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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------
Form 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 1998
Commission File No. 1-12248
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ICF KAISER INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 54-1437073
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
9300 Lee Highway, Fairfax, Virginia
(Address of principal executive offices)
22031-1207
(Zip Code)
Registrant's telephone number, including area code: (703) 934-3600
Name of each exchange on which registered:
New York Stock Exchange
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $0.01 per share
Preferred Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes No. X
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of Common Stock held by non-affiliates of the
registrant was $14.5 million based on the New York Stock Exchange Composite
Tape closing price of $0.75 on March 31, 1999.
On March 31, 1999, there were 24,270,978 shares of Common Stock outstanding.
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PART I
Item 1. Business
ICF Kaiser International, Inc., through its operating subsidiaries, is one
of the nation's largest engineering, construction, program management, and
consulting services companies. In 1998, the Company's Environment and
Facilities Management (EFM), ICF Kaiser Engineers and Constructors (E&C), and
Consulting Groups provided fully integrated services in the public and private
sectors in a variety of areas, including the environment, infrastructure,
transportation, industry, energy, information technology, housing, economic
development, and microelectronics markets. In 1999, the Company sold certain
of its assets and, as a result, ceased certain of its operations. The
"Company" or "ICF Kaiser" in this Report refers to ICF Kaiser International,
Inc. and/or any of its consolidated subsidiaries.
In the second half of 1998, the Board of Directors formed a Special
Committee to consider strategic alternatives for the Company. The Committee
was formed in response to strains brought about by cost overruns associated
with certain Nitric Acid Projects. The Special Committee engaged a financial
advisor and, with its assistance, evaluated various opportunities available to
the Company, including the sale of one or more of the Company's operating
groups.
In March 1999, the Company entered into an agreement pursuant to which it
agreed to sell the majority of its active contracts, and to transfer certain
personnel--all related to its EFM Group--to The IT Group, Inc. of Monroeville,
Pennsylvania, for proceeds of $82 million, less $8 million retained by The IT
Group, Inc. for working capital. The sale closed on April 9, 1999. The Company
retained the net working capital assets of the EFM Group and its 50% ownership
interest in Kaiser-Hill Company, LLC, the entity that serves as the
integrating management contractor at the U.S. Department of Energy's Rocky
Flats Environmental Technology Site near Denver, Colorado.
Also in March 1999, the Company signed a letter of intent to sell its
Consulting Group to certain members of that Group's current management and CM
Equity Partners, L.P. (CMEP), an equity investment firm based in New York
City, for aggregate consideration of approximately $75 million. As of the date
of this Annual Report Form 10-K, the Company expects the sale to be completed
by mid-1999.
Upon completion of the Consulting Group sale, management will focus on
efforts to realign and restructure its remaining operations, largely the E&C
operations, to return the Company to profitability. The E&C Group has
performed a mixture of public- and private-sector engineering and construction
work since the inception of its predecessor, Kaiser Engineers, in 1914.
Unless otherwise noted, all discussions contained in this Report reflect the
historical business operations of the Company during 1998 and prior.
Specifically, the Company's financial information included in this Report does
not give effect to the transactions discussed above or any other events that
have occurred since December 31, 1998.
Certain financial data as of and for the years ended December 31 is as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Gross revenue................................ $1,210,421 $1,108,116 $1,248,443
Service revenue.............................. $ 345,462 $ 426,086 $ 532,116
Operating income (loss)...................... $ (78,361) $ 18,069 $ 21,180
Assets....................................... $ 419,836 $ 399,288 $ 365,973
</TABLE>
Most of the Company's contract backlog is related to public- and private-
sector engineering and construction projects that span from one to five years.
The Company ended 1998 with $3.2 billion in contract backlog. The backlog of
the EFM and Consulting Groups totaled $658 million and $540 million,
respectively, at December 31, 1998. The Company expects to work off 42% of the
$2 billion backlog of the E&C Group and
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Kaiser-Hill. The reduction from $4.1 billion 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. Exclusive of the Rocky Flats backlog at
December 31, 1998, the Company's backlog decreased by 5.8% from December 31,
1997.
The Company's headquarters is located at 9300 Lee Highway, Fairfax, Virginia
22031-1207, and its telephone number is (703) 934-3600. The Company's four
regional headquarters are located as follows:
<TABLE>
<CAPTION>
Western United States Eastern United States Asia/Pacific Europe/Africa/Middle East
- --------------------- --------------------- ------------ -------------------------
<S> <C> <C> <C>
2101
Webster
Street Gateway View Plaza Q.V. 1 Building, Regal House,
Suite
1000 1600 West Carson St George's Terrace, London Road,
Oakland,
CA Pittsburgh, PA Perth, WA 6000 Australia Twickenham, Middlesex,
94612-
3060 15219 61-89-366-5366 TW1-3QQ, England
(510)
419-
6000 (412) 497-2000 44-181-892-4433
</TABLE>
Other domestic offices include Tempe, Arizona; Los Angeles, Sacramento, San
Diego, San Rafael, and Sherman Oaks, California; Mystic, Connecticut; Golden,
Colorado; Washington, DC; Brooksville, Ft. Lauderdale, Jacksonville, Lake
City, Miami, Orlando, Ruskin, and Tampa, Florida; Atlanta, Georgia; Boise,
Idaho; Ashland and Hawesville, Kentucky; Ruston, Louisiana; Baltimore,
Beltsville and Lexington Park, Maryland; Boston, Massachusetts; Kansas City,
Missouri; Albuquerque, New Mexico; New York City; Greensboro and Research
Triangle Park, North Carolina; Middletown, Pennsylvania; Baytown and Houston,
Texas; Lehi and Ogden, Utah; Richmond, Virginia; and Seattle, Washington. The
Company's other international offices include Brisbane and Sydney, Australia;
Toronto, Ontario, Canada; Ostrava and Prague, Czech Republic; Paris, France;
Hong Kong; Budapest, Hungary; Mexico City, Mexico; Rio de Janeiro, Brazil;
Manila, the Philippines; Lisbon, Portugal; Moscow, Russia; and Istanbul,
Turkey. Before the sale of its Environment and Facilities Management Group,
the Company also had offices at Sacramento, California; Lakewood, Colorado;
Titusville, Florida; Savannah, Georgia; Chicago, Illinois; Edgewood and
Hollywood, Maryland; Las Vegas, Nevada; Iselin and Mount Arlington, New
Jersey; Los Alamos and Santa Fe, New Mexico; Albany and Tonawanda, New York;
Greensboro, North Carolina; and Richland, Washington.
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 1988, the Company acquired the Kaiser Engineers business, which dates from
1914. As of March 31, 1999, ICF Kaiser had 4,854 employees. Following the
completion of the EFM sale on April 9, 1999, there were 583 fewer employees.
Overview of Markets Served by the Company
Environmental. In the environmental market in 1998, the Company provided
services in connection with the remediation of hazardous and radioactive
waste, waste minimization and disposal, risk assessment, global
warming and acid rain, alternative fuels, and clean up of harbors and
waterways. Demand for ICF Kaiser's environmental services was driven by a
number of factors, including the need to restore contaminated sites formerly
used for weapons production or military bases; the need to comply with
federal, state, and municipal environmental regulation and enforcement
regarding the quality of the environment; the need to bring aging production
facilities into compliance with current environmental regulations; the need to
minimize waste generation on an ongoing basis; and the need to reduce or
forestall liability associated with pollution-related injury and damage. In
addition, there is a growing international market arising from the increased
awareness of the need for additional and/or initial environmental regulations,
studies, and remediation.
A significant portion of future U.S. Departments of Defense (DOD) and Energy
(DOE) environmental expenditures will be directed to cleaning up hundreds of
military bases with thousands of contaminated sites and to restoring
contaminated former nuclear weapons facilities. DOD has stated that there is
an urgent need to ensure that the hazardous wastes present at these sites
(often located near population centers) do not pose a threat
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to the surrounding population, and, in connection with the closure of many
military bases, there is an economic incentive to make sure that the
environmental restoration enables these sites to be developed commercially by
the private sector. DOE has long recognized the need to stabilize and safely
store nuclear weapons materials such as plutonium, to clean up areas
contaminated with hazardous and radioactive waste, and restore the weapons
sites to the public.
Significant environmental laws have been enacted in the United States in
response to public concern about the environment. These laws and the
implementing regulations affected nearly every industrial activity, and
efforts to comply with the requirements of these laws, create demand for the
Company's services. The principal federal legislation that has created a
substantial market for the Company, and therefore has the most significant
effect on the Company's business, includes the following: The Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA) of 1980, as
amended by the Superfund Amendments and Reauthorization Act (SARA) of 1986,
established the Superfund program to clean up existing, often abandoned,
hazardous waste sites and provides for penalties and punitive damages for
noncompliance with U.S. Environmental Protection Agency (EPA) orders. The
Resource Conservation and Recovery Act (RCRA) of 1976, as amended by the
Hazardous and Solid Waste Amendments of 1984 (HSWA), provides a comprehensive
scheme for the regulation of hazardous waste from the time of generation to
its ultimate disposal (and sometimes thereafter), as well as the regulation of
persons engaged in the treatment, storage, and disposal of hazardous waste.
The Clean Air Act as amended in 1970 empowered EPA to establish and enforce
National Ambient Air Quality Standards, National Emission Standards for
Hazardous Air Pollutants, and limits on the emission of various pollutants.
The 1990 amendments to the Clean Air Act substantially increased the number of
sources emitting a regulated air pollutant which will be required to obtain an
operating permit; the amendments also address the issues of acid rain and
ozone protection. The Clean Water Act of 1972, originally the Federal Water
Pollution Control Act of 1948, established a system of standards, permits, and
enforcement procedures for the discharge of pollutants to surface water from
industrial, municipal, and other wastewater sources. The Toxic Substance
Control Act, enacted in 1976, established requirements for identifying and
controlling toxic chemical hazards to human health and the environment.
Infrastructure and Transportation. Both the domestic and international
infrastructure and transportation markets are driven by the need to maintain
and expand ports, roads, highways, rail and bus systems, bridges, people
movers, airports, and water resource facilities. Increasingly, environmental
concerns, such as wastewater treatment and the reduction of automotive air
pollutant emissions, have become a driving force behind new infrastructure and
transportation initiatives. These markets primarily are funded by government
dollars, although the private sector is seeking an increased role,
particularly in international projects where there is a critical need for
infrastructure and transportation projects because of the population growth of
major cities.
Industry. The industry market in a modern, global economy provides the base
for the production of industrial metals and chemicals. This market is driven
by the need to maintain and retrofit existing plants, to build new facilities
such as those required for the burgeoning microelectronics industry, to
replace aging production capacity with newer, more efficient and more
environmentally responsible facilities, and to reduce costs, improve quality,
and enhance competitiveness. Basic industrial materials include iron, steel,
alumina/aluminum, chemicals, and copper.
Other Markets. Traditionally DOD has maintained most of its own facilities
and performed its own facility activities, but it is now in the process of
transferring many of these responsibilities to private contractors and private
owners. The "privatization" market has been created by the government's
selling an asset or revenue stream--such as military housing and electric,
water, and wastewater utilities on a military base--to a private company,
which is then responsible for maintenance and operation. The "outsourcing"
market has been created by private contractors' taking over site activities
currently conducted by government, often military, personnel. The information
technology market is driven by the increasing need for software and software
tools to manage such diverse activities as financial management, accounting,
and reporting capabilities; forecasting wholesale power pricing by independent
and electric bulk power marketers; energy-use patterns; and energy use,
billing, and monitoring.
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Business Groups
During the fiscal year ended December 31, 1998, the Company was organized
into three business groups: Environment and Facilities Management (EFM); ICF
Kaiser Engineers and Constructors (E&C); and Consulting. Please refer to the
Company's consolidated financial statements for information concerning the
historical financial performance of each of these Groups. In April 1999, the
Company sold certain assets related to its EFM Group. See above. Following is
a description of each business group's activities.
Environment and Facilities Management (EFM)
Before the sale of the EFM Group, the Company's largest single contract was
managed by the EFM Group and performed through Kaiser-Hill Company, LLC, a
limited liability company owned equally by the Company and CH2M Hill
Companies, Ltd. (Kaiser-Hill). After the EFM sale, the Company retained its
50% ownership of Kaiser-Hill. In 1995, Kaiser-Hill won 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, and under the five-year contract, Kaiser-Hill is working
to stabilize and safely store more than 14 tons of plutonium at the site, to
clean up areas contaminated with hazardous and radioactive waste, and to
restore much of the 6,000-acre site to the public.
The EFM Group oversaw major program management and technical support
contracts for U.S. government agencies, particularly DOE and DOD. Examples of
the Group's projects in 1998 include providing technical support for
environmental restoration projects at certain of DOE's former weapons
production facilities; conducting hazardous, toxic, and radioactive waste
cleanups for the U.S. Army under two Total Environmental Restoration Contracts
(TERC); and providing technical and analytical support to the EPA Superfund,
RCRA, and other environmental programs. Another focus of this Group was to
provide support to DOD's privatization and outsourcing initiatives. As part of
a joint venture, the group provided facilities management support to NASA and
the U.S. Air Force at the Kennedy Space Center and nearby rocket launch sites
under a $2.2 billion contract.
Under the multi-year TERC contracts, the EFM Group provided environmental
restoration services to the U.S. Army Corps of Engineers (USACE) at federal
installations in California, Arizona, Nevada, and Utah (USACE South Pacific
Division) and in the Eastern Atlantic states encompassing USACE's Baltimore,
Maryland, District. The services provided under the TERCs include remedial
investigation and feasibility studies of contaminated sites and performing
remedial action and site cleanup activities. The Group also provided
environmental services to USACE, Savannah (Georgia) District, under several
contracts, including a contract to support the Corps' South Atlantic Division.
Tasks performed by the Group under this contract include site assessments,
risk assessments, remedial investigations, feasibility studies, remedial
design, and construction support at sites throughout the Savannah District,
especially at the Milan Army Ammunition Plant in Tennessee. Under a similar
contract with the U.S. Army Environmental Center, the Group provided a full
range of technical support for site investigation and remediation projects at
Aberdeen Proving Ground and other Army facilities. Under contracts with DOE,
the Group also conducted environmental restoration and cleanup activities at
DOE's Los Alamos National Laboratory in New Mexico and provided support
services for major projects at DOE's Hanford Site in Richland, Washington.
The Environment and Facilities Management Group was responsible for all of
the Company's environmental services to private-sector businesses, including
compliance planning, audits, and permitting; risk assessment, site
investigations, and feasibility studies; remedial design, construction, and
construction management; operation and maintenance of remedial systems;
decontamination and decommissioning of facilities; and community relations,
Clean Air Act strategies, and expert witness support. Private-sector
environmental clients include chemical plants; aerospace manufacturers; iron,
steel, and aluminum producers; oil and gas refineries; pharmaceutical
companies; the communications industry; and heavy industrial manufacturers.
Representative projects included providing remedial design, procurement, and
construction management services for a Superfund site remediation project; and
engineering and specification development for an in-situ groundwater
remediation system at a paint manufacturing facility in Maryland.
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ICF Kaiser Engineers and Constructors (E&C)
All of the E&C Group's markets are global in nature, and the Group provides
engineering, procurement, construction, program management, and consulting
services in numerous technology sectors through companies managed and staffed
by local professionals in Australia, Brazil, the Czech Republic, England,
France, the Philippines, Portugal, Taiwan, Turkey, and the United States, as
well as through project offices throughout the world. To capitalize on
international opportunities while minimizing its business development risks,
the Group has established international business relationships through joint
ventures, marketing agreements, and direct equity investments.
Industry Services. The E&C Group's engineering, procurement, construction,
project management, and consulting services to the industrial market involve
work with the iron, steel, alumina/aluminum, copper, and other minerals and
metals industries, as well as chemicals and heavy manufacturing. Current
projects include detailed design engineering, procurement, and construction
management for the expansion of an alumina refinery in Western Australia;
engineering and design services for an aluminum smelter expansion project in
the Midwestern United States; and upgrades for coke manufacturing operations
at a major steelmill in China.
The Group assists clients in private industry by providing the engineering,
construction, and program management skills needed to maintain and retrofit
existing plants and replace aging production capacity with newer, more
environmentally responsible facilities. A very significant international
industrial project is a mini-mill project for Nova Hut, a.s., an integrated
steel maker based in the Ostrava region of the Czech Republic. In March 1996,
ICF Kaiser was awarded a contract to provide turnkey engineering and
construction of the first phase of a facility that will receive liquid steel
from Nova Hut's existing steelmaking facilities. The facility will include a
ladle metallurgy furnace and a single-strand dual slab caster. ICF Kaiser also
is responsible for site development and related infrastructure. The successful
startup in late 1997 included preliminary acceptance of the first phase of the
facility by the owners, as well as production of steel ahead of schedule.
Under a second-phase contract awarded in 1997, the E&C Group is installing an
equalizing furnace, a reversing two-stand steckel mill, and associated
facilities. It is expected that the second phase will be completed in late
1999.
Infrastructure Services. The E&C Group provided engineering and construction
management services to build rail and bus systems, highways and bridges,
airports, high-speed rail, peoplemovers, and water resources projects in
domestic and international markets. Infrastructure funding at the federal,
state, and local levels is expected to increase in 1999, which will provide
opportunity for growth in the Group's infrastructure services business. The
Group currently is active in major U.S. metropolitan areas, providing
planning, design, construction management, and program management services in
Seattle (light rail project), San Francisco (commuter rail system renovation),
and Orlando (light rail initiative).
In the international infrastructure market, the Group's large-scale
construction infrastructure skills are at work in Manila, the Philippines,
where it is the program manager for the construction of a light rail transit
line, a project for which ICF Kaiser supported development and financing since
inception; in Portugal, where the Group provides program management of the
overhaul and upgrade of Portugal's main intercity freight and passenger rail
lines; and in Turkey, where the Group is providing construction management
services for the first phase of a light rail system as part of a joint
venture.
The major ports of many of the world's cities have serious water pollution
problems, and the E&C Group is helping to improve the condition of many
harbors and waterways. In its largest harbor project, the Group continues as
the construction manager of the cleanup of Boston Harbor, one of the largest
environmental projects in the country, under a contract extension that runs
through 2002. Since the inception of the project in 1988, the Group has served
as its construction manager and currently manages construction workers,
engineers, architects, and support personnel working to construct a wastewater
treatment plant on Deer Island in Boston Harbor,
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Massachusetts. The Group also is providing construction management services
for the construction of the Walnut Hill Water Treatment Facility for the
metropolitan Boston area. In Brazil, the E&C Group is providing program
management services for the construction of sanitation and wastewater systems
for communities surrounding Guanabara Bay.
Consulting
The Consulting Group serves customers in domestic and international markets,
including both public- and private-sector organizations. Among its major
customers are U.S. government agencies, especially EPA; U.S. private-sector
organizations, particularly major energy producers, such as utilities and oil
companies; and governments and businesses around the world, as well as
multinational banks, development organizations, and treaty organizations. The
Consulting Group draws upon the talents of its multidisciplinary professional
staff to support customers within five lines of business.
In March 1999, the Company signed a letter of intent to sell its Consulting
Group to certain members of that Group's current management and CM Equity
Partners, L.P. (CMEP), an equity investment firm based in New York City, for
aggregate consideration of approximately $75 million. The Company expects the
sale to be completed by mid-1999.
Energy. This line of business supports the development of corporate and
technical plans for managing power resources and energy projects (including
transmission and distribution, power generation, and customer service),
provides economic assessments of short- and long-term market conditions for
various fuels, and provides expert support in litigation and regulatory
proceedings. The Consulting Group assists its customers in identifying market
opportunities, commercializing new technologies, and developing public policy;
it links energy markets with energy technology.
Environmental. This line of business assists customers in developing plans
and policies, evaluating options for managing environmental responsibilities
in the most cost-effective manner, and identifying and employing the best
available technologies and practices. The Group has special expertise in such
areas as industrial and municipal waste management, air pollution control,
chemical accident prevention, and groundwater and drinking water management.
The Consulting Group also provides technical and regulatory support to EPA's
Office of Solid Waste, focusing on human health and ecological risk assessment
and waste characterization.
Global environmental issues are also a particular area of focus within the
Consulting Group. The Consulting Group works with U.S., international, and
private-sector organizations that fund global environmental work and has been
actively involved in supporting international environmental treaties. Working
on global change issues for EPA for 16 years, the Company supports the EPA's
Global Change Division, providing services related to the reduction of methane
and other greenhouse gases.
Transportation. Transportation-related capabilities include an in-depth
working knowledge of the legislative and policy issues facing the
transportation industry; broad modeling and economic analytical capabilities
that evaluate the full range of economic and policy trade-offs inherent in
transportation decisions; and extensive planning and mission support
experience with multinational and government organizations that operate in
transportation-related areas throughout the globe.
Economic and Community Development. This practice provides training,
technical assistance, program support, and research services related to
affordable housing and community development. Additionally, the Consulting
Group helps federal agencies, cities, states, and nonprofit organizations to
design and implement programs that provide affordable, cost-effective housing,
to promote business and economic development, and to help revitalize
deteriorated neighborhoods.
Information Management. The Group assists clients in developing decision
support systems that facilitate the collection and use of information to track
performance, identify opportunities, and improve decision making.
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The Group offers a number of simulation models and proprietary applications.
By combining consulting expertise with information technology skills, the
Group helps its customers deal with the unique challenges of their business
environments.
General Information about the Company
Competition and Contract Award Process
The market for the Company's services is highly competitive. The Company and
its consolidated subsidiaries compete with many other engineering,
construction, program management, and consulting services firms ranging from
small firms to large multinational firms having substantially greater
financial, management, and marketing resources than the Company. 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. The Company'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 the Company'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 Proposal (RFP) that delineates the size and scope of
the proposed contract. Proposals are evaluated by the government on the basis
of technical merit (for example, response to mandatory solicitation
provisions, corporate and personnel qualifications, and experience) and cost.
The Company 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, the Company, 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. The Company
maintains a large network of business relationships with other companies and
has drawn repeatedly upon these relationships to form winning teams.
Contract Structure. The Company's consolidated subsidiaries operate 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, the Company'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 the Company is paid at
a specified fixed hourly rate for direct labor hours worked. Under Fixed-Price
contracts, the Company 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 the Company 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 the Company
experiences cost overruns that are not recoverable from the client.
Customers
The Company's domestic clients include 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. DOE
accounted for approximately 54% of the Company'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.
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The Company'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 the
Company's consolidated gross revenue, respectively. For information concerning
gross revenue, operating income, and identifiable assets of the Company's
business by geographic area, see Note 12 to the consolidated financial
statements.
Backlog
Backlog refers to the aggregate amount of gross contract revenue remaining
to be earned pursuant to signed contracts extending beyond one year. The
Company ended 1998 with $3.2 billion in contract backlog. The backlog of the
EFM and Consulting Groups totaled $658 million and $540 million, respectively,
at December 31, 1998. The Company expects to work off 42% of the $2 billion
backlog. The reduction from $4.1 billion 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. Exclusive of the Rocky Flats backlog at December
31, 1998, the Company's backlog decreased by 5.6% from December 31, 1997.
Because of the nature of its contracts, the Company does not calculate the
amount or timing of service revenue that might be earned pursuant to these
contracts. The Company believes that backlog is not a predictor of future
gross or service revenue.
Differences in contracting practices between the public and private sectors
result in the Company's backlog being weighted heavily toward contracts
associated with departments and agencies of the federal government. Backlog
under contracts with the federal government that extend beyond the
government's current fiscal year includes the full contract amount, including,
in many cases, amounts anticipated to be earned in option periods and certain
performance fees, even though annual funding of the amounts under such
contracts generally must be appropriated by Congress before funds can be
expended during any year under such contracts. In addition, departments and/or
agencies must allocate the appropriated funds to these specific contracts and
thereafter authorize work or task orders to be performed under these specific
contracts. Such authorizations are generally for periods considerably shorter
than the duration of the work the Company expects to perform under a
particular contract and generally cover only a percentage of the contract
revenue. Because of these factors, the amount of federal government contract
backlog for which funds have been appropriated and allocated, and task orders
issued, at any given date is a substantially smaller amount than the total
federal government contract backlog as of that date. In the event that option
periods under any given contract are not exercised or funds are not
appropriated, allocated, or authorized to be spent under any given contract,
the amount of backlog attributable to that contract would not result in
revenue to the Company. All contracts and subcontracts with departments and/or
agencies of the federal government are subject to termination, reduction, or
modification at any time at the discretion of the government.
Potential Environmental Liability
The assessment, analysis, remediation, handling, management, and disposal of
hazardous substances necessarily involve significant risks, including the
possibility of damages or personal injuries caused by the escape of hazardous
materials into the environment, and the possibility of fines, penalties, or
other regulatory action. These risks include potentially large civil and
criminal liabilities for violations of environmental laws and regulations, and
liabilities to customers and to third parties for damages arising from
performing services for clients.
Potential Liabilities Arising Out of Environmental Laws and Regulations
All facets of the Company's business are conducted in the context of a
rapidly developing and changing statutory and regulatory framework. The
Company's operations and services are affected by and subject to regulation by
a number of federal agencies, including EPA and the Occupational Safety and
Health Administration, as well as applicable state and local regulatory
agencies.
8
<PAGE>
CERCLA addresses cleanup of sites at which there has been a release or
threatened release of hazardous substances into the environment. Increasingly,
there are efforts to expand the reach of CERCLA to make environmental
contractors responsible for cleanup costs by claiming that environmental
contractors are owners or operators of hazardous waste facilities or that they
arranged for treatment, transportation, or disposal of hazardous substances.
Several recent court decisions have accepted these claims. Should the Company
be held responsible under CERCLA for damages caused while performing services
or otherwise, it may be forced to bear such liability by itself,
notwithstanding the potential availability of contribution or indemnity from
other parties.
RCRA governs hazardous waste generation, treatment, transportation, storage,
and disposal. RCRA, or EPA-approved state programs at least as stringent,
govern waste handling activities involving wastes classified as "hazardous."
Substantial fees and penalties may be imposed under RCRA and similar state
statutes for any violation of such statutes and the regulations thereunder.
Potential Liabilities Involving Clients and Third Parties
In performing services for its clients, the Company 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.
Environmental contractors, in connection with work performed for clients,
potentially face liabilities to third parties from various claims, including
claims for property damage or personal injury stemming from a release of
hazardous substances or otherwise. Claims for damage to third parties could
arise in a number of ways, including through a sudden and accidental release
or discharge of contaminants or pollutants during the performance of services;
through the inability, despite reasonable care, of a remedial plan to contain
or correct an ongoing seepage or release of pollutants; through the
inadvertent exacerbation of an existing contamination problem; or through
reliance on reports or recommendations prepared by the Company. Personal
injury claims could arise contemporaneously with performance of the work or
long after completion of the project as a result of alleged exposure to toxic
or hazardous substances. In addition, increasing numbers of claimants assert
that companies performing environmental remediation should be adjudged
strictly liable, i.e., liable for damages even though its services were
performed using reasonable care, on the grounds that such services involved
"abnormally dangerous activities."
Clients frequently attempt to shift various liabilities arising out of
remediation of their own environmental problems to contractors through
contractual indemnities. Such provisions seek to require the Company to assume
liabilities for damage or personal injury to third parties and property and
for environmental fines and penalties. The Company has endeavored to protect
itself from potential liabilities resulting from pollution or environmental
damage by obtaining indemnification from its private-sector clients and
intends to continue this practice in the future. Under most of these
contracts, the Company has been successful in obtaining such indemnification;
however, such indemnification generally is not available if such liabilities
arise as a result of breaches by the Company of specified standards of care or
if the indemnifying party has insufficient assets to cover the liability. The
Company will continue its efforts to minimize the risks and potential
liability associated with its remediation activities by performing all
remediation contracts in a professional manner and by carefully reviewing any
and all remediation contracts it signs in an effort to ensure that its
environmental clients accept responsibility for their own environmental
problems.
For EPA contracts involving field services in connection with Superfund
response actions, the Company is eligible for indemnification under Section
119 of CERCLA for pollution and environmental damage liability resulting from
release or threatened release of hazardous substances. Some of the Company's
clients (including private clients, DOE, and DOD) are Potentially Responsible
Parties (PRPs) under CERCLA. Under the Company's contracts with these PRPs,
the Company has the right to seek contribution from these PRPs for liability
imposed on the Company in connection with its work at these clients' CERCLA
sites and generally
9
<PAGE>
qualifies for the limitations on liabilities under CERCLA Section 119(a). In
addition, in connection with contracts involving field services at certain of
DOE's weapons facilities, the Company is indemnified under the Price-Anderson
Act, as amended, against liability claims arising out of contractual
activities involving a nuclear incident. Recently, EPA has constricted
significantly the circumstances under which it will indemnify its contractors
against liabilities incurred in connection with CERCLA projects. There are
other proposals both in Congress and at the regulatory agencies to further
restrict indemnification of contractors from third-party claims.
Under Kaiser-Hill's contract with DOE, Kaiser-Hill is not responsible for,
and 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 shall be
reimbursed for the reasonable cost of bonds and insurance allocable to the
Rocky Flats contract and for liabilities (and expenses incidental to such
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.
In connection with its services to its environmental, infrastructure, and
industrial clients, the Company works closely with federal and state
government environmental compliance agencies, and occasionally contests the
conclusions those agencies reach regarding the Company's compliance with
permits and related regulations. To date, the Company never has paid a fine in
a material amount or had material liability imposed on it for pollution or
environmental damage in connection with its services; however, there can be no
assurance that the Company will not have substantial liability imposed on it
for any such damage in the future.
Insurance
The Company has a comprehensive risk management and insurance program that
provides a structured approach to protecting the Company. Included in this
program are coverages for general, automobile, pollution impairment, and
professional liability; for workers' compensation; and for employers and
property liability. The Company believes that the insurance it maintains,
including self-insurance, is in such amounts and protects against such risks
as is customarily maintained by similar businesses operating in comparable
markets. At this time, the Company expects to continue to be able to obtain
general, automobile, and professional liability; workers' compensation; and
employers and property 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 the Company.
The Company 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 the Company's
environmental activities, however, if successful and of sufficient magnitude,
could have a material adverse effect on the Company.
Government Regulation
The Company has a substantial number of cost-reimbursement contracts with
the U.S. government, the costs of which are subject to audit by the U.S.
government. As a result of pending audits related to fiscal years 1986
forward, the government has asserted, among other things, that certain costs
claimed as reimbursable under
10
<PAGE>
government contracts either were not allowable or not allocated in accordance
with federal procurement regulations. The Company is actively working with the
government to resolve these issues. The Company 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 the Company, and others are qualitative in nature, and
their potential financial impact, if any, is not quantifiable by the
government or the Company at this time. This provision will be reviewed
periodically as discussions with the government progress.
The Company 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. The Company 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 the Company by these agencies. Management
does not believe that there will be any material adverse effect on the
Company's financial position, results of operations, or cash flows as a result
of these investigations.
Federal agencies that are the Company's regular customers (including DOE,
EPA, and DOD) have formal policies against awarding contracts that would
present actual or potential conflicts of interest with other activities of the
contractor. Because the Company provides a broad range of services in
environmental and related fields for the federal government, state
governments, and private customers, there can be no assurance that government
conflict-of-interest policies will not restrict the Company's ability to
pursue business in the future.
Because some of the Company's consolidated subsidiaries provide the federal
government with nuclear energy and defense-related services, these
subsidiaries and a substantial number of their employees are required to have
and maintain security clearances from the federal government. These
subsidiaries and their employees have been able to obtain these security
clearances in the past, and the Company has no reason to believe that there
would be any problems in this area in the future; however, there can be no
assurance that the required security clearances will be obtained and
maintained in the future. Because of its nuclear energy and defense-related
services, the Company is subject to foreign ownership, control, and influence
(FOCI) regulations imposed by the federal government and designed to prevent
the release of classified information to contractors who are under foreign
control or influence. FOCI issues arise particularly in connection with
foreign ownership of the Company's Common Stock, foreign bank participation in
the Company's credit line, and increased foreign sources of the Company's
gross revenue. The Company has implemented procedures designed to insulate
such subsidiaries from any FOCI that might affect the Company. There can be no
assurance that such measures will prevent FOCI policies from affecting the
ability of the Company's subsidiaries to secure and maintain certain types of
federal government contracts.
Employees
As of March 31, 1999, ICF Kaiser had 4,854 employees, and the Company
believes that its relations with its employees are good. Following the
completion of the EFM sale on April 9, 1999, there were 583 fewer employees.
Of the total remaining employees, 1,763 persons are employed at Kaiser-Hill's
Rocky Flats site in Colorado. A total of 1,357 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. The Company believes that its relations with the union are good.
Item 2. Properties
The Company's operations are conducted in leased facilities or in facilities
provided by the federal government or other clients. The Company's
headquarters is located at 9300 Lee Highway, Fairfax, Virginia 22031-1207, and
its telephone number is (703) 934-3600. The Company's regional headquarters
and other offices are listed on page 2 of this Report. Because the Company'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. The
11
<PAGE>
Company believes that adequate space to conduct its operations will be
available for the foreseeable future. For information concerning an investment
by the Company in the Fairfax, Virginia, land and buildings where the
Company's headquarters are located, see Notes 4 and 9 to the consolidated
financial statements.
Item 3. Legal Proceedings
In the course of the Company's normal business activities, various claims or
charges have been asserted and litigation commenced against the Company
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 the Company in such litigation. See Item 1--
"General Information about the Company--Potential Environmental Liability" and
"Government Regulation," Item 7--"Other Items," and Note 13 to the
consolidated financial statements.
Item 4. Submission of Matters to a Vote of Security Holders--None
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Since September 14, 1993, the Common Stock has traded on the New York Stock
Exchange (NYSE) under the symbol "ICF". At March 31, 1999, there were 1,501
shareholders of record. On March 31, 1999, the closing price of the Common
Stock as reported by the NYSE was $0.75. The following table sets forth, for
the periods indicated, the high and low sales prices for the Common Stock as
reported by the NYSE:
<TABLE>
<CAPTION>
Common Stock Price
-------------------
High Low
--------- ---------
<S> <C> <C>
Year Ended December 31, 1997
First Quarter............................................ $ 2.625 $ 1.875
Second Quarter........................................... 2.750 1.875
Third Quarter............................................ 2.875 2.125
Fourth Quarter........................................... 2.813 2.000
Year Ended December 31, 1998
First Quarter............................................ $ 3.000 $ 2.063
Second Quarter........................................... 3.063 2.188
Third Quarter............................................ 2.313 1.125
Fourth Quarter........................................... 1.813 1.188
</TABLE>
The Company's Transfer Agent and Registrar is EquiServe, First Chicago Trust
Division (formerly First Chicago Trust Company of New York), P.O. Box 2536,
Jersey City, NJ 07303-2536. The Shareholder Relations telephone number is
(201) 324-0498, and the First Chicago Web site address is http://www.fctc.com.
The Company has never paid cash dividends on its Common Stock. The Board of
Directors anticipates that no cash dividends will be paid on its Common Stock
for the foreseeable future and that the Company's earnings will be retained
for use in the business.
The Board of Directors determines the Company's Common Stock dividend policy
based on the Company's results of operations, payment of dividends on
preferred stock, financial condition, capital requirements, and other
circumstances. The Company's debt agreements currently do not permit dividends
to be paid on its capital stock. See Note 6 to the consolidated financial
statements.
12
<PAGE>
Item 6. Selected Financial Data
The selected consolidated financial data of the Company for the years ended
December 31, 1998, 1997, and 1996, the ten months ended December 31, 1995, and
the year ended February 28, 1995, have been derived from the Company's audited
consolidated financial statements. This information should be read in
conjunction with the consolidated financial statements and the related notes
thereto appearing elsewhere in this Report and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." Certain
reclassifications have been made to the prior period financial statements to
conform to the presentation used in the December 31, 1998, financial
statements.
Selected Consolidated Financial Data
(in thousands, except per share data)
<TABLE>
<CAPTION>
Ten
Months Year
Ended Ended
December February
Year Ended December 31, 31, 28,
1998 1997 1996 1995 1995
---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Gross revenue............................... $1,210,421 $1,108,116 $1,248,443 $916,744 $861,518
Service revenue(1).......................... 345,462 426,086 532,116 425,896 459,786
Operating income (loss)..................... (78,361) 18,069 21,180 17,505 13,688
Income (loss) before income taxes, minority
interest, and extraordinary item and
cumulative effect of accounting change..... (97,101) 2,561 14,484 6,303 1,239
Net income (loss) before extraordinary item
and cumulative effect of accounting
change..................................... (93,442) (4,987) 5,834 2,252 (1,661)
Basic and Diluted Earnings (Loss) Per Share:
Before extraordinary item and cumulative
effect of accounting change................ $ (3.87) $ (0.22) $ 0.17 $ 0.02 $ (0.18)
Extraordinary item......................... (0.05) -- -- -- --
Cumulative effect of accounting change, net
of tax..................................... (0.25) -- -- -- --
---------- ---------- ---------- -------- --------
Total..................................... $ (4.17) $ (0.22) $ 0.17 $ 0.02 $ (0.18)
========== ========== ========== ======== ========
Weighted average common shares outstanding--
basic...................................... 24,092 22,382 22,035 21,132 20,957
Weighted average common shares outstanding--
diluted.................................... 24,092 22,382 22,057 21,606 20,957
Balance Sheet Data (end of period):
Total assets................................ $ 429,053 $ 399,288 $ 369,462 $370,179 $281,422
Working capital............................. 2,289 91,121 113,898 84,589 91,640
Long-term liabilities....................... 147,152 145,590 161,951 125,818 133,130
Redeemable preferred stock.................. -- -- 19,787 19,617
Shareholders' equity (deficit).............. (63,118) 27,327 34,892 28,427 27,624
</TABLE>
- --------
(1) Service revenue is derived by deducting the costs of subcontracted
services and direct project costs from gross revenue and adding the
Company's share of the equity in income of unconsolidated joint ventures
and affiliated companies.
13
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
Complications resulting from difficulties in executing several large fixed
price contracts involving the construction of plants to produce nitric acid
(the Nitric Acid Projects) caused the Company to recognize provisions for
total contract cost overruns totaling $66.0 million in 1998. A significant
amount of management's activities in 1998 were focused on responding to the
myriad of ramifications stemming from the substantial loss. As discussed in
the following overview, management has now addressed the predominant issues
related to completing the Nitric Acid Projects and financing the related cost
overruns.
Initially, the Company believed that it would incur cost overruns on only
one of the four Nitric Acid Projects being performed by the Company's
Engineers & Constructors (E&C) Group. Accordingly, as of December 1997, it
reversed all profit previously recognized on that specific project. However,
as time passed and as progress was made toward completion of all of the
contracts, it became apparent that the other contracts would incur sizeable
cost overruns as well. The Company's inability to control effectively many
conditions surrounding the projects--including issues involving subcontractor
productivity, reengineering work, customer demands and changes in project
management--paired with other inherent difficulties in large project cost
estimation processes, resulted in the Company's recording cost overrun charges
of $40.0 million, $7.0 million, and $19.0 million in the second, third, and
fourth quarters of 1998, respectively. On April 15, 1999, the last plant began
initial operations and the other three plants were operating and producing
nitric acid above contract-specific minimums. The Company entered into
settlement arrangements with several of the Nitric Acid Project customers and
subcontractors in order to minimize the remaining uncertainties associated
with these projects and to enable the Company to make a reasonable
determination of completion estimates. The Company will also continue to
pursue claims recoveries against certain subcontractors but has not included
any estimate for recoveries in the total recorded $66.0 million cost overrun.
The Company performed extensive reviews and analyses aimed at identifying
the causes of the Nitric Acid Project problems in an effort to mitigate the
risk of similar problems occurring in the future. Partly as a result of these
reviews, the Company recognized an additional charge totaling $10.2 million to
reflect the adjustment of the earned progress to date on several other large
fixed-price projects as well as to provide for reasonable estimates of
reserves for certain risks associated with those projects.
In anticipation of the cash flow and liquidity issues that likely would
result from the Nitric Acid Project cost overruns and intentions for
restructuring actions, in the latter part of 1998, management began to seek
additional sources of financing. Additionally, in the second half of 1998, the
Board of Directors formed a Special Committee to consider strategic
alternatives for the Company. The Special Committee retained a financial
advisor to assist with the potential sale of a portion(s) of the Company. The
Special Committee and senior management have since been focused on completing
both processes, i.e., securing and preserving the short-term financing and the
simultaneous sale of corporate operating assets.
In December 1998, the Company secured an alternate revolving line of credit,
which provided access to increased working capital. However, continued erosion
on the Nitric Acid Projects, combined with growth in the Company's federal
government business areas, soon pushed the Company to maximum available
borrowing levels. Since December 1998, the Company has had to amend the
revolver, resulting in cash borrowing and letter of credit access up to an
aggregate of $30 million with a requirement to provide $10 million in cash
collateral for existing letters of credit and an accelerated expiration date
of June 30, 1999. Additionally the Company has had to extend the average age
of its vendor obligations and carefully manage all cash disbursement activity.
The payment delays to trade creditors may, at least in the short term, have a
negative impact upon the Company's current and future ability to generate and
secure business opportunities.
Also in December 1998, the Company received proposals for the purchase of
several of its major operating activities. After reviewing recommendations
from its financial advisor, the Board of Directors instructed management to
enter into negotiations for the sale of the majority of the assets associated
with two of its operating groups.
14
<PAGE>
On March 9, 1999, the Company entered into a definitive asset purchase
agreement (the EFM Agreement) with The IT Group, Inc. (IT) for the sale of the
Company's Environment and Facilities Management Group (EFM). Pursuant to the
terms of the EFM Agreement, on April 9, 1999, the Company sold the majority of
the active contracts and investments, and transferred a substantial number of
employees to IT for a purchase price of $82 million, less $8 million to be
retained by IT for EFM's working capital requirements. IT also acquired the
Company's interest in various operating leases for equipment and facilities
used by EFM. The Company retained its 50% ownership in Kaiser-Hill.
In March 1999, the Company also announced its intentions to sell its
Consulting Group. On March 8, 1999, a non-binding letter of intent was signed
with CM Equity Partners, L.P. (CMEP), an equity investment firm based in New
York City, and the Group's management for the sale of the majority of the
assets associated with the Consulting Group for $75 million, which is
currently expected to be completed by mid-year 1999.
The cash proceeds from the completed sale of EFM and the pending Consulting
Group sale, net of income taxes and transaction costs, and from the
liquidation of the remaining EFM assets will be used to pay down the cash
borrowings on the Company's revolving line of credit and contribute to
resolving existing liquidity constraints. The Company also will continue to
pursue the realignment of its capital structure, the continued reductions of
its cost structure, and the increased focus on risk mitigation and effective
resource allocation, all of which are aimed at improving the profitability of
the Company's remaining operations. The Company is committed to implementing
proper management controls and the processes necessary to deliver high-
quality, profitable projects throughout its operations. A plan that management
began implementing late in 1998 provides for the discontinuance of
unprofitable market areas, the realignment of staff within the Company to meet
current needs, and the reduction of significant overhead costs in light of the
divestitures of two of its operating groups. At the inception of the plan's
execution in 1998, the Company recognized a $7.7 million charge for the costs
of office realignment and discontinuing operations in certain markets and a
$9.4 million charge for severance and other restructuring costs. Management
expects to complete execution of the plan by June 30, 1999.
Despite the severe financing constraints experienced by the Company, the
Company has continued to secure new projects, including several major
contracts. Significant examples include:
. the third quarter EFM award of a five-year, $1.1 billion contract to a
new joint venture among Northrop Grumman, Wackenhut Corporation, and the
Company to manage base operations for NASA and the U.S. Air Force at
Kennedy Space Center, Cape Canaveral Air Station, and several other Air
Force bases
. E&C's award of the $44.0 million follow-on operations and maintenance
contract to the Boston Harbor Wastewater Treatment construction project
that it performed over the last 11 years.
. EFM's award of a $9.7 million contract by the Indiana Department of
Environment for decontamination and demolition at the former Continental
Steel Superfund Site in Kokomo, Indiana.
. E&C's award of the $25.0 million Walnut Hill Water Treatment contract to
provide construction management services for the construction of the
largest water-treatment facility in New England to be located in
Marlborough, Massachusetts.
The Company ended 1998 with $3.2 billion in contract backlog. The backlog of
the EFM and Consulting Groups totaled $658 million and $540 million,
respectively, at December 31, 1998. The Company expects to work off 42% of the
$2 billion backlog. The reduction from $4.1 billion 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. Exclusive of the Rocky Flats backlog at
December 31, 1998, the Company's backlog decreased by 5.6% from December 31,
1997.
Results of Operations
The following discussion describes the Company's results of operations for
the years ended December 31, 1998, 1997, and 1996. Due to the magnitude of the
effect of many of the nonrecurring adjustments and transactions described
above, many of the analyses that follow have been adjusted to focus on the
Company's core operations.
15
<PAGE>
Gross Revenue(1)(2)
The Company's gross revenue by operating group for each of the years ended
December 31 are as follows (in millions):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Kaiser-Hill....................................... $ 632.6 $ 588.7 $ 544.0
Engineering and Construction (E&C)................ 374.1 337.8 266.8
Environment and Facilities Management (EFM)....... 105.3 88.1 355.6
Consulting Group.................................. 105.4 93.1 86.9
Eliminations...................................... (7.0) (0.4) (4.9)
-------- -------- --------
Total........................................... $1,210.4 $1,108.1 $1,248.4
======== ======== ========
</TABLE>
- --------
(1) Gross revenue represents services provided to customers with whom the
Company has a primary contractual relationship. Included in gross revenue
are costs of certain services subcontracted to third parties and other
reimbursable direct project costs such as materials procured by the
Company on behalf of its customers.
(2) Certain reclassifications have been made to the prior period information
to conform to the current period presentation.
Kaiser-Hill
Kaiser-Hill is a 50% owned joint venture between ICF Kaiser International,
Inc. and CH2M Hill formed solely to perform the U.S. Department of Energy's
Rocky Flats Closure Project awarded in late 1995. The contract is cost-plus
incentive fee in nature, accordingly, the changes in gross revenue earned by
Kaiser-Hill during the comparable periods are largely reflective of increased
levels of reimburseable subcontractor costs being incurred as the contract
progress continues.
Environment and Facilities Management Group (EFM)
The EFM Group derived revenues primarily from large environmental and
facilities management projects with federal government and commercial
customers. Fluctuations in the historic annual results above are attributable
to:
. an increase in 1998 gross revenue of $18.3 million and $43.1 million
compared to 1997 and 1996, respectively, predominantly from large
environmental restoration contracts for the Baltimore and Sacramento
districts of the U.S. Army Corps of Engineers, and
. the termination in September 1996 of the Company's then largest contract,
the Hanford contract, which generated $293.4 million in gross revenue
that year.
Engineers & Constructors Group (E&C)
The E&C Group provides design engineering, procurement, and construction
services to domestic and international clients in the industrial, water,
transportation and transit, and infrastructure markets. Fluctuations in the
historic annual results above are attributable to:
. the acquisition on March 19, 1998, of ICT Spectrum Constructors, Inc., a
construction contractor, based in Boise, Idaho, specializing in
construction management of fabrication plants and other facilities for
semiconductor and microelectronics customers resulting in $87.2 million
in gross revenue from January 1, 1998.
16
<PAGE>
. a reduction of $22.5 million of revenue recognized in 1998 compared to
1997 from the Nitric Acid Projects, partially reflective of the
decreasing volume of activity on the projects as they neared completion
and partially of the reversal of revenue as a result of changes in
estimates of contract losses at completion and an increase of $39.8
million in 1998 over 1996 earnings, reflective of the start-up phase of
several of those projects in late 1996.
