<PAGE>
As filed with the Securities and Exchange Commission on September 3, 1999
Registration No. 333-82643
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
PRE-EFFECTIVE AMENDMENT NO. 1
to
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
___________
ICF KAISER INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
Delaware 8711 54-1437073
(State or other (Primary Standard (I.R.S. Employer
jurisdiction Industrial Identification No.)
of incorporation Classification
or organization) Code No.)
9300 Lee Highway, Fairfax, Virginia 22031-1207
(703) 934-3600
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
James J. Maiwurm, President and Chief Executive Officer
9300 Lee Highway
Fairfax, Virginia 22031-1207
(703) 934-3600
(Name, address, including zip code,
& telephone number, including
area code, of agent for service)
Copy to:
Jeffrey J. Margulies, Esq.
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
___________________________________
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box: [_]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Proposed Proposed
Class of Maximum Maximum Amount of
Securities To Amount To Be Offering Aggregate Registration
Be Registered Registered (1) (2) Price Per Unit (2) Offering Price (1) (2) Fee (3)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Convertible Preferred Stock
- --------------------------------------------------------------------------------------------------------------------------------
Warrants to Purchase Common Stock
- --------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per share (4)
- --------------------------------------------------------------------------------------------------------------------------------
Secured Notes
- --------------------------------------------------------------------------------------------------------------------------------
Total $80,000,000 $80,000,000 $12,788
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of computing the registration fee pursuant to
Rule 457(o) under the Securities Act of 1933.
(2) Not specified as to each class of securities being registered, since the
amount of each class of securities to be offered in the exchange offer has not
been finally determined. The maximum aggregate offering price of securities
issued under this registration will not exceed $80,000,000 unless additional
securities are subsequently registered by an amendment to the registration
statement.
(3) Represents registration fee due for securities being registered in excess
of aggregate offering price of $34,000,000, for which amount the registration
fee was paid upon the initial filing of this registration statement.
(4) Represents common stock issuable upon conversion of convertible preferred
stock and upon exercise of warrants being registered under this registration
statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
================================================================================
<PAGE>
PROSPECTUS AND CONSENT SOLICITATION STATEMENT
ICF KAISER INTERNATIONAL, INC.
<TABLE>
<CAPTION>
Recapitalization
Our recapitalization consists of an exchange offer, an asset sale offer and consent solicitations,
all of which are dependent upon each other.
Exchange Offer Convertible Preferred Stock
<S> <C>
. We are offering to exchange convertible preferred . We will issue 650,000 shares of convertible preferred
stock with a liquidation preference of $65 million stock, with an aggregate liquidation preference of $65
plus accrued interest on the old notes through the million, or $100 per share, plus accrued interest on the
date of the closing, warrants to purchase 15% of our old notes through the date of the closing.
common stock on a fully diluted basis, and secured . We will pay quarterly dividends on the preferred
notes, if issued, for all outstanding 12% Senior stock at the initial rate of 4.75% of the liquidation
Subordinated Notes due 2003 following the purchase of preference, increasing to 12% after December 31, 2001.
the old notes in an asset sale offer. . The preferred stock will be convertible into our
common stock at the holders' option on or after
Asset Sale Offer December 31, 2001.
. We may redeem the preferred stock at our option.
. In connection with the exchange offer, we will
offer to purchase for cash at par on a pro rata basis Warrants
a total of up to $60 million in old notes, which
amount may be reduced by the issuance of secured . We will issue warrants to purchase 15% of our common
notes to replace up to $10 million in cash. stock on a fully diluted basis.
. The warrants are immediately exercisable and will
Consent Solicitations expire on December 31, 2004.
. The exercise price of the warrants will be equal to
. We are soliciting the holders of the old notes for the average closing price of our common stock for a
consents to remove most covenants in the indenture specified period following consummation of the exchange
for the old notes. We also are soliciting the offer.
holders of 12% Senior Notes due 2003 for consents to
amend some covenants in the senior notes indenture. Secured Notes
Market for Securities . We may issue up to $10 million in secured notes to
holders of old notes participating in the exchange offer
. Our common stock is listed on the New York Stock if we need that amount of cash to satisfy obligations
Exchange under the trading symbol "ICF." We will relating to our operations.
apply to list the preferred stock and the common . The interest on the secured notes will be set at a rate
stock underlying the preferred stock and warrants. mutually agreed upon by us and the holders of old notes.
The warrants and the secured notes, if issued, will . The secured notes will mature not later than June 30,
not be listed on any exchange. The NYSE has notified 2001.
us that we currently do not meet its newly effective
continued listing criteria, but we believe our
recapitalization will remedy this situation.
</TABLE>
_______________________________
See "Risk Factors" on page 13 of this prospectus for a discussion of risks
to be considered in connection with your investment decision.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the preferred stock, warrants or
common stock, or secured notes or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is September ___, 1999.
<PAGE>
INCORPORATION BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" information into this prospectus, which means that we can disclose
important information to you by referring you to other information we have filed
with the Securities and Exchange Commission. The information incorporated by
reference is deemed to be part of this prospectus, except for any information
superseded by information in this prospectus.
This prospectus incorporates by reference the documents set forth below
that we have previously filed with the Securities and Exchange Commission. All
of the documents listed below as incorporated by reference into this prospectus
also are being delivered to you with this prospectus. You should read this
prospectus together with the information incorporated by reference.
<TABLE>
<S> <C> <C>
. Annual Report on Form 10-K for the year ended December 31, 1998
. Quarterly Reports on Form 10-Q and 10-Q/A for the quarter ended March 31, 1999 and on Form 10-Q for
the quarter ended June 30, 1999
. Current Reports on Form 8-K dated March 10, 1999, April 9, 1999, May 12, 1999, June 10, 1999, July 6,
1999, July 7, 1999 and July 16, 1999
. Proxy Statement dated September __, 1999 relating to the 1999 Annual Meeting of Shareholders
</TABLE>
Our Annual Report on Form 10-K for the year ended December 31, 1998 also
served as our annual report to shareholders for 1998. The following information
contained in that Annual Report on Form 10-K is included among the information
incorporated by reference into this prospectus:
<TABLE>
<S> <C> <C>
. description of segments, classes of similar products and services, foreign
and domestic operations and export sales (note 12 of notes to consolidated financial statements);
. selected financial data (Item 6);
. supplementary financial information (Item 8 and note 15 of notes to consolidated financial statements);
. management's discussion and analysis of financial condition and results of operations (Item 7);
. changes in and disagreements with accountants on accounting and financial disclosures (Item 9); and
. quantitative and qualitative information about market risk (Item 7a).
</TABLE>
We also are incorporating by reference additional documents that we file
with the Securities and Exchange Commission between the date of this prospectus
and the consummation of the exchange offer described in this prospectus.
You can request an additional free copy of any or all of these documents,
including exhibits that are specifically incorporated by reference into these
documents, by writing or calling:
Shaun M. Martin, Senior Vice President, Treasurer and Secretary
ICF Kaiser International, Inc.
9300 Lee Highway
Fairfax, Virginia 22031-1207
(703) 934-3600
If you would like to request documents from us, please do so by
______________, 1999 to receive the documents before the consummation of the
exchange offer.
i
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INCORPORATION BY REFERENCE i
SUMMARY.......................................................................... 1
The Recapitalization.......................................................... 1
Rationale for the Recapitalization............................................ 2
Cautionary Note Regarding Forward-Looking Statements.......................... 2
The Convertible Preferred Stock............................................... 3
The Warrants.................................................................. 4
The Secured Notes............................................................. 4
The Exchange Offer............................................................ 5
The Asset Sale Offer.......................................................... 6
The Consent Solicitations..................................................... 6
Possible Prepackaged Plan of Reorganization................................... 7
The Company................................................................... 7
Strategy...................................................................... 8
Risk Factors.................................................................. 9
Summary Financial Data........................................................ 10
RISK FACTORS..................................................................... 13
CAPITALIZATION................................................................... 17
RATIO OF EARNINGS TO FIXED CHARGES............................................... 18
UNAUDITED PRO FORMA FINANCIAL STATEMENTS......................................... 19
NOTES TO THE PRO FORMA BALANCE SHEET............................................. 22
NOTES TO THE PRO FORMA INCOME STATEMENTS......................................... 25
OVERVIEW AND BACKGROUND OF THE RECAPITALIZATION.................................. 27
THE EXCHANGE OFFER............................................................... 27
THE ASSET SALE OFFER............................................................. 30
THE CONSENT SOLICITATIONS........................................................ 31
POSSIBLE PREPACKAGED PLAN OF REORGANIZATION...................................... 33
PROCEDURES FOR PARTICIPATING IN THE EXCHANGE OFFER, ASSET SALE OFFER
AND CONSENT SOLICITATIONS..................................................... 33
BUSINESS......................................................................... 38
MANAGEMENT....................................................................... 42
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS.................................. 43
DESCRIPTION OF CONVERTIBLE PREFERRED STOCK....................................... 50
DESCRIPTION OF WARRANTS.......................................................... 51
DESCRIPTION OF SECURED NOTES..................................................... 52
DESCRIPTION OF COMMON STOCK...................................................... 53
WHERE YOU CAN FIND MORE INFORMATION.............................................. 60
EXPERTS.......................................................................... 61
LEGAL MATTERS.................................................................... 61
</TABLE>
ii
<PAGE>
SUMMARY
The following summary highlights selected information from this prospectus
and may not contain all of the information that is important to you. This
prospectus includes specific terms of the preferred stock, warrants and
underlying common stock, and secured notes, as well as information regarding our
business and detailed financial data. We encourage you to read this prospectus
in its entirety.
The Recapitalization
Overview. The recapitalization will be completed in a series of
simultaneous transactions, each of which is dependent upon consummation of the
others. These transactions will occur, assuming the conditions of the exchange
offer are met, which include the following:
. we will purchase up to $60 million principal amount of tendered old
notes at par in an asset sale offer, which amount may be reduced by the
issuance of secured notes to replace up to $10 million in cash;
. we will exchange convertible preferred stock with a liquidation
preference of $65 million plus accrued interest on the old notes through
the date of the closing, warrants to purchase 15% of our common stock
and secured notes, if issued, for the remaining tendered old notes;
. holders of a majority of the outstanding old notes will consent to the
amendment of the indenture governing the old notes;
. holders of a majority of the outstanding senior notes will consent to
the amendment of the indenture governing the senior notes; and
. we will enter into a new credit facility.
As a result of the recapitalization, holders of old notes will receive, for each
$1,000 of old notes tendered in the asset sale offer and the exchange offer,
$____ in cash, ____ shares of preferred stock, representing a liquidation
preference of $_____ plus accrued interest through the date of the closing on a
pro rata basis, and warrants to purchase ___% of our common stock. The amount
of cash received for each $1,000 of old notes may be reduced by up to $_____ and
replaced by a like amount of secured notes, if issued.
The terms of the recapitalization are the product of negotiations with an
unofficial committee of holders of old notes owning in excess of 80% of the
aggregate principal amount of the old notes.
Asset Sale Offer. In general terms, the indenture governing the old notes
requires us to use proceeds from asset sales to reduce senior indebtedness or
reinvest in our business or make an asset sale offer to purchase the old notes
at par, on a pro rata basis. As a result of the sale of our Consulting Group we
have approximately $60 million of available cash to fund an asset sale offer to
holders of our old notes. The amount available to fund the asset sale offer may
be reduced by up to $10 million if we are required to collateralize letters of
credit for the Nova Hut project or if we are required to make an additional
capital contribution to Kaiser-Hill Company, LLC.
Exchange Offer. We are offering convertible preferred stock, warrants and
secured notes, if issued, in exchange for all remaining tendered old notes not
purchased in the asset sale offer. Our acceptance of old notes tendered in the
exchange offer is conditioned on, among other things, holders of at least 95% of
the principal amount of old notes accepting the exchange offer and our obtaining
a new credit facility. In order to participate in the exchange offer, the
holder of old notes must tender all of the old notes beneficially owned by the
holder.
Consent Solicitations. Simultaneously with the exchange offer we are
seeking a consent from the holders of our old notes to remove substantially all
restrictive covenants and some defined events of default from the indenture
governing the old notes. We also are seeking a consent from the holders of our
senior notes to amend restrictive covenants that would limit implementation of
our proposed business plan. In addition, we are requesting holders of the old
notes and the senior notes to deliver an instruction to the Trustee not to
interfere with our recapitalization. A holder of old notes does not need to
consent to the proposed amendments in order to tender its old notes in the
exchange offer.
1
<PAGE>
New Credit Facility. We are in preliminary discussions with potential
lenders with respect to a new credit facility. The closing of any new credit
facility is conditioned on the successful completion of the recapitalization,
and obtaining a new credit facility is a condition of completing the exchange
offer. We anticipate that any new credit facility will provide for revolving
credit availability and the issuance of letters of credit. We expect the
availability of credit under the new credit facility will be a function of a
borrowing base determined with reference to eligible receivables. We further
anticipate that borrowings under the new credit facility will be secured by
substantially all of our assets.
We do not expect to have available a new revolving credit facility until
the completion of the recapitalization. Until that time, we will cash
collateralize any letters of credit of the type often required to support
contract performance obligations and we will utilize other available cash for
working capital purposes.
Rationale for the Recapitalization
The amount of cash flow currently available from our remaining operations
is insufficient to service the interest expense associated with our existing
debt obligations. We are also significantly more leveraged than our
competitors. Especially in the recent past, this has sometimes impaired our
ability to win new business. Additionally, our current financial position has
impaired and could in the future impair our ability to retain key personnel. A
realignment of our capital structure through the recapitalization will
substantially reduce our level of debt and associated interest expense, and we
believe we will be better able to service remaining obligations after the
recapitalization. We also believe the recapitalization will enhance our ability
to win new business and retain and attract key employees. The completion of the
recapitalization is a condition to our securing a new credit facility, which is
necessary to support short-term liquidity needs and letters of credit.
If the recapitalization is not consummated, we may continue to negotiate
with the holders of the old notes and senior notes for a recapitalization, we
may invest the proceeds from the sale of our Consulting Group in a related
business investment or we may seek implementation of the recapitalization
through a so-called "prepackaged" plan of reorganization. See "Possible
Prepackaged Plan of Reorganization." If we were to seek implementation of a
recapitalization through confirmation in a bankruptcy proceeding, no assurance
can be given that the recapitalization would meet the requirements for
confirmation under the U.S. Bankruptcy Code even if the requisite consents are
received and the old notes subject to the consents are voted to accept the
recapitalization.
Cautionary Note Regarding Forward-Looking Statements
This prospectus contains what we believe are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. They
are statements about future performance or results such as statements including
the words, "believe," "expect" and "anticipate" when Kaiser discusses its
financial condition, results of operations and business. Forward-looking
statements involve risks, assumptions and uncertainties. They are not
guarantees of future performance. Factors may cause actual results to differ
materially from those expressed in these forward-looking statements. These
factors include those identified under the caption "Risk Factors" in this
prospectus, as well as the factors identified under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained in Kaiser's Annual Report on Form 10-K for the year ended December 31,
1998 and in Kaiser's Quarterly Report on Form 10-Q for each of the quarterly
periods ended March 31, 1999 and June 30, 1999 that are incorporated by
reference into and delivered with this prospectus.
We believe that the expectations reflected in our forward-looking
statements are reasonable. However, we cannot assure you that these
expectations will prove to be correct. You should consider the factors we have
noted under the captions stated above as you read this prospectus.
2
<PAGE>
The Convertible Preferred Stock
<TABLE>
<S> <C>
Issuer.................................... ICF Kaiser International, Inc.
Securities Offered........................ We are offering 650,000 shares of convertible preferred stock.
Liquidation Preference.................... The liquidation preference per share is $100, with an aggregate
liquidation preference of $65 million plus accrued interest on the
old notes through the date of the closing.
Dividends................................. Cumulative dividends on the preferred stock will be payable in cash
at an initial rate per year equal to 4.75% of the liquidation
preference per share. We will pay dividends quarterly commencing on
the closing date. The dividend rate on the preferred stock will
increase to 12% after December 31, 2001.
If we fail for any reason to pay a dividend in cash in any quarter,
and if we fail to pay the delinquent dividend and the current
dividend in the following quarter, holders of the preferred stock
will have the right to appoint two additional directors for the two
dividends missed and one additional director if any future dividend
payment is missed, up to a maximum of three additional directors.
The size of our Board of Directors will be expanded accordingly.
Unpaid dividends will accrue as additional dividends at 12% per year,
which will be added to the liquidation preference.
Conversion................................ The preferred stock will be convertible into our common stock at the
option of the holder, subject to prior redemption, at any time
following December 31, 2001. The conversion price will be equal to
the average closing price of our common stock for the 20 consecutive
trading days preceding the conversion election.
Redemption................................ We will have the option to redeem the preferred stock, in whole or in
part, following the consummation of the exchange offer at:
. 90% of the liquidation preference until June 30, 2001;
. 95% of the liquidation preference from June 30, 2001 to December
31, 2001; and
. 100% of the liquidation preference from and after December 31,
2001.
Holders will be entitled to convert prior to redemption on or after
December 31, 2001.
Change of Control Put..................... If there is a change of control, we must give holders of preferred
stock the opportunity to sell preferred stock at 101% of the
liquidation preference plus accumulated and unpaid dividends. If we
fail to make the offer, the preferred stock will become immediately
convertible into common stock at $.01 per share and will be entitled
to appoint two additional directors, and the dividend rate will
immediately increase to 14%.
Voting Rights............................. In addition to its special voting rights with respect to a class vote
on directors and special voting rights regarding mergers and
liquidations where the holders of the preferred stock do not receive
the liquidation preference, the holders of the preferred stock are
entitled to vote with holders of the common stock on all matters
submitted to a vote of our
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
stockholders. Each share of preferred stock will be entitled to
one vote until the time it is converted, at which point it will be
entitled to the number of shares into which the preferred stock
may be converted. Prior to conversion and assuming the reverse split
of the common stock is implemented, the preferred stock will represent
approximately 12% of the total voting power of the common and preferred
stock. If Kaiser or any of its affiliates hold any preferred stock,
they will not be entitled to vote that preferred stock on these matters.
The terms of the preferred stock may only be amended with a two-thirds
affirmative vote of the holders of preferred stock.
The Warrants
Issuer.................................... ICF Kaiser International, Inc.
Securities Offered........................ We are offering an aggregate of up to .882 million warrants which
will entitle the holders to purchase 15% of our common stock on a
fully diluted basis, to be issued upon consummation of the
recapitalization.
Term...................................... The warrants will expire on December 31, 2004.
Exercise Price............................ The exercise price of the warrants will be equal to the average
closing price of our common stock for the first 20 consecutive
trading days following consummation of the exchange offer.
The Secured Notes
Issuer.................................... ICF Kaiser International, Inc.
Overview.................................. We will issue up to $10 million of secured notes if:
. the new credit facility requires cash collateral in connection
with the Nova Hut collateral obligations, or
. we are required to make an additional capital contribution to
Kaiser-Hill Company, LLC.
Purpose................................... The secured notes, if issued, would replace funds otherwise available
for the asset sale offer but required to cash collateralize the
letter of credit for the Nova Hut project or make the additional
Kaiser-Hill capital contribution.
Interest.................................. The interest on the secured notes will be set at a rate mutually agreed
upon by Kaiser and the holders of old notes.
Maturity.................................. The secured notes will mature on June 30, 2001 or, if used to
collateralize the Nova Hut letter of credit, upon any earlier
termination of the Nova Hut collateral obligations.
Security.................................. The security for the secured notes will consist of a secondary lien
on Nova Hut cash collateral deposits, if used for the Nova Hut letter
of credit, and a lien on other assets of Kaiser valued at no less
than an additional $10 million.
</TABLE>
4
<PAGE>
The Exchange Offer
<TABLE>
<S> <C>
The Exchange Offer........................ We are offering to exchange convertible preferred stock, warrants and
secured notes, if issued, for all old notes outstanding after the
asset sale offer.
Minimum Tender Condition.................. In order for us to consummate the exchange offer, holders of at least
95% of the outstanding old notes must have validly tendered their old
notes.
Conditions of the Exchange Offer.......... Our acceptance of the exchange offer is subject to the following
conditions, among other things:
. the minimum tender condition of 95% must be met;
. we must obtain the requisite consents from holders of the old
notes and the senior notes;
. our shareholders must approve the issuance of the preferred stock
and warrants being offered in the exchange offer; and
. we must obtain a new credit facility.
At any time we can waive any condition to the exchange offer and
accept all old notes tendered for exchange pursuant to the exchange
offer. Additionally, we reserve the right at any time to terminate
the exchange offer and not accept for exchange any old notes tendered
for exchange. See "The Exchange Offer-Conditions of the Exchange
Offer."
Expiration Date........................... The exchange offer, as well as the asset sale offer and consent
solicitations, will expire at 5:00 p.m., New York City time, on
_______ unless we extend or earlier terminate them. We can extend
the exchange offer and accept all old notes tendered for exchange or
amend the terms of the exchange offer and any amendment will apply to
the old notes tendered pursuant to the exchange offer.
Tax Consequences of the Exchange.......... The exchange, taken together with the cash purchase of old notes
pursuant to the asset sale offer, should qualify as a
recapitalization under the Internal Revenue Code. If that is the
case, a holder of old notes who participates in both the exchange and
the asset sale offer will recognize taxable gain, but not loss, equal
to the lesser of the cash plus the fair market value of the secured
notes, if issued, received or the aggregate amount of gain realized
on the exchange and cash purchase of old notes. However, if the
Internal Revenue Service were to successfully claim that the exchange
of old notes and the cash purchase of old notes pursuant to the asset
sale offer should be treated independently of each other for federal
income tax purposes, a holder of the old notes who participates in
both the exchange and the asset sale offer would recognize taxable
gain, but not loss, on the exchange equal to the lesser of the fair
market value of the secured notes, if issued, received or the amount
of gain realized on the exchange and would recognize taxable gain or
loss on the purchase of the old notes pursuant to the asset sale
offer. Further, if the Internal Revenue Service were to successfully
claim that the exchange does not qualify as a recapitalization, the
holders of old notes who participate in the exchange offer and/or the
asset sale offer would be required to recognize taxable gain or loss
on both the exchange and the cash purchase. See "United States
Federal Income Tax Considerations."
</TABLE>
5
<PAGE>
The Asset Sale Offer
<TABLE>
<S> <C>
The Asset Sale Offer............... We will be offering to purchase up to $60 million of the
old notes. This amount may be reduced by up to $10
million and replaced by a like amount of secured notes, if
issued. All old notes tendered for purchase will be
purchased on a pro rata basis. The offer to purchase will
be made at the same time as the offer to exchange, and the
purchase will be consummated immediately prior to
consummation of the exchange offer.
Conditions to Asset Sale Offer..... We will only consummate the asset sale offer if the
conditions to the exchange offer are satisfied or waived
and the exchange offer is consummated, the requisite
number of consents are obtained, and the new credit
facility is obtained.
Tax Consequences of the Asset
Sale Offer....................... The tax consequences for holders of old notes whose old
notes are purchased in the asset sale offer for the old
notes are summarized above under "Tax Consequences of the
Exchange."
The Consent Solicitations
The Consent Solicitations.......... In connection with the exchange offer, we are soliciting
consents from the holders of the old notes and the holders
of the senior notes to approve proposed amendments to the
indentures governing the old notes and the senior notes.
We also are requesting holders of the old notes and the
senior notes to deliver an instruction to the Trustee not
to interfere with our recapitalization. The proposed
amendments will not become operative unless the conditions
of the exchange offer are met and will become effective
immediately preceding the consummation of the exchange
offer.
Requisite Consents................. Consents of registered holders of a majority of the
outstanding aggregate principal amount of the old notes
and of the senior notes are required to approve the
proposed amendments to the indentures.
Proposed Amendments................ The proposed amendments to the indenture governing the old
notes will eliminate substantially all of the restrictive
covenants and events of default in the old notes
indenture. The proposed amendments to the indenture
governing the senior notes will amend restrictive
covenants that would limit implementation of our proposed
business plan.
If the proposed amendments become effective with respect
to the old notes indenture, they will apply to all old
notes issued under the old notes indenture, and each
holder of old notes not tendered or accepted for exchange
pursuant to the exchange offer will be bound by the
proposed amendments regardless of whether the holder
consented to the proposed amendments.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Possible Prepackaged Plan of Reorganization
Alternative Implementation of
Recapitalization........................ If holders of 95% of the outstanding old notes do not tender their
old notes in the exchange offer but we obtain a substantial level of
support for the recapitalization, we may elect to implement that
recapitalization through a "prepackaged" plan of reorganization under
Chapter 11 of the Bankruptcy Code having the same terms and
conditions as regards the holders of old notes as contemplated by the
recapitalization. Such a plan of reorganization would not affect
Kaiser's operations, vendors or employees.
Binding Effect of Plan.................... If confirmed by the Bankruptcy Court, a prepackaged plan of
reorganization would bind all holders of old notes, without regard to
whether they tendered their old notes in the exchange offer or the
asset sale offer.
Effectiveness of Tenders of
Old Notes............................... Tenders of old notes and related documentation may not be withdrawn
after delivery and may be counted as ballots in favor of a plan of
reorganization in a Chapter 11 case commenced before or after
expiration of the solicitation period for the exchange offer and the
asset sale offer.
</TABLE>
The Company
We are a global provider of engineering, construction management, and
project and program management services. We also own a 50% interest in Kaiser-
Hill Company, LLC, which serves as the integrated management contractor at the
U.S. Department of Energy's Rocky Flats Environmental Technology Site.
We completed the sale of our Environment and Facilities Management Group on
April 9, 1999 for net cash proceeds, after a working capital adjustment, of $74
million and on June 30, 1999 we sold 90% of our Consulting Group for $64 million
in cash, plus $6.6 million of interest bearing notes. These actions were taken
in response to substantial losses incurred primarily in 1998 in connection with
fixed price contracts to construct four nitric acid plants.
We are now focused on serving clients in five major lines of business:
. Transit and Transportation - Our transit and transportation services
support the planning, design, engineering, and construction of heavy-
and light-rail transit systems, high-speed rail, peoplemovers, bus
systems, highways and bridges, and airport improvements.
. Alumina/Aluminum - We provide design and construction services for
expansion and modernization of some of the world's largest alumina and
aluminum facilities in locations from Kentucky to the Middle East and
Australia.
. Facilities and Water/Wastewater - We provide engineering services to
public-and private-sector clients who need to modernize or maintain
facilities, to design and build new capacity for the future, or to
improve existing operations and environmental conditions. Such
facilities include, but are not limited to, water supply and wastewater
treatment facilities.
7
<PAGE>
. Iron and Steel - We support the iron and steel industry by providing
traditional services such as engineering, design, and project and
construction management for plant expansions, modernizations, and
greenfield development.
. Microelectronics and Clean Technology - We also provide design/build
services for the microelectronics, semiconductor, biotechnology, and
telecommunication industries.
Our business is global in nature with more than 30 offices worldwide.
We own Kaiser-Hill Company, LLC equally with CH2M Hill Companies Ltd. We
designate a majority of the members of Kaiser-Hill's Board of Managers.
Kaiser-Hill currently serves as the integrated management contractor at the U.S.
Department of Energy's Rocky Flats Environmental Technology Site near Denver,
Colorado. The scope of Kaiser-Hill's contract with the DOE includes all
elements of daily and long-term operation of the site, including stabilizing and
safely storing more than 14 tons of plutonium, cleaning up areas contaminated
with hazardous and radioactive waste, and restoring much of the 6,000-acre site
for future use by the public. Kaiser-Hill's contract with the DOE currently
expires in September 2000. On July 30, 1999, the DOE announced that it intends
to negotiate with Kaiser-Hill for a new contract for services through the
closure of the Rocky Flats site in 2006. Such negotiations are expected to
begin in early October. The DOE has stated that if a new contract has not been
entered into by November 30, 1999, it intends to conduct a competition for the
new contract. We can provide no assurance as to Kaiser-Hill's ability to
compete for or win a new contract if Kaiser-Hill is unable to enter into a new
contract through negotiations.
Strategy
Our strategy is to grow the revenue base of our remaining operations and
improve profitability. We will focus on new business development, cost
reductions and stringent project and operating controls to achieve this goal.
New Business Development. With the nitric acid projects behind us, the
realignment of our capital structure will enable us to focus on expanding our
revenue base. We believe our expertise in our core lines of business and
worldwide presence and recognition for quality service delivery can be leveraged
into significant opportunities in the future. We will seek additional contracts
with our existing customers and utilize our expertise from our current projects
to win business from new clients.
Cost Reductions. Concurrently with the planning for the sales of the EFM
and Consulting Groups, we identified approximately $20 million of cost reduction
opportunities in our remaining operations. Upon elimination of these costs, we
will have aligned our cost structure with our remaining revenue base. By
changing the way we manage our business to a line of business focus with only
two regions - North America and International - we will be able to eliminate a
layer of overhead including personnel and facilities costs. In addition to
reductions in overhead, reductions in technical personnel resulting in higher
revenue per employee will improve profitability. As of July 31, 1999, we have
effected approximately 80% of these cost reductions.
Stringent Controls. Following the identification of our nitric acid plant
related problems we, along with several outside consultants, thoroughly reviewed
our policies and procedures in all phases of a contract lifecycle. As a result,
we have implemented:
. stronger financial and operating controls and project evaluation
processes;
. frequent senior management reviews of progress and profitability of each
contract; and
. a new project management reporting system that will allow us to more
proactively manage profitable project execution.
____________________
Our principal executive office is located at 9300 Lee Highway, Fairfax,
Virginia 22031-1207 and our telephone number is (703) 934-3600.
8
<PAGE>
Risk Factors
Before making an investment, you should consider carefully the information
included in the "Risk Factors" section, as well as all other information set
forth in this prospectus.
9
<PAGE>
================================================================================
Summary Financial Data
The following statement of operations, basic and diluted (loss) per
share data, and balance sheet data, excluding the data for the six months ended
and as of June 30, 1999, has been derived from Kaiser's audited financial
statements. The information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
with our consolidated financial statements and related notes, incorporated by
reference in this prospectus.
Effective January 1, 1999, the results of operations from the EFM and
Consulting Groups were treated as discontinued operations and were excluded from
the statement of operations data. Accordingly, the statement of operations data
for the six months ended June 30, 1999 is not comparable to the data for the
prior periods presented.
<TABLE>
<CAPTION>
Year Ten Months Six
Ended Ended Months
February December Year ended December 31, Ended
28, 31, ------------------------------------- June 30,
1995 1995 1996 1997 1998 1999
-------- -------- ---------- ---------- ---------- -----------
(in thousands, except per share data) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Gross revenue.......................... $861,518 $916,744 $1,248,443 $1,108,116 $1,210,421 $ 445,377
Service revenue (a).................... 459,786 425,896 532,116 426,086 345,462 127,433
Operating costs (b)................... 436,866 400,534 500,588 398,422 397,696 125,538
Depreciation and amortization.......... 9,232 8,357 10,348 9,595 9,048 3,098
Severance and restructuring -
charges............................. - - - - 9,407 9,359
Other unusual charges.................. - (500) - - 7,672 1,335
Operating income (loss)................ 13,688 17,505 21,180 18,069 (78,361) (11,897)
Income (loss) before income
taxes, minority interest,
extraordinary item
and cumulative effect of
accounting change................... 1,239 6,303 14,484 2,561 (97,101) (23,499)
Net income (loss) before
discontinued operations,
extraordinary item and
cumulative effect of (1,661) 2,252 5,834 (4,987) (93,442) (27,102)
accounting change...................
