment less (ii) the sum of (x) the aggregate outstanding principal amount of all Loans and (y) the aggregate Letter of Credit Exposure.

          “Withdrawal Liability” shall have the meaning given such term under Part I of Subtitle E of Title IV of ERISA.

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          SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. All references herein to Sections, Exhibits and Schedules shall be deemed references to Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time. Terms that are defined in the Uniform Commercial Code as in effect in the State of New York from time to time shall have the same meaning herein unless otherwise defined herein.

          SECTION 1.03. The Company As Agent For Borrowers. Each Borrower and Guarantor hereby irrevocably appoints the Company as the borrowing agent and attorney-in-fact for all Borrowers (the “Borrowers’ Agent”) which appointment shall remain in full force and effect unless and until Agent shall have received prior written notice signed by each Borrower and each Guarantor that such appointment has been revoked and that another Borrower has been appointed the Borrowers’ Agent. Each Borrower hereby irrevocably appoints and authorizes the Borrowers’ Agent (i) to provide the Agent with all notices with respect to Borrowings and Letters of Credit obtained for the benefit of any Borrower and all other notices and instructions under this Agreement and (ii) to take such action as the Borrowers’ Agent deems appropriate on its behalf to obtain Borrowings and Letters of Credit and to exercise such other powers as are reasonably incidental thereto to carry out the purposes of this Agreement. It is understood that the handling of the Funding Account, Cash Management Account, Concentration Account and Collateral of Borrowers in a combined fashion, as more fully set forth herein, is done solely as an accommodation to Borrowers in order to utilize the collective borrowing powers of Borrowers in the most efficient and economical manner and at their request, and that no Lender shall incur any liability to any Borrower as a result hereof.

          SECTION 1.04. The Term “Borrower” or “Borrowers”. Unless otherwise specifically provided herein, all references to “Borrower” or “Borrowers” herein shall refer to and include each Borrower separately and all representations contained herein shall be deemed to be separately made by each of them, and each of the covenants, agreements and obligations set forth herein shall be deemed to be the joint and several covenants, agreements and obligations of them. Any notice, request, consent, report or other information or agreement delivered to the Agent or any other Lender by any Borrower shall be deemed to be ratified by, consented to and also delivered by each other Borrower. Unless otherwise specified in this Agreement, the parties hereto anticipate that any notice, request, consent, report or other information or agreement to be delivered in connection with this Agreement by Borrowers to the Agent will be executed by the Borrowers’ Agent, on behalf of Borrowers, and that any such notice, request, consent, report or other information or agreement delivered to the Agent and executed by the Borrowers’ Agent shall be deemed to be executed by the Borrowers’ Agent on behalf of all the Borrowers. In addition, unless otherwise specified in this Agreement, the parties hereto anticipate that any advances made hereunder by any Lender to Borrowers shall be disbursed directly to the Borrowers’ Agent.

          SECTION 1.05. Obligations Not Affected. The Obligations of the Borrowers hereunder shall not be affected by (i) the failure of the Agent or a Lender to assert any claim or demand or to enforce any right or remedy against any Borrower or any Guarantor under the

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provisions of this Agreement or any other Loan Document or otherwise; (ii) any extension or renewal of any provision hereof or thereof; (iii) any rescission, waiver, compromise, acceleration, amendment or modification of any of the terms or provisions of any of the Loan Documents; (iv) the release, exchange, waiver or foreclosure of any security held by the Agent for the Obligations or any of them; (v) the failure of the Agent or a Lender to exercise any right or remedy against any other Borrower or Guarantor; (vi) the release or substitution of any Borrower or any Guarantor; or (vii) any other circumstance that might otherwise constitute a discharge of a surety, other than, in each case, the indefeasible payment in full in cash of the Obligations .

SECTION 2. AMOUNT AND TERMS OF CREDIT

          SECTION 2.01. The Facility. Subject to the terms and conditions set forth herein, each Lender agrees to make Loans to the Borrowers from time to time during the Availability Period in an aggregate principal amount that will not result in (i) such Lender’s Revolving Credit Exposure exceeding such Lender’s Commitment or (ii) the Aggregate Credit Exposures exceeding the Total Commitment. The Issuing Bank will issue Letters of Credit hereunder on the terms and conditions set forth below. The Facility shall be composed of Revolving Loans, Swingline Loans, Protective Advances and Letters of Credit as set forth below.

          SECTION 2.02. Revolving Loans. Subject to the terms and conditions set forth herein, each Lender agrees to make Revolving Loans to the Borrowers from time to time during the Availability Period in an aggregate principal amount that will not result in (i) such Lender’s Revolving Credit Exposure exceeding such Lender’s Commitment or (ii) the Aggregate Credit Exposure exceeding the lesser of (x) the sum of the Total Commitments minus the Liquidity Reserve from and after the occurrence and during the continuance of a Liquidity Trigger Event or (y) the Borrowing Base, subject to the Agent’s authority, in its sole discretion, to make Protective Advances pursuant to the terms of Section 2.05. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrowers may borrow, prepay and reborrow Revolving Loans.

          SECTION 2.03. Loans and Borrowings.

               (a) Each Revolving Loan shall be made as part of a Borrowing consisting of Revolving Loans made by the Lenders ratably in accordance with their respective Commitments. Any Protective Advance shall be made in accordance with the procedures set forth in Section 2.05.

               (b) Subject to Section 2.04, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrowers Agent may request in accordance herewith. Each Swingline Loan shall be an ABR Loan. Subject to Section 2.15, each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrowers to repay such Loan in accordance with the terms of this Agreement.

               (c) At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of

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$1,000,000 and not less than $5,000,000. Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of 10 Eurodollar Borrowings outstanding.

               (d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.

          SECTION 2.04. Requests for Borrowings. To request a Borrowing, the Borrowers’ Agent shall notify the Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 noon, Central time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 1:00 p.m., Central time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or facsimile to the Agent of a written Borrowing Request in substantially the form of Exhibit G and signed by the Borrowers’ Agent. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.03:

                    (i) the aggregate amount of the requested Borrowing;

                    (ii) the date of such Borrowing, which shall be a Business Day;

                    (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

                    (iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period.”

If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.

          SECTION 2.05. Protective Advances.

               (a) Subject to the limitations set forth below, the Agent is authorized by the Borrowers, the Guarantors and the Lenders, from time to time after the occurrence and during the continuance of an Event of Default in the Agent’s sole discretion (but shall have absolutely no obligation to), to make Loans to the Borrowers, on behalf of all Lenders, which the Agent, in its Permitted Discretion, deems necessary or desirable (i) to preserve or protect the Collateral, or any portion thereof, (ii) to enhance the likelihood of, or maximize the amount of, repayment of the Loans and other Obligations, or (iii) to pay any other amount chargeable to or required to be paid by the Borrowers pursuant to the terms of this Agreement, including

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payments of principal, interest, Letter of Credit Disbursements, fees, premiums, reimbursable expenses and other sums payable under the Loan Documents (any of such Loans are herein referred to as “Protective Advances”), whether or not such Protective Advances shall cause the Aggregate Credit Exposure to exceed the Total Commitment; provided that, the aggregate amount of Protective Advances outstanding at any time, which were made pursuant to clauses (i) and (ii) above, shall not at any time exceed $10,000,000. Protective Advances may be made even if the conditions precedent set forth in Section 4.02 have not been satisfied. The Protective Advances shall be secured by the Liens in favor of the Agent in and to the Collateral and shall constitute Obligations hereunder. All Protective Advances shall be ABR Borrowings. The Agent’s authorization to make Protective Advances may be revoked at any time by the Required Lenders. Any such revocation must be in writing and shall become effective prospectively upon the Agent’s receipt thereof. At any time that there is sufficient Availability and the conditions precedent set forth in Section 4.02 have been satisfied, the Agent may request the Lenders to make a Revolving Loan to repay a Protective Advance. At any other time the Agent may require the Lenders to fund their risk participations described in Section 2.05(b).

               (b) Upon the making of a Protective Advance by the Agent (whether before or after the occurrence of a Default), each Lender shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably purchased from the Agent without recourse or warranty, an undivided interest and participation in such Protective Advance in proportion to its Commitment Percentage.

          SECTION 2.06. Swingline Loans.

               (a) The Agent, the Swingline Lender and the Revolving Lenders agree that in order to facilitate the administration of this Agreement and the other Loan Documents, promptly after the Borrowers request an ABR Borrowing, the Swingline Lender may elect to have the terms of this Section 2.06(a) apply to such Borrowing Request by advancing, on behalf of the Lenders and in the amount requested, same day funds to the Borrowers on the applicable Borrowing date to the Funding Account (each such Loan made solely by the Swingline Lender pursuant to this Section 2.06(a) is referred to in this Agreement as a “Swingline Loan”), with settlement among them as to the Swingline Loans to take place on a periodic basis as set forth in Section 2.06(c). Each Swingline Loan shall be subject to all the terms and conditions applicable to other ABR Loans funded by the Lenders, except that all payments thereon shall be payable to the Swingline Lender solely for its own account. In addition, the Borrowers hereby authorize the Swingline Lender to, and the Swingline Lender shall, subject to the terms and conditions set forth herein (but without any further written notice required), not later than 3:00 p.m., Central time, on each Business Day, make available to the Borrowers by means of a credit to the Funding Account, the proceeds of a Swingline Loan to the extent necessary to pay items to be drawn on any Cash Management Account that day (as determined based on notice from the Agent). The aggregate amount of Swingline Loans outstanding at any time shall not exceed $17,500,000. The Swingline Lender shall not make any Swingline Loan if the requested Swingline Loan exceeds Availability (immediately before giving effect to such Swingline Loan). Swingline Loans may be made even if a Default exists, but may not be made if the conditions precedent set forth in Section 4.02 (other than the condition set forth in Section 4.02(c)) have not been satisfied. All Swingline Loans shall be ABR Borrowings.

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               (b) Upon the making of a Swingline Loan (whether before or after the occurrence of a Default and regardless of whether a Settlement has been requested with respect to such Swingline Loan), each Lender shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably purchased from the Swingline Lender or the Administrative Agent, as the case may be, without recourse or warranty, an undivided interest and participation in such Swingline Loan in proportion to its Commitment Percentage of the Commitment. The Swingline Lender or the Agent may, at any time, require the Lenders to fund their participations. From and after the date, if any, on which any Lender is required to fund its participation in any Swingline Loan purchased hereunder, the Agent shall promptly distribute to such Lender, such Lender’s Commitment Percentage of all payments of principal and interest and all proceeds of Collateral received by the Agent in respect of such Loan.

               (c) The Agent, on behalf of the Swingline Lender, shall request settlement (a “Settlement”) with the Lenders on at least a weekly basis on any date that the Agent elects, by notifying the Lenders of such requested Settlement by facsimile, telephone, or e-mail no later than 12:00 noon, Central time on the date of such requested Settlement (the “Settlement Date”). Each Lender (other than the Swingline Lender, in the case of the Swingline Loans) shall transfer the amount of such Lender’s Commitment Percentage of the outstanding principal amount of the applicable Loan with respect to which Settlement is requested to the Agent, to such account of the Agent as the Agent may designate, not later than 2:00 p.m., Central time, on such Settlement Date. Settlements may occur during the existence of a Default and whether or not the applicable conditions precedent set forth in Section 4.02 have then been satisfied. Such amounts transferred to the Agent shall be applied against the amounts of the Swingline Lender’s Swingline Loans and, together with Swingline Lender’s Commitment Percentage of such Swingline Loan, shall constitute Revolving Loans of such Lenders, respectively. If any such amount is not transferred to the Agent by any Lender on such Settlement Date, the Swingline Lender shall be entitled to recover such amount on demand from such Lender together with interest thereon as specified in Section 2.08.

          SECTION 2.07. Letters of Credit.

               (a) General. Subject to the terms and conditions set forth herein, the Borrowers’ Agent may request the issuance of Letters of Credit for the account of any Borrower, in a form reasonably acceptable to the Agent and the Issuing Bank, at any time and from time to time during the Availability Period. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrowers’ Agent, any Borrower or any Guarantor to, or entered into by any such Person with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control.

               (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrowers’ Agent shall hand deliver or facsimile (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Agent (prior to 1:00 p.m., Central time, at least three (3) Business Days (or such shorter period as may be agreed by the Borrowers’ Agent and the Issuing Bank) prior to the requested date of issuance, amendment, renewal or

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extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the Issuing Bank, the Borrower also shall submit a letter of credit application on the Issuing Bank’s standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the Letter of Credit Exposure shall not exceed $60,000,000, (ii) the total Revolving Credit Exposures shall not exceed the lesser of (x) the Total Commitments minus the Liquidity Reserve from and after the occurrence and during the continuance of a Liquidity Trigger Event and (y) the Borrowing Base and (iii) such requested Letter of Credit is satisfactory to the Issuing Bank and the Agent.

               (c) Expiration Date. Each Letter of Credit shall expire (the “Expiration Date”) at or prior to the close of business on the date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension); provided that if the Expiration Date is a date which is on or after the 5^th Business Day prior to the Maturity Date, then on or prior to the Maturity Date, the Borrower shall cash collateralize the Obligations with respect to such Letter of Credit in accordance with Section 2.07(j)(ii).

               (d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Commitment Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Agent, for the account of the Issuing Bank, such Lender’s Commitment Percentage of each Letter of Credit Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

               (e) Reimbursement. If the Issuing Bank shall make any Letter of Credit Disbursement in respect of a Letter of Credit, the Borrowers shall reimburse such Letter of Credit Disbursement by paying to the Agent an amount equal to such Letter of Credit Disbursement not later than 3:00 p.m., Central time, on the date that such Letter of Credit Disbursement is made, if the Borrower shall have received notice of such Letter of Credit Disbursement prior to 1:00 p.m., Central time, on such date, or, if such notice has not been

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received by the Borrower prior to such time on such date, then not later than 1:00 p.m., Central time, on (i) the Business Day that the Borrower receives such notice, if such notice is received prior to 10:00 a.m., Chicago time, on the day of receipt, or (ii) the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the day of receipt. The Borrowers may, subject to the conditions of borrowing set forth herein, request in accordance with Sections 2.04 or 2.06 that such payment be financed with an ABR Borrowing or Swingline Loan in an equivalent amount. Unless the Borrowers otherwise specify, each such payment automatically will be financed with a Swingline Loan in an equivalent amount, subject to the satisfaction of the conditions set forth in Section 4.02. To the extent any such payment is financed with an ABR Loan or a Swingline Loan, the Borrowers’ obligation to make such payment shall be discharged and replaced by the resulting ABR Loan or Swingline Loan. If the Borrower is ineligible to finance such payment with an ABR Loan or a Swingline Loan due to its inability to satisfy the conditions set forth in Section 4.02 or otherwise fails to make such payment when due, the Agent shall notify each Lender of the applicable Letter of Credit Disbursement, the payment then due from the Borrower in respect thereof and such Lender’s Commitment Percentage thereof. Promptly following receipt of such notice, each Lender shall pay to the Agent its Commitment Percentage of the payment then due from the Borrowers, in the same manner as provided in Section 2.08 with respect to Loans made by such Lender (and Section 2.08 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Lenders. Promptly following receipt by the Agent of any payment from the Borrowers pursuant to this paragraph, the Agent shall distribute such payment to the Issuing Bank or, to the extent that Lenders have made payments pursuant to this paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing Bank as their interests may appear. Any payment made by a Lender pursuant to this paragraph to reimburse the Issuing Bank for any Letter of Credit Disbursement (other than the funding of ABR Revolving Loans or a Swingline Loan as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such Letter of Credit Disbursement.

               (f) Obligations Absolute. The Borrower’s obligation to reimburse Letter of Credit Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrowers’ obligations hereunder. Neither the Agent, the Lenders nor the Issuing Bank, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of

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technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrowers to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrowers to the extent permitted by applicable law) suffered by any Borrower that are caused by the Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and refuse to make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

               (g) Disbursement Procedures. The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall promptly notify the Agent and the Borrowers’ Agent by telephone (confirmed by facsimile) of such demand for payment and whether the Issuing Bank has made or will make an Letter of Credit Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrowers of their obligation to reimburse the Issuing Bank and the Lenders with respect to any such Letter of Credit Disbursement.

               (h) Interim Interest. If the Issuing Bank shall make any Letter of Credit Disbursement, then, unless the Borrowers shall reimburse such Letter of Credit Disbursement in full on the date such Letter of Credit Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such Letter of Credit Disbursement is made to but excluding the date that the Borrower reimburses such Letter of Credit Disbursement, at the rate per annum then applicable to ABR Revolving Loans; provided that, if the Borrower fails to reimburse such Letter of Credit Disbursement when due pursuant to paragraph (e) of this Section, then Section 2.14(d) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment.

               (i) Replacement of the Issuing Bank. The Issuing Bank may be replaced at any time by written agreement among the Borrowers, the Agent, the replaced Issuing Bank and the successor Issuing Bank. The Agent shall notify the Lenders of any such replacement of the Issuing Bank. At the time any such replacement shall become effective, the Borrowers shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.13(b). From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed to refer to such successor or to any previous Issuing

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Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.

               (j) Cash Collateralization.

                    (i) If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Lenders with Letter of Credit Exposure representing greater than 50% of the total Letter of Credit Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in the Letter of Credit Account an amount in cash equal to 105% of the Letter of Credit Shortfall as of such date (“Cash Collateralization”); provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (e), (f), (i) or (j) of Article VII. Such deposit shall be held by the Agent as collateral for the payment and performance of the Obligations. The Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account and the Borrowers hereby grant the Agent a security interest in the Letter of Credit Account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Agent and at the Borrower’s risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Agent to reimburse the Issuing Bank for Letter of Credit Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the Letter of Credit Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Lenders with Letter of Credit Exposure representing greater than 50% of the total Letter of Credit Exposure), be applied to satisfy other Obligations. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three (3) Business Days after all such Events of Default have been cured or waived, unless needed to satisfy Section 2.07(j)(ii).

                    (ii) If, notwithstanding the provisions of this Section 2.07, any Letter of Credit is outstanding on the Termination Date, then on such date the Borrower shall deposit with the Agent, for the benefit of the Agent and the Lenders, with respect to all Letter of Credit Exposure, as the Agent in its discretion shall specify, either (i) a Supporting Letter of Credit (under which the Agent is entitled to draw amounts necessary to reimburse the Issuing Bank for Letter of Credit Disbursements for which it has not been reimbursed and any fees

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and expenses associated with such outstanding Letter of Credit), or (ii) cash, in immediately available funds, in an amount equal to 105% of the Letter of Credit Shortfall Amount to be held in the Letter of Credit Collateral Account. Such Supporting Letter of Credit or deposit of cash shall be held by the Agent, for the benefit of the Agent and the Lenders, as collateral for the payment and performance of the obligations of the Borrowers under any such Letter of Credit remaining outstanding.

          SECTION 2.08. Funding of Borrowings.

               (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 11:00 a.m., Chicago time, to the account of the Agent most recently designated by it for such purpose by notice to the Lenders in an amount equal to such Lender’s Commitment Percentage; provided that Swingline Loans shall be made as provided in Section 2.06. The Agent will make such Loans available to the Borrowers by promptly crediting the amounts so received, in like funds, to the Funding Account; provided that ABR Revolving Loans made to finance the reimbursement of (i) an Letter of Credit Disbursement as provided in Section 2.07(e) shall be remitted by the Agent to the Issuing Bank and (ii) a Protective Advance shall be retained by the Agent.

               (b) Unless the Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Agent such Lender’s share of such Borrowing, the Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrowers a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Agent (a “Defaulting Lender”), then the applicable Lender and the Borrowers severally agree to pay to the Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrowers to but excluding the date of payment to the Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrowers, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing. The Agent shall not be obligated to transfer to a Defaulting Lender any payments made by the Borrowers to the Agent for the Defaulting Lender’s benefit, and, in the absence of such transfer to the Defaulting Lender, the Agent shall transfer any such payments to each other non-Defaulting Lender ratably in accordance with their Commitment Percentage of the Commitments (but only to the extent that such Defaulting Lender’s Borrowing was funded by the other Lenders) or, if so directed by the Borrowers’ Agent and if no Default has occurred and is continuing (and to the extent such Defaulting Lender’s Borrowing was not funded by the other Lenders), retain the same to be re-advanced to the Borrowers as if such Defaulting Lender had made Loans to the Borrowers. Subject to the foregoing, the Agent may hold and, in its Permitted Discretion, setoff such Defaulting Lender’s funding shortfall against that Defaulting Lender’s Commitment Percentage of all payments received from the Borrowers or re-lend to the Borrowers for the account of such Defaulting Lender the amount of all such payments received and retained by the Agent for the account of such Defaulting Lender. Until a Defaulting Lender cures its failure to fund its Commitment

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Percentage of any Borrowing (i) solely for the purposes of voting or consenting to matters with respect to the Loan Documents, such Defaulting Lender shall be deemed not to be a “Lender” and such Defaulting Lender’s Commitment shall be deemed to be zero, (ii) such Defaulting Lender shall not be entitled to any portion of the commitment fee and (iii) the commitment fee shall accrue in favor of the Lenders which have funded their respective Commitment Percentages of such requested Borrowing and shall be allocated among such non-Defaulting Lenders ratably based on their Commitment Percentage of the Commitments. This Section shall remain effective with respect to such Defaulting Lender until (x) the Obligations under this Agreement shall have been declared or shall have become immediately due and payable, (y) the non-Defaulting Lenders, the Agent, and the Borrowers shall have waived such Defaulting Lender’s default in writing, or (z) the Defaulting Lender makes its Commitment Percentage of the applicable Borrowing and pays to Agent all amounts owing by the Defaulting Lender in respect thereof. The operation of this Section shall not be construed to increase or otherwise affect the Commitment of any Lender, to relieve or excuse the performance by such Defaulting Lender or any other Lender of its duties and obligations hereunder, or to relieve or excuse the performance by the Borrowers of their duties and obligations hereunder.

          SECTION 2.09. Interest Elections.

               (a) Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrowers may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrowers may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Swingline Borrowings or Protective Advances, which may not be converted or continued.

               (b) To make an election pursuant to this Section, the Borrowers’ Agent shall notify the Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.04 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or facsimile to the Agent of a written Interest Election Request in a form approved by the Agent and signed by the Borrower.

               (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.03:

                    (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

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                    (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

                    (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

                    (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.

               (d) Promptly following receipt of an Interest Election Request, the Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

               (e) If the Borrowers fail to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if a Default has occurred and is continuing and the Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as a Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

          SECTION 2.10. Termination of Commitments.

               (a) Unless previously terminated, the Commitments shall terminate on the Termination Date.

               (b) The Borrowers may at any time terminate the Commitments upon (i) the payment in full of all outstanding Loans, together with accrued and unpaid interest thereon, (ii) the cancellation and return of all outstanding Letters of Credit (or alternatively, with respect to each such Letter of Credit, the furnishing to the Agent of a cash deposit or Supporting Letter of Credit as required by Section 2.07(j)(ii)) and (iii) the payment in full of all reimbursable expenses and other Obligations together with accrued and unpaid interest thereon.

               (c) The Borrowers’ Agent shall notify the Agent of any election to terminate the Commitments under paragraph (b) of this Section at least two (2) Business Days prior to the closing date of such termination, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrowers’ Agent pursuant to this Section shall be irrevocable. Any termination of the Commitments shall be permanent.

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          SECTION 2.11. Repayment of Loans; Evidence of Debt.

               (a) The Borrowers hereby unconditionally promise to pay (i) to the Agent for the account of each Lender the then unpaid principal amount of each Revolving Loan on the Termination Date, (ii) to the Agent the then unpaid amount of each Protective Advance on the earlier of the Termination Date and demand by the Agent. All unpaid Obligations shall be paid in full in cash by the Borrower on the Termination Date.

               (b) At all times that the Dominion Period is in effect pursuant to Section 10.02, each Business Day, at or before 12:00 noon, Central time, the Agent shall apply all immediately available funds credited to the Cash Management Account first to prepay any Protective Advances that may be outstanding, pro rata, second, to repay the Swingline Loans and third, to prepay the Revolving Loans and, if an Event of Default has occurred and is continuing, to cash collateralize outstanding Letter of Credit Exposure in an amount equal to 105% of the Letter of Credit Shortfall Amount.

               (c) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

               (d) The Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Agent hereunder for the account of the Lenders and each Lender’s share thereof.

               (e) The entries made in the accounts maintained pursuant to paragraph (c) or (d) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that in the event of a conflict between an account maintained pursuant to paragraph (c) and an account maintained pursuant to paragraph (d) of this Section, the account maintained under paragraph (d) shall control; provided further, that the failure of any Lender or the Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement.

               (f) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered and permitted assigns) and in a form approved by the Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 11.03) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns) except to the extent that any such Lender subsequently returns any such promissory note for cancellation and requests that such Loans once again be evidenced as described in paragraphs (c) and (d) above.

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          SECTION 2.12. Prepayment of Loans.

               (a) The Borrowers shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (c) of this Section.

               (b) (i) The Borrowers shall immediately repay the Revolving Loans, Letter of Credit Exposure and/or Swingline Loans if at any time the Aggregate Credit Exposure exceeds the lesser of (A) the Total Commitments minus the Liquidity Reserve from and after the occurrence and during the continuance of a Liquidity Trigger Event and (B) the Borrowing Base, to the extent required to eliminate such excess; provided that any such repayments shall be applied first to pay any Protective Advances that may be outstanding, second to prepay Swingline Loans that may be outstanding, third to prepay Revolving Loans that may be outstanding, fourth to pay any unreimbursed Letter of Credit Disbursements, and fifth, if an Event of Default shall have occurred and be continuing, to cash collateralize Letters of Credit.

                    (ii) No later than the next Business Day after receipt by any Borrower or any Guarantor of the Net Proceeds of any asset disposition (other than sales of inventory in the ordinary course of business) the Borrower shall prepay the Obligations in an amount equal to 100% of such Net Proceeds as set forth in paragraph (b)(v) below; provided, however, that so long as no Dominion Period is in effect, such Borrower or such Guarantor, as the case may be, shall be entitled to retain such Net Proceeds of up to (x) $1,000,000 individually and (y) $5,000,000 in the aggregate.

                    (iii) If any Borrower or Guarantor issues Equity Interests or Indebtedness (other than Indebtedness permitted by clauses (i) — (ix) of Section 6.03), the Borrowers shall prepay the Obligations in an amount equal to 100% of the Net Proceeds of such issuance no later than the Business Day following the date of receipt of such Net Proceeds as set forth in paragraph (b)(vii) below.

                    (iv) Any insurance or condemnation proceeds to be applied to the Obligations in accordance with Section 5.03 shall be applied as set forth in paragraph (b)(vii) below. If the precise amount of insurance or condemnation proceeds allocable to Inventory as compared to Equipment, Fixtures and real Property is not otherwise determined, the allocation and application of those proceeds shall be determined by the Agent, in its Permitted Discretion.

                    (v) During a Dominion Period, promptly (and in no event, later than one (1) Business Day after the receipt thereof) upon receipt by any Borrower or any Guarantor of the Net Proceeds of any Extraordinary Receipts, the Borrowers shall prepay the Obligations in an amount equal to 100% of such Net Proceeds as set forth in paragraph (b)(vii) below.

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                    (vi) Without in any way limiting the foregoing, immediately upon receipt by any Borrower or any Guarantor of proceeds of any sale of any Collateral, the Borrower shall cause such Borrower or Guarantor to deliver such proceeds to the Agent, or deposit such proceeds in a deposit account subject to a control agreement acceptable to the Agent. All of such proceeds shall be applied during a Dominion Period as set forth in accordance with Section 2.12(b)(vii) below or otherwise as provided in Section 2.19(b). Nothing in this Section shall be construed to constitute Agent’s or any Lender’s consent to any transaction that is not permitted by other provisions of this Agreement or the other Loan Documents.

                    (vii) All such amounts pursuant to Sections 2.12(b)(ii) and (iii) and Sections 2.12(v) and (vi) (to the extent such proceeds are received during a Dominion Period) and Section 2.12(b)(iv) (to the extent such insurance or condemnation proceeds arise from casualties or losses to Equipment, Fixtures and real Property) shall be applied, first to prepay any Protective Advances that may be outstanding, pro rata, second to prepay Swingline Loans that may be outstanding, and third to prepay the Revolving Loans without a corresponding reduction in the Commitment and, if an Event of Default shall have occurred and be continuing, to cash collateralize outstanding Letter of Credit Exposure.

               (c) The Borrowers’ Agent shall notify the Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmed by facsimile) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 12:00 noon, Chicago time, three Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Borrowing, not later than 1:00 p.m., Central time, one Business Day before the date of prepayment. Promptly following receipt of any such notice relating to a Borrowing, the Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.03. Each prepayment of a Borrowing shall be applied ratably to the Revolving Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.14.

          SECTION 2.13. Fees.

               (a) The Borrowers agree to pay to the Agent for the account of each Lender a commitment fee (the “Commitment Fee”), which shall accrue at the Applicable Commitment Fee Rate on the average daily amount of the Unused Total Commitment of such Lender during the period from and including the Closing Date to but excluding the date on which the Lenders’ Commitments terminate. Accrued Commitment Fees shall be payable in arrears on the last day of each calendar month and on the date on which the Commitments terminate, commencing on the first such date to occur after the date hereof. All Commitment Fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

               (b) The Borrower agrees to pay (i) to the Agent for the account of each Lender a participation fee with respect to its participations in Letters of Credit, at a per annum

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rate equal to 2.0% on the average daily amount of such Lender’s Letter of Credit Exposure (excluding any portion thereof attributable to unreimbursed Letter of Credit Disbursements) during the period from and including the Closing Date to but excluding the later of the date on which such Lender’s Commitment terminates and the date on which such Lender ceases to have any Letter of Credit Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at the rate of 0.125% per annum on the average daily amount of the Letter of Credit Exposure (excluding any portion thereof attributable to unreimbursed Letter of Credit Disbursements) during the period from and including the Closing Date to but excluding the later of the date of termination of the Commitments and the date on which there ceases to be any Letter of Credit Exposure, as well as the Issuing Bank’s standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including the last day of each calendar month shall be payable on the third Business Day following such last day, commencing on the first such date to occur after the Closing Date; provided that all such fees shall be payable on the date on which the Commitments terminate and any such fees accruing after the date on which the Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within fourteen (14) days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

               (c) The Borrowers agree to pay to the Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrowers and the Agent in the Commitment Letter and that certain Fee Letter dated as of January 14, 2005.

               (d) The Borrowers agree to pay all Collateral Monitoring Fees pursuant to Section 5.08.

               (e) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Agent (or to the Issuing Bank, in the case of fees payable to it) for distribution, in the case of Commitment Fees and participation fees, to the Lenders. Fees paid shall not be refundable under any circumstances.

          SECTION 2.14. Interest.

               (a) The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear interest at the Alternate Base Rate plus the Applicable Margin.

               (b) The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin.

               (c) Each Protective Advance shall bear interest at the Alternate Base Rate plus the Applicable Margin for Revolving Loans plus 2%.

               (d) Notwithstanding the foregoing, during the occurrence and continuance of an Event of Default, the Agent or the Required Lenders may, at their option, by notice to the Borrowers (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 11.02 requiring the consent of each Lender affected

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thereby for reductions in interest rates), declare that (i) all Loans shall bear interest at 2% plus the rate otherwise applicable to such Loans as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount outstanding hereunder, such amount shall accrue at 2% plus the rate applicable to such fee or other obligation as provided hereunder.

               (e) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and upon termination of the Commitments; provided that (i) interest accrued pursuant to paragraph (d) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Revolving Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

               (f) All interest hereunder shall be computed on the basis of a year of 360 days, and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Agent, and such determination shall be conclusive absent manifest error.

          SECTION 2.15. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurodollar Borrowing:

               (a) the Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period; or

               (b) the Agent is advised by the Required Lenders that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing for such Interest Period;

then the Agent shall give notice thereof to the Borrowers’ Agent and the Lenders by telephone or facsimile as promptly as practicable thereafter and, until the Agent notifies the Borrowers’ Agent and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing.

          SECTION 2.16. Increased Costs.

               (a) If any Change in Law shall:

                    (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the

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                    account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank; or

                    (ii) impose on any Lender or the Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or the Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrowers will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.

               (b) If any Lender or the Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on the capital of such Lender’s or the Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Bank’s policies and the policies of such Lender’s or the Issuing Bank’s holding company with respect to capital adequacy), then from time to time the Borrowers will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company for any such reduction suffered.

               (c) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrowers and shall be conclusive absent manifest error. The Borrowers shall pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such certificate within fourteen (14) days after receipt thereof.

               (d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or the Issuing Bank’s right to demand such compensation; provided that the Borrowers shall not be required to compensate a Lender or the Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender or the Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the Issuing Bank’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased

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costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

          SECTION 2.17. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant hereto, or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrowers pursuant to Section 2.20, then, in any such event, the Borrowers shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate (without including the Applicable Margin in such calculation) that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within fourteen (14) days after receipt thereof.

          SECTION 2.18. Taxes.

               (a) Any and all payments by or on account of any obligation of the Borrowers or the Guarantors hereunder shall be made free and clear of and without deduction for any Indemnified Taxes; provided that if the Borrowers or the Guarantors or the Agent shall be required to deduct any Indemnified Taxes from such payments, then (i) the Borrowers or the Guarantors, as the case may be, shall increase the sum payable as necessary so that after all required deductions and payments of Taxes (including deductions and payments of Taxes applicable to additional sums payable under this Section) the Agent, Lender or Issuing Bank and each of their Tax Related Persons (as the case may be) receives and retains (after taking into account the deductions and/or payment of all related Taxes, including income Taxes) an amount equal to the sum it would have received and retained (after taking into account the deductions and/or payment of all related Taxes, including income Taxes) had no such deductions been made or such Taxes been payable, (ii) the Borrowers and/or the Agent and each of their Tax Related Persons shall make such deductions and (iii) the Borrowers and/or the Agent shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

               (b) In addition, the Borrowers shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

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               (c) The Borrowers shall indemnify the Agent, each Lender and the Issuing Bank for the full amount of any Indemnified Taxes paid by the Agent, such Lender or the Issuing Bank and each of their Tax Related Persons, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrowers hereunder (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority, but excluding penalties, interest and other expenses to the extent solely and directly attributable to the gross negligence or willful misconduct of the Person claiming such indemnity. Payment under this Section 2.18(c) shall be made within fourteen (14) days after the Agent, Lender or the Issuing Bank makes written demand therefor.. Such indemnification shall be made on an after-Tax basis, such that after all required deductions and payments of all Taxes (including, without limitation, deductions applicable to amounts payable under this Section 2.18 and income Taxes) and payment of all reasonable expenses, the Agent, the Issuing Bank, the Lenders and each of their respective Tax Related Persons receives and retains (after taking into account the deductions and/or payment of all related Taxes, including income Taxes) an amount equal to the sum it would have received and retained (after taking into account the deductions and/or payment of all related Taxes, including income Taxes) had such Indemnified Taxes not been paid or incurred or otherwise applicable. A certificate as to the amount of such payment or liability delivered to the Borrowers by a Lender or the Issuing Bank, or by the Agent on its own behalf or on behalf of a Lender or the Issuing Bank or their respective Tax Related Persons, shall be conclusive absent manifest error.

               (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrowers to a Governmental Authority, the Borrowers shall deliver to the Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Agent.

               (e) Any Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which any Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrowers’ Agent and the Agent, at the time or times prescribed by applicable law, the appropriate properly completed and executed Internal Revenue Service Form W-8 (including, without limitation, Form W-8ECI, W-8BEN or W-8IMY) or Form W-9 or such other evidence satisfactory to the Borrowers’ Agent and the Agent as will permit such payments to be made without withholding or at a reduced rate. “United States persons” (within the meaning of Code section 7701(a)(30)) that are “exempt recipients” (within the meaning of Treasury Regulations section 1.6049-4(c)(1)(ii) (without regard to the second sentence thereof)) shall not be required to furnish an Internal Revenue Service Form W-9 unless (i) Borrowers’ Agent reasonably believes that such person is, in fact, not an “exempt recipient,” and (ii) Borrowers’ Agent timely and reasonably requests a Form W-9 from such Person (provided, however, that if a United States person is not legally entitled to deliver a Form W-9 as a result of a change in law occurring after the date hereof, such Person shall not be required to deliver such Form W-9).

               (f) If the Agent or a Lender determines, in its sole discretion, that it has received a refund of any Taxes paid by any Borrower or as to which it has been indemnified

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by any Borrower or with respect to which any Borrower has paid additional amounts pursuant to this Section 2.18, it shall pay over such refund to such Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by such Borrower under this Section 2.18 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses and Taxes of the Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund) within 30 days of the receipt of such amount; provided, that the Borrowers, upon the request of the Agent or such Lender, agree to repay the amount paid over to any Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Agent or such Lender in the event the Agent or such Lender is required to repay such refund to such Governmental Authority. Nothing in this Section 2.18 shall be construed to require the Agent, any Lender, the Issuing Bank (or any of their Tax Related Persons) to make available its Tax returns (or any other information which it deems confidential) to any Borrower or any other Person.

          SECTION 2.19. Payments Generally; Allocation of Proceeds; Sharing of Set-offs.

               (a) The Borrowers shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of Letter of Credit Disbursements, or of amounts payable under Section 2.16, 2.17 or 2.18, or otherwise) prior to 1:00 p.m., Central time, on the date when due, in immediately available funds, without set off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Agent at its offices at 120 South LaSalle Street, Chicago, Illinois, except payments to be made directly to the Issuing Bank or Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.16, 2.17, 2.18 and 9.03 shall be made directly to the Persons entitled thereto. The Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in Dollars. Solely for purposes of determining the amount of Loans available for borrowing purposes, checks and cash or other immediately available funds from collections of items of payment and proceeds of any Collateral shall be applied in whole or in part against the Obligations, on the day of receipt, subject to actual collection.

               (b) Any proceeds of Collateral received by the Agent (i) not constituting either (A) a specific payment of principal, interest, fees or other sum payable under the Loan Documents (which shall be applied as specified by the Borrowers’ Agent), (B) a mandatory prepayment (which shall be applied in accordance with Section 2.12) or (C) amounts to be applied from the Cash Management Account (which shall be applied in accordance with Section 2.11(b)) or (ii) after an Event of Default has occurred and is continuing and the Agent so elects or the Required Lenders so direct, such funds shall be applied ratably first, to pay any fees, indemnities, or expense reimbursements including amounts then due to the Agent and the Issuing Bank from the Borrowers

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(other than in connection with Banking Services or Swap Obligations), second, to pay any fees or expense reimbursements then due to the Lenders from the Borrowers (other than in connection with Banking Services or Swap Obligations), third, to pay interest due in respect of the Protective Advances, fourth, to pay the principal of the Protective Advances, fifth, to pay interest then due and payable on the Swingline Loans ratably, sixth, to pay the principal on the Swingline Loans ratably, seventh, to pay interest then due and payable on the Revolving Loans ratably, eighth, to prepay principal on the Revolving Loans and unreimbursed Letter of Credit Disbursements ratably, ninth, if an Event of Default has occurred and is continuing, to pay an amount to the Agent equal to one hundred five percent (105%) of the aggregate undrawn face amount of all outstanding Letters of Credit and the aggregate amount of any unpaid Letter of Credit Disbursements, to be held as cash collateral for such Obligations, tenth, to payment of any amounts owing with respect to Banking Services and Swap Obligations (to the extent the same are Obligations), and eleventh, to the payment of any other Obligation due to the Agent or any Lender by the Borrowers. Notwithstanding anything to the contrary contained in this Agreement, unless so directed by the Borrowers’ Agent, or unless a Default is in existence, neither the Agent nor any Lender shall apply any payment which it receives to any Eurodollar Loan, except (a) on the expiration date of the Interest Period applicable to any such Eurodollar Loan or (b) in the event, and only to the extent, that there are no outstanding ABR Loans and, in any event, the Borrowers shall pay the break funding payment required in accordance with Section 2.17. The Agent and the Lenders shall have the continuing and exclusive right to apply and reverse and reapply any and all such proceeds and payments to any portion of the Obligations.

               (c) At the election of the Agent, all payments of principal, interest, Letter of Credit Disbursements, fees, premiums, reimbursable expenses (including, without limitation, all reimbursement for fees and expenses pursuant to Section 11.03), and other sums payable under the Loan Documents, may be paid from the proceeds of Borrowings made hereunder whether made following a request by the Borrowers’ Agent pursuant to Section 2.04 or a deemed request as provided in this Section or may be deducted from any deposit account of the Borrower maintained with the Agent. The Borrowers hereby irrevocably authorize (i) the Agent to make a Borrowing for the purpose of paying each payment of principal, interest and fees as it becomes due hereunder or any other amount due under the Loan Documents and agrees that all such amounts charged shall constitute Loans (including Swingline Loans and Protective Advances) and that all such Borrowings shall be deemed to have been requested pursuant to Sections 2.04, 2.05 or 2.06, as applicable and (ii) the Agent to charge any deposit account of the Borrowers maintained with the Agent for each payment of principal, interest and fees as it becomes due hereunder or any other amount due under the Loan Documents, to the extent such payment has not already been made.

               (d) If any Lender shall, by exercising any right of set off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or participations in Letter of Credit Disbursements resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and participations in Letter of Credit Disbursements and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and participations in Letter of Credit Disbursements of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and participations in Letter of Credit Disbursements; provided that (i) if any

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such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrowers pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in Letter of Credit Disbursements to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrowers consent to the foregoing and agree, to the extent they may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against any Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Borrower in the amount of such participation.

               (e) Unless the Agent shall have received notice from the Borrowers’ Agent prior to the date on which any payment is due to the Agent for the account of the Lenders or the Issuing Bank hereunder that the Borrowers will not make such payment, the Agent may assume that the Borrowers have made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may be, the amount due. In such event, if the Borrowers have not in fact made such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Agent in accordance with banking industry rules on interbank compensation.

               (f) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.06, 2.07(d) or (e), 2.08(b), 2.19(e) or 8.06, then the Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.

          SECTION 2.20. Mitigation Obligations; Replacement of Lenders. If any Lender requests compensation under Section 2.16, or if the Borrowers are required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.18, then:

               (a) such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.16 or 2.18, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender (and the Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment);

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               (b) the Borrower may, at its sole expense and effort, require such Lender or any Defaulting Lender (such Lender or Defaulting Lender herein, a “Departing Lender”), upon notice to the Departing Lender and the Agent, to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 11.03), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrowers shall have received the prior written consent of the Agent (and if a Commitment is being assigned, the Issuing Bank), which consent shall not unreasonably be withheld, (ii) the Departing Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in Letter of Credit Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrowers (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.16 or payments required to be made pursuant to Section 2.18, such assignment will result in a reduction in such compensation or payments. A Departing Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

          SECTION 2.21. Indemnity for Returned Payments. If after receipt of any payment which is applied to the payment of all or any part of the Obligations, the Agent or any Lender is for any reason compelled to surrender such payment or proceeds to any Person because such payment or application of proceeds is invalidated, declared fraudulent, set aside, determined to be void or voidable as a preference, impermissible setoff, or a diversion of trust funds, or for any other reason, then the Obligations or part thereof intended to be satisfied shall be revived and continued and this Agreement shall continue in full force as if such payment or proceeds had not been received by the Agent or such Lender and the Borrower shall be liable to pay to the Agent and the Lenders, and each Borrower hereby indemnifies the Agent and the Lenders and holds the Agent and the Lenders harmless for the amount of such payment or proceeds surrendered. The provisions of this Section 2.21 shall be and remain effective notwithstanding any contrary action which may have been taken by the Agent or any Lender in reliance upon such payment or application of proceeds, and any such contrary action so taken shall be without prejudice to the Agent’s and the Lenders’ rights under this Agreement and shall be deemed to have been conditioned upon such payment or application of proceeds having become final and irrevocable. The provisions of this Section 2.21 shall survive the termination of this Agreement.

          SECTION 2.22. Priority and Liens.

               (a) Each of the Borrowers and each of the Guarantors hereby covenants, represents and warrants that, upon entry of the Order, the Obligations of the Borrowers and the Guarantors hereunder and under the Loan Documents and in respect of Indebtedness, Banking Services Obligations and Swap Obligations (to the extent the same are Obligations) arising after the applicable Filing Date owed to one or more Lender: (i) pursuant to Section 364(c)(1) of the Bankruptcy Code, shall at all times constitute joint and several allowed administrative expense claims in the Cases having priority over all administrative expenses of the kind specified in Sections 503(b) or 507(b) of the Bankruptcy Code; (ii) pursuant to Section

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364(c)(2) of the Bankruptcy Code, shall at all times be secured by a perfected first priority Lien on all tangible and intangible property of the Borrowers’ and the Guarantors’ respective estates in the Cases that is not subject to valid, perfected and non-avoidable liens as of the applicable Filing Date, and on all cash maintained in the Letter of Credit Account and any direct investments of the funds contained therein; and (iii) pursuant to Section 364(c)(3) of the Bankruptcy Code, shall be secured by a perfected Lien upon all tangible and intangible property of the Borrowers and the Guarantors subject to valid, perfected and non-avoidable Liens in existence on the applicable Filing Date or to valid Liens in existence on the applicable Filing Date that are perfected subsequent to the applicable Filing Date as permitted by Section 546(b) of the Bankruptcy Code; in the case of each of clauses (i) through (iii) subject only to (x) in the event of the occurrence and during the continuance of a Default or an Event of Default, the payment of allowed and unpaid professional fees and disbursements incurred by the Borrowers and any statutory committees appointed in the Cases in an aggregate amount not in excess of $4,000,000 and (y) the payment of unpaid fees of the US Trustee pursuant to 28 U.S.C. § 1930 (collectively, the “Carve-Out”). The Lenders agree that so long as no Default shall have occurred and be continuing, the Borrowers and the Guarantors shall be permitted to pay compensation and reimbursement of expenses allowed and payable under 11 U.S.C. § 330 and 11 U.S.C. § 331, as the same may be due and payable, and the same shall not reduce the Carve-Out. Following the Termination Date, all cash maintained in the Letter of Credit Account and any direct investments of the funds contained therein shall not be subject to the Carve-Out.

               (b) Subject to the priorities set forth in subsection (a) above and to the Carve-Out, as to all real property the title to which is held by any of the Borrowers or any of the Guarantors, or the possession of which is held by any of the Borrowers or any of the Guarantors pursuant to leasehold interest, including, without limitation, Eligible Real Estate, each Borrower and each Guarantor hereby assigns and conveys as security, grants a security interest in, hypothecates, mortgages, pledges and sets over unto the Agent on behalf of the Lenders all of the right, title and interest of such Borrower and such Guarantor in all of such owned real property and in all such leasehold interests, together in each case with all of the right, title and interest of such Borrower and such Guarantor in and to all buildings, improvements, and fixtures related thereto, any lease or sublease thereof, all general intangibles relating thereto and all proceeds thereof. Each Borrower and each Guarantor acknowledges that, pursuant to the Order, the Liens in favor of the Agent on behalf of the Lenders in all of such real property and leasehold instruments shall be perfected without the recordation of any instruments of mortgage or assignment. Each Borrower and each Guarantor further agrees that, upon the request of the Agent, such Borrower and such Guarantor shall enter into separate fee or leasehold mortgages in recordable form pursuant to Mortgages or deeds of trust, as applicable, substantially in the form of Exhibit H.

          SECTION 2.23. Right of Set-Off. Subject to the provisions of Section 7.01, upon the occurrence and during the continuance of any Event of Default, the Agent and each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law and without further order of or application to the Bankruptcy Court, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Agent and each such Lender to or for the credit or the account of any Borrower or any Guarantor against any and all of the obligations of such Borrower or Guarantor now or hereafter existing under the Loan Documents, irrespective of

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whether or not such Lender shall have made any demand under any Loan Document and although such obligations may not have been accelerated. Each Lender and the Agent agrees promptly to notify the Borrowers and the Guarantors after any such set-off and application made by such Lender or by the Agent, as the case may be, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender and the Agent under this Section are in addition to other rights and remedies which such Lender and the Agent may have upon the occurrence and during the continuance of any Event of Default.

          SECTION 2.24. Security Interest in Letter of Credit Account. Pursuant to Section 364(c)(2) of the Bankruptcy Code, the Borrowers and the Guarantors hereby assign and pledge to the Agent, for its benefit and for the ratable benefit of the Lenders, and hereby grant to the Agent, for its benefit and for the ratable benefit of the Lenders, a first priority security interest, senior to all other Liens, if any, in all of the Borrowers’ and the Guarantors’ right, title and interest in and to the Letter of Credit Account and any direct investment of the funds contained therein. Cash held in the Letter of Credit Account shall not be available for use by any Borrower, whether pursuant to Section 363 of the Bankruptcy Code or otherwise and shall be released to the Borrowers upon the expiration, cancellation or other termination or satisfaction of such Borrower’s reimbursement obligations.

          SECTION 2.25. Payment of Obligations. Subject to the provisions of Section 7.01, upon the maturity (whether by acceleration or otherwise) of any of the Obligations under this Agreement or any of the other Loan Documents of the Borrowers and the Guarantors, the Lenders shall be entitled to immediate payment of such Obligations without further application to or order of the Bankruptcy Court.

          SECTION 2.26. No Discharge; Survival of Claims. Each of the Borrowers and the Guarantors agree that (i) its Obligations hereunder shall not be discharged by the entry of an order confirming a Reorganization Plan (and each of the Borrowers and the Guarantors, pursuant to Section 1141(d)(4) of the Bankruptcy Code, hereby waives any such discharge) and (ii) the Super-priority Claim granted to the Agent and the Lenders pursuant to the Order and described in Section 2.22 and the Liens granted to the Agent pursuant to the Order and described in Sections 2.22 and 2.24 shall not be affected in any manner by the entry of an order confirming a Reorganization Plan.

SECTION 3. REPRESENTATIONS AND WARRANTIES

          In order to induce the Lenders to make Loans and issue and/or participate in Letters of Credit hereunder, each of the Borrowers and each of the Guarantors jointly and severally represent and warrant as follows:

          SECTION 3.01. Organization and Authority. Each of the Borrowers, the Guarantors and the Significant Subsidiaries (other than any Excluded Subsidiary) (i) is duly organized and validly existing under the laws of the State of its organization and is duly qualified as a foreign organization and is in good standing in each jurisdiction in which the failure to so qualify would reasonably be expected to have a Material Adverse Effect; (ii) subject to the entry by the Bankruptcy Court of the Order, has the requisite corporate power and authority to effect the transactions contemplated hereby, and by the other Loan Documents to which it is a party,

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and (iii) subject to the entry by the Bankruptcy Court of the Order, has all requisite organizational power and authority and, upon the entry of the Order, the legal right to own, pledge, mortgage and operate its properties, and to conduct its business as now or currently proposed to be conducted.

          SECTION 3.02. Due Execution. Upon the entry by the Bankruptcy Court of the Order, the execution, delivery and performance by each of the Borrowers and the Guarantors of each of the Loan Documents to which it is a party (i) are within the respective organizational powers of each of the Borrowers and the Guarantors, have been duly authorized by all necessary organizational action including the consent of equity holders where required, and do not (A) contravene the charter or by-laws or other constituent documents of any of the Borrowers or the Guarantors, (B) violate any law (including, without limitation, the Securities Exchange Act of 1934) or regulation (including, without limitation, Regulations T, U or X of the Board of Governors of the Federal Reserve System), or any order or decree of any court or Governmental Authority, (C) conflict with or result in a breach of, or constitute a default under, any material indenture, mortgage or deed of trust entered into after the applicable Filing Date or any material lease, agreement or other instrument entered into after the applicable Filing Date binding on the Borrowers or the Guarantors or any of their properties, or (D) result in or require the creation or imposition of any Lien upon any of the property of any of the Borrowers or the Guarantors other than the Liens granted pursuant to this Agreement, the other Loan Documents or the Order; and (ii) do not require the consent, authorization by or approval of or notice to or filing or registration with any Governmental Authority, other than (x) the entry of the Order, (y) any actions required outside of the United States (with respect to Collateral located outside of the United States or Collateral consisting of stock of foreign issuers) and (z) actions required under the Federal Assignment of Claims Act of 1940 in order to perfect the security interests of the Agent in the Collateral. This Agreement has been duly executed and delivered by each of the Borrowers and the Guarantors. This Agreement is, and each of the other Loan Documents to which each of the Borrowers and each of the Guarantors is or will be a party, when delivered hereunder or thereunder, will be, a legal, valid and binding obligation of each Borrower and each Guarantor, as the case may be, enforceable against the Borrowers and the Guarantors, as the case may be, in accordance with its terms and the Order.

          SECTION 3.03. Statements Made. The information that has been delivered in writing by any of the Borrowers or any of the Guarantors to the Agent or to the Bankruptcy Court in connection with any Loan Document, and any financial statement delivered pursuant hereto or thereto (other than to the extent that any such statements constitute Projections), taken as a whole and in light of the circumstances in which made, as of the date of delivery of such information or financial statement (other than Projections), contains no untrue statement of a material fact and does not omit to state a material fact necessary to make such statements not misleading; and, to the extent that any such information constitutes Projections, such Projections were prepared in good faith on the basis of assumptions, methods, data, tests and information believed by such Borrower or such Guarantor to be reasonable at the time such Projections were furnished. It is understood by the Agent and the Lenders that all the Projections may not prove to be correct, that actual future financial performance may vary from the Projections and that nothing contained in this Section 3.03 shall be construed as a warranty or guarantee of future financial performance.

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          SECTION 3.04. Financial Statements. The Borrowers have furnished the Lenders with copies of the unaudited consolidated financial statements of the Borrowers for the Fiscal Quarter ended September 30, 2004 and the unaudited consolidated financial statements of the Borrowers and Guarantors for each of the Fiscal Months ended on October 31, 2004, November 30, 2004 and December 31, 2004. Subject to any qualifications set forth therein, (i) such financial statements present fairly the financial condition and results of operations of the Borrowers and their Subsidiaries on a consolidated basis as of such date and for such period, (ii) such balance sheets and any notes thereto disclose all liabilities, direct or contingent, of the Borrowers and the Guarantors as of the dates thereof required to be disclosed by GAAP and (iii) such financial statements were prepared in a manner consistent with GAAP. No event that had a Material Adverse Effect has occurred since September 30, 2004.

          SECTION 3.05. Ownership. Other than as set forth on Schedule 3.05, (i) as of the Closing Date, each of the Persons listed on Schedule 3.05 is a wholly-owned, direct or indirect Subsidiary of a Borrower as indicated on Schedule 3.05, and (ii) the Borrowers own no other Significant Subsidiaries, whether directly or indirectly.

          SECTION 3.06. Liens. Except for Liens existing on the applicable Filing Date as reflected on Schedule 3.06, there are no Liens of any nature whatsoever on any assets of any Borrower or any of the Guarantors other than: (i) Permitted Liens; (ii) Liens consisting of cash collateral securing reimbursement obligations with respect to letters of credit existing on the date of this Agreement and disclosed on Schedule 3.06(b) in the manner and in the amounts required by that certain letter agreement from Bank of America, N.A. to the Company, dated as of February ___, 2005; (iii) other Liens permitted pursuant to Section 6.01; and (iv) Liens in favor of the Agent and the Lenders. Neither any Borrower nor any Guarantor is a party to any contract, agreement, lease or instrument the performance of which, either unconditionally or upon the happening of an event, will result in or require the creation of a Lien on any assets of any Borrower or any Guarantor or otherwise result in a violation of this Agreement other than the Liens granted to the Agent and the Lenders as provided for in this Agreement.

          SECTION 3.07. Compliance with Law. Except as set forth on Schedule 3.07, neither any Borrower nor any Guarantor is, to the best of its knowledge, in violation of any law (except those relating to Environmental Laws set forth on Schedule 3.22), rule or regulation, or in default with respect to any judgment, writ, injunction or decree of any Governmental Authority the violation of which, or a default with respect to which, would have a material adverse effect on the financial condition, operations, business, properties, assets or prospects of the Borrowers and the Guarantors taken as a whole.

          SECTION 3.08. Insurance. All policies of insurance of any kind or nature owned by or issued to the Borrowers and the Guarantors, including, without limitation, policies of life, fire, theft, product liability, public liability, property damage, other casualty, employee fidelity, workers’ compensation, employee health and welfare, title, property and liability insurance, are in full force and effect and are of a nature and provide such coverage as is customarily carried by companies of the size and character of the Borrowers and the Guarantors.

          SECTION 3.09. Use of Proceeds. The proceeds of the Loans shall be used for (i) refinancing of the Existing Credit Agreement, (ii) working capital, letters of credit and capital

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expenditures; (iii) other general corporate purposes of the Borrowers; (iv) payment of any related transaction costs, fees and expenses; and (v) the costs of administration of the Cases. Such proceeds may not be used in connection with the investigation (including discovery proceedings), initiation or prosecution of any claims, causes of action, adversary proceedings or other litigation against the Lenders or the Agent in their capacities as such.

          SECTION 3.10. Litigation. Other than as set forth on Schedule 3.10 and other than the Cases, there are no unstayed actions, suits, proceedings or investigations pending or, to the actual knowledge of any of the Borrowers or the Guarantors, threatened against or affecting any Borrower or any Guarantor or any of their respective properties, before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which would be reasonably likely to have a Material Adverse Effect.

          SECTION 3.11. Investment and Holding Company Status . None of the Borrowers, the Guarantors nor any of their respective Subsidiaries is (a) an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a “holding company” as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935.

          SECTION 3.12. Taxes. Except as set forth on Schedule 3.12, each of the Borrowers and each of the Guarantors has timely filed or caused to be filed all federal and all state and other material Tax returns and reports required by law to have been filed by it and has paid or caused to be paid all federal and all state and other material Taxes required by law to have been paid by it, except Taxes that are being contested in good faith by appropriate proceedings or to the extent and so long as the payment of such Taxes is stayed pursuant to Section 362 of the Bankruptcy Code and, in each case, for which such Borrower or Guarantor, as applicable, has set aside on its books adequate reserves. Except as set forth on Schedule 3.12, no Tax liens have been filed and no claims are being asserted that any Taxes entitled to treatment as “administrative expenses” described in Bankruptcy Code section 507(a)(1) have not been paid when due except such Taxes that are being contested in good faith by appropriate proceedings and (i) for which such Borrower or Guarantor, as applicable, has set aside on its books adequate reserves and (ii) nonpayment of which Taxes would not give rise to Tax liens.

          SECTION 3.13. ERISA. No Termination Event has occurred or is reasonably expected to occur that, when taken together with all other such Termination Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The net present value of all accumulated benefit obligations under each Plan (excluding the Terminated Plans) as of December 31, 2004 (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not exceed $17,500,000.

          SECTION 3.14. Disclosure. Except as disclosed (i) in the Form 10-Q filed with the Securities and Exchange Commission by the Company on September 30, 2004 or in other periodic reports filed with the Securities and Exchange Commission after January 1, 2004 and prior to September 30, 2004 or (ii) to the Bankruptcy Court after the applicable Filing Date, the Borrowers and the Guarantors have disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which the Borrowers, the Guarantors or any of their respective

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Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.

          SECTION 3.15. Material Agreements. As of the Closing Date, all material agreements and contracts to which any Borrower or Guarantor is a party or is bound as of the date of this Agreement and which, under applicable law would be required to be filed with the Securities and Exchange Commission are either: (a) filed as exhibits to, or incorporated by reference in, the Form 10-Q filed with the Securities and Exchange Commission by the Company on September 30, 2004 or (b) are listed on Schedule 3.15. No Borrower or Guarantor is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (x) any material agreement arising after the applicable Filing Date to which it is a party or any material agreement arising prior to the applicable Filing Period to which it is a party which it has agreed to assume or perform or (y) any agreement or instrument arising after the applicable Filing Date evidencing or governing Indebtedness.

          SECTION 3.16. Reportable Transaction. The Borrowers do not intend to treat the Borrowings or issuances of Letters of Credit and related transactions as being a “reportable transaction” (within the meaning of Treasury Regulation Section 1.6011-4). In the event the Borrowers determine to take any action inconsistent with such intention, the Borrowers’ Agent will promptly notify the Agent thereof.

          SECTION 3.17. Capitalization and Subsidiaries. Schedule 3.17 sets forth (a) a correct and complete list of the name and relationship to each Borrower of each and all of such Borrower’s Significant Subsidiaries, (b) a true and complete listing of each class of each of the authorized Equity Interests of each Borrower, of which all of such issued shares are validly issued, outstanding, fully paid and non-assessable, and owned beneficially and of record by the Persons identified on Schedule 3.17, and (c) the type of entity of each of the Borrowers and each of the Guarantors and each of their respective Significant Subsidiaries. All of the issued and outstanding Equity Interests owned by any Borrower or by any Guarantor has been (to the extent such concepts are relevant with respect to such ownership interests) duly authorized and issued and is fully paid and nonassessable. The Borrowers’ Agent may amend from time to time Schedule 3.17 (by delivery of a revised Schedule 3.17 to the Agent) upon the sale of any Significant Subsidiary which is permitted in this Agreement.

          SECTION 3.18. Common Enterprise. Each Borrower and each Guarantor expects to derive benefit (and its board of directors or other governing body has determined that it may reasonably be expected to derive benefit), directly and indirectly, from (i) successful operations of each of the other Borrowers and Guarantors and (ii) the credit extended by the Lenders to the Borrowers hereunder, both in their separate capacities and as members of the group of companies. Each of the Borrowers and each of the Guarantors has determined that execution, delivery, and performance of this Agreement and any other Loan Documents to be executed by such Borrower or Guarantor, as applicable is within its purpose, will be of direct and indirect benefit to such Borrower or Guarantor, and is in its best interest.

          SECTION 3.19. Location of Bank Accounts. Schedule 3.19, as amended from time to time by the Borrowers’ Agent upon any change to the accounts maintained by each Borrower and each Guarantor (by delivery of a revised Schedule 3.19 to the Agent), sets forth

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initially, as of the Closing Date, a complete and accurate list of all deposit, checking and other bank accounts, all securities and other accounts maintained with any broker dealer and all other similar accounts maintained by each Borrower and Guarantor, together with a description thereof (i.e., the bank or broker dealer at which such deposit or other account is maintained and the account number and the purpose thereof). As of the Closing Date, no Borrower or Guarantor maintains any other accounts other than those set forth on Schedule 3.19.

          SECTION 3.20. Labor Disputes. Except as set forth on Schedule 3.20, as of the date of this Agreement (a) there is no collective bargaining agreement or other labor contract covering employees of the Borrowers or any Guarantors, (b) no such collective bargaining agreement or other labor contract is scheduled to expire during the term of this Agreement, (c) to the knowledge of any of the Borrowers or any Guarantor, no union or other labor organization is seeking to organize, or to be recognized as, a collective bargaining unit of employees of any of the Borrowers, any of the Guarantors or any of their respective Subsidiaries or for any similar purpose, and (d) there is no pending or to the knowledge of any of the Borrowers or any Guarantor, threatened, strike, work stoppage, material unfair labor practice claim, or other material labor dispute against or affecting the Borrowers, the Guarantors or their respective Subsidiaries or their employees.

          SECTION 3.21. Subordinated Indenture. Each borrower, guarantor or other obligor under the Subordinated Indenture is a debtor and debtor-in-possession and all obligations under the Subordinated Indenture constitute pre-petition obligations of such Person.

          SECTION 3.22. Environmental Matters. (a) Except as set forth on Schedule 3.22(a):

               (i) all facilities and Property (including underlying groundwater) owned, operated, or leased by the Borrowers, Guarantors, or any of their Subsidiaries have been, and continue to be, owned, operated, or leased by the Borrowers, Guarantors, and their Subsidiaries are in material compliance with all Environmental Laws;

               (ii) there are no pending or, to the knowledge of Borrowers or the Guarantors, after due inquiry, threatened

                    (A) claims, complaints, notices, or requests for information received by any of the Borrowers, Guarantors, or any of their Subsidiaries, from any Governmental Authority, or from any Person which has commenced a legal proceeding against any of the Borrowers, Guarantors, or any of their respective Subsidiaries, with respect to any alleged violation of any Environmental Law, or

                    (B) complaints, notices, or inquiries to any of the Borrowers, Guarantors, or any of their Subsidiaries, from any Governmental Authority, or from any Person which has commenced a legal proceeding against any of the Borrowers,

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Guarantors, or any of their Subsidiaries, regarding potential liability under any Environmental Law;

               (iii) there have been no Releases of Hazardous Materials at, on, into or under any Property now or previously owned, operated, or leased by any of the Borrowers, Guarantors, or any of their Subsidiaries that, singly, or in the aggregate, have a reasonable possibility of having a Material Adverse Effect;

               (iv) the Borrowers, Guarantors, and their Subsidiaries have been issued and are in material compliance with all permits, certificates, approvals, licenses, and other authorizations required by any applicable Environmental Law relating to any environmental matters and necessary for their businesses;

               (v) no Property now or previously owned, operated, or leased by any of the Borrowers, Guarantors, or any of their Subsidiaries is listed or, to the knowledge of any of the Borrowers or Guarantors, after due inquiry, proposed for listing (with respect to owned Property only) on the National Priorities List pursuant to CERCLA or in the CERCLIS, or, to the best knowledge and belief of any of the Borrowers or Guarantors, on any similar state list of sites requiring investigation or clean-up;

               (vi) there are no underground storage tanks (as defined in 40 C.F.R. §280.1, as the same may be amended, modified, supplemented, or replaced from time to time), active or abandoned, including petroleum storage tanks, on or under any Property now or previously owned or leased by any of the Borrowers, Guarantors, or any of their Subsidiaries that, singly or in the aggregate, have a reasonable possibility of having a Material Adverse Effect;

               (vii) none of the Borrowers, Guarantors, nor any of their Subsidiaries has, to the best knowledge and belief of any Borrower, transported or arranged for the transportation of any Hazardous Material to any location which is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or any similar state list or which is the subject of federal, state, or local enforcement actions or other investigations which has a reasonable possibility of leading to material claims against any of the Borrowers, Guarantors, or any of their Subsidiaries for any remedial work, damage to natural resources, or personal injury, including claims under CERCLA; and

               (viii) there are no polychlorinated biphenyls or friable asbestos present at any real property now or previously owned or leased by any of the Borrowers, Guarantors, or any of their Subsidiaries that singly or in the aggregate, have a reasonable possibility of having a Material Adverse Effect.

          (b) Schedule 3.22(b) identifies all sites at which any of the Borrowers, Guarantors, or any of their Subsidiaries are currently conducting cleanup or remediation or an investigation as to whether such cleanup or remediation is warranted or required.

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SECTION 4. CONDITIONS OF LENDING

          SECTION 4.01. Conditions Precedent to Initial Loans and Initial Letters of Credit. The obligation of the Lenders to make the initial Loans or the Issuing Bank to issue the initial Letter of Credit, whichever may occur first, is subject to the satisfaction (or waiver in accordance with Section 11.10) of the following conditions precedent:

               (a) Supporting Documents. The Agent shall have received for each of the Borrowers and the Guarantors:

                    (i) a copy of such entity’s certificate of incorporation or formation, as amended, certified as of a recent date by the Secretary of State of the state of its incorporation or formation;

                    (ii) a certificate of such Secretary of State, dated as of a recent date, as to the good standing of and payment of taxes by that entity and as to the charter documents on file in the office of such Secretary of State; and

                    (iii) a certificate of the Secretary or an Assistant Secretary of that entity dated the date of the initial Loans or the initial Letter of Credit hereunder, whichever first occurs, and certifying (A) that attached thereto is a true and complete copy of the by-laws or limited liability company agreement of that entity as in effect on the date of such certification, (B) that attached thereto is a true and complete copy of resolutions adopted by the Board of Directors or managers of that entity authorizing the Borrowings and Letter of Credit extensions hereunder, the execution, delivery and performance in accordance with their respective terms of this Agreement, the Loan Documents and any other documents required or contemplated hereunder or thereunder and the granting of the security interest in the Letter of Credit Account and other Liens contemplated hereby, (C) that the certificate of incorporation or formation of that entity has not been amended since the date of the last amendment thereto indicated on the certificate of the Secretary of State furnished pursuant to clause (i) above and (D) as to the incumbency and specimen signature of each officer or manager of that entity executing this Agreement and the Loan Documents or any other document delivered by it in connection herewith or therewith (such certificate to contain a certification by another officer or manager of that entity as to the incumbency and signature of the officer signing the certificate referred to in this clause (iii)).

               (b) Final Order. At the time of the making of the initial Loans or at the time of the issuance of the initial Letters of Credit, whichever first occurs, the Agent and the Lenders shall have received a certified copy of an order of the Bankruptcy Court in substantially the form of Exhibit A (the “Order”) approving the Loan Documents and granting the Superpriority Claim status and other Liens described in Section 2.22 which Order (i) shall approve the payment by the Borrowers of all of the Fees set forth in Section 2.13, (ii) shall be in full force and effect, and (iii) shall not have been vacated, stayed, reversed, modified or amended in any respect; and, if the Order is the subject of a pending appeal in any respect, neither the making of such Loans nor the issuance of such Letter of Credit nor the performance by the

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Borrower or any of the Guarantors of any of their respective obligations hereunder or under the Loan Documents or under any other instrument or agreement referred to herein shall be the subject of a presently effective stay pending appeal.

               (c) Security and Pledge Agreement. Each of the Borrowers and each of the Guarantors shall have duly executed and delivered to the Agent a Security and Pledge Agreement in substantially the form of Exhibit B (the “Security and Pledge Agreement”), pursuant to which each of the Borrowers and each of the Guarantors shall have granted to the Agent, for the benefit of the Lenders, a first priority, perfected security interest in the Collateral (free and clear of all Liens, other than Permitted Liens and other Liens permitted under the Loan Documents), and shall have (i) filed appropriately completed and duly executed Uniform Commercial Code financing statements and (ii) delivered to the Agent any pledged Collateral required to be delivered thereunder.

               (d) Orders. All of the orders entered by the Bankruptcy Court relating to the transactions contemplated hereby shall be satisfactory to the Agent.

               (e) Opinion of Counsel. The Agent and the Lenders shall have received the favorable written opinion of counsel to the Borrowers and the Guarantors reasonably acceptable to the Agent, dated the date of the initial Loans or the issuance of the initial Letter of Credit, whichever first occurs, substantially in the form of Exhibit C.

               (f) Payment of Fees. The Borrowers shall have paid to the Agent the then unpaid balance of all accrued and unpaid Fees due under and pursuant to this Agreement and the letter referred to in Section 2.13.

               (g) Field Exams, Environmental Reports, Appraisals. The Agent shall be satisfied with the results of field examinations. The Borrowers shall have delivered to the Agent satisfactory appraisals of the Borrowers’ and Guarantors’ Inventory and Equipment and such appraisals shall be from an appraiser selected and engaged by the Agent, and prepared on a basis satisfactory to the Agent, such appraisals to include, without limitation, information required by applicable law and regulations. The Borrowers shall have also delivered to the Agent satisfactory appraisals, environmental reports, surveys and title insurance with respect to material real Property to the extent the Borrowers propose to include such real Property in the Borrowing Base (provided that satisfactory appraisals, environmental reports, surveys and title insurance may be delivered on a post-closing basis so long as any related real Property is not included in the Borrowing Base until such reasonably satisfactory appraisals, environmental reports, surveys and title insurance are received by the Agent).

               (h) Certificates of Insurance. The Borrowers and Guarantors shall have delivered to the Agent certificates of insurance reasonably satisfactory to the Agent in all respects evidencing the existence of all insurance required to be maintained by the Borrowers and Guarantors pursuant to Section 5.03 of this Agreement.

               (i) Material Consents. The Borrowers and Guarantors shall have delivered to the Agent all material consents listed on Schedule 4.01(i).

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               (j) Cash Management. The applicable Borrowers and Guarantors together with JPMorgan Chase and the applicable financial institutions shall have entered into tri-party control and/or blocked account and/or lockbox agreements with respect to each deposit and securities account of such Borrowers and Guarantors set forth on Schedule 4.01(j), which control or blocked account agreements shall be in form and substance reasonably acceptable to the Agent.

               (k) Corporate and Judicial Proceedings. All corporate and judicial proceedings and all instruments and agreements in connection with the transactions among the Borrowers, the Guarantors, the Agent and the Lenders contemplated by this Agreement shall be reasonably satisfactory in form and substance to the Agent, and the Agent shall have received all information and copies of all material documents and papers, including records of corporate and judicial proceedings, which the Agent may have reasonably requested in connection therewith, such documents and papers where appropriate to be certified by proper corporate, governmental or judicial authorities.

               (l) Information. The Agent shall have received such information (financial or otherwise) as may be reasonably requested by the Agent, including, without limitation, copies of the unaudited consolidated financial statements of the Borrowers for the Fiscal Quarter ended September 30, 2004 and the unaudited consolidated financial statements of the Borrowers and Guarantors for each of the Fiscal Months ended on October 31, 2004, November 30, 2004 and December 31, 2004.

               (m) Business Plan. The Agent and the Lenders shall have received the Borrowers’ business plan dated February 4, 2005, which business plan shall cover the four year period commencing December 31, 2004 and ending December 31, 2008, such business plan shall be satisfactory in form and substance to them.

               (n) Compliance with Material Laws and Regulations. The Borrowers and the Guarantors shall have granted the Agent access to and the right to inspect all reports, audits and other internal information of the Borrower and the Guarantors relating to environmental matters, and any third party verification of certain matters relating to compliance with Environmental Laws requested by the Agent, and the Agent shall be reasonably satisfied (x) that the Borrowers and the Guarantors are in compliance in all material respects with all applicable material laws and regulations (including but not limited to ERISA (except for such violations as set forth on Schedule 3.07), margin regulations, bank regulatory limitations and Environmental Laws) and (y) that the Borrower has made adequate provision for the costs of maintaining such compliance.

               (o) UCC Searches. The Agent shall have received UCC searches (including tax liens and judgments) and Patent and Trademark searches conducted in the jurisdictions in which the Borrower and the Guarantors conduct business (dated as of a date reasonably satisfactory to the Agent), reflecting the absence of Liens and encumbrances on the assets of the Borrower and the Guarantors other than such Liens as may be satisfactory to the Agent.

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               (p) Minimum Availability. The Borrowers shall have minimum Availability at closing (on a pro forma basis after giving effect to the Loans made and the Letters of Credit issued or deemed issued on the Closing Date) in an amount not less than $75,000,000.

               (q) Funding Account. The Borrowers’ Agent shall have delivered to the Agent a notice setting forth the deposit account of the Borrowers (“Funding Account”) to which the Lenders are authorized by the Borrowers to transfer the proceeds of any Borrowing requested or authorized pursuant to this Agreement.

               (r) Closing Documents. The Agent shall have received all documents required by Section 4.01 and each item listed on the closing checklist, in each case, each reasonably satisfactory in form and substance to the Agent.

               (s) Post Filing Date Liens. The Agent shall be satisfied that (a) no Lien has attached to any Collateral subsequent to the applicable Filing Date or (b) if any Lien has attached to any Collateral subsequent to the applicable Filing Date, the applicable Borrower or Guarantor shall have delivered to the Agent an acknowledgment and consent in writing from such lienholder that such Lien is junior to the Liens securing the Obligations.

          SECTION 4.02. Conditions Precedent to Each Loan and Each Letter of Credit. The obligation of the Lenders to make each Loan and of the Issuing Bank to issue each Letter of Credit, including the initial Loan and the initial Letter of Credit is subject to the following conditions precedent:

               (a) Notice. To the extent required by Section 2, the Agent shall have received a notice with respect to such borrowing or issuance, as the case may be, as required by Section 2.

               (b) Representations and Warranties. All representations and warranties contained in this Agreement and the other Loan Documents shall be true and correct on and as of the date of each Borrowing or the issuance of each Letter of Credit hereunder with the same effect as if made on and as of such date except to the extent such representations and warranties expressly relate to an earlier date.

               (c) No Default. On the date of each Borrowing hereunder or the issuance of each Letter of Credit and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing.

               (d) Order. The Order shall be in full force and effect and shall not have been vacated, stayed reversed, modified or amended in any respect without the prior written consent of the Agent and the Required Lenders.

               (e) Payment of Fees. The Borrowers shall have paid to the Agent the then unpaid balance of all accrued and unpaid Fees then payable under and pursuant to this Agreement, the Order and the letter referred to in Section 2.13.

               (f) Borrowing Base Certificate. The Agent shall have received the timely delivery of the most recent Borrowing Base Certificate required to be delivered

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hereunder, substantially in the form of Exhibit E (except that the initial Borrowing Base Certificate shall be delivered by the Closing Date).

               (g) Availability. After giving effect to any Borrowing or the issuance of any Letter of Credit, Availability is not less than zero.

The request or deemed request by the Borrowers’ Agent or the Borrowers for, and the acceptance by any Borrower of, an extension of credit hereunder shall be deemed to be a representation and warranty by the Borrower that the conditions specified in this Section 4.02 have been satisfied or waived at that time. The Agent may (but shall not be obligated to) require a duly completed compliance certificate as a condition to making a Borrowing or requesting the issuance of Letter of Credit.

SECTION 5. AFFIRMATIVE COVENANTS

          From the date hereof and for so long as any Commitment shall be in effect or any Letter of Credit shall remain outstanding or any amount shall remain outstanding or unpaid under this Agreement or any other Loan Document, each of the Borrowers and each of the Guarantors agree that, unless the Required Lenders shall otherwise consent in writing, each of the Borrowers and each of the Guarantors will:

          SECTION 5.01. Financial Statements, Reports, etc. In the case of the Borrowers and the Guarantors, deliver to the Agent and each of the Lenders:

               (a) within 105 days after the end of each Fiscal Year, the Company’s (i) audited consolidated balance sheet and related statements of income, stockholders’ equity and cash flows, showing the financial condition of the Company and its Subsidiaries on a consolidated basis as of the close of such Fiscal Year and the results of their operations during such year, such consolidated financial statements to be audited for the Company and its Subsidiaries by Deloitte & Touche LLP or other independent public accountants of recognized national standing and accompanied by an audit opinion of such accountants (which shall not be qualified in any material respect as to scope but may include qualifications with respect to the Cases and going concern) and to be certified by a Financial Officer of the Company to the effect that such consolidated financial statements fairly present the financial condition and results of operations of the Company and its Subsidiaries on a consolidated basis in accordance with GAAP and (ii) unaudited consolidating balance sheet and related unaudited consolidating statements of income as of the close of the fourth Fiscal Quarter and as of the close of such Fiscal Year, all such consolidating financial statements showing separately the financial condition of the Company and its Significant Subsidiaries;

               (b) within 50 days after the end of each of the first three Fiscal Quarters of Parent, the Company’s (i) consolidated balance sheets and related statements of income, stockholders’ equity and cash flows, showing the financial condition of the Company and its Subsidiaries on a consolidated basis as of the close of such Fiscal Quarter and the results of their operations during such Fiscal Quarter and the then elapsed portion of the Fiscal Year, certified by a Financial Officer of the Company as fairly presenting the financial condition and results of operations of the Company and its Subsidiaries on a consolidated basis in accordance

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with GAAP, subject to normal year-end audit adjustments and the absence of footnotes and (ii) unaudited consolidating balance sheet and related unaudited consolidating statements of income as of the close of the such Fiscal Quarter, all such consolidating financial statements showing separately the financial condition of the Company and its Significant Subsidiaries;

               (c) commencing with the first Fiscal Month following the Closing Date (i) as soon as available, but no more than 30 days after the end of each month, the unaudited consolidated balance sheet as of the close of such Fiscal Month and related unaudited consolidated statements of income and cash flow of the Company and its Subsidiaries during such month and the year to date period, (ii) as soon as available, but no more than 31 days after the end of each month, a monthly operating report as filed with the Bankruptcy Court;

               (d) (i) concurrently with any delivery of financial statements under paragraphs (a), (b) and (c) above, a certificate of a Financial Officer certifying that such financial statements fairly present the financial condition and results of operations of the Company and its Subsidiaries in accordance with GAAP, subject to normal year-end audit adjustments and the absence of footnotes, (ii) concurrently with any delivery of financial statements under paragraph (a) above, a certificate in accordance with prevailing professional standards (which certificate may be limited to accounting matters and disclaim responsibility for legal interpretations) of the accountants auditing the consolidated financial statements delivered under paragraph (a) above certifying that, in the course of the regular audit of the business of the Company and its Subsidiaries, such accountants have obtained no knowledge that a Default or Event of Default has occurred and is continuing or if, in the opinion of such accountants, a Default or Event of Default has occurred and is continuing, specifying the nature thereof and all relevant facts with respect thereto;

               (e) as soon as available, but not more than sixty (60) days after the end of each Fiscal Year, a copy of the plan and forecast (including a projected consolidated balance sheet, income statement and funds flow statement) of the Company on a consolidated basis for each month of such Fiscal Year (the “Projections”) in form reasonably satisfactory to the Agent;

               (f) as soon as available but in any event within fifteen (15) days of the end of each calendar month, and during a Dominion Period more frequently as needed to redetermine Availability, but in any event not more frequently than weekly, as of the period then ended:

                    (i) a detailed aging of the Borrowers’ Accounts (1) aged by invoice date and (2) reconciled to the Borrowing Base Certificate delivered as of such date, prepared in a manner reasonably acceptable to the Agent, together with a summary specifying the name, address, and balance due for each Account Debtor;

                    (ii) a schedule detailing the Borrowers’ Inventory, in form satisfactory to the Agent, by location (showing Inventory in transit, any Inventory located with a third party under any consignment, bailee arrangement, or warehouse agreement), by class (raw material, work-in-process and finished goods), which Inventory shall be valued at the lower of cost (determined on a

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first-in, first-out basis) or market and reconciled to the Borrowing Base Certificate delivered as of such date;

                    (iii) a summary of categories of Accounts excluded from Eligible Accounts Receivable and Eligible Inventory; and

                    (iv) a reconciliation of the Borrowers’ Accounts and Inventory between the amounts shown in the applicable Borrower’s general ledger and financial statements and the reports delivered pursuant to clauses (i) and (ii) above;

               (g) such other information respecting any Borrower or any of their Subsidiaries as the Agent may from time to time reasonably request;

               (h) within 30 days of August 31, 2005 and February 28, 2006, an updated customer list for the Borrower and its Subsidiaries, which list shall state the customer’s name, mailing address and phone number and shall be certified as true and correct by a Financial Officer of the Parent;

               (i) within 30 days following September 30, 2005, a certificate of good standing for each Borrower and each Guarantor from the appropriate governmental officer in its jurisdiction of incorporation, formation, or organization;

               (j) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by it with the Securities and Exchange Commission (provided that any such documents shall be deemed delivered on the date the Company posts such documents electronically or provides a link thereto on the Company’s website), or any governmental authority succeeding to any of or all the functions of said commission, or with any national securities exchange, as the case may be;

               (k) promptly upon receipt thereof, any and all default notices received under or with respect to any leased location or public warehouse where Collateral is located (which shall be delivered within two Business Days after receipt thereof);

               (l) promptly upon any Borrower or any Guarantor obtaining knowledge thereof or having reason to know, notice of a material portion of Eligible Accounts Receivable, Eligible Equipment, Eligible Inventory or Eligible Real Estate, as the case may be, becoming ineligible under the Borrowing Base;

               (m) as soon as available and in any event within 30 days after the Borrower or any of its ERISA Affiliates knows that any Termination Event has occurred with respect to any Plan, a statement of a Financial Officer of such Borrower describing the full details of such Termination Event and the action, if any, which such Borrower or such ERISA Affiliate is required or proposes to take with respect thereto, together with any notices required or proposed to be given to or filed with or by such Borrower, the ERISA Affiliate, the PBGC, a Plan participant or the Plan administrator with respect thereto;

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               (n) promptly and in any event within 10 days after receipt thereof by any Borrower or any ERISA Affiliate from a Multiemployer Plan sponsor, a copy of each notice received by any Borrower or any ERISA Affiliate concerning (A) the imposition of Withdrawal Liability by a Multiemployer Plan, (B) the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA, (C) the termination of a Multiemployer Plan within the meaning of Title IV of ERISA, or (D) the amount of liability incurred, or which may be incurred, by any Borrower or any ERISA Affiliate in connection with any event described in clause (A), (B) or (C) above;

               (o) promptly and in any event within 10 days after receipt thereof by such Borrower or any of its ERISA Affiliates from the PBGC copies of each notice received by the Borrower or any such ERISA Affiliate of the PBGC’s intention to terminate any Single Employer Plan of any Borrower or such ERISA Affiliate other than the Terminated Plans or to have a trustee appointed to administer any such Plan;

               (p) within 10 days after notice is given or required to be given to the PBGC under Section 302(f)(4)(A) of ERISA of the failure of any Borrower or any of their ERISA Affiliates to make timely payments to a Plan other than such payments as are required to be made within 31 days after the effective date of the Settlement and Release Agreement, a copy of any such notice filed and a statement of a Financial Officer of such Borrower setting forth (A) sufficient information necessary to determine the amount of any lien under Section 302(f)(3), (B) the reason for the failure to make the required payments and (C) the action, if any, which such Borrower or any of its ERISA Affiliates proposed to take with respect thereto;

               (q) promptly upon obtaining knowledge thereof, notice by the holder of any Equity Interests of any Borrower or any Guarantor or the holder of any Indebtedness arising after the applicable Filing Date of any Borrower or any Guarantor in excess of $10,000,000 that any default exists with respect thereto or that any Borrower or any Guarantor is not in compliance therewith;

               (r) promptly upon receipt thereof, any notice of any governmental investigation or any litigation commenced or threatened against any Borrower or any Guarantor that (i) seeks damages in excess of $5,000,000, (ii) seeks injunctive relief, (iii) is asserted or instituted against any Plan, its fiduciaries or its assets, (iv) alleges criminal misconduct by any Borrower or any Guarantor, (v) alleges the violation of any law regarding, or seeks remedies in connection with, any Environmental Laws, or (vi) involves any product recall;

               (s) promptly upon any Borrower or any Guarantor obtaining knowledge thereof, notice of any Lien (other than Permitted Liens and other Liens permitted under the Loan Documents) or any material claim made or asserted against any of the Collateral;

               (t) promptly upon the commencement thereof, notice of any proceedings with respect to any Tax, fee, assessment, or other governmental charge in excess of $1,000,000;

               (u) prior to the opening thereof, notice of any new deposit account by any Borrower or any Guarantor with any bank or other financial institution;

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               (v) promptly upon obtaining knowledge thereof, notice of any loss, damage, or destruction to the Collateral having a book value of $5,000,000 or more, whether or not covered by insurance;

               (w) immediately after any Borrower or any Guarantor obtaining knowledge thereof, notice of any pending strike, work stoppage, unfair labor practice claim, or other labor dispute affecting any Borrower, any Guarantor or any of their respective Subsidiaries in a manner which could reasonably be expected to have a Material Adverse Effect; and

               (x) promptly upon obtaining knowledge thereof, notice of any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.

Each notice delivered under clauses (o) through (x) of this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Parent setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

          SECTION 5.02. Corporate Existence. Preserve and maintain in full force and effect all governmental rights, privileges, qualifications, permits, licenses and franchises necessary or desirable in the normal conduct of its business except (i)(A) if in the reasonable business judgment of the Company, it is in the best economic interest of the Borrowers and the Guarantors taken as a whole not to preserve and maintain such rights, privileges, qualifications, permits, licenses and franchises, and (B) such failure to preserve the same could not, in the aggregate, reasonably be expected to have a Material Adverse Effect on the operations, business, properties, assets, prospects or condition (financial or otherwise) of the Borrowers and the Guarantors, taken as a whole, and (ii) as otherwise permitted in connection with sales of assets permitted by Section 6.10.

          SECTION 5.03. Insurance. Maintain with financially sound and reputable carriers acceptable to the Agent in its Permitted Discretion (including, consistent with past practice, insurance companies affiliated with the Company), insurance with respect to their Properties and business (including business interruption insurance, fire insurance and public liability insurance) in such amounts, of such character and against such risks acceptable to the Agent in its Permitted Discretion and as are usually maintained by companies engaged in the same or similar business or having comparable properties, and in any case having a coverage which is not materially less than the insurance of such type maintained by the Borrower and the Guarantors on the date of this Agreement, provided that no Borrower and no Guarantor will use or permit any property to be used in any manner which might render inapplicable any insurance coverage; and (b) immediately forward any insurance or condemnation proceeds in excess of (i) $500,000 per occurrence and (ii) $2,000,000 in the aggregate to the Agent in accordance with Section 2.12(b)(iv); provided, however, that in the event such proceeds are received during a Dominion Period, all such proceeds shall be applied in accordance with Section 2.12(b)(iv). All property insurance covering Collateral maintained by the Borrowers and the Guarantors shall name the Agent as sole loss payee. All liability insurance maintained by the Borrowers and the Guarantors with respect to occurrences arising out of or relating to the Collateral shall name the Agent as additional insured. All such property and liability insurance shall further provide for at

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least 30 days’ (10 days’ with respect to cancellation for non-payment of premium or at the request of the insured) prior written notice to the Agent of the cancellation or substantial modification thereof.

          SECTION 5.04. Obligations and Taxes. With respect to each Borrower and each Guarantor, pay all its material obligations arising after the applicable Filing Date promptly and in accordance with their terms and pay and discharge promptly all material Taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property arising after the applicable Filing Date, before the same shall become delinquent, as well as all material lawful claims for labor, materials and supplies or otherwise arising after the applicable Filing Date which, if unpaid, would become a Lien or charge upon such properties or any part thereof; provided, however, that no Borrower and no Guarantor shall be required to pay and discharge or to cause to be paid and discharged any such obligation, Tax, assessment, charge, levy or claim to the extent that it is being contested in good faith by appropriate proceedings or to the extent and so long as the payment of such Taxes is stayed pursuant to Section 362 of the Bankruptcy Code and to the extent any Tax Liens are subordinate to the Lien in favor of the Agent, in each case, to the extent that adequate reserves for it have been set aside on the books of the Borrowers and the Guarantors.

          SECTION 5.05. Notice of Event of Default, etc. Promptly but no later than five (5) Business Days after any of the Borrowers has knowledge of a Default or an Event of Default, the Borrowers’ Agent shall give to the Agent notice in writing of such Default or Event of Default.

          SECTION 5.06. Access to Books and Records. Maintain or cause to be maintained at all times true and complete books and records in accordance with GAAP of the financial operations of the Borrowers and the Guarantors; and provide the Agent and its representatives and advisors access to all such books and records as well as any appraisals of the Collateral during regular business hours, in order that the Agent may upon reasonable prior notice examine and make abstracts from such books, accounts, records, appraisals and other papers for the purpose of verifying the accuracy of the various reports delivered by the Borrowers or the Guarantors to the Agent or the Lenders pursuant to this Agreement or for otherwise ascertaining compliance with this Agreement; and at any reasonable time and from time to time during regular business hours, upon reasonable notice and with reasonable frequency, permit the Agent and any agents or representatives (including, without limitation, appraisers) thereof to visit the properties of the Borrowers and the Guarantors and to conduct examinations of and to monitor the Collateral held by the Agent, in each case at the expense of the Borrowers.

          SECTION 5.07. Borrowing Base Certificate. Furnish to the Agent as soon as available and in any event on or before the 15^th day of each month, a Borrowing Base Certificate as of the last day of the immediately preceding month, or on a more frequent basis during a Dominion Period as needed to redetermine Availability, but in any event not more frequently than weekly.

          SECTION 5.08. Collateral Monitoring and Review. At any time upon the request of the Agent or the Required Lenders through the Agent, permit the Agent or

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professionals (including, without limitation, internal and third-party consultants, accountants and appraisers) retained by the Agent or its professionals to conduct: (i) evaluations of the Borrowers’ practices in the computation of the Borrowing Base and appraisals of the real Property and Equipment included in the Borrowing Base, provided that, if no Event of Default has occurred and is continuing and if no Liquidity Trigger Event has occurred and is continuing, one appraisal per calendar year shall be at the sole expense of the Borrowers (including all reasonable fees and expenses in connection therewith) and (ii) appraisals of the Inventory included in the Borrowing Base, provided that if no Event of Default has occurred and is continuing and if no Liquidity Trigger Event has occurred and is continuing, one such appraisal per calendar year shall be at the sole expense of the Borrowers (including all reasonable fees and expenses in connection therewith) (the reasonable fees and expenses in connection with such evaluations and appraisals, the “Collateral Monitoring Fees”). In connection with any collateral monitoring or review and appraisal relating to the computation of the Borrowing Base, the Borrowers shall make such adjustments to the Borrowing Base as the Agent shall reasonably require in its Permitted Discretion based upon the terms of this Agreement and results of such collateral monitoring, review or appraisal.

          SECTION 5.09. Business Plan. Make its Financial Officers available to discuss the Borrowers’ Projections (copies of which have heretofore been delivered to the Agent and the Lenders pursuant to Section 5.01(e)) with the Agent and/or the Lenders upon the Agent’s reasonable request.

          SECTION 5.10. Maintenance of Properties and Intellectual Property Rights. (a) Keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, and (b) obtain and maintain in effect at all times all material intellectual property rights, licenses and permits, which are necessary for it to own its property or conduct its business as currently conducted and not dispose of, grant, or permit to lapse any rights to any material intellectual property except as otherwise expressly permitted hereunder.

          SECTION 5.11. Compliance with Laws. Comply in all material respects with all laws (except those relating to Environmental Laws, which compliance is subject to Section 5.14), rules, regulations and orders of any Governmental Authority applicable to it or its property.

          SECTION 5.12. Use of Proceeds and Letters of Credit. Use the proceeds of the Loans only for (i) refinancing of the Existing Credit Agreement, (ii) working capital, letters of credit and capital expenditures; (iii) other general corporate purposes of the Borrowers; (iv) payment of any related transaction costs, fees and expenses; (v) and the costs of administration of the Cases; and not to use such proceeds for any purpose that would violate of any of the Regulations of the Board, including Regulations T, U and X.

          SECTION 5.13. Additional Collateral; Further Assurances. (a) Unless the Required Lenders otherwise consent and subject to the requirements of applicable law, cause each of its wholly owned Subsidiaries (excluding any foreign Subsidiary and all Excluded Subsidiaries) formed or acquired after the date of this Agreement in accordance with the terms of this Agreement to (i) become a Borrower or Guarantor by executing the Joinder Agreement set

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forth as Exhibit F hereto (the “Joinder Agreement”) and (ii) grant Liens to the Agent, for the benefit of the Agent and the Lenders, in any Property of such new Borrower or Guarantor which constitutes Collateral, including any parcel of real Property located in the United States owned by any Borrower or any Guarantor.

               (a) Cause (i) 100% of the issued and outstanding Equity Interests of each of their domestic Subsidiaries (other than any Excluded Subsidiaries) and (ii) 65% of the issued and outstanding Equity Interests in each foreign Subsidiary directly owned by any Borrower, any Guarantor or any or their respective domestic Subsidiaries (other than any Excluded Subsidiaries) to be subject at all times to a first priority Lien in favor of the Agent pursuant to the terms and conditions of the Loan Documents or other security documents as the Agent shall reasonably request; provided, that, with respect to any Subsidiary that is organized outside of the United States, Canada, or Bermuda, and is not a Significant Subsidiary, neither the Borrowers nor the Guarantors shall be required to take any action under the laws of the jurisdiction of organization to perfect or register the pledge of such shares and that the Borrowers and the Guarantors shall have until the date that is the 30^th day after the Closing Date to perfect the pledge of shares of (i) the Canadian Subsidiaries under the laws of Canada or the applicable province thereof and (ii) Trochus under the laws of Bermuda.

               (b) Execute and deliver, or cause to be executed and delivered, to the Agent such documents and agreements, and take or cause to be taken such actions as the Agent may, from time to time, reasonably request to carry out the terms and conditions of this Agreement and the other Loan Documents, including but not limited to all items of the type required by Section 4.01 (as applicable).

          SECTION 5.14. Environmental Covenant. The Borrowers and Guarantors will, and will cause each of their Subsidiaries to:

               (a) use and operate all of their respective facilities and properties in material compliance with all Environmental Laws, keep all necessary permits, approvals, certificates, licenses, and other authorizations required by applicable Environmental Laws relating to environmental matters in effect and remain in material compliance therewith, and handle all Hazardous Materials in material compliance with all applicable Environmental Laws.

               (b) (i) as soon as possible and in any event not later than 15 Business Days after the Borrowers shall have become aware of the receipt thereof, notify the Agent and provide copies of all written claims, complaints, notices, or inquiries by a Governmental Authority, or any Person which has commenced a legal proceeding against any of the Borrowers, Guarantors, or any of their Subsidiaries, relating to compliance by any of the Borrowers, Guarantors, or any of their Subsidiaries with, or potential liability of any of the Borrowers, Guarantors, or any of their Subsidiaries under, Environmental Laws; and

                    (ii) with reasonable diligence cure all environmental defects and conditions which are the subject of any actions and proceedings against any of the Borrowers, Guarantors, or any of their Subsidiaries relating to compliance with Environmental Laws, except to the extent such actions and proceedings (or the obligation of any of the Borrowers, Guarantors, or any of their Subsidiaries to cure such defects and

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conditions) are stayed or are being contested by any of the Borrowers, Guarantors, or any of their Subsidiaries in good faith by appropriate proceedings; and

               (c) provide such information, access, and certifications which the Agent may reasonably request form time to time to evidence compliance with this Section 5.14.

          SECTION 5.15. Post Closing Deliveries. (a) As soon as practicable but not later than 90 days following the Closing Date, deliver to the Agent a Mortgage, substantially in the form of Exhibit H, duly executed by the applicable Borrower or Guarantor, in or to any real Property which the Agent determines in its sole discretion is to be subject to a Mortgage.

               (b) As soon as practicable but not later than 90 days following the Closing Date, comply with Section 10.

               (c) As soon as practicable but not later than 30 days following the Closing Date, record all appropriate documents in the U.S. Patent and Trademark Office, the U.S. Library of Congress, the United States Copyright Office, and any domain name registry, as applicable.

SECTION 6. NEGATIVE COVENANTS

          From the date hereof and for so long as any Commitment shall be in effect or any Letter of Credit shall remain outstanding or any amount shall remain outstanding or unpaid under this Agreement, unless the Required Lenders shall otherwise consent in writing, no Borrower and no Guarantors will, and no Borrower and no Guarantor will it permit any of their respective Significant Subsidiaries (other than any Excluded Subsidiaries) to (and will not apply to the Bankruptcy Court for authority to (other than in a Reorganization Plan that provides for, upon consummation, the payment in full in cash of the Obligations hereunder)):

          SECTION 6.01. Liens. Incur, create, assume or suffer to exist any Lien on any asset of any Borrower or any Guarantor, now owned or hereafter acquired by any Borrower or any Guarantor, other than (i) Liens which were existing on the Applicable Filing Date as reflected on Schedule 3.06(a) hereto; (ii) Permitted Liens; (iii) Liens in favor of the Agent and the Lenders; (iv) Liens securing purchase money Indebtedness or Capital Leases permitted by Section 6.03(ii); (v) Liens consisting of cash collateral securing reimbursement obligations with respect to letters of credit existing on the date of this Agreement and disclosed on Schedule 3.06(b), but no amendments, modifications, extensions or renewals of such letters of credit (unless, in the case of amendments only, such amendment is satisfactory to the Agent in its sole discretion); and (vi) Liens on insurance proceeds received by any Borrower or any Guarantor, which insurance proceeds are held in escrow for the benefit of claimants having claims arising (a) from exposure to silica, asbestos or coal tar pitch volatile and/or (b) from noise induced hearing loss, (including any insurance proceeds for the benefit of such claimants received by any Borrower or Guarantor at a future date), and all income, earnings and proceeds with respect thereto, provided that no Borrower or Guarantor shall at any time contribute any funds other than such insurance proceeds to any such escrow (or to any trust for the benefit of the claimants described in this Section 6.01(vi) created pursuant to Section 524(g) of the Bankruptcy Code) prior to the consummation of the Reorganization Plan of the Borrowers and Guarantors.

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          SECTION 6.02. Merger, etc. Consolidate or merge with or into another Person; provided that (i) any Borrower or Guarantor may dissolve, merge or liquidate with or into another Borrower or Guarantor so long as, in the case of a Borrower merging with a Guarantor, such Borrower is the entity surviving such merger, (ii) any Subsidiary of a Borrower or a Guarantor may dissolve, merge or liquidate with or into a Borrower or a Guarantor so long as such Borrower or Guarantor is the entity surviving any merger and (iii) any Subsidiary of a Borrower or Guarantor that is not a Borrower or Guarantor may dissolve, merge or liquidate with or into any other Subsidiary of a Borrower or Guarantor other than an Excluded Subsidiary.

          SECTION 6.03. Indebtedness. Contract, create, incur, assume or suffer to exist any Indebtedness, except for (i) Indebtedness under the Loan Documents; (ii) Indebtedness incurred prior to the applicable Filing Date (including existing Capital Lease Obligations); (iii) Indebtedness of the Company as of the date hereof with respect to its Guarantee of Indebtedness of QAL, but no increases in principal, modifications, extensions, renewals, refinancings or refundings of such Indebtedness; (iv) intercompany Indebtedness of any Borrower or any Guarantor to any Borrower or any Guarantor; provided such intercompany Indebtedness is subordinated to the Obligations in a manner satisfactory to the Agent, (v) Indebtedness arising from Investments permitted by Section 6.08; (vi) Indebtedness in respect of obligations pursuant to any Permitted Commodity Swap Agreement; (vii) Indebtedness incurred by any Borrower or any Guarantor under Swap Agreements provided by any Agent, any Lender or any Affiliate of any Agent or any Lender entered into the ordinary course of financial management, consistent with past practice, and not for speculative purposes; (viii) Indebtedness owed to JPMorgan Chase, any of its Lending Affiliates, in respect of any Banking Services Obligations and Indebtedness incurred to another financial institution in the ordinary course of business in respect of depository and cash management services provided to any Borrower or Guarantor or any of their Subsidiaries by such financial institution, (ix) Indebtedness consisting of reimbursement obligations with respect to letters of credit existing on the date of this Agreement and disclosed on Schedule 3.06(b), but no amendments, modifications, extensions or renewals of such letters of credit (unless, in the case of amendments only, such amendment is satisfactory to the Agent in its sole discretion); and (x) other unsecured Indebtedness not to exceed $10,000,000 in the aggregate at any time outstanding.

          SECTION 6.04. Guarantees and Other Liabilities. Purchase or repurchase (or agree, contingently or otherwise, so to do) the Indebtedness of, or assume, Guarantee (directly or indirectly or by an instrument having the effect of assuring another’s payment or performance of any obligation or capability of so doing, or otherwise), endorse or otherwise become liable, directly or indirectly, in connection with the obligations, stock or dividends of any Person, except (i) for any guaranty of Indebtedness or other obligations of any Borrower or Guarantor if such Person could have incurred such Indebtedness or obligations under this Agreement, (ii) by endorsement of negotiable instruments for deposit or collection in the ordinary course of business and (iii) with respect to its Guarantee of Indebtedness pursuant to Section 6.03(iii).

          SECTION 6.05. Chapter 11 Claims. Incur, create, assume, suffer to exist or permit any other Super-priority Claim which is pari passu with or senior to the claims of the Agent and the Lenders against the Borrowers and the Guarantors hereunder, except for the Carve-Out.

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          SECTION 6.06. Dividends; Capital Stock. Declare or pay, directly or indirectly, any dividends or make any other distribution or payment, whether in cash, property, securities or a combination thereof, with respect to (whether by reduction of capital or otherwise) any shares of capital stock or membership interests (or any options, warrants, rights or other equity securities or agreements relating to any capital stock or membership interests), or set apart any sum for the aforesaid purposes, provided that any Guarantor may pay dividends to any other Borrower and to any other Guarantor that is its direct parent.

          SECTION 6.07. Transactions with Affiliates. Sell or transfer any property or assets to, or otherwise engage in any other material transactions with, any of its Affiliates (other than the Borrowers and the Guarantors), other than (i) in the ordinary course of business at prices and on terms and conditions not less favorable to such Borrower or such Guarantor than could be obtained on an arm’s-length basis from unrelated third parties, (ii) non-cash transactions consisting of transfers, offsets, and releases of intercompany claims pursuant to, and in accordance with, the Settlement and Release Agreement and (iii) payments to Kaiser Canada made in accordance with the Settlement and Release Agreement, provided that in no event shall the net amount of such loans and advances made by the Borrowers or the Guarantors pursuant to the Settlement and Release Agreement exceed $2,500,000 outstanding at any one time.

          SECTION 6.08. Investments, Loans and Advances. Purchase, hold or acquire any capital stock, evidences of indebtedness or other securities of, make or permit to exist any loans or advances to, or make or permit to exist any investment in, any other Person (all of the foregoing, “Investments”), except for (i) ownership by the Borrowers and the Guarantors of the capital stock or membership interests of each of the Subsidiaries listed on Schedule 3.05, provided that no further equity investments may be made in any such Person that is not a Borrower or Guarantor; (ii) Permitted Investments; (iii) advances and loans to Kaiser Canada (other than loans and advances pursuant to the Settlement and Release Agreement) in the ordinary course of business consistent with past practices; (iv) advances to QAL and KAAC for, among other things, the purchase of bauxite and the payment of tolling charges and taxes in return for which the applicable Borrower or Guarantor, as the case may be, receives alumina product, all occurring in the ordinary course of business consistent with past practices; (v) advances and loans to Trochus Insurance Company in the ordinary course of business consistent with past practices, provided that in no event shall the amount of advances or loans be greater than $5,000,000 at any one time outstanding; (vi) Investments received in connection with dispositions of assets, and Investments in escrows established in connection with dispositions of assets which are permitted hereby; (vii) Investments in the form of advance payments in connection with any Permitted Commodity Swap Agreement; (viii) non-cash Investments consisting of transfers, offsets, and releases of intercompany claims pursuant to, and in accordance with, the Settlement and Release Agreement; (ix) contributions to voluntary employee beneficiary associations established for the benefit of certain hourly retirees and for the benefit of certain salaried retirees pursuant to agreements, as amended and/or modified, that the Company and Kaiser Bellwood negotiated with (A) the United Steelworkers of America, the International Association of Machinists and Aerospace Workers, and the Official Committee of Retired Employees in the Cases and approved by a final order of the Bankruptcy Court signed March 22, 2004, (B) the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America and/or its Local Union No. 1186 and approved by a final order of the Bankruptcy Court signed May 24, 2004, and (C) the Paper, Allied-Industrial, Chemical

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and Energy Workers International Union, AFL-CIO, CLC and the International Chemical Workers Union Council-United Food & Commercial Workers and approved by a final order of the Bankruptcy Court signed May 24, 2004; (x) existing Investments described on Schedule 6.08 hereto, but no extensions, renewals or increases of such Investments; and (xi) Investments consisting of payment of any out-of-pocket third party costs of Subsidiaries that are debtors under the Bankruptcy Code to the extent that (A) such payments constitute payment of any out-of-pocket third party costs incurred solely in connection with the administration of such Subsidiaries’ cases under the Bankruptcy Code, (B) such Subsidiaries have an obligation to reimburse the Borrowers and the Guarantors therefor and (C) such Investments are made pursuant to, and in accordance with, the Settlement and Release Agreement.

          SECTION 6.09. Creation of Subsidiaries. Create or acquire of any Subsidiary of any Borrower or Guarantor after the Closing Date unless such created or acquired Subsidiary becomes a Borrower or Guarantor by executing the Joinder Agreement set forth as Exhibit F and pledges all of its assets to the Agent for the benefit of the Lenders pursuant to the Security and Pledge Agreement.