. a reduction of $4.3 million in 1998 revenue compared to 1997 generated by
the Company's Australia, and Asian activities. The decline was largely
due to the winding down of certain large projects and due to the negative
impacts of foreign currency volatility in the region, both during the
third quarter of 1998. The effects of these decreases in gross revenue on
operating income, however, were offset in 1998 and 1997 as a major new
joint venture project was secured and began operating in late 1997, the
equity results of which are reflected as a component of the Company's
service revenue and not as gross revenue.
. a decrease of $14.5 million in revenue in 1998 compared to 1997 resulting
from the 1997 completion of contracts for a major U.S. industrial client.
. total gross revenue of $77.8 million, $76.7 million and $27.2 million
generated by the Nova Hut steel mini-mill contract in the Czech Republic
in 1998, 1997 and 1996, respectively. The increases reflect the
contract's inception in 1996 and the ensuing advancement in 1997 and 1998
to stages of the project involving the procurement of significant amounts
of subcontracted labor and direct materials. Currently contracted
portions of this project are expected to be completed during late 1999.
. a decrease of $4.0 million was also experienced in 1998 versus 1997 on
the Boston Harbor project which progressed toward completion of the more
construction-laden phases and into the operations and maintenance phases.
Consulting Group
The Consulting Group provides energy, information technology, environmental,
economic, and community development consulting services to governmental and
commercial clients. The Consulting Group completed 1998 with the highest gross
revenue, $105.4 million, and the largest work force, now totaling nearly 750
employees, in its history. The Group's headcount and labor base both grew by
18% during 1998 compared to 1997 and by 13% in 1997 compared to 1996 in
response to growth experienced in contract awards. Historically, revenue from
the U.S. Environmental Protection Agency (the EPA) represented a majority of
the Group's total business. In 1998 and 1997, the percentage of the Group's
revenues derived from the EPA represented 45.5% and 49.0% of total Consulting
Group revenue, respectively, yet increased by $1.3 million in absolute terms
in 1998 over 1997.
17
<PAGE>
Service Revenue(1)
The Company's service revenue by operating group for each of the three years
ended December 31 is as follows (in millions):
<TABLE>
<CAPTION>
1998 1997
1998 (2) 1997 (2) Change 1996 (2) Change
------ --- ------ --- ------ ------ --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kaiser-Hill............. $154.5 24% $167.5 28% (8)% $168.0 31% 0%
Environment and
Facilities Management
(EFM).................. 52.0 49% 53.8 61% (3)% 155.4 44% (65)%
Engineering and
Construction (E&C)..... 55.0 15% 131.8 39% (58)% 138.2 52% (5)%
Consulting.............. 81.7 77% 71.3 77% 15 % 68.4 79% 5 %
Equity in income of
joint ventures and
affiliated companies... 6.0 -- 2.3 -- 161% 4.0 -- (43)%
Eliminations............ (3.7) -- (0.6) -- -- (1.9) -- --
------ ------ ------
$345.5 29% $426.1 38% (19)% $532.1 43% (20)%
====== ====== ======
Adjusted for all effects
of the Nitric Acid
projects............... $412.6 35% $420.7 40% (2)% $530.5 43% (21)%
====== ====== ======
Adjusted for the effects
of acquisitions and the
Nitric Acid projects... $402.9 37% $420.7 40% (4)% $530.5 43% (21)%
====== ====== ======
</TABLE>
- --------
(1) Service revenue is derived by deducting the costs of subcontracted
services and materials from gross revenue and adding the Company's share
of the equity in income of unconsolidated joint ventures and affiliated
companies.
(2) This column reflects each operating group's service revenue as a
percentage of its gross revenue.
Service revenue decreased by $80.6 million during 1998 compared to 1997. The
majority of the decrease was due to the $76.2 million loss reserve established
primarily in E&C to cover estimated cost overruns on the Nitric Acid Projects
and also for revised profit margin estimates at completion on other large
fixed price projects. Although management believes that adequate provision for
loss reserves and profit estimates for these fixed-price contracts has been
reflected in these results, no assurance can be given that there will be no
additional future adjustments.
Service revenue from the Rocky Flats contract decreased by $13.0 million
during 1998 compared to 1997. This decrease is attributable to Kaiser-Hill's
continuing strategy to subcontract more of the overall contract tasks and to
emphasize its primary role as the overall services integrator on the Rocky
Flats contract. Because the contract primarily reimburses Kaiser-Hill for its
actual costs incurred plus an incentive fee on performance-based completion
milestones, the shift from direct labor to subcontracted costs has no impact
to Kaiser-Hill's actual profitability. As with all contracts involving
incentive-based fee arrangements, the Company estimates the amount of fees it
believes it will earn and recognizes revenue equal to the estimated fee
percentage multiplied by the related base of costs. During the third quarter
of 1998, the Company determined that Kaiser-Hill was not going to earn the
same amount of fees as in 1997, and accordingly adjusted the fee revenue on a
cumulative basis down to the revised estimate.
Decline in service revenue of $9.6 million from the Nova Hut contract
compared to 1997 is as a result of progression into a phase of the contract
that is subcontractor-intensive and as a result, the Company recognized a $5.7
million negative adjustment in the third quarter of 1998. The revenue
adjustment was necessary to reflect earned progress resulting from the loss of
a change order modification which was previously considered highly probable of
being attained.
The service revenue decreases discussed above were somewhat offset by $9.7
million of service revenue generated by the 1998 acquisition of ICF Kaiser
Advanced Technology. Increases for both periods in service revenue from the
Consulting Group paralleled the increases in, and remained a relatively
consistent percentage of, that group's gross revenue.
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<PAGE>
Equity in income from joint ventures and affiliated companies increased by
$3.7 million in 1998 compared to 1997 due primarily to a joint venture
contract awarded in late 1997 for an alumina refinery expansion project in
Australia. The sale in 1996 of the Company's interest in a pulverized coal
injection operation accounted for the 1997 decline in joint venture equity
from 1996 of $1.7 million.
Service revenue as a percentage of gross revenue, adjusted for the effects
of the Nitric Acid Projects and acquisitions, decreased to 37% for 1998
compared to 40% for 1997 and 43% for 1996. Kaiser-Hill's service revenue
percentage to gross revenue decreased to 24% for 1998 compared to 29% and 31%
for 1997 and 1996, respectively. Adjusting service revenue further to exclude
the effects of Kaiser-Hill, the percentage to gross revenue increased to 66%
for 1998 compared to 63% and 53% for 1997 and 1996, respectively. This
increase is largely driven by a migration in the mix of the Company's E&C
contracts which are less construction intensive and more professional services
oriented compared to recent history.
Operating Expenses
The Company's operating expenses as a percentage of service revenue by
operating group for each of the years ended December 31 are as follows (in
millions):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service Revenue(1)............................................ 100% 100% 100%
Operating Expenses
Direct labor and fringe benefits............................ 68% 68% 71%
Group overhead(2)........................................... 22% 21% 18%
Corporate general and administrative (3).................... 6% 5% 5%
Depreciation and amortization............................... 2% 2% 2%
--- --- ---
Operating Income(4)........................................... 2% 4% 4%
=== === ===
</TABLE>
- --------
(1) Service revenue has been adjusted to exclude all of the effects of the
Nitric Acid Projects.
(2) Group overhead represents those general and administrative costs incurred
by the Company's operating groups for which an indirect benefit is
generally not derived by any other operating group.
(3) Corporate general and administrative expenses consist of costs incurred by
the Company which provide some indirect benefit to all operating groups.
(4) Operating Income as presented here excludes the effects of the severance
and restructuring and unusual charges recorded during 1998.
The acquisition of ICF Kaiser Advanced Technology in 1998 added direct labor
and fringe benefits expense of $5.8 million. Apart from acquired direct labor,
other direct labor spending decreased by $12.8 million, or 4%, in 1998
compared to 1997, resulting in total direct labor and fringe benefit expense
during 1998 of to $106.7 million. This reduction is due primarily to decreases
in Kaiser-Hill's direct labor of $8.0 million and $16.8 compared to 1997 and
1996, respectively. These reductions reflect Kaiser-Hill's migration to using
more subcontractors to execute work on the Rocky Flats contract. Another
$102.1 million of the 1998 decrease in direct labor from 1996 was due to the
loss of EFM's Hanford contract, which terminated in September, 1996.
Adjusting to exclude the Rocky Flats and the Hanford contracts, the
Company's direct labor and fringe benefit costs as a percentage of service
revenue were 76.0%, 56.0%, and 50.0% for the fiscal periods ended December 31,
1998, 1997, and 1996 respectively.
General and administrative, or indirect, expenses are incurred within each
of the operating groups and at the corporate level. Total group overhead
represents those general and administrative costs incurred by the Company's
operating groups for which an indirect benefit is generally not derived by or
allocated to any other
19
<PAGE>
operating group. Conversely, corporate general and administrative costs are
not allocated to group results and consist of expenses incurred by the Company
which provide some indirect benefit to all operating groups.
Group overhead expenses increased by $5.4 million, or 6.0%, during 1998
compared to 1997. The 1998 group overhead increase reflects the inclusion of
$3.0 million in general and administrative costs incurred by ICF Kaiser
Advanced Technology during 1998, a $0.7 million charge in the first quarter of
1998 to establish reserves for contingencies; and lastly, a combination of
other increases in expenses related to marketing, administration, and
unbillable technical labor, which were not incurred at similar levels during
the same periods in 1997. Group overhead decreased by $9.0 million, or 9.4%,
in 1997 compared to 1996 as a result of the Company's cost-reduction
initiatives undertaken in late 1996 and 1997. Significant reductions were
realized in indirect salaries, facilities expenses, consultants' costs, and
amortization expense.
Corporate general and administrative expense increased by $0.9 million, or
4.0%, in 1998 versus 1997. The positive effects of reductions in corporate
general and administrative costs were more than offset by administrative cost
increases undertaken for matters that are non-recurring in nature.
Specifically, numerous activities were undertaken by management and the Board
of Directors in 1998 as a precursor to realigning the Company's unprofitable
operations.
Management believes it can significantly reduce the Company's current annual
overhead and general and administrative cost structures and began execution
late in 1998 of its cost reduction plan. Also in 1998 the Company recognized a
$7.7 million charge for the costs of office realignment and discontinuing
operations in certain markets and a $9.4 million charge for severance and
other restructuring costs and has presented the charges individually on the
Consolidated Statements of Operations.
Gain on Sale of Investment
In December 1996, the Company sold the majority of its investment in a
pulverized coal injection operation for $16.6 million, resulting in a $9.4
million pretax gain. The buyer exercised an option on January 5, 1998, to
purchase the remaining investment for $2.4 million. The Company recognized a
total pretax gain on the option of $1.0 million during 1997 as the carrying
value of the option was increased to reflect its then current fair market
value. The Company's investment in this operation generated $0.8 million and
$2.8 million in equity income in 1997 and 1996, respectively.
Interest Expense
The Company's average annual outstanding debt and the related average
effective interest rates for 1998, 1997, and 1996 were $151.7 million and
13.3%, $140.8 million and 13.0%, and $131.0 million and 13.2%, respectively.
Interest expense increased by $2.0 million in 1998 compared to 1997,
primarily as a result of additional borrowings to fund the Nitric Acid
Projects overruns. Interest expense increased $0.9 million in 1997 from 1996,
a $1.8 million increase of which was the result of the Company's late 1996
issuance of $15 million in 12% Senior Notes due in 2003. The proceeds from
these Senior Notes were used primarily to redeem preferred stock, which
carried an annual dividend requirement of $1.95 million. The 1997 increase was
then offset partially by a one-time, $0.9 million reduction in interest
expense realized from the Company's favorable resolution and reversal of a
previously established liability for potential interest costs associated with
a foreign income tax matter.
Interest income is earned on available cash balances generated primarily by
Kaiser-Hill and foreign operations. All other cash flows not required for
operations are used to pay down outstanding cash borrowings.
Income Tax Expense
The income tax provision for all periods presented excludes the minority's
interest in Kaiser-Hill's operating income because it is owned partially by
another company and is a flow-through entity for income tax purposes.
20
<PAGE>
In 1998, the Company recognized a tax benefit of $11.4 million on a loss
before taxes of $97.1 million. This loss can be used as a future tax benefit
totaling $35.1 million; however, due to uncertainty over the ability to
realize the entire amount, the Company provided a valuation allowance of $22.4
million against the future benefit. However, management believes that future
earnings, including anticipated gains from the sale of portions of the
Company's operating assets, will generate sufficient taxable income within the
next year to realize the entire net $34.7 million deferred tax asset currently
reflected on the balance sheet, in addition to the $22.4 million of benefit
currently included in the valuation allowance.
Other 1998 changes in income tax expense versus 1997 include a $1.8 million
foreign income tax expense established for the anticipated repatriation to the
U.S. of Australian earnings, used for domestic working capital needs, and a
$0.7 million provision for the permanent book-tax difference expected for the
redemption of $1.8 million in non-recourse loans to officers and former
employees, which were collateralized solely by shares of the Company's common
stock. At the inception of the loans, the collateral value exceeded the loans'
face value.
In 1997, the Company recognized a tax benefit of $3.3 million on pre-tax
income of $2.6 million primarily as a result of completing a study of historic
research and experimental expenditures for certain open tax years, enabling
the Company to recognize a benefit for research tax credits of $1.9 million.
Extraordinary Item
In December 1998, initial proceeds totaling $25.0 million from the new
revolver were used to repay all outstanding amounts from the former revolving
credit facility. Accordingly, the Company wrote off the unamortized balance of
the capitalized costs related to the original issue of the debt and recognized
an extraordinary charge of $1.1 million. The Company did not recognize any
income tax benefit associated with this charge
Cumulative Effect of Accounting Change
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued a Statement of Position 98-5
Reporting on the Costs of Start-Up Activities (SOP 98-5). The SOP requires
costs of organization and start-up activities to be expensed as incurred. The
Company elected early adoption of the Statement effective April 1, 1998 and,
at that time, reported the cumulative effect of the change as a one-time, non-
cash charge of $6.0 million after tax, or $0.25 per share. The Company's
amortization expense in 1998 was reduced by $1.6 million because the
cumulative charge included balances for items that were previously amortizing.
Liquidity and Capital Resources
Operating activities: As of December 31, 1998, the Company had funded
approximately $40 million of the total estimated $66 million Nitric Acid
Project cost overruns. This use of cash was in part offset by the effects on
cash balances of increasing the average age of vendor payables, resulting in a
total net operating use of cash of $29.4 million in 1998.
The Company generated significant cash flows from operations during 1997,
due in part to increased activity in large commercial projects that had
provisions in the contract terms for milestone-based payments which were
collected prior to contract performance. Differences in the timing of the cash
payments made to suppliers on some of these large projects versus the
collection of customer trade receivables also contributed favorably to the
1997 operating cash flows. Cash flows generated from operations in 1996 were
impacted favorably by similar timing differences and impacted negatively by
the Company's timing of supplier payments made related to the termination of
the Hanford contract in late 1996.
21
<PAGE>
Investing activities: Proceeds totaling $2.4 million and $16.5 million from
the December 31, 1996 installment sale of the Company's ownership interest in
a pulverized coal injection operation were collected in 1998 and 1997,
respectively. Investments, including capitalized labor, were made in 1998 and
1997 totaling $4.5 million and $4.9 million, respectively, for capital
purchases. Such investment levels remained relatively consistent with that of
recent history and included the implementation costs of new accounting and
project management software, which began in 1995 and will continue in various
phases throughout 1999. In light of the planned completion of the software
project in 1999, which is a critical factor in the Company's Year-2000
readiness plan, and of the sale of two of its operating groups, the Company
anticipates reductions in future requirements for purchased capital
expenditures.
With the intent significantly restructuring fixed operating leases for the
Company's corporate headquarters, the Company paid $1.5 million on November
12, 1997, for a 40% ownership interest in a limited liability company (the
LLC) that leases the land and owns the buildings leased primarily by the
Company for its corporate headquarters. The Company is committed to make
additional annual capital contributions to the L.L.C. totaling $600,000
annually during each of the first three years and $700,000 annually during
each of the fourth through ninth years of the LLC. The ownership in the LLC
will increase to 16% in fixed annual 2.4% increments in each of the eleventh
through fifteenth years of the agreement. Transaction costs totaling $1.7
million were capitalized and will be amortized over the estimated 15-year life
of the LLC.
Financing activities: In 1998, the Company realized that it was going to
incur significant cost overruns on the Nitric Acid Projects. Due to the
significant risks, difficulties and uncertainties involved in estimating the
total costs to complete these large fixed price projects, the Company
increased the total completed project cost estimates several times in 1998.
Given the completion cost uncertainties and the inability to finitely
determine the impact of the losses on the Company's liquidity and financing
sources, management immediately pursued options for additional financing
sources and flexibilities. In addition to seeking a replacement working
capital facility, the Company's Board of Directors also began considering and
pursuing other strategic alternatives, including, but not limited to, the sale
of portions of the Company.
As a result of the activities, the Company successfully entered into a new
revolving credit facility (the Revolver) on December 18, 1998 which offered
additional flexibility and access to additional cash borrowings compared to
the predecessor revolving facility. The new Revolver provides for cash
borrowings and letters of credit up to an aggregate of $60 million. The total
available credit is based on a percentage of the Company's eligible billed and
unbilled accounts receivable, up to the $60 million maximum. The Company and
certain of its subsidiaries, which are guarantors of the Revolver, have
granted a security interest in certain accounts receivable and other assets
and pledged their respective stock to the lenders. The Revolver limits the
payment of cash dividends on common stock, prohibits the issuance of certain
types of additional indebtedness, limits certain investments and acquisitions,
limits the amount of outstanding letters of credit to $35 million, prohibits
the sale of certain assets, and requires the maintenance of specified
financial ratios.
The Revolver contains provisions for prime interest rate borrowings with
margins dependent upon the Company's financial operating results, and expires
on December 31, 2000. As of December 31, 1998, the Company had $30.7 million
in cash borrowings and $26.7 million in letters of credit outstanding under
the Revolver. The letters of credit outstanding under the Revolver are in
support of contract performance guarantees, primarily on international
projects. The weighted average interest rate incurred on revolver borrowings
for 1998 and 1997 was 8.9% and 8.5%, respectively. As of December 31, 1998,
the Company had $2.6 million of additional credit available from the Revolver.
Soon after obtaining the Revolver, the Company again increased the estimate
of the total Nitric Acid Projects cost overruns by an additional $19 million.
This material adverse change to the Company's financial condition triggered a
technical event of default pursuant to the Revolver's terms. Apart from the
financial effects of this latest increased estimate of the Nitric Acid Project
overruns, the Company was in compliance with all other of the Revolver's
restrictive financial covenants at December 31, 1998. Subsequent to the event
of default, the lender has permitted the Company to borrow and obtain letters
of credit pursuant to all other terms of the
22
<PAGE>
Revolver, primarily conditioned on the Revolver provision that proceeds from
asset sales be used to repay outstanding cash borrowings. That provision
combined with the fact that the Company was actively pursuing the sale of
significant operating assets was sufficient assurance for the lenders to
continue to permit the use of the facility until such time as an asset sale
was completed. On April 9, 1999, the Company completed the sale of its EFM
Group (see Note 3 to the Consolidated Financial Statements) and used $36
million of the sale proceeds to extinguish outstanding Revolver cash
borrowings. The Company has also received an amendment to the Revolver (the
Amended Revolver) providing for cash borrowing and letters of credit up to an
aggregate of $30 million. The Amended Revolver will expire on June 30, 1999
and will also require the Company to provide $10.0 million in cash collateral
for existing letters of credit.
The distributions of Kaiser-Hill earnings to the minority interest owner in
1998, 1997, and 1996 totaled $10.3 million, $13.9 million, and $2.4 million,
respectively. Kaiser-Hill currently has a $50 million receivables purchase
facility to support its working capital requirements. The receivables purchase
facility contains certain program fees, specified minimum tangible net worth
requirements, and default provisions for delinquent receivables. The
receivables purchase facility expires on June 30, 1999, and is non-recourse to
Kaiser-Hill's owners. The Company anticipates being able to renegotiate the
purchase facility in annual increments beyond the 1999 expiration.
Liquidity and Capital Resource Outlook
Management believes that the cash proceeds from the completed EFM sale and
the pending Consulting Group sale will yield sufficient short-term liquidity
to bridge the Company's financing needs until such time as the Company can
secure other longer-term alternatives. Specifically, the cash proceeds from
divestitures will be used to retire outstanding cash borrowings from the
revolving credit facility, provide required collateral for contract
performasnce guarantees, pay overdue vendor obligations and contribute to
supporting the future realigned working capital requirements and capital
expenditures of the Company's remaining operations including required interest
obligations of the Series B Senior and the Senior Subordinated Notes.
Subsequent to the sale of the EFM and Consulting Groups, however, as well as
between the closing dates of the sales, the Company's remaining E&C operations
will require access to a revolving credit line containing provisions for
access to letters of credit typically required to support certain contract
performance obligations. The Company has obtained an amended, $30 million,
revolver (the Amended Revolver) from its current lenders through June 30,
1999. The terms of the Amended Revolver include similar restrictive financial
covenants as the Revolver and in addition required the Company to
collateralize $10.0 million of its total contract performance guarantees which
are currently addressed by noncollateralized letters of credit. In the event
that access to a replacement revolving line cannot be secured by June 30,
1999, the Company will have to use available cash, generated largely from
asset sales: to collateralize its contract performance guarantees.
In the event the Consulting Group sale is not consummated, the Company
believes the cash flows from ongoing operations of the Consulting Group,
Kaiser-Hill, and the E&C Group would most likely generate sufficient
collateral, in the form of current trade accounts receivable, to adequately
support a borrowing base to secure the size of revolving credit line needed to
fund short-term borrowing needs of the Company's remaining operations, as well
as the letter-of-credit capacity needed primarily by the E&C Group. A factor
critical, however, to the Company's success in securing a sufficient and
affordable working capital facility in the near term, in all of the above
scenarios, is its ability to remove sufficient overhead costs from remaining
operations and demonstrate improved operating results. Although management
believes it will be able to accomplish these milestones, there can be no
assurance that it will be able to do so.
Regardless of the outcome of the pending Consulting Group sale, over the
long term the Company will need to realign its capital structure. Assuming the
sale of the Consulting Group is completed, the net proceeds may be used to
reinvest in the Company's business, pay down debt on the Amended Revolver or
offer to purchase the Company's outstanding Notes. The Company is considering
alternatives for the use of the net proceeds of the Consulting group sale and
the realignment of its capital structure. These alternatives will include
means by which the Company's outstanding debt may be reduced to levels that
can be supported by cash flows of the remaining operations.
23
<PAGE>
The Company will continue to explore options that would provide additional
capital for longer-term objectives and operating needs, including the
possibility for divestiture of additional operating assets, replacements for
the Company's long-term debt, and additional equity infusions.
Other Matters
Bath Contingency: In March 1998, the Company entered into a $187 million
maximum price contract to construct a ship building facility. In May 1998, the
Company subsequently 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 the Company and the customer. After learning this, the
Company advised the customer that it was not required to perform the contract
in accordance with its terms as a result of a mutual mistake among them in
negotiating that contract. In October 1998, the customer presented an initial
draft of a claim against the Company requesting payment for estimated damages
and entitlements pursuant to the terminated contract. The Company and the
customer are currently discussing the customer's draft claim. No provision for
loss for this matter has been included in the Company's financial results to
date as management does not believe that it has sufficient information at this
time to reasonably estimate the outcome of the negotiations.
Acquisition Contingency: The ICF Kaiser common shares exchanged for the
stock of ICT Spectrum in the March, 1998 acquisition, carry the guarantee that
the fair market value of each share of stock will reach $5.36 by March 1,
2001. In the event that the fair market value does not attain the guaranteed
level, the Company is 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 the Company's preference.
Pursuant to the terms of the Agreement, however, the total number of
contingently issuable shares of common stock cannot exceed an additional 1.5
million. Given that the quoted fair market value of the stock at December 31,
1998 was $1.44 per share, and that the Company's current debt instruments
restrict the amount of cash that can be used for acquisitions, the assumed
issuance of an additional 1.5 million shares would not completely extinguish
the purchase price contingency. The Company therefore would be required to
obtain an amendment to current debt instruments or replace them in order to
complete a cash fill-up. Any future distribution of cash or common stock would
be recorded as a charge to the Company's paid-in-capital.
Until the earlier of the contingent purchase price resolution or March 1,
2001, any additional shares assumed to be issued because of shortfalls in fair
market value will be included in the Company's 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 offering memorandum, and
otherwise, in connection with the Company's acquisition of ICT Spectrum in
1998.
Year-2000 Readiness: Similar to many organizations that use computer
programs in their operations, the Company is addressing the impact of the
Year-2000 issue on its business. The Year-2000 issue is the result of computer
programs that were written using two digits rather than four to identify the
year in a date field. Although it is possible that certain programs could
function if left uncorrected, there is a significant risk that computer
programs will recognize any two digit date containing "00" to be referring to
the year 1900 rather than the year 2000. This could result in system failures
and miscalculations causing disruptions to regular operations.
The Company has developed and implemented a plan to achieve Year-2000
readiness. The Year-2000 program, led and coordinated at the corporate level,
consists of senior management from all Company disciplines, and is being
executed and implemented by teams in each of the Company's operating groups
throughout the world. The Company has identified the following five areas in
which Year-2000 readiness and/or risk assessment are critical operations:
24
<PAGE>
(1) software applications used by management to run and monitor the
business ("Internal Systems");
(2) the hardware and related software used internally to run the core
business--such as desk-top hardware and software applications,
communications networks, and systems used in the operation of office
facilities ("Hardware, Network, and Facilities Systems");
(3) software that the Company has either purchased, designed, developed,
written, or interfaced, and sold to customers ("Customer Systems");
(4) software used by the Company's significant vendors or subcontractors
that could disrupt the flow of the Company's activities in the event that
the system malfunctions ("Vendor Systems"); and
(5) systems critical to the operations of Kaiser-Hill ("Kaiser-Hill
Systems").
Within each category, the Company has identified and assigned criticality
priorities to the various systems. Levels of system criticality were defined
as those that might have a significant adverse effect to the Company in any of
the areas of safety, environmental, legal, financial, and service-delivery
capabilities.
Internal Systems: Management's ongoing assessment of the majority of its
Internal Systems began in 1995 and 1996 with the replacement of its main-frame
based financial and project management software systems with new client-server
applications. The phased conversion to the new systems began in 1996 and will
be completed by September 1999. The costs of the new software, external
consultants, and the internal cost of implementation labor is being
capitalized and amortized over a period of five years. This investment in the
new software applications was $1.7 million, $0.9 million, and $2.6 million in
1998, 1997, and 1996, respectively. Depreciation expense related to these
investments totaled $1.2 million, $0.9 million and $0.6 million in 1998, 1997,
and 1996, respectively. The total remaining costs, excluding internal labor,
of this aspect of the Year-2000 project, including nonrecurring costs
associated with the historical archival of main-frame-based computer data, is
estimated to be less than $1.0 million.
Hardware, Network and Facilities Systems: The Company has completed the
inventory and assessment of these systems and is currently in the replacement
mode. Estimated costs of $0.2 million will be incurred to replace these
critical systems, primarily including the replacement of embedded technology
in items such as telephone switches. The Company will most likely finance the
majority of this obligation through operating leases just as it does for the
majority of its annual ongoing needs for technology updates for desk-top
hardware and software. Accordingly, the charges will be expensed as the lease
financing is paid.
Customer Systems: The Company also is assessing the risk surrounding Year-
2000 readiness in its customer systems, i.e. risk that may have been created
through the Company's contracts for services in which the Company's
professionals wrote and delivered software source code, or procured third
party software for modification and/or resale to customers. Based on the
service orientations of the Company's business, which historically did not
make wide use of computer software applications, management does not
anticipate significant contract exposures emanating from the improper
functioning of delivered source code that would still be covered under
nonexpired contract warranty provisions. There can be no assurances that the
Company's customers would be unable to seek such compensation even if the
contracts do not provide for it.
Vendor Systems: The Company is also corresponding with all vendors and
subcontractors related to the Vendor Systems that have been identified through
reasonable risk assessment techniques as critical to the Company's operations
regarding their Year-2000 readiness. Compliance assessment in this area will
be ongoing throughout 1999. The Company will devise contingency plans in the
event it believes significant risk to a disruption of service to the Company
is not being adequately mitigated. Currently, management does not anticipate
the need for contingency plans. Of course, the ability of parties to be
compensated for monetary or other damages resulting from Year-2000 readiness
risks is unknown.
Kaiser-Hill Systems: Kaiser-Hill also has a Year-2000 readiness program,
separate from that of the Company. The United States Department of Energy
(DOE) owns all property and equipment at the Rocky Flats Environmental
Technology Site near Denver, Colorado. While DOE bears the Year-2000 risk at
Rocky Flats,
25
<PAGE>
Kaiser-Hill manages and uses the DOE property in its execution of the site
closure contract. One work element of the Rocky Flats contract requires that
Kaiser-Hill plan and execute DOE's Year-2000 readiness activities at the site.
Costs incurred by Kaiser-Hill in the execution of the readiness activities are
fully reimbursed by the DOE. Additionally, Kaiser-Hill is eligible for
performance award fees for attaining certain plan performance milestones, and
is succeptible to penalties in the event certain plan milestones are not
attained. Total contract expenses incurred by Kaiser-Hill for these Year-2000
activities totaled approximately $17.0 million through 1998. Successful
progress on the plan execution to date has resulted in Kaiser-Hill being
awarded $0.5 million in performance award fees through March 31, 1999, as well
as attaining reductions to the total amount of potential penalties, limiting
the remaining potential penalty exposure to $0.5 million.
Although there can be no guarantee of complete readiness by the beginning of
the year 2000, the Company believes each of the business areas described above
will be Year-2000 ready or be substantially ready by November 1999 such that
further remediation and testing, if any, will not be significant. In the event
the Company does not complete its program, or fails to properly identify and
modify critical business applications, there may be an interruption to the
Company's business that may have a material adverse affect on its business,
future financial condition and results of operations. In addition, Year-2000-
related disruptions in the general economy may also have a materially adverse
effect on the Company's future financial condition and results of operations.
At this time, the Company has not developed a "worst case" scenario or an
overall Year-2000 contingency plan but will do so when, if ever, management
believes such plans are warranted. Management believes that the majority of
the risks to its critical business operations are within the Company's control
and ability to address. (see "Forward-Looking Information" below).
Market Risk
The Company does not believe that it has significant exposures to market
risk. The majority of its foreign contracts are denominated and executed in
the applicable local currency. The interest rate risk associated with the
majority of the Company's borrowing activities is fixed, however, a 10%
increase or decrease in the average annual prime rate would result in an
increase or decrease of .72% multiplied by the weighted-average amount of
fluctuating rate borrowings outstanding during a period.
Forward-Looking Statements
From time to time, certain disclosures in reports and statements released by
the Company, or statements made by its officers or directors, will be forward-
looking in nature. These forward-looking statements may contain information
related to the Company's intent, belief, or expectation with respect to
contract awards and performance, potential acquisitions and joint ventures,
and cost-cutting measures. In addition, these forward-looking statements
contain a number of factual assumptions made by the Company regarding, among
other things, future economic, competitive, and market conditions. Because the
accurate prediction of any future facts or conditions may be difficult and
involve the assessment of events beyond the Company's control, actual results
may differ materially from those expressed or implied in such forward-looking
statements.
The Company is availing itself of the safe harbor provisions provided in the
Private Securities Litigation Reform Act of 1995 by cautioning readers that
the forward-looking statements that use words such as the Company "believes,"
"anticipates," "expects," "estimates," and "believes" are subject to certain
risks and uncertainties which could cause actual results of operations to
differ materially from expectations. These forward-looking statements will be
contained in the Company's federal securities laws filings or in written or
oral statements made by the Company's officers and directors to press,
potential investors, securities analysts, and others. Any such written or oral
forward-looking statements should be considered in context with the risk
factors discussed below:
. the Company requires access to a revolving credit line to fund short-term
borrowing needs of the Company's total remaining operations, as well as
the letter of credit capacity needed primarily by the
26
<PAGE>
E&C Group. The Company may not be able to generate collateral to support a
borrowing base of sufficient size to obtain such credit or may not be able
to improve operating results enough, by removing overhead costs or
otherwise, to be able to obtain such credit.
. the Company may be precluded from attaining other satisfactory contract
performance guarantee mechanisms, such as performance bonding
capabilities.
. the Company may consider the sale of various operating groups in order to
generate liquidity sufficient to meet its obligations. In the event that
planned sales of operations cannot be consummated on a timely basis, the
Company will need access to other sources of working capital to
adequately fund its remaining operations.
. the Company may not be able to maintain existing contracts at current
levels and may not be able to realize increased contract performance
levels assumed for contracts. The Company is involved in a number of
fixed-price contracts under which the Company can benefit from cost
savings or performance efficiencies, but if certain pricing and
performance assumptions prove inaccurate, unrecoverable cost overruns can
occur.
. the Company may not be awarded new contracts for which it is competing in
its established markets or these awards may be delayed; in addition, the
Company may not be able to win contracts in the new markets it is
targeting. General economic conditions in the international arena,
especially Asia and Latin America, could negatively impact the Company's
current international business and its ability to expand in international
markets.
. the Company's EFM and Consulting Groups are very dependent on federal
government contracts, which are subject to annual funding approvals and
cost audits, and may be terminated at any time, with or without cause; a
large number of federal government contracts are included in the
Company's contract backlog, which potentially means that not all contract
backlog will become future revenue of the Company;
. the Company may not be able to make acquisitions and or enter into joint
ventures, and if made, acquisitions and joint ventures may take more time
to contribute favorably to the Company's financial results than was
formerly assumed. The Company is highly leveraged and is subject to
restrictive covenants that limit its ability to fund potential
acquisitions and joint ventures beyond certain levels established in its
debt agreements.
. a large portion of the Company's business has been and is generated
either directly or indirectly as a result of federal and state
environmental laws, regulations, and programs; a reduction in the number
or scope of these laws, regulations, or programs could materially affect
the Company's business. In addition, environmental work poses risks of
large civil and criminal liabilities for violations of environmental laws
and regulations, and liabilities to customers and to third parties for
damages arising from the Company's performing environmental services to
its clients. A large fine or penalty imposed on the Company could
negatively impact contract performance fees under certain existing
contracts or otherwise negatively affect the Company's financial results.
Item 7.a Quantitative and Qualitative Information about Market Risk
See "Market Risk" in Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Item 8. Financial Statements and Supplementary Data
The Financial Statements and Supplementary Data appear on pages F-1 through
F-33 and S-1 hereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None
27
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The Board of Directors currently consists of the following eight directors.
<TABLE>
<CAPTION>
Term to Expire
--------------
<S> <C>
Thomas C. Jorling......................................... 1999
Hazel R. O'Leary.......................................... 1999
Tony Coelho............................................... 2000
Jarrod M. Cohen........................................... 2000
James T. Rhodes........................................... 2000
James O. Edwards.......................................... 2001
Keith M. Price............................................ 2001
Michael E. Tennenbaum..................................... 2001
</TABLE>
Effective July 1, 1998, the Company enlarged the class of directors whose
terms expire at the 2000 Annual Meeting of Shareholders and elected Mr. Cohen
to fill the resulting vacancy. Mr. Cohen's election was pursuant to a written
agreement among the Company and Mr. Cohen.
Directors Whose Terms Expire in 1999
Thomas C. Jorling, 58, has been Vice President, Environmental Affairs, of
International Paper Company since 1994. Mr. Jorling was the Commissioner of
the New York State Department of Environmental Conservation from 1987 to 1994.
Prior to that, Mr. Jorling was a professor of environmental studies and
director of the center for environmental studies at Williams College in
Massachusetts. In addition, Mr. Jorling served from 1977 to 1979 as Assistant
Administrator for Water and Hazardous Material at the U.S. Environmental
Protection Agency. Mr. Jorling has been a Director of ICF Kaiser
International, Inc. since 1995. Mr. Jorling graduated from the University of
Notre Dame (B.S.), Washington State University (M.S.), and Boston College
(LL.B.).
Hazel R. O'Leary, 60, has been Chairman of the firm of O'Leary Associates,
Inc. since she left her position as Secretary of the Department of Energy
(DOE) in January 1997. President Clinton selected Mrs. O'Leary to be the
Secretary of Energy in December 1992, and she assumed her duties in January
1993. During her four-year tenure as Secretary, Mrs. O'Leary effectively
downsized DOE's number of employees by 27 percent and its budget by $10
billion over five years and focused all of DOE's activities around five areas:
science and technology, national security, energy research, environmental
quality, and economic productivity. Immediately before her appointment as
Secretary of Energy, Mrs. O'Leary was president of the wholly owned natural
gas subsidiary of Northern States Power (NSP), a $2 billion diversified
utility holding company headquartered in Minneapolis; she had been executive
vice president of the holding company from 1989 to 1992. Mrs. O'Leary has over
25 years of experience in sustainable energy policy and large project
development. She has been a Director of ICF Kaiser International, Inc. since
March 1997. She also currently serves on the Board of Directors of AES
Company, the global power company, and on the non-profit Boards of Africare,
Morehouse College (Atlanta), and The Keystone Center where she chairs the
Energy Policy Group. Mrs. O'Leary graduated from Fisk University (B.A.) and
Rutgers University Law School (J.D.).
28
<PAGE>
Directors Whose Terms Expire in 2000
Tony Coelho, 56, former Congressman and Majority Whip of the U.S. House of
Representatives, is a consultant to Tele-Communications, Inc. and Chairman of
the Board of International Thoroughbred Breeders, Inc. From October 1995 to
September 1997, he served as Chairman and CEO of ETC w/tci, Inc., an education
and training technology company. From 1989 to June 1995, Mr. Coelho was a
Managing Director of the New York investment banking firm Wertheim Schroder &
Company, and from 1990 to June 1995 he also served as President and CEO of
Wertheim Schroder Investment Services. Mr. Coelho has been a Director of ICF
Kaiser International, Inc. since 1990. In addition, he is a director of
Service Corporation International, Cyberonics, Inc., Kistler Aerospace
Corporation, AutoLend Group, Inc., and Pinnacle Global Group, Inc. He is also
a member of Fleishman-Hillard, Inc.'s international advisory board. Since his
appointment by President Clinton in 1994, Mr. Coelho has served as Chairman of
the President's Committee on Employment of People with Disabilities.
Mr. Coelho represented California's Central Valley in Congress from 1979 to
1989.
Jarrod M. Cohen, 32, is the Managing Director of J.M. Cohen and Company
since January 1999. He was the Managing Director, head of Proprietary
Investing, and head of Risk Management for Cowen and Company from April 1996
to December 1998. Previously, from September 1989 until April 1996, Mr. Cohen
was the Portfolio Manager for the Cowen Opportunity Fund and Co-head of Cowen
Small Cap Approach. Cowen and Company is one of the Company's significant
shareholders. An agreement between Mr. Cohen and the Company is described on
page 42 of this Report.
James T. Rhodes, 57, has been the Chairman and Chief Executive Officer of
the Institute of Nuclear Power Operations (INPO) since March 1998. INPO is a
nonprofit corporation established by the nuclear utility industry in 1979 to
promote the highest levels of safety and reliability in the operation of
nuclear electric generating plants. Dr. Rhodes retired as President and Chief
Executive Officer of Virginia Power in August 1997. He joined Virginia Power
in 1971 as a nuclear physicist and held increasingly responsible positions
throughout that company. In 1985 he became senior vice president-power
operations and in 1988, senior vice president-finance; in 1989 he was elected
President and CEO. Prior to joining Virginia Power, Dr. Rhodes worked as a
project engineer in the U.S. Army Nuclear Power Program from 1964 to 1968.
Prior to his retirement from Virginia Power, Dr. Rhodes was a director of the
Edison Electric Institute, NationsBank, N.A., the Nuclear Energy Institute,
the Southeastern Electric Exchange, and Virginia Power. Dr. Rhodes has been a
Director of ICF Kaiser International, Inc. since February 1998. Dr. Rhodes
graduated from North Carolina State University (B.S.), Catholic University
(M.S.), and Purdue University (Ph.D., Atomic Energy Commission Fellow ).
Directors Whose Terms Expire in 2001
James O. Edwards, 55, was Chairman of the Board and Chief Executive Officer
of ICF Kaiser International, Inc. or its predecessors from 1985 to 1998. In
1974, he joined ICF Incorporated, the predecessor of ICF Kaiser International,
Inc., and was its Chairman and Chief Executive Officer from 1985 until the
1987 establishment of ICF Kaiser International, Inc. Mr. Edwards graduated
from Northwestern University (B.S.I.E.) and Harvard University (M.B.A., High
Distinction, George F. Baker Scholar).
Keith M. Price, 62, has been President and Chief Executive Officer of ICF
Kaiser International, Inc. since November 1998. Mr. Price has been a Director
of ICF Kaiser International, Inc. since May 1997. He has been a consultant to
various U.S. and international engineering and construction companies since
1994. From 1991 to 1994, he was first Managing Director of Transportation
Systems and Engineering and then Managing Director of Operations for
Transmanche-Link, a joint venture of ten major European contractors that held
a contract to design, manufacture, and construct the tunnel transportation for
the Chunnel, an $11 billion project that links England to France. Prior to his
positions with Transmanche-Link, Mr. Price had a 27-year career with Morrison-
Knudsen where he held a number of senior management positions and was a
director. Mr. Price graduated from Pepperdine University (M.B.A.). In addition
to Mr. Price whose positions with the company and business experience are
described above, the names of the Company's other executive officers, who are
elected annually, and their ages (as of March 31, 1999), principal corporate
positions, and business experience are set forth below.
29
<PAGE>
Michael E. Tennenbaum, 63, has been the Managing Member of Tennenbaum & Co.,
LLC since June 1996. Mr. Tennenbaum also is currently the Chief Executive of
Tennenbaum Securities, LLC, and he has held this position since May 1997.
Previously, from February 1993 until June 1996, Mr. Tennenbaum was a Senior
Managing Director of Bear, Stearns & Co., Inc. In addition, Mr. Tennenbaum was
previously a member of the Board of Directors of Bear, Stearns & Co., Inc. and
also held the position of Vice Chairman, Investment Banking. Mr. Tennenbaum's
responsibilities at Bear, Stearns & Co., Inc. included managing the firm's
Risk Arbitrage, Investment Research, and Options Departments. Mr. Tennenbaum
has served on the Boards of Directors of Arden Group, Inc.; Bear, Stearns &
Co., Inc.; Jenny Craig, Inc.; Sun Gro Horticulture, Inc.; and Tosco
Corporation. Mr. Tennenbaum graduated from the Georgia Institute of Technology
(B.S.I.E.) and Harvard University (M.B.A., with Distinction).
Executive Officers
Thomas P. Grumbly, 49, has been President of the Environment & Facilities
Management Group of ICF Kaiser International, Inc. since January 1, 1998. He
joined the Company in April 1997 as President of the Federal Programs Group
and was responsible for combining the Company's private environmental practice
with its federal programs practice into the E&FM Group in late 1997. From 1996
to April 1997, Mr. Grumbly was Under Secretary of the U.S. Department of
Energy; prior to becoming Under Secretary, he was DOE's Assistant Secretary
for Environmental Management. Mr. Grumbly graduated from Cornell University
(B.A.), University of Toronto (M.A.), and the University of California,
Berkeley (Master in Public Policy).
Sudhakar Kesavan, 44, has been an Executive Vice President of the Company
and President of the Company's Consulting Group since December 1996. He has
held senior management positions in the Company's Consulting Group since 1983.
Prior to joining the Company, Mr. Kesavan worked for the Indian subsidiary of
the Royal Dutch/Shell Company. Mr. Kesavan graduated from the Indian Institute
of Technology (B. Tech), Indian Institute of Management (P.G.D.M.) and the
Massachusetts Institute of Technology. (S.M.).
Richard A. Leupen, 45, has been President of the Engineers & Constructors
Group of ICF Kaiser International, Inc. since August, 1998. He has held senior
management positions in the Company's Engineers & Constructors Group since
1995. Prior to joining the Company, Mr. Leupen worked for Protech Pty. Ltd.
Mr. Leupen graduated from the University of South Wales in Australia (B.S.).
Timothy P. O'Connor, 34, has been Senior Vice President and Chief Financial
Officer of ICF Kaiser International, Inc. since December 1998. He had been
Treasurer of the Company since May 1997. 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.).
Paul Weeks, II, 55, has been Senior Vice President, General Counsel, and
Secretary of ICF Kaiser International, Inc. since 1990. He joined ICF
Incorporated in May 1987 as its Vice President, General Counsel, and
Secretary. From 1973 to 1987 he was employed by Communications Satellite
Corporation, where from 1983 to 1987 he was Assistant General Counsel for
Corporate Matters. Mr. Weeks graduated from Princeton University (B.S.E.E.)
and The National Law Center of George Washington University (J.D.).
Section 16(a) Beneficial Ownership Reporting Compliance
The U.S. Securities and Exchange Commission (SEC) requires the Company to
tell its shareholders when certain persons fail to report their transactions
in the Company's equity securities to the SEC on a timely basis. During the
fiscal year ended December 31, 1998, Messrs. Rhodes and Cohen failed to timely
file an initial report on Form 3 and Mr. Edwards failed to timely file a
report on Form 4. All of such filings have since been made. Based upon a
review of SEC Forms 3, 4, and 5, and based on representations that no Forms 3,
4, and 5 other than those already filed were required to be filed, the Company
believes that all Section 16(a) filing requirements
30
<PAGE>
applicable to its officers, directors, and beneficial owners of more than 10%
of its equity securities other than the delinquencies disclosed in this
paragraph were timely met.
Item 11. Executive Compensation
The following table shows the compensation received by each person who served
as the Company's Chief Executive Officer ("CEO") during fiscal 1998, the four
other most highly compensated executive officers of the Company who were
serving as of December 31, 1998 and two other most highly compensated executive
officers who were no longer serving the Company as of December 31, 1998 (the
"Named Executive Officers") for the three years ended December 31, 1998.
31
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-term Compensation
Annual Compensation Awards
------------------------------ ------------------------------
(g)
(a) (b) (e) (f) Securities (i)
Name, Principal (c) (d) Other Annual Restricted Underlying All Other
Position, and Salary Bonus Compensation Stock Award(s) Options Compensation
Fiscal Period ($) ($)(a) ($)(a) ($)(a) (#)(a) (c)
--------------- -------- -------- ------------ -------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Keith M. Price, Current
President and CEO(d)
Fiscal 1998............ $141,347 $ 50,000 (b) 0 200,000 options $ 52,068
James O. Edwards, Former
Chairman and CEO(e)
Fiscal 1998............ $375,006 0 $49,520(b) $362,600(e) 0 $155,402
Fiscal 1997............ $386,542 0 (b) 0 0 $ 15,243
Fiscal 1996............ $350,000 $175,000 (b) $ 47,500(e) 40,000 options $ 13,098
Michael F. Gaffney,
Executive Vice
President(f)
Fiscal 1998............ $250,016 0 (b) 0 40,000 options $ 3,938
Fiscal 1997............ $239,050 $ 15,000 (b) 0 40,000 options $ 14,266
Fiscal 1996............ $197,897 $ 80,000 (b) 0 9,900 options $ 14,893
Sudhakar Kesavan,
Executive Vice
President(g)
Fiscal 1998............ $274,052 $ 69,656 (b) 0 0 $ 3,031
Fiscal 1997............ $225,014 $ 27,000 (b) $ 14,515(g) 50,000 options $ 12,696
Fiscal 1996............ $164,492 $ 72,771 (b) $ 28,538(g) 56,600 options $ 12,127
Thomas P. Grumbly,
Executive Vice
President(h)
Fiscal 1998............ $257,312 0 (b) 0 0 $ 3,926
Fiscal 1997............ $163,472 $ 75,000 (b) $ 14,784(h) 100,000 options $ 13,453
Richard Leupen,
Executive Vice
President(i)
Fiscal 1998............ $207,357 $146,000 (b) 0 200,000 options $ 57,514
Fiscal 1997............ $168,064 $ 80,000 (b) 0 0 $ 25,151
Fiscal 1996............ $132,185 $ 12,500 (b) 0 0 $ 23,732
Marc Tipermas, Former
President and Chief
Operating Officer(j)
Fiscal 1998............ $231,613 0 $142,909(b) 0 0 $736,857
Fiscal 1997............ $336,545 $ 50,000 $ 42,593(b) 0 0 $ 13,989
Fiscal 1996............ $293,285 $100,000 (b) $ 28,463(j) 26,400 options $ 13,800
David Watson, Former
Executive Vice
President(k)
Fiscal 1998............ $239,313 0 (b) $ 59,850(k) 0 $318,453
Fiscal 1997............ $275,018 $ 60,000 (b) $104,832(k) 0 $ 90,662
Fiscal 1996............ $227,899 $115,000 $ 8,376(b) $ 18,975(k) 94,800 options $ 29,574
</TABLE>
- --------
(a) Cash bonuses are reported for the year of service, for which the cash
bonus was earned, even if pre-paid or paid in a subsequent year.