Basic and Diluted Earnings (Loss)
Per Share:
Continuing operations before
extraordinary item and
cumulative effect of
accounting change................... $(0.18) $0.02 $ 0.17 $ (0.22) $ (3.87) $ (1.13)
Discontinued operations................ - - - - - 2.12
Extraordinary item..................... - - - - (0.05) (0.03)
Cumulative effect of
accounting change,
- - - - (0.25) -
net of tax.......................... -------- -------- ---------- ---------- ---------- ----------
Total.......................... $ (0.18) $ 0.02 $ 0.17 $ (0.22) $ (4.17) $ 0.96
======== ======== ========== ========== ========== ==========
Weighted average common
shares outstanding-basic............ 20,957 21,132 22,035 22,382 24,092 23,971
Weighted average common
shares outstanding-diluted.......... 20,957 21,606 22,057 22,382 24,092 23,971
Other Data:
Minority interest (c).................. $ - $ 1,960 $ 6,043 $ 10,867 $ 7,698 $ 4,205
EBITDA (d)............................. 22,920 23,402 25,485 16,797 (59,932) (2,310)
Ratio of earnings to fixed
charges (e)......................... (e) 1.24 1.60 1.01 (e) (e)
Balance Sheet Data (end of period):
Cash and cash equivalents.............. $ 28,233 $ 17,019 $ 20,250 $ 20,020 $ 15,267 $ 67,514
Total assets........................... 281,422 370,179 369,462 399,288 429,053 364,434
Long-term debt (f)..................... 126,733 120,112 156,519 141,004 137,488 137,730
Redeemable preferred stock............. 19,617 19,787 - - - -
Shareholders' equity (deficit)......... 27,624 28,427 34,892 27,327 (63,118) (39,849)
</TABLE>
================================================================================
10
<PAGE>
================================================================================
________________
(a) Service revenue is calculated by deducting the costs of subcontracted
services and other direct costs from the gross revenue and adding our share
of the income or loss of joint ventures and affiliated companies.
(b) Includes direct labor and fringe benefits, group overhead and corporate
general and administrative expense.
(c) Minority interest represents CH2M Hill's fifty-percent ownership of Kaiser-
Hill.
(d) EBITDA, as presented, includes operating income (loss) plus depreciation
and amortization, severance and restructuring charges, and unusual charges
and minus minority interest. We believe that EBITDA provides useful
information regarding our ability to service our indebtedness, but should
not be considered in isolation or as a substitute for operating income or
cash flow from operations, in each case as determined in accordance with
generally accepted accounting principles, as an indicator of our operating
performance or as a measure of our liquidity.
(e) Earnings for these periods are inadequate to cover fixed charges. The
deficiency, calculated as the dollar amount of earnings required to attain
a ratio of one-to-one, for the year ended February 28, 1995, December 31,
1998 and the six months ended June 30, 1999 was $2,848, $103,146 and
$26,495, respectively.
(f) Includes unamortized discounts.
The following financial information represents the results from
continuing operations for the three months ended June 30, 1999, as annualized
and adjusted for the effects of the following:
. the anticipated increase in our service revenue based upon internal
management projections, as compared to the annualization of the
results from continuing operations during the second three months
of 1999; and
. the full-year effect of our cost reduction plan as a result of the
scheduled separation of approximately 200 employees.
The results from continuing operations presented in the table exclude
the operating results of our EFM and Consulting Groups, which were sold during
the second quarter of 1999 and whose results were otherwise included in Kaiser's
results from discontinued operations not presented in the table.
We believe that the annualization of the continuing operating results
for the three months ended June 30, 1999 is a reasonable basis upon which to
present the effects of the adjustments noted above:
. since that quarter's results, excluding nonrecurring charges,
reflect the most recent actual results and may represent the near-
term future recurring operating trends and
. since the cost reduction plan was largely designed, planned and
executed based on the cost trends and operating results, excluding
nonrecurring charges, experienced during that quarter.
This financial data is provided for information purposes only and is
not intended to project our results of operations or financial position for any
future period or as of any future date. The information is based on our
unaudited historical financial information for the three months ended June 30,
1999 and should be read in conjunction with the related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
included in our quarterly report on Form 10-Q for the period ended June 30,
1999, that is incorporated by reference into this prospectus.
================================================================================
11
<PAGE>
================================================================================
<TABLE>
<CAPTION>
Adjusted
Annualized Run Annualized Run
Rate Adjustments Rate
---------------- ----------------- -----------------
<S> <C> <C> <C>
Statement of Operations Data:
Gross revenue $ 879,520 $ 2,424 $ 881,944
Service revenue (a) 253,096 2,424 255,520
Operating costs (b) 247,952 (15,040) 232,912
Depreciation and amortization 6,468 (1,968) 4,500
---------------- ----------------- -----------------
Operating income (loss) before other unusual (1,324) 19,432 18,108
charges
Other Data:
Minority interest (c) $ 8,492 $ 8,492
EBITDA (d) (3,348) 14,116
</TABLE>
(a) Service revenue is calculated by deducting the costs of subcontracted
services and other direct costs from the gross revenue and adding our share
of the income or loss of joint ventures and affiliated companies.
(b) Severance and restructuring charges and other unusual charges incurred
during the three months ended June 30, 1999 have not been included in the
annualized run rate column as operating costs.
(c) Minority interest represents CH2M Hill's fifty-percent ownership of Kaiser-
Hill.
(d) EBITDA, as presented above, includes operating income (loss), plus
depreciation and amortization, severance and restructuring charges, and
unusual charges and minus minority interest. Other unusual charges incurred
during the three months ended June 30, 1999 have not been included in the
annualized run rate column and have accordingly been excluded from this
definition of EBITDA. We believe that EBITDA as presented here provides
useful information regarding our ability to service our indebtedness, but
should not be considered in isolation or as a substitute for operating
income or cash flow from operations, in each case as determined in
accordance with generally accepted accounting principles, as an indicator
of our operating performance or as a measure of our liquidity.
The assumed increase in service revenue and the assumed decrease in costs
from the cost reduction plan are not predictions of actual future results. You
should not assume that the increase in service revenue and the decrease in costs
necessarily will occur. Accordingly, you should not use or rely on this
information as an indication of actual future results. The foregoing projections
constitute what we believe are forwarding-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements involve risks, assumptions and uncertainties. There can be no
assurance that future developments will be in accordance with Kaiser's
expectations. See "Cautionary Note Regarding Forward-Looking Statements."
================================================================================
12
<PAGE>
RISK FACTORS
An investment in the securities described in this prospectus involves
a high degree of risk. You should consider carefully the following factors, in
addition to the other information contained in this prospectus, before
participating in the exchange offer.
Specific factors related to our financial performance may adversely affect our
ability to pay interest and principal on our debt.
Sale of operating groups will reduce cash flow. During the first half
of 1999, we sold our EFM and Consulting Groups. Prior to their sale, these
groups had generated cash that was used to support Kaiser's operations and debt
service. In the recent past, apart from Kaiser's interest in Kaiser-Hill
Company, LLC, Kaiser's other operating units have not generated positive cash
flow.
We rely heavily on a plan to reduce expenses and increase cash flow,
which may not be successful. Our success will be dependent, to a large extent,
on our ability to execute promptly and effectively our plan to reduce operating
expenses, increase margins and enhance cash flow from remaining operations.
We are dependent on key customers, and the loss of any of them could
materially affect us. Our future profitability is dependent, to a significant
extent, on Kaiser-Hill's entering into a new contract with DOE. We have several
other key clients, the loss of any of which would have a significant material
adverse effect on our ability to return to profitability. The loss of a
significant client could impair our ability to compete for new clients and have
a significant negative impact on Kaiser's future growth.
We intend to continue bidding and entering into fixed price contracts,
which may not be completed profitably. Our recent history of financial losses is
partially attributable to our failure to accurately bid on, and our inability to
perform, fixed price contracts, specifically with respect to the nitric acid
plants. Despite this performance history, the nature of our business is such
that we believe it is necessary for us to continue to enter into fixed price
contracts. Although we believe we have put appropriate controls in place such
that we can successfully bid and perform fixed price contracts, we give no
assurances that all future fixed price contracts will be completed profitably.
The remaining operations may not be able to retain or attract the
personnel needed for growth and profitability. Our future performance will
depend to a significant extent upon the efforts and abilities of senior
executives, line of business managers and other key employees. Our current
financial circumstances make it more difficult to retain key managers, and the
loss of the services of these managers could have a material adverse effect on
us. In addition, because our remaining operations are service-oriented in
nature, our ability to deliver these services in a cost-effective and high
quality manner depends upon our ability to attract, retain, and properly manage
a staff of qualified professionals with the necessary skills. The market for
these professionals is quite competitive and our current financial circumstances
make it more difficult to attract these professionals.
The remaining operations may not grow and become profitable in their
highly competitive markets. We compete with many other firms ranging from small
firms to large multinational firms having substantially greater financial,
management and marketing resources. Other competitive factors include quality of
services, technical qualifications, reputation, geographic presence, price, and
the availability of key professional personnel. In order for us to become
profitable, we will have to successfully compete against these firms in order to
generate additional backlog of service contracts, including an extension of the
current contract or award of a new contract for Kaiser-Hill.
Holders of old notes may have to surrender any payments received from
Kaiser pursuant to the asset sale offer if the payments are found to be
avoidable preferences under the U.S. Bankruptcy Code. In the event we were to
file for relief under Chapter 11 of the U.S. Bankruptcy Code within 90 days or
possibly one year of the payment date, the payments may be avoidable as a
preference and could be subject to recovery by a trustee in bankruptcy, an
13
<PAGE>
official creditors' committee, or other representatives of creditors of Kaiser
as a debtor in possession. If the payments were successfully challenged as a
preference, holders either would be required to return the funds received,
together with interest in a rate determined by the court, or would be precluded
from receiving any distribution on account of the holders' old notes.
Our financial performance is significantly tied to Kaiser-Hill, which is subject
to uncertainties that may adversely affect its and our operating results.
If Kaiser-Hill does not successfully negotiate a new DOE contract, we
will lose a significant portion of our cash flow and value. The contract with
DOE under which Kaiser-Hill operates expires in September 2000. Although we
believe DOE will enter into a new contract with Kaiser-Hill, it is possible that
after negotiating with Kaiser-Hill, DOE will conduct a competition for a new
contract. Kaiser-Hill may not be able to compete for or win a new contract if a
competition is conducted by DOE. If Kaiser-Hill does not successfully negotiate
or win a new contract in any competition that is held, we will lose a
significant portion of our cash flow and value.
There are special Federal regulations that could adversely affect
Kaiser-Hill's DOE contract. Because Kaiser-Hill provides the Federal government
with nuclear energy and defense- related services, it and a number of its
employees are required to have and maintain security clearances from the Federal
government. There can be no assurance that the required security clearances will
be obtained and maintained in the future. In addition, Kaiser-Hill is subject to
foreign ownership, control and influence regulations imposed by the Federal
government and designed to prevent the release of classified information to
contractors subject to foreign ownership, influence and control. There can be no
assurance that foreign ownership, influence and control concerns will not affect
the ability of Kaiser-Hill to secure and maintain its DOE contract.
There are potential substantial liabilities and costs associated with
Kaiser-Hill's DOE contract. Kaiser-Hill performs DOE's Performance Based
Integrating Management Contract at DOE's Rocky Flats Environmental Technology
Site near Denver, Colorado. Rocky Flats is a former DOE nuclear weapons
production facility. Under the DOE contract, Kaiser-Hill is responsible for, and
DOE will not pay for costs associated with, liabilities caused by the willful
misconduct or lack of good faith of Kaiser-Hill's managerial personnel or the
failure to exercise prudent business judgment by Kaiser-Hill's managerial
personnel. If Kaiser-Hill were found liable for any of these reasons, the
associated costs could be substantial.
We face significant contingencies, which may adversely impact our ability to
meet our obligations on our debt and preferred stock and our ability to fund
continuing operations.
We have retained obligations relating to the operating groups that
were sold. We have indemnified the purchasers of the EFM and Consulting Groups
we sold against breaches of representations and warranties and covenants
included in the sale agreements. We also have retained some potential
liabilities arising from the pre-closing operations of these operating groups.
These retained liabilities relate primarily to potential liabilities arising out
of ongoing federal government audits of certain activities of the operating
groups prior to their sale.
We have a potential liability from a contract with Bath Iron Works as
to which we currently cannot estimate the outcome. In March 1998, we entered
into a $197 million maximum price contract to construct a ship building facility
for Bath Iron Works. In May 1998, we learned that estimated costs to perform the
contract as reflected in actual proposed subcontracts were approximately $30
million higher than the cost estimates originally used as the basis for contract
negotiation between us and our customer. After learning this, we advised the
customer that we were not required to perform the contract in accordance with
its terms as a result of a mutual mistake between us in negotiating that
contract. In October 1998, our customer presented an initial draft of a claim
against us requesting payment for estimated damages and entitlements pursuant to
the terminated contract. No provision for loss from this matter has been
included in our financial results to date as management does not believe that it
has sufficient information to reasonably estimate the outcome as negotiation
activity has not been significant to date.
We have contingencies from a recent acquisition that could require us
to use cash that might otherwise be available for debt service or operations. In
March 1998, we acquired ICT Spectrum Constructors, Inc. by issuing common stock
in exchange for the stock of ICT Spectrum. We guaranteed that the market value
of each of the 1.5
14
<PAGE>
million shares of common stock issued in the acquisition will reach $5.36 by
March 1, 2001. In the event that the market value does not attain the guaranteed
level, we are obligated to make up the shortfall either through the payment of
cash or by issuing additional shares of common stock with a total value equal to
the shortfall, depending upon our preference. Under the terms of the agreement,
however, the total number of contingently issuable shares of common stock cannot
exceed an additional 1.5 million. Given recently quoted prices of our stock, the
assumed issuance of an additional 1.5 million shares would not completely
extinguish the purchase price contingency and we would be required to pay a cash
fill-up to satisfy the contingency. Any future distribution of cash or common
stock would be recorded as a charge to our paid-in-capital. Until the earlier of
the resolution of the contingent purchase price or March 1, 2001, any additional
shares assumed to be issued because of shortfalls in market value will be
included in our diluted earnings per share calculations, unless they are
antidilutive. The exchanged shares also contain restrictions preventing their
sale prior to March 1, 2001.
On March 29, 1999, one ex-ICT Spectrum shareholder, individually and on
behalf of all others similarly situated, filed a class action lawsuit alleging
false and misleading statements made in a private disclosure document, and
asserting other claims, in connection with our acquisition of ICT Spectrum. We
have filed a motion to dismiss the plaintiffs' amended complaint.
There may be Y2K compliance issues associated with the remaining
operations. During recent years, there has been significant global awareness
raised regarding the potential disruption to business operations worldwide
resulting from the inability of current computer software to process properly
the change from the year 1999 to 2000. We have reviewed our data processing,
operating and other computer-based systems, and we do not currently anticipate
any material disruption in our operations as a result of any failure by us to
achieve year 2000 compliance, but we cannot give any assurance to that effect.
Even if our computer operations are unaffected by the year 2000, our business
operations may be interrupted or adversely affected as a result of year 2000
complications experienced by our subcontractors, clients, vendors, or general
business interruptions experienced domestically or internationally. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Other Matters - Year 2000 Readiness" in the Annual Report on Form
10-K enclosed with this prospectus.
There are significant financial risks associated with the preferred stock,
warrants, underlying common stock and secured notes, which could adversely
affect the value of the preferred stock, warrants, underlying common stock and
secured notes.
There may not be a trading market for the preferred stock, warrants
and secured notes. The preferred stock, warrants and secured notes are new
issues of securities for which there are currently no established trading
markets.
We cannot assure you that a trading market for the preferred stock,
warrants or secured notes will develop. The absence of a trading market
adversely affects the liquidity of your shares of preferred stock, warrants and
secured notes. It may be difficult for you to sell your preferred stock,
warrants and secured notes. We do not intend to apply for listing of the
warrants or the secured notes on any national securities exchange or for
quotation through any over-the-counter market and there is no assurance that we
will be able to obtain listing or quotation of the preferred stock. If your
shares of preferred stock, warrants or secured notes are traded, they may trade
at a substantial discount from their liquidation value or at a substantial
discount to the implied value of the warrants taking into account their exercise
price, as the case may be. Any discount could depend upon a number of factors,
including:
. the market demand for the preferred stock, warrants or secured notes,
as the case may be;
. the market for similar securities;
. the financial condition and performance of Kaiser;
15
<PAGE>
. prevailing dividend and interest rates generally in the financial
markets; and
. general economic conditions.
See "Description of Convertible Preferred Stock," "Description of Warrants" and
"Description of Secured Notes" on pages 50, 51 and 52 of this prospectus.
Our ability to pay the liquidation preference and dividends on the
preferred stock depends on our financial condition at that time. Our obligations
to the holders of our debt and other creditors take priority over our
obligations to the holders of the preferred stock. Under Delaware law, we may
not redeem the preferred stock for its stated liquidation preference if at that
time our remaining assets are not sufficient to pay our outstanding obligations
or if that redemption would impair our capital. See "Description of Convertible
Preferred Stock" on page 50 of this prospectus.
Preferred stock and warrants could result in potential dilution and
impair market price. To the extent that the preferred stock and warrants are
converted or exercised into our common stock, our existing shareholders will
experience dilution in their percentage ownership of Kaiser. So long as the
preferred stock and warrants are exercisable, the holders of these securities
will have the opportunity to profit from a rise in the price of our common
stock. The additional shares of common stock available for sale in the market
may have a negative impact on the price and liquidity of the common stock that
is currently outstanding.
Preferred stock, warrants and secured notes may have an adverse impact
on additional financing. The holders of the preferred stock and warrants are
more likely to convert or exercise them at a time when we may be able to obtain
additional capital by an offering of our stock at a price higher than the
conversion or exercise price of the preferred stock and warrants. This may make
it more difficult to obtain additional financing at a time when additional
financing may be necessary or desirable to sustain current or increased levels
of operations. In addition, the secured notes, if issued, will represent new
outstanding debt for Kaiser. Potential lenders may look unfavorably at our total
debt level with this additional debt, making it more difficult for us to obtain
additional financing.
Our common stock could be delisted from the New York Stock Exchange,
which may adversely affect holders of our common stock. Our common stock is
listed on the New York Stock Exchange. In order to continue to be listed on the
NYSE, we must meet specific quantitative standards. On August 5, 1999, the NYSE
notified us that we were "below criteria" regarding newly effective continued
listing standards. This means we are subject to the NYSE's procedures under
which the NYSE evaluates whether a listed company has a plan to bring it into
conformity with the applicable continued listing criteria or whether a company
should be delisted from the NYSE. We do not know whether our proposed
recapitalization and other ongoing programs will be sufficient to bring us into
conformity with the applicable continued listing criteria. Although we would
have an opportunity to appeal any decision by the NYSE to delist its common
stock, there can be no assurance that this appeal would be successful. If our
common stock were delisted from the NYSE, we would seek to have the common stock
listed on another exchange, such as AMEX or one of the regional exchanges, or
quoted in the Nasdaq National or SmallCap markets. However, many of these
exchanges and markets also have minimum quantitative standards that we may be
unable to meet. If our common stock is delisted from the NYSE and we are unable
to have our shares included on another exchange or in the over-the-counter
market, shareholders may find it more difficult to dispose of the shares or to
obtain accurate quotations of the market value of the shares. In addition, the
market price of the shares could decline, news coverage about us could decline,
and we could find it more difficult to obtain financing in the future.
Kaiser does not anticipate that it will pay any dividends on its
common stock in the foreseeable future, which adversely affects the value of our
common stock. We have never paid dividends on our common stock and anticipate
retaining all earnings for use in our business rather than paying cash dividends
in the foreseeable future. Our ability to pay cash dividends on our common stock
is substantially restricted under the indentures governing our outstanding debt.
The new revolving credit facility also will likely contain provisions
prohibiting us from paying dividends without the consent of the lender. These
contractual restrictions will limit our ability to pay dividends in the
future.
16
<PAGE>
Issuance of shares to former holders of ICT Spectrum stock could cause
significant dilution. As noted above, if we are required to issue shares to
extinguish the ICT Spectrum purchase price contingency, there will be
significant dilution to shareholders.
If the recapitalization is completed, holders of old notes not tendered in the
exchange offer or in the asset sale offer will have reduced rights under the
governing indenture and may find it difficult to sell their old notes.
The amendments to the indenture governing the old notes will have the
effect of reducing the rights of the holders of old notes not tendered in the
exchange offer or in the asset sale offer. Concurrent with the exchange offer,
we propose to amend the indenture that governs the old notes by eliminating
substantially all of the covenants that restrict our activities and those of our
subsidiaries. Although we will continue to remain subject to some similar
covenants that are included in the indenture governing the remaining senior
notes, holders of the old notes will not have the right to enforce these
covenants upon us.
The market price of the old notes may decline. If the exchange offer is
successful, the amount of old notes outstanding will be substantially reduced.
As a result, it may become much more difficult for holders to resell their old
notes. In addition, the reduced liquidity of old notes outstanding after the
recapitalization could have the effect of reducing the market price at which the
old notes may be resold.
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999, pro
forma to give effect to the divestiture of goodwill subsequent to June 30, 1999
and adjusted to give effect to the consummation of the recapitalization, without
the issuance of secured notes, as if it had occurred on June 30, 1999. The
information set forth below should be read in conjunction with our audited
financial statements and unaudited pro forma financial statements, together with
the related notes, included and incorporated by reference in this prospectus.
<TABLE>
<CAPTION>
June 30, 1999 (a)
------------------------------------------------------
Pro Forma Pro Forma
Before After
Actual Recapitalization (c) Recapitalization (d)
--------- ---------------- ----------------
(Dollars in thousands)
<S> <C> <C> <C>
Cash and cash equivalents (b) $ 90,368 $ 67,368 $ 7,368
======== ======== =======
Long-term debt (including current portion):
Credit Facility $ - $ - $ 2,200
12% Senior Notes 14,716 14,716 14,716
12% Senior Subordinated Notes 123,014 123,014 -
-------- -------- -------
Total Debt 137,730 137,730 16,916
Stockholders' Equity (Deficit) (39,849) (41,973) 16,708
-------- -------- -------
Total Capitalization $ 97,881 $ 95,757 $33,624
======== ======== =======
</TABLE>
- ----------------
(a) Assumes 100% participation by the note holders.
(b) Includes $22.9 million of restricted cash being used prior to
recapitalization to collateralize letters of credit.
(c) Pro forma to give effect to divestiture of goodwill subsequent to June 30,
1999.
(d) Pro forma to give effect to recapitalization.
17
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges for
the five years ended December 31, 1998 and the six months ended June 30, 1999.
The ratio of earnings to fixed charges has been calculated by dividing fixed
charges into the sum of fixed charges and income from continuing operations
before income tax expense and before equity in earnings or losses of less than
fifty-percent owned companies. Fixed charges consist solely of interest costs.
<TABLE>
<CAPTION>
Ten months Year ended Six months
-----------------------------------------
Year Ended ended ended
February 28, December 31, December 31, December 31, December 31, June 30,
1995 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before income
taxes, minority interest or
income or loss from equity
investees, discontinued
operations, extraordinary
item and cumulative effect
of accounting change $(2,848) $ 3,180 $10,469 $ 260 $(103,146) $(26,495)
======= ======= ======= ======= ========= ========
Total Fixed Charges:
Interest expense $14,799 $13,255 $17,334 $18,276 $ 20,279 $ 12,209
======= ======= ======= ======= ========= ========
Income (loss) before income
taxes, minority interest or
income or loss from equity
investees, discontinued
operations, extraordinary
item and cumulative effect
of accounting change plus
fixed charges $11,951 $16,435 $27,803 $18,536 $ (82,867) $(14,286)
======= ======= ======= ======= ========= ========
Ratio of earnings to fixed charges (a) 1.24 1.60 1.01 (a) (a)
======= ======= ======= ======= ========= ========
</TABLE>
(a) Earnings for these periods are inadequate to cover fixed charges. The
deficiency, calculated as the dollar amount of earnings required to attain a
ratio of one-to-one, for the year ended February 28, 1995, December 31, 1998
and the six months ended June 30, 1999 was $2,848, $103,146 and $26,495,
respectively.
18
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements are derived from our
historical financial statements incorporated by reference into this prospectus.
. The unaudited pro forma statement of operations for the year ended
December 31, 1998 reflects the sale of our EFM and Consulting Groups
and the completion of the recapitalization described in this
prospectus, as if these transactions had occurred on January 1, 1998.
. The unaudited pro forma balance sheet at June 30, 1999 reflects the
completion of the recapitalization described in this prospectus, as
well as several other transactions, as described in the notes to the
pro forma financial statements, as if they had occurred at
June 30, 1999.
. The unaudited pro forma statement of operations for the six months
ended June 30, 1999 reflects the operating results of the EFM and
Consulting Groups as discontinued operations. As a result, they have
been excluded from gross revenue, service revenue, operating income
(loss), other income (expense) and all information concerning
continuing operations for that period.
The unaudited pro forma financial statements should be read in conjunction with
the related notes, with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and with our historical financial
statements, including the related notes, incorporated by reference into this
prospectus.
The pro forma adjustments to give effect to the various events described
above are based upon currently available information and upon assumptions that
management believes are reasonable. The pro forma financial statements are
provided for information purposes only and should not be construed to be
indicative of our results of operations or financial position had the
transactions described above been consummated on or as of the dates assumed, and
are not intended to project our results of operations or financial position for
any future period or as of any future date.
19
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Balance Sheet
As of June 30, 1999
(In Thousands)
<TABLE>
<CAPTION>
Pro Forma Adjustments
------------------------------------
Actual Pro Forma
June 30, Other June 30,
1999 Transactions Recapitalization 1999
---------- ------------ ---------------- ----------
<S> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 67,514 $ (23,000) /(1,2)/ $ (37,146) /(4)/ $ 7,368
Restricted cash 22,854 - (22,854) /(4)/ -
Contract receivables, net 204,758 - - 204,758
Prepaid expenses and other current assets 15,693 - - 15,693
Deferred income taxes - - - -
---------- ------------ ---------------- ----------
Total Current Assets 310,819 (23,000) (60,000) 227,819
---------- ------------ ---------------- ----------
Fixed Assets
Furniture, equipment, and leasehold improvements 17,182 - - 17,182
Less depreciation and amortization (13,244) - - (13,244)
---------- ------------ ---------------- ----------
3,938 - - 3,938
---------- ------------ ---------------- ----------
Other Assets
Goodwill, net 21,687 (2,124) /(3)/ - 19,563
Investments in and advances to affiliates 8,939 - - 8,939
Capitalized software development costs 2,046 - - 2,046
Notes receivable 6,550 - - 6,550
Other 10,455 - (2,133) /(7)/ 8,322
---------- ------------ ---------------- ----------
49,677 (2,124) (2,133) 45,420
---------- ------------ ---------------- ----------
Total Assets $ 364,434 $ (25,124) $ (62,133) $ 277,177
========== ============ ================ =========
Liabilities and Shareholders' (Deficit)
Current Liabilities
Accounts payable $ 165,983 $ (13,900) /(2)/ $ - $ 152,083
Accrued salaries and benefits 35,447 - - 35,447
Other accrued expenses 22,959 - - 22,959
Accrued Interest 9,100 (9,100) /(1)/ - -
Deferred revenue 6,404 - - 6,404
Income taxes payable 4,307 - - 4,307
---------- ------------ ---------------- ----------
Total Current Liabilities 244,200 (23,000) - 221,200
Long-term Liabilities
Long-term debt 137,730 - (123,014) /(4,5,6)/ 14,716
Revolving credit facility - - 2,200 /(8,9)/ 2,200
Other 17,699 - - 17,699
---------- ------------ ---------------- ----------
Total Liabilities 399,629 (23,000) (120,814) 255,815
---------- ------------ ---------------- ----------
Commitments and Contingencies
Minority Interest 4,654 - - 4,654
Shareholders' Equity/(Deficit)
Preferred Stock, par value $.01 per share:
Authorized-650,000 shares
Issued and outstanding - 650,000 shares - - 7 /(5)/ 7
</TABLE>
20
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Common stock, par value $.01 per share:
Authorized-90,000,000 shares
Issued and outstanding- 23,822,657 shares 238 - - 238
Additional paid-in capital 75,127 - (55,154) /(5,9,10)/ 19,973
Accumulated deficit (111,704) (2,124) /(3)/ 113,828 /(6,7,8,10)/ -
Cumulative translation adjustment (3,510) - - (3,510)
----------- --------- --------- ---------
Total Shareholders' Equity (Deficit) (39,849) (2,124) 58,681 16,708
----------- --------- --------- ---------
Total Liabilities and Shareholders' Equity $ 364,434 $(25,124) $(62,133) $277,177
=========== ========= ========== =========
</TABLE>
21
<PAGE>
NOTES TO THE PRO FORMA BALANCE SHEET
Other Transactions
Several transactions completed subsequent to June 30, 1999 were deemed to be
significant to presenting the pro forma effects of the exchange offer
transaction described in this prospectus. Accordingly, such transactions have
been included in the pro forma balance sheet presentations.
1. To record the payment, within the 30 day grace period on July 30, 1999, of
$9.1 million of accrued interest on the senior notes and the old notes.
2. To pay $13.9 million in accounts payable.
3. To write off the remaining carrying value of goodwill for a particular
division.
Exchange Offer Transactions
4. To record the use of a total of $60.0 million in cash, including $22.9
million in currently restricted cash, to pay off an equal amount of the old
notes. The restricted cash balance is required to support uncollateralized
letters of credit until Kaiser obtains access to a revolving line of credit
that eliminates the cash collateral requirement.
5. To record the issuance of $65.0 million in newly issued preferred stock to
extinguish an equivalent amount of the old notes. A total of 650,000
shares with a par value of $.01/share.
6. To write off the remaining $2.0 million of unamortized carrying value of
the original issue discount associated with the old notes. The unamortized
carrying value had been netted from the carrying value of the old notes on
the face of the balance sheet.
7. To write off the remaining $2.1 million of unamortized carrying value of
the costs incurred by Kaiser to issue the old notes.
8. To record the $1.7 million estimate of the costs, including professional
fees, to be incurred as part of this exchange offer. It is assumed that
Kaiser will borrow against a new revolving credit facility to pay these
costs.
9. To record the $0.5 million estimate of costs, including professional fees,
to be incurred to issue the new preferred stock as a charge to paid in
capital. It is assumed that Kaiser will borrow against a new revolving
credit facility to pay these costs.
Quasi Reorganization
10. To reclassify $119.6 million from paid in capital to eliminate the balance
of the accumulated deficit after the completion of the exchange offer
transactions assuming shareholder approval.