          SECTION 6.10. Disposition of Assets. Sell or otherwise dispose of any assets (including, without limitation, the Equity Interests of any Subsidiary), except for (i) sales of Permitted Investments; (ii) sales of Inventory in the ordinary course of business; (iii) dispositions of surplus, obsolete or damaged Equipment no longer used in production; (iv) sales of assets set forth on Schedule 6.10 hereto; (v) the sale of (A) Equity Interests in QAL held by the Company, (B) certain tolling agreements and certain supply contracts held by KAII related to the sale of alumina and bauxite produced at QAL and (C) the sale of certain other assets incidental to the business of QAL held by the Borrowers and the Guarantors, all in accordance with the QAL Purchase Agreement; (vi) the disposition of assets by any Borrower or its Subsidiaries with a fair market value of less than $250,000 (in a single transaction or related series of transactions) in the ordinary course of business; (vii) all cash sales of other assets in the ordinary course of business having a fair market value not exceeding $10,000,000 in the aggregate during the period from the Closing Date to the Maturity Date; and (viii) any sale or disposition in a transaction described in clause (ii) or (iii) of Section 6.07.

          SECTION 6.11. Nature of Business. Modify or alter in any material manner the nature and type of its business as conducted on the Closing Date or the manner in which such business is conducted (except as required by the Bankruptcy Code and except such activities as may be incidental or related thereto or reasonably related extensions thereof), it being understood that asset sales permitted by Section 6.11 shall not constitute such a material modification or alteration.

          SECTION 6.12. Restrictive Agreements. Enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of such Borrower or Guarantor or any of their Significant Subsidiaries (other than Excluded Subsidiaries) to create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Subsidiary of a Borrower or Guarantor to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to the Borrowers or any other Subsidiary of the Borrowers or to guarantee Indebtedness of the Borrowers or any other Subsidiary of the Borrowers; provided that (i) the foregoing shall not

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apply to restrictions and conditions imposed by law or by this Agreement, (ii) the foregoing shall not apply to restrictions and conditions existing on the date hereof identified on Schedule 6.12 (but shall apply to any extension or renewal of, or any amendment or modification expanding the scope of, any such restriction or condition), (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement and (v) clause (a) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment thereof.

          SECTION 6.13. Prepayment of Indebtedness; Subordinated Indebtedness. (a) Directly or indirectly, voluntarily purchase, redeem, defease or prepay any principal of, premium, if any, interest or other amount payable in respect of any Indebtedness prior to its scheduled maturity, other than (i) the Obligations; (ii) Capital Lease Obligations permitted by Section 6.03(ii) not to exceed $10,000,000 in the aggregate; (iii) prepayment of Indebtedness in connection with the cancellation, termination or unwinding of Permitted Commodity Swap Agreements in the ordinary course of business; (iv) prepayment of Indebtedness in connection with the cancellation, termination or unwinding of Swap Obligations described in Section 6.03(vii) in the ordinary course of business; (v) redemption obligations in respect of Indebtedness of QAL not to exceed $4,000,000 in the event the QAL Purchase Agreement is not consummated; and (vi) transfers, offsets, and releases of intercompany claims pursuant to, and in accordance with, the Settlement and Release Agreement.

          (b) Make any amendment or modification to the indenture, note or other agreement evidencing or governing any Indebtedness arising after the applicable Filing Date (or arising prior to the Filing Date if the applicable Borrower or Guarantor has assumed or agreed to perform such obligation) of such Person the payment of which is subordinated to payment of the Obligations to the written satisfaction of the Agent, or directly or indirectly voluntarily prepay, defease or in substance defease, purchase, redeem, retire or otherwise acquire, any such Indebtedness.

SECTION 7. EVENTS OF DEFAULT

          SECTION 7.01. Events of Default. In the case of the happening of any of the following events and the continuance thereof beyond the applicable period of grace if any (each, an “Event of Default”):

               (a) any representation or warranty made by any Borrower or Guarantor in this Agreement or in any Loan Document or in connection with this Agreement or the credit extensions hereunder or any statement or representation made in any report, financial statement, certificate or other document furnished by any Borrower or Guarantor of any Borrower or Guarantor to the Lenders under or in connection with this Agreement, shall prove to have been false or misleading in any material respect when made or delivered; or

               (b) default shall be made in the payment of any (i) Fees, interest on the Loans, or any other amounts (other than principal of the Loans) payable by the Borrowers

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hereunder that continues for three (3) days after the date due or (ii) principal of the Loans (including, without limitation, reimbursement obligations or Cash Collateralization in respect of Letters of Credit), when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; or

               (c) default shall be made by any Borrower or any Guarantor in the due observance or performance of any covenant, condition or agreement contained in Section 6 hereof; or

               (d) default shall be made by any Borrower or any Guarantor in the due observance or performance of any other covenant, condition or agreement to be observed or performed pursuant to the terms of this Agreement or any of the other Loan Documents and such default shall continue unremedied for more than twenty (20) days; or

               (e) any of the Cases shall be dismissed or converted to a case under Chapter 7 of the Bankruptcy Code or any Borrower or Guarantor of any Borrower or Guarantor shall file a motion or other pleading seeking the dismissal of any of the Cases under Section 1112 of the Bankruptcy Code or otherwise; a trustee under Chapter 7 or Chapter 11 of the Bankruptcy Code, a responsible officer or an examiner with enlarged powers relating to the operation of the business (powers beyond those set forth in Section 1106(a)(3) and (4) of the Bankruptcy Code) under Section 1106(b) of the Bankruptcy Code shall be appointed in any of the Cases and the order appointing such trustee, responsible officer or examiner shall not be reversed or vacated within thirty (30) days after the entry thereof; the Board of Directors, or similar governing body, of any Borrower, Guarantor, or Significant Subsidiary (other than an Excluded Subsidiary) of any Borrower or Guarantor shall authorize a liquidation of such Borrower’s, Guarantor’s, or Significant Subsidiary’s (other than an Excluded Subsidiary) business; or an application shall be filed by any Borrower, Guarantor, or Affiliate of any Borrower or Guarantor for the approval of any other Super-priority Claim (other than the Carve-Out) in any of the Cases which is pari passu with or senior to the claims of the Agent and the Lenders against any Borrower or any Guarantor hereunder, or there shall arise or be granted any such pari passu or senior Super-priority Claim; or

               (f) the Bankruptcy Court shall enter an order or orders granting relief from the automatic stay applicable under Section 362 of the Bankruptcy Code to the holder or holders of any security interest to permit foreclosure (or the granting of a deed in lieu of foreclosure or the like) on any assets of any of the Borrowers or any of the Guarantors which have a value in excess of $1,000,000 in the aggregate; or

               (g) a Change of Control shall occur; or

               (h) the Borrowers’ Agent shall fail to deliver a certified Borrowing Base Certificate when due and such default shall continue unremedied for more than three (3) Business Days; or

               (i) any material provision of any Loan Document shall, for any reason, cease to be valid and binding on any of the Borrowers or any of the Guarantors, or any Borrower, Guarantor, or Affiliate of any Borrower or Guarantor shall so assert in any pleading

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filed in any court or any material portion of any Lien (as reasonably determined by the Agent) intended to be created by the Loan Documents shall cease to be or shall not be a valid and perfected Lien having the priorities contemplated hereby or thereby; or

               (j) an order of the Bankruptcy Court shall be entered reversing, staying for a period in excess of 10 days, vacating or (without the written consent of the Agent) otherwise amending, supplementing or modifying the Order or terminating the use of cash collateral by the Borrowers or the Guarantors pursuant to the Order; or

               (k) any judgment or order as to a liability or debt arising after the applicable Filing Date for the payment of money in excess of $1,000,000 not covered by insurance shall be rendered against any Borrower, Guarantor, or Significant Subsidiary (other than an Excluded Subsidiary) of any Borrower or Guarantor and the enforcement thereof shall not have been stayed, vacated or discharged within 30 days; or

               (l) any non-monetary judgment or order with respect to an event arising after the applicable Filing Date shall be rendered against any Borrower, Guarantor, or Significant Subsidiary (other than an Excluded Subsidiary) of any Borrower or Guarantor which does or would reasonably be expected to cause a Material Adverse Affect, and there shall be any period of ten (10) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

               (m) except as permitted by the Order or as otherwise agreed to by the Agent, the Borrowers or the Guarantors shall make any Pre-Petition Payment other than Pre-Petition Payments authorized by the Bankruptcy Court; or

               (n) any Termination Event shall have occurred and shall continue unremedied (if applicable) for more than 10 days and the sum (determined as of the date of occurrence of such Termination Event) of the insufficiency of the Plan in respect of which such Termination Event shall have occurred and be continuing and the insufficiency of any and all other Plans with respect to which such a Termination Event shall have occurred and then exist is equal to or greater than $5,000,000; or

               (o) (i) any Borrower or any ERISA Affiliate thereof shall have been notified by the sponsor or trustee of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan, (ii) such Borrower or such ERISA Affiliate does not have reasonable grounds, in the opinion of the Agent, to contest such Withdrawal Liability and is not in fact contesting such Withdrawal Liability in a timely and appropriate manner, and (iii) the amount of such Withdrawal Liability specified in such notice, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liabilities (determined as of the date of such notification), exceeds $5,000,000 allocable to obligations arising after the applicable Filing Date or requires payments exceeding $500,000 per annum in excess of the annual payments made with respect to such Multiemployer Plans by such Borrower or such ERISA Affiliate for the plan year immediately preceding the plan year in which such notification is received; or

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               (p) any Borrower or any ERISA Affiliate thereof shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of the Borrowers and its ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years that include the date hereof by an amount exceeding $5,000,000; or

               (q) a breach by any Borrower or any ERISA Affiliate of the Settlement Agreement shall have occurred; or

               (r) any Borrower or any Guarantor is criminally indicted or convicted under any law that may reasonably be expected to lead to a forfeiture of any property of such party having a fair market value in excess of $5,000,000; or

               (s) it shall be determined (whether by the Bankruptcy Court or by any other judicial or administrative forum) that any Borrower, Guarantor, or Subsidiary of any Borrower or Guarantor is liable for the payment of claims arising out of any failure to comply (or to have complied) with applicable Environmental Laws the payment of which will have a Material Adverse Effect; or

               (t) any Borrower, Guarantor, or Subsidiary of any Borrower or Guarantor shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable; or

               (u) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (v) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness; or

               (v) any Borrower, Guarantor, or Significant Subsidiary of any Borrower or Guarantor shall become unable, admit in writing its inability or fail generally to pay its debts arising after the applicable Filing Date as they become due;

then, and in every such event and at any time thereafter during the continuance of such event, and without further order of or application to the Bankruptcy Court, the Agent may, and at the request of the Required Lenders, shall, by notice to the Borrowers (with a copy to counsel for the Official Creditors’ Committee appointed in the Cases, and to the United States Trustee for the District of Delaware), take one or more of the following actions, at the same or different times (provided, that with respect to clause (iv) below and the enforcement of Liens or other remedies with respect to the Collateral under clause (v) below, the Agent shall provide the Borrowers’ Agent (with a copy to counsel for the Official Creditors’ Committee in the Cases, and to the

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United States Trustee for the District of Delaware) with five (5) Business Days’ written notice prior to taking the action contemplated thereby and provided, further, that upon receipt of notice referred to in the immediately preceding clause with respect to the accounts referred to in clause (iv) below, the Borrowers may continue to make ordinary course disbursements from such accounts (other than the Letter of Credit Account) but may not withdraw or disburse any other amounts from such accounts; in any hearing after the giving of the aforementioned notice, the only issue that may be raised by any party in opposition thereto being whether, in fact, an Event of Default has occurred and is continuing): (i) terminate forthwith the Total Commitment; (ii) declare the Loans then outstanding to be forthwith due and payable, whereupon the principal of the Loans together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrowers accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrowers and the Guarantors, anything contained herein or in any other Loan Document to the contrary notwithstanding; (iii) require the Borrowers and the Guarantors upon demand to forthwith deposit in the Letter of Credit Account cash in an amount which, together with any amounts then held in the Letter of Credit Account, is equal to the sum of 105% of the then Letter of Credit Exposure (and to the extent the Borrowers and the Guarantors shall fail to furnish such funds as demanded by the Agent, the Agent shall be authorized to debit the accounts of the Borrowers and the Guarantors maintained with the Agent in such amount five (5) Business Days after the giving of the notice referred to above (the “Default Notice Period”)); (iv) set-off amounts in the Letter of Credit Account or any other accounts maintained with the Agent and apply such amounts to the obligations of the Borrowers and the Guarantors hereunder and in the other Loan Documents; and (v) exercise any and all remedies under the Loan Documents and under applicable law available to the Agent and the Lenders.

SECTION 8. THE AGENT

          SECTION 8.01. Administration by Agent. The general administration of the Loan Documents shall be by the Agent. Each Lender hereby irrevocably authorizes the Agent, at its discretion, to take or refrain from taking such actions as agent on its behalf and to exercise or refrain from exercising such powers under the Loan Documents as are delegated by the terms hereof or thereof, as appropriate, together with all powers reasonably incidental thereto (including the release of Collateral in connection with any transaction that is expressly permitted by the Loan Documents). The Agent shall have no duties or responsibilities except as set forth in this Agreement and the remaining Loan Documents.

          SECTION 8.02. Advances and Payments.

               (a) On the date of each Loan, the Agent shall be authorized (but not obligated) to advance, for the account of each of the Lenders, the amount of the Loan to be made by it in accordance with its Commitment hereunder. Should the Agent do so, each of the Lenders agrees forthwith to reimburse the Agent in immediately available funds for the amount so advanced on its behalf by the Agent, together with interest at the Federal Funds Effective Rate if not so reimbursed on the date due from and including such date but not including the date of reimbursement.

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               (b) Any amounts received by the Agent in connection with this Agreement (other than amounts to which the Agent is entitled pursuant to Sections 2.19, 8.06, 11.05 and 11.06), the application of which is not otherwise provided for in this Agreement shall be applied, first, in accordance with each Lender’s Commitment Percentage to pay accrued but unpaid expenses Commitment Fees or Letter of Credit Fees, and second, in accordance with each Lender’s Commitment Percentage to pay accrued but unpaid interest and the principal balance outstanding and all unreimbursed Letter of Credit drawings and Cash Collateralization of Letters of Credit. All amounts to be paid to a Lender by the Agent shall be credited to that Lender, after collection by the Agent, in immediately available funds either by wire transfer or deposit in that Lender’s correspondent account with the Agent, as such Lender and the Agent shall from time to time agree.

          SECTION 8.03. Collateral; Collateral Reporting. (a) The Agent shall have no obligation to any of the Lenders to ensure that the Collateral exists, is owned by the Borrowers and Guarantors, is cared for, protected or insured, is unencumbered by others, or that the Liens granted to the Agent therein have been properly, sufficiently or lawfully created, perfected, protected or enforced, or that such Liens are entitled to any particular priority, it being understood and agreed that in respect of the Collateral, or any act, omission, or event related thereto, the Agent may act in any manner it may deem appropriate, in its sole discretion given the Agent’s own interest in the Collateral in its capacity as one of the Lenders and that the Agent shall have no other duty or liability whatsoever to any Lender as to any of the foregoing.

               (b) Each Lender hereby appoints each other Lender as its agent for the purpose of perfecting Liens, for the benefit of the Agent and the Lenders, in assets which, in accordance with Article 9 of the UCC or any other applicable law can be perfected only by possession. Should any Lender (other than the Agent) obtain possession of any such Collateral, such Lender shall notify the Agent thereof, and, promptly upon the Agent’s request therefor shall deliver such Collateral to the Agent or otherwise deal with such Collateral in accordance with the Agent’s instructions.

               (c) Each Lender hereby agrees that (i) it is deemed to have requested that the Agent furnish such Lender, promptly after it becomes available, a copy of each Report prepared by or on behalf of the Agent; (ii) the Agent (A) makes no representation or warranty, express or implied, as to the completeness or accuracy of any Report or any of the information contained therein or any inaccuracy or omission contained in or relating to a Report, or (B) shall not be liable for any information contained in any Report; (iii) the Reports are not comprehensive audits or examinations, and that the Agent or any other party performing any audit or examination will inspect only specific information regarding the Borrowers and Guarantors and will rely significantly upon the Borrowers’ and Guarantors’ books and records, as well as on representations of the Borrowers’ and Guarantors’ personnel and that the Agent undertakes no obligation to update, correct or supplement the Reports; (iv) it will keep all Reports confidential and strictly for its internal use, not share the Report with any Borrower or any Guarantor and not to distribute any Report to any other Person except as otherwise permitted pursuant to this Agreement; and (v) without limiting the generality of any other indemnification provision contained in this Agreement, it will pay and protect, and indemnify, defend, and hold the Agent and any such other Person preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses, and other amounts (including reasonable

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attorney fees) incurred by the Agent and any such other Person preparing a Report as the direct or indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender.

          SECTION 8.04. Agreement of Required Lenders. Upon any occasion requiring or permitting an approval, consent, waiver, election or other action on the part of the Required Lenders, action shall be taken by the Agent for and on behalf or for the benefit of all Lenders upon the direction of the Required Lenders, and any such action shall be binding on all Lenders. No amendment, modification, consent, or waiver shall be effective except in accordance with the provisions of Section 11.10.

          SECTION 8.05. Liability of Agent.

               (a) The Agent when acting on behalf of the Lenders, may execute any of its respective duties under this Agreement by or through any of its respective officers, agents, and employees, and neither the Agent nor its directors, officers, agents, employees or Affiliates shall be liable to the Lenders or any of them for any action taken or omitted to be taken in good faith, or be responsible to the Lenders or to any of them for the consequences of any oversight or error of judgment, or for any loss, unless the same shall happen through its gross negligence or willful misconduct. The Agent and its respective directors, officers, agents, employees and Affiliates shall in no event be liable to the Lenders or to any of them for any action taken or omitted to be taken by them pursuant to instructions received by them from the Required Lenders or in reliance upon the advice of counsel selected by it. Without limiting the foregoing, neither the Agent, nor any of its respective directors, officers, employees, agents or Affiliates shall be responsible to any Lender for the due execution, validity, genuineness, effectiveness, sufficiency, or enforceability of, or for any statement, warranty, or representation in, this Agreement, any Loan Document or any related agreement, document or order, or shall be required to ascertain or to make any inquiry concerning the performance or observance by the Borrowers of any of the terms, conditions, covenants, or agreements of this Agreement or any of the Loan Documents.

               (b) Neither the Agent nor any of its respective directors, officers, employees, agents or Affiliates shall have any responsibility to the Borrowers or the Guarantors on account of the failure or delay in performance or breach by any Lender (other than the Agent in its capacity as a Lender) or by the Borrowers or the Guarantors of any of their respective obligations under this Agreement or any of the Loan Documents or in connection herewith or therewith.

               (c) The Agent, in its capacity as Agent hereunder, shall be entitled to rely on any communication, instrument, or document reasonably believed by such person to be genuine or correct and to have been signed or sent by a person or persons believed by such person to be the proper person or persons, and such person shall be entitled to rely on advice of legal counsel, independent public accountants, and other professional advisers and experts selected by such person.

          SECTION 8.06. Reimbursement and Indemnification. Each Lender agrees (i) to reimburse (x) the Agent for such Lender’s Commitment Percentage of any expenses and

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fees incurred for the benefit of the Lenders under this Agreement and any of the Loan Documents, including, without limitation, counsel fees and compensation of agents and employees paid for services rendered on behalf of the Lenders, and any other expense incurred in connection with the operations or enforcement thereof not reimbursed by the Borrowers or the Guarantors and (y) the Agent for such Lender’s Commitment Percentage of any expenses of the Agent incurred for the benefit of the Lenders that the Borrowers have agreed to reimburse pursuant to Section 11.05 and has failed to so reimburse and (ii) to indemnify and hold harmless the Agent and any of its directors, officers, employees, agents or Affiliates, on demand, in the amount of its proportionate share, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against it or any of them in any way relating to or arising out of this Agreement or any of the Loan Documents or any action taken or omitted by it or any of them under this Agreement or any of the Loan Documents to the extent not reimbursed by the Borrowers or the Guarantors (except such as shall result from their respective gross negligence or willful misconduct).

          SECTION 8.07. Rights of Agent. It is understood and agreed that JPMorgan Chase Bank shall have the same rights and powers hereunder (including the right to give such instructions) as the other Lenders and may exercise such rights and powers, as well as its rights and powers under other agreements and instruments to which it is or may be party, and engage in other transactions with any Borrower or any Guarantor, as though it were not the Agent of the Lenders under this Agreement.

          SECTION 8.08. Independent Lenders. Each Lender acknowledges that it has decided to enter into this Agreement and to make the Loans hereunder based on its own analysis of the transactions contemplated hereby and of the creditworthiness of the Borrowers and the Guarantors and agrees that the Agent shall bear no responsibility therefor.

          SECTION 8.09. Notice of Transfer. The Agent may deem and treat a Lender party to this Agreement as the owner of such Lender’s portion of the Loans for all purposes, unless and until a written notice of the assignment or transfer thereof executed by such Lender shall have been received by the Agent.

          SECTION 8.10. Successor Agent. Subject to the appointment and acceptance of a successor Agent as provided in this paragraph, the Agent may resign at any time by giving written notice thereof to the Lenders and the Borrowers’ Agent. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Agent, which shall be reasonably satisfactory to the Borrowers. If no successor Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment, within 30 days after the retiring Agent’s giving of notice of resignation, the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a commercial Lender organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of a least $100,000,000, which shall be reasonably satisfactory to the Borrowers. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent’s resignation hereunder as Agent, the provisions of this

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Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement.

          SECTION 8.11. Syndication Agent, Bookrunner, Etc. The documentation agent, lead arranger, sole bookrunner, syndication agent and co-arranger shall have no rights, powers, obligations, liabilities, responsibilities or duties under this Agreement other than those applicable to all Lenders as such.

SECTION 9. GUARANTY

          SECTION 9.01. Guaranty.

               (a) Each of the Guarantors unconditionally and irrevocably guarantees the due and punctual payment by the Borrowers of the Obligations. Each of the Guarantors further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and it will remain bound upon this guaranty notwithstanding any extension or renewal of any of the Obligations. The Obligations of the Guarantors shall be joint and several.

               (b) Each of the Guarantors waives presentation to, demand for payment from and protest to any Borrower or any other Guarantor, and also waives notice of protest for nonpayment. The Obligations of the Guarantors hereunder shall not be affected by (i) the failure of the Agent or a Lender to assert any claim or demand or to enforce any right or remedy against any Borrower or any other Guarantor under the provisions of this Agreement or any other Loan Document or otherwise; (ii) any extension or renewal of any provision hereof or thereof; (iii) any rescission, waiver, compromise, acceleration, amendment or modification of any of the terms or provisions of any of the Loan Documents; (iv) the release, exchange, waiver or foreclosure of any security held by the Agent for the Obligations or any of them; (v) the failure of the Agent or a Lender to exercise any right or remedy against any other Guarantor; or (vi) the release or substitution of any Guarantor or any other Guarantor.

               (c) Each of the Guarantors further agrees that this guaranty constitutes a guaranty of payment when due and not just of collection, and waives any right to require that any resort be had by the Agent or a Lender to any security held for payment of the Obligations or to any balance of any deposit, account or credit on the books of the Agent or a Lender in favor of the Borrower or any other Guarantor, or to any other Person.

               (d) Each of the Guarantors hereby waives any defense that it might have based on a failure to remain informed of the financial condition of any Borrower and of any other Guarantor and any circumstances affecting the ability of the Borrower to perform under this Agreement.

               (e) Each Guarantor’s guaranty shall not be affected by the genuineness, validity, regularity or enforceability of the Obligations or any other instrument evidencing any Obligations, or by the existence, validity, enforceability, perfection, or extent of any collateral therefor or by any other circumstance relating to the Obligations which might otherwise constitute a defense to this Guaranty. Neither of the Agent, nor any of the Lenders makes any representation or warranty in respect to any such circumstances or shall have any duty

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or responsibility whatsoever to any Guarantor in respect of the management and maintenance of the Obligations.

               (f) Subject to the provisions of Section 7.01, upon the Obligations becoming due and payable (by acceleration or otherwise), the Lenders shall be entitled to immediate payment of such Obligations by the Guarantors upon written demand by the Agent, without further application to or order of the Bankruptcy Court.

          SECTION 9.02. No Impairment of Guaranty. The obligations of the Guarantors hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including, without limitation, any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations. Without limiting the generality of the foregoing, the obligations of the Guarantors hereunder shall not be discharged or impaired or otherwise affected by the failure of the Agent or a Lender to assert any claim or demand or to enforce any remedy under this Agreement or any other agreement, by any waiver or modification of any provision thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of the Guarantors or would otherwise operate as a discharge of the Guarantors as a matter of law, unless and until the Obligations are paid in full.

          SECTION 9.03. Subrogation. Upon payment by any Guarantor of any sums to the Agent or a Lender hereunder, all rights of such Guarantor against the Borrowers arising as a result thereof by way of right of subrogation or otherwise, shall in all respects be subordinate and junior in right of payment to the prior final and indefeasible payment in full of all the Obligations. If any amount shall be paid to such Guarantor for the account of any Borrower, such amount shall be held in trust for the benefit of the Agent and the Lenders and shall forthwith be paid to the Agent and the Lenders to be credited and applied to the Obligations, whether matured or unmatured.

SECTION 10. CASH MANAGEMENT

          SECTION 10.01. Cash Management. (a) The Borrowers and Guarantors and their Significant Subsidiaries (other than any Excluded Subsidiaries) shall (i) establish and maintain cash management services of a type and on terms reasonably satisfactory to the Agent at JPMorgan Chase, any Affiliate thereof or any bank providing cash management services to the Borrowers, Guarantors on the Closing Date (each, a “Cash Management Bank”). In accordance with Section 5.15(b), within 90 days after the Closing Date (or such later time as may be reasonably agreed to by the Agent), all Cash Management Accounts not maintained at JPMorgan Chase or any Affiliate thereof shall be closed and all Cash Management Accounts shall thereafter be maintained solely at JPMorgan Chase or any Affiliate thereof (JPMorgan Chase agrees that such cash management services will be provided at reasonably competitive market rates). The Borrowers and Guarantors shall take such reasonable steps to enforce, collect, receive and cause all amounts owing on the Accounts of the Borrowers and Guarantors to be remitted directly to a Cash Management Account (other than any payroll, operating, checking or disbursement or petty cash account) or the Agent’s Account, and (ii) deposit or cause to be deposited promptly, and in

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any event no later than the first Business Day after the date of receipt thereof, all proceeds in respect of any Collateral and all collections and other amounts received by any Borrower or Guarantor (including payments made by the Account Debtors directly to any Borrower or Guarantor) into a Cash Management Account.

               (a) Prior to the Closing Date, the Borrowers and Guarantors shall, with respect to each Cash Management Account, deliver to the Agent a Cash Management Agreement with respect to such Cash Management Account. Prior to the establishment of any Cash Management Account on or after the Closing Date, the Borrowers and Guarantors shall, with respect to such Cash Management Account, deliver to the Agent a Cash Management Agreement with respect to such Cash Management Account. No Cash Management Agreement shall be required if such Cash Management Account is maintained at JPMorgan Chase. Each Cash Management Agreement shall provide, among other things, that the Cash Management Bank shall, from and after the Closing Date, at the election of the Agent in its sole discretion, forward all cash deposited into the Cash Management Accounts covered thereby by electronic funds transfer (including, but not limited to, ACH transfers) on each Business Day to a designated Account of the Agent; provided, however that except during a Dominion Period all such cash deposited to such Account shall be deposited into the Borrowers’ designated operating account.

          SECTION 10.02. Cash Dominion. From and after a Dominion Trigger Event and prior to a Dominion Release Event (unless and until a subsequent Dominion Trigger Event occurs) (each such period, the “Dominion Period”), the Borrowers and the Guarantors hereby irrevocably waive the right to direct the application of all funds in their respective Cash Management Accounts and agree that the Agent shall apply all payments in respect of any Obligations and all available funds in the Cash Management Accounts on a daily basis in a manner provided in Section 2.11(b).

SECTION 11. MISCELLANEOUS

          SECTION 11.01. Notices. Notices and other communications provided for herein shall be in writing (including facsimile communication) and shall be mailed, transmitted by facsimile or delivered to (a) the Borrowers’ Agent, on behalf of any Borrower or any Guarantor, at Kaiser Aluminum & Chemical Corporation, 27422 Portola Parkway, Suite 350, Foothill Ranch, California, 92610, Attention: Kerry A. Shiba, Vice President and Chief Financial Officer, and John M. Donnan, General Counsel, or at facsimile number (949) 614-1930 and (b) to a Lender or the Agent to it at its address set forth on Annex B, or such other address as such party may from time to time designate by giving written notice to the other parties hereunder. In addition, copies of any notice of the occurrence of a Default shall be delivered to each of the parties (the “Notice Parties”) listed on Schedule 11.01 at the address specified on such schedule. Failure to deliver any notice to the Notice Parties shall not give rise to any liability hereunder nor shall it in any way affect the rights and obligations of any party hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the fifth Business Day after the date when sent by registered or certified mail, postage prepaid, return receipt requested, if by mail; or when receipt is acknowledged, if by any facsimile equipment of the sender; in each case addressed to such party as provided in this Section 11.01 or in accordance with the latest unrevoked written direction from such party; provided, however, that in the case of notices to the

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Agent notices pursuant to the preceding sentence with respect to change of address and pursuant to Section 2 shall be effective only when received by the Agent.

          SECTION 11.02. Survival of Agreement, Representations and Warranties, etc. All warranties, representations and covenants made by any Borrower or any Guarantor herein or in any certificate or other instrument delivered by it or on its behalf in connection with this Agreement shall be considered to have been relied upon by the Lenders and shall survive the making of the Loans herein contemplated regardless of any investigation made by any Lender or on its behalf and shall continue in full force and effect so long as any amount due or to become due hereunder is outstanding and unpaid and so long as the Commitments have not been terminated. All statements in any such certificate or other instrument shall constitute representations and warranties by the Borrowers and the Guarantors hereunder with respect to the Borrowers.

          SECTION 11.03. Successors and Assigns.

               (a) This Agreement shall be binding upon and inure to the benefit of the Borrowers, the Agent and the Lenders and their respective successors and assigns. Neither any of the Borrowers nor any of the Guarantors may assign or transfer any of their rights or obligations hereunder without the prior written consent of the Required Lenders. Each Lender may, with the consent of the Agent, sell participations to any Person in all or part of any Loan, or all or part of its Commitment, in which event, without limiting the foregoing, the provisions of Section 2.16 shall inure to the benefit of each purchaser of a participation (provided that such participant shall look solely to the seller of such participation for such benefits and the Borrowers’ and the Guarantors’ liability, if any, under Sections 2.16 and 2.18 shall not be increased as a result of the sale of any such participation) and the pro rata treatment of payments, as described in Section 2.17, shall be determined as if such Lender had not sold such participation. In the event any Lender shall sell any participation, such Lender shall retain the sole right and responsibility to enforce the obligations of each of the Borrowers and each of the Guarantors relating to the Loans, including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement (provided that such Lender may grant its participant the right to consent to such Lender’s execution of amendments, modifications or waivers which (i) reduce any Fees payable hereunder to the Lenders, (ii) reduce the amount of any scheduled principal payment on any Loan or reduce the principal amount of any Loan or the rate of interest payable hereunder or (iii) extend the maturity of the Borrowers’ obligations hereunder). The sale of any such participation shall not alter the rights and obligations of the Lender selling such participation hereunder with respect to the Borrowers and the Guarantors.

               (b) Each Lender may assign to one or more Lenders or Eligible Assignees all or a portion of its interests, rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment and the same portion of the related Loans at the time owing to it), provided, however, that (i) other than in the case of an assignment to a Lender Affiliate of such assignor Lender or to another Lender, the Agent and the Issuing Bank must give their respective prior written consent to such assignment, which consent will not be unreasonably withheld, (ii) the aggregate amount of the Commitment and/or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and

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Assumption with respect to such assignment is delivered to the Agent) shall, unless otherwise agreed to in writing by the Agent, in no event be less than $5,000,000 or the remaining portion of such Lender’s Commitment and/or Loans, if less (or $1,000,000 in the case of an assignment between Lenders) and (iii) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register (as defined below), an Assignment and Assumption with blanks appropriately completed, together with a processing and recordation fee of $3,500 (for which the Borrower and the Guarantors shall have no liability). Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Assumption, which effective date shall be within ten (10) Business Days after the execution thereof (unless otherwise agreed to in writing by the Agent), (A) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Assumption, have the rights and obligations of a Lender hereunder and (B) the Lender thereunder shall, to the extent provided in such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto).

               (c) By executing and delivering an Assignment and Assumption, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, such Lender assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any of the other Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any of the other Loan Documents; (ii) such Lender assignor makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower or any Guarantor or the performance or observance by any Borrower or any Guarantor of any of its obligations under this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement and the other Loan Documents, together with copies of the financial statements referred to in Section 3.04 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Assumption; (iv) such assignee will, independently and without reliance upon the Agent, such Lender assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms thereto, together with such powers as are reasonably incidental hereof; and (vi) such assignee agrees that it will perform in accordance with their terms all obligations that by the terms of this Agreement and any other Loan Documents are required to be performed by it as a Lender.

               (d) The Agent shall maintain at its office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amount of and interest owing on, the Loans owing to, each Lender from time to time (the “Register”). The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrowers, the Guarantors, the Agent and

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the Lenders shall treat each Person the name of which is recorded in the Register as the absolute Owner of any obligations held by such person, as included in the Register for all purposes of this Agreement. The Register shall be available for inspection by the Borrowers’ Agent or any Lender at any reasonable time and from time to time upon reasonable prior notice.

               (e) Upon its receipt of an Assignment and Assumption executed by an assigning Lender and the assignee thereunder together with the fee payable in respect thereto, the Agent shall, if such Assignment and Assumption has been completed with blanks appropriately filled and consented to by the Agent and the Issuing Bank (to the extent such consent is required hereunder), (i) accept such Assignment and Assumption, (ii) record the information contained therein in the Register and (iii) give prompt written notice thereof to the Borrowers’ Agent (together with a copy thereof). No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

               (f) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 11.03, disclose to the assignee or participant or proposed assignee or participant, any information relating to any of the Borrowers or any of the Guarantors furnished to such Lender by or on behalf of any of the Borrowers or any of the Guarantors; provided that prior to any such disclosure, each such assignee or participant or proposed assignee or participant shall agree in writing to be bound by the provisions of Section 11.04.

               (g) The Borrowers hereby agree, to the extent set forth in the Commitment Letter, to actively assist and cooperate with the Agent and JPMSI in their efforts to sell participations herein (as described in Section 11.03(a)) in a commercially reasonable manner and assign to one or more Lenders or Eligible Assignees a portion of its interests, rights and obligations under this Agreement (as set forth in Section 11.03(b)).

          SECTION 11.04. Confidentiality. Each Lender agrees to keep any information delivered or made available by any of the Borrowers or any of the Guarantors to it confidential from anyone other than persons employed or retained by such Lender who are engaged in evaluating, approving, structuring or administering the Loans; provided that nothing herein shall prevent any Lender from disclosing such information (i) to any of its Affiliates or to any other Lender, provided such Affiliate agrees to keep such information confidential to the same extent required by the Lenders hereunder, (ii) upon the order of any court or administrative agency, (iii) upon the request or demand of any regulatory agency or authority, (iv) which has been publicly disclosed other than as a result of a disclosure by the Agent or any Lender which is not permitted by this Agreement, (v) in connection with any litigation to which the Agent, any Lender, or their respective Affiliates may be a party to the extent reasonably required, (vi) to the extent reasonably required in connection with the exercise of any remedy hereunder, (vii) to such Lender’s legal counsel, independent auditors and other professional advisors, provided such advisors agree to keep such information confidential to the same extent required by the Lenders hereunder, and (viii) to any actual or proposed participant or assignee of all or part of its rights hereunder subject to the proviso in Section 11.03(f), provided such participant or assignee agrees to keep such information confidential to the same extent required by the Lenders hereunder. Each Lender shall use reasonable efforts to notify the Borrowers and the Guarantors of any required disclosure under clauses (ii) and (v) of this Section.

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          SECTION 11.05. Expenses. Whether or not the transactions hereby contemplated shall be consummated, the Borrowers shall pay (a) all reasonable out-of-pocket expenses (including, without limitation, expenses incurred in connection with due diligence) of the Lenders, the Agent, JPMSI and CIT associated with (i) the syndication and funding of the facility as evidenced by this Agreement, (ii) the creation, perfection or protection of the Liens under the Loan Documents (including all reasonable out-of-pocket search, filing and recording fees), and (iii) the preparation, negotiation, execution, delivery and on-going administration of the Loan Documents and any amendment, consent, waiver, assignment, restatement or supplement with respect thereto (including, without limitation, all field examination and audit fees (which audit fees will be $850 per day per auditor plus out-of-pocket fees and expenses) and reasonable out-of-pocket expenses, appraisal costs, costs of environmental reports, travel costs, reasonable out-of-pocket fees and expenses of the Agent’s counsel incurred in connection with the preparation, negotiation, execution and on-going administration of the Loan Documents, accounting and appraisal fees, and other customary fees and expenses) and (b) all out-of-pocket expenses of the Lenders and the Agent (including the fees, disbursements and other charges of counsel) in connection with (i) the enforcement of the Loan Documents and documentary taxes, (ii) any refinancing or restructuring of the facility as evidenced by this Agreement in the nature of a “work out” and (iii) any legal proceeding relating to or arising out of the facility as evidenced by this Agreement or the other transactions contemplated by the Loan Documents, except to the extent such legal proceeding arises from the gross negligence or willful misconduct of the party incurring such expense.

          SECTION 11.06. Indemnity. Each of the Borrowers and each of the Guarantors agrees to indemnify and hold harmless the Agent, JPMSI, CIT and the Lenders and their directors, officers, employees, agents and Affiliates (each an “Indemnified Party”) from and against any and all expenses, losses, claims, damages and liabilities incurred by such Indemnified Party arising out of claims made by any Person in any way relating to the transactions contemplated hereby, but excluding therefrom all expenses, losses, claims, damages, and liabilities to the extent that they are determined by the final judgment of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnified Party. The obligations of the Borrowers and the Guarantors under this Section shall survive the termination of this Agreement and/or the payment of the Loans.

          SECTION 11.07. CHOICE OF LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW, AND (TO THE EXTENT APPLICABLE) THE BANKRUPTCY CODE.

          SECTION 11.08. No Waiver. No failure on the part of the Agent or any of the Lenders to exercise, and no delay in exercising, any right, power or remedy hereunder or any of the other Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law.

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          SECTION 11.09. Extension of Maturity. Should any payment of principal of or interest or any other amount due hereunder become due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, in the case of principal, interest shall be payable thereon at the rate herein specified during such extension.

          SECTION 11.10. Amendments, etc.

               (a) No modification, amendment or waiver of any provision of this Agreement or the Security and Pledge Agreement or any other Loan Document, and no consent to any departure by any Borrower or any Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given; provided, however, that no such modification or amendment shall, without the written consent of (1) 100% of Lenders, (x) increase the advance rates set forth in the definition of the term “Borrowing Base”, (y) release all or substantially all of the Collateral, or modify any of the voting percentages, (z) amend the definition of “Equipment Percentage” or “Real Property Percentage” and (2) the Lender directly affected thereby, (x) increase the Commitment of a Lender (it being understood that a waiver of an Event of Default shall not constitute an increase in the Commitment of a Lender) or extend the expiry date of such Lender’s Commitment, or (y) reduce or forgive the principal amount of any Loan or Letter of Credit reimbursement obligation or the rate of interest payable thereon, or extend any date for the payment of interest hereunder or reduce any Fees payable hereunder or extend the final maturity of the Borrowers’ obligations hereunder. No such amendment or modification may adversely affect the rights and obligations of the Agent or any Issuing Bank hereunder or JPMorgan Chase in the capacity referred to in Section 6.03(viii) without its prior written consent. No notice to or demand on any Borrower or any Guarantor shall entitle any Borrower or any Guarantor to any other or further notice or demand in the same, similar or other circumstances. Each assignee under Section 11.03(b) shall be bound by any amendment, modification, waiver, or consent authorized as provided herein, and any consent by a Lender shall bind any Person subsequently acquiring an interest on the Loans held by such Lender. No amendment to this Agreement shall be effective against any Borrower or any Guarantor unless signed by such Borrower or such Guarantor, as the case may be.

               (b) Notwithstanding anything to the contrary contained in Section 11.10(a), in the event that the Borrowers or the Guarantors request that this Agreement be modified or amended in a manner which would require the unanimous consent of all of the Lenders and such modification or amendment is agreed to by the Super-majority Lenders (as hereinafter defined), then with the consent of the Borrowers or the Guarantors and the Super-majority Lenders, the Borrowers or the Guarantors and the Super-majority Lenders shall be permitted to amend the Agreement without the consent of the Lender or Lenders which did not agree to the modification or amendment requested by the Borrowers or the Guarantor (such Lender or Lenders, collectively the “Non-Consenting Lenders”) to provide for (w) the termination of the Commitment of each of the Non-Consenting Lenders, (x) the addition to this Agreement of one or more other financial institutions (each of which shall be an Eligible Assignee), or an increase in the Commitment of one or more of the Super-majority Lenders, so that the Total Commitment after giving effect to such amendment shall be in the same amount as

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the Total Commitment immediately before giving effect to such amendment, (y) if any Loans are outstanding at the time of such amendment, the making of such additional Loans by such new financial institutions or Super-majority Lender or Lenders, as the case may be, as may be necessary to repay in full the outstanding Loans of the Non-Consenting Lenders immediately before giving effect to such amendment and (z) such other modifications to this Agreement as may be appropriate. As used herein, the term “Super-majority Lenders” shall mean, at any time, Lenders holding Loans representing at least 66-2/3% of the aggregate principal amount of the Loans outstanding, or if no Loans are outstanding, Lenders having Commitments representing at least 66-2/3% of the Total Commitment.

               (c) Nothing contained in this Agreement shall prevent or limit any Lender from pledging all or any portion of that Lender’s interest and rights under this Agreement and the other Loan Documents to any of the twelve Federal Reserve Banks organized under §4 of the Federal Reserve Act (12 U.S.C. §341), provided, however, neither such pledge nor the enforcement thereof shall release the pledging Lender from any of its obligations hereunder or under any of the Loan Documents.

               (d) Notice shall be given to (i) the United States trustee for the District of Delaware, (ii) counsel for the official committee of unsecured creditors; (iii) counsel to the statutory committee of asbestos claimants; (iv) counsel to MAXXAM Inc., the Borrowers’ principal equity holder; (v) counsel to the legal representative for future asbestos claimants; (vi) counsel to the legal representative for future silica and coal tar pitch volatile claimants; and (vii) counsel to the official committee of retired employees prior to any modification, amendment or waiver of any provision of this Agreement or the Security and Pledge Agreement or any other Loan Document pursuant to terms herein.

          SECTION 11.11. Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

          SECTION 11.12. Headings. Section headings used herein are for convenience only and are not to affect the construction of or be taken into consideration in interpreting this Agreement.

          SECTION 11.13. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same instrument.

          SECTION 11.14. Prior Agreements. This Agreement represents the entire agreement of the parties with regard to the subject matter hereof and the terms of any letters and other documentation entered into between the Borrowers or a Guarantor and any Lender or the Agent prior to the execution of this Agreement which relate to Loans to be made hereunder shall be replaced by the terms of this Agreement (except as otherwise expressly provided herein with respect to the Commitment Letter and the fee letter referred to therein, including without limitation the Borrowers’ agreements to assist the Agent in the syndication of the transactions

99

contemplated hereby referred to in Section 11.03(g) and with respect to interest rates and Commitment Fees, closing fees and termination fees and including also the provisions of Section 2.19). Without limiting the generality of the foregoing, it is expressly agreed that each and every provision of the Commitment Letter and Fee Letter referred to therein in any way related to the Exit Facilities (as defined in the Commitment Letter), including, without limitation, the obligation to pay the fees described in the Commitment Letter and the Fee Letter referred to therein shall survive the execution and delivery of, and closing under, this Agreement and remain in full force and effect.

          SECTION 11.15. USA Patriot Act. Each Lender hereby notifies the Borrowers and Guarantors that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrowers, which information includes the name and address of the Borrowers and other information that will allow such Lender to identify the Borrowers in accordance with the Act.

          SECTION 11.16. Further Assurances. Whenever and so often as reasonably requested by the Agent, the Borrowers and the Guarantors will promptly execute and deliver or cause to be executed and delivered all such other and further instruments, documents or assurances, and promptly do or cause to be done all such other and further things as may be necessary and reasonably required in order to further and more fully vest in the Agent all rights, interests, powers, benefits, privileges and advantages conferred or intended to be conferred by this Agreement and the other Loan Documents.

          SECTION 11.17. Lender Reporting. Each Lender other than JPMorgan Chase shall notify the Agent and the Borrowers’ Agent in writing, as soon as available and in any event within fifteen (15) days after the end of each calendar month (or at more frequent intervals, and with such reporting dates, as the Agent may require in its discretion), of the Net Mark-to-Market Exposure under all Swap Obligations owing to such Lender.

          SECTION 11.18. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE GUARANTORS, THE AGENT AND EACH LENDER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.

[SIGNATURE PAGES TO FOLLOW]

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

BORROWERS: KAISER ALUMINUM CORPORATION
By:	______________________________
	Name:
	Title:

KAISER ALUMINUM & CHEMICAL CORPORATION
By:	______________________________
	Name:
	Title:

KAISER ALUMINIUM INTERNATIONAL, INC.
By:	______________________________
	Name:
	Title:

KAISER BELLWOOD CORPORATION
By:	______________________________
	Name:
	Title:

GUARANTORS: KAISER ALUMINUM & CHEMICAL INVESTMENT, INC.
By:	______________________________
	Name:
	Title:

101

KAISER ALUMINUM PROPERTIES, INC.
By:	______________________________
	Name:
	Title:

KAISER ALUMINUM TECHNICAL SERVICES, INC.
By:	______________________________
	Name:
	Title:

ALWIS LEASING, LLC
By:	______________________________
	Name:
	Title:

KAISER CENTER, INC.
By:	______________________________
	Name:
	Title:

KAISER CENTER PROPERTIES
By:	______________________________
	Name:
	Title:

OXNARD FORGE DIE COMPANY, INC.
By:	______________________________
	Name:
	Title:

102

AKRON HOLDING CORPORATION
By:	______________________________
	Name:
	Title:

KAISER TEXAS MICROMILL HOLDINGS, LLC
By:	______________________________
	Name:
	Title:

KAISER MICROMILL HOLDINGS, LLC
By:	______________________________
	Name:
	Title:

KAISER SIERRA MICROMILLS, LLC
By:	______________________________
	Name:
	Title:

KAISER TEXAS SIERRA MICROMILLS, LLC
By:	______________________________
	Name:
	Title:

KAE TRADING, INC.
By:	______________________________
	Name:
	Title:

103

KAISER EXPORT COMPANY
By:	______________________________
	Name:
	Title:

104

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,       Individually and as Agent and Lender
By:	______________________________
	Name:	Devin Mock
	Title:	Vice President
1717 Main Street, LL1 Dallas, TX 75201

LENDER: THE CIT GROUP/BUSINESS CREDIT, INC.
By:	______________________________
	Name:
	Title:

106

EX-99.2

Exhibit 99.2

For Information: Scott Lamb
Telephone: (713) 332-4751	February 11, 2005

KAISER ALUMINUM OBTAINS COURT APPROVAL OF NEW FINANCING ARRANGEMENT

     HOUSTON, Texas, February 11, 2005 — Kaiser Aluminum announced that the U.S. Bankruptcy Court for the District of Delaware has approved the company’s previously announced new financing arrangement.

     The new financing arrangement is an agreement with JPMorgan Chase Bank, National Association, J.P. Morgan Securities Inc., and The CIT Group/Business Credit, Inc., under which Kaiser will be provided with a new $200 million Debtor-in-Possession (DIP) credit facility intended to remain in place until the company’s emergence from Chapter 11. The new financing arrangement also provides a commitment to Kaiser for a multi-year exit financing in the form of a $200 million revolving credit facility and a fully drawn term loan of up to $50 million upon the company’s emergence from Chapter 11.

     The company closed on the new DIP credit facility today.

     Kaiser President and Chief Executive Officer Jack A. Hockema said, “Approval of the new financing arrangement demonstrates Kaiser’s continuing financial stability, and it is another important step as we prepare to file our formal Plan of Reorganization and Disclosure Statement within the next few months.”

     Kaiser Aluminum (OTCBB:KLUCQ) is a leading producer of fabricated aluminum products and owns interests in alumina and primary aluminum.

F-1011

     Company press releases may contain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The company cautions that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may vary materially from those expressed or implied in the forward-looking statements as a result of various factors.

EX-99.3

Exhibit 99.3

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

	x
	:
In re:	:
	:	Chapter 11 Case Nos.
ALPART JAMAICA INC. and	:	03-10144 and 03-10151
KAISER JAMAICA CORPORATION,	:	Jointly Administered Under
	:	Case No. 02-10429 (JKF)
	:
	:
	:
Debtors.	:
	:
	x

AMENDED JOINT PLAN OF LIQUIDATION
FOR ALPART JAMAICA INC. AND KAISER JAMAICA CORPORATION

Daniel J. DeFranceschi (DE 2732)
RICHARDS, LAYTON & FINGER
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
Telephone: (302) 651-7700
Facsimile: (302) 651-7701

            - and -

Gregory M. Gordon (TX 08435300)
Henry L. Gompf (TX 08116400)
Troy B. Lewis (TX 12308650)
Daniel P. Winikka (TX 00794873)
JONES DAY
2727 North Harwood
Dallas, Texas 75201
Telephone: (214) 220-3939
Facsimile: (214) 969-5100

ATTORNEYS FOR DEBTORS AND
DEBTORS IN POSSESSION

Dated: February 11, 2005

TABLE OF CONTENTS

		Page
ARTICLE I	DEFINED TERMS, RULES OF INTERPRETATION AND COMPUTATION OF TIME		1
1.1	Defined Terms		1
1.2	Rules of Interpretation		9
1.3	Computation of Time		9
ARTICLE II	CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS		9
2.1	General		9
2.2	Administrative Claims		10
2.3	Priority Tax Claims		11
2.4	Classified Claims		11
2.5	7-3/4% SWD Revenue Bond Dispute and Settlement		14
2.6	Senior Note Indenture Trustee and Ad Hoc Group Counsel Fees and
	Expenses; 7-3/4% SWD Revenue Bond Plaintiffs’ Fees		14
2.7	Allowance of Certain Public Note Claims		15
2.8	Substantive Consolidation		15
2.9	Order Granting Substantive Consolidation		15
2.10	No Effect on Claims Against or Interests in Other Kaiser Debtors		15
ARTICLE III	TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES		15
3.1	Executory Contracts and Unexpired Leases to Be Rejected		15
3.2	Bar Date for Rejection Damages		15
ARTICLE IV	RELEASE, LIMITATION OF LIABILITY AND INJUNCTION PROVISIONS		16
4.1	Release of Claims; Limitation of Liability		16
4.2	Injunctions		16
ARTICLE V	CRAMDOWN		17
ARTICLE VI	CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THE PLAN		17
6.1	Conditions to Confirmation		17
6.2	Conditions to the Effective Date		17
6.3	Waiver of Conditions to the Confirmation or Effective Date		17
ARTICLE VII	MEANS FOR IMPLEMENTATION OF THE PLAN		18
7.1	Liquidating Transactions		18
7.2	Corporate Action		18
7.3	No Revesting of Assets		18
7.4	Recourse Solely to Trust Accounts		18
7.5	Release of Liens		18
7.6	Exemption from Certain Taxes		18

i

TABLE OF CONTENTS
(continued)

		Page
ARTICLE VIII	DISTRIBUTION TRUST		19
8.1	Creation		19
8.2	Distribution Trustee		19
8.3	Preservation of Causes of Action		20
8.4	Reports to be Filed with the Bankruptcy Court		20
8.5	Payment of Distribution Trust Expenses		20
8.6	Use of Other Entities		20
8.7	Indemnification		20
8.8	Tax Treatment		21
8.9	Creation of Trust Accounts		21
8.10	Funding of Distribution Trust Expenses Account		21
8.11	Funding of Priority Claims Trust Account		22
8.12	Funding of Unsecured Claims Trust Account		22
8.13	Undeliverable Cash Trust Account		22
ARTICLE IX	PROVISIONS GOVERNING DISTRIBUTIONS		23
9.1	Method of Distributions to Holders of Allowed Claims		23
9.2	Delivery of Distributions		23
9.3	Means of Cash Payments		24
9.4	Timing and Calculation of Amounts to Be Distributed		24
9.5	Setoffs		26
9.6	Compensation and Reimbursement for Services Related to Distributions		27
9.7	Payments Limited to Trust Accounts		27
9.8	Insufficient Funds		27
ARTICLE X	DISPUTED CLAIMS		27
10.1	Prosecution of Objections to Claims		27
10.2	Treatment of Disputed Claims		27
ARTICLE XI	RETENTION OF JURISDICTION		28
ARTICLE XII	MISCELLANEOUS PROVISIONS		29
12.1	Preservation of Insurance		29
12.2	Modification of the Plan		29
12.3	Revocation of the Plan		29
12.4	Severability of Plan Provisions		29
12.5	Notices		29
12.6	Successors and Assigns		30

ii

TABLE OF CONTENTS
(continued)

		Page
12.7	Further Action		30
12.8	Exhibits		30

iii

TABLE OF EXHIBITS^*

Exhibit A — Distribution Trust Agreement

^* The Plan, Disclosure Statement and Distribution Trust Agreement will be available on the Document Website promptly following approval of the Disclosure Statement by the Bankruptcy Court.

iv

INTRODUCTION

          Alpart Jamaica Inc. (“AJI”) and Kaiser Jamaica Corporation (“KJC”) (collectively, the “Debtors”) in the above-captioned chapter 11 cases (the “Chapter 11 Cases”) propose the following joint plan of liquidation (the “Plan”) for the resolution of the outstanding claims against and equity interests in the Debtors.

ARTICLE I

DEFINED TERMS, RULES OF INTERPRETATION
AND COMPUTATION OF TIME

     1.1 Defined Terms.

          As used in the Plan, capitalized terms have the meanings set forth below. Any term that is not otherwise defined in the Plan, but that is defined in the Bankruptcy Code or the Bankruptcy Rules, will have the meaning given to that term in the Bankruptcy Code or Bankruptcy Rules, as applicable.

     (1) “7-3/4% SWD Revenue Bond Dispute” means Adversary Proceeding No. 04-51165 commenced by the 7-3/4% SWD Revenue Bond Indenture Trustee and certain holders of 7-3/4% SWD Revenue Bonds in connection with the Kaiser Cases.

     (2) “7-3/4% SWD Revenue Bond Indenture” means the Trust Indenture, dated as of December 1, 1992, between Parish of St. James, State of Louisiana, and the 7-3/4% SWD Revenue Bond Indenture Trustee, together with all instruments and agreements related thereto.

     (3) “7-3/4% SWD Revenue Bond Indenture Trustee” means J.P. Morgan Trust Company, N.A., as successor indenture trustee under the 7-3/4% SWD Revenue Bond Indenture.

     (4) “7-3/4% SWD Revenue Bonds” means the Parish of St. James, State of Louisiana, Solid Waste Disposal Revenue Bonds (Kaiser Aluminum Project) Series 1992 issued pursuant to the 7-3/4% SWD Revenue Bond Indenture in an outstanding principal amount of $20,000,000.

     (5) “9-7/8% Senior Note Claim” means a Claim against a Debtor under or in respect of one or more 9-7/8% Senior Notes and the 9-7/8% Senior Note Indenture.

     (6) “9-7/8% Senior Note Indenture” means the Indenture, dated as of February 17, 1994, by and among the Debtors, certain Other Kaiser Debtors (including KACC) and the 9-7/8% Senior Note Indenture Trustee, as the same may have been subsequently modified, amended or supplemented, together with all instruments and agreements related thereto.

     (7) “9-7/8% Senior Note Indenture Trustee” means U.S. Bank National Association, as successor indenture trustee under the 9-7/8% Senior Note Indenture.

     (8) “9-7/8% Senior Notes” means the 9-7/8% senior notes due 2002, issued by KACC pursuant to the 9-7/8% Senior Note Indenture in an outstanding principal amount of $172,780,000.

     (9) “10-7/8% Senior Note Claim” means a Claim against a Debtor under or in respect of one or more 10-7/8% Senior Notes and the applicable 10-7/8% Senior Note Indenture.

     (10) “10-7/8% Senior Note Indentures” means, together, the Indenture, dated as of October 23, 1996, and the Indenture, dated as of December 23, 1996, in each case, by and among the Debtors, certain Other Kaiser Debtors (including KACC) and the 10-7/8% Senior Note Indenture Trustee, as the same may have been subsequently modified, amended or supplemented, together with all instruments and agreements related thereto.

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     (11) “10-7/8% Senior Note Indenture Trustee” means U.S. Bank National Association, as successor indenture trustee under the 10-7/8% Senior Note Indentures.

     (12) “10-7/8% Senior Notes” means the 10-7/8% Series B senior notes due 2006 and the 10-7/8% Series D senior notes due 2006, issued by KACC pursuant to the 10-7/8% Senior Note Indentures in outstanding principal amounts of $175,000,000 and $50,000,000, respectively.

     (13) “Ad Hoc Group” means the ad hoc group of holders of Senior Notes comprised of Trilogy Capital, Caspian Capital Partners, Canyon Partners, Citadel Equity Fund Ltd., Citadel Credit Trading Ltd., Durham Asset Management L.L.C., Farallon Capital Management L.L.C. and TCM Spectrum Fund L.P.

     (14) “Administrative Claim” means a Claim for costs and expenses of administration allowed under sections 503(b), 507(b) or 1114(e)(2) of the Bankruptcy Code, including: (a) the actual and necessary costs and expenses incurred after the Petition Date in preserving the respective Estates and operating the businesses of the Debtors; (b) Professional Fee Claims; and (c) US Trustee Fees; provided, however, except as provided in the Intercompany Claims Settlement, Administrative Claims will not include any Intercompany Claim.

     (15) “Administrative Claim Bar Date” means the date by which all requests for payment of Administrative Claims (other than Professional Fee Claims and US Trustee Fees) are required to be Filed with the Bankruptcy Court.

     (16) “Administrative Claim Bar Date Order” means the order of the Bankruptcy Court establishing the Administrative Claim Bar Date.

     (17) “Allowed Claim” means:

(a)	a Claim that (i) has been listed by a particular Debtor on its Schedules as other than disputed, contingent, or unliquidated and (ii) is not otherwise a Disputed Claim;
(b)	a Claim (i) for which a proof of Claim or request for payment of Administrative Claim has been Filed by the applicable Bar Date or otherwise been deemed timely Filed under applicable law and (ii) that is not otherwise a Disputed Claim; or
(c)	a Claim that is allowed: (i) in any Stipulation of Amount and Nature of Claim executed by the applicable Debtor and Claim holder prior to the Effective Date and approved by the Bankruptcy Court; (ii) in any Stipulation of Amount and Nature of Claim executed by the Distribution Trustee and Claim holder after the Effective Date; (iii) in any contract, instrument or other agreement or document entered into in connection with the Plan prior to the Effective Date and approved by the Bankruptcy Court; (iv) in a Final Order; or (v) pursuant to the terms of the Plan.

     (18) “Alpart Proceeds” means the net Cash proceeds allocable to AJI and KJC in the aggregate in connection with the sale of their respective interests in Alumina Partners of Jamaica Inc. pursuant to the Alpart Purchase Agreement, after taking into account the costs and expenses of the sale payable by AJI and KJC in accordance with the Intercompany Claims Settlement and the satisfaction of any applicable Allowed Secured Claim with a valid and enforceable Lien against such proceeds.

     (19) “Alpart Purchase Agreement” means that certain Purchase Agreement, dated as of June 8, 2004, by and among KACC, Kaiser Aluminum International, Inc., Kaiser Bauxite Company, KJC and AJI and Quality Incorporations I Limited.

     (20) “Ballot” means the form or forms distributed to each holder of an impaired Claim entitled to vote on the Plan on which the holder indicates acceptance or rejection of the Plan.

     (21) “Bankruptcy Code” means title 11 of the United States Code, 11 U.S.C. §§ 101-1130, as now in effect or hereafter amended, as applicable to the Chapter 11 Cases.

2

     (22) “Bankruptcy Court” means the United States District Court for the District of Delaware having jurisdiction over the Chapter 11 Cases and, to the extent of any reference made pursuant to 28 U.S.C. § 157, the bankruptcy unit of such District Court.

     (23) “Bankruptcy Rules” means, collectively, the Federal Rules of Bankruptcy Procedure and the local rules of the Bankruptcy Court, as now in effect or hereafter amended, as applicable to the Chapter 11 Cases.

     (24) “Bar Date” means the applicable bar date by which a proof of Claim must be or must have been Filed, as established by order of the Bankruptcy Court, including the general Bar Date of May 15, 2003.

     (25) “Bar Date Order” means an order of the Bankruptcy Court establishing Bar Dates for Filing proofs of Claims in the Chapter 11 Cases, as the same may be amended, modified or supplemented, including the order entered March 17, 2003.

     (26) “Beneficiaries” means the creditors and claimants of the Estates.

     (27) “Business Day” means any day, other than a Saturday, Sunday or “legal holiday” (as defined in Bankruptcy Rule 9006(a)).

     (28) “Cash” means the legal tender of the United States of America.

     (29) “Chapter 11 Cases” has the meaning set forth in the introductory paragraph of the Plan.

     (30) “Claim” means a “claim,” as defined in section 101(5) of the Bankruptcy Code, against either Debtor.

     (31) “Claims Objection Bar Date” means, for all Claims, other than those Claims allowed in accordance with Sections 1.1(17) and 2.7, the latest of: (a) 120 days after the Effective Date; (b) 60 days after the Filing of a proof of Claim for such Claim; and (c) such other period of limitation for objecting to such Claim as may be specifically fixed by the Plan, the Confirmation Order or a Final Order.

     (32) “Claims Report” means, with respect to each Estate, a report certified by the claims agent for such Estate setting forth: (a) a listing, as of the Effective Date, of: (i) all Allowed Secured Claims of such Estate; (ii) all Allowed Administrative Claims of such Estate; (iii) all Allowed Priority Claims of such Estate, (iv) all Allowed Priority Tax Claims of such Estate; (v) all Allowed Unsecured Claims of such Estate; and (vi) all Disputed Claims of such Estate; and (b) for each Claim so listed (i) the name, address and federal taxpayer identification number or social security number (if known) of the holder thereof as of the Distribution Record Date and (ii) the amount thereof, including the amount of unpaid principal and accrued interest (if known).

     (33) “Class” means a class of Claims or Interests, as described in Article II.

     (34) “Confirmation Date” means the date on which the Bankruptcy Court enters the Confirmation Order on its docket, within the meaning of Bankruptcy Rules 5003 and 9021.

     (35) “Confirmation Hearing” means the hearing before the Bankruptcy Court to consider confirmation of the Plan pursuant to section 1129 of the Bankruptcy Code, as such hearing may be continued from time to time.

     (36) “Confirmation Order” means the order or orders of the Bankruptcy Court confirming the Plan pursuant to section 1129 of the Bankruptcy Code.

     (37) “Creditors’ Committee” means the official committee of unsecured creditors of the Debtors and the Other Kaiser Debtors appointed by the US Trustee pursuant to section 1102 of the Bankruptcy Code in the Kaiser Cases, as such appointment has been subsequently modified.

     (38) “Debtors” has the meaning set forth in the introductory paragraph of the Plan.

3

     (39) “Disbursing Agent” means the Distribution Trustee, in its capacity as a disbursing agent pursuant to the Plan, or any third party acting as disbursing agent at the direction of the Distribution Trustee.

     (40) “Disclosure Statement” means the disclosure statement that relates to the Plan (including all Exhibits), as approved by the Bankruptcy Court pursuant to section 1125 of the Bankruptcy Code, as the same may be amended, modified or supplemented.

     (41) “Disputed Claim” means:

(a)

if no proof of Claim has been Filed by the applicable Bar Date or has otherwise been deemed timely Filed under applicable law: (i) a Claim that is listed on a Debtor’s Schedules as other than disputed, contingent or unliquidated, but as to which the applicable Debtor or the Distribution Trustee, or prior to the Confirmation Date, any other party in interest, has Filed an objection by the Claims Objection Bar Date and such objection has not been withdrawn or denied by a Final Order; or (ii) a Claim that is listed on a Debtor’s Schedules as disputed, contingent or unliquidated; or

(b)

if a proof of Claim or proof of Administrative Claim has been Filed by the Bar Date or has otherwise been deemed timely Filed under applicable law: (i) a Claim for which no corresponding Claim is listed on a Debtor’s Schedules; (ii) a Claim for which a corresponding Claim is listed on a Debtor’s Schedules as other than disputed, contingent or unliquidated, but the nature or amount of the Claim as asserted in the proof of Claim varies from the nature and amount of such Claim as it is listed on the Schedules; (iii) a Claim for which a corresponding Claim is listed on a Debtor’s Schedules as disputed, contingent or unliquidated; or (iv) a Claim for which an objection has been Filed by the applicable Debtor or the Distribution Trustee or, prior to the Confirmation Date, any other party in interest, by the Claims Objection Bar Date, and such objection has not been withdrawn or denied by a Final Order.

     (42) “Disputed Claims Reserves” means, with respect to each of the Trust Accounts, the reserve of Cash retained in such Trust Account to satisfy Disputed Claims against the Estate of AJI or the Estate of KJC, if, as and when they are allowed, or, to the extent such Disputed Claims are not allowed, to satisfy Claims that are allowed in accordance with the terms of the Plan.

     (43) “Distribution Record Date” means the close of business on the Confirmation Date.

     (44) “Distribution Trust” means the trust established pursuant to the Plan, among other things, to hold the Distribution Trust Assets and make distributions pursuant to the Plan.

     (45) “Distribution Trust Agreement” means the trust agreement, to be dated on or prior to the Effective Date, between the Debtors and the Distribution Trustee, governing the Distribution Trust, which will be substantially in the form of Exhibit A to the Plan.

     (46) “Distribution Trust Assets” means collectively: (a) the Trust Accounts and any Cash held by such Trust Accounts; (b) the rights of the Debtors under or in respect of the Intercompany Claims Settlement, the Alpart Purchase Agreement or any causes of action not released by the Plan, including the Recovery Actions, and any proceeds thereof; and (c) the Alpart Proceeds to the extent that such funds are not included in (a) or (b).

     (47) “Distribution Trust Expenses” means any and all reasonable fees, costs and expenses incurred by the Distribution Trustee (or any Disbursing Agent, person, entity or professional engaged by the Distribution Trustee) in connection with the performance by the Distribution Trustee of its duties under the Plan or Distribution Trust Agreement.

     (48) “Distribution Trust Expenses Account” means the segregated trust account to be established and maintained pursuant to Sections 8.9 and 8.10 to fund the payment of Distribution Trust Expenses.

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     (49) “Distribution Trustee” means the trustee selected by the Creditors’ Committee with the consent of the Debtors and identified in the Distribution Trust Agreement (or any successor trustee), in its capacity as the trustee of the Distribution Trust.

     (50) “Document Website” means the Internet site with the address www.kaiseraluminum.com at which the Plan, the Disclosure Statement and all of the Exhibits and schedules to the Plan and to the Disclosure Statement will be available, without charge, to any party in interest and the public.

     (51) “Effective Date” means a day, as determined by the Debtors, that is the Business Day as soon as reasonably practicable after all conditions to the Effective Date have been satisfied or waived pursuant to the Plan.

     (52) “Equity Claim” means a legal, equitable or contractual Claim arising from any share or other stock ownership interest in a Debtor, whether or not transferable or denominated “stock”, or similar security, and any options, warrants, convertible security, liquidation preference or other right to acquire such shares or other stock ownership interests, including but not limited to Claims arising from rescission of the purchase or sale of such stock ownership interests, for damages arising from the purchase or sale of a such stock ownership interest, or for reimbursement or contribution on account of such Claim.

     (53) “Estate” means, as to each Debtor, the estate created for that Debtor in its Chapter 11 Case pursuant to section 541 of the Bankruptcy Code.

     (54) “Executory Contract and Unexpired Lease” means a contract or lease to which one or both of the Debtors is a party that is subject to assumption, assumption and assignment or rejection under section 365 of the Bankruptcy Code.

     (55) “Face Amount” means, when used with reference to a Disputed Claim: (a) the full stated amount claimed by the holder of such Claim in any proof of Claim Filed by the Bar Date or otherwise deemed timely Filed under applicable law, if the proof of Claim specifies only a liquidated amount; or (b) if no proof of Claim has been Filed by the Bar Date or has otherwise been deemed timely Filed under applicable law, or if the proof of Claim specified an unliquidated amount, the amount of the Claim (i) acknowledged by the applicable Debtor in any objection Filed to such Claim or in the Schedules as an undisputed, noncontingent, and liquidated Claim, (ii) estimated by the Bankruptcy Court pursuant to section 502(c) of the Bankruptcy Code, (iii) proposed by the applicable Debtor and approved by the Creditors’ Committee prior to the Effective Date, or (iv) established by the Distribution Trustee on behalf of the Distribution Trust following the Effective Date; or (c) if neither (a) nor (b) above are applicable, an amount estimated by the applicable Debtor or the Distribution Trustee, but such estimated amount will be no less than either (i) the amount of the claim estimated by the Bankruptcy Court or (ii) the liquidated portion of the amount claimed by the holder of such Claim in any proof of Claim Filed by the Bar Date or otherwise deemed timely Filed under applicable law.

     (56) “File,” “Filed” or “Filing” means file, filed or filing with the Bankruptcy Court or its authorized designee in the Chapter 11 Cases.

     (57) “Final Order” means an order or judgment of the Bankruptcy Court, or other court of competent jurisdiction, as entered on the docket in any Bankruptcy Case or the docket of any other court of competent jurisdiction, that has not been reversed, stayed, modified or amended, and as to which the time to appeal or seek certiorari or move for a new trial, reargument or rehearing has expired, and no appeal or petition for certiorari or other proceedings for a new trial, reargument or rehearing has been timely taken, or as to which any appeal that has been taken or any petition for certiorari that has been timely filed has been withdrawn or resolved by the highest court to which the order or judgment was appealed or from which certiorari was sought or the new trial, reargument or rehearing shall have been denied or resulted in no modification of such order.

     (58) “Indenture Trustee” means the 9-7/8% Senior Note Indenture Trustee, 10-7/8% Senior Note Indenture Trustee, Senior Subordinated Note Indenture Trustee or 7-3/4% SWD Revenue Bond Indenture Trustee, or any successor thereto.

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     (59) “Intercompany Claim” means a Claim held by a debtor in the Kaiser Cases against another debtor in any of the Kaiser Cases.

     (60) “Intercompany Claims Settlement” means the settlement and release agreement among the debtors in the Kaiser Cases and the Creditors’ Committee, dated as of October 5, 2004, in such form as approved by the Intercompany Claims Settlement Order.

     (61) “Intercompany Claims Settlement Order” means the order of the Bankruptcy Court approving the settlement of all claims by debtors in any of the Kaiser Cases against another debtor in any of the Kaiser Cases pursuant to the Intercompany Claims Settlement entered on February 1, 2005.

     (62) “Interest” means (a) any share or other stock ownership interest in a Debtor, whether or not transferable or denominated “stock”, or similar security, and any options, warrants, convertible security, liquidation preference or other right to acquire such shares or other stock ownership interests and (b) any Equity Claim.

     (63) “IRC” means the Internal Revenue Code of 1986, as amended.

     (64) “Jamaican Tax Claims” means collectively the Allowed Priority Tax Claims and Allowed Administrative Claims of the Government of Jamaica contemplated by Section 8.11(a), if any.

     (65) “KAAC” means Kaiser Alumina Australia Corporation.

     (66) “KAAC/KFC Plan” means the amended joint plan of liquidation filed by KAAC and KFC on February 11, 2005, as such plan may be amended, modified or supplemented from time to time with the consent of the Creditors’ Committee.

     (67) “KACC” means Kaiser Aluminum & Chemical Corporation.

     (68) “Kaiser Cases” means the chapter 11 cases styled “In re Kaiser Aluminum Corporation, a Delaware Corporation, et al.” jointly administered under Case No. 02-10429 (JKF) in the United States District Bankruptcy Court for the District of Delaware.

     (69) “KFC” means Kaiser Finance Corporation.

     (70) “Lien” means any mortgage, pledge, deed of trust, assessment, security interest, lease, adverse claim, levy, charge or other encumbrance of any kind, including any “lien” as defined in section 101 (37) of the Bankruptcy Code, or a conditional sale contract, title retention contract or other contract to give any of the foregoing.

     (71) “Liquidating Transactions” means the transactions set forth in the first sentence of Section 7.1 to effectuate a liquidation of the Debtors.

     (72) “Other Kaiser Debtor” means any of the debtors in the Kaiser Cases except the Debtors.

     (73) “Other Unsecured Claim” means an Unsecured Claim other than a Senior Note Claim, a Senior Subordinated Note Claim or a PBGC Claim.

     (74) “Other Unsecured Claims Percentage” means the percentage equaling the ratio of (a) the aggregate amount of all allowed Other Unsecured Claims to (b) the sum of (i) the aggregate amount of all allowed Other Unsecured Claims and (ii) $1,369,073,000.

     (75) “PBGC” means the Pension Benefit Guaranty Corporation.

     (76) “PBGC Claims” means the Claims (excluding any Administrative Claims) of the PBGC against the Debtors arising from or relating to the pension plans which were or are maintained by any of the Other Kaiser

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Debtors in the Kaiser Cases and guaranteed by the PBGC, as such Claims are allowed pursuant to the PBGC Settlement Agreement.

     (77) “PBGC Percentage” means (a) 32% less (b) 32% of the Other Unsecured Claims Percentage.

     (78) “PBGC Settlement Agreement” means the agreement among KACC and the PBGC, dated as of October 14, 2004.

     (79) “Pending Payments” means identified amounts (excluding undeliverable Cash) held by the Distribution Trust for distribution to holders of Allowed Claims in specific amounts as of the date the Distribution Trust receives the applicable Distribution Trust Assets.

     (80) “Permitted Investment” has the meaning ascribed thereto in the Distribution Trust Agreement.

     (81) “Petition Date” means January 14, 2003.

     (82) “Plan” means this joint plan of liquidation for the Debtors, to the extent applicable to either Debtor, and all Exhibits attached hereto or referenced herein, as any of the same may be amended, modified or supplemented from time to time.

     (83) “Priority Claim” means a Claim that is entitled to priority in payment pursuant to section 507(a) of the Bankruptcy Code that is not an Administrative Claim or a Priority Tax Claim.

     (84) “Priority Claims Trust Account” means the segregated trust account to be established and maintained by the Distribution Trustee pursuant to Sections 8.9 and 8.11 to satisfy Allowed Secured Claims, Allowed Administrative Claims, Allowed Priority Claims and Allowed Priority Tax Claims against the Estate of AJI or the Estate of KJC.

     (85) “Priority Tax Claim” means a Claim arising under U.S. federal, state or local tax laws that is entitled to priority in payment pursuant to section 507(a)(8) of the Bankruptcy Code.

     (86) “Professional Fee Claims” means the Claims of (a) any professional in the Chapter 11 Cases pursuant to sections 330 or 1103 of the Bankruptcy Code or (b) any professional or other entity seeking compensation or reimbursement of expenses in connection with the Chapter 11 Cases pursuant to sections 503(b)(3), 503(b)(4) or 503(b)(5) of the Bankruptcy Code.

     (87) “Pro Rata Share” means, when used with reference to a distribution to a holder of an Allowed Claim in a Subclass of Class 3, that share of Cash to be distributed on account of all Allowed Claims in such Subclass so that the ratio of (a)(i) the amount of Cash to be distributed on account of the particular Allowed Claim to (ii) the amount of such Claim, is the same as the ratio of (b)(i) the aggregate amount of Cash to be distributed on account of all Allowed Claims in such Subclass to (ii) the aggregate amount of all Allowed Claims in such Subclass.

     (88) “Public Note Claims” means Claims arising under the Public Notes.

     (89) “Public Note Distributable Consideration” means (a) the Public Note Percentage of the Cash in the Unsecured Claims Trust Account and (b) Cash in the amount of the aggregate fees payable under Section 2.6(a) up to an aggregate amount not to exceed $1,500,000 (with such Cash to be allocated from the Distribution Trust Assets in accordance with Section 8.12(a) prior to the funding of the Unsecured Claims Trust Account).

     (90) “Public Note Percentage” means (a) 68% less (b) 68% of the Other Unsecured Claims Percentage.

     (91) “Public Notes” means any of (a) the 9-7/8% Senior Notes, (b) the 10-7/8% Senior Notes, or (c) the Senior Subordinated Notes.

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     (92) “Quarterly Distribution Date” means, with respect to distributions subsequent to the initial distributions pursuant to Section 9.4, the last Business Day of the month following the end of each calendar quarter after the Effective Date; provided, however, that if the Effective Date is within 45 days of the end of a calendar quarter, the first Quarterly Distribution Date will be the last Business Day of the month following the end of the first calendar quarter after the calendar quarter in which the Effective Date falls.

     (93) “Recovery Actions” means, collectively and individually, preference actions, fraudulent conveyance actions, rights of setoff, and other claims or causes of action under chapter 5 of the Bankruptcy Code and other applicable bankruptcy or nonbankruptcy law.

     (94) “Schedules” means the schedules of assets and liabilities and the statements of financial affairs Filed by the Debtors, as required by section 521 of the Bankruptcy Code, as the same may be amended, modified or supplemented by the Debtors from time to time.

     (95) “Secured Claim” means a Claim that is secured by a Lien on property in which an Estate has an interest or that is subject to setoff under section 553 of the Bankruptcy Code, to the extent of the value of the Claim holder’s interest in the applicable Estate’s interest in such property or to the extent of the amount subject to setoff, as applicable, as determined pursuant to sections 506(a) and, if applicable, 1129(b) of the Bankruptcy Code.

     (96) “Senior Note Claims” means 9-7/8% Senior Note Claims and 10-7/8% Senior Note Claims.

     (97) “Senior Subordinated Note Claim” means a Claim against a Debtor under or in respect of one or more Senior Subordinated Notes and the Senior Subordinated Note Indenture.

     (98) “Senior Subordinated Note Indenture” means the Indenture, dated as of February 1, 1993, by and among the Debtors, certain Other Kaiser Debtors (including KACC) and the Senior Subordinated Note Indenture Trustee, as the same may have been subsequently modified, amended or supplemented, together with all instruments and agreements related thereto.

     (99) “Senior Subordinated Note Indenture Trustee” means Law Debenture Trust Company of New York, as successor indenture trustee under the Senior Subordinated Note Indenture.

     (100) “Senior Subordinated Notes” means the 12-3/4% senior subordinated notes due 2003 issued by KACC, pursuant to the Senior Subordinated Note Indenture in the outstanding aggregate principal amount of $400,000,000.

     (101) “Settlement Percentage” means the percentage equaling the ratio of (a) $4,000,000 to (b) 51.42% of the Public Note Percentage of the Cash in the Unsecured Claims Trust Account.

     (102) “Steering Committee” means a committee comprised of the members of the Alumina Creditor Subcommittee (as defined in the Intercompany Claims Settlement) other than any member thereof that is (a) a holder of a Senior Subordinated Note Claim or (b) the Senior Subordinated Note Indenture Trustee.

     (103) “Stipulation of Amount and Nature of Claim” means a stipulation or other agreement between the applicable Debtor or Distribution Trustee and a holder of a Claim or Interest, or an agreed order of the Bankruptcy Court, establishing the amount and nature of a Claim or Interest.

     (104) “Tax” means: (a) any net income, alternative or add-on minimum, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, license, property, environmental or other tax, assessment or charge of any kind whatsoever (together in each instance with any interest, penalty, addition to tax or additional amount) imposed by any U.S. federal, state, local or foreign taxing authority; or (b) any liability for payment of any amounts of the foregoing types as a result of being a member of an affiliated, consolidated, combined or unitary group, or being a party to any agreement or arrangement whereby liability for payment of any such amounts is determined by reference to the liability of any other entity.

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     (105) “Trust Accounts” means, collectively, the Distribution Trust Expenses Account, the Priority Claims Trust Account, the Unsecured Claims Trust Account and the Undeliverable Cash Trust Account.

     (106) “Undeliverable Cash Trust Account” means the segregated trust account to be established and maintained by the Distribution Trustee pursuant to Sections 8.9 and 8.13 to hold undeliverable Cash for the benefit of holders of Allowed Unsecured Claims against the Estate of AJI or the Estate of KJC otherwise entitled to such distributions.

     (107) “Unsecured Claim” means any Claim that is not an Administrative Claim, Priority Claim, Priority Tax Claim, Secured Claim or Intercompany Claim and includes, without limitation, Senior Note Claims, Senior Subordinated Note Claims and the PBGC Claims.

     (108) “Unsecured Claims Trust Account” means the segregated trust account to be established and maintained by the Distribution Trustee pursuant to Sections 8.9 and 8.12 to satisfy Allowed Unsecured Claims against the Estate of AJI or the Estate of KJC.

     (109) “US Trustee Fees” means all fees and charges assessed against the Estates under chapter 123 of title 28, United States Code, 28 U.S.C. §§ 1911-1930.

     1.2 Rules of Interpretation.

          For purposes of the Plan, unless otherwise provided herein: (a) whenever from the context it is appropriate, each term, whether stated in the singular or the plural, will include both the singular and the plural; (b) unless otherwise provided in the Plan, any reference in the Plan to a contract, instrument, release, or other agreement or document being in a particular form or on particular terms and conditions means that such document will be substantially in such form or substantially on such terms and conditions; (c) any reference in the Plan to an existing document or Exhibit Filed or to be Filed means such document or Exhibit, as it may have been or may be amended, modified or supplemented pursuant to the Plan or Confirmation Order; (d) any reference to an entity as a holder of a Claim or Interest includes that entity’s successors and assigns and affiliates; (e) all references in the Plan to Sections, Articles and Exhibits are references to Sections, Articles and Exhibits of or to the Plan; (f) the words “herein,” “hereunder” and “hereto” refer to the Plan in its entirety rather than to a particular portion of the Plan; (g) captions and headings to Articles and Sections are inserted for convenience of reference only and are not intended to be a part of or to affect the interpretation of the Plan; (h) subject to the provisions of any certificates of incorporation, by-laws or similar constituent documents or any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, the rights and obligations arising under the Plan will be governed by, and construed and enforced in accordance with, federal law, including the Bankruptcy Code and the Bankruptcy Rules; and (i) the rules of construction set forth in section 102 of the Bankruptcy Code will apply.

     1.3 Computation of Time.

          In computing any period of time prescribed or allowed by the Plan, the provisions of Bankruptcy Rule 9006(a) will apply.

ARTICLE II

CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS

     2.1 General. All Claims and Interests, except Administrative Claims and Priority Tax Claims, are placed in Classes. In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims and Priority Tax Claims have not been classified and thus are excluded from the Classes. A Claim or Interest is classified in a particular Class only to the extent that the Claim or Interest qualifies within the description of that Class and is classified in other Classes to the extent that any remainder of the Claim or Interest qualifies within the description of such other Classes.

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     (a) Unimpaired Classes of Claims.

          Class 1 (Priority Claims): Priority Claims against either of the Debtors.

          Class 2 (Secured Claims): Secured Claims against either of the Debtors.

     (b) Impaired Classes of Claims and Interests.

          Class 3 (Unsecured Claims): Unsecured Claims against either of the Debtors other than Claims otherwise classified under the Plan, subclassified as follows:

               Subclass 3A: Senior Note Claims against the Debtors.

               Subclass 3B: Senior Subordinated Note Claims against the Debtors.

               Subclass 3C: PBGC Claims against the Debtors.

               Subclass 3D: Other Unsecured Claims against either of the Debtors.

          Class 4 (Intercompany Claims): Intercompany Claims against the Debtors. Class 5 (Interests in the Debtors): Interests in either of the Debtors.

     2.2 Administrative Claims.

     (a) Administrative Claims in General. Except as otherwise provided herein or unless otherwise agreed by the holder of an Administrative Claim and the applicable Debtor or the Distribution Trustee, each holder of an Allowed Administrative Claim will receive, in full satisfaction of its Administrative Claim, Cash from the Priority Claims Trust Account in an amount equal to the allowed amount of such Administrative Claim either (a) on or promptly after the Effective Date or (b) if the Administrative Claim is not allowed as of the Effective Date, on or promptly after the date that is 30 days after the date on which (i) an order allowing such Administrative Claim becomes a Final Order or (ii) a Stipulation of Amount and Nature of Claim is executed by the Distribution Trustee and the holder of the Administrative Claim. Pursuant to the PBGC Settlement Agreement, the PBGC has agreed not to assert any Administrative Claims against the Debtors.

     (b) US Trustee Fees. On or before the Effective Date, Administrative Claims for fees payable pursuant to 28 U.S.C. § 1930, as determined by the Bankruptcy Court at the Confirmation Hearing, will be paid by the applicable Debtor or the Distribution Trustee in Cash equal to the amount of such Administrative Claims. All fees payable pursuant to 28 U.S.C. § 1930 will be paid by the Distribution Trustee in accordance herewith from the Priority Claims Trust Account until the closing of the Chapter 11 Cases pursuant to section 350(a) of the Bankruptcy Code.

     (c) Bar Dates for Administrative Claims.

(i)   General Bar Date Provisions. As provided in the Administrative Claim Bar Date Order, any holder of an Administrative Claim against a Debtor that was required to File and serve a request for payment of such Administrative Claim and does not File and serve such a request in accordance with the Administrative Claim Bar Date Order by the Administrative Claim Bar Date, will be forever barred from asserting such Administrative Claim against the Debtors, the Distribution Trustee or the property of any of them, or the Trust Accounts, and such Administrative Claim will be deemed waived and released as of the Effective Date. Objections to an Administrative Claim must be Filed by the Distribution Trustee and served on the requesting party by the later of (A) 45 days after the Effective Date and (B) 60 days after the Filing of the request for payment of an Administrative Claim.

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(ii)

Bar Dates for Professional Fees. Except as otherwise set forth herein or in the Intercompany Claims Settlement, professionals or other entities asserting a Professional Fee Claim for services rendered solely with respect to the Debtors before the Effective Date must File and serve on the Debtors and the Distribution Trustee and such other entities who are designated by the Bankruptcy Rules, the Confirmation Order or other order of the Bankruptcy Court, an application for final allowance of such Fee Claim no later than 60 days after the Effective Date. Objections to any Professional Fee Claim must be Filed and served on the Distribution Trustee and the requesting party by the later of (A) 90 days after the Effective Date and (B) 30 days after the Filing of the applicable request for payment of the Professional Fee Claim. To the extent necessary, the Confirmation Order will amend and supersede any previously entered order of the Bankruptcy Court regarding the payment of Professional Fee Claims (other than the Intercompany Claim Settlement Order) solely with respect to the Debtors.

To the extent that any professional has provided services in the Kaiser Cases, the Bar Date for Professional Fee Claims in this Section 2.2(c)(ii) relates only to such professional’s fees for services and reimbursement of expenses reasonably allocable by such Professional solely to the Debtors and not otherwise treated pursuant to the Intercompany Claims Settlement Order; Claims relating to such professional’s fees for services and reimbursement of expenses to the Other Kaiser Debtors may be sought against the estates of such Other Kaiser Debtors. The failure of a professional to allocate any particular charges to the Debtors will not foreclose, waive or affect in any way the professional’s right to seek allowance and payment of such charges from the Other Kaiser Debtors.

     2.3 Priority Tax Claims.

     (a) Pursuant to section 1129(a)(9)(C) of the Bankruptcy Code, unless otherwise agreed by the holder of a Priority Tax Claim and the applicable Debtor or the Distribution Trustee, each holder of an Allowed Priority Tax Claim will receive, in full satisfaction of its Priority Tax Claim, the full amount thereof in Cash, without postpetition interest or penalty, from the Priority Claims Trust Account as soon as practicable after the later of (i) the Effective Date and (ii) the date on which the Priority Tax Claim becomes an Allowed Claim.

     (b) Notwithstanding the provisions of Section 2.3(a), the holder of an Allowed Priority Tax Claim will not be entitled to receive any payment on account of any penalty arising with respect to or in connection with the Allowed Priority Tax Claim. Any such Claim or demand for any such penalty (i) will be subject to treatment in Subclass 3D and (ii) the holder of an Allowed Priority Tax Claim will not be entitled to assess or attempt to collect such penalty from the Debtors, the Distribution Trustee, their properties or the Trust Accounts (other than as the holder of an Allowed Subclass 3D Claim).

     2.4 Classified Claims.

     (a) Class 1 — Priority Claims. On the later of the Effective Date and the date on which a Priority Tax Claim is allowed, each holder of an Allowed Priority Claim will, in full and complete settlement and satisfaction of such Claim, receive either: (i) Cash in the amount of such holder’s Allowed Priority Claim without interest or penalty; or (ii) such other treatment as may be agreed upon in writing by such holder and the Debtors or the Distribution Trustee. Class 1 is unimpaired under the Plan. Each holder of an Allowed Priority Claim is conclusively presumed to have accepted the Plan and is not entitled to vote on the Plan.

     (b) Class 2 — Secured Claims. On the later of the Effective Date and the date on which a Secured Claim is allowed, each holder of an Allowed Secured Claim will, in full and complete settlement and satisfaction of such Claim, at the sole option of the Debtors, receive either (i) Cash in an amount equal to such Allowed Secured Claim, including such interest as is required to be paid pursuant to section 506(b) of the Bankruptcy Code; or (ii) the collateral securing such Allowed Secured Claim and Cash from the Priority Claims Trust Account an amount equal to such interest as is required to be paid pursuant to section 506(b) of the Bankruptcy Code. Class 2 is unimpaired under the Plan. Each holder of an Allowed Secured Claim is conclusively presumed to have accepted the Plan and is not entitled to vote on the Plan.

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     (c) Class 3 — Unsecured Claims. Subclass 3A, Subclass 3B, Subclass 3C and Subclass 3D are impaired under the Plan and holders of Allowed Claims in each of such Subclasses are entitled to vote on the appropriate Ballot to accept or reject the Plan. For voting purposes, each Subclass will vote as a separate class.

     (i) Subclass 3A (Senior Note Claims):

(A)

Plan Accepted by Subclass 3A and Subclass 3B. On the Effective Date, if both Subclass 3A and Subclass 3B vote to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, each holder of an Allowed Senior Note Claim will, in full and complete satisfaction of such Claim, be entitled to receive Cash from the Unsecured Claims Trust Account equal to its Pro Rata Share of the Public Note Distributable Consideration remaining after first giving effect to the following payments on the Effective Date by the Distribution Trustee from the Public Note Distributable Consideration: (I) the payment to be made to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of the holders of the 7-3/4% SWD Revenue Bonds pursuant to Section 2.5 and the payment of all amounts payable pursuant to Section 2.6(b); (II) the payment of all amounts payable pursuant to Section 2.6(a); and (III) the payment of $8,000,000 to be made to the Senior Subordinated Note Indenture Trustee for the benefit of the holders of Senior Subordinated Note Claims. If both Subclass 3A and Subclass 3B vote to accept the Plan, as of the Effective Date the treatment provided pursuant to this Section 2.4(c)(i)(A) and Section 2.4(c)(ii)(A) will be deemed to be in full and complete satisfaction of any and all obligations of holders of Senior Subordinated Note Claims relating to the contractual subordination provisions under the Senior Subordinated Note Indenture and any and all claims of holders of Senior Note Claims relating to the contractual subordination provisions of the Senior Subordinated Note Indenture, as such obligations and claims relate to AJI and KJC.

(B)

Plan Rejected by Subclass 3A or Subclass 3B. If either Subclass 3A or Subclass 3B fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the obligations of holders of Senior Subordinated Note Claims relating to the contractual subordination provisions of the Senior Subordinated Note Indenture and the claims of holders of Senior Note Claims relating to the contractual subordination provisions of the Senior Subordinated Note Indenture, as such obligations and claims relate to AJI and KJC, will be preserved under the Plan to the extent enforceable under section 510(a) of the Bankruptcy Code. In such event: (I) the holders of Senior Note Claims will not become entitled to receive the distribution described in Section 2.4(c)(i)(A); and (II) the Bankruptcy Court will enter an order (which will be the Confirmation Order) pursuant to which the Bankruptcy Court will determine the respective entitlement of the holders of Allowed 9-7/8% Senior Note Claims, Allowed 10-7/8% Senior Note Claims, Allowed Senior Subordinated Note Claims and, if applicable under Section 2.5(b), 7-3/4% SWD Revenue Bonds to the Public Note Distributable Consideration. The distributions ultimately made to a holder of an Allowed Senior Note Claim in accordance with this Section 2.4(c)(i)(B) will be reduced by such holder’s proportional share of (x) all amounts payable pursuant to Section 2.6(a) and (y) if the Bankruptcy Court determines that holders of Allowed Senior Subordinated Note Claims are not entitled to any portion of the Public Note Distributable Consideration, the payment, if any, to be made to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of the holders of 7-3/4% SWD Revenue Bonds pursuant to Section 2.5 (or a reservation in lieu thereof in accordance with Section 2.5(b)) and any amounts payable pursuant to Section 2.6(b).

     (ii) Subclass 3B (Senior Subordinated Note Claims):

(A)   Plan Accepted by Subclass 3A and Subclass 3B. On the Effective Date, if both Subclass 3A and Subclass 3B vote to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, each holder of an Allowed Senior Subordinated Note Claim will, in full and complete satisfaction of such Claim, be entitled to receive its Pro Rata

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Share of $8,000,000 in Cash to be paid to the Senior Subordinated Note Indenture Trustee as contemplated by clause (III) of the first sentence of Section 2.4(c)(i)(A), provided that any and all fees or expenses payable to the Senior Subordinated Note Indenture Trustee pursuant to the Senior Subordinated Note Indenture will, in all events, be payable solely from such $8,000,000. If both Subclass 3A and Subclass 3B vote to accept the Plan, as of the Effective Date the treatment provided pursuant to Section 2.4(c)(i)(A) and this Section 2.4(c)(ii)(A) will be deemed to be in full and complete satisfaction of any and all obligations of holders of Senior Subordinated Note Claims relating to the contractual subordination provisions under the Senior Subordinated Note Indenture and any and all claims of holders of Senior Note Claims relating to the contractual subordination provisions of the Senior Subordinated Note Indenture, as such obligations and claims relate to AJI and KJC.

(B)

Plan Rejected by Subclass 3A or Subclass 3B. If either Subclass 3A or Subclass 3B fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the obligations of holders of Senior Subordinated Note Claims relating to the contractual subordination provisions of the Senior Subordinated Note Indenture and the claims of holders of Senior Note Claims relating to the contractual subordination provisions of the Senior Subordinated Note Indenture, as such obligations and claims relate to AJI and KJC, will be preserved under the Plan to the extent enforceable under section 510(a) of the Bankruptcy Code. In such event: (I) the holders of Senior Subordinated Note Claims will not become entitled to receive the distribution described in Section 2.4(c)(ii)(A); and (II) the Bankruptcy Court will enter an order (which will be the Confirmation Order) pursuant to which the Bankruptcy Court will determine the respective entitlement of the holders of Allowed 9-7/8% Senior Note Claims, Allowed 10-7/8% Senior Note Claims, Allowed Senior Subordinated Note Claims and, if applicable under Section 2.5(b), 7-3/4% SWD Revenue Bonds to the Public Note Distributable Consideration. Any distributions ultimately made to a holder of an Allowed Senior Subordinated Note Claim in accordance with this Section 2.4(c)(ii)(B) may be reduced by such holder’s proportional share of any and all fees and expenses payable to the Senior Subordinated Note Indenture Trustee pursuant to the Senior Subordinated Note Indenture, which will, subject to such Trustee’s right to seek payment by the Debtors of such fees and expenses pursuant to section 503(b)(5) of the Bankruptcy Code, be payable solely from such distributions.

(iii)	Subclass 3C (PBGC Claims): On the Effective Date, the PBGC as holder of the PBGC Claims will, in full and complete satisfaction of such Claims, be entitled to receive the PBGC Percentage of the Cash in the Unsecured Claims Trust Account.
(iv)	Subclass 3D (Other Unsecured Claims): On the Effective Date, each holder of an Allowed Other Unsecured Claim will, in full and complete satisfaction of such Claim, be entitled to receive a Pro Rata Share of the Other Unsecured Claims Percentage of the Cash in the Unsecured Claims Trust Account.

     (d) Class 4 — Intercompany Claims. On the Effective Date, each holder of an Intercompany Claim will be entitled to receive the treatment set forth in the Intercompany Claims Settlement. Class 4 is impaired under the Plan. Notwithstanding this treatment of Class 4 Claims, each of the holders of Class 4 Claims will be deemed to have accepted the Plan.

     (e) Class 5 — Interests in the Debtors. No property will be distributed to, or retained by, KACC as the holder of the Interests on account of such Interests, and such Interests will be cancelled on the Effective Date. Notwithstanding this treatment of Class 5 Interests, each of the holders of Class 5 Interests will be deemed to have accepted the Plan.

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     2.5 7-3/4% SWD Revenue Bond Dispute and Settlement.

     (a) Plan Accepted by Subclass 3A. If Subclass 3A votes to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code and, unless the holders of Senior Note Claims otherwise agree pursuant to a settlement, all holders of Allowed Senior Note Claims are entitled under the Plan to identical treatment in respect of contractual subordination claims under the Senior Subordinated Note Indenture, on the Effective Date an amount equal to the Settlement Percentage of the Cash in the Unsecured Claims Trust Account that would otherwise have been distributed in respect of the Senior Subordinated Note Claims which, after giving effect to the contractual subordination provisions of the Senior Subordinated Note Indenture and pursuant to Sections 2.4(c)(i) and 2.4(c)(ii) but prior to giving effect to any payments under this Section 2.5, is to be distributed to holders of Senior Note Claims will, in full and complete satisfaction of the claims of holders of 7-3/4% SWD Revenue Bonds asserted in the 7-3/4% SWD Revenue Bond Dispute in respect of the Debtors, be paid to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of holders of 7-3/4% SWD Revenue Bonds. Notwithstanding the foregoing, in no event will the amount paid under this Section 2.5(a), when aggregated with any amount payable under any comparable provision of the KAAC/KFC Plan, exceed $8,000,000. If the Debtors do not File a separate motion, the Plan will serve as a motion pursuant to Bankruptcy Rule 9019 seeking entry of an order approving the foregoing settlement. Unless an objection to such settlement is made in writing by any creditor or claimant affected thereby, Filed with the Bankruptcy Court and served on the parties identified in Section 12.5 on or before April 5, 2005, such order (which will be the Confirmation Order) may be entered by the Bankruptcy Court. In the event any such objections are timely Filed, a hearing with respect thereto will occur at the Confirmation Hearing.

     (b) Plan Rejected by Subclass 3A. If Subclass 3A fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the rights, if any, of the holders of 7-3/4% SWD Revenue Bonds to payments from the Public Note Distributable Consideration will be as determined in an order of the Bankruptcy Court (which may be the Confirmation Order) in connection with the determinations contemplated by Sections 2.4(c)(i)(B) and 2.4(c)(ii)(B); provided that if the determination with respect to the rights of the holders of 7-3/4% SWD Revenue Bonds to such payment has not been made by the Bankruptcy Court prior to the Effective Date, then, in order to ensure the funding of such payment, on the Effective Date the Distribution Trustee will reserve from the Public Note Distributable Consideration any amount that may be ordered by the Bankruptcy Court to be so reserved pending such determination.

     2.6 Senior Note Indenture Trustee and Ad Hoc Group Counsel Fees and Expenses; 7-3/4% SWD Revenue Bond Plaintiffs’ Fees.

     (a) Senior Note Indenture Trustee and Ad Hoc Group Counsel Fees and Expenses. The fees and expenses of (a) the 9-7/8% Senior Note Indenture Trustee, (b) the 10-7/8% Senior Note Indenture Trustee, and (c) counsel for the Ad Hoc Group through the Effective Date will be paid out of the Public Note Distributable Consideration. No later than two Business Days prior to the Effective Date, each of the entities to which reference is made in clauses (a), (b) and (c) of the first sentence of this Section 2.6(a) will furnish to the counsel for the Creditors’ Committee and the Debtors information in respect of such fees and expenses incurred and estimated to be incurred through the Effective Date.

     (b) 7-3/4% SWD Revenue Bond Plaintiffs’ Fees. If a payment is required to be made to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of holders of 7-3/4% SWD Revenue Bonds under the first sentence of Section 2.5(a), the reasonable out-of-pocket expenses (including attorneys’ fees) incurred and paid by the plaintiffs in the 7-3/4% SWD Revenue Bond Dispute in connection with the Chapter 11 Cases and the chapter 11 cases of the Other Kaiser Debtors, including in connection with the 7-3/4% SWD Revenue Bond Dispute, and that certain civil action currently pending before the United States District Court for the Eastern District of Louisiana styled Paul J. Guillot, et al. v. Credit Suisse First Boston, LLC, and numbered 03-0797, will be paid out of the Public Note Distributable Consideration otherwise payable to holders of Allowed Claims in Subclass 3A; provided, however, that in no event will the amount paid under this sentence, when aggregated with any amount payable under any comparable provision of the KAAC/KFC Plan, exceed $500,000; provided further, however, that nothing in this Section 2.6(b) will prejudice the rights of such plaintiffs to seek additional recoveries (i) from amounts otherwise to be paid to or for the benefit of holders of 7-3/4% SWD Revenue Bonds under the Plan or the KAAC/KFC Plan or (ii) from, or in respect of amounts otherwise to be paid to or for the benefit of holders of 7-3/4% SWD Revenue Bonds by, any Other Kaiser Debtor other than KAAC or KFC. No later than two Business Days prior to the

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Effective Date, the plaintiffs in the 7-3/4% SWD Revenue Bond Dispute will furnish to the 9-7/8% Senior Note Indenture Trustee and the 10-7/8% Senior Note Indenture Trustee information in respect of such fees and expenses incurred and estimated to be incurred through the Effective Date.

     2.7 Allowance of Certain Public Note Claims. The 9-7/8% Senior Note Claims are allowed in the aggregate amount of $196,856,413.06, the 10-7/8% Senior Note Claims are allowed in the aggregate amount of $255,450,000 and the Senior Subordinated Note Claims are allowed in the aggregate amount of $478,661,479.17.

     2.8 Substantive Consolidation. In connection with confirmation of the Plan, the Debtors will seek Bankruptcy Court approval of the substantive consolidation of the Debtors for the purpose of implementing the Plan, including for purposes of voting, confirmation and distributions to be made under the Plan. Pursuant to the relevant order of the Bankruptcy Court: (a) all assets and liabilities of the Debtors will be deemed merged; (b) all guarantees by, or co-obligations of, one Debtor in respect of the obligations of the other Debtor will be deemed eliminated so that any Claim against either Debtor and any guarantee by, or co-obligation of, the other Debtor and any joint or several liability of either of the Debtors will be deemed to be one obligation of the consolidated Debtors; and (c) each and every Claim Filed or to be Filed in the Chapter 11 Case of either Debtor will be deemed Filed against the consolidated Debtors and will be deemed one Claim against and a single obligation of the consolidated Debtors. Such substantive consolidation (other than for the purpose of implementing the Plan) will not affect the legal and corporate structures of the Debtors, nor will such substantive consolidation affect or be deemed to affect any Intercompany Claim in any manner contrary to the Intercompany Claims Settlement, nor will such substantive consolidation be deemed to affect any Other Kaiser Debtor or claims against any Other Kaiser Debtor.

     2.9 Order Granting Substantive Consolidation. The Plan will serve as a motion seeking entry of an order substantively consolidating the Debtors, as described, and to the limited extent set forth, in Section 2.8. Unless an objection to such substantive consolidation is made in writing by any creditor or claimant affected by the Plan, Filed with the Bankruptcy Court and served on the parties identified in Section 12.5 on or before April 5, 2005, or such other date as may be fixed by the Bankruptcy Court, the substantive consolidation order (which will be the Confirmation Order) may be entered by the Bankruptcy Court. In the event any such objections are timely Filed, a hearing with respect thereto will occur at the Confirmation Hearing.

     2.10 No Effect on Claims Against or Interests in Other Kaiser Debtors. Nothing in the Plan will be deemed to affect any person’s claim against or interest in any Other Kaiser Debtor or any of their respective present or former directors, officers, employees, agents, advisors, attorneys, accountants, underwriters, investment bankers or other representatives, acting in such capacity, or any rights, including contractual subordination rights, that any person may have in respect of any such claim against or interest in any such Other Kaiser Debtor.

ARTICLE III

TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES

     3.1 Executory Contracts and Unexpired Leases to Be Rejected. On the Effective Date, except for an Executory Contract or Unexpired Lease that previously was assumed and assigned or rejected by an order of the Bankruptcy Court, each Executory Contract and Unexpired Lease entered into by a Debtor prior to the Petition Date that has not previously expired or terminated pursuant to its own terms will be rejected pursuant to section 365 of the Bankruptcy Code. The Confirmation Order will constitute an order of the Bankruptcy Court approving such rejections, pursuant to section 365 of the Bankruptcy Code, as of the Effective Date.

     3.2 Bar Date for Rejection Damages. Notwithstanding anything in the Bar Date Order or in the Administrative Bar Date Order to the contrary, if the rejection of an Executory Contract or Unexpired Lease pursuant to the Plan gives rise to a Claim by the other party or parties to such contract or lease, such Claim will be forever barred and will not be enforceable against the Debtors, the Distribution Trustee, the Debtors’ Estates or the Trust Accounts unless a proof of Claim or request for payment of Administrative Claim is Filed and served on the Distribution Trustee, pursuant to the procedures specified in the Confirmation Order, the notice of the entry of the Confirmation Order or another order of the Bankruptcy Court, no later than 30 days after the Effective Date.

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ARTICLE IV

RELEASE, LIMITATION OF LIABILITY AND INJUNCTION PROVISIONS

     4.1 Release of Claims; Limitation of Liability.

     (a) Releases by the Debtors. As of the Effective Date, for good and valuable consideration, the adequacy of which is hereby confirmed, the Debtors on behalf of themselves, their Estates, creditors and Interest holders will be deemed to release, waive and discharge all claims and rights of any nature in connection with or related to the Debtors, the Chapter 11 Cases or the Plan (other than the rights of the Distribution Trustee to enforce the Plan and any contracts, instruments, releases and other agreements and documents delivered thereunder, and to pursue objections to and resolve Disputed Claims), whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising (including, without limitation, those arising under the Bankruptcy Code), based on any act, omission or occurrence on or before the Effective Date, against the Creditors’ Committee, its members, any Indenture Trustee, any of the Debtors’ present or former directors or officers, or any of the respective present or former directors, officers, employees, agents, advisors, attorneys, accountants, underwriters, investment bankers or other representatives of the Debtors, the Creditors’ Committee, its members, or the Indenture Trustees, acting in such capacity, except for such Claims or rights based on (i) acts or omissions of any such person constituting gross negligence or willful misconduct or (ii) contractual obligations of, or loans owed by, any such person to a Debtor.