Restricted stock and options are reported for the year of service for
which the stock and/or options were earned, even if the grant date falls
in a subsequent fiscal year. No dividends are paid on any shares of
restricted stock.
(b) Any amounts shown in the "Other Annual Compensation" column do not include
any perquisites or other personal benefits because the aggregate amount of
such compensation for each of the Named Executive Officers did not exceed
the lesser of (i) $50,000 or (ii) 10% of the combined salary and bonus for
the Named Executive Officer for the stated fiscal period. The amount shown
in column (e) of the table for Dr. Tipermas for Fiscal 1997 and Mr. Watson
for Fiscal 1996 were amounts reimbursed for the payment of taxes.
32
<PAGE>
(c) The Company's 1998 contributions to the Named Executive Officers pursuant
to the Company's Retirement Plan will not be determined or made until
September 1999. The Company will disclose these contributions for the
Named Executive Officers in the Report for the 2000 Annual Meeting of
Shareholders if the Named Executive Officer is the CEO or one of the other
four most highly compensated executive officers in Fiscal 1999.
(d) Mr. Price was appointed President and CEO of the Company as of August 5,
1998. As a result, the information for Fiscal 1998, represents all
compensation paid to or earned by Mr. Price during the five-month period
commencing on his hire date through December 31, 1998. On August 27, 1998,
Mr. Price entered into an employment agreement with the Company, pursuant
to which he is entitled to receive an annual base salary of $375,000
through August 4, 1999, subject to adjustment. For a fuller description of
the terms of this agreement, please refer to the discussion under "Certain
Relationships and Related Transactions--Current Directors" at page 43 of
this Report. The amount in column (a) represents a signing bonus paid to
Mr. Price in connection with his agreeing to serve as President and CEO of
the Company. The amounts in column (i) of the table for Mr. Price comprise
the following:
<TABLE>
<C> <C> <S>
Fiscal 1998 $ 1,757 Company match under the Company's Section 401(k) Plan
$ 3,770 Spouse travel
$ 943 Car allowance
$45,598 Relocation expenses
</TABLE>
(e) Mr. Edwards resigned as Chairman and CEO of the Company effective November
6, 1998. As a result, the information for fiscal 1998, represents all
compensation paid to or earned by Mr. Edwards during the eleven months of
such year during which the Company employed him, including amounts paid
pursuant to Mr. Edwards' severance arrangements with the Company. Mr.
Edwards also was paid $49,520 in fiscal 1998 and $49,039 in fiscal 1999
for consulting services. See "Certain Relationships and Related
Transactions--Current Directors" at page 42 of this Report. These shares
fully vest on November 6, 1999 or, if earlier, on a change of control. For
his service in 1998, Mr. Edwards was awarded 200,000 shares of Restricted
Stock on November 6, 1998. The closing price of the Company's Common Stock
on November 6, 1998 was $1.813. For his service in fiscal 1996, Mr.
Edwards was awarded 20,000 shares of Restricted Stock on March 4, 1997.
The closing price of the Company's Common Stock on March 4, 1997, was
$2.375. As of December 31, 1998, Mr. Edwards owned a total of 220,000
Restricted Shares; the closing price of the Company's Common Stock on
December 31, 1998, was $1.438; the aggregate value of these holdings is
$316,360. The amounts shown in column (i) of the table for Mr. Edwards
comprise the following:
<TABLE>
<C> <C> <S>
Fiscal 1998 $ 2,545 Spouse travel
$ 2,857 Company match under the Company's Section 401(k) Plan
$150,000 Severance payments
Fiscal 1997 $ 2,731 Company match under the Company's Section 401(k) Plan
$ 10,184 Company Retirement Plan Contribution for 1997 made in
September 1998
$ 2,328 Spouse travel
Fiscal 1996 $ 9,492 Company Retirement Plan contribution for 1996 made in
September 1997
$ 2,731 Company match under the Company's Section 401(k) Plan
$ 875 Imputed income for Company-paid life insurance
</TABLE>
33
<PAGE>
(f) Mr. Gaffney resigned from his position effective March 17, 1999. The
amounts shown in column (i) of the table for Mr. Gaffney comprise the
following:
<TABLE>
<C> <C> <S>
Fiscal 1998 $ 361 Spouse travel
$ 3,304 Company match under the Company's Section 401(k) Plan
$ 273 Imputed income for Company-paid life insurance
Fiscal 1997 $ 3,225 Company match under the Company's Section 401(k) Plan
$ 273 Imputed income for Company-paid life insurance
$10,184 Company Retirement Plan Contribution for 1997 made in
September 1998
$ 584 Spouse travel
Fiscal 1996 $ 9,492 Company Retirement Plan contribution for 1996 made in
September 1997
$ 3,188 Company match under the Company's Section 401(k) Plan
$ 660 Imputed income for Company-paid life insurance
$ 1,553 Spouse travel
</TABLE>
(g) For his service in fiscal 1997, Mr. Kesavan was awarded 5,400 shares of
Restricted Stock on March 9, 1998. The closing price of the Company's
Common Stock on March 9, 1998, was $2.688. These Restricted Shares fully
vest on March 9, 2001, provided Mr. Kesavan remains an employee of the
Company. For his service in fiscal 1996, Mr. Kesavan was awarded 12,016
Restricted Shares on March 4, 1997. The closing price of the Company's
Common Stock on March 4, 1997, was $2.375. These Restricted Shares vest on
January 1, 2000, provided Mr. Kesavan remains an employee of the Company.
As of December 31, 1998, Mr. Kesavan owned a total of 17,416 Restricted
Shares; the closing price of the Company's Common Stock on December 31,
1998, was $1.438 the aggregate value of these holdings is $25,044. The
amounts shown in column (i) of the table for Mr. Kesavan comprise the
following:
<TABLE>
<C> <C> <S>
Fiscal 1998 $ 2,500 Company match under the Company's Section 401(k) Plan
$ 531 Spouse travel
Fiscal 1997 $ 2,423 Company match under the Company's Section 401(k) Plan
$10,184 Company Retirement Plan Contribution for 1997 made in
September 1998
$ 89 Imputed income for Company-paid life insurance
Fiscal 1996 $ 9,492 Company Retirement Plan contribution for 1996 made in
September 1997
$ 2,405 Company match under the Company's Section 401(k) Plan
$ 230 Imputed income for Company-paid life insurance
</TABLE>
(h) Mr. Grumbly joined the Company in April 1997. As a result, compensation
for 1997 represents amounts paid during an only eight month period. For
his service in fiscal 1997, Mr. Grumbly was awarded 5,500 shares of
Restricted Stock on March 9, 1998. The closing price of the Company's
common stock on March 9, 1998, was $2.688. These Restricted Shares fully
vest on March 9, 2001, provided Mr. Grumbly remains an employee of the
Company. The amounts show in column (i) of the table for Mr. Grumbly
comprise the following:
<TABLE>
<C> <C> <S>
Fiscal 1998 $ 3,346 Company match under the Company's Section 401(k) Plan
$ 580 Spouse travel
Fiscal 1997 $ 3,269 Company match under the Company's Section 401(k) Plan
$10,184 Company Retirement Plan contribution for 1997 made in
September 1998
</TABLE>
34
<PAGE>
(i) The amounts shown in column (i) of the table for Leupen comprise the
following:
<TABLE>
<C> <C> <S>
Fiscal 1998 $ 1,385 Company match under the Company's Section 401(k) Plan
$ 7,897 Company Retirement Plan contribution for 1997 made in
September 1998
$31,452 Relocation expenses
$11,191 Car Allowance
$ 5,589 Spouse travel
Fiscal 1997 $10,247 Company Retirement Plan contribution for 1997
$14,904 Car Allowance
Fiscal 1996 $ 8,828 Company Retirement Plan contribution for 1996
$14,904 Car allowance
</TABLE>
(j) Dr. Tipermas ceased to be employed by the Company as of August 7, 1998. As
a result, the amounts shown for fiscal 1998 represent all compensation
paid or earned during the 12 months of fiscal 1998 that the Company
employed Dr. Tipermas, including amounts paid pursuant to Dr. Tipermas'
severance arrangements with the Company. Dr. Tipermas also was paid
$142,909 in fiscal 1998 and $43,269 in fiscal 1999 for consulting
services. See "Certain Relationships and Related Transactions." For his
service in fiscal 1996, Dr. Tipermas was awarded 9,900 shares of
Restricted Stock on March 20, 1997. The closing price of the Company's
Common Stock on March 20, 1997, was $2.875. Of these Restricted Shares,
3,300 shares are vested, subject to a restriction on sale prior to March
4, 2000, and the balance were forfeited upon termination of Dr. Tipermas'
employment. As of December 31, 1998, Dr. Tipermas owned a total of 3,300
Restricted Shares; the closing price of the Company's Common Stock on
December 31, 1998, was $1.438; the aggregate value of these holdings is
$4,745. The amounts shown in column (i) of the table for Dr. Tipermas
comprise the following:
<TABLE>
<C> <C> <S>
Fiscal 1998 $ 3,400 Company match under the Company's Section 401(k) Plan
$ 515 Spouse travel
$ 442 Imputed income for Company-paid life insurance
$732,500 Severance payment
Fiscal 1997 $ 3,231 Company match under the Company's Section 401(k) Plan
$ 10,184 Company Retirement Plan contribution for 1997 made in
September 1998
$ 429 Imputed income for Company-paid life insurance
$ 145 Spouse travel
Fiscal 1996 $ 9,492 Company Retirement Plan contribution for 1996 made in
September 1997
$ 3,202 Company match under the Company's Section 401(k) Plan
$ 706 Imputed income for Company-paid life insurance
$ 400 Spouse travel
</TABLE>
(k) Mr. Watson ceased to be employed by the Company, effective August 17,
1998. As a result, the information set forth in the table shows all
compensation paid to or earned by Mr. Watson during the 10-month period of
fiscal 1998 that he was employed, including amounts paid pursuant to
Watson's severance arrangements with the Company. See "Certain
Relationships and Related Transactions--Former Directors/Executive
Officers" at page 45 of this Report. For his service in fiscal 1997, Mr.
Watson was awarded 39,000 shares of Restricted Stock on March 9, 1998. The
closing price of the Company's Common Stock on March 9, 1998, was $2.688.
For his service in fiscal 1996, Mr. Watson was awarded 6,600 Restricted
Shares on March 20, 1997. The closing price of the Company's Common Stock
on March 20, 1997, was $2.875. All of the Restricted Shares granted to Mr.
Watson were fully vested upon the termination of his employment by the
Company. As of December 31, 1998, Mr. Watson owned a total of 45,600
Restricted Shares; the closing price of the Company's Common Stock on
December 31, 1998, was $1.438; the aggregate value of these holdings is
$65,573. The amounts shown in column (i) of the table for Mr. Watson
comprise the following:
35
<PAGE>
<TABLE>
<C> <C> <S>
Fiscal 1998 $ 4,886 Lump-sum relocation payment made in 1998
$ 3,400 Company match under the Company's Section 401(k) Plan
$ 10,148 Spouse travel
$300,019 Lump-sum severance payment
Fiscal 1997 $ 77,160 Lump-sum relocation payment made in 1997
$ 3,173 Company match under the Company's Section 401(k) Plan
$ 10,184 Company Retirement Plan Contribution for 1997 made in
September 1998
$ 145 Spouse travel
Fiscal 1996 $ 9,492 Company Retirement Plan contribution for 1996 made in
September 1997
$ 3,192 Company match under the Company's Section 401(k) Plan
$ 908 Imputed income for Company-paid life insurance
$ 15,982 Reimbursed relocation expense
</TABLE>
The following table shows all individual grants of stock options made during
the fiscal year ended December 31, 1998 to each of the named executive
officers identified in the summary compensation table on page 32 of this
report. No grants were made during such period to Messrs. Edwards, Grumbly,
Tipermas or Watson.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f)
Number of % of Total
Securities Options Granted Grant Date
Underlying Options to Employees in Exercise Price Present Value
Name Granted (#) Fiscal Year(a) ($/Sh)(b) Expiration Date $(c)
---- ------------------ --------------- -------------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
Michael F. Gaffney(d)... 40,000 3.7% $2.50 February 27, 2003 $ 62,900
Sudhakar Kesavan(d)..... 50,000 4.7% $2.50 February 27, 2003 $ 78,625
Richard Leupen(d)....... 50,000 4.7% $2.50 February 27, 2003 $ 84,425
Richard Leupen(e)....... 150,000 14.0% $1.33 September 14, 2001 $100,815
Keith M. Price(f)....... 150,000 14.0% $1.39 September 3, 2001 $105,360
Keith M. Price(g)....... 50,000 4.7% $1.24 November 4, 2001 $ 31,330
</TABLE>
- --------
(a) The Company granted a total of 1,075,500 options to its employees in the
last fiscal year.
(b) The exercise price is the average closing price of the Company's common
stock on each of the 20 trading days prior to the date of grant, with the
20th day being the trading date immediately preceeding the date of grant.
(c) Grant date present value is determined using the Black-Scholes Model.
Since the Model makes assumptions about future variables, the actual value
of the options may be greater or less than the values stated in the table.
The calculations from which the above values were derived assume no
dividend yield, volatility of approximately 71.6%, exercise at or near the
expiration date, and a risk-free rate of return of 5.2% based on the
average monthly U.S. Treasury bill rate for five-year maturities on the
date of grant. No downward adjustments were made to the grant date option
values stated in the table to account for potential forfeiture or the
nontransferable nature of these options.
(d) Five-year options, granted February 27, 1998, vesting in equal increments
over four years, with the first 25% vesting one year from the date of
grant.
(e) Three-year options granted September 14, 1998, vesting 50% on the date of
grant and 50% on January 1, 1999.
(f) Three-year options granted September 3, 1998, vesting 50% on February 5,
1999 and 50% on August 4, 1999.
(g) Three-year options granted November 4, 1998, vesting 50% on May 4, 1999
and 50% on November 4, 1999.
36
<PAGE>
The following table shows certain information concerning the value as of
December 31, 1998 of unexercised options held by each of the Named Executive
Officers identified in the Summary Compensation Table on page 32 of this
Report. None of such Named Executive Officers exercised stock options during
the fiscal year ended December 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Shares Number of Securities Value of Unexercised
Acquired on Value Underlying Unexercised In-the-Money Options
Exercise Realized Options at 12/31/98 (#) at 12/31/98 ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable*
---- ----------- -------- ------------------------- --------------------------
<S> <C> <C> <C> <C>
Keith M. Price.......... 0 0 0/200,000 $0/$17,100(1)
James O. Edwards........ 0 0 190,000/0 N/A(2)
Michael F. Gaffney...... 0 0 50,475/59,425 N/A(2)
Sudhakar Kesavan........ 0 0 20,621/94,606 N/A(2)
Thomas P. Grumbly....... 0 0 25,000/75,000 N/A(2)
Richard Leupen.......... 0 0 75,000/125,000 8,100/$8,100(3)
Marc Tipermas........... 0 0 151,400/0 N/A(2)
David Watson............ 0 0 42,450/77,350 N/A(2)
</TABLE>
- --------
The exercise price of all options is the average closing price of the
Company's Common Stock on each of the 20 trading days prior to the date of
grant, with the 20th day being the trading date immediately preceding the date
of grant. The closing price of the Company's Common Stock on December 31,
1998, was $1.38 per share.
(1) 150,000 of the in-the-money options held by Mr. Price were granted at an
exercise price of $1.39 per share on September 14, 1998 and 50,000 were
granted at an exercise price of $1.24 per share on November 4, 1998.
(2) None of the options held by this person were in-the-money as of December
31, 1998.
(3) All of the in-the-money options held by Mr. Leupen were granted at an
exercise price of $1.33 per share on September 3, 1998.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
In connection with their employment with the Company during the year ended
December 31, 1998, seven of the executive officers, who are named in the
Summary Compensation Table have or had employment contracts. In connection
with the termination of their employment with the Company, three of these
executive officers received severance packages. These arrangements are
described under "Certain Relationships and Related Transactions--Current
Directors" and "--Former Directors/Executive Officers" on pages 41-5 of this
Report.
In April 1994, the then-named Compensation Committee of the Board of
Directors approved the adoption of the Company's Senior Executive Officers
Severance Plan (the "SEOSP"). In December 1994, the SEOSP was amended to
clarify (a) that once an officer becomes a participant in the SEOSP, he or she
will continue to be eligible for SEOSP benefits throughout his or her
employment by the Company and (b) that the SEOSP is intended to set a minimum
severance benefit for the participant. If a participant is entitled to a
greater benefit under his or her employment agreement with the Company, then
such arrangement prevails over the lower SEOSP benefit. In May 1997, the SEOSP
was further amended to increase the minimum benefit under the SEOSP from three
months to six months of the participant's average monthly salary. This
amendment reflects the fact that six months is the practical minimum severance
for senior executives; the Company has never paid less. The 1997 amendment
also removed the 18-month overall cap on the SEOSP benefit to provide the same
severance (one month of severance for each year of service) across all years
worked; to require that the Company and a SEOSP participant execute mutual
general releases in order to obtain the SEOSP benefit; and to clarify what is
meant by "continuing directors" in the definition of "good cause."
37
<PAGE>
The eligible participants in the SEOSP are the Chief Executive Officer, the
President, the Chief Operating Officer, the Chief Financial Officer, the
Executive Vice President (Corporate Development), the Group Presidents, the
Treasurer, the General Counsel, and any officer as designated by the
Compensation & Human Resources Committee. As of March 31, 1999, there were
four persons whose severance payments are governed by the SEOSP.
A participant is eligible to receive severance payments if the Company
terminates his or her employment without "cause" or if the participant
terminates his or her employment for "good reason." "Cause" and "good reason"
are defined in the SEOSP. Average monthly salary is defined in the SEOSP as
the participant's average monthly gross salary excluding all bonuses for the
six months prior to employment termination. Severance benefits may be paid
under the SEOSP in two installments or, with the approval of the Compensation
& Human Resources Committee, in a lump sum. The SEOSP provides that severance
pay will not be considered compensation for purposes of the Retirement Plan or
the Section 401(k) Plan; severance pay will not increase Years of Service for
those Plans' purposes. As of March 31, 1999, severance benefits have been paid
under the SEOSP to three participants.
Compensation and Human Resources Committee Interlocks and Insider
Participation
The members of the Compensation & Human Resources Committee are Hazel
O'Leary (Chairperson), Thomas C. Jorling, and James T. Rhodes, none of whom
are employed by the Company. For the year ended December 31, 1998, there were
no director relationships that require disclosure under this section.
Compensation of Non-employee Directors Effective March 1, 1997
Directors who are not employees of the Company ("Non-employee Directors")
are paid $1,000 for attendance at each meeting of the Board of Directors; they
are paid $1,000 for attendance at each meeting of a committee of the Board of
Directors of which the Director is a member. In addition, each Non-employee
Director receives an annual retainer of $20,000, payable in advance in
quarterly installments, and is reimbursed for his or her expenses incurred in
connection with his or her Board service. Directors of the Company who are
employees of the Company are not compensated separately for their service as
Directors.
On February 28, 1997, the Board of Directors adopted the ICF Kaiser
International, Inc. Non-employee Directors Compensation and Phantom Stock
Plan, which provides for the cash compensation discussed in the preceding
paragraph. In addition, in lieu of option grants under the Non-employee
Directors Stock Option Plan adopted in 1991, each Non-employee Director of the
Company is granted a Phantom Stock Award ("PSA") equal to $20,000 worth of
Common Stock on the date of grant; the date of grant is the date of the annual
board meeting which occurs immediately following the conclusion of the Annual
Meeting of Shareholders. Three years after the PSA grant, the Company will pay
each Non-employee Director in cash the value of the shares to which the PSA
relates. The number of shares of Common Stock to which the PSA relates will be
determined using the average closing prices of the Common Stock for the 20
trading days immediately prior to the date of grant. The same method will be
used to determine the value of the phantom stock as of the date of the cash
payout.
In lieu of receiving cash compensation pursuant to the terms of the ICF
Kaiser International, Inc. Non-employee Directors Compensation and Phantom
Stock Plan described above, beginning January 1, 1999, Mr. Coelho is being
paid an annual fee of $120,000. In addition, Mr. Coelho was granted 100,000
options, expiring November 4, 2001, vesting 50% on May 4, 1999 and 50% on
November 4, 1999 with an exercise price of $1.24. These amounts are being paid
to Mr. Coelho as consideration for his services as Chairman of the Board of
Directors.
38
<PAGE>
In 1998, the Non-employee Directors were awarded the following Phantom Stock
Units under the ICF Kaiser International, Inc. Non-employee Directors
Compensation and Phantom Stock Plan:
<TABLE>
<CAPTION>
Per Share Price
Total Value of (20-trading day Total Number of
Common Stock average at Phantom Stock Date of
Non-employee Director on Date of Grant May 1, 1998) Units Granted Cash Payout
- --------------------- ---------------- --------------- --------------- -----------
<S> <C> <C> <C> <C>
Tony Coelho............. $20,001 $2.85 7,018 May 4, 2001
Maynard H. Jackson,
Jr.(1)................. $20,001 $2.85 7,018 May 4, 2001
Thomas C. Jorling....... $20,001 $2.85 7,018 May 4, 2001
Hazel R. O'Leary........ $20,001 $2.85 7,018 May 4, 2001
Keith M. Price(2)....... $20,001 $2.85 7,018 May 4, 2001
James T. Rhodes......... $20,001 $2.85 7,018 May 4, 2001
Michael E. Tennenbaum... $20,001 $2.85 7,018 May 4, 2001
</TABLE>
- --------
(1) Mr. Jackson resigned from the Board of Directors effective February 8,
1999.
(2) Subsequent to the date these Phantom Stock Units were granted, Mr. Price
was appointed to serve as President and Chief Executive Officer of the
Company.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of the April 12, 1999,
regarding each person known by the Company to beneficially own 5% or more of
the outstanding Common Stock of the Company. A person is deemed to be a
beneficial owner of the Company's Common Stock if that person has voting or
investment power (or voting and investment powers) over any shares of Common
Stock or has the right to acquire such shares pursuant to exercisable options
or warrants within 60 days from April 12, 1999.
<TABLE>
<CAPTION>
Name and Address of Beneficial
Owners Amount and Nature of Beneficial Percent of
of More Than 5% of the Ownership of Shares of Common Common Stock
Common Stock of the Company Stock of the Company(a) of the Company
------------------------------ ------------------------------- --------------
<S> <C> <C>
Cowen and Company; Cowen
Incorporated;.................... 1,627,000(b) 7.0%
Joseph M. Cohen; Jarrod M. Cohen
Financial Square
New York, NY 10005-3597
State of Wisconsin Investment
Board............................ 2,092,200(c) 8.62%
P.O. Box 7842
Madison, WI 53707
Tennenbaum & Co., LLC;............ 2,100,000(d) 8.65%
Michael E. Tennenbaum
1999 Avenue of the Stars
Los Angeles, CA 90067
</TABLE>
- --------
(a) For the purposes of this table, a person or group is deemed to have
"beneficial ownership" of any shares of Common Stock which such person has
the right to acquire within 60 days after the date set forth in the
introductory paragraph above. However, for purposes of computing the
percentage of outstanding shares of Common Stock held by each person or
group of persons named above, any security which such person or group of
persons has or have the right to acquire from the Company within 60 days
from the date set forth in the introductory paragraph above is not deemed
to be outstanding for the purposes of computing the percentage ownership
of any other person.
(b) Includes 49,000 shares held by Jarrod Cohen directly and 1,578,000 shares
held by SG Cowen Securities, of which Joseph Cohen is Chairman. Jarrod
Cohen is the son of Joseph Cohen. The information with respect to the
shares of Common Stock beneficially owned by Joseph M. Cohen, and Jarrod
M. Cohen is based on information from Mr. Jarrod Cohen and is current as
of March 31, 1999. Mr. Joseph Cohen is an individual who may be deemed to
control SG Cowen Securities Corporation.
39
<PAGE>
(c) The information with respect to the shares of Common Stock beneficially
owned by the State of Wisconsin Investment Board is based on a Report on
Schedule 13G, Amendment No. 2 , which was filed with the SEC reporting
share ownership information as of December 31, 1998.
(d) The information with respect to the shares of Common Stock beneficially
owned by Tennenbaum & Co., LLC and Michael E. Tennenbaum is based on a
Report on Schedule 13D dated December 19, 1997, which was filed with the
SEC reporting share information as of December 18, 1997. Based on
information from Mr. Tennenbaum, this information also is current as of
the date of this Report.
The following table sets forth information regarding the beneficial
ownership of shares of Common Stock of the Company by each director, and by
executive officers named in the Summary Compensation Table on page 32 of this
Report, and by all directors and current executive officers as a group. The
information set forth below is current as of April 12, 1999, except that
information with respect to ownership of shares of Common Stock in the
Company's Employee Stock Ownership Plan, Section 401(k) Plan, and Retirement
Plan is current as of December 31, 1998. The information is based on the
Company's review of public reports filed by each director/executive officer.
<TABLE>
<CAPTION>
Certain Beneficial
Owners Amount and Nature of Percent of
of Shares of Common Beneficial Ownership Common Stock
Stock of Shares of Common of the Company
of the Company Stock of the Company(a) (*Less than 1%)
------------------- ----------------------- ---------------
<S> <C> <C>
(i) Directors
Tony Coelho.......................... 77,727(b) *
Jarrod M. Cohen...................... 1,627,000(c) 6.70%
James O. Edwards..................... 593,613(d) 2.45%
Thomas C. Jorling.................... 22,727(e) *
Hazel R. O'Leary..................... 16,727(f) *
Keith M. Price....................... 117,569(g) *
James T. Rhodes...................... 7,018(h) *
Michael E. Tennenbaum................ 2,107,018(i) 8.65%
(ii) Executive Officers Named in the
Summary Compensation Table
Michael F. Gaffney................... 75,536(j) *
Former Executive Vice President
Thomas Grumbly....................... 50,412(k) *
Executive Vice President
Sudhakar Kesavan..................... 63,416(l) *
Executive Vice President
Richard A. Leupen.................... 162,500(m) *
Executive Vice President
Marc Tipermas........................ 185,422(n) *
Former President and Chief Operating
Officer
David Watson......................... 118,997(o) *
Former Executive Vice President
(iii) All Directors and Current Execu-
tive Officers as a Group (13 Per-
sons) 4,970,496(p) 20.48%
</TABLE>
- --------
(a) For the purposes of this table, a person or group is deemed to have
"beneficial ownership" of any shares of Common Stock which such person has
the right to acquire within 60 days after the date set forth in the
introductory paragraph above. However, for purposes of computing the
percentage of outstanding shares of Common Stock held by each person or
group of persons named above, any security which such person or group of
persons has or have the right to acquire from the Company within 60 days
from the date set forth in the introductory paragraph above is not deemed
to be outstanding for the purposes of computing the percentage ownership
of any other person.
40
<PAGE>
(b) Mr. Coelho's share ownership includes 59,000 shares that may be acquired
within 60 days of April 12, 1999 upon the exercise of stock options. He
also owns directly 2,000 other shares. Mr. Coelho has 16,727 Phantom Stock
Units which are fully described on pages 38-9 of this Report.
(c) Mr. Cohen's share ownership includes 49,000 shares owned by him directly
and 1,578,000 shares held by SG Cowen Securities Corporation ("SG Cowen").
The shares held by SG Cowen are included in the table, because Mr. Cohen's
father is Chairman of SG Cowen and, as a result may be deemed to control
SG Cowen. The information in the table is based on information received
from Mr. Cohen and is current as of March 31, 1999.
(d) Mr. Edwards' share ownership includes 2,882 shares allocated to his ESOP
account, 2,505 shares allocated to his Section 401(k) Plan account, 75,293
shares allocated to his Retirement Plan account, and 190,000 shares that
may be acquired within 60 days of April 12, 1999 upon the exercise of
stock options. Mr. Edwards owns 20,000 Restricted Shares. Mr. Edwards also
owns directly 302,933 other shares.
(e) Mr. Jorling's share ownership includes 6,000 shares that may be acquired
within 60 days of April 12, 1999 upon the exercise of stock options. Mr.
Jorling has 16,727 Phantom Stock Units which are fully described on pages
38-9 of this Report.
(f) Ms. O'Leary has 16,727 Phantom Stock Units which are fully described on
pages 38-9 of this Report.
(g) Mr. Price has 16,727 Phantom Stock Units which are fully described on
pages 38-9 of this Report. Mr. Price's share ownership includes 842 shares
allocated to his Sectioni 401(k) account and 100,000 shares that may be
acquired within 60 days of April 12, 1999, upon the exercise of stock
options.
(h) Mr. Rhodes has 7,018 Phantom Stock Units which are fully described on
pages 38-9 of this Report.
(i) Mr. Tennenbaum is the Managing Member of and may be deemed to control
Tennenbaum & Co., LLC, which owns 2,100,000 shares of Common Stock. Mr.
Tennenbaum also has 7,018 Phantom Stock Units which are fully described on
page 38-9 of this Report.
(j) Mr. Gaffney's share ownership includes 586 shares allocated to his
Retirement Plan account and 74,950 shares that may be acquired within 60
days of April 12, 1999 upon exercise of option.
(k) Mr. Grumbly's share ownership includes 412 shares allocated to his Section
401(k) Plan and 50,000 shares that may be acquired within 60 days of April
12, 1999 upon exercise of options.
(l) Mr. Kesavan's share ownership includes 4,321 shares allocated to his ESOP
account, 2,049 allocated to his Retirement Plan account, and 47,552 shares
that may be acquired within 60 days of the April 12, 1999 upon the
exercise of options. Mr. Kesavan also owns 9,494 other shares.
(m) Mr. Leupen's shares ownership includes 162,500 shares that may be acquired
within 60 days of April 12, 1999.
(n) Dr. Tipermas' share ownership includes 7,955 shares allocated to his ESOP
account, 16,267 shares allocated to his Retirement Plan account and
151,400 shares that may be acquired within 60 days of April 12, 1999,
upon exercise of optioins. He also owns 3,300 Restricted Shares and 6,500
other shares.
(o) Mr. Watson's share ownership includes 23,298 shares allocated to his
Section 401(k) Plan account, 66,150 shares that may be acquired within 60
days of April 12, 1999, upon exercise of options and 29,549 other shares
directly.
(p) This total includes 80,944 Phantom Stock Units, 13,618 shares allocated to
ESOP accounts, 3,759 shares in Section 401(k) Plan accounts, 80,654 shares
allocated to individuals under the Retirement Plan or held in directed
investment accounts under the Retirement Plan, 701,419 shares that may be
acquired within 60 days of April 12, 1999, upon the exercise of stock
options, and 20,000 Restricted Shares that will be vested within 60 days
of April 12, 1999, and 4,070,102 other shares.
Item 13. Certain Relationships and Related Transactions
Current Directors
Tony Coelho. In lieu of receiving cash compensation pursuant to the terms of
the ICF Kaiser International, Inc. Non-employee Directors Compensation and
Phantom Stock Plan described above, beginning January 1, 1999, Mr. Coelho is
being paid an annual fee of $120,000. In addition, Mr. Coelho was granted
100,000 options, expiring November 4, 2001, vesting 50% on May 4, 1999 and 50%
on November 4, 1999 with an exercise price
41
<PAGE>
of $1.24. These amounts are being paid to Mr. Coelho as consideration for his
services as Chairman of the Board of Directors.
Jarrod M. Cohen. On March 13, 1998, the Company and Mr. Jarrod M. Cohen (for
himself, Cowen and Company, Cowen Incorporated, and Joseph M. Cohen,
collectively, the "Cohen Parties") signed an agreement pursuant to which the
Company agreed, upon receipt of Mr. Cohen's written request at any time
between July 1 and December 31, 1998, to enlarge the class of directors whose
terms expire at the 2000 Annual Meeting of Shareholders and elect Mr. Cohen to
fill the resulting vacancy. The Cohen Parties agreed (i) to withdraw any
previous consents and agreed not to consent to be a nominee for election to
the Board of Directors at the Company's 1998 Annual Meeting of Shareholders,
(ii) to vote in favor of the Company-proposed nominees for election at the
1998 Annual Meeting of Shareholders, and (iii) to be present, in person or by
Report, or otherwise be deemed to be present (to the extent permitted by law)
at meetings for which they were given notice for the purpose of determining
the presence of a quorum at such meetings. In addition, the Cohen Parties
agreed (a) not to subject any of the Company's voting securities to a voting
trust or voting agreement; (b) not to solicit proxies or become a participant
in a solicitation in opposition to any recommendation of the Board of
Directors of the Company; (c) not to join with others or otherwise act in
concert with others for the purpose of acquiring, holding,
voting, or disposing of voting securities of the Company; (d) not to become,
alone or in conjunction with others, an acquiring person as defined in the
Company's Shareholders Rights Plan; and (e) not to dispose of any voting
securities of the Company to any person who, to the knowledge of the Cohen
Parties, as a result of acquiring such voting securities would become an
acquiring person as defined in the Company's Shareholder Rights Plan. The
provisions of (a) through (e) above apply during the period from March 13,
1998 to the date Mr. Cohen or any other designee of the Cohen Parties ceases
to be a member of the Board of Directors. It was agreed that if the Cohen
Parties obtained the express written consent of a majority of the directors of
the Company who are not designated by the Cohen Parties, then the provisions
of (a) through (e) above would not apply.
James O. Edwards. Effective May 1, 1997, the Company entered into an
employment agreement with Mr. Edwards for his services as Chairman and Chief
Executive Officer of the Company through December 31, 1999. In addition to
delineating Mr. Edwards' areas of responsibility and reporting line, the
agreement provided for a base annual salary of $400,000 beginning on April 1,
1997 (with $25,000 increases in each of the next two years); annual bonus
compensation to be determined by the Compensation & Human Resources Committee
of the Company's Board of Directors; severance payments as provided under the
Company's Senior Executive Officers Severance Plan; eligibility under the
Company's employee benefit plans; and a one-year non-competition period
following voluntary or "for cause" employment termination. The agreement also
provided for the grant on December 31, 1998, of 200,000 shares of Restricted
Stock under the Company's Stock Incentive Plan; 100,000 of these shares to
vest on December 31, 1999, with the balance vesting on December 31, 2000.
Vesting terms in the event of termination of Mr. Edwards' employment or his
death also are outlined in the agreement.
As part of his employment agreement with the Company, Mr. Edwards'
outstanding indebtedness to the Company on May 1, 1997, was restructured.
On November 6, 1998, Mr. Edwards entered into an agreement with the Company,
pursuant to which the parties mutually agreed to terminate Mr. Edwards'
employment agreement. In consideration of Mr. Edwards agreeing to terminate
his employment agreement, the Company agreed to compensate him with cash in
the aggregate amount of $850,000, all of which has been paid. The Company
further agreed (i) to provide Mr. Edwards and his dependents with continued
health, welfare, and life insurance benefits through April 30, 1999, (ii) to
accelerate the vesting of 30,000 options previously granted pursuant to the
Company's Stock Incentive Plan, (iii) consistent with the terms of his
employment agreement, to award 200,000 shares of restricted Common Stock,
which shares vest upon the earlier of November 6, 1999, or the merger,
consolidation, sale of stock, or sale of substantially all of the assets of,
the Company, and (iv) to forgive approximately $1,396,139 of indebtedness
previously owed by Mr. Edwards to the Company. In addition, Mr. Edwards agreed
to provide
42
<PAGE>
certain consulting services to the Company through January 31, 1999, for which
he was compensated with approximately $98,559 of cash payments. The Company
will pay on Mr. Edwards' behalf the amount of $10,000 for legal fees incurred
by him in connection with the negotiation of this Agreement. In exchange for
the benefits received by Mr. Edwards which are described in this paragraph,
Mr. Edwards agreed to terminate his employment agreement and execute a full
general release as to the Company and its affiliated parties.
Keith M. Price. Effective August 5, 1998, the Company entered into an
employment agreement with Mr. Price for his services as President and Chief
Operating Officer of the Company through August 5, 1999. In addition to
delineating Mr. Price's areas of responsibility and reporting line, the
agreement provided for a base annual salary of $375,000; a signing bonus of
$100,000, $50,000 of which was paid upon commencement of employment and
$50,000 on January 1, 1999; annual bonus compensation of not less than 50% of
base annual salary; severance payments equal to the balance of base annual
compensation for the one year contract term; eligibility under the Company's
employee benefit plans, and a one-year, non-competition period following
termination of employment for any reason other than employment through the
term of the contract. The agreement also provided for the grant of three-year
options to purchase 150,000 shares of the Company's common stock, 50% of the
options to vest on February 5, 1999 and 50% on August 4, 1999.
Effective August 5, 1998, Mr. Price was promoted to Chief Executive Officer
and the Company agreed to extend the term of Mr. Price's contract to two years
commencing August 5, 1998 and to grant Mr. Price three year options to
purchase an additional 50,000 share of the Company's common stock, 50% of the
options to vest on May 4, 1999 and 50% to vest on November 4, 1999, subject to
his continued employment through such dates.
Michael E. Tennenbaum. On March 13, 1998, the Company and Mr. Michael E.
Tennenbaum signed an agreement pursuant to which the Company agreed to
nominate, recommend, and solicit proxies for Mr. Tennenbaum's election as a
Director of the Company at the May 1, 1998, Annual Meeting of Shareholders for
a three-year term expiring at the 2001 Annual Meeting of Shareholders, and
until his successor is duly elected. The Company and Mr. Tennenbaum agreed
that during the period from March 13, 1998, to the earlier of (i) March 13,
2003, and (ii) the day after the date Mr. Tennenbaum, Tennenbaum & Co., LLC,
and their affiliates cease to be the beneficial owners of any of the Company's
voting securities (the "Restricted Securities"), Mr. Tennenbaum and Tennenbaum
& Co., LLC (the "Tennenbaum Parties") shall not acquire, directly or
indirectly, any voting securities of the Company if, following such
acquisition, the Tennenbaum Parties and their affiliates would, directly or
indirectly, be the beneficial owners of more than 19.5% of the total combined
voting power of all issued and outstanding securities of the Company. The
agreement states that the limitation set forth in the immediately preceding
sentence shall not be violated if the Tennenbaum Parties and their affiliates
become entitled to exercise voting power in excess of 19.5% as a result of any
event or circumstance other than the acquisition by the Tennenbaum Parties or
their affiliates of beneficial ownership of additional voting securities of
the Company. The Company agreed not to take any action, including without
limitation, any amendment to its Shareholders Rights Plan that would prevent
the Tennenbaum Parties from acquiring additional securities within the
limitations set forth above. The Tennenbaum Parties agreed that they (a) would
not subject any Restricted Securities to any voting trust or voting agreement;
(b) would not recruit or engage in organizing persons not nominated by the
Board of Directors to oppose the Board of Directors nominated candidates in an
election; (c) would not financially support a Report contest for Board of
Directors candidates to oppose the candidates nominated by the Board of
Directors; (d) would not provide any material, non-public information gained
in Mr. Tennenbaum's position as a Director to opposing Board candidates,
except as required by law, and then only after giving notice to the Company;
(e) would not join a partnership, limited partnership, syndicate, or other
group or otherwise act in concert with others for the purpose of acquiring,
holding, voting, or disposing of voting securities of the Company; and (f)
would be present, in person or by Report, or otherwise be deemed to be present
(to the extent permitted by law), at meetings for which they were given notice
for the purpose of determining the presence of a quorum as such meetings. The
provisions of (a) through (f) above apply during the period during which Mr.
Tennenbaum (or another affiliate of the Tennenbaum Parties) is a member of the
Board of Directors, and for a period of 90 days thereafter. It was agreed that
if the Tennenbaum Parties obtained the express written consent of a majority
of the directors of the Company who are not designated by the Tennenbaum
Parties, then the 19.5% ownership limitation and the provisions of (a) through
(f) above would not apply. Finally, the Company agreed to reimburse the
Tennenbaum Parties for reasonable and necessary documented out-of-pocket
expenses incurred by them in connection with their proposals to the Board of
Directors of the Company and the potential solicitation of proxies for the
election of directors of the Company, which reimbursement was made in the
amount of $16,307.
43
<PAGE>
Current Executive Officers
Thomas P. Grumbly On April 7, 1997, the Company entered into an employment
agreement with Mr. Grumbly for his services as Executive Vice President and
President, Federal Programs Group. In addition to delineating Mr. Grumbly's
areas of responsibility and reporting line, the agreement provides for: a base
annual salary of $250,000 beginning April 28, 1997, subject to annual
increases of $10,000; signing bonus of $50,000 for the period ended December
31, 1997; an additional bonus opportunity to be determined by the Compensation
& Human Resources Committee and based on Company performance; eligibility
under the Company's employee benefit plans and 12 months severance in the
event Mr. Grumbly is terminated other than for cause. The agreement also
provided for the grant of 100,000 options, 25% of which vest on each of the
first four anniversaries of the grant date.
On March15, 1999, in consideration for Mr. Grumbly's remaining in the employ
of the Company for a period of at least 30 days after the closing of the sale
of EFM, the Company agreed to: increase Mr. Grumbly's annual compensation to
$270,000 effective February 1, 1999; pay health insurance for a 12-month
period following termination; pay a bonus of $50,000; payout the 12-month
severance upon the closing of the EFM transaction; vest ICF Kaiser common
stock options; and waive the non-competition provisions of the April 1997
employment agreement.
Richard A. Leupen The Company entered into an employment agreement with Mr.
Leupen for his services as President of the Engineers and Constructors Group
and Executive Vice President of the Company for the period October 5, 1998
through August 4, 2001. In addition to delineating Mr. Leupen's areas of
responsibility and reporting line, the agreement provides for a base annual
salary of $300,000 beginning on October 5, 1998, subject to annual increases
to be determined by the Compensation & Human Resources Committee; a relocation
bonus of $46,000; bonus compensation of $35,000 for the period ended June 30,
1998, not less than $75,000 for the period ended December 31, 1998, not less
than $150,000 for the period ended August 4, 1999; signing bonus of $100,000,
payable in two equal increments on August 4, 1998 and January 1, 1999;
eligibility under the Company's employee benefit plans; reimbursement of
relocation and related expenses for Mr. Leupen and his family; and a one-year
non-competition following termination for "cause" of Mr. Leupen's employment.
The agreement also provided for the grant of 150,000 options, 50% of which
vested immediately and the remainder vested on January 1, 1999. In addition,
Mr. Leupen has the right to elect to be reinstated in his prior position with
Kaiser Engineers Pty. Ltd., headquartered in Perth, Western Australia. Either
party may terminate the agreement upon thirty (30) days' prior written notice;
the Company may terminate the agreement for "cause", or Mr. Leupen may
terminate the agreement for "good reason". In the event that the agreement is
terminated without "cause" by the Company or by Mr. Leupen without "good
reason" in the event that his responsibilities are substantially reduced or
materially changed or in the event that the Company is the subject of a
voluntary or involuntary bankruptcy, Mr. Leupen is entitled to receive a
severance payment equal to two times his annual base salary in effect of such
termination. In the event that Mr. Leupen terminated the agreement for other
"good reason" (as defined in the agreement), he is entitled to receive a
severence payment equal to one time his annual base salary then in effect.
Former Directors/Executive Officers
Michael F. Gaffney. Effective January 1, 1997, the Company entered into an
employment agreement with Mr. Gaffney for his services as Senior Vice
President of the Company through December 31, 1999. In addition to delineating
Mr. Gaffney's areas of responsibility and reporting line, the agreement
provides for a base annual salary of $230,000 for the 15-month period
beginning January 1, 1997 (with a $20,000 annual increase for the next 12-
month period and a $25,000 annual increase for the remaining months); annual
bonus compensation to be determined by reference to sales targets, operating
group revenue and profit targets, and other qualitative factors as determined
by the Compensation & Human Resources Committee of the Company's Board of
Directors; a specified severance payment; eligibility under the Company's
employee benefit plans; and a six month non-competition period following
employment termination.
On March 8, 1999, Mr Gaffney entered into an agreement with the Company,
pursuant to which the parties mutually agreed to terminate Mr. Gaffney's
employment agreement. In consideration of Mr. Gaffney agreeing to terminate
his employment agreement, the Company agreed to compensate him with cash in
the aggregate amount of $200,000 and to continue health, welfare, and life
insurance benefits for Mr. Gaffney and his dependents through April 30, 1999.
In exchange for the benefits received by Mr. Gaffney which are described in
this paragraph, Mr. Gaffney agreed to terminate his employment agreement;
enter into a six-month non-competition agreement, and execute a full general
release as to the Company and its affiliated parties.
44
<PAGE>
Marc Tipermas. Effective May 1, 1997, the Company entered into an employment
agreement with Dr. Tipermas for his services as President and Chief Operating
Officer of the Company through December 31, 1999. Dr. Tipermas also was a
Director of the Company at the time of such agreement. In addition to
delineating Dr. Tipermas' areas of responsibility and reporting line, the
agreement provided for a minimum base salary of $350,000 from April 1, 1997,
with $25,000 increases in each of the following two years; annual bonus
compensation to be determined by the Compensation & Human Resources Committee
of the Company's Board of Directors; severance payments as provided under the
Company's Senior Executive Officers Severance Plan (with a minimum of two
years); eligibility under the Company's employee benefit plans; a cash payment
of $50,000 (net of taxes) in return for an agreement not to sell shares of
Common Stock without Compensation Committee approval; and a one-year non-
competition period following voluntary or "for cause" employment termination.
The agreement also provided for the grant on December 31, 1998, of 150,000
shares of Restricted Stock under the Company's Stock Incentive Plan; 75,000 of
these shares vest on December 31, 1999, with the balance vesting on December
31, 2000. Vesting terms in the event of termination of Dr. Tipermas'
employment or his death also are outlined in the agreement.
On August 7, 1998, Dr. Tipermas entered into an agreement with the Company,
pursuant to which the parties mutually agreed to terminate Dr. Tipermas'
employment agreement. In consideration of Dr. Tipermas agreeing to terminate
his employment agreement, the Company paid him $732,500 in cash. The Company
further agreed (i) to provide Dr. Tipermas and his dependents with continued
health, welfare and life insurance benefits through January 31, 1999, (ii) to
accelerate the vesting of 19,800 options previously granted pursuant to the
Company's Stock Incentive Plan, and (iii) consistent with the terms of his
Employment Agreement, to award 150,000 shares of restricted Common Stock,
which shares vest upon the earlier of November 6, 1999, or the merger,
consolidation, sale of stock, or sale of substantially all of the assets of
the Company. All unexercised options held by Dr. Tipermas on November 6, 1999
will expire. In addition, Dr. Tipermas agreed to provide certain consulting
services to the Company through January 31, 1999, for which he was compensated
with approximately $186,178 of cash payments. The Company also will pay on Dr.
Tipermas' behalf the amount of $8,781 for legal fees incurred by him in
connection with the negotiation of this agreement. In exchange for the
benefits received by Dr. Tipermas which are described in this paragraph, Dr.