22
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
Year Ended December 31, 1998
(In thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
------------------------------------
Actual Results Pro Forma Results
for the year ended Sale of for the year ended
December 31,1998 EFM and CG Recapitalization December 31, 1998
------------------ ---------- ---------------- ------------------
<S> <C> <C> <C> <C>
Gross Revenue $ 1,210,421 $ (210,529)/(2)/ $ - $ 999,892
Subcontract and direct material costs (794,794) 78,131 /(2)/ - (716,663)
Provision for contract losses (76,210) - - (76,210)
Equity in net income of unconsolidated
subsidiaries 6,045 (600)/(2)/ - 5,445
---------------- ------------ ---------------- -------------------
Service Revenue 345,462 (132,998) - 212,464
Operating Expenses
Direct labor and fringe benefits 282,562 (64,225)/(2)/ - 218,337
Group overhead 92,151 (48,144)/(2)/ - 44,007
Corporate general and administrative 22,983 (5,970)/(2)/ - 17,013
Depreciation and amortization 9,048 (2,776)/(2)/ - 6,272
Severance and restructuring 9,407 - - 9,407
Other unusual charges 7,672 - - 7,672
---------------- ------------ ---------------- -------------------
Operating Income (Loss) (78,361) (11,883) - (90,244)
Other Income (Expense)
Interest income 1,539 - - 1,539
Interest expense (20,279) 1,994/(3)/ 16,250 (5) (2,035)
---------------- ------------ ---------------- ------------------
Income (Loss) From Continuing Operations
Before Income Taxes, Minority Interest,
Extraordinary Item, and Cumulative
Effect of Accounting Change (97,101) (9,889) 16,250 (90,740)
Income tax benefit 11,357 - - 11,357
---------------- ------------ ---------------- ------------------
Income (Loss) From Continuing Operations
Before Minority Interest,
Extraordinary Item, and
Cumulative Effect of Accounting Change (85,744) (9,889) 16,250 (79,383)
Minority interest in net income of
subsidiaries (7,698) - (7,698)
---------------- ------------ ---------------- ------------------
Income (Loss) From Continuing Operations
Before Extraordinary Item and Cumulative
Effect of Accounting Change (93,442) (9,889) 16,250 (87,081)
Gain (loss) on sale of discontinued
operations (net of tax) - 55,642/(1)/ - 55,642
---------------- ------------ ---------------- ------------------
Income (Loss) Before Extraordinary
Item and Cumulative Effect of
Accounting Change (93,442) 45,753 16,250 (31,439)
Extraordinary Items (net of tax) (1,090) - (6,319) (4) (7,409)
---------------- ------------ ---------------- ------------------
Income (Loss) Before Cumulative Effect
of Accounting Change (94,532) 45,753 9,931 (38,848)
Cumulative effect of accounting change
(net of tax) (6,000) - - (6,000)
---------------- ------------ ---------------- ------------------
Net Income (Loss) (100,532) 45,753 9,931 (44,848)
Preferred Stock Dividends - - 3,088 (6) 3,088
---------------- ------------ ---------------- ------------------
Net Income (Loss) Available for
Common Shareholders $ (100,532) $ 45,753 $ 6,843 $ (47,936)
================ ============ ================ ==================
Basic and Fully Diluted Earnings
(Loss) Per Share:
Income (Loss) From Continuing Operations
Before Discontinued Operations,
Extraordinary Item and Cumulative
Effect of Accounting Change $ (3.87) $ (.41) .55 (3.73)
Discontinued Operations - 2.31 - 2.31
Extraordinary Item (.05) - (.26) (.31)
Cumulative Effect of Accounting Change (.25) - - (.25)
---------------- ------------ ---------------- ------------------
Net Income (Loss) Available to Common
Shareholders $ (4.17) $ 1.90 $ .29 $ (1.98)
================ ============ ================ ==================
Weighted Average Shares for Basic and
Fully Diluted Earnings (Loss)
Per Share 24,092 24,092 24,092 24,092
================ ============ ================ ==================
</TABLE>
23
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
Six Months Ended June 30, 1999
(In thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------------------
Actual Results Pro Forma Results
for the for the
six months ended Sale of six months ended
June 30, 1999 EFM and CG Recapitalization June 30, 1999
---------------- ---------- ---------------- ------------------
<S> <C> <C> <C> <C>
Gross Revenue $ 445,377 $ - $ - $ 445,377
Subcontract and direct material costs (320,940) - - (320,940)
Equity in net income of unconsolidated subsidiaries 2,996 - - 2,996
---------------- ---------- ---------------- ------------------
Service Revenue 127,433 - - 127,433
Operating Expenses
Direct labor and fringe benefits 97,310 - - 97,310
Group overhead 20,089 - - 20,089
Corporate general and administrative 8,139 - - 8,139
Depreciation and amortization 3,098 - - 3,098
Other unusual charges 1,335 - - 1,335
Severance and restructuring 9,359 - - 9,359
---------------- ---------- ---------------- ------------------
Operating Income (Loss) (11,897) - - (11,897)
Other Income (Expense)
Interest income 607 - - 607
Interest expense (12,209) - 8,125 /(5)/ (4,084)
---------------- ---------- ---------------- ------------------
Income (Loss) From Continuing Operations Before
Income Taxes and Minority Interest (23,499) - 8,125 (15,374)
Income tax expense benefit 602 - - 602
---------------- ---------- --------------- ------------------
Income (Loss) From Continuing Operations Before (22,897) - 8,125 (14,772)
Minority Interest
Minority interest in net income of subsidiaries (4,205) - - (4,205)
---------------- ---------- --------------- ------------------
Income (Loss) From Continuing Operations (27,102) - 8,125 (18,977)
Discontinued Operations
Income (Loss) from operations of discontinued
operations (net of tax) 2,157 (2,157)/(2)/ - -
Gain (loss) on sale of discontinued operations (net of
tax) 48,755 - - 48,755
---------------- ---------- --------------- ------------------
Income (Loss) from Continuing Operations Before
Extraordinary Item 23,810 (2,157) 8,125 29,778
Extraordinary Items(net of tax) (698) - (6,319)/(4)/ (7,017)
---------------- ---------- --------------- ------------------
Net Income (Loss) 23,112 (2,157) 1,806 22,761
Preferred Stock Dividends - - 1,544/(6)/ 1,544
---------------- ---------- --------------- ------------------
Net Income (Loss) Available for
Common Shareholders $ 23,112 $ (2,157) $ 262 $ 21,217
================ ========== =============== ==================
Basic and Fully Diluted Earnings (Loss) Per Share:
Income (Loss) From Continuing Operations $ (1.13) $ - $ .27 $ (.86)
Discontinued Operations 2.12 (.09) - 2.03
Extraordinary Item (.03) - (.26) (.29)
---------------- ---------- --------------- ------------------
Net Income (Loss) Available to Common Shareholders $ .96 $ (.09) $ .01 $ .88
================ ========== =============== ==================
Weighted Average Shares for Basic and Fully
Diluted Earnings (Loss) Per Share 23,971 23,971 23,971 23,971
================ ========== =============== ==================
</TABLE>
24
<PAGE>
NOTES TO THE PRO FORMA INCOME STATEMENTS
1. Sale of EFM and the Consulting Group
Sale of EFM
-----------
On April 9, 1999, we sold specified assets and certain liabilities of EFM
for $82.0 million, less $8.0 million in working capital, for total cash
proceeds of $74.0 million. The gain, for purposes of the pro forma
presentations, on the sale of EFM was calculated as follows, as if the
transaction had taken place on:
<TABLE>
<CAPTION>
January 1, 1998 January 1, 1999
--------------- ---------------
<S> <C> <C>
Sale proceeds 74,000 74,000
Transaction fees (2,056) (2,056)
-------- --------
Net sales price 71,944 71,944
Net assets of discontinued operations (31,016) (33,838)
-------- --------
Gain 40,928 38,106
Tax provision (a) (26,391) (24,721)
-------- --------
Gain on sale, net of tax $ 14,537 $ 13,385
======== ========
</TABLE>
Sale of the Consulting Group
----------------------------
On June 30, 1999, we sold 90% of our Consulting Group for $64 million in
cash, $6.6 million of interest bearing notes and a $3.0 million working
capital receivable. The gain, for purposes of the pro forma presentations,
on the sale of the Consulting Group was calculated as follows, as if the
transaction had taken place on:
<TABLE>
<CAPTION>
January 1, 1998 January 1, 1999
--------------- ---------------
<S> <C> <C>
Sale proceeds 73,550 73,550
Transaction fees (1,082) (1,082)
-------- --------
Net sales price 72,468 72,468
Net assets of discontinued operations and
other asset write-offs (20,568) (27,283)
-------- --------
Gain 51,900 45,185
Tax provision (a) (10,795) (9,815)
-------- --------
Gain on sale, net of tax $ 41,105 $ 35,370
======== ========
</TABLE>
(a) Assumes goodwill write-off is not deductible for tax purposes.
2. To remove the divestitures' results of operations for the respective
periods (Effective January 1, 1999, the results of operations of EFM and
the Consulting Group were reflected in the income statement as discontinued
operations).
3. To reflect the pro forma reduction of interest expense as if cash proceeds
had been used to pay off the closing date revolving debt balance of $36.9
million as of the beginning of the period.
25
<PAGE>
The Exchange Offer Transaction
4. To record the extraordinary loss on the exchange offer cumulatively
resulting from:
. the write-off of the remaining $2.0 million of unamortized
carrying of the original issued discount associated with the old
notes;
. the write-off of the remaining $2.1 million of unamortized
carrying value of the costs incurred by Kaiser to issue the old
notes; and
. the expenses of $2.2 million for professional fees estimated to
be incurred to complete the exchange offer.
5. To reflect the pro forma reduction of interest expense as if cash proceeds
and convertible preferred stock had been used to fully settle the old notes
as of the beginning of the period.
6. To reflect the pro forma effect of the accrual of dividends on the
convertible preferred stock as if it had been issued as of the beginning of
the period. The adjustment assumes Kaiser pays the dividends to the
shareholders at the 4.75% dividend rate.
26
<PAGE>
OVERVIEW AND BACKGROUND OF THE RECAPITALIZATION
Kaiser incurred losses during 1997, 1998 and the first six months of 1999
of an aggregate of approximately $129 million, largely as a result of
significant cost overruns on fixed price contracts to construct four nitric acid
plants. During the second half of 1998, Kaiser's Board of Directors formed a
special committee of members of the Board to consider strategic alternatives for
Kaiser. The special committee engaged a financial advisor and, with its
assistance, evaluated various opportunities available to Kaiser, including the
sale of one or more of Kaiser's operating groups. As a result of that process,
Kaiser sold its EFM and Consulting Groups during 1999.
Because of the cash drain and continuing obligations associated with
Kaiser's nitric acid plants and other losses, the sales of the EFM and
Consulting Groups were not enough to restore Kaiser's financial condition.
Kaiser has lost the earning power associated with the sold operating groups and
continues to have $140 million principal amount of outstanding notes, including
$125 million of the old notes.
The Board of Directors considered several alternative means of stabilizing
Kaiser's financial condition. Among the alternatives considered was the use of
the proceeds from the Consulting Group sale in an acquisition of a related
business or simply reinvesting the proceeds from the Consulting Group sale into
Kaiser's existing business activities. In considering these alternatives, the
Board of Directors met several times, reviewed the recommendations of its
financial, legal and other professional advisors, as well as the information
provided by management, and closely analyzed the information available to it.
The Board of Directors ultimately determined that the recapitalization described
in this prospectus represents the most advisable approach to significantly
improving Kaiser's financial position and future business prospects.
As described in more detail below, the Board of Directors has approved a
recapitalization that consists of an exchange offer, an asset sale offer and
amendments to the indentures governing the old notes and the senior notes. If
this recapitalization is not consummated, Kaiser may continue to negotiate with
the holders of the old notes and the senior notes for a recapitalization, Kaiser
may invest the proceeds in a related business investment or Kaiser may seek
implementation of the recapitalization through a so-called "prepackaged" plan of
reorganization. See "Possible Prepackaged Plan of Reorganization." If Kaiser
were to seek confirmation of the recapitalization in a bankruptcy proceeding, no
assurance can be given that the recapitalization would meet the requirements for
confirmation under the U.S. Bankruptcy Code even if the requisite consents are
received and the old notes subject to the consents are voted to accept the
recapitalization.
THE EXCHANGE OFFER
Terms of the Exchange Offer
Kaiser is offering to exchange convertible preferred stock with a
liquidation preference of $65 million plus accrued interest on the old notes
through the date of the closing, warrants to purchase 15% of our common stock on
a fully diluted basis, and up to $10 million in secured notes, if issued, for
$65 million principal amount of old notes which are outstanding after the asset
sale offer and which are properly tendered at or prior to the expiration date.
As a result of the recapitalization, holders of old notes will receive, for each
$1,000 of old notes tendered in the asset sale offer and the exchange offer,
$____ in cash, ______ shares of preferred stock, representing a liquidation
preference of $____ plus accrued interest through the date of the closing on a
pro rata basis, and warrants to purchase ___% of our common stock. The amount
of cash received for each $1,000 of old notes may be reduced by up to $___
and replaced by a like amount of secured notes, if issued.
The exchange offer is conditioned upon, among other things, at least 95% of
the outstanding principal amount of the old notes being tendered for exchange.
If 95% of the total outstanding notes are not tendered, or any other condition
to the exchange offer is not satisfied and the recapitalization is not
consummated, then we may seek implementation of the recapitalization through a
so-called "prepackaged" plan of reorganization. See "Possible Prepackaged Plan
of Reorganization."
27
<PAGE>
In order to participate in the exchange offer, the holder of old notes must
tender all of the old notes beneficially owned by the holder. We can extend the
exchange offer and accept all old notes tendered for exchange or amend the terms
of the exchange offer and any amendment will apply to the old notes tendered
pursuant to the exchange offer. Additionally, we reserve the right at any time
to terminate the exchange offer and not accept for exchange any old notes
tendered for exchange.
We shall be deemed to have accepted validly tendered old notes when, as and
if we have given oral or written notice to the exchange/solicitation/paying
agent. The exchange/solicitation/paying agent will act as agent for the
tendering holders of old notes and for the purposes of receiving the preferred
stock, warrants, secured notes, if issued, and cash from us.
If any tendered old notes are not accepted for exchange because of an
invalid tender, the occurrence of other events set forth in this prospectus or
otherwise, certificates for any unaccepted old notes will be returned, without
expense, to the tendering holder as promptly as practicable after the exchange
expiration date.
By agreeing to participate in the exchange and the asset sale offer, a
holder of old notes also agrees to allocate the cash, preferred stock, warrants
and secured notes, if issued, received for the old notes in the same manner in
which we will make this allocation. We will allocate the cash paid pursuant to
the asset sale offer to the principal amount of the old notes. Based on this
allocation method, up to $60 million in cash will be allocated to the principal
amount of the old notes.
Exchange Expiration Date; Extensions; Waiver; Termination; Amendments
The exchange expiration date will be October ___, 1999 at 5:00 p.m., New
York City time, unless we, in our sole discretion, extend the exchange offer, in
which case the exchange expiration date will be the latest date and time to
which the exchange offer is extended.
In order to extend the exchange offer, we will notify the
exchange/solicitation/paying agent of any extension by oral or written notice
and will make a public announcement. In either case we will do so prior to 9:00
a.m., New York City time, on the next business day after the previously
scheduled exchange expiration date.
We reserve the right, in our sole discretion:
. to delay accepting any old notes,
. to extend the expiration date and accept any old notes previously
tendered,
. to waive any condition to the exchange offer and accept any old notes
tendered for exchange,
. to terminate the exchange offer, whether or not any of the conditions
set forth below under "Conditions of the Exchange Offer" shall have
been satisfied, and
. to amend the terms of the exchange offer in any manner by giving oral
or written notice of this delay, extension, termination or
modification to the exchange/solicitation/paying agent. Any amendment
will apply to old notes tendered.
If the exchange offer is amended in a manner determined by us to constitute a
material change, we will promptly disclose these amendments by means of a public
announcement or a supplement to this prospectus that will be distributed to the
registered holders of the old notes.
Conditions of the Exchange Offer
The exchange offer is subject to the following conditions:
28
<PAGE>
. the minimum 95% tender condition must be met;
. holders of a majority of the old notes and of the senior notes consent
to the proposed amendments to the indentures governing the old notes
and the senior notes;
. we have obtained a new credit facility;
. our shareholders have approved the issuance of the preferred stock and
warrants being offered in the exchange offer;
. no legal action or proceeding has been instituted or threatened with
respect to the exchange offer or the consent solicitations, or which,
in our sole judgment, may materially adversely affect our business,
operations or financial condition;
. there has not occurred
. any material adverse development in any existing action or
proceeding of any nature,
. any general suspension of trading in, or limitation on prices
for, securities on the New York Stock Exchange,
. a declaration of a banking moratorium by United States
authorities or any governmental agency in the United States,
. the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly
involving the United States, or
. a material adverse change in general economic, political or
conditions, if the effect of any economic, political or financial
conditions on the financial markets of the United States, in our
sole judgment, makes it impracticable to consummate the exchange
offer;
. there has not occurred any change, or development involving a
prospective change, in or affecting our business or financial affairs
which, in our sole judgment, would materially impair the contemplated
benefits of the exchange offer or the consent solicitations;
. no statute, rule or regulation has been proposed or enacted, or any
action has been taken by any governmental authority, which, in our
sole judgment, would or might prohibit, restrict or delay consummation
of the exchange offer as presently proposed or materially impair the
contemplated benefits of the exchange offer or the consent
solicitations; and
. there does not exist, in our sole judgment, any other actual or
threatened legal impediment to the acquisition of the old notes in the
asset sale offer, or the issuance of the preferred stock and warrants
and possible issuance of the secured notes in the exchange offer.
At any time, we can waive any condition to the exchange offer and accept
all notes tendered for exchange pursuant to the exchange offer.
Accounting Treatment
The recapitalization transaction will be accounted for as a troubled debt
restructuring pursuant to Statement of Financial Accounting Standard No. 15 -
Accounting by Debtors and Creditors for Troubled Debt Restructurings.
. The face value of the old notes is $125.0 million.
29
<PAGE>
. The carrying amount of the old notes represents the face value of the
old notes adjusted for the unamortized original issue discount and the
unamortized debt issuance costs of the old notes.
. The old notes will, in part, be purchased at face value for up to
$60.0 million in cash and, in part, exchanged for convertible
preferred stock with a liquidation preference of $65.0 million plus
accrued interest on the old notes through the date of the closing, and
warrants to purchase 15% of our common stock on a fully diluted basis.
The amount of cash may be reduced by up to $10.0 million and replaced
by a like amount of secured notes, if issued.
. The excess of the total value of the preferred stock issued over its
$.01/per share par value will be credited to paid in capital, net of
any issuance costs.
. The carrying value of any remaining original issue discount on the old
notes will be written off.
. The carrying value of any remaining costs originally incurred to issue
the old notes will be written off.
. The amount of any costs incurred to complete the restructuring of the
old notes will be expensed.
. The difference between the face value of the old notes and all of the
above items will be recorded as an extraordinary loss on the
restructuring of the old notes.
The following table summarizes the accounting for this transaction:
Face value of old notes $125,000
Less:
Cash exchanged (60,000)
Value of new preferred stock issued (65,000)
Carrying value of original issue discount on the old notes (1,986)
Carrying value of the costs originally incurred to issue
the old notes (2,133)
Estimate of costs to be incurred to complete the exchange offer (2,200)
---------
Extraordinary loss on the old note restructuring $ (6,319)
=========
THE ASSET SALE OFFER
Simultaneously with the exchange offer, Kaiser will conduct an asset sale
offer pursuant to the terms of the indenture governing the old notes. We will
offer to purchase up to $60 million aggregate amount of old notes. This amount
may be reduced by up to $10 million and replaced by a like amount of secured
notes, if issued . We will make this asset sale offer to all holders of old
notes. If the holders of old notes accept the asset sale offer in amounts
greater than the amounts we offer to purchase, we will purchase old notes
tendered on a pro rata basis.
The cash to be used in the asset sale offer will consist primarily of the
proceeds from our sale of our Consulting Group. In the event we were to file
for relief under Chapter 11 of the U.S. Bankruptcy Code within 90 days, or
possibly one year, of making the payments made in the asset sale offer, the
payments may be avoidable as a preference and could be subject to recovery by a
trustee in bankruptcy, an official creditors' committee, other representatives
of our creditors, or Kaiser as a debtor in possession. If the payments were
successfully challenged as preferences, holders either could be required to
return the funds received, together with interest at a rate determined by the
court, or could be precluded from receiving any distribution on account of the
holders' old notes.
The asset sale offer will expire at 5:00 p.m., New York City time, on
October __, 1999. The asset sale offer is made subject to satisfaction of all
of the conditions to the exchange offer being satisfied or waived by us and
30
<PAGE>
the exchange offer not having been terminated by us. The asset sale offer will
not be consummated unless the exchange offer also is consummated and the
requisite consents are received.
THE CONSENT SOLICITATIONS
General
In connection with the exchange offer, we are soliciting consents from the
holders of the old notes to approve proposed amendments to the old notes
indenture and from holders of the senior notes to approve proposed amendments to
the senior notes indenture. We are also requesting holders of the old notes and
the senior notes to deliver an instruction to the trustee not to interfere with
our recapitalization. Consents of holders of a majority of the outstanding
aggregate principal amount of the old notes and of the senior notes are required
to approve the proposed amendments to the old notes indenture and the senior
notes indenture. The proposed amendments will become effective only if the
conditions of the exchange offer are satisfied or waived and will become
effective immediately preceding the consummation of the exchange offer. Both
our acceptance of the exchange offer and consummation of the asset sale offer
are contingent upon our receipt of requisite consents from holders of the old
notes and the senior notes. If the proposed amendments become effective with
respect to the old notes indenture or the senior notes indenture, they will
apply to all old notes or senior notes issued under that indenture.
Proposed Amendments
If the requisite consents are received from holders of the old notes, the
old notes indenture will be amended by eliminating substantially all of the
restrictive covenants governing the old notes. These proposed amendments will
eliminate the following covenants and events of default in the old notes
indenture:
. Section 5.04 (Limitation on Additional Indebtedness)
. Section 5.06 (Limitations on Restricted Payments)
. Section 5.07 (Limitations on Restrictions on Distributions from
Subsidiaries)
. Section 5.08 (Limitations on Transactions with Affiliates)
. Section 5.11 (Limitations on Guarantees)
. Section 5.12 (SEC Reports)
A holder of old notes need not consent to the proposed amendments in order
to tender its old notes in the exchange offer. Conversely, each holder of old
notes not tendered or accepted for exchange pursuant to the exchange offer will
be bound by the proposed amendments regardless of whether the holder consented
to the proposed amendments.
Upon effectiveness of the proposed amendments, a consenting holder's right
to sell or transfer the old notes will be restricted, and each consenting holder
will be required to hold their old notes in certificated form as opposed to
holding them in "street name." See "The Solicitation-Restriction on Transfer of
Old Notes; Issuance of Certificated Notes."
If the requisite consents are received from holders of the senior notes,
the proposed amendments to the senior notes indenture will amend those
restrictive covenants that would limit our proposed business plan. These
proposed amendments will amend the following covenants in the senior notes
indenture:
[TO BE ADDED]
31
<PAGE>
The proposed amendments will be set forth in amended and restated
indentures substantially in the form filed as exhibits ___ and ___ to the
registration statement of which this prospectus forms a part.
Solicitation Expiration Date; Extensions; Amendments
The consent solicitations will expire at 5:00 p.m., New York City time,
________ __, 1999, unless we, in our sole discretion, extend the period during
which a consent solicitation is open, in which case the solicitation expiration
date for that solicitation will be the latest date and time to which the consent
solicitation is extended.
In order to extend the solicitation expiration date, we will make a public
announcement prior to 9:00 a.m., New York time, on the next business day after
the previously scheduled solicitation expiration date.
We reserve the right, in our sole discretion,
. to delay accepting any consents,
. to extend either consent solicitation,
. to terminate either consent solicitation, and
. to amend the terms of either consent solicitation in any manner by
giving oral or written notice of the delay, extension, termination or
modification to the exchange/solicitation/paying agent.
If a consent solicitation is amended in a manner that we determine constitutes
an adverse change to the holders, we will promptly disclose the amendment by
means of a public announcement or a supplement to this prospectus that will be
distributed to the registered holders of affected notes.
Waivers and Nonacceptance of Consents
We reserve the absolute right to waive any defects or irregularities in the
furnishing of the consents. If any consents are not accepted for any reason,
the notes to which the consent relates will be returned without expense to the
submitting holder as promptly as practicable after the expiration or termination
of the consent solicitation.
Restriction on Transfer of Old Notes; Issuance of Certificated Notes
If the consents regarding the old notes become effective on the
solicitation expiration date, any holder of old notes that has furnished a
consent will have agreed
. not to transfer, sell, assign, encumber or otherwise dispose of the
beneficial ownership of the holder's old notes, unless the holder
provides evidence satisfactory to us that the holder's transferee,
and, if different, the beneficial owner of the old notes so
transferred, has agreed in writing in form and
32
<PAGE>
substance satisfactory to us that the transferred old notes are
subject to the terms of the consent, and that the transferee, and, if
different, the beneficial owner, has agreed to be bound by the terms
of the consent, and
. that any old notes subject to consents that are held through DTC will
be reissued in certificated form.
The restriction on transfer will be noted on the old notes with respect to which
consents are received and none of these old notes may be transferred unless the
holder delivers to us an opinion of counsel in form and substance satisfactory
to us in our sole discretion that the transferee has agreed to and is bound by
the proposed amendments.
POSSIBLE PREPACKAGED PLAN OF REORGANIZATION
It is possible that we will receive substantial support from holders of old
notes for the recapitalization but not reach the 95% level of acceptance of the
exchange offer required as a condition of the recapitalization. In that event,
if the level of holder approval is sufficient, we may elect to implement the
recapitalization through a so-called "prepackaged" plan of reorganization under
Chapter 11 of the Bankruptcy Code. We would do so by filing a petition
commencing a Chapter 11 bankruptcy case and asking the Bankruptcy Court to
approve a plan of reorganization which would contain terms and conditions for
the treatment of holders of old notes which are the same as the terms and
conditions of the recapitalization. Such a plan of reorganization would not
affect Kaiser's operations, vendors or employees.
If we were to seek implementation of the recapitalization through a Chapter
11 plan of reorganization, no assurance can be given that the plan would meet
the requirements for confirmation under the Bankruptcy Code, even if the plan
received the required level of approval form the holders of the old notes. The
requirement for plan approval by a impaired class of creditors is the
affirmative vote of a majority in number and more than two-thirds in dollar
amount of those voting to accept or reject the plan. If confirmed by the
Bankruptcy Court, the plan would be binding on all holders of old notes, without
regard to whether they voted in favor of the plan.
If a holder of old notes executes the documents required to tender old
notes in the exchange offer and the asset sale offer as contemplated in this
prospectus, the tender of old notes, once delivered, may not be withdrawn, and
the executed documentation will be counted at our election, as ballots in favor
of a Chapter 11 plan as described above. We reserve the right to commence a
Chapter 11 case before expiration of the period provided for tender of old notes
in the exchange offer and the asset sale offer and to count executed
documentation received both before and after commencement of the Chapter 11 cast
as ballots in favor of the Chapter 11 plan.
PROCEDURES FOR PARTICIPATING IN THE EXCHANGE OFFER,
ASSET SALE OFFER AND CONSENT SOLICITATIONS
General
As previously discussed, each of the exchange offer, the asset sale offer
and the consent solicitations are interdependent. However, you must make a
separate decision as to each applicable transaction. The procedures for
participating in each of the transactions are substantially similar, and are
described below.
As of______ __, 1999, there were __ registered holders of the old notes and
____ registered holders of the senior notes. Solely for reasons of
administration and for no other purpose, Kaiser has fixed the close of business
on _______ ___, 1999, as the record date for determining the persons to whom
this prospectus and the applicable letter of transmittal and consent form will
be mailed initially. Only a holder of the old notes or senior notes or the
holder's legal representative or attorney-in-fact may participate in the
exchange offer or deliver a consent.
33
<PAGE>
Procedures for Tendering Old Notes in the Exchange Offer, Tendering Old Notes in
the Asset Sale Offer and Tendering Consents in the Consent Solicitations
The tender of a holder's old notes or the tender of consents and its
acceptance by Kaiser will constitute a binding agreement between the tendering
holder and Kaiser upon the terms and subject to the conditions set forth in this
prospectus and in the applicable letter of transmittal and consent form. Except
as described below, a holder who wishes to tender old notes for exchange in the
exchange offer or old notes for purchase in the asset sale offer or tender
consents in a consent solicitation must transmit any tendered old notes,
together with a properly completed and duly executed letter of transmittal and
consent form, including all other documents required by the letter of
transmittal and consent form to the exchange/solicitation/paying agent at the
address set forth on page 37 of this prospectus prior to 5:00 p.m., New York
City time, on the exchange/asset sale offer/consent solicitation expiration
date. The method of delivery of old notes, letter of transmittal and consent
forms and all other required documents is at the election and risk of the
holder. If the delivery is by mail, it is recommended that tendering holders
use registered mail, properly insured, with return receipt requested. Instead
of delivery by mail, it is recommended that the holder use an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery.
Any financial institution that is a participant in The Depository Trust
Company's book-entry transfer facility system may make book-entry delivery of
the old notes by causing The Depository Trust Company to transfer these old
notes into the exchange/solicitation/paying agent's account in accordance with
The Depository Trust Company's procedures for this transfer. In connection with
a book-entry transfer, a letter of transmittal and consent form need not be
transmitted to the exchange/solicitation/paying agent, provided that the book-
entry transfer procedure is completed prior to 5:00 p.m., New York City time, on
the exchange/asset sale offer/consent solicitation expiration date.
Each signature on a letter of transmittal and consent form or a notice of
revocation, as the case may be, must be guaranteed except that they do not need
to be guaranteed if the old notes surrendered for exchange are tendered:
. by a registered holder of the old notes who has not completed either
the box entitled "Special Exchange Instructions" or the box entitled
"Special Delivery Instructions" in the letter of transmittal and
consent form, or
. by an eligible institution.
In the event that a signature on a letter of transmittal and consent form or a
notice of revocation, as the case may be, is required to be guaranteed, this
guarantee must be by a firm which is a member of a registered national
securities exchange or the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or otherwise be an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Securities Exchange Act of 1934. If the letter of
transmittal and consent form is signed by a person other than the registered
holder of the old notes or senior notes, the tendered old notes and consents
must either
. be endorsed by the registered holder, with the signature guaranteed by
an eligible institution, or
. be accompanied by a proxy, in a form determined to be satisfactory by
us, in our sole discretion, duly executed by the registered holder,
with the signature guaranteed by an eligible institution.