     (b) General Releases by Holders of Claims. Subject to the provisions of Section 2.10, as of the Effective Date, in consideration for the obligations of the Debtors and the Distribution Trustee under the Plan and the Cash to be distributed in connection with the Plan, each holder of a Claim that votes in favor of the Plan will be deemed to forever release and waive all claims, obligations, suits, judgments, damages, demands, debts, rights, causes of action and liabilities (other than the right to enforce the Debtors’ or the Distribution Trustee’s obligations under the Plan and the contracts, instruments, releases and other agreements and documents delivered thereunder), whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising in law, equity or otherwise, that are based in whole or in part on any act, omission, transaction or other occurrence taking place on or prior to the Effective Date in any way relating to a Debtor, the Chapter 11 Cases or the Plan that such entity has, had or may have against the Creditors’ Committee, its members, any Indenture Trustee, either Debtor and any of their respective present or former directors, officers, employees, agents, advisors, attorneys, accountants, underwriters, investment bankers or other representatives, acting in such capacity, except for those based on (i) acts or omissions of any such person constituting gross negligence or willful misconduct or (ii) contractual obligations of, or loans owed by, any such person to a Debtor.

     (c) Limitation of Liability. The Debtors, the Distribution Trust, the Distribution Trustee, the Indenture Trustees and their respective directors, officers, employees and professionals, acting in such capacity, and the Creditors’ Committee, its members and their respective professionals will neither have nor incur any liability to any entity for any act taken or omitted to be taken in connection with or related to the formulation, preparation, dissemination, implementation, confirmation or consummation of the Plan, the Disclosure Statement or any contract, instrument, release or other agreement or document created or entered into, or any other act taken or omitted to be taken, in connection with the Plan; provided, however, that the foregoing provisions of this Section 4.1 will have no effect on: (i) the liability of any entity that would otherwise result from the failure to perform or pay any obligation or liability under the Plan or any contract, instrument, release or other agreement or document to be entered into or delivered in connection with the Plan; or (ii) the liability of any entity that would otherwise result from any such act or omission to the extent that such act or omission is determined in a Final Order to have constituted gross negligence or willful misconduct.

     4.2 Injunctions. Except as otherwise provided in the Plan or the Confirmation Order, as of the Effective Date, all entities that have held, currently hold or may hold a Claim or other debt or liability of the Debtors, or an Interest or other right of an equity security holder with respect to the Debtors, that is released, waived, settled or deemed satisfied pursuant to the Plan will be permanently enjoined from taking any of the following actions on account of any such Claims, debts, liabilities, Interests or rights: (a) commencing or continuing in any manner any action or other proceeding against the Debtors, the Distribution Trust, the

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Distribution Trustee or the property of any of them other than to enforce any right pursuant to the Plan to a distribution from the Trust Accounts; (b) enforcing, attaching, collecting or recovering in any manner any judgment, award, decree or order against the Debtors, the Distribution Trust or the Distribution Trustee, other than as permitted pursuant to (a) above; (c) creating, perfecting or enforcing any Lien or encumbrance against the Debtors, the Distribution Trust, the property of any of them or the Trust Accounts; (d) asserting a setoff, right of subrogation or recoupment of any kind against any debt, liability or obligation due to the Distribution Trust; and (e) commencing or continuing any action, in any manner, in any place that does not comply with or is inconsistent with the provisions of the Plan.

ARTICLE V

CRAMDOWN

     The Debtors request confirmation of the Plan under section 1129(b) of the Bankruptcy Code with respect to any impaired Class that does not accept the Plan pursuant to section 1126 of the Bankruptcy Code. The Debtors reserve the right to modify the Plan to the extent, if any, that confirmation of the Plan pursuant to section 1129(b) of the Bankruptcy Code requires modification. Subclass 3A, Subclass 3B, Subclass 3C, and Subclass 3D each constitute a separate class pursuant to section 1122(a) of the Bankruptcy Code.

ARTICLE VI

CONDITIONS PRECEDENT TO CONFIRMATION
AND CONSUMMATION OF THE PLAN

     6.1 Conditions to Confirmation. The following are conditions to the confirmation of the Plan:

     (a) The Confirmation Order shall have been entered on the docket of the Clerk of the Bankruptcy Court in form and substance acceptable to the Debtors and the Creditors’ Committee;

     (b) All Exhibits to the Plan shall be in form and substance satisfactory to the Debtors and the Creditors’ Committee; and

     (c) The Intercompany Claims Settlement shall have become effective.

     6.2 Conditions to the Effective Date. The following are conditions to the occurrence of the Effective Date:

     (a) The Confirmation Order shall have become a Final Order;

     (b) The Liquidating Transactions shall have been consummated;

     (c) All funds due and owing to or by the Debtors under the Intercompany Claims Settlement shall have been paid in accordance with its terms;

     (d) The Distribution Trustee shall have been appointed and shall have accepted such appointment;

     (e) The Distribution Trust Agreement shall have been executed and the Trust Accounts shall have been established; and

     (f) All other actions, documents, consents and agreements necessary to implement the Plan shall have been effected, obtained and/or executed.

     6.3 Waiver of Conditions to the Confirmation or Effective Date. The conditions to confirmation set forth in Section 6.1 and the conditions to the Effective Date set forth in Section 6.2 may be waived by the Debtors at any time and without an order of the Bankruptcy Court, with the consent of the Creditors’ Committee.

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ARTICLE VII

MEANS FOR IMPLEMENTATION OF THE PLAN

     7.1 Liquidating Transactions. On the Effective Date, the Distribution Trust Assets will be transferred to and vest in the Distribution Trust, free and clear of Claims, Liens and Interests, except as may be otherwise provided in the Intercompany Claims Settlement. On or after the Effective Date, the Debtors will enter into such transactions and will take such actions as may be necessary or appropriate to merge, dissolve or otherwise terminate the corporate existence of the Debtors. Notwithstanding the foregoing and regardless of whether the actions in the preceding sentence have yet been taken with respect to a particular Debtor, upon the transfer of the Distribution Trust Assets to the Distribution Trust, the Debtors will be deemed dissolved and their business operations withdrawn for all purposes without any necessity of filing any document, taking any further action or making any payment to any governmental authority in connection therewith.

     7.2 Corporate Action. The following (which will occur and be deemed effective as of the date specified in the documents effectuating the same or, if no date is so specified, the Effective Date) will be deemed authorized and approved in all respects and for all purposes without any requirement of further action by KACC, as the sole stockholder of each Debtor, by the directors of either Debtor or by the Distribution Trustee or any other person or entity: (a) the Liquidating Transactions; (b) the establishment of the Distribution Trust; (c) the appointment of the Distribution Trustee to act on behalf of the Distribution Trust; (d) the transfer of the Distribution Trust Assets to the Distribution Trust; (e) the creation of the Trust Accounts; (f) the distribution of Cash pursuant to the Plan; (g) the adoption, execution, delivery and implementation of all contracts, instruments, releases and other agreements or documents related to any of the foregoing; (h) the adoption, execution and implementation of the Distribution Trust Agreement; and (i) the other matters provided for under the Plan involving the corporate structure of either Debtor or corporate action to be taken by, or required of, either Debtor or the Distribution Trustee.

     7.3 No Revesting of Assets. On the Effective Date, the property of the Debtors’ Estates will vest in the Distribution Trust to be administered by the Distribution Trustee in accordance with the Plan and the Distribution Trust Agreement.

     7.4 Recourse Solely to Trust Accounts. The Liquidating Transactions will not in any way merge the assets of the Debtors’ Estates, including the Trust Accounts. All Claims against the Debtors are deemed fully satisfied in exchange for the treatment of such Claims under the Plan, and holders of Allowed Claims against either Debtor will have recourse solely to the applicable Trust Accounts for the payment of their Allowed Claims in accordance with the terms of the Plan.

     7.5 Release of Liens. Except as otherwise provided in the Plan or in any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, on the Effective Date all Liens against the property of either Estate will be fully released, and all of the right, title and interest of any holder of such Liens, including any rights to any collateral thereunder, will attach to and be enforceable solely against the applicable Distribution Trust Assets held in the applicable Trust Account in accordance with, and subject to the terms of, the Plan. All such Liens against the Distribution Trust Assets will be fully released upon the holder of the Lien receiving its full distribution under the Plan, or upon the Effective Date if the holder of the Lien is not entitled to any distribution under the Plan.

     7.6 Exemption from Certain Taxes. Pursuant to section 1146(c) of the Bankruptcy Code, the following will not be subject to any stamp Tax, real estate transfer Tax, sales or use Tax or similar Tax: (a) any Liquidating Transaction; (b) the execution and implementation of the Distribution Trust Agreement, including any transfers to or by the Distribution Trust; or (c) the making or delivery of any deed or other instrument of transfer under, in furtherance of or in connection with the Plan, including any merger agreements or agreements of consolidation, disposition, liquidation or dissolution executed in connection with any transaction pursuant to the Plan.

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ARTICLE VIII

DISTRIBUTION TRUST

     8.1 Creation.

     (a) On the Effective Date, the Debtors will enter into the Distribution Trust Agreement with the Distribution Trustee, thereby creating the Distribution Trust.

     (b) The Distribution Trust has no objective to, and will not, engage in the conduct of a trade or business and, subject to the terms of the Distribution Trust Agreement, will terminate upon completion of its liquidation and distribution duties.

     (c) The Distribution Trust will be a “representative of the estate” under section 1123(b)(3)(B) of the Bankruptcy Code.

     8.2 Distribution Trustee.

     (a) The Distribution Trustee, whose identity and address will be disclosed at least ten days prior to the Confirmation Hearing, will be selected by the Creditors’ Committee with the consent of the Debtors, and will be the exclusive trustee of the assets of the Distribution Trust for purposes of 31 U.S.C. § 3713(b) and 26 U.S.C. § 6012(b)(3).

     (b) The rights, powers and privileges of the Distribution Trustee (to act on behalf of the Distribution Trust) will be specified in the Distribution Trust Agreement and will include, among others, the authority and responsibility to: (i) accept, preserve, receive, collect, manage, invest, supervise and protect the Distribution Trust Assets (directly or through one or more third-party Disbursing Agents), each in accordance with the Plan and the Distribution Trust Agreement; (ii) liquidate, transfer or otherwise dispose of the Distribution Trust Assets or any part thereof or any interest therein upon such terms as the Distribution Trustee determines to be necessary, appropriate or desirable, pursuant to the procedures for allowing Claims and making distributions prescribed in the Plan, and otherwise consistent with the terms of the Plan; (iii) calculate and make distributions of the Distribution Trust Assets to holders of Allowed Claims pursuant to the procedures for allowing Claims and making distributions prescribed in the Plan; (iv) review, reconcile, settle or object to Claims and resolve any such objections as set forth in the Plan and the Distribution Trust Agreement; (v) comply with the Plan and exercise its rights and fulfill its obligations thereunder; (vi) investigate and, if appropriate, pursue any Recovery Actions or other available causes of action (including any actions previously initiated by the Debtors and pending as of the Effective Date) and raise any defenses in any adverse actions or counter-claims; (vii) retain and compensate, without further order of the Bankruptcy Court, the services of professionals or other persons or entities to represent, advise and assist the Distribution Trustee in the fulfillment of its responsibilities in connection with the Plan and the Distribution Trust Agreement; (viii) take such actions as are necessary, appropriate or desirable, to close the Chapter 11 Cases; (ix) file appropriate Tax returns on behalf of the Distribution Trust and Debtors and pay Taxes or other obligations owed by the Distribution Trust; (x) exercise the rights, and fulfill the obligations, of the Debtors under the Alpart Purchase Agreement; (xi) take such actions as are necessary, appropriate or desirable to terminate the existence of the Debtors under the laws of Jamaica; and (xii) terminate the Distribution Trust in accordance with the terms of the Plan and the Distribution Trust Agreement.

     (c) Except as otherwise provided in the Plan or the Distribution Trust Agreement, the Distribution Trustee will not be required to obtain the order or approval of the Bankruptcy Court or any other court of competent jurisdiction in, or account to the Bankruptcy Court or any other court of competent jurisdiction for, the exercise of any right, power or privilege conferred under the Distribution Trust Agreement.

     (d) Except as otherwise provided in the Plan or the Distribution Trust Agreement, after the Effective Date only the Distribution Trustee, on behalf of the Distribution Trust, with the prior consent of the Steering Committee, acting through a majority thereof, will have the authority to File, settle, compromise, withdraw or litigate to judgment objections to Claims, including pursuant to any alternative dispute resolution or similar

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procedures approved by the Bankruptcy Court. After the Effective Date, the Distribution Trustee, with the prior consent of the Steering Committee, acting through a majority thereof, may settle or compromise any Disputed Claim without approval of the Bankruptcy Court in accordance with the Distribution Trust Agreement.

     8.3 Preservation of Causes of Action. Except as otherwise provided in the Plan or in any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, in accordance with section 1123(b) of the Bankruptcy Code, the Distribution Trustee will retain and may enforce any claims, demands, rights and causes of action that either Debtor or Estate may hold against any entity, including the Recovery Actions, to the extent not expressly released under the Plan. Without intending to limit the generality of the foregoing, the Distribution Trustee will retain the right to pursue any adversary proceedings available to the Debtors in connection with the Alpart Purchase Agreement or the Intercompany Claims Settlement.

     8.4 Reports to be Filed with the Bankruptcy Court.

     (a) Within 45 days after the end of each of the first three calendar quarters of the calendar year, the Distribution Trustee, on behalf of the Distribution Trust, will File an unaudited report with the Bankruptcy Court reflecting (i) all Distribution Trust Assets received by the Distribution Trust during such calendar quarter; (ii) all Distribution Trust Assets held by the Distribution Trust at the end of such quarter; and (iii) all Distribution Trust Assets disbursed during such calendar quarter, in each case itemized for the individual Trust Accounts.

     (b) Within 90 days after the end of each calendar year, the Distribution Trustee, on behalf of the Distribution Trust, will File an unaudited report with the Bankruptcy Court reflecting: (i) all Distribution Trust Assets received by the Distribution Trust during such calendar year; (ii) all Distribution Trust Assets held by the Distribution Trust at the end of such calendar year; and (iii) all Distribution Trust Assets disbursed during such calendar year, in each case itemized for the individual Trust Accounts.

     (c) In the event of developments affecting the Distribution Trust in any material respect (as determined by the Distribution Trustee in its reasonable discretion), the Distribution Trustee, on behalf of the Distribution Trust, will File promptly with the Bankruptcy Court a report describing such development in reasonable detail.

     (d) Any report required by this Section 8.4 will be in such form as required or approved by the US Trustee.

     (e) The Distribution Trustee will furnish or otherwise make available to any then-current Beneficiary, upon written request, a copy of: (a) the most recent annual receipts/disbursements report referred to in Section 8.4(b); (b) any quarterly receipts/disbursements report referred to in Section 8.4(a) for any period subsequent to the period covered by the most recent annual receipts/disbursements report (or, if no annual receipts/disbursements report has yet been Filed, for any period subsequent to the Effective Date); or (c) any current report referred to in Section 8.4(c) Filed subsequent to the period covered by the most recent annual receipts/disbursements report (or, if no annual receipts/disbursements report has yet been Filed, subsequent to the Effective Date).

     8.5 Payment of Distribution Trust Expenses. Except as otherwise ordered by the Bankruptcy Court, the Distribution Trustee, in its capacity as Disbursing Agent, will, in its reasonable discretion, pay Distribution Trust Expenses from the Distribution Trust Expenses Account, without the need for further Bankruptcy Court approval.

     8.6 Use of Other Entities. The Distribution Trustee, on behalf of the Distribution Trust, may employ, without further order of the Bankruptcy Court, other entities to assist in or make distributions required by the Plan and the Distribution Trust Agreement and may compensate and reimburse the expenses of those entities, without further order of the Bankruptcy Court, from the Distribution Trust Expenses Account in accordance with the Distribution Trust Agreement.

     8.7 Indemnification. The Distribution Trustee and the members of the Steering Committee will be indemnified as provided in the Distribution Trust Agreement.

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     8.8 Tax Treatment.

     (a) The Distribution Trust is intended to be treated, for U.S. federal income Tax purposes, in part as a liquidating trust within the meaning of Treasury Regulations section 301.7701-4(d), for the benefit of the holders of Allowed Claims entitled to distributions of Pending Payments, and otherwise as one or more disputed ownership funds within the meaning of Proposed Treasury Regulations section 1.468B-9(a), as more specifically provided for under the Distribution Trust Agreement. Accordingly, for all federal income Tax purposes the transfer of the Distribution Trust Assets to the Distribution Trust will be treated as: (a) to the extent of Pending Payments, (i) a transfer of the Pending Payments directly from the Debtors to the holders of such Allowed Claims followed by (ii) the transfer of such Pending Payments by such holders of Allowed Claims to the Distribution Trust in exchange for beneficial interests in the Distribution Trust; and (b) to the extent of amounts that are not Pending Payments, as a transfer to one or more disputed ownership funds. Accordingly, the holders of Allowed Claims entitled to distributions of Pending Payments will be treated for federal income Tax purposes as the grantors and deemed owners of their respective shares of the Distribution Trust Assets in the amounts of the Pending Payments and any earnings thereon.

     (b) The Distribution Trustee will be required by the Distribution Trust Agreement to file federal Tax returns for the Distribution Trust as a grantor trust with respect to any Pending Payments and as one or more disputed ownership funds with respect to all other funds or other property held by the Distribution Trust pursuant to applicable Treasury Regulations, and any income of the Distribution Trust will be treated as subject to Tax on a current basis. The Distribution Trust Agreement will provide that the Distribution Trustee will pay such Taxes from the Distribution Trust Assets as required by law and in accordance with Section 10.2(c). In addition, the Distribution Trust Agreement will require consistent valuation by the Distribution Trustee and the Beneficiaries, for all federal income Tax purposes, of any property held by the Distribution Trust. The Distribution Trust Agreement will provide that termination of the trust will occur no later than two years after the Effective Date, unless the Bankruptcy Court will approve an extension based upon a finding that such an extension is necessary for the Distribution Trust to complete its claims resolution and liquidating purpose. The Distribution Trust Agreement also will limit the investment powers of the Distribution Trustee in accordance with IRS Rev. Proc. 94-45 and will require the Distribution Trust to distribute at least annually to the Beneficiaries (as such may have been determined at such time) its net income (net of any payment of or provision for Taxes), except for amounts retained as reasonably necessary to maintain the value of the Distribution Trust Assets or to meet claims and contingent liabilities (including Disputed Claims).

     8.9 Creation of Trust Accounts. On or prior to the Effective Date, the Trust Accounts will be established in federally insured United States banks in the name of the Distribution Trustee or one or more third-party Disbursing Agents. On the Effective Date, title to each of the Trust Accounts and the contents thereof will be transferred to and irrevocably vest in the Distribution Trust.

     8.10 Funding of Distribution Trust Expenses Account.

     (a) Initial Funding. No later than ten days prior to the commencement of the Confirmation Hearing, the Creditors’ Committee and the Debtors will agree on the amount to be funded into the Distribution Trust Expenses Account on the Effective Date. On the Effective Date, the Distribution Trust Expenses Account will be funded by the transfer of Cash in such amount from the Distribution Trust Assets. The Distribution Trustee will act as the Disbursing Agent for the Distribution Trust Expenses Account.

     (b) Use of Funds. Funds in the Distribution Trust Expenses Account will be used solely as provided in the Distribution Trust Agreement.

     (c) Subsequent Funding. If the balance of the Distribution Trust Expenses Account is insufficient to make all payments payable therefrom in accordance with the terms of the Plan and the Distribution Trust Agreement, additional Cash may be transferred to the Distribution Trust Expenses Account from the Unsecured Claims Trust Account (to the extent Cash remains available therein) as provided in the Distribution Trust Agreement.

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     (d) Excess Funds. If the Distribution Trustee determines that the balance of the Distribution Trust Expenses Account is in excess of the amount that will be sufficient to make all payments payable therefrom in accordance with the terms of the Plan and the Distribution Trust Agreement, the Distribution Trustee, with the consent of the Steering Committee acting through a majority thereof, may transfer such excess to the Unsecured Claims Trust Account as provided in the Distribution Trust Agreement.

     8.11 Funding of Priority Claims Trust Account.

     (a) Initial Funding. No later than ten days prior to the commencement of the Confirmation Hearing, the Creditors’ Committee and the Debtors will agree on the amount to be funded into the Priority Claims Trust Account on the Effective Date. On the Effective Date, the Priority Claims Trust Account will be funded by the transfer of Cash in such amount from the Distribution Trust Assets. For purposes of this Section 8.11, any and all Taxes ultimately determined to be due and owing from the Debtors to the Government of Jamaica for any taxable period (including interest and penalties, if any, determined and calculated under applicable Jamaican law without regard to the provisions of section 502(b)(2) of the Bankruptcy Code or any other provision of U.S. federal, state or local law) will be treated as Allowed Priority Tax Claims or Allowed Administrative Claims, as the case may be, and will be paid in full in Cash in accordance with the provisions of Section 9.4(a); provided, however, that any liability of the Debtors to the Australian Tax Office for income or capital gains Taxes for any period shall not exceed the amount of such Taxes, if any, determined in writing by the Australian Tax Office to be due and payable for such period.. Until such determination, any such potential Tax obligation in respect of the Jamaican Tax Claims will be treated as a Disputed Claim.

     (b) Use of Funds. Cash deposited in the Priority Claims Trust Account will be used solely as provided in the Distribution Trust Agreement.

     (c) Subsequent Funding. If the balance of the Priority Claim Trust Account is insufficient to make all payments payable therefrom in accordance with the terms of the Plan and the Distribution Trust Agreement, additional funds may be transferred from the Unsecured Claims Trust Account (to the extent Cash remains available therein) to the Priority Claims Trust Account as provided in the Distribution Trust Agreement.

     (d) Excess Funds. If the Distribution Trustee determines that the balance of the Priority Claims Trust Account is in excess of the amount that will be sufficient to make all payments payable therefrom in accordance with the terms of the Plan and the Distribution Trust Agreement, the Distribution Trustee, with the consent of the Steering Committee acting through a majority thereof, may transfer such excess to the Unsecured Claims Trust Account as provided in the Distribution Trust Agreement.

     8.12 Funding of Unsecured Claims Trust Account.

     (a) Initial Funding. On the Effective Date, after the initial funding of the Distribution Trust Expenses Account in accordance with Section 8.10(a) and the initial funding of the Priority Claims Trust Account in accordance with Section 8.11(a), the Distribution Trustee will (i) allocate from the Distribution Trust Assets to the Public Note Distributable Consideration Cash in an amount equal to the fees contemplated by clause (b) of Section 1.1(89), (ii) pay from the Distribution Trust Assets any payment required under the Intercompany Settlement Agreement, and (iii) thereafter fund the Unsecured Claims Trust Account with the remainder of the Distribution Trust Assets, all as provided in the Distribution Trust Agreement.

     (b) Use of Funds. Cash in the Unsecured Claims Trust Account will be used solely as provided in the Distribution Trust Agreement.

     (c) Additional Deposits. Any Cash that becomes available to the Distribution Trust following the Effective Date will be deposited in the Unsecured Claims Trust Account as provided in the Distribution Trust Agreement.

     8.13 Undeliverable Cash Trust Account. After the Effective Date, if any distribution to a holder of an Allowed Unsecured Claim is returned to the Disbursing Agent as undeliverable, the Disbursing Agent will deposit

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the undeliverable Cash in the Undeliverable Cash Trust Account. The Disbursing Agent will hold such funds, in a book-entry sub-account in the Undeliverable Cash Trust Account, for the benefit of such holder. Until such holder notifies the Disbursing Agent in writing of its then-current address, as contemplated by Section 9.2(c), no attempt will be made to deliver subsequent distributions to such holder and any such distributions that such holder would otherwise be entitled to receive instead will be transferred from the Unsecured Claims Trust Account to the Undeliverable Cash Trust Account and credited to such book-entry sub-account. All Cash held in such book-entry sub-account for the benefit of such holder will be invested by the Disbursing Agent in a manner consistent with the investment and deposit guidelines set forth in the Distribution Trust Agreement. Any income or interest generated from such investment activities will be held in such book-entry sub-account for the benefit of such holder until such holder notifies the Disbursing Agent in writing of its then-current address as contemplated by Section 9.2(c). Subject to Section 9.2(c)(ii), when such holder notifies the Disbursing Agent in writing of its then-current address as contemplated by Section 9.2(c), the Disbursing Agent will deliver to such holder all Cash contained in such book-entry sub-account (net of provision for Taxes). In the event such holder’s right to assert a claim for undeliverable distributions is forfeited as contemplated by Section 9.2(c)(ii), all Cash contained in such book-entry sub-account will be transferred from the Undeliverable Cash Trust Account to the Unsecured Claims Trust Account for redistribution to holders of Allowed Unsecured Claims entitled to distributions therefrom.

ARTICLE IX

PROVISIONS GOVERNING DISTRIBUTIONS

     9.1 Method of Distributions to Holders of Allowed Claims. The Disbursing Agent will make all distributions of Cash required under the Plan. The Disbursing Agent will serve without bond, and may employ or contract with other entities to assist in, or make the distributions required by, the Plan.

     9.2 Delivery of Distributions.

     (a) Generally. Except as otherwise provided in the Plan, distributions in respect of Allowed Claims will be made to the holders of such Claims as of the Distribution Record Date at the addresses set forth in the applicable Claims Report. Prior to making any distribution to a Beneficiary, the Disbursing Agent may request written notification of the Beneficiary’s federal taxpayer identification number or social security number if the Disbursing Agent determines, in its reasonable discretion, that such information (a) is necessary to fulfill its Tax reporting and withholding obligations and (b) has not been provided in the applicable Claims Report or otherwise. The Disbursing Agent, in its reasonable discretion, may suspend distributions to any Beneficiary that has not provided its federal taxpayer identification number or social security number, as the case may be, after a request is made pursuant to and in accordance with the terms of this Section 9.2(a).

     (b) Distributions to Holders of Public Note Claims. All distributions to holders of Allowed Public Note Claims will be made by the Distribution Trustee to the applicable Indenture Trustee for subsequent distribution to holders of Allowed Public Note Claims as of the Distribution Record Date.

     (c) Undeliverable Distributions.

(i)

No Further Attempts at Delivery. If any distribution to a holder of an Allowed Unsecured Claim is returned to the Disbursing Agent as undeliverable, then unless and until the Disbursing Agent is notified in writing of such holder’s then-current address: (A) subject to Section 9.2(c)(ii), such undeliverable distributions will remain in the possession of the Disbursing Agent as provided in Section 8.13 and no further attempt will be made to deliver such distribution; and (B) no attempt will be made to deliver subsequent distributions to such holder and any such distributions that such holder would otherwise be entitled to receive instead will be treated as provided in Section 8.13.

(ii)

Forfeiture and Redistribution. Any holder of an Allowed Unsecured Claim that does not assert a claim for an undeliverable distribution by delivering to the Disbursing Agent a written notice setting forth such holder’s then-current address within 180 days after the later of (A) the Effective Date and (B) the last date on which a distribution was deliverable to the holder will have its claim

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for undeliverable distributions discharged and will be forever barred from asserting such claim or any claim for subsequent distributions against the Debtors, the Disbursing Agent or the property of any of them, including the Trust Accounts, whereupon all Cash contained in the book-entry sub-account in the Undeliverable Cash Trust Account created for the benefit of such holder will be transferred to the Unsecured Claims Trust Account for redistribution to holders of Allowed Unsecured Claims entitled to distributions therefrom. For purposes of any such redistribution, each Allowed Claim in respect of which a claim for undeliverable distributions has been discharged as contemplated by this Section 9.2(c)(ii) will be deemed disallowed in its entirety.

(iii)

No Requirement to Attempt to Locate Holders. Nothing contained in the Plan will require the Debtors or the Disbursing Agent to attempt to locate any holder of an Allowed Claim.

     9.3 Means of Cash Payments. Except as otherwise provided in the Plan or the Distribution Trust Agreement, Cash payments made pursuant to the Plan will be in United States currency by checks drawn on the applicable Trust Accounts or, at the option of the Disbursing Agent, by wire transfer from a domestic bank; provided, however, that Cash payments to foreign holders of Allowed Claims may be made, at the option of the Disbursing Agent, in such funds and by such means as are necessary or customary in a particular foreign jurisdiction. If a check included in a distribution to a holder of an Allowed Unsecured Claim is not cashed within 180 days of the issuance thereof, the Disbursing Agent will void such check and such distribution will be treated as undeliverable in accordance with Section 9.2(c).

     9.4 Timing and Calculation of Amounts to Be Distributed.

     (a) Allowed Claims Other Than Unsecured Claims. On or as promptly as practicable after the Effective Date, the Disbursing Agent will make distributions to holders of Secured Claims, Administrative Claims, Priority Claims and Priority Tax Claims allowed as of the Effective Date. On or as promptly as practicable after each Quarterly Distribution Date, the Disbursing Agent will make distributions to holders of Disputed Secured Claims, Disputed Administrative Claims, Disputed Priority Claims and Disputed Priority Tax Claims that have become Allowed Claims during the immediately preceding calendar quarter. Notwithstanding the foregoing, if the Disbursing Agent determines, in its reasonable discretion, that the amount of any quarterly distribution is too small to justify the administrative costs associated with such distribution, the Disbursing Agent may postpone such quarterly distribution until the next Quarterly Distribution Date. The Disbursing Agent will have no obligation to notify Beneficiaries if it determines, in its reasonable discretion, that any quarterly distribution will be postponed.

     (b) Allowed Unsecured Claims in Subclass 3A; Certain Payments from the Public Note Distributable Consideration.

          (i) Plan Accepted by Subclass 3A and Subclass 3B.

(A)

If both Subclass 3A and Subclass 3B vote to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, on or as promptly as practicable after the Effective Date, the Disbursing Agent will: (i) make distributions to holders of Allowed Claims in Subclass 3A in accordance with Section 2.4(c)(i)(A); provided that the amount of such distributions will be calculated as if each Disputed Unsecured Claim in Subclass 3D were an Allowed Unsecured Claim in its Face Amount as of the Effective Date; and (ii) make the payments to be deducted from the Public Note Distributable Consideration as contemplated by clauses (I) and (II) of the first sentence of Section 2.4(c)(i)(A).

(B)

If both Subclass 3A and Subclass 3B vote to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, on or as promptly as practicable after each Quarterly Distribution Date, the Disbursing Agent will distribute to each holder of an Allowed Claim in Subclass 3A a distribution from the Unsecured Claims Trust Account (net of provision for Taxes) in an amount equal to: (a) the amount of Cash that such holder would have been entitled to receive pursuant to the Plan if such Claim and each other Unsecured Claim allowed prior to such Quarterly Distribution Date had been an

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Allowed Unsecured Claim as of the Effective Date (with such amount to be calculated in the manner described in Section 9.4(b)(i)(A)) minus (b) the aggregate amount of Cash previously distributed on account of such Claim. Notwithstanding the foregoing, if the Disbursing Agent determines, in its reasonable discretion, that the amount of any quarterly distribution is too small to justify the administrative costs associated with such distribution, the Disbursing Agent may postpone such quarterly distribution until the next Quarterly Distribution Date. The Disbursing Agent will have no obligation to notify Beneficiaries if it determines, in its reasonable discretion, that any quarterly distribution will be postponed. In the event of the disallowance of a Disputed Unsecured Claim in Subclass 3D, any amounts held in respect thereof will be released from the Disputed Claims Reserve for distribution in accordance with this Section 9.4(b)(i) and Section 9.4(d).

(ii)   Plan Rejected by Subclass 3A or Subclass 3B. If either Subclass 3A or Subclass 3B fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the amount of the Public Note Distributable Consideration to which the Bankruptcy Court determines the holders of Allowed Claims in Subclass 3A are entitled in respect of such Claims will be distributed as provided in an order of the Bankruptcy Court and the Disbursing Agent will, contemporaneously or as promptly as practicable thereafter, make the payments (or reservations for payment) by which such distributions are to be reduced in accordance with Section 2.4(a)(i)(B).

     (c) Allowed Unsecured Claims in Subclass 3B.

(i)

Plan Accepted by Subclass 3A and Subclass 3B. If both Subclass 3A and Subclass 3B vote to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, on or as promptly as practicable after the Effective Date, the Disbursing Agent will make the payment to the Senior Subordinated Note Indenture Trustee as contemplated by clause (III) of the first sentence of Section 2.4(c)(i)(A) and Section 2.4(c)(ii)(A) for subsequent distribution by the Senior Subordinated Note Indenture Trustee to the holders of Allowed Claims in Subclass 3B.

(ii)

Plan Rejected by Subclass 3A or Subclass 3B. If either Subclass 3A or Subclass 3B fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the amount of the Public Note Distributable Consideration, if any, to which the Bankruptcy Court determines the holders of Allowed Claims in Subclass 3B are entitled in respect of such Claims will be distributed as provided in an order of the Bankruptcy Court. As contemplated by Section 2.4(c)(ii)(B), any such distributions ultimately made to a holder of an Allowed Claim in Subclass 3B may be reduced by such holder’s proportional share of any and all fees and expenses payable to the Senior Subordinated Note Indenture Trustee pursuant to the Senior Subordinated Note Indenture, which will, subject to such Trustee’s right to seek payment by the Debtors of such fees and expenses pursuant to section 503(b)(5) of the Bankruptcy Code, be payable solely from such distributions.

     (d) Allowed Unsecured Claims in Subclass 3C and Subclass 3D.

(i)

On or as promptly as practicable after the Effective Date, the Disbursing Agent will make distributions to holders of Unsecured Claims in Subclass 3C and Subclass 3D allowed as of the Effective Date; provided that the amount of such distributions will be calculated as if each Disputed Unsecured Claim in Subclass 3D were an Allowed Unsecured Claim in its Face Amount as of the Effective Date; provided further, however, that no distribution will be made on account of any Disputed Unsecured Claim in Subclass 3D unless and until it becomes an Allowed Unsecured Claim and amounts withheld for Disputed Unsecured Claims in Subclass 3D will remain in the Unsecured Claims Trust Account as part of the Disputed Claims Reserve.

(ii)

On or as promptly as practicable after each Quarterly Distribution Date, the Disbursing Agent will distribute to each holder of an Unsecured Claim in Subclass 3C or Subclass 3D allowed prior to such Quarterly Distribution Date a distribution from the Unsecured Claims Trust Account (net of provision for Taxes) in an amount equal to: (a) the amount of Cash that such holder would have

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been entitled to receive pursuant to the Plan if such Claim and each other Unsecured Claim allowed prior to such Quarterly Distribution Date had been an Allowed Unsecured Claim as of the Effective Date (with such amount to be calculated in the manner described in Section 9.4(d)(i)(A)) minus (b) the aggregate amount of Cash previously distributed on account of such Claim. Notwithstanding the foregoing, if the Disbursing Agent determines, in its reasonable discretion, that the amount of any quarterly distribution is too small to justify the administrative costs associated with such distribution, the Disbursing Agent may postpone such quarterly distribution until the next Quarterly Distribution Date. The Disbursing Agent will have no obligation to notify Beneficiaries if it determines, in its reasonable discretion, that any quarterly distribution will be postponed. In the event of the disallowance of a Disputed Unsecured Claim in Subclass 3D, any amounts held in respect thereof will be released from the Disputed Claims Reserve for distribution in accordance with Section 9.4(b)(i) and this Section 9.4(d).

     (e) 7-3/4% SWD Revenue Bonds.

(i)

Plan Accepted by Subclass 3A. If Subclass 3A votes to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code and, unless the holders of Senior Note Claims otherwise agree pursuant to a settlement, all holders of Allowed Senior Note Claims are entitled under the Plan to identical treatment in respect of contractual subordination claims under the Senior Subordinated Note Indenture, on or as promptly as practicable on the Effective Date the Disbursing Agent will make the payment, if any, to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of holders of 7-3/4% SWD Revenue Bonds pursuant to Section 2.5(a) and pay any amounts payable pursuant to Section 2.6(b).

(ii)

Plan Rejected by Subclass 3A. If Subclass 3A fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the amount of the Public Note Distributable Consideration, if any, to which the Bankruptcy Court determines the holders of 7-3/4% SWD Revenue Bonds are entitled will be distributed as provided in an order of the Bankruptcy Court.

     (f) Distributions to Holders of Public Note Claims. All distributions to holders of Allowed Public Note Claims will be deemed to apply first to the principal amount of such Claims until such principal amount is paid in full, and then the remaining portion of such distribution, if any, will be deemed to apply to any prepetition accrued interest included in such Claim.

     (g) No De Minimis Distributions. The Disbursing Agent will not be required to distribute Cash to the holder of an Allowed Unsecured Claim if the total aggregate amount of Cash to be distributed on account of such Claim is less than $25. Any holder of an Allowed Unsecured Claim on account of which the total aggregate amount of Cash to be distributed is less than $25 will have its claim for such distribution deemed satisfied, waived and released and will be forever barred from asserting any such Claim against the Debtors, the Distribution Trustee, the Disbursing Agent or the property of any of them, including the Trust Accounts. Any Cash not distributed with respect to Allowed Unsecured Claims as a result of the provisions of this Section 9.4(g) will be retained in the Unsecured Claims Trust Account for redistribution to other holders of Allowed Unsecured Claims entitled to distributions from the Unsecured Claims Trust Account.

     (h) Compliance with Tax Requirements. To the extent applicable, the Disbursing Agent will comply with all Tax withholding and reporting requirements imposed on it by any governmental unit, and all distributions pursuant to the Plan will be subject to such withholding and reporting requirements. The Disbursing Agent will be authorized to take any actions that it determines, in its reasonable discretion, to be necessary, appropriate or desirable to comply with such withholding and reporting requirements. Notwithstanding any other provision of the Plan or the Distribution Trust Agreement, each entity receiving a distribution of Cash pursuant to the Plan will have sole and exclusive responsibility for the satisfaction and payment of any Tax obligations imposed on it by any governmental unit on account of such distribution, including income, withholding and other Tax obligations.

     9.5 Setoffs. Except with respect to claims of a Debtor released pursuant to the Plan or any contract, instrument, release, or other agreement or document entered into or delivered in connection with the Plan, the Distribution Trustee or any other Disbursing Agent may, pursuant to section 553 of the Bankruptcy Code or

26

applicable nonbankruptcy law, set off against any Allowed Claim and the distributions to be made pursuant to the Plan on account of such Claim (before any distribution is made on account of such Claim) the claims, rights and causes of action of any nature that the applicable Debtor may hold against the holder of such Allowed Claim; provided, however, that neither the failure to effect a setoff nor the allowance of any Claim hereunder will constitute a waiver or release by the applicable Debtor of any claims, rights and causes of action that the Debtor or Debtors may possess against such a Claim holder, which are preserved under the Plan.

     9.6 Compensation and Reimbursement for Services Related to Distributions. If the Distribution Trustee employs or contracts with a third-party Disbursing Agent, such Disbursing Agent will receive, without the need for further Bankruptcy Court approval, reasonable compensation for such services and reimbursement of reasonable out-of-pocket expenses incurred in connection with such services. These payments will be made on terms agreed to with the Distribution Trustee and will be paid to such Disbursing Agent from funds in the Distribution Trust Expenses Account. To assist in making distributions under the Plan, notwithstanding any other provision of the Plan, the applicable Trust Accounts (other than the Distribution Trust Expenses Account) may be held in the name of one or more such Disbursing Agents. Any such Disbursing Agent will invest the Cash in the Trust Accounts as directed by the Distribution Trustee, who will direct such Disbursing Agent to invest such Cash only in Permitted Investments; provided, however, that should the Distribution Trustee determine, in its reasonable discretion, that the administrative costs associated with such investment will exceed the return on such investment, it may direct such Disbursing Agent to not invest such Cash.

     9.7 Payments Limited to Trust Accounts. All payments or other distributions to be made by the Distribution Trustee in accordance with the Plan or the Distribution Trust Agreement will be made only from the Trust Accounts.

     9.8 Insufficient Funds. Provided that the Disbursing Agent has not acted in bad faith, engaged in fraud, willful misconduct or gross negligence or breached its fiduciary duties, if the Distribution Trust Assets at any point prove insufficient to pay all Beneficiaries of the Priority Claims Trust Account in full or all Beneficiaries of the Unsecured Claims Trust Account in accordance with the terms of the Plan, the Disbursing Agent will have no obligation to seek disgorgement from any Beneficiary, but may seek the guidance of the Bankruptcy Court or another court of competent jurisdiction.

ARTICLE X

DISPUTED CLAIMS

     10.1 Prosecution of Objections to Claims. All objections to Claims must be Filed and served on the holders of such Claims by the Claims Objection Bar Date, and, if Filed prior to the Effective Date, such objections will be served on the parties on the then-applicable service list in the Chapter 11 Cases. If an objection has not been Filed to a proof of Claim, a scheduled Claim or a request for payment of Administrative Claim by the applicable Claims Objection Bar Date, the Claim to which the proof of Claim, scheduled Claim or request for payment of Administrative Claim relates will be treated as an Allowed Claim if such Claim has not been allowed earlier.

     10.2 Treatment of Disputed Claims.

     (a) No Payments on Account of Disputed Claims and Disputed Claims Reserves. Notwithstanding any other provisions of the Plan, no payments or distributions will be made on account of a Disputed Claim until such Claim becomes an Allowed Claim. In lieu of distributions under the Plan to holders of Disputed Claims, a Disputed Claims Reserve will be established on the Effective Date in each Trust Account, which, in the case of Unsecured Claims in Subclass 3D, will include an amount equal to the Pro Rata Share of the distribution to which all of the Disputed Claims in Subclass 3D would be entitled if such Disputed Claim was allowed in its Face Amount on the Effective Date.

     (b) Recourse. Each holder of a Disputed Claim that ultimately becomes an Allowed Claim will have recourse only to the undistributed Cash held in the applicable Trust Account for the satisfaction of such Allowed Claim and not to any other Trust Account or any assets previously distributed on account of any Allowed Claim.

27

     (c) Tax Requirements for Income Generated by Disputed Claim Reserves. The Distribution Trustee will include in the Tax returns of the Trust Accounts all items of income, deduction and credit of the Trust Accounts, except to the extent such items are included in the income of the Beneficiaries of the Trust Accounts as grantors of grantor trusts. The Distribution Trustee will pay, or cause to be paid, out of the funds held in applicable Trust Accounts, any Tax imposed on the Trust Accounts by any governmental unit with respect to income generated by the funds held in the Trust Accounts. The Distribution Trustee also will file or cause to be filed any Tax or information return related to the applicable Trust Account that is required by any governmental unit.

ARTICLE XI

RETENTION OF JURISDICTION

          Notwithstanding the entry of the Confirmation Order and the occurrence of the Effective Date, the Bankruptcy Court will retain all such jurisdiction over the Chapter 11 Cases after the Effective Date as is legally permissible, including jurisdiction to:

     (a) Allow, disallow, determine, liquidate, classify, reclassify, estimate or establish the priority, secured or unsecured status (or proper Plan classification) of any Claim or Interest, including the resolution of any request for payment of any Administrative Claim, and the resolution of any objections to the allowance, priority, or classification of Claims or Interests;

     (b) Grant or deny any applications for allowance of compensation or reimbursement of expenses authorized pursuant to the Bankruptcy Code or the Plan for periods ending on or before the Effective Date;

     (c) Resolve any matters related to the assumption, assumption and assignment or rejection of any Executory Contract or Unexpired Lease to which either Debtor is a party or with respect to which either Debtor may be liable and to hear, determine and, if necessary, liquidate any Claims arising therefrom;

     (d) Ensure that distributions to holders of Allowed Claims are accomplished pursuant to the provisions of the Plan;

     (e) Decide or resolve any motions, adversary proceedings, contested or litigated matters and any other matters, including the Recovery Actions and claims of the holders of the 7-3/4% SWD Revenue Bonds in respect of subordination rights under the Senior Subordinated Note Indenture, and grant or deny any applications involving the Debtors or the Distribution Trustee that may be pending on the Effective Date or brought thereafter;

     (f) Enter such orders as may be necessary or appropriate to implement or consummate the provisions of the Plan and all contracts, instruments, releases and other agreements or documents entered into or delivered in connection with the Plan, the Disclosure Statement or the Confirmation Order, including the Distribution Trust Agreement;

     (g) Resolve any cases, controversies, suits or disputes that may arise in connection with the Recovery Actions or the consummation, interpretation, or enforcement of the Plan or any contract, instrument, release, or other agreement or document that is entered into or delivered pursuant to the Plan (including the Distribution Trust Agreement), or any entity’s rights arising from or obligations incurred in connection with the Plan or such documents;

     (h) Modify the Plan before or after the Effective Date pursuant to section 1127 of the Bankruptcy Code; modify the Confirmation Order, or any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, the Disclosure Statement or the Confirmation Order; or remedy any defect or omission or reconcile any inconsistency in any Bankruptcy Court order, the Plan, the Disclosure Statement, the Confirmation Order, or any contract, instrument, release or other agreement or document entered into, delivered or created in connection with the Plan, the Disclosure Statement or the Confirmation Order, in such manner as may be necessary or appropriate to consummate the Plan;

28

     (i) Issue injunctions, enforce the injunctions contained in the Plan and the Confirmation Order, enter and implement other orders or take such other actions as may be necessary or appropriate to restrain interference by any entity with consummation, implementation or enforcement of the Plan or the Confirmation Order;

     (j) Enter and implement such orders as are necessary or appropriate if the Confirmation Order is for any reason or in any respect modified, stayed, reversed, revoked or vacated or distributions pursuant to the Plan are enjoined or stayed;

     (k) Determine any other matters that may arise in connection with or relate to the Plan, the Disclosure Statement, the Confirmation Order, or any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, the Disclosure Statement or the Confirmation Order;

     (l) Enter a final decree closing the Chapter 11 Cases in accordance with the Bankruptcy Rules; and

     (m) Determine matters concerning state, local and federal Taxes in accordance with sections 346, 505 and 1146 of the Bankruptcy Code, including any Disputed Claims for Taxes.

ARTICLE XII

MISCELLANEOUS PROVISIONS

     12.1 Preservation of Insurance. Nothing in the Plan will diminish or impair the enforceability of any insurance policies that may cover Claims against either Debtor.

     12.2 Modification of the Plan. Subject to the restrictions on modifications set forth in section 1127 of the Bankruptcy Code, the Debtors reserve the right to alter, amend or modify the Plan before its substantial consummation, with the consent of the Creditors’ Committee.

     12.3 Revocation of the Plan. The Debtors reserve the right to revoke or withdraw the Plan prior to the Effective Date, with the consent of the Creditors’ Committee. If the Debtors so revoke or withdraw the Plan, or if confirmation of the Plan does not occur, the Plan will be null and void in all respects, and nothing contained in the Plan will: (a) constitute a waiver or release of any Claims by or against, or any Interests in, the Debtors; or (b) prejudice in any manner the rights of either Debtor or any other party.

     12.4 Severability of Plan Provisions. If, prior to confirmation of the Plan, any term or provision of the Plan is held by the Bankruptcy Court to be invalid, void or unenforceable, the Bankruptcy Court will have the power to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void or unenforceable, and such term or provision then will be applicable as altered or interpreted; provided, however, that any such alteration or interpretation must be in form and substance acceptable to the Debtors and the Creditors’ Committee. Notwithstanding any such holding, alteration or interpretation, the remainder of the terms and provisions of the Plan will remain in full force and effect and will in no way be affected, impaired or invalidated by such holding, alteration or interpretation. The Confirmation Order will constitute a judicial determination and will provide that each term and provision of the Plan, as it may have been altered or interpreted in accordance with the foregoing, is valid and enforceable pursuant to its terms.

     12.5 Notices. Any pleading, notice, or other document required by the Plan or Confirmation Order to be served on or delivered to the Debtors, the Distribution Trustee or the Creditors’ Committee must be sent by overnight delivery service, facsimile transmission, courier service, or messenger to:

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(a)	The Debtors:
	Daniel J. DeFranceschi RICHARDS, LAYTON & FINGER One Rodney Square P.O. Box 551 Wilmington, Delaware 19899 Facsimile: (302) 651-7701
	Gregory M. Gordon Henry L. Gompf Troy B. Lewis Daniel P. Winikka JONES DAY 2727 North Harwood Street Dallas, Texas 75201 Facsimile (214) 969-5100
	(Counsel to the Debtors)
(b)	The Distribution Trustee:
	Distribution Trustee [The identity and address of the Distribution Trustee to be disclosed at least ten days prior to the Confirmation Hearing as provided in Section 8.2(a).]
(c)	The Creditors’ Committee:
	Lisa G. Beckerman AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. 590 Madison Avenue New York, NY 10022
	William P. Bowden ASHBY & GEDDES 222 Delaware Avenue P.O. Box 1150 Wilmington, DE 19899
	(Counsel to the Creditors’ Committee)

     12.6 Successors and Assigns. The rights, benefits, and obligations of any entity named or referred to in the Plan will be binding on, and will inure to the benefit of, any heir, executor, administrator, successor, or assign of such entity, regardless of whether such entity voted to accept the Plan.

     12.7 Further Action. Nothing contained in the Plan will prevent the Debtors or the Distribution Trustee from taking such actions as may be necessary to consummate the Plan, even though such actions may not be specifically provided for within the Plan.

     12.8 Exhibits. All Exhibits to the Plan are incorporated by reference and are intended to be an integral part of this document as though fully set forth in the Plan.

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Dated: February 11, 2005	Respectfully submitted, ALPART JAMAICA INC.
	By:
	Name:
	Title:

KAISER JAMAICA CORPORATION
 

By:  

Name:  

Title:  

COUNSEL:

Daniel J. DeFranceschi (DE 2732)
RICHARDS, LAYTON & FINGER
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
Telephone: (302) 651-7700
Facsimile: (302) 651-7701

     – and –

Gregory M. Gordon (TX 08435300)
Henry L. Gompf (TX 08116400)
Troy B. Lewis (TX 12308650)
Daniel P. Winikka (TX 00794873)
JONES DAY
2727 North Harwood Street
Dallas, Texas 75201
Telephone: (214) 220-3939
Facsimile: (214) 969-5100

ATTORNEYS FOR DEBTORS AND
DEBTORS IN POSSESSION

31

EX-99.4

Exhibit 99.4

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

	x
	:
In re:	:
	:	Chapter 11 Case Nos.
ALPART JAMAICA INC. and	:	03-10144 and 03-10151
KAISER JAMAICA CORPORATION,	:	Jointly Administered Under
	:	Case No. 02-10429 (JKF)
Debtors.	:
	:
	x

DISCLOSURE STATEMENT
PURSUANT TO SECTION 1125 OF THE BANKRUPTCY CODE
WITH RESPECT TO THE AMENDED JOINT PLAN OF LIQUIDATION
FOR ALPART JAMAICA INC. AND KAISER JAMAICA CORPORATION

	Daniel J. DeFranceschi (DE 2732)
	RICHARDS, LAYTON & FINGER
	One Rodney Square
	P.O. Box 551
	Wilmington, Delaware 19899
	Telephone: (302) 651-7700
	Facsimile: (302) 651-7701
	– and –
	Gregory M. Gordon (TX 08435300)
	Henry L. Gompf (TX 08116400)
	Troy B. Lewis (TX 12308650)
	Daniel P. Winikka (TX 00794873)
	JONES DAY
	2727 North Harwood Street
	Dallas, Texas 75201
	Telephone: (214) 220-3939
	Facsimile: (214) 969-5100
	ATTORNEYS FOR DEBTORS AND
	DEBTORS IN POSSESSION
Dated: February 11, 2005

DISCLOSURE STATEMENT, DATED FEBRUARY 11, 2005
SOLICITATION OF VOTES
WITH RESPECT TO THE
AMENDED JOINT PLAN OF LIQUIDATION
FOR
ALPART JAMAICA INC. AND KAISER JAMAICA CORPORATION
(WHOLLY OWNED SUBSIDIARIES OF KAISER ALUMINUM & CHEMICAL CORPORATION)

     THE BOARDS OF DIRECTORS OF ALPART JAMAICA INC. (“AJI”) AND KAISER JAMAICA CORPORATION (“KJC” AND, TOGETHER WITH AJI, THE “DEBTORS”) BELIEVE THAT THE AMENDED JOINT PLAN OF LIQUIDATION FOR ALPART JAMAICA INC. AND KAISER JAMAICA CORPORATION, DATED FEBRUARY 11, 2005 AND ATTACHED HERETO AS EXHIBIT I (THE “PLAN”), IS IN THE BEST INTERESTS OF CREDITORS. ALL CREDITORS ENTITLED TO VOTE ON THE PLAN ARE URGED TO VOTE IN FAVOR THEREOF. A SUMMARY OF THE VOTING INSTRUCTIONS IS SET FORTH BEGINNING AT PAGE 55 OF THIS DISCLOSURE STATEMENT. MORE DETAILED INSTRUCTIONS ARE CONTAINED ON THE BALLOTS DISTRIBUTED TO CREDITORS ENTITLED TO VOTE ON THE PLAN. TO BE COUNTED, YOUR BALLOT MUST BE DULY COMPLETED, EXECUTED AND RECEIVED BY 5:00 P.M., EASTERN TIME, ON APRIL 5, 2005 OR SUCH OTHER TIME OR DATE IDENTIFIED ON YOUR BALLOT (THE “VOTING DEADLINE”), UNLESS EXTENDED.

     [THE CREDITORS’ COMMITTEE HAS INDEPENDENTLY CONCLUDED THAT THE PLAN IS IN THE BEST INTERESTS OF CREDITORS AND URGES CREDITORS TO VOTE IN FAVOR OF THE PLAN.]

     [NOTE: THIS IS NOT A SOLICITATION OF ACCEPTANCES OR REJECTIONS OF THE PLAN. ACCEPTANCES OR REJECTIONS MAY NOT BE SOLICITED UNTIL A DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE BANKRUPTCY COURT. THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED BY THE BANKRUPTCY COURT.]

     THE CONFIRMATION AND EFFECTIVENESS OF THE PROPOSED PLAN ARE SUBJECT TO MATERIAL CONDITIONS PRECEDENT, SOME OF WHICH MAY NOT BE SATISFIED. SEE “ANSWERS TO CERTAIN QUESTIONS ABOUT THE PLAN AND DISCLOSURE STATEMENT — WHAT MUST HAPPEN BEFORE THE PLAN CAN BE CONSUMMATED?” AND “VOTING AND CONFIRMATION OF THE PLAN — CONFIRMATION — ACCEPTANCE OR CRAMDOWN.” THERE IS NO ASSURANCE THAT THESE CONDITIONS WILL BE SATISFIED OR WAIVED.

     No person is authorized by either of the Debtors in connection with the Plan or the solicitation of acceptances of the Plan to give any information or to make any representation other than as contained in this Disclosure Statement or incorporated by reference or referred to herein, and, if given or made, such information or representation may not be relied upon as having been authorized by either of the Debtors. The delivery of this Disclosure Statement will not under any circumstances imply that the information herein is correct as of any time subsequent to the date hereof. The Debtors will make available to creditors entitled to vote on acceptance of the Plan such additional information as may be required by applicable law prior to the Voting Deadline.

     ALL CREDITORS ARE ENCOURAGED TO READ AND CAREFULLY CONSIDER THIS ENTIRE DISCLOSURE STATEMENT, INCLUDING THE PLAN ATTACHED HERETO AS EXHIBIT I, PRIOR TO SUBMITTING BALLOTS PURSUANT TO THIS SOLICITATION.

     The summaries of the Plan and the other documents contained in this Disclosure Statement are qualified by reference to the Plan itself, the Exhibit thereto and other documents summarized herein, all as Filed prior to approval of this Disclosure Statement.

     The information contained in this Disclosure Statement, including the information regarding the history, businesses and operations of the Debtors, is included for purposes of soliciting acceptances of the Plan, but, as to contested matters and adversary proceedings, is not to be construed as admissions or stipulations, but rather as statements made in settlement negotiations.

     FORWARD-LOOKING STATEMENTS: THIS DISCLOSURE STATEMENT INCLUDES FORWARD-LOOKING STATEMENTS BASED LARGELY ON THE CURRENT EXPECTATIONS OF THE DEBTORS ABOUT FUTURE EVENTS. THE WORDS “BELIEVE,” “MAY,” “WILL,” “ESTIMATE,” “CONTINUE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS IDENTIFY THESE FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO A NUMBER OF RISKS, UNCERTAINTIES AND ASSUMPTIONS. IN LIGHT OF THESE RISKS AND UNCERTAINTIES, THE FORWARD-LOOKING EVENTS AND CIRCUMSTANCES DISCUSSED IN THIS DISCLOSURE STATEMENT MAY NOT OCCUR AND ACTUAL EVENTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS. THE DEBTORS UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

     THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”) OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN.

     All capitalized terms in this Disclosure Statement not otherwise defined herein have the meanings given to them in the Plan.

TABLE OF CONTENTS

	Page
INTRODUCTION		1
ANSWERS TO CERTAIN QUESTIONS ABOUT THE PLAN AND DISCLOSURE STATEMENT		4
OVERVIEW OF THE PLAN		13
Introduction		13
Summary of Classes and Treatment of Claims and Interests		14
Guaranty Subordination Dispute		17
7-3/4% SWD Revenue Bond Dispute		17
Sources and Uses of Cash		18
Sources of Cash		18
Uses of Cash		18
Additional Information Regarding Assertion and Treatment of Administrative Claims and Priority
Tax Claims		22
Administrative Claims		22
Administrative Claims in General		22
US Trustee Fees		22
Bar Dates for Administrative Claims		23
Priority Tax Claims		23
Reserves for Payment of Certain Potential Administrative Claims and Priority Tax Claims		23
Senior Note Indenture Trustee and Ad Hoc Group Counsel Fees and Expenses; 7-3/4% SWD
Revenue Bond Plaintiffs’ Fees		23
CERTAIN EVENTS PRECEDING THE DEBTORS’ CHAPTER 11 FILINGS		24
Background		24
Chapter 11 Filings of the Other Kaiser Debtors		24
Note Guarantees		24
Pension Funding Obligations; Commencement of the Chapter 11 Cases by the Debtors		25
OPERATIONS DURING THE CHAPTER 11 CASES		26
First Day Relief Requested by the Original Debtors		26
Cash Management Order		26
Joint Venture Order		27
First Day Relief Requested by AJI, KJC and the other Additional Debtors		27
Appointment of the Committees and Future Claimants’ Representatives		27
Creditors’ Committee		27
Asbestos Claimants’ Committee and Certain Other Appointed Representatives		28
Assumption and Assignment or Rejection of Executory Contracts and Unexpired Leases		28

i

	Page
Claims Process and Bar Dates		29
Postpetition Financing		29
Strategic Plan to Sell Commodities Assets		29
The Sale of the Alpart Interests and Liquidation of AJI and KJC		30
Certain Jamaican Tax Matters		30
Agreements with Labor Regarding Pension and Retiree Medical Benefits		30
PBGC Claims		31
Intercompany Claims Settlement		32
Guaranty Subordination Dispute		33
7-3/4% SWD Revenue Bond Dispute		35
GENERAL INFORMATION CONCERNING THE PLAN		37
Substantive Consolidation		37
Executory Contracts and Unexpired Leases to be Rejected		37
Releases, Limitation of Liability, Injunctions and Preservation of Insurance		38
Release of Claims and Termination of Interests; Limitation of Liability		38
Injunctions		38
Preservation of Insurance		39
Means for Implementation of the Plan		39
Liquidating Transactions		39
Corporate Action		39
No Revesting of Assets		40
Recourse Solely to Trust Accounts		40
Release of Liens		40
Exemption from Certain Taxes		40
Distribution Trust		40
Creation of the Distribution Trust		40
Distribution Trust Assets		40
Purposes of the Distribution Trust		41
Tax Treatment		41
Trust Accounts		42
Distribution Trust Expenses Account		42
Priority Claims Trust Account		42
Unsecured Claims Trust Account		43
Disputed Claims Reserve		43
Undeliverable Cash Trust Account		44
Risks Associated with Funding of Trust Accounts		44

ii

	Page
Powers of the Distribution Trustee		45
General Powers		45
Right to Object to Claims		46
Right to Pursue Causes of Action		46
Limitation on Liability and Indemnification of Distribution Trustee		46
Removal and Resignation of the Distribution Trustee; Filling of Vacancy		47
Compensation of the Distribution Trustee		47
Books and Records; Reports and Tax Filings		47
Books and Records		47
Reports to be Filed with the Bankruptcy Court		47
Tax Returns and Payments		48
Term of the Distribution Trust		48
DISTRIBUTIONS UNDER THE PLAN		48
Method of Distributions to Holders of Allowed Claims		48
Delivery of Distributions		49
Generally		49
Special Provisions for Distributions to Holders of Public Note Claims		49
Undeliverable or Unclaimed Distributions		49
Means of Cash Payments		50
Timing and Calculation of Amounts to Be Distributed		50
Allowed Claims Other Than Unsecured Claims		50
Allowed Unsecured Claims in Subclass 3A; Certain Payments From the Public Note Distributable Consideration		50
Plan Accepted by Subclass 3A and Subclass 3B		50
Plan Rejected by Subclass 3A or Subclass 3B		51
Allowed Unsecured Claims in Subclass 3B		51
Plan Accepted by Subclass 3A and Subclass 3B		51
Plan Rejected by Subclass 3A or Subclass 3B		51
Allowed Unsecured Claims in Subclass 3C and Subclass 3D		51
7-3/4% SWD Revenue Bonds		52
Plan Accepted by Subclass 3A		52
Plan Rejected by Subclass 3A		52
No De Minimis Distributions		52
Compliance with Tax Requirements		52
Setoffs		52
Compensation and Reimbursement for Services Related to Distributions		53
Payments Limited to Trust Accounts		53

iii

	Page
Insufficient Funds		53
Disputed Claims		53
Prosecution of Objections to Claims		53
Treatment of Disputed Claims		53
VOTING AND CONFIRMATION OF THE PLAN		54
General		54
Voting Procedures and Requirements		54
Confirmation Hearing		55
Confirmation		56
Acceptance or Cramdown		56
Best Interests Test		56
Generally		56
Liquidation Analysis		57
Feasibility		57
Compliance with Applicable Provisions of the Bankruptcy Code		57
Modification or Revocation of the Plan		58
Alternatives to Confirmation and Consummation of the Plan		58
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF CONSUMMATION OF THE PLAN		58
General		58
U.S. Federal Income Tax Consequences to Holders of Claims		59
Recognition of Gain or Loss		59
In General		59
Post-Effective Date Cash Distributions		59
Bad Debt and/or Worthless Securities Deduction		60
Pending Payments		60
Payments Other than Pending Payments		60
Certain Other Tax Consequences for Holders of Claims		60
Receipt of Pre-Effective Date Interest		60
Installment Method		60
Information Reporting and Backup Withholding		60
Importance of Obtaining Professional Tax Assistance		61
APPLICABILITY OF CERTAIN FEDERAL AND STATE SECURITIES LAWS		61
General		61
Bankruptcy Code Exemptions from Registration Requirements		61

iv

	Page
Initial Offer and Sale		61
Subsequent Transfers		61
ADDITIONAL INFORMATION		62
RECOMMENDATION AND CONCLUSION		63

v

TABLE OF EXHIBITS

Exhibit I — Amended Joint Plan of Liquidation for Alpart Jamaica Inc. and Kaiser Jamaica Corporation

vi

INTRODUCTION

     The Debtors are seeking approval of the Plan, a copy of which is attached hereto as Exhibit I. This Disclosure Statement is submitted by the Debtors in connection with the solicitation of acceptances of the Plan.

     The confirmation of a plan of reorganization or liquidation, which is the vehicle for satisfying the rights of holders of claims against and interests in a debtor, is the overriding purpose of a chapter 11 case. Chapter 11 may be used to either reorganize or conduct an orderly liquidation of a debtor’s business. The Plan provides for the orderly liquidation and dissolution of the Debtors. The primary objectives of the Plan are to:

•   maximize the value of the ultimate recoveries to all creditor groups on a fair and equitable basis;

•   settle, compromise or otherwise dispose of certain Claims and other disputes on terms that the Debtors believe to be fair and reasonable under the circumstances and in the best interests of their respective Estates and creditors and Kaiser Aluminum & Chemical Corporation (“KACC”), as the sole stockholder of each Debtor; and

•   effectuate the orderly liquidation and dissolution of the Debtors.

     The Plan provides for, among other things, (a) the classification and treatment of Claims and Interests; (b) the establishment of the Distribution Trust to make distributions in accordance with the Plan; (c) the creation and administration of the Trust Accounts; and (d) the liquidation of the Debtors.

     Please refer to the chart beginning on page 14 of this Disclosure Statement for a summary of the proposed treatment of each Class of Claims and Interests.

     If the Plan is confirmed and consummated in accordance with its terms, among other things:

•   holders of Allowed Administrative Claims, Allowed Priority Tax Claims and Allowed Priority Claims in Class 1 will receive Cash from the Priority Claims Trust Account in the amount of their respective Allowed Claim without interest or penalty;

•   holders of Allowed 9-7/8% Senior Note Claims and 10-7/8% Senior Note Claims in Subclass 3A:

w   if both Subclass 3A and Subclass 3B vote to accept the Plan, will receive from the Unsecured Claims Trust Account their respective Pro Rata Share of the Public Note Distributable Consideration (i.e., (a) the Public Note Percentage of the Cash in the Unsecured Claims Trust Account plus (b) Cash in the amount of the aggregate fees payable to the 9-7/8% Senior Note Indenture Trustee, the 10-7/8% Senior Note Indenture Trustee and counsel for the Ad Hoc Group in accordance with the Plan up to an aggregate not to exceed $1.5 million) remaining after first giving effect to the following payments by the Distribution Trustee from the Public Note Distributable Consideration:

•   the payment to be made to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of the holders of the 7-3/4% SWD Revenue Bonds pursuant to Section 2.5 of the Plan (the “7-3/4% SWD Revenue Bonds Payment”);

•   the payment of up to $500,000 of the reasonable out-of-pocket expenses (including attorneys’ fees) incurred and paid by the plaintiffs in the 7-3/4% SWD Revenue Bond Dispute in connection with the Chapter 11 Cases and the chapter 11 cases of the Other Kaiser Debtors, including in connection with the 7-3/4% SWD Revenue Bond Dispute and that certain civil action currently pending before the United States District Court for the Eastern District of Louisiana styled Paul J. Guillot, et al. v. Credit Suisse First Boston, LLC, and numbered 03-0797 (the “7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments”);

•   the payment of the amount of the aggregate fees payable to the 9-7/8% Senior Note Indenture Trustee, the 10-7/8% Senior Note Indenture Trustee and the

	counsel for the Ad Hoc Group in accordance with the Plan, whether or not in excess of $1.5 million (the “Senior Notes Fee Payments”); and
•	the payment of $8.0 million to be made to the Senior Subordinated Note Indenture Trustee for the benefit of the holders of Senior Subordinated Note Claims; or

w   if either Subclass 3A or Subclass 3B fails to accept the Plan, will receive that portion of the Public Note Distributable Consideration to which the Bankruptcy Court determines they are entitled, provided the distributions ultimately made to a holder of an Allowed Senior Note Claim will be reduced by such holder’s proportional share of the Senior Notes Fee Payments and, if the Bankruptcy Court determines that holders of Allowed Senior Subordinated Note Claims are not entitled to any portion of the Subclass 3A Distributable Consideration, the 7-3/4% SWD Revenue Bond Payment (or a reservation in lieu thereof), if any, and any 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments;

•   holders of Allowed Senior Subordinated Note Claims in Subclass 3B:

w

if both Subclass 3A and Subclass 3B vote to accept the Plan, will receive their respective Pro Rata Share of $8.0 million to be paid to the Senior Subordinated Note Indenture Trustee, provided that any and all fees or expenses payable to the Senior Subordinated Note Indenture Trustee pursuant to the Senior Subordinated Note Indenture will, in all events, be payable solely from such $8.0 million; or

w

if either Subclass 3A or Subclass 3B fails to accept the Plan, will receive that portion, if any, of the Public Note Distributable Consideration to which the Bankruptcy Court determines they are entitled, provided any distributions ultimately made to a holder of an Allowed Senior Subordinated Note Claim may be reduced by such holder’s proportional share of any and all fees and expenses payable to the Senior Subordinated Note Trustee pursuant to the Senior Subordinated Note Indenture, which will, subject to such Trustee’s right to seek payment by the Debtors of such fees and expenses pursuant to section 503(b)(5) of the Bankruptcy Code, be payable solely from such distributions;

•   Pension Benefit Guaranty Corporation (the “PBGC”), as the holder of the PBGC Claims in Subclass 3C, will receive the PBGC Percentage of the Cash in the Unsecured Claims Trust Account; and

•   holders of Allowed Other Unsecured Claim in Subclass 3D will receive their respective Pro Rata Share of the Other Unsecured Claims Percentage of the Cash in the Unsecured Claims Trust Account.

As the foregoing indicates, in general, all holders of Claims will have recourse, if any, only to the Cash in the applicable Trust Accounts. The Debtors will cease to exist as legal entities following consummation of the Plan. See “Overview of the Plan — Summary of Classes and Treatment of Claims and Interests.”

     SUBJECT TO THE PROVISIONS OF SECTION 2.10 OF THE PLAN, AS OF THE EFFECTIVE DATE, IN CONSIDERATION FOR THE OBLIGATIONS OF THE DEBTORS AND THE DISTRIBUTION TRUSTEE UNDER THE PLAN AND THE CASH TO BE DISTRIBUTED IN CONNECTION WITH THE PLAN, EACH HOLDER OF A CLAIM THAT VOTES IN FAVOR OF THE PLAN WILL BE DEEMED TO FOREVER RELEASE AND WAIVE ALL CLAIMS, OBLIGATIONS, SUITS, JUDGMENTS, DAMAGES, DEMANDS, DEBTS, RIGHTS, CAUSES OF ACTION AND LIABILITIES (OTHER THAN THE RIGHT TO ENFORCE THE DEBTORS’ OR THE DISTRIBUTION TRUSTEE’S OBLIGATIONS UNDER THE PLAN AND THE CONTRACTS, INSTRUMENTS, RELEASES AND OTHER AGREEMENTS AND DOCUMENTS DELIVERED THEREUNDER), WHETHER LIQUIDATED OR UNLIQUIDATED, FIXED OR CONTINGENT, MATURED OR UNMATURED, KNOWN OR UNKNOWN, FORESEEN OR UNFORESEEN, THEN EXISTING OR THEREAFTER ARISING IN LAW, EQUITY OR OTHERWISE, THAT ARE BASED IN WHOLE OR IN PART ON ANY ACT, OMISSION, TRANSACTION OR OTHER OCCURRENCE TAKING PLACE ON OR PRIOR TO THE EFFECTIVE DATE IN ANY WAY

2

RELATING TO A DEBTOR, THE CHAPTER 11 CASES OR THE PLAN THAT SUCH ENTITY HAS, HAD OR MAY HAVE AGAINST THE CREDITORS’ COMMITTEE, ITS MEMBERS, ANY INDENTURE TRUSTEE, EITHER DEBTOR AND ANY OF THEIR RESPECTIVE PRESENT OR FORMER DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ADVISORS, ATTORNEYS, ACCOUNTANTS, UNDERWRITERS, INVESTMENT BANKERS OR OTHER REPRESENTATIVES, ACTING IN SUCH CAPACITY, EXCEPT FOR THOSE BASED ON (A) ACTS OR OMISSIONS OF ANY SUCH PERSON CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OR (B) CONTRACTUAL OBLIGATIONS OF, OR LOANS OWED BY, ANY SUCH PERSON TO A DEBTOR. SEE “GENERAL INFORMATION CONCERNING THE PLAN — RELEASES, LIMITATION OF LIABILITY, AND INJUNCTIONS — RELEASE OF CLAIMS AND TERMINATION OF INTERESTS; LIMITATION OF LIABILITY.”

     EXCEPT AS OTHERWISE PROVIDED IN THE PLAN OR THE CONFIRMATION ORDER, AS OF THE EFFECTIVE DATE, ALL ENTITIES THAT HAVE HELD, CURRENTLY HOLD OR MAY HOLD A CLAIM OR OTHER DEBT OR LIABILITY OF THE DEBTORS, OR AN INTEREST OR OTHER RIGHT OF AN EQUITY SECURITY HOLDER WITH RESPECT TO THE DEBTORS, THAT IS RELEASED, WAIVED, SETTLED OR DEEMED SATISFIED PURSUANT TO THE PLAN WILL BE PERMANENTLY ENJOINED FROM TAKING ANY OF THE FOLLOWING ACTIONS ON ACCOUNT OF ANY SUCH CLAIMS, DEBTS, LIABILITIES, INTERESTS OR RIGHTS: (A) COMMENCING OR CONTINUING IN ANY MANNER ANY ACTION OR OTHER PROCEEDING AGAINST THE DEBTORS, THE DISTRIBUTION TRUST OR THE DISTRIBUTION TRUSTEE OR THE PROPERTY OF ANY OF THEM OTHER THAN TO ENFORCE ANY RIGHT PURSUANT TO THE PLAN TO A DISTRIBUTION FROM THE TRUST ACCOUNTS; (B) ENFORCING, ATTACHING, COLLECTING OR RECOVERING IN ANY MANNER ANY JUDGMENT, AWARD, DECREE OR ORDER AGAINST THE DEBTORS, THE DISTRIBUTION TRUST OR THE DISTRIBUTION TRUSTEE, OTHER THAN AS PERMITTED PURSUANT TO (A) ABOVE; (C) CREATING, PERFECTING OR ENFORCING ANY LIEN OR ENCUMBRANCE AGAINST THE DEBTORS, THE DISTRIBUTION TRUST, THE PROPERTY OF ANY OF THEM OR THE TRUST ACCOUNTS; (D) ASSERTING A SETOFF, RIGHT OF SUBROGATION OR RECOUPMENT OF ANY KIND AGAINST ANY DEBT, LIABILITY OR OBLIGATION DUE TO THE DISTRIBUTION TRUST; AND (E) COMMENCING OR CONTINUING ANY ACTION, IN ANY MANNER, IN ANY PLACE THAT DOES NOT COMPLY WITH OR IS INCONSISTENT WITH THE PROVISIONS OF THE PLAN. SEE “GENERAL INFORMATION CONCERNING THE PLAN — LEGAL EFFECTS OF THE PLAN — RELEASES, LIMITATION OF LIABILITY, AND INJUNCTIONS — INJUNCTIONS.”

     [NOTE THAT THIS PARAGRAPH IS TO BE INCLUDED AFTER THIS DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE BANKRUPTCY COURT: BY AN ORDER OF THE BANKRUPTCY COURT DATED [___], 2005, THIS DISCLOSURE STATEMENT HAS BEEN APPROVED AS CONTAINING “ADEQUATE INFORMATION” FOR CREDITORS OF THE DEBTORS IN ACCORDANCE WITH SECTION 1125 OF THE BANKRUPTCY CODE. THE BANKRUPTCY CODE DEFINES “ADEQUATE INFORMATION” AS “INFORMATION OF A KIND, AND IN SUFFICIENT DETAIL, AS FAR AS IS REASONABLY PRACTICABLE IN LIGHT OF THE NATURE AND THE HISTORY OF THE DEBTOR AND THE CONDITION OF THE DEBTOR’S BOOKS AND RECORDS, THAT WOULD ENABLE A HYPOTHETICAL REASONABLE INVESTOR TYPICAL OF HOLDERS OF CLAIMS OR INTERESTS OF THE RELEVANT CLASS TO MAKE AN INFORMED JUDGMENT ABOUT THE PLAN . .. . .” 11 U.S.C. § 1125(A)(1).]

     THE DEBTORS’ BOARDS OF DIRECTORS BELIEVE THAT THE PLAN IS IN THE BEST INTERESTS OF CREDITORS UNDER THE CIRCUMSTANCES. ALL CREDITORS ENTITLED TO VOTE ARE URGED TO VOTE IN FAVOR OF THE PLAN BY NO LATER THAN 5:00 P.M., EASTERN TIME, ON APRIL 5, 2005 OR SUCH OTHER TIME OR DATE IDENTIFIED ON YOUR BALLOT.

     The requirements for confirmation of the Plan under the Bankruptcy Code, including the vote of creditors to accept the Plan and certain of the statutory findings that must be made by the Bankruptcy Court, are described in “Voting and Confirmation of the Plan.” Confirmation of the Plan and the occurrence of the Effective Date are also subject to a number of significant conditions, which are set forth in the Plan and summarized in “Answers To

3

Certain Questions About The Plan And Disclosure Statement — What must happen before the Plan can be consummated?” There is no assurance that these conditions will be satisfied or waived.

ANSWERS TO CERTAIN QUESTIONS ABOUT THE PLAN AND DISCLOSURE STATEMENT

     The information presented in the answers to the questions set forth below is qualified in its entirety by reference to the full text of this Disclosure Statement, including the Plan attached hereto as Exhibit I. All creditors entitled to vote on the Plan are encouraged to read and carefully consider this entire Disclosure Statement, including the Plan attached hereto as Exhibit I, prior to submitting a Ballot or Ballots to accept or reject the Plan.

What is this document and why am I receiving it?

     On January 14, 2003, AJI and KJC Filed petitions for relief under chapter 11 of the Bankruptcy Code. The reasons the Debtors Filed for such protection are described under “Certain Events Preceding the Debtors’ Chapter 11 Filings.” In connection with their proposed liquidation pursuant to chapter 11, the Debtors have prepared the Joint Plan of Liquidation attached as Exhibit I to this Disclosure Statement (i.e., the Plan), which sets forth in detail the proposed treatment of the Claims of the Debtors’ creditors and the Interests of KACC, as the sole stockholder of the Debtors. This Disclosure Statement describes the terms of, and certain other material information relating to, the Plan.

     This Disclosure Statement is being delivered to you in connection with the Debtors’ solicitation of votes with respect to the Plan because either (a) you are the holder of, or have otherwise asserted, a Claim or Claims against either or both of the Debtors or (b) you are the holder of a 7-3/4% SWD Revenue Bond. This Disclosure Statement is intended to provide you with information sufficient to make an informed to decision as to whether to vote to accept or reject the Plan (to the extent you are eligible to do so).

Am I eligible to vote to accept or reject the Plan?

     You are entitled to vote to accept or reject the Plan only if you hold an Allowed Unsecured Claim (or an Unsecured Claim which has been temporarily allowed for voting purposes) against one or both Debtors. In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims and Priority Tax Claims have not been classified and thus are excluded from the Classes, and if you are a holder of an Administrative Claim or Priority Tax Claim, you are not eligible to vote with respect to the Plan. If you hold a Priority Claim or a Secured Claim against either Debtor, because you are receiving Cash or property equal in value to the allowed amount of such Claim, you are deemed to have accepted the Plan and may not vote with respect to it. While the Plan includes a proposed settlement of certain claims asserted by holders of 7-3/4% SWD Revenue Bonds (see “Operations During the Chapter 11 Cases — 7-3/4% SWD Revenue Bond Dispute), such holders do not have Claims against the Debtors and, accordingly, are not entitled to vote on the Plan, although creditors or claimants affected by such settlement may file an objection to it with the Bankruptcy Court on or prior to April 5, 2005. See “Voting and Confirmation of the Plan — Voting Procedures and Requirements.”

Why should I vote to accept the Plan?

     The Debtors are, as a result of the sale of their interests in Alumina Partners of Jamaica, a Delaware general partnership (“Alpart”), no longer operating entities and possess no assets other than Cash. See “Operations During the Chapter 11 Cases — The Sale of the Alpart Interests and Liquidation of AJI and KJC.” As such, the only alternatives to confirmation and consummation of the Plan are conversion of the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code and the confirmation and consummation of an alternative plan of liquidation under chapter 11 of the Bankruptcy Code. The Debtors believe that the confirmation and consummation of the Plan is in the best interests of the Debtors’ stakeholders and is preferable to either alternative.

     Chapter 7 Liquidation

     The Debtors believe that the Plan provides for the liquidation of the Debtors in a manner significantly more efficient than would occur in the event the Chapter 11 Cases were converted to cases under chapter 7 of the

4

Bankruptcy Code. The Debtors’ Estates have already been substantially liquidated and converted to Cash proceeds, subject only to receipt of the proceeds, if any, received from the successful prosecution, settlement or collection of Recovery Actions (the “Recovery Action Proceeds”). The Debtors are not aware of the existence of any claim against a third party that would constitute a Recovery Action. Further, the Debtors have been informed that the Creditors’ Committee conducted an analysis of potential preference actions and determined that there were no viable preference actions concerning payments made by the Debtors. The Debtors believe that conversion to chapter 7 of the Bankruptcy Code would result in additional costs relating to the appointment of a chapter 7 trustee, likely delays in distributions to all creditors who would be entitled to receive a distribution under the Plan (thus reducing the present value of such distributions) and diminished recoveries for holders of Allowed Unsecured Claims. See “Voting and Confirmation of the Plan — Confirmation — Best Interests Test.”

     Alternative Chapter 11 Liquidation

     The Plan has been negotiated by the Debtors and representatives of certain of the Debtors’ most significant creditors, including the Creditors’ Committee (a committee appointed by the Bankruptcy Court to represent the interests of the Debtors’ unsecured creditors), [which has independently concluded that the Plan is in the best interests of creditors]. Therefore, the Debtors believe that negotiating an alternative plan of liquidation under chapter 11 of the Bankruptcy Code is unlikely to alter significantly the relative treatment of Claims. The Debtors believe that negotiating such an alternative plan would result in additional professional costs in connection with such negotiations, likely delays in distributions to all creditors who would be entitled to receive a distribution under the Plan (thus reducing the present value of such distributions) and potentially diminished recoveries for holders of Allowed Unsecured Claims.

How do I vote to accept or reject the Plan?

     If you are the holder of an Allowed Unsecured Claim (other than a holder of a Senior Note Claim or Senior Subordinated Note Claim held through a nominee) against one or both of the Debtors and are, therefore, entitled to vote on the Plan, complete, execute and return your Ballot or Ballots in accordance with the instructions to Logan & Company, Inc., 546 Valley Road, Upper Montclair, New Jersey 07043 (unless another address is set forth on the preaddressed enveloped provided to you) on or prior to 5:00 P.M. Eastern Time, on April 5, 2005 (unless another time or date is identified on your Ballot). If your vote is not received by that time and date, it will not be counted. If you are the holder of a Senior Note Claim or Senior Subordinated Note Claim held in the name of a broker, dealer, commercial bank, trust company or other nominee, you must complete and deliver to such nominee the Ballot or Ballots provided to such holder in order to vote on the Plan; we urge you to deliver such Ballot or Ballots to your nominee holder or holders no later than the date identified on such Ballot or Ballots in order to ensure that your vote will be counted. If you are entitled to vote and you did not receive a Ballot, received a damaged Ballot or lost your Ballot, please call the Debtors’ voting agent, Logan & Company, at (973) 509-3190. See “Voting and Confirmation of the Plan — Voting Procedures and Requirements.”

What if I’m entitled to vote to accept or reject the Plan and don’t?

     In general, within any particular Class of Claims, only those holders who actually vote to accept or reject the Plan will affect whether the Plan is accepted by the requisite holders of Claims in such Class. In order for the Plan to be accepted by each Subclass of Class 3 (Unsecured Claims), the holders representing at least two-thirds in dollar amount and a majority in number of Allowed Claims in each such Subclass held by holders of such Claims who actually vote to accept or reject the Plan must vote to accept the Plan. Thus, if you hold an Unsecured Claim, your failure to vote in respect of such Claim will count as neither a vote for acceptance nor a vote for rejection of the Plan. See “Voting and Confirmation of the Plan — Confirmation — Acceptance or Cramdown.”

What happens if the Plan is not accepted by each Class entitled to vote on the Plan?

     If the holders of each Class of Claims entitled to vote on the Plan (i.e., Subclass 3A, Subclass 3B, Subclass 3C and Subclass 3D) reject the Plan, the Plan will not be confirmed or consummated in its present form. However, as long as the requisite holders of Claims in at least one such Subclass vote to accept the Plan, the Debtors may seek confirmation pursuant to the “cramdown” provisions of the Bankruptcy Code (which will require a determination by the Bankruptcy Court that that the Plan is “fair and equitable” and “does not discriminate unfairly”

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as to each nonaccepting Subclass). The Debtors believe that the Plan satisfies the “cramdown” provisions of the Bankruptcy Code and, in any case, have reserved the right to modify the Plan to the extent that confirmation thereunder requires modification. See “Voting and Confirmation of the Plan — Confirmation — Acceptance or Cramdown.”

What will I actually receive in respect of my Claim if the Plan is confirmed and goes effective?

     If you are the holder of an Allowed Claim against either Debtor, what you will actually receive, if anything, in respect of such Claim will depend on the classification of that Claim. For detailed information about the classification and treatment of creditors under the Plan, see “Overview of the Plan — Summary of Classes and Treatment of Claims and Interests.”

     Unlike the holders of Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Priority Claims or Allowed Secured Claims against the Debtors, holders of Allowed Claims in Subclass 3A, Subclass 3B, Subclass 3C and Subclass 3D will not receive Cash or property in an amount equal to 100% of the amount of their Claims.

     Holders of Allowed Senior Note Claims in Subclass 3A

     If the Plan is accepted by both Subclass 3A and Subclass 3B

     If both Subclass 3A and Subclass 3B vote to accept the Plan, a holder of an Allowed Senior Note Claim will be entitled to a distribution of its Pro Rata Share of the Public Note Distributable Consideration remaining after first giving effect to certain payments by the Distribution Trustee from the Public Note Distributable Consideration as discussed below. For purposes of the Plan, (a) the term “Public Note Distributable Consideration” means (i) the Public Note Percentage of the Cash in the Unsecured Claims Trust Account and (ii) Cash in the amount of the Senior Notes Fee Payments, up to an aggregate amount not to exceed $1.5 million (with such amount to be deducted from the Distribution Trust Assets before the funding of the Unsecured Claims Trust Account); (b) the term “Public Note Percentage” means (i) 68% less (ii) 68% of the Other Unsecured Claims Percentage; (c) the term “Other Unsecured Claims Percentage” means the percentage equal to the ratio of (i) the aggregate amount of all Allowed Other Unsecured Claims to (ii) the sum of (A) the aggregate amount of all Allowed Other Unsecured Claims and (B) $1,369,073,000; and (d) the term “Pro Rata Share” means, when used with reference to a distribution to a holder of an Allowed Claim in a Subclass of Class 3, that share of the Cash to be distributed on account of all Allowed Claims in such Subclass so that the ratio of (i)(A) the amount of Cash to be distributed on account of the particular Allowed Claim to (B) the amount of such Allowed Claim, is the same as the ratio of (ii)(A) the aggregate amount of Cash to be distributed on account of all Allowed Claims in such Subclass to (B) the aggregate amount of all Allowed Claims in such Subclass.

     The Unsecured Claims Trust Account will be funded with the Debtors’ Cash remaining after (a) the payment of reasonable fees, costs and expenses incurred by the Distribution Trustee in connection with the performance of its duties in accordance with the Plan and the Distribution Trust Agreement; (b) the distribution of Cash in accordance with the Plan to holders of Claims having a higher priority than Claims in Subclass 3A, Subclass 3B, Subclass 3C or Subclass 3D; (c) an allowance for the allocation to, and payment from, the Public Note Distributable Consideration of the Senior Notes Fee Payments, up to an aggregate amount not to exceed $1.5 million; and (d) any payment required to be made by the Debtors to KACC in accordance with the Intercompany Claim Settlement (“Intercompany Settlement Payments”). After the Public Note Distributable Consideration is calculated as described above, to determine the Cash to be distributed to holders of Senior Note Claims, the following payments must first be deducted from the Public Note Distributable Consideration:

•   the 7-3/4% SWD Revenue Bonds Payment;

•   the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments;

•   the Senior Notes Fee Payments, whether or not in excess of $1.5 million; and

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•   the payment of the $8.0 million to be made to the Senior Subordinated Note Indenture Trustee for the benefit of the holders of Senior Subordinated Note Claims.

     Accordingly, if the Plan is accepted by both Subclass 3A and Subclass 3B, the recovery by holders of Allowed Senior Note Claims will depend upon a number of factors, including:

•   the amount of Cash ultimately available to the Estates of the Debtors; · the amount of Distribution Trust Expenses;

•   the amount of Distribution Trust Expenses;

•   the amount of Allowed Secured Claims, Allowed Administrative Claims, Allowed Priority Claims and Allowed Priority Tax Claims;

•   the amount of the 7-3/4% SWD Revenue Bonds Payment;

•   the amount of the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments;

•   the amount of the Senior Notes Fee Payments;

•   the amount of the Intercompany Settlement Payments, if any; and

•   the aggregate amount of Allowed Other Unsecured Claims, if any.

See “Overview of the Plan — Sources and Uses of Cash” for the Debtors’ current estimates of Cash available for distribution to holders of Allowed Senior Note Claims.

     Pursuant to the KAAC/KFC Plan, if holders of the Senior Note Claims and the Senior Subordinated Note Claims vote to accept the KAAC/KFC Plan, then an additional $8.0 million will be paid to the Senior Subordinated Note Indenture Trustee for the benefit of holders of Senior Subordinated Note Claims, with such amount to be paid from consideration that would otherwise be distributed to holders of Allowed Senior Note Claims under the KAAC/KFC Plan.

     If the Plan is rejected by either Subclass 3A or Subclass 3B

     If either Subclass 3A or Subclass 3B fails to accept the Plan, the holders of 9-7/8% Senior Note Claims and 10-7/8% Senior Note Claims in Subclass 3A will receive that portion of the Public Note Distributable Consideration to which the Bankruptcy Court determines they are entitled in respect of such Claims. The distributions ultimately made to a holder of an Allowed Senior Note Claim will be reduced by such holder’s proportional share of:

•   the Senior Notes Fee Payments;

•   any 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments; and

•   if the Bankruptcy Court determines that holders of Allowed Senior Subordinated Note Claims are not entitled to any portion of the Public Note Distributable Consideration, the 7-3/4% SWD Revenue Bond Payment (or reservation in lieu thereof), if any. See “- What will I receive in respect of my 7-3/4% SWD Revenue Bond if the Plan is confirmed and goes effective and when will I receive it?”

In such event, the recovery by holders of Allowed Senior Notes Claims will depend on the determination of the Bankruptcy Court with respect to the relative entitlement of the holders of Senior Note Claims and Senior Subordinated Note Claims to the Public Note Distributable Consideration, as well as the factors listed above. See “Overview of the Plan — Sources and Uses of Cash” for the Debtors’ current estimates of Cash available for distribution to holders of Allowed Senior Note Claims and Allowed Senior Subordinated Note Claims.

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     Holders of Allowed Senior Subordinated Note Claims in Subclass 3B

     If the Plan is accepted by both Subclass 3A and Subclass 3B

     If both Subclass 3A and Subclass 3B vote to accept the Plan, a holder of an Allowed Senior Subordinated Note Claim will receive its Pro Rata Share of $8.0 million (less any fees or expenses payable to the Senior Subordinated Note Trustee pursuant to the Senior Subordinated Note Indenture).

     Pursuant to the KAAC/KFC Plan, if holders of the Senior Note Claims and the Senior Subordinated Note Claims vote to accept the KAAC/KFC Plan, then an additional $8.0 million will be paid to the Senior Subordinated Note Indenture Trustee for the benefit of holders of Senior Subordinated Note Claims, with such amount to be paid from consideration that would otherwise be distributed to holders of Allowed Senior Note Claims under the KAAC/KFC Plan.

     If the Plan is rejected by either Subclass 3A or Subclass 3B

     If either Subclass 3A or Subclass 3B fails to accept the Plan, the holders of Senior Subordinated Note Claims in Subclass 3B will receive that portion, if any, of the Public Note Distributable Consideration to which the Bankruptcy Court determines they are entitled in respect of such Claims, provided any distributions ultimately made to a holder of an Allowed Senior Subordinated Note Claim may be reduced by such holder’s proportional share of any and all fees and expenses payable to the Senior Subordinated Note Trustee pursuant to the Senior Subordinated Note Indenture, which will, subject to such Trustee’s right to seek payment by the Debtors of such fees and expenses pursuant to section 503(b)(5) of the Bankruptcy Code, be payable solely from such distributions. Accordingly, as with the recoveries by holders of Allowed Senior Notes Claims in the scenario in which either the Subclass 3A or Subclass 3B fails to accept the Plan, the recovery by the holders of Allowed Senior Subordinated Note Claims in this situation will depend on a number of factors, including:

•   the amount of Cash ultimately available to the Estates of the Debtors;

•   the amount of Distribution Trust Expenses;

•   the amount of Allowed Secured Claims, Allowed Administrative Claims, Allowed Priority Claims and Allowed Priority Tax Claims;

•   the amount of the Intercompany Settlement Payments, if any;

•   the aggregate amount of Allowed Other Unsecured Claims, if any; and

•   the determination of the Bankruptcy Court with respect to the relative entitlement of the holders of 9-7/8% Senior Note Claims, 10-7/8% Senior Note Claims and Senior Subordinated Note Claims to the Public Note Distributable Consideration.

See “Overview of the Plan — Sources and Uses of Cash” for the Debtors’ current estimates of Cash available for distribution to holders of Allowed Senior Note Claims and Allowed Senior Subordinated Note Claims.

     The PBGC, as the holder of the PBGC Claims in Subclass 3C

     The PBGC, as holder of the PBGC Claims in Subclass 3C, will receive the PBGC Percentage of the Cash in the Unsecured Claims Trust Account. For purposes of the Plan, the term “PBGC Percentage” means (a) 32% less (b) 32% of the Other Unsecured Claims Percentage.

     Accordingly, as with the recoveries by holders of Allowed Senior Note Claims discussed above, the recovery by the PBGC, as the holder of the PBGC Claims, will depend upon a number of factors, including:

•   the amount of Cash ultimately available to the Estates of the Debtors;

•   the amount of Distribution Trust Expenses;

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•   the amount of Allowed Secured Claims, Allowed Administrative Claims, Allowed Priority Claims and Allowed Priority Tax Claims;

•   the amount of the Intercompany Settlement Payments, if any; and

•   the aggregate amount of Allowed Other Unsecured Claims, if any.

See “Overview of the Plan — Sources and Uses of Cash” for the Debtors’ current estimates of Cash available for distribution to the PBGC in respect of the PBGC Claims in Subclass 3C.

     Holders of Other Unsecured Claims in Subclass 3D

     A holder of an Allowed Other Unsecured Claim will receive its Pro Rata Share of the Other Unsecured Claims Percentage of the Cash in the Unsecured Claims Trust Account.

     Accordingly, as with the recoveries by holders of Senior Note Claims and by the PBGC as the holder of the PBGC Claims discussed above, the recoveries by holder of Other Unsecured Claims will depend upon a number of factors, including:

•   the amount of Cash ultimately available to the Estates of the Debtors;

•   the amount of Distribution Trust Expenses;

•   the amount of Allowed Secured Claims, Allowed Administrative Claims, Allowed Priority Claims and Allowed Priority Tax Claims;

•   the amount of the Intercompany Settlement Payments, if any.

Although several Other Unsecured Claims have been asserted, the Debtors do not believe that any of those Claims constitute allowable Claims; however, no assurance can be given that all such Claims will be disallowed in their entirety. See “Overview of the Plan — Sources and Uses of Cash.”

What will I receive if my Claim is Disputed?

     No distributions will be made in respect of any Claim that is Disputed until that Claim becomes an Allowed Claim, if ever. See “Distributions Under the Plan — Treatment of Disputed Claims.”

Is there a particular record date for determining who will be entitled to receive distributions under the Plan in respect of an Allowed Claim?

     Under the Plan, distributions in respect of an Allowed Claim will be made only to the holder of that Claim as of the close of business on the Confirmation Date (the “Distribution Record Date”). Neither the Debtors nor the Distribution Trustee will recognize any purported transfer of a Claim following the Distribution Record Date.

When will I receive what I am entitled to receive in respect of my Claim if the Plan is confirmed and goes effective?

     Holders of Allowed Claims Other Than Unsecured Claims

     If you are the holder of an Administrative Claim, a Priority Tax Claim, a Priority Claim or a Secured Claim that is allowed as of the Effective Date, you will receive the distribution to which you are entitled under the Plan on account of such Claim on or promptly after the Effective Date. If you are the holder of a Secured Claim, Administrative Claim, a Priority Tax Claim, a Priority Claim or a Secured Claim that is a Disputed Claim as of the Effective Date, to the extent such Claim becomes an Allowed Claim after the Effective Date, you should receive the distribution to which you are entitled under the Plan on or promptly after the Quarterly Distribution Date next following the date on which such Claim is allowed.

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     Holders of Allowed Unsecured Claims in Subclass 3A

     If you are the holder of a Senior Note Claim and the Plan is accepted by both Subclass 3A and Subclass 3B, you will receive an initial distribution on account of such Claim on or promptly after the Effective Date. The amount of initial distributions to be made to holders of Senior Note Claims that are allowed as of the Effective Date will be calculated as if each Disputed Other Unsecured Claim were an Allowed Other Unsecured Claim in its Face Amount as of the Effective Date. In addition, on or promptly after each Quarterly Distribution Date, you may receive an additional distribution on account of such Claim in an amount equal to: (a) the amount of Cash that you would have been entitled to receive pursuant to the Plan if such Claim and each other Unsecured Claims allowed prior to such Quarterly Distribution Date had been allowed as of the Effective Date minus (b) the aggregate amount of Cash previously distributed to you on account of such Claim. See “Distributions Under the Plan — Timing and Calculation of Amounts to Be Distributed.” All distributions to holders of Senior Note Claims under the Plan will be made by the Distribution Trustee to the applicable Indenture Trustee, which will thereafter forward such distributions to such holders in due course.

     If you are the holder of an Allowed Senior Note Claim and the Plan is not accepted by either Subclass 3A or Subclass 3B, the timing of the distribution to which you will be entitled in respect of such Claim will depend upon when the Bankruptcy Court makes the determination contemplated by the Plan to be made in such circumstance.

     Holders of Allowed Unsecured Claims in Subclass 3B

     If you are the holder of an Allowed Senior Subordinated Note Claim and the Plan is accepted by both Subclass 3A and Subclass 3B, you will receive the distribution to which you are entitled under the Plan on account of such Claim on or promptly after the Effective Date as described in this paragraph. On the Effective Date, the Senior Subordinated Note Indenture Trustee will receive a Cash payment in the amount of $8.0 million for the benefit of the holders of the Allowed Senior Subordinated Note Claims. The Senior Subordinated Note Indenture Trustee is entitled to deduct its fees and expenses from such payment prior to making distributions to holders of Senior Subordinated Note Claims. In due course following the Effective Date, the Senior Subordinated Note Indenture Trustee will distribute to each holder of an Allowed Senior Subordinated Note Claim its Pro Rata Share of such payment as reduced by any fees and expenses so deducted. See “Distributions Under the Plan — Timing and Calculation of Amounts to Be Distributed.”

     If you are the holder of an Allowed Senior Subordinated Note Claim and the Plan is not accepted by either Subclass 3A or Subclass 3B, the timing of the distribution, if any, to which you may be entitled in respect of such Claim will depend upon when the Bankruptcy Court makes the determination contemplated by the Plan to be made in such circumstance.

     Holders of Allowed Unsecured Claims in Subclass 3C and Subclass 3D

     If you are the holder of the PBGC Claims or an Other Unsecured Claim that is allowed as of the Effective Date, you will receive an initial distribution on account of such Claim on or promptly after the Effective Date. The amount of initial distributions to be made to holders of the PBGC Claims and Other Unsecured Claims that are allowed as of the Effective Date will be calculated as if each Disputed Other Unsecured Claim were an Allowed Other Unsecured Claim in its Face Amount as of the Effective Date. If you are the holder of an Other Unsecured Claim that is a Disputed Claim as of the Effective Date, to the extent such Claim becomes an Allowed Claim after the Effective Date, you should receive an initial distribution on account of such Claim on or promptly after the Quarterly Distribution Date next following the date on which such Claim was allowed. In addition, on or promptly after each Quarterly Distribution Date, if you are the holder of the PBGC Claims or an Other Unsecured Claim and have already received your initial distribution in respect of such Claim, you may receive an additional distribution on account of such Claim in an amount equal to: (a) the amount of Cash that you would have been entitled to receive pursuant to the Plan if such Claim and each other Unsecured Claims allowed prior to such Quarterly Distribution Date had been allowed as of the Effective Date minus (b) the aggregate amount of Cash previously distributed to you on account of such Claim. See “Distributions Under the Plan — Timing and Calculation of Amounts to Be Distributed.”

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What will I receive in respect of my 7-3/4% SWD Revenue Bond if the Plan is confirmed and goes effective and when will I receive it?

     If Subclass 3A votes to accept the Plan and, unless the holders of Senior Note Claims otherwise agree pursuant to a settlement, all holders of Allowed Senior Note Claims are entitled under the Plan to identical treatment in respect of contractual subordination claims under the Senior Subordinated Note Indenture, on the Effective Date an amount equal to the Settlement Percentage of the Cash in the Unsecured Claims Trust Account that would otherwise have been distributed in respect of the Senior Subordinated Note Claims which, after giving effect to the contractual subordination provisions of the Senior Subordinated Note Indenture and pursuant to Sections 2.4(c)(i) and 2.4(c)(ii) of the Plan (but prior to giving effect to any 7–3/4% SWD Revenue Bond Payment), is to be distributed to holders of Senior Note Claims will be paid to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of the holders of the 7-3/4% SWD Revenue Bonds pursuant to Section 2.5 of the Plan (i.e., the 7–3/4% SWD Revenue Bond Payment). For purposes of the Plan, the term “Settlement Percentage” means the percentage equaling the ratio of (a) $4,000,000 to (b) 51.42% of the Public Note Percentage of the Cash in the Unsecured Claims Trust Account. Notwithstanding the foregoing, in no event will the amount so paid, when aggregated with any amount payable under any comparable provision of the KAAC/KFC Plan, exceed $8.0 million. If the Debtors do not File a separate motion, the Plan will serve as a motion pursuant to Bankruptcy Rule 9019 seeking entry of an order approving the settlement described above. Unless an objection to such settlement is made in writing by any creditor or claimant affected thereby, Filed with the Bankruptcy Court and served on the parties identified in Section 12.4 of the Plan on or before April 5, 2005, such order (which will be the Confirmation Order) may be entered by the Bankruptcy Court. In the event any such objections are timely Filed, a hearing with respect thereto will occur at the Confirmation Hearing.

     If Subclass 3A fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the rights, if any, of the holders of 7-3/4% SWD Revenue Bonds to payments from the Public Note Distributable Consideration will be as determined by an order of the Bankruptcy Court (which may be the Confirmation Order) in connection with its determination of the relative entitlement of the holders of Senior Note Claims and Senior Subordinated Note Claims to the Public Note Distributable Consideration; provided that if the determination with respect to the rights of the holders of 7-3/4% SWD Revenue Bonds to such payment has not been made by the Bankruptcy Court prior to the Effective Date, then, in order to ensure the funding of such payment, on the Effective Date the Distribution Trustee will reserve from the Public Note Distributable Consideration any amount that may be ordered by the Bankruptcy Court to be so reserved pending such determination.

     Any payment described above (i.e., the 7-3/4% SWD Revenue Bond Payment) would be made to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of the holders of 7-3/4% SWD Revenue Bonds. The 7-3/4% SWD Revenue Bond Indenture Trustee is entitled to deduct its fees and expenses from any such payment prior to making distributions to holders of 7-3/4% SWD Revenue Bonds. However, if Subclass 3A accepts the Plan and, unless the holders of Senior Note Claims otherwise agree pursuant to a settlement, all holders of Allowed Senior Note Claims are entitled under the Plan to identical treatment in respect of contractual subordination claims under the Senior Subordinated Note Indenture, the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments will made out of the Public Note Distributable Consideration otherwise payable to holders of Allowed Senior Note Claims, up to a maximum of $500,000 (including any comparable payment made under the KAAC/KFC Plan). Fees and expenses in excess of such amount may be deducted from amounts otherwise payable to or for the benefit of the holders of 7-3/4% SWD Revenue Bonds. Nothing in the Plan will prejudice the rights of the plaintiffs in the 7-3/4% SWD Revenue Bond Dispute to seek recoveries (a) from amounts otherwise to be paid to or for the benefit of holders of 7–3/4% SWD Revenue Bonds under the Plan or the KAAC/KFC Plan or (b) from, or in respect of amounts otherwise to be paid to or for the benefit of holders of 7–3/4% SWD Revenue Bonds by, any other Kaiser Debtor other than KAAC or KFC. In due course following its receipt of any such payment, the 7-3/4% SWD Revenue Bond Indenture Trustee will distribute to each holder of 7-3/4% SWD Revenue Bonds its proportionate share of any such payment, as reduced by any fees and expenses so deducted.

     See “Operations During the Chapter 11 Cases — 7-3/4% SWD Revenue Bond Dispute.”

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Will my rights against the Other Kaiser Debtors be affected by the Plan?

     Nothing in the Plan will be deemed to affect any person’s claim against or interest in any of the debtors in the Kaiser Cases except the Debtors (the “Other Kaiser Debtors”) or any of their respective present or former directors, officers, employees, agents, advisors, attorneys, accountants, underwriters, investment bankers or other representatives, acting in such capacity, or any rights, including contractual subordination rights, that any person may have in respect of any such claim against or interest in any such Other Kaiser Debtor.

What will my tax consequences be if the Plan is consummated?

     For a summary of certain potential U.S. federal income Tax consequences of the Plan, see “Certain Federal Income Tax Consequences of Consummation of the Plan.” The summary contained in this Disclosure Statement does not contain any information with respect to potential state, local or foreign Tax consequences to creditors of the Debtors. For these reasons and others, including because Tax consequences are in many cases uncertain and may vary depending on a creditor’s individual circumstances, the discussion of the Tax consequences of the Plan contained in this Disclosure Statement is not intended in any way to be Tax advice – or otherwise to be a substitute for careful Tax planning with a professional. You are urged to consult with your own Tax advisor regarding the U.S. federal, state, local and foreign Tax consequences of the Plan.

What must happen before the Plan can be consummated?

     In order for the Plan to be effective, certain events must occur. The Plan contains conditions to both the confirmation of and the effectiveness of the Plan.

     Confirmation

     The Debtors and Creditors’ Committee have agreed that, before the Bankruptcy Court can confirm the Plan, each of the following must have occurred (or the requirement that it have occurred must have been waived in accordance with the Plan):

•   the Confirmation Order must have been entered on the docket of the Clerk of the Bankruptcy Court in form and substance acceptable to the Debtors and the Creditors’ Committee;

•   all Exhibits to the Plan must be in form and substance satisfactory to the Debtors and the Creditors’ Committee; and

•   the Intercompany Claims Settlement must be effective.

In addition, there are a number of substantial confirmation requirements under the Bankruptcy Code that must be satisfied for the Plan to be confirmed, including either the acceptance of the Plan by the requisite holders of Claims in each of Subclass 3A, Subclass 3B, Subclass 3C and Subclass 3D (i.e., acceptance by holders of at least two-thirds in dollar amount and a majority in number of Claims held by holders actually voting) or, if the Plan is not accepted by each such Subclass of Class 3, the acceptance of the Plan by the requisite holders of Claims in at least one such Subclass and the determination by the Bankruptcy Court that the Plan is “fair and equitable” and “does not discriminate unfairly” as to each nonaccepting Subclass. See “Voting and Confirmation of the Plan — Confirmation.”