Tipermas agreed to terminate his employment agreement and execute a full
general release as to the Company and its affiliated parties.
David Watson. Effective November 13, 1995, the Company entered into an
employment agreement with Mr. Watson for his services as Executive Vice
President and President of the International Operations Group of the Company
through November 13, 1998. This agreement was subsequently amended, effective
December 1, 1996, to provides for Mr. Watson's services as Executive Vice
President, and President of the ICF Kaiser Engineers & Constructors Group
through December 1, 1999. In addition to delineating Mr. Watson's areas of
responsibility, the amended agreement provides for a minimum base annual
salary of $275,000, and bonuses in the range of $25,000 to $100,000 for fiscal
1996 and in amounts to be determined by the Compensation Committee for future
years; severance payments as provided under the Company's Senior Executive
Officers Severance Plan; and reimbursement of relocation expenses up to a
maximum of $50,000. The amended agreement also provided for the grant (i) on
December 15, 1995 of 20,000 stock options, 6,250 of which were vested
immediately and the remainder to vest in three equal increments on each annual
anniversary of the grant date, and (ii) on January 24, 1997 of 75,000
additional options, 18,750 of which vested upon grant, and the remainder to
vest in three equal increments on each annual anniversary of the grant date.
In return for the benefits afforded Mr. Watson in his employment agreement,
Mr. Watson agreed to a one-year non-competition and non-solicitation period
following termination of his employment for any reason.
On August 17, 1998, Mr. Watson entered into an agreement with the Company,
pursuant to which the parties mutually agreed to terminate Mr. Watson's
employment agreement. In consideration of Mr. Watson agreeing to terminate his
employment agreement, the Company paid him $300,019 in cash in October 1998.
The Company further agreed (i) to enable Mr. Watson to use the Company's
Corporate Membership at a private club through December 31, 1999, (ii) to
accelerate the vesting of 45,600 shares of restricted stock previously
granted, and (iii) reimburse up to $2,500 of legal fees incurred by Mr. Watson
in connection with the negotiation of this agreement. In exchange for the
benefits received by Mr. Watson which are described in this paragraph,
Mr. Watson agreed to terminate his employment agreement, execute a full
general release as to the Company and its affiliated parties, and further
agreed not to compete with the Company for a period of one year following the
termination of his employment by the Company.
45
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
<TABLE>
<S> <C>
(a) Documents filed as part of this Report
<CAPTION>
Page
----
<S> <C>
1. Consolidated Financial Statements of ICF Kaiser International, Inc. and
Subsidiaries
a. Report of Independent Accountants.................................... F-1
b. Consolidated Balance Sheets as of December 31, 1998 and December 31,
1997................................................................. F-2
c. Consolidated Statements of Operations for the years ended December
31, 1998, 1997 and 1996.............................................. F-3
d. Consolidated Statements of Shareholders' Equity (Deficit) and
Comprehensive Income (Loss) for the years ended December 31, 1998,
1997 and 1996........................................................ F-4
e. Consolidated Statements of Cash Flows for the years ended December
31, 1998, 1997 and 1996.............................................. F-5
f. Notes to Consolidated Financial Statements........................... F-6
2. Supplemental Schedule Relating to the Consolidated Financial Statements
of ICF Kaiser International, Inc. and Subsidiaries for the years ended
December 31, 1998, 1997 and 1996.
a.Schedule II: Valuation and Qualifying Accounts........................ S-1
</TABLE>
All Schedules except the one listed above have been omitted because they are
not applicable or not required or because the required information is included
elsewhere in the financial statements in this filing.
(b) Exhibits
3. Exhibits (listed according to the number assigned in the table in Item 601
of Regulation S-K).
Exhibit No. 3--Articles of Incorporation and By-laws of the Registrant
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)
Exhibit No. 3--Articles of Incorporation and By-laws of the Subsidiary
Guarantors
3(c) Articles of Incorporation of Cygna Consulting Engineers and Project
Management, Inc. (Incorporated by reference to Exhibit No. 3(c) to
Registration Statement on Form S-1 Registration No. 333-19519 filed with
the Commission on January 10, 1997)
3(d) By-laws of Cygna Consulting Engineers and Project Management, Inc.
(Incorporated by reference to Exhibit No. 3(d) to Registration Statement
on Form S-1 Registration No. 333-19519 filed with the Commission on
January 10, 1997)
3(e) Certificate of Incorporation of ICF Kaiser Government Programs, Inc.
(Incorporated by reference to Exhibit No. 3(e) to Registration Statement
on Form S-1 Registration No. 333-19519 filed with the Commission on
January 10, 1997)
3(f) By-laws of ICF Kaiser Government Programs, Inc. (Incorporated by
reference to Exhibit No. 3(f) to Registration Statement on Form S-1
Registration No. 333-19519 filed with the Commission on January 10, 1997)
46
<PAGE>
3(g) Certificate of Incorporation of Systems Applications International, Inc.
(Incorporated by reference to Exhibit No. 3(i) to Registration Statement
on Form S-1 Registration No. 333-19519 filed with the Commission on
January 10, 1997)
3(h) By-laws of Systems Applications International, Inc. (Incorporated by
reference to Exhibit No. 3(j) to Registration Statement on Form S-1
Registration No. 333-19519 filed with the Commission on January 10, 1997)
3(i) Certificate of Incorporation of EDA, Incorporated (Incorporated by
reference to Exhibit No. 3(k) to Annual Report on Form 10-K (Registrant
No. 1-12248) for fiscal year 1997 filed with the Commission on March 31,
1998)
3(j) Amended and Restated By-laws of EDA, Incorporated (Incorporated by
reference to Exhibit No. 3(l) to Annual Report on Form 10-K (Registrant
No. 1-12248) for fiscal year 1997 filed with the Commission on March 31,
1998)
3(k) Certificate of Incorporation of Global Trade & Investment, Inc.
(Incorporated by reference to Exhibit No. 3(o) to Annual Report on Form
10-K (Registrant No. 1-12248) for fiscal year 1997 filed with the
Commission on March 31, 1998)
3(l) Amended and Restated By-laws of Global Trade & Investment, Inc.
(Incorporated by reference to Exhibit No. 3(p) to Annual Report on Form
10-K (Registrant No. 1-12248) for fiscal year 1997 filed with the
Commission on March 31, 1998)
3(m) Certificate of Incorporation of ICF Kaiser Europe, Inc. (Incorporated by
reference to Exhibit No. 3(q) to Annual Report on Form 10-K (Registrant
No. 1-12248) for fiscal year 1997 filed with the Commission on March 31,
1998)
3(n) By-laws of ICF Kaiser Europe, Inc. (Incorporated by reference to Exhibit
No. 3(r) to Annual Report on Form 10-K (Registrant No. 1-12248) for
fiscal year 1997 filed with the Commission on March 31, 1998)
3(o) Certificate of Incorporation of ICF Kaiser / Georgia Wilson, Inc.
(Incorporated by reference to Exhibit No. 3(s) to Annual Report on Form
10-K (Registrant No. 1-12248) for fiscal year 1997 filed with the
Commission on March 31, 1998)
3(p) By-laws of ICF Kaiser / Georgia Wilson, Inc. (Incorporated by reference
to Exhibit No. 3(t) to Annual Report on Form 10-K (Registrant No. 1-
12248) for fiscal year 1997 filed with the Commission on March 31, 1998)
3(q) Certificate of Incorporation of ICF Kaiser Overseas Engineering, Inc.
(Incorporated by reference to Exhibit No. 3(u) to Annual Report on Form
10-K (Registrant No. 1-12248) for fiscal year 1997 filed with the
Commission on March 31, 1998)
3(r) Amended and Restated By-laws of ICF Kaiser Overseas Engineering, Inc.
(Incorporated by reference to Exhibit No. 3(v) to Annual Report on Form
10-K (Registrant No. 1-12248) for fiscal year 1997 filed with the
Commission on March 31, 1998)
3(s) Certificate of Incorporation of ICF Kaiser Engineers Pacific, Inc.
(Incorporated by reference to Exhibit No. 3(w) to Annual Report on Form
10-K (Registrant No. 1-12248) for fiscal year 1997 filed with the
Commission on March 31, 1998)
3(t) Amended and Restated By-laws of ICF Kaiser Engineers Pacific, Inc.
(Incorporated by reference to Exhibit No. 3(x) to Annual Report on Form
10-K (Registrant No. 1-12248) for fiscal year 1997 filed with the
Commission on March 31, 1998)
3(u) Certificate of Incorporation of ICF Kaiser Remediation Company
(Incorporated by reference to Exhibit No. 3(y) to Annual Report on Form
10-K (Registrant No. 1-12248) for fiscal year 1997 filed with the
Commission on March 31, 1998)
3(v) By-laws of ICF Kaiser Remediation Company (Incorporated by reference to
Exhibit No. 3(z) to Annual Report on Form 10-K (Registrant No. 1-12248)
for fiscal year 1997 filed with the Commission on March 31, 1998)
47
<PAGE>
3(w) Certificate of Incorporation of ICF Kaiser Advanced Technology, Inc.
(Incorporated by reference to Exhibit No. 3(y) 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 E No.
3 (aa) 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).
3(x) By-laws of ICF Kaiser Advanced Technology, Inc. (Incorporated by
reference to Exhibit No. 3(z) 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. 3 (bb) 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).
Exhibit No. 4--Instruments Defining the Rights of Security Holders, including
Indentures
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)
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)
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)
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. 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)
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)
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)
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(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) Form of Common Stock Purchase Warrant expiring May 15, 1999 (as amended
and restated through January 11, 1994) (Incorporated by reference to
Exhibit No. 4(e) 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)
48
<PAGE>
4(d) 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(e) Warrant Agreement dated as of January 11, 1994, between the Registrant
and The Bank of New York, as Warrant Agent (Incorporated by reference to
Exhibit No. 4(c) 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(f) 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)
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.
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(g) 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(h) 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(i) 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)
Exhibit No. 10 -- Material Contracts
10(a) Loan and Security Agreement dated as of December 18, 1998, with
Madeleine L.L.C, as agent
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)
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)
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)
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)
49
<PAGE>
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)
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.)
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)
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(k) WAS FILED IN PAPER ON MAY 23, 1995, ON FORM SE
PURSUANT TO A CONTINUING HARDSHIP EXEMPTION is incorporated herein by
reference thereto]
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)
50
<PAGE>
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)
3. Modifications 47 to 81 to Contract #DE-AC3495RF00825 (Modifications 72
and 78 not received)
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)
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)
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)
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)
1. Agreement dated as of November 6, 1998, terminating Mr. Edwards'
employment agreement .
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)
1. Agreement dated as of August 7, 1998, terminating Dr. Tipermas'
employment agreement.
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).
51
<PAGE>
10(ff) Employment Agreement with Thomas P. Grumbly, Executive Vice President
of the Registrant, effective as of April 7, 1997.
1. Letter dated March 15, 1999, amending Mr. Grumbly's employment
agreement.
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).
1. Agreement and Mutual Release dated August 17, 1998, terminating Mr.
Watson's employment agreement.
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).
1. Agreement dated March 8, 1999, terminating Mr. Gaffney's employment
agreement.
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
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).
1. Terms of Promotion for Mr. Price effective as of November 4, 1998.
Exhibit No. 21--Consolidated Subsidiaries of the Registrant as of April 12,
1999
Exhibit No. 23--Consent of PricewaterhouseCoopers, LLP
Exhibit No. 27--Financial Data Schedule. This schedule contains summary
financial information extracted from the consolidated financial statements of
ICF Kaiser International, Inc. as of December 31, 1998 and 1997 and for the
three years ended December 31, 1998 and is qualified in its entirety by
reference to such financial statements.
(c) Reports on Form 8-K
On November 6, 1998, the Company filed a Current Report on Form 8-K.
Pursuant to Item 5 of its Report, the Company disclosed that James O. Edwards
had resigned as its Chief Executive Officer, effective November 4, 1998.
52
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ICF Kaiser International, Inc.
(Registrant)
/s/ Keith M. Price
By: _________________________________
Keith M. Price,
President and Chief Executive
Officer
Date: April 15, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
(1) Principal executive officer
<TABLE>
<S> <C> <C>
/s/ Keith M. Price President and Chief April 15, 1999
______________________________________ Executive Officer
Keith M. Price
</TABLE>
(2) Principal financial and accounting officer
<TABLE>
<S> <C> <C>
/s/ Timothy P. O'Connor Senior Vice President and April 15, 1999
_____________________________________ Chief Financial Officer
Timothy P. O'Connor
</TABLE>
(3) Board of Directors
<TABLE>
<S> <C> <C>
/s/ Tony Coelho Director April 15, 1999
______________________________________
Tony Coelho
/s/ Jarrod M. Cohen Director April 15, 1999
______________________________________
Jarrod M. Cohen
/s/ James O. Edwards Director April 15, 1999
______________________________________
James O. Edwards
/s/ Thomas C. Jorling Director April 15, 1999
______________________________________
Thomas C. Jorling
/s/ Hazel R. O'Leary Director April 15, 1999
______________________________________
Hazel R. O'Leary
/s/ Keith M. Price Director April 15, 1999
______________________________________
Keith M. Price
/s/ James T. Rhodes Director April 15, 1999
______________________________________
James T. Rhodes
Director April 15, 1999
______________________________________
Michael E. Tennebaum
</TABLE>
53
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of ICF Kaiser International, Inc.
In our opinion, the consolidated financial statements listed in Item 14(a) of
this Form 10-K present fairly, in all material respects, the financial
position of ICF Kaiser International, Inc. and Subsidiaries at December 31,
1998 and 1997, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above. In
addition, in our opinion, the financial statement schedule referred to in
Item 14(a), when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the information
required to be included therein.
Due to substantial operating losses incurred in 1998 and the resulting
liquidity constraints, the Company engaged in an evaluation of strategic
alternatives available to it, including the sale of one or more of the
Company's operating groups. Management's progress to date and future plans
regarding these matters are discussed more fully in Note 2 to the consolidated
financial statements.
PricewaterhouseCoopers LLP
April 15, 1999
McLean, Virginia
F-1
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------
1998 1997
-------- --------
(In thousands,
except share
amounts)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents.................................. $ 15,267 $ 20,020
Contract receivables, net.................................. 284,078 264,030
Prepaid expenses and other current assets.................. 12,841 15,090
Deferred income taxes...................................... 34,673 15,281
-------- --------
Total Current Assets.................................... 346,859 314,421
-------- --------
Fixed Assets
Furniture, equipment, and leaseholds....................... 43,996 45,681
Less depreciation and amortization......................... (37,411) (37,968)
-------- --------
6,585 7,713
-------- --------
Other Assets
Goodwill, net.............................................. 49,292 47,323
Investments in and advances to affiliates.................. 7,728 7,038
Capitalized software development costs..................... 5,062 4,085
Other...................................................... 13,527 18,708
-------- --------
75,609 77,154
-------- --------
Total Assets............................................ $429,053 $399,288
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Debt currently payable..................................... $ 30,729 $ 15
Accounts payable........................................... 189,906 121,190
Accrued salaries and benefits.............................. 37,931 37,654
Other accrued expenses..................................... 43,846 26,902
Deferred revenue........................................... 40,011 36,527
Income taxes payable....................................... 2,147 1,012
-------- --------
Total Current Liabilities............................... 344,570 223,300
Long-term Liabilities
Long-term debt............................................. 137,488 141,004
Other...................................................... 9,664 4,586
-------- --------
Total Liabilities....................................... 491,722 368,890
-------- --------
Commitments and Contingencies
Minority Interest.......................................... 449 3,071
Shareholders' Equity (Deficit)............................. -- --
Preferred stock............................................ -- --
Common stock, par value $.01 per share:
Authorized--90,000,000 shares
Issued and outstanding-- 24,257,828 and 22,475,904
shares.................................................. 242 225
Additional paid-in capital................................. 75,422 67,116
Notes receivable collateralized by common stock............ (638) (2,422)
Accumulated deficit........................................ (134,757) (34,225)
Accumulated other comprehensive income (loss).............. (3,387) (3,367)
-------- --------
Total Shareholders' Equity (Deficit).................... (63,118) 27,327
-------- --------
Total Liabilities and Shareholders' Equity (Deficit).... $429,053 $399,288
======== ========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1998 1997 1996
------------- ------------- -------------
(In thousands, except per share amounts)
<S> <C> <C> <C>
Gross Revenue..................... $ 1,210,421 $ 1,108,116 $ 1,248,443
Subcontract and direct material
costs.......................... (794,794) (677,431) (720,342)
Provision for contract losses... (76,210) (6,900) --
Equity in income of joint
ventures and affiliated
companies...................... 6,045 2,301 4,015
------------- ------------- -------------
Service Revenue................... 345,462 426,086 532,116
Operating Expenses
Direct labor and fringe
benefits....................... 282,562 289,571 380,400
Group overhead.................. 92,151 86,792 95,747
Corporate general and
administrative................. 22,983 22,059 24,441
Depreciation and amortization... 9,048 9,595 10,348
Severance and restructuring
charges........................ 9,407 -- --
Other unusual charges........... 7,672 -- --
------------- ------------- -------------
Operating Income (Loss)........... (78,361) 18,069 21,180
Other Income (Expense)
Gain on sale of investment...... -- 1,018 9,384
Interest income................. 1,539 1,750 1,254
Interest expense................ (20,279) (18,276) (17,334)
------------- ------------- -------------
Income (Loss) Before Income Tax,
Minority Interest, Extraordinary
Item, and Cumulative Effect of
Accounting Change................ (97,101) 2,561 14,484
Income tax expense (benefit).... (11,357) (3,319) 2,607
------------- ------------- -------------
Income (Loss) Before Minority
Interest, Extraordinary Item, and
Cumulative Effect of Accounting
Change........................... (85,744) 5,880 11,877
Minority interest in net income
of subsidiaries................ 7,698 10,867 6,043
------------- ------------- -------------
Income (Loss) Before Extraordinary
Item and Cumulative Effect of
Accounting Change................ (93,442) (4,987) 5,834
Extraordinary item.............. 1,090 -- --
------------- ------------- -------------
Income (Loss) Before Cumulative
Effect of Accounting Change...... (94,532) (4,987) 5,834
Cumulative Effect of Accounting
Change, net of tax............. 6,000 -- --
------------- ------------- -------------
Net Income (Loss)................. (100,532) (4,987) 5,834
Preferred stock dividends and
accretion...................... -- -- 2,178
------------- ------------- -------------
Net Income (Loss) Available for
Common Shareholders.............. $ (100,532) $ (4,987) $ 3,656
============= ============= =============
Basic and Fully Diluted Earnings
(Loss) Per Share:
Income (Loss) Before
Extraordinary Item and of
Cumulative Effect of Accounting
Change......................... $ (3.87) $ (0.22) $ 0.17
Extraordinary item............ (0.05) -- --
------------- ------------- -------------
Income (Loss) Before Cumulative
Effect of Accounting Change.... (3.92) (0.22) 0.17
Cumulative effect of
accounting change, net of
tax.......................... (0.25) -- --
------------- ------------- -------------
Net Income (Loss) Per Share..... $ (4.17) $ (0.22) $ 0.17
============= ============= =============
Weighted average shares for basic
earnings (loss) per share........ 24,092 22,382 22,035
Effect of dilutive stock
options........................ -- -- 22
------------- ------------- -------------
Weighted average shares for
diluted earnings (loss) per
share............................ 24,092 22,382 22,057
============= ============= =============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock
--------------------- Accumulated
Additional Accumulated Other Shareholders'
Paid-in Notes Earnings Comprehensive Equity
Shares Par Value Capital Receivable (Deficit) Income (Deficit)
---------- --------- ---------- ---------- ----------- ------------- -------------
(In thousands, except share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1996................... 21,263,828 $213 $64,654 $(1,732) $ (32,894) $(1,814) $ 28,427
Net income............. -- -- -- -- 5,834 -- 5,834
Preferred stock
dividends............. -- -- -- -- (1,965) -- (1,965)
Preferred stock
accretion............. -- -- -- -- (213) -- (213)
Issuances of common
stock................. 1,153,014 11 2,650 -- -- -- 2,661
Reacquisition of common
stock................. (105,000) (1) (426) -- -- -- (427)
Foreign currency
translation
adjustment............ -- -- -- -- -- 470 470
Other.................. -- -- 105 -- -- -- 105
---------- ---- ------- ------- --------- ------- --------
Balance, December 31,
1996................... 22,311,842 223 66,983 (1,732) (29,238) (1,344) 34,892
Net loss............... -- -- -- (4,987) -- (4,987)
Issuances of common
stock................. 319,300 3 644 -- -- -- 647
Reacquisition of common
stock................. (155,238) (1) (511) -- -- -- (512)
Foreign currency
translation
adjustment............ (2,023) (2,023)
Other.................. -- -- -- (690) -- -- (690)
---------- ---- ------- ------- --------- ------- --------
Balance, December 31,
1997................... 22,475,904 225 67,116 (2,422) (34,225) (3,367) 27,327
---------- ---- ------- ------- --------- ------- --------
Net loss............... -- -- -- (100,532) -- (100,532)
Issuances of common
stock................. 1,941,446 19 8,856 -- -- 8,875
Reacquisition of common
stock................. (159,522) (2) (550) -- -- -- (552)
Foreign currency
translation
adjustment............ (20) (20)
Other.................. -- -- -- 1,784 -- -- 1,784
---------- ---- ------- ------- --------- ------- --------
Balance, December 31,
1998................... 24,257,828 $242 $75,422 $ (638) $(134,757) $(3,387) $(63,118)
========== ==== ======= ======= ========= ======= ========
</TABLE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1998 1997 1996
--------- ------- ------
<S> <C> <C> <C>
Net Income (Loss) .................................. $(100,532) $(4,987) $5,834
Other Comprehensive Income (Loss)
Foreign currency translation adjustments.......... (20) (2,023) 470
--------- ------- ------
Total Comprehensive Income (Loss)............... $(100,552) $(7,010) $6,304
========= ======= ======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1998 1997 1996
--------- -------- -------
(In thousands)
<S> <C> <C> <C>
Operating Activities
Net income (loss)............................... $(100,532) $ (4,987) $ 5,834
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization................... 9,048 9,595 10,348
Provision for losses............................ 29,679 1,195 1,881
Provision for deferred income taxes............. (13,210) (4,586) 2,127
Charge for cumulative effect of accounting
change......................................... 6,000 -- --
Note receivable write-off....................... 1,784 -- --
Extraordinary item.............................. 1,090 -- --
Earnings in excess of cash distributions from
joint ventures and affiliated companies........ (1,044) (91) (374)
Minority interest in net income of
subsidiaries................................... 7,698 10,867 6,043
Gain on sale of investment...................... -- (1,018) (9,384)
Changes in operating assets and liabilities,
net of acquisitions and dispositions:
Contract receivables, net...................... (23,679) (42,494) 2,638
Prepaid expenses and other current assets...... 506 (2,268) 1,843
Accounts payable and accrued expenses.......... 45,403 41,573 (24,781)
Deferred revenue............................... 3,484 14,698 7,727
Income tax payable............................. 1,129 160 --
Other liabilities.............................. 5,954 3,296 (2,202)
Other operating activities...................... (2,748) 251 (334)
--------- -------- -------
Net Cash Provided by (Used in) Operating
Activities................................... (29,438) 26,191 1,366
--------- -------- -------
Investing Activities
Investments in subsidiaries and affiliates, net
of cash acquired............................... 3,456 (4,074) (1,317)
Sales of subsidiaries and/or investments........ 2,400 17,028 --
Purchases of fixed assets....................... (4,494) (4,888) (4,910)
--------- -------- -------
Net Cash Provided by (Used in) Investing
Activities................................... 1,362 8,066 (6,227)
--------- -------- -------
Financing Activities
Borrowings under revolving credit facility...... 139,629 104,500 114,000
Principal payments on revolving credit
facility....................................... (112,875) (121,000) (98,500)
Proceeds from issuance of senior notes.......... -- -- 14,700
Repurchase of preferred stock................... -- -- (20,000)
Distribution of income to minority interest..... (10,320) (13,950) (2,428)
Change in book overdraft........................ 8,395 (2,667) 2,827
Proceeds from issuances of common stock......... 155 213 383
Repurchases of common stock..................... -- (251) --
Preferred stock dividends....................... -- -- (2,615)
Debt issuance costs............................. (1,380) (624) (1,427)
Other financing activities...................... -- -- 924
--------- -------- -------
Net Cash Provided by (Used in) Financing
Activities................................... 23,604 (33,779) 7,864
--------- -------- -------
Effect of Exchange Rate Changes on Cash.......... (281) (708) 228
--------- -------- -------
Increase (Decrease) in Cash and Cash
Equivalents..................................... (4,753) (230) 3,231
Cash and Cash Equivalents at Beginning of
Period.......................................... 20,020 20,250 17,019
--------- -------- -------
Cash and Cash Equivalents at End of Period....... $ 15,267 $ 20,020 $20,250
========= ======== =======
Supplemental cash flow information is as follows:
Cash payments for interest...................... $ 20,051 $ 18,649 $24,701
Cash payments for income taxes.................. 936 402 765
Non-cash transactions:
Issuance of common stock........................ 8,720 434 2,175
Reacquisition of common stock................... (552) (261) (427)
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies
Nature of Operations: ICF Kaiser International, Inc. and subsidiaries (the
Company) provides engineering, construction, program management, and
consulting services primarily to the public and private environmental,
infrastructure, industry, and energy markets domestically and internationally.
Principles of Consolidation: The consolidated financial statements include
all majority-owned or controlled subsidiaries. Investments in unconsolidated
joint ventures and affiliated companies are accounted for using the equity
method. The difference between the cost of joint venture investments and the
Company's underlying equity is amortized on a straight-line basis over the
estimated lives of the related investments. All significant intercompany
balances and transactions have been eliminated.
Revenue Recognition: The Company's revenue is derived primarily from long-
term contracts of various types. Revenue on time-and-materials contracts is
recognized based on actual hours delivered times the contracted hourly billing
rate, plus the costs incurred for any materials. Revenue on fixed-priced
contracts is recognized using the percentage-of-completion method and is
comprised of the portion of expected total contract earnings represented by
actual costs incurred to date as a percentage of the contract's total
estimated costs at completion. Revenue on cost-reimbursable contracts is
recognized to the extent of costs incurred plus a proportionate amount of the
contracted fee. Certain cost-reimbursable contracts also include provisions
for earning performance-based incentive fees. Such incentive fees are included
in revenue at the time the amounts can be reasonably determined. Provisions
for anticipated contract losses are recognized at the time they become
estimable.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
the disclosed amounts of contingent assets and liabilities at the date of the
financial statements, and the amounts of revenues and expenses recognized
during the reporting period. Actual results could differ from those estimates.
Foreign Currency Translation: Results of operations for foreign entities are
translated using the average exchange rates during the period. Assets and
liabilities are translated to U.S. dollars using the exchange rate in effect
at the balance sheet date. Resulting translation adjustments are reflected net
of tax in shareholders' equity (deficit) as cumulative translation
adjustments.
Cash Equivalents and Restricted Cash: The Company considers all highly
liquid financial instruments purchased with maturities of three months or less
at date of purchase to be cash equivalents. A short-term restricted cash
equivalent of $600,000, supporting an outstanding letter of credit at December
31, 1998, as well as restricted cash balances of the wholly owned insurance
subsidiary, totaling $2,441,000 and $1,165,000 at December 31, 1998 and 1997,
respectively, were included in prepaid expenses and other current assets on
the balance sheet.
Fixed Assets: Furniture and equipment are carried at cost or fair value at
acquisition if acquired through the purchase of a business, and are
depreciated using the straight-line method over their estimated useful lives,
ranging from three to ten years. Leasehold improvements are carried at cost
and are amortized using the straight-line method over the remaining lease
terms.
Capitalized Software Development Costs: Certain costs, including consulting
expenses and internal labor, incurred to develop major software applications
for internal Company use, as well as for external software
F-6
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
product sales are capitalized and amortized over the estimated useful or
economic lives of the software, respectively. Amortization expense of
$1,260,000 and $1,049,000 was recognized during 1998 and 1997, respectively.
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Internal use software........................................ $7,136 $5,444
External use software........................................ 816 321
------ ------
Total capitalized software................................. 7,952 5,765
Accumulated amortization..................................... (2,890) (1,680)
------ ------
$5,062 $4,085
====== ======
</TABLE>
Goodwill: Goodwill represents the excess of cost of acquired businesses over
the fair value of the identifiable net tangible and intangible assets
acquired. Goodwill is amortized using the straight-line method over the period
for which the Company estimates it will benefit directly from the
acquisitions. The range of estimated benefit from the Company's historical
acquisitions ranges from five to forty years. The Company periodically
evaluates these ranges and the recoverability of goodwill by comparing the
estimated future undiscounted operating cash flows for each underlying
acquisition to the respective carrying value of goodwill. Management does not
believe there has been any impairment in the value of goodwill at December 31,
1998. Accumulated amortization was $20,145,000 and $17,463,000, at December
31, 1998 and 1997, respectively.
Income Taxes: Deferred tax assets and liabilities represent the tax effects
of differences between the financial statement carrying amounts and the tax
basis carrying amounts of the Company's assets and liabilities. These
differences are calculated based upon the statutory tax rates in effect in the
years in which the differences are expected to reverse. The effect of
subsequent changes in tax rates on deferred tax balances is recognized in the
period in which a tax rate change is enacted. The Company evaluates its
ability to realize future benefit from all deferred tax assets and establishes
reserve allowances for amounts that may not be realizable.
Unless otherwise noted, provisions are not made for U.S. income taxes for
the undistributed earnings of the Company's foreign subsidiaries because the
Company intends to reinvest such earnings in continuing operations
indefinitely. Undistributed earnings of foreign subsidiaries for which income
taxes have not been provided approximated $3.8 million at December 31, 1998.
Concentrations of Credit Risk: The Company maintains cash balances primarily
in overnight Eurodollar deposits, investment-grade commercial paper, bank
certificates of deposit, and U.S. government securities. The Company grants
uncollateralized credit to its customers. Approximately 63% of the Company's
contract receivables at December 31, 1998, were from agencies of the U.S.
government (see Note 4).
Recent Accounting Pronouncements: In 1998, and for all comparable periods,
the Company adopted the Financial Accounting Standards Board Statement of
Financial Accounting Standards (SFAS) No. 130 --Reporting Comprehensive
Income. Comprehensive income is defined as the change in equity during a
period from transactions and other events and circumstances with non-owner
sources.
Also in 1998, the Company adopted SFAS No. 131--Disclosures About Segments
of an Enterprise and Related Information. SFAS No. 131 superseded SFAS 14,
Financial Reporting for Segments of a Business Enterprise, replacing the
"industry segment" approach with the "management" approach. Pursuant to the
management approach, the determination of reportable segments is based on the
internal organizational formats and management reporting formats used by the
Company in making operating, investing, resource allocation and performance
assessment. SFAS 131 also requires disclosures about products and services,
geographic areas, and major customers.
F-7
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In February 1998, the Financial Accounting Standards Board issued SFAS
Statement No. 132--Employers' Disclosures about Pensions and Other Post-
retirement Benefits. The Statement merely revises employers' disclosures about
pension and other post-retirement benefit plans. The Company adopted the new
SFAS No. 132 disclosure requirements in its financial statements for the year
ended December 31, 1998 and for all comparable periods.
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5--
Reporting on the Costs of Start-Up Activities (SOP 98-5). The SOP requires
costs of organization and start-up activities to be expensed as incurred. The
Company elected early adoption of SOP 98-5 effective April 1, 1998 and, at
that time, reported the cumulative effect of the change as a one-time, non-
cash charge of $6,000,000, net of a tax benefit of $2,930,000.
Reclassifications: Certain reclassifications have been made to the prior-
period financial statements contained herein in order to conform to the 1998
presentation.
2. Liquidity and Capital Resource Outlook
Management believes that the cash proceeds from the completed EFM sale and
the pending Consulting Group sale will yield sufficient short-term liquidity
to bridge the Company's financing needs until such time as the Company can
secure other longer-term alternatives. Specifically, the cash proceeds from
divestitures will be used to retire outstanding cash borrowings from the
revolving credit facility, provide required collateral for contract
performance guarantees, pay overdue vendor obligations and contribute to
supporting the future realigned working capital requirements and capital
expenditures of the Company's remaining operations including required interest
obligations of the Series B Senior and the Senior Subordinated notes.
Subsequent to the sale of the EFM and Consulting Groups, however, as well as
between the closing dates of the sales, the Company's remaining E&C operations
will require access to a revolving credit line containing provisions for
access to letters of credit typically required to support certain contract
performance obligations. The Company has obtained an amended, $30 million,
revolver (the Amended Revolver) from its current lenders through June 30,
1999. The terms of the Amended Revolver include similar restrictive financial
covenants as the Revolver and in addition required the Company to
collateralize $10.0 million of its total contract performance guarantees which
are currently addressed by noncollateralized letters of credit. In the event
that access to a replacement revolving line cannot be secured by June 30,
1999, the Company will have to use available cash, generated largely from
asset sales; to collateralize its contract performance guarantees.
In the event the Consulting Group sale is not consummated, the Company
believes the cash flows from ongoing operations of the Consulting Group,
Kaiser-Hill, and the E&C Group would most likely generate sufficient
collateral, in the form of current trade accounts receivable, to adequately
support a borrowing base to secure the size of revolving credit line needed to
fund short-term borrowing needs of the Company's remaining operations, as well
as the letter-of-credit capacity needed primarily by the E&C Group. A factor
critical, however, to the Company's success in securing a sufficient and
affordable working capital facility in the near term, in all of the above
scenarios, is its ability to remove sufficient overhead costs from remaining
operations and demonstrate improved operating results. Although management
believes it will be able to accomplish these milestones, there can be no
assurance that it will be able to do so.
Regardless of the outcome of the pending Consulting Group sale, over the
long term the Company will need to realign its capital structure. Assuming the
sale of the Consulting Group is completed, the net proceeds may be used to
reinvest in the Company's business, pay down debt on the Amended Revolver or
offer to purchase the Company's outstanding Notes. The Company is considering
alternatives for the use of the net proceeds of the Consulting Group sale and
the realignment of its capital structure. These alternatives will include
means by which the Company's outstanding debt may be reduced to levels that
can be supported by cash flows of the remaining operations.
The Company also will continue to explore options that would provide
additional capital for longer-term objectives and operating needs, including
the possibility for divestiture of additional operating assets, replacements
for the Company's long-term debt, and additional equity infusions.
F-8
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. Acquisitions and Dispositions
Acquisition of ICT Spectrum: On February 17, 1998, the Company's Board of
Directors approved the acquisition of ICT Spectrum Constructors, Inc., a
construction contractor, based in Boise, Idaho, specializing in construction
management of fabrication plants and other facilities for semiconductor and
microelectronics customers. Each share of ICT Spectrum stock was exchanged for
shares of ICF Kaiser stock, resulting in the issuance of 1.5 million shares of
ICF Kaiser common stock and a total purchase price of $8,040,000. The
acquisition of $18.5 million in total assets and $13.7 million in total
liabilities accounted for as a purchase, resulted in approximately $4.8
million in goodwill, which is being amortized over 12 years. The purchase was
completed on March 19, 1998 and the Company's Consolidated Statement of
Operations includes the operating results of the acquired entity from January
1, 1998.
The exchanged ICF Kaiser shares carry the guarantee that the fair market
value of each share of stock will reach $5.36 by March 1, 2001. In the event
that the fair market value does not attain the guaranteed level, the Company
is obligated to make up the shortfall either through the payment of cash or by
issuing additional shares of common stock, depending upon the Company's
preference. Pursuant to the terms of the Agreement, however, the total number
of contingently issuable shares of common stock cannot exceed an additional
1.5 million. Given the quoted fair market value of the Company's common stock
at December 31, 1998 was $1.44 per share, and that the Company's current debt
instruments restrict the amount of cash that can be used for acquisitions, the
assumed issuance of an additional 1.5 million shares would not completely
extinguish the purchase price contingency. Any future distribution of cash or
common stock would be recorded as a charge to the Company's paid-in-capital.
Until the earlier of the contingent purchase price resolution or March 1,
2001, any additional shares assumed to be issued because of shortfalls in fair
market value will be included in the Company's diluted earnings per share
calculations, unless they are antidilutive. The exchanged shares also contain
restrictions preventing their sale prior to March 1, 2001.
Sale of the Environment and Facilities Management Group (EFM): On March 9,
1999, the Company entered into a definitive asset purchase agreement (the EFM
Agreement) with The IT Group, Inc. (IT) for the sale of the Company's
Environment and Facilities Management Group (EFM), exclusive of the Kaiser-
Hill subsidiary. Pursuant to the terms of the EFM Agreement, on April 9, 1999,
the Company sold the majority of the active contracts and investments, and
transferred a substantial number of employees of EFM to IT for a cash purchase
price of $82 million, less $8 million retained by IT for EFM's working capital
requirements.
Intent to sell the Consulting Group: In March 8, 1999, the Company signed a
non-binding letter of intent for the sale of its Consulting Group to CM Equity
Partners, L.P. and the Group's management. While final terms of the sale are
being negotiated, the transaction is expected to be completed by mid-year
1999.
Sale of Gary PCI: In December 1996, the Company sold the majority of its
investment in Gary PCI Ltd. L.P. (owners of pulverized coal injection
operations) and a related entity and certain related contractual rights for
$16.6 million resulting in a $9.4 million pretax gain. The buyer exercised an
option on January 5, 1998, to purchase the remaining equity investment for
$2.4 million. The Company recognized a total pretax gain of $1.0 million
during 1997 as the carrying value of the option was increased to reflect fair
market value. The sales price for both installments was included in other
current assets in the accompanying balance sheets and was collected in January
of each of the subsequent years.
F-9
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Contract Receivables
Contract receivables consisted of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
U.S. government agencies:
Currently due......................................... $ 20,193 $ 19,650
Retention............................................. 3,030 2,695
Unbilled.............................................. 156,025 114,921
-------- --------
179,248 137,266
-------- --------
Commercial clients and state and municipal governments:
Currently due......................................... 74,184 97,909
Retention............................................. 21,267 18,952
Unbilled.............................................. 20,229 17,045
-------- --------
115,680 133,906
-------- --------
294,928 271,172
Less allowances for uncollectible receivables........... (10,850) (7,142)
-------- --------
$284,078 $264,030
======== ========
</TABLE>
Unbilled receivables result from revenue that has been earned but not
billed. The unbilled receivables can be invoiced at contractually defined
intervals or milestones, as well as upon completion of the contract or the
U.S. government cost audit. Retention balances are billable at contract
completion or upon attainment of other specified contract milestones. Other
unbilled amounts consist primarily of indirect costs that will be billed on
cost-reimbursable government contracts upon completion of applicable cost
audits by the government. Consistent with industry practice, these receivables
are classified as current assets. The balance of unbilled receivables with
U.S. government agencies includes $5.3 million in claims to which the Company
believes it is entitled, and recovery of which may take more than one year.
The Company anticipates that the remaining unbilled receivables will be
substantially billed and collected within one year.
In 1996, the Company accelerated its process for obtaining approval from the
U.S. government to invoice certain indirect costs on cost-reimbursable
contracts, prior to the completion of government audits of such costs. The net
effect of the accelerated ability to invoice these costs resulted in the
recognition of approximately $3.3 million of Consulting Group gross revenue
and operating income in 1996.
5. Joint Ventures and Affiliated Companies
The Company has ownership interests in certain unconsolidated corporate
joint ventures and affiliated companies. The Company's net investments in and
advances to these corporate joint ventures and affiliated companies totaled
$7.7 million and $7.0 million at December 31, 1998 and 1997, respectively.
Combined
F-10
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
summarized financial information of all of the Company's unconsolidated
corporate joint ventures and affiliated companies as of December 31, was as
follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Current assets...................................... $20,390 $23,661 $26,558
Non-current assets.................................. 12,462 10,182 7,887
Current liabilities................................. 21,602 20,479 13,314
Non-current liabilities............................. 2,641 -- 53
Gross revenue....................................... 24,546 41,285 28,742
Net income.......................................... 5,318 7,522 11,930
</TABLE>
With the intent of significantly restructuring fixed operating leases for
the Company's corporate headquarters, the Company paid $1.5 million on
November 12, 1997, for a 40% ownership interest in a limited liability company
(the LLC) that leases the land and owns the buildings leased primarily by the
Company for its corporate headquarters. The Company is committed to make
additional annual capital contributions to the LLC totaling $600,000 annually
during each of the first three years and $700,000 annually during each of the
fourth through ninth years of the LLC. The ownership in the LLC will increase
to 16% in fixed annual 2.4% increments in each of the eleventh through
fifteenth years of the agreement. Transaction costs totaling $1.7 million were
capitalized and will be amortized over the estimated 15-year life of the LLC.
6. Debt
The Company's long-term debt was as follows at December 31 (in thousands):
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
12% Senior Subordinated Notes due 2003.................... $125,000 $125,000
12% Senior Notes due 2003, Series B....................... 15,000 15,000
Revolving credit facility................................. 30,729 4,000
Other notes............................................... -- 15
-------- --------
170,729 144,015
Less unamortized discount................................. 2,512 2,996
-------- --------
168,217 141,019
Less current maturities................................... 30,729 15
-------- --------
$137,488 $141,004
======== ========
</TABLE>
All long-term debt, net of current maturities, outstanding at December 31,
1998, is due in 2003.
Background to 1998 financing developments: In 1998, the Company realized
that it was going to incur significant cost overruns on four large fixed-price
contracts to construct plants to produce nitric acid (the Nitric Acid
Projects). Due to the significant risks, difficulties and uncertainties
involved in estimating the total costs to complete these large fixed price
projects, the Company increased the total completed project cost estimates
several times in 1998. Given the completion cost uncertainties and the
inability to finitely determine the impact
F-11
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
of the losses on the Company's liquidity and financing sources, management
immediately pursued options for additional financing sources and
flexibilities. In addition to seeking a replacement revolving credit facility,
the Company's Board of Directors also began considering and pursuing other
potential alternatives, including, but not limited to, the sale of a portion
of the Company.
Revolving Credit Facility: As a result of the sourcing activities, the
Company successfully entered into a new revolving credit facility (the
Revolver) on December 18, 1998 which offered additional flexibility and access
to additional cash borrowings as compared to the predecessor revolving
facility. The new Revolver provides for cash borrowings and letters of credit
up to an aggregate of $60 million. The total available credit is based on a
percentage of eligible billed and unbilled accounts receivable, up to the $60
million maximum. The Company and certain of its subsidiaries, which are
guarantors of the Revolver, have pledged their stock and granted a security
interest in certain accounts receivable and other assets. The Revolver limits
the payments of cash dividends on common stock, prohibits the issuance of
certain types of additional indebtedness, limits certain investments and
acquisitions, limits the amount of outstanding letters of credit to $35
million, prohibits the sale of certain assets, and requires the maintenance of
specified financial ratios.
The Revolver contains provisions for prime interest rate borrowings with
margins dependent upon the Company's financial operating results, and expires
on December 18, 2000. As of December 31, 1998, the Company had $30.7 million
in cash borrowings and $26.7 million of letters of credit outstanding under
the Revolver. The letters of credit outstanding under the Revolver are in
support of contract performance guarantees, primarily on international
projects. The weighted average interest rate incurred on revolver borrowings
for 1998 and 1997 was 8.9% and 8.5%, respectively. As of December 31, 1998,
the Company had $2.6 million of additional credit available from the Revolver.
Soon after obtaining the Revolver, the Company again increased the estimate
of the total Nitric Acid Projects cost overruns by an additional $19 million.
This material adverse change to the Company's financial condition triggered a
technical event of default pursuant to the Revolver's terms. Subsequent to the
event of default, the lender did permit the Company to borrow and obtain
letters of credit pursuant to all other terms of the Revolver, primarily
conditioned on the Revolver provision that proceeds from asset sales be used
to repay outstanding cash borrowings. That provision combined with the fact
that the Company was actively pursuing the sale of significant operating
assets was sufficient assurance for the lenders to continue to permit the use
of the facility until such time as an asset sale was completed. On April 9,
1999, the Company completed the sale of its EFM Group (Note 3) and used $36
million of the sale proceeds to extinguish outstanding Revolver cash
borrowings. The Company has also received a commitment from the Revolver's
financial institutions for an amendment to the Revolver (the Amended Revolver)
providing for cash borrowing and letters of credit up to an aggregate of $30
million. The Amended Revolver will expire on June 30, 1999 and will also
require the Company to provide $10.0 million in cash collateral for existing
letters of credit.
Extraordinary Item: Proceeds totaling $25,000,000 from the Revolver were
used to repay all outstanding amounts from the former revolving credit
facility. Accordingly, the Company wrote off the unamortized balance of the
capitalized costs related to the original issue the debt and recognized an
extraordinary charge of $1,090,000. The Company did not recognize any income
tax benefit associated with this charge.
Senior and Subordinated Notes: On December 23, 1996, the Company privately
issued 15,000 Units, each Unit consisting of $1,000 principal amount of 12%
Senior Notes due in 2003, Series A (Series A Senior Notes), and 7 warrants,
each to purchase one share of the Company's common stock at an exercise price
of $2.30 per share. The warrants contain certain anti-dilution provisions and
expire on December 31, 1999. Payment of the
F-12
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
principal, premium if any and interest on the Series A Senior Notes are
unconditionally guaranteed by 10 of the Company's wholly owned subsidiaries
(Note 16). The discounted issue price of $14.7 million was allocated to the
warrants and the notes in the amounts of $0.1 million and $14.6 million,
respectively.
In January 1997, the Company registered $15.0 million of 12% Senior Notes
due in 2003, Series B (Series B Senior Notes) with the U.S. Securities and
Exchange Commission. In March 1997 the Company completed the exchange of the
Series B Senior Notes for Series A Senior Notes. The terms of the Series B
Senior Notes are substantially identical (including principal amount, interest
rate, and maturity) to the terms of the Series A Senior Notes. Interest has
and will continue to accrue at 13% until the Company achieves and maintains a
specified level of earnings.
On January 11, 1994, the Company issued 125,000 Units, each consisting of
$1,000 principal amount of the Company's 12% Senior Subordinated Notes due
2003 (Subordinated Notes) and 4.8 warrants, each to purchase one share of the
Company's common stock at an exercise price of $5.00 per share. The warrants
expired on December 31, 1998. In March 1996, the interest rate on the
Subordinated Notes was increased by 1% until the Company achieves and
maintains a specified level of earnings. The Company's obligations under the
Subordinated Notes are subordinate to its obligations under the Company's
revolving credit facility and the Series B Senior Notes.
Interest payments are due semiannually on the Series B Senior Notes and the
Subordinated Notes (collectively, the Notes). Subsequent to December 31, 1998,
the Company may prepay the Notes at a premium. The indentures governing the
Notes contain business and financial covenants, including restrictions on
additional indebtedness, dividends, acquisitions and certain types of
investments, and asset sales. At December 31, 1998, the fair value, derived
from the average of quoted financial institution market prices, of the Series
B Senior Notes and Subordinated Notes was approximately $15.0 million and
$75.0 million, respectively. The capitalized balance of Note issuance costs
totaled $3.3 million and $4.0 million, respectively, at December 31, 1998 and
1997, and are being amortized over the Note terms.
Kaiser Hill Receivables Purchase Facility: The Company's Kaiser-Hill
subsidiary has a $50 million receivables purchase facility to support its
working capital requirements for a U.S. Department of Energy contract. The
receivables purchase facility contains certain program fees, requires the
subsidiary to maintain a specified tangible net worth, and contains certain
letter-of-credit and default provisions for delinquent receivables. The
receivables purchase facility expires on June 30, 1999, and is non-recourse to
the Company and its other consolidated subsidiaries.