All questions concerning the validity, form, eligibility, including time of
receipt, acceptance, and revocation of consents, will be decided by us in our
sole discretion, which decision shall be final and binding. We reserve the
absolute right to reject any and all old notes or consents not properly tendered
and to reject any old notes or consents which might, in our judgment or that of
our counsel, be unlawful for us to accept. We also reserve the absolute right
to waive any defects or irregularities or conditions of the exchange offer as to
particular old notes either before or after the exchange/asset sale
offer/consent solicitation expiration date, including the right to waive the
ineligibility of any holder who seeks to tender old notes in the exchange offer,
old notes in the asset sale offer or
34
<PAGE>
consents in a consent solicitation, whether or not similar defects or
irregularities are waived in the case of other holders. Our interpretation of
the terms and conditions of the exchange offer, asset sale offer and consent
solicitations, including the letter of transmittal and its instructions, shall
be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of old notes for exchange or for
purchase or tenders of consents must be cured within a period of time as we
shall determine. We will use reasonable efforts to give notification of defects
or irregularities with respect to tenders of old notes for exchange or for
purchase or tenders of consents but shall not incur any liability for failure to
give this notification. Tenders of the old notes and consents will not be deemed
to have been made until any irregularities have been cured or waived.
If any letter of transmittal and consent form, endorsement, proxy, power of
attorney or any other document required by the letter of transmittal and consent
form is signed by a trustee, executor, corporation or other person acting in a
fiduciary or representative capacity, this person should indicate when signing,
and, unless waived by us, must submit proper evidence satisfactory to us, in our
sole discretion, of this person's authority to act.
Any beneficial owner of old notes or senior notes whose notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wants to tender old notes in the exchange offer or in the
asset sale offer or tender consents in a consent solicitation, should contact
the registered holder promptly and instruct the registered holder to tender on
the beneficial owner's behalf. If a beneficial owner wishes to tender directly,
the beneficial owner must, prior to completing and executing the letter of
transmittal and consent form and tendering old notes and consents, make
appropriate arrangements to register ownership of the notes in the beneficial
owner's name. Beneficial owners should be aware that the transfer of registered
ownership may take considerable time.
Guaranteed Delivery Procedures
Holders who wish to tender their old notes and
. whose old notes are not immediately available or
. who cannot deliver their old notes or any other documents required by
the letter of transmittal and consent form to the
exchange/solicitation/paying agent prior to the exchange/asset sale
offer/consent solicitation expiration date or complete the procedure
for book-entry transfer on a timely basis,
may tender their old notes according to the guaranteed delivery procedures
described in the letter of transmittal and consent form. Pursuant to these
procedures:
. the tender must be made by or through an eligible institution and a
notice of guaranteed delivery, as defined in the letter of transmittal
and consent form, must be signed by the holder,
. on or prior to the exchange/asset sale offer/consent solicitation
expiration date, the exchange/solicitation/paying agent must have
received from the holder and the eligible institution a properly
completed and duly executed notice of guaranteed delivery by facsimile
transmission, mail or hand delivery setting forth the name and address
of the holder, the certificate number or numbers of the tendered old
notes, and the principal amount of tendered old notes, stating that
the tender is being made and guaranteeing that, within three business
days after the date of delivery of the notice of guaranteed delivery,
the tendered old notes, a duly executed letter of transmittal and
consent form and any other required documents will be deposited by the
eligible institution with the exchange/solicitation/paying agent, and
. the properly completed and executed documents required by the letter
of transmittal and the tendered old notes in proper form for transfer,
or confirmation of a book-entry transfer of these old notes into the
exchange/solicitation/paying agent's account at DTC, must be received
by the exchange/solicitation/paying agent within four business days
after the exchange/asset sale offer/consent solicitation expiration
date.
35
<PAGE>
Any holder who wishes to tender old notes pursuant to the guaranteed delivery
procedures described above must ensure that the exchange/solicitation/paying
agent receives the notice of guaranteed delivery and letter of transmittal
relating to these old notes prior to 5:00 p.m., New York City time, on the
exchange/asset sale offer/consent solicitation expiration date.
Acceptance of Old Notes for Exchange or Purchase and Acceptance of Consents;
Delivery of Preferred Stock and Warrants
Upon satisfaction or waiver of all the conditions to the exchange offer,
Kaiser will accept any and all old notes that are properly tendered in the
exchange offer, old notes properly tendered in the asset sale offer and consents
properly tendered in a consent solicitation prior to 5:00 p.m., New York City
time, on the exchange/asset sale offer/consent solicitation expiration date.
The preferred stock, warrants and secured notes issued pursuant to the exchange
offer will be delivered promptly after acceptance of the old notes. For
purposes of the exchange offer, we will be deemed to have accepted validly
tendered old notes, when, as, and if we have given oral or written notice to the
exchange/solicitation/paying agent. Immediately prior to consummation of the
exchange offer, we will consummate the asset sale offer and purchase for cash at
par on a pro rata basis from the holders of old notes who elect to participate
an aggregate of up to $60 million principal amount of old notes. This amount
may be reduced by up to $10 million and replaced by a like amount of secured
notes, if issued.
Revocation of Consents
We will process all properly completed and executed letters of transmittal
and consent forms we receive, unless we receive from a holder a properly
completed and duly executed notice of revocation or a changed consent bearing a
date later than the date of the prior consent at any time prior to the
exchange/asset sale offer/consent solicitation expiration date when the proposed
consents become effective. Until the exchange/asset sale offer/consent
solicitation expiration date, any holder may revoke the consent as to an old
note or senior note or portion of an old note or senior note if we receive
notice of revocation.
The Exchange/Solicitation/Paying Agent; Assistance
The Bank of New York is the exchange/solicitation/paying agent. All
tendered old notes and consents, executed letters of transmittal and consent
forms and other related documents should be directed to the
exchange/solicitation/paying agent. Questions and requests for assistance and
requests for additional copies of the prospectus, a letter of transmittal and
other related documents should be addressed to the exchange/solicitation/paying
agent as follows:
36
<PAGE>
Exchange/Solicitation/Paying Agent
By Hand or Overnight Courier:
The Bank of New York
101 Barclay Street
21 West
New York, NY 10286
By Registered or Certified Mail:
The Bank of New York
101 Barclay Street
21 West
New York, NY 10286
By Facsimile:
(212) 815-5915
Confirm by Telephone:
(212) 815-5213
Financial Advisor to Kaiser
We have engaged Jefferies & Company, Inc. to provide certain financial
advisory services to us in connection with the proposed recapitalization. As
part of such services, employees of Jefferies may solicit, on our behalf,
holders of old notes to tender their old notes in the exchange offer and the
asset sale offer and holders of old notes and senior notes to deliver their
consent to the proposed amendments to the indentures governing the old notes and
the senior notes. As consideration for providing these services, we have agreed
to pay Jefferies certain fees, to reimburse its reasonable out-of-pocket
expenses and to indemnify it against liabilities, including liabilities they may
incur under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Fees and Expenses
In addition to the fees and expenses payable to Jefferies that are
described above, we will pay all other fees and expenses incurred in connection
with the recapitalization, including each of the following:
. fees and disbursements of legal counsel and a financial advisor
retained by the ad hoc committee of holders of old notes formed to
participate with our representatives in the determination of the terms
of the recapitalization,
. fees and disbursements of our counsel and independent certified public
accountants,
. SEC registration and NYSE listing fees, and
. reasonable and customary fees and out-of-pocket expenses incurred by
the exchange/solicitation/paying agent for their services in
connection with the recapitalization.
We will pay all transfer taxes, if any, applicable to the exchange of old
notes pursuant to the exchange offer. If, however, a transfer tax is imposed
for any reason other than the exchange of old notes pursuant to the exchange
offer, then the amount of the transfer taxes, whether imposed on the registered
holder or any other persons, will be payable by the tendering holder. If
satisfactory evidence of payment of these taxes or exemption is not submitted
with the letter of transmittal and consent form, the amount of these transfer
taxes will be billed directly to the tendering holder.
37
<PAGE>
BUSINESS
Kaiser is a global provider of engineering, construction management, and
project and program management services. Kaiser also owns a 50% interest in
Kaiser-Hill Company, LLC, which serves as the integrated management contractor
at the U.S. Department of Energy's Rocky Flats Environmental Technology Site.
Overview of Services and Markets
Kaiser's activities are focused on serving clients in five major lines of
business: transit and transportation; alumina/aluminum; facilities engineering
and management, including wastewater treatment; iron and steel; and
microelectronics and clean technology.
Transit and Transportation - Kaiser's transit and transportation services
support the planning, design, engineering, and construction of heavy- and light-
rail transit systems, high-speed rail, peoplemovers, bus systems, highways and
bridges, and airport improvements. We are developing state-of-the- art transit
systems for 20 cities worldwide and designing major highway projects throughout
the United States and in selected international markets. Domestic growth is
driven by the Federal Transportation Equity Act for the 21st Century. Passed in
July 1998, the bill authorized $217 billion of spending during the next six
years in transit and highway programs. Significant opportunities also exist
internationally as developing countries seek to improve their transit systems.
Current projects include transit systems in Seattle, Orlando, Los Angeles, the
Philippines, and Turkey; an intercity freight and passenger rail line in
Portugal; and multi-million dollar highway and bridge improvements in
California, Florida, Massachusetts, and Oklahoma.
Alumina/Aluminum - Kaiser provides design and construction services for
expansion and modernization of some of the world's largest alumina and aluminum
facilities in locations from Kentucky to the Middle East and Australia. Our
areas of expertise include bauxite mining and handling; alumina refining;
aluminum reduction; and fabrication and rolling. Domestic opportunities involve
maintaining and retrofitting existing plants and replacing aging production
capacity with newer, more efficient, and environmentally responsible facilities.
Outside of the United States, there will be greater focus on building new
facilities. Current projects include detailed design engineering, procurement,
and construction management for the expansion of a $500 million alumina refinery
in Western Australia, and engineering and design services for an aluminum
expansion project in the mid-western United States.
Facilities and Water/Wastewater - Kaiser provides engineering services to
public- and private-sector clients who need to modernize or maintain facilities;
design and build new capacity for the future; or improve existing operations and
environmental conditions. Future growth in this area of activity will be based
in part on the trend toward outsourcing by both private- and public-sector
clients. Kaiser's largest project of this type involves serving, through
Kaiser-Hill Company, LLC, as the integrating management contractor at the DOE
Rocky Flats site, a former nuclear weapons production facility near Denver,
Colorado. In another significant project, Kaiser serves as construction manager
for the $3.4 billion Boston Harbor cleanup project that is currently scheduled
to continue through December 31, 2002.
Iron and Steel - Kaiser supports the iron and steel industry by providing
traditional services such as engineering, design, and project and construction
management for plant expansions, modernizations, and greenfield development.
Kaiser is the sole U.S. domestic designer and builder of coke ovens and coke
oven machinery, and is active in the development of mini-mills as an
alternative, cost-effective method of making steel. For example, we are
providing turnkey engineering and construction services for the new $262 million
thin-slab casting mini-mill project for Nova Hut, a.s. in Ostrava, Czech
Republic.
Microelectronics and Clean Technology - Kaiser also provides design/build
services for the microelectronics, semiconductor, biotechnology, and
telecommunication industries. We have constructed or remodeled over seven
million square feet of manufacturing, office, and other facilities, including
more than 500,000 square feet of cleanrooms, from class 1 to class 10,000.
Following a contraction over the past several years, this market is expected to
experience growth over the next two years, driven primarily by the automotive
industry and
38
<PAGE>
advanced technology manufacturers' needs for increased manufacturing capacity
and capabilities. A major project is the $219 million semiconductor facility for
Motorola in Arizona.
Kaiser-Hill Company, LLC is equally owned by Kaiser and CH2M Hill Companies
Ltd.; Kaiser designates a majority of the members of Kaiser-Hill's Board of
Managers. The scope of Kaiser-Hill's contract with the DOE includes all
elements of daily and long-term operation of the site, including stabilizing and
safely storing more than 14 tons of plutonium, cleaning up areas contaminated
with hazardous and radioactive waste, and restoring much of the 6,000-acre site
for future use by the public. Kaiser-Hill's contract with the DOE currently
expires in September 2000. On July 30, 1999, the DOE announced that it intends
to negotiate with Kaiser-Hill for a new contract for services through the
closure of the Rocky Flats site in 2006. Such negotiations are expected to
begin in early October. The DOE has stated that if a new contract has not been
entered into by November 30, 1999, it intends to conduct a competition for the
new contract. We can provide no assurance as to Kaiser-Hill's ability to
compete for or win a new contract if Kaiser-Hill is unable to enter into a new
contract through negotiations.
General Information about Kaiser
Competition and Contract Award Process
The market for Kaiser's services is highly competitive. Kaiser competes
with many other engineering and construction, program and project management
services firms ranging from small firms to large multinational firms having
substantially greater financial, management and marketing resources than Kaiser.
Other competitive factors include quality of services, technical qualifications,
reputation, geographic presence, price, and the availability of key professional
personnel.
Private-Sector Work. Competition for private-sector work generally is
based on several factors, including quality of work, reputation, price and
marketing approach. Kaiser's objective is to establish and maintain a strong
competitive position in its areas of operations by adhering to its basic
philosophy of delivering high-quality work in a timely fashion within its
clients' budget constraints.
Public-Sector Work. Most of Kaiser's contracts with public-sector clients
are awarded through a competitive bidding process that places no limit on the
number or type of offerors. The process usually begins with a government
request for proposals that delineates the size and scope of the proposed
contract. Proposals are evaluated by the government on the basis of technical
merit, including responses to mandatory solicitation provisions, corporate and
personnel qualifications, experience, and cost. Kaiser believes that its
experience and ongoing work strengthen its technical qualifications and,
thereby, enhance its ability to compete successfully for future government work.
Teaming Arrangements and Joint Ventures. In both the private and public
sectors, Kaiser, acting either as a prime contractor or as a subcontractor, may
join with other firms to form a team or a joint venture that competes for a
single contract or submits a single proposal. Because a team of firms or a
joint venture almost always can offer a stronger set of qualifications than any
firm standing alone, these arrangements often are very important to the success
of a particular competition or proposal. Kaiser maintains a large network of
business relationships with other companies and has drawn repeatedly upon these
relationships to form winning teams.
Contract Structure. Kaiser operates under a number of different types of
contract structures with its private- and public-sector clients, the most common
of which are cost plus and fixed price. Under cost plus contracts, Kaiser's
costs are reimbursed with a fee, either fixed or percentage of cost, and/or an
incentive or award fee offered to provide inducement for effective project
management. A variation of cost plus contracts are time-and-materials contracts
under which Kaiser is paid at a specified fixed hourly rate for direct labor
hours worked. Under fixed price contracts, Kaiser is paid a predetermined
amount for all services provided as detailed in the design and performance
specifications agreed to at the project's inception, and under which Kaiser
retains more performance risk than under cost plus contracts. While these fixed
price contracts can result in higher profit margins, they also can be costly if
Kaiser experiences cost overruns that are not recoverable from the client.
39
<PAGE>
Customers
Kaiser's domestic clients include the DOE and other federal departments and
agencies; major corporations in the energy, transportation, chemical, steel,
aluminum, mining, and manufacturing industries; utilities; and a variety of
state and local government agencies throughout the United States. The DOE
accounted for approximately 54% of Kaiser's consolidated gross revenue for the
year ended December 31, 1998, approximately 56% for the year ended December 31,
1997, and approximately 69% for the year ended December 31, 1996. The DOE
percentage will increase for fiscal 1999 since Kaiser has disposed of its EFM
and Consulting Groups and continues to consolidate in its financial statements
the results of Kaiser-Hill Company, LLC.
Kaiser's international clients include both private firms and foreign
government agencies. For the years ended December 31, 1998, 1997, and 1996,
foreign clients accounted for approximately 10.1%, 14.2%, and 5.8% of Kaiser's
consolidated gross revenue, respectively. Mainly due to the sales of the EFM and
Consulting Groups, the Company currently expects this percentage to increase to
approximately 35-40% in 1999. For information concerning gross revenue,
operating income, and identifiable assets of Kaiser's business by geographic
area during 1998, see note 12 to the consolidated financial statements included
in Kaiser's 1998 Annual Report on Form 10-K for the year ended December 31,
1998, which is incorporated by reference into and delivered with this
prospectus.
Backlog
Backlog refers to the aggregate amount of gross contract revenue remaining
to be earned pursuant to signed contracts extending beyond one year. Kaiser
ended 1998 with $3.2 billion in contract backlog. The reduction from $4.1
billion of backlog at December 31, 1997 is due primarily to the completion of
another year of the Kaiser-Hill Rocky Flats contract, resulting in the
conversion of approximately $632.6 million of the 1997 backlog into revenue in
1998. The backlog of the EFM and Consulting Groups totaled $659 million and
$540 million, respectively, at December 31, 1998. Kaiser expects to work off
42% of the $2 billion engineering and construction and Kaiser-Hill backlog
during 1999.
Kaiser ended the second quarter of 1999 with approximately $900 million
in contract backlog for its continuing operations; $650 million for Kaiser-Hill
and $250 million for the Engineering and Construction Group.
Kaiser believes that backlog is not a predictor of future gross or service
revenue. Most of Kaiser's backlog relates to the Kaiser-Hill Rocky Flats
contract. With the dispositions of the EFM and Consulting Groups, which were
involved, to a significant extent, in providing services to the Federal
government, backlog is less of an indicator of future revenue than was the case
prior to those dispositions.
Potential Liabilities Involving Clients and Third Parties
In performing services for its clients, Kaiser could potentially be liable
for breach of contract, personal injury, property damage, and negligence,
including improper or negligent performance or design, failure to meet
specifications, and breaches of express or implied warranties. The damages
available to a client, should it prevail in its claims, are potentially large
and could include consequential damages.
Under Kaiser-Hill's contract with the DOE, Kaiser-Hill is not responsible
for, and the DOE pays all costs associated with, any liability, including
without limitation, a claim involving strict or absolute liability and any civil
fine or penalty, expense, or remediation cost, but limited to those of a civil
nature, which may be incurred by, imposed on, or asserted against Kaiser-Hill
arising out of any act or failure to act, condition, or exposure which occurred
before Kaiser-Hill assumed responsibility on July 1, 1995 ("pre- existing
conditions"). To the extent the acts or omissions of Kaiser-Hill constitute
willful misconduct, lack of good faith, or failure to exercise prudent business
judgment on the part of Kaiser-Hill's managerial personnel and cause or add to
any liability, expense, or remediation cost resulting from pre- existing
conditions, Kaiser-Hill is responsible, but only for the incremental liability,
expense, or remediation caused by Kaiser-Hill.
The Kaiser-Hill contract further provides that Kaiser-Hill will be
reimbursed for the reasonable cost of bonds and insurance allocable to the Rocky
Flats contract and for liabilities and expenses incidental to these
40
<PAGE>
liabilities, including litigation costs, to third parties not compensated by
insurance or otherwise. The exception to this reimbursement provision applies to
liabilities caused by the willful misconduct or lack of good faith of Kaiser-
Hill's managerial personnel or the failure to exercise prudent business judgment
by Kaiser-Hill's managerial personnel.
Insurance
Kaiser has a comprehensive risk management and insurance program that
provides a structured approach to protecting Kaiser. Included in this program
are coverages for:
. general, automobile, pollution impairment, and professional liability;
. workers' compensation; and
. employers and property liability.
Kaiser believes that the insurance it maintains, including self-insurance, is in
amounts and protects against risks as is customarily maintained by similar
businesses operating in comparable markets. At this time, Kaiser expects to
continue to be able to obtain insurance in amounts generally available to firms
in its industry. There can be no assurance that this situation will continue,
and if insurance of these types is not available, it could have a material
adverse effect on Kaiser.
Kaiser has pollution insurance coverage on a claims-made basis, in amounts
and on terms that are economically reasonable, against possible liabilities that
may be incurred in connection with its conduct of its environmental business.
An uninsured claim arising out of Kaiser's environmental activities, however, if
successful and of sufficient magnitude, could have a material adverse effect on
Kaiser.
Government Regulation
In the past, Kaiser had a number of cost-reimbursement contracts with the
U.S. government, the costs of which are subject to audit by the U.S. government.
Most of these contracts were held by Kaiser's former EFM and Consulting Groups,
but Kaiser has retained many of the liabilities associated with the pre-closing
performance of these contracts. As a result of pending audits related to fiscal
year 1986 forward, the government has asserted, among other things, that some
costs claimed as reimbursable under government contracts either were not
allowable or not allocated in accordance with federal procurement regulations.
Kaiser is actively working with the government to resolve these issues. Kaiser
has provided for its estimate of the potential effect of issues that have been
quantified, including its estimate of disallowed costs for the periods currently
under audit and for periods not yet audited. Many of the issues, however, have
not been quantified by the government or Kaiser, and others are qualitative in
nature, and their potential financial impact, if any, is not quantifiable by the
government or Kaiser at this time. This provision will be reviewed periodically
as discussions with the government progress.
Kaiser may, from time to time, either individually or in conjunction with
other government contractors operating in similar types of businesses, be
involved in U.S. government investigations for alleged violations of procurement
or other federal laws and regulations. Kaiser currently is the subject of a
number of U.S. government investigations and is cooperating with the responsible
government agencies involved. No charges presently are known to have been filed
against Kaiser by these agencies.
Employees
As of June 30, 1999 Kaiser had approximately 3,300 employees, and Kaiser
believes that its relations with its employees are good. Of this total,
approximately 1,700 persons are employed at Kaiser-Hill's Rocky Flats site in
Colorado. Approximately 1,300 of the Rocky Flats employees are represented by
the United Steelworkers of America, Local 8031. Almost all of the union
employees are contracted out to other companies working at Rocky Flats. Kaiser
believes that its relations with the union are good.
41
<PAGE>
Corporate History and Properties
ICF Kaiser International, Inc. is a Delaware corporation incorporated in
1987 under the name American Capital and Research Corporation. It is the
successor to ICF Incorporated, a nationwide consulting firm organized in 1969.
In 1998 Kaiser acquired the Kaiser Engineers business, which dates from 1914.
In the near future, Kaiser plans to change its name to Kaiser Group
International, Inc. and its ticker-symbol to "KSR." The name of its principal
operating subsidiary in the United States will be changed to Kaiser Engineers,
Inc.
Kaiser's activities are carried out through operating subsidiaries and more
than 30 offices throughout the world. Kaiser's headquarters are located at 9300
Lee Highway, Fairfax, Virginia 22031-1207, and its telephone number is (703)
934-3600. Kaiser's operations are organized into North American and
International regions. The North American regional headquarters is located in
Fairfax, Virginia, and the International regional headquarters is located at
Q.V. 1 Building, George's Terrace, Perth WA 6000 Australia, telephone 61-89-366-
5366.
Kaiser's operations are conducted in leased facilities or in facilities
provided by the Federal government or other clients. Because Kaiser's
operations generally do not require the maintenance of unique facilities,
suitable office space is available for lease in all of the geographic areas
currently served. Kaiser believes that adequate space to conduct its operations
will be available for the foreseeable future. For information concerning an
investment by Kaiser in Fairfax, Virginia land and buildings where Kaiser's
headquarters are located, see notes 4 and 9 to the consolidated financial
statements included in Kaiser's 1998 Annual Report on Form 10-K for the year
ended December 31, 1998, which is incorporated by reference into and delivered
with this prospectus.
Legal Proceedings
In the course of Kaiser's normal business activities, various claims or
charges have been asserted and litigation commenced against Kaiser arising from
or related to properties, injuries to persons, and breaches of contract, as well
as claims related to acquisitions and dispositions. Claimed amounts may not
bear any reasonable relationship to the merits of the claim or to a final court
award. In the opinion of management, an adequate reserve has been provided for
final judgments, if any, in excess of insurance coverage, that might be rendered
against Kaiser in the event of litigation. See "Risk Factors" and note 7 to the
consolidated financial statements included in Kaiser's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999, which is incorporated by reference
into and delivered with this prospectus for a description of certain pending
legal proceedings.
MANAGEMENT
During 1999, Kaiser implemented certain changes in its executive
management. These changes were made in light of the changes in Kaiser's
business focus that resulted from its sale of the EFM and Consulting Groups, and
in order to manage Kaiser's operations during what is expected to be a period of
significant change, including the recapitalization described in this prospectus.
The following individuals currently serve as the principal executive officers of
Kaiser:
James J. Maiwurm, 50, Chairman of the Board, President and Chief Executive
Officer. Mr. Maiwurm has been President and Chief Executive Officer of Kaiser
since April 19, 1999. Mr. Maiwurm was elected to, and as Chairman of, the Board
of Directors of Kaiser on June 7, 1999. Mr. Maiwurm serves as Managing Member
of the board of managing directors of Kaiser-Hill Company, LLC, the joint
venture that conducts the performance based integrating management services at
the Department of Energy's Rocky Flats Environmental Technology Site near
Denver, Colorado. From August 1998 until elected as Kaiser's President and
Chief Executive Officer, Mr. Maiwurm was a partner of Squire Sanders & Dempsey
L.L.P., Washington, D.C., and prior to August 1998 was a partner of Crowell &
Moring LLP, Washington, D.C. Both law firms served as counsel to Kaiser. Mr.
Maiwurm is a member of the Board of Trustees of Davis Memorial Goodwill
Industries, Washington, D.C., a non-profit entity, and is a member of the board
of directors of Workflow Management, Inc., an integrated graphic arts company
providing documents, envelopes and commercial printing to businesses in North
America, the stock of which is traded on the Nasdaq National Market System. Mr.
Maiwurm graduated from the College of Wooster (B.A.) and the University of
Michigan Law School (J.D.).
42
<PAGE>
S. Robert Cochran, 46, Executive Vice President and President, North
America. Mr. Cochran has been President, North America for ICF Kaiser
International, Inc. since April 1999. Mr. Cochran serves on the board of
managing directors of Kaiser-Hill Company, LLC, the joint venture that conducts
the performance based integrating management services at the Department of
Energy's Rocky Flats Environmental Technology Site near Denver, Colorado. Prior
to that, he was Senior Vice President for Business Development for Kaiser's
former EFM Group. Before joining Kaiser in 1995, Mr. Cochran was Senior Vice
President of Hazwaste Industries, Inc. & Earth Technology Incorporated, focusing
primarily on business development in the hazardous and radioactive site cleanup
area. He was Senior Vice President and partner with Interface Incorporated;
served as Vice President of PEI/IT; was senior project and geotechnical group
manager with JRB/SAIC; and for Versar, Inc., worked as a senior project
geologist. He received a B.S. in Geology from James Madison University and is a
registered professional geologist.
Richard A. Leupen, 45, has been Executive Vice President and President,
International of Kaiser since April 1999. Prior thereto, he was President of
the Engineers & Constructors Group of Kaiser from August 1998. Mr. Leupen has
held senior management positions in Kaiser's former Engineers & Constructors
Group since 1995. Prior to joining Kaiser, Mr. Leupen worked for Protech Pty.
Ltd. Mr. Leupen also serves as Managing Director of KWP Kenwalt Australia Pty.
Limited, and as a director of Weda Bay Minerals Ltd. (Calgary), Strand Mining
Pte. Ltd. (Singapore) Pty. Limited, Strand Management Pty. Limited as well as
serving as a director of a number of Kaiser subsidiaries and affiliates. Mr.
Leupen graduated from the University of South Wales in Australia (B.S.).
Timothy P. O'Connor, 34, Executive Vice President and Chief Financial
Officer. Mr. O'Connor has been Executive Vice President and Chief Financial
Officer of ICF Kaiser International, Inc. since 1999. He had been Treasurer of
Kaiser since May 1997 and has been employed by Kaiser in various financial
positions since 1995. From 1990 until 1995, Mr. O'Connor was employed by
Lockheed Martin Corporation of Bethesda, Maryland, where he held a number of
financial positions. Prior to that, Mr. O'Connor worked for General Electric
Company and Lazard Freres and Co. of New York. Mr. O'Connor, who is a Certified
Cash Manager, graduated from the University of Delaware (B.S.).
UNITED STATES FEDERAL
INCOME TAX CONSIDERATIONS
The following discussion sets forth the opinion of Squire, Sanders &
Dempsey L.L.P, counsel to Kaiser, regarding the material United States federal
income tax consequences to holders of old notes and senior notes resulting from
the exchange, the cash purchase pursuant to the asset sale offer, and the
consent solicitations and payment. The summary assumes that holders hold the old
notes, senior notes, preferred stock, warrants and secured notes, if issued, as
capital assets within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended. Further, this summary assumes that the old notes are
treated as debt and not equity for United States federal income tax purposes.
This discussion does not purport to deal with all aspects of United States
federal income taxation that may be relevant to holders who may be subject to
special federal income tax laws, such as dealers in securities, financial
institutions, life insurance companies, individuals who are not citizens or
residents of the United States or corporations, partnerships or other entities
that are not organized under the laws of the United States or any political
subdivision, or persons that hold the old notes, the senior notes, the preferred
stock, the warrants or the secured notes as part of a hedge, conversion
transaction, straddle or other risk reduction transaction. In addition, the
following discussion does not consider the effect of any applicable foreign,
state or local tax laws.
The discussion below is based upon the current provisions of the Internal
Revenue Code, existing and proposed Treasury Regulations promulgated under the
Internal Revenue Code, rulings of the Internal Revenue Service and judicial
decisions now in effect as of the date of this prospectus. Such authorities may
be repealed, revoked or modified, possibly with retroactive effect, so as to
result in United States federal income tax consequences different from those
described below.
As discussed below, the exchange, together with the cash purchase of old
notes, should constitute a recapitalization under Section 368(a)(1)(E) of the
Internal Revenue Code. However, Kaiser will not seek a ruling from the Internal
Revenue Service regarding any of the tax issues described in this summary,
including the tax
43
<PAGE>
treatment of the exchange and cash purchase as a recapitalization. Moreover, as
noted in the discussion, issues relevant to the federal income tax consequences
of some matters are factual in nature, and other issues involve areas of law
that are ambiguous or with respect to which legal authority is lacking and as to
which limited guidance is available. It is possible, for example, that the
Internal Revenue Service may challenge the treatment of the exchange and cash
purchase of old notes as a recapitalization and assert either that the exchange
and cash purchase must be treated independently for federal income tax purposes
and/or that the exchange is a taxable transaction because the old notes do not
constitute "securities" or because of other legal positions. Consequently, there
can be no assurance that the Service will not challenge one or more of the tax
consequences described in this summary.
This section does not purport to deal with all aspects of United States
federal income taxation that, because of specific circumstances applicable to a
holder, might be relevant to a holder's decision to participate in the exchange,
a cash purchase pursuant to the asset sale offer, or the consent solicitations
and payment or to the ownership and disposition of the preferred stock, warrants
and secured notes. Holders are urged to consult their tax advisors concerning
the United States federal income tax considerations that may be specific to them
as well as any tax consequences arising under the laws of any other taxing
jurisdiction.
Tax Consequences to the Holders Upon the Exchange and Cash Purchase of Old Notes
Importance of Whether the Old Notes Constitute "Securities." The federal
income tax consequences to the holders of old notes will depend, in part, on
whether the old notes constitute "securities" for federal income tax purposes.
The term "security" is not defined in the Internal Revenue Code or in the
Treasury Regulations and has not been clearly defined in court decisions.