     Effectiveness

     In addition, the Debtors and Creditors’ Committee have agreed that the Plan will not be consummated until each of the following has occurred (or the requirement that it occur has been waived in accordance with the Plan):

•   the Confirmation Order must have become a Final Order;

•   the Liquidating Transactions must have been consummated;

•   all funds due and owing to or by the Debtors under the Intercompany Claims Settlement must have been paid in accordance with its terms;

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•   the Distribution Trustee must have been appointed and must have accepted such appointment;

•   the Distribution Trust Agreement must have been executed and the Trust Accounts must have been established; and

•   all other actions, documents, consents and agreements necessary to implement the Plan must have been effected, obtained and/or executed.

When will the Plan be confirmed? When will the Plan be effective?

     Confirmation

     A hearing in the Bankruptcy Court relating to the confirmation of the Plan is currently scheduled for April 13, 2005. This hearing may be continued or adjourned, however, and even if it is held, there is no guaranty that the Bankruptcy Court will find that the requirements of the Bankruptcy Code with respect to confirmation have been met. See “Voting and Confirmation of the Plan — Confirmation Hearing” and “Voting and Confirmation of the Plan — Confirmation.” In addition, the additional conditions to confirmation set forth in the Plan must be satisfied or waived in accordance with the Plan before the Plan can be confirmed. Thus, there is no way to predict with any certainty when, if ever, confirmation will actually occur.

     Effective Date

     Even if the Plan is confirmed on April 13, 2005, there are a number of additional conditions which must be satisfied or waived before the Plan can be consummated. While the Debtors have assumed an Effective Date of April 30, 2005 for purposes of this Disclosure Statement, no assurance can be given as to if or when the Effective Date will actually occur.

What will happen to AJI and KJC if the Plan is consummated?

     The Debtors will be liquidated if the Plan is consummated. Because the interests of each of the Debtors in Alpart have been sold, the Debtors no longer have any material ongoing activities or operations. Thus, upon the transfer of the Distribution Trust Assets to the Distribution Trust, the Debtors will be dissolved and their assets will be distributed in accordance with the Plan. See “General Information Concerning the Plan — Means for Implementation of the Plan — Liquidating Transactions.”

What happens if the Plan isn’t confirmed or doesn’t become effective?

     The Debtors expect that all of the conditions to confirmation of the Plan or the Effective Date will be satisfied (or waived in accordance with the Plan). However, there is no guaranty that the Plan will be consummated. Although the Debtors intend to take all acts reasonably necessary to satisfy the conditions to the confirmation of the Plan and the Effective Date that are within the Debtors’ control, if, for any reason, the Plan is not confirmed or the Effective Date does not occur, the Debtors may be forced to convert the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code or propose an alternative plan of liquidation under chapter 11 of the Bankruptcy Code.

OVERVIEW OF THE PLAN

Introduction

     The following is a brief overview of certain material provisions of the Plan. This overview is qualified in its entirety by reference to the provisions of the Plan, which is attached hereto as Exhibit I, and the Distribution Trust Agreement, which is an Exhibit thereto. See “Additional Information.” For a description of certain other significant terms and provisions of the Plan, see “General Information Concerning the Plan” and “Distributions Under the Plan.”

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Summary of Classes and Treatment of Claims and Interests

     The table below summarizes: (a) the classification of Claims and Interests; (b) the estimated aggregate amount of Claims in each of Class 1, Class 2 and Subclass 3D; (c) the actual aggregate amount of Allowed Claims in each of Subclass 3A, Subclass 3B and Subclass 3C; (d) the aggregate amount and nature of distributions to holders of Claims or Interests in each Class; and (e) the estimated percentage recovery for each of Subclass 3A, Subclass 3B and Subclass 3C. In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims and Priority Tax Claims have not been classified and thus are excluded from the Classes. For a discussion of certain additional matters related to Administrative Claims and Priority Tax Claims, see “ — Additional Information Regarding Assertion and Treatment of Administrative Claims and Priority Tax Claims.” The estimated aggregate amount of Claims set forth in the table below with respect to each of Class 1, Class 2 and Subclass 3D is based on the Debtors’ estimate of the maximum aggregate amounts of such Claims that the Debtors believe will be allowed.

     Each “Estimated Aggregate Claims Amount” shown in the table below is based upon the Debtors’ preliminary review of Claims Filed on or before the May 15, 2003 general Bar Date and the Debtors’ books and records and may be substantially revised following the completion of a further analysis of the Claims Filed. See “Operations During the Chapter 11 Cases — Claims Process and Bar Dates.” In addition, certain Disputed Claims that the Debtors do not believe are allowable ultimately may be allowed by the Bankruptcy Court.

     The “Estimated Percentage Recovery” shown in the table with respect to Subclass 3C is the quotient of the estimated Cash to be distributed to the PBGC, as the holder of Allowed Claims in that Subclass, divided by the aggregate amount of Allowed Claims in such Subclass. The recoveries for holders of Allowed Claims in both Subclass A and Subclass 3B will vary depending on, among other things, whether both Subclass 3A and Subclass 3B accept the Plan and, if either Subclass 3A or Subclass 3B fails to accept the Plan, the determination of the Bankruptcy Court with respect to the relative entitlement of the holders of Senior Note Claims and Senior Subordinated Note Claims to the Public Note Distributable Consideration. See “- Sources and Uses of Cash” below for estimates of the percentage recovery for Subclass 3A and Subclass 3B in four different scenarios. See “Answers to Certain Questions About the Plan and Disclosure Statement - What will I actually receive if the Plan is confirmed and goes effective?” for a discussion of other factors that may affect the recoveries of holders of Allowed Unsecured Claims.

Description and Amount of Claims or Interests Against the Debtors			Treatment
	•	Class 1 — Priority Claims: Claims against either of the Debtors entitled to priority in payment pursuant to section 507(a) of the Bankruptcy Code that are not Administrative Claims or Priority Tax Claims.	Unimpaired. On the later of the Effective Date and the date on which a Priority Claims is allowed, each holder of an Allowed Priority Claim will be entitled to receive either (a) Cash from the Priority Claims Trust Account in the amount of such holder’s Allowed Priority Claim without interest or penalty or (b) such other treatment as may be agreed upon in writing by such holder and the Debtors or the Distribution Trustee.
		Estimated Aggregate Claims Amount: $0
•		Class 2 — Secured Claims: Claims against either of the Debtors secured by a Lien on property in which such Debtor’s Estate has an interest or that is subject to setoff under section 533 of the Bankruptcy Code, to the extent of the value of the Claim holder’s interest in such Estate’s interest in such property or to the extent of the amount subject to setoff, as applicable, as determined pursuant to section 506(a) and, if applicable, section 1129(b) of the Bankruptcy Code.	Unimpaired. On the later of the Effective Date and the date on which a Secured Claim is allowed, each holder of an Allowed Secured Claim will be entitled to receive either (a) Cash from the Priority Claims Trust Account in an amount equal to such Allowed Secured Claim, including such interest as is required to be paid pursuant to section 506(b) of the Bankruptcy Code, or (b) the collateral securing such Allowed Secured Claim and Cash from the Priority Claims Trust Account in an amount equal to such interest as is required to be paid pursuant to section 506(b) of the Bankruptcy Code.
		Estimated Aggregate Claims Amount: $0

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Description and Amount of Claims or Interests Against the Debtors			Treatment
	•	Subclass 3A — Senior Note Claims: Claims against either of the Debtors under or in respect of either (x) the 9-7/8% Senior Notes and the 9-7/8% Senior Note Indenture or (y) the 10-7/8% Senior Notes and the 10-7/8% Senior Note Indentures.	Impaired; depends on whether the Plan is accepted by both Subclass 3A and Subclass 3B. On the Effective Date, if both Subclass 3A and Subclass 3B vote to accept the Plan, each holder of an Allowed Senior Note Claim will be entitled to receive Cash from the Unsecured Claims Trust Account equal to its Pro Rata Share of the Public Note Distributable Consideration remaining after first giving effect to the following payments on the Effective Date by the Distribution Trustee from the Public Note Distributable Consideration: (a) the payment to be made to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of the holders of the 7-3/4% SWD Revenue Bonds in accordance with the Plan (i.e., the 7-3/4% SWD Revenue Bond Payment) and the payment of all fees and expenses payable to the plaintiffs in the 7-3/4% SWD Revenue Bond Dispute in accordance with the Plan (i.e., the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments); (b) the payment of all fees and expenses payable to the 9-7/8% Senior Note Indenture Trustee, the 10-7/8% Senior Note Indenture Trustee and the counsel for the Ad Hoc Group in accordance with the Plan (i.e., the Senior Notes Fee Payments); and (c) the payment of $8.0 million to be made to the Senior Subordinated Note Indenture Trustee for the benefit of the holders of Senior Subordinated Note Claims. If either Subclass 3A or Subclass 3B fails to accept the Plan: (a) the holders of Senior Note Claims will not become entitled to receive the distribution described in the immediately preceding paragraph; and (b) the Bankruptcy Court will enter an order (which will be the Confirmation Order) pursuant to which the Bankruptcy Court will determine the respective entitlement of the holders of Allowed 9-7/8% Senior Note Claims, Allowed 10-7-8% Senior Note Claims, Allowed Senior Subordinated Note Claims and, if applicable under Section 2.5(b) of the Plan, 7-3/4% SWD Revenue Bonds to the Public Note Distributable Consideration. The distributions ultimately made to a holder of an Allowed Senior Note Claim as described in this paragraph will be reduced by such holder’s proportional share of the Senior Notes Fee Payments and, if the Bankruptcy Court determines that holders of Allowed Senior Subordinated Note Claims are not entitled to any portion of the Public Note Distributable Consideration, any 7-3/4% SWD Revenue Bond Payment (or a reservation in lieu thereof in accordance with the Plan) and the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments.
		Aggregate Allowed Claims Amount: $452,306,413.06	Estimated Percentage Recovery: Varies (see “- Sources and Uses of Cash”)

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Description and Amount of Claims or Interests Against the Debtors			Treatment
	•	Subclass 3B — Senior Subordinated Note Claims: Claims against either of the Debtors under or in respect of the Senior Subordinated Notes and the Senior Subordinated Note Indenture.	Impaired; depends on whether the Plan is accepted by both Subclass 3A and Subclass 3B. On the Effective Date, if both Subclass 3A and Subclass 3B vote to accept the Plan, each holder of an Allowed Senior Subordinated Note Claim will be entitled to receive its Pro Rata Share of $8.0 million in Cash to be paid to the Senior Subordinated Note Indenture Trustee, provided that any and all fees or expenses payable to the Senior Subordinated Note Indenture Trustee pursuant to the Senior Subordinated Note Indenture will, in all events, be payable solely from such $8.0 million. If either Subclass 3A or Subclass 3B fails to accept the Plan: (a) the holders of Senior Subordinated Note Claims will not become entitled to receive the distribution described in the immediately preceding paragraph; and (b) the Bankruptcy Court will enter an order (which will be the Confirmation Order) pursuant to which the Bankruptcy Court will determine the respective entitlement of the holders of Allowed 9-7/8% Senior Note Claims, Allowed 10-7-8% Senior Note Claims, Allowed Senior Subordinated Note Claims and, if applicable under Section 2.5(b) of the Plan, 7-3/4% SWD Revenue Bonds to the Public Note Distributable Consideration. Any distributions ultimately made to a holder of an Allowed Senior Subordinated Note Claim as described in the immediately preceding sentence may be reduced by such holder’s proportional share of any and all fees and expenses payable to the Senior Subordinated Note Indenture Trustee pursuant to the Senior Subordinated Note Indenture, which will, subject to such Trustee’s right to seek payment by the Debtors of such fees and expenses pursuant to section 503(b)(5) of the Bankruptcy Code, be payable solely from such distributions.
		Aggregate Allowed Claims Amount: $478,661,479.17	Estimated Percentage Recovery: Varies (see "- Sources and Uses of Cash”)
	•	Subclass 3C — PBGC Claims: Claims (other than Administrative Claims) of the PBGC against either of the Debtors arising from, or relating to, the pension plans which were or are maintained by any of the Other Kaiser Debtors in the Kaiser Cases and guaranteed by the PBGC.	Impaired. On the Effective Date, the PBGC as holder of the PBGC Claims will be entitled to receive the PBGC Percentage of the Cash in the Unsecured Claims Trust Account.
		Allowed Claim Amount: $616,000,000.00	Estimated Percentage Recovery: 13.2% to 13.7%
	•	Subclass 3D — Other Unsecured Claims: Claims against either of the Debtors that are not Administrative Claims, Priority Claims, Priority Tax Claims, Secured Claims, Intercompany Claims, Senior Note Claims, Senior Subordinated Note Claims or the PBGC Claims.	Impaired. On the Effective Date, each holder of an Allowed Other Unsecured Claim will be entitled to receive a Pro Rata Share of the Other Unsecured Claims Percentage of the Cash in the Unsecured Claims Trust Account.
		Estimated Aggregate Claims Amount: $0
	•	Class 4 — Intercompany Claims: Claims held by any Other Kaiser Debtor against either of the Debtors.	Impaired. On the Effective Date, each holder of an Intercompany Claim will be entitled to receive the treatment set forth in the Intercompany Claims Settlement.
	•	Class 5 — Interests in the Debtors: Stock ownership interests in either of the Debtors, or rights to acquire the same, and any Claim arising therefrom.	Impaired. No property will be distributed to, or retained by, KACC as the holder of the Interests on account of such Interests, and such Interests will be canceled on the Effective Date.

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Guaranty Subordination Dispute

     Litigation relating to the relative priority of holders of Senior Note Claims and holders of Senior Subordinated Note Claims to payments by certain subsidiaries of KACC that guaranteed the Senior Notes and the Senior Subordinated Notes, including the Debtors (i.e., the Guaranty Subordination Dispute), is currently pending before the Bankruptcy Court. See “Operations During the Chapter 11 Cases — Guaranty Subordination Dispute.” The Plan contains the following proposed settlement of the Guaranty Subordination Dispute: If both Subclass 3A and Subclass 3B vote to accept the Plan, a holder of an Allowed Senior Subordinated Note Claim will receive its Pro Rata Share of $8.0 million (less any fees or expenses payable to the Senior Subordinated Note Trustee pursuant to the Senior Subordinated Note Indenture) and a holder of an Allowed Senior Note Claim will receive its Pro Rata Share of the Public Note Distributable Consideration remaining after giving effect to the payment of the $8.0 million to be made to the holders of Senior Subordinated Note Claims, the 7-3/4% SWD Revenue Bond Payment, the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payment and the Senior Notes Fee Payments. If either Subclass 3A or Subclass 3B fails to accept the Plan, the Bankruptcy Court will resolve the Guaranty Subordination Dispute with respect to the Debtors and determine the distributions from the Public Note Distributable Consideration to be made to the holders of Claims in Subclass 3A and any distributions from the Public Note Distributable Consideration to be made to holders of Claims in Subclass 3B. In such event, the distributions ultimately made to a holder of an Allowed Senior Note Claim will be reduced by such holder’s proportional share of the Senior Notes Fee Payments and, if the Bankruptcy Court determines that holders of Allowed Senior Subordinated Note Claims are not entitled to any portion of the Subclass 3A Distributable Consideration, the 7-3/4% SWD Revenue Bond Payment (or reservation in lieu thereof), if any, and any 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payment. Similarly, any distributions ultimately made to a holder of an Allowed Senior Subordinated Note Claim may be reduced by such holder’s proportional share of any and all fees and expenses payable to the Senior Subordinated Note Trustee pursuant to the Senior Subordinated Note Indenture.

     Similarly, pursuant to the KAAC/KFC Plan, if holders of both the Senior Note Claims and the Senior Subordinated Note Claims vote to accept the KAAC/KFC Plan, then an additional $8.0 million will be paid to the Senior Subordinated Note Indenture Trustee for the benefit of holders of Senior Subordinated Note Claims (resulting in aggregate consideration of $16.0 million if the Plan is also accepted by the holders of the Senior Note Claims and the Senior Subordinated Note Claims), with such amount to be paid from consideration that would otherwise be distributed to holders of Allowed Senior Note Claims under the KAAC/KFC Plan, and the holders of Senior Note Claims would receive a specified percentage of the Cash and other property available for distribution to the holders of unsecured claims (less certain payments or reservations of payment therefrom). If the holders of the Senior Note Claims or the Senior Subordinated Note Claims fail to accept the KAAC/KFC Plan, the Bankruptcy Court would resolve the Guaranty Subordination Dispute with respect to KAAC and KFC and determine the distributions to be made to the holders of Senior Note Claims and any distributions to be made to holders of Senior Subordinated Note Claims under the KAAC/KFC Plan.

7-3/4% SWD Revenue Bond Dispute

     If Subclass 3A votes to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code and, unless the holders of Senior Note Claims otherwise agree pursuant to a settlement, all holders of Allowed Senior Note Claims are entitled under the Plan to identical treatment in respect of contractual subordination claims under the Senior Subordinated Note Indenture, on the Effective Date an amount equal to the Settlement Percentage of the Cash in the Unsecured Claims Trust Account that would otherwise have been distributed in respect of the Senior Subordinated Note Claims which, after giving effect to the contractual subordination provisions of the Senior Subordinated Note Indenture and pursuant to Sections 2.4(c)(i) and 2.4(c)(ii) of the Plan (but prior to giving effect to any 7–3/4% SWD Revenue Bond Payment), is to be distributed to holders of Senior Note Claims will, in full and complete satisfaction of the claims of holders of 7-3/4% SWD Revenue Bonds asserted in the 7-3/4% SWD Revenue Bond Dispute in respect of the Debtors, be paid to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of holders of 7-3/4% SWD Revenue Bonds pursuant to Section 2.5 of the Plan (i.e., the 7-3/4% SWD Revenue Bond Payment). Notwithstanding the foregoing, in no event will the amount so paid, when aggregated with any amount payable under any comparable provision of the KAAC/KFC Plan, exceed $8.0 million. If the Debtors do not File a separate motion, the Plan will serve as a motion pursuant to Bankruptcy Rule 9019 seeking entry of an order approving the settlement described above. Unless an objection to such settlement is made in writing by any creditor or claimant affected thereby, Filed with the Bankruptcy Court and served on the parties

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identified in Section 12.4 of the Plan on or before April 5, 2005, such order (which will be the Confirmation Order) may be entered by the Bankruptcy Court. In the event any such objections are timely Filed, a hearing with respect thereto will occur at the Confirmation Hearing.

     If Subclass 3A fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the rights, if any, of the holders of 7-3/4% SWD Revenue Bonds to payments from the Public Note Distributable Consideration will be as determined in an order of the Bankruptcy Court (which may be the Confirmation Order) in connection with the determinations contemplated by Sections 2.4(c)(i)(B) and 2.4(c)(ii)(B) of the Plan; provided that if the determination with respect to the rights of the holders of 7-3/4% SWD Revenue Bonds to such payment has not been made by the Bankruptcy Court prior to the Effective Date, then, in order to ensure the funding of such payment, on the Effective Date the Distribution Trustee will reserve from the Public Note Distributable Consideration any amount that may be ordered by the Bankruptcy Court to be so reserved pending such determination.

     See “Operations During the Chapter 11 Cases — 7-3/4% SWD Revenue Bond Dispute.”

Sources and Uses of Cash

     Sources of Cash

     The Cash available in the Debtors’ Estates to fund the Plan will come from: (a) the net Cash proceeds received by the Debtors in connection with the sale of their interests in Alpart pursuant to the Alpart Purchase Agreement (after taking into account the costs and expenses of such sale payable by the Debtors in accordance with the Intercompany Claims Settlement), together with any interest thereon and earnings from the investment thereof (the “Alpart Proceeds”); (b) the net Cash proceeds allocable to Kaiser Bauxite Company (“KBC”) from the sale of its interests in and related to Kaiser Jamaica Bauxite Company (“KJBC”) and KACC’s alumina refinery in Gramercy, Louisiana (together, the “Gramercy/KJBC Interests”) received by the Debtors pursuant to the Intercompany Claims Settlement (after taking into account the reimbursement of KACC for professional fees and expenses of KBC incurred after July 1, 2004 and prior to the closing of the sale of the Gramercy/KJBC Interests in accordance with the Intercompany Claims Settlement), together with any interest thereon and earnings from the investment thereof (the “KBC Proceeds”); and (c) the Recovery Action Proceeds. See “Operations During the Chapter 11 Cases — The Sale of the Alpart Interests and Liquidation of AJI and KJC” and “Operations During the Chapter 11 Cases - Intercompany Claims Settlement.”

     The Debtors currently estimate that, as of the Effective Date (which, for this purpose, is assumed to occur on April 30, 2005), the Alpart Proceeds will be approximately $273.8 million and the KBC Proceeds will be approximately $4.0 million. The Debtors are not aware of any Recovery Actions (and the Creditors’ Committee has independently determined that there are no viable preference actions concerning payments made by the Debtors) and, accordingly, it has been assumed that the Recovery Action Proceeds will be zero.

     Uses of Cash

     As more fully described below, the Debtors’ Cash as of the Effective Date will be used to (a) fund the Distribution Trust Expenses Account to enable the Distribution Trustee to pay Distribution Trust Expenses; (b) fund the Priority Claims Trust Account to enable the Distribution Trustee to pay the Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Priority Claims and Allowed Secured Claims in accordance with the Plan; (c) provide for up to $1.5 million of the Senior Notes Fee Payments; (d) make any Intercompany Settlement Payments; and (e) then fund the Unsecured Claims Trust Account with any remaining Cash. The Debtors and the Creditors’ Committee currently anticipate that available Cash will be applied initially as follows (in millions):

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Estimated Available Cash			$277.8
Estimated Funding of Distribution Trust Expenses Account			($    1.0	)
Estimated Funding of Priority Claims Trust Account	($12.5)	-	($  17.5	)*
Estimated Senior Notes Fee Payments			($    1.5	)
Estimated Intercompany Settlement Payments	$       0	-	($    4.0	)
Estimated Cash Remaining to Initially Fund Unsecured Claims Trust Account	$253.8	-	$262.8

* Includes funding for Allowed Administrative Claims, including Professional Fee Claims, and Allowed Priority Tax Claims.

     The Debtors and Creditors’ Committee will agree no later than ten days prior to the Confirmation Hearing on the actual amount of the Debtors’ Cash to be used for the initial funding of the Distribution Trust Expenses Account in order to ensure the payment of Distribution Trust Expenses. The actual amount of Distribution Trust Expenses to be incurred prior to termination of the Distribution Trust may vary materially from the amount of such initial funding. If the Distribution Trustee at any time determines that the Cash balance of the Distribution Trust Expenses Account is insufficient to make all payments payable therefrom in accordance with the terms of the Plan and the Distribution Trust Agreement, the Distribution Trustee may transfer additional Cash from the Unsecured Claims Trust Account (to the extent Cash remains available therein) to the Distribution Expenses Account. If, on the other hand, the Distribution Trustee determines that the Cash balance of the Distribution Trust Expenses Account is in excess of the amount that will be sufficient to make all payments payable therefrom in accordance with the terms of the Plan and the Distribution Trust Agreement, the Distribution Trustee, with the consent of the Steering Committee, may transfer such excess Cash to the Unsecured Claims Trust Account.

     The Debtors and Creditors’ Committee will agree no later than ten days prior to the Confirmation Hearing on the actual amount of the Debtors’ Cash to be used for the initial funding of the Priority Claims Trust Account in order to ensure the payment of Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Priority Claims and Allowed Secured Claims. Under the Intercompany Claims Settlement, the Debtors are responsible for, among other things, (a) the payment of third-party costs that are incurred after June 30, 2004 solely in connection with the administration of the Chapter 11 Cases and (b) the payment of all foreign Taxes, transfer Taxes and recording fees payable by the Debtors as a result of the sale of their interests in Alpart and all other foreign Taxes payable by the Debtors. Accordingly, the initial funding of the Priority Claims Trust Account will include a reserve for the payment of Professional Fee Claims and a reserve for the payment of Taxes that may be assessed against the Debtors by the Government of Jamaica as a result of the sale by the Debtors of their interests in Alpart or otherwise (which will be treated as Priority Tax Claims or Administrative Claims, as the case may be). See “Operations During the Chapter 11 Cases — Certain Jamaican Tax Matters.” The actual amounts of Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Priority Claims and Allowed Secured Claims could vary materially from the amount of the initial funding of the Priority Claims Trust Account. If at any time the Distribution Trustee determines that the Cash balance of the Priority Claims Trust Account is insufficient to make all payments payable therefrom in accordance with the terms of the Plan and the Distribution Trust Agreement, the Distribution Trustee will transfer an amount equal to the shortfall from the Unsecured Claims Trust Account (to the extent Cash remains available therein) to the Priority Claims Trust Account. If, on the other hand, the Distribution Trustee determines that the Cash balance of the Priority Claims Trust Account is in excess of the amount that will be sufficient to make all payments payable therefrom in accordance with the terms of the Plan and the Distribution Trust Agreement, the Distribution Trustee, with the consent of the Steering Committee, may transfer such excess Cash to the Unsecured Claims Trust Account.

     The Debtors and the Creditors’ Committee currently estimate that the Senior Notes Fee Payments will be $1.5 million in the aggregate. The actual aggregate amount of the Senior Notes Fee Payments may vary from such amount. To the extent the actual aggregate amount of the Senior Notes Fee Payments is less than $1.5 million, the amount of Cash available for distribution to holders of Senior Note Claims, Senior Subordinated Claims, the PBGC Claims and Other Unsecured Claims will increase by that difference. To the extent the Senior Notes Fee Payments exceed $1.5 million, such excess will be paid solely from Cash otherwise available for distribution to holders of Senior Note Claims.

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     The Debtors and the Creditors’ Committee currently estimate that the Intercompany Settlement Payments will be between zero and $4.0 million.

     Based on the various estimates indicated above, the Debtors and the Creditors’ Committee currently estimate that the Unsecured Claims Trust Account initially will be funded with an aggregate of $253.8 million to $262.8 million. No assurance can be given (a) that the actual amount of Cash to be used for the funding of the Distribution Trust Expenses Account or the Priority Claims Trust Account or the Senior Notes Fee Payments or Intercompany Settlement Payments will not vary from the estimates thereof indicated above, (b) that the initial funding of the Distribution Trust Expenses Account and the Priority Claims Trust Account will be made in the amount of the estimates indicated above, or (c) that, regardless of the amount of initial funding of such Trust Accounts, the actual payments payable therefrom will not vary from the amount of such initial funding, increasing Cash ultimately available for distribution from the Unsecured Claims Trust Account to the extent actual payments are less than such initial funding and decreasing Cash ultimately available for distribution from the Unsecured Claims Trust Account to the extent actual payments are greater than such initial funding.

     Based on the various estimates indicated above and assuming there are no Allowed Unsecured Claims, the aggregate Cash ultimately to be distributed to the PBGC, as the holder of the PBGC Claims, would be $81.2 million to $84.1 million, and $172.6 million to $178.7 million would remain available for distribution to holders of Senior Note Claims and Senior Subordinated Note Claims and, if applicable, holders of 7-3/4% SWD Revenue Bonds. The aggregate Cash ultimately to be distributed to holders of Senior Note Claims and Senior Subordinated Note Claims depends on, among other things, whether Subclass 3A and Subclass 3B vote to accept the Plan and, if either Subclass 3A or Subclass 3B fails to accept the Plan, the outcome of the Guaranty Subordination Dispute. See “Operations During the Chapter 11 Cases — Guaranty Subordination Dispute.” The chart below indicates, based on the various estimates indicated above and assuming there are no Allowed Other Unsecured Claims, the aggregate Cash ultimately to be distributed to holders of Senior Note Claims and Senior Subordinated Note Claims in each of the following four scenarios: (a) Subclass 3A and Subclass 3B vote to accept the Plan (“Scenario A”); (b) Subclass 3A or Subclass 3B fails to accept the Plan and the Bankruptcy Court rules in favor of the 9-7/8% Senior Note Indenture Trustee, the 10-7/8% Senior Note Indenture Trustee and the Ad Hoc Group (collectively, the “Senior Note Parties”) in the Guaranty Subordination Dispute such that the Senior Subordinated Note Claims are subordinated to the Senior Note Claims (“Scenario B”); (c) Subclass 3A or Subclass 3B fails to accept the Plan and the Bankruptcy Court rules in favor of the Senior Subordinated Note Indenture Trustee in the Guaranty Subordination Dispute such that the Senior Subordinated Note Claims and the Senior Note Claims are treated on a pari passu basis (“Scenario C”); and (d) Subclass 3A or Subclass 3B fails to accept the Plan and the Bankruptcy Court rules in favor of Liverpool Limited Partnership, a holder of 9-7/8% Senior Notes and Senior Subordinated Notes (“Liverpool”), in the Guaranty Subordination Dispute such that the Senior Subordinated Note Claims are subordinated, but only to a portion of the 9-7/8% Senior Note Claims and not to any of the 10-7/8% Senior Note Claims (“Scenario D”) (in each case, in millions).

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	Estimated Aggregate Cash Distribution
	Scenario A*		Scenario B*		Scenario C		Scenario D**
10-7/8% Senior Note Claims	$	90.9-$94.3	$	95.2-$98.7	$	47.4-$49.0	$	47.4-$49.0
9-7/8% Senior Note Claims	$	70.0-$72.7	$	73.4-$76.0	$	36.5-$37.8	$	95.6-$95.7
Senior Subordinated Note Claims	$	8.0		—	$	88.7-$91.9	$	29.6-$34.0

*

Assumes that Subclass 3A accepts the Plan and, unless the holders of Senior Note Claims otherwise agree pursuant to a settlement, all holders of Allowed Senior Note Claims are entitled under the Plan to identical treatment in respect of contractual subordination claims under the Senior Subordinated Note Indenture, and the recoveries of holders of Senior Note Claims reflect reductions of $3.6 million to $3.7 million in Scenario A and $4.0 million in Scenario B for payment of the 7-3/4% SWD Revenue Bond Payment, but do not reflect the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments, which could be up to $0.5 million. See “Operations During the Chapter 11 Cases — 7-3/4% SWD Revenue Bond Dispute.”

**

Calculation of the contractual subordination payments includes claims for postpetition interest and an allocation of such payments proportionally between the Debtors, on the one hand, and KAAC, on the other hand, based on the estimated value distributable in respect of Public Note Claims under each of the Plan and the KAAC/KFC Plan.

Although the Debtors and the Creditors’ Committee believe that no Other Unsecured Claims will ultimately be allowed, in the event Other Unsecured Claims that have been asserted are not disallowed prior to the Effective Date, Disputed Claims Reserves would have to be established in respect of Subclass 3D, thereby further reducing the initial Cash distributions to be made to holders of Senior Note Claims, to holders of Senior Subordinated Note Claims in certain circumstances and to the PBGC. See “General Information Concerning the Plan — Means for Implementation of the Plan — Trust Accounts.”

     The chart below indicates, based on the estimated Cash distributions indicated above, the estimated percentage recovery by holders of Senior Note Claims and Senior Subordinated Note Claims in each of Scenario A, Scenario B, Scenario C and Scenario D (computed as the quotient of the estimated Cash to be distributed to all holders of the applicable Claims divided by the aggregate amounts of such Claims allowed pursuant to Section 2.7 of the Plan).

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	Estimated Aggregate Cash Distribution
	Scenario A*			Scenario B*			Scenario C			Scenario D**
10-7/8% Senior Note Claims		35.6%-36.9	%		37.3%-38.6	%		18.5%-19.2	%		18.5%-19.2	%
9-7/8% Senior Note Claims		35.6%-36.9	%		37.3%-38.6	%		18.5%-19.2	%		48.6%-48.6	%
Senior Subordinated Note Claims		1.7	%		—			18.5%-19.2	%		6.2%-7.1	%

*

Assumes that Subclass 3A accepts the Plan and, unless the holders of Senior Note Claims otherwise agree pursuant to a settlement, all holders of Allowed Senior Note Claims are entitled under the Plan to identical treatment in respect of contractual subordination claims under the Senior Subordinated Note Indenture, and the recoveries of holders of Senior Note Claims reflect reductions of $3.6 million to $3.7 million in Scenario A and $4.0 million in Scenario B for payment of the 7-3/4% SWD Revenue Bond Payment, but do not reflect the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments, which could be up to $0.5 million. See “Operations During the Chapter 11 Cases — 7-3/4% SWD Revenue Bond Dispute.”

**

Calculation of the contractual subordination payments includes claims for postpetition interest and an allocation of such payments proportionally between the Debtors, on the one hand, and KAAC, on the other hand, based on estimated the value distributable in respect of Public Note Claims under each of the Plan and the KAAC/KFC Plan.

Additional Information Regarding Assertion and Treatment of Administrative Claims and Priority Tax Claims

     Administrative Claims

     Administrative Claims in General

     Except as otherwise provided in the Plan or unless otherwise agreed by the holder of an Administrative Claim and the applicable Debtor or the Distribution Trustee, each holder of an Allowed Administrative Claim will receive, in full satisfaction of its Administrative Claim, Cash from the Priority Claims Trust Account in an amount equal to the allowed amount of such Administrative Claim either: (a) on or promptly after the Effective Date or (b) if the Administrative Claim is not allowed as of the Effective Date, on or promptly after the date that is 30 days after the date on which (i) an order allowing such Administrative Claim becomes a Final Order or (ii) a Stipulation of Amount and Nature of Claim is executed by the Distribution Trustee and the holder of the Administrative Claim.

     Administrative Claims include Claims for costs and expenses of administration allowed under sections 503(b), 507(b) or 1114(e)(2) of the Bankruptcy Code, including (a) the actual and necessary costs and expenses incurred after the Petition Date in preserving the respective Estates and operating the business of each of the Debtors; (b) Professional Fee Claims; and (c) US Trustee Fees. Except as provided in the Intercompany Claims Settlement, no Intercompany Claim will constitute an Administrative Claim, and pursuant to the PBGC Settlement Agreement, the PBGC has agreed not to assert any Administrative Claims against the Debtors.

     US Trustee Fees

     On or before the Effective Date, Administrative Claims for fees payable pursuant to 28 U.S.C. § 1930, as determined by the Bankruptcy Court at the Confirmation Hearing, will be paid by the applicable Debtor or the Distribution Trustee in Cash equal to the amount of such Administrative Claims. All fees payable pursuant to 28 U.S.C. § 1930 will be paid by the Distribution Trustee in accordance with the Plan from the Priority Claims Trust Account until the closing of the Chapter 11 Cases pursuant to section 350(a) of the Bankruptcy Code.

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     Bar Dates for Administrative Claims

     As provided in the Administrative Claim Bar Date Order, any holder of an Administrative Claim against a Debtor that was required to File and serve a request for payment of such Administrative Claim and that does not File and serve such a request in accordance with the Administrative Claim Bar Date Order by the Administrative Claim Bar Date, will be forever barred from asserting such Administrative Claim against the Debtors, the Distribution Trustee or the property of any of them, or the Trust Accounts, and such Administrative Claim will be deemed waived and released as of the Effective Date. Objections to an Administrative Claim must be Filed by the Distribution Trustee and served on the requesting party by the later of (a) 45 days after the Effective Date and (b) 60 days after the Filing of the request for payment of an Administrative Claim.

     Except as otherwise set forth in the Plan or in the Intercompany Claims Settlement, professionals or other entities asserting a Professional Fee Claim for services rendered solely with respect to the Debtors before the Effective Date must File and serve on the Debtors and the Distribution Trustee and such other entities who are designated by the Bankruptcy Rules, the Confirmation Order or other order of the Bankruptcy Court an application for final allowance of such Fee Claim no later than 60 days after the Effective Date. Objections to any Professional Fee Claim must be Filed and served on the Distribution Trustee and the requesting party by the later of (a) 90 days after the Effective Date and (b) 30 days after the Filing of the applicable request for payment of the Professional Fee Claim. To the extent necessary, the Confirmation Order will amend and supersede any previously entered order of the Bankruptcy Court regarding the payment of Professional Fee Claims (other than the Intercompany Claim Settlement Order) solely with respect to the Debtors.

     To the extent that any professional has provided services in the Kaiser Cases, the Bar Date for Professional Fee Claims in Section 2.2 of the Plan relates only to such professional’s fees for services and reimbursement of expenses reasonably allocable by such professional solely to the Debtors and not otherwise treated pursuant to the Intercompany Claims Settlement Order; Claims relating to such professional’s fees for services and reimbursement of expenses to the Other Kaiser Debtors may be sought against the estates of such Other Kaiser Debtors. The failure of a professional to allocate any particular charges to the Debtors will not foreclose, waive or affect in any way the professional’s right to seek allowance and payment of such charges from the Other Kaiser Debtors.

     Priority Tax Claims

     Pursuant to section 1129(a)(9)(C) of the Bankruptcy Code, unless otherwise agreed by the holder of a Priority Tax Claim and the applicable Debtor or the Distribution Trustee, each holder of an Allowed Priority Tax Claim will receive, in full satisfaction of its Priority Tax Claim, the full amount thereof in Cash, without postpetition interest or penalty, from the Priority Claims Trust Account as soon as practicable after the later of (a) the Effective Date and (b) the date on which the Priority Tax Claim becomes an Allowed Claim. Notwithstanding the foregoing, the holder of an Allowed Priority Tax Claim will not be entitled to receive any payment on account of any penalty arising with respect to or in connection with the Allowed Priority Tax Claim. Any such Claim or demand for any such penalty (a) will be subject to treatment in Subclass 3D and (b) the holder of an Allowed Priority Tax Claim will not be entitled to assess or attempt to collect such penalty from the Debtors, the Distribution Trustee, their properties or the Trust Accounts (other than as the holder of a Subclass 3D Claim).

     Reserves for Payment of Certain Potential Administrative Claims and Priority Tax Claims

     As part of the initial funding of the Priority Claims Trust Accounts, the Debtors will include reserves for payments in respect of certain potential Administrative Claims and Priority Tax Claims. For a description of such potential Claims, see “Operations During the Chapter 11 Cases - Certain Jamaican Tax Matters.”

Senior Note Indenture Trustee and Ad Hoc Group Counsel Fees and Expenses; 7-3/4% SWD Revenue Bond Plaintiffs’ Fees

     The Senior Notes Fee Payments will be made out of the Public Note Distributable Consideration. No later than two Business Days prior to the Effective Date, each of the 9-7/8% Senior Note Indenture Trustee, the 10-7/8% Senior Note Indenture Trustee and counsel for the Ad Hoc Group must furnish to the counsel for the Creditors’

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Committee and the Debtors information in respect of such fees and expenses incurred and estimated to be incurred through the Effective Date.

     In addition, if the 7-3/4% SWD Revenue Bond Payment is required to be made under the first sentence of Section 2.5(a) of the Plan, the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments will be made out of the Public Note Distributable Consideration otherwise payable to holders of Allowed Claims in Subclass 3A; provided, however, that in no case will the amount of the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payment, when aggregated with any comparable amount payable under the KAAC/KFC Plan, exceed $500,000; provided further, however, that nothing in the Plan will prejudice the rights of such plaintiffs to seek additional recoveries (i) from amounts otherwise to be paid to or for the benefit of holders of 7–3/4% SWD Revenue Bonds under the Plan or the KAAC/KFC Plan or (ii) from, or in respect of amounts otherwise to be paid to or for the benefit of holders of 7–3/4% SWD Revenue Bonds by, any Other Kaiser Debtor other than KAAC or KFC. No later than two Business Days prior to the Effective Date, the plaintiffs in the 7-3/4% SWD Revenue Bond Dispute must furnish to the 9-7/8% Senior Note Indenture Trustee and the 10-7/8% Senior Note Indenture Trustee information in respect of such fees and expenses incurred and estimated to be incurred through the Effective Date.

CERTAIN EVENTS PRECEDING THE DEBTORS’ CHAPTER 11 FILINGS

Background

     Kaiser Aluminum Corporation (“KAC”), through its wholly owned subsidiary KACC and the subsidiaries of KACC, has historically been one of the leading international producers and marketers of alumina, primary aluminum and fabricated aluminum products, operating worldwide in all principal aspects of the aluminum industry – the mining of bauxite, the refining of bauxite into alumina, the production of primary aluminum from alumina and the manufacture of both fabricated and semi-fabricated aluminum products. Both Debtors are direct wholly owned subsidiaries of KACC and, until July 1, 2004, collectively owned 65% of Alpart, a general partnership formed by the Debtors and Hydro Aluminium Jamaica a.s. (“Hydro”) for the purpose of mining bauxite, processing it into alumina and delivering the resulting alumina to its partners. The Debtors sold their respective interests in Alpart to Quality Incorporation I Limited (“Quality”), an affiliate of Hydro, on July 1, 2004, as part of the overall disposition by KAC and its subsidiaries of their commodity businesses. Immediately thereafter, Glencore International AG (“Glencore”) purchased 100% of the equity interests in Quality. For a discussion of the sale by the Debtors of their interests in Alpart, see “Operations During the Chapter 11 Cases - The Sale of the Alpart Interests and Liquidation of AJI and KJC.”

Chapter 11 Filings of the Other Kaiser Debtors

     On February 12, 2002 (the “2002 Petition Date”), KAC, KACC and 13 of their subsidiaries Filed for relief under chapter 11 of the Bankruptcy Code. On March 15, 2002, two additional affiliates of KAC and KACC commenced their respective chapter 11 cases (collectively with the 15 previously-filed debtors, the “Original Debtors”). The filing of these cases was necessitated by the liquidity and cash flow problems that arose in late 2001 and early 2002. KAC and its subsidiaries were facing significant near-term debt maturities at a time of unusually weak aluminum industry business conditions, depressed aluminum prices and a broad economic slowdown that was further exacerbated by the events of September 11, 2001. In addition, KAC and its subsidiaries had become increasingly burdened by asbestos litigation and growing legacy obligations for retiree medical and pension costs. The confluence of these factors created continuing operating losses and negative cash flows, which resulted in lower credit ratings and an inability to access the capital markets. Notwithstanding the filing of these cases, the Debtors did not File for relief under chapter 11 of the Bankruptcy Code until January 14, 2003. For a description of such Filing, see “- Pension Funding Obligations; Commencement of the Chapter 11 Cases by the Debtors.”

Note Guarantees

     The Debtors, together with certain other subsidiaries of KACC, are guarantors of KACC’s obligations under the 9-7/8% Senior Note Indenture and 10-7/8% Senior Note Indentures (collectively, the “Senior Notes Indentures”) and the Senior Subordinated Note Indenture (collectively with the Senior Notes Indentures, the “Public Note Indentures”). Upon the commencement of KACC’s chapter 11 case, the debt issued pursuant to each Public Note Indenture was accelerated and the trustee under each Public Note Indenture had the right to proceed to collect

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on the debt issued pursuant to such Public Note Indenture. It was not yet clear on the 2002 Petition Date that a filing by the Debtors for protection under chapter 11 of the Bankruptcy Code would be in the best interests of the Debtors’ constituents, but the enforcement of the Debtors’ guarantees of the 9-7/8% Senior Notes, 10-7/8% Senior Notes and Senior Subordinated Notes would likely have necessitated such a filing. Thus, in connection with their chapter 11 filings, the Original Debtors sought and obtained an injunction enjoining the holders of 9-7/8% Senior Notes, 10-7/8% Senior Notes and Senior Subordinated Notes from seeking to enforce such guarantees (which injunction was subsequently mooted by the commencement of the Chapter 11 Cases). During the Chapter 11 Cases, certain litigation was initiated involving the relative rights of the holders of the Senior Subordinated Notes and the holders of the 9-7/8% Senior Notes and the 10-7/8% Senior Notes. See “Operations During the Chapter 11 Cases - Guaranty Subordination Dispute.” Litigation was also initiated in order to determine the rights of the 7-3/8% SWD Revenue Bonds in relation to the Senior Subordinated Notes. See “Operations During the Chapter 11 Case — 7-3/8% SWD Revenue Bond Dispute.”

Pension Funding Obligations; Commencement of the Chapter 11 Cases by the Debtors

     Originally, a total of eight pension plans were sponsored by KACC and one of its subsidiaries for the benefit of their employees. Most likely as a result of public disclosure regarding the potential termination of the Kaiser pension plans and increasing concern over the continuing uncertain status of the Kaiser pension plans, beginning in November 2002, a higher than average number of salaried employees retired and opted for a lump-sum distribution from the Kaiser Aluminum Salaried Employees Retirement Plan (the “Salaried Pension Plan”). The resulting increase in the aggregate amount of lump-sum distributions from the Salaried Pension Plan combined with a reduction in the level of the Salaried Pension Plan’s liquid assets and the ratio of the plan’s assets over current liabilities, in each case below the statutory limit as of January 1, 2003, triggered a “Liquidity Shortfall” under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and the IRC. As a result, KACC was required by statute to make an additional contribution in the amount of $17.0 million to the Salaried Pension Plan on January 15, 2003, but KACC determined prior to that date that it was not in the best interest of its estate to make such contribution. Under ERISA, upon the failure of a plan sponsor to make a statutory contribution to the pension plan of which it is the sponsor, a lien enforceable by the PBGC automatically arises against all of the assets of that plan sponsor and each member of the sponsor’s “controlled group” (which, in the case of KACC, is all entities of which KACC owns 80% or more, including the Debtors). As there was an automatic stay in effect in the chapter 11 cases of the Original Debtors, neither the additional funding requirement nor the creation of such a lien posed an issue for the Original Debtors. However, the imposition or perfection of such a lien or other enforcement action by the PBGC against the Debtors, had the Debtors not Filed for protection under chapter 11 of the Bankruptcy Code, could have:

•   detrimentally affected the business operations of the Debtors;

•   triggered adverse Tax consequences, resulting in additional taxable income in the Debtors’ U.S. consolidated Tax return;

•   caused an event of default under the Original Debtors’ then-existing postpetition financing arrangement; and

•   irretrievably altered the relative priorities of creditor Claims by elevating the PBGC Claims above the other unsecured creditors’ Claims (even though the PBGC Claims were treated as general unsecured prepetition claims in the chapter 11 cases of the Original Debtors).

Accordingly, on the Petition Date, AJI, KJC and seven additional affiliates of KAC (AJI, KJC and such additional affiliates collectively, the “Additional Debtors”) Filed petitions for relief. The PBGC, as was expected, Filed several proofs of Claims against the Debtors. See “Operations During the Chapter 11 Cases — PBGC Claims” for further information.

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OPERATIONS DURING THE CHAPTER 11 CASES

First Day Relief Requested by the Original Debtors

     On the 2002 Petition Date, the Original Debtors Filed a number of motions and other pleadings (collectively, the “2002 First Day Motions”). Certain of the most significant 2002 First Day Motions are briefly described below. The 2002 First Day Motions were designed to meet the Original Debtors’ goals of:

•   continuing their and their nondebtor subsidiaries’ operations with as little disruption and loss of productivity as possible;

•   maintaining the confidence and support of the Original Debtors’ and their nondebtor subsidiaries’ customers, employees, vendors, suppliers, service providers, contractors and other key groups;

•   maintaining good relations in the communities served by the Original Debtors’ and their nondebtor subsidiaries’ businesses; and

•   obtaining necessary postpetition financing.

The 2002 First Day Motions included:

•   motions relating to case administration included the appointment of counsel, the appointment of a claims and noticing agent, and the approval of interim compensation procedures for professionals;

•   a motion seeking authority to pay prepetition wages and other benefits to or on behalf of the Original Debtors’ employees and independent contractors;

•   a motion seeking authority to retain and pay ordinary course professionals;

•   a motion seeking authority to continue the Original Debtors’ workers’ compensation insurance programs and pay certain prepetition workers’ compensation claims, premiums and related expenses;

•   a motion seeking authority to pay or honor prepetition obligations to customers;

•   a motion seeking authority to pay prepetition claims of certain critical vendors and service providers;

•   a motion seeking approval of (a) the Original Debtors’ cash management system; (b) certain intercompany transactions with and transfers to affiliates; (c) the use of existing bank accounts, business forms, and investment and deposit guidelines; and (d) the priority of postpetition Intercompany Claims, as discussed below under “- Cash Management Order”; and

•   a motion seeking approval to continue funding certain joint venture affiliates, including Alpart, as discussed below under “- Joint Venture Order”.

All of the 2002 First Day Motions ultimately were granted on the 2002 Petition Date or shortly thereafter.

     Cash Management Order

     Prior to the 2002 Petition Date, the Original Debtors utilized certain centralized cash management systems in the day — to — day operation of their businesses. These cash management systems included an overall centralized cash management system maintained by KACC, as well as certain cash management subsystems maintained by certain of their subsidiaries and business units. These cash management systems provided well — established mechanisms for the collection, concentration, management and disbursement of funds used in the Original Debtors’ businesses.

     On February 13, 2002, the Bankruptcy Court entered an interim order authorizing the Original Debtors to maintain these systems on a postpetition basis and, on July 23, 2002, entered a final order authorizing the continued

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use and maintenance of the centralized cash management system (the “Cash Management Order”). In addition, the Cash Management Order authorized the Original Debtors to continue their ordinary course transactions with, and transfers of Cash to, their nondebtor affiliates (which, prior to the Petition Date, included the Debtors). In connection with this relief, the Cash Management Order accorded superpriority status to any Intercompany Claims among the Original Debtors and nondebtor affiliates that arose after the 2002 Petition Date as a result of the intercompany transactions made through the Original Debtors’ cash management system.

     Joint Venture Order

     As of the 2002 Petition Date, much of the bauxite, alumina and primary aluminum utilized by KACC and its subsidiaries was produced at overseas facilities owned through five nondebtor joint venture affiliates, of which KACC held, directly or indirectly, less than a 100% ownership interest (collectively, the “Joint Ventures”). Alpart, described above in “Certain Events Preceding the Debtors’ Chapter 11 Cases — Background,” was one of the Joint Ventures. Certain of the Original Debtors were obligated to purchase products from the Joint Ventures and to fund the Joint Ventures’ cash costs for raw materials, labor and other operational costs, as well as capital expenditures, Taxes, debt service and working capital. Failure to purchase products from, or fund the costs of, a Joint Venture would have been a default under the relevant Joint Venture agreements, which, in turn, could have lead to the forfeiture of the Original Debtors’ interests in the Joint Venture. As a consequence, the Original Debtors sought and obtained an interim order dated February 13, 2002 authorizing them to continue ordinary course transactions with, and pay prepetition claims of, the Joint Ventures and, on July 23, 2002, obtained a final order authorizing them to do so (the “Joint Venture Order”).

First Day Relief Requested by AJI, KJC and the other Additional Debtors

     On the Petition Date, AJI, KJC and the other Additional Debtors Filed motions for relief (collectively, the “2003 First Day Motions”), the most material of which are briefly described below. The 2003 First Day Motions were designed to meet the Additional Debtors’ goals of:

•   continuing their operations with as little disruption and loss of productivity as possible;

•   maintaining the confidence and support of the Additional Debtors’ customers, employees, vendors, suppliers, service providers, contractors and other key groups; and

•   extending certain relief granted under the 2002 First Day Motions to the Additional Debtors.

The 2003 First Day Motions included:

•   motions relating to case administration, the Filing of a consolidated list of creditors and appointment of a claims and noticing agent;

•   a motion to extend the relief granted in the Cash Management Order to each of the Additional Debtors;

•   a motion to allow Kaiser Aluminum & Chemical of Canada Limited, a solvent Canadian corporation and a subsidiary of KACC, to continue, without interruption, the Canadian operations, including the payment of prepetition claims in the ordinary course; and

•   a motion to extend the relief granted in the Joint Venture Order to AJI, KJC and KBC.

All of the 2003 First Day Motions were granted on the Petition Date or shortly thereafter.

Appointment of the Committees and Future Claimants’ Representatives

     Creditors’ Committee

     On February 25, 2002, the US Trustee appointed the Creditors’ Committee. The Creditors’ Committee acts as such in all of the Kaiser Cases (including the Chapter 11 Cases). The membership of the Creditors’ Committee

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has been amended three times during the Kaiser Cases; the current members of, and advisors to, the Creditors’ Committee are:

Committee Members:	Counsel:
J.P. Morgan Trust Company, N.A., as Indenture Trustee	Lisa G. Beckerman, Esq.
6525 West Campus Oval Road	Akin, Gump, Strauss, Hauer & Feld, L.L.P.
New Albany, OH 43054	590 Madison Avenue
	New York, NY 10022
Law Debenture Trust Company of New York, as Indenture Trustee
767 Third Avenue, 31st Floor	William P. Bowden, Esq.
New York, NY 10017	Ashby & Geddes
	222 Delaware Avenue
U.S. Bank National Association, as Indenture Trustee	P.O. Box 1150
180 East 5th Street	Wilmington, DE 19899
St. Paul, MN 55101
United Steelworkers of America	Financial Advisors:
Five Gateway Center
Pittsburgh, PA 15222	Amit R. Patel
	Houlihan Lokey Howard & Zukin
Pension Benefit Guaranty Corporation	1930 Century Park West
1200 K Street, N.W.	Los Angeles, CA 90067
Washington, D.C. 20005
	Asbestos Experts:
Farallon Capital Management LLC
1 Maritime Plaza, Suite 1325	Charles E. Bates
San Francisco, CA 94111	Bates White & Ballantine
	2001 K Street, N.W.
Dwight Asset Management Company	Suite 700
100 Bank Street	Washington, D.C. 20006
Burlington, VT 05401

Asbestos Claimants’ Committee and Certain Other Appointed Representatives

     On February 25, 2002, the US Trustee appointed a statutory committee of asbestos claimants (the “Asbestos Claimants’ Committee”). On January 27, 2003, the Bankruptcy Court entered an order appointing Martin J. Murphy as legal representative for future asbestos claimants (the “Future Asbestos Claimants’ Representative”). On August 26, 2003, the Bankruptcy Court entered an order appointing an official committee of retired employees (the “Retirees’ Committee”). On June 22, 2004, the Bankruptcy Court entered an order appointing a legal representative for future silica and coal tar pitch volatile claimants (the “Future Silica Claimants’ Representative”). While each of these appointments has been made in the administratively consolidated chapter 11 cases of the Original Debtors and Additional Debtors, the Debtors do not believe that they have any liability with respect to the claims that are the subject of the respective roles of the Asbestos Claimants’ Committee, the Future Asbestos Claimants’ Representative or the Future Silica Claimants’ Representative and no Claims in respect thereof have been asserted (other than several Claims asserted by insurance carriers that are being challenged by the Debtors and that are expected to be disallowed).

Assumption and Assignment or Rejection of Executory Contracts and Unexpired Leases

     As debtors in possession, the Debtors have the right under section 365 of the Bankruptcy Code, subject to the approval of the Bankruptcy Court, to assume, assume and assign, or reject executory contracts and unexpired

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leases. Section 365 of the Bankruptcy Code provides generally that a debtor may assume, assume and assign, or reject an executory contract at any time before the confirmation of a plan of reorganization, but the Bankruptcy Court, on the request of a party in interest, may order the debtor to determine whether to assume or reject a particular executory contract within a specified period of time. In addition, section 365 of the Bankruptcy Code further provides that a debtor is given until 60 days after the date of commencement of its bankruptcy to decide whether to assume, assume and assign, or reject an unexpired lease of nonresidential real property. This period may be extended for “cause.”

     On April 11, 2002, the Bankruptcy Court entered an order granting the Original Debtors’ motion to extend the time within which they may assume, assume and assign, or reject an unexpired lease of nonresidential property until the Confirmation Date to allow them to evaluate further their executory contracts and unexpired leases. On April 17, 2003, the Bankruptcy Court entered an order granting the same relief to the AJI, KJC and the other Additional Debtors.

     As described below in “- The Sale of the Alpart Interests and Liquidation of AJI and KJC,” the interests of AJI and KJC in Alpart have been sold and all executory contracts related to Alpart have been assumed and assigned in connection therewith. The Debtors do not believe they have any material executory contracts or unexpired leases that were not assumed and assigned in connection with the sale of their interests in Alpart, but, in any case, any remaining executory contracts of AJI and KJC will be deemed rejected pursuant to the Plan.

Claims Process and Bar Dates

     In May 2002, the Original Debtors filed their Schedules, identifying the assets and liabilities of their respective estates. These Schedules have been amended from time to time subsequent to these initial filings. In March 2003, AJI, KJC and the other Additional Debtors filed their respective Schedules. The Bankruptcy Court set the following bar dates for the filing of proofs of claim in the Kaiser Cases: (a) January 31, 2003 as the last date by which holders of prepetition claims against the Original Debtors (other than asbestos-related personal injury, noise-induced hearing loss and coal tar pitch volatiles claims) could file their claims; (b) May 15, 2003 as the last date by which holders of prepetition claims against AJI, KJC and the other Additional Debtors (other than asbestos-related personal injury, noise-induced hearing loss and coal tar pitch volatiles claims) could file their claims; and (c) February 29, 2004 as the last date by which holders of noise-induced hearing loss and coal tar pitch volatiles prepetition claims against KACC could file their claims. No bar date has been established for the filing of asbestos-related personal injury claims.

Postpetition Financing

     On the 2002 Petition Date, the Original Debtors entered into a postpetition financing agreement arranged by Bank of America, N.A. and, in March 2003, the Additional Debtors (including the Debtors) were added as co-guarantors. That financing facility provided for a secured, revolving line of credit through February 13, 2005. On February 11, 2005, the Bankruptcy Court approved a replacement financing agreement for certain of the Other Kaiser Debtors. The replacement facility was arranged by J.P. Morgan Securities Inc. and provides for a secured, revolving line of credit in the principal amount of $200.0 million through the earlier of February 11, 2006, the effective date of a plan of reorganization for the Other Kaiser Debtors or the voluntary termination of the financing facility by the Other Kaiser Debtors. Because the Debtors have liquidated their assets and have no working operations, the Debtors are not parties to the replacement financing agreement and the lenders under the replacement financing agreement have no Liens on the Cash held by the Debtors.

Strategic Plan to Sell Commodities Assets

     In September 2002, KAC and KACC prepared a strategic plan for their business operations. That plan envisioned the sale of some or all of their bauxite, alumina and primary aluminum assets and the reorganization around their fabricated products business. Thereafter, the strategic plan was shared with the Creditors’ Committee, the Asbestos Claimants’ Committee and the Future Asbestos Claimants’ Representative. After these parties completed considerable due diligence, they each indicated that they did not oppose the strategic plan.

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     In furtherance of the strategic plan, the Debtors and the Other Kaiser Debtors have sold or are in the process of selling their interests in the Joint Ventures other than Anglesey Aluminium Limited. On July 1, 2004 the Debtors sold their interests in Alpart. See “ - The Sale of the Alpart Interests and Liquidation of AJI and KJC.” In October 2004, KACC sold the Gramercy/KJBC Interests for approximately $23.0 million, subject to certain adjustments. Pursuant to the Intercompany Claims Settlement described below, approximately $4.0 million of the proceeds from that sale will be allocated to the Debtors’ Estates. Also in October 2004, certain of the Other Kaiser Debtors sold their interests in Volta Aluminium Company Limited, which owns a primary aluminum smelter on the coast of Ghana. In November 2004, the Bankruptcy Court approved the sale of KAAC’s interests in and related to Queensland Alumina Limited, an Australian corporation that owns an alumina refinery in Queensland, Australia.

The Sale of the Alpart Interests and Liquidation of AJI and KJC

     Following an extensive marketing process that spanned more than seven months, in January 2004, the Debtors and certain of the Other Kaiser Debtors filed a motion (the “Sale Motion”) to approve the sale of their respective interests in Alpart to Glencore AG (or, if Hydro exercised its right of first refusal (“RFR”) with respect to such proposed sale, to Hydro), for $165.0 million, subject to certain adjustments. On March 23, 2004, the Open Joint Stock Company Russian Aluminium (“RUSAL”) Filed an objection to the Sale Motion, stating that it was willing to purchase the interests in Alpart for $215.0 million. On April 6, 2004, the Bankruptcy Court entered an order (the “Bidding Procedures Order”) authorizing the termination of the purchase agreement with Glencore AG and approving bidding procedures for an auction of the Debtors’ interests in Alpart. The Bidding Procedures Order included a preservation of Hydro’s RFR to purchase the interests in Alpart subsequent to the auction. An auction was held pursuant to the Bidding Procedures Order on April 20, 2004, and Rual Trade Limited (“Rual”), a subsidiary of RUSAL, with a bid of approximately $331.7 million, subject to certain adjustments, was determined to be the successful bidder. On May 25, 2004, Hydro exercised its contractual RFR to acquire the interests in Alpart and simultaneously announced that it intended to re-sell those interests to Glencore AG for the same price that Hydro was paying to exercise its RFR. On May 26, 2004, the Debtors and certain of the Other Kaiser Debtors filed a motion requesting that the auction for the interests in Alpart be re-opened, or, in the alternative, that the Bankruptcy Court authorize the sale of such interests to Hydro in accordance with the terms of Hydro’s RFR. On June 4, 2004, the Bankruptcy Court ordered the sale of the interests in Alpart to Hydro. The sale of such interests to Quality, an affiliate of Hydro, for approximately $331.7 million, subject to certain adjustments, was completed on July 1, 2004, and immediately thereafter Glencore purchased 100% of the equity interests in Quality.

     The Debtors estimate that, after payment of the costs and expenses of the sale payable by the Debtors in accordance with the Intercompany Claims Settlement, the Alpart Proceeds will be approximately $274.4 million as of the Effective Date.

Certain Jamaican Tax Matters

     The Government of Jamaica (the “GOJ”) could assert that the Debtors owe Taxes for one or more Taxable periods through the Effective Date, including Taxes resulting from the sale of the Debtors’ interest in Alpart. Pursuant to the Alpart Purchase Agreement, transfer or stamp Taxes arising from the sale of such interests were the responsibility of the buyer and the buyer has paid such Taxes.

     The Plan provides that any and all Taxes ultimately determined to be due and owing from either Debtor to the GOJ for any taxable period (including interest and penalties, if any) will be treated as Allowed Priority Tax Claims (if they relate to prepetition periods) or Allowed Administrative Claims (if they relate to the administrative period) (collectively, the “Jamaican Tax Claims”), and will be paid in full in Cash from the Priority Claims Trust Account following the determination of the amount or amounts of any such Tax liability. (Until this determination has been made, any potential Tax obligation will be treated under the Plan as a Disputed Claim.) Interest and penalties associated with any such Tax liability will be determined and calculated for purposes of the Plan under applicable Jamaican law.

Agreements with Labor Regarding Pension and Retiree Medical Benefits

     In January 2004, KACC and one of the Other Kaiser Debtors filed motions with the Bankruptcy Court for a distress termination of all of their domestic hourly pension plans and to terminate or substantially modify

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postretirement medical obligations for both salaried and certain hourly employees. KACC subsequently reached agreements (collectively, the “Legacy Liability Agreements”) with the Retirees’ Committee and representatives from the unions representing the hourly employees of KACC. The Legacy Liability Agreements provided for the termination of existing salaried and hourly retiree benefit plans (including medical) and provided salaried and hourly retirees with an opportunity either to pay premiums for continued medical coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (i.e., COBRA continuation coverage) or to elect coverage pursuant to voluntary employee beneficiary association trusts, to which KACC has, and will continue to contribute, a certain amount of Cash and to which KAC will contribute a certain portion of the equity it issues upon the consummation of its chapter 11 plan. Under the Legacy Liability Agreements, the parties also agreed to the termination of their then-existing hourly pension plans and to the terms of one or more replacement pension plans.

     During the first half of 2004, the Bankruptcy Court entered orders approving each of the Legacy Liability Agreements, subject to certain conditions, including Bankruptcy Court approval of the Intercompany Claims Settlement (described below) in a form acceptable to the Debtors, the Other Kaiser Debtors and the Creditors’ Committee. On June 1, 2004, the Bankruptcy Court entered an order making the Legacy Liability Agreements effective, notwithstanding that the Intercompany Claims Settlement had not then been agreed upon or approved, and authorizing the Other Kaiser Debtors to proceed with the implementation of those agreements, subject to certain termination rights granted to the Creditors’ Committee. As a result of the PBGC Settlement Agreement (described below), KACC and the United Steelworkers of America, AFL-CIO-CLC later agreed to certain modifications of their Legacy Liability Agreement, which the Bankruptcy Court approved on November 8, 2004, subject to finalization of a form of order. The Bankruptcy Court entered the order on February 1, 2005.

PBGC Claims

     The PBGC is a wholly owned United States government corporation that administers the defined benefit pension plan termination insurance program under ERISA. Pursuant to federal statute, KACC and each member of its controlled group are jointly and severally liable to the PBGC for amounts that KACC is required to contribute to any of the Kaiser pension plans. The controlled group includes each of AJI and KJC, as well as all of the Other Kaiser Debtors.

     In January 2003, the PBGC filed claims against Debtors and the Other Kaiser Debtors on behalf of each of the eight Kaiser pension plans, which included: (a) claims for estimated unfunded benefit liabilities, totaling approximately $620.0 million; (b) unliquidated claims for missed statutory insurance premiums; and (c) a $17.1 million claim for minimum funding contributions related to the Salaried Pension Plan and unliquidated claims for minimum funding contributions related to the remaining Kaiser pension plans.

     Although the Bankruptcy Court, in conjunction with approving the Legacy Liability Agreements, had determined that the financial requirements for a distress termination of certain of the pension plans had been satisfied and had authorized the implementation of replacement defined contribution plans as negotiated in the Legacy Liability Agreements, the termination of the pension plans and implementation of the replacements plans remained subject to the PBGC’s determination that the statutory requirements had been satisfied. In March 2004, the PBGC appealed the Bankruptcy Court’s ruling that the Debtors and the Other Kaiser Debtors had met the financial requirements for a distress termination with respect to certain of the Kaiser pension plans. The PBGC also informed the Debtors and the Other Kaiser Debtors that it believed that the replacement pension plans negotiated in the Legacy Liability Agreements did not comply with the PBGC’s policies.

     On October 14, 2004, the Debtors and the Other Kaiser Debtors entered into the PBGC Settlement Agreement, pursuant to which the PBGC approved the termination of the largest of the Kaiser pension plans that had not previously been terminated (two of the Kaiser pension plans had been terminated by the PBGC prior to that date) and KACC retained, and agreed to continue, the remaining smaller pension plans. In addition, the PBGC Settlement Agreement provides for, among other things: (a) the PBGC’s issuance of a letter indicating that it intends to take no action with respect to the replacement pension plans; (b) the payment by KACC of amounts necessary to satisfy the minimum funding requirements under applicable law for the retained pension plans; (c) the allowance of administrative claims in the aggregate amount of $14.0 million against the Other Kaiser Debtors (including KACC) with the exception of the Debtors; and (d) the allowance of unsecured claims against the Debtors and the Other Kaiser Debtors for $616.0 million for unfunded benefit liabilities under the terminated plans and statutory

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premiums, provided that the PBGC’s recovery from the Estates of the Debtors in respect of the PBGC Claims is limited to the PBGC Percentage of the Cash in the Unsecured Claims Trust. On January 25, 2005, the Bankruptcy Court entered an order approving the PBGC Settlement Agreement. On February 3, 2005, the Senior Subordinated Note Indenture Trustee Filed a notice of appeal in respect of such order and a notice of appeal of the Bankruptcy Court’s order denying its motion for reconsideration of the Bankruptcy Court’s stay of the Senior Subordinated Note Indenture Trustee’s objection to certain PBGC Claims. See “Overview of the Plan — Summary of Classes and Treatment of Claims and Interests” for a description of the treatment of the PBGC Claims.

Intercompany Claims Settlement

     The operations of KAC and its subsidiaries, which included transactions with foreign joint ventures and the use of a centralized cash management system, gave rise to a significant number of intercompany transactions, which were accounted for as intercompany receivables and payables. Because many of the intercompany accounts reflected an aggregate of activity over many years, the account balances for these intercompany receivables and payables in many cases were substantial, in some cases aggregating more than a $1.0 billion. In addition to the complex nature of the transactions and the significant amounts involved, there were numerous legal theories and arguments that could be advanced to support varying treatments of all or a portion of these intercompany account balances or to apply principles of setoff or recoupment to eliminate or substantially reduce certain of these intercompany account balances. Issues also existed with respect to postpetition Intercompany Claims, including, among other issues: (a) whether to “synchronize” the petition dates for the Original Debtors and the Additional Debtors or otherwise how to treat Intercompany Claims that arose after the commencement of the chapter 11 cases of the Original Debtors in 2002 but prior to the commencement of chapter 11 cases of the Additional Debtors in 2003; and (b) how certain costs or services funded by KACC but accruing to the benefit of the Debtors and Other Kaiser Debtors as well (e.g., professional fees and costs incurred in the chapter 11 cases and overhead costs) should be allocated among the Debtors and the Other Kaiser Debtors.

     On October 5, 2004, the Debtors, the Other Kaiser Debtors and the Creditors’ Committee entered into a settlement and release agreement which resolves all of these issues (i.e., the Intercompany Claims Settlement), thereby eliminating the potential costs, uncertainties and potential delays that could have resulted had each of these issues been left for resolution through litigation. On October 14, 2004, the Debtors, the Other Kaiser Debtors and the Creditors’ Committee jointly Filed a motion to approve the Intercompany Claims Settlement (the “Joint Motion”). Objections to the Joint Motion were Filed by numerous parties, many of which were resolved by a January 27, 2005 amendment to the Intercompany Claims Settlement. The Bankruptcy Court entered an order approving the Intercompany Claims Settlement on February 1, 2005.

     The material terms of the Intercompany Claims Settlement (as amended) specifically relating to the Debtors include, among others, the following:

•   upon the effectiveness of the Intercompany Claims Settlement, various offsets and transfers will be effected, with the ultimate economic effect that Intercompany Claims held by or against the Debtors will be released, except as otherwise described below;

•   upon the closing of the sale of the Debtors’ interests in Alpart, KACC was entitled to, and received, Cash proceeds of approximately $43.0 million;

•   KACC will have an Allowed Administrative Claim against the Debtors in the amount of $22.0 million, subject to certain adjustments, including reductions to the extent KACC received positive net cash flow from the Debtors from January 1, 2004 through June 30, 2004;

•   if the Plan becomes effective on or before April 30, 2005, the Debtors will pay an additional $2.5 million to KACC;

•   upon the effectiveness of the Intercompany Claims Settlement, the Debtors will receive $4.0 million, less certain cost reimbursements to KACC in respect of KBC, from the proceeds of the sale of the Gramercy/KJBC Interests;

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•   the Debtors are responsible for the payment of third-party costs of administration of the Chapter 11 Cases incurred after June 30, 2004; and

•   the Debtors are responsible for all foreign Taxes, transfer Taxes and recording fees payable by the Debtors as a result of the sale of their interests in Alpart and all other foreign taxes payable by them, whether for current or prior years.

For a detailed discussion of the Intercompany Claims Settlement, see the Joint Motion, and for a summary thereof, see the supplemental notice regarding the hearing on the Joint Motion (the “Supplemental Notice”), which was served on all parties in interest on December 27-28, 2004. The Joint Motion and the Supplemental Notice, as well as the January 27, 2005 amendment to the Intercompany Claims Settlement, are available to the public over the Internet on the Document Website (www.kaiseraluminum.com).

     The Intercompany Claims Settlement does not affect any claim by either Debtor against any of its non-debtor affiliates or by any such affiliate against a Debtor. However, the Debtors are not aware of the existence of any such claims.

Guaranty Subordination Dispute

     In 1993, KACC issued $400.0 million of the Senior Subordinated Notes, which were guaranteed by certain KACC subsidiaries, including the Debtors (such guaranty being referred to herein as the “Subsidiary Guaranty”). The Senior Subordinated Note Indenture contains, among other things, a detailed definition of “Senior Indebtedness,” debt subordination provisions and guaranty provisions. Under the Subordinated Note Indenture, holders of the Subordinated Notes agreed (a) “that all direct or indirect payments or distributions on or which respect to the Notes...is [sic]...subordinated to the prior payment of all Senior Indebtedness of the Company” and (b) “that all payments pursuant to [the Subsidiary Guaranty] are...subordinated...to the prior payment in full...of all Senior Indebtedness of such [s]ubsidiary [g]uarantor.”

     On August 16, 2004, the Senior Subordinated Note Indenture Trustee filed a motion (the “Guaranty Subordination Classification Motion”) with the Bankruptcy Court to determine the classification of the Senior Subordinated Note Claims under any plans of reorganization filed by the Debtors and the Other Kaiser Debtors that made the Subsidiary Guaranty. The Guaranty Subordination Classification Motion asserted that the obligations to the holders of 9-7/8% Senior Notes and 10-7/8% Senior Notes in respect of the Subsidiary Guaranty do not constitute “Senior Indebtedness” under the applicable definitions in the Senior Subordinated Note Indenture and that, accordingly, the obligations on the guaranty of the Senior Subordinated Notes (i.e., the Subsidiary Guaranty) and the guaranties of the 9-7/8% Senior Notes and 10-7/8% Senior Notes are entitled to pari passu distributions under plans of reorganization filed by the Debtors and the Other Kaiser Debtors that made the Subsidiary Guaranty (including the Plan).

     On September 3, 2004, the Senior Note Parties filed a complaint (the “Guaranty Subordination Adversary Proceeding”) with the Bankruptcy Court seeking a declaration that any payment rights of the Senior Subordinated Note Claims are subordinate to the Senior Note Claims, or, alternatively, a reformation of the Senior Subordinated Note Indenture to provide that the Senior Subordinated Note Claims are junior to the Senior Note Claims. Pursuant to the Bankruptcy Court’s order, on October 8, 2004, the Debtors and the Other Kaiser Debtors filed their response to the Guaranty Subordination Classification Motion and an answer in the Guaranty Subordination Adversary Proceeding (together with the Guaranty Subordination Classification Motion, the “Guaranty Subordination Dispute”) and the Creditors’ Committee filed its response to the Guaranty Subordination Classification Motion. In their respective responses, the Debtors, the Other Kaiser Debtors and the Creditors’ Committee both supported the interpretation advanced by the Senior Note Parties. The Senior Note Parties also filed responses opposing the Guaranty Subordination Classification Motion. Liverpool also Filed a response to the Guaranty Subordination Classification Motion, asserting that only $100.0 million of the obligations to the holders of the 9-7/8% Senior Notes in respect of the Subsidiary Guaranty, plus associated interest and fees, constitute “Senior Indebtedness” under the Senior Subordinated Note Indenture based on the fact that there was a reduction of $100.0 million in the credit commitment under KACC’s senior credit facility at the time the Subsidiary Guaranty was made. Liverpool therefore contends that, other than this $100.0 million of the Subsidiary Guaranty obligations in respect of the 9-7/8% Senior

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Notes, the 10-7/8% Senior Notes, the 9-7/8% Senior Notes and the Senior Subordinated Notes are entitled to pari passu distributions under the Plan.

     In connection with the Guaranty Subordination Dispute and the 7-3/4% SWD Revenue Bond Dispute (see “- 7-3/4% SWD Revenue Bond Dispute”), the Senior Subordinated Note Indenture Trustee has asserted that, even if such disputes are ultimately resolved by the Bankruptcy Court in favor of the holders of Senior Note Claims, under the terms of the Senior Subordinated Note Indenture, the Senior Subordinated Note Indenture Trustee will be entitled to the payment of its fees and expenses from the Debtors. The Debtors do not agree with that assertion and believe, in such circumstances, that the contractual subordination provisions of the Senior Subordinated Note Indenture require the payment to holders of Senior Note Claims of all amounts that would otherwise be payable to or for the benefit of holders of Senior Subordinated Note Claims absent such provisions and that the Debtors are not required to make any payment in respect of the fees and expenses of the Senior Subordinated Note Indenture Trustee; if, however, the Bankruptcy Court determines that the assertion of the Senior Subordinated Note Indenture Trustee is correct, the ultimate recoveries to holders of Senior Note Claims may be reduced.

     On October 25, 2004, the Bankruptcy Court held a status conference on the Guaranty Subordination Dispute and ordered the parties to attempt to consensually resolve the Guaranty Subordination Dispute, as well as the 7-3/4% SWD Revenue Bond Dispute, through mediation. On November 18, 2004, the parties participated in a day-long mediation. To date, the parties have not reached a settlement, although the mediator has not, as yet, terminated the mediation proceedings. No further mediation sessions are currently scheduled.

     On December 2, 2004, the Senior Subordinated Note Indenture Trustee Filed a motion in the Guaranty Subordination Adversary Proceeding requesting that the Bankruptcy Court order the parties to file briefs regarding the Guaranty Subordination Dispute by January 10, 2005, and hold an oral summary judgment argument on January 24, 2005.

     On December 10, 2004, the Debtors, the Other Kaiser Debtors and the Senior Note Parties Filed a joint motion to stay the Guaranty Subordination Adversary Proceeding and the 7-3/4% SWD Revenue Bond Dispute pending the completion of the confirmation process for plans of liquidation for the Debtors, KAAC and KFC and requesting that the Guaranty Subordination Dispute be adjudicated in connection with confirmation of such plans if the proposed settlement of the dispute included in each such plan was not accepted. On the same date, Liverpool Filed a motion requesting that the Bankruptcy Court either (a) consolidate litigation concerning the Guaranty Subordination Dispute or (b) permit Liverpool to intervene as a defendant in the Guaranty Subordination Adversary Proceeding.

     On January 24, 2005, the Bankruptcy Court stayed the Guaranty Subordination Adversary Proceeding and ruled that the Guaranty Subordination Dispute and 7-3/4% SWD Revenue Bond Dispute will be adjudicated in connection with the confirmation of the plans of liquidation for the Debtors, KAAC and KFC. The confirmation hearing for the Plan and KAAC/KFC Plan is currently scheduled for April 13, 2005 and may be continued from time to time.

     The Plan contains the following proposed settlement of the Guaranty Subordination Dispute as it relates to the Debtors: If both Subclass 3A and Subclass 3B vote to accept the Plan, a holder of an Allowed Senior Subordinated Note Claim will receive its Pro Rata Share of $8.0 million (less any fees or expenses payable to the Senior Subordinated Note Trustee pursuant to the Senior Subordinated Note Indenture) and a holder of an Allowed Senior Note Claim will receive its Pro Rata Share of the Public Note Distributable Consideration remaining after giving effect to the payment of the $8.0 million to be made to the holders of Senior Subordinated Note Claims, the 7-3/4% SWD Revenue Bond Payment, the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payment and the Senior Notes Fee Payments. If either Subclass 3A or Subclass 3B fails to accept the Plan, the Bankruptcy Court will resolve the Guaranty Subordination Dispute with respect to the Debtors and determine the distributions to be made to the holders of Claims in Subclass 3A from the Public Note Distributable Consideration and any distributions to be made to holders of Claims in Subclass 3B from the Public Note Distributable Consideration. In such event, the distributions ultimately made to a holder of an Allowed Senior Note Claim will be reduced by such holder’s proportional share of the Senior Notes Fee Payments and, if the Bankruptcy Court determines that holders of Allowed Senior Subordinated Note Claims are not entitled to any portion of the Subclass 3A Distributable Consideration, the 7-3/4% SWD Revenue Bond Payment (or reservation in lieu thereof), if any, and any 7-3/4%

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SWD Revenue Bond Plaintiffs’ Expense Payment. Similarly, any distributions ultimately made to a holder of an Allowed Senior Subordinated Note Claim may be reduced by such holder’s proportional share of any and all fees and expenses payable to the Senior Subordinated Note Trustee, pursuant to the Senior Subordinated Note Indenture.

     Similarly, pursuant to the KAAC/KFC Plan, if holders of both the Senior Note Claims and the Senior Subordinated Note Claims vote to accept the KAAC/KFC Plan, then an additional $8.0 million will be paid to the Senior Subordinated Note Indenture Trustee for the benefit of holders of Senior Subordinated Note Claims (resulting in aggregate consideration of $16.0 million if the Plan is also accepted by the holders of the Senior Note Claims and the Senior Subordinated Note Claims), with such amount to be paid from consideration that would otherwise be distributed to holders of Allowed Senior Note Claims under the KAAC/KFC Plan, and the holders of Senior Note Claims would receive a specified percentage of the Cash and other property available for distribution to the holders of unsecured claims (less certain payments or reservations of payment therefrom). If the holders of the Senior Note Claims or the Senior Subordinated Note Claims fail to accept the KAAC/KFC Plan, the Bankruptcy Court would resolve the Guaranty Subordination Dispute with respect to KAAC and KFC and determine the distributions to be made to the holders of Senior Note Claims and any distributions to be made to holders of Senior Subordinated Note Claims under the KAAC/KFC Plan.

7-3/4% SWD Revenue Bond Dispute

     The 7-3/4% SWD Revenue Bonds Indenture Trustee has asserted entitlement to receive any direct or indirect payment or distribution on or with respect to the Senior Subordinated Notes. The Debtors are guarantors of the Senior Subordinated Notes but are not guarantors of the 7-3/4% SWD Revenue Bonds.

     On January 13, 2004, the 7-3/4% SWD Revenue Bonds Indenture Trustee and certain holders of the 7-3/4% SWD Revenue Bonds (collectively, the “7-3/4% SWD Revenue Bond Plaintiffs”) filed an adversary proceeding (i.e., the 7-3/4% SWD Revenue Bond Dispute) against the Senior Subordinated Note Indenture Trustee and KACC. This adversary proceeding is currently pending before the Bankruptcy Court. At issue is whether KACC properly designated the 7-3/4% SWD Revenue Bonds as senior indebtedness under the Senior Subordinated Note Indenture or whether the 7-3/4% SWD Revenue Bonds are otherwise entitled to treatment as senior indebtedness vis-à-vis the Senior Subordinated Notes. It is the position of the 7-3/4% SWD Revenue Bond Plaintiffs that the holders of the 7-3/4% SWD Revenue Bonds have subordination claims in respect of any distributions on the Senior Subordinated Notes under the Plan. In response to the complaint, KACC stated that it had not been able to confirm that it provided the Senior Subordinated Note Indenture Trustee with a written designation that the 7-3/4% SWD Revenue Bonds constitute senior indebtedness, which designation would subordinate the indebtedness under the Senior Subordinated Notes to the indebtedness under the 7-3/4% SWD Revenue Bonds.

     On March 26, 2004, the Senior Subordinated Note Indenture Trustee filed a motion to dismiss the 7-3/4% SWD Revenue Bond Dispute for failure to join necessary parties such as the Senior Note Indenture Trustee. On May 4, 2004, the 7-3/4% SWD Revenue Bond Plaintiffs filed a motion for summary judgment, requesting that the Bankruptcy Court either: (a) declare that KACC be deemed to have submitted the appropriate designation of senior indebtedness; (b) order KACC to designate the 7-3/4% SWD Revenue Bonds as senior indebtedness; or (c) declare that the 7-3/4% SWD Revenue Bonds are senior in terms of payment priority to the Senior Subordinated Notes. Shortly thereafter, the Senior Subordinated Note Trustee filed a motion to stay all proceedings pending the Bankruptcy Court’s decision on the motion to dismiss the 7-3/4% SWD Revenue Bond Dispute. KACC subsequently joined the motion to stay proceedings.

     On October 25, 2004, the Bankruptcy Court held a status conference on the 7-3/4% SWD Revenue Bond Dispute and ordered the parties to attempt to consensually resolve the 7-3/4% SWD Revenue Bond Dispute, as well as the Guaranty Subordination Dispute, through mediation. On November 18, 2004, the parties participated in a day-long mediation. To date, the parties have not reached a settlement, although the mediator has not, as yet, terminated the mediation proceedings. No further mediation sessions are currently scheduled.

     On November 29, 2004, the Bankruptcy Court entered orders permitting the Senior Note Indenture Trustee to intervene as a defendant in the proceeding and denying the Senior Subordinated Note Indenture Trustee’s motion to dismiss the 7-3/4% SWD Revenue Bond Dispute.

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     On December 10, 2004, the Debtors, the Other Kaiser Debtors and the Senior Note Parties Filed a joint motion to stay the 7-3/4% SWD Revenue Bond Dispute and the Guaranty Subordination Adversary Proceeding pending the completion of the confirmation process for plans of liquidation for the Debtors, KAAC and KFC and requesting that the 7-3/4% SWD Revenue Bond Dispute be adjudicated, along with the Guaranty Subordination Dispute if necessary, in connection with the confirmation of such plans.

     On December 17, 2004, the Senior Subordinated Note Indenture Trustee filed an answer in the 7-3/4% SWD Revenue Bond Dispute that included, among other things: (a) a counterclaim for declaratory judgment that the 7-3/4% SWD Revenue Bonds are not senior to the Senior Subordinated Notes; (b) a counterclaim against the 7-3/4% SWD Revenue Bond Plaintiffs for reimbursement of legal expenses incurred by the Senior Subordinated Note Indenture Trustee; (c) a cross claim against KACC for indemnification in the amount of any judgment that may be rendered in favor of the 7-3/4% SWD Revenue Bond Plaintiffs against the Senior Subordinated Note Indenture Trustee; and (d) a complaint against certain of the Debtors and Other Kaiser Debtors for indemnification in the amount of any judgment that may be rendered in favor of the 7-3/4% SWD Revenue Bond Plaintiffs against the Senior Subordinated Note Indenture Trustee.

     On January 24, 2005, the Bankruptcy Court stayed the 7-3/4% SWD Revenue Bond Dispute and ruled that the 7-3/4% SWD Revenue Bond Dispute and the Guaranty Subordination Dispute will be adjudicated in connection with the confirmation of the plans of liquidation for the Debtors, KAAC and KFC. The confirmation hearing for the Plan and KAAC/KFC Plan is currently scheduled for April 13, 2005 and may be continued from time to time.

     In connection with the development and proposal of the Plan, representatives of certain of the holders of Senior Note Claims and 7-3/4% SWD Revenue Bonds entered into negotiations in an attempt to reach a settlement in respect of the 7-3/4% SWD Revenue Bond Dispute. In early February, such representatives reached an agreement on a proposed settlement of that Dispute. Such settlement, as it relates to the Debtors, is reflected in the Plan as follows: If Subclass 3A votes to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code and, unless the holders of Senior Note Claims otherwise agree pursuant to a settlement, all holders of Allowed Senior Note Claims are entitled under the Plan to identical treatment in respect of contractual subordination claims under the Senior Subordinated Note Indenture, on the Effective Date an amount equal to the Settlement Percentage of the Cash in the Unsecured Claims Trust Account that would otherwise have been distributed in respect of the Senior Subordinated Note Claims which, after giving effect to the contractual subordination provisions of the Senior Subordinated Note Indenture and pursuant to Sections 2.4(c)(i) and 2.4(c)(ii) of the Plan (but prior to giving effect to any 7–3/4% SWD Revenue Bond Payment), is to be paid to holders of Senior Note Claims will, in full and complete satisfaction of the claims of holders of 7-3/4% SWD Revenue Bonds asserted in the 7-3/4% SWD Revenue Bond Dispute in respect of the Debtors, be paid to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of holders of 7-3/4% SWD Revenue Bonds (i.e., the 7-3/4% SWD Revenue Bond Payment). Notwithstanding the foregoing, in no event will the amount so paid, when aggregated with any amount payable under any comparable provision of the KAAC/KFC Plan, exceed $8.0 million. If the Debtors do not File a separate motion, the Plan will serve as a motion pursuant to Bankruptcy Rule 9019 seeking entry of an order approving the settlement described elsewhere in this Disclosure Statement. Unless an objection to such settlement is made in writing by any creditor or claimant affected thereby, Filed with the Bankruptcy Court and served on the parties identified in Section 12.4 of the Plan on or before April 5, 2005, such order (which will be the Confirmation Order) may be entered by the Bankruptcy Court. In the event any such objections are timely Filed, a hearing with respect thereto will occur at the Confirmation Hearing. If Subclass 3A fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the rights, if any, of the holders of 7-3/4% SWD Revenue Bonds to payments from the Public Note Distributable Consideration will be as determined in an order of the Bankruptcy Court (which may be the Confirmation Order) in connection with the determinations contemplated by Sections 2.4(c)(i)(B) and 2.4(c)(ii)(B) of the Plan; provided that if the determination with respect to the rights of the holders of 7-3/4% SWD Revenue Bonds to such payment has not been made by the Bankruptcy Court prior to the Effective Date, then, in order to ensure the funding of such payment, on the Effective Date the Distribution Trustee will reserve from the Public Note Distributable Consideration any amount that may be ordered by the Bankruptcy Court to be so reserved pending such determination. See “Overview of the Plan — 7-3/4% SWD Revenue Bond Dispute.”

     The proposed settlement also contemplates that similar provisions will be included in the KAAC/KFC Plan and that, under any plan of reorganization for KACC, the holders of claims against KACC in respect of the 7-3/4%

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SWD Revenue Bonds and the Senior Notes will share pro rata in any contractual subordination recoveries pursuant to the Senior Subordinated Note Indenture.

GENERAL INFORMATION CONCERNING THE PLAN

     THE FOLLOWING IS A SUMMARY OF SOME OF THE SIGNIFICANT ELEMENTS OF THE PLAN. THIS DISCLOSURE STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION SET FORTH IN THE PLAN ATTACHED HERETO AS EXHIBIT I AND THE EXHIBIT THERETO.

Substantive Consolidation

     In connection with confirmation of the Plan, the Debtors will seek Bankruptcy Court approval of the substantive consolidation of the Debtors for the purpose of implementing the Plan, including for purposes of voting, confirmation and distributions to be made under the Plan. Pursuant to the relevant order of the Bankruptcy Court: (a) all assets and liabilities of the Debtors will be deemed merged; (b) all guarantees by, or co-obligations of, one Debtor in respect of the obligations of the other Debtor will be deemed eliminated so that any Claim against either Debtor and any guarantee by, or co-obligation of, the other Debtor and any joint or several liability of either of the Debtors will be deemed to be one obligation of the consolidated Debtors; and (c) each and every Claim Filed or to be Filed in the Chapter 11 Case of either Debtor will be deemed Filed against the consolidated Debtors and will be deemed one Claim against and a single obligation of the consolidated Debtors. Such substantive consolidation (other than for the purpose of implementing the Plan) will not affect the legal and corporate structures of the Debtors, nor will such substantive consolidation affect or be deemed to affect any Intercompany Claim in any manner contrary to the Intercompany Claims Settlement, nor will such substantive consolidation be deemed to affect any Other Kaiser Debtor or claims against any Other Kaiser Debtor. Because the Debtors have the same joint creditors, creditors of the Debtors would receive exactly the same distributions on their Claims whether or not the Debtors are substantively consolidated. Accordingly, substantive consolidation is being sought solely for administrative convenience.

     The Plan will serve as a motion seeking entry of an order substantively consolidating the Debtors, as described, and to the limited extent set forth in, the immediately preceding paragraph. Unless an objection to such substantive consolidation is made in writing by any creditor or claimant affected by the Plan, Filed with the Bankruptcy Court and served on the parties entitled to notice thereof pursuant to the Plan on or before April 5, 2005, or such other date as may be fixed by the Bankruptcy Court, the substantive consolidation order (which will be the Confirmation Order) may be entered by the Bankruptcy Court. In the event any such objections are timely Filed, a hearing with respect thereto will occur at the Confirmation Hearing.

Executory Contracts and Unexpired Leases to be Rejected

     On the Effective Date, except for an Executory Contract or Unexpired Lease that previously was assumed and assigned or rejected by an order of the Bankruptcy Court, each Executory Contract and Unexpired Lease entered into by a Debtor prior to the Petition Date that has not previously expired or terminated pursuant to its own terms will be rejected pursuant to section 365 of the Bankruptcy Code. The Confirmation Order will constitute an order of the Bankruptcy Court approving such rejections, pursuant to section 365 of the Bankruptcy Code, as of the Effective Date.

     Notwithstanding anything in the Bar Date Order or in the Administrative Claim Bar Date Order to the contrary, if the rejection of an Executory Contract or Unexpired Lease pursuant to the Plan gives rise to a Claim by the other party or parties to such contract or lease, such Claim will be forever barred and will not be enforceable against the Debtors, the Distribution Trustee, the Debtors’ Estates or the Trust Accounts unless a proof of Claim or request for payment of Administrative Claim is Filed and served on the Distribution Trustee, pursuant to the procedures specified in the Confirmation Order, the notice of the entry of the Confirmation Order or another order of the Bankruptcy Court, no later than 30 days after the Effective Date.

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Releases, Limitation of Liability, Injunctions and Preservation of Insurance

     Release of Claims and Termination of Interests; Limitation of Liability

     Subject to the provisions of Section 2.10 of the Plan, as of the Effective Date, in consideration for the obligations of the Debtors and the Distribution Trustee under the Plan and the Cash to be distributed in connection with the Plan, each holder of a Claim that votes in favor of the Plan will be deemed to forever release and waive all claims, obligations, suits, judgments, damages, demands, debts, rights, causes of action and liabilities (other than the right to enforce the Debtors’ or the Distribution Trustee’s obligations under the Plan and the contracts, instruments, releases and other agreements and documents delivered thereunder), whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising in law, equity or otherwise, that are based in whole or in part on any act, omission, transaction or other occurrence taking place on or prior to the Effective Date in any way relating to a Debtor, the Chapter 11 Cases or the Plan that such entity has, had or may have against the Creditors’ Committee, its members, any Indenture Trustee, either Debtor and any of their respective present or former directors, officers, employees, agents, advisors, attorneys, accountants, underwriters, investment bankers or other representatives, acting in such capacity, except for those based on (a) acts or omissions of any such person constituting gross negligence or willful misconduct or (b) contractual obligations of, or loans owed by, any such person to a Debtor.

     As of the Effective Date, for good and valuable consideration, the adequacy of which is confirmed by the Plan, the Debtors on behalf of themselves, their Estates, creditors and Interest holders will be deemed to release, waive and discharge all claims and rights of any nature in connection with or related to the Debtors, the Chapter 11 Cases or the Plan (other than the rights of the Distribution Trustee to enforce the Plan and any contracts, instruments, releases and other agreements and documents delivered thereunder, and to pursue objections to and resolve Disputed Claims), whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising (including, without limitation, those arising under the Bankruptcy Code), based on any act, omission or occurrence on or before the Effective Date, against the Creditors’ Committee, its members, any Indenture Trustee, any of the Debtors’ present or former directors or officers, or any of the respective present or former directors, officers, employees, agents, advisors, attorneys, accountants, underwriters, investment bankers or other representatives of the Debtors, the Creditors’ Committee, its members, or the Indenture Trustees, acting in such capacity, except for such Claims or rights based on (a) acts or omissions of any such person constituting gross negligence or willful misconduct or (b) contractual obligations of, or loans owed by, any such person to a Debtor.

     The Debtors, the Distribution Trust, the Distribution Trustee, the Indenture Trustees and their respective directors, officers, employees and professionals, acting in such capacity, and the Creditors’ Committee, its members and their respective professionals will neither have nor incur any liability to any entity for any act taken or omitted to be taken in connection with or related to the formulation, preparation, dissemination, implementation, confirmation or consummation of the Plan, this Disclosure Statement, or any contract, instrument, release or other agreement or document created or entered into, or any other act taken or omitted to be taken, in connection with the Plan; such provisions will have no effect on: (a) the liability of any entity that would otherwise result from the failure to perform or pay any obligation or liability under the Plan or any contract, instrument, release or other agreement or document to be entered into or delivered in connection with the Plan; or (b) the liability of any entity that would otherwise result from any such act or omission to the extent that such act or omission is determined in a Final Order to have constituted gross negligence or willful misconduct.

     Injunctions

     Except as otherwise provided in the Plan or the Confirmation Order, as of the Effective Date, all entities that have held, currently hold or may hold a Claim or other debt or liability of the Debtors, or an Interest or other right of an equity security holder with respect to the Debtors, that is released, waived, settled or deemed satisfied pursuant to the Plan will be permanently enjoined from taking any of the following actions on account of any such Claims, debts, liabilities, Interests or rights: (a) commencing or continuing in any manner any action or other proceeding against the Debtors, the Distribution Trust, the Distribution Trustee or the property of any of them other than to enforce any right pursuant to the Plan to a distribution

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from the Trust Accounts; (b) enforcing, attaching, collecting or recovering in any manner any judgment, award, decree or order against the Debtors, the Distribution Trust or the Distribution Trustee, other than as described in (a) above; (c) creating, perfecting or enforcing any Lien or encumbrance against the Debtors, the Distribution Trust, the property of any of them or the Trust Accounts; (d) asserting a setoff, right of subrogation or recoupment of any kind against any debt, liability or obligation due to the Distribution Trust; and (e) commencing or continuing any action, in any manner, in any place that does not comply with or is inconsistent with the provisions of the Plan.

     Preservation of Insurance

     Nothing in the Plan will diminish or impair the enforceability of any insurance policies that may cover Claims against either Debtor.

Means for Implementation of the Plan

     Liquidating Transactions

     On the Effective Date, the Distribution Trust Assets will be transferred to and vest in the Distribution Trust, free and clear of Claims, Liens and Interests, except as may be otherwise provided in the Intercompany Claims Settlement. On or after the Effective Date, the Debtors will enter into such transactions and will take such actions as may be necessary or appropriate to merge, dissolve or otherwise terminate the corporate existence of the Debtors. Notwithstanding the foregoing and regardless of whether the actions in the preceding sentence have yet been taken with respect to a particular Debtor, upon the transfer of the Distribution Trust Assets to the Distribution Trust, the Debtors will be deemed dissolved and their business operations withdrawn for all purposes without any necessity of filing any document, taking any further action or making any payment to any governmental authority in connection therewith.

     Corporate Action

     The following (which will occur and be deemed effective as of the date specified in the documents effectuating the same or, if no date is so specified, the Effective Date) will be deemed authorized and approved in all respects and for all purposes without any requirement of further action by KACC, as the sole stockholder of each Debtor, by the directors of either Debtor or by the Distribution Trustee or any other person or entity:

•   the Liquidating Transactions;

•   the establishment of the Distribution Trust;

•   the appointment of the Distribution Trustee to act on behalf of the Distribution Trust;

•   the transfer of the Distribution Trust Assets to the Distribution Trust;

•   the creation of the Trust Accounts;

•   the distribution of Cash pursuant to the Plan;

•   the adoption, execution, delivery and implementation of all contracts, instruments, releases and other agreements or documents related to any of the foregoing;

•   the adoption, execution and implementation of the Distribution Trust Agreement; and

•   the other matters provided for under the Plan involving the corporate structure of either Debtor or corporate action to be taken by, or required of, either Debtor or the Distribution Trustee.

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     No Revesting of Assets

     The property of the Debtors’ Estates will not revest in the Debtors on or after the Effective Date but will vest in the Distribution Trust to be administered by the Distribution Trustee in accordance with the Plan and the Distribution Trust Agreement.

     Recourse Solely to Trust Accounts

     The Liquidating Transactions will not in any way merge the assets of the Debtors’ Estates, including the Trust Accounts. All Claims against the Debtors are deemed fully satisfied in exchange for the treatment of such Claims under the Plan, and holders of Allowed Claims against either Debtor will have recourse solely to the applicable Trust Accounts for the payment of their Allowed Claims in accordance with the terms of the Plan.

     Release of Liens

     Except as otherwise provided in the Plan or in any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, on the Effective Date all Liens against the property of either Estate will be fully released, and all of the right, title and interest of any holder of such Liens, including any rights to any collateral thereunder, will attach to and be enforceable solely against the applicable Distribution Trust Assets held in the applicable Trust Account in accordance with, and subject to the terms of, the Plan. All such Liens against the Distribution Trust Assets will be fully released upon the holder of the Lien receiving its full distribution under the Plan, or upon the Effective Date if the holder of the Lien is not entitled to any distribution under the Plan.

     Exemption from Certain Taxes

     Pursuant to section 1146(c) of the Bankruptcy Code, the following will not be subject to any stamp Tax, real estate transfer Tax, sales or use Tax or similar Tax: (a) any Liquidating Transaction; (b) the execution and implementation of the Distribution Trust Agreement, including any transfers to or by the Distribution Trust; or (c) the making or delivery of any deed or other instrument of transfer under, in furtherance of or in connection with the Plan, including any merger agreements or agreements of consolidation, disposition, liquidation or dissolution executed in connection with any transaction pursuant to the Plan.

Distribution Trust

     Creation of the Distribution Trust

     On the Effective Date, the Debtors and the Distribution Trustee will enter into the Distribution Trust Agreement, thereby creating the Distribution Trust.

     The Distribution Trustee, whose identity and address will be disclosed at least ten days prior to the Confirmation Hearing, will be selected by the Creditors’ Committee with the consent of the Debtors, and will be the exclusive trustee of the assets of the Distribution Trust for purposes of 31 U.S.C. § 3713(b) and 26 U.S.C. § 6012(b)(3), as well as the “representative of the estate” of each of the Debtors under section 1123(b)(3)(B) of the Bankruptcy Code.

     On the Effective Date, the Debtors will transfer to the Distribution Trust all the Distribution Trust Assets then owned by the Estates, whereupon title to such Distribution Trust Assets will irrevocably vest in the Distribution Trust, free and clear of Claims, Liens and Interests.

     Distribution Trust Assets

     The Distribution Trust Assets include: (a) the Trust Accounts and any Cash held by such Trust Accounts; (b) the rights of the Debtors under or in respect of the Intercompany Claims Settlement, the Alpart Purchase Agreement or any causes of action not released by the Plan, including the Recovery Actions, and any proceeds

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thereof; and (c) the Alpart Proceeds to the extent that such funds are not included in the foregoing clauses (a) and (b).

     Purposes of the Distribution Trust

     The Distribution Trust will be established pursuant to the Distribution Trust Agreement for the following purposes and no other:

•   collecting, maintaining and administering any Distribution Trust Assets for the benefit of the creditors and claimants of the Estates (collectively, the “Beneficiaries”);

•   liquidating (including objecting to Claims and determining the proper recipients and amounts of distributions to be made from the Distribution Trust) and distributing the Distribution Trust Assets for the benefit of the Beneficiaries who are determined to hold Allowed Claims as expeditiously as reasonably possible;

•   pursuing available causes of action, including Recovery Actions;

•   closing the Chapter 11 Cases; and

•   otherwise implementing the Plan and completing the dissolution of the Debtors;

all in accordance with the Plan and the Distribution Trust Agreement. The Distribution Trust will have no objective to, and will not, engage in the conduct of a trade or business and will terminate upon the completion of its liquidation and distribution duties pursuant to the terms of the Distribution Trust Agreement.

     Tax Treatment

     The Distribution Trust is intended to be treated, for U.S. federal income Tax purposes, in part as a liquidating trust within the meaning of Treasury Regulations section 301.7701-4(d), for the benefit of the holders of Allowed Claims entitled to distributions of Pending Payments (as defined below), and otherwise as one or more disputed ownership funds within the meaning of Proposed Treasury Regulations section 1.468B-9(a), as more specifically provided for under the Distribution Trust Agreement. Accordingly, for all federal income Tax purposes the transfer of Distribution Trust Assets to the Distribution Trust will be treated as: (a) to the extent of identified amounts (excluding undeliverable Cash) held by the Distribution Trust for distribution to holders of Allowed Claims in specific amounts as of the date the Distribution Trust receives the applicable Distribution Trust Assets (“Pending Payments”), a transfer of the Pending Payments directly from the Debtors to the holders of such Allowed Claims followed by the transfer of such Pending Payments by the holders of Allowed Claims to the Distribution Trust in exchange for beneficial interests in the Distribution Trust; and (b) to the extent of amounts that are not Pending Payments, as a transfer to one or more disputed ownership funds. The holders of Allowed Claims entitled to distributions of Pending Payments will be treated for federal income Tax purposes as the grantors and deemed owners of their respective shares of the Distribution Trust Assets in the amounts of the Pending Payments and any earnings thereon.

     The Distribution Trustee will be required by the Distribution Trust Agreement to file federal Tax returns for the Distribution Trust as a grantor trust with respect to any Pending Payments and as one or more disputed ownership funds with respect to all other funds or other property held by the Distribution Trust pursuant to applicable Treasury Regulations, and any income of the Distribution Trust will be treated as subject to Tax on a current basis. The Distribution Trust Agreement will provide that the Distribution Trustee will pay such Taxes from the Distribution Trust Assets as required by law and in accordance with the provisions of the Plan described in “Distributions Under the Plan — Treatment of Disputed Claims.” In addition, the Distribution Trust Agreement will require consistent valuation by the Distribution Trustee and the Beneficiaries, for all federal income Tax purposes, of any property held by the Distribution Trust. The Distribution Trust Agreement will provide that termination of the trust will occur no later than two years after the Effective Date, unless the Bankruptcy Court approves an extension based upon a finding that such an extension is necessary for the Distribution Trust to complete its claims resolution and liquidating purpose. The Distribution Trust Agreement also will limit the investment powers of the Distribution Trustee in accordance with IRS Rev. Proc. 94-45 and will require the Distribution Trust to distribute at

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least annually to the Beneficiaries (as such may have been determined at such time) its net income (net of any payment of or provision for Taxes), except for amounts retained as reasonably necessary to maintain the value of the Distribution Trust Assets or to meet Claims and contingent liabilities (including Disputed Claims).

     Trust Accounts

     On or prior to the Effective Date, the Trust Accounts will be established in federal insured United States banks in the name of the Distribution Trustee or one or more third-party Disbursing Agents. On the Effective Date, the Trust Accounts and the contents thereof will be transferred to, and irrevocably vest in, the Distribution Trust.

          Distribution Trust Expenses Account

     No later than ten days prior to the commencement of the Confirmation Hearing, the Creditors’ Committee and the Debtors will agree on the amount to be funded into the Distribution Trust Expenses Account on the Effective Date. On the Effective Date, the Distribution Trust Expenses Account will be funded by the transfer of Cash in such amount from the Distribution Trust Assets. The Distribution Trustee will act as the Disbursing Agent for the Distribution Trust Expenses Account. See “Overview of the Plan — Sources and Uses of Cash.”

     Except as otherwise ordered by the Bankruptcy Court, the Distribution Trustee, in its capacity as Disbursing Agent, will, in its reasonable discretion, pay Distribution Trust Expenses from the Distribution Trust Expenses Account, without the need for further Bankruptcy Court approval. Cash in the Distribution Trust Expenses Account will also be used to pay Taxes owing in respect of any amounts included in the Distribution Trust Expenses Account in accordance with the Distribution Trust Agreement. At least five Business Days prior to making any payment from the Distribution Trust Expenses Account, the Distribution Trustee will provide the Steering Committee with a notice setting forth the amount and nature of such payment, with such notice to be accompanied by supporting documentation in reasonable detail.

     If, at any time after the initial funding of the Distribution Trust Expenses Account as contemplated above, the Distribution Trustee determines, in its reasonable discretion, that the Cash balance of the Distribution Trust Expenses Account will be insufficient to make all payments payable therefrom in accordance with the terms of the Plan and the Distribution Trust Agreement, the Distribution Trustee may transfer from the Unsecured Claims Trust Account (to the extent Cash remains available therein) to the Distribution Trust Expenses Account Cash in an aggregate amount determined by the Distribution Trustee, in its reasonable discretion, to be necessary to ensure that the Cash balance of the Distribution Trust Expenses Account will be sufficient to make all such payments. To the fullest extent possible, any transfer described in this paragraph will be accomplished in a manner intended to avoid or minimize any adverse impact on the ability to make full distributions to holders of Allowed Secured Claims, Allowed Administrative Claims, Allowed Priority Claims and Allowed Priority Tax Claims or distributions to holders of Allowed Unsecured Claims in accordance with the terms of the Plan.