7. Capital Stock
Notes Receivable Collateralized by Common Stock: Certain current and former
members of senior management have outstanding notes to the Company for which
396,849 shares of the Company's common stock serve as the primary collateral.
Several of the managers left the employ of the Company in 1998 and the related
amount of note principal in excess of the then fair market value of the
collateral shares totaling $1,784,000 was expensed. Subsequent to December 31,
1998, all of the notes were called or came due and all of the collateral
shares were tendered to the Company in lieu of note payment.
Shareholder Rights Plan: The Shareholder Rights Plan (Rights Plan) provides
the Board of Directors (the Board) with the ability to negotiate with a person
or group that might, in the future, make an unsolicited attempt to acquire
control of the Company. The Rights Plan provides for one Right (Right) for
each outstanding share of the Company's common stock. Each right entitles the
holder to purchase 1/100 of a share of Series 4 Junior Preferred Stock at a
purchase price of $50. The Rights generally may cause substantial dilution to
a person or
F-13
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
group that attempts to acquire the Company on terms not approved by the Board.
The Rights expire on January 13, 2002.
Preferred Stock: The Company's 200 shares of Series 2D Senior Preferred
Stock were redeemed in 1996 for $20 million. The other authorized classes of
preferred stock consist of 200 shares of Series 1 Junior Convertible Preferred
Stock, par value $0.01 per share and 500,000 shares of Series 4 Junior
Preferred Stock, par value $0.01 per share. There were no preferred shares
issued or outstanding as of December 31, 1998 or 1997.
8. Earnings Per Share
Basic EPS excludes dilution and is computed on the basis of the weighted-
average number of common shares outstanding for the period. Diluted EPS
includes the weighted-average effect of dilutive securities outstanding during
the period. Summary information of other common stock equivalents not included
in the 1998 and 1997 per share calculations because of their anti-dilutive
impact is as follows:
<TABLE>
<CAPTION>
Weighted-
Year Ended Number of Average Range of
December Other Common Remaining Exercise Weighted-Average
31, Stock Equivalents Contract Life Prices Exercise Price
---------- ----------------- ------------- ------------- ---------------- ---
<S> <C> <C> <C> <C> <C>
1998...... 3,390,290 2.5 years $1.24 - $6.87 $2.96
1997...... 3,475,077 2.1 years $1.90 - $6.90 $3.83
</TABLE>
F-14
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9 Income Taxes
The components of income (loss) used to compute the provision (benefit) for
income taxes for the years ended December 31 were as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- -------
<S> <C> <C> <C>
Income (loss) before income taxes and minority
interests:
Domestic.................................... $(97,791) $ 675 $13,900
Foreign..................................... 690 1,886 584
-------- ------- -------
$(97,101) $ 2,561 $14,484
======== ======= =======
Provision (benefit) for income taxes:
Federal:
Current................................... $ -- $ 129 $ --
Deferred.................................. (10,341) (4,231) 1,660
-------- ------- -------
(10,341) (4,102) 1,660
-------- ------- -------
State:
Current................................... 232 374 55
Deferred.................................. (2,747) (854) 864
-------- ------- -------
(2,515) (480) 919
-------- ------- -------
Foreign:
Current................................... 1,621 764 425
Deferred.................................. (122) 499 (397)
-------- ------- -------
1,499 1,263 28
-------- ------- -------
$(11,357) $(3,319) $ 2,607
======== ======= =======
</TABLE>
The effective income tax provision (benefit) varied from the federal
statutory income tax provision (benefit) because of the following differences
(in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- ------
<S> <C> <C> <C>
Income tax (benefit) computed at federal
statutory tax rate............................ $(33,014) $ 896 $5,069
Change in tax (benefit) from:
Goodwill amortization........................ 1,102 1,024 996
Minority interest earnings................... (2,617) (3,803) (2,115)
State income taxes........................... (2,548) (312) 597
Foreign taxes................................ 2,908 316 (427)
Valuation allowance.......................... 22,031 -- (2,100)
Stock redemption............................. 646 -- --
Business meals and entertainment............. 455 342 449
Research and experimentation credits......... (551) (1,881) --
Other........................................ 231 99 138
-------- ------- ------
21,657 (4,215) (2,462)
-------- ------- ------
$(11,357) $(3,319) $2,607
======== ======= ======
</TABLE>
F-15
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The tax effects of the principal temporary differences and carryforwards
that give rise to the Company's deferred tax asset (net) are as follows (in
thousands):
<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
Reserves for adjustments and allowances................... $ 23,686 $13,162
Vacation and incentive compensation accruals.............. 5,264 3,275
Tax credit carryforwards.................................. 3,008 2,472
Net operating loss carryforwards.......................... 25,899 555
Gain on sale of investment................................ 155 (767)
Restricted stock.......................................... 2,669 --
Unbilled revenue.......................................... (2,616) (1,680)
Other..................................................... 253 (516)
-------- -------
58,318 16,501
Valuation allowance....................................... (23,645) (1,220)
-------- -------
$ 34,673 $15,281
======== =======
</TABLE>
Certain components of the deferred tax asset at December 31, 1998 are
subject to expiration: $0.5 million of the $25.9 million of net operating loss
carryforwards expire within the next five years, and the remaining
$25.4 million expire by 2018; $1.0 million of the $3.0 million tax credit
carryforwards have no expiration and $2.0 million expire by 2012. The ability
to derive benefit from these carryforwards in the future is dependant on the
Company's ability to generate sufficient taxable income prior to the
expiration dates.
The Company provided for an additional valuation allowance of $22.4 million
in 1998 as management believes that the Company is not currently assured of
being able to derive future benefit from a portion of the deferred tax asset.
The Company believes that expected levels of pretax earnings, including
anticipated gains from the divestiture of portions of the Company will
generate sufficient future taxable income to be able to realize the net $34.7
million deferred tax asset within the next year. Until such sales are
finalized, however, the valuation allowance is deemed necessary. Additionally,
in the event that the Company does not generate significant additional taxable
income, either through asset sales or through profitable operations, the
Company's ability to fully utilize the deferred tax assets could be reduced.
The remaining $1.2 million of the valuation allowance at December 31, 1998 is
attributed to foreign income tax benefits also not currently assured of
realization.
10. Leases
Annual future minimum payments and corresponding receipts on noncancelable
operating leases and subleases, respectively, for office space and equipment
with initial or remaining terms in excess of one year at December 31, 1998 are
as follows, net of the amount of EFM Lease commitments sold on April 9, 1999
(Note 3) (in thousands):
<TABLE>
<CAPTION>
Lease Sublease
Year Amount Amount
---- -------- --------
<S> <C> <C>
1999....................................................... $ 16,781 $ 4,512
2000....................................................... 14,304 2,346
2001....................................................... 11,113 524
2002....................................................... 9,611 535
2003....................................................... 8,823 498
Thereafter................................................. 71,203 2,715
-------- -------
$131,835 $11,130
======== =======
</TABLE>
F-16
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The total rental expense for all operating leases was $28,733,000,
$27,576,000, and $31,686,000 for the years ended December 31, 1998, 1997, and
1996, respectively. Sublease rental income was $5,482,000, $4,617,000, and
$3,887,000 for the years ended December 31, 1998, 1997, 1996, respectively.
11. Benefits and Compensation Plans
Employee Stock Purchase Plan: The Company's Stock Purchase Plan provides for
the sale of up to 2.0 million shares of common stock to all eligible
employees. Employees may elect to withhold up to 10% of annual base earnings
for the purchase of the Company's common stock. Options to purchase shares of
common stock are offered quarterly with a purchase price equal to 90% of the
lower of the closing market price on the first trading day of the month
preceding the quarter or the last trading day of the quarter. During the years
ended December 31, 1998 and 1997, respectively, 98,551 and 101,927 shares were
sold under the plan. Operation of the Plan was suspended effective March 31,
1999.
Fixed Stock Option Plans: A Stock Incentive Plan (Incentive Plan) provides
for the issuance of options, stock appreciation rights, restricted shares, and
restricted stock units of up to an aggregate of 6.0 million shares of the
Company's common stock. Awards are made to employees at the discretion of the
Compensation and Human Resources Committee of the Board (Committee). Vesting
periods, determined by the Committee, are generally in equal installments over
three to six years. At December 31, 1998, 1,114,738 shares were available for
grant under this plan.
On February 28, 1997, the Board of Directors adopted the Non-Employee
Directors Compensation and Phantom Stock Plan under which non-employee
directors are given phantom stock awards (PSA's). In lieu of option grants,
each non-employee director of the Company will be granted a PSA equal to
$20,000 worth of common stock on the date of grant. Three years after the PSA
grant, the Company will pay each non-employee director, in cash, the value of
the shares to which the PSA relates. Any increases in value of the PSA after
the date of grant and prior to the cash payment will be expensed in the period
of the value increase. PSA's granted in 1998 and 1997 totaled 49,126 and
48,545, respectively, with initial share values of $2.85 and $2.06,
respectively. Expense associated with this plan of $76,000 and $83,000 was
recognized in 1998 and 1997, respectively.
The precursor to the above plan was the Non-Employee Directors Stock Option
Plan (Non-Employee Plan) which provided each non-employee director of the
Company an immediately exercisable option to purchase 3,000 shares of the
Company's common stock for each year of service. The Non-Employee Plan does
not specify a maximum number of available shares. As of December 31, 1998,
there are 135,000 shares of common stock reserved for issuance upon the
exercise of options granted under this plan and 60,000 are outstanding. This
Plan was suspended following adoption of the Non-Employee Directors
Compensation and Phantom Stock Plan.
The Company's Consultants, Agents, and Part-Time Employees Stock Option Plan
(Consultants Plan) provides for the issuance of options or restricted shares
of up to 1.0 million shares of the Company's common stock to consultants,
agents, and part-time employees. The vesting period is a minimum of one year.
In 1998, 100,000 options were granted and 200,000 options were granted in
1997. At December 31, 1998, there were 688,200 options available for grant. In
1997, 100,000 of the options granted contained a provision for a cash payment
equal to one half of the difference between $4.00 and the lesser average
market price through December 19, 1998.
All three plans provide that the option or grant price is not to be less
than the fair market value on the date of grant. Under the Incentive and Non-
Employee Directors Plans, an option's maximum term is 10 years. As of December
31, 1998, there have been no options granted under these plans with terms
greater than five years. An option's maximum term under the Consultants Plan
is five years.
F-17
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A summary of stock option activity under all option plans is as follows:
<TABLE>
<CAPTION>
Weighted-Average
Shares Option Price Exercise Price
--------- --------------- ----------------
<S> <C> <C> <C>
Balance, January 1, 1996........ 2,451,673 $2.34 to $17.00 $5.16
Granted......................... 187,200 $1.90 to $3.77 $3.30
Expired......................... (451,940) $2.50 to $17.00 $8.69
Exercised....................... (4,002) $3.00 to $3.50 $2.68
---------
Balance, December 31, 1996...... 2,182,931 $1.90 to $9.59 $4.29
Granted......................... 885,019 $1.91 to $4.00 $2.39
Expired......................... (572,961) $2.23 to $9.59 $5.77
---------
Balance, December 31, 1997...... 2,494,989 $1.90 to $6.90 $3.27
Granted......................... 1,175,500 $1.24 to $2.99 $1.95
Expired......................... (659,957) $1.90 to $6.07 $3.92
Exercised....................... (330) $2.23 $2.23
---------
Balance, December 31, 1998...... 3,010,202 $1.24 to $4.42 $2.62
========= =============== =====
</TABLE>
Options exercisable at December 31, 1998 and 1997, were 1,408,203 and
1,217,617, respectively. The weighted-average remaining contractual life on
options outstanding at December 31, 1998, was 2.8 years. There were 87,501
exercisable options outstanding at a price below the fair market value of the
Company's common stock at December 31, 1998.
The following is a summary of fixed stock options outstanding at December
31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------- ----------------------------
Weighted-Average
Range of Number Remaining Weighted-Average Number Weighted-Average
Exercise Prices Outstanding Contract Life (years) Exercise Price Exercisable Exercise Price
--------------- ----------- --------------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
<$1.90 560,000 3.5 years $1.34 87,501 $1.34
$1.90 to $2.50 1,292,830 3.7 years $2.31 342,621 $2.19
$2.51 to $3.50 451,234 1.4 years $2.91 373,409 $2.90
$3.51 to $5.00 706,138 1.5 years $4.01 604,672 $3.99
</TABLE>
Pro Forma Compensation Cost: Statement of Financial Accounting Standards No.
123, Accounting for Stock-based Compensation (SFAS No. 123), encourages
companies to adopt a fair value method of accounting for employee stock
options and similar equity instruments. The fair value method requires
compensation cost to be measured at the grant date based on the value of the
award and to be recognized over the service period. As alternatively provided
by SFAS No. 123, however, the Company elects to provide pro forma fair value
disclosures for stock-based compensation. Accordingly, had compensation cost
been recognized for awards granted under the Company's stock plans during the
years ended December 31, 1998, 1997, and 1996, respectively, the net loss
would have been $(101.3) million, [$(4.20) per share], $(5.7) million,
[$(0.26) per share], and $5.2 million [$0.14 per share]. These per share
amounts reflect basic and diluted earnings per share.
The fair value of each option grant under the fixed-price option plans and
the fair value of the employees' purchase rights under the employee stock
purchase plan are estimated on the date of grant for pro forma computations
using the Black-Scholes option-pricing model. The dividend yield was assumed
to be zero for both
F-18
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
periods below. The weighted-average of all other significant assumptions of
weighted-average fair value of grants made during the years ended December 31
are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Fixed Stock Option Plans:
Volatility................................ 71.6% 61.4% 63.4%
Risk-free interest rate................... 5.2% 6.2% 5.8%
Expected lives............................ 5.0 years 5.0 years 5.0 years
Fair value of grants...................... $1.20 $1.22 $1.92
Employee Stock Purchase Plan:
Volatility................................ 71.6% 61.4% 63.4%
Risk-free interest rate................... 4.7% 5.1% 5.0%
Expected lives............................ 0.3 years 0.3 years 0.3 years
Fair value of grants...................... $0.36 $1.40 $0.95
</TABLE>
Retirement Benefits Plans: The Company sponsors several retirement benefit
plans covering substantially all employees who meet minimum length of service
requirements. These plans include a defined-contribution retirement plan that
provides for contributions by the Company based on a percentage of covered
compensation, and a 401(k) Plan that allows employees to defer portions of
their salary, subject to certain limitations. Total expense for these plans
for the years ended December 31, 1998, 1997, and 1996, was $7,383,000,
$7,266,000, and $7,427,000, respectively. As of December 31, 1998, the
Retirement Plan, 401(k) Plan, and a discontinued Employee Stock Ownership Plan
owned 849,908, 417,176, and 1,519,200 shares, respectively, of the Company's
common stock.
Collective Bargaining Agreements: Certain of the Company's employees are
covered by union-sponsored, collectively bargained, multi-employer benefit
plans. Contributions and costs are determined in accordance with the
provisions of negotiated labor contracts or terms of the plans. Pension
expense for these plans was $413,000, $482,000, and $9,097,000 for the years
ended December 31, 1998, 1997, and 1996, respectively.
Postemployment Benefit Plan: The Company also continues to fulfill the
provisions of a previously curtailed plan which provides certain medical and
dental benefits to a group of former retirees. The benefits, which are limited
to a fixed amount, are funded to the insurance company as participants'
insurance claims are reimbursed. The benefit cost for this curtailed plan for
the years ended December 31 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- ------
<S> <C> <C> <C>
Interest cost.......................................... $ 359 $ 412 $ 525
Amortization of transition obligation.................. 980 980 980
Amortization of unrecognized net gain.................. (591) (563) (409)
----- ----- ------
Net benefit charge..................................... $ 748 $ 829 $1,096
===== ===== ======
</TABLE>
F-19
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Because there are no new particpants in this plan, there is no current
service cost. The change in the status of the plan as of December 31 was as
follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Benefit obligation at January 1,.......................... $ 5,508 $ 6,161
Service cost............................................ -- --
Interest cost........................................... 359 412
Benefits paid........................................... (740) (856)
Actuarial gain.......................................... (248) (209)
------- -------
Benefit obligation at December 31,........................ 4,879 5,508
Unamortized transition obligation....................... (8,487) (9,467)
Unrecognized net gain................................... 5,920 6,263
------- -------
Net benefit obligation liability at December 31,.......... $(2,312) $(2,304)
======= =======
</TABLE>
The discount rate for both 1998 and 1997 was 7%. The 1998 health-care cost
trend rate is 5%, effective until 2013 when the cost will be in excess of the
Company's maximum obligation. If the trend rate were increased by 1% for each
year, the benefit obligation as of December 31, 1998 would increase by
approximately $148,000 or 3%. The transition obligation is being amortized
over 14.5 years.
12. Major Customers, Business Segments, and Foreign Operations
Major Customers: Gross revenue from the U.S. Department of Energy totaled
$653,631,000, $622,190,000, and $866,361,000 for the years ended December 31,
1998, 1997 and 1996, respectively.
Business Segments: In 1998, the Company adopted Statement of Financial
Accounting Standards No. 131--Disclosures About Segments of an Enterprise and
Related Information (SFAS 131) which requires the reporting of certain
financial information by business segment. For purposes of providing segment
information, the Company's four business segments are:
. the Engineers and Constructors Group (E&C) which provides engineering and
construction services to commercial and state and local entities in the
areas of industry, infrastructure, transportation, and microelectronics;
. the Environment and Facilities Management Group (EFM) which oversees
major program management and technical support contracts for U.S.
government agencies;
. the Kaiser-Hill Company, LLC (Kaiser-Hill) which performs and manages the
Department of Energy's multibillion-dollar management contract at Rocky
Flats;
. the Consulting Group (Consulting) which provides energy, information
technology, environmental, economic, and community development consulting
services to industry and governmental clients as well as private-sector
environmental clients.
These segments are used for internal management purposes primarily because
of the similarities in products and services, customers, and regulatory
environments. The operating results include all activities that had sole
direct benefit to the respective segment. Operating activities that are deemed
to benefit more than one segment are managed by the Company and are not
allocated to the segments. Asset information by reportable segment is not
reported, because the Company does not maintain or use such information for
internal management purposes.
The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies except that the
Company allocates some expenses to the operating segments
F-20
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
according to a methodology designed by management for internal reporting
purposes and involves estimates and assumptions. Financial data for the
business segments are as follows (in thousands):
<TABLE>
<CAPTION>
Intersegment
Kaiser-Hill E&C EFM Consulting Eliminations Other Total
----------- --------- --------- ---------- ------------ ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1998
Gross Revenue............... $ 632,600 $ 374,100 $ 105,300 $105,400 $(6,979) $ $1,210,421
Subcontracts and
materials................. (478,100) (242,890) (53,300) (23,700) 3,196 (794,794)
Provision for contract
losses.................... -- (76,210) -- -- -- (76,210)
Equity income of
affiliates................ -- -- -- -- -- 6,045 6,045
--------- --------- --------- -------- ------- ------- ----------
Service Revenue............. 154,500 55,000 52,000 81,700 (3,783) 6,045 345,462
Operating Expenses:
Direct labor and fringe.... 138,300 78,300 26,600 38,100 1,262 282,562
General and
administrative............ -- 48,800 19,800 29,800 (6,249) -- 92,151
--------- --------- --------- -------- ------- ------- ----------
Segment Income/(Loss)....... $ 16,200 $ (72,100) $ 5,600 $ 13,800 1,204 6,045 (29,251)
========= ========= ========= ======== =======
Corporate overhead......... 22,983 22,983
Depreciation/amortization.. 9,048 9,048
Severance and
restructuring............. 9,407 9,407
Other unusual charges...... 7,672 7,672
----------
Operating Income/(Loss)..... $ (78,361)
==========
1997
Gross Revenue............... $ 588,700 $ 337,800 $ 88,100 $ 93,100 $ 416 $ $1,108,116
Subcontracts and
materials................. (421,200) (199,100) (34,300) (21,800) (1,031) (677,431)
Provision for contract
losses.................... (6,900) (6,900)
Equity income of
affiliates................ -- -- -- -- -- 2,301 2,301
--------- --------- --------- -------- ------- ------- ----------
Service Revenue............. 167,500 131,800 53,800 71,300 (615) 2,301 426,086
Operating Expenses:
Direct labor and fringe.... 145,500 80,100 30,800 33,300 (129) 289,571
General and
administrative............ -- 42,700 18,900 26,100 (908) -- 86,792
--------- --------- --------- -------- ------- ------- ----------
Segment Income/(Loss)....... $ 22,000 $ 9,000 $ 4,100 $ 11,900 422 2,301 49,723
========= ========= ========= ======== =======
Corporate overhead......... 22,059 22,059
Depreciation/amortization.. 9,595 9,595
----------
Operating Income............ $ 18,069
==========
1996
Gross Revenue............... $ 544,000 $ 266,800 $ 355,600 $ 86,900 $(4,857) $ $1,248,443
Subcontracts and
materials................. (376,000) (128,600) (200,200) (18,500) 2,958 (720,342)
Equity income of
affiliates................ -- -- -- -- -- 4,015 4,015
--------- --------- --------- -------- ------- ------- ----------
Service Revenue............ 168,000 138,200 155,400 68,400 (1,899) 4,015 532,116
Operating Expenses:
Direct labor and fringe.... 155,100 75,300 121,600 28,900 (500) 380,400
General and
administrative............ -- 53,100 14,800 26,000 1,847 -- 95,747
--------- --------- --------- -------- ------- ------- ----------
Segment Income/(Loss)....... $ 12,900 $ 9,800 $ 19,000 $ 13,500 (3,246) 4,015 55,969
========= ========= ========= ======== =======
Corporate overhead......... 24,441 24,441
Depreciation/amortization.. 10,348 10,348
----------
Operating Income............ $ 21,180
==========
</TABLE>
F-21
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Foreign Operations: Gross revenue and operating income from foreign
operations and foreign assets of all consolidated subsidiaries were as follows
for the years ended December 31 (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Foreign gross revenue:
Europe.................................. $ 89,155 $ 86,937 $ 37,105
Asia-Pacific............................ 31,460 44,871 31,327
Other................................... 1,387 25,876 3,676
---------- ---------- ----------
122,002 157,684 72,108
Domestic gross revenue.................... 1,088,419 950,432 1,176,335
---------- ---------- ----------
Total gross revenue................... $1,210,421 $1,108,116 $1,248,443
========== ========== ==========
Foreign operating income (loss):
Europe.................................. $ 2,106 $ 11,153 $ 1,346
Asia-Pacific............................ 2,068 2,209 1,002
Other................................... (22,457) 785 (422)
---------- ---------- ----------
(18,283) 14,147 1,926
Domestic operating income (loss).......... (60,078) 3,922 19,254
---------- ---------- ----------
Total operating income (loss)......... $ (78,361) $ 18,069 $ 21,180
========== ========== ==========
Foreign assets:
Europe.................................. $ 42,241 $ 34,900 $ 17,666
Asia-Pacific............................ 18,312 15,071 13,562
Other................................... 1,649 833 24
---------- ---------- ----------
62,202 50,804 31,252
Domestic assets........................... 366,851 348,484 338,210
---------- ---------- ----------
Total assets.......................... $ 429,053 $ 399,288 $ 369,462
========== ========== ==========
</TABLE>
F-22
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
13. Contingencies
Certain Contracts: In March 1998, the Company entered into a $187 million
maximum price contract to construct a ship-building facility. The Company
subsequently learned that estimated costs to perform the contract as reflected
in actual proposed subcontracts were approximately $30 million higher than the
cost estimates used as the basis for contract negotiation between the Company
and the customer. After learning this, the Company advised the customer that
it was not required to perform the contract in accordance with its terms.
Negotiations with the customer resulted in an interim agreement under which
both parties reserved their rights and, on a day-to-day basis, the Company
continued to execute certain transitional on-site activities. The customer
terminated the interim agreement with the Company effective August 14, 1998.
In October 1998, the customer presented an initial draft of a claim against
the Company requesting payment for estimated damages and entitlements pursuant
to the terminated contract. The Company and the customer are currently
discussing the customer's draft claim. No provision for loss for this matter
has been included in the Company's financial results to date as management
does not believe that it has sufficient information at this time to reasonably
estimate the outcome of the negotiations.
As a result of uncertainties surrounding the costs to complete certain large
fixed-price contracts, including the Nitric Acid Projects, the Company
recorded a $76.2 million charge during the year ended December 31, 1998 to
establish $66.0 million in reserves intended to cover its estimate of the
nitric acid contract cost overruns and charges totaling $10.2 million to
reflect the adjustment of the earned progress to date on several other fixed
price projects. Although management believes that, based on information
currently available, an adequate provision for loss reserves for these fixed-
price contracts has been reflected in the financial statements, no assurance
can be given that the full amount of any claims will be realized or that the
loss provision is entirely adequate.
Litigation, Claims and Assessments: In the course of the Company's normal
business activities, various claims or charges have been asserted and
litigation commenced against the Company 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, adequate reserves have been provided for final
judgments, if any, in excess of insurance coverage, that might be rendered
against the Company in such litigation. The continued adequacy of reserves is
reviewed periodically as progress on such matters ensues.
The Company 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. The Company 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 the Company by these agencies. The Company
has provided for its estimate of the potential effect of these investigations,
and the continued adequacy of reserves is reviewed periodically as progress on
such matters ensues.
The Company has a substantial number of cost-reimbursement contracts with
the U.S. government, the costs of which are subject to audit by the U.S.
government. As a result of pending audits related to fiscal years 1986
forward, the government has asserted, among other things, that certain costs
claimed as reimbursable under government contracts either were not allowable
or not allocated in accordance with federal procurement regulations. The
Company is actively working with the government to resolve these issues. The
Company 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. The government
or the Company, however, has not quantified many of the issues,, and others
are qualitative in nature, and their potential financial impact, if any, is
not quantifiable by the government or the Company at this time. The continued
F-23
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
adequacy of provisions for reserves is reviewed periodically as progress with
the government on such matters ensues.
Contract warranties and performance guarantees: In the course of the
Company's normal business activities, many of its contracts contain provisions
for warranties and performance guarantees. As progress on contracts ensues,
the Company regularly updates the estimates of the costs to perform such
contingencies and reserves a proportionate amount of the total related
contract value until such time as the contingency is resolved.
14. Unusual Items
Severance and restructuring: Largely as a result of significant changes in
senior management positions of the Company in 1998 as well as enacted Company-
wide profitability improvement initiatives, the Company recorded charges
totaling $9.4 million. These charges included $7.6 million related to employee
separation costs, substantially all of which was for estimated management
position reductions and terminations. The charge was based on plans that
identified the number and functions of employees to be terminated. As of March
31, 1998, less than $1.0 million of the reduction plan remained to be settled.
Remaining terminations and settlements will occur in 1999.
Other unusual charges: A $7.7 million charge was also taken in 1998 to
address:
. cost estimates for discontinuing certain E&C markets in 1998, including
Taiwan, Panama and Mexico, and
. increased provisions for estimated settlement costs of certain existing
litigation.
15. Selected Quarterly Financial Information (Unaudited)
Quarterly financial information for fiscal quarters for the years ended
December 31 is presented in the following tables (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
Fourth Third Second First
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1998
Gross revenue........................ $300,625 $292,528 $312,012 $305,256
Service revenue...................... 89,761 82,476 65,962 107,263
Operating income (loss).............. (19,357) (31,444) (36,020) 8,460
Net income (loss) before
extraordinary item and cumulative
effect of accounting change......... (25,928) (38,291) (29,668) 445
Net income (loss).................... (27,018) (38,291) (35,668) 445
Basic and fully diluted per share
amounts for:
Income (loss) before cumulative
effect of accounting change $ (1.08) $ (1.58) $ (1.23) $ .02
Extraordinary item................. (.05) -- -- --
Cumulative effect of accounting
change............................ -- -- (.25) --
-------- -------- -------- --------
Net income (loss).................. $ (1.13) $ (1.58) $ (1.48) $ .02
======== ======== ======== ========
</TABLE>
F-24
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Fourth Third Second First
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1997
Gross revenue........................ $268,400 $332,173 $241,586 $265,957
Service revenue...................... 96,424 116,103 109,581 103,978
Operating income (loss).............. (3,112) 7,194 7,389 6,598
Net income (loss).................... (5,157) 120 3 47
Basic and fully diluted per share
amounts for net income (loss)....... $ (.23) $ (.01) $ -- $ --
</TABLE>
At March 31, 1999, there were 24,270,978 shares of common stock outstanding
held by 1,501 holders of record.
16. Guarantor Subsidiaries
Pursuant to U.S. Securities and Exchange Commission rules regarding publicly
held debt, the Company is required to provide financial information for wholly
owned subsidiaries of ICF Kaiser International, Inc. (Subsidiary Guarantors)
that unconditionally guarantee the payment of the principal, premium, if any,
and interest on the Company's Subordinated Notes and its Series B Senior
Notes. Subsequent to the sale of EFM, the Subsidiary Guarantors are Cygna
Consulting Engineers and Project Management, Inc; ICF Kaiser Government
Programs, Inc; Systems Applications International, Inc; EDA, Incorporated;
Global Trade & Investment, Inc; ICF Kaiser Europe, Inc; ICF Kaiser/Georgia
Wilson, Inc; ICF Kaiser Overseas Engineering, Inc; ICF Kaiser Engineers
Pacific, Inc; and ICF Kaiser Advanced Technology, Inc.
Presented below is condensed consolidating financial information for ICF
Kaiser International, Inc. (Parent Company), the Subsidiary Guarantors, and
the Non-Guarantor Subsidiaries. The information, except for the December 31,
1998 condensed consolidating balance sheet, is unaudited.
Investments in subsidiaries have been presented using the equity method of
accounting. The Company does not have a formal tax-sharing arrangement with
its subsidiaries and has allocated taxes to its subsidiaries based on the
Company's overall effective tax rate. In the Company's opinion, presentation
of separate financial statements for each individual Subsidiary Guarantor
would not provide additional information that is material to investors.
Therefore, the Subsidiary Guarantors are combined in the presentation below.
F-25
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 1998
(In thousands)
<TABLE>
<CAPTION>
ICF Kaiser
Parent Subsidiary Non-Guarantor International, Inc.
Company Guarantors Subsidiaries Eliminations Consolidated
-------- ---------- ------------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash
equivalents............ $ 2,414 $ 3,822 $ 9,031 $ -- $ 15,267
Contract receivables,
net.................... (5,283) 134,256 155,105 -- 284,078
Intercompany
receivables, net....... 184,700 10,030 (194,730) -- --
Prepaid expenses and
other current assets... 2,185 448 10,208 -- 12,841
Deferred income taxes... 30,367 3,245 1,061 -- 34,673
-------- -------- -------- ------- --------
Total Current Assets.... 214,383 151,801 (19,325) -- 346,859
-------- -------- -------- ------- --------
Fixed Assets
Furniture, equipment,
and leasehold
improvements........... 4,589 3,456 35,951 -- 43,996
Less depreciation and
amortization........... (4,040) (3,155) (30,216) -- (37,411)
-------- -------- -------- ------- --------
549 301 5,735 -- 6,585
-------- -------- -------- ------- --------
Other Assets
Goodwill, net........... -- 8,745 40,547 -- 49,292
Investment in and
advances to
affiliates............. (64,556) 116 6,189 65,979 7,728
Capitalized software
development costs...... 4,296 766 5,062
Other................... 4,910 523 8,094 -- 13,527
-------- -------- -------- ------- --------
(55,350) 9,384 55,596 65,979 75,609
-------- -------- -------- ------- --------
Total Assets............ $159,582 $161,486 $ 42,006 $65,979 $429,053
======== ======== ======== ======= ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities
Current portion of long-
term debt.............. $ 30,729 $ -- $ -- $ -- $ 30,729
Accounts payable and
other accrued
expenses............... 39,759 121,833 72,160 -- 233,752
Accrued salaries and
employee benefits...... 7,818 13,999 16,114 -- 37,931
Other................... 1,910 1,335 38,913 -- 42,158
-------- -------- -------- ------- --------
Total Current
Liabilities............ 80,216 137,167 127,187 -- 344,570
Long-term Liabilities
Long-term debt, less
current portion........ 137,487 -- 1 -- 137,488
Other................... 2,000 26 7,638 -- 9,664
-------- -------- -------- ------- --------
Total Liabilities....... 219,703 137,193 134,826 -- 491,722
-------- -------- -------- ------- --------
Minority interests in
subsidiaries........... -- 449 -- -- 449
Shareholders' Equity
Common stock............ 230 8,179 121 (8,288) 242
Additional paid-in
capital................ 75,200 2,596 58,544 (60,918) 75,422
Accumulated earnings
(deficit).............. (134,913) 13,339 (148,368) 135,185 (134,757)
Accumulated other
comprehensive income
(loss)................. (638) (270) (3,117) -- (4,025)
-------- -------- -------- ------- --------
Total Shareholders'
Equity (Deficit)....... (60,121) 23,844 (92,820) 65,979 (63,118)
-------- -------- -------- ------- --------
Total Liabilities and
Shareholders' Equity
(Deficit).............. $159,582 $161,486 $ 42,006 $65,979 $429,053
======== ======== ======== ======= ========
</TABLE>
F-26
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Year Ended December 31, 1998
(In thousands)
<TABLE>
<CAPTION>
ICF Kaiser
Parent Subsidiary Non-Guarantor International, Inc.
Company Guarantors Subsidiaries Eliminations Consolidated
--------- ---------- ------------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
Gross Revenue........... $ 1,120 $737,546 $ 471,755 $ -- $1,210,421
Subcontract and direct
material costs....... (527) (564,284) (229,983) -- (794,794)
Provision for contract
losses............... -- -- (76,210) -- (76,210)
Equity in income of
joint ventures and
affiliated
companies............ (101,187) -- 6,621 100,611 6,045
--------- -------- --------- -------- ----------
Service Revenue......... (100,594) 173,262 172,183 100,611 345,462
Operating Expenses
Operating expenses.... (16,750) 156,584 257,862 -- 397,696
Depreciation and
amortization......... 2,513 1,340 5,195 -- 9,048
Severance and
restructuring
charges.............. 9,407 -- -- -- 9,407
Other unusual
charges.............. 2,882 -- 4,790 -- 7,672
--------- -------- --------- -------- ----------
Operating Income
(Loss)................. (98,646) 15,338 (95,664) 100,611 (78,361)
Other Income (Expense)
Gain on sale of
investment........... -- -- -- -- --
Interest and
investment income.... 248 516 775 -- 1,539
Interest expense...... (280) (1,722) (18,277) -- (20,279)
--------- -------- --------- -------- ----------
Income (Loss) Before
Income Taxes, Minority
Interests,
Extraodrinary Item, and
Cumulative Effect of
Accounting Change...... (98,678) 14,132 (113,166) 100,611 (97,101)
Income tax expense
(benefit)............ 764 727 (12,848) -- (11,357)
--------- -------- --------- -------- ----------
Income Before Minority
Interests,
Extraordinary Item, and
Cumulative Effect of
Accounting Change...... (99,442) 13,405 (100,318) 100,611 (85,744)
Minority interest in
net income of
subsidiaries......... -- 7,698 -- -- 7,698
--------- -------- --------- -------- ----------
Income Before
Extraordinary Item, and
Cumulative Effect of
Accounting Change...... (99,442) 5,707 (100,318) 100,611 (93,442)
Extraordinary item..... 1,090 -- -- -- 1,090
Cumulative effect of
accounting change, net
of tax................ -- 754 5,246 -- 6,000
--------- -------- --------- -------- ----------
Net Income (Loss)....... $(100,532) $ 4,953 $(105,564) $100,611 $ (100,532)
========= ======== ========= ======== ==========
</TABLE>
F-27
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 1998
(In thousands)
<TABLE>
<CAPTION>
ICF Kaiser
Parent Subsidiary Non-Guarantor International, Inc.
Company Guarantors Subsidiaries Eliminations Consolidated
--------- ---------- ------------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
Net Cash Provided by
(Used in) Operating
Activities............. $ (28,568) $ 3,899 $(4,769) $-- $ (29,438)
--------- -------- ------- ---- ---------
Investing Activities
Sales of subsidiaries
and subsidiary
assets............... -- -- 2,400 -- 2,400
Purchases of fixed
assets............... (2,208) (15) (2,271) -- (4,494)
Investments in
subsidiaries and
affiliates, net of
cash acquired........ 4,094 -- (638) -- 3,456
--------- -------- ------- ---- ---------
Net Cash Provided by
(Used in) Investing
Activities......... 1,886 (15) (509) -- 1,362
--------- -------- ------- ---- ---------
Financing Activities
Borrowings under
credit facility...... 139,629 -- -- -- 139,629
Principal payments on
credit facility...... (112,860) -- (15) -- (112,875)
Distribution of income
to minority
interest............. -- (10,320) -- -- (10,320)
Change in book
overdraft............ 8,395 -- -- -- 8,395
Proceeds from
issuances of common
stock................ 155 -- -- -- 155
Debt issuance costs... (1,380) -- -- -- (1,380)
--------- -------- ------- ---- ---------
Net Cash Provided by
(Used in) Financing
Activities......... 33,939 (10,320) (15) -- 23,604
--------- -------- ------- ---- ---------
Effect of Exchange Rate
Changes on Cash........ -- -- (281) -- (281)
--------- -------- ------- ---- ---------
Increase (Decrease) in
Cash and Cash
Equivalents............ 7,257 (6,436) (5,574) -- (4,753)
Cash and Cash
Equivalents at
Beginning of Period.... (4,843) 10,258 14,605 -- 20,020
--------- -------- ------- ---- ---------
Cash and Cash
Equivalents at End of
Period................. $ 2,414 $ 3,822 $ 9,031 $-- $ 15,267
========= ======== ======= ==== =========
</TABLE>
F-28
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 1997
(In thousands)
<TABLE>
<CAPTION>
ICF Kaiser
Parent Subsidiary Non-Guarantor International, Inc.
Company Guarantors Subsidiaries Eliminations Consolidated
-------- ---------- ------------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash
equivalents............ $ (4,843) $ 10,258 $ 14,605 $ -- $ 20,020
Contract receivables,
net.................... 3,210 96,921 163,899 -- 264,030
Intercompany
receivables, net....... 136,629 (2,529) (134,100) -- --
Prepaid expenses and
other current assets... 4,781 476 9,833 -- 15,090
Deferred income taxes... 14,749 -- 532 -- 15,281
-------- -------- --------- -------- --------
Total Current Assets.... 154,526 105,126 54,769 -- 314,421
-------- -------- --------- -------- --------
Fixed Assets
Furniture, equipment,
and leasehold
improvements........... 4,284 2,505 38,892 -- 45,681
Less depreciation and
amortization........... (3,729) (2,275) (31,964) -- (37,968)
-------- -------- --------- -------- --------
555 230 6,928 -- 7,713
-------- -------- --------- -------- --------
Other Assets
Goodwill, net........... -- 4,793 42,530 -- 47,323
Investment in and
advances to
affiliates............. 45,584 54 4,983 (43,583) 7,038
Capitalized software
development costs...... 3,812 273 4,085
Other................... 4,344 1,794 12,570 -- 18,708
-------- -------- --------- -------- --------
53,740 6,641 60,356 (43,583) 77,154
-------- -------- --------- -------- --------
Total Assets............ $208,821 $111,997 $ 122,053 $(43,583) $399,288
======== ======== ========= ======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities
Current portion of long-
term debt.............. $ -- $ -- $ 15 $ -- $ 15
Accounts payable and
other accrued
expenses............... 26,852 80,315 40,925 -- 148,092
Accrued salaries and
employee benefits...... 6,938 16,722 13,994 -- 37,654
Other................... 1,294 426 35,819 -- 37,539
-------- -------- --------- -------- --------
Total Current
Liabilities............ 35,084 97,463 90,753 -- 223,300
Long-term Liabilities
Long-term debt, less
current portion........ 141,004 -- -- -- 141,004
Other................... 2,437 26 2,123 -- 4,586
-------- -------- --------- -------- --------
Total Liabilities....... 178,525 97,489 92,876 -- 368,890
-------- -------- --------- -------- --------
Minority interests in
subsidiaries........... -- 3,071 -- -- 3,071
Shareholders' equity
Common stock............ 214 148 129 (266) 225
Additional paid-in
capital................ 66,888 2,796 58,548 (61,116) 67,116
Accumulated earnings
(deficit).............. (34,384) 8,757 (26,397) 17,799 (34,225)
Accumulated other
comprehensive income
(loss)................. (2,422) (264) (3,103) -- (5,789)
-------- -------- --------- -------- --------
Total Shareholders'
Equity................. 30,296 11,437 29,177 (43,583) 27,327
-------- -------- --------- -------- --------
Total Liabilities and
Shareholders' Equity... $208,821 $111,997 $ 122,053 $(43,583) $399,288
======== ======== ========= ======== ========
</TABLE>
F-29
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Year Ended December 31, 1997
(In thousands)
<TABLE>
<CAPTION>
ICF Kaiser
Parent Subsidiary Non-Guarantor International, Inc.
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
Gross Revenue........... $ 727 $ 608,156 $ 499,233 $ -- $1,108,116
Subcontract and direct
material costs....... (608) (428,582) (248,241) -- (677,431)
Provision for contract
losses............... -- -- (6,900) -- (6,900)
Equity in income of
joint ventures and
affiliated
companies............ (6,059) -- 2,328 6,032 2,301
------- --------- --------- ------ ----------
Service Revenue......... (5,940) 179,574 246,420 6,032 426,086
Operating Expenses
Operating expenses.... (3,982) 156,273 246,131 -- 398,422
Depreciation and
amortization......... 2,350 1,092 6,153 -- 9,595
------- --------- --------- ------ ----------
Operating Income
(Loss)................. (4,308) 22,209 (5,864) 6,032 18,069
Other Income (Expense)
Gain on sale of
investment........... -- -- 1,018 -- 1,018
Interest and
investment income.... 570 671 567 (58) 1,750
Interest expense...... (570) (984) (16,775) 53 (18,276)
------- --------- --------- ------ ----------
Income (Loss) Before
Income Taxes and
Minority Interests..... (4,308) 21,896 (21,054) 6,027 2,561
Income tax expense
(benefit)............ 679 4,513 (8,511) -- (3,319)
------- --------- --------- ------ ----------
Income Before Minority
Interests.............. (4,987) 17,383 (12,543) 6,027 5,880
Minority interest in
net income of
subsidiaries......... -- 10,867 -- -- 10,867
------- --------- --------- ------ ----------
Net Income (Loss) ...... $(4,987) $ 6,516 $ (12,543) $6,027 $ (4,987)
======= ========= ========= ====== ==========
</TABLE>
F-30
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 1997
(In thousands)
<TABLE>
<CAPTION>
ICF Kaiser
Parent Subsidiary Non-Guarantor International, Inc.
Company Guarantors Subsidiaries Eliminations Consolidated
--------- ---------- ------------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
Net Cash Provided by
(Used in) Operating
Activities............. $ 21,088 $ 12,153 $(7,544) $ 494 $ 26,191
Investing Activities
Sales of subsidiaries
and subsidiary
assets............... -- -- 17,028 -- 17,028
Purchases of fixed
assets............... (1,871) (53) (2,964) -- (4,888)
Investments in
subsidiaries and
affiliates, net of
cash acquired........ -- (100) (3,974) -- (4,074)
--------- -------- ------- ----- ---------
Net Cash Provided by
(Used in) Investing
Activities......... (1,871) (153) 10,090 -- 8,066
--------- -------- ------- ----- ---------
Financing Activities
Borrowings under
credit facility...... 104,500 -- -- -- 104,500
Principal payments on
credit facility...... (121,000) -- -- -- (121,000)
Distribution of income
to minority
interest............. -- (13,950) -- -- (13,950)
Change in book
overdraft............ (2,667) -- -- -- (2,667)
Proceeds from
issuances of common
stock................ 213 -- -- -- 213
Repurchases of common
stock................ (251) -- -- -- (251)
Debt issuance costs... (624) -- -- -- (624)
--------- -------- ------- ----- ---------
Net Cash Used in
Financing
Activities......... (19,829) (13,950) -- -- (33,779)
--------- -------- ------- ----- ---------
Effect of Exchange Rate
Changes on Cash........ -- -- (708) -- (708)
--------- -------- ------- ----- ---------
Increase (Decrease) in
Cash and Cash
Equivalents............ (612) (1,950) 1,838 494 (230)
Cash and Cash
Equivalents at
Beginning of Period.... (4,231) 12,208 12,767 (494) 20,250
--------- -------- ------- ----- ---------
Cash and Cash
Equivalents at End of
Period................. $ (4,843) $ 10,258 $14,605 $ -- $ 20,020
========= ======== ======= ===== =========
</TABLE>
F-31
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Year Ended December 31, 1996
(In thousands)
<TABLE>
<CAPTION>
ICF Kaiser
Parent Subsidiary Non-Guarantor International, Inc.
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
Gross Revenue........... $ 2,024 $ 560,609 $ 685,810 $ -- $1,248,443
Subcontract and direct
material costs....... (777) (384,061) (335,504) -- (720,342)
Equity in income of
joint ventures and
affiliated
companies............ 5,081 -- 2,895 (3,961) 4,015
------- --------- --------- ------- ----------
Service Revenue......... 6,328 176,548 353,201 (3,961) 532,116
Operating Expenses
Operating expenses.... (1,835) 166,552 335,874 (3) 500,588
Depreciation and
amortization......... 2,065 1,175 7,108 -- 10,348
------- --------- --------- ------- ----------
Operating Income........ 6,098 8,821 10,219 (3,958) 21,180
Other Income (Expense)
Gain on sale of
investment........... -- -- 9,384 -- 9,384
Interest and
investment income.... 284 376 863 (269) 1,254
Interest expense...... (284) (934) (16,324) 208 (17,334)
------- --------- --------- ------- ----------
Income (Loss) Before
Income Taxes and
Minority Interests..... 6,098 8,263 4,142 (4,019) 14,484
Income tax expense
(benefit)............ 264 520 1,823 -- 2,607
------- --------- --------- ------- ----------
Income Before Minority
Interests.............. 5,834 7,743 2,319 (4,019) 11,877
Minority interest in
net income of
subsidiaries......... -- 6,043 -- -- 6,043
------- --------- --------- ------- ----------
Net Income.............. 5,834 1,700 2,319 (4,019) 5,834
Preferred stock
dividends and
accretion............ 2,178 -- -- -- 2,178
------- --------- --------- ------- ----------
Net Income Available for
Common Shareholders.... $ 3,656 $ 1,700 $ 2,319 $(4,019) $ 3,656
======= ========= ========= ======= ==========
</TABLE>
F-32
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 1996
(In thousands)
<TABLE>
<CAPTION>
ICF Kaiser
Parent Subsidiary Non-Guarantor International, Inc.