Although there are a number of factors that may affect the determination of
whether a debt instrument is a "security," one of the most important factors is
the original term of the instrument, or the length of time between the issuance
of the instrument and its maturity. In general, instruments with an original
term of more than ten years are likely to be treated as "securities," and
instruments with an original term of less than five years are unlikely to be
treated as "securities." Because the term of the old notes is between five and
ten years, it is impossible to be certain regarding the treatment of such old
notes as "securities." Nevertheless, although the issue is not free from doubt,
the old notes should constitute "securities" for federal income tax purposes.
BECAUSE THE ISSUE IS UNCERTAIN, HOLDERS ARE URGED TO CONSULT WITH THEIR TAX
ADVISORS AS TO THE PROPER TREATMENT OF THE OLD NOTES.
Treatment of the Exchange and the Purchase of Old Notes as a
Recapitalization Under Internal Revenue Code Section 368. Assuming that the old
notes are treated as securities, the exchange of old notes for preferred stock,
warrants and secured notes, if issued, and the purchase by Kaiser of old notes
for cash should be treated together as a recapitalization under Section
368(a)(1)(E) of the Internal Revenue Code. The secured notes likely will not be
considered "securities" for federal income tax purposes. If the exchange and
purchase together qualify as a recapitalization, a holder that both exchanges
old notes for preferred stock, warrants and secured notes, if issued, and sells
old notes pursuant to the asset sale offer by Kaiser will recognize gain, but
not loss, generally equal to the lesser of:
. the amount of cash received in the purchase of old notes and the fair
market value of secured notes, if issued, received in the exchange, or
. the amount of gain realized in the purchase and exchange, which is the
excess, if any, of
. the sum of the cash received in the purchase of old notes plus the
total of the fair market values of the preferred stock, warrants and
secured notes, if issued, received in the exchange over
. the holder's aggregate adjusted tax basis in the old notes purchased
and exchanged.
A holder that only exchanges old notes for preferred stock, warrants and secured
notes, if issued, will recognize gain, but not loss, generally equal to the
lesser of:
. the fair market value of the secured notes, if issued, received in the
exchange, or
44
<PAGE>
. the amount of gain realized in the exchange, which is the excess, if
any, of
. the total of the fair market values of the preferred stock, warrants
and secured notes, if issued, received in the exchange over
. the holder's aggregate adjusted tax basis in the old notes exchanged.
Any recognized gain will generally be treated as capital gain and will be
long-term capital gain if the holder held the old notes for more than 12 months.
If, however, a holder purchased the old notes at a market discount within the
meaning of Internal Revenue Code Section 1278, any gain recognized will be
treated as ordinary income to the extent of the accrued market discount on the
old notes.
A holder who participates in the purchase and exchange will generally have
a tax basis in the preferred stock and warrants received in the exchange equal
to the holder's adjusted tax basis in the old notes purchased and exchanged,
decreased by the sum of the amount of cash received in the purchase and the fair
market value of the secured notes, if issued, received in the exchange, and
increased by the amount of gain, if any, recognized in the purchase and
exchange. That basis will be allocated between the preferred stock and warrants
in proportion to their relative fair market values. A holder will have a basis
in the secured notes, if issued, equal to their fair market value at the time of
the exchange. A holder's holding period for the preferred stock and warrants
will include the holding period for the old notes purchased and exchanged. A
holder's holding period for the secured notes, if issued, will begin following
the day of the exchange.
A holder who participates only in the exchange will generally have a tax
basis in the preferred stock and warrants received in the exchange equal to the
holder's adjusted tax basis in the old notes exchanged, decreased by the fair
market value of the secured notes, if issued, received in the exchange, and
increased by the amount of gain, if any, recognized in the exchange. That basis
will be allocated between the preferred stock and warrants in proportion to
their relative fair market values on the date of the exchange. A holder will
have a basis in the secured notes, if issued, equal to their fair market value
at the time of the exchange. A holder's holding period for the preferred stock
and warrants will include the holding period for the old notes exchanged. A
holder's holding period for the secured notes, if issued, will begin following
the day of the exchange.
Treatment of the Exchange as a Recapitalization Under Internal Revenue Code
Section 368 But Treatment of the Purchase of Old Notes as a Separate
Transaction. It is possible that the Internal Revenue Service could
successfully claim that the purchase of old notes and the exchange must be
treated independently of each other for federal income tax purposes. In that
event, if the exchange qualifies as a recapitalization, a holder that exchanges
old notes for preferred stock, warrants and secured notes, if issued, will
recognize gain, but not loss, generally equal to the lesser of:
. the fair market value of the secured notes, if issued, received in the
exchange, or
. the amount of gain realized in the exchange, which is the excess, if
any, of
. the total of the fair market values of the preferred stock, warrants
and secured notes, if issued, received in the exchange over
. the holder's aggregate adjusted tax basis in the old notes exchanged.
The holder's aggregate tax basis in the preferred stock and warrants received in
the exchange will generally be equal to the holder's adjusted tax basis in the
old notes exchanged, decreased by the fair market value of the secured notes, if
issued, received in the exchange, and increased by the amount of gain, if any,
recognized in the exchange. That basis will be allocated between the preferred
stock and warrants in proportion to their relative fair market values on the
date of the exchange. A holder will have a basis in the secured notes, if
issued, equal to their fair market value at the time of the exchange. A
holder's holding period for the preferred stock and warrants will include the
holding
45
<PAGE>
period for the old notes exchanged. A holder's holding period for the secured
notes, if issued, will begin following the day of the exchange.
Further, if the Internal Revenue Service successfully claims that the
purchase of old notes and the exchange must be treated independently of each
other for federal income tax purposes, a holder whose old notes are purchased
will recognize an amount of gain or loss generally equal to the amount of cash
received minus the holder's adjusted tax basis in the old notes purchased.
Subject to the market discount rules discussed above, any recognized gain or
loss would generally be treated as capital gain or loss and would be long-term
capital gain or loss if the holder held the old notes for more than 12 months.
Treatment of the Exchange as a Taxable Exchange. Assuming that the old
notes constitute "securities" for federal income tax purposes, the purchase of
old notes and the exchange will constitute a recapitalization under Internal
Revenue Code Section 368 resulting in the federal income tax consequences
discussed above under "Treatment of the Exchange and Purchase of Old Notes as a
Recapitalization Under Internal Revenue Code Section 368." However, Kaiser will
not seek a ruling from the Internal Revenue Service regarding the treatment of
the old notes as "securities," and it is possible that the Internal Revenue
Service may challenge this treatment. If this challenge were successful, the
exchange would be considered a taxable exchange with the likely result that a
holder would recognize gain or loss upon the exchange, in addition to any gain
or loss recognized on the purchase, generally equal to the difference between:
. the sum of the fair market values of the preferred stock, warrants and
secured notes, if issued, received in the exchange, and
. the holder's adjusted tax basis in the old notes exchanged.
Subject to the market discount rules discussed above, any recognized gain
or loss would generally be treated as capital gain or loss and would be long-
term capital gain or loss if the holder held the old notes for more than 12
months. A holder's tax basis in the preferred stock, warrants and secured
notes, if issued, would equal their respective fair market values, and their
holding period would begin following the day of the exchange.
Payment of Accrued Interest on Old Notes. Regardless of the treatment of
the purchase and exchange as described above, a holder, in addition to any gain
recognized as a result of the purchase and exchange, will recognize ordinary
income attributable to any consideration received as payment for accrued
interest on the old notes that was not previously included in the holder's
income. Holders that have already included the accrued interest in income will
not recognize any additional income as a result of the consideration received as
payment for the accrued interest on the old notes.
For federal income tax purposes, it is unclear how much, if any, of the
cash payment in the purchase and the preferred stock, warrants and secured notes
issued in the exchange should be allocated to accrued interest. Consistent with
the form of the transaction to be consummated as part of the solicitation,
Kaiser intends to take the position for tax and accounting purposes, and for
purposes of backup withholding and information reporting, that approximately
$______ of the cash paid and $_____ in value of the preferred stock, warrants
and secured notes issued in the exchange will be paid to holders as payment for
accrued interest on the old notes.
By participating in the purchase and/or exchange, a holder agrees to
allocate the cash, preferred stock, warrants and secured notes, if issued,
received for the principal amount of the old notes and accrued and unpaid
interest in the same manner in which Kaiser will make this allocation. It is
possible, however, that the Internal Revenue Service may challenge this
allocation and require a holder to allocate the cash, preferred stock, warrants
and secured notes received first to accrued and unpaid interest on all of the
old notes held by the holder, and allocate any remaining cash, preferred stock,
warrants and secured notes to the principal amount of the old notes. This will
have the effect of causing a cash basis holder to report a greater portion of
the accrued interest on its old notes as ordinary income. In calculating the
amount of gain or loss recognized on the purchase or exchange as described
above, the amount of cash, preferred stock, warrants and secured notes, if
issued, allocated to accrued interest will not be taken into account.
46
<PAGE>
Economic Accrual of Redemption Premium on Preferred Stock. The preferred
stock will be redeemable, in whole or in part, at the option of Kaiser at any
time following the exchange. In addition, upon the occurrence of a change of
control, Kaiser is required to offer to purchase the preferred stock. The issue
price of such preferred stock is generally the stock's fair market value as of
the issue date. For federal income tax purposes, if a corporation issues
preferred stock that may be redeemed at a price that is more than a de minimis
amount higher than its issue price, the difference is treated as a "redemption
premium" that is taxable to the holder on an annual economic accrual basis,
which is commonly referred to as a constant-yield-to-maturity basis. In such
event, the holder's tax basis in the preferred stock will increase by the amount
included in the holder's gross income as accrued redemption premium.
Where as in this case the preferred stock is optionally redeemable by
Kaiser at any time and is subject to a mandatory purchase offer upon a change of
control, the determination of the redemption premium and the period over which
that redemption premium is accrued and taxable to the holder is determined based
on the date that redemption is most likely to occur, provided redemption is more
likely than not to occur at some time. Kaiser believes that the most likely
date of redemption of the preferred stock is December 31, 2001, at which time
the preferred stock will be redeemable at 100% of its liquidation preference.
Accordingly, the redemption premium will be the excess of 100% of the
liquidation preference of the preferred stock over the fair market value of that
stock on its date of issuance. Kaiser is required to and will provide
information relating to the accrual of redemption premium to the Internal
Revenue Service and make this information available to holders. A holder is
required to report the accrued redemption premium for federal income tax
purposes consistently with this information unless the holder explicitly
discloses to the Internal Revenue Service that its determination of accrued
redemption premium differs from that of Kaiser.
Original Issue Discount on Secured Notes, If Issued. The Secured Notes,
if issued, may have "original issue discount." Original issue discount is the
excess of the stated redemption price at maturity of the secured notes over
their issue price. The issue price of the secured notes, if issued, will equal:
. their fair market value if the secured notes are treated as traded on an
established market within the meaning of the Treasury Regulations,
. the excess of the fair market value of the old notes over the fair
market value of the preferred stock and warrants issued in the exchange,
but only if the secured notes are not treated as traded on an
established market and the old notes, preferred stock and warrants are
treated as so traded, or
. the stated principal amount of the secured notes, if neither of the
previous two alternatives applies.
For federal income tax purposes, original issue discount that exceeds a de
minimis amount accrues to a holder of a secured note over the period to maturity
based on the constant yield to maturity method, compounded semi-annually, or
over such shorter permitted compounding interval selected by the holder. With
respect to an original holder of a secured note, the portion of original issue
discount that accrues during the period such holder owns the secured note:
. is includable in that holder's gross income for federal income tax
purposes and
. is added to that holder's tax basis for purposes of determining gain or
loss on the maturity, redemption, prior sale or other disposition of
that secured note.
Disposition of Preferred Stock, Warrants, or Secured Notes. A holder
generally will recognize gain or loss upon the sale, exchange, redemption or
other disposition of the preferred stock, warrants, or secured notes equal to
the difference between the amount realized on the disposition and the holder's
adjusted tax basis in the preferred stock, warrants, or secured notes, as
applicable. The gain or loss recognized on such a disposition generally will be
capital gain or loss and will be long-term capital gain or loss if the holder's
holding period for the preferred stock, warrants, or secured notes, as
applicable, is more than 12 months. However, an amount of gain up to the amount
47
<PAGE>
accrued market discount, if any, on the old notes at the time of the exchange
will be treated as ordinary income, assuming the exchange was treated as a
recapitalization under Internal Revenue Code Section 368.
Exercise of Conversion Option. A holder generally will not recognize gain
or loss upon the conversion of shares of preferred stock into shares of common
stock. However, any common stock attributable to dividend arrearages on the
preferred stock at the time of the conversion will generally be treated as a
taxable dividend to the holder. A holder's tax basis in the common stock will
generally equal the holder's adjusted tax basis in the preferred stock
exchanged. A holder's holding period for the common stock will include the
holding period for the preferred stock exchanged.
Exercise of Warrants. A holder will not recognize gain or loss upon the
exercise of the warrants. Following exercise of the warrants, a holder's tax
basis in any common stock for which the holder paid a cash exercise price should
equal the holder's adjusted tax basis in the warrants exercised, increased by
the exercise price. A holder's holding period for any common stock for which
the holder paid a cash exercise price should commence on the day following the
day that the warrants are exercised. A holder's tax basis in any common stock
acquired upon exercise of the warrants using preferred stock to pay the exercise
price should generally equal the holder's aggregate adjusted tax basis in the
preferred stock so used plus the holder's tax basis in the warrants exercised.
A holder's holding period for any common stock acquired upon exercise of the
warrants using preferred stock to pay the exercise price should include the
holder's holding period for the preferred stock so used.
Solicitation of the Consents of Holders
Concurrently with the exchange offer, Kaiser will solicit the consents of
the holders of the old notes to remove some covenants in the old notes indenture
and will solicit the consents of the holders of the senior notes to amend some
covenants in the senior notes indenture. The federal income tax consequences to
holders will depend upon whether removal or amendment of the covenants results
in a deemed exchange of "new" or modified notes for the "original" notes.
Treasury Regulations promulgated under Section 1001 of the Internal Revenue Code
provide that such a deemed exchange occurs if a "significant modification," as
described in the Treasury Regulations, in the terms of the debt instrument has
occurred, taking into account all relevant facts and circumstances.
The Treasury Regulations provide that a modification to a debt
instrument that adds, deletes, or alters customary accounting or financial
covenants is not a significant modification giving rise to a deemed exchange.
Based on these Regulations, the removal of the covenants from the old notes
indenture and the amendment of the covenants in the senior notes indenture will
not constitute a significant modification of the old notes or the senior notes.
Accordingly, the removal of the covenants from the old notes indenture and the
amendment of the covenants in the senior notes indenture will not result in a
taxable exchange of the old notes or the senior notes under Internal Revenue
Code Section 1001.
48
<PAGE>
Backup Withholding and Information Reporting
Under some circumstances, a holder may be subject to backup withholding at
a 31% rate on payments received in the purchase or exchange and with respect to
the preferred stock and warrants issued in the exchange. This withholding
generally applies only if the holder:
. fails to furnish the holder's social security or other taxpayer
identification number,
. furnishes an incorrect taxpayer identification number,
. is notified by the Internal Revenue Service that the holder has failed
to report payment of interest and dividends properly and the Internal
Revenue Service has notified Kaiser that the holder is subject to backup
withholding, or
. fails, under some circumstances, to provide a certified statement,
signed under penalties of perjury, that the taxpayer identification
number provided is the holder's correct number and that the holder is
not subject to backup withholding.
Any amount withheld from a payment to a holder under the backup withholding
rules is allowable as a credit against the holder's federal income tax
liability, provided that the required information is furnished to the Internal
Revenue Service. Some holders, such as corporations and financial institutions,
are not subject to backup
49
<PAGE>
withholding. Holders should consult their tax advisors as to their qualification
for exemption from backup withholding and the procedure for obtaining this
exemption.
Because the purchase and exchange should be treated as a recapitalization
under Internal Revenue Code Section 368, holders will be required to file
information regarding the purchase and exchange in connection with filing their
federal income tax returns for the period in which the purchase and exchange
occur.
Tax Consequences to Kaiser Upon the Purchase and Exchange
Discharge of Indebtedness. The principal amount of Kaiser's aggregate
outstanding indebtedness will be reduced upon the purchase and exchange.
Generally, the cancellation or other discharge of indebtedness triggers ordinary
income to a debtor unless payment of the liability would have given rise to a
deduction. The amount of the discharge of indebtedness income generally will be
equal to the excess of the adjusted issue price, as defined in Treasury
Regulation Section 1.1275-1(b), of the indebtedness discharged over the
aggregate value of cash and other property, including the preferred stock,
warrants, and secured notes transferred in satisfaction of the indebtedness.
However, Kaiser may not realize taxable income from discharge of
indebtedness if the discharge of indebtedness occurs while Kaiser is
"insolvent," as defined in Internal Revenue Code Section 108(d)(3). Instead, to
the extent that the amount of the discharge of indebtedness does not exceed the
amount by which Kaiser is insolvent, certain tax attributes, including net
operating losses, otherwise available to Kaiser will be reduced, generally by
the amount that would otherwise be included as ordinary income. These attribute
reductions will generally have the effect of increasing Kaiser's federal income
tax liability in subsequent taxable years. The extent, if any, to which Kaiser
is insolvent is determined for this purpose immediately before the discharge of
indebtedness.
DESCRIPTION OF CONVERTIBLE PREFERRED STOCK
General. We are offering 650,000 shares of convertible preferred stock as
part of the exchange offer.
Liquidation Preference. Each share of preferred stock will have a
liquidation preference of $100, with an aggregate liquidation preference of $65
million plus accrued interest on the old notes through the date of the closing.
This means that, if Kaiser is liquidated, dissolved or wound up, each holder of
a share of preferred stock will be entitled to be paid the per share liquidation
preference plus accrued interest on a pro rata basis. As a holder of preferred
stock, you will not be entitled to any further payment.
If the assets remaining after distribution to holders of debt and other
obligations are insufficient to pay all of the holders of preferred stock, any
remaining assets will be distributed on a proportionate basis to the holders of
preferred stock. In a liquidation, holders of preferred stock must be paid
before any holders of Kaiser common stock and other junior securities receive
any payments for their shares.
Rank. The preferred stock will rank ahead of Kaiser's common stock. It is
not expected that there will be other classes of preferred stock immediately
after the recapitalization. The Kaiser Board of Directors could at any time
after the recapitalization authorize the issuance of preferred stock that ranks
equal with the preferred stock. However, it may not authorize the issuance of
preferred stock that ranks senior to the preferred stock without the consent of
holders of two-thirds of the preferred stock.
Dividends. Cumulative dividends on the preferred stock will be payable in
cash at an initial rate per year equal to 4.75% of the liquidation preference
per share. We will pay dividends quarterly commencing on the closing date. The
dividend rate on the preferred stock will increase to 12% after December 31,
2001.
If we fail for any reason to pay a dividend in cash in any quarter, and if
we fail to pay the delinquent dividend and the current dividend in the following
quarter, holders of the preferred stock will have the right to appoint two
additional directors for the two dividends missed and one additional director if
any future dividend payment is missed, up to a maximum of three additional
directors. The size of our Board of Directors will be
50
<PAGE>
expanded accordingly. Unpaid dividends will accrue as additional dividends at
12% per year, which amount will be added to the liquidation preference.
Conversion. The preferred stock will be convertible into our common stock
at the option of the holder, subject to prior redemption, at any time following
December 31, 2001. The conversion price will be equal to the average closing
price of our common stock for the 20 consecutive trading days preceding the
conversion election.
Redemption. We will have the option to redeem the preferred stock, in
whole or in part, following the consummation of the exchange offer at:
. 90% of the liquidation preference until June 30, 2001,
. 95% of the liquidation preference from June 30, 2001 to December 31,
2001, and
. 100% of the liquidation preference from and after December 31, 2001.
Holders will be entitled to convert into common stock prior to redemption if the
preferred stock is then convertible into common stock.
Change of Control Put. If there is a change of control, we must give
holders of preferred stock the opportunity to sell us their preferred stock at
101% of the liquidation preference plus accumulated and unpaid dividends. If we
fail to make the offer, the preferred stock will become immediately convertible
into common stock at $.01 per share and will be entitled to appoint two
additional directors, and the dividend rate will immediately increase to 14%.
Voting Rights. In addition to its special voting rights with respect to a
class vote on directors and special voting rights regarding mergers and
liquidations where the holders of the preferred stock do not receive the
liquidation preference, the holders of the preferred stock are entitled to vote
with holders of the common stock on all matters submitted to a vote of our
stockholders. Each share of preferred stock will be entitled to one vote for
each preferred share until the time it is converted, at which point holders will
be entitled to the number of votes corresponding to the number of shares into
which the preferred stock may be converted. Prior to conversion and assuming
the reverse split of the common stock is implemented, the preferred stock will
represent approximately 12% of the total voting power of the common and
preferred stock. If Kaiser or any of its affiliates holds any preferred stock,
they will not be entitled to vote that preferred stock on these matters. The
terms of the preferred stock may only be amended with a two-thirds affirmative
vote of the holders of preferred stock.
If the stockholders of Kaiser do not approve the "shareholder democracy"
amendments to Kaiser's certificate of incorporation and bylaws at the 1999
Annual Meeting of Shareholders, the holders of preferred stock will be entitled
to vote, at any annual or special meeting, on all matters submitted to a vote of
our stockholders, the number of shares of common stock into which the preferred
stock is convertible as if the preferred stock had been converted. See
"Description of Common Stock - Summary of Proposed Amendments to Kaiser's
Certificate of Incorporation and Bylaws."
Protective Provisions. Kaiser may not issue senior preferred stock or some
types of additional indebtedness without the consent of holders of two-thirds of
the preferred stock or the unanimous consent of the directors elected by the
preferred stock.
Warrant Exercise Provision. The preferred stock may be "useable" in the
exercise of the warrants at a value equal to the liquidation preference, plus
accrued and unpaid dividends, if any.
DESCRIPTION OF WARRANTS
General. We are offering an aggregate of up to .882 million warrants which
will entitle the holders to purchase 15% of our common stock on a fully diluted
basis, to be issued upon consummation of the recapitalization.
51
<PAGE>
Exercise Price. The exercise price of the warrants will be equal to the
average closing price of our common stock for the first 20 consecutive trading
days following consummation of the exchange offer.
Fractional Interests. No fractional shares of common stock will be issued
upon exercise of the warrants. We will pay to the holder of a warrant at the
time of exercise an amount in cash equal to the current market value of any
fractional share of Kaiser common stock less a corresponding fraction of the
exercise price.
No Voting Rights. The holders of the warrants will have no right to vote
on matters submitted to the stockholders of Kaiser.
No Dividends or Rights to Share in Assets. The holders of the warrants
will have no right to receive dividends. Also, the holders of the warrants will
not be entitled to share in the assets of Kaiser if Kaiser is liquidated,
dissolved or wound up. If a bankruptcy or reorganization action is commenced by
or against Kaiser, a bankruptcy court may hold that unexercised warrants are
executory contracts that may be subject to rejection by Kaiser with approval of
the bankruptcy court. If this happened, the holders of warrants may, even if
sufficient funds are available, receive nothing or a lesser amount as a result
of a bankruptcy case than they would be entitled to if they had exercised their
warrants prior to the commencement of the bankruptcy case.
Procedures for Exercise. You can exercise a warrant by surrendering to
Kaiser the warrant certificate evidencing the warrant to be exercised, and
delivering a form of election to purchase that is properly completed together
with the exercise price. You can pay the exercise price in cash or by certified
or official bank check payable to Kaiser. Alternatively, a holder can exercise a
warrant by using preferred stock issued in the exchange offer, at a value equal
to the liquidation value plus accrued and unpaid dividends.
After a holder has surrendered warrant certificates and paid the exercise
price, Kaiser will deliver or cause to be delivered, to or upon the written
order of such holder, stock certificates representing the number of whole shares
of Kaiser common stock to which the holder is entitled. If less than all of the
warrants evidenced by a warrant certificate are exercised, a new warrant
certificate will be issued for the remaining number of warrants.
Warrant Expiration. The warrants will expire on December 31, 2004 if they
have not been exercised prior to this date.
Registration. The warrants and the common stock underlying the warrants
will be registered under the Securities Act at the time of the recapitalization.
Adjustments. The number of shares of Kaiser common stock that you can
purchase upon exercise of the warrants and the exercise price will be subject to
customary anti-dilution provisions.
If Kaiser is subject to a merger, or all or substantially all of Kaiser's
assets are sold, each warrant will be exercisable for the right to receive the
kind and amount of securities, cash, or property to which the holder would have
been entitled if the warrants had been exercised immediately prior to the merger
or sale.
DESCRIPTION OF SECURED NOTES
General. Kaiser will issue up to $10 million of secured notes if:
. the new credit facility requires cash collateral in connection with the
Nova Hut collateral obligations, or
. we are required to make an additional capital contribution to Kaiser-
Hill Company, LLC.
In such an event, we would retain up to $10 million of cash to collateralize the
letter of credit or make the additional capital contribution and would issue the
secured notes to tendering holders in an equal amount.
52
<PAGE>
Purpose. The secured notes, if issued, would replace funds otherwise
available for the asset sale offer but required to cash collateralize the letter
of credit for the Nova Hut project or make the additional Kaiser-Hill capital
contribution.
Interest. The interest on the secured notes will be set at a rate mutually
agreed upon by Kaiser and the holders of old notes.
Maturity. The secured notes will mature on June 30, 2001 or, if used to
collateralize the Nova Hut letter of credit, upon any earlier termination of the
Nova Hut collateral obligations.
Security. The security for the secured notes will consist of a secondary
lien on Nova Hut cash collateral deposits, if used for the Nova Hut letter of
credit, and a lien on other assets of Kaiser valued at no less than an
additional $10 million.
DESCRIPTION OF COMMON STOCK
Description of Kaiser's Capital Stock
Kaiser's Board of Directors has submitted a proposal to its shareholders
that some terms and provisions of the Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws that govern the terms, rights and
preferences of Kaiser's capital stock be amended. If these proposals are
adopted, the rights attributable to holders of Kaiser common stock would be
altered. A summary of the substance of those proposals is included under
"Summary of Proposed Amendments to Kaiser's Certificate of Incorporation and
Bylaws" below. The following summary does not give effect to the adoption of
any of these proposals.
The authorized capital stock of Kaiser consists of 90,000,000 shares of
common stock, par value $0.01 per share, and 2,000,000 shares of preferred
stock, par value $0.01 per share. As of September 1, 1999, the outstanding
capital stock of Kaiser consisted of 24,833,890 shares of common stock and no
shares of preferred stock.
Common Stock
Each share of common stock has one vote per share on all matters submitted
to a vote of shareholders. Kaiser's Amended and Restated Certificate of
Incorporation provides that no action may be taken by the holders of shares of
common stock by written consent in lieu of holding a meeting of shareholders.
Kaiser has never paid cash dividends on its common stock. The Board of
Directors anticipates that for the foreseeable future no cash dividends will be
paid on its common stock and that Kaiser's earnings will be retained for use in
the business. The Board of Directors determines Kaiser's common stock dividend
policy based on Kaiser's results of operations, payment of dividends on
preferred stock, if any is outstanding, financial condition, capital
requirements, and other circumstances. Kaiser's debt agreements currently do
not permit dividends to be paid on its common stock.
Holders of common stock have no preemptive or other rights to subscribe for
additional shares of capital stock. Upon liquidation, dissolution, or winding
up of Kaiser, each share of common stock will share equally in assets legally
available for distribution to shareholders.
The transfer agent and registrar for the common stock is First Chicago
Trust Company of New York, 14 Wall Street, Mail Suite 4680, New York, New York
10005. The shareholder relations telephone number at First Chicago is (201)
324-0498, and the First Chicago Web site address is http://www.fctc.com.
Since September 14, 1993, the common stock has been traded on the New York
Stock Exchange under the symbol "ICF." From December 14, 1989, to September 13,
1993, the common stock was traded on the Nasdaq National Market. The number of
holders of record of Kaiser common stock was 1,501 as of September 1, 1999. On
September 1, 1999, the closing price per share of Kaiser common stock on the
NYSE was $0.50. Included in
53
<PAGE>
Kaiser's Annual Report on Form 10-K for the year ended December 31, 1998, which
is incorporated by reference into and delivered with this prospectus, is
information concerning the high and low sales prices of Kaiser common stock
during each of the fiscal quarters during 1997 and 1998. The table below sets
forth this price information, as reported by NYSE, for each of the quarterly
periods ended since December 31, 1998.
High Low
---- ---
1999
- ----------------------
First Quarter $1.500 $.813
Second Quarter $ .813 $.250
Third Quarter (through September 1, 1999) $ .500 $.406
Preferred Stock
Preferred stock is available for issuance from time to time at the
discretion of the Board of Directors of Kaiser and without shareholder approval.
No shares are currently outstanding. For each series of preferred stock it
establishes, the Board of Directors has authority to prescribe the number of
shares in that series and the dividend rate. In addition, the Board of
Directors has authority to prescribe the voting rights, conversion privileges,
redemption, sinking fund provisions and liquidation rights, if any, and any
other rights, preferences and limitations of the particular series. The
issuance of preferred stock could decrease the amount of earnings and assets
available for distribution to the holders of common stock or adversely affect
the rights and powers, including voting rights, of the holders of common stock.
Additionally, the issuance of preferred stock could have the effect of delaying,
deferring or preventing a change in control of Kaiser without further action by
the shareholders. Kaiser's debt and credit agreements currently do not permit
dividends to be paid on its preferred stock if any shares of preferred stock
were to be issued.
Senior Debt Warrants Issued in 1996
A total of 105,000 Senior Debt Warrants were issued by Kaiser under a
warrant agreement dated as of December 23, 1996, between Kaiser and The Bank of
New York, a New York banking corporation, as warrant agent. Each 1996 senior
warrant entitles the holder to acquire one share of common stock of Kaiser, upon
payment of the exercise price of $2.30, subject to adjustment as described
below. All outstanding 1996 Warrants terminate and become void on December 31,
1999. The 1996 Warrants are subject to the terms contained in the 1996 Warrant
Agreement; capitalized terms that are not otherwise defined below are used as
defined in the 1996 Warrant Agreement. The common stock issuable upon exercise
of the 1996 Warrants has been registered with the Securities and Exchange
Commission and listed on the New York Stock Exchange.
Non-Surviving Combination. If Kaiser proposes to enter into a transaction
-------------------------
that would constitute a Non-Surviving Combination if consummated, Kaiser must
give written notice to the holders promptly after an agreement is reached with
respect to the Non-Surviving Combination but in no event less than 30 days prior
to the consummation. As used herein, a "Non-Surviving Combination" means any
merger, consolidation, or other business combination by Kaiser with one or more
persons other than a wholly owned subsidiary of Kaiser in which Kaiser is not
the survivor, or a sale of all or substantially all of the assets of Kaiser to
one or more of the other persons, if, in connection with any of the foregoing,
consideration other than consideration which includes common stock or securities
convertible into, or exercisable or exchangeable for, common stock or rights or
options to acquire common stock or other securities is distributed to holders of
common stock in exchange for all or substantially all of their equity interest
in Kaiser.