     If, at any time after the initial funding of the Distribution Trust Expenses Account as contemplated above, the Distribution Trustee determines that the Cash balance of the Distribution Trust Expenses Account is in excess of the amount that will be sufficient to make all payments payable therefrom in accordance with the terms of the Plan and the Distribution Trust Agreement, the Distribution Trustee, with the consent of the Steering Committee, acting through a majority thereof, may transfer such excess Cash to the Unsecured Claims Trust Account.

          Priority Claims Trust Account

     No later than ten days prior to the commencement of the Confirmation Hearing, the Creditors’ Committee and the Debtors will agree on the amount to be funded into the Priority Claims Trust Account on the Effective Date. On the Effective Date, the Priority Claims Trust Account will be funded by the transfer of Cash in such amount from the Distribution Trust Assets. For purposes of the funding of the Priority Claims Trust Account, any and all Taxes ultimately determined to be due and owing from the Debtors to the Government of Jamaica for any taxable period (including interest and penalties, if any, determined and calculated under applicable Jamaican law without regard to the provisions of section 502(b)(2) of the Bankruptcy Code or any other provision of U.S. federal, state or local law) will be treated as Allowed Priority Tax Claims or Allowed Administrative Claims, as the case may be, and will be

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paid in full in Cash in accordance with the Plan following the determination of the amount or amounts of such Tax liability. Until such determination, any such potential Tax obligation in respect of the Jamaican Tax Claims will be treated as a Disputed Claim. See “Overview of the Plan - - Sources and Uses of Cash” and “Operations During the Chapter 11 Cases — Certain Jamaican Tax Matters.”

     Cash in the Priority Claims Trust Account will be used by the Distribution Trustee only to (a) satisfy Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Priority Claims and Allowed Secured Claims against the Estate of AJI or the Estate of KJC in accordance with the terms of the Plan and (b) pay Taxes owing in respect of any amounts included in the Priority Claims Trust Account in accordance with the Distribution Trust Agreement.

     If, at any time after the initial funding of the Priority Claims Trust Account as contemplated above, the Distribution Trustee determines, in its reasonable discretion, that the Cash balance of the Priority Claims Trust Account is insufficient to make all payments payable therefrom in accordance with the terms of the Plan and the Distribution Trust Agreement, the Distribution Trustee will transfer from the Unsecured Claims Trust Account (to the extent Cash remains available therein) to the Priority Claims Trust Account Cash in an amount determined by the Distribution Trustee, in its reasonable discretion, to be necessary to ensure that the Cash balance of the Priority Claims Trust Account will be sufficient to so make all such payments. To the fullest extent possible, any transfer described in this paragraph will be accomplished in a manner intended to avoid or minimize any adverse impact on the ability to make distributions to holders of Allowed Unsecured Claims in accordance with the Plan.

     If, at any time after the initial funding of the Priority Claims Trust Account described above, the Distribution Trustee determines that the Cash balance of the Priority Claims Trust Account is in excess of the amount that will be sufficient to make all payments payable therefrom in accordance with the Plan and the Distribution Trust Agreement, the Distribution Trustee, with the consent of the Steering Committee, acting through a majority thereof, may transfer such excess Cash to the Unsecured Claims Trust Account.

          Unsecured Claims Trust Account

     On the Effective Date, after the initial funding of the Distribution Trust Expenses Account as described in “Distribution Trust Expenses Account” above and the initial funding of the Priority Claims Trust Account as described in “Priority Claims Trust Account” above, the Distribution Trustee will (a) from the Distribution Trust Assets, (i) make an allowance for the allocation to the Public Note Distributable Consideration of, and pay therefrom, an amount equal to the aggregate fees payable to the Senior Note Parties pursuant to the Plan up to an aggregate amount not to exceed $1.5 million (i.e., up to $1.5 million of the Senior Notes Fee Payments) and (ii) make any Intercompany Settlement Payments and (b) thereafter fund the Unsecured Claims Trust Account with the remainder of the Distribution Trust Assets, all as provided in the Distribution Trust Agreement.

     Cash in the Unsecured Claims Trust Account will be used by the Distribution Trustee only to (a) satisfy Allowed Unsecured Claims against the Estate of AJI or the Estate of KJC in accordance with the terms of the Plan, (b) pay amounts to be deducted from the Public Note Distributable Consideration in accordance with the terms of the Plan (except the extent allowance has been made therefor as described in clause (a)(i) in the immediately preceding paragraph), and (c) pay Taxes owing in respect of any amounts included in the Unsecured Claims Trust Account.

          Disputed Claims Reserve

     It is currently contemplated that, on the Effective Date, in connection with the initial funding of the Priority Claims Trust Account as described above, the Distribution Trustee will designate, with the consent of the Creditors’ Committee and KACC, a specified portion of such initial funding as a Disputed Claims Reserve to be retained in such Trust Account to satisfy any Disputed Administrative Claims, Disputed Priority Tax Claims, Disputed Priority Claims and Disputed Secured Claims against the Estate of AJI or the Estate of KJC in accordance with the Plan, if, as and when they are allowed or, to the extent such Disputed Claims are not allowed, to satisfy Claims that are allowed in accordance with the terms of the Plan. In connection with any subsequent transfer of Cash to the Priority Claims Trust Account as described above, the Distribution Trustee will designate amounts so transferred, to the extent they are not identified as Pending Payments, as Disputed Claims Reserves to be retained in such Trust

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Account to satisfy Disputed Administrative Claims, Disputed Priority Tax Claims, Disputed Priority Claims and Disputed Secured Claims against the Estate of AJI or the Estate of KJC in accordance with the Plan, if, as and when they are allowed or, to the extent such Disputed Claims are not allowed, to satisfy Claims that are allowed in accordance with the terms of the Plan.

     Further, it is contemplated that on the Effective Date, in connection with the initial funding of the Unsecured Claims Trust Account as contemplated above, the Distribution Trustee will designate a specified portion of such initial funding as a Disputed Claims Reserve to be retained in such Trust Account to satisfy any Disputed Unsecured Claims against the Estate of AJI of the Estate of KJC in accordance with the terms of the Plan, if, as and when they are allowed or, to the extent such Disputed Claims are not allowed, to satisfy Claims that are allowed in accordance with the terms of the Plan. In connection with any subsequent transfers of Cash to the Unsecured Claims Trust Account in accordance with the Distribution Trust Agreement, the Distribution Trustee will designate all amounts so transferred, to the extent not identified as Pending Payments, as Disputed Claims Reserves to be retained in such Trust Account to satisfy the Disputed Unsecured Claims against the Estate of AJI or the Estate of KJC in accordance with the terms of the Plan, if, as and when they are allowed or, to the extent such Disputed Claims are not allowed, to satisfy Claims that are allowed in accordance with the terms of the Plan.

     Any Cash that becomes available to the Distribution Trust, following the Effective Date, including as a result of the receipt of any income or interest generated by the investment of Cash held in the Unsecured Claims Trust Account, will be deposited in the Unsecured Claims Trust Account.

          Undeliverable Cash Trust Account

     After the Effective Date, if any distribution to a holder of an Allowed Unsecured Claim is returned to the Distribution Trustee as undeliverable, the Distribution Trustee will deposit the undeliverable Cash in the Undeliverable Cash Trust Account. The Distribution Trustee will hold such funds, in a book-entry sub-account in the Undeliverable Cash Trust Account, for the benefit of such holder. Until such holder notifies the Distribution Trustee in writing of its then-current address, as contemplated by the Distribution Trust Agreement no attempt will be made to deliver subsequent distributions to such holder and any such distributions that such holder would otherwise be entitled to receive instead will be transferred from the Unsecured Claims Trust Account to the Undeliverable Cash Trust Account and credited to such book-entry sub-account. All Cash held in such book-entry sub-account for the benefit of such holder will be invested by the Distribution Trustee in a manner consistent with the investment and deposit guidelines set forth in the Distribution Trust Agreement. Any income or interest generated from such investment activities will be held in such book-entry sub-account for the benefit of such holder until such holder notifies the Distribution Trustee in writing of its then-current address, as contemplated by the Distribution Trust Agreement. Subject to the provisions of the Distribution Trust Agreement relating to the forfeiture of certain undeliverable distributions, when such holder notifies the Distribution Trustee in writing of its then-current address as contemplated by the Distribution Trust Agreement, the Distribution Trustee will deliver to such holder all Cash contained in such book-entry sub-account (net of provision for Taxes owing in respect of amounts included in such book-entry sub-account in accordance with the Distribution Trust Agreement). In the event such holder’s right to assert a claim for undeliverable distributions is forfeited as contemplated by the Distribution Trust Agreement, all Cash contained in such book-entry sub-account will be transferred from the Undeliverable Cash Trust Account to the Unsecured Claims Trust Account for redistribution to holders of Allowed Unsecured Claims entitled to distributions therefrom. See “Distributions Under the Plan — Undeliverable or Unclaimed Distributions.”

          Risks Associated with Funding of Trust Accounts

     A holder of a Disputed Claim that ultimately becomes an Allowed Claim will have recourse only to the undistributed Cash held in the Disputed Claim Reserve of the applicable Trust Account (net of Taxes on such Disputed Claim Reserves) for the satisfaction of such Allowed Claims and not to any other Trust Account or any assets previously distributed on account of any Allowed Claim.

     The funding of the Distribution Trust Expenses Account and the Priority Claims Trust Account will be based on the Debtors’ estimates of the amount of liabilities to be funded from these Trust Accounts. There is no assurance that these estimates will be accurate and, despite the Debtors’ best efforts, it is possible that the Cash in

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these Trust Accounts may be insufficient to satisfy the Distribution Trust Expenses and/or the Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Priority Claims and Allowed Secured Claims against the Debtors’ Estates. Although the Plan provides certain mechanisms to further fund any deficiencies in these Trust Accounts, it is possible that insufficient Cash may be available to fund any deficiency. Based on information currently available, the Debtors do not believe that these risks are material.

     Powers of the Distribution Trustee

          General Powers

     The Distribution Trustee will have only the rights, powers and privileges to act on behalf of the Distribution Trust expressly provided in the Plan and the Distribution Trust Agreement. The Distribution Trustee will be empowered to, among other things:

•   execute all agreements, instruments and other documents and effect all other actions necessary to implement the Plan;

•   establish, maintain and administer the Trust Accounts;

•   accept, preserve, receive, collect, manage, invest, supervise and protect the Distribution Trust Assets (directly or through one or more third-party Disbursing Agents), each in accordance with the Plan and the Distribution Trust Agreement;

•   liquidate, transfer or otherwise dispose of the Distribution Trust Assets or any part thereof or any interest therein upon such terms as the Distribution Trustee determines to be necessary, appropriate or desirable, pursuant to the procedures for allowing Claims and making distributions prescribed in the Plan, and otherwise consistent with the terms of the Plan;

•   calculate and make distributions of the Distribution Trust Assets to holders of Allowed Claims pursuant to the procedures for allowing Claims and making distributions prescribed in the Plan;

•   comply with the Plan and exercise its rights and fulfill its obligations thereunder;

•   review, reconcile, settle or object to Claims and resolve any such objections as set forth in the Plan and the Distribution Trust Agreement;

•   investigate and, if appropriate, pursue any Recovery Actions or other available causes of action (including any actions previously initiated by the Debtors and pending as of the Effective Date) and raise any defenses in any adverse actions or counterclaims;

•   retain and compensate, without further order of the Bankruptcy Court, the services of professionals or other persons or entities to represent, advise and assist the Distribution Trustee in the fulfillment of its responsibilities in connection with the Plan and the Distribution Trust Agreement;

•   take such steps as are necessary, appropriate or desirable to coordinate with representatives of the estates of the Other Kaiser Debtors;

•   take such actions as are necessary, appropriate or desirable to close the Chapter 11 Cases;

•   file appropriate Tax returns on behalf of the Distribution Trust and Debtors and pay Taxes or other obligations owed by the Distribution Trust;

•   exercise the rights, and fulfill the obligations of, the Debtors under the Alpart Purchase Agreement;

•   pay all Distribution Trust Expenses using the Distribution Trust Expenses Account;

•   execute, deliver and perform such other agreements and documents or exercise such other powers and duties as the Distribution Trustee determines, in its reasonable discretion, to be necessary,

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	appropriate or desirable to accomplish and implement the purposes and provisions of the Distribution Trust as set forth in the Plan and the Distribution Trust Agreement;
•	take such actions as are necessary, appropriate or desirable to terminate the existence of the Debtors under the laws of Jamaica; and
•	terminate the Distribution Trust in accordance with the terms of the Plan and Distribution Trust Agreement.

     Except as otherwise provided in the Plan or the Distribution Trust Agreement, the Distribution Trustee will not be required to obtain the order or approval of the Bankruptcy Court or any other court of competent jurisdiction in, or account to the Bankruptcy Court or any other court of competent jurisdiction for, the exercise of any right, power or privilege conferred under the Distribution Trust Agreement.

          Right to Object to Claims

     Except as otherwise provided in the Plan or the Distribution Trust Agreement, after the Effective Date only the Distribution Trustee, on behalf of the Distribution Trust, with the prior consent of the Steering Committee, acting through a majority thereof, will have the authority to File, settle, compromise, withdraw or litigate to judgment objections to Claims, including pursuant to any alternative dispute resolution or similar procedures approved by the Bankruptcy Court. After the Effective Date, the Distribution Trustee, with the prior consent of the Steering Committee, acting through a majority thereof, may settle or compromise any Disputed Claim without approval of the Bankruptcy Court in accordance with the Distribution Trust Agreement.

          Right to Pursue Causes of Action

     Except as otherwise provided in the Plan or in any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, in accordance with section 1123(b) of the Bankruptcy Code, the Distribution Trustee will retain and may enforce any claims, demands, rights and causes of action that either Debtor or Estate may hold against any entity, including the Recovery Actions, to the extent not expressly released under the Plan. In particular, the Distribution Trustee will retain the right to pursue any adversary proceedings available to the Debtors in connection with the Alpart Purchase Agreement or the Intercompany Claims Settlement.

     Limitation on Liability and Indemnification of Distribution Trustee

     In exercising its rights under the Distribution Trust Agreement, the Distribution Trustee will be obligated to use the same degree of care and skill as an individual of ordinary prudence, discretion and judgment would exercise or use in such individual’s own affairs. The Distribution Trustee, however, will incur no liability for any action taken or omitted to be taken in connection with the Plan or the Distribution Trust Agreement except liability that would otherwise result from (a) a failure to perform or pay any obligation or liability thereunder or (b) an act or omission that is determined in a Final Order to have constituted bad faith, fraud, willful misconduct, gross negligence or a breach of its fiduciary duties.

     The Distribution Trustee and the members of the Steering Committee will be indemnified by the Distribution Trust from the Distribution Trust Expenses Trust Account for any losses, claims, damages, liabilities or expenses, including reasonable attorneys’ fees, disbursements and related expenses, that the Distribution Trustee may incur or to which the Distribution Trustee may become subject in connection with any action, suit, proceeding or investigation brought by or threatened against the Distribution Trustee on account of the acts or omissions of the Distribution Trustee in its capacity as such, provided that the Distribution Trust will not be liable to indemnify the Distribution Trustee for any act or omission constituting bad faith, fraud, willful misconduct, gross negligence or a breach of its fiduciary duties. The Distribution Trustee will be entitled to obtain advances from the Distribution Trust Expenses Account to cover expenses of defending itself in any action brought against it as a result of actions or omissions, actual or alleged, of the Distribution Trustee in its capacity as such, so long as the Distribution Trustee provides an undertaking to repay the amounts so advanced to the Distribution Expenses Trust Account upon the entry of a Final Order finding that the Distribution Trustee was not entitled to indemnity.

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     Removal and Resignation of the Distribution Trustee; Filling of Vacancy

     The Distribution Trustee may be removed at any time by Final Order of the Bankruptcy Court. Such removal will be effective as specified in such Final Order.

     The Distribution Trustee may resign at any time by giving the Bankruptcy Court at least 30 days’ written notice of its intention to do so. Such resignation will be effective on the latest of: (a) the date specified in the notice; (b) the date that is 30 days after the notice is delivered; (c) the date the Distribution Trustee delivers a full and complete accounting of assets received, disbursed and held to the Bankruptcy Court; and (d) the date the successor Distribution Trustee accepts its appointment as such.

     The Indenture Trustees and the PBGC together will identify a successor Distribution Trustee to fill any vacancy and request the Bankruptcy Court’s approval of the identity and terms of engagement of such successor Distribution Trustee. The Distribution Trust Agreement will provide for a dispute resolution mechanism in the event that the Indenture Trustees and the PBGC cannot agree on a successor Distribution Trustee.

     Compensation of the Distribution Trustee

     The Distribution Trustee will receive fair and reasonable compensation for its services, with such compensation to be paid from the Distribution Trust Expenses Account. In addition, reasonable costs, expenses and obligations incurred by the Distribution Trustee in administering the Distribution Trust, in carrying out its other responsibilities under the Distribution Trust Agreement, or in any manner connected, incidental or related thereto will be paid, at the direction of the Distribution Trustee, from the Distribution Trust Expenses Account.

     Books and Records; Reports and Tax Filings

          Books and Records

     The Distribution Trustee will maintain books and records containing a description of all property from time to time constituting the Distribution Trust Assets (which assets will be valued consistently for all federal income Tax purposes) and an accounting of all receipts and disbursements. Such books and records will be open to inspection by any Beneficiary or the Bankruptcy Court at any reasonable time during normal business hours. The fiscal year of the Distribution Trust will be the calendar year.

          Reports to be Filed with the Bankruptcy Court

     Within 45 days after the end of each of the first three calendar quarters of the calendar year, the Distribution Trustee will File an unaudited report with the Bankruptcy Court reflecting: (a) all Distribution Trust Assets received by the Distribution Trust during such calendar quarter; (b) all Distribution Trust Assets held by the Distribution Trust at the end of such quarter; and (c) all Distribution Trust Assets disbursed during such calendar quarter, in each case itemized for the individual Trust Accounts (a “Quarterly Receipts/Disbursements Report”).

     Within 90 days after the end of each calendar year, the Distribution Trustee will File an unaudited report with the Bankruptcy Court reflecting: (a) all Distribution Trust Assets received by the Distribution Trust during such calendar year; (b) all Distribution Trust Assets held by the Distribution Trust at the end of such calendar year; and (c) all Distribution Trust Assets disbursed during such calendar year, in each case itemized for the individual Trust Accounts (an “Annual Receipts/Disbursements Report”).

     In the event of developments affecting the Distribution Trust in any material respect (as determined by the Distribution Trustee in its reasonable discretion), the Distribution Trustee will File promptly with the Bankruptcy Court a report describing such development in reasonable detail (a “Current Report”).

     The Distribution Trustee will furnish or otherwise make available to any then-current Beneficiary, upon written request, a copy of: (a) the most recent Annual Receipts/Disbursements Report; (b) any Quarterly Receipts/Disbursements Report for any period subsequent to the period covered by the most recent Annual

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Receipts/Disbursements Report (or, if no Annual Receipts/Disbursements Report has yet been Filed, for any period subsequent to the Effective Date); or (c) any Current Report Filed subsequent to the period covered by the most recent Annual Receipts/Disbursements Report (or, if no Annual Receipts/Disbursements Report has yet been Filed, subsequent to the Effective Date).

          Tax Returns and Payments

     The Distribution Trustee will be responsible for filing all foreign, U.S. federal, state and local Tax returns for the Distribution Trust and Debtors and for the timely preparation and distribution to the Beneficiaries of any necessary foreign, U.S. federal, state or local information returns. Notwithstanding any other provision of the Distribution Trust Agreement, the Distribution Trustee will not be obligated to deliver any such information returns to holders of Disputed Claims in their capacity as such.

     The Distribution Trustee will timely file Tax returns for the Trust Accounts as a grantor trust and/or a liquidating trust under Treasury Regulations section 1.671-1(a) and/or Treasury Regulations section 301.7701-4(d) and related regulations with respect to Pending Payments. Pursuant to such provisions, for federal income Tax purposes the Distribution Trustee will allocate to Beneficiaries entitled to receive Pending Payments their pro rata shares of any income or loss of the Trust Accounts, and such Beneficiaries will be subject to Tax on the Trust Accounts’ taxable income on a current basis.

     With respect to the Trust Accounts (excluding amounts constituting Pending Payments), the Distribution Trustee will timely (a) file such income Tax and other returns and statements as are required to comply with (i) the applicable provisions of the IRC and the Treasury Regulations promulgated thereunder, including the requirements set forth in Proposed Treasury Regulations section 1.468B-9(c)(1) and (ii) any applicable state and local law and the regulations promulgated thereunder and (b) pay from the applicable Trust Account any Taxes reported as owing on such returns and statements.

     Term of the Distribution Trust

     The Distribution Trust will terminate upon:

•   the payment of all costs, expenses and obligations incurred in connection with administering the Distribution Trust;

•   the distribution of all remaining Distribution Trust Assets and/or proceeds therefrom in accordance with the provisions of the Plan, the Confirmation Order and the Distribution Trust Agreement;

•   the closure of the Chapter 11 Cases; and

•   the completion of any necessary or appropriate reports, Tax returns or other documentation.

     If the Distribution Trust has not been previously terminated as described above, on the second anniversary of the Effective Date, unless otherwise extended by the Bankruptcy Court due to the Distribution Trust’s necessity to complete its claims resolution and liquidating purpose, and provided such extension does not adversely affect the status of the Distribution Trust for federal income Tax or federal securities law purposes, the Distribution Trustee will distribute all of the Distribution Trust Assets to the Beneficiaries in accordance with the Plan and the Distribution Trust Agreement.

DISTRIBUTIONS UNDER THE PLAN

Method of Distributions to Holders of Allowed Claims

     The Distribution Trustee will make all distributions of Cash required under the Plan. The Distribution Trustee will serve without bond and may employ or contract with other entities to assist in, or make the distributions required by, the Plan and the Distribution Trust Agreement. Unless the context otherwise requires, all references to the Distribution Trustee contained in this section will be deemed to be references to the Distribution Trustee in its

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capacity as Disbursing Agent and, in the event the Distribution Trustee employs or contracts with one or more other entities to assist in, or make the distributions required by, the Plan and the Distribution Trust Agreement as contemplated by the immediately preceding sentence, to any such third-party Disbursing Agent in its capacity as such. Notwithstanding the foregoing, the Distribution Trustee will act as the Disbursing Agent for the Distribution Expenses Trust Account.

Delivery of Distributions

     Generally

     Except as otherwise provided in the Plan, distributions in respect of Allowed Claims will be made to holders of such Claims as of the Distribution Record Date at the addresses set forth in the applicable Claims Report. Prior to making any distribution to a Beneficiary, the Distribution Trustee may request written notification of the Beneficiary’s federal taxpayer identification number or social security number if the Distribution Trustee determines, in its reasonable discretion, that such information (a) is necessary to fulfill its Tax reporting and withholding obligations and (b) has not been provided in the applicable Claims Report or otherwise. The Distribution Trustee, in its reasonable discretion, may suspend distributions to any Beneficiary that has not provided its federal taxpayer identification number or social security number, as the case may be, after a request is made as described in this paragraph.

     Special Provisions for Distributions to Holders of Public Note Claims

     All distributions to holders of Allowed Public Note Claims will be made by the Distributing Trustee to the applicable Indenture Trustee for subsequent distribution to holders of the Allowed Public Note Claims as of the Distribution Record Date.

Undeliverable or Unclaimed Distributions

     If any distribution to a holder of an Allowed Unsecured Claim is returned to the Distribution Trustee as undeliverable, then unless and until the Distribution Trustee is notified in writing of such holder’s then-current address: (a) subject to the provisions described in the immediately following paragraph, such undeliverable distributions will remain in the possession of the Distribution Trustee as provided in the Plan and no further attempt will be made to deliver such distribution; and (b) no attempt will be made to deliver subsequent distributions to such holder and any such distributions that such holder would otherwise be entitled to receive instead will be transferred from the Unsecured Claims Trust Account to the Undeliverable Cash Trust Account where it will be held in a book-entry sub-account for the benefit of such holder. See “General Information Concerning the Plan — Distribution Trust — Distribution Trust Accounts — Undeliverable Cash Trust Accounts.”

     Any holder of an Allowed Unsecured Claim that does not assert a claim for an undeliverable distribution by delivering to the Distribution Trustee a written notice setting forth such holder’s then-current address within 180 days after the later of (a) the Effective Date and (b) the last date on which a distribution was deliverable to the holder will have its claim for undeliverable distributions discharged and will be forever barred from asserting such claim or any claim for subsequent distributions against the Debtors, the Distribution Trustee or the property of any of them, including the Trust Accounts, whereupon all Cash contained in the book-entry sub-account in the Undeliverable Cash Trust Account created for the benefit of such holder will be transferred to the Unsecured Claims Trust Account for redistribution to holders of Allowed Unsecured Claims entitled to distributions therefrom. For purposes of any such redistribution, each Allowed Claim in respect of which a claim for undeliverable distributions has been discharged will be deemed disallowed in its entirety.

     Nothing contained in the Plan will require the Debtors or the Distribution Trustee to attempt to locate any holder of an Allowed Claim.

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Means of Cash Payments

     Except as otherwise provided in the Plan or the Distribution Trust Agreement, Cash payments made pursuant to the Plan will be in United States currency by checks drawn on the applicable Trust Accounts or, at the option of the Distribution Trustee, by wire transfer from a domestic bank; provided, however, that Cash payments to foreign holders of Allowed Claims may be made, at the option of the Distribution Trustee, in such funds and by such means as are necessary or customary in a particular foreign jurisdiction. If a check included in a distribution to a holder of an Allowed Unsecured Claim is not cashed within 180 days of the issuance thereof, the Distribution Trustee will void such check and such distribution will be treated as undeliverable as described in “Undeliverable or Unclaimed Distributions” above.

Timing and Calculation of Amounts to Be Distributed

     Allowed Claims Other Than Unsecured Claims

     On or as promptly as practicable after the Effective Date, the Distribution Trustee will make distributions to holders of Secured Claims, Administrative Claims, Priority Claims and Priority Tax Claims allowed as of the Effective Date. On or as promptly as practicable after each Quarterly Distribution Date, the Distribution Trustee will make distributions to holders of Disputed Secured Claims, Disputed Administrative Claims, Disputed Priority Claims and Disputed Priority Tax Claims that have become Allowed Claims during the immediately preceding calendar quarter. The Quarterly Distribution Date will be on the last Business Day of the month following the end of each calendar quarter after the Effective Date, except that if the Effective Date is within 45 days of the end of a calendar quarter, the first Quarterly Distribution Date will be the last Business Day of the month following the end of the first calendar quarter after the calendar quarter in which the Effective Date falls. Notwithstanding the foregoing, if the Distribution Trustee determines, in its reasonable discretion, that the amount of any quarterly distribution is too small to justify the administrative costs associated with such distribution, the Distribution Trustee may postpone such quarterly distribution until the next Quarterly Distribution Date. The Distribution Trustee will have no obligation to notify Beneficiaries if it determines, in its reasonable discretion, that any quarterly distribution will be postponed.

     Allowed Unsecured Claims in Subclass 3A; Certain Payments From the Public Note Distributable Consideration

          Plan Accepted by Subclass 3A and Subclass 3B

     If both Subclass 3A and Subclass 3B vote to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, on or as promptly as practicable after the Effective Date, the Distribution Trustee will: (a) make distributions to holders of Allowed Claims in Subclass 3A in accordance with Section 2.4(c)(i)(A) of the Plan; provided that the amount of such distributions will be calculated as if each Disputed Unsecured Claim in Subclass 3D were an Allowed Unsecured Claim in its Face Amount as of the Effective Date; and (b) make the payments to be deducted from the Public Note Distributable Consideration as contemplated by clauses (I) and (II) of the first sentence of Section 2.4(c)(i)(A) of the Plan.

     If both Subclass 3A and Subclass 3B vote to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, on or as promptly as practicable after each Quarterly Distribution Date, the Distribution Trustee will distribute to each holder of an Allowed Claim in Subclass 3A a distribution from the Unsecured Claims Trust Account (net of provision for Taxes) in an amount equal to: (a) the amount of Cash that such holder would have been entitled to receive pursuant to the Plan if such Claim and each other Unsecured Claim allowed prior to such Quarterly Distribution Date had been an Allowed Unsecured Claim as of the Effective Date (with such amount to be calculated in the manner described in the immediately preceding paragraph) minus (b) the aggregate amount of Cash previously distributed on account of such Claim. Notwithstanding the foregoing, if the Distribution Trustee determines, in its reasonable discretion, that the amount of any quarterly distribution is too small to justify the administrative costs associated with such distribution, the Distribution Trustee may postpone such quarterly distribution until the next Quarterly Distribution Date. The Distribution Trustee will have no obligation to notify Beneficiaries if it determines, in its reasonable discretion, that any quarterly distribution will be postponed. In the event of the disallowance of a Disputed Unsecured Claim in Subclass 3D, any amounts held in respect thereof will

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be released from the Disputed Claims Reserve for distribution as described in this paragraph and “- Allowed Unsecured Claims in Subclass 3C and Subclass 3D.”

          Plan Rejected by Subclass 3A or Subclass 3B

     If either Subclass 3A or Subclass 3B fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the amount of the Public Note Distributable Consideration to which the Bankruptcy Court determines the holders of Allowed Claims in Subclass 3A are entitled in respect of such Claims will be distributed as provided in an order of the Bankruptcy Court and the Distribution Trustee will, contemporaneously or as promptly as practicable thereafter, make the payments (or reservations for payment) by which such distributions are to be reduced in accordance with Section 2.4(a)(i)(B) of the Plan.

     Allowed Unsecured Claims in Subclass 3B

          Plan Accepted by Subclass 3A and Subclass 3B

     If both Subclass 3A and Subclass 3B vote to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, on or as promptly as practicable after the Effective Date, the Distribution Trustee will make the payment to the Senior Subordinated Note Indenture Trustee as contemplated by clause (III) of the first sentence of Section 2.4(c)(i)(A) of the Plan and Section 2.4(c)(ii)(A) of the Plan for subsequent distribution by the Senior Subordinated Note Indenture Trustee to the holders of Allowed Claims in Subclass 3B.

          Plan Rejected by Subclass 3A or Subclass 3B

     If either Subclass 3A or Subclass 3B fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the amount of the Public Note Distributable Consideration, if any, to which the Bankruptcy Court determines the holders of Allowed Claims in Subclass 3B are entitled in respect of such Claims will be distributed as provided in an order of the Bankruptcy Court. As contemplated by Section 2.4(c)(ii)(B) of the Plan, any such distributions ultimately made to a holder of an Allowed Claim in Subclass 3B may be reduced by such holder’s proportional share of any and all fees and expenses payable to the Senior Subordinated Note Indenture Trustee pursuant to the Senior Subordinated Note Indenture, which will, subject to such Trustee’s right to seek payment by the Debtors of such fees and expenses pursuant to section 503(b)(5) of the Bankruptcy Code, be payable solely from such distributions.

     Allowed Unsecured Claims in Subclass 3C and Subclass 3D

     On or as promptly as practicable after the Effective Date, the Distribution Trustee will make distributions to holders of Unsecured Claims in Subclass 3C and Subclass 3D allowed as of the Effective Date; provided that the amount of such distributions will be calculated as if each Disputed Unsecured Claim in Subclass 3D were an Allowed Unsecured Claim in its Face Amount as of the Effective Date; provided further, however, that no distribution will be made on account of any Disputed Unsecured Claim in Subclass 3D unless and until it becomes an Allowed Unsecured Claim and amounts withheld for Disputed Unsecured Claims in Subclass 3D will remain in the Unsecured Claims Trust Account as part of the Disputed Claims Reserve.

     On or as promptly as practicable after each Quarterly Distribution Date, the Distribution Trustee will distribute to each holder of an Unsecured Claim in Subclass 3C or Subclass 3D allowed prior to such Quarterly Distribution Date a distribution from the Unsecured Claims Trust Account (net of provision for Taxes) in an amount equal to: (a) the amount of Cash that such holder would have been entitled to receive pursuant to the Plan if such Claim and each other Unsecured Claim allowed prior to such Quarterly Distribution Date had been an Allowed Unsecured Claim as of the Effective Date (with such amount to be calculated in the manner described in the immediately preceding paragraph) minus (b) the aggregate amount of Cash previously distributed on account of such Claim. Notwithstanding the foregoing, if the Distribution Trustee determines, in its reasonable discretion, that the amount of any quarterly distribution is too small to justify the administrative costs associated with such distribution, the Distribution Trustee may postpone such quarterly distribution until the next Quarterly Distribution Date. The Distribution Trustee will have no obligation to notify Beneficiaries if it determines, in its reasonable

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discretion, that any quarterly distribution will be postponed. In the event of the disallowance of a Disputed Unsecured Claim in Subclass 3D, any amounts held in respect thereof will be released from the Disputed Claims Reserve for distribution as described in this paragraph and “- Allowed Unsecured Claims in Subclass 3C and Subclass 3D — Plan Accepted by Subclass 3A and Subclass 3B.”

     7-3/4% SWD Revenue Bonds.

          Plan Accepted by Subclass 3A

     If Subclass 3A votes to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code and, unless the holders of Senior Note Claims otherwise agree pursuant to a settlement, all holders of Allowed Senior Note Claims are entitled under the Plan to identical treatment in respect of contractual subordination claims under the Senior Subordinated Note Indenture, on or as promptly as practicable on the Effective Date the Distribution Trustee will make the payment, if any, to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of holders of 7-3/4% SWD Revenue Bonds pursuant to Section 2.5(a) of the Plan and pay any amounts payable pursuant to Section 2.6(b) of the Plan.

          Plan Rejected by Subclass 3A

     If Subclass 3A fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the amount of the Public Note Distributable Consideration, if any, to which the Bankruptcy Court determines the holders of 7-3/4% SWD Revenue Bonds are entitled will be distributed as provided in an order of the Bankruptcy Court.

     No De Minimis Distributions

     The Distribution Trustee will not be required to distribute Cash to the holder of an Allowed Unsecured Claim if the total aggregate amount of Cash to be distributed on account of such Claim is less than $25. Any holder of an Allowed Unsecured Claim on account of which the total aggregate amount of Cash to be distributed is less than $25 will have its Claim for such distribution deemed satisfied, waived and released and will be forever barred from asserting any such Claim against the Debtors, the Distribution Trustee or the property of any of them, including the Trust Accounts. Any Cash not distributed with respect to Allowed Unsecured Claims as a result of the provisions described in this paragraph will be retained in the Unsecured Claims Trust Account for redistribution to other holders of Allowed Unsecured Claims entitled to distributions from the Unsecured Claims Trust Account.

     Compliance with Tax Requirements

     To the extent applicable, the Distribution Trustee will comply with all Tax withholding and reporting requirements imposed on it by any governmental unit, and all distributions pursuant to the Plan will be subject to such withholding and reporting requirements. The Distribution Trustee will be authorized to take any actions that it determines, in its reasonable discretion, to be necessary, appropriate or desirable to comply with such withholding and reporting requirements. Notwithstanding any other provision of the Plan or the Distribution Trust Agreement, each entity receiving a distribution of Cash pursuant to the Plan will have sole and exclusive responsibility for the satisfaction and payment of any Tax obligations imposed on it by any governmental unit on account of such distribution, including income, withholding and other Tax obligations.

     Setoffs

     Except with respect to claims of a Debtor released pursuant to the Plan or any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, the Distribution Trustee may, pursuant to section 553 of the Bankruptcy Code or applicable nonbankruptcy law, set off against any Allowed Claim and the distributions to be made pursuant to the Plan on account of such Claim (before any distribution is made on account of such Claim) the claims, rights and causes of action of any nature that the applicable Debtor may hold against the holder of such Allowed Claim; provided, however, that neither the failure to effect a setoff nor the

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allowance of any Claim will constitute a waiver or release by the applicable Debtor of any claims, rights and causes of action that the Debtor or Debtors may possess against such a Claim holder, which are preserved under the Plan.

Compensation and Reimbursement for Services Related to Distributions

     If the Distribution Trustee employs or contracts with a third-party Disbursing Agent, such Disbursing Agent will receive, without the need for further Bankruptcy Court approval, reasonable compensation for such services and reimbursement of reasonable out-of-pocket expenses incurred in connection with such services. These payments will be made on terms agreed to with the Distribution Trustee and will be paid to such Disbursing Agent from funds in the Distribution Trust Expenses Account. To assist in making distributions under the Plan, notwithstanding any other provision of the Distribution Trust Agreement, the applicable Trust Accounts (other than the Distribution Trust Expenses Account) may be held in the name of one or more such Disbursing Agents. Any such Disbursing Agent will invest the Cash in the Trust Accounts as directed by the Distribution Trustee, who will direct such Disbursing Agent to invest such Cash only in Permitted Investments; provided, however, that should the Distribution Trustee determine, in its reasonable discretion, that the administrative costs associated with such investment will exceed the return on such investment, it may direct such Disbursing Agent to not invest such Cash.

Payments Limited to Trust Accounts

     All payments or other distributions to be made by the Distribution Trustee in accordance with the Plan or the Distribution Trust Agreement will be made only from the Trust Accounts.

Insufficient Funds

     Provided that the Distribution Trustee has not acted in bad faith, engaged in fraud, willful misconduct or gross negligence, or breached its fiduciary duties, if the Distribution Trust Assets at any point prove insufficient to pay all Beneficiaries of the Priority Claims Trust Account in full or all Beneficiaries of the Unsecured Claims Trust Account in accordance with the terms of the Plan, the Distribution Trustee will have no obligation to seek disgorgement from any Beneficiary, but may seek the guidance of the Bankruptcy Court or another court of competent jurisdiction.

Disputed Claims

     Prosecution of Objections to Claims

     All objections to Claims must be Filed and served on the holders of such Claims by the Claims Objection Bar Date, and, if Filed prior to the Effective Date, such objections will be served on the parties on the then-applicable service list in the Chapter 11 Cases. If an objection has not been Filed to a proof of Claim, a scheduled Claim or a request for payment of Administrative Claim by the applicable Claims Objection Bar Date, the Claim to which the proof of Claim, scheduled Claim or request for payment of Administrative Claim relates will be treated as an Allowed Claim if such Claim has not been allowed earlier.

     Treatment of Disputed Claims

     Notwithstanding any other provisions of the Plan, no payments or distributions will be made on account of a Disputed Claim until such Claim becomes an Allowed Claim. In lieu of distributions under the Plan to holders of Disputed Claims, a Disputed Claims Reserve will be established on the Effective Date in each Trust Account, which, in the case of Unsecured Claims in Subclass 3D, will include an amount equal to the Pro Rata Share of the distribution to which all of the Disputed Claims in Subclass 3D would be entitled to if each such Disputed Claim was allowed in its Face Amount on the Effective Date.

     Each holder of a Disputed Claim that ultimately becomes an Allowed Claim will have recourse only to the undistributed Cash held in the applicable Trust Account for the satisfaction of such Allowed Claim and not to any other Trust Account or any assets previously distributed on account of any Allowed Claim.

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     The Distribution Trustee will include in the Tax returns of the Trust Accounts all items of income, deduction and credit of the Trust Accounts, except to the extent such items are included in the income of the Beneficiaries of the Trust Accounts as grantors of grantor trusts. The Distribution Trustee will pay, or cause to be paid, out of the funds held in applicable Trust Accounts, any Tax imposed on the Trust Accounts by any governmental unit with respect to income generated by the funds held in the Trust Accounts. The Distribution Trustee also will file or cause to be filed any Tax or information return related to the applicable Trust Account that is required by any governmental unit.

VOTING AND CONFIRMATION OF THE PLAN

General

     To confirm the Plan, the Bankruptcy Code requires that the Bankruptcy Court make a series of findings concerning the Plan and the Debtors, including that:

•   the Plan has classified Claims and Interests in a permissible manner;

•   the Plan complies with the applicable provisions of the Bankruptcy Code;

•   the Debtors comply with the applicable provisions of the Bankruptcy Code;

•   the Debtors, as proponents of the Plan within the meaning of section 1129 of the Bankruptcy Code, have proposed the Plan in good faith and not by any means forbidden by law;

•   the disclosure required by section 1125 of the Bankruptcy Code has been made;

•   the Plan has been accepted by the requisite votes of creditors and equity interest holders, except to the extent that “cramdown” is available under section 1129(b) of the Bankruptcy Code;

•   the Plan is in the “best interests” of all holders of Claims or Interests in an impaired Class (that is, that such creditors will receive at least as much pursuant to the Plan as they would receive or retain in a chapter 7 liquidation);

•   the Plan is feasible (that is, there is a reasonable prospect that the Debtors will be able to perform their obligations under the Plan); and

•   all fees and expenses payable under 28 U.S.C. § 1930, as determined by the Bankruptcy Court at the Confirmation Hearing, have been paid, or the Plan provides for the payment of such fees on the Effective Date.

Voting Procedures and Requirements

     Pursuant to the Bankruptcy Code, only classes of claims against, or equity interests in, a debtor that are “impaired” under the terms of that debtor’s plan are entitled to vote to accept or reject the Plan. A class is “impaired” if the legal, equitable or contractual rights attaching to the claims or equity interests of that class are modified, other than by curing defaults and reinstating maturity. Classes of claims that are not impaired are not entitled to vote on a plan and are conclusively presumed to have accepted that plan. Classes of claims or equity interests that receive no distributions under a plan are not entitled to vote on that plan and are deemed to have rejected that plan unless such class otherwise indicates acceptance. Only Class 3 is entitled to vote on the Plan and each Subclass of Class 3 constitutes a separate class for that purpose. For a summary of the classification of Claims and Interests pursuant to the Plan, together with an indication of whether each Class of Claims or Interests is impaired or unimpaired under the terms of the Plan, see “Overview of the Plan — Summary of Classes and Treatment of Claims and Interests.”

     Although the 7-3/4% SWD Revenue Bond Indenture Trustee may receive a payment for the benefit of the holders of the 7-3/4% SWD Revenue Bonds in accordance with the Plan, holders of 7-3/4% SWD Revenue Bonds do not have Claims against the Debtors and, accordingly, are not entitled to vote on the Plan, although creditors or claimants affected by such settlement may file an objection to it with the Bankruptcy

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Court on or prior to April 5, 2005. See “Operations During the Chapter 11 Cases — 7-3/4% SWD Revenue Bond Dispute” for more information regarding the 7-3/4% SWD Revenue Bonds and the proposed settlement.

     Pursuant to section 502 of the Bankruptcy Code and Bankruptcy Rule 3018, the Bankruptcy Court may estimate and temporarily allow a Claim for voting or other purposes. By order of the Bankruptcy Court, certain vote tabulation rules have been approved that temporarily allow or disallow certain Claims for voting purposes only. These tabulation rules are described in the solicitation materials provided with your Ballot.

     VOTING ON THE PLAN BY EACH HOLDER OF AN IMPAIRED CLAIM ENTITLED TO VOTE ON THE PLAN IS IMPORTANT. IF YOU HOLD MULTIPLE UNSECURED CLAIMS, YOU MAY RECEIVE MORE THAN ONE BALLOT. YOU SHOULD COMPLETE, SIGN AND RETURN EACH BALLOT YOU RECEIVE.

     PLEASE CAREFULLY FOLLOW ALL OF THE INSTRUCTIONS CONTAINED ON THE BALLOT OR BALLOTS PROVIDED TO YOU. ALL BALLOTS MUST BE COMPLETED AND RETURNED IN ACCORDANCE WITH THE INSTRUCTIONS PROVIDED.

     TO BE COUNTED, YOUR BALLOT OR BALLOTS MUST BE ACTUALLY RECEIVED BY 5:00 P.M., EASTERN TIME, ON APRIL 5, 2005 (OR SUCH OTHER TIME AND DATE IDENTIFIED ON YOUR BALLOT OR BALLOTS) AT THE ADDRESS SET FORTH ON THE PREADDRESSED ENVELOPE PROVIDED TO YOU. IT IS OF THE UTMOST IMPORTANCE TO THE DEBTORS THAT YOU VOTE PROMPTLY TO ACCEPT THE PLAN.

     A HOLDER OF A 9-7/8% SENIOR NOTE, A 10-7/8% SENIOR NOTE OR A SENIOR SUBORDINATED NOTE HELD IN THE NAME OF A BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE MUST COMPLETE AND DELIVER TO SUCH NOMINEE THE BALLOT OR BALLOTS PROVIDED TO SUCH HOLDER IN ORDER TO VOTE ON THE PLAN. SUCH HOLDERS ARE URGED TO DELIVER SUCH BALLOT OR BALLOTS TO THEIR RESPECTIVE NOMINEE HOLDERS NO LATER THAN THE DATE IDENTIFIED ON SUCH BALLOT OR BALLOTS IN ORDER TO ENSURE THAT THEIR VOTE WILL BE COUNTED.

     Votes cannot be transmitted orally. Accordingly, you are urged to return your signed and completed Ballot promptly.

     IF YOU ARE ENTITLED TO VOTE AND YOU DID NOT RECEIVE A BALLOT, RECEIVED A DAMAGED BALLOT OR LOST YOUR BALLOT, PLEASE CALL THE DEBTORS’ VOTING AGENT, LOGAN & COMPANY, AT (973) 509-3190.

Confirmation Hearing

     The Bankruptcy Code requires the Bankruptcy Court, after notice, to hold a hearing on whether the Debtors have fulfilled the requirements of section 1129 of the Bankruptcy Code relating to the confirmation of the Plan. The Confirmation Hearing has been scheduled for April 13, 2005 at 9:00 a.m. before the Honorable Judith K. Fitzgerald, Chief United States Bankruptcy Judge for the Western District of Pennsylvania and visiting United States Bankruptcy Judge for the District of Delaware, in the Judge’s usual courtroom at the U.S. Bankruptcy Court for the District of Delaware, 824 Market Street, Wilmington, Delaware 19801. The Confirmation Hearing may be continued or adjourned from time to time by the Bankruptcy Court without further notice, except for an announcement of the continued or adjourned date made at the Confirmation Hearing. Any objection to confirmation of the Plan must be made in writing and must specify in detail the name and address of the objector, all grounds for the objection and the amount of the Claim or Interest held by the objector. Any such objections must be Filed and served upon the persons designated in the notice of the Confirmation Hearing, in the manner and by the deadline described in such notice.

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Confirmation

     At the Confirmation Hearing, the Bankruptcy Court will confirm the Plan only if all of the applicable requirements of section 1129 of the Bankruptcy Code are satisfied. Among the requirements for confirmation of a plan with respect to a debtor are that the plan:

•   is accepted by the requisite holders of claims and equity interests in each impaired class of such debtor or, if not so accepted, has been accepted by the requisite holders of at least one impaired class and is “fair and equitable” and “does not discriminate unfairly” as to each nonaccepting class;

•   is either accepted by, or is in the “best interests” of, each holder of a claim or equity interest in each impaired class of such debtor;

•   is feasible; and

•   complies with the other applicable provisions of the Bankruptcy Code.

     Subject to the conditions set forth in the Plan, a determination by the Bankruptcy Court that the Plan, as it applies to a particular Estate, is not confirmable pursuant to section 1129 of the Bankruptcy Code will not limit or affect: (a) the confirmability of the Plan as it applies to the other Estate; or (b) the Debtors’ ability to modify the Plan, as it applies to such Estate, to satisfy the provisions of section 1129(b) of the Bankruptcy Code.

     Acceptance or Cramdown

     A plan is accepted by an impaired class of claims if holders of at least two — thirds in dollar amount and a majority in number of claims of that class vote to accept the plan. Only those holders of claims who actually vote (and are entitled to vote) to accept or to reject a plan count in this tabulation. Section 1129(b) of the Bankruptcy Code contains so-called “cramdown” provisions pursuant to which a plan may be confirmed even if it is not accepted by all impaired classes, as long as at least one impaired class of claims has accepted it and the Bankruptcy Court finds that it is “fair and equitable” and “does not discriminate unfairly” as to each nonaccepting class. The “fair and equitable” standard, also known as the “absolute priority rule,” requires, among other things, that unless a dissenting class of unsecured claims receives full compensation for the aggregate allowed amount of such claims, no holder of an allowed claim in any class junior to such class may receive or retain any property on account of such claim. The “fair and equitable” standard has also been interpreted to prohibit any class of claims senior to a dissenting class from receiving under a plan more than 100% of the aggregate allowed amount of such claims. The requirement that a plan not “discriminate unfairly” means, among other things, that a dissenting class of claims must be treated substantially equally with respect to other classes of claims of equal rank. The Debtors do not believe that the Plan unfairly discriminates against any Class that may not accept or otherwise consent to the Plan. The Debtors believe that the Plan is “fair and equitable” and “does not discriminate unfairly” as to each impaired Class entitled to vote upon the Plan. The Debtors may seek confirmation of the Plan under the “cramdown” provisions with respect to any impaired Class that does not accept the Plan (and have reserved the right to modify the Plan to the extent that confirmation of the Plan under such provisions requires modification).

     Best Interests Test

          Generally

     Notwithstanding acceptance of a plan by each impaired class (or satisfaction of the “cramdown” provisions of the Bankruptcy Code in lieu thereof), for a plan to be confirmed, the Bankruptcy Court must determine that the plan is in the best interest of each holder of a claim who is in an impaired class and has not voted to accept the plan. Accordingly, if an impaired class does not unanimously accept a plan, the best interests test requires the Bankruptcy Court to find that the plan provides to each member of such impaired class a recovery on account of the class member’s claim that has a value, as of the date such plan is consummated, at least equal to the value of the distribution that such class member would receive if the debtors proposing such plan were liquidated under chapter 7 of the Bankruptcy Code on such date. The Debtors have considered the effect that the conversion of the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code would have and have concluded that Plan provides for the liquidation of the Debtors in a manner significantly more efficient than would occur in the event the Chapter 11

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Cases were converted to cases under chapter 7 of the Bankruptcy Code. The Debtors’ Estates have already been substantially liquidated and converted to Cash proceeds, subject only to receipt of any Recovery Action Proceeds. The Debtors are not aware of the existence of any claim against a third party that would constitute a Recovery Action. Further, the Debtors have been informed that the Creditors’ Committee conducted an analysis of potential preference actions and determined that there were no viable preference actions concerning payments made by the Debtors. The Debtors believe that conversion to chapter 7 of the Bankruptcy Code would result in: (a) additional costs relating to the appointment of a chapter 7 trustee; (b) likely delays in distributions to creditors entitled to receive a distribution under the Plan; and (c) diminished recoveries for Class 3. The Debtors therefore believe that the Plan satisfies the best interests test for each class of impaired Claims.

          Liquidation Analysis

     Because the liquidation value of each Debtor is limited to the amount of Cash held or to be held in each Debtor’s Trust Accounts, the Debtors’ liquidation analysis focused on the additional costs and the diminution in value to the Debtors’ Estates that would occur if the Chapter 11 Cases were converted to cases under chapter 7 of the Bankruptcy Code. That is, in the event of a conversion of the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code, the liquidation value available to holders of Unsecured Claims and Interests would be reduced by: (a) the costs, fees and expenses of the liquidation, as well as other administrative expenses of the Debtors’ chapter 7 cases; (b) unpaid Administrative Claims of the Chapter 11 Cases; and (c) Priority Claims and Priority Tax Claims.

     The Debtors’ costs of liquidation in chapter 7 cases would include, among other things, the compensation of a trustee or trustees, as well as counsel and other professionals retained by such trustees. The trustees and any newly retained professionals would have to expend considerable time and effort to review and understand the issues raised by the liquidation of the Debtors, thereby duplicating the efforts of the Debtors and their professionals and resulting in the incurrence of fees and expenses anticipated to exceed materially the fees and expenses that would be incurred by the Distribution Trustee and its professionals under the Plan. The trustee’s fees in any chapter 7 case, which could be as much as 3% of the assets in the Debtors’ Estates under section 326 of the Bankruptcy Code (or approximately $9.0 million in the aggregate), also are anticipated to exceed the fees to be paid to the Distribution Trustee. Moreover, since any newly retained professionals would lack the institutional knowledge of the facts and circumstances underlying Claims and Recovery Actions, it is likely that Disputed Claims would be settled at higher amounts and Recovery Actions at lower amounts, thereby resulting in lower recoveries to holders of Unsecured Claims. Finally, due to the lack of familiarity with the Debtors of any trustees appointed in the chapter 7 cases, distributions in the chapter 7 cases likely would be made substantially later than the Effective Date assumed in connection with the Plan and this delay would reduce the present value of distributions to creditors, including holders of Unsecured Claims. In light of the foregoing, the Debtors believe that creditors will receive greater and more expeditious distributions under the Plan than they would receive through a chapter 7 liquidation. The Plan is, therefore, in the best interests of each Claim holder.

     Feasibility

     Section 1129(a)(11) of the Bankruptcy Code requires that confirmation of a plan not be likely to be followed by the liquidation, or the need for further financial reorganization, of the debtors proposing such plan or any successor to such debtors (unless such liquidation or reorganization is proposed in the plan). The Plan provides for the liquidation of the Debtors and the distribution of Cash to holders of Allowed Claims in accordance with the priority scheme of the Bankruptcy Code and the terms of the Plan. The ability of the Debtors to make the distributions described in the Plan is based solely on the amount of Cash held, or to be held, in the Trust Accounts, and does not depend on future earnings of the Debtors. Accordingly, the Debtors believe that the Plan satisfies the feasibility requirements of the Bankruptcy Code.

     Compliance with Applicable Provisions of the Bankruptcy Code

     Section 1129(a)(1) of the Bankruptcy Code requires that a plan comply with the applicable provisions of the Bankruptcy Code. The Debtors have considered each of these provisions in the development of the Plan and believe that the Plan complies with all provisions of the Bankruptcy Code.

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     Modification or Revocation of the Plan

     Subject to the restrictions on modifications set forth in section 1127 of the Bankruptcy Code, the Debtors reserve the right to alter, amend or modify the Plan before its substantial consummation, with the consent of the Creditors’ Committee.

     The Debtors reserve the right to revoke or withdraw the Plan prior to the Effective Date, with the consent of the Creditors’ Committee. If the Debtors so revoke or withdraw the Plan, or if confirmation of the Plan does not occur, the Plan will be null and void in all respects, and nothing contained in the Plan will: (a) constitute a waiver or release of any Claims by or against, or any Interests in, the Debtors; or (b) prejudice in any manner the rights of either Debtor or any other party.

Alternatives to Confirmation and Consummation of the Plan

     Because the Debtors are not operating entities and possess no assets other than Cash, the only alternatives to confirmation and consummation of the Plan are a conversion of the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code and the confirmation and consummation of an alternative plan of liquidation under chapter 11 of the Bankruptcy Code.

     The Debtors believe that, in a liquidation under chapter 7, before creditors received any distribution, additional administrative expenses involved in the appointment of a trustee, and the retention of professionals to assist such trustee, would cause a diminution in the value of the Debtors’ Estates. The Debtors believe that conversion of the Chapter 11 Cases to chapter 7 would, therefore, result in (a) significant delay in distributions to all creditors who would have received a distribution under the Plan and (b) diminished recoveries for Class 3. See “- Confirmation — Best Interests Test.”

     The Debtors believe that, because the Plan has been negotiated by the Debtors and representatives of certain of the Debtors’ most significant creditors, including the Creditors’ Committee, negotiating an alternative plan of liquidation under chapter 11 of the Bankruptcy Code is unlikely to alter significantly the relative treatment of the Claims. The Debtors believe that negotiating such an alternative plan would result in additional costs to the Debtors relating to the retention of professionals to represent the Debtors and their significant creditors in connection with such negotiations, resulting in a diminution in the value of the Debtors’ Estates. The Debtors believe that the consummation of an alternative plan of liquidation under chapter 11 of the Bankruptcy Code would also result in (a) likely delays in distributions to all creditors who would be entitled to receive a distribution under the Plan (thus reducing the present value of such distributions) and (b) potentially diminished recoveries for Class 3.

     THE DEBTORS AND THE CREDITORS’ COMMITTEE BELIEVE THAT THE PLAN AFFORDS GREATER BENEFITS TO CREDITORS THAN EITHER LIQUIDATION UNDER CHAPTER 7 OF THE BANKRUPTCY CODE OR THE CONSUMMATION OF AN ALTERNATIVE PLAN OF LIQUIDATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF CONSUMMATION OF THE PLAN

General

     A DESCRIPTION OF CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN IS PROVIDED BELOW. THE DESCRIPTION IS BASED ON THE IRC, TREASURY REGULATIONS ISSUED THEREUNDER, JUDICIAL DECISIONS AND INTERNAL REVENUE SERVICE (“IRS”) AND ADMINISTRATIVE DETERMINATIONS, ALL AS IN EFFECT ON THE DATE HEREOF. CHANGES IN ANY OF THESE AUTHORITIES OR IN THE INTERPRETATION THEREOF, ANY OF WHICH MAY HAVE RETROACTIVE EFFECT, MAY CAUSE THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN TO DIFFER MATERIALLY FROM THE CONSEQUENCES DESCRIBED BELOW.

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     THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN ARE COMPLEX AND ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES. NO RULING HAS BEEN REQUESTED FROM THE IRS; NO OPINION HAS BEEN REQUESTED FROM COUNSEL CONCERNING ANY U.S. TAX CONSEQUENCE OF THE PLAN; AND NO TAX OPINION IS GIVEN BY THIS DISCLOSURE STATEMENT.

     THE DESCRIPTION DOES NOT COVER ALL ASPECTS OF U.S. FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO THE DEBTORS OR HOLDERS OF CLAIMS. FOR EXAMPLE, THE DESCRIPTION DOES NOT ADDRESS ISSUES OF SPECIAL CONCERN TO CERTAIN TYPES OF TAXPAYERS, SUCH AS DEALERS IN SECURITIES, LIFE INSURANCE COMPANIES, FINANCIAL INSTITUTIONS, TAX EXEMPT ORGANIZATIONS AND FOREIGN TAXPAYERS, NOR DOES IT ADDRESS TAX CONSEQUENCES TO HOLDERS OF INTERESTS IN THE DEBTORS. IN ADDITION, THE DESCRIPTION IS LIMITED TO U.S. FEDERAL INCOME TAX CONSEQUENCES AND DOES NOT DISCUSS STATE, LOCAL OR FOREIGN TAX CONSEQUENCES.

     FOR THESE REASONS, THE DESCRIPTION THAT FOLLOWS IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING AND PROFESSIONAL TAX ADVICE BASED UPON THE INDIVIDUAL CIRCUMSTANCES OF EACH HOLDER OF A CLAIM OR INTEREST. HOLDERS OF CLAIMS OR INTERESTS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PLAN.

U.S. Federal Income Tax Consequences to Holders of Claims

     The federal income Tax consequences of the Plan to a holder of a Claim will depend, in part, on: (a) whether the holder reports income on the accrual or cash basis; (b) whether the holder has previously taken a bad debt deduction or worthless security deduction with respect to the Claim; (c) whether the holder’s Claim is allowed or disputed at the Effective Date; (d) whether the holder receives distributions under the Plan in more than one taxable year; and (e) whether the holder receives distributions with respect to its Claim under one or more plans of reorganization or liquidation of an Other Kaiser Debtor in addition to the Plan.

     Recognition of Gain or Loss

          In General

     In general, a holder of a Claim should recognize gain or loss equal to the amount realized under the Plan in respect of its Claim less the holder’s basis in the Claim. Any gain or loss recognized in the exchange may be long-term or short-term capital gain or loss or ordinary income or loss, depending upon the nature of the Claim and the holder, the length of time the holder held the Claim and whether the Claim was acquired at a market discount. If the holder realizes a capital loss, its deduction of the loss may be subject to limitation. The holder’s aggregate Tax basis for any property received under the Plan generally will equal the amount realized. The holder’s amount realized generally will equal the sum of the Cash and the fair market value of any other property received (or deemed received) by the holder under the Plan on the Effective Date or subsequent distribution date, less the amount (if any) allocable to Claims for interest, as discussed below.

          Post-Effective Date Cash Distributions

     Because certain holders of Allowed Claims (including Disputed Claims that ultimately become Allowed Claims) may receive Cash distributions subsequent to the Effective Date in respect of Claims held against the Debtors, including claims against Other Kaiser Debtor(s) as well as the Debtors, the imputed interest provisions of the IRC may apply to treat a portion of such distributions as imputed interest. Additionally, because such distributions may be made to such holders after the initial distribution, any loss and a portion of any gain realized by such holder may be deferred. All such holders are urged to consult their Tax advisors regarding the possible application of (or ability to elect out of) the “installment method” of reporting gain that may be recognized by such holder in respect of its Claims.

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          Bad Debt and/or Worthless Securities Deduction

     A holder who, under the Plan, receives in respect of a Claim an amount less than the holder’s Tax basis in the Claim may be entitled in the year of receipt (or in an earlier or later year) to a bad debt deduction in some amount under section 166(a) of the IRC or a worthless securities deduction under section 165(g) of the IRC. The rules governing the timing, character and amount of bad debt and/or worthless securities deductions place considerable emphasis on the facts and circumstances of the holder, the obligor and the instrument with respect to which a deduction is claimed. Holders of Claims, therefore, are urged to consult their Tax advisors with respect to their ability to take such a deduction.

     Pending Payments

     Cash that a Trust Account holds as a Pending Payment after the Effective Date should be deemed to have been paid to the holder of the Claim entitled to receive such Pending Payment on the date that the Distribution Trust received it and to have been contributed by such holder to the Trust Account as a grantor and beneficiary of the Distribution Trust. Thus, the holder should recognize gain or loss based upon the amount deemed received and contributed to the Trust Account on the Effective Date, and any income subsequently realized by the Trust Account with respect to such Pending Payment will be reported by the Trustee as income of the grantor-beneficiary in the year realized, prior to the actual distribution of the Pending Payment to the holder of the Allowed Claim. The actual receipt of the Pending Payments from the Trust Account will not be a taxable event.

     Payments Other than Pending Payments

     If any payment other than a Pending Payment is to be made out of a Trust Account, such payment will not be deemed to have been made to any recipient until, and to the extent that, the amount to which the payee is entitled has been determined and distributed. Any income realized by the Trust Account prior to such time will be reported by the Distribution Trustee as income of and taxable to the Trust Account.

Certain Other Tax Consequences for Holders of Claims

     Receipt of Pre-Effective Date Interest

     In general, a Claim holder that was not previously required to include in its taxable income any accrued but unpaid pre-Effective Date interest on the Claim may be required to take such amount into income as taxable interest. A Claim holder that was previously required to include in its taxable income any accrued but unpaid pre-Effective Date interest on the Claim may be entitled to recognize a deductible loss to the extent that such interest is not satisfied under the Plan. The Plan provides that all distributions to holders of Allowed Public Note Claims will be deemed to apply first to the principal amount of such Claims until such principal amount is paid in full, and then the remaining portion of such distribution, if any, will be deemed to apply to any prepetition accrued interest included in such Claim. There is no assurance, however, that the IRS will respect this treatment and will not determine that all or a portion of amounts distributed to holders of Allowed Public Note Claims is properly allocable to prepetition interest. Each Claim holder is urged to consult its tax advisor regarding the tax treatment of its distributions under the Plan and the deductibility of any accrued but unpaid interest for federal income tax purposes.

     Installment Method

     A holder of a Claim constituting an installment obligation for Tax purposes may be required to recognize currently any gain remaining with respect to the obligation if, pursuant to the Plan, the obligation is considered to be satisfied at other than its face value, distributed, transmitted, sold, or otherwise disposed of within the meaning of section 453B of the IRC.

     Information Reporting and Backup Withholding

     All distributions under the Plan will be subject to applicable federal income Tax reporting and withholding. The IRC imposes “backup withholding” on certain “reportable” payments to certain taxpayers, including payments

60

of interest. Under the IRC’s backup withholding rules, a holder of a Claim may be subject to backup withholding with respect to distributions or payments made pursuant to the Plan, unless the holder: (a) comes within certain exempt categories (which generally include corporations) and, when required, demonstrates this fact; or (b) provides a correct taxpayer identification number and certifies under penalty of perjury that the taxpayer identification number is correct and that the taxpayer is not subject to backup withholding because of a failure to report all dividend and interest income. Backup withholding is not an additional Tax, but merely an advance payment that may be refunded to the extent it results in an overpayment of Tax. A holder of a Claim may be required to establish an exemption from backup withholding or to make arrangements with respect to the payment of backup withholding.

Importance of Obtaining Professional Tax Assistance

     THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN, AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING WITH A TAX PROFESSIONAL. THE ABOVE DISCUSSION IS FOR INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. THE TAX CONSEQUENCES ARE IN MANY CASES UNCERTAIN AND MAY VARY DEPENDING ON A HOLDER’S INDIVIDUAL CIRCUMSTANCES. ACCORDINGLY, HOLDERS ARE URGED TO CONSULT WITH THEIR TAX ADVISORS ABOUT THE U.S. FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF THE PLAN.

APPLICABILITY OF CERTAIN FEDERAL AND STATE SECURITIES LAWS

General

     No registration statement will be filed under the Securities Act of 1933, as amended, 15 U.S.C. §§ 77a-77aa (the “Securities Act”), or any state securities laws with respect to the offer and distribution under the Plan of the beneficial interests in the Distribution Trust (which may be deemed to constitute “securities” and are treated as such for purposes of the following discussion). The Debtors believe that the provisions of section 1145(a)(1) of the Bankruptcy Code exempt the offer and distribution of such securities under the Plan from federal and state securities registration requirements.

Bankruptcy Code Exemptions from Registration Requirements

     Initial Offer and Sale

     Section 1145(a)(1) of the Bankruptcy Code exempts the offer and sale of securities under a plan of reorganization from registration under the Securities Act and state securities laws if three principal requirements are satisfied: (a) the securities must be offered and sold under a plan of reorganization and must be securities of the debtor, an affiliate participating in a joint plan with the debtor or a successor to the debtor under the plan; (b) the recipients of the securities must hold a prepetition or administrative expense claim against the debtor or an interest in the debtor or such affiliate; and (c) the securities must be issued entirely in exchange for the recipient’s claim against or interest in the debtor or principally in such exchange and partly for cash or property. The Debtors believe that the offer and sale of the beneficial interests in the Distribution Trust under the Plan satisfy the requirements of section 1145(a)(1) of the Bankruptcy Code and, therefore, are exempt from registration under the Securities Act and state securities laws.

     Subsequent Transfers

     The beneficial interests in the Distribution Trust will be non-certificated and non-transferable (except by will or under the laws of descent and distribution). Therefore, holders of beneficial interests in the Distribution Trust will not be able to voluntarily transfer such securities to other entities.

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ADDITIONAL INFORMATION

     Any statements in this Disclosure Statement concerning the provisions of any document are not necessarily complete, and in each instance reference is made to such document for the full text thereof. The Plan, this Disclosure Statement and the Distribution Trust Agreement will be available on the Document Website promptly following approval of this Disclosure Statement by the Bankruptcy Court.

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RECOMMENDATION AND CONCLUSION

     For all of the reasons set forth in this Disclosure Statement, the Debtors believe that the confirmation and consummation of the Plan is preferable to all other alternatives. Consequently, the Debtors urge all holders of Claims in voting Classes to vote to accept the Plan and to evidence their acceptance by duly completing and returning their Ballots so that they will be received on or before the Voting Deadline.

Dated: February 11, 2005	Respectfully submitted, ALPART JAMAICA INC.
	By:	_________________________________
	Name:
	Title:

KAISER JAMAICA CORPORATION
By:	______________________
Name:
Title:

COUNSEL:

Daniel J. DeFranceschi (DE 2732)
RICHARDS, LAYTON & FINGER
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
Telephone: (302) 651-7700
Facsimile: (302) 651-7701

   – and –

Gregory M. Gordon (TX 08435300)
Henry L. Gompf (TX 08116400)
Troy B. Lewis (TX 12308650)
Daniel P. Winikka (TX 00794873)
JONES DAY
2727 North Harwood Street
Dallas, Texas 75201
Telephone: (214) 220-3939
Facsimile: (214) 969-5100

ATTORNEYS FOR DEBTORS AND
DEBTORS IN POSSESSION

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EXHIBIT I

AMENDED JOINT PLAN OF LIQUIDATION FOR
ALPART JAMAICA INC. AND KAISER JAMAICA CORPORATION

EX-99.5

Exhibit 99.5

UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE

	x
	:
In re:	:
	:	Chapter 11 Case Nos.
KAISER ALUMINA AUSTRALIA	:	02-10432 and 02-10438
CORPORATION	:
and	:
KAISER FINANCE CORPORATION,	:	Jointly Administered Under
	:	Case No. 02-10429 (JKF)
Debtors.	:
	:
	x

AMENDED JOINT PLAN OF LIQUIDATION
FOR KAISER ALUMINA AUSTRALIA CORPORATION
AND KAISER FINANCE CORPORATION

	Daniel J. DeFranceschi (DE 2732)
	RICHARDS, LAYTON & FINGER
	One Rodney Square
	P.O. Box 551
	Wilmington, Delaware 19899
	Telephone: (302) 651-7700
	Facsimile: (302) 651-7701
	- and -
	Gregory M. Gordon (TX 08435300)
	Henry L. Gompf (TX 08116400)
	Troy B. Lewis (TX 12308650)
	Daniel P. Winikka (TX 00794873)
	JONES DAY
	2727 North Harwood
	Dallas, Texas 75201
	Telephone: (214) 220-3939
	Facsimile: (214) 969-5100
	ATTORNEYS FOR DEBTORS AND
	DEBTORS IN POSSESSION
Dated: February 11, 2005

TABLE OF CONTENTS

			Page
ARTICLE I		DEFINED TERMS, RULES OF INTERPRETATION AND COMPUTATION OF TIME		1
	1.1	Defined Terms		1
	1.2	Rules of Interpretation		9
	1.3	Computation of Time		9
ARTICLE II		CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS		10
	2.1	General		10
	2.2	Administrative Claims		10
	2.3	Priority Tax Claims		11
	2.4	Classified Claims		12
	2.5	7-3/4% SWD Revenue Bond Dispute and Settlement.		14
	2.6	Senior Note Indenture Trustee and Ad Hoc Group Counsel Fees and Expenses; 7-3/4% SWD Revenue Bond Plaintiffs’ Fees		15
	2.7	Allowance of Certain Public Note Claims		15
	2.8	Substantive Consolidation		15
	2.9	Order Granting Substantive Consolidation		15
	2.10	KFC Claim against KACC		16
	2.11	No Effect on Claims Against or Interests in Other Kaiser Debtors		16
ARTICLE III		TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES		16
	3.1	Executory Contracts and Unexpired Leases to Be Rejected		16
	3.2	Bar Date for Rejection Damages		16
ARTICLE IV		RELEASE, LIMITATION OF LIABILITY AND INJUNCTION PROVISIONS		16
	4.1	Release of Claims; Limitation of Liability		16
	4.2	Injunctions		17
ARTICLE V		CRAMDOWN		17
ARTICLE VI		CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THE PLAN		18
	6.1	Conditions to Confirmation		18
	6.2	Conditions to the Effective Date		18
	6.3	Waiver of Conditions to the Confirmation or Effective Date		18
ARTICLE VII		MEANS FOR IMPLEMENTATION OF THE PLAN		18
	7.1	Liquidating Transactions		18
	7.2	Corporate Action		19
	7.3	No Revesting of Assets		19
	7.4	Recourse Solely to Trust Accounts		19
	7.5	Release of Liens		19

i

TABLE OF CONTENTS
(continued)

			Page
	7.6	Exemption from Certain Taxes		19
ARTICLE VIII		DISTRIBUTION TRUST		19
	8.1	Creation		19
	8.2	Distribution Trustee		20
	8.3	Preservation of Causes of Action		20
	8.4	Reports to be Filed with the Bankruptcy Court		21
	8.5	Payment of Distribution Trust Expenses		21
	8.6	Use of Other Entities		21
	8.7	Indemnification		21
	8.8	Tax Treatment		21
	8.9	Creation of Trust Accounts		22
	8.10	Funding of Distribution Trust Expenses Account		22
	8.11	Funding of Priority Claims Trust Account		23
	8.12	Funding of Unsecured Claims Trust Account		23
	8.13	Undeliverable Property Trust Account		23
ARTICLE IX		PROVISIONS GOVERNING DISTRIBUTIONS		24
	9.1	Method of Distributions to Holders of Allowed Claims		24
	9.2	Delivery of Distributions		24
	9.3	Means of Cash Payments		25
	9.4	Timing and Calculation of Amounts to Be Distributed		25
	9.5	Setoffs		28
	9.6	Compensation and Reimbursement for Services Related to Distributions		28
	9.7	Payments Limited to Trust Accounts		28
	9.8	Insufficient Assets		28
	9.9	Distributions of Securities		28
ARTICLE X		DISPUTED CLAIMS		29
	10.1	Prosecution of Objections to Claims		29
	10.2	Treatment of Disputed Claims		29
ARTICLE XI		RETENTION OF JURISDICTION		29
ARTICLE XII		MISCELLANEOUS PROVISIONS		30
	12.1	Preservation of Insurance		30
	12.2	Modification of the Plan		31
	12.3	Revocation of the Plan		31
	12.4	Severability of Plan Provisions		31

ii

TABLE OF CONTENTS
(continued)

		Page
12.5	Notices		31
12.6	Successors and Assigns		32
12.7	Further Action		32
12.8	Exhibits		32

iii

TABLE OF EXHIBITS^*

Exhibit A — Distribution Trust Agreement

^* The Plan, Disclosure Statement and Distribution Trust Agreement will be available on the Document Website promptly following approval of the Disclosure Statement by the Bankruptcy Court.

iv

INTRODUCTION

     Kaiser Alumina Australia Corporation (“KAAC”) and Kaiser Finance Corporation (“KFC”) (collectively, the “Debtors”) in the above-captioned chapter 11 cases (the “Chapter 11 Cases”) propose the following joint plan of liquidation (the “Plan”) for the resolution of the outstanding claims against and equity interests in the Debtors.

ARTICLE I

DEFINED TERMS, RULES OF INTERPRETATION
AND COMPUTATION OF TIME

     1.1 Defined Terms.

          As used in the Plan, capitalized terms have the meanings set forth below. Any term that is not otherwise defined in the Plan, but that is defined in the Bankruptcy Code or the Bankruptcy Rules, will have the meaning given to that term in the Bankruptcy Code or Bankruptcy Rules, as applicable.

     (1) “7-3/4% SWD Revenue Bond Dispute” means Adversary Proceeding No. 04-51165 commenced by the 7-3/4% SWD Revenue Bond Indenture Trustee and certain holders of 7-3/4% SWD Revenue Bonds in connection with the Kaiser Cases.

     (2) “7-3/4% SWD Revenue Bond Indenture” means the Trust Indenture, dated as of December 1, 1992, between Parish of St. James, State of Louisiana, and the 7-3/4% SWD Revenue Bond Indenture Trustee, together with all instruments and agreements related thereto.

     (3) “7-3/4% SWD Revenue Bond Indenture Trustee” means J.P. Morgan Trust Company, N.A., as successor indenture trustee under the 7-3/4% SWD Revenue Bond Indenture.

     (4) “7-3/4% SWD Revenue Bonds” means the Parish of St. James, State of Louisiana, Solid Waste Disposal Revenue Bonds (Kaiser Aluminum Project) Series 1992 issued pursuant to the 7-3/4% SWD Revenue Bond Indenture in an outstanding principal amount of $20,000,000.

     (5) “9-7/8% Senior Note Claim” means a Claim against a Debtor under or in respect of one or more 9-7/8% Senior Notes and the 9-7/8% Senior Note Indenture.

     (6) “9-7/8% Senior Note Indenture” means the Indenture, dated as of February 17, 1994, by and among the Debtors, certain Other Kaiser Debtors (including KACC) and the 9-7/8% Senior Note Indenture Trustee, as the same may have been subsequently modified, amended or supplemented, together with all instruments and agreements related thereto.

     (7) “9-7/8% Senior Note Indenture Trustee” means U.S. Bank National Association, as successor indenture trustee under the 9-7/8% Senior Note Indenture.

     (8) “9-7/8% Senior Notes” means the 9-7/8% senior notes due 2002, issued by KACC pursuant to the 9-7/8% Senior Note Indenture in an outstanding principal amount of $172,780,000.

     (9) “10-7/8% Senior Note Claim” means a Claim against a Debtor under or in respect of one or more 10-7/8% Senior Notes and the applicable 10-7/8% Senior Note Indenture.

     (10) “10-7/8% Senior Note Indentures” means, together, the Indenture, dated as of October 23, 1996, and the Indenture, dated as of December 23, 1996, in each case, by and among the Debtors, certain Other Kaiser Debtors (including KACC) and the 10-7/8% Senior Note Indenture Trustee, as the same may have been subsequently modified, amended or supplemented, together with all instruments and agreements related thereto.

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     (11) “10-7/8% Senior Note Indenture Trustee” means U.S. Bank National Association, as successor indenture trustee under the 10-7/8% Senior Note Indentures.

     (12) “10-7/8% Senior Notes” means the 10-7/8% Series B senior notes due 2006 and the 10-7/8% Series D senior notes due 2006, issued by KACC pursuant to the 10-7/8% Senior Note Indentures in outstanding principal amounts of $175,000,000 and $50,000,000, respectively.

     (13) “Ad Hoc Group” means the ad hoc group of holders of Senior Notes comprised of Trilogy Capital, Caspian Capital Partners, Canyon Partners, Citadel Equity Fund Ltd., Citadel Credit Trading Ltd., Durham Asset Management L.L.C., Farallon Capital Management L.L.C. and TCM Spectrum Fund L.P.

     (14) “Administrative Claim” means a Claim for costs and expenses of administration allowed under sections 503(b), 507(b) or 1114(e)(2) of the Bankruptcy Code, including: (a) the actual and necessary costs and expenses incurred after the Petition Date in preserving the respective Estates and operating the businesses of the Debtors; (b) Professional Fee Claims; and (c) US Trustee Fees; provided, however, except as provided in the Intercompany Claims Settlement, Administrative Claims will not include any Intercompany Claim.

     (15) “Administrative Claim Bar Date” means the date by which all requests for payment of Administrative Claims (other than Professional Fee Claims and US Trustee Fees) are required to be Filed with the Bankruptcy Court.

     (16) “Administrative Claim Bar Date Order” means the order of the Bankruptcy Court establishing the Administrative Claim Bar Date.

     (17) “Allowed Claim” means:

(a)	a Claim that (i) has been listed by a particular Debtor on its Schedules as other than disputed, contingent, or unliquidated and (ii) is not otherwise a Disputed Claim;
(b)	a Claim (i) for which a proof of Claim or request for payment of Administrative Claim has been Filed by the applicable Bar Date or otherwise been deemed timely Filed under applicable law and (ii) that is not otherwise a Disputed Claim; or
(c)	a Claim that is allowed: (i) in any Stipulation of Amount and Nature of Claim executed by the applicable Debtor and Claim holder prior to the Effective Date and approved by the Bankruptcy Court; (ii) in any Stipulation of Amount and Nature of Claim executed by the Distribution Trustee and Claim holder after the Effective Date; (iii) in any contract, instrument or other agreement or document entered into in connection with the Plan prior to the Effective Date and approved by the Bankruptcy Court; (iv) in a Final Order; or (v) pursuant to the terms of the Plan.

     (18) “AJI” means Alpart Jamaica Inc.

     (19) “AJI/KJC Plan” means the amended joint plan of liquidation filed by AJI and KJC on February 11, 2005, as such plan may be amended, modified or supplemented from time to time with the consent of the Creditors’ Committee.

     (20) “Australian Tax Claims” means collectively the Allowed Priority Tax Claims and Allowed Administrative Claims of the Government of Australia contemplated by Section 8.11(a), if any.

     (21) “Ballot” means the form or forms distributed to each holder of an impaired Claim entitled to vote on the Plan on which the holder indicates acceptance or rejection of the Plan.

     (22) “Bankruptcy Code” means title 11 of the United States Code, 11 U.S.C. §§ 101-1130, as now in effect or hereafter amended, as applicable to the Chapter 11 Cases.

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     (23) “Bankruptcy Court” means the United States District Court for the District of Delaware having jurisdiction over the Chapter 11 Cases and, to the extent of any reference made pursuant to 28 U.S.C. § 157, the bankruptcy unit of such District Court.

     (24) “Bankruptcy Rules” means, collectively, the Federal Rules of Bankruptcy Procedure and the local rules of the Bankruptcy Court, as now in effect or hereafter amended, as applicable to the Chapter 11 Cases.

     (25) “Bar Date” means the applicable bar date by which a proof of Claim must be or must have been Filed, as established by order of the Bankruptcy Court, including the general Bar Date of January 31, 2003.

     (26) “Bar Date Order” means an order of the Bankruptcy Court establishing Bar Dates for Filing proofs of Claims in the Chapter 11 Cases, as the same may be amended, modified or supplemented, including the order entered October 29, 2002.

     (27) “Beneficiaries” means the creditors and claimants of the Estates.

     (28) “Business Day” means any day, other than a Saturday, Sunday or “legal holiday” (as defined in Bankruptcy Rule 9006(a)).

     (29) “Cash” means the legal tender of the United States of America.

     (30) “Chapter 11 Cases” has the meaning set forth in the introductory paragraph of the Plan.

     (31) “Claim” means a “claim,” as defined in section 101(5) of the Bankruptcy Code, against either Debtor.

     (32) “Claims Objection Bar Date” means, for all Claims, other than those Claims allowed in accordance with Sections 1.1(17) and 2.7, the latest of: (a) 120 days after the Effective Date; (b) 60 days after the Filing of a proof of Claim for such Claim; and (c) such other period of limitation for objecting to such Claim as may be specifically fixed by the Plan, the Confirmation Order or a Final Order.

     (33) “Claims Report” means, with respect to each Estate, a report certified by the claims agent for such Estate setting forth: (a) a listing, as of the Effective Date, of: (i) all Allowed Secured Claims of such Estate; (ii) all Allowed Administrative Claims of such Estate; (iii) all Allowed Priority Claims of such Estate, (iv) all Allowed Priority Tax Claims of such Estate; (v) all Allowed Unsecured Claims of such Estate; and (vi) all Disputed Claims of such Estate; and (b) for each Claim so listed (i) the name, address and federal taxpayer identification number or social security number (if known) of the holder thereof as of the Distribution Record Date and (ii) the amount thereof, including the amount of unpaid principal and accrued interest (if known).

     (34) “Class” means a class of Claims or Interests, as described in Article II.

     (35) “Confirmation Date” means the date on which the Bankruptcy Court enters the Confirmation Order on its docket, within the meaning of Bankruptcy Rules 5003 and 9021.

     (36) “Confirmation Hearing” means the hearing before the Bankruptcy Court to consider confirmation of the Plan pursuant to section 1129 of the Bankruptcy Code, as such hearing may be continued from time to time.

     (37) “Confirmation Order” means the order or orders of the Bankruptcy Court confirming the Plan pursuant to section 1129 of the Bankruptcy Code.

     (38) “Creditors’ Committee” means the official committee of unsecured creditors of the Debtors and the Other Kaiser Debtors appointed by the US Trustee pursuant to section 1102 of the Bankruptcy Code in the Kaiser Cases, as such appointment has been subsequently modified.

     (39) “Debtors” has the meaning set forth in the introductory paragraph of the Plan.

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     (40) “Disbursing Agent” means the Distribution Trustee, in its capacity as a disbursing agent pursuant to the Plan, or any third party acting as disbursing agent at the direction of the Distribution Trustee.

     (41) “Disclosure Statement” means the disclosure statement that relates to the Plan (including all Exhibits), as approved by the Bankruptcy Court pursuant to section 1125 of the Bankruptcy Code, as the same may be amended, modified or supplemented.

     (42) “Disputed Claim” means:

(a)

if no proof of Claim has been Filed by the applicable Bar Date or has otherwise been deemed timely Filed under applicable law: (i) a Claim that is listed on a Debtor’s Schedules as other than disputed, contingent or unliquidated, but as to which the applicable Debtor or the Distribution Trustee, or prior to the Confirmation Date, any other party in interest, has Filed an objection by the Claims Objection Bar Date and such objection has not been withdrawn or denied by a Final Order; or (ii) a Claim that is listed on a Debtor’s Schedules as disputed, contingent or unliquidated; or

(b)

if a proof of Claim or proof of Administrative Claim has been Filed by the Bar Date or has otherwise been deemed timely Filed under applicable law: (i) a Claim for which no corresponding Claim is listed on a Debtor’s Schedules; (ii) a Claim for which a corresponding Claim is listed on a Debtor’s Schedules as other than disputed, contingent or unliquidated, but the nature or amount of the Claim as asserted in the proof of Claim varies from the nature and amount of such Claim as it is listed on the Schedules; (iii) a Claim for which a corresponding Claim is listed on a Debtor’s Schedules as disputed, contingent or unliquidated; or (iv) a Claim for which an objection has been Filed by the applicable Debtor or the Distribution Trustee or, prior to the Confirmation Date, any other party in interest, by the Claims Objection Bar Date, and such objection has not been withdrawn or denied by a Final Order.

     (43) “Disputed Claims Reserves” means, with respect to each of the Trust Accounts, the reserve of Cash (and any other property) retained in such Trust Account to satisfy Disputed Claims against the Estate of KAAC or the Estate of KFC, if, as and when they are allowed, or, to the extent such Disputed Claims are not allowed, to satisfy Claims that are allowed in accordance with the terms of the Plan.

     (44) “Distribution Record Date” means the close of business on the Confirmation Date.

     (45) “Distribution Trust” means the trust established pursuant to the Plan, among other things, to hold the Distribution Trust Assets and make distributions pursuant to the Plan.

     (46) “Distribution Trust Agreement” means the trust agreement, to be dated on or prior to the Effective Date, between the Debtors and the Distribution Trustee, governing the Distribution Trust, which will be substantially in the form of Exhibit A to the Plan.

     (47) “Distribution Trust Assets” means collectively: (a) the Trust Accounts and any Cash (and any other property) held by such Trust Accounts; (b) the rights of the Debtors under or in respect of the Intercompany Claims Settlement, the QAL Purchase Agreement or any causes of action not released by the Plan, including the Recovery Actions, and any proceeds thereof; and (c) the QAL Proceeds to the extent that such funds are not included in (a) or (b).

     (48) “Distribution Trust Expenses” means any and all reasonable fees, costs and expenses incurred by the Distribution Trustee (or any Disbursing Agent, person, entity or professional engaged by the Distribution Trustee) in connection with the performance by the Distribution Trustee of its duties under the Plan or Distribution Trust Agreement.

     (49) “Distribution Trust Expenses Account” means the segregated trust account to be established and maintained pursuant to Sections 8.9 and 8.10 to fund the payment of Distribution Trust Expenses.

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     (50) “Distribution Trustee” means the trustee selected by the Creditors’ Committee with the consent of the Debtors and identified in the Distribution Trust Agreement (or any successor trustee), in its capacity as the trustee of the Distribution Trust.

     (51) “Document Website” means the Internet site with the address www.kaiseraluminum.com at which the Plan, the Disclosure Statement and all of the Exhibits and schedules to the Plan and to the Disclosure Statement will be available, without charge, to any party in interest and the public.

     (52) “Effective Date” means a day, as determined by the Debtors, that is the Business Day as soon as reasonably practicable after all conditions to the Effective Date have been satisfied or waived pursuant to the Plan.

     (53) “Equity Claim” means a legal, equitable or contractual Claim arising from any share or other stock ownership interest in a Debtor, whether or not transferable or denominated “stock”, or similar security, and any options, warrants, convertible security, liquidation preference or other right to acquire such shares or other stock ownership interests, including but not limited to Claims arising from rescission of the purchase or sale of such stock ownership interests, for damages arising from the purchase or sale of a such stock ownership interest, or for reimbursement or contribution on account of such Claim.

     (54) “Estate” means, as to each Debtor, the estate created for that Debtor in its Chapter 11 Case pursuant to section 541 of the Bankruptcy Code.

     (55) “Executory Contract and Unexpired Lease” means a contract or lease to which one or both of the Debtors is a party that is subject to assumption, assumption and assignment or rejection under section 365 of the Bankruptcy Code.

     (56) “Face Amount” means, when used with reference to a Disputed Claim: (a) the full stated amount claimed by the holder of such Claim in any proof of Claim Filed by the Bar Date or otherwise deemed timely Filed under applicable law, if the proof of Claim specifies only a liquidated amount; or (b) if no proof of Claim has been Filed by the Bar Date or has otherwise been deemed timely Filed under applicable law, or if the proof of Claim specified an unliquidated amount, the amount of the Claim (i) acknowledged by the applicable Debtor in any objection Filed to such Claim or in the Schedules as an undisputed, noncontingent, and liquidated Claim, (ii) estimated by the Bankruptcy Court pursuant to section 502(c) of the Bankruptcy Code, (iii) proposed by the applicable Debtor and approved by the Creditors’ Committee prior to the Effective Date, or (iv) established by the Distribution Trustee on behalf of the Distribution Trust following the Effective Date; or (c) if neither (a) nor (b) above are applicable, an amount estimated by the applicable Debtor or the Distribution Trustee, but such estimated amount will be no less than either (i) the amount of the claim estimated by the Bankruptcy Court or (ii) the liquidated portion of the amount claimed by the holder of such Claim in any proof of Claim Filed by the Bar Date or otherwise deemed timely Filed under applicable law.

     (57) “File,” “Filed” or “Filing” means file, filed or filing with the Bankruptcy Court or its authorized designee in the Chapter 11 Cases.

     (58) “Final Order” means an order or judgment of the Bankruptcy Court, or other court of competent jurisdiction, as entered on the docket in any Bankruptcy Case or the docket of any other court of competent jurisdiction, that has not been reversed, stayed, modified or amended, and as to which the time to appeal or seek certiorari or move for a new trial, reargument or rehearing has expired, and no appeal or petition for certiorari or other proceedings for a new trial, reargument or rehearing has been timely taken, or as to which any appeal that has been taken or any petition for certiorari that has been timely filed has been withdrawn or resolved by the highest court to which the order or judgment was appealed or from which certiorari was sought or the new trial, reargument or rehearing shall have been denied or resulted in no modification of such order.

     (59) “Indenture Trustee” means the 9-7/8% Senior Note Indenture Trustee, 10-7/8% Senior Note Indenture Trustee, Senior Subordinated Note Indenture Trustee or 7-3/4% SWD Revenue Bond Indenture Trustee, or any successor thereto.

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     (60) “Intercompany Claim” means a Claim held by a debtor in the Kaiser Cases against another debtor in any of the Kaiser Cases.

     (61) “Intercompany Claims Settlement” means the settlement and release agreement among the debtors in the Kaiser Cases and the Creditors’ Committee, dated as of October 5, 2004, in such form as approved by the Intercompany Claims Settlement Order.

     (62) “Intercompany Claims Settlement Order” means the order of the Bankruptcy Court approving the settlement of all claims by debtors in any of the Kaiser Cases against another debtor in any of the Kaiser Cases pursuant to the Intercompany Claims Settlement entered on February 1, 2005.

     (63) “Interest” means (a) any share or other stock ownership interest in a Debtor, whether or not transferable or denominated “stock”, or similar security, and any options, warrants, convertible security, liquidation preference or other right to acquire such shares or other stock ownership interests and (b) any Equity Claim.

     (64) “IRC” means the Internal Revenue Code of 1986, as amended.

     (65) “KACC” means Kaiser Aluminum & Chemical Corporation.

     (66) “Kaiser Cases” means the chapter 11 cases styled “In re Kaiser Aluminum Corporation, a Delaware Corporation, et al.” jointly administered under Case No. 02-10429 (JKF) in the United States District Bankruptcy Court for the District of Delaware.

     (67) “KFC Claim” means the general unsecured claim of KFC against KACC in the amount of $1,106,000,000 to be treated in accordance with Section 4.2.f of the Intercompany Claims Settlement.

     (68) “KJC” means Kaiser Jamaica Corporation.

     (69) “Lien” means any mortgage, pledge, deed of trust, assessment, security interest, lease, adverse claim, levy, charge or other encumbrance of any kind, including any “lien” as defined in section 101 (37) of the Bankruptcy Code, or a conditional sale contract, title retention contract or other contract to give any of the foregoing.

     (70) “Liquidating Transactions” means the transactions set forth in the first sentence of Section 7.1 to effectuate a liquidation of the Debtors.

     (71) “Other Kaiser Debtor” means any of the debtors in the Kaiser Cases except the Debtors.

     (72) “Other Unsecured Claim” means an Unsecured Claim other than a Senior Note Claim, a Senior Subordinated Note Claim or a PBGC Claim.

     (73) “Other Unsecured Claims Percentage” means the percentage equaling the ratio of (a) the aggregate amount of all allowed Other Unsecured Claims to (b) the sum of (i) the aggregate amount of all allowed Other Unsecured Claims and (ii) $1,237,237,000.

     (74) “PBGC” means the Pension Benefit Guaranty Corporation.

     (75) “PBGC Claims” means the Claims (excluding any Administrative Claims) of the PBGC against the Debtors arising from or relating to the pension plans which were or are maintained by any of the Other Kaiser Debtors in the Kaiser Cases and guaranteed by the PBGC, as such Claims are allowed pursuant to the PBGC Settlement Agreement.

     (76) “PBGC Percentage” means (a) 32% less (b) 32% of the Other Unsecured Claims Percentage.

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     (77) “PBGC Settlement Agreement” means the agreement among KACC and the PBGC, dated as of October 14, 2004.

     (78) “Pending Payments” means identified amounts (excluding undeliverable Cash) held by the Distribution Trust for distribution to holders of Allowed Claims in specific amounts as of the date the Distribution Trust receives the applicable Distribution Trust Assets.

     (79) “Permitted Investment” has the meaning ascribed thereto in the Distribution Trust Agreement.

     (80) “Petition Date” means February 12, 2002.

     (81) “Plan” means this joint plan of liquidation for the Debtors, to the extent applicable to either Debtor, and all Exhibits attached hereto or referenced herein, as any of the same may be amended, modified or supplemented from time to time.

     (82) “Priority Claim” means a Claim that is entitled to priority in payment pursuant to section 507(a) of the Bankruptcy Code that is not an Administrative Claim or a Priority Tax Claim.

     (83) “Priority Claims Trust Account” means the segregated trust account to be established and maintained by the Distribution Trustee pursuant to Sections 8.9 and 8.11 to satisfy Allowed Secured Claims, Allowed Administrative Claims, Allowed Priority Claims and Allowed Priority Tax Claims against the Estate of KAAC or the Estate of KFC.

     (84) “Priority Tax Claim” means a Claim arising under U.S. federal, state or local tax laws that is entitled to priority in payment pursuant to section 507(a)(8) of the Bankruptcy Code.

     (85) “Professional Fee Claims” means the Claims of (a) any professional in the Chapter 11 Cases pursuant to sections 330 or 1103 of the Bankruptcy Code or (b) any professional or other entity seeking compensation or reimbursement of expenses in connection with the Chapter 11 Cases pursuant to sections 503(b)(3), 503(b)(4) or 503(b)(5) of the Bankruptcy Code.

     (86) “Pro Rata Share” means, when used with reference to a distribution to a holder of an Allowed Claim in a Subclass of Class 3, that share of Cash or other property to be distributed on account of all Allowed Claims in such Subclass so that the ratio of (a)(i) the amount of Cash or other property to be distributed on account of the particular Allowed Claim to (ii) the amount of such Claim, is the same as the ratio of (b)(i) the aggregate amount of Cash or other property to be distributed on account of all Allowed Claims in such Subclass to (ii) the aggregate amount of all Allowed Claims in such Subclass.

     (87) “Public Note Claims” means Claims arising under the Public Notes.

     (88) “Public Note Distributable Consideration” means the Public Note Percentage of the Cash and other property in the Unsecured Claims Trust Account.

     (89) “Public Note Percentage” means (a) 68% less (b) 68% of the Other Unsecured Claims Percentage.

     (90) “Public Notes” means any of (a) the 9-7/8% Senior Notes, (b) the 10-7/8% Senior Notes, or (c) the Senior Subordinated Notes.

     (91) “QAL” means Queensland Australia Limited, an Australian corporation.

     (92) “QAL Proceeds” means the net Cash proceeds to KAAC in connection with the sale of its interests in QAL pursuant to the QAL Purchase Agreement, after taking into account the costs and expenses of the sale payable by KAAC in accordance with the Intercompany Claims Settlement and the satisfaction of any applicable Allowed Secured Claim with a valid and enforceable Lien against such proceeds.

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     (93) “QAL Purchase Agreement” means that certain Purchase Agreement, dated as of October 28, 2004, by and among Alumina & Bauxite Company Ltd., KACC and KAAC or, in the event such agreement is terminated, the purchase agreement entered into by and among Pegasus Queensland Acquisition Pty Limited and/or Glencore AG and KACC and KAAC, as contemplated by the Bankruptcy Court’s order dated November 8, 2004.

     (94) “Quarterly Distribution Date” means, with respect to distributions subsequent to the initial distributions pursuant to Section 9.4, the last Business Day of the month following the end of each calendar quarter after the Effective Date; provided, however, that if the Effective Date is within 45 days of the end of a calendar quarter, the first Quarterly Distribution Date will be the last Business Day of the month following the end of the first calendar quarter after the calendar quarter in which the Effective Date falls.

     (95) “Recovery Actions” means, collectively and individually, preference actions, fraudulent conveyance actions, rights of setoff, and other claims or causes of action under chapter 5 of the Bankruptcy Code and other applicable bankruptcy or nonbankruptcy law.

     (96) “Retained Portion of the KFC Claim” means the portion of the KFC Claim retained by KFC after giving effect to Section 4.2.f of the Intercompany Claims Settlement.

     (97) “Schedules” means the schedules of assets and liabilities and the statements of financial affairs Filed by the Debtors, as required by section 521 of the Bankruptcy Code, as the same may be amended, modified or supplemented by the Debtors from time to time.

     (98) “Secured Claim” means a Claim that is secured by a Lien on property in which an Estate has an interest or that is subject to setoff under section 553 of the Bankruptcy Code, to the extent of the value of the Claim holder’s interest in the applicable Estate’s interest in such property or to the extent of the amount subject to setoff, as applicable, as determined pursuant to sections 506(a) and, if applicable, 1129(b) of the Bankruptcy Code.

     (99) “Senior Note Claims” means 9-7/8% Senior Note Claims and 10-7/8% Senior Note Claims.

     (100) “Senior Subordinated Note Claim” means a Claim against a Debtor under or in respect of one or more Senior Subordinated Notes and the Senior Subordinated Note Indenture.

     (101) “Senior Subordinated Note Indenture” means the Indenture, dated as of February 1, 1993, by and among the Debtors, certain Other Kaiser Debtors (including KACC) and the Senior Subordinated Note Indenture Trustee, as the same may have been subsequently modified, amended or supplemented, together with all instruments and agreements related thereto.

     (102) “Senior Subordinated Note Indenture Trustee” means Law Debenture Trust Company of New York, as successor indenture trustee under the Senior Subordinated Note Indenture.

     (103) “Senior Subordinated Notes” means the 12-3/4% senior subordinated notes due 2003 issued by KACC, pursuant to the Senior Subordinated Note Indenture in the outstanding aggregate principal amount of $400,000,000.

     (104) “Settlement Percentage” means the percentage equaling the ratio of (a) $4,000,000 to (b) 50.78% of the Public Note Percentage of the Cash in the Unsecured Claims Trust Account.

     (105) “Steering Committee” means a committee comprised of the members of the Alumina Creditor Subcommittee (as defined in the Intercompany Claims Settlement) other than any member thereof that is (a) a holder of a Senior Subordinated Note Claim or (b) the Senior Subordinated Note Indenture Trustee.

     (106) “Stipulation of Amount and Nature of Claim” means a stipulation or other agreement between the applicable Debtor or Distribution Trustee and a holder of a Claim or Interest, or an agreed order of the Bankruptcy Court, establishing the amount and nature of a Claim or Interest.

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     (107) “Tax” means: (a) any net income, alternative or add-on minimum, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, license, property, environmental or other tax, assessment or charge of any kind whatsoever (together in each instance with any interest, penalty, addition to tax or additional amount) imposed by any U.S. federal, state, local or foreign taxing authority; or (b) any liability for payment of any amounts of the foregoing types as a result of being a member of an affiliated, consolidated, combined or unitary group, or being a party to any agreement or arrangement whereby liability for payment of any such amounts is determined by reference to the liability of any other entity.

     (108) “Trust Accounts” means, collectively, the Distribution Trust Expenses Account, the Priority Claims Trust Account, the Unsecured Claims Trust Account and the Undeliverable Property Trust Account.

     (109) “Undeliverable Property Trust Account” means the segregated trust account to be established and maintained by the Distribution Trustee pursuant to Sections 8.9 and 8.13 to hold undeliverable Cash or other property for the benefit of holders of Allowed Unsecured Claims against the Estate of KAAC or the Estate of KFC otherwise entitled to such distributions.

     (110) “Unsecured Claim” means any Claim that is not an Administrative Claim, Priority Claim, Priority Tax Claim, Secured Claim or Intercompany Claim and includes, without limitation, Senior Note Claims, Senior Subordinated Note Claims and the PBGC Claims.

     (111) “Unsecured Claims Trust Account” means the segregated trust account to be established and maintained by the Distribution Trustee pursuant to Sections 8.9 and 8.12 to satisfy Allowed Unsecured Claims against the Estate of KAAC or the Estate of KFC.

     (112) “US Trustee Fees” means all fees and charges assessed against the Estates under chapter 123 of title 28, United States Code, 28 U.S.C. §§ 1911-1930.

     1.2 Rules of Interpretation.

          For purposes of the Plan, unless otherwise provided herein: (a) whenever from the context it is appropriate, each term, whether stated in the singular or the plural, will include both the singular and the plural; (b) unless otherwise provided in the Plan, any reference in the Plan to a contract, instrument, release, or other agreement or document being in a particular form or on particular terms and conditions means that such document will be substantially in such form or substantially on such terms and conditions; (c) any reference in the Plan to an existing document or Exhibit Filed or to be Filed means such document or Exhibit, as it may have been or may be amended, modified or supplemented pursuant to the Plan or Confirmation Order; (d) any reference to an entity as a holder of a Claim or Interest includes that entity’s successors and assigns and affiliates; (e) all references in the Plan to Sections, Articles and Exhibits are references to Sections, Articles and Exhibits of or to the Plan; (f) the words “herein,” “hereunder” and “hereto” refer to the Plan in its entirety rather than to a particular portion of the Plan; (g) captions and headings to Articles and Sections are inserted for convenience of reference only and are not intended to be a part of or to affect the interpretation of the Plan; (h) subject to the provisions of any certificates of incorporation, by-laws or similar constituent documents or any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, the rights and obligations arising under the Plan will be governed by, and construed and enforced in accordance with, federal law, including the Bankruptcy Code and the Bankruptcy Rules; and (i) the rules of construction set forth in section 102 of the Bankruptcy Code will apply.

     1.3 Computation of Time.

          In computing any period of time prescribed or allowed by the Plan, the provisions of Bankruptcy Rule 9006(a) will apply.

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ARTICLE II

CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS

     2.1 General. All Claims and Interests, except Administrative Claims and Priority Tax Claims, are placed in Classes. In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims and Priority Tax Claims have not been classified and thus are excluded from the Classes. A Claim or Interest is classified in a particular Class only to the extent that the Claim or Interest qualifies within the description of that Class and is classified in other Classes to the extent that any remainder of the Claim or Interest qualifies within the description of such other Classes.

(a)	Unimpaired Classes of Claims.
	Class 1 (Priority Claims): Priority Claims against either of the Debtors.
	Class 2 (Secured Claims): Secured Claims against either of the Debtors.
(b)	Impaired Classes of Claims and Interests.
	Class 3 (Unsecured Claims): Unsecured Claims against either of the Debtors other than Claims otherwise classified under the Plan, subclassified as follows:

Subclass 3A: Senior Note Claims against the Debtors.

Subclass 3B: Senior Subordinated Note Claims against the Debtors.

Subclass 3C: PBGC Claims against the Debtors.

Subclass 3D: Other Unsecured Claims against either of the Debtors.

Class 4 (Intercompany Claims): Intercompany Claims against the Debtors.

Class 5 (Interests in the Debtors): Interests in either of the Debtors.

     2.2 Administrative Claims.

     (a) Administrative Claims in General. Except as otherwise provided herein or unless otherwise agreed by the holder of an Administrative Claim and the applicable Debtor or the Distribution Trustee, each holder of an Allowed Administrative Claim will receive, in full satisfaction of its Administrative Claim, Cash from the Priority Claims Trust Account in an amount equal to the allowed amount of such Administrative Claim either (a) on or promptly after the Effective Date or (b) if the Administrative Claim is not allowed as of the Effective Date, on or promptly after the date that is 30 days after the date on which (i) an order allowing such Administrative Claim becomes a Final Order or (ii) a Stipulation of Amount and Nature of Claim is executed by the Distribution Trustee and the holder of the Administrative Claim.

     (b) US Trustee Fees. On or before the Effective Date, Administrative Claims for fees payable pursuant to 28 U.S.C. § 1930, as determined by the Bankruptcy Court at the Confirmation Hearing, will be paid by the applicable Debtor or the Distribution Trustee in Cash equal to the amount of such Administrative Claims. All fees payable pursuant to 28 U.S.C. § 1930 will be paid by the Distribution Trustee in accordance herewith from the Priority Claims Trust Account until the closing of the Chapter 11 Cases pursuant to section 350(a) of the Bankruptcy Code.

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     (c) Bar Dates for Administrative Claims.

(i)	General Bar Date Provisions. As provided in the Administrative Claim Bar Date Order, any holder of an Administrative Claim against a Debtor that was required to File and serve a request for payment of such Administrative Claim and does not File and serve such a request in accordance with the Administrative Claim Bar Date Order by the Administrative Claim Bar Date, will be forever barred from asserting such Administrative Claim against the Debtors, the Distribution Trustee or the property of any of them, or the Trust Accounts, and such Administrative Claim will be deemed waived and released as of the Effective Date. Objections to an Administrative Claim must be Filed by the Distribution Trustee and served on the requesting party by the later of (A) 45 days after the Effective Date and (B) 60 days after the Filing of the request for payment of an Administrative Claim.
(ii)	Bar Dates for Professional Fees. Except as otherwise set forth herein or in the Intercompany Claims Settlement, professionals or other entities asserting a Professional Fee Claim for services rendered solely with respect to the Debtors before the Effective Date must File and serve on the Debtors and the Distribution Trustee and such other entities who are designated by the Bankruptcy Rules, the Confirmation Order or other order of the Bankruptcy Court, an application for final allowance of such Fee Claim no later than 60 days after the Effective Date. Objections to any Professional Fee Claim must be Filed and served on the Distribution Trustee and the requesting party by the later of (A) 90 days after the Effective Date and (B) 30 days after the Filing of the applicable request for payment of the Professional Fee Claim. To the extent necessary, the Confirmation Order will amend and supersede any previously entered order of the Bankruptcy Court regarding the payment of Professional Fee Claims (other than the Intercompany Claim Settlement Order) solely with respect to the Debtors.
	To the extent that any professional has provided services in the Kaiser Cases, the Bar Date for Professional Fee Claims in this Section 2.2(c)(ii) relates only to such professional’s fees for services and reimbursement of expenses reasonably allocable by such Professional solely to the Debtors and not otherwise treated pursuant to the Intercompany Claims Settlement Order; Claims relating to such professional’s fees for services and reimbursement of expenses to the Other Kaiser Debtors may be sought against the estates of such Other Kaiser Debtors. The failure of a professional to allocate any particular charges to the Debtors will not foreclose, waive or affect in any way the professional’s right to seek allowance and payment of such charges from the Other Kaiser Debtors.