Company Guarantors Subsidiaries Eliminations Consolidated
-------- ---------- ------------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
Net Cash Provided by
(Used in) Operating
Activities............. $(16,387) $13,954 $ 2,929 $ 870 $ 1,366
-------- ------- ------- ------- --------
Investing Activities
Purchases of fixed
assets............... (2,002) (102) (2,828) -- (4,932)
Investments in
subsidiaries and
affiliates, net of
cash acquired........ -- (225) (1,092) -- (1,317)
Sale of fixed assets.. -- -- 22 -- 22
-------- ------- ------- ------- --------
Net Cash Used in
Investing
Activities......... (2,002) (327) (3,898) -- (6,227)
-------- ------- ------- ------- --------
Financing Activities
Borrowings under
credit facility...... 114,000 -- -- -- 114,000
Principal payments on
credit facility...... (98,500) -- -- -- (98,500)
Proceeds from issuance
of senior notes ..... 14,700 -- -- -- 14,700
Repurchases of
preferred stock...... (20,000) -- -- -- (20,000)
Distribution of income
to minority
interest............. -- (2,428) -- -- (2,428)
Change in book
overdraft............ 2,827 -- -- -- 2,827
Proceeds from
issuances of common
stock................ 383 -- -- -- 383
Preferred stock
dividends............ (2,615) -- -- -- (2,615)
Debt issuance costs... (1,427) -- -- -- (1,427)
Other financing
activities........... -- -- 924 -- 924
-------- ------- ------- ------- --------
Net Cash Provided by
(Used in) Financing
Activities......... 9,368 (2,428) 924 -- 7,864
-------- ------- ------- ------- --------
Effect of Exchange Rate
Changes on Cash........ -- -- 228 -- 228
-------- ------- ------- ------- --------
Increase (Decrease) in
Cash and Cash
Equivalents............ (9,021) 11,199 183 870 3,231
Cash and Cash
Equivalents at
Beginning of Period.... 4,790 1,009 12,584 (1,364) 17,019
-------- ------- ------- ------- --------
Cash and Cash
Equivalents at End of
Period................. $ (4,231) $12,208 $12,767 $ (494) $ 20,250
======== ======= ======= ======= ========
</TABLE>
F-33
<PAGE>
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
ICF KAISER INTERNATIONAL, INC AND SUBSIDIARIES
(in thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- -------------------- ----------------------- ---------- --------------
Add itions
-----------------------
Balance at beginning Charged to costs Balance at end
Description of Period and expenses Other Deductions of period
----------- -------------------- ---------------- ------ ---------- --------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1998
Deducted from asset ac-
count:
Allowance for doubtful
accounts $ 7,142 15,111 1,756(5) 13,159(1) $10,850
Deducted from asset
account and included in
other liabilities:
provision for future
losses on contracts 1,199 76,210 47,730 29,679
------- ------- ------ ------- -------
$ 8,341 $91,321 $1,756 $60,889 $40,529
======= ======= ====== ======= =======
Year Ended December 31,
1997
Deducted from asset ac-
count:
Allowance for doubtful
accounts $ 9,450 1,195 1,150(5) 4,653(1) $ 7,142
Deducted from asset
account and included in
other liabilities:
provision for future
losses on contracts 1,517 494 812 1,199
------- ------- ------ ------- -------
$10,967 $ 1,689 $1,150 $ 5,465 $ 8,341
======= ======= ====== ======= =======
Year Ended December 31,
1996
Deducted from asset
account:
Allowance for doubtful
accounts $ 9,435 1,881 175(3) 3,490(1) $ 9,450
1,449(5)
Deducted from asset
account and included in
other liabilities:
provision for future
losses on contracts 2,274 300 491(4) 1,548(2) 1,517
------- ------- ------ ------- -------
$11,709 $ 2,181 $2,115 $ 5,038 $10,967
======= ======= ====== ======= =======
</TABLE>
- --------
(1) Reflects amounts written off against the allowance and related accounts
receivable accounts and settlement of doubtful accounts.
(2) Reflects losses charged against the provision for contract losses.
(3) Reflects net allowance for doubtful accounts from the purchase of a
subsidiary.
(4) Reflects provision for future contract losses provided for in connection
with the purchase of a subsidiary.
(5) Reflects other additions to reserves.
S-1
<PAGE>
Exhibit 10(a)
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is entered into as
of December 18, 1998, among ICF KAISER INTERNATIONAL, INC., a Delaware
corporation ("Borrower"), with its chief executive office located at 9300 Lee
Highway, Fairfax, Virginia 22031-1207, each subsidiary of the Borrower that is a
signatory hereto or that is joined to this Agreement pursuant to Section 18.7
hereof (each a "Subsidiary Guarantor" and collectively, the "Subsidiary
Guarantors"), each of the financial institutions signatories hereto (such
financial institutions, together with their respective successors and assigns,
each a "Lender" and collectively, the "Lenders"), and MADELEINE L.L.C., a New
York limited liability company ("Madeleine"), with a place of business at 450
Park Avenue, New York, New York 10022, as administrative agent for the Lenders
(in such capacity, the "Administrative Agent").
WHEREAS, the Borrower, certain subsidiaries of the Borrower, the
Existing Lender (as hereafter defined) and First Union Capital Markets (as
successor to CoreStates Bank, N.A.), as agent for the Existing Lender, are
parties to an Amended and Restated Credit Agreement, dated as of December 3,
1997, as amended (the "Existing Credit Agreement"); and
WHEREAS, the parties desire to enter into this Agreement, as a
successor agreement to the Existing Credit Agreement;
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms
shall have the following definitions:
"Acceptable Bank" means Norwest Bank or any bank
organized under the laws of the United States or any State thereof whose long-
term debt securities or whose holding company's long-term debt securities are
rated A or better by Standard & Poor's Corporation or A or better by Moody's
Investors Service Inc.
"Account Debtor" means any Person who is or who may become
obligated under, with respect to, or on account of, an Account.
"Accounts" means all currently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower or any Subsidiary Guarantor arising out of the sale or lease of goods
or the rendition of services by Borrower or such Subsidiary Guarantor,
irrespective of whether earned by performance, and any and all credit insurance,
guaranties, or security therefor.
"Administrative Agent" has the meaning set forth in the
preamble to this Agreement, and shall include any successor administrative
agent.
"Advances" has the meaning set forth in Section 2.1(a).
"Affiliate" means, as applied to any Person, any other
Person who directly or indirectly controls, is controlled by, is under common
control with or is a director or officer of such Person. For purposes of this
definition, (i) "control" means the possession, directly or indirectly, of the
power to vote 10% or more of the securities having ordinary voting power for the
election of directors or Persons
1
<PAGE>
performing similar functions or the direct or indirect power to direct the
management and policies of a Person, (ii) each Company is an Affiliate of each
other Company, and (iii) any Person of which Borrower is a partner or member is
an Affiliate of each Company.
"Agents" means Administrative Agent and Collateral Agent
and shall include any successor to each such Agent.
"Agent Advances" has the meaning set forth in Section 2.1(g).
"Agent Loans" has the meaning set forth in Section 2.1(f).
"Agent-Related Persons" means the respective Agents, together
with their respective Affiliates, and the officers, directors, employees,
counsel, agents and attorneys-in-fact of such Agents and such Affiliates.
"Agreement" has the meaning set forth in the preamble hereto.
"Assignee" has the meaning set forth in Section 15.1(a).
"Assignment and Acceptance" has the meaning set forth in
Section 15.1(a) and shall be substantially in the form of Exhibit 15.1.
"Assignment of Claims Act" means the Assignment of Claims Act
of 1940, as amended from time to time, codified at 31 U.S.C. ss. 3727 and 41
U.S.C. ss. 15, and the rules and regulations promulgated thereunder.
"Assignment of Claims Act Notices" has the meaning set forth
in Section 6.18.
"Authorized Person" means any officer or other employee of
Borrower.
"Availability" means, as of the date of determination, the
difference (so long as such difference is a positive number) between (a) the
lesser of (i) the Borrowing Base and (ii) the Maximum Revolving Amount and (b)
the Revolving Facility Usage.
"Average Exposure" has the meaning set forth in Section
2.6(a).
"Average Unused Portion of Maximum Revolving Amount" means,
as of any date of determination, (a) the Maximum Revolving Amount, less (b) the
sum of (i) the average Daily Balance of Advances that were outstanding during
the immediately preceding month, plus (ii) the average Daily Balance of the
undrawn Letters of Credit that were outstanding during the immediately preceding
month.
"Bankruptcy Code" means the United States Bankruptcy Code (11
U.S.C. ss. 101 et seq.), as amended, and any successor statute.
"Benefit Plan" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which Borrower, any Subsidiary of Borrower, or any
ERISA Affiliate has been an "employer" (as defined in Section 3(5) of ERISA)
within the past six (6) years.
"Borrower" has the meaning set forth in the preamble hereto.
2
<PAGE>
"Borrowing" means a borrowing hereunder consisting of
Advances made on the same day by Lenders, or by Administrative Agent in the case
of an Agent Loan or an Agent Advance.
"Borrowing Base" has the meaning set forth in Section 2.1(a).
"Business Day" means any day that is not a Saturday, Sunday,
or other day on which national banks are
authorized or required to close.
"Change of Control" means (i) any person or group of persons
(within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934,
as amended) shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the Securities and Exchange Commission under said Act) of
20% or more of the voting power of the then outstanding common stock of
Borrower, (ii) during any period of 12 consecutive calendar months, individuals
who were directors of Borrower on the first day of such period shall cease to
constitute a majority of the board of directors of Borrower, provided that a
director who has resigned or is replaced during such time shall not be included
in any determination of whether a Change of Control has occurred pursuant to
this clause (ii) to the extent such director is replaced by a successor director
elected by a majority of those directors who were directors at the commencement
of such period, (iii) except to the extent not prohibited by Section 7.3,
Borrower shall cease to directly or indirectly own and control, of record and
beneficially, 100% of the then outstanding capital stock of each Subsidiary
Guarantor free and clear of all Liens, (iv) either Keith M. Price or Timothy P.
O'Connor shall cease to manage and be involved in the day-to-day operations of
the Borrower and its Subsidiaries and a successor, reasonably acceptable to the
Administrative Agent, is not appointed within thirty (30) days of the cessation
of such management and involvement or (v) a "Change of Control", as such term is
defined under either of the Indentures, shall occur.
"Closing Date" means the date of the first to occur of the
making of the initial Advance or the issuance of the initial Letter of Credit.
"Code" means the New York Uniform Commercial Code.
"Collateral" means each of the following:
(a) the Accounts,
(b) the Companies' Books,
(c) the Equipment,
(d) the General Intangibles,
(e) the Inventory,
(f) the Negotiable Collateral,
(g) the Real Property Collateral,
(h) any money, or other assets of any Company that now or
hereafter come into the possession, custody or control of any Agent or the
Lender Group, and
(i) the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the Collateral, and any and all Accounts,
3
<PAGE>
Companies' Books, Equipment, General Intangibles, Inventory, Negotiable
Collateral, Real Property, money, deposit accounts, or other tangible or
intangible property resulting from the sale, exchange, collection, or other
disposition of any of the foregoing, or any portion thereof or interest therein,
and the proceeds thereof.
"Collateral Access Agreement" means a landlord waiver,
mortgagee waiver, bailee letter, or acknowledgment agreement of any
warehouseman, processor, lessor, consignee, or other Person in possession of,
having a Lien upon, or having rights or interests in the Equipment or Inventory,
in each case, in form and substance satisfactory to Administrative Agent.
"Collateral Agent" means the Person selected by the
Administrative Agent, after consultation with Borrower, to perform the duties of
Collateral Agent as set forth in this Agreement and such other duties as the
Administrative Agent shall determine.
"Collateral Agent's Account" has the meaning set forth in
Section 2.7.
"Collections" means all cash, checks, notes, instruments, and
other items of payment (including, insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds).
"Commitment" means, at any time with respect to a Lender, the
principal amount set forth beside such Lender's name under the heading
"Commitment" on Schedule C-1 or on Annex I of the Assignment and Acceptance
pursuant to which such Lender became a Lender hereunder in accordance with the
provisions of Section 15.1, as such Commitment may be adjusted from time to time
in accordance with the provisions of Section 15.1, and "Commitments" means,
collectively, the aggregate amount of the Commitments of all of Lenders.
"Companies" means Borrower and the Subsidiary Guarantors;
each of the Borrower and Subsidiary Guarantors may be referred to herein as a
"Company".
"Companies' Books" means all of the books and records of the
Companies including: ledgers; records indicating, summarizing, or evidencing the
Companies' properties or assets (including the Collateral) or liabilities; all
information relating to the Companies' business operations or financial
condition; and all computer programs, disk or tape files, printouts, runs, or
other computer prepared information; provided, however, that the term
"Companies' Books" shall not include books, records or information that may not
be provided to the Agents or the Lender Group under applicable law or
regulations other than financial information with respect to the Borrower and
its Subsidiaries generally and financial information with respect to the
Accounts (the "Restricted Records"); provided, further, that, if Administrative
Agent determines that any such Restricted Records are necessary to monitor or
enforce the rights or remedies of the Agents or the Lender Group pursuant to any
Loan Document, Borrower (i) shall use its best efforts to obtain consent from
the applicable Governmental Authority for Administrative Agent to have access to
such Restricted Records, subject to such limitations as may be required by such
Governmental Authority, and (ii) shall provide such Restricted Records to
Administrative Agent, redacted as necessary to comply with applicable law and
regulations.
"Compliance Certificate" means a certificate substantially in
the form of Exhibit C-1 and delivered by the chief executive officer, chief
financial officer or chief accounting officer of Borrower to Administrative
Agent.
"Consolidated Group" means Borrower and its Subsidiaries as
reflected from time to time in Borrower's consolidated financial statements,
prepared in accordance with GAAP, provided that
4
<PAGE>
the Consolidated Group shall include Kaiser-Hill and K-H Funding to the extent
reflected in Borrower's consolidated financial statements in accordance with
GAAP.
"Contribution Agreement" means an Indemnity, Subrogation and
Contribution Agreement to be executed by each of the Companies, substantially in
the form of Exhibit C-2, as the same may be amended or otherwise modified from
time to time.
"Daily Balance" means the amount of an Obligation owed at the
end of a given day.
"deems itself insecure" means that the Person deems itself
insecure in accordance with the provisions of Section 1-208 of the Code.
"Default" means an event, condition, or default that, with
the giving of notice, the passage of time, or both, would be an Event of
Default.
"Designated Account" means account number 2014122 098094 of
Borrower maintained with Borrower's Designated Account Bank, or such other
deposit account of Borrower (located within the United States) which has been
designated, in writing and from time to time, by Borrower to Administrative
Agent and Collateral Agent.
"Designated Account Bank" means First Union National Bank,
whose office is located at McLean, Virginia, and whose ABA number is 031201467.
"Dilution" means, in each case based upon the experience of
the immediately prior twelve (12) months, the result of dividing the Dollar
amount of (a) bad debt write-downs, other than write downs disclosed in a
writing delivered to Administrative Agent on or prior to the Closing Date,
discounts, advertising, returns, promotions, credits, or other dilution with
respect to the Accounts, by (b) the Companies' Collections (excluding
extraordinary items) plus the Dollar amount of clause (a).
"Dilution Reserve" means, as of any date of determination, an
amount sufficient to reduce the Lenders' advance rate against Eligible Accounts
and Eligible Unbilled Accounts by one percentage point for each percentage point
by which Dilution is in excess of 5%.
"Disbursement Letter" means an instructional letter executed
and delivered by Borrower to Administrative Agent and Collateral Agent regarding
the extensions of credit to be made on the Closing Date, the form and substance
of which shall be satisfactory to each such Agent.
"Dollars" or "$" means United States dollars.
"Dutch Receivables Pledge" means the Dutch Supplemental Deed
of Pledge of Receivables made by ICF Kaiser Netherlands B.V. in favor of
Administrative Agent, in form and substance satisfactory to Administrative
Agent, as the same may be amended or otherwise modified from time to time.
"EBITDA" means, with respect to any fiscal period of
Borrower, an amount equal to the sum for such fiscal period of (i) Net Income,
plus (ii) provision for taxes based on income, plus (iii) Interest Expense, plus
(iv) depreciation, amortization and other non-cash charges, in each case of the
Consolidated Group.
5
<PAGE>
"Eligible Accounts" means those Accounts created by a Company
(other than ICF Kaiser Europe, Inc.) in the ordinary course of business, that
arise out of such Company's rendition of services, that strictly comply with
each and all of the representations and warranties respecting Accounts made by
such Company to Lender Group in the Loan Documents, and that are and at all
times continue to be acceptable to Administrative Agent in all respects;
provided, however, that standards of eligibility may be fixed and revised from
time to time by Administrative Agent, in its reasonable credit judgment.
Eligible Accounts shall not include the following:
(a) Accounts for which (i) an invoice has not been rendered
to the applicable Account Debtor or (ii) the Account Debtor has failed to pay
within 120 days of invoice date;
(b) Accounts owed by an Account Debtor or its Affiliates
where 50% or more of all Accounts owed by that Account Debtor (or its
Affiliates) are deemed ineligible under clause (a) (ii) above;
(c) Accounts with respect to which the Account Debtor is an
employee, Excluded Affiliate, or agent of Borrower or any of its Subsidiaries;
(d) Accounts that are not payable in Dollars or with respect
to which the Account Debtor: (i) does not maintain its chief executive office in
the United States, or (ii) is not organized under the laws of the United States,
any State thereof or the District of Columbia, or (iii) is the government of any
foreign country or sovereign state, or of any state, province, municipality, or
other political subdivision thereof, or of any department, agency, public
corporation, or other instrumentality thereof, unless (y) the Account is
supported by an irrevocable letter of credit reasonably satisfactory to
Administrative Agent (as to form, substance, and issuer or domestic confirming
bank) that has been delivered to Administrative Agent and is directly drawable
by Administrative Agent, or (z) the Account is covered by credit insurance for
which Administrative Agent is a loss payee, in form and amount, and by an
insurer, reasonably satisfactory to Administrative Agent;
(e) Accounts with respect to which the Account Debtor is
either (i) the United States or any department, agency, or instrumentality of
the United States (exclusive, however, of Accounts with respect to which the
applicable Company has (x) complied, to the satisfaction of Administrative
Agent, with the Assignment of Claims Act or (y) pursuant to Section 6.18,
delivered to Administrative Agent Assignment of Claims Act Notices satisfactory
to Administrative Agent), or (ii) any state or city Governmental Authority
(exclusive, however, of (A) Accounts owed by any such Governmental Authority
that does not have a statutory counterpart to the Assignment of Claims Act, (B)
Accounts owed by any such Governmental Authority that does have a statutory
counterpart to the Assignment of Claims Act and with respect to which Borrower
has (x) complied with such applicable statutory counterpart to the satisfaction
of Administrative Agent or (y) pursuant to Section 6.18, delivered to
Administrative Agent Assignment of Claims Act Notices satisfactory to
Administrative Agent, and (C) Accounts owed by any such Governmental Authority
if the aggregate amount of all Accounts owed by such Governmental Authority do
not exceed $1,000,000);
(f) Accounts with respect to which the Account Debtor is a
creditor of any Company and has, by notification to any Company, any action or
otherwise, made known its intention to assert a right of setoff, has asserted a
right of setoff, has disputed its liability, or has made any claim with respect
to the Account;
(g) Accounts with respect to an Account Debtor (other than
the United States or any department, agency or instrumentality of the United
States) whose total obligations owing to the
6
<PAGE>
Companies, taken as a whole, exceed 20% of all Eligible Accounts and Eligible
Unbilled Accounts, to the extent of the obligations owing by such Account Debtor
in excess of such percentage;
(h) Accounts with respect to which the Account Debtor is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business;
(i) Accounts the collection of which Administrative Agent,
in its reasonable credit judgment, believes to be doubtful by reason of the
Account Debtor's financial condition;
(j) (i) Accounts with respect to which the services giving
rise to such Account have not been performed and accepted by the Account Debtor
or with respect to which the Account Debtor's obligations on the Account is
conditional, whether because further action is required to be performed by the
applicable Company, approval of a Person is required to be obtained, or
otherwise, or (ii) the Account otherwise does not represent a final sale;
provided that, where payment by the Account Debtor under an Account is required
upon the completion of certain actions, the obtaining of certain approvals or
the achievement of certain milestones, to the extent of the amount of such
required payment, such Account shall be deemed an Eligible Account if the
applicable Company determines in good faith that the applicable action has been
taken, the applicable approval has been obtained or the applicable milestones
have been achieved in accordance with the contract giving rise to such Account
and such Account otherwise qualifies as an Eligible Account;
(k) Accounts with respect to which the Account Debtor is
located in the states of New Jersey, Minnesota, Indiana, or West Virginia (or
any other state that requires a creditor to file a Business Activity Report or
similar document in order to bring suit or otherwise enforce its remedies
against such Account Debtor in the courts or through any judicial process of
such state), unless the Subsidiary Guarantor owning such Account has qualified
to do business in New Jersey, Minnesota, Indiana, West Virginia, or such other
states, or has filed a Notice of Business Activities Report with the applicable
division of taxation, the department of revenue, or with such other state
offices, as appropriate, for the then-current year, or is exempt from such
filing requirement; and
(l) Accounts which include a "retainage" or "hold-back" from
the amount due with respect to such Accounts, to the extent of the amount of
such "retainage" or "hold-back."
"Eligible Unbilled Account" means an Account which satisfies
all of the standards of eligibility for an Eligible Account except that an
invoice for such Account has not been rendered to the applicable Account Debtor;
provided, however, that the invoice for such Account is rendered to the Account
Debtor within 45 days of the creation thereof.
"Equipment" means all of the Companies' present and hereafter
acquired owned machinery, machine tools, motors, equipment, furniture,
furnishings, fixtures, vehicles (including motor vehicles and trailers), tools,
parts, goods (other than consumer goods, farm products, or Inventory), wherever
located in the United States of America, including, (a) any interest of any
Company in any of the foregoing, and (b) all attachments, accessories,
accessions, replacements, substitutions, additions, and improvements to any of
the foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, 29 U.S.C. ss.ss. 1000 et seq., amendments thereto, successor statutes, and
regulations or guidance promulgated thereunder.
7
<PAGE>
"ERISA Affiliate" means (a) any corporation subject to ERISA
whose employees are treated as employed by the same employer as the employees of
any Company under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
any Company under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which any Company is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any party subject to ERISA that is a party to an arrangement
with any Company and whose employees are aggregated with the employees of any
Company under IRC Section 414(o).
"ERISA Event" means (a) a Reportable Event with respect to
any Benefit Plan or Multiemployer Plan, (b) the withdrawal of Borrower, any of
its Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in
which it was a "substantial employer" (as defined in Section 4001(a)(2) of
ERISA), (c) the providing of notice of intent to terminate a Benefit Plan in a
distress termination (as described in Section 4041(c) of ERISA), (d) the
institution by the PBGC of proceedings to terminate a Benefit Plan or
Multiemployer Plan, (e) any event or condition (i) that provides a basis under
Section 4042(a)(1), (2), or (3) of ERISA for the termination of, or the
appointment of a trustee to administer, any Benefit Plan or Multiemployer Plan,
or (ii) that may result in termination of a Multiemployer Plan pursuant to
Section 4041A of ERISA, (f) the partial or complete withdrawal within the
meaning of Sections 4203 and 4205 of ERISA, of Borrower or any of its
Subsidiaries or ERISA Affiliates from a Multiemployer Plan, or (g) providing any
security to any Plan under Section 401(a)(29) of the IRC by Borrower or any of
its Subsidiaries or any of their ERISA Affiliates.
"Event of Default" has the meaning set forth in Section 8.
"Excluded Affiliate" means an Affiliate of Borrower or any of
its Subsidiaries, with respect to which Borrower or such Subsidiary possesses,
directly or indirectly, (i) the power to vote 40% or more of the securities
having ordinary voting power for the election of directors or Persons performing
similar functions or (ii) the direct or indirect power to direct the management
and policies of such Affiliate.
"Existing Credit Agreement" has the meaning set forth in the
first "Whereas" clause hereto.
"Existing Lender" means, collectively, each of the lenders
that are a party to the Existing Credit Agreement.
"FEIN" means Federal Employer Identification Number.
"Foreign Account Debtor" means an Account Debtor described in
clauses (i), (ii) or (iii) of paragraph (d) of the definition of Eligible
Accounts.
"Funding Date" means the date on which a Borrowing occurs or
a Letter of Credit is issued.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"General Intangibles" means all of the Companies' present and
future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes,
8
<PAGE>
or regulations, choses or things in action, goodwill, patents, trade names,
trademarks, servicemarks, copyrights, blueprints, drawings, purchase orders,
customer lists, monies due or recoverable from pension funds, route lists,
rights to payment and other rights under any royalty or licensing agreements,
infringement claims, computer programs, information contained on computer disks
or tapes, literature, reports, catalogs, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims), other than goods, Accounts, and
Negotiable Collateral.
"Governing Documents" means the certificate or articles of
incorporation, by-laws, or other organizational or governing documents of any
Person.
"Governmental Authority" means any nation or government, any
federal, state, city, town, municipality, county, local or other political
subdivision thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Hazardous Materials" means (a) substances that are defined
or listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"Indebtedness" means, with respect to any Person, without
duplication: (a) all obligations of such Person for borrowed money, (b) all
obligations of such Person evidenced by bonds, debentures, notes, or other
similar instruments and all reimbursement or other obligations of such Person in
respect of letters of credit, bankers acceptances, interest rate swaps, or other
financial products, (c) all obligations of such Person under capital leases, (d)
all obligations or liabilities of others secured by a Lien on any property or
asset of such Person, irrespective of whether such obligation or liability is
assumed, and (e) any obligation of such Person guaranteeing or intended to
guarantee (whether guaranteed, endorsed, co-made, discounted, or sold with
recourse to such Person) any indebtedness, capital lease, dividend, letter of
credit, or other financial obligation (other than operating leases) of any other
Person.
"Indentures" means collectively (i) the Indenture, dated as
of January 11, 1994, as supplemented or amended from time to time, with respect
to Borrower's $125,000,000 12% Senior Subordinated Notes due 2003 and (ii) the
Indenture, dated as of December 23, 1996, as supplemented or amended from time
to time, with respect to the Borrower's $15,000,000 12% Senior Notes due 2003.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, foreign or domestic, assignments for the benefit
of creditors, formal or informal moratoria, compositions, extensions generally
with creditors, or proceedings seeking reorganization, arrangement, or other
similar relief.
"Intangible Assets" means, with respect to any Person, that
portion of the book value of all of such Person's assets that would be treated
as intangibles under GAAP.
9
<PAGE>
"Interest Expense" means total interest obligations (paid or
accrued) of the Consolidated Group, determined in accordance with GAAP on a
basis consistent with the latest audited financial statements of the
Consolidated Group.
"Inventory" means all present and future inventory in which
any Company has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of such Company's present and
future raw materials, work in process, finished goods, and packing and shipping
materials, wherever located.
"IRC" means the Internal Revenue Code of 1986, as amended,
and the regulations thereunder.
"Kaiser-Hill" means Kaiser-Hill Company, LLC, a limited
liability company formed under the laws of Colorado, owned equally by ICF Kaiser
Government Programs, Inc. and CH2M Hill Constructors, Inc.
"K-H Funding" means Kaiser-Hill Funding Company, L.L.C., a
limited liability company formed under the laws of the Sate of Delaware, owned
in the following percentages by Kaiser-Hill (98%), ICF Kaiser Government
Programs, Inc. (1%), and CH2M Hill Constructors, Inc. (1%).
"L/C" has the meaning set forth in Section 2.2(a).
"L/C Guaranty" has the meaning set forth in Section 2.2(a).
"Lender" and "Lenders" have the respective meanings set forth
in the preamble hereto, and shall include any other Person made a party to this
Agreement in accordance with the provisions of Section 15.1.
"Lender Group" means, individually and collectively, each of
the individual Lenders and each Agent.
"Lender Group Expenses" means all reasonable costs or
expenses (including taxes and insurance premiums) required to be paid by
Borrower or any other Company under any of the Loan Documents that are paid or
incurred by any of Lender Group; fees or charges paid or incurred by any of
Lender Group in connection with any of Lender Group's transactions with the
Companies, including, fees or charges for photocopying, notarization, couriers
and messengers, telecommunication, public record searches (including tax lien,
judgment and UCC searches and including searches with the patent and trademark
office, the copyright office, or the department of motor vehicles), filing,
recording, publication, appraisal (including periodic Collateral appraisals) and
environmental audits; costs and expenses incurred by any of Lender Group in the
disbursement of funds to Borrower (by wire transfer or otherwise); charges paid
or incurred by any of Lender Group resulting from the dishonor of checks; costs
and expenses paid or incurred by any of Lender Group to correct any default or
enforce any provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Collateral or any portion thereof, irrespective
of whether a sale is consummated; costs and expenses paid or incurred by any of
Lender Group in examining the Companies' Books; costs and expenses of third
party claims or any other suit paid or incurred by any of Lender Group in
enforcing or defending the Loan Documents or in connection with the transactions
contemplated by the Loan Documents or any of Lender Group's relationship with
Borrower or any other Company; and any of Lender Group's reasonable attorneys'
fees and expenses incurred in advising, structuring, drafting, reviewing,
administering, amending, terminating, enforcing (including attorneys fees and
expenses incurred in connection with a
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"workout," a "restructuring," or an Insolvency Proceeding concerning Borrower or
any Company), defending, or concerning the Loan Documents, irrespective of
whether suit is brought.
"Letter of Credit" means an L/C or an L/C Guaranty, as the
context requires.
"Lien" means any interest in property securing an obligation
owed to, or a claim by, any Person other than the owner of such property,
whether such interest shall be based on the common law, statute, or contract,
whether such interest shall be recorded or perfected, and whether such interest
shall be contingent upon the occurrence of some future event or events or the
existence of some future circumstance or circumstances, including the lien or
security interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, adverse
claim or charge, conditional sale or trust receipt, or from a lease,
consignment, or bailment for security purposes and also including reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting Real
Property.
"Loan Account" has the meaning set forth in Section 2.10.
"Loan Documents" means this Agreement, the Pledge Agreements,
the Trademark Security Agreement, the Contribution Agreement, any Joinder
Agreement, the Dutch Receivables Pledge, the Disbursement Letter, the Letters of
Credit, the Lockbox Agreements, any Assignment of Claims Act Notices, any
Mortgage, any note or notes executed by Borrower and payable to any Lender in
connection with this Agreement, and any other agreement entered into, now or in
the future, in connection with this Agreement.
"Lockbox Account" means a depositary account established
pursuant to one of the Lockbox Agreements.
"Lockbox Agreements" means those certain Lockbox Operating
Procedural Agreements and those certain Depository Account Agreements, in form
and substance satisfactory to the Agents, each of which is among one or more
Companies, the Collateral Agent, and one of the Lockbox Banks.
"Lockbox Banks" means Bank of America (NationsBank) and Wells
Fargo.
"Lockboxes" has the meaning set forth in Section 2.7.
"Madeleine" has the meaning set forth in the preamble hereto.
"Margin" has the meaning set forth in Section 2.6(a).
"Material Adverse Change" means (a) a material adverse change
in the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of any Company or of the
Consolidated Group, taken as a whole, (b) the material impairment of any
Company's ability to perform its obligations under the Loan Documents to which
it is a party or of the Agents or the Lender Group to enforce the Obligations or
realize upon the Collateral, (c) a material adverse effect on the value of the
Collateral or the amount that the Agents or the Lender Group would be likely to
receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of such Collateral, or (d) a material impairment
of the priority of the Agents or the Lender Group's Liens with respect to the
Collateral, provided that the events described in a separate writing delivered
to the Administrative Agent prior to the Closing Date shall not constitute a
Material Adverse Change.
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"Material Contract" means any agreement or contract of any
Company or any Subsidiary of a Company (excluding subcontracts the costs of
which by their terms are paid by such Company's or Subsidiary's customer) which
(a) involves consideration to such Company or Subsidiary of $5,000,000 or more,
(b) involves consideration by such Company or Subsidiary of $1,000,000 or more,
(c) imposes financial obligations on any Company or any Subsidiary of a Company
of $1,000,000 or more (other than any agreement that by its terms may be
terminated by any Company or any Subsidiary of a Company upon sixty (60) days'
notice or less) or (d) is otherwise material (or together with related
agreements and contracts, is material) to the business, operations, condition
(financial or otherwise), performance, prospects or properties of any Company,
provided that Material Contracts shall include the Material Customer Contracts,
and provided further that, notwithstanding the foregoing, Administrative Agent
may, in its reasonable business judgment, reduce the Dollar amounts specified in
clauses (a), (b) and (c) above without declaring an Event of Default.
"Material Customer Contracts" means, collectively, each
agreement or contract of any Company pursuant to which any Company may
reasonably be expected to receive gross revenues of $5,000,000 or more during
the term thereof, provided that, notwithstanding the foregoing, Administrative
Agent may, in its reasonable business judgment, reduce the foregoing Dollar
amount without declaring an Event of Default.
"Maturity Date" has the meaning set forth in Section 3.4.
"Maximum Revolving Amount" means $60,000,000.
"Mortgage" has the meaning set forth in Section 6.17.
"Multiemployer Plan" means a "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA) to which Borrower, any of its Subsidiaries, or
any ERISA Affiliate has contributed, or was obligated to contribute, within the
past six (6) years.
"Negotiable Collateral" means, with respect to any Company,
all of such Company's present and future letters of credit, notes, drafts,
instruments, investment property, security entitlements, securities (including
the shares of stock of direct Subsidiaries of such Company), documents, personal
property leases (wherein such Company is the lessor), chattel paper, and such
Company's Books relating to any of the foregoing.
"Net Income" means, for any period, the net income (or net
loss) of the Consolidated Group for such period after giving effect to deduction
of or provision for all operating expenses, all taxes and reserves (including
reserves for deferred taxes) and all other proper deductions, all determined in
accordance with GAAP, provided that there shall be excluded: (i) any restoration
of any contingency reserve for extraordinary items, except to the extent that
the provision for such reserve was made out of income during such period, (ii)
any net gains or losses on the sale or other disposition, not in the ordinary
course of business, of capital assets, provided that there shall also be
excluded any related charges for taxes thereon, (iii) any net gain arising from
the collection of the proceeds of any insurance policy, (iv) any write-up of any
asset, and (v) any other extraordinary item.
"Net Proceeds" means: (a) with respect to the sale or other
disposition of any asset (other than any capital stock or debt security) by
Borrower or any of its Subsidiaries (including in connection with any
sale-leaseback), the excess, if any, of (i) the aggregate amount received in
cash (including any cash received by way of deferred payment pursuant to a note
receivable, other non-cash consideration or otherwise, but only as and when such
cash is so received) in connection with such sale
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or other disposition, over (ii) the sum of (A) the principal amount of any
Indebtedness which is secured by any such asset (other than Indebtedness assumed
by the purchaser of such asset) or which is required to be, and is, repaid in
connection with the sale or other disposition thereof (other than Indebtedness
hereunder), (B) the reasonable out-of-pocket expenses and fees incurred by the
Borrower or its Subsidiaries in connection with such sale or other disposition
(but only to the extent that such out-of-pocket expenses and fees, if paid to an
Affiliate of Borrower, are approved by the Administrative Agent in its sole
discretion exercised reasonably), and provided that all such expenses and fees
are set forth on a certificate provided to the Administrative Agent, and (C)
federal and state taxes incurred in connection with such sale or other
disposition, whether payable at such time or thereafter; and (b) with respect to
the sale or other disposition of any capital stock or debt security by Borrower
or any of its Subsidiaries, excluding any sale or disposition of capital stock
of Borrower pursuant to employee stock option or purchase plans of Borrower, the
excess of (i) the aggregate amount received in cash (including any cash received
by way of deferred payment pursuant to a note receivable, other non-cash
consideration or otherwise, but only as and when such cash is so received) in
connection with such sale or other disposition, over (ii) the sum of (A) the
reasonable fees, commissions and other out-of-pocket expenses incurred by
Borrower or its Subsidiaries in connection with such sale or other disposition
(but only to the extent such fees, commissions and expenses, if paid to an
Affiliate of Borrower, are approved by the Administrative Agent in its sole
discretion exercised reasonably and provided that all such fees, commissions,
discounts and expenses are set forth on a certificate provided to the
Administrative Agent) and (B) federal and state taxes incurred in connection
with such sale or other disposition, whether payable at such time or thereafter.
"Non-Recourse Indebtedness" means Indebtedness of a Single
Purpose Subsidiary that (a) is not a Subsidiary Guarantor (or required to be
joined to this Agreement as a Subsidiary Guarantor pursuant to Section 18.7) and
(b) except for ICF Kaiser Defense Programs, Inc. (but only to the extent that
the aggregate Indebtedness incurred by ICF Kaiser Defense Programs, Inc. does
not exceed $4,900,000), is not in existence on the Closing Date, with respect to
which: (i) the sole legal recourse for collection of principal, premium, if any,
and interest and all other obligations on or with respect to such Indebtedness
is against (A) the specific property identified in the instruments evidencing or
securing such Indebtedness and such property was acquired with the proceeds of
such Indebtedness or such Indebtedness was incurred within 90 days of the
acquisition of such property, and/or (B) the capital stock or other equity of
such Single Purpose Subsidiary, provided that such Single Purpose Subsidiary has
no assets other than the specific property acquired with the proceeds of such
Indebtedness and such other assets as may be reasonably required for the limited
operations of such Single Purpose Subsidiary; and (ii) neither Borrower nor any
Subsidiary of Borrower, other than such Single Purpose Subsidiary (A) is
directly or indirectly liable to make any payment thereon (other than as
permitted by the following clause (B)), (B) has any guarantee obligation in
respect of such Indebtedness or such Single Purpose Subsidiary (other than a
guarantee as to which recourse is limited to the capital stock or other equity
of such Single Purpose Subsidiary), or (C) has pledged or granted any Lien or
encumbrances on any assets as collateral or security with respect thereto, other
than the capital stock or other equity of such Single Purpose Subsidiary.
"Notes" means the promissory notes issued by Borrower
pursuant to the Indentures.
"Obligations" means all loans, Advances, debts, principal,
interest (including any interest that, but for the provisions of the Bankruptcy
Code, would have accrued), contingent reimbursement obligations under any
outstanding Letters of Credit, premiums, liabilities (including all amounts
charged to Borrower's Loan Account pursuant hereto), obligations, fees, charges,
costs, or Lender Group Expenses (including any fees or expenses that, but for
the provisions of the Bankruptcy Code, would have accrued),
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lease payments, guaranties, covenants, and duties owing by any Company to the
Agents or the Lender Group of any kind and description (whether pursuant to or
evidenced by the Loan Documents or pursuant to any other agreement between the
Agents or the Lender Group and any Company, and irrespective of whether for the
payment of money), whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, and including any debt,
liability, or obligation owing from any Company to others that the Agents or the
Lender Group may have obtained by assignment or otherwise, and further including
all interest not paid when due and all Lender Group Expenses that any Company is
required to pay or reimburse by the Loan Documents, by law, or otherwise.
"Originating Lender" has the meaning set forth in Section
15.1(e).
"Overadvance" has the meaning set forth in Section 2.5.
"Participant" means any Person to which a Lender has sold a
participation interest in its rights under the Loan Documents.
"Pay-Off Letter" means a letter agreement, in form and
substance reasonably satisfactory to the Administrative Agent, from Existing
Lender respecting the amount necessary to repay in full all of the obligations
of Borrower owing to Existing Lender and obtain a termination or release of all
of the Liens existing in favor of Existing Lender in and to the properties or
assets of the Companies.
"PBGC" means the Pension Benefit Guaranty Corporation as
defined in Title IV of ERISA, or any successor
thereto.
"Permitted Businesses" means the businesses of providing
consulting, engineering or construction services to public and private sector
clients in the environment, energy, infrastructure and industry markets.
"Permitted Liens" means (a) Liens in favor of any Agent for
the benefit of Lender Group, (b) Liens for unpaid taxes that either (i) are not
yet due and payable or (ii) are the subject of Permitted Protests, (c) Liens set
forth on Schedule P-1, (d) the interests of lessors under operating leases and
purchase money Liens of lessors under capital leases to the extent that the
acquisition or lease of the underlying asset is permitted under Section 7.21 and
so long as the Lien only attaches to the asset purchased or acquired and only
secures the purchase price of the asset, (e) Liens arising by operation of law
in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers,
or suppliers, incurred in the ordinary course of business of the Companies and
not in connection with the borrowing of money, and which Liens either (i) are
for sums not yet due and payable, or (ii) are the subject of Permitted Protests,
(f) Liens arising from deposits made in connection with obtaining worker's
compensation or other unemployment insurance, (g) Liens or deposits to secure
performance of bids, tenders, or leases (to the extent permitted under this
Agreement), incurred in the ordinary course of business of the Companies and not
in connection with the borrowing of money, (h) Liens arising by reason of
security for surety or appeal bonds in the ordinary course of business of the
Companies, (i) Liens of or resulting from any judgment or award that would not
cause a Material Adverse Change and as to which the time for the appeal or
petition for rehearing of which has not yet expired, or in respect of which a
Company is in good faith prosecuting an appeal or proceeding for a review, and
in respect of which a stay of execution pending such appeal or proceeding for
review has been secured, (j) Liens with respect to the Real Property Collateral
that are exceptions to the commitments for title insurance issued in connection
with any Mortgages, as accepted by the Administrative Agent, (k) with respect to
any Real Property that is not part of the Real Property Collateral, easements,
rights of way, zoning and similar covenants and restrictions, and similar
encumbrances that customarily exist on properties of Persons engaged in similar
activities and similarly situated and that in any event do not
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materially interfere with or impair the use or operation of the Collateral by
the Company or the value of Lender Group's Lien thereon or therein, or
materially interfere with the ordinary conduct of the business of any Company,
(l) Liens securing Non-Recourse Indebtedness and Indebtedness permitted by
Section 7.1(j), and (m) Liens (not otherwise permitted) which secure obligations
not exceeding (as to the Borrower and the other Companies) $500,000 in an
aggregate amount at any time outstanding, provided that such Liens are limited
to assets other than Accounts and General Intangibles.
"Permitted Protest" means the right of any Company to protest
any Lien other than any such Lien that secures the Obligations, tax (other than
payroll taxes or taxes that are the subject of a United States federal tax
lien), or rental payment, provided that (a) a reserve with respect to such
obligation is established on the books of the affected Company in an amount that
is reasonably satisfactory to Administrative Agent, (b) any such protest is
instituted and diligently prosecuted by such Company in good faith, and (c)
Administrative Agent is satisfied that, while any such protest is pending, there
will be no impairment of the enforceability, validity, or priority of any of the
Liens of Lender Group, or of any Agent for the benefit of Lender Group, in and
to the Collateral.
"Person" means and includes natural persons, corporations,
limited liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"Personal Property Collateral" means all Collateral other
than the Real Property Collateral.
"Plan" means any employee benefit plan, program, or
arrangement maintained or contributed to by any Company or with respect to which
any Company may incur liability.
"Pledge Agreements" means the Pledge and Security Agreements
made by each of the Borrower, the Subsidiary Guarantors and the corporate parent
of each Subsidiary Guarantor in favor of the Administrative Agent, each in the
form of Exhibits P-1, P-2 or P-3 hereto, as applicable, as the same may be
amended or otherwise modified from time to time.
"Pro-Rata Share" means, with respect to a Lender, a fraction
(expressed as a percentage), the numerator of which is the amount of such
Lender's Commitment and the denominator of which is the aggregate amount of the
Commitments.
"Real Property" means any estates or interests in real
property now owned or hereafter acquired by any
Company.
"Real Property Collateral" means any estates or interests in
owned real property hereafter acquired by any Company.
"Reference Rate" means the variable rate of interest per
annum most recently announced by The Chase Manhattan Bank, N.A., or any
successor thereto, as its "prime rate," irrespective of whether such announced
rate is the best rate available from such financial institution.
"Report" has the meaning set forth in Section 17.16(a).
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"Reportable Event" means any of the events described in
Section 4043(c) of ERISA or the regulations thereunder other than a Reportable
Event as to which the provision of thirty (30) days' notice to the PBGC is
waived under applicable regulations.
"Required Lenders" means, at any time, Administrative Agent
together with such other Lenders whose Pro Rata Shares together with
Administrative Agent aggregate sixty-six and two-thirds percent (66-2/3%) or
more of the Commitments.
"Retiree Health Plan" means an "employee welfare benefit plan"
within the meaning of Section 3(1) of ERISA that provides benefits to
individuals after termination of their employment, other than as required by
Section 601 of ERISA.
"Revolving Facility Usage" means, as of any date of
determination, the aggregate amount of Advances and undrawn or unreimbursed
Letters of Credit outstanding.
"Settlement" has the meaning set forth in Section 2.1(h)(i).
"Settlement Date" has the meaning set forth in Section
2.1(h)(i).
"Single Purpose Subsidiary" means as to any Person, a
Subsidiary of such Person the activities of which are limited to (a) ownership
of all or a portion of the interests in a single project constituting one or
more Permitted Businesses, either directly or through the ownership of the
capital stock or other equity of another Person, and (b) the development,
engineering, design, project management, construction or operation of such
project; ICF Kaiser Defense Programs, Inc. shall be deemed to be a Single
Purpose Subsidiary for all purposes hereunder.
"Solvent" means, with respect to any Person on a particular
date, that on such date (a) at fair valuations, all of the properties and assets
of such Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair salable value of the
properties and assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, and (d) such Person does not intend to, and does not believe that it
will, incur debts beyond such Person's ability to pay as such debts mature. In
computing the amount of contingent liabilities at any time, it is intended that
such liabilities will be computed at the amount that, in light of all the facts
and circumstances existing at such time, represents the amount that reasonably
can be expected to become an actual or matured liability.
"Specified Liens" has the meaning set forth in Section 3.3(b).
"Subsidiary" of a Person means a corporation, partnership,
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors (or
appoint other comparable managers) of such corporation, partnership, limited
liability company, or other entity; provided, however, that neither Kaiser-Hill
nor K-H Funding shall constitute a Subsidiary so long as Borrower does not own
beneficially in excess of 50% of the membership interests in either such entity.
"Subsidiary Guarantors" has the meaning set forth in the
preamble hereto.
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"Tangible Net Worth" means, as of any date of determination,
the difference of (a) total stockholder's equity of the Consolidated Group,
minus (b) the sum of: (i) all Intangible Assets of the Consolidated Group, (ii)
all prepaid expenses of the Consolidated Group, and (iii) all amounts due to the
Consolidated Group from Affiliates.
"Total Debt" means, at any time, the aggregate amount of
Indebtedness of the Consolidated Group for borrowed money plus the aggregate
amount of the Consolidated Group's obligations under capitalized leases.
"Trademark Security Agreement" means each Trademark Security
Agreement dated the date hereof, each substantially in the form of Exhibit T-1,
made by the Borrower and certain Subsidiary Guarantors in favor of the
Administrative Agent, as the same may be amended or otherwise modified from time
to time.
"Voidable Transfer" has the meaning set forth in Section 19.8.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. When used herein, the
term "financial statements" shall include the notes and schedules thereto.
Whenever the term "Borrower" is used in respect of a financial covenant or a
related definition, it shall be understood to mean the Consolidated Group unless
the context clearly requires otherwise.
1.3 Code. Any terms used in this Agreement that are defined in the
Code shall be construed and defined as set forth in the Code unless otherwise
defined herein.
1.4 Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, the term "including" is not limiting, and the
term "or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. An Event of Default
shall "continue" or be "continuing" until such Event of Default has been waived
in writing by the requisite members of Lender Group. Section, subsection,
clause, schedule, and exhibit references are to this Agreement unless otherwise
specified. Unless the context of this Agreement clearly requires otherwise, the
phrases "aggregate amount," "aggregate value" and "in the aggregate" mean the
total aggregate amount or value (as applicable) during the term of this
Agreement. Any reference in this Agreement or in the Loan Documents to this
Agreement or any of the Loan Documents shall include all alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, and supplements, thereto and thereof, as applicable.
1.5 Schedules and Exhibits. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 Revolving Advances.
(a) Subject to the terms and conditions of this Agreement,
each Lender agrees to make advances ("Advances") to Borrower in an amount at any
one time outstanding not to exceed such Lender's Pro Rata Share of an amount
equal to the lesser of (i) the Maximum Revolving Amount less the outstanding
balance of all undrawn or unreimbursed Letters of Credit, or (ii) the Borrowing
Base less the
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aggregate amount of all undrawn or unreimbursed Letters of Credit. For purposes
of this Agreement, "Borrowing Base", as of any date of determination, shall mean
the result of:
(x) the lesser of (i) the sum of (A) 85% of Eligible
Accounts (other than Accounts with respect to which the Account Debtor
is a Foreign Account Debtor), that have been outstanding less than 90
days from the invoice date, plus (B) 80% of Eligible Accounts (other
than Accounts with respect to which the Account Debtor is a Foreign
Account Debtor) that have been outstanding 90 days or more but less
than 120 days from the invoice date, plus (C) 90% of Eligible Accounts
with respect to which the Account Debtor is a Foreign Account Debtor,
plus (D) the lesser of (1) 65% of Eligible Unbilled Accounts and (2)
$25,000,000, minus (E) the amount, if any, of the Dilution Reserve, and
(ii) an amount equal to the Companies' Collections with respect to
Accounts for the immediately preceding 60 day period, minus
(y) the aggregate amount of reserves, if any,
established by Administrative Agent under Section 2.1(b) and Section
10, from time to time.