In a Non-Surviving Combination, the surviving entity will be obligated to
distribute or pay to each holder of the 1996 Warrants, upon payment of the
purchase price prior to the expiration date, the number of shares of stock or
other securities or other property, including any cash, of the survivor that
would have been distributable or payable on account of the common stock if the
holder's 1996 Warrants had been exercised immediately prior to the Non-Surviving
Combination or, if applicable, the record date. Following the consummation of a
Non-Surviving Combination, the 1996 Warrants will represent only the right to
receive these shares of stock or other property from the survivor upon payment
of the purchase price prior to the expiration date.
No transaction is presently in progress or under negotiation that would
constitute a Non-Surviving Combination.
54
<PAGE>
Adjustment. The number of shares of common stock issuable upon the
----------
exercise of each 1996 Warrant and the purchase price are subject to adjustment
in some circumstances, including:
. a dividend or distribution on Kaiser's common stock in shares of its
common stock or a combination, subdivision, reorganization, or
reclassification of common stock,
. the issuance of shares of common stock for a consideration per share
less than the market price per share at the time of issuance,
. the issuance of rights, warrants, or options for the purchase of common
stock or for the purchase of securities convertible into or
exchangeable for common stock where the aggregate amount of
consideration, taking into account the consideration received for the
issuance of the right, warrant, or option plus any consideration to be
received upon the exercise and including, in the case of a right,
warrant, or option to purchase a convertible or exchangeable security,
any consideration to be received upon the eventual conversion or
exchange of the security for common stock per share of common stock
received or receivable by Kaiser is less than the market price per
share at the time of issuance of the right, warrant, or option,
. the issuance of any securities convertible into or exchangeable for
common stock where the aggregate amount of consideration taking into
account the consideration received for the issuance of the convertible
or exchangeable security and the consideration to be received upon the
conversion or exchange per share of common stock received or receivable
by Kaiser is less than the market price per share of common stock on
the date of issuance of the convertible or exchangeable security, and
. a dividend or distribution on Kaiser's common stock of cash, evidences
of its indebtedness, other securities, or other properties or assets
other than any cash dividend which, when aggregated with all other cash
dividends paid in the year prior to the declaration of the cash
dividend, does not exceed 10% of the market price per share of common
stock on the date of this declaration.
If the terms of any of Kaiser's outstanding rights, warrants, or options for the
purchase of common stock or securities convertible into or exchangeable for
common stock change, in each case where the issuance caused an adjustment in the
terms of the 1996 Warrants, including by way of expiration of the securities but
excluding by way of antidilution provisions triggering an adjustment of the
terms upon the occurrence of an event that would cause an adjustment of the
terms of the 1996 Warrant, then the purchase price and the number of shares of
common stock issuable upon the exercise of each 1996 Warrant shall be readjusted
to take account of the change. Notwithstanding the foregoing, no adjustment in
the purchase price or the number of shares of common stock issuable upon
exercise of 1996 Warrants will be required:
. until cumulative adjustments would result in an adjustment of at least
one percent in the purchase price,
. for the granting, in a transaction which would otherwise trigger an
adjustment, of any rights, warrants, or options or the issuance of any
common stock to officers, directors, or employees of, or consultants or
advisors to, Kaiser where the issuances are registered with the
Securities and Exchange Commission on Form S-8 and do not, in the
aggregate exceed five percent of the number of shares of common stock
outstanding assuming the exercise of the options so granted and all
rights, warrants, options, and convertible securities then outstanding,
or
. the issuance of common stock pursuant to any dividend reinvestment plan
where the purchase price of common stock is no less than 95% of the
market price on the date of issuance.
55
<PAGE>
Shareholder Rights Plan
On January 13, 1992, the Board of Directors of Kaiser declared a dividend
distribution to shareholders of record at the close of business on January 31,
1992 of one right for each outstanding share of common stock.
Each right entitles the registered holder of common stock to purchase from
Kaiser a unit consisting of one 1/100th of a share of Series 4 Junior Preferred
Stock, at a purchase price of $50.00 per Preferred Stock Unit, subject to
adjustment. The rights also are subject to antidilution adjustments. The
description of the rights is set forth in a rights agreement between Kaiser and
the rights agent. The rights agent is First Chicago Trust Company of New York.
A distribution date for the rights will occur upon the earlier of:
. 10 business days following a "Stock Acquisition Date," which is the
public announcement that a person or group of affiliated or associated
persons has acquired, or obtained the right to acquire, beneficial
ownership of 20% or more of the outstanding shares of common stock or
. 10 business days following the commencement of a tender offer or
exchange offer that would if consummated result in a person or group
becoming an acquiring person.
On July 2, 1999, the Board of Directors amended the definition of acquiring
person within the rights agreement, subject to shareholder approval, so that it
now means any person or group of affiliated or associated persons that has
acquired, or obtained the right to acquire, beneficial ownership of 20% or more
of the outstanding shares of Kaiser's common stock other than as a result of a
"Permitted Offer." The rights agreement provides that a "Permitted Offer" is:
. a tender or exchange offer which is for all outstanding common stock
and on terms determined to be adequate and in the best interests of
Kaiser and its stockholders by at least a majority of the Board of
Directors who are not officers or employees of Kaiser and who are not
acquiring persons or affiliates, associates, nominees or
representatives of an acquiring person, and
. a cash tender offer for all outstanding common stock after July 31,
2000.
The rights are not exercisable until the distribution date and will expire at
the close of business on January 13, 2002, unless earlier redeemed by Kaiser as
described below.
Until the distribution date:
. the rights will be evidenced by the common stock certificates and will
be transferred with and only with these certificates and
. the surrender for transfer of any certificates for common stock
outstanding will also constitute the transfer of the rights associated
with the common stock represented by the certificate.
In the event that, at any time following the distribution date, a person
becomes an acquiring person, then each holder of a right other than the
acquiring person will have the right to receive:
. upon exercise and payment of the purchase price, common stock or, in
some circumstances, cash, property or other securities of Kaiser having
a value equal to two times the purchase price of the right or
. at the discretion of the Board of Directors, upon exercise and without
payment of the purchase price, common stock or, in some circumstances,
cash, property or other securities of Kaiser having a value equal to
the purchase price of the right.
In the event that, at any time following the Stock Acquisition Date:
56
<PAGE>
. Kaiser is acquired in a merger or other business combination
transaction in which Kaiser is not the surviving corporation,
. Kaiser is the surviving corporation in a merger with any person, as
defined in the rights agreement, and its common stock is changed into
or exchanged for stock or other securities of any other person or cash
or any other property, or
. 50% or more of Kaiser's assets or earning power is sold or transferred,
each holder of a right, except rights held by an acquiring person or which
previously have been exercised as set forth above shall have the right to
receive, upon exercise, common stock of the acquiring company having a value
equal to two times the purchase price of the right. The events set forth in
this paragraph and in the immediately preceding paragraph are referred to as the
"Triggering Events."
As noted above, following the occurrence of any of the events described
above, all rights that are, or under some circumstances specified in the rights
agreement were, beneficially owned by any acquiring person will be null and
void.
The purchase price payable, and the number of Preferred Stock Units or
other securities or property issuable upon exercise of the rights, are subject
to amendment from time to time to prevent dilution:
. in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Series 4 Preferred Stock,
. if holders of the Series 4 Preferred Stock are granted rights or
warrants to subscribe for Series 4 Preferred Stock or convertible
securities at less than the current market price of the Series 4
Preferred Stock, or
. upon the distribution to holders of the Series 4 Preferred Stock of
evidences of indebtedness or assets, excluding regular quarterly cash
dividends, or of subscription rights or warrants other than those
referred to above.
With exceptions, no adjustment in the purchase price will be required until
cumulative adjustments amount to at least one percent of the purchase price. In
addition, to the extent that Kaiser does not have sufficient shares of common
stock issuable upon exercise of the rights following the occurrence of a
Triggering Event, Kaiser may, under some circumstances, reduce the purchase
price. No fractional Preferred Stock Units will be issued and an adjustment in
cash will be made.
In general, Kaiser may redeem the rights in whole, but not in part, at a
price of $0.01 per right payable in cash, common stock or other consideration
deemed appropriate by the Board of Directors, at any time until 10 business days
following the Stock Acquisition Date. After the redemption period has expired,
Kaiser's right of redemption may be reinstated if an acquiring person reduces
its beneficial ownership to less than 10% of the outstanding shares of common
stock in a transaction or series of transactions not involving Kaiser and there
are no other acquiring persons. Immediately upon the action of the Board of
Directors ordering redemption of the rights, and without any notice to the
holder of these rights prior to the redemption, the rights will terminate and
the only right of the holders of rights will be to receive the $0.01 redemption
price.
Until a right is exercised, the holder will have no rights as a shareholder
of Kaiser, including, without limitation, the right to vote or to receive
dividends.
Other than those provisions relating to the principal economic terms of the
rights, except with respect to increasing the purchase price under some
circumstances described in the rights agreement, any of the provisions of the
rights agreement may be amended by the Board of Directors of Kaiser prior to the
distribution date. After the distribution date, the provisions of the rights
agreement may be amended by the Board in order to cure any ambiguity,
57
<PAGE>
to make changes which do not adversely affect the interests of holders of
rights, excluding the interests of any acquiring person, or to shorten or
lengthen any time period under the rights agreement. However, no amendment to
adjust the time period governing redemption shall be made when the rights are
not redeemable.
One right will be distributed to shareholders of Kaiser for each share of
common stock owned of record by them at the close of business on the record
date. Until the distribution date, Kaiser will issue a right with each share of
common stock so that all shares of common stock will have attached rights.
The rights may be deemed to have anti-takeover effects. The rights
generally may cause substantial dilution to a person or group that attempts to
acquire Kaiser under circumstances not approved by the Board of Directors of
Kaiser. The rights should not interfere with any merger or other business
combination approved by the Board of Directors of Kaiser since the Board of
Directors may, at its option, at any time prior to the close of business on the
earlier of:
. the tenth business day following the Stock Acquisition Date or
. January 13, 2002,
redeem all but not less than all of the then outstanding rights at $0.01 per
right.
Provisions Affecting Changes of Control and Extraordinary Transactions
In addition to the shareholder rights plan, some provisions of Kaiser's
Certificate of Incorporation and By-laws and other agreements could have the
effect of delaying, deferring, or preventing a change in control of Kaiser or
other extraordinary corporate transaction.
Kaiser's Amended and Restated Certificate of Incorporation and By-laws
provide for classification of the Board of Directors into three classes, as
nearly equal in number as possible, with one class of directors being elected
each year for three-year terms. Under Delaware law, members of a classified
board may be removed only for cause. Thus, at least two years would be required
to effect a change of control in the Board of Directors, unless a shareholder
had sufficient voting power to amend or repeal the Certificate of Incorporation
and By-law provisions relating to classification of the Board of Directors.
In addition, the Certificate of Incorporation imposes supermajority voting
requirements for some corporate transactions that apply if a majority of the
Board of Directors has not served in the positions for at least 12 months.
Under those circumstances, the approval of two-thirds of the voting power of
Kaiser's capital stock would be required in order for Kaiser to:
. merge with or consolidate into any other entity, other than a
subsidiary of Kaiser,
. sell, lease or assign all or substantially all of the assets or
properties of Kaiser, or
. amend the voting provisions of the Certificate of Incorporation.
Other Certificate of Incorporation provisions of the type referred to above
include:
. the denial of the right of holders of common stock to take action by
written consent in lieu of a shareholders' meeting and
. the ability of the Board of Directors to determine the rights and
preferences, including voting rights, of Kaiser's authorized but
unissued preferred stock, and then to issue this stock.
Relevant By-law provisions include those that:
58
<PAGE>
. require advance nomination of directors,
. require advance notice of business to be conducted at shareholders'
meetings, and
. provide that shareholders owning at least 50% of the voting power of
the capital stock are required to call a special meeting of
shareholders.
With the exception of the provision that authorizes the Board of Directors
to fix the terms of and issue authorized but unissued shares of preferred stock,
the approval of the holders of at least two-thirds of the voting power of
Kaiser's capital stock is required to amend, alter, or repeal, or to adopt
provisions inconsistent with, the Certificate of Incorporation and By-law
provisions described above, regardless of whether a majority of the members of
the Board of Directors has served in such positions for more than 12 months at
the time of the action.
Delaware Takeover Statute
Section 203 of the Delaware General Corporation Law applies to Delaware
corporations with a class of voting stock listed on a national securities
exchange, authorized for quotation on an inter-dealer quotation system, or held
of record by 2,000 or more persons, and restricts transactions which may be
entered into by such a corporation and certain of its shareholders. The
Delaware takeover statute provides, in essence, that a stockholder acquiring
more than 15% of the outstanding voting shares of a corporation subject to the
statute, but less than 85% of the shares, may not engage in certain "Business
Combinations" with the corporation for a period of three years subsequent to the
date on which the stockholder became an Interested Stockholder, unless:
. prior to the date the corporation's board of directors approved either
the Business Combination or the transaction in which the stockholder
became an Interested Stockholder or
. the Business Combination is approved by the corporation's board of
directors and authorized by a vote of at least 66 2/3% of the
outstanding voting stock of the corporation not owned by the Interested
Stockholder.
The Delaware takeover statute defines the term "Business Combination" to
encompass a wide variety of transactions with or caused by an Interested
Stockholder in which the Interested Stockholder receives or could receive a
benefit on other than a pro rata basis with other stockholders, including
mergers, some asset sales, some issuances of additional shares to the Interested
Stockholder, transactions with the corporation which increase the proportionate
interest of the Interested Stockholder, or transactions in which the Interested
Stockholder receives some other benefits.
Summary of Proposed Amendments to Kaiser's Certificate of Incorporation and
Bylaws
The 1999 Annual Meeting of Shareholders of Kaiser will be held on
___________, ____________ ____, 1999, at 9:00 a.m. At the annual meeting,
Kaiser's shareholders will be asked to vote upon, among other things, proposals
to:
. approve the issuance of shares of the preferred stock and warrants in
connection with the exchange offer;
. approve a reverse stock split of Kaiser's common stock;
. approve the "shareholder democracy" amendments to Kaiser's certificate
of incorporation and bylaws to eliminate the provisions of the
certificate of incorporation and, where applicable, the bylaws that:
. require the affirmative vote of holders of 66 2/3% of the
outstanding capital stock to approve certain transactions
following a change in the majority of directors within 12 months;
. provide for staggered, three-year terms for members of the board
of directors;
. prohibit shareholders from filling vacancies on the board of
directors;
. require the affirmative vote of the holders of 66 2/3% of the
outstanding capital stock to approve certain amendments to the
certificate of incorporation and bylaws; and
. provide that shareholders owning at least twenty percent (20%) of
the voting power of the outstanding capital stock could require a
special meeting of shareholders to be called;
59
<PAGE>
. approve an amendment to Kaiser's certificate of incorporation and
Bylaws to provide that no new shareholder rights plan, sometimes
referred to as a poison pill, shall be adopted without the approval of
the shareholders;
. approve an amendment to Kaiser's certificate of incorporation to
eliminate provisions related to the terms of series of preferred stock
that are obsolete and no longer outstanding;
. approve an amendment to Kaiser's stock incentive plan to increase the
number of shares of common stock available for issuance under the plan,
to permit the transfer of options granted under the incentive plan to
immediate family members of plan participants and to provide greater
flexibility to Kaiser's board of directors to make future amendments to
the plan; and
. approve a quasi-reorganization of Kaiser's financial statements to
remove its existing retained earnings deficit.
If the shareholders approve one or more of the foregoing proposals, the above
description of the common stock and shareholder rights plan would be altered
accordingly.
WHERE YOU CAN FIND MORE INFORMATION
Kaiser files annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any reports, statements or other information we file at the Securities and
Exchange Commission's public reference room at the following location:
Public Reference Room
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the operation of the public reference room. Our
Securities and Exchange Commission filings are also available to the public from
commercial document retrieval services and at the web site maintained by the
Securities and Exchange Commission at http://www.sec.gov. In addition, our
------------------
filings can be inspected at the office of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
We have filed a registration statement on Form S-4 with the Securities and
Exchange Commission to register the preferred stock and warrants proposed to be
issued in the exchange offer described in this prospectus and the common stock
underlying the preferred stock and warrants. This prospectus is a part of that
registration statement. As permitted by the rules of the Securities and
Exchange Commission, this prospectus does not contain all of the information
included in the registration statement and the accompanying exhibits and
schedules. The registration statement, together with the related exhibits and
schedules, is available at the public reference room or through the web site of
the Securities and Exchange Commission.
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
information that is different from or in addition to what is contained in this
prospectus. Therefore, if anyone does give you information of this sort, you
should not rely on it. If you are in a jurisdiction where it is unlawful to
offer to exchange or sell or to ask for offers to exchange or buy the securities
offered by this prospectus, or if you are a person to whom it is unlawful to
direct those activities, then the offer presented in this prospectus does not
extend to you. The information contained in this prospectus speaks only as of
its date unless the information specifically indicates that another date
applies.
60
<PAGE>
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K for the year ended December 31,
1998, have been incorporated by reference in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
LEGAL MATTERS
Squire, Sanders & Dempsey L.L.P. will pass upon the validity of the
preferred stock, warrants and secured notes to be issued in the exchange offer
and the common stock underlying the preferred stock and warrants.
61
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. Indemnification of directors and officers.
Under the Delaware General Corporation Law (the "Delaware Law"), a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to an action by reason of the person's past or present service
as a director, officer, employee, or agent of the corporation or of the person's
past or present service, at the corporation's request, as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise. Under the Delaware Law, a corporation may indemnify such
persons against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement that are actually and reasonably incurred by that
person in connection with such action. The Delaware Law provides, however, that
such person must have acted in good faith and in a manner that such person
reasonably believed to be in (or not opposed to) the corporation's best
interests. In respect of any criminal action or proceeding, an indemnifiable
person must have no reasonable cause to believe such conduct to be unlawful. In
addition, the Delaware Law permits no indemnification in any action by or in the
right of the corporation where such person has been adjudged liable to the
corporation, unless, and only to the extent that, a court determines that such
person fairly and reasonably is entitled to indemnity for such costs the court
deems proper in spite of liability adjudication.
The sections of the Company's Restated Certificate of Incorporation and
Amended and Restated Bylaws relating to indemnification of directors and
officers provide for mandatory indemnification of directors and officers on
generally the same terms as permitted by the Delaware Law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
3(a) Restated Certificate of Incorporation of ICF Kaiser International,
Inc. (restated through June 26, 1993) (Incorporated by reference to
Exhibit No. 3(a) to Quarterly Report on Form 10-Q (Registrant
No. 1-12248) for the second quarter of fiscal 1994 filed with
the Commission on October 15, 1 993)
3(b) Amended and Restated By-laws of ICF Kaiser International, Inc.
(as amended through June 23, 1995) (Incorporated by reference to
Exhibit No. 3(b) to Quarterly Report on Form 10-Q (Registrant No.
1-12248) for the second quarter of fiscal 1995 filed with the
Commission on October 13, 1995)
4(a) Indenture dated as of January 11, 1994, between ICF Kaiser
International, Inc. and The Bank of New York, as Trustee
(Incorporated by reference to Exhibit No. 4(a) to Quarterly
Report on Form 10-Q (Registrant No. 1-12248) for the third
quarter of fiscal 1994 filed with the Commission on January 14,
1994)
4(a)(1) First Supplemental Indenture dated as of February 17, 1995
(Incorporated by reference to Exhibit No. 4(a)(1) to Annual
Report on Form 10-K (Registrant No. 1-12248) for fiscal year
1995 filed with the Commission on May 23, 1995)
4(a)(2) Second Supplemental Indenture dated September 1, 1995
(Incorporated by reference to Exhibit No. 4(a)(2) to Registration
Statement on Form S-1 Registration No. 33-64655 filed with the
Commission on November 30, 1995)
II-1
<PAGE>
4(a)(3) Third Supplemental Indenture dated October 20, 1995 (Incorporated
by reference to Exhibit No. 4(a)(3) to Registration Statement on
Form S-1 Registration No. 33-64655 filed with the Commission on
November 30, 1995)
4(a)(4) Fourth Supplemental Indenture dated as of March 8, 1996
(Incorporated by reference to Exhibit No. 4(a)(4) to Transition
Report on Form 10-K (Registrant No. 1-12248) for the transition
period from March 1, 1995 to December 31, 1995 filed with the
Commission on March 29, 1996)
4(a)(5) Fifth Supplemental Indenture dated as of June 24, 1996
(Incorporated by reference to Exhibit No. 4(a)(5) to Registration
Statement on Form S-1 Registration No. 333-16937 filed with the
Commission on November 27, 1996)
4(a)(6) Sixth Supplemental Indenture dated as of December 3, 1997
(Incorporated by reference to Exhibit No. 4(a)(6) to Annual
Report on Form 10- K (Registrant No. 1-12248) for fiscal year
1997 filed with the Commission on March 31, 1998)
4(a)(7) Seventh Supplemental Indenture dated as of August 13, 1998
(Incorporated by reference to Exhibit No. 4(a)(7) to Quarterly
Report on Form 10-Q (Registrant No. 1-12248) for the third
quarter of fiscal 1997 filed with the Commission on November 16,
1998)
**4(a)(8) Amended and Restated Indenture with respect to the 12% Senior
Subordinated Notes due 2003 dated as of _____________, 1999
4(b) Form of 12% Senior Subordinated Note due 2003 (Incorporated by
reference to Exhibit No. 4(b) to Quarterly Report on Form 10-Q
(Registrant No. 1-12248) for the third quarter of fiscal 1994
filed with the Commission on January 14, 1994)
4(c) Rights Agreement, dated as of January 13, 1992, between ICF Kaiser
International, Inc. and Office of the Secretary, ICF Kaiser
International, Inc. as Rights Agent, including (1) Form of
Certificate of Designations of Series 4 Junior Preferred Stock;
(2) Form of Rights Certificate; and (3) Summary of Rights to
Purchase Preferred Stock (Incorporated by reference to Exhibit
No. 4(h) to Quarterly Report on Form 10-Q (Registrant No. 0-
18025) for the third quarter of fiscal 1992 filed with the
Commission on January 14, 1992)
4(d) Indenture dated as of December 23, 1996, between ICF Kaiser
International, Inc. and The Bank of New York, as Trustee, including
Guarantees, dated December 23, 1996, by each of the Subsidiary
Guarantors (Incorporated by reference to Exhibit No. 4(g) to
Registration Statement on Form S-1 Registration No. 333-19519 filed
with the Commission on January 10, 1997)
4(d)(1) First Supplemental Indenture dated as of December 3, 1997
(Incorporated by reference to Exhibit No. 4(a)(6) to Annual
Report on Form 10- K (Registrant No. 1-12248) for fiscal year
1997 filed with the Commission on March 31, 1998)
4(d)(2) Second Supplemental Indenture dated as of August 13, 1998
(Incorporated by reference to Exhibit No. 4(g)(2) to Quarterly
Report on Form 10-Q (Registrant No. 1-12248) for the third
quarter of fiscal 1997 filed with the Commission on November 16,
1998)
**4(d)(3) Third Supplemental Indenture dated as of _____________, 1999
4(e) Form of 12% Senior Note due 2003, Series B (Incorporated by
reference to Exhibit No. 4(i) to Registration Statement on Form S-1
Registration No. 333-19519 filed with the Commission on January
10, 1997)
II-2
<PAGE>
4(f) Warrant Agreement dated as of December 23, 1996, between ICF Kaiser
International, Inc. and The Bank of New York, as Warrant Agent
(Incorporated by reference to Exhibit No. 4(j) to Registration
Statement on Form S-1 Registration No. 333-19519 filed with the
Commission on January 10, 1997)
4(g) Form of Warrant expiring December 31, 1999 issued under Warrant
Agreement dated as of December 23, 1996 (Incorporated by
reference to Exhibit No. 4(k) to Registration Statement on Form S-1
Registration No. 333-19519 filed with the Commission on January
10, 1997)
**5 Opinion of Squire, Sanders & Dempsey L.L.P. regarding securities
being registered
**8 Opinion of Squire, Sanders & Dempsey L.L.P. regarding tax
consequences
10(a) Loan and Security Agreement dated as of December 18, 1998, with
Madeleine L.L.C. as agent (Incorporated by reference to Exhibit
No. 10(a) to Annual Report on Form 10-K (Registrant No. 1-12248)
filed with the Commission on April 15, 1999)
10(b) ICF Kaiser International, Inc. Employee Stock Ownership Plan (as
amended and restated as of March 1, 1993) (and further amended with
respect to name change only as of June 26, 1993) (Incorporated
by reference to Exhibit No. 10(c) to Quarterly Report on Form
10-Q (Registrant No. 1-12248) for the second quarter of fiscal
1994 filed with the Commission on October 15, 1993)
10(b)(1) Amendment No. 1 dated April 24, 1995 (Incorporated by reference to
Exhibit No. 10(l)(1) to Annual Report on Form 10-K (Registrant
No. 1-12248) for fiscal 1995 filed with the Commission on May
23, 1995)
10(b)(2) Amendment No. 2 dated December 15, 1995 (Incorporated by
reference to Exhibit No. 10(b)(2) to Transition Report on Form 10-K
(Registrant No. 1-12248) for the transition period from March 1,
1995 to December 31, 1995 filed with the Commission on March 29,
1996)
10(b)(3) Amendment No. 3 dated December 13, 1996 (Incorporated by
reference to Exhibit No. 10(b)(3) to Registration Statement on
Form S-1 Registration No. 333-19519 filed with the Commission on
January 10, 1997)
10(c) Trust Agreement with Vanguard Fiduciary Trust Company dated as of
August 31, 1995, for ICF Kaiser International, Inc. Employee Stock
Ownership Plan (Incorporated by reference to Exhibit No. 10(c)
to Registration Statement on Form S-1 Registration No. 33-64655
filed with the Commission on November 30, 1995)
10(d) ICF Kaiser International, Inc. Retirement Plan (as amended and
restated as of March 1, 1993) (and further amended with respect to
name change only as of June 26, 1993) (Incorporated by reference to
Exhibit No. 10(d) to Quarterly Report on Form 10-Q (Registrant No.
1-12248) for the second quarter of fiscal 1994 filed with the
Commission on October 15, 1993)
10(d)(1) Amendment No. 1 dated April 24, 1995 (Incorporated by reference to
Exhibit No. 10(d)(1) to Annual Report on Form 10-K (Registrant
No. 1-12248) filed with the Commission on May 23, 1995)
II-3
<PAGE>
10(d)(2) Amendment No. 2 dated December 15, 1995 (Incorporated by
reference to Exhibit No. 10(d)(2) to Transition Report on Form 10-K
(Registrant No. 1-12248) for the transition period from March 1,
1995 to December 31, 1995 filed with the Commission on March 29,
1996)
10(d)(3) Amendment No. 3 dated December 13, 1996 (Incorporated by
reference to Exhibit No. 10(d)(3) to Registration Statement on
Form S-1 Registration No. 333-19519 filed with the Commission
on January 10, 1997)
10(e) Trust Agreement with Vanguard Fiduciary Trust Company dated as of
August 31, 1995, for ICF Kaiser International, Inc. Retirement Plan
(Incorporated by reference to Exhibit No. 10(e) to Registration
Statement on Form S-1 Registration No. 33-64655 filed with the
Commission on November 30, 1995)
10(f) Consolidated, Amended and Restated Deed of Lease Agreement
between HMCE Associates Limited Partnership R.L.L.P. (as Landlord)
and ICF Kaiser Hunters Branch Leasing, Inc. (as Tenant), dated
November 12, 1997, for the lease of the Registrant's headquarters
in Fairfax, Virginia known as Hunters Branch--Phase I (Incorporated
by reference to Exhibit No. 10(g) to Annual Report on Form 10-K
(Registrant No. 1-12248) filed with the Commission on March 25,
1997)
10(g) Consolidated, Amended and Restated Deed of Lease Agreement between
HMCE Associates Limited Partnership R.L.L.P. (as Landlord) and ICF
Kaiser Hunters Branch Leasing, Inc. (as Tenant), dated November
12, 1997, for the lease of space in the building adjacent to the
Registrant's headquarters in Fairfax, Virginia known as Hunters
Branch--Phase II (Incorporated by reference to Exhibit No. 10(h)
to Annual Report on Form 10-K (Registrant No. 1-12248) filed
with the Commission on March 25, 1997)
10(h) Contribution Agreement by and among HMCE Associates Limited
Partnership R.L.L.P.; ICF Kaiser Hunters Branch Leasing, Inc.; and
IFA Nutley Partners, LLC dated November 3, 1997 (Incorporated by
reference to Exhibit No. 10(i) to Annual Report on Form 10-K
(Registrant No. 1-12248) filed with the Commission on March 25,
1997)
10(i) ICF Kaiser International, Inc. Stock Incentive Plan (as amended and
restated through March 1, 1996) (Incorporated by reference to
Exhibit No. 10(j) to Registration Statement on Form S-1
Registration No. 333-16937 filed with the Commission on November
27, 1996)
10(j) Contract (#DE-AC3495RF00825) between Kaiser-Hill Company, LLC, a
subsidiary of the Corporation, and the U.S. Department of Energy
dated as of April 4, 1995 (IN ACCORDANCE WITH RULE 202 OF
REGULATION S-T, THIS EXHIBIT NO. 10(j) WAS FILED IN PAPER ON MAY
23, 1995, ON FORM SE PURSUANT TO A CONTINUING HARDSHIP EXEMPTION
and is incorporated herein by reference thereto)
10(j)(1) Modifications 1 to 40 to Contract #DE-AC3495RF00825 (Incorporated
by reference to Exhibit No. 10(p)(l) to Registration Statement on
Form S-1 Registration No. 333-16937 filed with the Commission on
November 27, 1996)
10(j)(2) Modifications 42 to 46 to Contract #DE-AC3495RF00825
(Modification 41 not received) (Incorporated by reference to
Exhibit No. 10(p)(2) to Annual Report on Form 10-K (Registrant
No. 1-12248) filed with the Commission on March 25, 1997)
II-4
<PAGE>
10(j)(3) Modifications 47 to 81 to Contract #DE-AC3495RF00825
(Modifications 72 and 78 not received) (Incorporated by reference
to Exhibit No. 10(j)(3) to Annual Report on Form 10-K (Registrant
No. 1-12248) filed with the Commission on April 15, 1999)
10(k) ICF Kaiser International, Inc. Section 401(k) Plan (as amended and
restated as of March 1, 1993) (and further amended with respect
to name change only as of June 26, 1993) (Incorporated by
reference to Exhibit No. 10(f) to Quarterly Report on Form 10-Q
(Registrant No. 1-12248) for the second quarter of fiscal 1994
filed with the Commission on October 15, 1993)
10(k)(1) Amendment No. 1 dated April 24, 1995 (Incorporated by reference to
Exhibit No. 10(p)(1) to Annual Report on Form 10-K (Registrant
No. 1-12248) for fiscal 1995 filed with the Commission on May
23, 1995)
10(k)(2) Amendment No. 2 dated December 15, 1995 (Incorporated by
reference to Exhibit No. 10(p)(2) to Transition Report on Form 10-K
(Registrant No. 1-12248) for the transition period from March 1,
1995 to December 31, 1995 filed with the Commission on March 29,
1996)
10(k)(3) Amendment No. 3 dated December 13, 1996 (Incorporated by
reference to Exhibit No. 10(q)(3) to Registration Statement on
Form S-1 Registration No. 333-19519 filed with the Commission
on January 10, 1997)
10(l) Trust Agreement with Vanguard Fiduciary Trust Company dated as of
March 1, 1989, for the ICF Kaiser International, Inc. Section
401(k) Plan (Incorporated by reference to Exhibit No. 28(b) to
Registration Statement on Form S-8 Registration No. 33-51460
filed with the Commission on August 31, 1992)
Exhibit No. 10--Material Contracts (management contracts, compensatory plans, or
arrangements)
10(aa) Agreement dated as of May 19, 1997 with James O. Edwards,
Chairman and Chief Executive Officer of the Registrant
(Incorporated by reference to Exhibit No. 10(ll) to Quarterly
Report on Form 10-Q (Registrant No. 1- 12248) for the second
quarter of fiscal 1997 filed with the Commission on August 14,
1997)
10(aa)(1) Agreement dated as of November 6, 1998, terminating Mr. Edwards'
employment agreement (Incorporated by reference to Exhibit No.