     (d) QAL Purchase Agreement. From and after the Effective Date, any amounts payable by KAAC under the QAL Purchase Agreement, including any amounts that become payable in respect of indemnification claims, will be paid in full in Cash from the Priority Claims Trust Account in accordance with the applicable provisions of the QAL Purchase Agreement. The Distribution Trust will have no claim against KACC, for contribution or otherwise, as a result of any such payment.

     (e) PBGC Administrative Claim. Pursuant to paragraph 10 of the PBGC Settlement Agreement, the PBGC will have an Allowed Administrative Claim against KAAC and KFC and, on the Effective Date, if neither KACC nor any of the Other Kaiser Debtors has paid to the PBGC $14,000,000 in full as required by Section 7.10 of the Intercompany Claims Settlement, then the PBGC will receive, in full satisfaction of such Allowed Administrative Claim, Cash from the Priority Claims Trust Account in the amount of $14,000,000 less any portion of such amount that has been previously paid to the PBGC by KACC or any of the Other Kaiser Debtors.

     2.3 Priority Tax Claims.

     (a) Pursuant to section 1129(a)(9)(C) of the Bankruptcy Code, unless otherwise agreed by the holder of a Priority Tax Claim and the applicable Debtor or the Distribution Trustee, each holder of an Allowed Priority Tax Claim will receive, in full satisfaction of its Priority Tax Claim, the full amount thereof in Cash, without postpetition interest or penalty, from the Priority Claims Trust Account as soon as practicable after the later of (i) the Effective Date and (ii) the date on which the Priority Tax Claim becomes an Allowed Claim.

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     (b) Notwithstanding the provisions of Section 2.3(a), the holder of an Allowed Priority Tax Claim will not be entitled to receive any payment on account of any penalty arising with respect to or in connection with the Allowed Priority Tax Claim. Any such Claim or demand for any such penalty (i) will be subject to treatment in Subclass 3D and (ii) the holder of an Allowed Priority Tax Claim will not be entitled to assess or attempt to collect such penalty from the Debtors, the Distribution Trustee, their properties or the Trust Accounts (other than as the holder of an Allowed Subclass 3D Claim).

     2.4 Classified Claims.

     (a) Class 1 — Priority Claims. On the later of the Effective Date and the date on which a Priority Tax Claim is allowed, each holder of an Allowed Priority Claim will, in full and complete settlement and satisfaction of such Claim, receive either: (i) Cash in the amount of such holder’s Allowed Priority Claim without interest or penalty; or (ii) such other treatment as may be agreed upon in writing by such holder and the Debtors or the Distribution Trustee. Class 1 is unimpaired under the Plan. Each holder of an Allowed Priority Claim is conclusively presumed to have accepted the Plan and is not entitled to vote on the Plan.

     (b) Class 2 — Secured Claims. On the later of the Effective Date and the date on which a Secured Claim is allowed, each holder of an Allowed Secured Claim will, in full and complete settlement and satisfaction of such Claim, at the sole option of the Debtors, receive either (i) Cash in an amount equal to such Allowed Secured Claim, including such interest as is required to be paid pursuant to section 506(b) of the Bankruptcy Code; or (ii) the collateral securing such Allowed Secured Claim and Cash from the Priority Claims Trust Account an amount equal to such interest as is required to be paid pursuant to section 506(b) of the Bankruptcy Code. Class 2 is unimpaired under the Plan. Each holder of an Allowed Secured Claim is conclusively presumed to have accepted the Plan and is not entitled to vote on the Plan.

     (c) Class 3 — Unsecured Claims. Subclass 3A, Subclass 3B, Subclass 3C and Subclass 3D are impaired under the Plan and holders of Allowed Claims in each of such Subclasses are entitled to vote on the appropriate Ballot to accept or reject the Plan. For voting purposes, each Subclass will vote as a separate class.

(i)   Subclass 3A (Senior Note Claims):

(A)

Plan Accepted by Subclass 3A and Subclass 3B. On the Effective Date, if both Subclass 3A and Subclass 3B vote to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, each holder of an Allowed Senior Note Claim will, in full and complete satisfaction of such Claim, be entitled to receive Cash and other property from the Unsecured Claims Trust Account equal to its Pro Rata Share of the Public Note Distributable Consideration remaining after first giving effect to the following payments on the Effective Date by the Distribution Trustee from the Public Note Distributable Consideration: (I) the payment to be made to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of the holders of the 7-3/4% SWD Revenue Bonds pursuant to Section 2.5 and the payment of all amounts payable pursuant to Section 2.6(b); (II) the payment of all amounts payable pursuant to Section 2.6(a); and (III) the payment of $8,000,000 to be made to the Senior Subordinated Note Indenture Trustee for the benefit of the holders of Senior Subordinated Note Claims. If both Subclass 3A and Subclass 3B vote to accept the Plan, as of the Effective Date the treatment provided pursuant to this Section 2.4(c)(i)(A) and Section 2.4(c)(ii)(A) will be deemed to be in full and complete satisfaction of any and all obligations of holders of Senior Subordinated Note Claims relating to the contractual subordination provisions under the Senior Subordinated Note Indenture and any and all claims of holders of Senior Note Claims relating to the contractual subordination provisions of the Senior Subordinated Note Indenture, as such obligations and claims relate to KAAC and KFC.

(B)

Plan Rejected by Subclass 3A or Subclass 3B. If either Subclass 3A or Subclass 3B fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the obligations of holders of Senior Subordinated Note Claims relating to the contractual subordination provisions of the Senior Subordinated Note Indenture and the claims of

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holders of Senior Note Claims relating to the contractual subordination provisions of the Senior Subordinated Note Indenture, as such obligations and claims relate to KAAC and KFC, will be preserved under the Plan to the extent enforceable under section 510(a) of the Bankruptcy Code. In such event: (I) the holders of Senior Note Claims will not become entitled to receive the distribution described in Section 2.4(c)(i)(A); and (II) the Bankruptcy Court will enter an order (which will be the Confirmation Order) pursuant to which the Bankruptcy Court will determine the respective entitlement of the holders of Allowed 9-7/8% Senior Note Claims, Allowed 10-7/8% Senior Note Claims, Allowed Senior Subordinated Note Claims and, if applicable under Section 2.5(b), 7-3/4% SWD Revenue Bonds to the Public Note Distributable Consideration. The distributions ultimately made to a holder of an Allowed Senior Note Claim in accordance with this Section 2.4(c)(i)(B) will be reduced by such holder’s proportional share of (x) all amounts payable pursuant to Section 2.6(a) and (y) if the Bankruptcy Court determines that holders of Allowed Senior Subordinated Note Claims are not entitled to any portion of the Public Note Distributable Consideration, the payment, if any, to be made to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of the holders of 7-3/4% SWD Revenue Bonds pursuant to Section 2.5 (or a reservation in lieu thereof in accordance with Section 2.5(b)) and any amounts payable pursuant to Section 2.6(b).

(ii)   Subclass 3B (Senior Subordinated Note Claims):

(A)

Plan Accepted by Subclass 3A and Subclass 3B. On the Effective Date, if both Subclass 3A and Subclass 3B vote to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, each holder of an Allowed Senior Subordinated Note Claim will, in full and complete satisfaction of such Claim, be entitled to receive its Pro Rata Share of $8,000,000 in Cash to be paid to the Senior Subordinated Note Indenture Trustee as contemplated by clause (III) of the first sentence of Section 2.4(c)(i)(A), provided that any and all fees or expenses payable to the Senior Subordinated Note Indenture Trustee pursuant to the Senior Subordinated Note Indenture will, in all events, be payable solely from such $8,000,000. If both Subclass 3A and Subclass 3B vote to accept the Plan, as of the Effective Date the treatment provided pursuant to Section 2.4(c)(i)(A) and this Section 2.4(c)(ii)(A) will be deemed to be in full and complete satisfaction of any and all obligations of holders of Senior Subordinated Note Claims relating to the contractual subordination provisions under the Senior Subordinated Note Indenture and any and all claims of holders of Senior Note Claims relating to the contractual subordination provisions of the Senior Subordinated Note Indenture, as such obligations and claims relate to KAAC and KFC.

(B)

Plan Rejected by Subclass 3A or Subclass 3B. If either Subclass 3A or Subclass 3B fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the obligations of holders of Senior Subordinated Note Claims relating to the contractual subordination provisions of the Senior Subordinated Note Indenture and the claims of holders of Senior Note Claims relating to the contractual subordination provisions of the Senior Subordinated Note Indenture, as such obligations and claims relate to KAAC and KFC, will be preserved under the Plan to the extent enforceable under section 510(a) of the Bankruptcy Code. In such event: (I) the holders of Senior Subordinated Note Claims will not become entitled to receive the distribution described in Section 2.4(c)(ii)(A); and (II) the Bankruptcy Court will enter an order (which will be the Confirmation Order) pursuant to which the Bankruptcy Court will determine the respective entitlement of the holders of Allowed 9-7/8% Senior Note Claims, Allowed 10-7/8% Senior Note Claims, Allowed Senior Subordinated Note Claims and, if applicable under Section 2.5(b), 7-3/4% SWD Revenue Bonds to the Public Note Distributable Consideration. Any distributions ultimately made to a holder of an Allowed Senior Subordinated Note Claim in accordance with this Section 2.4(c)(ii)(B) may be reduced by such holder’s proportional share of any and all fees and expenses payable to the Senior Subordinated Note Indenture Trustee pursuant to the Senior Subordinated Note Indenture, which will,

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subject to such Trustee’s right to seek payment by the Debtors of such fees and expenses pursuant to section 503(b)(5) of the Bankruptcy Code, be payable solely from such distributions.

(iii)	Subclass 3C (PBGC Claims): On the Effective Date, the PBGC as holder of the PBGC Claims will, in full and complete satisfaction of such Claims, be entitled to receive the PBGC Percentage of the Cash and, subject to Section 2.10, other property in the Unsecured Claims Trust Account.
(iv)	Subclass 3D (Other Unsecured Claims): On the Effective Date, each holder of an Allowed Other Unsecured Claim will, in full and complete satisfaction of such Claim, be entitled to receive a Pro Rata Share of the Other Unsecured Claims Percentage of the Cash and, subject to Section 2.10, other property in the Unsecured Claims Trust Account.

     (d) Class 4 — Intercompany Claims. On the Effective Date, each holder of an Intercompany Claim will be entitled to receive the treatment set forth in the Intercompany Claims Settlement. Class 4 is impaired under the Plan. Notwithstanding this treatment of Class 4 Claims, each of the holders of Class 4 Claims will be deemed to have accepted the Plan.

     (e) Class 5 — Interests in the Debtors. No property will be distributed to, or retained by, KACC as the holder of the Interests in KAAC on account of such Interests or KAAC as the holder of Interests in KFC on account of such Interests, and such Interests will be cancelled on the Effective Date. Notwithstanding this treatment of Class 5 Interests, each of the holders of Class 5 Interests will be deemed to have accepted the Plan.

     2.5 7-3/4% SWD Revenue Bond Dispute and Settlement.

     (a) Plan Accepted by Subclass 3A. If Subclass 3A votes to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code and, unless the holders of Senior Note Claims otherwise agree pursuant to a settlement, all holders of Allowed Senior Note Claims are entitled under the Plan to identical treatment in respect of contractual subordination claims under the Senior Subordinated Note Indenture, on the Effective Date an amount equal to the Settlement Percentage of the Cash in the Unsecured Claims Trust Account that would otherwise have been distributed in respect of the Senior Subordinated Note Claims which, after giving effect to the contractual subordination provisions of the Senior Subordinated Note Indenture and pursuant to Sections 2.4(c)(i) and 2.4(c)(ii) but prior to giving effect to any payments under this Section 2.5, is to be distributed to holders of Senior Note Claims will, in full and complete satisfaction of the claims of holders of 7-3/4% SWD Revenue Bonds asserted in the 7-3/4% SWD Revenue Bond Dispute in respect of the Debtors, be paid to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of holders of 7-3/4% SWD Revenue Bonds. Notwithstanding the foregoing, in no event will the amount paid under this Section 2.5(a), when aggregated with any amount payable under any comparable provision of the AJI/KJC Plan, exceed $8,000,000. If the Debtors do not File a separate motion, the Plan will serve as a motion pursuant to Bankruptcy Rule 9019 seeking entry of an order approving the foregoing settlement. Unless an objection to such settlement is made in writing by any creditor or claimant affected thereby, Filed with the Bankruptcy Court and served on the parties identified in Section 12.5 on or before April 5, 2005, such order (which will be the Confirmation Order) may be entered by the Bankruptcy Court. In the event any such objections are timely Filed, a hearing with respect thereto will occur at the Confirmation Hearing.

     (b) Plan Rejected by Subclass 3A. If Subclass 3A fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the rights, if any, of the holders of 7-3/4% SWD Revenue Bonds to payments from the Public Note Distributable Consideration will be as determined in an order of the Bankruptcy Court (which may be the Confirmation Order) in connection with the determinations contemplated by Sections 2.4(c)(i)(B) and 2.4(c)(ii)(B); provided that if the determination with respect to the rights of the holders of 7-3/4% SWD Revenue Bonds to such payment has not been made by the Bankruptcy Court prior to the Effective Date, then, in order to ensure the funding of such payment, on the Effective Date the Distribution Trustee will reserve from the Public Note Distributable Consideration any amount that may be ordered by the Bankruptcy Court to be so reserved pending such determination.

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     2.6 Senior Note Indenture Trustee and Ad Hoc Group Counsel Fees and Expenses; 7-3/4% SWD Revenue Bond Plaintiffs’ Fees.

     (a) Senior Note Indenture Trustee and Ad Hoc Group Counsel Fees and Expenses. The fees and expenses of (a) the 9-7/8% Senior Note Indenture Trustee, (b) the 10-7/8% Senior Note Indenture Trustee, and (c) counsel for the Ad Hoc Group through the Effective Date will be paid out of the Public Note Distributable Consideration. No later than two Business Days prior to the Effective Date, each of the entities to which reference is made in clauses (a), (b) and (c) of the first sentence of this Section 2.6(a) will furnish to the counsel for the Creditors’ Committee and the Debtors information in respect of such fees and expenses incurred and estimated to be incurred through the Effective Date.

     (b) 7-3/4% SWD Revenue Bond Plaintiffs’ Fees. If a payment is required to be made to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of holders of 7-3/4% SWD Revenue Bonds under the first sentence of Section 2.5(a), the reasonable out-of-pocket expenses (including attorneys’ fees) incurred and paid by the plaintiffs in the 7-3/4% SWD Revenue Bond Dispute in connection with the Chapter 11 Cases and the chapter 11 cases of the Other Kaiser Debtors, including in connection with the 7-3/4% SWD Revenue Bond Dispute, and that certain civil action currently pending before the United States District Court for the Eastern District of Louisiana styled Paul J. Guillot, et al. v. Credit Suisse First Boston, LLC, and numbered 03-0797, will be paid out of the Public Note Distributable Consideration otherwise payable to holders of Allowed Claims in Subclass 3A, provided, however, that in no event will the amount paid under this sentence, when aggregated with any amount payable under any comparable provision of the AJI/KJC Plan, exceed $500,000; provided further, however, that nothing in this Section 2.6(b) will prejudice the rights of such plaintiffs to seek additional recoveries (i) from amounts otherwise to be paid to or for the benefit of holders of 7-3/4% SWD Revenue Bonds under the Plan or the AJI/KJC Plan or (ii) from, or in respect of amounts otherwise to be paid to or for the benefit of holders of 7-3/4% SWD Revenue Bonds by, any Other Kaiser Debtor other than AJI or KJC. No later than two Business Days prior to the Effective Date, the plaintiffs in the 7-3/4% SWD Revenue Bond Dispute will furnish to the 9-7/8% Senior Note Indenture Trustee and the 10-7/8% Senior Note Indenture Trustee information in respect of such fees and expenses incurred and estimated to be incurred through the Effective Date.

     2.7 Allowance of Certain Public Note Claims. The 9-7/8% Senior Note Claims are allowed in the aggregate amount of $181,168,828.96, the 10-7/8% Senior Note Claims are allowed in the aggregate amount of $232,952,343.77 and the Senior Subordinated Note Claims are allowed in the aggregate amount of $427,200,000.

     2.8 Substantive Consolidation. In connection with confirmation of the Plan, the Debtors will seek Bankruptcy Court approval of the substantive consolidation of the Debtors for the purpose of implementing the Plan, including for purposes of voting, confirmation and distributions to be made under the Plan. Pursuant to the relevant order of the Bankruptcy Court: (a) all assets and liabilities of the Debtors will be deemed merged; (b) all guarantees by, or co-obligations of, one Debtor in respect of the obligations of the other Debtor will be deemed eliminated so that any Claim against either Debtor and any guarantee by, or co-obligation of, the other Debtor and any joint or several liability of either of the Debtors will be deemed to be one obligation of the consolidated Debtors; and (c) each and every Claim Filed or to be Filed in the Chapter 11 Case of either Debtor will be deemed Filed against the consolidated Debtors and will be deemed one Claim against and a single obligation of the consolidated Debtors. Such substantive consolidation (other than for the purpose of implementing the Plan) will not affect the legal and corporate structures of the Debtors, nor will such substantive consolidation affect or be deemed to affect any Intercompany Claim in any manner contrary to the Intercompany Claims Settlement, nor will such substantive consolidation be deemed to affect any Other Kaiser Debtor or claims against any Other Kaiser Debtor.

     2.9 Order Granting Substantive Consolidation. The Plan will serve as a motion seeking entry of an order substantively consolidating the Debtors, as described, and to the limited extent set forth, in Section 2.8. Unless an objection to such substantive consolidation is made in writing by any creditor or claimant affected by the Plan, Filed with the Bankruptcy Court and served on the parties identified in Section 12.5 on or before April 5, 2005, or such other date as may be fixed by the Bankruptcy Court, the substantive consolidation order (which will be the Confirmation Order) may be entered by the Bankruptcy Court. In the event any such objections are timely Filed, a hearing with respect thereto will occur at the Confirmation Hearing.

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     2.10 KFC Claim against KACC. Notwithstanding anything to the contrary herein, no distributions in respect of the Retained Portion of the KFC Claim will be made, and the Retained Portion of the KFC Claim will be held in the Unsecured Claims Trust Account, until receipt by the Distribution Trustee of distributions in respect thereof from KACC pursuant to a confirmed plan of reorganization of KACC or otherwise and then in-kind distributions consisting of the property received by the Distribution Trustee from KACC in respect of the Retained Portion of the KFC Claim will be made in accordance with the terms of the Plan. Section 4.2.f of the Intercompany Claims Settlement is, and will be, determinative of the ownership rights in the KFC Claim.

     2.11 No Effect on Claims Against or Interests in Other Kaiser Debtors. Nothing in the Plan, including the acceptance or rejection of the Plan by Subclass 3A or Subclass 3B, will be deemed to affect any person’s claim against or interest in any Other Kaiser Debtor or any of their respective present or former directors, officers, employees, agents, advisors, attorneys, accountants, underwriters, investment bankers or other representatives, acting in such capacity, or any rights, including contractual subordination rights, that any person may have in respect of any such claim against or interest in any such Other Kaiser Debtor.

ARTICLE III

TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES

     3.1 Executory Contracts and Unexpired Leases to Be Rejected. On the Effective Date, except for an Executory Contract or Unexpired Lease that previously was assumed and assigned or rejected by an order of the Bankruptcy Court, each Executory Contract and Unexpired Lease entered into by a Debtor prior to the Petition Date that has not previously expired or terminated pursuant to its own terms will be rejected pursuant to section 365 of the Bankruptcy Code. The Confirmation Order will constitute an order of the Bankruptcy Court approving such rejections, pursuant to section 365 of the Bankruptcy Code, as of the Effective Date.

     3.2 Bar Date for Rejection Damages. Notwithstanding anything in the Bar Date Order or in the Administrative Bar Date Order to the contrary, if the rejection of an Executory Contract or Unexpired Lease pursuant to the Plan gives rise to a Claim by the other party or parties to such contract or lease, such Claim will be forever barred and will not be enforceable against the Debtors, the Distribution Trustee, the Debtors’ Estates or the Trust Accounts unless a proof of Claim or request for payment of Administrative Claim is Filed and served on the Distribution Trustee, pursuant to the procedures specified in the Confirmation Order, the notice of the entry of the Confirmation Order or another order of the Bankruptcy Court, no later than 30 days after the Effective Date.

ARTICLE IV

RELEASE, LIMITATION OF LIABILITY AND INJUNCTION PROVISIONS

     4.1 Release of Claims; Limitation of Liability.

     (a) Releases by the Debtors. As of the Effective Date, for good and valuable consideration, the adequacy of which is hereby confirmed, the Debtors on behalf of themselves, their Estates, creditors and Interest holders will be deemed to release, waive and discharge all claims and rights of any nature in connection with or related to the Debtors, the Chapter 11 Cases or the Plan (other than the rights of the Distribution Trustee to enforce the Plan and any contracts, instruments, releases and other agreements and documents delivered thereunder, and to pursue objections to and resolve Disputed Claims), whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising (including, without limitation, those arising under the Bankruptcy Code), based on any act, omission or occurrence on or before the Effective Date, against the Creditors’ Committee, its members, any Indenture Trustee, any of the Debtors’ present or former directors or officers, or any of the respective present or former directors, officers, employees, agents, advisors, attorneys, accountants, underwriters, investment bankers or other representatives of the Debtors, the Creditors’ Committee, its members, or the Indenture Trustees, acting in such capacity, except for such Claims or rights based on (i) acts or omissions of any such person constituting gross negligence or willful misconduct or (ii) contractual obligations of, or loans owed by, any such person to a Debtor.

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     (b) General Releases by Holders of Claims. Subject to the provisions of Section 2.11, as of the Effective Date, in consideration for the obligations of the Debtors and the Distribution Trustee under the Plan and the Cash and other property to be distributed in connection with the Plan, each holder of a Claim that votes in favor of the Plan will be deemed to forever release and waive all claims, obligations, suits, judgments, damages, demands, debts, rights, causes of action and liabilities (other than the right to enforce the Debtors’ or the Distribution Trustee’s obligations under the Plan and the contracts, instruments, releases and other agreements and documents delivered thereunder), whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising in law, equity or otherwise, that are based in whole or in part on any act, omission, transaction or other occurrence taking place on or prior to the Effective Date in any way relating to a Debtor, the Chapter 11 Cases or the Plan that such entity has, had or may have against the Creditors’ Committee, its members, any Indenture Trustee, either Debtor and any of their respective present or former directors, officers, employees, agents, advisors, attorneys, accountants, underwriters, investment bankers or other representatives, acting in such capacity, except for those based on (i) acts or omissions of any such person constituting gross negligence or willful misconduct or (ii) contractual obligations of, or loans owed by, any such person to a Debtor.

     (c) Limitation of Liability. The Debtors, the Distribution Trust, the Distribution Trustee, the Indenture Trustees and their respective directors, officers, employees and professionals, acting in such capacity, and the Creditors’ Committee, its members and their respective professionals will neither have nor incur any liability to any entity for any act taken or omitted to be taken in connection with or related to the formulation, preparation, dissemination, implementation, confirmation or consummation of the Plan, the Disclosure Statement or any contract, instrument, release or other agreement or document created or entered into, or any other act taken or omitted to be taken, in connection with the Plan; provided, however, that the foregoing provisions of this Section 4.1 will have no effect on: (i) the liability of any entity that would otherwise result from the failure to perform or pay any obligation or liability under the Plan or any contract, instrument, release or other agreement or document to be entered into or delivered in connection with the Plan; or (ii) the liability of any entity that would otherwise result from any such act or omission to the extent that such act or omission is determined in a Final Order to have constituted gross negligence or willful misconduct.

     4.2 Injunctions. Except as otherwise provided in the Plan or the Confirmation Order, as of the Effective Date, all entities that have held, currently hold or may hold a Claim or other debt or liability of the Debtors, or an Interest or other right of an equity security holder with respect to the Debtors, that is released, waived, settled or deemed satisfied pursuant to the Plan will be permanently enjoined from taking any of the following actions on account of any such Claims, debts, liabilities, Interests or rights: (a) commencing or continuing in any manner any action or other proceeding against the Debtors, the Distribution Trust, the Distribution Trustee or the property of any of them other than to enforce any right pursuant to the Plan to a distribution from the Trust Accounts; (b) enforcing, attaching, collecting or recovering in any manner any judgment, award, decree or order against the Debtors, the Distribution Trust or the Distribution Trustee, other than as permitted pursuant to (a) above; (c) creating, perfecting or enforcing any Lien or encumbrance against the Debtors, the Distribution Trust, the property of any of them or the Trust Accounts; (d) asserting a setoff, right of subrogation or recoupment of any kind against any debt, liability or obligation due to the Distribution Trust; and (e) commencing or continuing any action, in any manner, in any place that does not comply with or is inconsistent with the provisions of the Plan.

ARTICLE V

CRAMDOWN

     The Debtors request confirmation of the Plan under section 1129(b) of the Bankruptcy Code with respect to any impaired Class that does not accept the Plan pursuant to section 1126 of the Bankruptcy Code. The Debtors reserve the right to modify the Plan to the extent, if any, that confirmation of the Plan pursuant to section 1129(b) of the Bankruptcy Code requires modification. Subclass 3A, Subclass 3B, Subclass 3C, and Subclass 3D each constitute a separate class pursuant to section 1122(a) of the Bankruptcy Code.

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ARTICLE VI

CONDITIONS PRECEDENT TO CONFIRMATION
AND CONSUMMATION OF THE PLAN

     6.1 Conditions to Confirmation. The following are conditions to the confirmation of the Plan:

     (a) The Confirmation Order shall have been entered on the docket of the Clerk of the Bankruptcy Court in form and substance acceptable to the Debtors and the Creditors’ Committee;

     (b) All Exhibits to the Plan shall be in form and substance satisfactory to the Debtors and the Creditors’ Committee; and

     (c) The Intercompany Claims Settlement shall have become effective.

     6.2 Conditions to the Effective Date. The following are conditions to the occurrence of the Effective Date:

     (a) The Confirmation Order shall have become a Final Order;

     (b) The sale of the interests in QAL pursuant to the QAL Purchase Agreement shall have been consummated;

     (c) The Creditors’ Committee and the Debtors shall have agreed upon the amount of the reserves contemplated by Section 8.10(a) and Section 8.11(a);

     (d) The Liquidating Transactions shall have been consummated;

     (e) All funds due and owing to or by the Debtors under the Intercompany Claims Settlement shall have been paid in accordance with its terms;

     (f) The Distribution Trustee shall have been appointed and shall have accepted such appointment;

     (g) The Distribution Trust Agreement shall have been executed and the Trust Accounts shall have been established; and

     (h) All other actions, documents, consents and agreements necessary to implement the Plan shall have been effected, obtained and/or executed.

     6.3 Waiver of Conditions to the Confirmation or Effective Date. The conditions to confirmation set forth in Section 6.1 and the conditions to the Effective Date set forth in Section 6.2 may be waived by the Debtors at any time and without an order of the Bankruptcy Court, with the consent of the Creditors’ Committee.

ARTICLE VII

MEANS FOR IMPLEMENTATION OF THE PLAN

     7.1 Liquidating Transactions. On the Effective Date, the Distribution Trust Assets will be transferred to and vest in the Distribution Trust, free and clear of Claims, Liens and Interests, except as may be otherwise provided in the Intercompany Claims Settlement. On or after the Effective Date, the Debtors will enter into such transactions and will take such actions as may be necessary or appropriate to merge, dissolve or otherwise terminate the corporate existence of the Debtors. Notwithstanding the foregoing and regardless of whether the actions in the preceding sentence have yet been taken with respect to a particular Debtor, upon the transfer of the Distribution Trust Assets to the Distribution Trust, the Debtors will be deemed dissolved and their business operations withdrawn

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for all purposes without any necessity of filing any document, taking any further action or making any payment to any governmental authority in connection therewith.

     7.2 Corporate Action. The following (which will occur and be deemed effective as of the date specified in the documents effectuating the same or, if no date is so specified, the Effective Date) will be deemed authorized and approved in all respects and for all purposes without any requirement of further action by KACC, as the sole stockholder of KAAC, by KAAC, as the sole stockholder of KFC, by the directors of either Debtor or by the Distribution Trustee or any other person or entity: (a) the Liquidating Transactions; (b) the establishment of the Distribution Trust; (c) the appointment of the Distribution Trustee to act on behalf of the Distribution Trust; (d) the transfer of the Distribution Trust Assets to the Distribution Trust; (e) the creation of the Trust Accounts; (f) the distribution of Cash and other property pursuant to the Plan; (g) the adoption, execution, delivery and implementation of all contracts, instruments, releases and other agreements or documents related to any of the foregoing; (h) the adoption, execution and implementation of the Distribution Trust Agreement; and (i) the other matters provided for under the Plan involving the corporate structure of either Debtor or corporate action to be taken by, or required of, either Debtor or the Distribution Trustee.

     7.3 No Revesting of Assets. On the Effective Date, the property of the Debtors’ Estates will vest in the Distribution Trust to be administered by the Distribution Trustee in accordance with the Plan and the Distribution Trust Agreement.

     7.4 Recourse Solely to Trust Accounts. The Liquidating Transactions will not in any way merge the assets of the Debtors’ Estates, including the Trust Accounts. All Claims against the Debtors are deemed fully satisfied in exchange for the treatment of such Claims under the Plan, and holders of Allowed Claims against either Debtor will have recourse solely to the applicable Trust Accounts for the payment of their Allowed Claims in accordance with the terms of the Plan.

     7.5 Release of Liens. Except as otherwise provided in the Plan or in any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, on the Effective Date all Liens against the property of either Estate will be fully released, and all of the right, title and interest of any holder of such Liens, including any rights to any collateral thereunder, will attach to and be enforceable solely against the applicable Distribution Trust Assets held in the applicable Trust Account in accordance with, and subject to the terms of, the Plan. All such Liens against the Distribution Trust Assets will be fully released upon the holder of the Lien receiving its full distribution under the Plan, or upon the Effective Date if the holder of the Lien is not entitled to any distribution under the Plan.

     7.6 Exemption from Certain Taxes. Pursuant to section 1146(c) of the Bankruptcy Code, the following will not be subject to any stamp Tax, real estate transfer Tax, sales or use Tax or similar Tax: (a) any Liquidating Transaction; (b) the execution and implementation of the Distribution Trust Agreement, including any transfers to or by the Distribution Trust; or (c) the making or delivery of any deed or other instrument of transfer under, in furtherance of or in connection with the Plan, including any merger agreements or agreements of consolidation, disposition, liquidation or dissolution executed in connection with any transaction pursuant to the Plan.

ARTICLE VIII

DISTRIBUTION TRUST

     8.1 Creation.

     (a) On the Effective Date, the Debtors will enter into the Distribution Trust Agreement with the Distribution Trustee, thereby creating the Distribution Trust.

     (b) The Distribution Trust has no objective to, and will not, engage in the conduct of a trade or business and, subject to the terms of the Distribution Trust Agreement, will terminate upon completion of its liquidation and distribution duties.

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     (c) The Distribution Trust will be a “representative of the estate” under section 1123(b)(3)(B) of the Bankruptcy Code.

     8.2 Distribution Trustee.

     (a) The Distribution Trustee, whose identity and address will be disclosed at least ten days prior to the Confirmation Hearing, will be selected by the Creditors’ Committee with the consent of the Debtors, and will be the exclusive trustee of the assets of the Distribution Trust for purposes of 31 U.S.C. § 3713(b) and 26 U.S.C. § 6012(b)(3).

     (b) The rights, powers and privileges of the Distribution Trustee (to act on behalf of the Distribution Trust) will be specified in the Distribution Trust Agreement and will include, among others, the authority and responsibility to: (i) accept, preserve, receive, collect, manage, invest, supervise and protect the Distribution Trust Assets (directly or through one or more third-party Disbursing Agents), each in accordance with the Plan and the Distribution Trust Agreement; (ii) liquidate, transfer or otherwise dispose of the Distribution Trust Assets or any part thereof or any interest therein upon such terms as the Distribution Trustee determines to be necessary, appropriate or desirable, pursuant to the procedures for allowing Claims and making distributions prescribed in the Plan, and otherwise consistent with the terms of the Plan; (iii) calculate and make distributions of the Distribution Trust Assets to holders of Allowed Claims pursuant to the procedures for allowing Claims and making distributions prescribed in the Plan; (iv) review, reconcile, settle or object to Claims and resolve any such objections as set forth in the Plan and the Distribution Trust Agreement; (v) comply with the Plan and exercise its rights and fulfill its obligations thereunder; (vi) investigate and, if appropriate, pursue any Recovery Actions or other available causes of action (including any actions previously initiated by the Debtors and pending as of the Effective Date) and raise any defenses in any adverse actions or counter-claims; (vii) retain and compensate, without further order of the Bankruptcy Court, the services of professionals or other persons or entities to represent, advise and assist the Distribution Trustee in the fulfillment of its responsibilities in connection with the Plan and the Distribution Trust Agreement; (viii) take such actions as are necessary, appropriate or desirable, to close the Chapter 11 Cases; (ix) file appropriate Tax returns on behalf of the Distribution Trust and Debtors and pay Taxes or other obligations owed by the Distribution Trust; (x) exercise the rights, and fulfill the obligations of KAAC under the QAL Purchase Agreement, including with respect to any claim for indemnification; (xi) take such actions as are necessary, appropriate or desirable to terminate the existence of the Debtors under the laws of Australia or any political subdivision thereof; (xii) take such actions as are necessary, appropriate or desirable with respect to the Retained Portion of the KFC Claim; and (xiii) terminate the Distribution Trust in accordance with the terms of the Plan and the Distribution Trust Agreement.

     (c) Except as otherwise provided in the Plan or the Distribution Trust Agreement, the Distribution Trustee will not be required to obtain the order or approval of the Bankruptcy Court or any other court of competent jurisdiction in, or account to the Bankruptcy Court or any other court of competent jurisdiction for, the exercise of any right, power or privilege conferred under the Distribution Trust Agreement.

     (d) Except as otherwise provided in the Plan or the Distribution Trust Agreement, after the Effective Date only the Distribution Trustee, on behalf of the Distribution Trust, with the prior consent of the Steering Committee, acting through a majority thereof, will have the authority to File, settle, compromise, withdraw or litigate to judgment objections to Claims, including pursuant to any alternative dispute resolution or similar procedures approved by the Bankruptcy Court. After the Effective Date, the Distribution Trustee, with the prior consent of the Steering Committee, acting through a majority thereof, may settle or compromise any Disputed Claim without approval of the Bankruptcy Court in accordance with the Distribution Trust Agreement.

     (e) Except as otherwise provided in the Plan or the Distribution Trust Agreement after the Effective Date only the Distribution Trustee, on behalf of the Distribution Trust as holder of the Retained Portion of the KFC Claim, with the prior consent of the Steering Committee, acting through a majority thereof, will have the authority to accept or reject a plan of reorganization for KACC.

     8.3 Preservation of Causes of Action. Except as otherwise provided in the Plan or in any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, in accordance with section 1123(b) of the Bankruptcy Code, the Distribution Trustee will retain and may enforce any

20

claims, demands, rights and causes of action that either Debtor or Estate may hold against any entity, including the Recovery Actions, to the extent not expressly released under the Plan. Without intending to limit the generality of the foregoing, the Distribution Trustee will retain the right to pursue any adversary proceedings available to the Debtors in connection with the QAL Purchase Agreement or the Intercompany Claims Settlement.

     8.4 Reports to be Filed with the Bankruptcy Court.

     (a) Within 45 days after the end of each of the first three calendar quarters of the calendar year, the Distribution Trustee, on behalf of the Distribution Trust, will File an unaudited report with the Bankruptcy Court reflecting (i) all Distribution Trust Assets received by the Distribution Trust during such calendar quarter; (ii) all Distribution Trust Assets held by the Distribution Trust at the end of such quarter; and (iii) all Distribution Trust Assets disbursed during such calendar quarter, in each case itemized for the individual Trust Accounts.

     (b) Within 90 days after the end of each calendar year, the Distribution Trustee, on behalf of the Distribution Trust, will File an unaudited report with the Bankruptcy Court reflecting: (i) all Distribution Trust Assets received by the Distribution Trust during such calendar year; (ii) all Distribution Trust Assets held by the Distribution Trust at the end of such calendar year; and (iii) all Distribution Trust Assets disbursed during such calendar year, in each case itemized for the individual Trust Accounts.

     (c) In the event of developments affecting the Distribution Trust in any material respect (as determined by the Distribution Trustee in its reasonable discretion), the Distribution Trustee, on behalf of the Distribution Trust, will File promptly with the Bankruptcy Court a report describing such development in reasonable detail.

     (d) Any report required by this Section 8.4 will be in such form as required or approved by the US Trustee.

     (e) The Distribution Trustee will furnish or otherwise make available to any then-current Beneficiary, upon written request, a copy of: (a) the most recent annual receipts/disbursements report referred to in Section 8.4(b); (b) any quarterly receipts/disbursements report referred to in Section 8.4(a) for any period subsequent to the period covered by the most recent annual receipts/disbursements report (or, if no annual receipts/disbursements report has yet been Filed, for any period subsequent to the Effective Date); or (c) any current report referred to in Section 8.4(c) Filed subsequent to the period covered by the most recent annual receipts/disbursements report (or, if no annual receipts/disbursements report has yet been Filed, subsequent to the Effective Date).

     8.5 Payment of Distribution Trust Expenses. Except as otherwise ordered by the Bankruptcy Court, the Distribution Trustee, in its capacity as Disbursing Agent, will, in its reasonable discretion, pay Distribution Trust Expenses from the Distribution Trust Expenses Account, without the need for further Bankruptcy Court approval.

     8.6 Use of Other Entities. The Distribution Trustee, on behalf of the Distribution Trust, may employ, without further order of the Bankruptcy Court, other entities to assist in or make distributions required by the Plan and the Distribution Trust Agreement and may compensate and reimburse the expenses of those entities, without further order of the Bankruptcy Court, from the Distribution Trust Expenses Account in accordance with the Distribution Trust Agreement.

     8.7 Indemnification. The Distribution Trustee and the members of the Steering Committee will be indemnified as provided in the Distribution Trust Agreement.

     8.8 Tax Treatment.

     (a) The Distribution Trust is intended to be treated, for U.S. federal income Tax purposes, in part as a liquidating trust within the meaning of Treasury Regulations section 301.7701-4(d), for the benefit of the holders of Allowed Claims entitled to distributions of Pending Payments, and otherwise as one or more disputed ownership funds within the meaning of Proposed Treasury Regulations section 1.468B-9(a), as more specifically provided for

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under the Distribution Trust Agreement. Accordingly, for all federal income Tax purposes the transfer of the Distribution Trust Assets to the Distribution Trust will be treated as: (a) to the extent of Pending Payments, (i) a transfer of the Pending Payments directly from the Debtors to the holders of such Allowed Claims followed by (ii) the transfer of such Pending Payments by such holders of Allowed Claims to the Distribution Trust in exchange for beneficial interests in the Distribution Trust; and (b) to the extent of amounts that are not Pending Payments, as a transfer to one or more disputed ownership funds. Accordingly, the holders of Allowed Claims entitled to distributions of Pending Payments will be treated for federal income Tax purposes as the grantors and deemed owners of their respective shares of the Distribution Trust Assets in the amounts of the Pending Payments and any earnings thereon.

     (b) The Distribution Trustee will be required by the Distribution Trust Agreement to file federal Tax returns for the Distribution Trust as a grantor trust with respect to any Pending Payments and as one or more disputed ownership funds with respect to all other funds or other property held by the Distribution Trust pursuant to applicable Treasury Regulations, and any income of the Distribution Trust will be treated as subject to Tax on a current basis. The Distribution Trust Agreement will provide that the Distribution Trustee will pay such Taxes from the Distribution Trust Assets as required by law and in accordance with Section 10.2(c). In addition, the Distribution Trust Agreement will require consistent valuation by the Distribution Trustee and the Beneficiaries, for all federal income Tax purposes, of any property held by the Distribution Trust. The Distribution Trust Agreement will provide that termination of the trust will occur no later than two years after the Effective Date, unless the Bankruptcy Court will approve an extension based upon a finding that such an extension is necessary for the Distribution Trust to complete its claims resolution and liquidating purpose. The Distribution Trust Agreement also will limit the investment powers of the Distribution Trustee in accordance with IRS Rev. Proc. 94-45 and will require the Distribution Trust to distribute at least annually to the Beneficiaries (as such may have been determined at such time) its net income (net of any payment of or provision for Taxes), except for amounts retained as reasonably necessary to maintain the value of the Distribution Trust Assets or to meet claims and contingent liabilities (including Disputed Claims).

     8.9 Creation of Trust Accounts. On or prior to the Effective Date, the Trust Accounts will be established in federally insured United States banks in the name of the Distribution Trustee or one or more third-party Disbursing Agents. On the Effective Date, title to each of the Trust Accounts and the contents thereof will be transferred to and irrevocably vest in the Distribution Trust.

     8.10 Funding of Distribution Trust Expenses Account.

     (a) Initial Funding. Prior to the Effective Date, the Creditors’ Committee and the Debtors will agree on the amount to be funded into the Distribution Trust Expenses Account on the Effective Date. On the Effective Date, the Distribution Trust Expenses Account will be funded by the transfer of Cash in such amount from the Distribution Trust Assets. The Distribution Trustee will act as the Disbursing Agent for the Distribution Trust Expenses Account.

     (b) Use of Funds. Funds in the Distribution Trust Expenses Account will be used solely as provided in the Distribution Trust Agreement.

     (c) Subsequent Funding. If the balance of the Distribution Trust Expenses Account is insufficient to make all payments payable therefrom in accordance with the terms of the Plan and the Distribution Trust Agreement, additional Cash may be transferred to the Distribution Trust Expenses Account from the Unsecured Claims Trust Account (to the extent Cash remains available therein) as provided in the Distribution Trust Agreement.

     (d) Excess Funds. If the Distribution Trustee determines that the balance of the Distribution Trust Expenses Account is in excess of the amount that will be sufficient to make all payments payable therefrom in accordance with the terms of the Plan and the Distribution Trust Agreement, the Distribution Trustee, with the consent of the Steering Committee acting through a majority thereof, may transfer such excess to the Unsecured Claims Trust Account as provided in the Distribution Trust Agreement.

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     8.11 Funding of Priority Claims Trust Account.

     (a) Initial Funding. Prior to the Effective Date, the Creditors’ Committee and the Debtors will agree on the amount to be funded into the Priority Claims Trust Account on the Effective Date. On the Effective Date, the Priority Claims Trust Account will be funded by the transfer of Cash in such amount from the Distribution Trust Assets. For purposes of this Section 8.11, any and all amounts that become payable by KAAC under the QAL Purchase Agreement, including amounts that become payable in respect of indemnification claims, will be treated as Allowed Administrative Claims and will be paid in full in Cash in accordance with the applicable provisions of the QAL Purchase Agreement. For purposes of this Section 8.11, any and all Taxes determined to be due and owing from the Debtors to the Australian Tax Office for any taxable period (including interest and penalties, if any, determined and calculated under applicable Australian law without regard to the provisions of section 502(b)(2) of the Bankruptcy Code or any other provision of U.S. federal, state or local law) will be treated as Allowed Priority Tax Claims or Allowed Administrative Claims, as the case may be, and will be paid in full in Cash in accordance with the provisions of Section 9.4(a); provided, however, that any liability of the Debtors to the Australian Tax Office for income or capital gains Taxes for any period shall not exceed the amount of such Taxes, if any, determined in writing by the Australian Tax Office to be due and payable for such period. Until such determination, any Claim for Taxes by the Australian Tax Office will be treated as a Disputed Claim.

     (b) Use of Funds. Cash deposited in the Priority Claims Trust Account will be used solely as provided in the Distribution Trust Agreement.

     (c) Subsequent Funding. If the balance of the Priority Claim Trust Account is insufficient to make all payments payable therefrom in accordance with the terms of the Plan and the Distribution Trust Agreement, additional funds may be transferred from the Unsecured Claims Trust Account (to the extent Cash remains available therein) to the Priority Claims Trust Account as provided in the Distribution Trust Agreement.

     (d) Excess Funds. If the Distribution Trustee determines that the balance of the Priority Claims Trust Account is in excess of the amount that will be sufficient to make all payments payable therefrom in accordance with the terms of the Plan and the Distribution Trust Agreement, the Distribution Trustee, with the consent of the Steering Committee acting through a majority thereof, may transfer such excess to the Unsecured Claims Trust Account as provided in the Distribution Trust Agreement; provided, however, no amounts included in the Priority Claims Trust Account in connection with any potential obligation under the QAL Purchase Agreement for which KAAC and KACC are jointly and severally liable may be so transferred without the consent of KACC until the applicable survival period with respect to such obligation has expired.

     8.12 Funding of Unsecured Claims Trust Account.

     (a) Initial Funding. On the Effective Date, after the initial funding of the Distribution Trust Expenses Account in accordance with Section 8.10(a) and the initial funding of the Priority Claims Trust Account in accordance with Section 8.11(a), the Distribution Trustee will (i) pay from the Distribution Trust Assets any payment required under the Intercompany Settlement Agreement and (ii) thereafter fund the Unsecured Claims Trust Account with the remainder of the Distribution Trust Assets, including the Retained Portion of the KFC Claim, all as provided in the Distribution Trust Agreement.

     (b) Use of Cash and Other Property. Cash and other property in the Unsecured Claims Trust Account will be used solely as provided in the Distribution Trust Agreement.

     (c) Additional Deposits. Any Cash or other property that becomes available to the Distribution Trust following the Effective Date will be deposited in the Unsecured Claims Trust Account as provided in the Distribution Trust Agreement.

     8.13 Undeliverable Property Trust Account. After the Effective Date, if any distribution to a holder of an Allowed Unsecured Claim is returned to the Disbursing Agent as undeliverable, the Disbursing Agent will deposit the undeliverable Cash or other property in the Undeliverable Property Trust Account. The Disbursing Agent will hold such funds and property, in a book-entry sub-account in the Undeliverable Property Trust Account,

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for the benefit of such holder. Until such holder notifies the Disbursing Agent in writing of its then-current address, as contemplated by Section 9.2(c), no attempt will be made to deliver subsequent distributions to such holder and any such distributions that such holder would otherwise be entitled to receive instead will be transferred from the Unsecured Claims Trust Account to the Undeliverable Property Trust Account and credited to such book-entry sub-account. Any dividends or other distributions on account of undeliverable securities held in such book-entry sub-account will also be held in such book-entry sub-account for the benefit of such holder until such holder notifies the Disbursing Agent in writing of its then-current address as contemplated by Section 9(c). All Cash (including dividends or other distributions on account of undeliverable securities) held in such book-entry sub-account for the benefit of such holder will be invested by the Disbursing Agent in a manner consistent with the investment and deposit guidelines set forth in the Distribution Trust Agreement. Any income or interest generated from such investment activities will be held in such book-entry sub-account for the benefit of such holder until such holder notifies the Disbursing Agent in writing of its then-current address as contemplated by Section 9.2(c). Subject to Section 9.2(c)(ii), when such holder notifies the Disbursing Agent in writing of its then-current address as contemplated by Section 9.2(c), the Disbursing Agent will deliver to such holder all Cash and other property contained in such book-entry sub-account (net of provision for Taxes). In the event such holder’s right to assert a claim for undeliverable distributions is forfeited as contemplated by Section 9.2(c)(ii), all Cash and other property contained in such book-entry sub-account will be transferred from the Undeliverable Property Trust Account to the Unsecured Claims Trust Account for redistribution to holders of Allowed Unsecured Claims entitled to distributions therefrom.

ARTICLE IX

PROVISIONS GOVERNING DISTRIBUTIONS

     9.1 Method of Distributions to Holders of Allowed Claims. The Disbursing Agent will make all distributions of Cash and other property required under the Plan. The Disbursing Agent will serve without bond, and may employ or contract with other entities to assist in, or make the distributions required by, the Plan.

     9.2 Delivery of Distributions.

     (a) Generally. Except as otherwise provided in the Plan, distributions in respect of Allowed Claims will be made to the holders of such Claims as of the Distribution Record Date at the addresses set forth in the applicable Claims Report. Prior to making any distribution to a Beneficiary, the Disbursing Agent may request written notification of the Beneficiary’s federal taxpayer identification number or social security number if the Disbursing Agent determines, in its reasonable discretion, that such information (a) is necessary to fulfill its Tax reporting and withholding obligations and (b) has not been provided in the applicable Claims Report or otherwise. The Disbursing Agent, in its reasonable discretion, may suspend distributions to any Beneficiary that has not provided its federal taxpayer identification number or social security number, as the case may be, after a request is made pursuant to and in accordance with the terms of this Section 9.2(a).

     (b) Distributions to Holders of Public Note Claims. All distributions to holders of Allowed Public Note Claims will be made by the Distribution Trustee to the applicable Indenture Trustee for subsequent distribution to holders of Allowed Public Note Claims as of the Distribution Record Date.

     (c) Undeliverable Distributions.

(i)   No Further Attempts at Delivery. If any distribution to a holder of an Allowed Unsecured Claim is returned to the Disbursing Agent as undeliverable, then unless and until the Disbursing Agent is notified in writing of such holder’s then-current address: (A) subject to Section 9.2(c)(ii), such undeliverable distributions will remain in the possession of the Disbursing Agent as provided in Section 8.13 and no further attempt will be made to deliver such distribution; and (B) no attempt will be made to deliver subsequent distributions to such holder and any such distributions that such holder would otherwise be entitled to receive instead will be treated as provided in Section 8.13.

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(ii)

Forfeiture and Redistribution. Any holder of an Allowed Unsecured Claim that does not assert a claim for an undeliverable distribution by delivering to the Disbursing Agent a written notice setting forth such holder’s then-current address within 180 days after the later of (A) the Effective Date and (B) the last date on which a distribution was deliverable to the holder will have its claim for undeliverable distributions discharged and will be forever barred from asserting such claim or any claim for subsequent distributions against the Debtors, the Disbursing Agent or the property of any of them, including the Trust Accounts, whereupon all Cash and other property contained in the book-entry sub-account in the Undeliverable Property Trust Account created for the benefit of such holder will be transferred to the Unsecured Claims Trust Account for redistribution to holders of Allowed Unsecured Claims entitled to distributions therefrom. For purposes of any such redistribution, each Allowed Claim in respect of which a claim for undeliverable distributions has been discharged as contemplated by this Section 9.2(c)(ii) will be deemed disallowed in its entirety.

(iii)

No Requirement to Attempt to Locate Holders. Nothing contained in the Plan will require the Debtors or the Disbursing Agent to attempt to locate any holder of an Allowed Claim.

     9.3 Means of Cash Payments. Except as otherwise provided in the Plan or the Distribution Trust Agreement, Cash payments made pursuant to the Plan will be in United States currency by checks drawn on the applicable Trust Accounts or, at the option of the Disbursing Agent, by wire transfer from a domestic bank; provided, however, that Cash payments to foreign holders of Allowed Claims may be made, at the option of the Disbursing Agent, in such funds and by such means as are necessary or customary in a particular foreign jurisdiction. If a check included in a distribution to a holder of an Allowed Unsecured Claim is not cashed within 180 days of the issuance thereof, the Disbursing Agent will void such check and such distribution will be treated as undeliverable in accordance with Section 9.2(c).

     9.4 Timing and Calculation of Amounts to Be Distributed.

     (a) Allowed Claims Other Than Unsecured Claims. On or as promptly as practicable after the Effective Date, the Disbursing Agent will make distributions to holders of Secured Claims, Administrative Claims, Priority Claims and Priority Tax Claims allowed as of the Effective Date. On or as promptly as practicable after each Quarterly Distribution Date, the Disbursing Agent will make distributions to holders of Disputed Secured Claims, Disputed Administrative Claims, Disputed Priority Claims and Disputed Priority Tax Claims that have become Allowed Claims during the immediately preceding calendar quarter. Notwithstanding the foregoing, if the Disbursing Agent determines, in its reasonable discretion, that the amount of any quarterly distribution is too small to justify the administrative costs associated with such distribution, the Disbursing Agent may postpone such quarterly distribution until the next Quarterly Distribution Date. The Disbursing Agent will have no obligation to notify Beneficiaries if it determines, in its reasonable discretion, that any quarterly distribution will be postponed.

     (b) Allowed Unsecured Claims in Subclass 3A; Certain Payments from the Public Note Distributable Consideration.

(i)   Plan Accepted by Subclass 3A and Subclass 3B.

(A)

If both Subclass 3A and Subclass 3B vote to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, on or as promptly as practicable after the Effective Date, the Disbursing Agent will: (i) make distributions to holders of Allowed Claims in Subclass 3A in accordance with Section 2.4(c)(i)(A); provided that the amount of such distributions will be calculated as if each Disputed Unsecured Claim in Subclass 3D were an Allowed Unsecured Claim in its Face Amount as of the Effective Date; and (ii) make the payments to be deducted from the Public Note Distributable Consideration as contemplated by clauses (I) and (II) of the first sentence of Section 2.4(c)(i)(A).

(B)

If both Subclass 3A and Subclass 3B vote to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, on or as promptly as practicable after each

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Quarterly Distribution Date, the Disbursing Agent will distribute to each holder of an Allowed Claim in Subclass 3A a distribution from the Unsecured Claims Trust Account (net of provision for Taxes) in an amount equal to: (a) the amount of Cash and other property that such holder would have been entitled to receive pursuant to the Plan if such Claim and each other Unsecured Claim allowed prior to such Quarterly Distribution Date had been an Allowed Unsecured Claim as of the Effective Date (with such amount to be calculated in the manner described in Section 9.4(b)(i)(A)) minus (b) the aggregate amount of Cash and other property previously distributed on account of such Claim. Notwithstanding the foregoing, if the Disbursing Agent determines, in its reasonable discretion, that the amount of any quarterly distribution is too small to justify the administrative costs associated with such distribution, the Disbursing Agent may postpone such quarterly distribution until the next Quarterly Distribution Date. The Disbursing Agent will have no obligation to notify Beneficiaries if it determines, in its reasonable discretion, that any quarterly distribution will be postponed. In the event of the disallowance of a Disputed Unsecured Claim in Subclass 3D, any amounts held in respect thereof will be released from the Disputed Claims Reserve for distribution in accordance with this Section 9.4(b)(i) and Section 9.4(d).

(ii)   Plan Rejected by Subclass 3A or Subclass 3B. If either Subclass 3A or Subclass 3B fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the amount of the Public Note Distributable Consideration to which the Bankruptcy Court determines the holders of Allowed Claims in Subclass 3A are entitled in respect of such Claims will be distributed as provided in an order of the Bankruptcy Court and the Disbursing Agent will, contemporaneously or as promptly as practicable thereafter, make the payments (or reservations for payment) by which such distributions are to be reduced in accordance with Section 2.4(a)(i)(B).

     (c) Allowed Unsecured Claims in Subclass 3B.

(i)

Plan Accepted by Subclass 3A and Subclass 3B. If both Subclass 3A and Subclass 3B vote to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, on or as promptly as practicable after the Effective Date, the Disbursing Agent will make the payment to the Senior Subordinated Note Indenture Trustee as contemplated by clause (III) of the first sentence of Section 2.4(c)(i)(A) and Section 2.4(c)(ii)(A) for subsequent distribution by the Senior Subordinated Note Indenture Trustee to the holders of Allowed Claims in Subclass 3B.

(ii)

Plan Rejected by Subclass 3A or Subclass 3B. If either Subclass 3A or Subclass 3B fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the amount of the Public Note Distributable Consideration, if any, to which the Bankruptcy Court determines the holders of Allowed Claims in Subclass 3B are entitled in respect of such Claims will be distributed as provided in an order of the Bankruptcy Court. As contemplated by Section 2.4(c)(ii)(B), any such distributions ultimately made to a holder of an Allowed Claim in Subclass 3B may be reduced by such holder’s proportional share of any and all fees and expenses payable to the Senior Subordinated Note Indenture Trustee pursuant to the Senior Subordinated Note Indenture, which will, subject to such Trustee’s right to seek payment by the Debtors of such fees and expenses pursuant to section 503(b)(5) of the Bankruptcy Code, be payable solely from such distributions.

     (d) Allowed Unsecured Claims in Subclass 3C and Subclass 3D.

(i)   On or as promptly as practicable after the Effective Date, the Disbursing Agent will make distributions to holders of Unsecured Claims in Subclass 3C and Subclass 3D allowed as of the Effective Date; provided that the amount of such distributions will be calculated as if each Disputed Unsecured Claim in Subclass 3D were an Allowed Unsecured Claim in its Face Amount as of the Effective Date; provided further, however, that no distribution will be made on account of any Disputed Unsecured Claim in Subclass 3D unless and until it becomes an Allowed Unsecured Claim and amounts withheld for Disputed Unsecured Claims in Subclass 3D will remain in the Unsecured Claims Trust Account as part of the Disputed Claims Reserve.

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(ii)   On or as promptly as practicable after each Quarterly Distribution Date, the Disbursing Agent will distribute to each holder of an Unsecured Claim in Subclass 3C or Subclass 3D allowed prior to such Quarterly Distribution Date a distribution from the Unsecured Claims Trust Account (net of provision for Taxes) in an amount equal to: (a) the amount of Cash and other property that such holder would have been entitled to receive pursuant to the Plan if such Claim and each other Unsecured Claim allowed prior to such Quarterly Distribution Date had been an Allowed Unsecured Claim as of the Effective Date (with such amount to be calculated in the manner described in Section 9.4(d)(i)(A)) minus (b) the aggregate amount of Cash and other property previously distributed on account of such Claim. Notwithstanding the foregoing, if the Disbursing Agent determines, in its reasonable discretion, that the amount of any quarterly distribution is too small to justify the administrative costs associated with such distribution, the Disbursing Agent may postpone such quarterly distribution until the next Quarterly Distribution Date. The Disbursing Agent will have no obligation to notify Beneficiaries if it determines, in its reasonable discretion, that any quarterly distribution will be postponed. In the event of the disallowance of a Disputed Unsecured Claim in Subclass 3D, any amounts held in respect thereof will be released from the Disputed Claims Reserve for distribution in accordance with Section 9.4(b)(i) and this Section 9.4(d).

     (e) 7-3/4% SWD Revenue Bonds.

(i)

Plan Accepted by Subclass 3A. If Subclass 3A votes to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code and, unless the holders of Senior Note Claims otherwise agree pursuant to a settlement, all holders of Allowed Senior Note Claims are entitled under the Plan to identical treatment in respect of contractual subordination claims under the Senior Subordinated Note Indenture, on or as promptly as practicable on the Effective Date the Disbursing Agent will make the payment, if any, to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of holders of 7-3/4% SWD Revenue Bonds pursuant to Section 2.5(a) and pay any amounts payable pursuant to Section 2.6(b).

(ii)

Plan Rejected by Subclass 3A. If Subclass 3A fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the amount of the Public Note Distributable Consideration, if any, to which the Bankruptcy Court determines the holders of 7-3/4% SWD Revenue Bonds are entitled will be distributed as provided in an order of the Bankruptcy Court.

     (f) Distributions to Holders of Public Note Claims. All distributions to holders of Allowed Public Note Claims will be deemed to apply first to the principal amount of such Claims until such principal amount is paid in full, and then the remaining portion of such distribution, if any, will be deemed to apply to any prepetition accrued interest included in such Claim.

     (g) No De Minimis Distributions. The Disbursing Agent will not be required to distribute Cash to the holder of an Allowed Unsecured Claim if the total aggregate amount of Cash to be distributed on account of such Claim is less than $25. Any holder of an Allowed Unsecured Claim on account of which the total aggregate amount of Cash to be distributed is less than $25 will have its claim for such distribution deemed satisfied, waived and released and will be forever barred from asserting any such Claim against the Debtors, the Distribution Trustee, the Disbursing Agent or the property of any of them, including the Trust Accounts. Any Cash not distributed with respect to Allowed Unsecured Claims as a result of the provisions of this Section 9.4(g), including dividends or other distributions made on account of securities held in the Unsecured Claims Trust Account, will be retained in the Unsecured Claims Trust Account for redistribution to other holders of Allowed Unsecured Claims entitled to distributions from the Unsecured Claims Trust Account.

     (h) Compliance with Tax Requirements. To the extent applicable, the Disbursing Agent will comply with all Tax withholding and reporting requirements imposed on it by any governmental unit, and all distributions pursuant to the Plan will be subject to such withholding and reporting requirements. The Disbursing Agent will be authorized to take any actions that it determines, in its reasonable discretion, to be necessary, appropriate or desirable to comply with such withholding and reporting requirements, including but not limited to requiring recipients to fund the payment of such withholding as a condition to delivery or entering into arrangements for the

27

sale (subject to any applicable restrictions or transfer) of non-Cash property otherwise to be distributed to a recipient subject to a withholding requirement in order to generate net proceeds (together with any Cash included in such distribution) sufficient to fund the payment of any such withholding. Notwithstanding any other provision of the Plan or the Distribution Trust Agreement, each entity receiving a distribution of Cash or other property pursuant to the Plan will have sole and exclusive responsibility for the satisfaction and payment of any Tax obligations imposed on it by any governmental unit on account of such distribution, including income, withholding and other Tax obligations.

     9.5 Setoffs. Except with respect to claims of a Debtor released pursuant to the Plan or any contract, instrument, release, or other agreement or document entered into or delivered in connection with the Plan, the Distribution Trustee or any other Disbursing Agent may, pursuant to section 553 of the Bankruptcy Code or applicable nonbankruptcy law, set off against any Allowed Claim and the distributions to be made pursuant to the Plan on account of such Claim (before any distribution is made on account of such Claim) the claims, rights and causes of action of any nature that the applicable Debtor may hold against the holder of such Allowed Claim; provided, however, that neither the failure to effect a setoff nor the allowance of any Claim hereunder will constitute a waiver or release by the applicable Debtor of any claims, rights and causes of action that the Debtor or Debtors may possess against such a Claim holder, which are preserved under the Plan.

     9.6 Compensation and Reimbursement for Services Related to Distributions. If the Distribution Trustee employs or contracts with a third-party Disbursing Agent, such Disbursing Agent will receive, without the need for further Bankruptcy Court approval, reasonable compensation for such services and reimbursement of reasonable out-of-pocket expenses incurred in connection with such services. These payments will be made on terms agreed to with the Distribution Trustee and will be paid to such Disbursing Agent from funds in the Distribution Trust Expenses Account. To assist in making distributions under the Plan, notwithstanding any other provision of the Plan, the applicable Trust Accounts (other than the Distribution Trust Expenses Account) may be held in the name of one or more such Disbursing Agents. Any such Disbursing Agent will invest the Cash in the Trust Accounts as directed by the Distribution Trustee, who will direct such Disbursing Agent to invest such Cash only in Permitted Investments; provided, however, that should the Distribution Trustee determine, in its reasonable discretion, that the administrative costs associated with such investment will exceed the return on such investment, it may direct such Disbursing Agent to not invest such Cash.

     9.7 Payments Limited to Trust Accounts. All payments or other distributions to be made by the Distribution Trustee in accordance with the Plan or the Distribution Trust Agreement will be made only from the Trust Accounts.

     9.8 Insufficient Assets. Provided that the Disbursing Agent has not acted in bad faith, engaged in fraud, willful misconduct or gross negligence or breached its fiduciary duties, if the Distribution Trust Assets at any point prove insufficient to pay all Beneficiaries of the Priority Claims Trust Account in full or all Beneficiaries of the Unsecured Claims Trust Account in accordance with the terms of the Plan, the Disbursing Agent will have no obligation to seek disgorgement from any Beneficiary, but may seek the guidance of the Bankruptcy Court or another court of competent jurisdiction.

     9.9 Distributions of Securities.

     (a) Voting of Securities. Pending the distribution of any voting securities, the Distribution Trustee will cause all such securities held in the Trust Accounts to be (i) represented in person or by proxy at each meeting at which the holder of such securities is entitled to vote, (ii) voted in any election of directors for the nominees recommended by the board of directors of the issuer of such securities, and (iii) voted with respect to any other matter as recommended by the board of directors of the issuer of such securities.

     (b) Dividends and Distributions. Any distribution of securities will include, to the extent applicable: (i) any dividends or other distributions that were previously paid to the Distribution Trust in respect of the securities included in such distribution; and (ii) any income or interest generated by the investment of such dividends or other distributions (net of provision for Taxes owing in respect of such amounts in accordance with Section 10.2(c)).

28

     (c) No Fractional Securities. Notwithstanding any provision of the Plan, only whole numbers of securities will be distributed. When any distribution on account of an Allowed Unsecured Claim would otherwise result in the distribution of a number of securities that is not a whole number, the number of securities to be so distributed will be rounded to a whole number on an equitable basis to be determined by the Distribution Trustee in order to ensure that all such securities are distributed and are so distributed only in whole numbers.

ARTICLE X

DISPUTED CLAIMS

     10.1 Prosecution of Objections to Claims. All objections to Claims must be Filed and served on the holders of such Claims by the Claims Objection Bar Date, and, if Filed prior to the Effective Date, such objections will be served on the parties on the then-applicable service list in the Chapter 11 Cases. If an objection has not been Filed to a proof of Claim, a scheduled Claim or a request for payment of Administrative Claim by the applicable Claims Objection Bar Date, the Claim to which the proof of Claim, scheduled Claim or request for payment of Administrative Claim relates will be treated as an Allowed Claim if such Claim has not been allowed earlier.

     10.2 Treatment of Disputed Claims.

     (a) No Payments on Account of Disputed Claims and Disputed Claims Reserves. Notwithstanding any other provisions of the Plan, no payments or distributions will be made on account of a Disputed Claim until such Claim becomes an Allowed Claim. In lieu of distributions under the Plan to holders of Disputed Claims, a Disputed Claims Reserve will be established on the Effective Date in each Trust Account, which, in the case of Unsecured Claims in Subclass 3D, will include an amount equal to the Pro Rata Share of the distribution to which all of the Disputed Claims in Subclass 3D would be entitled if such Disputed Claim was allowed in its Face Amount on the Effective Date.

     (b) Recourse. Each holder of a Disputed Claim that ultimately becomes an Allowed Claim will have recourse only to the undistributed Cash held in the applicable Trust Account for the satisfaction of such Allowed Claim and not to any other Trust Account or any assets previously distributed on account of any Allowed Claim.

     (c) Tax Requirements for Income Generated by Disputed Claim Reserves. The Distribution Trustee will include in the Tax returns of the Trust Accounts all items of income, deduction and credit of the Trust Accounts, except to the extent such items are included in the income of the Beneficiaries of the Trust Accounts as grantors of grantor trusts. The Distribution Trustee will pay, or cause to be paid, out of the funds held in applicable Trust Accounts, any Tax imposed on the Trust Accounts by any governmental unit with respect to income generated by the funds held in the Trust Accounts. The Distribution Trustee also will file or cause to be filed any Tax or information return related to the applicable Trust Account that is required by any governmental unit.

ARTICLE XI

RETENTION OF JURISDICTION

     Notwithstanding the entry of the Confirmation Order and the occurrence of the Effective Date, the Bankruptcy Court will retain all such jurisdiction over the Chapter 11 Cases after the Effective Date as is legally permissible, including jurisdiction to:

     (a) Allow, disallow, determine, liquidate, classify, reclassify, estimate or establish the priority, secured or unsecured status (or proper Plan classification) of any Claim or Interest, including the resolution of any request for payment of any Administrative Claim, and the resolution of any objections to the allowance, priority, or classification of Claims or Interests;

     (b) Grant or deny any applications for allowance of compensation or reimbursement of expenses authorized pursuant to the Bankruptcy Code or the Plan for periods ending on or before the Effective Date;

29

     (c) Resolve any matters related to the assumption, assumption and assignment or rejection of any Executory Contract or Unexpired Lease to which either Debtor is a party or with respect to which either Debtor may be liable and to hear, determine and, if necessary, liquidate any Claims arising therefrom;

     (d) Ensure that distributions to holders of Allowed Claims are accomplished pursuant to the provisions of the Plan;

     (e) Decide or resolve any motions, adversary proceedings, contested or litigated matters and any other matters, including the Recovery Actions and claims of the holders of the 7-3/4% SWD Revenue Bonds in respect of subordination rights under the Senior Subordinated Note Indenture, and grant or deny any applications involving the Debtors or the Distribution Trustee that may be pending on the Effective Date or brought thereafter;

     (f) Enter such orders as may be necessary or appropriate to implement or consummate the provisions of the Plan and all contracts, instruments, releases and other agreements or documents entered into or delivered in connection with the Plan, the Disclosure Statement or the Confirmation Order, including the Distribution Trust Agreement;

     (g) Resolve any cases, controversies, suits or disputes that may arise in connection with the Recovery Actions or the consummation, interpretation, or enforcement of the Plan or any contract, instrument, release, or other agreement or document that is entered into or delivered pursuant to the Plan (including the Distribution Trust Agreement), or any entity’s rights arising from or obligations incurred in connection with the Plan or such documents;

     (h) Modify the Plan before or after the Effective Date pursuant to section 1127 of the Bankruptcy Code; modify the Confirmation Order, or any contract, instrument, release, or other agreement or document entered into or delivered in connection with the Plan, the Disclosure Statement or the Confirmation Order; or remedy any defect or omission or reconcile any inconsistency in any Bankruptcy Court order, the Plan, the Disclosure Statement, the Confirmation Order, or any contract, instrument, release or other agreement or document entered into, delivered or created in connection with the Plan, the Disclosure Statement or the Confirmation Order, in such manner as may be necessary or appropriate to consummate the Plan;

     (i) Issue injunctions, enforce the injunctions contained in the Plan and the Confirmation Order, enter and implement other orders or take such other actions as may be necessary or appropriate to restrain interference by any entity with consummation, implementation or enforcement of the Plan or the Confirmation Order;

     (j) Enter and implement such orders as are necessary or appropriate if the Confirmation Order is for any reason or in any respect modified, stayed, reversed, revoked or vacated or distributions pursuant to the Plan are enjoined or stayed;

     (k) Determine any other matters that may arise in connection with or relate to the Plan, the Disclosure Statement, the Confirmation Order, or any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, the Disclosure Statement or the Confirmation Order;

     (l) Enter a final decree closing the Chapter 11 Cases in accordance with the Bankruptcy Rules; and

     (m) Determine matters concerning state, local and federal Taxes in accordance with sections 346, 505 and 1146 of the Bankruptcy Code, including any Disputed Claims for Taxes.

ARTICLE XII

MISCELLANEOUS PROVISIONS

     12.1 Preservation of Insurance. Nothing in the Plan will diminish or impair the enforceability of any insurance policies that may cover Claims against either Debtor.

30

     12.2 Modification of the Plan. Subject to the restrictions on modifications set forth in section 1127 of the Bankruptcy Code, the Debtors reserve the right to alter, amend or modify the Plan before its substantial consummation, with the consent of the Creditors’ Committee.

     12.3 Revocation of the Plan. The Debtors reserve the right to revoke or withdraw the Plan prior to the Effective Date, with the consent of the Creditors’ Committee. If the Debtors so revoke or withdraw the Plan, or if confirmation of the Plan does not occur, the Plan will be null and void in all respects, and nothing contained in the Plan will: (a) constitute a waiver or release of any Claims by or against, or any Interests in, the Debtors; or (b) prejudice in any manner the rights of either Debtor or any other party.

     12.4 Severability of Plan Provisions. If, prior to confirmation of the Plan, any term or provision of the Plan is held by the Bankruptcy Court to be invalid, void or unenforceable, the Bankruptcy Court will have the power to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void or unenforceable, and such term or provision then will be applicable as altered or interpreted; provided, however, that any such alteration or interpretation must be in form and substance acceptable to the Debtors and the Creditors’ Committee. Notwithstanding any such holding, alteration or interpretation, the remainder of the terms and provisions of the Plan will remain in full force and effect and will in no way be affected, impaired or invalidated by such holding, alteration or interpretation. The Confirmation Order will constitute a judicial determination and will provide that each term and provision of the Plan, as it may have been altered or interpreted in accordance with the foregoing, is valid and enforceable pursuant to its terms.

     12.5 Notices. Any pleading, notice, or other document required by the Plan or Confirmation Order to be served on or delivered to the Debtors, the Distribution Trustee or the Creditors’ Committee must be sent by overnight delivery service, facsimile transmission, courier service, or messenger to:

     (a) The Debtors:

Daniel J. DeFranceschi
RICHARDS, LAYTON & FINGER
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
Facsimile: (302) 651-7701

Gregory M. Gordon
Henry L. Gompf
Troy B. Lewis
Daniel P. Winikka
JONES DAY
2727 North Harwood Street
Dallas, Texas 75201
Facsimile (214) 969-5100

(Counsel to the Debtors)

     (b) The Distribution Trustee:

Distribution Trustee
[The identity and address of the Distribution Trustee to be disclosed at least ten
days prior to the Confirmation Hearing as provided in Section 8.2(a).]

31

     (c) The Creditors’ Committee:

Lisa G. Beckerman
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
590 Madison Avenue
New York, NY 10022

William P. Bowden
ASHBY & GEDDES
222 Delaware Avenue
P.O. Box 1150
Wilmington, DE 19899

(Counsel to the Creditors’ Committee)

     12.6 Successors and Assigns. The rights, benefits, and obligations of any entity named or referred to in the Plan will be binding on, and will inure to the benefit of, any heir, executor, administrator, successor, or assign of such entity, regardless of whether such entity voted to accept the Plan.

     12.7 Further Action. Nothing contained in the Plan will prevent the Debtors or the Distribution Trustee from taking such actions as may be necessary to consummate the Plan, even though such actions may not be specifically provided for within the Plan.

     12.8 Exhibits. All Exhibits to the Plan are incorporated by reference and are intended to be an integral part of this document as though fully set forth in the Plan.

32

Dated: February 11, 2005	Respectfully submitted,
	KAISER ALUMINA AUSTRALIA CORPORATION
	By:
	Name:
	Title:
	KAISER FINANCE CORPORATION
	By:
	Name:
	Title:

COUNSEL:

Daniel J. DeFranceschi (DE 2732)
RICHARDS, LAYTON & FINGER
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
Telephone: (302) 651-7700
Facsimile: (302) 651-7701

– and –

Gregory M. Gordon (TX 08435300)
Henry L. Gompf (TX 08116400)
Troy B. Lewis (TX 12308650)
Daniel P. Winikka (TX 00794873)
JONES DAY
2727 North Harwood Street
Dallas, Texas 75201
Telephone: (214) 220-3939
Facsimile: (214) 969-5100

ATTORNEYS FOR DEBTORS AND
DEBTORS IN POSSESSION

33

EX-99.6

EXHIBIT 99.6

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

	x
	:
In re:	:
	:	Chapter 11 Case Nos.
KAISER ALUMINA AUSTRALIA CORPORATION and	:	02-10432 and 02-10438
KAISER FINANCE CORPORATION,	:	Jointly Administered Under
	:	Case No. 02-10429 (JKF)
Debtors.	:
	:
	x

DISCLOSURE STATEMENT

PURSUANT TO SECTION 1125 OF THE BANKRUPTCY CODE

WITH RESPECT TO THE AMENDED JOINT PLAN OF LIQUIDATION

FOR KAISER ALUMINA AUSTRALIA CORPORATION

AND KAISER FINANCE CORPORATION

Daniel J. DeFranceschi (DE 2732)

RICHARDS, LAYTON & FINGER

One Rodney Square

P.O. Box 551

Wilmington, Delaware 19899

Telephone: (302) 651-7700

Facsimile: (302) 651-7701

– and –

Gregory M. Gordon (TX 08435300)

Henry L. Gompf (TX 08116400)

Troy B. Lewis (TX 12308650)

Daniel P. Winikka (TX 00794873)

JONES DAY

2727 North Harwood Street

Dallas, Texas 75201

Telephone: (214) 220-3939

Facsimile: (214) 969-5100

ATTORNEYS FOR DEBTORS AND

DEBTORS IN POSSESSION

Dated: February 11, 2005

DISCLOSURE STATEMENT, DATED FEBRUARY 11, 2005

SOLICITATION OF VOTES
WITH RESPECT TO THE
AMENDED JOINT PLAN OF LIQUIDATION
FOR
KAISER ALUMINA AUSTRALIA CORPORATION AND KAISER FINANCE CORPORATION
(WHOLLY OWNED SUBSIDIARIES OF KAISER ALUMINUM & CHEMICAL CORPORATION)

     THE BOARDS OF DIRECTORS OF KAISER ALUMINA AUSTRALIA CORPORATION (“KAAC”) AND KAISER FINANCE CORPORATION (“KFC” AND, TOGETHER WITH KAAC, THE “DEBTORS”) BELIEVE THAT THE AMENDED JOINT PLAN OF LIQUIDATION FOR KAISER ALUMINA AUSTRALIA CORPORATION AND KAISER FINANCE CORPORATION, DATED FEBRUARY 11, 2005 AND ATTACHED HERETO AS EXHIBIT I (THE “PLAN”) IS IN THE BEST INTERESTS OF CREDITORS. ALL CREDITORS ENTITLED TO VOTE ON THE PLAN ARE URGED TO VOTE IN FAVOR THEREOF. A SUMMARY OF THE VOTING INSTRUCTIONS IS SET FORTH BEGINNING AT PAGE 58 OF THIS DISCLOSURE STATEMENT. MORE DETAILED INSTRUCTIONS ARE CONTAINED ON THE BALLOTS DISTRIBUTED TO CREDITORS ENTITLED TO VOTE ON THE PLAN. TO BE COUNTED, YOUR BALLOT MUST BE DULY COMPLETED, EXECUTED AND RECEIVED BY 5:00 P.M., EASTERN TIME, ON APRIL 5, 2005 OR SUCH OTHER TIME OR DATE IDENTIFIED ON YOUR BALLOT (THE “VOTING DEADLINE”), UNLESS EXTENDED.

     [THE CREDITORS’ COMMITTEE HAS INDEPENDENTLY CONCLUDED THAT THE PLAN IS IN THE BEST INTERESTS OF CREDITORS AND URGES CREDITORS TO VOTE IN FAVOR OF THE PLAN.]

     [NOTE: THIS IS NOT A SOLICITATION OF ACCEPTANCES OR REJECTIONS OF THE PLAN. ACCEPTANCES OR REJECTIONS MAY NOT BE SOLICITED UNTIL A DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE BANKRUPTCY COURT. THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED BY THE BANKRUPTCY COURT.]

     THE CONFIRMATION AND EFFECTIVENESS OF THE PROPOSED PLAN ARE SUBJECT TO MATERIAL CONDITIONS PRECEDENT, SOME OF WHICH MAY NOT BE SATISFIED. SEE “ANSWERS TO CERTAIN QUESTIONS ABOUT THE PLAN AND DISCLOSURE STATEMENT — WHAT MUST HAPPEN BEFORE THE PLAN CAN BE CONSUMMATED?” AND “VOTING AND CONFIRMATION OF THE PLAN — CONFIRMATION — ACCEPTANCE OR CRAMDOWN.” THERE IS NO ASSURANCE THAT THESE CONDITIONS WILL BE SATISFIED OR WAIVED.

     No person is authorized by either of the Debtors in connection with the Plan or the solicitation of acceptances of the Plan to give any information or to make any representation other than as contained in this Disclosure Statement or incorporated by reference or referred to herein, and, if given or made, such information or representation may not be relied upon as having been authorized by either of the Debtors. The delivery of this Disclosure Statement will not under any circumstances imply that the information herein is correct as of any time subsequent to the date hereof. The Debtors will make available to creditors entitled to vote on acceptance of the Plan such additional information as may be required by applicable law prior to the Voting Deadline.

     ALL CREDITORS ARE ENCOURAGED TO READ AND CAREFULLY CONSIDER THIS ENTIRE DISCLOSURE STATEMENT, INCLUDING THE PLAN ATTACHED HERETO AS EXHIBIT I, PRIOR TO SUBMITTING BALLOTS PURSUANT TO THIS SOLICITATION.

     The summaries of the Plan and the other documents contained in this Disclosure Statement are qualified by reference to the Plan itself, the Exhibit thereto and other documents summarized herein, all as Filed prior to approval of this Disclosure Statement.

     The information contained in this Disclosure Statement, including the information regarding the history, businesses and operations of the Debtors, is included for purposes of soliciting acceptances of the Plan, but, as to contested matters and adversary proceedings, is not to be construed as admissions or stipulations, but rather as statements made in settlement negotiations.

     FORWARD-LOOKING STATEMENTS: THIS DISCLOSURE STATEMENT INCLUDES FORWARD-LOOKING STATEMENTS BASED LARGELY ON THE CURRENT EXPECTATIONS OF THE DEBTORS ABOUT FUTURE EVENTS. THE WORDS “BELIEVE,” “MAY,” “WILL,” “ESTIMATE,” “CONTINUE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS IDENTIFY THESE FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO A NUMBER OF RISKS, UNCERTAINTIES AND ASSUMPTIONS. IN LIGHT OF THESE RISKS AND UNCERTAINTIES, THE FORWARD-LOOKING EVENTS AND CIRCUMSTANCES DISCUSSED IN THIS DISCLOSURE STATEMENT MAY NOT OCCUR AND ACTUAL EVENTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS. THE DEBTORS UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

     THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”) OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN.

     All capitalized terms in this Disclosure Statement not otherwise defined herein have the meanings given to them in the Plan.

TABLE OF CONTENTS

	Page
INTRODUCTION	1
ANSWERS TO CERTAIN QUESTIONS ABOUT THE PLAN AND DISCLOSURE STATEMENT	4
OVERVIEW OF THE PLAN	14
Introduction	14
Summary of Classes and Treatment of Claims and Interests	14
Guaranty Subordination Dispute	18
7-3/4% SWD Revenue Bond Dispute	18
Sources and Uses of Cash	19
Sources of Cash	19
Uses of Cash	19
KFC Claim Against KACC	23
Additional Information Regarding Assertion and Treatment of Administrative Claims and Priority Tax Claims	24
Administrative Claims	24
Administrative Claims in General	24
US Trustee Fees	24
Bar Dates for Administrative Claims	24
QAL Purchase Agreement	25
Intercompany Claims Settlement Payments	25
PBGC Administrative Claim	25
Priority Tax Claims	25
Reserves for Payment of Certain Potential Administrative Claims and Priority Tax Claims	26
Senior Note Indenture Trustee and Ad Hoc Group Counsel Fees and Expenses; 7-3/4% SWD Revenue Bond Plaintiffs’ Fees	26
CERTAIN EVENTS PRECEDING THE DEBTORS’ CHAPTER 11 FILINGS	26
Background	26
Note Guarantees	27
OPERATIONS DURING THE CHAPTER 11 CASES	27
First Day Relief	27
Cash Management Order	28
Joint Venture Order	28
Bankruptcy Petitions of the 2003 Debtors	28
Appointment of the Committees and Future Claimants’ Representatives	29
Creditors’ Committee	29
Asbestos Claimants’ Committee and Certain Other Appointed Representatives	29

i

TABLE OF CONTENTS
(continued)

	Page
Assumption and Assignment or Rejection of Executory Contracts and Unexpired Leases	30
Claims Process and Bar Dates	30
Postpetition Financing	30
Strategic Plan to Sell Commodities Assets	31
The Sale of the QAL Interests and Liquidation of KAAC	31
Certain Australian Tax Matters	32
Agreements with Labor Regarding Pension and Retiree Medical Benefits	32
PBGC Claims	33
Intercompany Claims Settlement	33
Guaranty Subordination Dispute	35
7-3/4% SWD Revenue Bond Dispute	37
GENERAL INFORMATION CONCERNING THE PLAN	39
Substantive Consolidation	39
KFC Claim against KACC	39
Executory Contracts and Unexpired Leases to be Rejected	39
Releases, Limitation of Liability, Injunctions and Preservation of Insurance	40
Release of Claims and Termination of Interests; Limitation of Liability	40
Injunctions	41
Preservation of Insurance	41
Means for Implementation of the Plan	41
Liquidating Transactions	41
Corporate Action	41
No Revesting of Assets	42
Recourse Solely to Trust Accounts	42
Release of Liens	42
Exemption from Certain Taxes	42
Distribution Trust	42
Creation of the Distribution Trust	42
Distribution Trust Assets	43
Purposes of the Distribution Trust	43
Tax Treatment	43
Trust Accounts	44
Distribution Trust Expenses Account	44
Priority Claims Trust Account	45
Unsecured Claims Trust Account	45

ii

TABLE OF CONTENTS
(continued)

	Page
Disputed Claims Reserve	46
Undeliverable Property Trust Account	46
Risks Associated with Funding of Trust Accounts	47
Powers of the Distribution Trustee	47
General Powers	47
Right to Object to Claims	48
Right to Pursue Causes of Action	49
Right to Vote the Retained Portion of the KFC Claim	49
Limitation on Liability and Indemnification of Distribution Trustee	49
Removal and Resignation of the Distribution Trustee; Filling of Vacancy	49
Compensation of the Distribution Trustee	50
Books and Records; Reports and Tax Filings	50
Books and Records	50
Reports to be Filed with the Bankruptcy Court	50
Tax Returns and Payments	50
Term of the Distribution Trust	51
DISTRIBUTIONS UNDER THE PLAN	51
Method of Distributions to Holders of Allowed Claims	51
Delivery of Distributions	52
Generally	52
Special Provisions for Distributions to Holders of Public Note Claims	52
Undeliverable or Unclaimed Distributions	52
Means of Cash Payments	52
Timing and Calculation of Amounts to Be Distributed	53
Allowed Claims Other Than Unsecured Claims	53
Allowed Unsecured Claims in Subclass 3A; Certain Payments From the Public Note Distributable Consideration	53
Plan Accepted by Subclass 3A and Subclass 3B	53
Plan Rejected by Subclass 3A or Subclass 3B	53
Allowed Unsecured Claims in Subclass 3B	54
Plan Accepted by Subclass 3A and Subclass 3B	54
Plan Rejected by Subclass 3A or Subclass 3B	54
Allowed Unsecured Claims in Subclass 3C and Subclass 3D	54
7-3/4% SWD Revenue Bonds	55
Plan Accepted by Subclass 3A	55
Plan Rejected by Subclass 3A	55

iii

TABLE OF CONTENTS
(continued)

	Page
No De Minimis Distributions	55
Compliance with Tax Requirements	55
Setoffs	55
Compensation and Reimbursement for Services Related to Distributions	56
Payments Limited to Trust Accounts	56
Insufficient Assets	56
Distributions of Securities	56
Disputed Claims	57
Prosecution of Objections to Claims	57
Treatment of Disputed Claims	57
VOTING AND CONFIRMATION OF THE PLAN	57
General	57
Voting Procedures and Requirements	58
Confirmation Hearing	59
Confirmation	59
Acceptance or Cramdown	59
Best Interests Test	60
Generally	60
Liquidation Analysis	60
Feasibility	61
Compliance with Applicable Provisions of the Bankruptcy Code	61
Modification or Revocation of the Plan	61
Alternatives to Confirmation and Consummation of the Plan	61
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF CONSUMMATION OF THE PLAN	62
General	62
U.S. Federal Income Tax Consequences to Holders of Claims	63
Recognition of Gain or Loss	63
In General	63
Post-Effective Date Cash Distributions	63
Bad Debt and/or Worthless Securities Deduction	63
Pending Payments	63
Payments Other than Pending Payments	64
Certain Other Tax Consequences for Holders of Claims	64
Receipt of Pre-Effective Date Interest	64
Installment Method	64

iv

TABLE OF CONTENTS
(continued)

	Page
Information Reporting and Backup Withholding	64
Importance of Obtaining Professional Tax Assistance	64
APPLICABILITY OF CERTAIN FEDERAL AND STATE SECURITIES LAWS	65
General	65
Bankruptcy Code Exemptions from Registration Requirements	65
Initial Offer and Sale	65
Subsequent Transfers	65
ADDITIONAL INFORMATION	65
RECOMMENDATION AND CONCLUSION	66

v

TABLE OF EXHIBITS

Exhibit I - Amended Joint Plan of Liquidation for Kaiser Alumina Australia Corporation and Kaiser Finance Corporation

vi

INTRODUCTION

     The Debtors are seeking approval of the Plan, a copy of which is attached hereto as Exhibit I. This Disclosure Statement is submitted by the Debtors in connection with the solicitation of acceptances of the Plan.

     The confirmation of a plan of reorganization or liquidation, which is the vehicle for satisfying the rights of holders of claims against and interests in a debtor, is the overriding purpose of a chapter 11 case. Chapter 11 may be used to either reorganize or conduct an orderly liquidation of a debtor’s business. The Plan provides for the orderly liquidation and dissolution of the Debtors. The primary objectives of the Plan are to:

•   maximize the value of the ultimate recoveries to all creditor groups on a fair and equitable basis;

•   settle, compromise or otherwise dispose of certain Claims and other disputes on terms that the Debtors believe to be fair and reasonable under the circumstances and in the best interests of their respective Estates and creditors and Kaiser Aluminum & Chemical Corporation (“KACC”), as the sole stockholder of KAAC, and KAAC, as the sole stockholder of KFC; and

•   effectuate the orderly liquidation and dissolution of the Debtors.

     The Plan provides for, among other things, (a) the classification and treatment of Claims and Interests; (b) the establishment of the Distribution Trust to make distributions in accordance with the Plan; (c) the creation and administration of the Trust Accounts; and (d) the liquidation of the Debtors.

     Please refer to the chart beginning on page 14 of this Disclosure Statement for a summary of the proposed treatment of each Class of Claims and Interests.

     If the Plan is confirmed and consummated in accordance with its terms, among other things:

•   holders of Allowed Administrative Claims, Allowed Priority Tax Claims and Allowed Priority Claims in Class 1 will receive Cash from the Priority Claims Trust Account in the amount of their respective Allowed Claim without interest or penalty;

•   holders of Allowed 9-7/8% Senior Note Claims and 10-7/8% Senior Note Claims in Subclass 3A:

w if both Subclass 3A and Subclass 3B vote to accept the Plan, will receive from the Unsecured Claims Trust Account their respective Pro Rata Share of the Public Note Distributable Consideration (i.e., the Public Note Percentage of the Cash and other property in the Unsecured Claims Trust Account) remaining after first giving effect to the following payments by the Distribution Trustee from the Public Note Distributable Consideration:

•   the payment to be made to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of the holders of the 7-3/4% SWD Revenue Bonds pursuant to Section 2.5 of the Plan (the “7-3/4% SWD Revenue Bonds Payment”);

•   the payment of up to $500,000 of the reasonable out-of-pocket expenses (including attorneys’ fees) incurred and paid by the plaintiffs in the 7-3/4% SWD Revenue Bond Dispute in connection with the Chapter 11 Cases and the chapter 11 cases of the Other Kaiser Debtors, including in connection with the 7-3/4% SWD Revenue Bond Dispute and that certain civil action currently pending before the United States District Court for the Eastern District of Louisiana styled Paul J. Guillot, et al. v. Credit Suisse First Boston, LLC, and numbered 03-0797 (the “7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments”);

•   the payment of the amount of the aggregate fees payable to the 9-7/8% Senior Note Indenture Trustee, the 10-7/8% Senior Note Indenture Trustee and the counsel for the Ad Hoc Group in accordance with the Plan (the “Senior Notes Fee Payments”); and

•   the payment of $8.0 million to be made to the Senior Subordinated Note Indenture Trustee for the benefit of the holders of Senior Subordinated Note Claims; or

w if either Subclass 3A or Subclass 3B fails to accept the Plan, will receive that portion of the Public Note Distributable Consideration to which the Bankruptcy Court determines they are entitled, provided the distributions ultimately made to a holder of an Allowed Senior Note Claim will be reduced by such holder’s proportional share of the Senior Notes Fee Payments and, if the Bankruptcy Court determines that holders of Allowed Senior Subordinated Note Claims are not entitled to any portion of the Subclass 3A Distributable Consideration, the 7-3/4% SWD Revenue Bond Payment (or a reservation in lieu thereof), if any, and any 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments;

•   holders of Allowed Senior Subordinated Note Claims in Subclass 3B:

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if both Subclass 3A and Subclass 3B vote to accept the Plan, will receive their respective Pro Rata Share of $8.0 million to be paid to the Senior Subordinated Note Indenture Trustee, provided that any and all fees or expenses payable to the Senior Subordinated Note Indenture Trustee pursuant to the Senior Subordinated Note Indenture will, in all events, be payable solely from such $8.0 million; or

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if either Subclass 3A or Subclass 3B fails to accept the Plan, will receive that portion, if any, of the Public Note Distributable Consideration to which the Bankruptcy Court determines they are entitled, provided any distributions ultimately made to a holder of an Allowed Senior Subordinated Note Claim may be reduced by such holder’s proportional share of any and all fees and expenses payable to the Senior Subordinated Note Trustee pursuant to the Senior Subordinated Note Indenture, which will, subject to such Trustee’s right to seek payment by the Debtors of such fees and expenses pursuant to section 503(b)(5) of the Bankruptcy Code, be payable solely from such distributions;

•   Pension Benefit Guaranty Corporation (the “PBGC”), as the holder of the PBGC Claims in Subclass 3C, will receive the PBGC Percentage of the Cash and other property in the Unsecured Claims Trust Account; and

•   holders of Allowed Other Unsecured Claim in Subclass 3D will receive their respective Pro Rata Share of the Other Unsecured Claims Percentage of the Cash and other property in the Unsecured Claims Trust Account.

As the foregoing indicates, in general, all holders of Claims will have recourse, if any, only to the Cash and other property in the applicable Trust Accounts. The Debtors will cease to exist as legal entities following consummation of the Plan. See “Overview of the Plan — Summary of Classes and Treatment of Claims and Interests.”

     SUBJECT TO THE PROVISIONS OF SECTION 2.11 OF THE PLAN, AS OF THE EFFECTIVE DATE, IN CONSIDERATION FOR THE OBLIGATIONS OF THE DEBTORS AND THE DISTRIBUTION TRUSTEE UNDER THE PLAN AND THE CASH TO BE DISTRIBUTED IN CONNECTION WITH THE PLAN, EACH HOLDER OF A CLAIM THAT VOTES IN FAVOR OF THE PLAN WILL BE DEEMED TO FOREVER RELEASE AND WAIVE ALL CLAIMS, OBLIGATIONS, SUITS, JUDGMENTS, DAMAGES, DEMANDS, DEBTS, RIGHTS, CAUSES OF ACTION AND LIABILITIES (OTHER THAN THE RIGHT TO ENFORCE THE DEBTORS’ OR THE DISTRIBUTION TRUSTEE’S OBLIGATIONS UNDER THE PLAN AND THE CONTRACTS, INSTRUMENTS, RELEASES AND OTHER AGREEMENTS AND DOCUMENTS DELIVERED THEREUNDER), WHETHER LIQUIDATED OR UNLIQUIDATED, FIXED

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OR CONTINGENT, MATURED OR UNMATURED, KNOWN OR UNKNOWN, FORESEEN OR UNFORESEEN, THEN EXISTING OR THEREAFTER ARISING IN LAW, EQUITY OR OTHERWISE, THAT ARE BASED IN WHOLE OR IN PART ON ANY ACT, OMISSION, TRANSACTION OR OTHER OCCURRENCE TAKING PLACE ON OR PRIOR TO THE EFFECTIVE DATE IN ANY WAY RELATING TO A DEBTOR, THE CHAPTER 11 CASES OR THE PLAN THAT SUCH ENTITY HAS, HAD OR MAY HAVE AGAINST THE CREDITORS’ COMMITTEE, ITS MEMBERS, ANY INDENTURE TRUSTEE, EITHER DEBTOR AND ANY OF THEIR RESPECTIVE PRESENT OR FORMER DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ADVISORS, ATTORNEYS, ACCOUNTANTS, UNDERWRITERS, INVESTMENT BANKERS OR OTHER REPRESENTATIVES, ACTING IN SUCH CAPACITY, EXCEPT FOR THOSE BASED ON (A) ACTS OR OMISSIONS OF ANY SUCH PERSON CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OR (B) CONTRACTUAL OBLIGATIONS OF, OR LOANS OWED BY, ANY SUCH PERSON TO A DEBTOR. SEE “GENERAL INFORMATION CONCERNING THE PLAN — RELEASES, LIMITATION OF LIABILITY, AND INJUNCTIONS — RELEASE OF CLAIMS AND TERMINATION OF INTERESTS; LIMITATION OF LIABILITY.”

     EXCEPT AS OTHERWISE PROVIDED IN THE PLAN OR THE CONFIRMATION ORDER, AS OF THE EFFECTIVE DATE, ALL ENTITIES THAT HAVE HELD, CURRENTLY HOLD OR MAY HOLD A CLAIM OR OTHER DEBT OR LIABILITY OF THE DEBTORS, OR AN INTEREST OR OTHER RIGHT OF AN EQUITY SECURITY HOLDER WITH RESPECT TO THE DEBTORS, THAT IS RELEASED, WAIVED, SETTLED OR DEEMED SATISFIED PURSUANT TO THE PLAN WILL BE PERMANENTLY ENJOINED FROM TAKING ANY OF THE FOLLOWING ACTIONS ON ACCOUNT OF ANY SUCH CLAIMS, DEBTS, LIABILITIES, INTERESTS OR RIGHTS: (A) COMMENCING OR CONTINUING IN ANY MANNER ANY ACTION OR OTHER PROCEEDING AGAINST THE DEBTORS, THE DISTRIBUTION TRUST OR THE DISTRIBUTION TRUSTEE OR THE PROPERTY OF ANY OF THEM OTHER THAN TO ENFORCE ANY RIGHT PURSUANT TO THE PLAN TO A DISTRIBUTION FROM THE TRUST ACCOUNTS; (B) ENFORCING, ATTACHING, COLLECTING OR RECOVERING IN ANY MANNER ANY JUDGMENT, AWARD, DECREE OR ORDER AGAINST THE DEBTORS, THE DISTRIBUTION TRUST OR THE DISTRIBUTION TRUSTEE, OTHER THAN AS PERMITTED PURSUANT TO (A) ABOVE; (C) CREATING, PERFECTING OR ENFORCING ANY LIEN OR ENCUMBRANCE AGAINST THE DEBTORS, THE DISTRIBUTION TRUST, THE PROPERTY OF ANY OF THEM OR THE TRUST ACCOUNTS; (D) ASSERTING A SETOFF, RIGHT OF SUBROGATION OR RECOUPMENT OF ANY KIND AGAINST ANY DEBT, LIABILITY OR OBLIGATION DUE TO THE DISTRIBUTION TRUST; AND (E) COMMENCING OR CONTINUING ANY ACTION, IN ANY MANNER, IN ANY PLACE THAT DOES NOT COMPLY WITH OR IS INCONSISTENT WITH THE PROVISIONS OF THE PLAN. SEE “GENERAL INFORMATION CONCERNING THE PLAN — LEGAL EFFECTS OF THE PLAN — RELEASES, LIMITATION OF LIABILITY, AND INJUNCTIONS — INJUNCTIONS.”

     [NOTE THAT THIS PARAGRAPH IS TO BE INCLUDED AFTER THIS DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE BANKRUPTCY COURT: BY AN ORDER OF THE BANKRUPTCY COURT DATED [___], 2005, THIS DISCLOSURE STATEMENT HAS BEEN APPROVED AS CONTAINING “ADEQUATE INFORMATION” FOR CREDITORS OF THE DEBTORS IN ACCORDANCE WITH SECTION 1125 OF THE BANKRUPTCY CODE. THE BANKRUPTCY CODE DEFINES “ADEQUATE INFORMATION” AS “INFORMATION OF A KIND, AND IN SUFFICIENT DETAIL, AS FAR AS IS REASONABLY PRACTICABLE IN LIGHT OF THE NATURE AND THE HISTORY OF THE DEBTOR AND THE CONDITION OF THE DEBTOR’S BOOKS AND RECORDS, THAT WOULD ENABLE A HYPOTHETICAL REASONABLE INVESTOR TYPICAL OF HOLDERS OF CLAIMS OR INTERESTS OF THE RELEVANT CLASS TO MAKE AN INFORMED JUDGMENT ABOUT THE PLAN . .. . .” 11 U.S.C. § 1125(A)(1).]

     THE DEBTORS’ BOARDS OF DIRECTORS BELIEVE THAT THE PLAN IS IN THE BEST INTERESTS OF CREDITORS UNDER THE CIRCUMSTANCES. ALL CREDITORS ENTITLED TO VOTE ARE URGED TO VOTE IN FAVOR OF THE PLAN BY NO LATER THAN 5:00 P.M., EASTERN TIME, ON APRIL 5, 2005 OR SUCH OTHER TIME OR DATE IDENTIFIED ON YOUR BALLOT.

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     The requirements for confirmation of the Plan under the Bankruptcy Code, including the vote of creditors to accept the Plan and certain of the statutory findings that must be made by the Bankruptcy Court, are described in “Voting and Confirmation of the Plan.” Confirmation of the Plan and the occurrence of the Effective Date are also subject to a number of significant conditions, which are set forth in the Plan and summarized in “Answers To Certain Questions About The Plan And Disclosure Statement — What must happen before the Plan can be consummated?” There is no assurance that these conditions will be satisfied or waived.

ANSWERS TO CERTAIN QUESTIONS ABOUT THE PLAN AND DISCLOSURE STATEMENT

     The information presented in the answers to the questions set forth below is qualified in its entirety by reference to the full text of this Disclosure Statement, including the Plan attached hereto as Exhibit I. All creditors entitled to vote on the Plan are encouraged to read and carefully consider this entire Disclosure Statement, including the Plan attached hereto as Exhibit I, prior to submitting a Ballot or Ballots to accept or reject the Plan.

What is this document and why am I receiving it?

     On February 12, 2002, KACC and KFC, along with their parent companies and certain of their affiliates, filed petitions for relief under chapter 11 of the Bankruptcy Code. The reasons the Debtors Filed for such protection are described under “Certain Events Preceding the Debtors’ Chapter 11 Filings.” In connection with their proposed liquidation pursuant to chapter 11, the Debtors have prepared the Joint Plan of Liquidation attached as Exhibit I to this Disclosure Statement (i.e., the Plan), which sets forth in detail the proposed treatment of the Claims of the Debtors’ creditors and the Interests of KACC, as the sole stockholder of KAAC, and KAAC, as the sole stockholder of KFC. This Disclosure Statement describes the terms of, and certain other material information relating to, the Plan.

     This Disclosure Statement is being delivered to you in connection with the Debtors’ solicitation of votes with respect to the Plan because either (a) you are the holder of, or have otherwise asserted, a Claim or Claims against either or both of the Debtors or (b) you are the holder of a 7-3/4% SWD Revenue Bond. This Disclosure Statement is intended to provide you with information sufficient to make an informed to decision as to whether to vote to accept or reject the Plan (to the extent you are eligible to do so).

Am I eligible to vote to accept or reject the Plan?

     You are entitled to vote to accept or reject the Plan only if you hold an Allowed Unsecured Claim (or an Unsecured Claim which has been temporarily allowed for voting purposes) against one or both Debtors. In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims and Priority Tax Claims have not been classified and thus are excluded from the Classes, and if you are a holder of an Administrative Claim or Priority Tax Claim, you are not eligible to vote with respect to the Plan. If you hold a Priority Claim or a Secured Claim against either Debtor, because you are receiving Cash or property equal in value to the allowed amount of such Claim, you are deemed to have accepted the Plan and may not vote with respect to it. While the Plan includes a proposed settlement of certain claims asserted by holders of 7-3/4% SWD Revenue Bonds (see “Operations During the Chapter 11 Cases — 7-3/4% SWD Revenue Bond Dispute), such holders do not have Claims against the Debtors and, accordingly, are not entitled to vote on the Plan, although creditors or claimants affected by such settlement may file an objection to it with the Bankruptcy Court on or prior to April 5, 2005. See “Voting and Confirmation of the Plan — Voting Procedures and Requirements.”

Why should I vote to accept the Plan?

     KAAC has entered into an agreement to sell its interests in QAL and, upon the consummation of such sale, will no longer be an operating entity. See “Operations During the Chapter 11 Cases - The Sale of the QAL Interests and Liquidation of KAAC.” Following such sale, KAAC’s only remaining assets will be Cash and its Interest in its wholly owned non-operating subsidiary, KFC. KFC is not an operating company and has no material assets other than its claim against KACC described below. See “- KFC Claim Against KACC.” As such, the only alternatives to confirmation and consummation of the Plan are conversion of the Chapter 11 Cases to cases under chapter 7 of the

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Bankruptcy Code and the confirmation and consummation of an alternative plan of liquidation under chapter 11 of the Bankruptcy Code. The Debtors believe that the confirmation and consummation of the Plan is in the best interests of the Debtors’ stakeholders and is preferable to either alternative.

     Chapter 7 Liquidation

     The Debtors believe that the Plan provides for the liquidation of the Debtors in a manner significantly more efficient than would occur in the event the Chapter 11 Cases were converted to cases under chapter 7 of the Bankruptcy Code. KFC has no material assets other than a claim against KACC, which will be subject to treatment under KACC’s plan of reorganization and, upon consummation of the sale of KAAC’s interests in QAL (the “QAL Interests”), KAAC’s Estate will have been substantially liquidated and converted to Cash proceeds, subject only to receipt of the proceeds, if any, received from the successful prosecution, settlement, or collection of Recovery Actions (the “Recovery Action Proceeds”). The Debtors are not aware of the existence of any claim against a third party that would constitute a Recovery Action. Further, the Debtors have been informed that the Creditors’ Committee conducted an analysis of potential preference actions and determined that there were no viable preference actions concerning payments made by the Debtors. The Debtors believe that conversion to chapter 7 of the Bankruptcy Code would result in additional costs relating to the appointment of a chapter 7 trustee, likely delays in distributions to all creditors who would be entitled to receive a distribution under the Plan (thus reducing the present value of such distributions) and diminished recoveries for holders of Allowed Unsecured Claims. See “Voting and Confirmation of the Plan — Confirmation — Best Interests Test.”

     Alternative Chapter 11 Liquidation

     The Plan has been negotiated by the Debtors and representatives of certain of the Debtors’ most significant creditors, including the Creditors’ Committee (a committee appointed by the Bankruptcy Court to represent the interests of the Debtors’ unsecured creditors), [which has independently concluded that the Plan is in the best interests of creditors]. Therefore, the Debtors believe that negotiating an alternative plan of liquidation under chapter 11 of the Bankruptcy Code is unlikely to alter significantly the relative treatment of Claims. The Debtors believe that negotiating such an alternative plan would result in additional professional costs in connection with such negotiations, likely delays in distributions to all creditors who would be entitled to receive a distribution under the Plan (thus reducing the present value of such distributions) and potentially diminished recoveries for holders of Allowed Unsecured Claims.

How do I vote to accept or reject the Plan?