(b) Anything to the contrary in Section 2.1(a) above
notwithstanding, Administrative Agent may, in its reasonable business judgment,
create reserves against or reduce Lender Group's advance rates based upon
Eligible Accounts or Eligible Unbilled Accounts without declaring an Event of
Default. Lenders shall have no obligation to make Advances hereunder to the
extent such Advances would cause the outstanding Obligations to exceed the
Maximum Revolving Amount. Amounts borrowed pursuant to this Section 2.1 may be
repaid and, subject to the terms and conditions of this Agreement, reborrowed at
any time during the term of this Agreement.
(c) Procedure for Borrowing. Each Borrowing shall be made
upon Borrower's irrevocable request therefor delivered to each of Administrative
Agent and Collateral Agent (which notice must be received by each of
Administrative Agent and Collateral Agent (i) by 12:00 noon (New York time) on
the Business Day of the requested Funding Date, in the case of any Borrowing in
an amount of less than $5,000,000 and (ii) by 12:00 noon (New York time) on the
second Business Day immediately prior to the requested Funding Date, in the case
of any Borrowing in an amount of $5,000,000 or greater) specifying (i) the
amount of the Borrowing and (ii) the requested Funding Date, which shall be a
Business Day. The amount of each Borrowing shall not be less than $1,000,000.
(d) Agent's Election. Administrative Agent shall elect, in
its discretion and by notice to the Collateral Agent, (i) to have the terms of
Section 2.1(e) apply to any requested Borrowing, or (ii) cause Collateral Agent
to make an Agent Loan pursuant to the terms of Section 2.1(f) in the amount of
the requested Borrowing.
(e) Making of Advances.
(i) In the event that Administrative Agent shall elect
to have the terms of this Section 2.1(e) apply to a requested Borrowing as
described in Section 2.1(d), then promptly after receipt of a request for a
Borrowing pursuant to Section 2.1(c), the Collateral Agent shall notify Lenders,
not later than 1:00 p.m. (New York time) on the Funding Date applicable thereto
(or not later than 3:00 p.m. (New York time) on the Business Day immediately
preceding the Funding Date applicable thereto, in the case of requested
Borrowings in an amount of $5,000,000 or greater), by telephone and promptly
confirmed by telecopy, or other similar form of transmission, of the requested
Borrowing. Each Lender shall make the amount of such Lender's Pro Rata Share of
the requested Borrowing available to Collateral Agent in same day funds, to such
account of Collateral Agent as Collateral Agent
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may designate, not later than 3:00 p.m. (New York time) on the Funding Date
applicable thereto. After Collateral Agent's receipt of the proceeds of such
Advances, upon satisfaction of the applicable conditions precedent set forth in
Sections 3.1 and 3.2, Collateral Agent shall make the proceeds of such Advances
available to Borrower on the applicable Funding Date by transferring same day
funds equal to the proceeds of such Advances received by Collateral Agent to the
Designated Account; provided, however, that, subject to the provisions of
Section 2.1(k), Administrative Agent shall instruct Collateral Agent not to
request any Lender to make, and no Lender shall have the obligation to make, any
Advance if Administrative Agent shall have received written notice from any
Lender that (A) one or more of the applicable conditions precedent set forth in
Section 3.1 or 3.2 will not be satisfied on the requested Funding Date for the
applicable Borrowing, or (B) the requested Borrowing would exceed the
Availability on such Funding Date. Administrative Agent and Collateral Agent
shall not otherwise be required to determine whether the applicable conditions
precedent set forth in Sections 3.1 or 3.2 have been satisfied on the Funding
Date applicable thereto prior to making, in its sole discretion, any Agent Loan.
(ii) Unless Administrative Agent and Collateral Agent
receive notice from a Lender on or prior to the Closing Date or, with respect to
any Borrowing after the Closing Date, at least one (1) Business Day prior to the
date of such Borrowing, that such Lender will not make available as and when
required hereunder to Collateral Agent for the account of Borrower the amount of
such Lender's Pro Rata Share of the Borrowing, Administrative Agent and
Collateral Agent may assume that each Lender has made or will make such amount
available to Collateral Agent in immediately available funds on the Funding Date
and Collateral Agent may (but shall not be so required), in reliance upon such
assumption, make available to Borrower on such date a corresponding amount. If
and to the extent any Lender shall not have made its full amount available to
Collateral Agent in immediately available funds and Collateral Agent shall have
made available to Borrower such amount, then such Lender shall on the Business
Day following such Funding Date make such amount available to Collateral Agent,
together with interest at the Reference Rate for the first three (3) days from
and after the date the relevant payment is due and thereafter at the interest
rate then applicable to Advances. A notice from Administrative Agent or
Collateral Agent submitted to any Lender with respect to amounts owing under
this subsection shall be conclusive, absent manifest error. If such amount is
paid to Collateral Agent such payment to Collateral Agent shall constitute such
Lender's Advance on the Funding Date for all purposes of this Agreement. If such
amount is not paid to Collateral Agent on the Business Day following the Funding
Date, Administrative Agent will notify Borrower of such failure to fund and,
upon demand by Administrative Agent, Borrower shall pay such amount to
Collateral Agent, together with interest thereon for each day elapsed since the
date of such Borrowing, at a rate per annum equal to the interest rate then
applicable to Advances. The failure of any Lender to make any Advance on any
Funding Date shall not relieve any other Lender of any obligation hereunder to
make an Advance on such Funding Date, but no Lender shall be responsible for the
failure of any other Lender to make the Advance to be made by such other Lender
on such Funding Date.
(f) Making of Agent Loans.
(i) In the event Administrative Agent shall elect to
have the terms of this Section 2.1(f) apply to a requested Borrowing as
described in Section 2.1(d), Collateral Agent shall make an Advance in the
amount of such Borrowing (any such Advance made solely by Collateral Agent
pursuant to this Section 2.1(f) being referred to as an "Agent Loan" and such
Advances being referred to collectively as "Agent Loans") available to Borrower
on the Funding Date applicable thereto by transferring same day funds to
Borrower's Designated Account. Each Agent Loan is an Advance hereunder and shall
be subject to all the terms and conditions applicable to other Advances, except
that all payments thereon shall be payable to Collateral Agent solely for the
account of the Collateral Agent
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(and for the account of the holder of any participation interest with respect to
such Advance). Subject to the provisions of Section 2.1(k), Administrative Agent
shall not cause Collateral Agent to make any Agent Loan if Administrative Agent
and Collateral Agent shall have received written notice from any Lender, that
(i) one or more of the applicable conditions precedent set forth in Sections 3.1
or 3.2 will not be satisfied on the requested Funding Date for the applicable
Borrowing, or (ii) the requested Borrowing would exceed the Availability on such
Funding Date. Administrative Agent and Collateral Agent shall not otherwise be
required to determine whether the applicable conditions precedent set forth in
Sections 3.1 or 3.2 have been satisfied on the Funding Date applicable thereto
prior to making, in its sole discretion, any Agent Loan.
(ii) Agent Loans shall be secured by the Collateral and
shall constitute Advances and Obligations hereunder, and shall bear interest at
the rate then applicable to Advances pursuant to Section 2.6.
(g) Agent Advances.
(i) Administrative Agent hereby is authorized by
Borrower and Lenders, from time to time in Administrative Agent's sole
discretion, (1) after the occurrence of a Default or an Event of Default (but
without constituting a waiver of such Default or Event of Default) or (2) at any
time that any of the other applicable conditions precedent set forth in Section
3.1 or 3.2 have not been satisfied, to make or to cause Collateral Agent to make
Advances to Borrower on behalf of Lenders which Administrative Agent, in its
reasonable business judgment, deems necessary or desirable (A) to preserve or
protect the Collateral, or any portion thereof, (B) to enhance the likelihood
of, or maximize the amount of, repayment of the Obligations, or (C) to pay any
other amount chargeable to any Company pursuant to the terms of this Agreement,
including Lender Group Expenses and the costs, fees, and expenses described in
Section 10 (any of the Advances described in this Section 2.1(g) being
hereinafter referred to as "Agent Advances"); provided, that Administrative
Agent shall not make or cause Collateral Agent to make any Agent Advances to
Borrower without the consent of Required Lenders if the amount outstanding
thereof would exceed $5,000,000 in the aggregate at any one time.
(ii) Agent Advances shall be repayable by Borrower on
demand and secured by the Collateral, shall constitute Advances and Obligations
hereunder, and shall bear interest at the rate then applicable to Advances
pursuant to Section 2.6.
(h) Settlement. It is agreed that each Lender's funded
portion of the Advances is intended by Lenders to be equal at all times to such
Lender's Pro Rata Share of the outstanding Advances. Such agreement
notwithstanding, each Agent and Lenders agree (which agreement shall not be for
the benefit of or enforceable by the Companies) that in order to facilitate the
administration of this Agreement and the other Loan Documents, settlement among
them as to the Advances, Agent Loans and Agent Advances shall take place on a
periodic basis in accordance with the following provisions:
(i) Collateral Agent shall request settlement
("Settlement")with Lenders, on a weekly basis, or on a more frequent basis as
agreed in writing by Administrative Agent and Collateral Agent, (1) for
Administrative Agent, with respect to each Agent Advance, (2) for Collateral
Agent, with respect to each Agent Loan, and (3) with respect to Collections
received, as to each Lender, by notifying Lenders by telephone and promptly
confirmed by telecopy, or other similar form of transmission, of such requested
Settlement, no later than 4:00 p.m. (New York time) on the Business Date
immediately preceding the date of such requested Settlement (the "Settlement
Date"). Such notice of a Settlement shall include a summary statement of the
amount of outstanding Advances, Agent Loans
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and Agent Advances for the period since the prior Settlement, the amount of
repayments received in such period, and the amounts allocated to each Lender of
the principal, interest, fees, and other charges for such period. Subject to the
terms and conditions contained herein (including Section 2.1(h)(ii)): (y) if a
Lender's balance of the Advances, Agent Loans and Agent Advances exceeds such
Lender's Pro Rata Share of the Advances, Agent Loans and Agent Advances as of a
Settlement Date, then, Collateral Agent shall by no later than 4:00 p.m. (New
York time) on such Settlement Date transfer in same day funds to the account of
such Lender as Lender may designate, an amount such that each such Lender shall,
upon receipt of such amount, have as of the Settlement Date, its Pro Rata Share
of the Advances, Agent Loans and Agent Advances; and (z) if a Lender's balance
of the Advances, Agent Loans and Agent Advances is less than such Lender's Pro
Rata Share of the Advances, Agent Loans and Agent Advances as of a Settlement
Date, such Lender shall by no later than 4:00 p.m. (New York time) on such
Settlement Date transfer in same day funds to such account of Collateral Agent
as Collateral Agent may designate, an amount such that each such Lender shall,
upon transfer of such amount, have as of such Settlement Date, its Pro Rata
Share of the Advances, Agent Loans and Agent Advances. Such amounts made
available to Collateral Agent under clause (z) of the immediately preceding
sentence shall be applied against the amounts of the applicable Agent Loan or
Agent Advance and shall, together with the portion of such Agent Loan or Agent
Advance representing Administrative Agent's and Collateral Agent's (in their
capacity as Lenders) Pro Rata Share thereof, constitute Advances of such
Lenders. If any such amount is not made available to Collateral Agent by any
Lender on the Settlement Date applicable thereto to the extent required by the
terms hereof, Collateral Agent shall be entitled to recover, for the benefit of
Administrative Agent or Collateral Agent, as applicable, such amount on demand
from such Lender together with interest thereon at the Reference Rate for the
first three (3) days from and after such Settlement Date and thereafter at the
interest rate then applicable to Advances.
(ii) In determining whether a Lender's balance of the
Advances, Agent Loans and Agent Advances is less than, equal to, or greater than
such Lender's Pro Rata Share of the Advances, Agent Loans and Agent Advances as
of a Settlement Date, Collateral Agent shall, as part of the relevant
Settlement, apply to such balance the portion of payments actually received by
Collateral Agent with respect to principal, interest and fees payable by
Borrower and allocable to Lenders hereunder, and proceeds of Collateral. To the
extent that a net amount is owed to any such Lender after such application, such
net amount shall be distributed by Collateral Agent to that Lender as part of
such Settlement; provided, however, that the first annual fee payable by
Borrower under Section 2.11(a) on the Closing Date shall be distributed to
Lenders within two (2) Business Days following the Closing Date without regard
to the netting of amounts owing to or owed by any Lender as part of a
Settlement.
(iii) Between Settlement Dates, Collateral Agent, to the
extent no Agent Advances or Agent Loans are outstanding, may pay over to
Collateral Agent (in its capacity as Lender) any payments received by Collateral
Agent, which in accordance with the terms of this Agreement would be applied to
the reduction of the Advances, for application to Collateral Agent's (in its
capacity as Lender) Pro Rata Share of the Advances. If, as of any Settlement
Date, Collections received since the then immediately preceding Settlement Date
have been applied to Collateral Agent's (in its capacity as Lender) Pro Rata
Share of the Advances other than to Agent Loans, as provided for in the previous
sentence, Collateral Agent shall pay to Lenders, to be applied to the
outstanding Advances of such Lenders, an amount such that each Lender shall,
upon receipt of such amount, have, as of such Settlement Date, its Pro Rata
Share of the Advances. During the period between Settlements, Administrative
Agent with respect to Agent Advances, Collateral Agent with respect to Agent
Loans and each Lender with respect to the Advances other than Agent Loans and
Agent Advances, shall be entitled to interest at the applicable rate or rates
payable under this Agreement on the daily amount of funds employed by Agents or
Lenders, as applicable.
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(i) Notation. Collateral Agent shall record on its books the
principal amount of the Advances owing to each Lender, including Agent Loans and
Agent Advances owing to Administrative Agent or Collateral Agent, as applicable,
and the interests therein of each Lender, from time to time. In addition, each
Lender is authorized, at such Lender's option, to note the date and amount of
each payment or prepayment of principal of such Lender's Advances in its books
and records, including computer records, such books and records constituting
rebuttably presumptive evidence, absent manifest error, of the accuracy of the
information contained therein.
(j) Lenders' Failure to Perform. All Advances (other than
Agent Loans and Agent Advances) shall be made by Lenders simultaneously and in
accordance with their Pro Rata Shares. It is understood that (i) no Lender shall
be responsible for any failure by any other Lender to perform its obligation to
make any Advances hereunder, nor shall any Commitment of any Lender be increased
or decreased as a result of any failure by any other Lender to perform its
obligation to make any Advances hereunder, and (ii) no failure by any Lender to
perform its obligation to make any Advances hereunder shall excuse any other
Lender from its obligation to make any Advances hereunder.
(k) Overadvances. (i) Administrative Agent may make or may
cause Collateral Agent to make voluntary Overadvances without the written
consent of Required Lenders for amounts charged to the Loan Account for
interest, fees or Lender Group Expenses pursuant to Section 2.1(g)(i)(2)(C).
Administrative Agent may or may cause Collateral Agent to, but such Agents shall
not be obligated to, knowingly and intentionally continue to make Advances to
Borrower if, at any time, (1) either (A) the outstanding Revolving Facility
Usage would not exceed the Borrowing Base by more than $5,000,000 or (B) (y) the
outstanding Revolving Facility Usage would not exceed the Borrowing Base by more
than the amount proposed by Administrative Agent and agreed to by Required
Lenders, and (z) such Advances are made pursuant to a plan (proposed by
Administrative Agent and agreed to by Required Lenders) for the elimination of
the outstanding Revolving Facility Usage in excess of the Borrowing Base, and
(2) the outstanding Revolving Facility Usage (except for and excluding amounts
charged to the Loan Account for interest, fees or Lender Group Expenses) does
not exceed the Maximum Revolving Amount. The foregoing provisions are for the
sole and exclusive benefit of Agents and Lenders and are not intended to benefit
Borrower or any other Company in any way. The Agent Advances and Agent Loans, as
applicable, that are made pursuant to this Section 2.1(k) shall be subject to
the same terms and conditions as any other Agent Loan or Agent Advance, except
that the rate of interest applicable thereto shall be the rates set forth in
Section 2.6(c)(i) without regard to the presence or absence of a Default or
Event of Default; provided, that Required Lenders may, at any time, revoke
Administrative Agent's authorization contained in this Section 2.1(k) to make
Overadvances (except for and excluding amounts charged to the Loan Account for
interest, fees, or Lender Group Expenses), any such revocation to be in writing
and to become effective upon Administrative Agent's receipt thereof; provided
further, however, that the making of such Overadvances shall not constitute a
waiver of such Event of Default arising therefrom.
(ii) In the event Administrative Agent obtains actual
knowledge that Revolving Facility Usage exceeds the amount permitted by the
preceding paragraph, regardless of the amount of or reason for such excess,
Administrative Agent shall notify Lenders as soon as practicable (and prior to
making or causing Collateral Agent to make any (or any further) intentional
Overadvances (except for and excluding amounts charged to the Loan Account for
interest, fees or Lender Group Expenses) unless Administrative Agent determines
that prior notice would result in imminent harm to the Collateral or its value),
and Lenders thereupon shall, together with Administrative Agent, jointly
determine the terms of arrangements that shall be implemented with Borrower
intended to reduce, within a reasonable time, the outstanding principal amount
of the Advances to Borrower to an amount permitted by the preceding paragraph.
In the event any Lender disagrees over the terms of reduction and/or
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repayment of any Overadvance, the terms of reduction and/or repayment thereof
shall be implemented according to the determination of Required Lenders.
(iii) Each Lender shall be obligated to settle with
Collateral Agent as provided in Section 2.1(h) for the amount of such Lender's
Pro Rata Share of any unintentional Overadvances reported to such Lender, any
intentional Overadvances made as permitted under this Section 2.1(k), and any
Overadvances resulting from the charging to the Loan Account of interest, fees
or Lender Group Expenses.
2.2 Letters of Credit.
(a) Subject to the terms and conditions of this Agreement,
Administrative Agent agrees to cause Collateral Agent on behalf of the Lenders,
to issue Letters of Credit for the account of Borrower (each an "L/C") or to
issue guarantees of payment (each such guaranty, an "L/C Guaranty") with respect
to letters of credit issued by an issuing bank for the account of Borrower. Each
letter of credit issued for the account of Borrower and which is the subject of
an L/C Guaranty shall be issued by an Acceptable Bank. Administrative Agent and
Collateral Agent shall have no obligation to issue or cause the issuance of an
L/C or L/C Guaranty if any of the following would result:
(i) the aggregate amount of all undrawn and
unreimbursed Letters of Credit, would exceed the Borrowing Base less
the amount of outstanding Advances; or
(ii) the aggregate amount of all undrawn or
unreimbursed Letters of Credit would exceed the lower of: (x) the
Maximum Revolving Amount less the amount of outstanding Advances less
reserves established under Section 2.1(b) or Section 10; or (y)
$35,000,000; or
(iii) the outstanding Obligations would exceed the
Maximum Revolving Amount.
Borrower expressly understands and agrees that Collateral Agent shall have no
obligation to arrange for the issuance by issuing banks of the letters of credit
that are to be the subject of L/C Guarantees except as requested by
Administrative Agent and in compliance with the terms and conditions of this
Agreement. Borrower and the Lender Group acknowledge and agree that certain of
the letters of credit that are to be the subject of L/C Guarantees may be
outstanding on the Closing Date. Each Letter of Credit shall expire on a date
(the "Expiry Date") that is (i) no later than 15 days prior to the date on which
this Agreement is scheduled to terminate under Section 3.4 or (ii) one (1) year
from the date of issuance, whichever is earlier, (unless such Letter of Credit
shall have been collateralized on or prior to such Expiry Date in accordance
with Section 2.2(e)) and all such Letters of Credit shall be in form and
substance acceptable to Agents in their sole discretion. If Collateral Agent is
obligated to advance funds under a Letter of Credit, Borrower immediately shall
reimburse such amount to Collateral Agent and, in the absence of such
reimbursement, the amount so advanced immediately and automatically shall be
deemed to be an Advance and, thereafter, shall bear interest at the rate then
applicable to Advances under Section 2.6. Subject to the provisions of Section
2.1(k), Administrative Agent shall instruct Collateral Agent not to issue any
Letter of Credit, and no Lender shall have the obligation to participate in any
Letter of Credit, if Administrative Agent shall have received written notice
from any Lender that (A) one or more of the applicable conditions precedent set
forth in Section 3.1 or 3.2 will not be satisfied on the requested issuance date
for the applicable Letter of Credit, or (B) the requested Letter of Credit would
exceed the Availability on the date of issuance. Administrative Agent and
Collateral Agent shall not otherwise be required to determine whether the
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applicable conditions precedent set forth in Sections 3.1 or 3.2 have been
satisfied on the date of issuance applicable thereto prior to issuing any Letter
of Credit.
(b) Borrower hereby agrees to indemnify, save, defend, and
hold Agents and Lender Group harmless from any loss, cost, expense, or
liability, including payments made by Agents and Lender Group, expenses, and
reasonable attorneys fees incurred by Agents and Lender Group arising out of or
in connection with any Letter of Credit. Borrower agrees to be bound by the
issuing bank's regulations and interpretations of any letters of credit
guarantied by an L/C Guaranty and by Collateral Agent's interpretation of any
L/C, even though this interpretation may be different from Borrower's own, and
Borrower understands and agrees that Agents and Lender Group shall not be liable
for any error, negligence, or mistake, whether of omission or commission, in
following Borrower's instructions or those contained in the letter of credit or
L/C (as applicable) or any modifications, amendments, or supplements thereto.
Borrower understands that the L/C Guarantees may require Agents and/or Lender
Group to indemnify the issuing bank for certain costs or liabilities arising out
of claims by Borrower against such issuing bank. Borrower hereby agrees to
indemnify, save, defend, and hold Agents and Lender Group harmless with respect
to any loss, cost, expense (including reasonable attorneys fees), or liability
incurred by Agents and Lender Group under any L/C Guaranty as a result of
Agents' and/or Lender Group's indemnification of any such issuing bank.
(c) Borrower hereby authorizes and directs any bank that
issues a letter of credit guaranteed by an L/C Guaranty to deliver to Collateral
Agent all instruments, documents, and other writings and property received by
the issuing bank pursuant to such letter of credit, and to accept and rely upon
Collateral Agent's instructions and agreements with respect to all matters
arising in connection with such letter of credit and the related application.
Borrower may or may not be the "applicant" or "account party" with respect to
such letter of credit.
(d) Any and all charges, commissions, fees, and costs
incurred by Agents or Lender Group relating to the letters of credit guaranteed
by an L/C Guaranty shall be considered Lender Group Expenses for purposes of
this Agreement and immediately shall be reimbursable by Borrower to Collateral
Agent.
(e) Immediately upon the termination of this Agreement,
Borrower agrees to either (i) provide cash collateral to be held by Collateral
Agent in an amount equal to 105% of the maximum amount of Agents' and Lender
Group's obligations under all Letters of Credit, or (ii) cause to be delivered
to the Collateral Agent (x) releases of all of Lender Group's obligations under
outstanding Letters of Credit and/or (y) one or more letters of credit, in form
satisfactory to the Agents, securing Agents' and Lender Group's Obligations
under all Letters of Credit. At Administrative Agent's discretion, any proceeds
of Collateral received by Agents or Lender Group after the occurrence and during
the continuation of an Event of Default may be held as the cash collateral
required by this Section 2.2(e).
(f) If by reason of (i) any change in any applicable law,
treaty, rule, or regulation or any change in the interpretation or application
by any Governmental Authority of any such applicable law, treaty, rule, or
regulation, or (ii) compliance by the Agents, issuing bank or Lender Group with
any direction, request, or requirement (irrespective of whether having the force
of law) of any Governmental Authority or monetary authority including, without
limitation, Regulation D of the Board of Governors of the Federal Reserve System
as from time to time in effect (and any successor thereto):
(A) any reserve, deposit, or similar requirement is or
shall be imposed or modified in respect of any Letters of Credit issued
hereunder, or
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(B) there shall be imposed on the Agents, issuing bank
or Lender Group any other condition regarding any letter of credit, L/C or L/C
Guaranty, as applicable, issued pursuant hereto;
and the result of the foregoing is to increase, directly or indirectly, the cost
to the Agents, issuing bank or Lender Group of issuing, making, guaranteeing, or
maintaining any letter of credit, L/C or L/C Guaranty, as applicable, or to
reduce the amount receivable in respect thereof by such Agent, issuing bank or
Lender Group, then, and in any such case, Administrative Agent may, at any time
within a reasonable period after the additional cost is incurred or the amount
received is reduced, notify Borrower, and Borrower shall pay on demand such
amounts as the issuing bank or Administrative Agent may specify to be necessary
to compensate the Agents, issuing bank or Lender Group for such additional cost
or reduced receipt, together with interest on such amount from the date of such
demand until payment in full thereof at the rate set forth in Section 2.6(a) or
(c)(i), as applicable. The determination by the issuing bank or Administrative
Agent, as the case may be, of any amount due pursuant to this Section 2.2(f), as
set forth in a certificate setting forth the calculation thereof in reasonable
detail, shall, in the absence of manifest or demonstrable error, be final and
conclusive and binding on all of the parties hereto.
2.3 Participations in Letters of Credit.
(a) Purchase of Participations. Immediately upon
issuance of any Letter of Credit in accordance with Section 2.2, each Lender
shall be deemed to have irrevocably and unconditionally purchased and received
without recourse or warranty, an undivided interest and participation in the
Letter of Credit issued by Collateral Agent and any other credit support or
enhancement provided through Collateral Agent in connection therewith, equal to
such Lender's Pro Rata Share of the face amount of such Letter of Credit
(including, without limitation, all obligations of Collateral Agent with respect
thereto, and any security therefor or guaranty pertaining thereto).
(b) Documentation. Upon the request of any Lender,
Collateral Agent shall furnish to such Lender copies of any letter of credit,
guaranty, security agreement or reimbursement agreement executed in connection
therewith, application for any letter of credit and credit support or
enhancement provided through Collateral Agent in connection with the issuance of
any Letter of Credit, and such other documentation as may reasonably by
requested by such Lender.
(c) Obligations Irrevocable. The obligations of each
Lender to make payments to Collateral Agent with respect to any Letter of Credit
or other credit support or enhancement provided through Collateral Agent with
respect to a Letter of Credit, and the obligations of Borrower to make payments
to Collateral Agent, for the account of Lenders, shall be irrevocable, not
subject to any qualification or exception whatsoever, including, without
limitation, any of the following circumstances:
(i) any lack of validity or enforceability of
this Agreement or any of the other Loan Documents;
(ii) the existence of any claim, setoff, defense,
or other right which Borrower may have at any time against a beneficiary named
in a letter of credit or L/C or any transferee of any letter of credit or L/C
(or any Person for whom any such transferee may be acting), any Lender, Agent or
issuing bank, or any other Person, whether in connection with this Agreement,
any Letter of Credit, the transactions contemplated herein or any unrelated
transactions (including any underlying transactions between such Borrower or any
other Person and the beneficiary named in any letter of credit or L/C);
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(iii) any draft, certificate, or any other document
presented under the Letter of Credit proving to be forged, fraudulent, invalid,
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security
for the performance or observance of any of the terms of any of the Loan
Documents; or
(v) the occurrence of any Default or Event of
Default.
2.4 Payments.
(a) Payments by Borrower.
(i) All payments to be made by Borrower shall be
made without set-off, recoupment, deduction, or counterclaim. Except as
otherwise expressly provided herein, all payments by Borrower shall be made to
Collateral Agent for the account of Lenders or Agents, as the case may be, at
Collateral Agent's address set forth in a written notice delivered to Borrower,
and shall be made in immediately available funds, no later than 2:00 p.m. (New
York time) on the date specified herein. Any payment received by Collateral
Agent later than 2:00 p.m. (New York time), at the option of Collateral Agent,
shall be deemed to have been received on the following Business Day and any
applicable interest or fee shall continue to accrue until such following
Business Day.
(ii) Whenever any payment is due on a day other
than a Business Day, such payment shall be made on the following Business Day,
and such extension of time shall in such case be included in the computation of
interest or fees, as the case may be.
(iii) Unless Administrative Agent and Collateral
Agent receive notice from Borrower prior to the date on which any payment is due
to Lenders that Borrower will not make such payment in full as and when
required, Administrative Agent and Collateral Agent may assume that Borrower has
made such payment in full to Collateral Agent on such date in immediately
available funds and Administrative Agent may or may cause Collateral Agent to
(but shall not be so required), in reliance upon such assumption, distribute to
each Lender on such due date an amount equal to the amount then due such Lender.
If and to the extent Borrower has not made such payment in full to Collateral
Agent, each Lender shall repay to Collateral Agent on demand such amount
distributed to such Lender, together with interest thereon at the Reference Rate
for each day from the date such amount is distributed to such Lender until the
date repaid.
(iv) Immediately upon the receipt by the Borrower
or any of its Subsidiaries of any Net Proceeds from the issuance, sale,
assignment, transfer or other disposition of any capital stock, debt securities
or assets of Borrower or any of its Subsidiaries, Borrower shall make a
prepayment of any outstanding Advances or other outstanding Obligations in an
amount equal to the amount of such Net Proceeds.
(v) Immediately upon the receipt by any Company
of any insurance proceeds, Borrower shall prepay outstanding Advances or other
outstanding Obligations in an amount equal to the insurance proceeds received by
such Company, except to the extent such insurance proceeds are required by a
binding agreement to be paid to a third Person. Such insurance proceeds shall be
applied to the outstanding Advances or other outstanding Obligations.
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(b) Apportionment and Application of Payments.
Aggregate principal and interest payments shall be apportioned ratably among
Lenders (according to the unpaid principal balance of the Advances to which such
payments relate held by each Lender) and payments of the fees (other than fees
designated for an Agent's separate account) shall, as applicable, be apportioned
ratably among Lenders. All payments shall be remitted to Collateral Agent and
all such payments not relating to principal or interest on specific Advances, or
not constituting payment of specific fees and all proceeds of Collateral
received by Collateral Agent, shall be applied, first, to pay any fees or Lender
Group Expenses then due to Agents from Borrower; second, to pay any fees or
Lender Group Expenses then due to Lenders from Borrower; third, to pay interest
due in respect of all Agent Loans and Agent Advances; fourth, to pay interest
due in respect of all Advances (other than Agent Loans and Agent Advances);
fifth, to pay or prepay principal of Agent Loans and Agent Advances; sixth,
ratably to pay principal of the Advances (other than Agent Loans and Agent
Advances) and unreimbursed obligations in respect of Letters of Credit, which
may include the cash collateralization of Obligations with respect to undrawn
Letters of Credit; and seventh, ratably to pay any other Obligations due to
Agents or any Lender by Borrower. Collateral Agent shall promptly distribute to
each Lender, pursuant to the applicable wire transfer instructions received from
each Lender in writing, such funds as it may be entitled to receive, subject to
a Settlement delay as provided for in Section 2.1(h).
2.5 Overadvances. If, at any time or for any reason, the amount
of Obligations owed by Borrower to Lender Group pursuant to Sections 2.1 and 2.2
is greater than either the Dollar or percentage limitations set forth in
Sections 2.1 or 2.2 (an "Overadvance"), Borrower immediately shall pay to the
Collateral Agent, in cash, the amount of such excess. Such payment shall be used
by Collateral Agent, first, to eliminate such Overadvance, and second, if a
Default or Event of Default has occurred and is continuing, to repay all
Advances outstanding under Section 2.1 and, thereafter, to be held by the
Collateral Agent as cash collateral to secure Borrower's obligation to repay the
Collateral Agent for all amounts paid pursuant to Letters of Credit. If,
following elimination of such Overadvance, no Default or Event of Default has
occurred and is continuing, any remaining amount shall, upon the written request
of Borrower, be transferred by Collateral Agent to the Designated Account.
2.6 Interest and Letter of Credit Fees: Rates, Payments, and
Calculations.
(a) Interest Rate. Except as provided in clause (b) below,
all Obligations (except for undrawn Letters of Credit), shall bear interest at a
per annum rate equal to the Reference Rate plus the margin (the "Margin") in
effect from time to time in accordance with the chart set forth below. For
purposes of the chart set forth below, "Average Exposure" means the sum of (A)
the average daily balance of Advances that were outstanding during the
immediately preceding month plus (B) the average daily balance of the undrawn
Letters of Credit that were outstanding during the immediately preceding month;
provided, however, that for the period from the Closing Date to, but not
including, the first day of the next succeeding calendar month, the "Average
Exposure" for such period means the sum of (A) the average daily balance of
Advances that were outstanding during such period plus (B) the average daily
balance of the undrawn Letters of Credit that were outstanding during such
period. The Average Exposure shall be calculated by the Collateral Agent on the
first day of each calendar month and shall be conclusive absent manifest error.
As of the Closing Date and through and including the date of termination of this
Agreement, the Margin shall be the applicable per annum rate set forth in the
table below:
<TABLE>
<CAPTION>
----------------------------------- ---------------------------------------
Average Exposure % Margin over Reference Rate
----------------------------------- ---------------------------------------
<S> <C>
less than or equal to $30,000,000 1.75
----------------------------------- ---------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
------------------------------------ ---------------------------------------
Average Exposure % Margin over Reference Rate
------------------------------------ ---------------------------------------
<S> <C>
greater than $30,000,000 2.50
less than or equal to $40,000,000
------------------------------------ ---------------------------------------
greater than $40,000,000 3.00
------------------------------------ ---------------------------------------
</TABLE>
(b) Letter of Credit Fee. Borrower shall pay the Collateral
Agent, for the ratable benefit of the Lender Group, a fee (in addition to the
charges, commissions, fees, and costs described in Section 2.2(d)) equal to
2.75% per annum times the aggregate undrawn amount of all outstanding Letters of
Credit payable monthly in arrears on the first day of each month.
(c) Default Rate. Upon the occurrence and during the
continuation of an Event of Default, (i) all Obligations (except for undrawn
Letters of Credit), shall bear interest at a per annum rate equal to three (3)
percentage points above the rate otherwise in effect pursuant to Section 2.6(a),
and (ii) the Letter of Credit fee provided in Section 2.6(b) shall be increased
to 5.75% per annum times the amount of the aggregate undrawn amount of all
outstanding Letters of Credit.
(d) Minimum Interest. In no event shall the rate of interest
chargeable hereunder for any day be less than 9.25% per annum. To the extent
that interest accrued hereunder at the rate set forth herein would be less than
the foregoing minimum daily rate, the interest rate chargeable hereunder for
such day automatically shall be deemed increased to the minimum rate. To the
extent that interest accrued hereunder at the rate set forth herein (including
the minimum interest rate) would yield less than the foregoing minimum amount,
the interest rate chargeable hereunder for the period in question automatically
shall be deemed increased to that rate that would result in the minimum amount
of interest being accrued and payable hereunder.
(e) Payments. Interest and Letter of Credit fees payable
hereunder shall be due and payable, in arrears, on the first day of each month
during the term hereof. Borrower hereby authorizes the Administrative Agent, and
Administrative Agent shall, cause the Collateral Agent, without prior notice to
Borrower, to charge such interest and Letter of Credit fees, all Lender Group
Expenses (as and when incurred), the charges, commissions, fees, and costs
provided for in Section 2.2(d) (as and when accrued or incurred), the fees and
charges provided for in Section 2.11 (as and when accrued or incurred), and all
payments due under any Loan Document to Borrower's Loan Account, which amounts
thereafter shall accrue interest at the rate then applicable to Advances
hereunder; provided, however, that, upon prior written notice to Borrower,
Administrative Agent may, in its sole discretion, cause Collateral Agent to
discontinue charging interest, Lender Group Expenses and the fees and charges
referred to above to Borrower's Loan Account at any time. Any interest not paid
when due shall be compounded and shall thereafter accrue interest at the rate
then applicable to Advances hereunder.
(f) Computation. The Reference Rate as of the date of this
Agreement is 7.75% per annum. In the event the Reference Rate is changed from
time to time hereafter, the applicable rate of interest hereunder automatically
and immediately shall be increased or decreased by an amount equal to such
change in the Reference Rate. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed.
(g) Intent to Limit Charges to Maximum Lawful Rate. In no
event shall the interest rate or rates payable under this Agreement, plus any
other amounts paid in connection herewith, exceed the highest rate permissible
under any law that a court of competent jurisdiction shall, in a final
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<PAGE>
determination, deem applicable. Borrower and Lender Group, in executing and
delivering this Agreement, intend legally to agree upon the rate or rates of
interest and manner of payment stated within it; provided, however, that,
anything contained herein to the contrary notwithstanding, if said rate or rates
of interest or manner of payment exceeds the maximum allowable under applicable
law, then, ipso facto as of the date of this Agreement, Borrower is and shall be
liable only for the payment of such maximum as allowed by law, and payment
received from Borrower in excess of such legal maximum, whenever received, shall
be applied to reduce the principal balance of the Obligations to the extent of
such excess.
2.7 Collection of Accounts. Except for (i) Collections of the
Subsidiary Guarantors listed on Schedule 2.7 that are deposited in the lockboxes
or accounts corresponding to such Subsidiary Guarantors listed on Schedule 2.7,
which lockboxes and accounts shall not in the aggregate have funds on deposit in
excess of $500,000 at any time and (ii) ICF Kaiser Netherlands B.V. and its
Accounts, General Intangibles and Negotiable Collateral and the Collections
arising therefrom, the Companies shall at all times maintain lockboxes (the
"Lockboxes") and, promptly, and in any event within three (3) Business Days
after the Closing Date, shall instruct all Account Debtors (or with respect to
Accounts existing on the Closing Date, make other arrangements satisfactory to
the Administrative Agent) with respect to the Accounts, General Intangibles, and
Negotiable Collateral of the Companies to remit all Collections in respect
thereof to such Lockboxes, provided that ICF Kaiser Netherlands B.V. transfers
to such Lockboxes the proceeds of all of its Collections that are not used to
pay customary expenses, consistent with past practices, in connection with the
operation of its businesses outside of the United States. The Companies,
Collateral Agent, and the Lockbox Banks shall enter into the Lockbox Agreements
satisfactory to the Agents, which among other things shall provide for the
opening of a Lockbox Account for the deposit of Collections at a Lockbox Bank.
The Companies agree that all Collections and other amounts received by the
Companies from any Account Debtor or any other source immediately upon receipt
shall be deposited into a Lockbox Account. No Lockbox Agreement or arrangement
contemplated thereby shall be modified by any Company without the prior written
consent of the Agents. Upon the terms and subject to the conditions set forth in
the Lockbox Agreements, all amounts received in each Lockbox Account shall be
wired each Business Day into an account (the "Collateral Agent's Account")
maintained by Collateral Agent at a depositary selected by the Collateral Agent.
2.8 Crediting Payments; Application of Collections. The
receipt of any Collections by the Collateral Agent (whether from transfers to
the Collateral Agent by the Lockbox Banks pursuant to the Lockbox Agreements or
otherwise) shall be applied to reduce the Obligations outstanding under Section
2.1 if such Collection item is a wire transfer of immediately available federal
funds and is made to the Collateral Agent's Account, or at such time as such
Collection is otherwise immediately available funds. Anything to the contrary
contained herein notwithstanding, any Collection item shall be deemed received
by the Collateral Agent only if it is immediately available funds received into
the Collateral Agent's Account on a Business Day on or before 2:00 p.m., New
York time. If any Collection item is received into the Collateral Agent's
Account on a non-Business Day or after 2:00 p.m. New York time on a Business
Day, it shall be deemed to have been received by the Collateral Agent as of the
opening of business on the immediately following Business Day.
2.9 Designated Account. The Agents on behalf of the Lender
Group are authorized to make the Advances and issue the Letters of Credit under
this Agreement based upon telephonic or other instructions received from anyone
purporting to be an Authorized Person, or without instructions if pursuant to
Sections 2.6 and 2.10. Borrower agrees to establish and maintain the Designated
Account with the Designated Account Bank for the purpose of receiving the
proceeds of the Advances made hereunder. Unless otherwise agreed by the Agents
and Borrower, any Advance requested by Borrower and made hereunder shall be made
to the Designated Account.
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<PAGE>
2.10 Maintenance of Loan Account; Statements of Obligations.
Collateral Agent on behalf of Administrative Agent and Lender Group shall
maintain an account on its books in the name of Borrower (the "Loan Account") on
which Borrower will be charged with all Advances made by the Lender Group to
Borrower or for Borrower's account (including all Agent Loans and Agent
Advances), including accrued interest, fees, the Lender Group Expenses, and any
other payment Obligations of Borrower. In accordance with Section 2.8, the Loan
Account will be credited with all payments received by Collateral Agent from
Borrower or for Borrower's account, including all amounts received in the
Collateral Agent's Account from any Lockbox Bank. Collateral Agent on behalf of
Administrative Agent and Lender Group shall render statements regarding the Loan
Account to Borrower, including principal, interest, fees, and including an
itemization of all charges and expenses constituting Lender Group Expenses
owing, and such statements shall be conclusively presumed to be correct and
accurate and constitute an account stated between Borrower and Lender Group
unless, within thirty (30) days after receipt thereof by Borrower, Borrower
shall deliver to the Agents written objection thereto describing the error or
errors contained in any such statements.
2.11 Fees. Borrower shall pay to Collateral Agent for the
benefit of Lender Group (to be distributed among Lender Group as set forth in a
separate writing among them) the following fees:
(a) Annual Fee. On the Closing Date and on each anniversary
of the Closing Date, a fee of $500,000.
(b) Unused Line Fee. On the first day of each month during
the term of this Agreement, an unused line fee in an amount equal to .375% per
annum times the Average Unused Portion of the Maximum Revolving Amount.
(c) Fee. On the six month anniversary of the Closing Date, a
fee in an amount equal to .25% of the Maximum Revolving Amount, and on the
eighteenth month anniversary of the Closing Date, a fee in an amount equal to
.75% of the Maximum Revolving Amount.
(d) Financial Examination, Documentation, and Appraisal
Fees. Upon receipt of an invoice therefor, (A) an audit or examination fee of
$650 per day per examiner, plus out-of-pocket expenses, for each financial
analysis and examination (i.e., audits) of any Company performed by personnel
employed by one or both Agents; (B) the cost of each third party appraisal
required by Section 4.6 plus out-of-pocket expenses for each such appraisal;
and, (C) the actual charges paid or incurred by the Agents if they elect to
employ the services of one or more third Persons to perform such financial
analyses and examinations (i.e., audits) of any Company; and
(e) Servicing Fee. On the first day of each month during the
term of this Agreement, and thereafter so long as any Obligations are
outstanding, a servicing fee in an amount equal to $10,000.
Each of the foregoing fees is non-refundable and shall be
earned and due and payable on the dates indicated above, provided that the audit
or examination fee described in Section 2.11(d)(A) shall be earned as and when
an audit or examination specific to the Companies is performed and the other
charges described in Section 2.11(d) shall be earned when incurred.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to the Initial Advance and Letters
of Credit. The obligation of Lender Group to make the initial Advance or to
issue the initial Letter of Credit is subject to the
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<PAGE>
fulfillment, to the satisfaction of Lender Group and its counsel, of each of the
following conditions on or before the Closing Date:
(a) the Closing Date shall occur on or before December 30,
1998;
(b) Administrative Agent shall be satisfied that its
financing statements have been accepted for filing in each applicable filing
office;
(c) Administrative Agent shall have received each of the
following documents, duly executed and delivered, and each such document shall
be in full force and effect:
i. the Lockbox Agreements;
ii. the Disbursement Letter;
iii. the Pay-Off Letter, together with UCC
termination statements and other
documentation evidencing the termination by
Existing Lender of its Liens in and to the
properties and assets of the Companies;
iv. the Trademark Security Agreement;
v. the Pledge Agreements and the Dutch
Receivables Pledge;
vi. the Contribution Agreement; and
vii. Assignment of Claims Act Notices for each
Account existing as of the Closing Date,
with respect to which the Account Debtor is
(A) the United States, or any department,
agency or instrumentality thereof, or (B) a
state or city Governmental Authority, except
to the extent such Account is not deemed an
ineligible Account by reason of clause
(ii)(A) or (ii)(C) of paragraph (e) of the
definition of "Eligible Accounts" set forth
in Section 1.1;
(d) Administrative Agent shall have received a certificate
from the Secretary of each Company attesting to the resolutions of such
Company's Board of Directors authorizing its execution, delivery, and
performance of this Agreement and the other Loan Documents to which such Company
is a party and authorizing specific officers of such Company to execute the
same;
(e) Administrative Agent shall have received copies of each
Company's Governing Documents, as amended, modified, or supplemented to the
Closing Date, certified by the Secretary of such Company;
(f) Administrative Agent shall have received a certificate of
status with respect to each Company, dated within thirty (30) days of the
Closing Date, such certificate to be issued by the appropriate officer of the
jurisdiction of organization of such Company, which certificate shall indicate
that such Company is in good standing in such jurisdiction;
(g) Administrative Agent shall have received certificates of
status with respect to each Company, each dated within thirty (30) days of the
Closing Date, such certificates to be issued by the appropriate officer of the
jurisdictions in which the failure of such Company to be duly qualified or
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<PAGE>
licensed would constitute a Material Adverse Change, which certificates shall
indicate that such Company is in good standing in such jurisdictions;
(h) Administrative Agent shall have received a certificate of
insurance, together with the endorsements thereto, as are required by Section
6.10, the form and substance of which shall be satisfactory to Administrative
Agent and its counsel;
(i) Administrative Agent shall have received such Collateral
Access Agreements from lessors, warehousemen, bailees, and other third persons
as Administrative Agent may require;
(j) Administrative Agent shall have received an opinion of
the Companies' counsel in form and substance reasonably satisfactory to
Administrative Agent;
(k) Administrative Agent shall have received satisfactory
evidence that all tax returns required to be filed by any Company have been
timely filed and all taxes upon the Companies or their respective properties,
assets, income, and franchises (including real property taxes and payroll taxes)
have been paid prior to delinquency, except such taxes that are the subject of a
Permitted Protest;
(l) Administrative Agent shall be satisfied as to the
implementation by Borrower of a cash management system reasonably satisfactory
to Administrative Agent, which cash management system shall include, among other
things, the procedures provided for in Sections 2.7 and 2.8;
(m) there shall be no pending claim, investigation or
litigation with respect to any Company by any state or federal government entity
except as disclosed on Schedule 5.10 and any claim, investigation or litigation
disclosed on such schedule shall be satisfactory to Administrative Agent and
Lenders in all respects;
(n) Intentionally Omitted;
(o) Administrative Agent shall have received an enterprise
valuation of Borrower and its Subsidiaries prepared by Ernst & Young LLP at the
request of Administrative Agent, satisfactory in form and substance to
Administrative Agent;
(p) Administrative Agent shall have received a copy of the
takeover audit of Borrower and its Subsidiaries, satisfactory in form and
substance to Administrative Agent;
(q) Administrative Agent shall have received a Company
prepared balance sheet, income statement, and statement of cash flow covering
the operations of the Consolidated Group on a consolidated and consolidating
basis for the month of October, 1998;
(r) Administrative Agent shall have received a complete copy
of each Material Contract, including, without limitation, each Indenture,
accompanied by a certificate of the chief executive officer, chief financial
officer or Secretary of Borrower as to the completeness thereof;
(s) Borrower shall have a minimum of $5,000,000 of
unrestricted cash balances and Availability after the repayment of all amounts
owing to the Existing Lender and all fees and expenses incurred in connection
with the transactions contemplated by this Agreement and based upon a Borrowing
Base calculated using information as of a date no earlier than November 30,
1998,
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<PAGE>
rolled forward to a date acceptable to the Agents and provided that accounts
payable of the Companies are at a level and in a condition satisfactory to the
Administrative Agent; and
(t) all other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered,
executed, or recorded and shall be in form and substance satisfactory to
Administrative Agent and its counsel and the fees and disbursements of Schulte
Roth & Zabel LLP and all other accrued and unpaid Lender Group Expenses shall be
paid if invoiced as of the Closing Date.