10(aa)(1) to Annual Report on Form 10-K (Registrant No. 1-12248)
filed with the Commission on April 15, 1999)
10(bb) ICF Kaiser International, Inc. 1998 Compensation (IC) Plan for
Senior Executives (adopted by the Board of Directors on February
27, 1998) (Incorporated by reference to Exhibit No. 10(bb) to
Annual Report on Form 10-K (Registrant No. 1-12248) filed with the
Commission on March 25, 1997)
10(cc) ICF Kaiser International, Inc. Non-employee Director Stock Option
Plan (as amended and restated as of June 26, 1993) (Incorporated by
reference to Exhibit No. 10(bb) to Quarterly Report on Form 10-Q
(Registrant No. 1-12248) for the second quarter of fiscal 1994
filed with the Commission on October 15, 1993)
10(dd) Agreement dated as of May 19, 1997 with Marc Tipermas, President
and Chief Operating Officer of the Registrant (Incorporated by
reference to Exhibit No. 10(mm) to Quarterly Report on Form 10-Q
(Registrant No. 1- 12248) for the second quarter of fiscal 1997
filed with the Commission on August 14, 1997)
II-5
<PAGE>
10(dd)(1) Agreement dated as of August 7, 1998, terminating Dr. Tipermas'
employment agreement (Incorporated by reference to Exhibit No.
10(dd)(1) to Annual Report on Form 10-K (Registrant No. 1-12248)
filed with the Commission on April 15, 1999)
10(ee) ICF Kaiser International, Inc. Senior Executive Officers
Severance Plan as approved by the Compensation Committee of the
Board of Directors on April 4, 1994, and adopted by the Board of
Directors on May 5, 1994, as further amended through May 1, 1997
(Incorporated by reference to Exhibit No. 10(ee) to Annual
Report on Form 10-K (Registrant No. 1-12248) filed with the
Commission on March 25, 1997)
10(ff) Employment Agreement with Thomas P. Grumbly, Executive Vice
President of the Registrant, effective as of April 7, 1997
(Incorporated by reference to Exhibit No. 10(ff) to Annual Report
on Form 10-K (Registrant No. 1-12248) filed with the Commission
on April 15, 1999)
10(ff)(1) Letter dated March 15,1999, amending Mr. Grumbly's employment
agreement (Incorporated by reference to Exhibit No. 10(ff)(1) to
Annual Report on Form 10-K (Registrant No. 1-12248) filed with
the Commission on April 15, 1999)
10(gg) ICF Kaiser International, Inc. Consultants, Agents and Part-Time
Employees Stock Plan dated as of June 23, 1995 (Incorporated by
reference to Exhibit No. 99 to Registration Statement on Form S-
8 Registration No. 33-60665 filed with the Commission on June
28, 1995)
10(hh) ICF Kaiser International, Inc. Stock Incentive Plan (as amended and
restated through March 1, 1996) (Incorporated by reference to
Exhibit No. 10(j) to Registration Statement on Form S-1
Registration No. 333-16937 filed with the Commission on November
27, 1996)
10(ii) Amended Employment Agreement dated as of December 1, 1996, with
David Watson, Executive Vice President and President, ICF Kaiser
Engineers and Constructors Group of the Registrant (Incorporated
by reference to Exhibit No. 10(kk) to Annual Report on Form 10-K
(Registrant No. 1-12248) filed with the Commission on March 25,
1997)
10(ii)(1) Agreement and Mutual Release dated August 17, 1998, terminating Mr.
Watson's employment agreement (Incorporated by reference to
Exhibit No. 10(ii)(1) to Annual Report on Form 10-K (Registrant
No. 1-12248) filed with the Commission on April 15, 1999)
10(jj) Intentionally Omitted
10(kk) Employment Agreement with Michael F. Gaffney, Executive Vice
President of the Registrant, effective as of January 1, 1997
(Incorporated by reference to Exhibit No. 10(kk) to Annual Report
on Form 10-K (Registrant No. 1-12248) for fiscal year 1997 filed
with the Commission on March 31, 1998)
10(kk)(1) Agreement dated March 8, 1999, terminating Mr. Gaffney's employment
agreement (Incorporated by reference to Exhibit No. 10(kk)(1) to
Annual Report on Form 10-K (Registrant No. 1-12248) filed with
the Commission on April 15, 1999)
10(ll) Letter Agreement with Cowen Incorporated and Jarrod M. Cohen,
dated as of March 13, 1998 (Incorporated by reference to Exhibit
No. 10(ll) to Annual Report on Form 10-K (Registrant No. 1-12248)
for fiscal year 1997 filed with the Commission on March 31, 1998)
(Incorporated by reference to Exhibit No. 10(mm) to Annual Report
on Form 10-K (Registrant No. 1-12248) filed with the Commission on
March 25, 1997)
II-6
<PAGE>
10(mm) ICF Kaiser International, Inc. Non-employee Directors Compensation
and Phantom Stock Plan as adopted by the Board of Directors on
February 28, 1997, with an effective date of March 1, 1997
(Incorporated by reference to Exhibit No. 10(mm) to Annual Report
on Form 10-K (Registrant No. 1-12248) filed with the Commission on
April 15, 1999)
10(nn) Letter Agreement with Tennenbaum & Co., L.L.C. and Michael E.
Tennenbaum, dated as of March 13, 1998 (Incorporated by
reference to Exhibit No. 10(nn) to Annual Report on Form 10-K
(Registrant No. 1-12248) for fiscal year 1997 filed with the
Commission on March 31, 1998)
10(oo) Employment Agreement with Keith M. Price, President and Chief
Executive Officer of the Registrant, effective as of August 27,
1998 (Incorporated by reference to Exhibit No. 10(oo) to
Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the
third quarter of 1998 filed with the Commission on November 16,
1998)
10(oo)(1) Terms of Promotion for Mr. Price effective as of November 4, 1998
(Incorporated by reference to Exhibit No. 10(oo)(1) to Annual
Report on Form 10-K (Registrant No. 1-12248) filed with the
Commission on April 15, 1999)
*10(oo)(2) Agreement dated April 27, 1999, terminating Mr. Price's employment
agreement
*10(pp) Employment Agreement with James J. Maiwurm, President and Chief
Executive Officer of the Registrant, effective as of June 1, 1999
*10(qq) Employment Agreement with S. Robert Cochran, Executive Vice
President and President, North America of the Registrant,
effective as of June 1, 1999
*10(rr) Employment Agreement with Timothy P. O'Connor, Executive Vice
President and Chief Financial Officer of the Registrant,
effective as of June 1, 1999
10(ss) Employment Agreement with Richard A. Leupen, Executive Vice
President and President, International of the Registrant,
effective as of June 1, 1999.
12 Statement regarding computation of ratio of earnings to fixed
charges
*21 Consolidated subsidiaries of the Registrant as of July 9, 1999
**23(a) Consent of Squire, Sanders & Dempsey L.L.P. (included in opinions
filed as Exhibits 5 and 8)
23(b) Consent of PricewaterhouseCoopers LLP
*24 Power of Attorney (included as part of the signature page to this
Form S-4 Registration Statement)
**25 Statement of Eligibility and Qualification on Form T-1 of Trustee
**99(a) Form of Letter of Transmittal and Consent Form and related
documents for the 12% Senior Subordinated Notes due 2003
II-7
<PAGE>
**99(b) Form of Letter of Transmittal and Consent Form and related
documents for the 12% Senior Notes due 2003
_____________
* Previously filed.
** To be filed by amendment.
ITEM 22. UNDERTAKINGS
(1) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(2) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 23(a) or Section 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(4) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(5) The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers and sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or
II-8
<PAGE>
high and of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate
offering price set forth in "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement;
provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 of 15(d) of the
Exchange Act that are incorporated by reference in the registration
statement.
(b) That for the purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the 1933 Act, the registrant has duly
caused this amendment to its registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in Fairfax, Virginia on September
3, 1999.
ICF KAISER INTERNATIONAL, INC.
By: /s/ James J. Maiwurm
--------------------
Name: James J. Maiwurm
Title: Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement on Form S-4 has been signed below by the following
persons in the capacities and on the dates indicated.
(1) Principal executive officer
Date: September 3, 1999 By /s/ James J. Maiwurm
--------------------
James J. Maiwurm
Chairman, President and Chief Executive Officer
(2) Principal financial and accounting officer
Date: September 3, 1999 By /s/ Timothy P. O'Connor
--------------------
Timothy P. O'Connor
Executive Vice President and Chief Financial
Officer
(3) The Board of Directors
Date: September 3, 1999 By *
--------------------
Tony Coelho
Director
Date: September 3, 1999 By *
--------------------
Jarrod M. Cohen
Director
Date: September 3, 1999 By *
--------------------
James O. Edwards
Director
Date: September __, 1999 By
--------------------
Thomas C. Jorling
Director
Date: September 3, 1999 By *
--------------------
James J. Maiwurm
Director
Date: September __, 1999 By
--------------------
Hazel R. O'Leary
Director
S-1
<PAGE>
Date: September 3, 1999 By *
--------------------
Keith M. Price
Director
Date: September 3, 1999 By *
--------------------
James T. Rhodes
Director
Date: September 3, 1999 By *
--------------------
Michael E. Tennenbaum
Director
* By: /s/ James J. Maiwurm
--------------------
Attorney-in-Fact
S-2
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
3(a) Restated Certificate of Incorporation of ICF Kaiser International,
Inc. (restated through June 26, 1993) (Incorporated by reference to
Exhibit No. 3(a) to Quarterly Report on Form 10-Q (Registrant No.
1-12248) for the second quarter of fiscal 1994 filed with the
Commission on October 15, 1993)
3(b) Amended and Restated By-laws of ICF Kaiser International, Inc. (as
amended through June 23, 1995) (Incorporated by reference to
Exhibit No. 3(b) to Quarterly Report on Form 10-Q (Registrant No.
1-12248) for the second quarter of fiscal 1995 filed with the
Commission on October 13, 1995)
4(a) Indenture dated as of January 11, 1994, between ICF Kaiser
International, Inc. and The Bank of New York, as Trustee
(Incorporated by reference to Exhibit No. 4(a) to Quarterly Report
on Form 10-Q (Registrant No. 1-12248) for the third quarter of
fiscal 1994 filed with the Commission on January 14, 1994)
4(a)(1) First Supplemental Indenture dated as of February 17, 1995
(Incorporated by reference to Exhibit No. 4(a)(1) to Annual
Report on Form 10-K (Registrant No. 1-12248) for fiscal year
1995 filed with the Commission on May 23, 1995)
4(a)(2) Second Supplemental Indenture dated September 1, 1995 (Incorporated
by reference to Exhibit No. 4(a)(2) to Registration Statement on
Form S-1 Registration No. 33-64655 filed with the Commission on
November 30, 1995)
4(a)(3) Third Supplemental Indenture dated October 20, 1995 (Incorporated
by reference to Exhibit No. 4(a)(3) to Registration Statement on
Form S-1 Registration No. 33-64655 filed with the Commission on
November 30, 1995)
4(a)(4) Fourth Supplemental Indenture dated as of March 8, 1996
(Incorporated by reference to Exhibit No. 4(a)(4) to Transition
Report on Form 10-K (Registrant No. 1-12248) for the transition
period from March 1, 1995 to December 31, 1995 filed with the
Commission on March 29, 1996)
4(a)(5) Fifth Supplemental Indenture dated as of June 24, 1996
(Incorporated by reference to Exhibit No. 4(a)(5) to Registration
Statement on Form S-1 Registration No. 333-16937 filed with the
Commission on November 27, 1996)
4(a)(6) Sixth Supplemental Indenture dated as of December 3, 1997
(Incorporated by reference to Exhibit No. 4(a)(6) to Annual Report
on Form 10-K (Registrant No. 1-12248) for fiscal year 1997 filed
with the Commission on March 31, 1998)
4(a)(7) Seventh Supplemental Indenture dated as of August 13, 1998
(Incorporated by reference to Exhibit No. 4(a)(7) to Quarterly
Report on Form 10-Q (Registrant No. 1-12248) for the third
quarter of fiscal 1997 filed with the Commission on November 16,
1998)
**4(a)(8) Amended and Restated Indenture with respect to the 12% Senior
Subordinated Notes due 2003 dated as of ____________, 1999
4(b) Form of 12% Senior Subordinated Note due 2003 (Incorporated by
reference to Exhibit No. 4(b) to Quarterly Report on Form 10-Q
(Registrant No. 1-12248) for the third quarter of fiscal 1994 filed
with the Commission on January 14, 1994)
<PAGE>
4(c) Rights Agreement, dated as of January 13, 1992, between ICF Kaiser
International, Inc. and Office of the Secretary, ICF Kaiser
International, Inc. as Rights Agent, including (1) Form of
Certificate of Designations of Series 4 Junior Preferred Stock;
(2) Form of Rights Certificate; and (3) Summary of Rights to
Purchase Preferred Stock (Incorporated by reference to Exhibit
No. 4(h) to Quarterly Report on Form 10-Q (Registrant No. 0-18025)
for the third quarter of fiscal 1992 filed with the Commission on
January 14, 1992)
4(d) Indenture dated as of December 23, 1996, between ICF Kaiser
International, Inc. and The Bank of New York, as Trustee, including
Guarantees, dated December 23, 1996, by each of the Subsidiary
Guarantors (Incorporated by reference to Exhibit No. 4(g) to
Registration Statement on Form S-1 Registration No. 333-19519 filed
with the Commission on January 10, 1997)
4(d)(1) First Supplemental Indenture dated as of December 3, 1997
(Incorporated by reference to Exhibit No. 4(a)(6) to Annual Report
on Form 10-K (Registrant No. 1-12248) for fiscal year 1997 filed
with the Commission on March 31, 1998)
4(d)(2) Second Supplemental Indenture dated as of August 13, 1998
(Incorporated by reference to Exhibit No. 4(g)(2) to Quarterly
Report on Form 10-Q (Registrant No. 1-12248) for the third quarter
of fiscal 1997 filed with the Commission on November 16, 1998)
**4(d)(3) Third Supplemental Indenture dated as of ____________, 1999
4(e) Form of 12% Senior Note due 2003, Series B (Incorporated by
reference to Exhibit No. 4(i) to Registration Statement on Form S-1
Registration No. 333-19519 filed with the Commission on January 10,
1997)
4(f) Warrant Agreement dated as of December 23, 1996, between ICF Kaiser
International, Inc. and The Bank of New York, as Warrant Agent
(Incorporated by reference to Exhibit No. 4(j) to Registration
Statement on Form S-1 Registration No. 333-19519 filed with the
Commission on January 10, 1997)
4(g) Form of Warrant expiring December 31, 1999 issued under Warrant
Agreement dated as of December 23, 1996 (Incorporated by reference
to Exhibit No. 4(k) to Registration Statement on Form S-1
Registration No. 333-19519 filed with the Commission on January 10,
1997)
**5 Opinion of Squire, Sanders & Dempsey L.L.P. regarding securities
being registered
**8 Opinion of Squire, Sanders & Dempsey L.L.P. regarding tax
consequences
10(a) Loan and Security Agreement dated as of December 18, 1998, with
Madeleine L.L.C. as agent (Incorporated by reference to Exhibit No.
10(a) to Annual Report on Form 10-K (Registrant No. 1-12248) filed
with the Commission on April 15, 1999)
10(b) ICF Kaiser International, Inc. Employee Stock Ownership Plan (as
amended and restated as of March 1, 1993) (and further amended with
respect to name change only as of June 26, 1993) (Incorporated by
reference to Exhibit No. 10(c) to Quarterly Report on Form 10-Q
(Registrant No. 1-12248) for the second quarter of fiscal 1994
filed with the Commission on October 15, 1993)
10(b)(1) Amendment No. 1 dated April 24, 1995 (Incorporated by reference to
Exhibit No. 10(l)(1) to Annual Report on Form 10-K (Registrant
No. 1-12248) for fiscal 1995 filed with the Commission on May
23, 1995)
<PAGE>
10(b)(2) Amendment No. 2 dated December 15, 1995 (Incorporated by reference
to Exhibit No. 10(b)(2) to Transition Report on Form 10-K
(Registrant No. 1-12248) for the transition period from March 1,
1995 to December 31, 1995 filed with the Commission on March 29,
1996)
10(b)(3) Amendment No. 3 dated December 13, 1996 (Incorporated by reference
to Exhibit No. 10(b)(3) to Registration Statement on Form S-1
Registration No. 333-19519 filed with the Commission on January 10,
1997)
10(c) Trust Agreement with Vanguard Fiduciary Trust Company dated as of
August 31, 1995, for ICF Kaiser International, Inc. Employee Stock
Ownership Plan (Incorporated by reference to Exhibit No. 10(c) to
Registration Statement on Form S-1 Registration No. 33-64655 filed
with the Commission on November 30, 1995)
10(d) ICF Kaiser International, Inc. Retirement Plan (as amended and
restated as of March 1, 1993) (and further amended with respect to
name change only as of June 26, 1993) (Incorporated by reference to
Exhibit No. 10(d) to Quarterly Report on Form 10-Q (Registrant No.
1-12248) for the second quarter of fiscal 1994 filed with the
Commission on October 15, 1993)
10(d)(1) Amendment No. 1 dated April 24, 1995 (Incorporated by reference to
Exhibit No. 10(d)(1) to Annual Report on Form 10-K (Registrant
No. 1-12248) filed with the Commission on May 23, 1995)
10(d)(2) Amendment No. 2 dated December 15, 1995 (Incorporated by reference
to Exhibit No. 10(d)(2) to Transition Report on Form 10-K
(Registrant No. 1-12248) for the transition period from March 1,
1995 to December 31, 1995 filed with the Commission on March 29,
1996)
10(d)(3) Amendment No. 3 dated December 13, 1996 (Incorporated by reference
to Exhibit No. 10(d)(3) to Registration Statement on Form S-1
Registration No. 333-19519 filed with the Commission on January 10,
1997)
10(e) Trust Agreement with Vanguard Fiduciary Trust Company dated as of
August 31, 1995, for ICF Kaiser International, Inc. Retirement Plan
(Incorporated by reference to Exhibit No. 10(e) to Registration
Statement on Form S-1 Registration No. 33-64655 filed with the
Commission on November 30, 1995)
10(f) Consolidated, Amended and Restated Deed of Lease Agreement between
HMCE Associates Limited Partnership R.L.L.P. (as Landlord) and ICF
Kaiser Hunters Branch Leasing, Inc. (as Tenant), dated November 12,
1997, for the lease of the Registrant's headquarters in Fairfax,
Virginia known as Hunters Branch--Phase I (Incorporated by
reference to Exhibit No. 10(g) to Annual Report on Form 10-K
(Registrant No. 1-12248) filed with the Commission on March 25,
1997)
10(g) Consolidated, Amended and Restated Deed of Lease Agreement between
HMCE Associates Limited Partnership R.L.L.P. (as Landlord) and ICF
Kaiser Hunters Branch Leasing, Inc. (as Tenant), dated November 12,
1997, for the lease of space in the building adjacent to the
Registrant's headquarters in Fairfax, Virginia known as Hunters
Branch--Phase II (Incorporated by reference to Exhibit No. 10(h) to
Annual Report on Form 10-K (Registrant No. 1-12248) filed with the
Commission on March 25, 1997)
10(h) Contribution Agreement by and among HMCE Associates Limited
Partnership R.L.L.P.; ICF Kaiser Hunters Branch Leasing, Inc.; and
IFA Nutley Partners, LLC dated November 3, 1997 (Incorporated by
reference to Exhibit No. 10(i) to Annual Report on Form 10-K
(Registrant No. 1-12248) filed with the Commission on March 25,
1997)
<PAGE>
10(i) ICF Kaiser International, Inc. Stock Incentive Plan (as amended and
restated through March 1, 1996) (Incorporated by reference to
Exhibit No. 10(j) to Registration Statement on Form S-1
Registration No. 333-16937 filed with the Commission on November
27, 1996)
10(j) Contract (#DE-AC3495RF00825) between Kaiser-Hill Company, LLC, a
subsidiary of the Corporation, and the U.S. Department of Energy
dated as of April 4, 1995 (IN ACCORDANCE WITH RULE 202 OF
REGULATION S-T, THIS EXHIBIT NO. 10(j) WAS FILED IN PAPER ON MAY
23, 1995, ON FORM SE PURSUANT TO A CONTINUING HARDSHIP EXEMPTION
and is incorporated herein by reference thereto)
10(j)(1) Modifications 1 to 40 to Contract #DE-AC3495RF00825 (Incorporated
by reference to Exhibit No. 10(p)(l) to Registration Statement on
Form S-1 Registration No. 333-16937 filed with the Commission on
November 27, 1996)
10(j)(2) Modifications 42 to 46 to Contract #DE-AC3495RF00825 (Modification
41 not received) (Incorporated by reference to Exhibit No. 10(p)(2)
to Annual Report on Form 10-K (Registrant No. 1-12248) filed
with the Commission on March 25, 1997)
10(j)(3) Modifications 47 to 81 to Contract #DE-AC3495RF00825 (Modifications
72 and 78 not received) (Incorporated by reference to Exhibit No.
10(j)(3) to Annual Report on Form 10-K (Registrant No. 1-12248)
filed with the Commission on April 15, 1999)
10(k) ICF Kaiser International, Inc. Section 401(k) Plan (as amended and
restated as of March 1, 1993) (and further amended with respect
to name change only as of June 26, 1993) (Incorporated by
reference to Exhibit No. 10(f) to Quarterly Report on Form 10-Q
(Registrant No. 1-12248) for the second quarter of fiscal 1994
filed with the Commission on October 15, 1993)
10(k)(1) Amendment No. 1 dated April 24, 1995 (Incorporated by reference to
Exhibit No. 10(p)(1) to Annual Report on Form 10-K (Registrant
No. 1-12248) for fiscal 1995 filed with the Commission on May
23, 1995)
10(k)(2) Amendment No. 2 dated December 15, 1995 (Incorporated by reference
to Exhibit No. 10(p)(2) to Transition Report on Form 10-K
(Registrant No. 1-12248) for the transition period from March 1,
1995 to December 31, 1995 filed with the Commission on March 29,
1996)
10(k)(3) Amendment No. 3 dated December 13, 1996 (Incorporated by reference
to Exhibit No. 10(q)(3) to Registration Statement on Form S-1
Registration No. 333-19519 filed with the Commission on January 10,
1997)
10(l) Trust Agreement with Vanguard Fiduciary Trust Company dated as of
March 1, 1989, for the ICF Kaiser International, Inc. Section
401(k) Plan (Incorporated by reference to Exhibit No. 28(b) to
Registration Statement on Form S-8 Registration No. 33-51460 filed
with the Commission on August 31, 1992)
Exhibit No. 10--Material Contracts (management contracts, compensatory plans, or
arrangements)
10(aa) Agreement dated as of May 19, 1997 with James O. Edwards, Chairman
and Chief Executive Officer of the Registrant (Incorporated by
reference to Exhibit No. 10(ll) to Quarterly Report on Form 10-Q
(Registrant No. 1- 12248) for the second quarter of fiscal 1997
filed with the Commission on August 14, 1997)
<PAGE>
10(aa)(1) Agreement dated as of November 6, 1998, terminating Mr. Edwards'
employment agreement (Incorporated by reference to Exhibit No.
10(aa)(1) to Annual Report on Form 10-K (Registrant No. 1-12248)
filed with the Commission on April 15, 1999)
10(bb) ICF Kaiser International, Inc. 1998 Compensation (IC) Plan for
Senior Executives (adopted by the Board of Directors on February
27, 1998) (Incorporated by reference to Exhibit No. 10(bb) to
Annual Report on Form 10-K (Registrant No. 1-12248) filed with the
Commission on March 25, 1997)
10(cc) ICF Kaiser International, Inc. Non-employee Director Stock Option
Plan (as amended and restated as of June 26, 1993) (Incorporated by
reference to Exhibit No. 10(bb) to Quarterly Report on Form 10-Q
(Registrant No. 1-12248) for the second quarter of fiscal 1994
filed with the Commission on October 15, 1993)
10(dd) Agreement dated as of May 19, 1997 with Marc Tipermas, President
and Chief Operating Officer of the Registrant (Incorporated by
reference to Exhibit No. 10(mm) to Quarterly Report on Form 10-Q
(Registrant No. 1- 12248) for the second quarter of fiscal 1997
filed with the Commission on August 14, 1997)
10(dd)(1) Agreement dated as of August 7, 1998, terminating Dr. Tipermas'
employment agreement (Incorporated by reference to Exhibit No.
10(dd)(1) to Annual Report on Form 10-K (Registrant No. 1-12248)
filed with the Commission on April 15, 1999)
10(ee) ICF Kaiser International, Inc. Senior Executive Officers Severance
Plan as approved by the Compensation Committee of the Board of
Directors on April 4, 1994, and adopted by the Board of Directors
on May 5, 1994, as further amended through May 1, 1997
(Incorporated by reference to Exhibit No. 10(ee) to Annual Report
on Form 10-K (Registrant No. 1-12248) filed with the Commission on
March 25, 1997)
10(ff) Employment Agreement with Thomas P. Grumbly, Executive Vice
President of the Registrant, effective as of April 7, 1997
(Incorporated by reference to Exhibit No. 10(ff) to Annual Report
on Form 10-K (Registrant No. 1-12248) filed with the Commission on
April 15, 1999)
10(ff)(1) Letter dated March 15,1999, amending Mr. Grumbly's employment
agreement (Incorporated by reference to Exhibit No. 10(ff)(1) to
Annual Report on Form 10-K (Registrant No. 1-12248) filed with
the Commission on April 15, 1999)
10(gg) ICF Kaiser International, Inc. Consultants, Agents and Part-Time
Employees Stock Plan dated as of June 23, 1995 (Incorporated by
reference to Exhibit No. 99 to Registration Statement on Form S-
8 Registration No. 33-60665 filed with the Commission on June
28, 1995)
10(hh) ICF Kaiser International, Inc. Stock Incentive Plan (as amended and
restated through March 1, 1996) (Incorporated by reference to
Exhibit No. 10(j) to Registration Statement on Form S-1
Registration No. 333-16937 filed with the Commission on November
27, 1996)
10(ii) Amended Employment Agreement dated as of December 1, 1996, with
David Watson, Executive Vice President and President, ICF Kaiser
Engineers and Constructors Group of the Registrant (Incorporated by
reference to Exhibit No. 10(kk) to Annual Report on Form 10-K
(Registrant No. 1-12248) filed with the Commission on March 25,
1997)
<PAGE>
10(ii)(1) Agreement and Mutual Release dated August 17, 1998, terminating Mr.
Watson's employment agreement (Incorporated by reference to
Exhibit No. 10(ii)(1) to Annual Report on Form 10-K (Registrant
No. 1-12248) filed with the Commission on April 15, 1999)
10(jj) Intentionally Omitted
10(kk) Employment Agreement with Michael F. Gaffney, Executive Vice
President of the Registrant, effective as of January 1, 1997
(Incorporated by reference to Exhibit No. 10(kk) to Annual Report
on Form 10-K (Registrant No. 1-12248) for fiscal year 1997 filed
with the Commission on March 31, 1998)
10(kk)(1) Agreement dated March 8, 1999, terminating Mr. Gaffney's employment
agreement (Incorporated by reference to Exhibit No. 10(kk)(1) to
Annual Report on Form 10-K (Registrant No. 1-12248) filed with
the Commission on April 15, 1999)
10(ll) Letter Agreement with Cowen Incorporated and Jarrod M. Cohen, dated
as of March 13, 1998 (Incorporated by reference to Exhibit No.
10(ll) to Annual Report on Form 10-K (Registrant No. 1-12248) for
fiscal year 1997 filed with the Commission on March 31, 1998)
(Incorporated by reference to Exhibit No. 10(mm) to Annual Report
on Form 10-K (Registrant No. 1-12248) filed with the Commission on
March 25, 1997)
10(mm) ICF Kaiser International, Inc. Non-employee Directors Compensation
and Phantom Stock Plan as adopted by the Board of Directors on
February 28, 1997, with an effective date of March 1, 1997
(Incorporated by reference to Exhibit No. 10(mm) to Annual Report
on Form 10-K (Registrant No. 1-12248) filed with the Commission on
April 15, 1999)
10(nn) Letter Agreement with Tennenbaum & Co., L.L.C. and Michael E.
Tennenbaum, dated as of March 13, 1998 (Incorporated by
reference to Exhibit No. 10(nn) to Annual Report on Form 10-K
(Registrant No. 1-12248) for fiscal year 1997 filed with the
Commission on March 31, 1998)
10(oo) Employment Agreement with Keith M. Price, President and Chief
Executive Officer of the Registrant, effective as of August 27,
1998 (Incorporated by reference to Exhibit No. 10(oo) to Quarterly
Report on Form 10-Q (Registrant No. 1-12248) for the third quarter
of 1998 filed with the Commission on November 16, 1998)
10(oo)(1) Terms of Promotion for Mr. Price effective as of November 4, 1998
(Incorporated by reference to Exhibit No. 10(oo)(1) to Annual
Report on Form 10-K (Registrant No. 1-12248) filed with the
Commission on April 15, 1999)
*10(oo)(2) Agreement dated April 27, 1999, terminating Mr. Price's employment
agreement
*10(pp) Employment Agreement with James J. Maiwurm, President and Chief
Executive Officer of the Registrant, effective as of June 1, 1999
*10(qq) Employment Agreement with S. Robert Cochran, Executive Vice
President and President, North America of the Registrant, effective
as of June 1, 1999
*10(rr) Employment Agreement with Timothy P. O'Connor, Executive Vice
President and Chief Financial Officer of the Registrant, effective
as of June 1, 1999
10(ss) Employment Agreement with Richard A. Leupen, Executive Vice
President and President, International of the Registrant, effective
as of June 1, 1999.