     If you are the holder of an Allowed Unsecured Claim (other than a holder of a Senior Note Claim or Senior Subordinated Note Claim held through a nominee) against one or both of the Debtors and are, therefore, entitled to vote on the Plan, complete, execute and return your Ballot or Ballots in accordance with the instructions to Logan & Company, Inc., 546 Valley Road, Upper Montclair, New Jersey 07043 (unless another address is set forth on the preaddressed enveloped provided to you) on or prior to 5:00 P.M. Eastern Time, on April 5, 2005 (unless another time or date is identified on your Ballot). If your vote is not received by that time and date, it will not be counted. If you are the holder of a Senior Note Claim or Senior Subordinated Note Claim held in the name of a broker, dealer, commercial bank, trust company or other nominee, you must complete and deliver to such nominee the Ballot or Ballots provided to such holder in order to vote on the Plan; we urge you to deliver such Ballot or Ballots to your nominee holder or holders no later than the date identified on such Ballot or Ballots in order to ensure that your vote will be counted. If you are entitled to vote and you did not receive a Ballot, received a damaged Ballot or lost your Ballot, please call the Debtors’ voting agent, Logan & Company, at (973) 509-3190. See “Voting and Confirmation of the Plan — Voting Procedures and Requirements.”

What if I’m entitled to vote to accept or reject the Plan and don’t?

     In general, within any particular Class of Claims, only those holders who actually vote to accept or reject the Plan will affect whether the Plan is accepted by the requisite holders of Claims in such Class. In order for the Plan to be accepted by each Subclass of Class 3 (Unsecured Claims), the holders representing at least two-thirds in dollar amount and a majority in number of Allowed Claims in each such Subclass held by holders of such Claims who actually vote to accept or reject the Plan must vote to accept the Plan. Thus, if you hold an Unsecured Claim,

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your failure to vote in respect of such Claim will count as neither a vote for acceptance nor a vote for rejection of the Plan. See “Voting and Confirmation of the Plan — Confirmation - Acceptance or Cramdown.”

What happens if the Plan is not accepted by each Class entitled to vote on the Plan?

     If the holders of each Class of Claims entitled to vote on the Plan (i.e., Subclass 3A, Subclass 3B, Subclass 3C and Subclass 3D) reject the Plan, the Plan will not be confirmed or consummated in its present form. However, as long as the requisite holders of Claims in at least one such Subclass vote to accept the Plan, the Debtors may seek confirmation pursuant to the “cramdown” provisions of the Bankruptcy Code (which will require a determination by the Bankruptcy Court that that the Plan is “fair and equitable” and “does not discriminate unfairly” as to each nonaccepting Subclass). The Debtors believe that the Plan satisfies the “cramdown” provisions of the Bankruptcy Code and, in any case, have reserved the right to modify the Plan to the extent that confirmation thereunder requires modification. See “Voting and Confirmation of the Plan - Confirmation — Acceptance or Cramdown.”

What will I actually receive in respect of my Claim if the Plan is confirmed and goes effective?

     If you are the holder of an Allowed Claim against either Debtor, what you will actually receive, if anything, in respect of such Claim will depend on the classification of that Claim. For detailed information about the classification and treatment of creditors under the Plan, see “Overview of the Plan — Summary of Classes and Treatment of Claims and Interests.”

     Unlike the holders of Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Priority Claims or Allowed Secured Claims against the Debtors, holders of Allowed Claims in Subclass 3A, Subclass 3B, Subclass 3C and Subclass 3D will not receive Cash or property in an amount equal to 100% of the amount of their Claims.

     Holders of Allowed Senior Note Claims in Subclass 3A

               If the Plan is accepted by both Subclass 3A and Subclass 3B

     If both Subclass 3A and Subclass 3B vote to accept the Plan, a holder of an Allowed Senior Note Claim will be entitled to a distribution of its Pro Rata Share of the Public Note Distributable Consideration remaining after first giving effect to certain payments by the Distribution Trustee from the Public Note Distributable Consideration as discussed below. For purposes of the Plan, (a) the term “Public Note Distributable Consideration” means the Public Note Percentage of the Cash and other property in the Unsecured Claims Trust Account; (b) the term “Public Note Percentage” means (i) 68% less (ii) 68% of the Other Unsecured Claims Percentage; (c) the term “Other Unsecured Claims Percentage” means the percentage equal to the ratio of (i) the aggregate amount of all Allowed Other Unsecured Claims to (ii) the sum of (A) the aggregate amount of all Allowed Other Unsecured Claims and (B) $1,237,237,000; and (d) the term “Pro Rata Share” means, when used with reference to a distribution to a holder of an Allowed Claim in a Subclass of Class 3, that share of the Cash or other property to be distributed on account of all Allowed Claims in such Subclass so that the ratio of (i)(A) the amount of Cash or other property to be distributed on account of the particular Allowed Claim to (B) the amount of such Allowed Claim, is the same as the ratio of (ii)(A) the aggregate amount of Cash or other property to be distributed on account of all Allowed Claims in such Subclass to (B) the aggregate amount of all Allowed Claims in such Subclass.

     The Unsecured Claims Trust Account will be funded with the Debtors’ Cash remaining after (a) the payment of reasonable fees, costs and expenses incurred by the Distribution Trustee in connection with the performance of its duties in accordance with the Plan and the Distribution Trust Agreement; (b) the distribution of Cash or property in accordance with the Plan to holders of Claims having a higher priority than Claims in Subclass 3A, Subclass 3B, Subclass 3C or Subclass 3D; and (c) any payment required to be made by the Debtors to KACC in accordance with the Intercompany Claim Settlement (“Intercompany Settlement Payments”). In addition, the Unsecured Claims Trust Account will hold the Retained Portion of the KFC Claim and, when received, any distributions ultimately made by KACC in respect of the Retained Portion of the KFC Claim. After the Public Note Distributable Consideration is calculated as described above, to determine the Cash and other property to be

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distributed to holders of Senior Note Claims, the following payments must first be deducted from the Public Note Distributable Consideration:

•   the 7-3/4% SWD Revenue Bonds Payment;

•   the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments;

•   the Senior Notes Fee Payments; and

•   the payment of the $8.0 million to be made to the Senior Subordinated Note Indenture Trustee for the benefit of the holders of Senior Subordinated Note Claims.

Notwithstanding anything contained in the Plan to the contrary, no distributions in respect of the Retained Portion of the KFC Claim will be made, and the Retained Portion of the KFC Claim will be held in the Unsecured Claims Trust Account, until receipt by the Distribution Trustee of distributions in respect thereof from KACC pursuant to a confirmed plan of reorganization of KACC or otherwise; upon receipt from KACC of such distributions in respect of the Retained Portion of the KFC Claim, in-kind distributions consisting of the property so received by the Distribution Trustee from KACC will be made to holders of Allowed Claims in Subclass 3A, Subclass 3C and Subclass 3D in accordance with the terms of the Plan.

     Accordingly, if the Plan is accepted by both Subclass 3A and Subclass 3B, the recovery by holders of Allowed Senior Note Claims will depend upon a number of factors, including:

•   the amount of Cash ultimately available to the Estates of the Debtors;

•   the amount of Distribution Trust Expenses;

•   the amount of Allowed Secured Claims, Allowed Administrative Claims, Allowed Priority Claims and Allowed Priority Tax Claims;

•   the amount of the 7-3/4% SWD Revenue Bonds Payment;

•   the amount of the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments;

•   the amount of the Senior Notes Fee Payments;

•   the amount of the Intercompany Settlement Payments, if any;

•   the aggregate amount of Allowed Other Unsecured Claims, if any; and

•   the value of any property distributed by KACC in respect of the Retained Portion of the KFC Claim.

See “Overview of the Plan — Sources and Uses of Cash” for the Debtors’ current estimates of Cash available for distribution to holders of Allowed Senior Note Claims.

     Pursuant to the AJI/KJC Plan, if holders of the Senior Note Claims and the Senior Subordinated Note Claims vote to accept the AJI/KJC Plan, then an additional $8.0 million will be paid to the Senior Subordinated Note Indenture Trustee for the benefit of holders of Senior Subordinated Note Claims, with such amount to be paid from consideration that would otherwise be distributed to holders of Allowed Senior Note Claims under the AJI/KJC Plan.

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               If the Plan is rejected by either Subclass 3A or Subclass 3B

     If either Subclass 3A or Subclass 3B fails to accept the Plan, the holders of 9-7/8% Senior Note Claims and 10-7/8% Senior Note Claims in Subclass 3A will receive that portion of the Public Note Distributable Consideration to which the Bankruptcy Court determines they are entitled in respect of such Claims. The distributions ultimately made to a holder of an Allowed Senior Note Claim will be reduced by such holder’s proportional share of:

•   the Senior Notes Fee Payments;

•   any 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments; and

•   if the Bankruptcy Court determines that holders of Allowed Senior Subordinated Note Claims are not entitled to any portion of the Public Note Distributable Consideration, the 7-3/4% SWD Revenue Bond Payment (or reservation in lieu thereof), if any. See “- What will I receive in respect of my 7-3/4% SWD Revenue Bond if the Plan is confirmed and goes effective and when will I receive it?”

In such event, the recovery by holders of Allowed Senior Notes Claims will depend on the determination of the Bankruptcy Court with respect to the relative entitlement of the holders of Senior Note Claims and Senior Subordinated Note Claims to the Public Note Distributable Consideration, as well as the factors listed above. See “Overview of the Plan — Sources and Uses of Cash” for the Debtors’ current estimates of Cash available for distribution to holders of Allowed Senior Note Claims and Allowed Senior Subordinated Note Claims.

     Holders of Allowed Senior Subordinated Note Claims in Subclass 3B

               If the Plan is accepted by both Subclass 3A and Subclass 3B

     If both Subclass 3A and Subclass 3B vote to accept the Plan, a holder of an Allowed Senior Subordinated Note Claim will receive its Pro Rata Share of $8.0 million (less any fees or expenses payable to the Senior Subordinated Note Trustee pursuant to the Senior Subordinated Note Indenture).

     Pursuant to the AJI/KJC Plan, if holders of the Senior Note Claims and the Senior Subordinated Note Claims vote to accept the AJI/KJC Plan, then an additional $8.0 million will be paid to the Senior Subordinated Note Indenture Trustee for the benefit of holders of Senior Subordinated Note Claims, with such amount to be paid from consideration that would otherwise be distributed to holders of Allowed Senior Note Claims under the AJI/KJC Plan.

               If the Plan is rejected by either Subclass 3A or Subclass 3B

     If either Subclass 3A or Subclass 3B fails to accept the Plan, the holders of Senior Subordinated Note Claims in Subclass 3B will receive that portion, if any, of the Public Note Distributable Consideration to which the Bankruptcy Court determines they are entitled in respect of such Claims, provided any distributions ultimately made to a holder of an Allowed Senior Subordinated Note Claim may be reduced by such holder’s proportional share of any and all fees and expenses payable to the Senior Subordinated Note Trustee pursuant to the Senior Subordinated Note Indenture, which will, subject to such Trustee’s right to seek payment by the Debtors of such fees and expenses pursuant to section 503(b)(5) of the Bankruptcy Code, be payable solely from such distributions. Accordingly, as with the recoveries by holders of Allowed Senior Notes Claims in the scenario in which either the Subclass 3A or Subclass 3B fails to accept the Plan, the recovery by the holders of Allowed Senior Subordinated Note Claims in this situation will depend on a number of factors, including:

•   the amount of Cash ultimately available to the Estates of the Debtors;

•   the amount of Distribution Trust Expenses;

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•   the amount of Allowed Secured Claims, Allowed Administrative Claims, Allowed Priority Claims and Allowed Priority Tax Claims;

•   the amount of the Intercompany Settlement Payments, if any;

•   the aggregate amount of Allowed Other Unsecured Claims, if any;

•   the value of any property distributed by KACC in respect of the Retained Portion of the KFC Claim; and

•   the determination of the Bankruptcy Court with respect to the relative entitlement of the holders of 9-7/8% Senior Note Claims, 10-7/8% Senior Note Claims and Senior Subordinated Note Claims to the Public Note Distributable Consideration.

See “Overview of the Plan — Sources and Uses of Cash” for the Debtors’ current estimates of Cash available for distribution to holders of Allowed Senior Note Claims and Allowed Senior Subordinated Note Claims.

The PBGC, as the holder of the PBGC Claims in Subclass 3C

     The PBGC, as holder of the PBGC Claims in Subclass 3C, will receive the PBGC Percentage of the Cash in the Unsecured Claims Trust Account. For purposes of the Plan, the term “PBGC Percentage” means (a) 32% less (b) 32% of the Other Unsecured Claims Percentage.

     Accordingly, as with the recoveries by holders of Allowed Senior Note Claims discussed above, the recovery by the PBGC, as the holder of the PBGC Claims, will depend upon a number of factors, including:

•   the amount of Cash ultimately available to the Estates of the Debtors;

•   the amount of Distribution Trust Expenses;

•   the amount of Allowed Secured Claims, Allowed Administrative Claims, Allowed Priority Claims and Allowed Priority Tax Claims;

•   the amount of the Intercompany Settlement Payments, if any;

•   the aggregate amount of Allowed Other Unsecured Claims, if any; and

•   the value of any property distributed by KACC in respect of the Retained Portion of the KFC Claim.

See “Overview of the Plan — Sources and Uses of Cash” for the Debtors’ current estimates of Cash available for distribution to the PBGC in respect of the PBGC Claims in Subclass 3C.

     Holders of Other Unsecured Claims in Subclass 3D

     A holder of an Allowed Other Unsecured Claim will receive its Pro Rata Share of the Other Unsecured Claims Percentage of the Cash in the Unsecured Claims Trust Account.

     Accordingly, as with the recoveries by holders of Senior Note Claims and by the PBGC as the holder of the PBGC Claims discussed above, the recoveries by holder of Other Unsecured Claims will depend upon a number of factors, including:

•   the amount of Cash ultimately available to the Estates of the Debtors;

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•   the amount of Distribution Trust Expenses;

•   the amount of Allowed Secured Claims, Allowed Administrative Claims, Allowed Priority Claims and Allowed Priority Tax Claims;

•   the amount of the Intercompany Settlement Payments, if any; and

•   the value of any property distributed by KACC in respect of the Retained Portion of the KFC Claim.

Although several Other Unsecured Claims have been asserted, the Debtors believe that such Claims are either de minimis in amount or will not constitute allowable Claims; however, no assurance can be given that all Claims that the Debtors believe not to be allowable will be disallowed in their entirety. See “Overview of the Plan — Sources and Uses of Cash.”

What will I receive if my Claim is Disputed?

     No distributions will be made in respect of any Claim that is Disputed until that Claim becomes an Allowed Claim, if ever. See “Distributions Under the Plan — Treatment of Disputed Claims.”

Is there a particular record date for determining who will be entitled to receive distributions under the Plan in respect of an Allowed Claim?

     Under the Plan, distributions in respect of an Allowed Claim will be made only to the holder of that Claim as of the close of business on the Confirmation Date (the “Distribution Record Date”). Neither the Debtors nor the Distribution Trustee will recognize any purported transfer of a Claim following the Distribution Record Date.

When will I receive what I am entitled to receive in respect of my Claim if the Plan is confirmed and goes effective?

     Holders of Allowed Claims Other Than Unsecured Claims

     If you are the holder of an Administrative Claim, a Priority Tax Claim, a Priority Claim or a Secured Claim that is allowed as of the Effective Date, you will receive the distribution to which you are entitled under the Plan on account of such Claim on or promptly after the Effective Date. If you are the holder of a Secured Claim, Administrative Claim, a Priority Tax Claim, a Priority Claim or a Secured Claim that is a Disputed Claim as of the Effective Date, to the extent such Claim becomes an Allowed Claim after the Effective Date, you should receive the distribution to which you are entitled under the Plan on or promptly after the Quarterly Distribution Date next following the date on which such Claim is allowed.

     Holders of Allowed Unsecured Claims in Subclass 3A

     If you are the holder of a Senior Note Claim and the Plan is accepted by both Subclass 3A and Subclass 3B, you will receive an initial distribution on account of such Claim on or promptly after the Effective Date. The amount of initial distributions to be made to holders of Senior Note Claims that are allowed as of the Effective Date will be calculated as if each Disputed Other Unsecured Claim were an Allowed Other Unsecured Claim in its Face Amount as of the Effective Date. In addition, on or promptly after each Quarterly Distribution Date, you may receive an additional distribution on account of such Claim in an amount equal to: (a) the amount of Cash and other property that you would have been entitled to receive pursuant to the Plan if such Claim and each other Unsecured Claims allowed prior to such Quarterly Distribution Date had been allowed as of the Effective Date minus (b) the aggregate amount of Cash and other property previously distributed to you on account of such Claim. See “Distributions Under the Plan — Timing and Calculation of Amounts to Be Distributed.” All distributions to holders of Senior Note Claims under the Plan will be made by the Distribution Trustee to the applicable Indenture Trustee, which will thereafter forward such distributions to such holders in due course.

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     If you are the holder of an Allowed Senior Note Claim and the Plan is not accepted by either Subclass 3A or Subclass 3B, the timing of the distribution to which you will be entitled in respect of such Claim will depend upon when the Bankruptcy Court makes the determination contemplated by the Plan to be made in such circumstance.

     Holders of Allowed Unsecured Claims in Subclass 3B

     If you are the holder of an Allowed Senior Subordinated Note Claim and the Plan is accepted by both Subclass 3A and Subclass 3B, you will receive the distribution to which you are entitled under the Plan on account of such Claim on or promptly after the Effective Date as described in this paragraph. On the Effective Date, the Senior Subordinated Note Indenture Trustee will receive a Cash payment in the amount of $8.0 million for the benefit of the holders of the Allowed Senior Subordinated Note Claims. The Senior Subordinated Note Indenture Trustee is entitled to deduct its fees and expenses from such payment prior to making distributions to holders of Senior Subordinated Note Claims. In due course following the Effective Date, the Senior Subordinated Note Indenture Trustee will distribute to each holder of an Allowed Senior Subordinated Note Claim its Pro Rata Share of such payment as reduced by any fees and expenses so deducted. See “Distributions Under the Plan — Timing and Calculation of Amounts to Be Distributed.”

     If you are the holder of an Allowed Senior Subordinated Note Claim and the Plan is not accepted by either Subclass 3A or Subclass 3B, the timing of the distribution, if any, to which you may be entitled in respect of such Claim will depend upon when the Bankruptcy Court makes the determination contemplated by the Plan to be made in such circumstance.

     Holders of Allowed Unsecured Claims in Subclass 3C and Subclass 3D

     If you are the holder of the PBGC Claims or an Other Unsecured Claim that is allowed as of the Effective Date, you will receive an initial distribution on account of such Claim on or promptly after the Effective Date. The amount of initial distributions to be made to holders of the PBGC Claims and Other Unsecured Claims that are allowed as of the Effective Date will be calculated as if each Disputed Other Unsecured Claim were an Allowed Other Unsecured Claim in its Face Amount as of the Effective Date. If you are the holder of an Other Unsecured Claim that is a Disputed Claim as of the Effective Date, to the extent such Claim becomes an Allowed Claim after the Effective Date, you should receive an initial distribution on account of such Claim on or promptly after the Quarterly Distribution Date next following the date on which such Claim was allowed. In addition, on or promptly after each Quarterly Distribution Date, if you are the holder of the PBGC Claims or an Other Unsecured Claim and have already received your initial distribution in respect of such Claim, you may receive an additional distribution on account of such Claim in an amount equal to: (a) the amount of Cash and other property that you would have been entitled to receive pursuant to the Plan if such Claim and each other Unsecured Claims allowed prior to such Quarterly Distribution Date had been allowed as of the Effective Date minus (b) the aggregate amount of Cash and other property previously distributed to you on account of such Claim. See “Distributions Under the Plan - - Timing and Calculation of Amounts to Be Distributed.”

What will I receive in respect of my 7-3/4% SWD Revenue Bond if the Plan is confirmed and goes effective and when will I receive it?

     If Subclass 3A votes to accept the Plan and, unless the holders of Senior Note Claims otherwise agree pursuant to a settlement, all holders of Allowed Senior Note Claims are entitled under the Plan to identical treatment in respect of contractual subordination claims under the Senior Subordinated Note Indenture, on the Effective Date an amount equal to the Settlement Percentage of the Cash in the Unsecured Claims Trust Account that would otherwise have been distributed in respect of the Senior Subordinated Note Claims which, after giving effect to the contractual subordination provisions of the Senior Subordinated Note Indenture and pursuant to Sections 2.4(c)(i) and 2.4(c)(ii) of the Plan (but prior to giving effect to any 7-3/4% SWD Revenue Bond Payment), is to be distributed to holders of Senior Note Claims will be paid to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of the holders of the 7-3/4% SWD Revenue Bonds pursuant to Section 2.5 of the Plan (i.e., the 7-3/4% SWD Revenue Bond Payment). For purposes of the Plan, the term “Settlement Percentage” means the percentage equaling the ratio of (a) $4,000,000 to (b) 50.78% of the Public Note Percentage of the Cash in the Unsecured Claims Trust Account. Notwithstanding the foregoing, in no event will the amount so paid, when aggregated with

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any amount payable under any comparable provision of the AJI/KJC Plan, exceed $8.0 million. If the Debtors do not File a separate motion, the Plan will serve as a motion pursuant to Bankruptcy Rule 9019 seeking entry of an order approving the settlement described above. Unless an objection to such settlement is made in writing by any creditor or claimant affected thereby, Filed with the Bankruptcy Court and served on the parties identified in Section 12.4 of the Plan on or before April 5, 2005, such order (which will be the Confirmation Order) may be entered by the Bankruptcy Court. In the event any such objections are timely Filed, a hearing with respect thereto will occur at the Confirmation Hearing.

     If Subclass 3A fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the rights, if any, of the holders of 7-3/4% SWD Revenue Bonds to payments from the Public Note Distributable Consideration will be as determined by an order of the Bankruptcy Court (which may be the Confirmation Order) in connection with its determination of the relative entitlement of the holders of Senior Note Claims and Senior Subordinated Note Claims to the Public Note Distributable Consideration; provided that if the determination with respect to the rights of the holders of 7-3/4% SWD Revenue Bonds to such payment has not been made by the Bankruptcy Court prior to the Effective Date, then, in order to ensure the funding of such payment, on the Effective Date the Distribution Trustee will reserve from the Public Note Distributable Consideration any amount that may be ordered by the Bankruptcy Court to be so reserved pending such determination.

     Any payment described above (i.e., the 7-3/4% SWD Revenue Bond Payment) would be made to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of the holders of 7-3/4% SWD Revenue Bonds. The 7-3/4% SWD Revenue Bond Indenture Trustee is entitled to deduct its fees and expenses from any such payment prior to making distributions to holders of 7-3/4% SWD Revenue Bonds. However, if Subclass 3A accepts the Plan and, unless the holders of Senior Note Claims otherwise agree pursuant to a settlement, all holders of Allowed Senior Note Claims are entitled under the Plan to identical treatment in respect of contractual subordination claims under the Senior Subordinated Note Indenture, the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments will made out of the Public Note Distributable Consideration otherwise payable to holders of Allowed Senior Note Claims, up to a maximum of $500,000 (including any comparable payment made under the AJI/KJC Plan). Fees and expenses in excess of such amount may be deducted from amounts otherwise payable to or for the benefit of holders of 7-3/4% SWD Revenue Bonds. Nothing in the Plan will prejudice the rights of the plaintiffs in the 7-3/4% SWD Revenue Bond Dispute to seek recoveries (a) from amounts otherwise to be paid to or for the benefit of holders of 7-3/4% SWD Revenue Bonds under the Plan or the AJI/KJC Plan or (b) from, or in respect of amounts otherwise to be paid to or for the benefit of holders of 7-3/4% SWD Revenue Bonds by, any Other Kaiser Debtor other than AJI or KJC. In due course following its receipt of any such payment, the 7-3/4% SWD Revenue Bond Indenture Trustee will distribute to each holder of 7-3/4% SWD Revenue Bonds its proportionate share of any such payment, as reduced by any fees and expenses so deducted.

     See “Operations During the Chapter 11 Cases — 7-3/4% SWD Revenue Bond Dispute.”

Will my rights against the Other Kaiser Debtors be affected by the Plan?

     Nothing in the Plan, including acceptance or rejection of the Plan by Subclass 3A or Subclass 3B, will be deemed to affect any person’s claim against or interest in any of the debtors in the Kaiser Cases except the Debtors (the “Other Kaiser Debtors”) or any of their respective present or former directors, officers, employees, agents, advisors, attorneys, accountants, underwriters, investment bankers or other representatives, acting in such capacity, or any rights, including contractual subordination rights, that any person may have in respect of any such claim against or interest in any such Other Kaiser Debtor.

What will my tax consequences be if the Plan is consummated?

     For a summary of certain potential U.S. federal income Tax consequences of the Plan, see “Certain Federal Income Tax Consequences of Consummation of the Plan.” The summary contained in this Disclosure Statement does not contain any information with respect to potential state, local or foreign Tax consequences to creditors of the Debtors. For these reasons and others, including because Tax consequences are in many cases uncertain and may vary depending on a creditor’s individual circumstances, the discussion of the Tax consequences of the Plan contained in this Disclosure Statement is not intended in any way to be Tax advice – or otherwise to be a substitute

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for careful Tax planning with a professional. You are urged to consult with your own Tax advisor regarding the U.S. federal, state, local and foreign Tax consequences of the Plan.

What must happen before the Plan can be consummated?

     In order for the Plan to be effective, certain events must occur. The Plan contains conditions to both the confirmation of and the effectiveness of the Plan.

     Confirmation

     The Debtors and Creditors’ Committee have agreed that, before the Bankruptcy Court can confirm the Plan, each of the following must have occurred (or the requirement that it have occurred must have been waived in accordance with the Plan):

•   the Confirmation Order must have been entered on the docket of the Clerk of the Bankruptcy Court in form and substance acceptable to the Debtors and the Creditors’ Committee;

•   all Exhibits to the Plan must be in form and substance satisfactory to the Debtors and the Creditors’ Committee; and

•   the Intercompany Claims Settlement must be effective.

In addition, there are a number of substantial confirmation requirements under the Bankruptcy Code that must be satisfied for the Plan to be confirmed, including either the acceptance of the Plan by the requisite holders of Claims in each of Subclass 3A, Subclass 3B, Subclass 3C and Subclass 3D (i.e., acceptance by holders of at least two-thirds in dollar amount and a majority in number of Claims held by holders actually voting) or, if the Plan is not accepted by each such Subclass of Class 3, the acceptance of the Plan by the requisite holders of Claims in at least one such Subclass and the determination by the Bankruptcy Court that the Plan is “fair and equitable” and “does not discriminate unfairly” as to each nonaccepting Subclass. See “Voting and Confirmation of the Plan — Confirmation.”

     Effectiveness

     In addition, the Debtors and Creditors’ Committee have agreed that the Plan will not be consummated until each of the following has occurred (or the requirement that it occur has been waived in accordance with the Plan):

•   the Confirmation Order must have become a Final Order;

•   the sale of the QAL Interests pursuant to the QAL Purchase Agreement must have been consummated;

•   the Creditors’ Committee and the Debtors must have agreed upon the amount of the reserves contemplated by Section 8.10(a) and Section 8.11(a) of the Plan (see “Overview of the Plan — Sources and Uses of Cash”);

•   the Liquidating Transactions must have been consummated;

•   all funds due and owing to or by the Debtors under the Intercompany Claims Settlement must have been paid in accordance with its terms;

•   the Distribution Trustee must have been appointed and must have accepted such appointment;

•   the Distribution Trust Agreement must have been executed and the Trust Accounts must have been established; and

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•   all other actions, documents, consents and agreements necessary to implement the Plan must have been effected, obtained and/or executed.

When will the Plan be confirmed? When will the Plan be effective?

     Confirmation

     A hearing in the Bankruptcy Court relating to the confirmation of the Plan is currently scheduled for April 13, 2005. This hearing may be continued or adjourned, however, and even if it is held, there is no guaranty that the Bankruptcy Court will find that the requirements of the Bankruptcy Code with respect to confirmation have been met. See “Voting and Confirmation of the Plan — Confirmation Hearing” and “Voting and Confirmation of the Plan — Confirmation.” In addition, the additional conditions to confirmation set forth in the Plan must be satisfied or waived in accordance with the Plan before the Plan can be confirmed. Thus, there is no way to predict with any certainty when, if ever, confirmation will actually occur.

     Effective Date

     Even if the Plan is confirmed on April 13, 2005, there are a number of additional conditions which must be satisfied or waived before the Plan can be consummated. While the Debtors have assumed an Effective Date of April 30, 2005 for purposes of this Disclosure Statement, no assurance can be given as to if or when the Effective Date will actually occur.

What will happen to KAAC and KFC if the Plan is consummated?

     The Debtors will be liquidated if the Plan is consummated. Once the QAL Interests have been sold, the Debtors will no longer have any material ongoing activities or operations. Thus, upon the transfer of the Distribution Trust Assets to the Distribution Trust, the Debtors will be dissolved and their assets will be distributed in accordance with the Plan. See “General Information Concerning the Plan — Means for Implementation of the Plan — Liquidating Transactions.”

What happens if the Plan isn’t confirmed or doesn’t become effective?

     The Debtors expect that all of the conditions to confirmation of the Plan or the Effective Date will be satisfied (or waived in accordance with the Plan). However, there is no guaranty that the Plan will be consummated. Although the Debtors intend to take all acts reasonably necessary to satisfy the conditions to the confirmation of the Plan and the Effective Date that are within the Debtors’ control, if, for any reason, the Plan is not confirmed or the Effective Date does not occur, the Debtors may be forced to convert the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code or propose an alternative plan of liquidation under chapter 11 of the Bankruptcy Code.

OVERVIEW OF THE PLAN

Introduction

     The following is a brief overview of certain material provisions of the Plan. This overview is qualified in its entirety by reference to the provisions of the Plan, which is attached hereto as Exhibit I, and the Distribution Trust Agreement, which is an Exhibit thereto. See “Additional Information.” For a description of certain other significant terms and provisions of the Plan, see “General Information Concerning the Plan” and “Distributions Under the Plan.”

Summary of Classes and Treatment of Claims and Interests

     The table below summarizes: (a) the classification of Claims and Interests; (b) the estimated aggregate amount of Claims in each of Class 1, Class 2 and Subclass 3D; (c) the actual aggregate amount of Allowed Claims in each of Subclass 3A, Subclass 3B and Subclass 3C; (d) the aggregate amount and nature of distributions to holders of Claims or Interests in each Class; and (e) the estimated percentage recovery for each of Subclass 3A,

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Subclass 3B and Subclass 3C. In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims and Priority Tax Claims have not been classified and thus are excluded from the Classes. For a discussion of certain additional matters related to Administrative Claims and Priority Tax Claims, see “ — Additional Information Regarding Assertion and Treatment of Administrative Claims and Priority Tax Claims.” The estimated aggregate amount of Claims set forth in the table below with respect to each of Class 1, Class 2 and Subclass 3D is based on the Debtors’ estimate of the maximum aggregate amounts of such Claims that the Debtors believe will be allowed.

     Each “Estimated Aggregate Claims Amount” shown in the table below is based upon the Debtors’ preliminary review of Claims Filed on or before the January 31, 2003 general Bar Date and the Debtors’ books and records and may be substantially revised following the completion of a further analysis of the Claims Filed. See “Operations During the Chapter 11 Cases — Claims Process and Bar Dates.” In addition, certain Disputed Claims that the Debtors do not believe are allowable ultimately may be allowed by the Bankruptcy Court.

     The “Estimated Percentage Recovery” shown in the table with respect to Subclass 3C is the quotient of the estimated Cash to be distributed to the PBGC, as the holder of Allowed Claims in that Subclass, divided by the aggregate amount of Allowed Claims in such Subclass. The recoveries for holders of Allowed Claims in both Subclass A and Subclass 3B will vary depending on, among other things, whether both Subclass 3A and Subclass 3B accept the Plan and, if either Subclass 3A or Subclass 3B fails to accept the Plan, the determination of the Bankruptcy Court with respect to the relative entitlement of the holders of Senior Note Claims and Senior Subordinated Note Claims to the Public Note Distributable Consideration. See “- Sources and Uses of Cash” below for estimates of the percentage recovery for Subclass 3A and Subclass 3B in four different scenarios. See “Answers to Certain Questions About the Plan and Disclosure Statement - What will I actually receive if the Plan is confirmed and goes effective?” for a discussion of other factors that may affect the recoveries of holders of Allowed Unsecured Claims.

     It is presently anticipated that, pursuant to the Legacy Liability Agreements (as defined below) and the Intercompany Claims Settlement, the holder or holders of the KFC Claim will receive an aggregate of approximately one-third of 25% of the residual value of reorganized KACC after the satisfaction of any and all administrative, priority and secured claims against KACC and after taking into account, among other things, the satisfaction of claims of the PBGC against Kaiser Aluminum & Chemical of Canada Limited and any use of KACC assets to settle asbestos, silica and other tort claims against KACC. See “Operations During the Chapter 11 Cases — Agreements with Labor Regarding Pension and Retiree Medical Benefits” and “- Intercompany Claims Settlement.” The portion of the KFC Claim which KFC will ultimately retain will depend upon the amount of Cash and other property which the master tort trust established in connection with the plan or plans of reorganization or Kaiser Aluminum Corporation (“KAC”) and/or KACC receives pursuant to those plans. Because no plan or plans of reorganization for KAC or KACC have yet been proposed and the residual value of reorganized KACC has not yet been determined, no “Estimated Percentage Recovery” shown in the table below reflects any value for distributions that may ultimately be made to KFC in respect of the Retained Portion of the KFC Claim. See “- KFC Claim Against KACC.”

Description and Amount of Claims
or Interests Against the Debtors			Treatment
	•	Class 1 – Priority Claims: Claims against either of the Debtors entitled to priority in payment pursuant to section 507(a) of the Bankruptcy Code that are not Administrative Claims or Priority Tax Claims.	Unimpaired. On the later of the Effective Date and the date on which a Priority Claims is allowed, each holder of an Allowed Priority Claim will be entitled to receive either (a) Cash from the Priority Claims Trust Account in the amount of such holder’s Allowed Priority Claim without interest or penalty or (b) such other treatment as may be agreed upon in writing by such holder and the Debtors or the Distribution Trustee.
		Estimated Aggregate Claims Amount: $0

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Description and Amount of Claims
or Interests Against the Debtors			Treatment
	•	Class 2 – Secured Claims: Claims against either of the Debtors secured by a Lien on property in which such Debtor’s Estate has an interest or that is subject to setoff under section 533 of the Bankruptcy Code, to the extent of the value of the Claim holder’s interest in such Estate’s interest in such property or to the extent of the amount subject to setoff, as applicable, as determined pursuant to section 506(a) and, if applicable, section 1129(b) of the Bankruptcy Code.	Unimpaired. On the later of the Effective Date and the date on which a Secured Claim is allowed, each holder of an Allowed Secured Claim will be entitled to receive either (a) Cash from the Priority Claims Trust Account in an amount equal to such Allowed Secured Claim, including such interest as is required to be paid pursuant to section 506(b) of the Bankruptcy Code, or (b) the collateral securing such Allowed Secured Claim and Cash from the Priority Claims Trust Account in an amount equal to such interest as is required to be paid pursuant to section 506(b) of the Bankruptcy Code.
		Estimated Aggregate Claims Amount: $0
	•	Subclass 3A – Senior Note Claims: Claims against either of the Debtors under or in respect of either (x) the 9-7/8% Senior Notes and the 9-7/8% Senior Note Indenture or (y) the 10-7/8% Senior Notes and the 10-7/8% Senior Note Indentures.	Impaired; depends on whether the Plan is accepted by both Subclass 3A and Subclass 3B. On the Effective Date, if both Subclass 3A and Subclass 3B vote to accept the Plan, each holder of an Allowed Senior Note Claim will be entitled to receive Cash from the Unsecured Claims Trust Account equal to its Pro Rata Share of the Public Note Distributable Consideration remaining after first giving effect to the following payments on the Effective Date by the Distribution Trustee from the Public Note Distributable Consideration: (a) the payment to be made to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of the holders of the 7-3/4% SWD Revenue Bonds in accordance with the Plan (i.e., the 7-3/4% SWD Revenue Bond Payment) and the payment of all fees and expenses payable to the plaintiffs in the 7-3/4% SWD Revenue Bond Dispute in accordance with the Plan (i.e., the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments); (b) the payment of all fees and expenses payable to the 9-7/8% Senior Note Indenture Trustee, the 10-7/8% Senior Note Indenture Trustee and the counsel for the Ad Hoc Group in accordance with the Plan (i.e., the Senior Notes Fee Payments); and (c) the payment of $8.0 million to be made to the Senior Subordinated Note Indenture Trustee for the benefit of the holders of Senior Subordinated Note Claims. If either Subclass 3A or Subclass 3B fails to accept the Plan: (a) the holders of Senior Note Claims will not become entitled to receive the distribution described in the immediately preceding paragraph; and (b) the Bankruptcy Court will enter an order (which will be the Confirmation Order) pursuant to which the Bankruptcy Court will determine the respective entitlement of the holders of Allowed 9-7/8% Senior Note Claims, Allowed 10-7/8% Senior Note Claims, Allowed Senior Subordinated Note Claims and, if applicable under Section 2.5(b) of the Plan, 7-3/4% SWD Revenue Bonds to the Public Note Distributable Consideration. The distributions ultimately made to a holder of an Allowed Senior Note Claim as described in this paragraph will be reduced by such holder’s proportional share of the Senior Notes Fee Payments and, if the Bankruptcy Court determines that holders of Allowed Senior Subordinated Note Claims are not entitled to any portion of the Public Note Distributable Consideration, any 7-3/4% SWD Revenue Bond Payment (or a reservation in lieu thereof in accordance with the Plan) and the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments.
		Aggregate Allowed Claims Amount: $414,121,172.73	Estimated Percentage Recovery: Varies (see "- Sources and Uses of Cash”)

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Description and Amount of Claims
or Interests Against the Debtors			Treatment
	•	Subclass 3B – Senior Subordinated Note Claims: Claims against either of the Debtors under or in respect of the Senior Subordinated Notes and the Senior Subordinated Note Indenture.	Impaired; depends on whether the Plan is accepted by both Subclass 3A and Subclass 3B. On the Effective Date, if both Subclass 3A and Subclass 3B vote to accept the Plan, each holder of an Allowed Senior Subordinated Note Claim will be entitled to receive its Pro Rata Share of $8.0 million in Cash to be paid to the Senior Subordinated Note Indenture Trustee, provided that any and all fees or expenses payable to the Senior Subordinated Note Indenture Trustee pursuant to the Senior Subordinated Note Indenture will, in all events, be payable solely from such $8.0 million. If either Subclass 3A or Subclass 3B fails to accept the Plan: (a) the holders of Senior Subordinated Note Claims will not become entitled to receive the distribution described in the immediately preceding paragraph; and (b) the Bankruptcy Court will enter an order (which will be the Confirmation Order) pursuant to which the Bankruptcy Court will determine the respective entitlement of the holders of Allowed 9-7/8% Senior Note Claims, Allowed 10-7/8% Senior Note Claims, Allowed Senior Subordinated Note Claims and, if applicable under Section 2.5(b) of the Plan, 7-3/4% SWD Revenue Bonds to the Public Note Distributable Consideration. Any distributions ultimately made to a holder of an Allowed Senior Subordinated Note Claim as described in the immediately preceding sentence may be reduced by such holder’s proportional share of any and all fees and expenses payable to the Senior Subordinated Note Indenture Trustee pursuant to the Senior Subordinated Note Indenture, which will, subject to such Trustee’s right to seek payment by the Debtors of such fees and expenses pursuant to section 503(b)(5) of the Bankruptcy Code, be payable solely from such distributions.
		Aggregate Allowed Claims Amount: $427,200,000.00	Estimated Percentage Recovery: Varies (see "- Sources and Uses of Cash”)
	•	Subclass 3C – PBGC Claims: Claims (other than Administrative Claims) of the PBGC against either of the Debtors arising from, or relating to, the pension plans which were or are maintained by any of the Other Kaiser Debtors in the Kaiser Cases and guaranteed by the PBGC.	Impaired. On the Effective Date, the PBGC as holder of the PBGC Claims will be entitled to receive the PBGC Percentage of the Cash and, subject to Section 2.10 of the Plan, other property in the Unsecured Claims Trust Account.
		Allowed Claim Amount: $616,000,000.00	Estimated Percentage Recovery: 17.3% to 18.6%
	•	Subclass 3D – Other Unsecured Claims: Claims against either of the Debtors that are not Administrative Claims, Priority Claims, Priority Tax Claims, Secured Claims, Intercompany Claims, Senior Note Claims, Senior Subordinated Note Claims or the PBGC Claims.	Impaired. On the Effective Date, each holder of an Allowed Other Unsecured Claim will be entitled to receive a Pro Rata Share of the Other Unsecured Claims Percentage of the Cash and, subject to Section 2.10 of the Plan, other property in the Unsecured Claims Trust Account.
		Estimated Aggregate Claims Amount: $0
	•	Class 4 – Intercompany Claims: Claims held by any Other Kaiser Debtor against either of the Debtors.	Impaired. On the Effective Date, each holder of an Intercompany Claim will be entitled to receive the treatment set forth in the Intercompany Claims Settlement.
	•	Class 5 – Interests in the Debtors: Stock ownership interests in either of the Debtors, or rights to acquire the same, and any Claim arising therefrom.	Impaired. No property will be distributed to, or retained by, KACC as the holder of the Interests in KAAC on account of such Interests or KAAC as the holder of the Interests in KFC on account of such Interests, and such Interests will be canceled on the Effective Date.

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Guaranty Subordination Dispute

     Litigation relating to the relative priority of holders of Senior Note Claims and holders of Senior Subordinated Note Claims to payments by certain subsidiaries of KACC that guaranteed the Senior Notes and the Senior Subordinated Notes, including the Debtors (i.e., the Guaranty Subordination Dispute), is currently pending before the Bankruptcy Court. See “Operations During the Chapter 11 Cases — Guaranty Subordination Dispute.” The Plan contains the following proposed settlement of the Guaranty Subordination Dispute: If both Subclass 3A and Subclass 3B vote to accept the Plan, a holder of an Allowed Senior Subordinated Note Claim will receive its Pro Rata Share of $8.0 million (less any fees or expenses payable to the Senior Subordinated Note Trustee pursuant to the Senior Subordinated Note Indenture) and a holder of an Allowed Senior Note Claim will receive its Pro Rata Share of the Public Note Distributable Consideration remaining after giving effect to the payment of the $8.0 million to be made to the holders of Senior Subordinated Note Claims, the 7-3/4% SWD Revenue Bond Payment, the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payment and the Senior Notes Fee Payments. If either Subclass 3A or Subclass 3B fails to accept the Plan, the Bankruptcy Court will resolve the Guaranty Subordination Dispute with respect to the Debtors and determine the distributions from the Public Note Distributable Consideration to be made to the holders of Claims in Subclass 3A and any distributions from the Public Note Distributable Consideration to be made to holders of Claims in Subclass 3B. In such event, the distributions ultimately made to a holder of an Allowed Senior Note Claim will be reduced by such holder’s proportional share of the Senior Notes Fee Payments and, if the Bankruptcy Court determines that holders of Allowed Senior Subordinated Note Claims are not entitled to any portion of the Subclass 3A Distributable Consideration, the 7-3/4% SWD Revenue Bond Payment (or reservation in lieu thereof), if any, and any 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payment. Similarly, any distributions ultimately made to a holder of an Allowed Senior Subordinated Note Claim may be reduced by such holder’s proportional share of any and all fees and expenses payable to the Senior Subordinated Note Trustee pursuant to the Senior Subordinated Note Indenture.

     Similarly, pursuant to the AJI/KJC Plan, if holders of both the Senior Note Claims and the Senior Subordinated Note Claims vote to accept the AJI/KJC Plan, then an additional $8.0 million will be paid to the Senior Subordinated Note Indenture Trustee for the benefit of holders of Senior Subordinated Note Claims (resulting in aggregate consideration of $16.0 million if the Plan is also accepted by the holders of the Senior Note Claims and the Senior Subordinated Note Claims), with such amount to be paid from consideration that would otherwise be distributed to holders of Allowed Senior Note Claims under the AJI/KJC Plan, and the holders of Senior Note Claims would receive a specified percentage of the Cash available for distribution to the holders of unsecured claims (less certain payments or reservations of payment therefrom). If the holders of the Senior Note Claims or the Senior Subordinated Note Claims fail to accept the AJI/KJC Plan, the Bankruptcy Court would resolve the Guaranty Subordination Dispute with respect to AJI and KJC and determine the distributions to be made to the holders of Senior Note Claims and any distributions to be made to holders of Senior Subordinated Note Claims under the AJI/KJC Plan.

7-3/4% SWD Revenue Bond Dispute

     If Subclass 3A votes to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code and, unless the holders of Senior Note Claims otherwise agree pursuant to a settlement, all holders of Allowed Senior Note Claims are entitled under the Plan to identical treatment in respect of contractual subordination claims under the Senior Subordinated Note Indenture, on the Effective Date an amount equal to the Settlement Percentage of the Cash in the Unsecured Claims Trust Account that would otherwise have been distributed in respect of the Senior Subordinated Note Claims which, after giving effect to the contractual subordination provisions of the Senior Subordinated Note Indenture and pursuant to Sections 2.4(c)(i) and 2.4(c)(ii) of the Plan (but prior to giving effect to any 7-3/4% SWD Revenue Bond Payment), is to be distributed to holders of Senior Note Claims will, in full and complete satisfaction of the claims of holders of 7-3/4% SWD Revenue Bonds asserted in the 7-3/4% SWD Revenue Bond Dispute in respect of the Debtors, be paid to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of holders of 7-3/4% SWD Revenue Bonds pursuant to Section 2.5 of the Plan (i.e., the 7-3/4% SWD Revenue Bond Payment). Notwithstanding the foregoing, in no event will the amount so paid, when aggregated with any amount payable under any comparable provision of the AJI/KJC Plan, exceed $8.0 million. If the Debtors do not File a separate motion, the Plan will serve as a motion pursuant to Bankruptcy Rule 9019 seeking entry of an order approving the settlement described above. Unless an objection to such settlement is made in writing by any creditor or claimant affected thereby, Filed with the Bankruptcy Court and served on the parties identified in Section

18

12.4 of the Plan on or before April 5, 2005, such order (which will be the Confirmation Order) may be entered by the Bankruptcy Court. In the event any such objections are timely Filed, a hearing with respect thereto will occur at the Confirmation Hearing.

     If Subclass 3A fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the rights, if any, of the holders of 7-3/4% SWD Revenue Bonds to payments from the Public Note Distributable Consideration will be as determined in an order of the Bankruptcy Court (which may be the Confirmation Order) in connection with the determinations contemplated by Sections 2.4(c)(i)(B) and 2.4(c)(ii)(B) of the Plan; provided that if the determination with respect to the rights of the holders of 7-3/4% SWD Revenue Bonds to such payment has not been made by the Bankruptcy Court prior to the Effective Date, then, in order to ensure the funding of such payment, on the Effective Date the Distribution Trustee will reserve from the Public Note Distributable Consideration any amount that may be ordered by the Bankruptcy Court to be so reserved pending such determination.

See “Operations During the Chapter 11 Cases — 7-3/4% SWD Revenue Bond Dispute.”

Sources and Uses of Cash

     Sources of Cash

     The Cash available in the Debtors’ Estates to fund the Plan will come from: (a) the net Cash proceeds to be received by the Debtors in connection with the sale of the QAL Interests pursuant to the QAL Purchase Agreement (after taking into account the costs and expenses of the sale payable by KAAC in accordance with the Intercompany Claims Settlement), together with any interest thereon and earnings from the investment thereof, (the “QAL Proceeds”); and (b) the Recovery Action Proceeds. See “Operations During the Chapter 11 Cases — The Sale of the QAL Interests and Liquidation of KAAC” and “Operations During the Chapter 11 Cases — Intercompany Claims Settlement.”

     The Debtors currently estimate that, as of the Effective Date, the QAL Proceeds will be approximately $396.0 million. The Debtors are not aware of any Recovery Actions (and the Creditors’ Committee has independently determined that there are no viable preference actions concerning payments made by the Debtors) and, accordingly, it has been assumed that the Recovery Action Proceeds will be zero.

     Uses of Cash

     As more fully described below, the Debtors’ Cash as of the Effective Date (which, for this purpose, is assumed to occur on April 30, 2005) will be used to (a) fund the Distribution Trust Expenses Account to enable the Distribution Trustee to pay Distribution Trust Expenses; (b) fund the Priority Claims Trust Account to enable the Distribution Trustee to pay the Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Priority Claims and Allowed Secured Claims in accordance with the Plan; (c) make any Intercompany Settlement Payments; and (d) then fund the Unsecured Claims Trust Account with any remaining Cash. The Debtors and the Creditors’ Committee currently anticipate that available Cash will be applied initially as follows (in millions):

Estimated Available Cash	$396.0
Estimated Funding of Distribution Trust Expenses Account	($1.0)
Estimated Funding of Priority Claims Trust Account	($21.0) - ($25.0)	*
Estimated Net Intercompany Settlement Payments	($26.5) - ($37.5)	**
Estimated Cash Remaining to Initially Fund Unsecured Claims Trust Account	$332.5 - $347.5

* Includes reserves of $4.0 million to $7.0 million for Professional Fee Claims, reserves of $10.0 million for potential indemnity claims under the QAL Purchase Agreement, reserves of $6.0 million for payment of alternative minimum Tax and reserves of $1.0 million to $2.0 million

19

for payment of a portion of service fees of financial advisors, but does not include any reserves for payments to the Australian Tax Office in respect of the sale of the QAL Interests or the payment of the $14.0 million Allowed Administrative Claims of the PBGC. Currently, the Debtors are not aware of any facts which would give rise to a claim for indemnification under the QAL Purchase Agreement and believe that the reserves in respect of such potential indemnity claims will ultimately be transferred into the Unsecured Claims Trust Account and be available for distribution to holders of Allowed Unsecured Claims. See “Operations During the Chapter 11 Cases — The Sale of QAL Interests and Liquidation of KAAC.” The Debtors do not believe any payments to the Australian Tax Office should be required; however, it is possible that the Australian Tax Office could take a different position. If, prior to the Effective Date, it has not been definitively determined that no such payments will be required, the funding of the Priority Claims Trust Account will include reserves for potential payments to the Australian Tax Office, and such reserves could be material in amount. See “Operations During the Chapter 11 Cases — Certain Australian Tax Matters.” It is anticipated that, as contemplated by the Intercompany Claims Settlement, KACC will pay to the PBGC the $14.0 million aggregate amount of the PBGC’s Allowed Administrative Claim prior to the Effective Date and, accordingly, such Claim will not be required to be paid from the Priority Claims Trust Account. See “- Additional Information Regarding Assertion and Treatment of Administrative Claims and Priority Tax Claims — Administrative Claims — PBGC Administrative Claim” and “Operations During the Chapter 11 Cases — PBGC Claims.”

**

Reflects an aggregate of $47.5 million in Intercompany Settlement Payments reduced by estimated net credits of approximately $10.0 million to $21.0 million in the aggregate as provided in the Intercompany Claims Settlement.

     Prior to the Effective Date, the Debtors and Creditors’ Committee will agree on the actual amount of the Debtors’ Cash to be used for the initial funding of the Distribution Trust Expenses Account in order to ensure the payment of Distribution Trust Expenses. The actual amount of Distribution Trust Expenses to be incurred prior to termination of the Distribution Trust may vary materially from the amount of such initial funding. If the Distribution Trustee at any time determines that the Cash balance of the Distribution Trust Expenses Account is insufficient to make all payments payable therefrom in accordance with the terms of the Plan and the Distribution Trust Agreement, the Distribution Trustee may transfer additional Cash from the Unsecured Claims Trust Account (to the extent Cash remains available therein) to the Distribution Expenses Account. If, on the other hand, the Distribution Trustee determines that the Cash balance of the Distribution Trust Expenses Account is in excess of the amount that will be sufficient to make all payments payable therefrom in accordance with the terms of the Plan and the Distribution Trust Agreement, the Distribution Trustee, with the consent of the Steering Committee, may transfer such excess Cash to the Unsecured Claims Trust Account.

     Prior to the Effective Date, the Debtors and Creditors’ Committee will agree on the actual amount of the Debtors’ Cash to be used for the initial funding of the Priority Claims Trust Account in order to ensure the payment of Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Priority Claims and Allowed Secured Claims. Under the Intercompany Claims Settlement, the Debtors are responsible for, among other things, (a) the payment of third-party costs that are incurred after June 30, 2004 solely in connection with the administration of the Chapter 11 Cases, (b) the payment of all foreign Taxes, transfer Taxes and recording fees payable by KAAC as a result of the sale of the QAL Interests and all other foreign Taxes payable by the Debtors, (c) the payment of any amount determined to be payable to the purchaser of the QAL Interests in respect of any indemnity or other claims of such purchaser under the QAL Purchase Agreement, (d) the payment of any alternative minimum Tax due as a result of the sale by AJI and KJC of their interests in Alumina Partners of Jamaica (“Alpart”) and the sale of the QAL Interests, and (e) a portion of the success fees of the financial advisors retained by KACC and its affiliates and by the Creditors’ Committee. Accordingly, the initial funding of the Priority Claims Trust Account will include reserves for such items as determined by the Debtors and the Creditors’ Committee. See “Operations During the Chapter 11 Cases — The Sale of the QAL Interests and Liquidation of KAAC,” “Operations During the Chapter 11 Cases — Intercompany Claims Settlement,” and “Operations During the Chapter 11 Cases — Certain Australian Tax Matters.” The actual amounts of Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Priority Claims and Allowed Secured Claims could vary materially from the amount of the initial funding of the Priority Claims Trust Account. If at any time the Distribution Trustee determines that the Cash balance of the Priority

20

Claims Trust Account is insufficient to make all payments payable therefrom in accordance with the terms of the Plan and the Distribution Trust Agreement, the Distribution Trustee will transfer an amount equal to the shortfall from the Unsecured Claims Trust Account (to the extent Cash remains available therein) to the Priority Claims Trust Account. If, on the other hand, the Distribution Trustee determines that the Cash balance of the Priority Claims Trust Account is in excess of the amount that will be sufficient to make all payments payable therefrom in accordance with the terms of the Plan and the Distribution Trust Agreement, the Distribution Trustee, with the consent of the Steering Committee, may transfer such excess Cash to the Unsecured Claims Trust Account.

     The Debtors and the Creditors’ Committee currently estimate that, assuming the Effective Date occurs on or prior to June 30, 2005, the Intercompany Settlement Payments will be $47.5 million and that approximately $10.0 million to $21.0 million will be credited against the Intercompany Settlement Payments. Accordingly, it is projected that net Intercompany Settlement Payments will be approximately $26.5 million to $37.5 million.

     Assuming (a) aggregate actual payments from the Distribution Trust Expenses Account are $1.0 million (the amount with which such account is estimated to be initially funded), (b) aggregate actual payments from the Priority Claims Trust Expenses Account are between $11.0 million (which assumes that the $10.0 million to be initially reserved for payments in respect of potential claims for indemnification under the QAL Purchase Agreement is ultimately released in its entirety for distribution to holders of Allowed Unsecured Claims) and $25.0 million (which assumes that the $10.0 million to be initially reserved for payments in respect of potential claims for indemnification under the QAL Purchase Agreement is used in its entirety to make such payments and, accordingly, that no portion thereof is ever released for distribution to holders of Allowed Unsecured Claims), (c) aggregate actual Intercompany Settlement Payments are between $26.5 million and $37.5 million (as estimated above), the Debtors and the Creditors’ Committee currently estimate that the Unsecured Claims Trust Account ultimately would be funded with an aggregate of $332.5 million to $357.5 million. No assurance can be given (a) that the actual amount of Cash to be used for funding the Distribution Trust Expenses Account or the Priority Claims Trust Account or the actual amount of Intercompany Settlement Payments and related credits will not vary materially from the estimates thereof indicated above, (b) that the initial funding of the Distribution Trust Expenses Account and the Priority Claims Trust Account will be made in the amount of the estimates indicated above, or (c) that, regardless of the amount of initial funding of such Trust Accounts, the actual payments payable therefrom will not vary materially from the amount of such initial funding, increasing Cash ultimately available for distribution from the Unsecured Claims Trust Account to the extent actual payments are less than such initial funding and decreasing Cash ultimately available for distribution from the Unsecured Claims Trust Account to the extent actual payments are greater than such initial funding. In particular, no assurance can be given (a) that actual funding of the Priority Claims Trust Account will not materially exceed the estimates indicated above after taking into account any reserves that may ultimately be required in connection with payments potentially due to the Australian Tax Office in respect of the sale of the QAL Interests, which reserves could be material in amount, (b) as to whether any payments will ultimately be required to be made from the Priority Claims Trust Account to the Australian Tax Office in respect of the sale of the QAL Interests, or (c) if such payments in respect of the sale of the QAL Interests are ultimately required, as to the amount thereof. Nor can any assurance be given (a) as to whether any of the $10.0 million reserved for payments in respect of potential claims for indemnification under the QAL Purchase Agreement will be released for distribution to holders of Allowed Unsecured Claims or (b) if any of such reserve is ultimately released for distribution to holders of Allowed Unsecured Claims, as to the amount so released. See “Operations During the Chapter 11 Cases — Certain Australian Tax Matters.”

     Based on the various estimates indicated above and assuming there are no Allowed Unsecured Claims, the aggregate Cash ultimately to be distributed to the PBGC, as the holder of the PBGC Claims, would be $106.4 million to $114.4 million, and $226.1 million to $243.1 million would remain available for distribution to holders of Senior Note Claims and Senior Subordinated Note Claims and, if applicable, holders of 7-3/4% SWD Revenue Bonds. The aggregate Cash ultimately to be distributed to holders of Senior Note Claims and Senior Subordinated Note Claims depends on, among other things, whether Subclass 3A and Subclass 3B vote to accept the Plan and, if either Subclass 3A or Subclass 3B fails to accept the Plan, the outcome of the Guaranty Subordination Dispute. See “Operations During the Chapter 11 Cases — Guaranty Subordination Dispute.” The chart below indicates, based on the various estimates indicated above and assuming there are no Allowed Other Unsecured Claims, the aggregate Cash ultimately to be distributed to holders of Senior Note Claims and Senior Subordinated Note Claims in each of the following four scenarios: (a) Subclass 3A and Subclass 3B vote to accept the Plan (“Scenario A”); (b) Subclass 3A or Subclass 3B fails to accept the Plan and the Bankruptcy Court rules in favor of

21

the 9-7/8% Senior Note Indenture Trustee, the 10-7/8% Senior Note Indenture Trustee and the Ad Hoc Group (collectively, the “Senior Note Parties”) in the Guaranty Subordination Dispute such that the Senior Subordinated Note Claims are subordinated to the Senior Note Claims (“Scenario B”); (c) Subclass 3A or Subclass 3B fails to accept the Plan and the Bankruptcy Court rules in favor of the Senior Subordinated Note Indenture Trustee in the Guaranty Subordination Dispute such that the Senior Subordinated Note Claims and the Senior Note Claims are treated on a pari passu basis (“Scenario C”); and (d) Subclass 3A or Subclass 3B fails to accept the Plan and the Bankruptcy Court rules in favor of Liverpool Limited Partnership, a holder of 9-7/8% Senior Notes and Senior Subordinated Notes (“Liverpool”), in the Guaranty Subordination Dispute such that the Senior Subordinated Note Claims are subordinated, but only to a portion of the 9-7/8% Senior Note Claims and not to any of the 10-7/8% Senior Note Claims (“Scenario D”) (in each case, in millions).

	Estimated Aggregate Cash Distribution
	Scenario A*		Scenario B*		Scenario C		Scenario D**
10-7/8% Senior Note Claims	$	120.6-$130.1	$	124.9-$134.5	$	62.6-$67.3	$	62.6-$67.3
9-7/8% Senior Note Claims	$	93.8-$101.2	$	97.2-$104.6	$	48.7-$52.3	$	126.2-$131.3
Senior Subordinated Note Claims	$	8.0		—	$	114.8-$123.4	$	37.3-$44.7

*

Assumes that Subclass 3A accepts the Plan and, unless the holders of Senior Note Claims otherwise agree pursuant to a settlement, all holders of Allowed Senior Note Claims are entitled under the Plan to identical treatment in respect of contractual subordination claims under the Senior Subordinated Note Indenture, and the recoveries of holders of Senior Note Claims reflect reductions of $3.7 million in Scenario A and $4.0 million in Scenario B for payment of the 7-3/4% SWD Revenue Bond Payment, but do not reflect the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments, which could be up to $0.5 million. See “Operations During the Chapter 11 Cases - 7-3/4% SWD Revenue Bond Dispute.”

**

Calculation of the contractual subordination payments includes claims for postpetition interest and an allocation of such payments proportionally between KAAC, on the one hand, and AJI and KJC, on the other hand, based on the estimated value distributable in respect of Public Note Claims under each of the Plan and the AJI/KJC Plan.

Although the Debtors and the Creditors’ Committee believe that either no Other Unsecured Claims will ultimately be allowed or any Allowed Other Unsecured Claims will be de minimis, in the event Other Unsecured Claims that have been asserted are not disallowed prior to the Effective Date, Disputed Claims Reserves would have to be established in respect of Subclass 3D, thereby further reducing the initial Cash distributions to be made to holders of Senior Note Claims, to holders of Senior Subordinated Note Claims in certain circumstances and to the PBGC. See “General Information Concerning the Plan — Means for Implementation of the Plan — Trust Accounts.”

     The chart below indicates, based on the estimated Cash distributions indicated above, the estimated percentage recovery by holders of Senior Note Claims and Senior Subordinated Note Claims in each of Scenario A, Scenario B, Scenario C and Scenario D (computed as the quotient of the estimated Cash to be distributed to all holders of the applicable Claims divided by the aggregate amounts of such Claims allowed pursuant to Section 2.7 of the Plan).

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	Estimated Aggregate Cash Distribution
	Scenario A*			Scenario B*			Scenario C			Scenario D**
10-7/8% Senior Note Claims		51.8%-55.9	%		53.6%-57.7	%		26.9%-28.9	%		26.9%-28.9	%
9-7/8% Senior Note Claims		51.8%-55.9	%		53.6%-57.7	%		26.9%-28.9	%		69.6%-72.4	%
Senior Subordinated Note Claims		1.9	%		—			26.9%-28.9	%		8.7%-10.5	%

*

Assumes that Subclass 3A accepts the Plan and, unless the holders of Senior Note Claims otherwise agree pursuant to a settlement, all holders of Allowed Senior Note Claims are entitled under the Plan to identical treatment in respect of contractual subordination claims under the Senior Subordinated Note Indenture, and the recoveries of holders of Senior Note Claims reflect reductions of $3.7 million in Scenario A and $4.0 million in Scenario B for payment of the 7-3/4% SWD Revenue Bond Payment, but do not reflect the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments, which could be up to $0.5 million. See “Operations During the Chapter 11 Cases - 7-3/4% SWD Revenue Bond Dispute.”

**

Calculation of the contractual subordination payments includes claims for postpetition interest and an allocation of such payments proportionally between KAAC, on the one hand, and AJI and KJC, on the other hand, based on the estimated value distributable in respect of Public Note Claims under each of the Plan and the AJI/KJC Plan.

KFC Claim Against KACC

     The KFC Claim is a general unsecured claim held by KFC against KACC in the amount of $1.106 billion. Under the Intercompany Claims Settlement, the KFC Claim will, subject to certain rights of the United States government to object, be allowed in such amount and will receive the same treatment as allowed general unsecured claims under any plan of reorganization of KACC. It is presently anticipated that, pursuant to the Legacy Liability Agreements and the Intercompany Claims Settlement, the holder or holders of the KFC Claim will receive an aggregate of approximately one-third of 25% of the residual value of reorganized KACC after the satisfaction of any and all administrative, priority and secured claims against KACC and after taking into account, among other things, the satisfaction of claims of the PBGC against Kaiser Aluminum & Chemical of Canada Limited any use of KACC assets to settle asbestos, silica and other tort claims against KACC. See “Operations During the Chapter 11 Cases — Agreements with Labor Regarding Pension and Retiree Medical Benefits” and “- Intercompany Claims Settlement.” Because no plan of reorganization for KACC has yet been proposed and the residual value of reorganized KACC has not yet been determined, no assurance can be given as to whether or when any distribution will be made in respect of the KFC Claim or, if a distribution is made, as to the value thereof.

     Seventy-five percent of the KFC Claim will be assigned by KFC to a master tort trust established in connection with the plan or plans of reorganization for KAC and KACC on the effective date of such plan or plans if such plan or plans provide that such master tort trust or trusts will receive no more than the following:

• a Cash distribution of $13.0 million or less; and

• the stock of KAE Trading, Inc. (an Other Kaiser Debtor, the sole asset of which will be, as of the effective date of such plan or plans, certain real property located in Louisiana and rights under a related lease or other property having a value not greater than $1.0 million) and no other equity interests.

If a plan or plans of reorganization for KAC and KACC which provide that such master tort trust or trusts will receive more than the Cash and other property listed above are confirmed and become effective, KFC will be entitled to retain the entire KFC Claim, and, in such circumstance, the United States, on behalf of certain agencies thereof, will be permitted to object to the allowance of the KFC Claim within 30 days after the effective date of such plan or plans. While no plan or plans of reorganization for KAC or KACC have yet been proposed, the Debtors

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believe that such master tort trust or trusts will receive no more than the Cash and other property listed above and, as a consequence, KFC will be entitled to retain only 25% of the KFC Claim and the United States will not be permitted to object to the allowance thereof.

     Under the Plan, no distribution in respect of the Retained Portion of the KFC Claim will be made, and the Retained Portion of the KFC Claim will be held in the Unsecured Claims Trust Account, until receipt by the Distribution Trustee of distributions in respect thereof from KACC pursuant to a confirmed plan of reorganization of KACC or otherwise, and then in-kind distributions consisting of the property received by the Distribution Trustee from KACC in respect of the Retained Portion of the KFC Claim will be made to holders of Allowed Claims in Subclass 3A, Subclass 3C and Subclass 3D in accordance with the terms of the Plan.

Additional Information Regarding Assertion and Treatment of Administrative Claims and Priority Tax Claims

     Administrative Claims

Administrative Claims in General

     Except as otherwise provided in the Plan or unless otherwise agreed by the holder of an Administrative Claim and the applicable Debtor or the Distribution Trustee, each holder of an Allowed Administrative Claim will receive, in full satisfaction of its Administrative Claim, Cash from the Priority Claims Trust Account in an amount equal to the allowed amount of such Administrative Claim either (a) on or promptly after the Effective Date or (b) if the Administrative Claim is not allowed as of the Effective Date, on or promptly after the date that is 30 days after the date on which (i) an order allowing such Administrative Claim becomes a Final Order or (ii) a Stipulation of Amount and Nature of Claim is executed by the Distribution Trustee and the holder of the Administrative Claim.

     Administrative Claims include Claims for costs and expenses of administration allowed under sections 503(b), 507(b) or 1114(e)(2) of the Bankruptcy Code, including: (a) the actual and necessary costs and expenses incurred after the Petition Date in preserving the respective Estates and operating the business of each of the Debtors; (b) Professional Fee Claims; and (c) US Trustee Fees. Except as provided in the Intercompany Claims Settlement, no Intercompany Claim will constitute an Administrative Claim.

US Trustee Fees

     On or before the Effective Date, Administrative Claims for fees payable pursuant to 28 U.S.C. § 1930, as determined by the Bankruptcy Court at the Confirmation Hearing, will be paid by the applicable Debtor or the Distribution Trustee in Cash equal to the amount of such Administrative Claims. All fees payable pursuant to 28 U.S.C. § 1930 will be paid by the Distribution Trustee in accordance with the Plan from the Priority Claims Trust Account until the closing of the Chapter 11 Cases pursuant to section 350(a) of the Bankruptcy Code.

Bar Dates for Administrative Claims

     As provided in the Administrative Claim Bar Date Order, any holder of an Administrative Claim against a Debtor that was required to File and serve a request for payment of such Administrative Claim and that does not File and serve such a request in accordance with the Administrative Claim Bar Date Order by the Administrative Claim Bar Date, will be forever barred from asserting such Administrative Claim against the Debtors, the Distribution Trustee or the property of any of them, or the Trust Accounts, and such Administrative Claim will be deemed waived and released as of the Effective Date. Objections to an Administrative Claim must be Filed by the Distribution Trustee and served on the requesting party by the later of (a) 45 days after the Effective Date and (b) 60 days after the Filing of the request for payment of an Administrative Claim.

     Except as otherwise set forth in the Plan or in the Intercompany Claims Settlement, professionals or other entities asserting a Professional Fee Claim for services rendered solely with respect to the Debtors before the Effective Date must File and serve on the Debtors and the Distribution Trustee and such other entities who are designated by the Bankruptcy Rules, the Confirmation Order or other order of the Bankruptcy Court an application

24

for final allowance of such Fee Claim no later than 60 days after the Effective Date. Objections to any Professional Fee Claim must be Filed and served on the Distribution Trustee and the requesting party by the later of (a) 90 days after the Effective Date and (b) 30 days after the Filing of the applicable request for payment of the Professional Fee Claim. To the extent necessary, the Confirmation Order will amend and supersede any previously entered order of the Bankruptcy Court regarding the payment of Professional Fee Claims (other than the Intercompany Claim Settlement Order) solely with respect to the Debtors.

     To the extent that any professional has provided services in the Kaiser Cases, the Bar Date for Professional Fee Claims in Section 2.2 of the Plan relates only to such professional’s fees for services and reimbursement of expenses reasonably allocable by such professional solely to the Debtors and not otherwise treated pursuant to the Intercompany Claims Settlement Order; Claims relating to such professional’s fees for services and reimbursement of expenses to the Other Kaiser Debtors may be sought against the estates of such Other Kaiser Debtors. The failure of a professional to allocate any particular charges to the Debtors will not foreclose, waive or affect in any way the professional’s right to seek allowance and payment of such charges from the Other Kaiser Debtors.

QAL Purchase Agreement

     From and after the Effective Date, any amounts payable by KAAC under the QAL Purchase Agreement, including any amounts that become payable in respect of indemnification claims, will be paid in full in Cash from the Priority Claims Trust Account in accordance with the applicable provisions of the QAL Purchase Agreement. The Distribution Trust will have no claim against KACC, for contribution or otherwise, as a result of any such payment. “Operations During the Chapter 11 Cases — The Sale of the QAL Interests and Liquidation of KAAC.”

Intercompany Claims Settlement Payments

     From and after the Effective Date, certain obligations, including obligations relating to success fees of financial advisors retained by the Debtors and the Creditors’ Committee, alternative minimum Tax due as a result of the sale of the QAL Interests and AJI and KJC’s interests in Alpart, foreign Taxes, transfer Taxes and recording fees payable by KAAC as a result of the sale of the QAL Interests and third-party costs incurred after June 30, 2004 solely in connection with the Chapter 11 Cases and the chapter 11 cases of AJI and KJC, will be paid in full in Cash from the Priority Claims Trust Account in accordance with the applicable provisions of the Intercompany Claims Settlement. See “Operations During the Chapter 11 Cases — Intercompany Claims Settlement.”

PBGC Administrative Claim

     Pursuant to paragraph 10 of the PBGC Settlement Agreement, the PBGC will have an Allowed Administrative Claim against KAAC and KFC and, on the Effective Date, if neither KACC nor any of the Other Kaiser Debtors has paid to the PBGC $14.0 million in full as required by Section 7.10 of the Intercompany Claims Settlement, then the PBGC will receive, in full satisfaction of such Allowed Administrative Claim, Cash from the Priority Claims Trust Account in the amount of $14.0 million less any portion of such amount that has been previously paid to the PBGC by KACC or any of the Other Kaiser Debtors. It is anticipated that KACC will pay to the PBGC the $14.0 million aggregate amount of such Allowed Administrative Claims prior to the Effective Date. See “Operations During the Chapter 11 Cases — PBGC Claims.”

     Priority Tax Claims

     Pursuant to section 1129(a)(9)(C) of the Bankruptcy Code, unless otherwise agreed by the holder of a Priority Tax Claim and the applicable Debtor or the Distribution Trustee, each holder of an Allowed Priority Tax Claim will receive, in full satisfaction of its Priority Tax Claim, the full amount thereof in Cash, without postpetition interest or penalty, from the Priority Claims Trust Account as soon as practicable after the later of (a) the Effective Date and (b) the date on which the Priority Tax Claim becomes an Allowed Claim. Notwithstanding the foregoing, the holder of an Allowed Priority Tax Claim will not be entitled to receive any payment on account of any penalty arising with respect to or in connection with the Allowed Priority Tax Claim. Any such Claim or demand for any such penalty (a) will be subject to treatment in Subclass 3D and (b) the holder of an Allowed Priority Tax Claim will

25

not be entitled to assess or attempt to collect such penalty from the Debtors, the Distribution Trustee, their properties or the Trust Accounts (other than as the holder of a Subclass 3D Claim).

     Reserves for Payment of Certain Potential Administrative Claims and Priority Tax Claims

     As part of the initial funding of the Priority Claims Trust Accounts, the Debtors will include reserves for payments in respect of certain potential Administrative Claims and, in certain circumstances, Priority Tax Claims. See “Overview of the Plan — Sources and Uses of Cash.”

Senior Note Indenture Trustee and Ad Hoc Group Counsel Fees and Expenses; 7-3/4% SWD Revenue Bond Plaintiffs’ Fees

     The Senior Notes Fee Payments will be made out of the Public Note Distributable Consideration. No later than two Business Days prior to the Effective Date, each of the 9-7/8% Senior Note Indenture Trustee, the 10-7/8% Senior Note Indenture Trustee and counsel for the Ad Hoc Group must furnish to the counsel for the Creditors’ Committee and the Debtors information in respect of such fees and expenses incurred and estimated to be incurred through the Effective Date.

     In addition, if the 7-3/4% SWD Revenue Bond Payment is required to be made under the first sentence of Section 2.5(a) of the Plan, the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payments will be made out of the Public Note Distributable Consideration otherwise payable to holders of Allowed Claims in Subclass 3A; provided, however, that in no case will the amount of the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payment, when aggregated with any comparable amount payable under the AJI/KJC Plan, exceed $500,000; provided further, however, that nothing in the Plan will prejudice the rights of such plaintiffs to seek additional recoveries (i) from amounts otherwise to be paid to or for the benefit of holders of 7-3/4% SWD Revenue Bonds under the Plan or the AJI/KJC Plan or (ii) from, or in respect of amounts otherwise to be paid to or for the benefit of holders of 7-3/4% SWD Revenue Bonds by, any Other Kaiser Debtor other than AJI or KJC. No later than two Business Days prior to the Effective Date, the plaintiffs in the 7-3/4% SWD Revenue Bond Dispute must furnish to the 9-7/8% Senior Note Indenture Trustee and the 10-7/8% Senior Note Indenture Trustee information in respect of such fees and expenses incurred and estimated to be incurred through the Effective Date.

CERTAIN EVENTS PRECEDING THE DEBTORS’ CHAPTER 11 FILINGS

Background

     KAC, through its wholly owned subsidiary KACC and the subsidiaries of KACC, has historically been one of the leading international producers and marketers of alumina, primary aluminum and fabricated aluminum products, operating worldwide in all principal aspects of the aluminum industry – the mining of bauxite, the refining of bauxite into alumina, the production of primary aluminum from alumina and the manufacture of both fabricated and semi-fabricated aluminum products. KAAC is a direct wholly owned subsidiary of KACC. KAAC currently owns a 20% interest in QAL, an Australian corporation that operates an alumina refinery at Gladstone in Queensland, but has entered into an agreement to sell such interests (i.e., the QAL Interests) (which agreement and sale were approved by an order of the Bankruptcy Court dated November 8, 2004). For a discussion of the sale by KAAC of the QAL Interests, see “Operations During the Chapter 11 Cases - The Sale of the QAL Interests and Liquidation of KAAC.” KFC is a direct wholly owned subsidiary of KAAC and operates to coordinate financing for QAL. KFC’s only assets are Intercompany Claims against certain Other Kaiser Debtors, including the $1.106 billion Intercompany Claim against KACC (i.e., the KFC Claim), the majority of which KFC may be required to assign to a master tort trust established in connection with the plan or plans of reorganization of KAC and/or KACC. For further information about the KFC Claim, see “Overview of the Plan — KFC Claims Against KACC” and “Operations During the Chapter 11 Cases - Intercompany Claims Settlement.”

     On February 12, 2002 (the “Petition Date”), KAC, KACC and 13 of their subsidiaries, including the Debtors, Filed for relief under chapter 11 of the Bankruptcy Code. On March 15, 2002, two additional affiliates (collectively with the previously-Filed debtors, the “Original Debtors”) of KAC and KACC commenced their respective chapter 11 cases. Nine other affiliates (collectively, the “2003 Debtors”) commenced their voluntary

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chapter 11 cases on January 14, 2003. The Filing of these cases was necessitated by the liquidity and cash flow problems that arose in late 2001 and early 2002. KAC and its subsidiaries were facing significant near-term debt maturities at a time of unusually weak aluminum industry business conditions, depressed aluminum prices and a broad economic slowdown that was further exacerbated by the events of September 11, 2001. In addition, KAC and its subsidiaries had become increasingly burdened by asbestos litigation and growing legacy obligations for retiree medical and pension costs. The confluence of these factors created continuing operating losses and negative cash flows, which resulted in lower credit ratings and an inability to access the capital markets.

Note Guarantees

     The Debtors, together with certain other subsidiaries of KACC, are guarantors of KACC’s obligations under the 9-7/8% Senior Note Indenture and 10-7/8% Senior Note Indentures (collectively, the “Senior Notes Indentures”) and the Senior Subordinated Note Indenture (collectively with the Senior Notes Indentures, the “Public Note Indentures”). Upon the commencement of KACC’s chapter 11 case, the debt issued pursuant to each Public Note Indenture was accelerated and the trustee under each Public Note Indenture had the right to proceed to collect on the debt issued pursuant to such Public Note Indenture. During the Chapter 11 Cases, certain litigation was initiated involving the relative rights of the holders of the Senior Subordinated Notes and the holders of the 9-7/8% Senior Notes and the 10-7/8% Senior Notes. See “Operations During the Chapter 11 Cases — Guaranty Subordination Dispute.” Litigation was also initiated in order to determine the rights of the 7-3/8% SWD Revenue Bonds in relation to the Senior Subordinated Notes. See “Operations During the Chapter 11 Case — 7-3/8% SWD Revenue Bond Dispute.”

OPERATIONS DURING THE CHAPTER 11 CASES

First Day Relief

     On the Petition Date, the Original Debtors Filed a number of motions and other pleadings (collectively, the “First Day Motions”). Certain of the most significant First Day Motions are briefly described below. The First Day Motions were designed to meet the Original Debtors’ goals of:

• continuing their and their nondebtor subsidiaries’ operations with as little disruption and loss of productivity as possible;

• maintaining the confidence and support of the Original Debtors’ and their nondebtor subsidiaries’ customers, employees, vendors, suppliers, service providers, contractors and other key groups;

• maintaining good relations in the communities served by the Original Debtors and their nondebtor subsidiaries’ businesses; and

• obtaining necessary postpetition financing.

The First Day Motions included:

• motions relating to case administration included the appointment of counsel, the appointment of a claims and noticing agent, and the approval of interim compensation procedures for professionals;

• a motion seeking authority to pay prepetition wages and other benefits to or on behalf of the Original Debtors’ employees and independent contractors;

• a motion seeking authority to retain and pay ordinary course professionals;

• a motion seeking authority to continue the Original Debtors’ workers’ compensation insurance programs and pay certain prepetition workers’ compensation claims, premiums and related expenses;

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• a motion seeking authority to pay or honor prepetition obligations to customers;

• a motion seeking authority to pay prepetition claims of certain critical vendors and service providers;

• a motion seeking approval of (a) the Original Debtors’ cash management system; (b) certain intercompany transactions with and transfers to affiliates; (c) the use of existing bank accounts, business forms, and investment and deposit guidelines; and (d) the priority of postpetition Intercompany Claims, as discussed below under “- Cash Management Order”; and

• a motion seeking approval to continue funding certain joint venture affiliates, including QAL, as discussed below under “- Joint Venture Order”.

All of the First Day Motions ultimately were granted on the Petition Date or shortly thereafter.

     Cash Management Order

     Prior to the Petition Date, the Original Debtors utilized certain centralized cash management systems in the day — to — day operation of their businesses. These cash management systems included an overall centralized cash management system maintained by KACC, as well as certain cash management subsystems maintained by certain of their subsidiaries and business units. These cash management systems provided well — established mechanisms for the collection, concentration, management and disbursement of funds used in the Original Debtors’ businesses.

     On February 13, 2002, the Bankruptcy Court entered an interim order authorizing the Original Debtors to maintain these systems on a postpetition basis and, on July 23, 2002, entered a final order authorizing the continued use and maintenance of the centralized cash management system (the “Cash Management Order”). In addition, the Cash Management Order authorized the Original Debtors to continue their ordinary course transactions with, and transfers of Cash to, their nondebtor affiliates. In connection with this relief, the Cash Management Order accorded superpriority status to any Intercompany Claims among the Original Debtors and nondebtor affiliates that arose after the Petition Date as a result of the intercompany transactions made through the Original Debtors’ cash management system.

     Joint Venture Order

     As of the Petition Date, much of the bauxite, alumina and primary aluminum utilized by KACC and its subsidiaries was produced at overseas facilities owned through five nondebtor joint venture affiliates, of which KACC held, directly or indirectly, less than a 100% ownership interest (collectively, the “Joint Ventures”). QAL, described above in “Certain Events Preceding the Debtors’ Chapter 11 Cases — Background,” was one of the Joint Ventures. Certain of the Original Debtors were obligated to purchase products from the Joint Ventures and to fund the Joint Ventures’ cash costs for raw materials, labor and other operational costs, as well as capital expenditures, Taxes, debt service and working capital. Failure to purchase products from, or fund the costs of, a Joint Venture would have been a default under the relevant Joint Venture agreements, which, in turn, could have lead to the forfeiture of the Original Debtors’ interests in the Joint Venture. As a consequence, the Original Debtors sought and obtained an interim order dated February 13, 2002 authorizing them to continue ordinary course transactions with, and pay prepetition claims of, the Joint Ventures and, on July 23, 2002, obtained a final order authorizing them to do so (the “Joint Venture Order”).

Bankruptcy Petitions of the 2003 Debtors

     The 2003 Debtors commenced their respective chapter 11 cases in order to, among other reasons, protect their assets against statutory liens that might have arisen and been enforced by the PBGC against them as a result of KACC’s failure to make a $17.0 million contribution to its salaried employee retirement plan in January 2003 as required under the Employee Retirement Income Security Act of 1974, as amended. In connection with these filings, the Bankruptcy Court authorized 2003 Debtors to continue to make payments in the normal course of business (including payments of pre-Filing date amounts), including payments of wages and benefits, payments for

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items such as materials, supplies and freight and payments of taxes. The Bankruptcy Court also extended the relief provided under the Cash Management Order and Joint Venture Order to the 2003 Debtors.

Appointment of the Committees and Future Claimants’ Representatives

     Creditors’ Committee

     On February 25, 2002, the US Trustee appointed the Creditors’ Committee. The Creditors’ Committee acts as such in all of the Kaiser Cases (including the Chapter 11 Cases). The membership of the Creditors’ Committee has been amended three times during the Kaiser Cases; the current members of, and advisors to, the Creditors’ Committee are:

Committee Members:	Counsel
J.P. Morgan Trust Company, N.A., as Indenture Trustee	Lisa G. Beckerman, Esq.
6525 West Campus Oval Road	Akin, Gump, Strauss, Hauer & Feld, L.L.P.
New Albany, OH 43054	590 Madison Avenue
	New York, NY 10022
Law Debenture Trust Company of New York, as Indenture Trustee	William P. Bowden, Esq.
767 Third Avenue, 31st Floor	Ashby & Geddes
New York, NY 10017	222 Delaware Avenue P.O. Box 1150
U.S. Bank National Association, as Indenture Trustee	Wilmington, DE 19899
180 East 5th Street
St. Paul, MN 55101
	Financial Advisors:
United Steelworkers of America	Amit R. Patel
Five Gateway Center	Houlihan Lokey Howard & Zukin
Pittsburgh, PA 15222	1930 Century Park West Los Angeles, CA 90067
Pension Benefit Guaranty Corporation
1200 K Street, N.W.
Washington, D.C. 20005
	Asbestos Experts:
Farallon Capital Management LLC	Charles E. Bates
1 Maritime Plaza, Suite 1325	Bates White & Ballantine
San Francisco, CA 94111	2001 K Street, N.W. Suite 700
Dwight Asset Management Company	Washington, D.C. 20006
100 Bank Street
Burlington, VT 05401

     Asbestos Claimants’ Committee and Certain Other Appointed Representatives

     On February 25, 2002, the US Trustee appointed a statutory committee of asbestos claimants (the “Asbestos Claimants’ Committee”). On January 27, 2003, the Bankruptcy Court entered an order appointing Martin J. Murphy as legal representative for future asbestos claimants (the “Future Asbestos Claimants’ Representative”). On August 26, 2003, the Bankruptcy Court entered an order appointing an official committee of retired employees (the “Retirees’ Committee”). On June 22, 2004, the Bankruptcy Court entered an order appointing a legal representative for future silica and coal tar pitch volatile claimants (the “Future Silica Claimants’ Representative”). While each of these appointments has been made in the administratively consolidated chapter 11 cases of the Original Debtors and Additional Debtors, the Debtors do not believe that they have any liability with respect to the claims that are the subject of the respective roles of the Asbestos Claimants’ Committee, the Future Asbestos

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Claimants’ Representative or the Future Silica Claimants’ Representative and no Claims in respect thereof have been asserted (other than several Claims asserted by insurance carriers that are being challenged by the Debtors and that are expected to be disallowed).

Assumption and Assignment or Rejection of Executory Contracts and Unexpired Leases

     As debtors in possession, the Debtors have the right under section 365 of the Bankruptcy Code, subject to the approval of the Bankruptcy Court, to assume, assume and assign, or reject executory contracts and unexpired leases. Section 365 of the Bankruptcy Code provides generally that a debtor may assume, assume and assign, or reject an executory contract at any time before the confirmation of a plan of reorganization, but the Bankruptcy Court, on the request of a party in interest, may order the debtor to determine whether to assume or reject a particular executory contract within a specified period of time. In addition, section 365 of the Bankruptcy Code further provides that a debtor is given until 60 days after the date of commencement of its bankruptcy to decide whether to assume, assume and assign, or reject an unexpired lease of nonresidential real property. This period may be extended for “cause.”

     On April 11, 2002, the Bankruptcy Court entered an order granting the Original Debtors’ motion to extend the time within which they may assume, assume and assign, or reject an unexpired lease of nonresidential property until the Confirmation Date to allow them to evaluate further their executory contracts and unexpired leases. On April 17, 2003, the Bankruptcy Court entered an order granting the same relief to the 2003 Debtors.

     As described below in “- The Sale of the QAL Interests and Liquidation of KAAC,” the QAL Interests have been sold and all executory contracts related to QAL have been assumed and assigned in connection therewith. KAAC does not believe it has any material executory contracts or unexpired leases that will not be assumed and assigned in connection with the sale of the QAL Interests, but, in any case, any remaining executory contracts of KAAC will be deemed rejected pursuant to the Plan.

Claims Process and Bar Dates

     In May 2002, the Debtors and thirteen of the Other Kaiser Debtors filed their Schedules, identifying the assets and liabilities of their respective estates. These Schedules have been amended from time to time subsequent to these initial filings. In March 2003, the 2003 Debtors filed their respective Schedules. The Bankruptcy Court set the following bar dates for the filing of proofs of claim in the Kaiser Cases: (a) January 31, 2003 as the last date by which holders of prepetition claims against the Original Debtors (other than asbestos-related personal injury, noise-induced hearing loss and coal tar pitch volatiles claims) could file their claims; (b) May 15, 2003 as the last date by which holders of prepetition claims against the 2003 Debtors (other than asbestos-related personal injury, noise-induced hearing loss and coal tar pitch volatiles claims) could file their claims; and (c) February 29, 2004 as the last date by which holders of noise-induced hearing loss and coal tar pitch volatiles prepetition claims against KACC could file their claims. No bar date has been established for the filing of asbestos-related personal injury claims.

Postpetition Financing

     On the Petition Date, the Original Debtors (including the Debtors) entered into a postpetition financing agreement arranged by Bank of America, N.A. and, in March 2003, the 2003 Debtors were added as co-guarantors. That financing facility provided for a secured, revolving line of credit through February 13, 2005. On February 11, 2005, the Bankruptcy Court approved a replacement financing agreement for certain of the Other Kaiser Debtors. The replacement facility was arranged by J.P. Morgan Securities Inc. and provides for a secured, revolving line of credit in the principal amount of $200.0 million through the earlier of February 11, 2006, the effective date of a plan of reorganization for the Other Kaiser Debtors or the voluntary termination of the financing facility by the Other Kaiser Debtors. Because the Debtors will be liquidating their assets and will have no working operations, the Debtors are not parties to the replacement financing agreement and the lenders under the replacement financing agreement have no Liens on the Cash held by the Debtors.

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Strategic Plan to Sell Commodities Assets

     In September 2002, KAC and KACC prepared a strategic plan for their business operations. That plan envisioned the sale of some or all of their bauxite, alumina and primary aluminum assets and the reorganization around their fabricated products business. Thereafter, the strategic plan was shared with the Creditors’ Committee, the Asbestos Claimants’ Committee and the Future Asbestos Claimants’ Representative. After these parties completed considerable due diligence, they each indicated that they did not oppose the strategic plan.

     In furtherance of the strategic plan, the Debtors and the Other Kaiser Debtors have sold or are in the process of selling their interests in the Joint Ventures other than Anglesey Aluminium Limited. In July 2004, KACC, KJC, AJI and certain of their affiliates sold their interests in Alpart for approximately $331.7 million, subject to certain adjustments. In October 2004, KACC sold its alumina refinery in Gramercy, Louisiana and the interests of Kaiser Bauxite Company in and related to Kaiser Jamaica Bauxite Company for consideration of approximately $23.0 million, subject to certain adjustments. Also in October 2004, certain of the Other Kaiser Debtors sold their interests in Volta Aluminium Company Limited, which owns a primary aluminum smelter on the coast of Ghana. In November 2004, the Bankruptcy Court approved the sale of KAAC’s interests in and related to QAL, which operates an alumina refinery in Queensland, Australia that is one of the most competitive refineries in the world. The QAL Interests consist of: (a) ownership of 20% of the outstanding shares of QAL; and (b) rights and obligations under a variety of contracts to which KACC, KAAC and/or Kaiser Aluminium International, Inc. (“KAII”) are parties, including financing, bauxite supply and alumina sales contracts. See “ - The Sale of the QAL Interests and Liquidation of KACC.”

The Sale of the QAL Interests and Liquidation of KAAC

     Following an extensive marketing process that included providing notices to Comalco Limited (“Comalco”), another stockholder of QAL entitled a right of first opportunity (“RFO”) if at any time KACC wished to sell or otherwise dispose of all or any part of the QAL Interests, in June 2004, KACC, KAAC and KAII filed a motion (the “First Sale Motion”) to approve the sale of the QAL Interests pursuant to an action with a reserve price of $525.0 million. No bids were received for the QAL Interests and in August 2004 the First Sale Motion was withdrawn.

     Shortly thereafter, KACC approached Comalco and other potential purchasers to continue the sale process for the QAL Interests. On September 23, 2004, KACC, KAAC and KAII filed motions to approve a two-pronged approach to the sale of the QAL Interests. First, KACC signed a “stalking horse” agreement to sell the QAL Interests to Comalco Aluminium Limited, a subsidiary of Comalco, for a base price of $308.0 million in Cash plus purchase of certain alumina and bauxite inventories and subject to certain working capital adjustments, and the assumption of KACC’s obligations in respect of approximately $60.0 million of QAL debt. Pursuant to the agreement, all existing alumina sales contracts and other agreements relating to QAL would be transferred to Comalco Aluminium Limited. The agreement was supplemented by a letter agreement in which Comalco Aluminium Limited’s parent companies agree that execution of the stalking horse agreement satisfied — or that such parties otherwise waived — rights that they would otherwise have had under the RFO. Unless waived or satisfied, these rights could have potentially delayed the sale process for a significant period of time, during which delay the market value of the QAL Interests could have decreased, thereby reducing recoveries to creditors and jeopardizing the closing of any sale of the QAL Interests. The stalking horse agreement also includes a provision for KACC’s payment of a termination fee of $11.0 million (the “Termination Fee”) to Comalco Aluminium Limited upon the sale of the QAL Interests pursuant to the auction process if Comalco Aluminium Limited was not the ultimate purchaser.

     Separately, KACC negotiated an agreement with Glencore AG (“Glencore”) whereby Glencore agreed that its wholly owned subsidiary, Pegasus Queensland Acquisition Pty Limited (“Pegasus”), would submit a qualified auction bid for the QAL Interests, with a base price of $400.0 million in Cash and otherwise on the terms and conditions of the stalking horse agreement described above. KACC agreed to pay to Glencore a fee of approximately $7.7 million (the “Glencore Fee”) upon submission of that qualified bid. On September 28, 2004, the Bankruptcy Court approved the motions to select Comalco Aluminium Limited as the stalking horse bidder in an auction for the QAL Interests and to approve the Termination Fee and Glencore Fee. An auction was held on October 28, 2004. Pegasus timely submitted its bid and received the Glencore Fee and Alumina & Bauxite

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Company Ltd. (“ABC Ltd.”), an affiliate of RUSAL Holding Ltd., was selected as the successful bidder, with a bid with a base price of $401.0 million in Cash and otherwise on terms similar to the stalking horse agreement described above.

     Following the auction, ABC Ltd., KACC and KAAC entered into a definitive purchase agreement reflecting such bid, which agreement is subject to customary closing conditions, including receipt of required governmental approvals and third-party consents. The agreement contains customary representations and warranties for a transaction involving the sale of a minority stake. Under the agreement, KACC and KAAC agreed to indemnify ABC Ltd. from, among other things, breaches of such representations and warranties. Subject to certain limited exceptions, the maximum liability of KACC and KAAC for indemnification in respect of breaches of representations and warranties is $10.0 million. The Intercompany Claims Settlement provides that KAAC will satisfy any such indemnification or other obligations under the QAL Purchase Agreement and, in such event, will have no claim against KACC for contribution.

     By an order dated November 8, 2004, the Bankruptcy Court approved the purchase agreement with ABC Ltd. and the transactions contemplated thereby and authorized KACC and KAAC, in the event such agreement is terminated, to enter into the purchase agreement submitted by Pegasus with its bid and to consummate the transactions contemplated thereby. The closing of the sale of the QAL Interests is expected to occur during the first quarter of 2005.

Certain Australian Tax Matters

     The Australian Tax Office could assert that the Debtors owe Taxes for one or more taxable periods through Effective Date, including Taxes resulting from the sale of the QAL Interests. The Debtors believe that a Claim for Taxes resulting from the sale of the QAL Interests is unlikely because they believe that the sale price to be received pursuant to the QAL Purchase Agreement will not be sufficient to produce taxable gain under Australian Tax laws; however, no assurance can be given (a) that the Australian Tax Office will not take a different position and assert a Claim that the Debtors owe Taxes as a result of the sale of the QAL Interests or (b) that if the Australian Tax Office does assert such a Claim, as to the amount of such Claim, which could be material, or as to the amount of Taxes, if any, that may ultimately be determined to be due and owing to the Australian Tax Office in connection with such Claim. The Plan provides that any and all Taxes determined to be due and owing to the Australian Tax Office from either Debtor to the Australian Tax Office for any taxable period (including interest and penalties, if any) will be treated as Allowed Priority Tax Claims (if they relate to prepetition periods) or Allowed Administrative Claims (if they relate to the administrative period), and will be paid in full in Cash from the Priority Claims Trust Account following the determination of the amount or amounts of such Tax liabilities. Interest and penalties associated with any such Tax liability will be determined and calculated for purposes of the Plan under applicable Australian law. (Until this determination has been made, any Claim for Taxes by the Australian Tax Office will be treated under the Plan as a Disputed Claim.) See “Overview of the Plan — Sources and Uses of Cash.”

Agreements with Labor Regarding Pension and Retiree Medical Benefits

     In January 2004, KACC and one of the Other Kaiser Debtors filed motions with the Bankruptcy Court for a distress termination of all of their domestic hourly pension plans and to terminate or substantially modify postretirement medical obligations for both salaried and certain hourly employees. KACC subsequently reached agreements (collectively, the “Legacy Liability Agreements”) with the Retirees’ Committee and representatives from the unions representing the hourly employees of KACC. The Legacy Liability Agreements provided for the termination of existing salaried and hourly retiree benefit plans (including medical) and provided salaried and hourly retirees with an opportunity either to pay premiums for continued medical coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (i.e., COBRA continuation coverage) or to elect coverage pursuant to voluntary employee beneficiary association trusts, to which KACC has, and will continue to contribute, a certain amount of Cash and to which KAC will contribute a certain portion of the equity it issues upon the consummation of its chapter 11 plan. Under the Legacy Liability Agreements, the parties also agreed to the termination of their then-existing hourly pension plans and to the terms of one or more replacement pension plans.

     During the first half of 2004, the Bankruptcy Court entered orders approving each of the Legacy Liability Agreements, subject to certain conditions, including Bankruptcy Court approval of the Intercompany Claims

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Settlement (described below) in a form acceptable to the Debtors, the Other Kaiser Debtors and the Creditors’ Committee. On June 1, 2004, the Bankruptcy Court entered an order making the Legacy Liability Agreements effective, notwithstanding that the Intercompany Claims Settlement had not then been agreed upon or approved, and authorizing the Other Kaiser Debtors to proceed with the implementation of those agreements, subject to certain termination rights granted to the Creditors’ Committee. As a result of the PBGC Settlement Agreement (described below), KACC and the United Steelworkers of America, AFL-CIO-CLC later agreed to certain modifications of their Legacy Liability Agreement, which the Bankruptcy Court approved on November 8, 2004, subject to finalization of a form of order. The Bankruptcy Court entered the order on February 1, 2005.

PBGC Claims

     The PBGC is a wholly owned United States government corporation that administers the defined benefit pension plan termination insurance program under ERISA. Pursuant to federal statute, KACC and each member of its controlled group are jointly and severally liable to the PBGC for amounts that KACC is required to contribute to any of the Kaiser pension plans. The controlled group includes each of KAAC and KFC, as well as all of the Other Kaiser Debtors.

     In January 2003, the PBGC filed claims against Debtors and the Other Kaiser Debtors on behalf of each of the eight Kaiser pension plans, which included: (a) claims for estimated unfunded benefit liabilities, totaling approximately $620.0 million; (b) unliquidated claims for missed statutory insurance premiums; and (c) a $17.1 million claim for minimum funding contributions related to the salaried pension plan and unliquidated claims for minimum funding contributions related to the remaining Kaiser pension plans.

     Although the Bankruptcy Court, in conjunction with approving the Legacy Liability Agreements, had determined that the financial requirements for a distress termination of certain of the pension plans had been satisfied and had authorized the implementation of replacement defined contribution plans as negotiated in the Legacy Liability Agreements, the termination of the pension plans and implementation of the replacements plans remained subject to the PBGC’s determination that the statutory requirements had been satisfied. In March 2004, the PBGC appealed the Bankruptcy Court’s ruling that the Debtors and the Other Kaiser Debtors had met the financial requirements for a distress termination with respect to certain of the Kaiser pension plans. The PBGC also informed the Debtors and the Other Kaiser Debtors that it believed that the replacement pension plans negotiated in the Legacy Liability Agreements did not comply with the PBGC’s policies.

     On October 14, 2004, the Debtors and the Other Kaiser Debtors entered into the PBGC Settlement Agreement, pursuant to which the PBGC approved the termination of the largest of the Kaiser pension plans that had not previously been terminated (two of the Kaiser pension plans had been terminated by the PBGC prior to that date) and KACC retained, and agreed to continue, the remaining smaller pension plans. In addition, the PBGC Settlement Agreement provides for, among other things: (a) the PBGC’s issuance of a letter indicating that it intends to take no action with respect to the replacement pension plans; (b) the payment by KACC of amounts necessary to satisfy the minimum funding requirements under applicable law for the retained pension plans; (c) the allowance of administrative claims in the aggregate amount of $14.0 million against the Debtors and the Other Kaiser Debtors with the exception of AJI and KJC; and (d) the allowance of unsecured claims against the Debtors and the Other Kaiser Debtors for $616.0 million for unfunded benefit liabilities under the terminated plans and statutory premiums, provided that the PBGC’s recovery from the Estates of the Debtors in respect of the PBGC Claims is limited to the PBGC Percentage of the Cash or other property in the Unsecured Claims Trust. On January 25, 2005, the Bankruptcy Court entered an order approving the PBGC Settlement Agreement. On February 3, 2005, the Senior Subordinated Note Indenture Trustee Filed a notice of appeal in respect of such order and a notice of appeal of the Bankruptcy Court’s order denying its motion for reconsideration of the Bankruptcy Court’s stay of the Senior Subordinated Note Indenture Trustee’s objection to certain PBGC Claims. See “Overview of the Plan — Summary of Classes and Treatment of Claims and Interests” for a description of the treatment of the PBGC Claims.

Intercompany Claims Settlement

     The operations of KAC and its subsidiaries, which included transactions with foreign joint ventures and the use of a centralized cash management system, gave rise to a significant number of intercompany transactions, which were accounted for as intercompany receivables and payables. Because many of the intercompany accounts

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reflected an aggregate of activity over many years, the account balances for these intercompany receivables and payables in many cases were substantial, in some cases aggregating more than a $1.0 billion. In addition to the complex nature of the transactions and the significant amounts involved, there were numerous legal theories and arguments that could be advanced to support varying treatments of all or a portion of these intercompany account balances or to apply principles of setoff or recoupment to eliminate or substantially reduce certain of these intercompany account balances. Issues also existed with respect to postpetition Intercompany Claims, including, among other issues: (a) whether to “synchronize” the petition dates for the Original Debtors and the Additional Debtors or otherwise how to treat Intercompany Claims that arose after the commencement of the chapter 11 cases of the Original Debtors in 2002 but prior to the commencement of chapter 11 cases of the 2003 Debtors; and (b) how certain costs or services funded by KACC but accruing to the benefit of the Debtors and Other Kaiser Debtors as well (e.g., professional fees and costs incurred in the chapter 11 cases and overhead costs) should be allocated among the Debtors and the Other Kaiser Debtors.

     On October 5, 2004, the Debtors, the Other Kaiser Debtors and the Creditors’ Committee entered into a settlement and release agreement which resolves all of these issues (i.e., the Intercompany Claims Settlement), thereby eliminating the potential costs, uncertainties and potential delays that could have resulted had each of these issues been left for resolution through litigation. On October 14, 2004, the Debtors, the Other Kaiser Debtors and the Creditors’ Committee jointly Filed a motion to approve the Intercompany Claims Settlement (the “Joint Motion”). Objections to the Joint Motion were Filed by numerous parties, many of which were resolved by a January 27, 2005 amendment to the Intercompany Claims Settlement. The Bankruptcy Court entered an order approving the Intercompany Claims Settlement on February 1, 2005.

     The material terms of the Intercompany Claims Settlement (as amended) specifically relating to the Debtors include, among others, the following:

• upon the effectiveness of the Intercompany Claims Settlement, various offsets and transfers will be effected, with the ultimate economic effect that Intercompany Claims held by or against the Debtors will be released except as otherwise described below;

• KACC will have an Allowed Administrative Claim against KAAC in the amount of $45.0 million, subject to certain adjustments, including reductions (a) to the extent that KACC receives positive net cash flow from KACC after June 30, 2004 and prior to the closing of the sale of the QAL Interests, (b) in respect of KACC’s reimbursement Claim for payment of the Glencore Fee, and (c) to the extent that positive net cash flow from Alpart is not set off against amounts otherwise owed to KACC by AJI and KJC under the Intercompany Claims Settlement, which reductions are expected to reduce such Claim to $24.0 million to $35.0 million;

• if the Plan becomes effective on or before June 30, 2005, KAAC will pay an additional $2.5 million to KACC;

• KAAC is responsible for a portion of the success fees of the financial advisors retained by the Debtors and the Creditors’ Committee and any alternative minimum Tax due as a result of the sale of AJI and KJC’s interests in Alpart and the sale of the QAL Interests and any foreign Taxes, transfer Taxes and recording fees payable by KAAC as a result of the sale of the QAL Interests and the Debtors are responsible for all other foreign taxes payable by them, whether for current or prior years;

• seventy-five percent of KFC’s unsecured claim against KACC in respect of certain intercompany loans (i.e., the KFC Claim) will be assigned by KFC to a master tort trust or trusts on the effective date of a plan or plans of reorganization for KAC and KACC if such plan or plans provide that such master tort trust or trusts will receive no more than: (a) a Cash distribution of $13.0 million or less and (b) the stock of KAE Trading, Inc. (an Other Kaiser Debtor, the sole asset of which will be, as of the effective date of such plan or plans, certain real property located in Louisiana and rights under a related lease or other property having a value not greater than $1.0 million);

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• the KFC Claim will be allowed in the amount of $1.106 billion (subject to the right of the United States, on behalf of certain agencies thereof, to object to such allowance within 30 days after the effective date of a plan or plans of reorganization for KAC and KACC, if the master tort trust or trusts do not receive 75% of the KFC Claim as described above) and will receive the same treatment as allowed general unsecured claims under any plan of reorganization for KACC; and

• the Debtors are responsible for the payment of third-party costs of administration of the Chapter 11 Cases incurred after June 30, 2004.

For a detailed discussion of the Intercompany Claims Settlement, see the Joint Motion, and for a summary thereof, see the supplemental notice regarding the hearing on the Joint Motion (the “Supplemental Notice”), which was served on all parties in interest on December 27-28, 2004. The Joint Motion and the Supplemental Notice, as well as the January 27, 2005 amendment to the Intercompany Claims Settlement, are available to the public over the Internet on the Document Website (www.kaiseraluminum.com).

     The Intercompany Claims Settlement does not affect any claim by either Debtor against any of its non-debtor affiliates or by any such affiliate against a Debtor. The only such claim of which the Debtors are aware is a claim of less than $5,000 against KAAC by Kaiser Australia Pty, Ltd., a non-debtor, wholly-owned subsidiary of KACC; the Debtors anticipate that this claim will be waived by Kaiser Australia Pty, Ltd. on the Effective Date.

Guaranty Subordination Dispute

     In 1993, KACC issued $400.0 million of the Senior Subordinated Notes, which were guaranteed by certain KACC subsidiaries, including the Debtors (such guaranty being referred to herein as the “Subsidiary Guaranty”). The Senior Subordinated Note Indenture contains, among other things, a detailed definition of “Senior Indebtedness,” debt subordination provisions and guaranty provisions. Under the Subordinated Note Indenture, holders of the Subordinated Notes agreed (a) “that all direct or indirect payments or distributions on or which respect to the Notes...is [sic]...subordinated to the prior payment of all Senior Indebtedness of the Company” and (b) “that all payments pursuant to [the Subsidiary Guaranty] are...subordinated...to the prior payment in full...of all Senior Indebtedness of such [s]ubsidiary [g]uarantor.”