<PAGE>
12 Statement regarding computation of ratio of earnings to fixed
charges
*21 Consolidated subsidiaries of the Registrant as of July 9, 1999
**23(a) Consent of Squire, Sanders & Dempsey L.L.P. (included in opinions
filed as Exhibits 5 and 8)
23(b) Consent of PricewaterhouseCoopers LLP
*24 Power of Attorney (included as part of the signature page to this
Form S-4 Registration Statement)
**25 Statement of Eligibility and Qualification on Form T-1 of Trustee
**99(a) Form of Letter of Transmittal and Consent Form and related
documents for the 12% Senior Subordinated Notes due 2003
**99(b) Form of Letter of Transmittal and Consent Form and related
documents for the 12% Senior Notes due 2003
______________
* Previously filed.
** To be filed by amendment.
<PAGE>
[LETTERHEAD OF KAISER ENGINEERS PTY. LTD. APPEARS HERE]
June 1, 1999
Mr. Richard A. Leupen
Kaiser Engineers Australia Pty. Ltd.
250 St. George's Terrace
6th Floor, QV1 Bldg.
Perth, WA 6000
Australia
Re: Employment Arrangements
Dear Richard:
This letter supplements the existing arrangements between you and Kaiser
Engineers Pty. Ltd. (the "Company"), Kaiser Engineers Australia Pty. Ltd. and
ICF Pty. Ltd. (all three collectively referred to as the "Companies"). This
letter is to confirm that the terms and conditions applicable to your
employment shall be as set forth in this letter and, except to the extent
specifically set forth in this letter, in the following attachments:
Attachment I - Australian Employment Provisions
Attachment II - Local Employment Provisions
Attachment III - Agreement on Ideas, Inventions and Confidential
Information
Notwithstanding the foregoing or any term or condition found in
Attachments I, II and III, your titles, responsibilities and obligations,
salary, bonus opportunities and employment arrangements shall be as follows
(with all amounts expressed in U.S. Dollars):
1. Titles - You shall serve as an Executive Chairman and Chief
------
Executive Officer of the Companies, reporting to the President and Chief
Executive Officer of ICF Kaiser
<PAGE>
Mr. Richard A. Leupen
June 1, 1999
Page 2
International, Inc. ("Kaiser"). In addition, you shall hold the titles
of Executive Vice President and President, International Operations, of
Kaiser.
2. Term - This letter is not intended to affect the term of the
----
employment arrangements provided for in Attachments I and II and
applicable Australian law. Paragraph 3 contemplates an annual review in
June of each year, but does not result in your employment arrangements
having a one-year term.
3. Salary Package - You shall be entitled to a base salary at the rate
--------------
of $260,000 per year through June 1, 2000, in installments in accordance
with the Company's regular practice for compensating executive personnel.
Thereafter the amount of your base compensation shall be subject to
adjustment as recommended by the Compensation and Human Resources
Committee of Kaiser's Board (the "Compensation Committee").
4. Annual Incentive Bonus - During the period ending June 30, 2000,
----------------------
you are entitled to an incentive bonus in an amount not to exceed $130,000
(representing a bonus opportunity equal to 50% of your initial annual base
salary that is contingent on satisfaction of operational objectives)
payable at the time and contingent upon the extent to which Kaiser
achieves specified objectives set forth in Attachment IV. In subsequent
years you will be entitled to a bonus opportunity as set by the
Compensation Committee in its discretion.
5. Retention Bonus - You shall be entitled to a retention bonus in the
---------------
amount of $25,000, payable on December 31, 1999, provided you are still
employed with the Company on December 31, 1999. You will be entitled to a
second retention bonus in the amount of $25,000, payable on May 1, 2000,
provided you are still employed with the Company on May 1, 2000.
6. Termination -
-----------
(a) Subject to Attachments I and II and applicable Australian
law, upon 90 days' prior written notice the Companies may terminate your
employment, with or without "cause," as defined in paragraph 6(f) below.
Upon 90 days' prior written notice you may terminate your employment, with
or without "good reason", as defined in paragraph 6(e) below. Upon
termination of your employment for any reason, the Company shall:
(i) pay to you any unpaid salary through the date of termination;
(ii) pay to you any unpaid bonus payments earned through the
date of termination under the terms of applicable bonus
arrangements; and
<PAGE>
Mr. Richard A. Leupen
June 1, 1999
Page 3
(iii) provide to or for your benefit the benefits, if any,
otherwise expressly provided under this letter and the
Attachments.
Any payments under this paragraph 6 that are to be made in connection with
the termination of your employment will be paid in cash (with deduction of
such amounts as may be required to be withheld under applicable Australian
law and regulations) within ten business days of your termination of
employment. All other compensation and employment benefit arrangements
provided for in this letter and the Attachments shall cease upon
termination of employment except to the extent required by law or
otherwise expressly provided by such arrangement. You hereby agree that
you shall not under any circumstances be entitled to benefits under
Kaiser's Senior Executive Officer's Severance Plan as in effect on the
date hereof notwithstanding anything to the contrary herein or under the
terms of such plan, and you hereby release any claims for benefits under
such plan.
(b) In the event the Companies terminate your employment without
"cause" or you terminate your employment for "good reason," then, in
addition to the benefits provided for under paragraphs 6(a)(i) and
(a)(ii), the Companies shall pay to you a severance payment equal to your
annual basis salary. In addition, all unvested stock options and any other
equity-based compensation arrangements will vest in full on the effective
date of such termination and all vested stock options shall be exercisable
for the shorter of one (1) year from the date of such termination and
until they expire in accordance with their original maximum term.
(c) In the event the Companies terminate your employment for
"cause", then, in addition to the benefits provided for under paragraphs
6(a)(i) and 6(a)(ii), all unvested stock options and any other equity-
based compensation arrangements shall be terminated and all vested stock
options shall be exercisable for the shorter of thirty (30) days from the
date of such termination and until they expire in accordance with their
original maximum term.
(d) In the event you terminate your employment without "good
reason," then, in addition to the benefits provided under paragraphs
6(a)(i) and 6(a)(ii), all unvested stock options and any other equity-
based compensation arrangements shall be terminated and all vested stock
options shall be exercisable for the shorter of thirty (30) days from the
date of such termination and until they expire in accordance with their
original maximum term.
<PAGE>
(e) For the purposes of this letter agreement, you shall be
considered to have "good reason" to terminate your employment if without
your express written consent (i) your responsibilities are substantially
reduced (except in connection with the termination of your employment
voluntarily by you or by the Companies for "cause") (ii) your annual base
salary is reduced, or (iii) your office is relocated anywhere other than
within fifty (50) mile radius of your office in Perth, Australia.
(f) For purposes of this letter agreement, the Companies shall
have "cause" to terminate your employment hereunder upon (i) your
continued, willful and deliberate failure to perform your duties in a
manner substantially consistent with the manner prescribed by the Board or
the Chief Executive Officer of Kaiser (other than any such failure
resulting from your incapacity due to physical or mental illness), (ii)
your engaging in misconduct materially and demonstrably injurious to the
Companies, or (iii) your conviction of commission of a felony, whether or
not such felony was committed in connection with the Companies' business.
7. Certain Benefits - In addition to the benefits contemplated by the
----------------
Attachments, you shall continue to be provided with a home telephone and
facsimile machine in accordance with current practice. You shall be
entitled to medical benefits in accordance with the Companies' practice in
Australia with respect to executive personnel. While employed by the
Companies in a position, and at a salary, comparable to those contemplated
by this letter, you shall also be entitled to the payment of $16,000 each
year into the Companies' superannuation plan in addition to the amounts
otherwise payable into such plan on your behalf.
8. Corporation's Consent - References in Attachment I to taking actions
---------------------
with the agreement, approval or consent of the President, International
Operations, of Kaiser shall be deemed to require the agreement, approval
or consent of the President and Chief Executive Officer of Kaiser.
The base salary, bonus and benefits provided for in paragraphs 1, 3 and
7 above are provided in lieu of any amounts described in Section D of Attachment
II, and the retention bonus provided in paragraph 5 above is provided in lieu of
any option grant described in Section F of Attachment II (but you shall be
entitled to retain any previously granted options in accordance with their
terms). Paragraphs D and F of Attachment II shall be inoperative and are hereby
terminated.
<PAGE>
Mr. Richard A. Leupen
June 1, 1999
Page 5
The arrangements set forth in this letter shall be effective as of June
1, 1999. Your signature on this letter will signify your understanding and
acceptance of the terms and conditions as set forth in this letter agreement and
in Attachments I, II, III and IV. Your acceptance confirms that this letter
agreement and the Attachments constitute the entire agreement, and terminate and
supersede all prior offers or arrangements, of the parties hereto relating to
your employment with and compensation and benefits from the Companies and Kaiser
or any of its affiliates, and that there are no written or oral terms or
representations made by either party other than those contained here.
Yours truly,
KAISER ENGINEERS PTY. LTD.
by Kaiser Engineers International, Inc. and
Kaiser Engineers and Constructors, Inc.,
Shareholders
By: /s/ James J. Maiwurm
--------------------------------------
James J. Maiwurm
Chairman and Sole Director
Acknowledgement: /s/ Richard A. Leupen
--------------------------
Richard A. Leupen
<PAGE>
KAISER ENGINEERS PTY LIMITED
AUSTRALIAN EMPLOYMENT CONDITIONS
Issued as Attachment I to Letter of Employment dated 27 July 1995
A. AREA OF OPERATION
Unless otherwise advised in writing to the contrary, the provisions of this
Attachment shall operate within the Commonwealth of Australia and its
dependencies.
B. HOURS OF WORK
Your hours of work shall be those necessary to perform your duties. It is
expected that you will attend and be available for consultation during the
normal hours of business of the office to which you are assigned. Your
salary is based on a 40 hour week. By acceptance of employment, individuals
acknowledge that work in excess of the 40 hour week is performed without
direct monetary compensation.
When transferred, either permanently or on short term assignment
conditions, from one location to another, you will be expected to work the
standard hours of business at the new location.
C. PUBLIC HOLIDAYS
Employees shall observe the public holidays gazetted for their permanent or
short term assignment location.
Employees on business trips may be required to work on days gazetted as
public holidays at their home base.
At some assignment locations, local holidays may be substituted in lieu of
gazetted holidays.
D. SALARY
The current salary review program provides for a general merit and economic
review each January and June.
E. ANNUAL LEAVE
You are entitled to four (4) weeks Annual Leave after each 12 months
continuous service.
You may take pro rata Annual Leave prior to the completion of any period of
12 months continuous service, provided leave so taken does not exceed the
pro rata leave accrued, except where the written agreement of the
President, IOG is obtained for you to take leave earlier.
Any absence on approved leave shall count as continuous service except
where we notify you in writing to the contrary (e.g. during extended
periods of leave without pay).
-1-
<PAGE>
Annual Leave should be taken within 12 months of it falling due and at a
time mutually agreeable to yourself and the President, International
Operations Group of ICF Kaiser International, Inc. (IOG).
Annual Leave generally should be taken in not more than two (2) periods,
one of which should be not less than three (3) consecutive weeks.
Unused Annual Leave and pro rata Annual Leave shall be paid to you on
termination at your then current base rate of salary.
Accrued but unused Annual Leave will be transferred to your credit,
irrespective of assignment or location, but no payment shall be made in
lieu of taking leave at any time during your employment.
F. SICK LEAVE
You shall be credited with two weeks Sick Leave at the beginning of each
year of employment.
Sick Leave may be granted over and above these benefits at the discretion
of the Company. Any unused portion of Sick Leave shall accumulate from year
to year.
In claiming Sick Leave, the onus of proof rests with you and documentary
proof of sickness may be requested.
If you fall ill during periods of Annual Leave, you may apply to have such
period of time debited to your Sick Leave accrual balance and recredited to
Annual Leave.
G. LONG SERVICE LEAVE
The Long Service Leave provisions of the State in which you are employed
shall apply, except where service has been performed in more than one
State. In such cases all relevant documents will need to be reviewed to
determine which shall apply.
H. OTHER LEAVE
Other types of special leave, both with and without pay are available under
certain conditions (e.g. Military Leave, Paternity Leave). The details of
these benefits may be obtained from your Human Resources Department
representatives.
I. CONTRACT OF SERVICE
Subject to the next paragraph of this Section I, your contract of
employment may be terminated by either party's giving to the other not less
than three (3) months' written notice or by the Companies' giving you three
(3) months' pay in lieu of notice.
During the first year of your employment, the Companies shall not be
entitled to terminate your contract of employment other than by reason of
serious misconduct or incapacity on your part. During the second year of
your employment, the Companies may terminate your contract of employment by
giving you six months' written notice or such lesser period of notice
specifying a termination date not earlier than the second anniversary of
your date of commencement (provided always that such period is not less
than three months), except in the event of serious misconduct or incapacity
on your part, in which case the provisions of the first paragraph of this
Section I shall apply.
-2-
<PAGE>
J. NOT USED
K. SUPERANNUATION
You are eligible for membership of the Company's Superannuation Plan -
Accumulation Category immediately upon commencement. The Company
automatically provides superannuation support to this Plan on behalf of the
member in accordance with the provisions of the Superannuation Guarantee
Charge Act. Entitlements to membership of this Plan shall not be affected
by change in assignment or location. The provisions of the Plan are
outlined in the attached Member Booklet.
Alternatively, the Company will make Superannuation Guarantee Charge and
any voluntary contribution superannuation payments (by salary sacrifice or
otherwise as agreed with you from time to time) to a superannuation fund of
your choice.
L. HEALTH INSURANCE BENEFITS
The Company will contribute up to A$650.00 per annual towards your and your
family's health insurance with a health fund of your choice.
M. MEDICALS
You may be required to take medical examinations to comply with legislative
or Company requirements at commencement or during the term of your
assignment.
N. CONFIDENTIALITY AGREEMENT
You are required to sign the confidentiality agreement in Attachment III to
comply with Company policy and to give effect to this contract.
You may also be required to sign additional documents of a similar nature
relating to specific projects in accordance with client requirements.
O. MOTOR VEHICLE
For insurance reasons, if you are required to drive a Company supplied
vehicle, you must hold a valid motor vehicle driver's license issued by the
State or Territory in which your assignment is located.
P. INTERPRETATION
Unless expressly stated to the contrary, interpretations of these
Employment conditions and associated Assignment Provisions shall be made by
the President, IOG in accordance with the laws of Western Australia.
-3-
<PAGE>
KAISER ENGINEERS PTY LIMITED
LOCAL EMPLOYMENT PROVISIONS
PERTH OFFICE
Issued as Attachment II to Letter of Employment dated 27 July 1995
CONTENTS
- --------
CONDITIONS
A. AREA AND SCOPE OF OPERATION
B. DEFINITIONS
C. STANDARD WORK WEEK
D. COMPENSATION
E. MOTOR VEHICLES
F. RELOCATION ASSISTANCE
G. HOLIDAYS
H. OCCUPATIONAL HEALTH AND SAFETY
I. QUALITY MANAGEMENT
-1-
<PAGE>
A. AREA AND SCOPE OF OPERATION
Unless otherwise advised in writing to the contrary, the provisions of this
Attachment shall apply to working time expended whilst based in the Perth
Office.
These provisions should be read and/or applied in conjunction with your
Employment Conditions and administrative practices applicable to employees
of Kaiser Engineers Pty Limited.
B. DEFINITIONS
. Business Trip
A work related trip for a period which is normally anticipated to be
less than 60 calendar days.
. Short-term Assignment
Assignment to a location for a period anticipated to be more than 60
calendar days but not greater than 183 calendar days in duration
. Permanent Assignment
Assignment to a location for a period greater than 183 calendar days
will be regarded as a Permanent Assignment.
. Total Compensation Rate
The remuneration you would receive for working the rostered ordinary
hours being the Salary Package, plus Location Allowance, if
applicable.
. Salary Package
The remuneration you would receive for working the rostered ordinary
hours exclusive of the Location Allowance.
. Base Salary Rate
The remuneration you would receive for working the rostered ordinary
hours exclusive of all allowances.
C. STANDARD WORK WEEK
In Perth, the standard hours of business of the office are between 8:00
a.m. and 5:00 p.m. Monday to Friday and one hour is provided for lunch,
between 12 noon and 1:00 p.m.
-2-
<PAGE>
D. COMPENSATION AND ALLOWANCES SUMMARY
The Salary Package offered is A$220,000 per annum. You will also be
provided with a fully-maintained motor vehicle within a price range of
A$55,000 to A$80,000 or a novated or other lease arrangement to an
equivalent value and superannuation and medical benefits. In addition, the
Company will pay for the installation and maintenance at your specified
residence of a telephone and facsimile machine for business purposes. You
will also be supplied, at the Company's cost, with a mobile telephone for
business calls.
The following summary is based on Terms and Conditions of Employment to
Perth, Western Australia, as at the date of Employment.
Per Month
$.
SALARY
------
Base Salary 18,333.33
Other Allowances NIL
Salary Package/Total Compensation Rate 18,333.33
In addition, you will be eligible for a results-based performance bonus of
A$0 to A$80,000, pro-rated for the current fiscal year. The intent of the
bonus scheme is to share real and achieved monetary benefits received from
clients for superior project performance by the Company with key personnel
at Project Manager or above level to reflect exceptional personal
performance. Bonuses are granted only to the extent that the Company has
generated sufficient profits and are granted only to those officers/senior
staff whose performance throughout the year is rated outstanding. Bonus
ranges indicate the minimum and maximum value of bonus awards. Bonus awards
may be comprised of cash, stock, and/or stock options at the discretion of
the President, IOG. It is corporate policy to make bonus payments only to
eligible staff who are employed within the ICF Kaiser International, Inc.
group of compensation when bonuses are distributed. The amount of bonus
paid, if any, will depend upon your individual performance, particularly as
measured by the level of accomplishment of your agreed objectives.
E. MOTOR VEHICLES
The Company will provide you with a fully maintained motor vehicle in the
price range A$55,000 to A$80,000. You will have the option to use salary
sacrifice and a novated lease (or equivalent) arrangement, should you
request a vehicle in excess of that price range, upon terms and conditions
to be agreed with the President, IOG.
F. OPTION TO PURCHASE SHARES
You will be granted ten thousand (10,000) options to purchase ICF Kaiser
International, Inc. Common Stock as soon as practicable after commencement,
with a term of 4-1/4 years from the date of grant, a strike price equal to
the average of the closing prices of the 20 trading days immediately
preceding the date of grant, and vesting 25% on each anniversary of the
date of grant provided that you remain in the employ of a company within
the ICF Kaiser International, Inc. group of companies. Should your
employment with the Companies terminate for any reason during the first
four years of the term of these options, those options which have vested
before your termination will remain exercisable for ninety (90) days after
your termination.
-3-
<PAGE>
G. HOLIDAYS
Public holidays gazetted for Perth, Western Australia are:
New Year's Day
Australia Day
Labour Day
Good Friday
Easter Monday
Anzac Day
Foundation Day
Queen's Birthday
Christmas Day
Boxing Day
Where a Public Holiday falls during a period of Annual Leave one working
day shall be added to that period of leave.
H. OCCUPATIONAL HEALTH AND SAFETY
Attached to this letter is a copy of the Health and Safety Policy for the
Company. Your position with the Company embraces certain responsibilities
that are fundamental to the ability of the Company to attain its stated
safety goals, therefore you should read and understand this policy as it is
a condition of employment that you fully support the statement contained
therein.
I. QUALITY STATEMENT
Attached to this letter is a copy of the Quality Policy Statement for the
Company. Procedures are in place to ensure our quality standards are
maintained and your active participation in our Quality Management
Programme is required.
-4-
<PAGE>
ATTACHMENT III
ICF KAISER INTERNATIONAL, INC.
AGREEMENT ON IDEAS, INVENTIONS AND
CONFIDENTIAL INFORMATION
To induce ICF Kaiser International, Inc. and/or its subsidiary companies
(collectively, the Company) to employ me or to continue to lease my services and
in consideration of the Company's leasing of said services, I agree as follows:
1. This Agreement covers all information concerning data processing,
technical, engineering, administrative, management, financial or marketing
activities (such as specifications, procedures, software, programs,
techniques, plans and procedures, information processing, processes,
business plans, marketing plans and strategies, customer names, employee
data, and cost and financial data) and physical embodiments of such
information (such as drawings, specification sheets, schematics, flow
charts, logic diagrams, graphs, procedural diagrams, recording media for
machine information processing systems, documentation, contracts, reports,
customer lists of potential or current customers, manuals, proposals, maps,
work sheets, printouts, employment records pertaining to employees other
than myself, correspondence, forms, check lists, samples and any other
written expressions fixed in any tangible material).
2. I understand that all items of information listed in paragraph 1 are
valuable trade secrets for which the Company has expended and will expend
considerable sums to protect and which I must hold in trust and strictest
confidence for the exclusive purpose of performing my assigned duties and
fulfilling my responsibilities to the Company.
3. I understand that the Company claims copyright on all items listed in
paragraph 1 and that the Company, when appropriate, will register or has
registered such items with the relevant authority.
4. Both during and after my employment by the Company, I will not disclose or
deliver to anyone, whether employed by or outside the Company, except as
authorized by the Company, or use in any way other than in the Company's
business, any information or material as defined in paragraph 1of this
Agreement relating to the business of the Company (including information or
material received by the Company from others) and intended by the Company
to be kept in confidence by recipients of such information. My
confidentiality obligations under paragraphs 2 and 4 of this Agreement
shall not apply to any information that becomes generally known to the
public by reason other than by breach of this Agreement.
5. I will not remove any material covered by paragraph 1 from the Company's
premises or make any copies of such material, except for use in the
Company's business. I will return to the Company all such material and
copies at any times upon request of the Company and, in any event and
without such a request, prior to the termination of my employment by the
Company.
-5-
<PAGE>
6. I will not disclose to the Company or use in the Company's business any
information or material relating to the business of any third person and
intended by that person not to be disclosed to the Company.
7. I hereby assign to the Company all of my right, title and interest in and
to any inventions and ideas, patentable or not, that I make, conceive or
develop, alone or with others, during the period of time in which I am
employed by the Company and that relate in any way to the actual or
prospective business of the Company.
8. I will disclose, promptly and on a regular basis, to the Company all
inventions and ideas covered by paragraph 7 and I will, upon request,
execute specific assignments and take any action that the Company may
request to secure patents or otherwise secure its proprietary rights in
such inventions or ideas.
9. I acknowledge that all writings including, without limitation, software
program code, logic diagrams, engineering drawings, procedural diagrams and
graphics or maps produced by me in the course of my work for the Company
are works produced for hire and are the property of the Company, including,
without limitation, any copyrights on these writings but, to the extent any
writings may not, by operation of law or otherwise, be works made for hire.
I hereby assign to the Company the ownership of copyright in such works,
whether published or unpublished, and I agree to execute any further
documents necessary to perfect the Company's title in any such works or
copyrights therein at any time.
10. I will not submit any writing for publication or deliver any speech that
contains any information relating to the business of the Company, unless I
receive advance written clearance from an authorized representative of the
Company.
11. I acknowledge that I am subject to immediate dismissal by the Company for
any breach of this Agreement and that such a dismissal will not relieve me
from my continuing obligations under this Agreement or from the imposition
by a court of any judicial remedies, such as money damages or an injunction
for such a breach.
12. This is my entire agreement with the Company with respect to its subject
matter as of its date, superseding any prior negotiations and agreements.
This Agreement may not be changed in any respect, except by a written
agreement signed by both myself and an officer of the Company.
Signed:____________________ Witness:___________________
___________________________ ___________________________
(Type or print full name) (Type or print full name)
Date:______________________
-6-
<PAGE>
ATTACHMENT IV
ICF Kaiser International, Inc.
Annual Incentive Bonus Terms
Name: Richard A. Leupen
Title: President, International and Executive Vice President
Overview:
. This Attachment A describes the annual incentive bonus plan in which the
named executive will participate from 6/1/99 through 5/31/00.
. The executive's performance will be assessed against the following
objectives as described in this Attachment A:
- Cost Savings
- EBITDA Improvement
COST SAVINGS
- ------------
Goal: $19 million in total Company cost savings, including $3 million in
International operations cost savings, achieved between 3/31/99 and 11/30/99
Measurement:
Reduction in the annualized run rate of the Company's costs, exclusive of the
costs associated with the discontinued operations of the EFM and Consulting
Groups, as set forth in the financial statements of the Company as filed with
the Securities and Exchange Commission and prepared in accordance with GAAP on a
consistent basis, as compared to the annualized run rate of such costs for the
quarter ended March 31, 1999.
Cost savings will be measured on three Measurement Dates as indicated below, and
will be based on costs for the month ending on each of the three Measurement
Dates. For purposes of measuring cost reductions, costs will be categorized as
either direct (those incurred directly and solely for the benefit of a project)
or indirect (those incurred for the general operations of the Company).
Direct Costs:
To reflect the fact that direct costs may increase as the business begins to
prosper, direct cost reductions will be measured as follows:
Changes in direct subcontract and materials will be excluded from measurement.
Changes in direct labor and fringe benefits will be measured based on the change
in the relationship of such costs to service revenue.
1
<PAGE>
ATTACHMENT IV
ICF Kaiser International, Inc.
Annual Incentive Bonus Terms
Name: Richard A. Leupen
Example of Direct Cost Savings Calculation:
<TABLE>
<CAPTION>
Annualized Rate
Thru March 31, 1999 at Measurement Date
------------------ ---------------------------------
<S> <C> <C> <C>
Service revenue $ 27,877 $ 111,000
Direct labor and fringe 17,837 66,600
Direct labor and fringe costs
as a % of service revenue 64% 60%
Improvement in gross margins 4%
Actual annual labor and fringe $ 66,600
-----------
Savings credit $ 2,664
===========
</TABLE>
Indirect Costs:
The measurement of indirect cost savings will be calculated from costs for the
month ending on the Measurement Date, excluding any costs incurred prior to the
Measurement Dates set forth below that were incurred to effect future cost
reductions, such as severance, lease buyouts, litigation defense costs and
settlements, employee retention incentives, and any other nonrecurring costs
incurred outside the ordinary course of business for a non-troubled company
(collectively, "Restructuring Costs").
Total annualized indirect costs as of the March 31, 1999 financial statements
was $68,468 (none of which were Restructuring Costs).
Example of Indirect Cost Savings Calculation:
Indirect cost benchmark - March 31, 1999 $ 68,468
Total indirect costs incurred during
measurement period $ 5,000
Less: Restructuring Costs (500)
--------
Adjusted indirect costs incurred during
measurement period $ 4,500
--------
Annualized $ 54,000
--------
Savings from indirect costs $ 14,468
========
2
<PAGE>
ATTACHMENT IV
ICF Kaiser International, Inc.
Annual Incentive Bonus Terms
Name: Richard A. Leupen
Thus, under the foregoing two examples, "Cost Savings" (in thousands) for the
month would equal $17,102, which is the sum of $2,664 (annualized direct cost
savings) and $14,468 (annualized indirect cost savings).
Following each Measurement Date the executive shall submit to the Compensation
and Human Resources Committee (the "Compensation Committee") a report showing
the computation of Operating Cost savings in accordance with this Attachment A
and the amount of bonus, if any, due with respect to the period ending on the
Measurement Date.
Target Cost Savings Bonus:
Total Company: $ 13,000
International Operations: $ 52,000
Performance Measurement and Payout:
. Performance is measured on the three Measurement Dates shown below:
. At each Measurement Date, the actual bonus earned will be calculated by
multiplying (i) the target bonus amounts for total Company and
International operations, by (ii) the percentage (but not more than 100%)
that actual cost savings achieved for the month ending on the Measurement
Date bears to total target cost savings (i.e., $19 million and $3 million,
respectively), by (iii) the appropriate timing incentive for the
Measurement Date as specified in the table below. This amount will be
reduced by the amount of any cost savings bonus earned at an earlier
Measurement Date.
Measurement Date Timing Incentive
---------------- ----------------
7/31/99 100%
9/30/99 95%
11/30/99 85%
. Incentive earned will be paid within 10 days after review of the
computation of cost savings as of each Measurement Date by the Compensation
Committee.
3
<PAGE>
ATTACHMENT IV
ICF Kaiser International, Inc.
Annual Incentive Bonus Terms
Name: Richard A. Leupen
EBITDA IMPROVEMENT
- ------------------
Goal: Annual run rate of $6 million of EBITDA (excluding Kaiser-Hill)
Target Incentive: $65,000
Performance Measurement and Payout:
. Performance will be measured by comparing the Company's actual EBITDA
annual run rate for the five months ending May 31, 2000 (excluding Kaiser-
Hill), as reported in the Company's financial statements, to the EBITDA
target of $6 million (excluding Kaiser-Hill).
. A minimum of 50% of the goal must be achieved to qualify for payment. If
less than 50% of the goal is achieved, no EBITDA improvement incentive will
be paid.
. The target incentive will be multiplied by the actual percentage (but not
more than 100%) of EBITDA achieved as follows:
Percentage Earned = Actual EBITDA
-------------
$6 million
. Up to 100% of target incentive can be earned.
. Following May 31, 2000, the executive shall submit to the Compensation
Committee a report showing the computation of the amount of bonus, if any,
due hereunder. Incentive earned will be paid within 10 days after review of
the computation by the Compensation Committee.
4
<PAGE>
EXHIBIT 12
ICF KAISER INTERNATIONAL, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in thousands)
<TABLE>
<CAPTION>
Ten months Year ended Six months
Year Ended ended ---------------------------------------- ended
February 28, December 31, December 31, December 31, December 31, June 30,
1995 1995 1996 1997 1998 1999
------------- ------------ ------------ ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before income
taxes, minority interest or
income or loss from equity
investees, discontinued
operations, extraordinary
item and cumulative effect
of accounting change $(2,848) $ 3,180 $10,469 $ 260 $(103,146) $(26,495)
============ ============ ============ ============ ============ ==========
Total Fixed Charges:
Interest expense $14,799 $13,255 $17,334 $18,276 $ 20,279 $ 12,209
============ ============ ============ ============ ============ ==========
Income (loss) before income
taxes, minority interest or
income or loss from equity
investees, discontinued
operations, extraordinary
item and cumulative effect
of accounting change plus
fixed charges $11,951 $16,435 $27,803 $18,536 $ (82,867) $(14,286)
============ ============ ============ ============ ============ ==========
Ratio of earnings to fixed
charges (A) 1.24 1.60 1.01 (A) (A)
============ ============ ============ ============ ============ ==========
</TABLE>
(A) Earnings for these periods are inadequate to cover fixed charges. The
deficiency, calculated as the dollar amount of earnings required to attain a
ratio of one-to-one, for the year ended February 28, 1995, December 31, 1998
and the six months ended June 30, 1999 was $2,848, $103,146 and $26,495,
respectively.
<PAGE>
EXHIBIT 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of ICF Kaiser International, Inc. and its subsidiaries of
our report dated April 15, 1999 relating to the consolidated financial
statements and financial statement schedule appearing in ICF Kaiser
International, Inc. and subsidiaries' Annual Report on Form 10-K for the year
ended December 31, 1998. We also consent to the references to us under the
heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
McLean, Virginia
September 3, 1999