     On August 16, 2004, the Senior Subordinated Note Indenture Trustee filed a motion (the “Guaranty Subordination Classification Motion”) with the Bankruptcy Court to determine the classification of the Senior Subordinated Note Claims under any plans of reorganization filed by the Debtors and the Other Kaiser Debtors that made the Subsidiary Guaranty. The Guaranty Subordination Classification Motion asserted that the obligations to the holders of 9-7/8% Senior Notes and 10-7/8% Senior Notes in respect of the Subsidiary Guaranty do not constitute “Senior Indebtedness” under the applicable definitions in the Senior Subordinated Note Indenture and that, accordingly, the obligations on the guaranty of the Senior Subordinated Notes (i.e., the Subsidiary Guaranty) and the guaranties of the 9-7/8% Senior Notes and 10-7/8% Senior Notes are entitled to pari passu distributions under plans of reorganization filed by the Debtors and the Other Kaiser Debtors that made the Subsidiary Guaranty (including the Plan).

     On September 3, 2004, the Senior Note Parties filed a complaint (the “Guaranty Subordination Adversary Proceeding”) with the Bankruptcy Court seeking a declaration that any payment rights of the Senior Subordinated Note Claims are subordinate to the Senior Note Claims, or, alternatively, a reformation of the Senior Subordinated Note Indenture to provide that the Senior Subordinated Note Claims are junior to the Senior Note Claims. Pursuant to the Bankruptcy Court’s order, on October 8, 2004, the Debtors and the Other Kaiser Debtors filed their response to the Guaranty Subordination Classification Motion and an answer in the Guaranty Subordination Adversary Proceeding (together with the Guaranty Subordination Classification Motion, the “Guaranty Subordination Dispute”) and the Creditors’ Committee filed its response to the Guaranty Subordination Classification Motion. In their respective responses, the Debtors, the Other Kaiser Debtors and the Creditors’ Committee both supported the interpretation advanced by the Senior Note Parties. The Senior Note Parties also filed responses opposing the Guaranty Subordination Classification Motion. Liverpool also Filed a response to the Guaranty Subordination Classification Motion, asserting that only $100.0 million of the obligations to the holders of the 9-7/8% Senior Notes in respect of the Subsidiary Guaranty, plus associated interest and fees, constitute “Senior Indebtedness” under the

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Senior Subordinated Note Indenture based on the fact that there was a reduction of $100.0 million in the credit commitment under KACC’s senior credit facility at the time the Subsidiary Guaranty was made. Liverpool therefore contends that, other than this $100.0 million of the Subsidiary Guaranty obligations in respect of the 9-7/8% Senior Notes, the 10-7/8% Senior Notes, the 9-7/8% Senior Notes and the Senior Subordinated Notes are entitled to pari passu distributions under the Plan.

     In connection with the Guaranty Subordination Dispute and the 7-3/4% SWD Revenue Bond Dispute (see “- 7-3/4% SWD Revenue Bond Dispute”), the Senior Subordinated Note Indenture Trustee has asserted that, even if such disputes are ultimately resolved by the Bankruptcy Court in favor of the holders of Senior Note Claims, under the terms of the Senior Subordinated Note Indenture, the Senior Subordinated Note Indenture Trustee will be entitled to the payment of its fees and expenses from the Debtors. The Debtors do not agree with that assertion and believe, in such circumstances, that the contractual subordination provisions of the Senior Subordinated Note Indenture require the payment to holders of Senior Note Claims of all amounts that would otherwise be payable to or for the benefit of holders of Senior Subordinated Note Claims absent such provisions and that the Debtors are not required to make any payment in respect of the fees and expenses of the Senior Subordinated Note Indenture Trustee; if, however, the Bankruptcy Court determines that the assertion of the Senior Subordinated Note Indenture Trustee is correct, the ultimate recoveries to holders of Senior Note Claims may be reduced.

     On October 25, 2004, the Bankruptcy Court held a status conference on the Guaranty Subordination Dispute and ordered the parties to attempt to consensually resolve the Guaranty Subordination Dispute, as well as the 7-3/4% SWD Revenue Bond Dispute, through mediation. On November 18, 2004, the parties participated in a day-long mediation. To date, the parties have not reached a settlement, although the mediator has not, as yet, terminated the mediation proceedings. No further mediation sessions are currently scheduled.

     On December 2, 2004, the Senior Subordinated Note Indenture Trustee Filed a motion in the Guaranty Subordination Adversary Proceeding requesting that the Bankruptcy Court order the parties to file briefs regarding the Guaranty Subordination Dispute by January 10, 2005, and hold an oral summary judgment argument on January 24, 2005.

     On December 10, 2004, the Debtors, the Other Kaiser Debtors and the Senior Note Parties Filed a joint motion to stay the Guaranty Subordination Adversary Proceeding and the 7-3/4% SWD Revenue Bond Dispute pending the completion of the confirmation process for plans of liquidation for the Debtors, AJI and KJC and requesting that the Guaranty Subordination Dispute be adjudicated in connection with confirmation of such plans if the proposed settlement of the dispute included in each such plan was not accepted. On the same date, Liverpool Filed a motion requesting that the Bankruptcy Court either (a) consolidate litigation concerning the Guaranty Subordination Dispute or (b) permit Liverpool to intervene as a defendant in the Guaranty Subordination Adversary Proceeding.

     On January 24, 2005, the Bankruptcy Court stayed the Guaranty Subordination Adversary Proceeding and ruled that the Guaranty Subordination Dispute and 7-3/4% SWD Revenue Bond Dispute will be adjudicated in connection with the confirmation of the plans of liquidation for the Debtors, AJI and KJC. The confirmation hearing for the Plan and AJI/KJC Plan is currently scheduled for April 13, 2005 and may be continued from time to time.

     The Plan contains the following proposed settlement of the Guaranty Subordination Dispute as it relates to the Debtors: If both Subclass 3A and Subclass 3B vote to accept the Plan, a holder of an Allowed Senior Subordinated Note Claim will receive its Pro Rata Share of $8.0 million (less any fees or expenses payable to the Senior Subordinated Note Trustee pursuant to the Senior Subordinated Note Indenture) and a holder of an Allowed Senior Note Claim will receive its Pro Rata Share of the Public Note Distributable Consideration remaining after giving effect to the payment of the $8.0 million to be made to the holders of Senior Subordinated Note Claims, the 7-3/4% SWD Revenue Bond Payment, the 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payment and the Senior Notes Fee Payments. If either Subclass 3A or Subclass 3B fails to accept the Plan, the Bankruptcy Court will resolve the Guaranty Subordination Dispute with respect to the Debtors and determine the distributions to be made to the holders of Claims in Subclass 3A from the Public Note Distributable Consideration and any distributions to be made to holders of Claims in Subclass 3B from the Public Note Distributable Consideration. In such event, the distributions ultimately made to a holder of an Allowed Senior Note Claim will be reduced by such holder’s

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proportional share of the Senior Notes Fee Payments and, if the Bankruptcy Court determines that holders of Allowed Senior Subordinated Note Claims are not entitled to any portion of the Subclass 3A Distributable Consideration, the 7-3/4% SWD Revenue Bond Payment (or reservation in lieu thereof), if any, and any 7-3/4% SWD Revenue Bond Plaintiffs’ Expense Payment. Similarly, any distributions ultimately made to a holder of an Allowed Senior Subordinated Note Claim may be reduced by such holder’s proportional share of any and all fees and expenses payable to the Senior Subordinated Note Trustee, pursuant to the Senior Subordinated Note Indenture.

     Similarly, pursuant to the AJI/KJC Plan, if holders of both the Senior Note Claims and the Senior Subordinated Note Claims vote to accept the AJI/KJC Plan, then an additional $8.0 million will be paid to the Senior Subordinated Note Indenture Trustee for the benefit of holders of Senior Subordinated Note Claims (resulting in aggregate consideration of $16.0 million if the Plan is also accepted by the holders of the Senior Note Claims and the Senior Subordinated Note Claims), with such amount to be paid from consideration that would otherwise be distributed to holders of Allowed Senior Note Claims under the AJI/KJC Plan, and the holders of Senior Note Claims would receive a specified percentage of the Cash available for distribution to the holders of unsecured claims (less certain payments or reservations of payment therefrom). If the holders of the Senior Note Claims or the Senior Subordinated Note Claims fail to accept the AJI/KJC Plan, the Bankruptcy Court would resolve the Guaranty Subordination Dispute with respect to AJI and KJC and determine the distributions to be made to the holders of Senior Note Claims and any distributions to be made to holders of Senior Subordinated Note Claims under the AJI/KJC Plan.

7-3/4% SWD Revenue Bond Dispute

     The 7-3/4% SWD Revenue Bonds Indenture Trustee has asserted entitlement to receive any direct or indirect payment or distribution on or with respect to the Senior Subordinated Notes. The Debtors are guarantors of the Senior Subordinated Notes but are not guarantors of the 7-3/4% SWD Revenue Bonds.

     On January 13, 2004, the 7-3/4% SWD Revenue Bonds Indenture Trustee and certain holders of the 7-3/4% SWD Revenue Bonds (collectively, the “7-3/4% SWD Revenue Bond Plaintiffs”) filed an adversary proceeding (i.e., the 7-3/4% SWD Revenue Bond Dispute) against the Senior Subordinated Note Indenture Trustee and KACC. This adversary proceeding is currently pending before the Bankruptcy Court. At issue is whether KACC properly designated the 7-3/4% SWD Revenue Bonds as senior indebtedness under the Senior Subordinated Note Indenture or whether the 7-3/4% SWD Revenue Bonds are otherwise entitled to treatment as senior indebtedness vis-à-vis the Senior Subordinated Notes. It is the position of the 7-3/4% SWD Revenue Bond Plaintiffs that the holders of the 7-3/4% SWD Revenue Bonds have subordination claims in respect of any distributions on the Senior Subordinated Notes under the Plan. In response to the complaint, KACC stated that it had not been able to confirm that it provided the Senior Subordinated Note Indenture Trustee with a written designation that the 7-3/4% SWD Revenue Bonds constitute senior indebtedness, which designation would subordinate the indebtedness under the Senior Subordinated Notes to the indebtedness under the 7-3/4% SWD Revenue Bonds.

     On March 26, 2004, the Senior Subordinated Note Indenture Trustee filed a motion to dismiss the 7-3/4% SWD Revenue Bond Dispute for failure to join necessary parties such as the Senior Note Indenture Trustee. On May 4, 2004, the 7-3/4% SWD Revenue Bond Plaintiffs filed a motion for summary judgment, requesting that the Bankruptcy Court either: (a) declare that KACC be deemed to have submitted the appropriate designation of senior indebtedness; (b) order KACC to designate the 7-3/4% SWD Revenue Bonds as senior indebtedness; or (c) declare that the 7-3/4% SWD Revenue Bonds are senior in terms of payment priority to the Senior Subordinated Notes. Shortly thereafter, the Senior Subordinated Note Trustee filed a motion to stay all proceedings pending the Bankruptcy Court’s decision on the motion to dismiss the 7-3/4% SWD Revenue Bond Dispute. KACC subsequently joined the motion to stay proceedings.

     On October 25, 2004, the Bankruptcy Court held a status conference on the 7-3/4% SWD Revenue Bond Dispute and ordered the parties to attempt to consensually resolve the 7-3/4% SWD Revenue Bond Dispute, as well as the Guaranty Subordination Dispute, through mediation. On November 18, 2004, the parties participated in a day-long mediation. To date, the parties have not reached a settlement, although the mediator has not, as yet, terminated the mediation proceedings. No further mediation sessions are currently scheduled.

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     On November 29, 2004, the Bankruptcy Court entered orders permitting the Senior Note Indenture Trustee to intervene as a defendant in the proceeding and denying the Senior Subordinated Note Indenture Trustee’s motion to dismiss the 7-3/4% SWD Revenue Bond Dispute.

     On December 10, 2004, the Debtors, the Other Kaiser Debtors and the Senior Note Parties Filed a joint motion to stay the 7-3/4% SWD Revenue Bond Dispute and the Guaranty Subordination Adversary Proceeding pending the completion of the confirmation process for plans of liquidation for the Debtors, AJI and KJC and requesting that the 7-3/4% SWD Revenue Bond Dispute be adjudicated, along with the Guaranty Subordination Dispute if necessary, in connection with the confirmation of such plans.

     On December 17, 2004, the Senior Subordinated Note Indenture Trustee filed an answer in the 7-3/4% SWD Revenue Bond Dispute that included, among other things: (a) a counterclaim for declaratory judgment that the 7-3/4% SWD Revenue Bonds are not senior to the Senior Subordinated Notes; (b) a counterclaim against the 7-3/4% SWD Revenue Bond Plaintiffs for reimbursement of legal expenses incurred by the Senior Subordinated Note Indenture Trustee; (c) a cross claim against KACC for indemnification in the amount of any judgment that may be rendered in favor of the 7-3/4% SWD Revenue Bond Plaintiffs against the Senior Subordinated Note Indenture Trustee; and (d) a complaint against certain of the Debtors and Other Kaiser Debtors for indemnification in the amount of any judgment that may be rendered in favor of the 7-3/4% SWD Revenue Bond Plaintiffs against the Senior Subordinated Note Indenture Trustee.

     On January 24, 2005, the Bankruptcy Court stayed the 7-3/4% SWD Revenue Bond Dispute and ruled that the 7-3/4% SWD Revenue Bond Dispute and the Guaranty Subordination Dispute will be adjudicated in connection with the confirmation of the plans of liquidation for the Debtors, AJI and KJC. The confirmation hearing for the Plan and AJI/KJC Plan is currently scheduled for April 13, 2005 and may be continued from time to time.

     In connection with the development and proposal of the Plan, representatives of certain of the holders of Senior Note Claims and 7-3/4% SWD Revenue Bonds entered into negotiations in an attempt to reach a settlement in respect of the 7-3/4% SWD Revenue Bond Dispute. In early February, such representatives reached an agreement on a proposed settlement of that Dispute. Such settlement, as it relates to the Debtors, is reflected in the Plan as follows: If Subclass 3A votes to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code and, unless the holders of Senior Note Claims otherwise agree pursuant to a settlement, all holders of Allowed Senior Note Claims are entitled under the Plan to identical treatment in respect of contractual subordination claims under the Senior Subordinated Note Indenture, on the Effective Date an amount equal to the Settlement Percentage of the Cash in the Unsecured Claims Trust Account that would otherwise have been distributed in respect of the Senior Subordinated Note Claims which, after giving effect to the contractual subordination provisions of the Senior Subordinated Note Indenture and pursuant to Sections 2.4(c)(i) and 2.4(c)(ii) of the Plan (but prior to giving effect to any 7-3/4% SWD Revenue Bond Payment), is to be paid to holders of Senior Note Claims will, in full and complete satisfaction of the claims of holders of 7-3/4% SWD Revenue Bonds asserted in the 7-3/4% SWD Revenue Bond Dispute in respect of the Debtors, be paid to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of holders of 7-3/4% SWD Revenue Bonds (i.e., the 7-3/4% SWD Revenue Bond Payment). Notwithstanding the foregoing, in no event will the amount so paid, when aggregated with any amount payable under any comparable provision of the AJI/KJC Plan, exceed $8.0 million. If the Debtors do not File a separate motion, the Plan will serve as a motion pursuant to Bankruptcy Rule 9019 seeking entry of an order approving the settlement described elsewhere in this Disclosure Statement. Unless an objection to such settlement is made in writing by any creditor or claimant affected thereby, Filed with the Bankruptcy Court and served on the parties identified in Section 12.4 of the Plan on or before April 5, 2005, such order (which will be the Confirmation Order) may be entered by the Bankruptcy Court. In the event any such objections are timely Filed, a hearing with respect thereto will occur at the Confirmation Hearing. If Subclass 3A fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the rights, if any, of the holders of 7-3/4% SWD Revenue Bonds to payments from the Public Note Distributable Consideration will be as determined in an order of the Bankruptcy Court (which may be the Confirmation Order) in connection with the determinations contemplated by Sections 2.4(c)(i)(B) and 2.4(c)(ii)(B) of the Plan; provided that if the determination with respect to the rights of the holders of 7-3/4% SWD Revenue Bonds to such payment has not been made by the Bankruptcy Court prior to the Effective Date, then, in order to ensure the funding of such payment, on the Effective Date the Distribution Trustee will reserve from the Public Note Distributable Consideration any amount that may be ordered by the Bankruptcy Court to be so reserved pending such determination. See “Overview of the Plan — 7-3/4% SWD Revenue Bond Dispute.”

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     The proposed settlement also contemplates that similar provisions will be included in the AJI/KJC Plan and that, under any plan of reorganization for KACC, the holders of claims against KACC in respect of the 7-3/4% SWD Revenue Bonds and the Senior Notes will share pro rata in any contractual subordination recoveries pursuant to the Senior Subordinated Note Indenture.

GENERAL INFORMATION CONCERNING THE PLAN

     THE FOLLOWING IS A SUMMARY OF SOME OF THE SIGNIFICANT ELEMENTS OF THE PLAN. THIS DISCLOSURE STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION SET FORTH IN THE PLAN ATTACHED HERETO AS EXHIBIT I AND THE EXHIBIT THERETO.

Substantive Consolidation

     In connection with confirmation of the Plan, the Debtors will seek Bankruptcy Court approval of the substantive consolidation of the Debtors for the purpose of implementing the Plan, including for purposes of voting, confirmation and distributions to be made under the Plan. Pursuant to the relevant order of the Bankruptcy Court: (a) all assets and liabilities of the Debtors will be deemed merged; (b) all guarantees by, or co-obligations of, one Debtor in respect of the obligations of the other Debtor will be deemed eliminated so that any Claim against either Debtor and any guarantee by, or co-obligation of, the other Debtor and any joint or several liability of either of the Debtors will be deemed to be one obligation of the consolidated Debtors; and (c) each and every Claim Filed or to be Filed in the Chapter 11 Case of either Debtor will be deemed Filed against the consolidated Debtors and will be deemed one Claim against and a single obligation of the consolidated Debtors. Such substantive consolidation (other than for the purpose of implementing the Plan) will not affect the legal and corporate structures of the Debtors, nor will such substantive consolidation affect or be deemed to affect any Intercompany Claim in any manner contrary to the Intercompany Claims Settlement, nor will such substantive consolidation be deemed to affect any Other Kaiser Debtor or claims against any Other Kaiser Debtor. Because the Debtors have virtually the same joint creditors, creditors of the Debtors would receive exactly the same distributions on their Claims whether or not the Debtors are substantively consolidated. Accordingly, substantive consolidation is being sought solely for administrative convenience.

     The Plan will serve as a motion seeking entry of an order substantively consolidating the Debtors, as described, and to the limited extent set forth in, the immediately preceding paragraph. Unless an objection to such substantive consolidation is made in writing by any creditor or claimant affected by the Plan, Filed with the Bankruptcy Court and served on the parties entitled to notice thereof pursuant to the Plan on or before April 5, 2005, or such other date as may be fixed by the Bankruptcy Court, the substantive consolidation order (which will be the Confirmation Order) may be entered by the Bankruptcy Court. In the event any such objections are timely Filed, a hearing with respect thereto will occur at the Confirmation Hearing.

KFC Claim against KACC

     Notwithstanding anything to the contrary in the Plan, no distributions in respect the Retained Portion of the KFC Claim will be deemed made (and the Retained Portion of the KFC Claim will be held in the Unsecured Claims Trust Account) until receipt of by the Distribution Trustee of distributions in respect thereof from KACC pursuant to a confirmed plan of reorganization of KACC or otherwise and then in-kind distributions consisting of the property received by the Distribution Trustee from KACC in respect of the Retained Portion of the KFC Claim will be made to holders of Allowed Claims in Subclass 3A, Subclass 3C and Subclass 3D in accordance with the terms of the Plan. Section 4.2.f of the Intercompany Claims Settlement is, and will be, determinative of the ownership rights in the KFC Claim. See “Operations During the Chapter 11 Cases — Intercompany Claims Settlement.”

Executory Contracts and Unexpired Leases to be Rejected

     On the Effective Date, except for an Executory Contract or Unexpired Lease that previously was assumed and assigned or rejected by an order of the Bankruptcy Court, each Executory Contract and Unexpired Lease entered into by a Debtor prior to the Petition Date that has not previously expired or terminated pursuant to its own terms

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will be rejected pursuant to section 365 of the Bankruptcy Code. The Confirmation Order will constitute an order of the Bankruptcy Court approving such rejections, pursuant to section 365 of the Bankruptcy Code, as of the Effective Date.

     Notwithstanding anything in the Bar Date Order or in the Administrative Claim Bar Date Order to the contrary, if the rejection of an Executory Contract or Unexpired Lease pursuant to the Plan gives rise to a Claim by the other party or parties to such contract or lease, such Claim will be forever barred and will not be enforceable against the Debtors, the Distribution Trustee, the Debtors’ Estates or the Trust Accounts unless a proof of Claim or request for payment of Administrative Claim is Filed and served on the Distribution Trustee, pursuant to the procedures specified in the Confirmation Order, the notice of the entry of the Confirmation Order or another order of the Bankruptcy Court, no later than 30 days after the Effective Date.

Releases, Limitation of Liability, Injunctions and Preservation of Insurance

     Release of Claims and Termination of Interests; Limitation of Liability

     Subject to the provisions of Section 2.11 of the Plan, as of the Effective Date, in consideration for the obligations of the Debtors and the Distribution Trustee under the Plan and the Cash or other property to be distributed in connection with the Plan, each holder of a Claim that votes in favor of the Plan will be deemed to forever release and waive all claims, obligations, suits, judgments, damages, demands, debts, rights, causes of action and liabilities (other than the right to enforce the Debtors’ or the Distribution Trustee’s obligations under the Plan and the contracts, instruments, releases and other agreements and documents delivered thereunder), whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising in law, equity or otherwise, that are based in whole or in part on any act, omission, transaction or other occurrence taking place on or prior to the Effective Date in any way relating to a Debtor, the Chapter 11 Cases or the Plan that such entity has, had or may have against the Creditors’ Committee, its members, any Indenture Trustee, either Debtor and any of their respective present or former directors, officers, employees, agents, advisors, attorneys, accountants, underwriters, investment bankers or other representatives, acting in such capacity, except for those based on (a) acts or omissions of any such person constituting gross negligence or willful misconduct or (b) contractual obligations of, or loans owed by, any such person to a Debtor.

     As of the Effective Date, for good and valuable consideration, the adequacy of which is confirmed by the Plan, the Debtors on behalf of themselves, their Estates, creditors and Interest holders will be deemed to release, waive and discharge all claims and rights of any nature in connection with or related to the Debtors, the Chapter 11 Cases or the Plan (other than the rights of the Distribution Trustee to enforce the Plan and any contracts, instruments, releases and other agreements and documents delivered thereunder, and to pursue objections to and resolve Disputed Claims), whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising (including, without limitation, those arising under the Bankruptcy Code), based on any act, omission or occurrence on or before the Effective Date, against the Creditors’ Committee, its members, any Indenture Trustee, any of the Debtors’ present or former directors or officers, or any of the respective present or former directors, officers, employees, agents, advisors, attorneys, accountants, underwriters, investment bankers or other representatives of the Debtors, the Creditors’ Committee, its members, or the Indenture Trustees, acting in such capacity, except for such Claims or rights based on (a) acts or omissions of any such person constituting gross negligence or willful misconduct or (b) contractual obligations of, or loans owed by, any such person to a Debtor.

     The Debtors, the Distribution Trust, the Distribution Trustee, the Indenture Trustees and their respective directors, officers, employees and professionals, acting in such capacity, and the Creditors’ Committee, its members and their respective professionals will neither have nor incur any liability to any entity for any act taken or omitted to be taken in connection with or related to the formulation, preparation, dissemination, implementation, confirmation or consummation of the Plan, this Disclosure Statement, or any contract, instrument, release or other agreement or document created or entered into, or any other act taken or omitted to be taken, in connection with the Plan; such provisions will have no effect on: (a) the liability of any entity that would otherwise result from the failure to perform or pay any obligation or liability under the Plan or any contract, instrument, release or other agreement or document to be entered into or delivered in connection with the Plan; or (b) the liability of any entity

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that would otherwise result from any such act or omission to the extent that such act or omission is determined in a Final Order to have constituted gross negligence or willful misconduct.

     Injunctions

     Except as otherwise provided in the Plan or the Confirmation Order, as of the Effective Date, all entities that have held, currently hold or may hold a Claim or other debt or liability of the Debtors, or an Interest or other right of an equity security holder with respect to the Debtors, that is released, waived, settled or deemed satisfied pursuant to the Plan will be permanently enjoined from taking any of the following actions on account of any such Claims, debts, liabilities, Interests or rights: (a) commencing or continuing in any manner any action or other proceeding against the Debtors, the Distribution Trust, the Distribution Trustee or the property of any of them other than to enforce any right pursuant to the Plan to a distribution from the Trust Accounts; (b) enforcing, attaching, collecting or recovering in any manner any judgment, award, decree or order against the Debtors, the Distribution Trust or the Distribution Trustee, other than as described in (a) above; (c) creating, perfecting or enforcing any Lien or encumbrance against the Debtors, the Distribution Trust, the property of any of them or the Trust Accounts; (d) asserting a setoff, right of subrogation or recoupment of any kind against any debt, liability or obligation due to the Distribution Trust; and (e) commencing or continuing any action, in any manner, in any place that does not comply with or is inconsistent with the provisions of the Plan.

     Preservation of Insurance

     Nothing in the Plan will diminish or impair the enforceability of any insurance policies that may cover Claims against either Debtor.

Means for Implementation of the Plan

     Liquidating Transactions

     On the Effective Date, the Distribution Trust Assets will be transferred to and vest in the Distribution Trust, free and clear of Claims, Liens and Interests, except as may be otherwise provided in the Intercompany Claims Settlement. On or after the Effective Date, the Debtors will enter into such transactions and will take such actions as may be necessary or appropriate to merge, dissolve or otherwise terminate the corporate existence of the Debtors. Notwithstanding the foregoing and regardless of whether the actions in the preceding sentence have yet been taken with respect to a particular Debtor, upon the transfer of the Distribution Trust Assets to the Distribution Trust, the Debtors will be deemed dissolved and their business operations withdrawn for all purposes without any necessity of filing any document, taking any further action or making any payment to any governmental authority in connection therewith.

     Corporate Action

     The following (which will occur and be deemed effective as of the date specified in the documents effectuating the same or, if no date is so specified, the Effective Date) will be deemed authorized and approved in all respects and for all purposes without any requirement of further action by KACC, as the sole stockholder of KAAC, by KAAC, as the sole stockholder of KFC, by the directors of either Debtor or by the Distribution Trustee or any other person or entity:

• the Liquidating Transactions;

• the establishment of the Distribution Trust;

• the appointment of the Distribution Trustee to act on behalf of the Distribution Trust;

• the transfer of the Distribution Trust Assets to the Distribution Trust;

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• the creation of the Trust Accounts;

• the distribution of Cash and other property pursuant to the Plan;

• the adoption, execution, delivery and implementation of all contracts, instruments, releases and other agreements or documents related to any of the foregoing;

• the adoption, execution and implementation of the Distribution Trust Agreement; and

• the other matters provided for under the Plan involving the corporate structure of either Debtor or corporate action to be taken by, or required of, either Debtor or the Distribution Trustee.

     No Revesting of Assets

     The property of the Debtors’ Estates will not revest in the Debtors on or after the Effective Date but will vest in the Distribution Trust to be administered by the Distribution Trustee in accordance with the Plan and the Distribution Trust Agreement.

     Recourse Solely to Trust Accounts

     The Liquidating Transactions will not in any way merge the assets of the Debtors’ Estates, including the Trust Accounts. All Claims against the Debtors are deemed fully satisfied in exchange for the treatment of such Claims under the Plan, and holders of Allowed Claims against either Debtor will have recourse solely to the applicable Trust Accounts for the payment of their Allowed Claims in accordance with the terms of the Plan.

     Release of Liens

     Except as otherwise provided in the Plan or in any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, on the Effective Date all Liens against the property of either Estate will be fully released, and all of the right, title and interest of any holder of such Liens, including any rights to any collateral thereunder, will attach to and be enforceable solely against the applicable Distribution Trust Assets held in the applicable Trust Account in accordance with, and subject to the terms of, the Plan. All such Liens against the Distribution Trust Assets will be fully released upon the holder of the Lien receiving its full distribution under the Plan, or upon the Effective Date if the holder of the Lien is not entitled to any distribution under the Plan.

     Exemption from Certain Taxes

     Pursuant to section 1146(c) of the Bankruptcy Code, the following will not be subject to any stamp Tax, real estate transfer Tax, sales or use Tax or similar Tax: (a) any Liquidating Transaction; (b) the execution and implementation of the Distribution Trust Agreement, including any transfers to or by the Distribution Trust; or (c) the making or delivery of any deed or other instrument of transfer under, in furtherance of or in connection with the Plan, including any merger agreements or agreements of consolidation, disposition, liquidation or dissolution executed in connection with any transaction pursuant to the Plan.

Distribution Trust

     Creation of the Distribution Trust

     On the Effective Date, the Debtors and the Distribution Trustee will enter into the Distribution Trust Agreement, thereby creating the Distribution Trust.

     The Distribution Trustee, whose identity and address will be disclosed at least ten days prior to the Confirmation Hearing, will be selected by the Creditors’ Committee with the consent of the Debtors, and will be the exclusive trustee of the assets of the Distribution Trust for purposes of 31 U.S.C. § 3713(b) and 26 U.S.C.

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§ 6012(b)(3), as well as the “representative of the estate” of each of the Debtors under section 1123(b)(3)(B) of the Bankruptcy Code.

     On the Effective Date, the Debtors will transfer to the Distribution Trust all the Distribution Trust Assets then owned by the Estates, whereupon title to such Distribution Trust Assets will irrevocably vest in the Distribution Trust, free and clear of Claims, Liens and Interests.

     Distribution Trust Assets

     The Distribution Trust Assets include: (a) the Trust Accounts and any Cash (and any other property) held by such Trust Accounts; (b) the rights of the Debtors under or in respect of the Intercompany Claims Settlement, the QAL Purchase Agreement or any causes of action not released by the Plan, including the Recovery Actions, and any proceeds thereof; and (c) the QAL Proceeds to the extent that such funds are not included in the foregoing clauses (a) and (b).

     Purposes of the Distribution Trust

     The Distribution Trust will be established pursuant to the Distribution Trust Agreement for the following purposes and no other:

• collecting, maintaining and administering any Distribution Trust Assets for the benefit of the creditors and claimants of the Estates (collectively, the “Beneficiaries”);

• liquidating (including objecting to Claims and determining the proper recipients and amounts of distributions to be made from the Distribution Trust) and distributing the Distribution Trust Assets for the benefit of the Beneficiaries who are determined to hold Allowed Claims as expeditiously as reasonably possible;

• pursuing available causes of action, including Recovery Actions;

• closing the Chapter 11 Cases; and

• otherwise implementing the Plan and completing the dissolution of the Debtors;

all in accordance with the Plan and the Distribution Trust Agreement. The Distribution Trust will have no objective to, and will not, engage in the conduct of a trade or business and will terminate upon the completion of its liquidation and distribution duties pursuant to the terms of the Distribution Trust Agreement.

     Tax Treatment

     The Distribution Trust is intended to be treated, for U.S. federal income Tax purposes, in part as a liquidating trust within the meaning of Treasury Regulations section 301.7701-4(d), for the benefit of the holders of Allowed Claims entitled to distributions of Pending Payments (as defined below), and otherwise as one or more disputed ownership funds within the meaning of Proposed Treasury Regulations section 1.468B-9(a), as more specifically provided for under the Distribution Trust Agreement. Accordingly, for all federal income Tax purposes the transfer of Distribution Trust Assets to the Distribution Trust will be treated as: (a) to the extent of identified amounts (excluding undeliverable Cash) held by the Distribution Trust for distribution to holders of Allowed Claims in specific amounts as of the date the Distribution Trust receives the applicable Distribution Trust Assets (“Pending Payments”), a transfer of the Pending Payments directly from the Debtors to the holders of such Allowed Claims followed by the transfer of such Pending Payments by the holders of Allowed Claims to the Distribution Trust in exchange for beneficial interests in the Distribution Trust; and (b) to the extent of amounts that are not Pending Payments, as a transfer to one or more disputed ownership funds. The holders of Allowed Claims entitled to distributions of Pending Payments will be treated for federal income Tax purposes as the grantors and deemed owners of their respective shares of the Distribution Trust Assets in the amounts of the Pending Payments and any earnings thereon.

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     The Distribution Trustee will be required by the Distribution Trust Agreement to file federal Tax returns for the Distribution Trust as a grantor trust with respect to any Pending Payments and as one or more disputed ownership funds with respect to all other funds or other property held by the Distribution Trust pursuant to applicable Treasury Regulations, and any income of the Distribution Trust will be treated as subject to Tax on a current basis. The Distribution Trust Agreement will provide that the Distribution Trustee will pay such Taxes from the Distribution Trust Assets as required by law and in accordance with the provisions of the Plan described in “Distributions Under the Plan — Treatment of Disputed Claims.” In addition, the Distribution Trust Agreement will require consistent valuation by the Distribution Trustee and the Beneficiaries, for all federal income Tax purposes, of any property held by the Distribution Trust. The Distribution Trust Agreement will provide that termination of the trust will occur no later than two years after the Effective Date, unless the Bankruptcy Court approves an extension based upon a finding that such an extension is necessary for the Distribution Trust to complete its claims resolution and liquidating purpose. The Distribution Trust Agreement also will limit the investment powers of the Distribution Trustee in accordance with IRS Rev. Proc. 94-45 and will require the Distribution Trust to distribute at least annually to the Beneficiaries (as such may have been determined at such time) its net income (net of any payment of or provision for Taxes), except for amounts retained as reasonably necessary to maintain the value of the Distribution Trust Assets or to meet Claims and contingent liabilities (including Disputed Claims).

     Trust Accounts

     On or prior to the Effective Date, the Trust Accounts will be established in federal insured United States banks in the name of the Distribution Trustee or one or more third-party Disbursing Agents. On the Effective Date, the Trust Accounts and the contents thereof will be transferred to, and irrevocably vest in, the Distribution Trust.

Distribution Trust Expenses Account

     Prior to the Effective Date, the Creditors’ Committee and the Debtors will agree on the amount to be funded into the Distribution Trust Expenses Account on the Effective Date. On the Effective Date, the Distribution Trust Expenses Account will be funded by the transfer of Cash in such amount from the Distribution Trust Assets. The Distribution Trustee will act as the Disbursing Agent for the Distribution Trust Expenses Account. See “Overview of the Plan — Sources and Uses of Cash.”

     Except as otherwise ordered by the Bankruptcy Court, the Distribution Trustee, in its capacity as Disbursing Agent, will, in its reasonable discretion, pay Distribution Trust Expenses from the Distribution Trust Expenses Account, without the need for further Bankruptcy Court approval. Cash in the Distribution Trust Expenses Account will also be used to pay Taxes owing in respect of any amounts included in the Distribution Trust Expenses Account in accordance with the Distribution Trust Agreement. At least five Business Days prior to making any payment from the Distribution Trust Expenses Account, the Distribution Trustee will provide the Steering Committee with a notice setting forth the amount and nature of such payment, with such notice to be accompanied by supporting documentation in reasonable detail.

     If, at any time after the initial funding of the Distribution Trust Expenses Account as contemplated above, the Distribution Trustee determines, in its reasonable discretion, that the Cash balance of the Distribution Trust Expenses Account will be insufficient to make all payments payable therefrom in accordance with the terms of the Plan and the Distribution Trust Agreement, the Distribution Trustee may transfer from the Unsecured Claims Trust Account (to the extent Cash remains available therein) to the Distribution Trust Expenses Account Cash in an aggregate amount determined by the Distribution Trustee, in its reasonable discretion, to be necessary to ensure that the Cash balance of the Distribution Trust Expenses Account will be sufficient to make all such payments. To the fullest extent possible, any transfer described in this paragraph will be accomplished in a manner intended to avoid or minimize any adverse impact on the ability to make full distributions to holders of Allowed Secured Claims, Allowed Administrative Claims, Allowed Priority Claims and Allowed Priority Tax Claims or distributions to holders of Allowed Unsecured Claims in accordance with the terms of the Plan.

     If, at any time after the initial funding of the Distribution Trust Expenses Account as contemplated above, the Distribution Trustee determines that the Cash balance of the Distribution Trust Expenses Account is in excess of the amount that will be sufficient to make all payments payable therefrom in accordance with the terms of the Plan

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and the Distribution Trust Agreement, the Distribution Trustee, with the consent of the Steering Committee, acting through a majority thereof, may transfer such excess Cash to the Unsecured Claims Trust Account.

Priority Claims Trust Account

     Prior to the Effective Date, the Creditors’ Committee and the Debtors will agree on the amount to be funded into the Priority Claims Trust Account on the Effective Date. On the Effective Date, the Priority Claims Trust Account will be funded by the transfer of Cash in such amount from the Distribution Trust Assets. For purposes of the funding of the Priority Claims Trust Account, any and all amounts that become payable by KAAC under the QAL Purchase Agreement, including amounts that become payable in respect of indemnification claims, will be treated as Allowed Administrative Claims and will be paid in full in Cash in accordance with the applicable provisions of the QAL Purchase Agreement. For purposes of the funding of the Priority Claims Trust Account, any and all Taxes determined to be due and owing from the Debtors to the Australian Tax Office for any taxable period (including interest and penalties, if any, determined and calculated under applicable Australian law without regard to the provisions of section 502(b)(2) of the Bankruptcy Code or any other provision of U.S. federal, state or local law) will be treated as Allowed Priority Tax Claims or Allowed Administrative Claims, as the case may be, and will be paid in full in Cash in accordance with the provisions of the Plan described below in “Distributions Under the Plan - Timing Calculation of Amounts to Be Distributed — Allowed Claims Other Than Unsecured Claims in Subclass 3A, Subclass 3B and Subclass 3D; Certain Payments From the Public Note Distributable Consideration”, provided, however, that any liability of the Debtors to the Australian Tax Office for income or capital gains Taxes for any period shall not exceed the amount of such Taxes, if any, determined in writing by the Australian Tax Office to be due and payable for such period. Until such determination, any Claim for Taxes by the Australian Tax Office will be treated as a Disputed Claim. See “Overview of the Plan — Sources and Uses of Cash” and “Operations During the Chapter 11 Cases — Certain Australian Tax Matters.”

     Cash in the Priority Claims Trust Account will be used by the Distribution Trustee only to (a) satisfy Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Priority Claims and Allowed Secured Claims against the Estate of KAAC or the Estate of KFC in accordance with the terms of the Plan and (b) pay Taxes owing in respect of any amounts included in the Priority Claims Trust Account in accordance with the Distribution Trust Agreement.

     If, at any time after the initial funding of the Priority Claims Trust Account as contemplated above, the Distribution Trustee determines, in its reasonable discretion, that the Cash balance of the Priority Claims Trust Account is insufficient to make all payments payable therefrom in accordance with the terms of the Plan and the Distribution Trust Agreement, the Distribution Trustee will transfer from the Unsecured Claims Trust Account (to the extent Cash remains available therein) to the Priority Claims Trust Account Cash in an amount determined by the Distribution Trustee, in its reasonable discretion, to be necessary to ensure that the Cash balance of the Priority Claims Trust Account will be sufficient to so make all such payments. To the fullest extent possible, any transfer described in this paragraph will be accomplished in a manner intended to avoid or minimize any adverse impact on the ability to make distributions to holders of Allowed Unsecured Claims in accordance with the Plan.

     If, at any time after the initial funding of the Priority Claims Trust Account described above, the Distribution Trustee determines that the Cash balance of the Priority Claims Trust Account is in excess of the amount that will be sufficient to make all payments payable therefrom in accordance with the Plan and the Distribution Trust Agreement, the Distribution Trustee, with the consent of the Steering Committee, acting through a majority thereof, may transfer such excess Cash to the Unsecured Claims Trust Account, except that no amounts included in the Priority Claims Trust Account in connection with any potential obligation under the QAL Purchase Agreement for which KAAC and KACC are jointly and severally liable may be so transferred without the consent of KACC until the applicable survival period with respect to such obligation has expired.

Unsecured Claims Trust Account

     On the Effective Date, after the initial funding of the Distribution Trust Expenses Account as described in “Distribution Trust Expenses Account” above and the initial funding of the Priority Claims Trust Account as described in “Priority Claims Trust Account” above, the Distribution Trustee will (a) from the Distribution Trust Assets, make any Intercompany Settlement Payments and (b) thereafter fund the Unsecured Claims Trust Account

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with the remainder of the Distribution Trust Assets, including the Retained Portion of the KFC Claim, all as provided in the Distribution Trust Agreement.

     Cash and other property in the Unsecured Claims Trust Account will be used by the Distribution Trustee only to (a) satisfy Allowed Unsecured Claims against the Estate of KAAC or the Estate of KFC in accordance with the terms of the Plan, (b) pay amounts to be deducted from the Public Note Distributable Consideration in accordance with the terms of the Plan, and (c) pay Taxes owing in respect of any amounts included in the Unsecured Claims Trust Account.

Disputed Claims Reserve

     It is currently contemplated that, on the Effective Date, in connection with the initial funding of the Priority Claims Trust Account as described above, the Distribution Trustee will designate, with the consent of the Creditors’ Committee and KACC, a specified portion of such initial funding as a Disputed Claims Reserve to be retained in such Trust Account to satisfy any Disputed Administrative Claims, Disputed Priority Tax Claims, Disputed Priority Claims and Disputed Secured Claims against the Estate of KAAC or the Estate of KFC in accordance with the Plan, if, as and when they are allowed or, to the extent such Disputed Claims are not allowed, to satisfy Claims that are allowed in accordance with the terms of the Plan. In connection with any subsequent transfer of Cash to the Priority Claims Trust Account as described above, the Distribution Trustee will designate amounts so transferred, to the extent they are not identified as Pending Payments, as Disputed Claims Reserves to be retained in such Trust Account to satisfy Disputed Administrative Claims, Disputed Priority Tax Claims, Disputed Priority Claims and Disputed Secured Claims against the Estate of KAAC or the Estate of KFC in accordance with the Plan, if, as and when they are allowed or, to the extent such Disputed Claims are not allowed, to satisfy Claims that are allowed in accordance with the terms of the Plan.

     Further, it is contemplated that on the Effective Date, in connection with the initial funding of the Unsecured Claims Trust Account as contemplated above, the Distribution Trustee will designate a specified portion of such initial funding as a Disputed Claims Reserve to be retained in such Trust Account to satisfy any Disputed Unsecured Claims against the Estate of KAAC of the Estate of KFC in accordance with the terms of the Plan, if, as and when they are allowed or, to the extent such Disputed Claims are not allowed, to satisfy Claims that are allowed in accordance with the terms of the Plan. In connection with any subsequent transfers of Cash to the Unsecured Claims Trust Account in accordance with the Distribution Trust Agreement, the Distribution Trustee will designate all amounts so transferred, to the extent not identified as Pending Payments, as Disputed Claims Reserves to be retained in such Trust Account to satisfy the Disputed Unsecured Claims against the Estate of KAAC or the Estate of KFC in accordance with the terms of the Plan, if, as and when they are allowed or, to the extent such Disputed Claims are not allowed, to satisfy Claims that are allowed in accordance with the terms of the Plan.

     Any Cash or other property that becomes available to the Distribution Trust following the Effective Date, including as a result of (a) the receipt of any non-Cash property in respect of the Retained Portion of the KFC Claim, (b) the receipt of any dividends or other distributions on account of securities held in the Unsecured Claims Trust Account, or (c) the receipt of any income or interest generated by the investment of Cash held in the Unsecured Claims Trust Account, will be deposited in the Unsecured Claims Trust Account.

Undeliverable Property Trust Account

     After the Effective Date, if any distribution to a holder of an Allowed Unsecured Claim is returned to the Distribution Trustee as undeliverable, the Distribution Trustee will deposit the undeliverable Cash or other property in the Undeliverable Property Trust Account. The Distribution Trustee will hold such funds and property, in a book-entry sub-account in the Undeliverable Property Trust Account, for the benefit of such holder. Until such holder notifies the Distribution Trustee in writing of its then-current address, as contemplated by the Distribution Trust Agreement, no attempt will be made to deliver subsequent distributions to such holder and any such distributions that such holder would otherwise be entitled to receive instead will be transferred from the Unsecured Claims Trust Account to the Undeliverable Property Trust Account and credited to such book-entry sub-account. Any dividends or other distributions on account of undeliverable securities held in such book-entry sub-account will also be held in such book-entry sub-account for the benefit of such holder until such holder notifies the Distribution Trustee in writing of its then-current address. All Cash (including dividends or other distributions on account of

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undeliverable securities) held in such book-entry sub-account for the benefit of such holder will be invested by the Distribution Trustee in a manner consistent with the investment and deposit guidelines set forth in the Distribution Trust Agreement. Any income or interest generated from such investment activities will be held in such book-entry sub-account for the benefit of such holder until such holder notifies the Distribution Trustee in writing of its then-current address as contemplated by the Distribution Trust Agreement. Subject to the provisions of the Distribution Trust Agreement relating to the forfeiture of certain undeliverable distributions, when such holder notifies the Distribution Trustee in writing of its then-current address as contemplated by the Distribution Trust Agreement, the Distribution Trustee will deliver to such holder all Cash and other property contained in such book-entry sub-account (net of provision for Taxes owing in respect of amounts included in such book-entry sub-account in accordance with the Distribution Trust Agreement). In the event such holder’s right to assert a claim for undeliverable distributions is forfeited as contemplated by the Distribution Trust Agreement, all Cash and other property contained in such book-entry sub-account will be transferred from the Undeliverable Property Trust Account to the Unsecured Claims Trust Account for redistribution to holders of Allowed Unsecured Claims entitled to distributions therefrom. See “Distributions Under the Plan - Undeliverable or Unclaimed Distributions.”

          Risks Associated with Funding of Trust Accounts

     A holder of a Disputed Claim that ultimately becomes an Allowed Claim will have recourse only to the undistributed Cash held in the Disputed Claim Reserve of the applicable Trust Account (net of Taxes on such Disputed Claim Reserves) for the satisfaction of such Allowed Claims and not to any other Trust Account or any assets previously distributed on account of any Allowed Claim.

     The funding of the Distribution Trust Expenses Account and the Priority Claims Trust Account will be based on the Debtors’ estimates of the amount of liabilities to be funded from these Trust Accounts. There is no assurance that these estimates will be accurate and, despite the Debtors’ best efforts, it is possible that the Cash in these Trust Accounts may be insufficient to satisfy the Distribution Trust Expenses and/or the Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Priority Claims and Allowed Secured Claims against the Debtors’ Estates. Although the Plan provides certain mechanisms to further fund any deficiencies in these Trust Accounts, it is possible that insufficient Cash may be available to fund any deficiency. Based on information currently available, the Debtors do not believe that these risks are material.

     Powers of the Distribution Trustee

          General Powers

     The Distribution Trustee will have only the rights, powers and privileges to act on behalf of the Distribution Trust expressly provided in the Plan and the Distribution Trust Agreement. The Distribution Trustee will be empowered to, among other things:

•   execute all agreements, instruments and other documents and effect all other actions necessary to implement the Plan;

•   establish, maintain and administer the Trust Accounts;

•   accept, preserve, receive, collect, manage, invest, supervise and protect the Distribution Trust Assets (directly or through one or more third-party Disbursing Agents), each in accordance with the Plan and the Distribution Trust Agreement;

•   liquidate, transfer or otherwise dispose of the Distribution Trust Assets or any part thereof or any interest therein upon such terms as the Distribution Trustee determines to be necessary, appropriate or desirable, pursuant to the procedures for allowing Claims and making distributions prescribed in the Plan, and otherwise consistent with the terms of the Plan;

•   calculate and make distributions of the Distribution Trust Assets to holders of Allowed Claims pursuant to the procedures for allowing Claims and making distributions prescribed in the Plan;

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•   comply with the Plan and exercise its rights and fulfill its obligations thereunder;

•   review, reconcile, settle or object to Claims and resolve any such objections as set forth in the Plan and the Distribution Trust Agreement;

•   investigate and, if appropriate, pursue any Recovery Actions or other available causes of action (including any actions previously initiated by the Debtors and pending as of the Effective Date) and raise any defenses in any adverse actions or counterclaims;

•   retain and compensate, without further order of the Bankruptcy Court, the services of professionals or other persons or entities to represent, advise and assist the Distribution Trustee in the fulfillment of its responsibilities in connection with the Plan and the Distribution Trust Agreement;

•   take such steps as are necessary, appropriate or desirable to coordinate with representatives of the estates of the Other Kaiser Debtors;

•   take such actions as are necessary, appropriate or desirable to close the Chapter 11 Cases;

•   file appropriate Tax returns on behalf of the Distribution Trust and Debtors and pay Taxes or other obligations owed by the Distribution Trust;

•   exercise the rights and fulfill the obligations of KAAC under the QAL Purchase Agreement, including with respect to any claim for indemnification;

•   pay all Distribution Trust Expenses using the Distribution Trust Expenses Account;

•   execute, deliver and perform such other agreements and documents or exercise such other powers and duties as the Distribution Trustee determines, in its reasonable discretion, to be necessary, appropriate or desirable to accomplish and implement the purposes and provisions of the Distribution Trust as set forth in the Plan and the Distribution Trust Agreement;

•   take such actions as are necessary, appropriate or desirable to terminate the existence of the Debtors under the laws of Australia or any political subdivision thereof;

•   take such actions as are necessary, appropriate or desirable with respect to the Retained Portion of the KFC Claim ; and

•   terminate the Distribution Trust in accordance with the terms of the Plan and Distribution Trust Agreement.

     Except as otherwise provided in the Plan or the Distribution Trust Agreement, the Distribution Trustee will not be required to obtain the order or approval of the Bankruptcy Court or any other court of competent jurisdiction in, or account to the Bankruptcy Court or any other court of competent jurisdiction for, the exercise of any right, power or privilege conferred under the Distribution Trust Agreement.

          Right to Object to Claims

     Except as otherwise provided in the Plan or the Distribution Trust Agreement, after the Effective Date only the Distribution Trustee, on behalf of the Distribution Trust, with the prior consent of the Steering Committee, acting through a majority thereof, will have the authority to File, settle, compromise, withdraw or litigate to judgment objections to Claims, including pursuant to any alternative dispute resolution or similar procedures approved by the Bankruptcy Court. After the Effective Date, the Distribution Trustee, with the prior consent of the

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Steering Committee, acting through a majority thereof, may settle or compromise any Disputed Claim without approval of the Bankruptcy Court in accordance with the Distribution Trust Agreement.

          Right to Pursue Causes of Action

     Except as otherwise provided in the Plan or in any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, in accordance with section 1123(b) of the Bankruptcy Code, the Distribution Trustee will retain and may enforce any claims, demands, rights and causes of action that either Debtor or Estate may hold against any entity, including the Recovery Actions, to the extent not expressly released under the Plan. In particular, the Distribution Trustee will retain the right to pursue any adversary proceedings available to the Debtors in connection with the QAL Purchase Agreement or the Intercompany Claims Settlement.

          Right to Vote the Retained Portion of the KFC Claim

     Except as otherwise provided in the Plan or the Distribution Trust Agreement, after the Effective Date only the Distribution Trustee, on behalf of the Distribution Trust as holder of the Retained Portion of the KFC Claim, with the prior consent of the Steering Committee, acting through a majority thereof, will have the authority to accept or reject a plan of reorganization for KACC.

     Limitation on Liability and Indemnification of Distribution Trustee

     In exercising its rights under the Distribution Trust Agreement, the Distribution Trustee will be obligated to use the same degree of care and skill as an individual of ordinary prudence, discretion and judgment would exercise or use in such individual’s own affairs. The Distribution Trustee, however, will incur no liability for any action taken or omitted to be taken in connection with the Plan or the Distribution Trust Agreement except liability that would otherwise result from (a) a failure to perform or pay any obligation or liability thereunder or (b) an act or omission that is determined in a Final Order to have constituted bad faith, fraud, willful misconduct, gross negligence or a breach of its fiduciary duties.

     The Distribution Trustee and the members of the Steering Committee will be indemnified by the Distribution Trust from the Distribution Trust Expenses Trust Account for any losses, claims, damages, liabilities or expenses, including reasonable attorneys’ fees, disbursements and related expenses, that the Distribution Trustee may incur or to which the Distribution Trustee may become subject in connection with any action, suit, proceeding or investigation brought by or threatened against the Distribution Trustee on account of the acts or omissions of the Distribution Trustee in its capacity as such, provided that the Distribution Trust will not be liable to indemnify the Distribution Trustee for any act or omission constituting bad faith, fraud, willful misconduct, gross negligence or a breach of its fiduciary duties. The Distribution Trustee will be entitled to obtain advances from the Distribution Trust Expenses Account to cover expenses of defending itself in any action brought against it as a result of actions or omissions, actual or alleged, of the Distribution Trustee in its capacity as such, so long as the Distribution Trustee provides an undertaking to repay the amounts so advanced to the Distribution Expenses Trust Account upon the entry of a Final Order finding that the Distribution Trustee was not entitled to indemnity.

     Removal and Resignation of the Distribution Trustee; Filling of Vacancy

     The Distribution Trustee may be removed at any time by Final Order of the Bankruptcy Court. Such removal will be effective as specified in such Final Order.

     The Distribution Trustee may resign at any time by giving the Bankruptcy Court at least 30 days’ written notice of its intention to do so. Such resignation will be effective on the latest of: (a) the date specified in the notice; (b) the date that is 30 days after the notice is delivered; (c) the date the Distribution Trustee delivers a full and complete accounting of assets received, disbursed and held to the Bankruptcy Court; and (d) the date the successor Distribution Trustee accepts its appointment as such.

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     The Indenture Trustees and the PBGC together will identify a successor Distribution Trustee to fill any vacancy and request the Bankruptcy Court’s approval of the identity and terms of engagement of such successor Distribution Trustee. The Distribution Trust Agreement will provide for a dispute resolution mechanism in the event that the Indenture Trustees and the PBGC cannot agree on a successor Distribution Trustee.

     Compensation of the Distribution Trustee

     The Distribution Trustee will receive fair and reasonable compensation for its services, with such compensation to be paid from the Distribution Trust Expenses Account. In addition, reasonable costs, expenses and obligations incurred by the Distribution Trustee in administering the Distribution Trust, in carrying out its other responsibilities under the Distribution Trust Agreement, or in any manner connected, incidental or related thereto will be paid, at the direction of the Distribution Trustee, from the Distribution Trust Expenses Account.

     Books and Records; Reports and Tax Filings

          Books and Records

     The Distribution Trustee will maintain books and records containing a description of all property from time to time constituting the Distribution Trust Assets (which assets will be valued consistently for all federal income Tax purposes) and an accounting of all receipts and disbursements. Such books and records will be open to inspection by any Beneficiary or the Bankruptcy Court at any reasonable time during normal business hours. The fiscal year of the Distribution Trust will be the calendar year.

          Reports to be Filed with the Bankruptcy Court

     Within 45 days after the end of each of the first three calendar quarters of the calendar year, the Distribution Trustee will File an unaudited report with the Bankruptcy Court reflecting: (a) all Distribution Trust Assets received by the Distribution Trust during such calendar quarter; (b) all Distribution Trust Assets held by the Distribution Trust at the end of such quarter; and (c) all Distribution Trust Assets disbursed during such calendar quarter, in each case itemized for the individual Trust Accounts (a “Quarterly Receipts/Disbursements Report”).

     Within 90 days after the end of each calendar year, the Distribution Trustee will File an unaudited report with the Bankruptcy Court reflecting: (a) all Distribution Trust Assets received by the Distribution Trust during such calendar year; (b) all Distribution Trust Assets held by the Distribution Trust at the end of such calendar year; and (c) all Distribution Trust Assets disbursed during such calendar year, in each case itemized for the individual Trust Accounts (an “Annual Receipts/Disbursements Report”).

     In the event of developments affecting the Distribution Trust in any material respect (as determined by the Distribution Trustee in its reasonable discretion), the Distribution Trustee will File promptly with the Bankruptcy Court a report describing such development in reasonable detail (a “Current Report”).

     The Distribution Trustee will furnish or otherwise make available to any then-current Beneficiary, upon written request, a copy of: (a) the most recent Annual Receipts/Disbursements Report; (b) any Quarterly Receipts/Disbursements Report for any period subsequent to the period covered by the most recent Annual Receipts/Disbursements Report (or, if no Annual Receipts/Disbursements Report has yet been Filed, for any period subsequent to the Effective Date); or (c) any Current Report Filed subsequent to the period covered by the most recent Annual Receipts/Disbursements Report (or, if no Annual Receipts/Disbursements Report has yet been Filed, subsequent to the Effective Date).

          Tax Returns and Payments

     The Distribution Trustee will be responsible for filing all foreign, U.S. federal, state and local Tax returns for the Distribution Trust and Debtors and for the timely preparation and distribution to the Beneficiaries of any necessary foreign, U.S. federal, state or local information returns. Notwithstanding any other provision of the

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Distribution Trust Agreement, the Distribution Trustee will not be obligated to deliver any such information returns to holders of Disputed Claims in their capacity as such.

     The Distribution Trustee will timely file Tax returns for the Trust Accounts as a grantor trust and/or a liquidating trust under Treasury Regulations section 1.671-1(a) and/or Treasury Regulations section 301.7701-4(d) and related regulations with respect to Pending Payments. Pursuant to such provisions, for federal income Tax purposes the Distribution Trustee will allocate to Beneficiaries entitled to receive Pending Payments their pro rata shares of any income or loss of the Trust Accounts, and such Beneficiaries will be subject to Tax on the Trust Accounts’ taxable income on a current basis.

     With respect to the Trust Accounts (excluding amounts constituting Pending Payments), the Distribution Trustee will timely (a) file such income Tax and other returns and statements as are required to comply with (i) the applicable provisions of the IRC and the Treasury Regulations promulgated thereunder, including the requirements set forth in Proposed Treasury Regulations section 1.468B-9(c)(1) and (ii) any applicable state and local law and the regulations promulgated thereunder and (b) pay from the applicable Trust Account any Taxes reported as owing on such returns and statements.

     Term of the Distribution Trust

     The Distribution Trust will terminate upon:

•   the payment of all costs, expenses and obligations incurred in connection with administering the Distribution Trust;

•   the distribution of all remaining Distribution Trust Assets and/or proceeds therefrom in accordance with the provisions of the Plan, the Confirmation Order and the Distribution Trust Agreement;

•   the closure of the Chapter 11 Cases; and

•   the completion of any necessary or appropriate reports, Tax returns or other documentation.

     If the Distribution Trust has not been previously terminated as described above, on the second anniversary of the Effective Date, unless otherwise extended by the Bankruptcy Court due to the Distribution Trust’s necessity to complete its claims resolution and liquidating purpose, and provided such extension does not adversely affect the status of the Distribution Trust for federal income Tax or federal securities law purposes, the Distribution Trustee will distribute all of the Distribution Trust Assets to the Beneficiaries in accordance with the Plan and the Distribution Trust Agreement.

DISTRIBUTIONS UNDER THE PLAN

Method of Distributions to Holders of Allowed Claims

     The Distribution Trustee will make all distributions of Cash and other property required under the Plan. The Distribution Trustee will serve without bond and may employ or contract with other entities to assist in, or make the distributions required by, the Plan and the Distribution Trust Agreement. Unless the context otherwise requires, all references to the Distribution Trustee contained in this section will be deemed to be references to the Distribution Trustee in its capacity as Disbursing Agent and, in the event the Distribution Trustee employs or contracts with one or more other entities to assist in, or make the distributions required by, the Plan and the Distribution Trust Agreement as contemplated by the immediately preceding sentence, to any such third-party Disbursing Agent in its capacity as such. Notwithstanding the foregoing, the Distribution Trustee will act as the Disbursing Agent for the Distribution Expenses Trust Account.

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Delivery of Distributions

     Generally

     Except as otherwise provided in the Plan, distributions in respect of Allowed Claims will be made to holders of such Claims as of the Distribution Record Date at the addresses set forth in the applicable Claims Report. Prior to making any distribution to a Beneficiary, the Distribution Trustee may request written notification of the Beneficiary’s federal taxpayer identification number or social security number if the Distribution Trustee determines, in its reasonable discretion, that such information (a) is necessary to fulfill its Tax reporting and withholding obligations and (b) has not been provided in the applicable Claims Report or otherwise. The Distribution Trustee, in its reasonable discretion, may suspend distributions to any Beneficiary that has not provided its federal taxpayer identification number or social security number, as the case may be, after a request is made as described in this paragraph.

     Special Provisions for Distributions to Holders of Public Note Claims

     All distributions to holders of Allowed Public Note Claims will be made by the Distributing Trustee to the applicable Indenture Trustee for subsequent distribution to holders of the Allowed Public Note Claims as of the Distribution Record Date.

Undeliverable or Unclaimed Distributions

     If any distribution to a holder of an Allowed Unsecured Claim is returned to the Distribution Trustee as undeliverable, then unless and until the Distribution Trustee is notified in writing of such holder’s then-current address: (a) subject to the provisions described in the immediately following paragraph, such undeliverable distributions will remain in the possession of the Distribution Trustee as provided in the Plan and no further attempt will be made to deliver such distribution; and (b) no attempt will be made to deliver subsequent distributions to such holder and any such distributions that such holder would otherwise be entitled to receive instead will be transferred from the Unsecured Claims Trust Account to the Undeliverable Property Trust Account where it will be held in a book-entry sub-account for the benefit of such holder. See “General Information Concerning the Plan — Distribution Trust — Distribution Trust Accounts — Undeliverable Cash Trust Accounts.”

     Any holder of an Allowed Unsecured Claim that does not assert a claim for an undeliverable distribution by delivering to the Distribution Trustee a written notice setting forth such holder’s then-current address within 180 days after the later of (a) the Effective Date and (b) the last date on which a distribution was deliverable to the holder will have its claim for undeliverable distributions discharged and will be forever barred from asserting such claim or any claim for subsequent distributions against the Debtors, the Distribution Trustee or the property of any of them, including the Trust Accounts, whereupon all Cash and other property contained in the book-entry sub-account in the Undeliverable Property Trust Account created for the benefit of such holder will be transferred to the Unsecured Claims Trust Account for redistribution to holders of Allowed Unsecured Claims entitled to distributions therefrom. For purposes of any such redistribution, each Allowed Claim in respect of which a claim for undeliverable distributions has been discharged will be deemed disallowed in its entirety.

     Nothing contained in the Plan will require the Debtors or the Distribution Trustee to attempt to locate any holder of an Allowed Claim.

Means of Cash Payments

     Except as otherwise provided in the Plan or the Distribution Trust Agreement, Cash payments made pursuant to the Plan will be in United States currency by checks drawn on the applicable Trust Accounts or, at the option of the Distribution Trustee, by wire transfer from a domestic bank; provided, however, that Cash payments to foreign holders of Allowed Claims may be made, at the option of the Distribution Trustee, in such funds and by such means as are necessary or customary in a particular foreign jurisdiction. If a check included in a distribution to a holder of an Allowed Unsecured Claim is not cashed within 180 days of the issuance thereof, the Distribution

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Trustee will void such check and such distribution will be treated as undeliverable as described in “Undeliverable or Unclaimed Distributions” above.

Timing and Calculation of Amounts to Be Distributed

     Allowed Claims Other Than Unsecured Claims

     On or as promptly as practicable after the Effective Date, the Distribution Trustee will make distributions to holders of Secured Claims, Administrative Claims, Priority Claims and Priority Tax Claims allowed as of the Effective Date. On or as promptly as practicable after each Quarterly Distribution Date, the Distribution Trustee will make distributions to holders of Disputed Secured Claims, Disputed Administrative Claims, Disputed Priority Claims and Disputed Priority Tax Claims that have become Allowed Claims during the immediately preceding calendar quarter. The Quarterly Distribution Date will be on the last Business Day of the month following the end of each calendar quarter after the Effective Date, except that if the Effective Date is within 45 days of the end of a calendar quarter, the first Quarterly Distribution Date will be the last Business Day of the month following the end of the first calendar quarter after the calendar quarter in which the Effective Date falls. Notwithstanding the foregoing, if the Distribution Trustee determines, in its reasonable discretion, that the amount of any quarterly distribution is too small to justify the administrative costs associated with such distribution, the Distribution Trustee may postpone such quarterly distribution until the next Quarterly Distribution Date. The Distribution Trustee will have no obligation to notify Beneficiaries if it determines, in its reasonable discretion, that any quarterly distribution will be postponed.

     Allowed Unsecured Claims in Subclass 3A; Certain Payments From the Public Note Distributable Consideration

          Plan Accepted by Subclass 3A and Subclass 3B

     If both Subclass 3A and Subclass 3B vote to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, on or as promptly as practicable after the Effective Date, the Distribution Trustee will: (a) make distributions to holders of Allowed Claims in Subclass 3A in accordance with Section 2.4(c)(i)(A) of the Plan; provided that the amount of such distributions will be calculated as if each Disputed Unsecured Claim in Subclass 3D were an Allowed Unsecured Claim in its Face Amount as of the Effective Date; and (b) make the payments to be deducted from the Public Note Distributable Consideration as contemplated by clauses (I) and (II) of the first sentence of Section 2.4(c)(i)(A) of the Plan.

     If both Subclass 3A and Subclass 3B vote to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, on or as promptly as practicable after each Quarterly Distribution Date, the Distribution Trustee will distribute to each holder of an Allowed Claim in Subclass 3A a distribution from the Unsecured Claims Trust Account (net of provision for Taxes) in an amount equal to: (a) the amount of Cash and other property that such holder would have been entitled to receive pursuant to the Plan if such Claim and each other Unsecured Claim allowed prior to such Quarterly Distribution Date had been an Allowed Unsecured Claim as of the Effective Date (with such amount to be calculated in the manner described in the immediately preceding paragraph) minus (b) the aggregate amount of Cash and other property previously distributed on account of such Claim. Notwithstanding the foregoing, if the Distribution Trustee determines, in its reasonable discretion, that the amount of any quarterly distribution is too small to justify the administrative costs associated with such distribution, the Distribution Trustee may postpone such quarterly distribution until the next Quarterly Distribution Date. The Distribution Trustee will have no obligation to notify Beneficiaries if it determines, in its reasonable discretion, that any quarterly distribution will be postponed. In the event of the disallowance of a Disputed Unsecured Claim in Subclass 3D, any amounts held in respect thereof will be released from the Disputed Claims Reserve for distribution as described in this paragraph and “- Allowed Unsecured Claims in Subclass 3C and Subclass 3D.”

          Plan Rejected by Subclass 3A or Subclass 3B

     If either Subclass 3A or Subclass 3B fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the amount of the Public Note Distributable Consideration to which the Bankruptcy Court

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determines the holders of Allowed Claims in Subclass 3A are entitled in respect of such Claims will be distributed as provided in an order of the Bankruptcy Court and the Distribution Trustee will, contemporaneously or as promptly as practicable thereafter, make the payments (or reservations for payment) by which such distributions are to be reduced in accordance with Section 2.4(a)(i)(B) of the Plan.

     Allowed Unsecured Claims in Subclass 3B

          Plan Accepted by Subclass 3A and Subclass 3B

     If both Subclass 3A and Subclass 3B vote to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, on or as promptly as practicable after the Effective Date, the Distribution Trustee will make the payment to the Senior Subordinated Note Indenture Trustee as contemplated by clause (III) of the first sentence of Section 2.4(c)(i)(A) of the Plan and Section 2.4(c)(ii)(A) of the Plan for subsequent distribution by the Senior Subordinated Note Indenture Trustee to the holders of Allowed Claims in Subclass 3B.

          Plan Rejected by Subclass 3A or Subclass 3B

     If either Subclass 3A or Subclass 3B fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the amount of the Public Note Distributable Consideration, if any, to which the Bankruptcy Court determines the holders of Allowed Claims in Subclass 3B are entitled in respect of such Claims will be distributed as provided in an order of the Bankruptcy Court. As contemplated by Section 2.4(c)(ii)(B) of the Plan, any such distributions ultimately made to a holder of an Allowed Claim in Subclass 3B may be reduced by such holder’s proportional share of any and all fees and expenses payable to the Senior Subordinated Note Indenture Trustee pursuant to the Senior Subordinated Note Indenture, which will, subject to such Trustee’s right to seek payment by the Debtors of such fees and expenses pursuant to section 503(b)(5) of the Bankruptcy Code, be payable solely from such distributions.

     Allowed Unsecured Claims in Subclass 3C and Subclass 3D

     On or as promptly as practicable after the Effective Date, the Distribution Trustee will make distributions to holders of Unsecured Claims in Subclass 3C and Subclass 3D allowed as of the Effective Date; provided that the amount of such distributions will be calculated as if each Disputed Unsecured Claim in Subclass 3D were an Allowed Unsecured Claim in its Face Amount as of the Effective Date; provided further, however, that no distribution will be made on account of any Disputed Unsecured Claim in Subclass 3D unless and until it becomes an Allowed Unsecured Claim and amounts withheld for Disputed Unsecured Claims in Subclass 3D will remain in the Unsecured Claims Trust Account as part of the Disputed Claims Reserve.

     On or as promptly as practicable after each Quarterly Distribution Date, the Distribution Trustee will distribute to each holder of an Unsecured Claim in Subclass 3C or Subclass 3D allowed prior to such Quarterly Distribution Date a distribution from the Unsecured Claims Trust Account (net of provision for Taxes) in an amount equal to: (a) the amount of Cash and other property that such holder would have been entitled to receive pursuant to the Plan if such Claim and each other Unsecured Claim allowed prior to such Quarterly Distribution Date had been an Allowed Unsecured Claim as of the Effective Date (with such amount to be calculated in the manner described in the immediately preceding paragraph) minus (b) the aggregate amount of Cash and other property previously distributed on account of such Claim. Notwithstanding the foregoing, if the Distribution Trustee determines, in its reasonable discretion, that the amount of any quarterly distribution is too small to justify the administrative costs associated with such distribution, the Distribution Trustee may postpone such quarterly distribution until the next Quarterly Distribution Date. The Distribution Trustee will have no obligation to notify Beneficiaries if it determines, in its reasonable discretion, that any quarterly distribution will be postponed. In the event of the disallowance of a Disputed Unsecured Claim in Subclass 3D, any amounts held in respect thereof will be released from the Disputed Claims Reserve for distribution as described in this paragraph and “- Allowed Unsecured Claims in Subclass 3C and Subclass 3D — Plan Accepted by Subclass 3A and Subclass 3B.”

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     7-3/4% SWD Revenue Bonds.

          Plan Accepted by Subclass 3A

     If Subclass 3A votes to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code and, unless the holders of Senior Note Claims otherwise agree pursuant to a settlement, all holders of Allowed Senior Note Claims are entitled under the Plan to identical treatment in respect of contractual subordination claims under the Senior Subordinated Note Indenture, on or as promptly as practicable on the Effective Date the Distribution Trustee will make the payment, if any, to the 7-3/4% SWD Revenue Bond Indenture Trustee for the benefit of holders of 7-3/4% SWD Revenue Bonds pursuant to Section 2.5(a) of the Plan and pay any amounts payable pursuant to Section 2.6(b) of the Plan.

          Plan Rejected by Subclass 3A

     If Subclass 3A fails to accept the Plan in accordance with section 1126(c) of the Bankruptcy Code, the amount of the Public Note Distributable Consideration, if any, to which the Bankruptcy Court determines the holders of 7-3/4% SWD Revenue Bonds are entitled will be distributed as provided in an order of the Bankruptcy Court.

     No De Minimis Distributions

     The Distribution Trustee will not be required to distribute Cash to the holder of an Allowed Unsecured Claim if the total aggregate amount of Cash to be distributed on account of such Claim is less than $25. Any holder of an Allowed Unsecured Claim on account of which the total aggregate amount of Cash to be distributed is less than $25 will have its Claim for such distribution deemed satisfied, waived and released and will be forever barred from asserting any such Claim against the Debtors, the Distribution Trustee or the property of any of them, including the Trust Accounts. Any Cash not distributed with respect to Allowed Unsecured Claims as a result of the provisions described in this paragraph, including dividends or other distributions made on account of securities in the unsecured Claims Account, will be retained in the Unsecured Claims Trust Account for redistribution to other holders of Allowed Unsecured Claims entitled to distributions from the Unsecured Claims Trust Account.

     Compliance with Tax Requirements

     To the extent applicable, the Distribution Trustee will comply with all Tax withholding and reporting requirements imposed on it by any governmental unit, and all distributions pursuant to the Plan will be subject to such withholding and reporting requirements. The Distribution Trustee will be authorized to take any actions that it determines, in its reasonable discretion, to be necessary, appropriate or desirable to comply with such withholding and reporting requirements, including but not limited to requiring recipients to fund the payment of such withholding as a condition to delivery or entering into arrangements for the sale (subject to any applicable restrictions or transfer) of non-Cash property otherwise to be distributed to a recipient subject to a withholding requirement in order to generate net proceeds (together with any Cash included in such distribution) sufficient to fund the payment of any such withholding. Notwithstanding any other provision of the Plan or the Distribution Trust Agreement, each entity receiving a distribution of Cash pursuant to the Plan will have sole and exclusive responsibility for the satisfaction and payment of any Tax obligations imposed on it by any governmental unit on account of such distribution, including income, withholding and other Tax obligations.

     Setoffs

     Except with respect to claims of a Debtor released pursuant to the Plan or any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, the Distribution Trustee may, pursuant to section 553 of the Bankruptcy Code or applicable nonbankruptcy law, set off against any Allowed Claim and the distributions to be made pursuant to the Plan on account of such Claim (before any distribution is made on account of such Claim) the claims, rights and causes of action of any nature that the applicable Debtor may hold against the holder of such Allowed Claim; provided, however, that neither the failure to effect a setoff nor the

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allowance of any Claim will constitute a waiver or release by the applicable Debtor of any claims, rights and causes of action that the Debtor or Debtors may possess against such a Claim holder, which are preserved under the Plan.

Compensation and Reimbursement for Services Related to Distributions

     If the Distribution Trustee employs or contracts with a third-party Disbursing Agent, such Disbursing Agent will receive, without the need for further Bankruptcy Court approval, reasonable compensation for such services and reimbursement of reasonable out-of-pocket expenses incurred in connection with such services. These payments will be made on terms agreed to with the Distribution Trustee and will be paid to such Disbursing Agent from funds in the Distribution Trust Expenses Account. To assist in making distributions under the Plan, notwithstanding any other provision of the Distribution Trust Agreement, the applicable Trust Accounts (other than the Distribution Trust Expenses Account) may be held in the name of one or more such Disbursing Agents. Any such Disbursing Agent will invest the Cash in the Trust Accounts as directed by the Distribution Trustee, who will direct such Disbursing Agent to invest such Cash only in Permitted Investments; provided, however, that should the Distribution Trustee determine, in its reasonable discretion, that the administrative costs associated with such investment will exceed the return on such investment, it may direct such Disbursing Agent to not invest such Cash.

Payments Limited to Trust Accounts

     All payments or other distributions to be made by the Distribution Trustee in accordance with the Plan or the Distribution Trust Agreement will be made only from the Trust Accounts.

Insufficient Assets

     Provided that the Distribution Trustee has not acted in bad faith, engaged in fraud, willful misconduct or gross negligence, or breached its fiduciary duties, if the Distribution Trust Assets at any point prove insufficient to pay all Beneficiaries of the Priority Claims Trust Account in full or all Beneficiaries of the Unsecured Claims Trust Account in accordance with the terms of the Plan, the Distribution Trustee will have no obligation to seek disgorgement from any Beneficiary, but may seek the guidance of the Bankruptcy Court or another court of competent jurisdiction.

Distributions of Securities.

     Pending the distribution of any voting securities, the Distribution Trustee will cause all such securities held in the Trust Accounts to be (a) represented in person or by proxy at each meeting at which the holder of such securities is entitled to vote, (b) voted in any election of directors for the nominees recommended by the board of directors of the issuer of such securities, and (c) voted with respect to any other matter as recommended by the board of directors of the issuer of such securities.

     Any distribution of securities will include, to the extent applicable: (a) any dividends or other distributions that were previously paid to the Distribution Trust in respect of the securities included in such distribution; and (b) any income or interest generated by the investment of such dividends or other distributions (net of provision for Taxes owing in respect of such amounts in accordance with Section 10.2(c)) of the Plan.

     Notwithstanding any provision of the Plan, only whole numbers of securities will be distributed. When any distribution on account of an Allowed Unsecured Claim would otherwise result in the distribution of a number of securities that is not a whole number, the number of securities to be so distributed will be rounded to a whole number on an equitable basis to be determined by the Distribution Trustee in order to ensure that all such securities are distributed and are so distributed only in whole numbers.

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Disputed Claims

     Prosecution of Objections to Claims

     All objections to Claims must be Filed and served on the holders of such Claims by the Claims Objection Bar Date, and, if Filed prior to the Effective Date, such objections will be served on the parties on the then-applicable service list in the Chapter 11 Cases. If an objection has not been Filed to a proof of Claim, a scheduled Claim or a request for payment of Administrative Claim by the applicable Claims Objection Bar Date, the Claim to which the proof of Claim, scheduled Claim or request for payment of Administrative Claim relates will be treated as an Allowed Claim if such Claim has not been allowed earlier.

     Treatment of Disputed Claims

     Notwithstanding any other provisions of the Plan, no payments or distributions will be made on account of a Disputed Claim until such Claim becomes an Allowed Claim. In lieu of distributions under the Plan to holders of Disputed Claims, a Disputed Claims Reserve will be established on the Effective Date in each Trust Account, which, in the case of Unsecured Claims in Subclass 3D, will include an amount equal to the Pro Rata Share of the distribution to which all of the Disputed Claims in Subclass 3D would be entitled to if each such Disputed Claim was allowed in its Face Amount on the Effective Date.

     Each holder of a Disputed Claim that ultimately becomes an Allowed Claim will have recourse only to the undistributed Cash held in the applicable Trust Account for the satisfaction of such Allowed Claim and not to any other Trust Account or any assets previously distributed on account of any Allowed Claim.

     The Distribution Trustee will include in the Tax returns of the Trust Accounts all items of income, deduction and credit of the Trust Accounts, except to the extent such items are included in the income of the Beneficiaries of the Trust Accounts as grantors of grantor trusts. The Distribution Trustee will pay, or cause to be paid, out of the funds held in applicable Trust Accounts, any Tax imposed on the Trust Accounts by any governmental unit with respect to income generated by the funds held in the Trust Accounts. The Distribution Trustee also will file or cause to be filed any Tax or information return related to the applicable Trust Account that is required by any governmental unit.

VOTING AND CONFIRMATION OF THE PLAN

General

     To confirm the Plan, the Bankruptcy Code requires that the Bankruptcy Court make a series of findings concerning the Plan and the Debtors, including that:

•   the Plan has classified Claims and Interests in a permissible manner;

•   the Plan complies with the applicable provisions of the Bankruptcy Code;

•   the Debtors comply with the applicable provisions of the Bankruptcy Code;

•   the Debtors, as proponents of the Plan within the meaning of section 1129 of the Bankruptcy Code, have proposed the Plan in good faith and not by any means forbidden by law;

•   the disclosure required by section 1125 of the Bankruptcy Code has been made;

•   the Plan has been accepted by the requisite votes of creditors and equity interest holders, except to the extent that “cramdown” is available under section 1129(b) of the Bankruptcy Code;

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•   the Plan is in the “best interests” of all holders of Claims or Interests in an impaired Class (that is, that such creditors will receive at least as much pursuant to the Plan as they would receive or retain in a chapter 7 liquidation);

•   the Plan is feasible (that is, there is a reasonable prospect that the Debtors will be able to perform their obligations under the Plan); and

•   all fees and expenses payable under 28 U.S.C. § 1930, as determined by the Bankruptcy Court at the Confirmation Hearing, have been paid, or the Plan provides for the payment of such fees on the Effective Date.

Voting Procedures and Requirements

     Pursuant to the Bankruptcy Code, only classes of claims against, or equity interests in, a debtor that are “impaired” under the terms of that debtor’s plan are entitled to vote to accept or reject the Plan. A class is “impaired” if the legal, equitable or contractual rights attaching to the claims or equity interests of that class are modified, other than by curing defaults and reinstating maturity. Classes of claims that are not impaired are not entitled to vote on a plan and are conclusively presumed to have accepted that plan. Classes of claims or equity interests that receive no distributions under a plan are not entitled to vote on that plan and are deemed to have rejected that plan unless such class otherwise indicates acceptance. Only Class 3 is entitled to vote on the Plan and each Subclass of Class 3 constitutes a separate class for that purpose. For a summary of the classification of Claims and Interests pursuant to the Plan, together with an indication of whether each Class of Claims or Interests is impaired or unimpaired under the terms of the Plan, see “Overview of the Plan — Summary of Classes and Treatment of Claims and Interests.”

     Although the 7-3/4% SWD Revenue Bond Indenture Trustee may receive a payment for the benefit of the holders of the 7-3/4% SWD Revenue Bonds in accordance with the Plan, holders of 7-3/4% SWD Revenue Bonds do not have Claims against the Debtors and, accordingly, are not entitled to vote on the Plan, although creditors or claimants affected by such settlement may file an objection to it with the Bankruptcy Court on or prior to April 5, 2005. See “Operations During the Chapter 11 Cases — 7-3/4% SWD Revenue Bond Dispute” for more information regarding the 7-3/4% SWD Revenue Bonds and the proposed settlement.

     Pursuant to section 502 of the Bankruptcy Code and Bankruptcy Rule 3018, the Bankruptcy Court may estimate and temporarily allow a Claim for voting or other purposes. By order of the Bankruptcy Court, certain vote tabulation rules have been approved that temporarily allow or disallow certain Claims for voting purposes only. These tabulation rules are described in the solicitation materials provided with your Ballot.

     VOTING ON THE PLAN BY EACH HOLDER OF AN IMPAIRED CLAIM ENTITLED TO VOTE ON THE PLAN IS IMPORTANT. IF YOU HOLD MULTIPLE UNSECURED CLAIMS, YOU MAY RECEIVE MORE THAN ONE BALLOT. YOU SHOULD COMPLETE, SIGN AND RETURN EACH BALLOT YOU RECEIVE.

     PLEASE CAREFULLY FOLLOW ALL OF THE INSTRUCTIONS CONTAINED ON THE BALLOT OR BALLOTS PROVIDED TO YOU. ALL BALLOTS MUST BE COMPLETED AND RETURNED IN ACCORDANCE WITH THE INSTRUCTIONS PROVIDED.

     TO BE COUNTED, YOUR BALLOT OR BALLOTS MUST BE ACTUALLY RECEIVED BY 5:00 P.M., EASTERN TIME, ON APRIL 5, 2005 (OR SUCH OTHER TIME AND DATE IDENTIFIED ON YOUR BALLOT OR BALLOTS) AT THE ADDRESS SET FORTH ON THE PREADDRESSED ENVELOPE PROVIDED TO YOU. IT IS OF THE UTMOST IMPORTANCE TO THE DEBTORS THAT YOU VOTE PROMPTLY TO ACCEPT THE PLAN.

     A HOLDER OF A 9-7/8% SENIOR NOTE, A 10-7/8% SENIOR NOTE OR A SENIOR SUBORDINATED NOTE HELD IN THE NAME OF A BROKER, DEALER, COMMERCIAL BANK,

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TRUST COMPANY OR OTHER NOMINEE MUST COMPLETE AND DELIVER TO SUCH NOMINEE THE BALLOT OR BALLOTS PROVIDED TO SUCH HOLDER IN ORDER TO VOTE ON THE PLAN. SUCH HOLDERS ARE URGED TO DELIVER SUCH BALLOT OR BALLOTS TO THEIR RESPECTIVE NOMINEE HOLDERS NO LATER THAN THE DATE IDENTIFIED ON SUCH BALLOT OR BALLOTS IN ORDER TO ENSURE THAT THEIR VOTE WILL BE COUNTED.

     Votes cannot be transmitted orally. Accordingly, you are urged to return your signed and completed Ballot promptly.

     IF YOU ARE ENTITLED TO VOTE AND YOU DID NOT RECEIVE A BALLOT, RECEIVED A DAMAGED BALLOT OR LOST YOUR BALLOT, PLEASE CALL THE DEBTORS’ VOTING AGENT, LOGAN & COMPANY, AT (973) 509-3190.

Confirmation Hearing

     The Bankruptcy Code requires the Bankruptcy Court, after notice, to hold a hearing on whether the Debtors have fulfilled the requirements of section 1129 of the Bankruptcy Code relating to the confirmation of the Plan. The Confirmation Hearing has been scheduled for April 13, 2005 at 9:00 a.m. before the Honorable Judith K. Fitzgerald, Chief United States Bankruptcy Judge for the Western District of Pennsylvania and visiting United States Bankruptcy Judge for the District of Delaware, in the Judge’s usual courtroom at the U.S. Bankruptcy Court for the District of Delaware, 824 Market Street, Wilmington, Delaware 19801. The Confirmation Hearing may be continued or adjourned from time to time by the Bankruptcy Court without further notice, except for an announcement of the continued or adjourned date made at the Confirmation Hearing. Any objection to confirmation of the Plan must be made in writing and must specify in detail the name and address of the objector, all grounds for the objection and the amount of the Claim or Interest held by the objector. Any such objections must be Filed and served upon the persons designated in the notice of the Confirmation Hearing, in the manner and by the deadline described in such notice.

Confirmation

     At the Confirmation Hearing, the Bankruptcy Court will confirm the Plan only if all of the applicable requirements of section 1129 of the Bankruptcy Code are satisfied. Among the requirements for confirmation of a plan with respect to a debtor are that the plan:

•   is accepted by the requisite holders of claims and equity interests in each impaired class of such debtor or, if not so accepted, has been accepted by the requisite holders of at least one impaired class and is “fair and equitable” and “does not discriminate unfairly” as to each nonaccepting class;

•   is either accepted by, or is in the “best interests” of, each holder of a claim or equity interest in each impaired class of such debtor;

•   is feasible; and

•   complies with the other applicable provisions of the Bankruptcy Code.

     Subject to the conditions set forth in the Plan, a determination by the Bankruptcy Court that the Plan, as it applies to a particular Estate, is not confirmable pursuant to section 1129 of the Bankruptcy Code will not limit or affect: (a) the confirmability of the Plan as it applies to the other Estate; or (b) the Debtors’ ability to modify the Plan, as it applies to such Estate, to satisfy the provisions of section 1129(b) of the Bankruptcy Code.

     Acceptance or Cramdown

     A plan is accepted by an impaired class of claims if holders of at least two — thirds in dollar amount and a majority in number of claims of that class vote to accept the plan. Only those holders of claims who actually vote (and are entitled to vote) to accept or to reject a plan count in this tabulation. Section 1129(b) of the Bankruptcy

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Code contains so-called “cramdown” provisions pursuant to which a plan may be confirmed even if it is not accepted by all impaired classes, as long as at least one impaired class of claims has accepted it and the Bankruptcy Court finds that it is “fair and equitable” and “does not discriminate unfairly” as to each nonaccepting class. The “fair and equitable” standard, also known as the “absolute priority rule,” requires, among other things, that unless a dissenting class of unsecured claims receives full compensation for the aggregate allowed amount of such claims, no holder of an allowed claim in any class junior to such class may receive or retain any property on account of such claim. The “fair and equitable” standard has also been interpreted to prohibit any class of claims senior to a dissenting class from receiving under a plan more than 100% of the aggregate allowed amount of such claims. The requirement that a plan not “discriminate unfairly” means, among other things, that a dissenting class of claims must be treated substantially equally with respect to other classes of claims of equal rank. The Debtors do not believe that the Plan unfairly discriminates against any Class that may not accept or otherwise consent to the Plan. The Debtors believe that the Plan is “fair and equitable” and “does not discriminate unfairly” as to each impaired Class entitled to vote upon the Plan. The Debtors may seek confirmation of the Plan under the “cramdown” provisions with respect to any impaired Class that does not accept the Plan (and have reserved the right to modify the Plan to the extent that confirmation of the Plan under such provisions requires modification).

     Best Interests Test

          Generally

     Notwithstanding acceptance of a plan by each impaired class (or satisfaction of the “cramdown” provisions of the Bankruptcy Code in lieu thereof), for a plan to be confirmed, the Bankruptcy Court must determine that the plan is in the best interest of each holder of a claim who is in an impaired class and has not voted to accept the plan. Accordingly, if an impaired class does not unanimously accept a plan, the best interests test requires the Bankruptcy Court to find that the plan provides to each member of such impaired class a recovery on account of the class member’s claim that has a value, as of the date such plan is consummated, at least equal to the value of the distribution that such class member would receive if the debtors proposing such plan were liquidated under chapter 7 of the Bankruptcy Code on such date. The Debtors have considered the effect that the conversion of the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code would have and have concluded that Plan provides for the liquidation of the Debtors in a manner significantly more efficient than would occur in the event the Chapter 11 Cases were converted to cases under chapter 7 of the Bankruptcy Code. KFC has no material assets other than a claim against KACC which will be subject to treatment under KACC’s plan of reorganization and, upon consummation of the sale of the QAL Interests, KAAC’s Estate will have been substantially liquidated and converted to Cash proceeds, subject only to receipt of any Recovery Action Proceeds. The Debtors are not aware of the existence of any claim against a third party that would constitute a Recovery Action. Further, the Debtors have been informed that the Creditors’ Committee conducted an analysis of potential preference actions and determined that there were no viable preference actions concerning payments made by the Debtors. The Debtors believe that conversion to chapter 7 of the Bankruptcy Code would result in: (a) additional costs relating to the appointment of a chapter 7 trustee; (b) likely delays in distributions to creditors entitled to receive a distribution under the Plan; and (c) diminished recoveries for Class 3. The Debtors therefore believe that the Plan satisfies the best interests test for each class of impaired Claims.

          Liquidation Analysis

     Because the liquidation value of each Debtor is limited to the amount of Cash or other property held or to be held in each Debtor’s Trust Accounts, the Debtors’ liquidation analysis focused on the additional costs and the diminution in value to the Debtors’ Estates that would occur if the Chapter 11 Cases were converted to cases under chapter 7 of the Bankruptcy Code. That is, in the event of a conversion of the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code, the liquidation value available to holders of Unsecured Claims and Interests would be reduced by: (a) the costs, fees and expenses of the liquidation, as well as other administrative expenses of the Debtors’ chapter 7 cases; (b) unpaid Administrative Claims of the Chapter 11 Cases; and (c) Priority Claims and Priority Tax Claims.

     The Debtors’ costs of liquidation in chapter 7 cases would include, among other things, the compensation of a trustee or trustees, as well as counsel and other professionals retained by such trustees. The trustees and any newly retained professionals would have to expend considerable time and effort to review and understand the issues raised

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by the liquidation of the Debtors, thereby duplicating the efforts of the Debtors and their professionals and resulting in the incurrence of fees and expenses anticipated to exceed materially the fees and expenses that would be incurred by the Distribution Trustee and its professionals under the Plan. The trustee’s fees in any chapter 7 case, which could be as much as 3% of the assets in the Debtors’ Estates under section 326 of the Bankruptcy Code (or approximately $12.0 million in the aggregate), also are anticipated to exceed the fees to be paid to the Distribution Trustee. Moreover, since any newly retained professionals would lack the institutional knowledge of the facts and circumstances underlying Claims and Recovery Actions, it is likely that Disputed Claims would be settled at higher amounts and Recovery Actions at lower amounts, thereby resulting in lower recoveries to holders of Unsecured Claims. Finally, due to the lack of familiarity with the Debtors of any trustees appointed in the chapter 7 cases, distributions in the chapter 7 cases likely would be made substantially later than the Effective Date assumed in connection with the Plan and this delay would reduce the present value of distributions to creditors, including holders of Unsecured Claims. In light of the foregoing, the Debtors believe that creditors will receive greater and more expeditious distributions under the Plan than they would receive through a chapter 7 liquidation. The Plan is, therefore, in the best interests of each Claim holder.

     Feasibility

     Section 1129(a)(11) of the Bankruptcy Code requires that confirmation of a plan not be likely to be followed by the liquidation, or the need for further financial reorganization, of the debtors proposing such plan or any successor to such debtors (unless such liquidation or reorganization is proposed in the plan). The Plan provides for the liquidation of the Debtors and the distribution of Cash to holders of Allowed Claims in accordance with the priority scheme of the Bankruptcy Code and the terms of the Plan. The ability of the Debtors to make the distributions described in the Plan is based solely on the amount of Cash held, or to be held, in the Trust Accounts, and does not depend on future earnings of the Debtors. Accordingly, the Debtors believe that the Plan satisfies the feasibility requirements of the Bankruptcy Code.

     Compliance with Applicable Provisions of the Bankruptcy Code

     Section 1129(a)(1) of the Bankruptcy Code requires that a plan comply with the applicable provisions of the Bankruptcy Code. The Debtors have considered each of these provisions in the development of the Plan and believe that the Plan complies with all provisions of the Bankruptcy Code.

     Modification or Revocation of the Plan

     Subject to the restrictions on modifications set forth in section 1127 of the Bankruptcy Code, the Debtors reserve the right to alter, amend or modify the Plan before its substantial consummation, with the consent of the Creditors’ Committee.

     The Debtors reserve the right to revoke or withdraw the Plan prior to the Effective Date, with the consent of the Creditors’ Committee. If the Debtors so revoke or withdraw the Plan, or if confirmation of the Plan does not occur, the Plan will be null and void in all respects, and nothing contained in the Plan will: (a) constitute a waiver or release of any Claims by or against, or any Interests in, the Debtors; or (b) prejudice in any manner the rights of either Debtor or any other party.

Alternatives to Confirmation and Consummation of the Plan

     Because the Debtors are not operating entities and possess no assets other than Cash, the only alternatives to confirmation and consummation of the Plan are a conversion of the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code and the confirmation and consummation of an alternative plan of liquidation under chapter 11 of the Bankruptcy Code.

     The Debtors believe that, in a liquidation under chapter 7, before creditors received any distribution, additional administrative expenses involved in the appointment of a trustee, and the retention of professionals to assist such trustee, would cause a diminution in the value of the Debtors’ Estates. The Debtors believe that conversion of the Chapter 11 Cases to chapter 7 would, therefore, result in (a) significant delay in distributions to all

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creditors who would have received a distribution under the Plan and (b) diminished recoveries for Class 3. See “- Confirmation — Best Interests Test.”

     The Debtors believe that, because the Plan has been negotiated by the Debtors and representatives of certain of the Debtors’ most significant creditors, including the Creditors’ Committee, negotiating an alternative plan of liquidation under chapter 11 of the Bankruptcy Code is unlikely to alter significantly the relative treatment of the Claims. The Debtors believe that negotiating such an alternative plan would result in additional costs to the Debtors relating to the retention of professionals to represent the Debtors and their significant creditors in connection with such negotiations, resulting in a diminution in the value of the Debtors’ Estates. The Debtors believe that the consummation of an alternative plan of liquidation under chapter 11 of the Bankruptcy Code would also result in (a) likely delays in distributions to all creditors who would be entitled to receive a distribution under the Plan (thus reducing the present value of such distributions) and (b) potentially diminished recoveries for Class 3.

     THE DEBTORS AND THE CREDITORS’ COMMITTEE BELIEVE THAT THE PLAN AFFORDS GREATER BENEFITS TO CREDITORS THAN EITHER LIQUIDATION UNDER CHAPTER 7 OF THE BANKRUPTCY CODE OR THE CONSUMMATION OF AN ALTERNATIVE PLAN OF LIQUIDATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF CONSUMMATION OF THE PLAN

General

     A DESCRIPTION OF CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN IS PROVIDED BELOW. THE DESCRIPTION IS BASED ON THE IRC, TREASURY REGULATIONS ISSUED THEREUNDER, JUDICIAL DECISIONS AND INTERNAL REVENUE SERVICE (“IRS”) AND ADMINISTRATIVE DETERMINATIONS, ALL AS IN EFFECT ON THE DATE HEREOF. CHANGES IN ANY OF THESE AUTHORITIES OR IN THE INTERPRETATION THEREOF, ANY OF WHICH MAY HAVE RETROACTIVE EFFECT, MAY CAUSE THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN TO DIFFER MATERIALLY FROM THE CONSEQUENCES DESCRIBED BELOW.

     THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN ARE COMPLEX AND ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES. NO RULING HAS BEEN REQUESTED FROM THE IRS; NO OPINION HAS BEEN REQUESTED FROM COUNSEL CONCERNING ANY U.S. TAX CONSEQUENCE OF THE PLAN; AND NO TAX OPINION IS GIVEN BY THIS DISCLOSURE STATEMENT.

     THE DESCRIPTION DOES NOT COVER ALL ASPECTS OF U.S. FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO THE DEBTORS OR HOLDERS OF CLAIMS. FOR EXAMPLE, THE DESCRIPTION DOES NOT ADDRESS ISSUES OF SPECIAL CONCERN TO CERTAIN TYPES OF TAXPAYERS, SUCH AS DEALERS IN SECURITIES, LIFE INSURANCE COMPANIES, FINANCIAL INSTITUTIONS, TAX EXEMPT ORGANIZATIONS AND FOREIGN TAXPAYERS, NOR DOES IT ADDRESS TAX CONSEQUENCES TO HOLDERS OF INTERESTS IN THE DEBTORS. IN ADDITION, THE DESCRIPTION IS LIMITED TO U.S. FEDERAL INCOME TAX CONSEQUENCES AND DOES NOT DISCUSS STATE, LOCAL OR FOREIGN TAX CONSEQUENCES.

     FOR THESE REASONS, THE DESCRIPTION THAT FOLLOWS IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING AND PROFESSIONAL TAX ADVICE BASED UPON THE INDIVIDUAL CIRCUMSTANCES OF EACH HOLDER OF A CLAIM OR INTEREST. HOLDERS OF CLAIMS OR INTERESTS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PLAN.

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U.S. Federal Income Tax Consequences to Holders of Claims

     The federal income Tax consequences of the Plan to a holder of a Claim will depend, in part, on: (a) whether the holder reports income on the accrual or cash basis; (b) whether the holder has previously taken a bad debt deduction or worthless security deduction with respect to the Claim; (c) whether the holder’s Claim is allowed or disputed at the Effective Date; (d) whether the holder receives distributions under the Plan in more than one taxable year; and (e) whether the holder receives distributions with respect to its Claim under one or more plans of reorganization or liquidation of an Other Kaiser Debtor in addition to the Plan.

     Recognition of Gain or Loss

          In General

     In general, a holder of a Claim should recognize gain or loss equal to the amount realized under the Plan in respect of its Claim less the holder’s basis in the Claim. Any gain or loss recognized in the exchange may be long-term or short-term capital gain or loss or ordinary income or loss, depending upon the nature of the Claim and the holder, the length of time the holder held the Claim and whether the Claim was acquired at a market discount. If the holder realizes a capital loss, its deduction of the loss may be subject to limitation. The holder’s aggregate Tax basis for any property received under the Plan generally will equal the amount realized. The holder’s amount realized generally will equal the sum of the Cash and the fair market value of any other property received (or deemed received) by the holder under the Plan on the Effective Date or subsequent distribution date, less the amount (if any) allocable to Claims for interest, as discussed below.

          Post-Effective Date Cash Distributions

     Because certain holders of Allowed Claims (including Disputed Claims that ultimately become Allowed Claims) may receive Cash distributions subsequent to the Effective Date in respect of Claims held against the Debtors, including claims against Other Kaiser Debtor(s) as well as the Debtors, the imputed interest provisions of the IRC may apply to treat a portion of such distributions as imputed interest. Additionally, because such distributions may be made to such holders after the initial distribution, any loss and a portion of any gain realized by such holder may be deferred. All such holders are urged to consult their Tax advisors regarding the possible application of (or ability to elect out of) the “installment method” of reporting gain that may be recognized by such holder in respect of its Claims.

          Bad Debt and/or Worthless Securities Deduction

     A holder who, under the Plan, receives in respect of a Claim an amount less than the holder’s Tax basis in the Claim may be entitled in the year of receipt (or in an earlier or later year) to a bad debt deduction in some amount under section 166(a) of the IRC or a worthless securities deduction under section 165(g) of the IRC. The rules governing the timing, character and amount of bad debt and/or worthless securities deductions place considerable emphasis on the facts and circumstances of the holder, the obligor and the instrument with respect to which a deduction is claimed. Holders of Claims, therefore, are urged to consult their Tax advisors with respect to their ability to take such a deduction.

     Pending Payments

     Cash or property that a Trust Account holds as a Pending Payment after the Effective Date should be deemed to have been paid to the holder of the Claim entitled to receive such Pending Payment on the date that the Distribution Trust received it and to have been contributed by such holder to the Trust Account as a grantor and beneficiary of the Distribution Trust. Thus, the holder should recognize gain or loss based upon the amount deemed received and contributed to the Trust Account on the Effective Date, and any income subsequently realized by the Trust Account with respect to such Pending Payment will be reported by the Trustee as income of the grantor-beneficiary in the year realized, prior to the actual distribution of the Pending Payment to the holder of the Allowed Claim. The actual receipt of the Pending Payments from the Trust Account will not be a taxable event.

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     Payments Other than Pending Payments

     If any payment other than a Pending Payment is to be made out of a Trust Account, such payment will not be deemed to have been made to any recipient until, and to the extent that, the amount to which the payee is entitled has been determined and distributed. Any income realized by the Trust Account prior to such time will be reported by the Distribution Trustee as income of and taxable to the Trust Account.

Certain Other Tax Consequences for Holders of Claims

     Receipt of Pre-Effective Date Interest

     In general, a Claim holder that was not previously required to include in its taxable income any accrued but unpaid pre-Effective Date interest on the Claim may be required to take such amount into income as taxable interest. A Claim holder that was previously required to include in its taxable income any accrued but unpaid pre-Effective Date interest on the Claim may be entitled to recognize a deductible loss to the extent that such interest is not satisfied under the Plan. The Plan provides that all distributions to holders of Allowed Public Note Claims will be deemed to apply first to the principal amount of such Claims until such principal amount is paid in full, and then the remaining portion of such distribution, if any, will be deemed to apply to any prepetition accrued interest included in such Claim. There is no assurance, however, that the IRS will respect this treatment and will not determine that all or a portion of amounts distributed to holders of Allowed Public Note Claims is properly allocable to prepetition interest. Each Claim holder is urged to consult its tax advisor regarding the tax treatment of its distributions under the Plan and the deductibility of any accrued but unpaid interest for federal income tax purposes.

     Installment Method

     A holder of a Claim constituting an installment obligation for Tax purposes may be required to recognize currently any gain remaining with respect to the obligation if, pursuant to the Plan, the obligation is considered to be satisfied at other than its face value, distributed, transmitted, sold, or otherwise disposed of within the meaning of section 453B of the IRC.

     Information Reporting and Backup Withholding

     All distributions under the Plan will be subject to applicable federal income Tax reporting and withholding. The IRC imposes “backup withholding” on certain “reportable” payments to certain taxpayers, including payments of interest. Under the IRC’s backup withholding rules, a holder of a Claim may be subject to backup withholding with respect to distributions or payments made pursuant to the Plan, unless the holder: (a) comes within certain exempt categories (which generally include corporations) and, when required, demonstrates this fact; or (b) provides a correct taxpayer identification number and certifies under penalty of perjury that the taxpayer identification number is correct and that the taxpayer is not subject to backup withholding because of a failure to report all dividend and interest income. Backup withholding is not an additional Tax, but merely an advance payment that may be refunded to the extent it results in an overpayment of Tax. A holder of a Claim may be required to establish an exemption from backup withholding or to make arrangements with respect to the payment of backup withholding.

Importance of Obtaining Professional Tax Assistance

     THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN, AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING WITH A TAX PROFESSIONAL. THE ABOVE DISCUSSION IS FOR INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. THE TAX CONSEQUENCES ARE IN MANY CASES UNCERTAIN AND MAY VARY DEPENDING ON A HOLDER’S INDIVIDUAL CIRCUMSTANCES. ACCORDINGLY, HOLDERS ARE URGED TO CONSULT WITH THEIR TAX ADVISORS ABOUT THE U.S. FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF THE PLAN.

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APPLICABILITY OF CERTAIN FEDERAL AND STATE SECURITIES LAWS

General

     No registration statement will be filed under the Securities Act of 1933, as amended, 15 U.S.C. §§ 77a-77aa (the “Securities Act”), or any state securities laws with respect to the offer and distribution under the Plan of the beneficial interests in the Distribution Trust (which may be deemed to constitute “securities” and are treated as such for purposes of the following discussion). The Debtors believe that the provisions of section 1145(a)(1) of the Bankruptcy Code exempt the offer and distribution of such securities under the Plan from federal and state securities registration requirements.

Bankruptcy Code Exemptions from Registration Requirements

     Initial Offer and Sale

     Section 1145(a)(1) of the Bankruptcy Code exempts the offer and sale of securities under a plan of reorganization from registration under the Securities Act and state securities laws if three principal requirements are satisfied: (a) the securities must be offered and sold under a plan of reorganization and must be securities of the debtor, an affiliate participating in a joint plan with the debtor or a successor to the debtor under the plan; (b) the recipients of the securities must hold a prepetition or administrative expense claim against the debtor or an interest in the debtor or such affiliate; and (c) the securities must be issued entirely in exchange for the recipient’s claim against or interest in the debtor or principally in such exchange and partly for cash or property. The Debtors believe that the offer and sale of the beneficial interests in the Distribution Trust under the Plan satisfy the requirements of section 1145(a)(1) of the Bankruptcy Code and, therefore, are exempt from registration under the Securities Act and state securities laws.

     Subsequent Transfers

     The beneficial interests in the Distribution Trust will be non-certificated and non-transferable (except by will or under the laws of descent and distribution). Therefore, holders of beneficial interests in the Distribution Trust will not be able to voluntarily transfer such securities to other entities.

ADDITIONAL INFORMATION

     Any statements in this Disclosure Statement concerning the provisions of any document are not necessarily complete, and in each instance reference is made to such document for the full text thereof. The Plan, this Disclosure Statement and the Distribution Trust Agreement will be available on the Document Website promptly following approval of this Disclosure Statement by the Bankruptcy Court.

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RECOMMENDATION AND CONCLUSION

     For all of the reasons set forth in this Disclosure Statement, the Debtors believe that the confirmation and consummation of the Plan is preferable to all other alternatives. Consequently, the Debtors urge all holders of Claims in voting Classes to vote to accept the Plan and to evidence their acceptance by duly completing and returning their Ballots so that they will be received on or before the Voting Deadline.

Dated: February 11, 2005	Respectfully submitted,
	KAISER ALUMINA AUSTRALIA CORPORATION
	By:
	Name:
	Title:
	KAISER FINANCE CORPORATION
	By:
	Name:
	Title:

COUNSEL:

Daniel J. DeFranceschi (DE 2732)
RICHARDS, LAYTON & FINGER
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
Telephone: (302) 651-7700
Facsimile: (302) 651-7701

– and –

Gregory M. Gordon (TX 08435300)
Henry L. Gompf (TX 08116400)
Troy B. Lewis (TX 12308650)
Daniel P. Winikka (TX 00794873)
JONES DAY
2727 North Harwood Street
Dallas, Texas 75201
Telephone: (214) 220-3939
Facsimile: (214) 969-5100

ATTORNEYS FOR DEBTORS AND
DEBTORS IN POSSESSION

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EXHIBIT I

AMENDED JOINT PLAN OF LIQUIDATION FOR
KAISER ALUMINA AUSTRALIA CORPORATION AND KAISER FINANCE CORPORATION