3.2 Conditions Precedent to all Advances and all Letters of Credit.
The following shall be conditions precedent to all Advances and all Letters of
Credit hereunder:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all respects
on and as of the date of such extension of credit, as though made on and as of
such date (except to the extent that such representations and warranties relate
solely to or are expressly made as of an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof; and
(c) no injunction, writ, restraining order, or other order of
any nature prohibiting, directly or indirectly, the extending of such credit
shall have been issued and remain in force by any Governmental Authority against
any Company, any Agent, the Lender Group, or any of their Affiliates.
3.3 Condition Subsequent. As a condition subsequent to the initial
closing hereunder, Borrower shall perform or cause to be performed the following
(the failure by Borrower to so perform or cause to be performed constituting an
Event of Default):
(a) within 30 days of the Closing Date, deliver to the
Administrative Agent (i) the certified copies of the policies of insurance,
together with the endorsements thereto, as are required by Section 6.10, the
form and substance of which shall be satisfactory to Administrative Agent and
its counsel, and (ii) a one-year monthly cash flow budget, by Material Customer
Contract, prepared by Borrower and Ernst & Young LLP, satisfactory in form and
substance to Administrative Agent and the Lenders;
(b) use its best efforts to deliver, within 45 days of the
Closing Date, to the Administrative Agent, evidence, satisfactory to the
Administrative Agent, that the Liens identified on Schedule 3.3(b) (the
"Specified Liens") have been released of record; and
(c) on or before February 26, 1999, replace all existing bank
accounts of the Companies at First Union National Bank (including, without
limitation, the Designated Account) to accounts established at any other bank;
provided that the Companies may maintain bank accounts at First Union National
Bank to the extent necessary to provide for the payment of checks outstanding in
the ordinary course of business.
3.4 Term. This Agreement shall become effective upon the execution
and delivery hereof by Borrower, the Subsidiary Guarantors, each of the Lenders
and each of the Agents, and shall continue in full force and effect for a term
ending on the date (the "Maturity Date") that is two (2) years from the Closing
Date, unless sooner terminated pursuant to the terms hereof. The foregoing
notwithstanding, Administrative Agent (on behalf of Lender Group) shall have the
right to terminate Lender
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<PAGE>
Group's obligations under this Agreement immediately and without notice upon the
occurrence and during the continuation of an Event of Default.
3.5 Effect of Termination. On the date of termination of this
Agreement, all Obligations (including contingent reimbursement obligations of
Borrower with respect to any outstanding Letters of Credit, except as permitted
by clause (x) or (y) in Section 2.2(e)(ii)) immediately shall become due and
payable without notice or demand. No termination of this Agreement, however,
shall relieve or discharge the Companies of their duties, Obligations, or
covenants hereunder, and Lender Group's continuing security interests in the
Collateral shall remain in effect until all Obligations have been fully and
finally discharged and Lender Group's obligation to provide additional credit
hereunder is terminated.
3.6 Early Termination by Borrower. Borrower has the option, at any
time upon thirty (30) days' prior written notice to Administrative Agent, to
terminate this Agreement by paying to Collateral Agent (for the ratable benefit
of Lender Group), in cash, the Obligations (including an amount equal to 105% of
the undrawn amount of the Letters of Credit, unless final documentation has been
executed with respect to the arrangements permitted under clauses (x) and (y) of
Section 2.2(e)(ii)), in full, without premium or penalty.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Each of the Companies hereby grants
to Administrative Agent for the benefit of Lender Group a continuing security
interest in all currently existing and hereafter acquired or arising Personal
Property Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by the Companies of their
covenants and duties under the Loan Documents. The security interests of the
Administrative Agent for the benefit of Lender Group in the Personal Property
Collateral shall attach to all Personal Property Collateral without further act
on the part of the Agents, Lender Group or any Company. Anything contained in
this Agreement or any other Loan Document to the contrary notwithstanding, no
Company has authority, express or implied, to dispose of any item or portion of
the Personal Property Collateral, except as expressly permitted under Section
7.4.
4.2 Negotiable Collateral. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower shall notify Administrative Agent and, immediately upon the request of
Administrative Agent, shall cause such Negotiable Collateral to be endorsed to
Administrative Agent and to be delivered into Administrative Agent's physical
possession.
4.3 Collection of Accounts, General Intangibles, and Negotiable
Collateral. At any time after the occurrence and during the continuance of an
Event of Default, the Agents or their designees may (a) notify customers or
Account Debtors of the Companies that the Accounts, General Intangibles, or
Negotiable Collateral have been assigned to Administrative Agent or that
Administrative Agent for the benefit of Lender Group has a security interest
therein, and (b) collect the Accounts, General Intangibles, and Negotiable
Collateral directly and charge the collection costs and expenses to the Loan
Account. Each Company agrees that in such circumstances it will hold in trust
for Lender Group, as Administrative Agent's trustee, any Collections that it
receives and immediately will deliver said Collections to Administrative Agent
in their original form as received by such Company.
4.4 Delivery of Additional Documentation Required. At any time upon
the request of either Agent, each Company shall execute and deliver to
Administrative Agent all financing statements, continuation financing
statements, mortgages, fixture filings, security agreements, pledges,
assignments, endorsements of certificates of title, applications for title,
affidavits, reports, notices, schedules of accounts,
34
<PAGE>
letters of authority, and all other documents that such Agent reasonably may
request, in form satisfactory to such Agent, to perfect and continue perfected
Administrative Agent's security interests for the benefit of Lender Group in the
Collateral, and in order to fully consummate all of the transactions
contemplated hereby and under the other the Loan Documents.
4.5 Power of Attorney. Each Company hereby irrevocably makes,
constitutes, and appoints Administrative Agent and Collateral Agent (and any of
such Agents' officers, employees, or agents designated by such Agents) as such
Company's true and lawful attorney, with power to (a) if such Company refuses
to, or fails timely to execute and deliver any of the documents described in
Section 4.4, sign the name of such Company on any of the documents described in
Section 4.4, (b) at any time that an Event of Default has occurred and is
continuing, sign such Company's name on any invoice or bill of lading relating
to any Account, drafts against Account Debtors, schedules and assignments of
Accounts, verifications of Accounts, and notices to Account Debtors, (c) send
requests for verification of Accounts, (d) endorse such Company's name on any
Collection item that may come into Lender Group's possession, (e) at any time
that an Event of Default has occurred and is continuing, notify the post office
authorities to change the address for delivery of such Company's mail to an
address designated by Administrative Agent, to receive and open all mail
addressed to such Company, and to retain all mail relating to the Collateral and
forward all other mail to such Company, (f) at any time that an Event of Default
has occurred and is continuing, make, settle, and adjust all claims under such
Company's policies of insurance and make all determinations and decisions with
respect to such policies of insurance, and (g) at any time that an Event of
Default has occurred and is continuing, settle and adjust disputes and claims
respecting the Accounts directly with Account Debtors, for amounts and upon
terms that Administrative Agent determines to be reasonable, and Administrative
Agent may cause to be executed and delivered any documents and releases that
Administrative Agent determines to be necessary. The appointment of the Agents
as such Company's attorney, and each and every one of the Agents' rights and
powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully and finally repaid and performed and Lender Group's
obligation to extend credit hereunder is terminated.
4.6 Right to Inspect and to Conduct Appraisals. The Agents (through
any of their respective officers, employees, or agents) shall have the right, at
the expense of Borrower, from time to time hereafter, to inspect the Companies'
Books and to check, test, and appraise the Collateral in order to verify the
Companies' financial condition or the amount, quality, value, condition of, or
any other matter relating to, the Collateral. In addition, on an annual basis,
the Agents shall receive from Ernst & Young, LLP, at the expense of the
Borrower, an update of the enterprise valuation delivered to the Administrative
Agent pursuant to Section 3.1(o).
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Lender Group to enter into this Agreement, the
Companies jointly and severally make the following representations and
warranties which shall be true, correct, and complete in all respects as of the
date hereof, and shall be true, correct, and complete in all respects as of the
Closing Date, and at and as of the date of the making of each Advance or Letter
of Credit, made thereafter, as though made on and as of the date of such Advance
or Letter of Credit (except to the extent that such representations and
warranties relate solely to or are expressly made as of an earlier date) and
such representations and warranties shall survive the execution and delivery of
this Agreement:
5.1 No Encumbrances. The Companies have good and indefeasible title
to the Collateral, free and clear of Liens except for Permitted Liens.
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<PAGE>
5.2 Eligible Accounts. The Eligible Accounts and Eligible Unbilled
Accounts are bona fide existing obligations created by the rendition of services
to Account Debtors in the ordinary course of the Companies' business, and such
Accounts, to the extent not excluded from the definition of "Eligible Accounts"
pursuant to paragraph (j) thereof, are unconditionally owed to a Company without
defenses, disputes, offsets, counterclaims, or rights of return or cancellation.
The services giving rise to such Eligible Accounts and Eligible Unbilled
Accounts, to the extent such Accounts are not excluded from the definition of
"Eligible Accounts" pursuant to paragraph (j) thereof, have been performed and
unconditionally accepted by such Account Debtor. No Company has received notice
of actual or imminent bankruptcy, insolvency, or material impairment of the
financial condition of any Account Debtor regarding any Eligible Account or
Eligible Unbilled Account. Each Company that owns an Account the Account Debtor
of which is the United States or a State, or any department, agency or
instrumentality thereof, has executed and delivered to Administrative Agent an
Assignment of Claims Act Notice with respect to such Account, to the extent
required pursuant to Section 3.1(c)(vii) or Section 6.18. Upon filing such
Assignment of Claims Act Notice with such Account Debtor and/or as instructed in
a cover memorandum prepared by Borrower and attached to such Assignment of
Claims Act Notice, such Assignment of Claims Act Notice will be effective under
the Assignment of Claims Act (or if applicable, under such State's statutory
counterpart to the Assignment of Claims Act) to require such Account Debtor to
remit the proceeds of such Account directly to Collateral Agent for the benefit
of Lender Group.
5.3 Other Subsidiaries. Except for (i) the Subsidiaries described
in Schedule 5.3 or organized under the laws of any jurisdiction outside of the
United States of America or (ii) ICF Kaiser Engineers Eastern Europe, Inc. and
ICF Kaiser Technology Holdings, Inc. as long as either such Subsidiary listed in
this clause (ii) owns no assets, other than equity interests in another Person,
and conducts no business, the Subsidiaries of the Borrower that are not
Subsidiary Guarantors do not conduct any business and do not own any assets with
a fair market value in excess of $5,000,000 in the aggregate for all such
Subsidiaries and $1,000,000 for any such individual Subsidiary.
5.4 Equipment. All of the Equipment is used or held for use in the
Companies' business and is fit for such purposes.
5.5 Location of Inventory and Equipment. The Equipment is not
stored with a bailee, warehouseman, or similar party (without Administrative
Agent's prior written consent) and is located only at the locations identified
on Schedule 6.12 or otherwise permitted by Section 6.12.
5.6 Intentionally Omitted.
5.7 Location of Chief Executive Office; FEIN. The chief executive
office of Borrower is located at the address indicated in the preamble to this
Agreement and Borrower's FEIN is 54-1437073. The chief executive office of each
other Company and each other Company's FEIN is set forth on Schedule 5.7.
5.8 Due Organization and Qualification; Subsidiaries.
(a) Each Company is duly organized and existing and in good
standing under the laws of the jurisdiction of its incorporation and qualified
and licensed to do business in, and in good standing in, any state where the
failure to be so licensed or qualified reasonably could be expected to cause a
Material Adverse Change.
(b) Set forth on Schedule 5.8 is a complete and accurate list
of (x) each Company's state of incorporation and each jurisdiction in which such
Company is qualified to do business,
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and (y) each Company's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their incorporation; (ii) the number of shares of each class of
common and preferred stock authorized for each of such Subsidiaries; and (iii)
the number and the percentage of the outstanding shares of each such class owned
directly or indirectly by such Company. All of the outstanding capital stock of
each such Subsidiary has been validly issued and is fully paid and non-
assessable.
(c) Except as set forth on Schedule 5.8, no capital stock (or
any securities, instruments, warrants, options, purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible into
or exercisable for capital stock) of any direct or indirect Subsidiary of
Borrower is subject to the issuance of any security, instrument, warrant,
option, purchase right, conversion or exchange right, call, commitment or claim
of any right, title, or interest therein or thereto.
5.9 Due Authorization; No Conflict.
(a) The execution, delivery, and performance by each Company
of this Agreement and the Loan Documents to which such Company is a party have
been duly authorized by all necessary corporate action.
(b) The execution, delivery, and performance by each Company
of this Agreement and the Loan Documents to which such Company is a party do not
and will not (i) violate any provision of federal, state, or local law or
regulation (including Regulations T, U, and X of the Federal Reserve Board)
applicable to such Company, the Governing Documents of such Company, or any
order, judgment, or decree of any court or other Governmental Authority binding
on such Company, (ii) conflict with, result in a breach of, or constitute (with
due notice or lapse of time or both) a default under any Material Contract,
(iii) result in or require the creation or imposition of any Lien of any nature
whatsoever upon any properties or assets of such Company, other than Permitted
Liens, or (iv) require any approval of stockholders or any approval or consent
of any Person under any Material Contract (except as may be required under the
Assignment of Claims Act).
(c) Other than the filing of appropriate financing
statements, fixture filings, Assignment of Claims Act Notices and mortgages, the
execution, delivery, and performance by each Company of this Agreement and the
Loan Documents to which each Company is a party do not and will not require any
registration with, consent, or approval of, or notice to, or other action with
or by, any federal, state, foreign, or other Governmental Authority or other
Person.
(d) This Agreement and the Loan Documents to which each
Company is a party, and all other documents contemplated hereby and thereby,
when executed and delivered by such Company will be the legally valid and
binding obligations of such Company, enforceable against such Company in
accordance with their respective terms, except as enforcement may be limited by
equitable principles or by bankruptcy, insolvency, reorganization, moratorium,
or similar laws relating to or limiting creditors' rights generally.
(e) The Liens granted by each Company to Administrative Agent
(for the benefit of Lender Group) in and to its properties and assets pursuant
to this Agreement and the other Loan Documents are validly created, perfected,
and first priority Liens, subject only to Permitted Liens.
(f) No Company has been notified by any Account Debtor,
Governmental Authority or instrumentality, accreditation agency or any other
Person, during the immediately preceding 24-month period, that such party has
rescinded or not renewed, or intends to rescind or not renew, any such permit,
license, accreditation, certification, authorization, approval, consent or
agreement granted by it to
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such Company or to which it and such Company are parties where such event would
affect the collectibility or enforceability of the Accounts or cause a Material
Adverse Change in the operation of the Companies.
5.10 Litigation. There are no actions or proceedings pending by or
against any Company or any Subsidiary of a Company before any court or
administrative agency, and no Company has knowledge or belief of any pending,
threatened, or imminent litigation, governmental investigations, or claims,
complaints, actions, or prosecutions against any Company or any Subsidiary of a
Company except for: (a) matters that if decided adversely to such Company or
such Subsidiary of a Company would result in liability to such Company or such
Subsidiary of a Company of less than $100,000; (b) matters disclosed on Schedule
5.10; and (c) matters arising after the date hereof that, if decided adversely
to such Company or such Subsidiary of a Company, would not cause a Material
Adverse Change.
5.11 Financial Statements; No Material Adverse Change. All financial
statements relating to the Consolidated Group or any of the Companies that have
been delivered by any Company to Lender Group have been prepared in accordance
with GAAP (except, in the case of unaudited financial statements, for the lack
of footnotes and being subject to year-end audit adjustments) and fairly present
the Consolidated Group's or such Company's, as applicable, financial condition
as of the date thereof and results of operations for the period then ended.
There has not been a Material Adverse Change with respect to the Consolidated
Group or any Company since the date of the latest financial statements submitted
to Lender Group on or before the Closing Date.
5.12 Solvency. The Consolidated Group and each of the Companies are
Solvent. No transfer of property is being made by any Company and no obligation
is being incurred by any Company in connection with the transactions
contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of any Company.
5.13 Employee Benefits. None of Borrower, any of its Subsidiaries,
or any of their ERISA Affiliates maintains or contributes to any Benefit Plan,
other than those listed on Schedule 5.13. Borrower, each of its Subsidiaries and
each ERISA Affiliate have satisfied the minimum funding standards of ERISA and
the IRC with respect to each Benefit Plan to which it is obligated to
contribute. No ERISA Event has occurred nor has any other event occurred that
may result in an ERISA Event that reasonably could be expected to result in a
Material Adverse Change. None of Borrower or its Subsidiaries or any ERISA
Affiliate is required to provide security to any Benefit Plan under Section
401(a)(29) of the IRC.
5.14 Environmental Condition. Except as disclosed on Schedule 5.14
and except for such matters or conditions that are in compliance in all material
respects with all applicable laws and regulations: (i) none of the Companies' or
their respective Subsidiaries' properties or assets has ever been used by any
Company or any Subsidiary of a Company or, to the best of any Company's
knowledge, by previous owners or operators, in the disposal of, or to produce,
store, handle, treat, release, or transport, any Hazardous Materials; (ii) none
of the Companies' or their respective Subsidiaries' properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a Hazardous Materials disposal site, or a candidate for
closure pursuant to any environmental protection statute; (iii) no Lien arising
under any environmental protection statute has attached to any revenues or to
any real or personal property owned or operated by any Company or any Subsidiary
of a Company; and (iv) no Company nor any Subsidiary of a Company has received a
summons, citation, notice, or directive from the Environmental Protection Agency
or any other federal or foreign governmental agency concerning any action or
omission by any Company or any Subsidiary of a Company resulting in the
releasing or disposing of Hazardous Materials into the environment.
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5.15 No Default. Except as disclosed on Schedule 5.15, no Company
nor Subsidiary of a Company is in default with respect to (i) any note,
indenture, loan agreement, mortgage, lease, deed, or other agreement to which
such Company or such Subsidiary is a party or by which it is bound, which
default could reasonably be expected to cause a Material Adverse Change or (ii)
any Material Contract.
5.16 Material Contracts; Restrictive Agreements. Except for such
changes as have been provided to Administrative Agent in writing, (i) each
Material Customer Contract to which any Company or any Subsidiary of a Company
is a party is set forth in Part I of Schedule 5.16 and (ii) each other Material
Contract to which any Company or any Subsidiary of a Company is a party is set
forth in Part II of Schedule 5.16. Borrower has provided to Administrative Agent
or its counsel each definitive written agreement relating to each such Material
Customer Contract and Material Contract. Except as set forth in Part III of
Schedule 5.16, no Company nor Subsidiary of a Company is a party to or bound by
any agreement or instrument or subject to any corporate or other restriction,
the performance or observance of which has caused or, as far as such Company or
Subsidiary can reasonably foresee, may cause a Material Adverse Change.
5.17 Government Contracts. No Company nor Subsidiary of a Company is
in receipt of any notice from any Governmental Authority that such Company or
such Subsidiary of a Company is disqualified, barred or suspended from bidding
on or performing any contract or proposed contract.
5.18 Year 2000 Compliance. Any reprogramming required to address the
Year 2000 problem (i.e., the inability of certain computer applications to
recognize correctly and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999) and to permit the
proper functioning, in and following the year 2000, of (a) the Companies' and
their Subsidiaries' computer systems and (b) equipment containing embedded
microchips (including systems and equipment supplied by others or with which the
Companies' or their Subsidiaries' systems interface) and the testing of all such
systems and equipment, as so reprogrammed, will, or in the case of systems and
equipment supplied by others or with which the Companies' or their Subsidiaries'
systems interface, to the best of each Company's knowledge, will be completed by
October 30, 1999. The cost to the Companies and their Subsidiaries of such
reprogramming and testing and of the reasonably foreseeable consequences of the
Year 2000 problem to the Companies and their Subsidiaries (including, without
limitation, reprogramming errors and the failure of others' systems and
equipment) will not result in an Event of Default or cause a Material Adverse
Change.
5.19 Specified Liens. No Company has any obligation with respect to
any Specified Lien to any Person that is the secured party with respect to any
such Specified Lien.
6. AFFIRMATIVE COVENANTS.
Each of the Companies hereby jointly and severally covenants and
agrees that, so long as any credit hereunder shall be available and until full
and final payment of the Obligations, the Companies shall do all of the
following:
6.1 Accounting System. Maintain a standard and modern system of
accounting that enables the Companies to produce financial statements in
accordance with GAAP, and maintain records pertaining to the Collateral that
contain information as from time to time may be requested by any Agent.
6.2 Collateral Reporting. Provide the Agents with the following
documents at the following times in form and substance satisfactory to the
Agents: (a) on a monthly basis and, in any event, by no later than the 10th
Business Day of each fiscal month of Borrower during the term of this Agreement
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with respect to the following clauses (i) and (ii) and the 5th Business Day of
each fiscal month of Borrower during the term of this Agreement with respect to
the following clause (iii), (i) a detailed calculation of the Borrowing Base,
(ii) a schedule, in form and substance satisfactory to the Collateral Agent, of
the Eligible Unbilled Accounts, and (iii) a detailed aging, by total, of the
Eligible Accounts, (b) on a monthly basis and, in any event, by no later than
the 15th day of each month during the term of this Agreement, a summary aging,
by vendor, of Borrower's accounts payable and any book overdraft, (c) if
requested by an Agent, on each Business Day, notice of all disputes or claims
not previously reported, (d) upon request, copies of invoices in connection with
the Accounts, customer statements, credit memos, remittance advices and reports,
deposit slips, purchase orders and invoices, (e) on a quarterly basis, a
detailed list of Borrower's customers by contract, (f) on a monthly basis, a
calculation of the Dilution for the prior month; and (g) such other reports as
to the Collateral or the financial condition of the Companies as any Agent may
request from time to time. Original invoices shall be mailed by the Companies to
each Account Debtor and, at Administrative Agent's direction after the
occurrence and during the continue of an Event of Default, the invoices shall
indicate on their face that the Account has been assigned to the Administrative
Agent and that all payments are to be made directly to the Collateral Agent.
6.3 Financial Statements, Reports, Certificates. Deliver to
Administrative Agent with copies to each Lender: (a) as soon as available, but
in any event within thirty (30) days after the end of each month during each of
Borrower's fiscal years, a company prepared balance sheet, income statement, and
statement of cash flow covering the operations of the Consolidated Group on a
consolidated and consolidating basis during such period; and (b) as soon as
available, but in any event within one hundred and five (105) days after the end
of each of Borrower's fiscal years, consolidated and consolidating financial
statements of the Consolidated Group for each such fiscal year, audited by
independent certified public accountants reasonably acceptable to Administrative
Agent and certified, without any qualifications, by such accountants to have
been prepared in accordance with GAAP, together with a certificate of such
accountants addressed to Administrative Agent stating that such accountants do
not have knowledge of the existence of any Default or Event of Default. Such
audited financial statements shall include a balance sheet, profit and loss
statement, and statement of cash flow and, if prepared, such accountants' letter
to management.
In addition to the above, the Borrower also shall deliver to
Administrative Agent, with a copy to each Lender, Borrower's Form 10-Q Quarterly
Reports, Form 10-K Annual Reports, and Form 8-K Current Reports, and any other
filings made by Borrower with the Securities and Exchange Commission, if any, as
soon as the same are filed, or any other information that is provided by
Borrower to its shareholders, and any other report reasonably requested by
Administrative Agent relating to the financial condition of the Companies.
Each month, together with the financial statements provided pursuant
to Section 6.3(a), Borrower shall deliver to Administrative Agent, with a copy
to each Lender, a certificate signed by the chief financial officer or treasurer
of each Company to the effect that: (i) all financial statements delivered or
caused to be delivered to Administrative Agent hereunder have been prepared in
accordance with GAAP (except, in the case of unaudited financial statements, for
the lack of footnotes and being subject to year-end audit adjustments) and
fairly present the financial condition of the Consolidated Group, (ii) the
representations and warranties of the Companies contained in this Agreement and
the other Loan Documents are true and correct in all material respects on and as
of the date of such certificate, as though made on and as of such date (except
to the extent that such representations and warranties relate solely to or are
expressly made as of an earlier date), (iii) for each month that also is the
date on which a financial covenant in Section 7.20 or Section 7.21 is to be
tested, a Compliance Certificate demonstrating in reasonable detail compliance
at the end of such period with the applicable financial covenants contained in
Section 7.20 or Section 7.21, and (iv) on the date of delivery of such
certificate to Administrative Agent
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there does not exist any condition or event that constitutes a Default or Event
of Default (or, in the case of clauses (i), (ii), or (iii), to the extent of any
non-compliance, describing such non-compliance as to which he or she may have
knowledge and what action the Companies have taken, are taking, or propose to
take with respect thereto).
At least five (5) days prior to the Closing Date, Borrower shall have
issued written instructions to its independent certified public accountants
authorizing them to communicate with Administrative Agent and to release to
Administrative Agent whatever financial information concerning the Companies
that Administrative Agent may reasonably request. Each Company hereby
irrevocably authorizes and directs all auditors and accountants to deliver to
Administrative Agent, at Borrower's expense, copies of such Company's financial
statements, papers related thereto, and other accounting records of any nature
in their possession, and to disclose to Administrative Agent any information
they may have regarding such Company's business affairs and financial condition.
6.4 Other Reports. Deliver to Administrative Agent the following
additional reports, each to be certified as to accuracy by the chief financial
officer of Borrower:
(a) Quarterly Status Reports. Within thirty (30) days after
the end of each fiscal quarter of each fiscal year, a contract status report,
substantially in the form of Exhibit 6.4(a), with respect to each Material
Customer Contract.
(b) Nitric Acid Monthly Reports. Within thirty (30) days
after the end of each month and until all four nitric acid projects of the
Companies, as described in Schedule 6.4(b), are completed, a monthly report
containing information with respect to the actual cost to complete and cash
flows of each nitric acid project set forth in Schedule 6.4(b); in each such
report, which shall be substantially in the form of Exhibit 6.4(b), the actual
information required to be contained therein shall be compared to the project
cost to complete and cash flows for each such nitric acid project as set forth
in Schedule 6.4(b).
(c) New Contract Report. At the time each new Material
Customer Contract is entered into by a Company, a report containing a summary of
the material terms of such Material Customer Contract, a budget setting forth
the projected costs and cash flows relating to such Material Customer Contract,
and a complete copy of such Material Customer Contract attached thereto.
6.5 Tax Returns. Make available, or if requested by Administrative
Agent, deliver to Administrative Agent copies of each of the Companies' future
federal income tax returns, and any amendments thereto, within 30 days of the
filing thereof with the Internal Revenue Service.
6.6 Intentionally Omitted.
6.7 Title to Equipment. Upon Administrative Agent's request,
immediately deliver or caused to be delivered to Administrative Agent, properly
endorsed, any and all evidences of ownership of, certificates of title, or
applications for title to any items of material owned Equipment.
6.8 Maintenance of Equipment. Maintain the Equipment in good
operating condition and repair (ordinary wear and tear excepted), and make all
necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Other than those items
of Equipment that constitute fixtures on the Closing Date, the Companies shall
not permit any item of Equipment to become a fixture to real estate or an
accession to other property, and such Equipment shall at all times remain
personal property.
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6.9 Taxes. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against any of the
Companies or any of their respective Subsidiaries or properties to be paid in
full, before delinquency or before the expiration of any extension period,
except to the extent that the validity of such assessment or tax shall be the
subject of a Permitted Protest. The Companies shall make, and cause their
Subsidiaries to make, due and timely payment or deposit of all such federal,
state, and local taxes, assessments, or contributions required of them by law,
and will execute and deliver to Administrative Agent, on demand, appropriate
certificates attesting to the payment thereof or deposit with respect thereto.
The Companies will make, and cause their Subsidiaries to make, timely payment or
deposit of all tax payments and withholding taxes required of them by applicable
laws, including those laws concerning F.I.C.A., F.U.T.A., state disability, and
local, state, and federal income taxes, and will, upon request, furnish the
Administrative Agent with proof satisfactory to Administrative Agent indicating
that the Companies and such Subsidiaries have made such payments or deposits.
6.10 Insurance.
(a) At its expense, keep the Personal Property Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as are ordinarily insured against by
other owners in similar businesses. The Companies also shall maintain business
interruption, public liability, product liability, and property damage insurance
relating to the Companies' ownership and use of the Personal Property
Collateral, as well as insurance against larceny, embezzlement, and criminal
misappropriation.
(b) All such policies of insurance shall be in such form, with such
companies, and in such amounts as may be reasonably satisfactory to
Administrative Agent. All insurance required herein shall be written by
companies which are admitted or otherwise authorized to do insurance business in
the States of Virginia and New York. All hazard insurance and such other
insurance as Administrative Agent shall specify, shall contain a standard
mortgagee endorsement, or an equivalent endorsement satisfactory to
Administrative Agent, showing Administrative Agent (for the ratable benefit of
Lenders) as a loss payee thereof. Every policy of insurance referred to in this
Section 6.10 shall contain an agreement by the insurer that it will not cancel
such policy except after thirty (30) days' prior written notice to
Administrative Agent (or ten (10) days' prior written notice, in the case of
cancellation due to non-payment of premium) and that any loss payable thereunder
shall be payable notwithstanding any act or negligence of any Company or
Administrative Agent which might, absent such agreement, result in a forfeiture
of all or a part of such insurance payment. Borrower shall deliver to
Administrative Agent certified copies of such policies of insurance and evidence
of the payment of all premiums therefor.
(c) Original policies or certificates thereof satisfactory to
Administrative Agent evidencing such insurance shall be delivered to
Administrative Agent prior to the expiration of the existing or preceding
policies. Borrower shall give Administrative Agent prompt notice of any loss
covered by such insurance, and Administrative Agent shall have the right to
adjust any loss. Administrative Agent shall have the right to adjust all losses
payable under any such insurance policies without any liability to the Companies
whatsoever in respect of such adjustments and, if an Event of Default has
occurred and is continuing, no Company shall adjust losses under such insurance
policies without the prior written consent of Administrative Agent. If any
insurance company shall refuse to permit Administrative Agent to adjust losses,
Borrower shall adjust such losses in accordance with the written directions of
Administrative Agent. Any monies received as payment for any loss under any
insurance policy including the insurance policies mentioned above, shall, except
to the extent otherwise provided in Section 2.4(a)(v), be paid over to
Administrative Agent (for the ratable benefit of Lenders) to be applied at the
option of Administrative Agent either to the prepayment of the Obligations
without premium, in such order or manner as
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Administrative Agent may elect and direct Administrative Agent, or shall be
disbursed to Borrower under stage payment terms satisfactory to Administrative
Agent for application to the cost of repairs, replacements, or restorations. All
repairs, replacements, or restorations shall be effected with reasonable
promptness and shall be of a value at least equal to the value of the items or
property destroyed prior to such damage or destruction. Upon the occurrence of
an Event of Default, Administrative Agent shall have the right to apply all
prepaid premiums available in accordance with the terms of the applicable
insurance policies to the payment of the Obligations in such order or form as
Administrative Agent shall determine and direct Administrative Agent.
(d) No Company shall take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
under this Section 6.10, unless Administrative Agent is included thereon as
additional named insured with the loss payable to Administrative Agent (for the
ratable benefit of Lenders) under a standard mortgagee endorsement acceptable to
the Administrative Agent. Borrower immediately shall notify Administrative Agent
whenever such separate insurance is taken out, specifying the insurer thereunder
and full particulars as to the policies evidencing the same, and originals of
such policies immediately shall be provided to Administrative Agent.
6.11 No Set-offs or Counterclaims. Make payments hereunder and under
the other Loan Documents by or on behalf of Borrower without set-off or
counterclaim and free and clear of, and without deduction or withholding for or
on account of, any federal, state, or local taxes.
6.12 Location of Equipment. Keep the Equipment only at the locations
identified on Schedule 6.12; provided, however, that Borrower may amend Schedule
6.12 so long as such amendment occurs by written notice to the Agents not less
than thirty (30) days prior to the date on which the Equipment is moved to such
new location, so long as such new location is within the United States, and so
long as, at the time of such written notification, the Companies provide to
Administrative Agent any financing statements or fixture filings necessary to
perfect and continue perfected Administrative Agent's security interests (for
the benefit of Lender Group) in such assets and also provide to Administrative
Agent, if so requested, a Collateral Access Agreement.
6.13 Compliance with Laws. Comply and cause their Subsidiaries to
comply with the requirements of all applicable laws, rules, regulations, and
orders of any Governmental Authority, including the Fair Labor Standards Act and
the Americans With Disabilities Act, other than laws, rules, regulations, and
orders the non-compliance with which, individually or in the aggregate, would
not cause and could not reasonably be expected to cause a Material Adverse
Change.
6.14 Employee Benefits.
(a) Deliver to Administrative Agent (i) promptly, and in any
event within ten (10) Business Days after Borrower or any of its Subsidiaries
knows that an ERISA Event has occurred that reasonably could be expected to
result in a Material Adverse Change, a written statement of the chief financial
officer of Borrower describing such ERISA Event and any action that is being
taking with respect thereto by Borrower, any such Subsidiary or ERISA Affiliate,
and any action taken or threatened by the IRS, Department of Labor, or PBGC,
(ii) promptly, and in any event within three (3) Business Days after the filing
thereof with the IRS, a copy of each funding waiver request filed with respect
to any Benefit Plan and all communications received by Borrower, any of its
Subsidiaries or, to the knowledge of Borrower, any ERISA Affiliate with respect
to such request, and (iii) promptly, and in any event within three (3) Business
Days after receipt by Borrower, any of its Subsidiaries or, to the knowledge of
Borrower, any ERISA Affiliate, of the PBGC's intention to terminate a Benefit
Plan or to have a trustee appointed to administer a Benefit Plan, copies of each
such notice.
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(b) Cause to be delivered to Administrative Agent, upon
Administrative Agent's request, each of the following: (i) a copy of each Plan
(and if applicable, related trust agreements or other funding instruments) and
all amendments thereto; (ii) the most recent determination letter issued by the
IRS with respect to each Benefit Plan; (iii) for the most recent plan year, the
annual reports on Form 5500 Series required to be filed with any governmental
agency for any Benefit Plan; (iv) all actuarial reports prepared for the most
recent plan year for each Benefit Plan; (v) a listing of all Multiemployer
Plans, with the aggregate amount of the most recent annual contributions
required to be made by Borrower or any ERISA Affiliate to each such
Multiemployer Plan; (vi) any information that has been provided to Borrower or
any ERISA Affiliate regarding withdrawal liability under any Multiemployer Plan;
and (vii) the aggregate amount of the most recent annual payments made to former
employees of Borrower or its Subsidiaries under any Retiree Health Plan.
6.15 Leases. Pay when due all rents and other amounts payable under any
leases to which any Company is a party or by which any Company's properties and
assets are bound, unless such payments are the subject of a Permitted Protest.
To the extent that any Company fails timely to make payment of such rents and
other amounts payable when due under its leases, Administrative Agent shall be
entitled, in its discretion, to reserve an amount equal to such unpaid amounts
against the Borrowing Base.
6.16 Joinder. Cause the Subsidiaries of the Borrower that are not
Subsidiary Guarantors to be joined to this Agreement and each other Loan
Document to which the Subsidiary Guarantors are parties as and when required
pursuant to Section 18.7.
6.17 Real Property Collateral. Immediately notify Administrative Agent
in writing each time any Company obtains any Real Property and, if so requested
by Administrative Agent, (i) execute a mortgage with respect to such Real
Property in favor of Administrative Agent for the benefit of Lender Group (a
"Mortgage"), (ii) cause a phase-I environmental report and a real estate survey
to be completed with respect to such Real Property and copies thereof to be
delivered to Administrative Agent; the environmental consultants and surveyors
retained for such reports or surveys, the scope of the reports or surveys, and
the results thereof shall be acceptable to Administrative Agent in its sole
discretion, (iii) obtain title policy insurance for such Real Property naming
Administrative Agent as beneficiary for the benefit of Lender Group, from an
insurer acceptable to Administrative Agent, and in form and substance acceptable
to Administrative Agent, subject only to such exceptions as shall be approved by
Administrative Agent, (iv) deliver an opinion of counsel to Administrative Agent
with respect to the Mortgage, title insurance policy, applicable zoning laws and
such other matters as Administrative Agent may request, and (v) and execute and
deliver such other documents and take such other actions as Administrative Agent
may request.
6.18 Assignment of Claims Act. On the Closing Date, with respect to any
Accounts existing on the Closing Date, and within ten (10) Business Days after
any Company creates or otherwise generates an Account, the Account Debtor of
which is (1) the United States, or any department, agency or instrumentality
thereof, or (2) a state or city Governmental Authority, except to the extent
such Account is not deemed an ineligible Account by reason of clause (ii)(A) or
(ii)(C) of paragraph (e) of the definition of "Eligible Accounts" set forth in
Section 1.1, deliver to Administrative Agent executed notices ("Assignment of
Claims Act Notices") (i) complying with the requirements of (A) FAR 32.805(c),
codified at 48 C.F.R. ss. 32.805(c), promulgated under the Assignment of Claims
Act (or any successor provision), or (B) if applicable, the statutory or
regulatory counterpart to FAR 32.805(c) of such State, (ii) substantially in the
form of Exhibit 6.18 (adjusted as necessary to comply with (A) the Assignment of
Claims Act or (B) if applicable, the statutory counterpart of the Assignment of
Claims Act of such State), (iii) naming Administrative Agent as assignee, and
(iv) addressed to each such Account Debtor, together
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with a cover memorandum identifying each Person that must receive a copy of such
Assignment of Claims Act Notices in order to effect a proper assignment of such
Account to Collateral Agent.
6.19 Year 2000 Compliance. Complete (i) the reprogramming required to
address the Year 2000 problem (i.e., the inability of certain computer
applications to recognize correctly and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31, 1999)
and to permit the proper functioning, in and following the year 2000, of (a) the
Companies' and their Subsidiaries' computer systems and (b) equipment containing
embedded microchips (including the exercise of reasonable commercial efforts
with respect to systems and equipment supplied by others or with which the
Companies' or their Subsidiaries' systems interface) and (ii) the testing of all
such systems and equipment, as so reprogrammed, by October 30, 1999.
7. NEGATIVE COVENANTS.
Each of the Companies hereby jointly and severally covenants and agrees
that, so long as any credit hereunder shall be available and until full and
final payment of the Obligations, none of the Companies will not do any of the
following:
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, or permit any Subsidiary to do so, except:
(a) Indebtedness evidenced by this Agreement, together with
Indebtedness to issuers of letters of credit that are the subject of L/C
Guarantees;
(b) Indebtedness set forth in the latest consolidated financial
statements of the Consolidated Group submitted to Administrative Agent on or
prior to the Closing Date;
(c) Indebtedness secured by Permitted Liens;
(d) Indebtedness owing by one Company to another Company;
(e) Indebtedness owing by a Company to a member of the
Consolidated Group that is not a Company, provided that such Indebtedness, when
added to the loans, advances, capital contributions or transfers of property
permitted by clause (i) of the proviso to clause (b) in Section 7.13, shall not
in the aggregate exceed $500,000, and provided further, that both immediately
before and after giving effect to any payment on such Indebtedness permitted by
this clause (e), Availability is not less than $2,000,000;
(f) Indebtedness owing by a Company to a member of the
Consolidated Group organized under the laws of a jurisdiction outside of the
United States that is not a Company, provided that such Company has received
from such Person cash in an amount equal to the principal amount of such
Indebtedness within the immediately preceding 90 days, and provided further,
that both immediately before and after giving effect to any payment on such
Indebtedness permitted by this clause (f), Availability is not less than
$2,000,000;
(g) Non-Recourse Indebtedness;
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(h) Indebtedness evidenced by, and reimbursement obligations with
respect to, surety bonds or performance bonds (other than bid bonds) issued by
or for the benefit of a Company or a Subsidiary of a Company in the ordinary
course of business;
(i) reimbursement obligations with respect to bid bonds issued
by or for the benefit of a member of the Consolidated Group in the ordinary
course of business;
(j) Indebtedness owing by a member of the Consolidated Group
that is not a Company in an aggregate principal amount not exceeding $1,000,000
at any time outstanding; and
(k) refinancings, renewals, or extensions of Indebtedness
permitted under clause (b), (c), (d), (e), (g), (h), (i) or (j) of this Section
7.1 (and continuance or renewal of any Permitted Liens associated therewith) so
long as in the case of clauses (b) and (c): (i) the terms and conditions of such
refinancings, renewals, or extensions do not materially impair the prospects of
repayment of the Obligations by Borrower, (ii) the net cash proceeds of such
refinancings, renewals, or extensions do not result in an increase in the
aggregate principal amount of the Indebtedness so refinanced, renewed, or
extended, (iii) such refinancings, renewals, refundings, or extensions do not
result in a shortening of the average weighted maturity of the Indebtedness so
refinanced, renewed, or extended, and (iv) to the extent that Indebtedness that
is refinanced was subordinated in right of payment to the Obligations, then the
subordination terms and conditions of the refinancing Indebtedness must be at
least as favorable to Lender Group as those applicable to the refinanced
Indebtedness.
7.2 Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, or permit any Subsidiary to do so, except for Permitted Liens
(including Liens that are replacements of Permitted Liens to the extent that the
original Indebtedness is refinanced under Section 7.1(k) and so long as the
replacement Liens only encumber those assets or property that secured the
original Indebtedness).
7.3 Restrictions on Fundamental Changes. Enter into any merger,
consolidation, reorganization, or recapitalization, or reclassify its capital
stock, or liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose of,
in one transaction or a series of transactions, all or any substantial part of
its property or assets, provided, however, that this Section 7.3 shall not
prohibit (i) the merger of a Subsidiary Guarantor into Borrower or another
Subsidiary Guarantor, (ii) the consolidation of two or more Subsidiary
Guarantors, and (iii) the transfer of assets from one Company to another
Company.
7.4 Disposal of Assets. Sell, lease, assign, transfer, or otherwise
dispose of any of its properties or assets, other than (i) a sale, lease,
assignment, transfer or other disposition to another Company and (ii) sales or
dispositions of obsolete Equipment, consistent with past practices, having an
aggregate value not greater than $250,000, provided that 100% of the Net
Proceeds of all sales permitted by the foregoing clause (ii) shall be remitted
directly to Collateral Agent for the benefit of Lender Group to repay the
outstanding Advances and any other outstanding Obligations.
7.5 Change of Name. Change a Company's name, FEIN, or identity, or add
any new fictitious name without thirty (30) days' prior written notice to the
Administrative Agent or change a Company's corporate structure (within the
meaning of Section 9-402(7) of the Code).
7.6 Guarantee. Guarantee or otherwise become in any way liable with
respect to the financial obligations of any third Person, or permit any
Subsidiary to do so, except (a) by endorsement of
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instruments or items of payment for deposit to the account of a Company or which
are transmitted or turned over to Collateral Agent and (b) guarantees of
Indebtedness or other obligations otherwise permitted hereunder (including,
without limitation, guaranty of the obligations of the Borrower under the
Indentures and Notes).
7.7 Nature of Business. Make any change in the principal nature of the
Companies' businesses as conducted on the Closing Date.
7.8 Prepayments and Amendments.
(a) Except in connection with a refinancing permitted by Section
7.1(k), prepay, redeem, retire, defease, purchase, or otherwise acquire any
Indebtedness owing to any third Person, other than the Obligations in accordance
with this Agreement;
(b) Directly or indirectly, amend, modify, alter, increase, or
change any of the terms or conditions of (i) any agreement, instrument,
document, indenture, or other writing evidencing or concerning Indebtedness
(other than the Indentures and the Notes) permitted under Sections 7.1(b), (c),
(d), (e) or (g) or (ii) any Material Contract, if such amendment, modification,
alteration, increase or change could reasonably be expected to cause a Material
Adverse Change; and
(c) Agree to any amendment or make any other change to (or make
any payment consistent with any amendment or other change to), or waive any of
its rights under, any Indenture or refinance any Indebtedness evidenced by the
Indentures without obtaining the prior written consent of the Required Lenders
to such amendment, modification, payment, waiver, change or refinancing, except
for (i) an amendment or supplement that adds a Subsidiary Guarantor as an
additional guarantor thereunder and (ii) an amendment or supplement that cures
any ambiguity, inconsistency or defect in any Indenture, provided that any such
amendment or supplement is not adverse to the interests of the Agents and the
Lender Group.
7.9 Change of Control. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 Intentionally Omitted.
7.11 Distributions. Make any distribution or declare or pay any
dividends (in cash or other property, other than capital stock) on, or purchase,
acquire, redeem, or retire any of Borrower's or any Company's capital stock, of
any class, whether now or hereafter outstanding; provided, however, that this
Section 7.11 shall not prohibit dividends or other distributions or payments (i)
by a Subsidiary Guarantor to Borrower or by one Subsidiary Guarantor to another
Subsidiary Guarantor or (ii) required by the terms of employee benefit programs
of Borrower and its Subsidiaries.
7.12 Accounting Methods. Modify or change its method of accounting or
enter into, modify, or terminate any agreement currently existing, or at any
time hereafter entered into with any third party accounting firm or service
bureau for the preparation or storage of the Companies' accounting records
without said accounting firm or service bureau agreeing to provide the Agents
information regarding the Collateral or the Companies' financial condition. Each
Company waives the right to assert a confidential relationship, if any, it may
have with any accounting firm or service bureau in connection with any
information requested by the Agents pursuant to or in accordance with this
Agreement, and agrees that the Agents may contact directly any such accounting
firm or service bureau in order to obtain such information.
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7.13 Investments. Directly or indirectly make, acquire, or incur any
liabilities (including contingent obligations) for or in connection with (a) the
acquisition of the securities (whether debt or equity) of, or other interests
in, a Person, other than another Company existing on the Closing Date, (b)
loans, advances, capital contributions, or transfers of property to a Person
other than another Company, provided that, (i) the Companies may make loans,
advances, capital contributions or other transfers of property to their
Affiliates (including Persons that will become Affiliates as a result of such
loan, advance, capital contribution or other transfer) that are not Companies
hereunder in an aggregate amount during the term of this Agreement, when added
to the Indebtedness permitted to be incurred pursuant to clause (e) of Section
7.1, of not more than $500,000 if (A) both immediately before and after giving
effect to such transactions, Availability is not less than $2,000,000 and (B) no
such investment shall result in an acquisition of all or substantially all of
the assets or stock or equity of any such Person and (ii) any Company may make
loans, advances, capital contributions or other transfers of property to a
member of the Consolidated Group organized under the laws of a jurisdiction
outside of the United States that is not a Company so long as (A) such Company
has received from such Person an amount in cash equal to such loan, advance,
capital contribution or other transfer within the immediately preceding 90 days
and (B) both immediately before and after giving effect to such transaction
Availability is not less than $2,000,000, and (iii) such investments are made in
joint ventures and similar project vehicles consistent with past practice, or
(c) the acquisition of all or substantially all of the properties or assets of a
Person other than another Company. Nothing in this Section 7.13 shall prohibit
the Companies from (1) fulfilling their obligations under the agreements
referred to on Schedule 7.13 or (2) receiving equity in another Person in
consideration of bid and proposal or similar costs incurred, or in-kind services
provided, for the benefit of such Person in the ordinary course of business.
7.14 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of a Company other
than another Company except for transactions that are in the ordinary course of
such Company's business, upon fair and reasonable terms, that are fully
disclosed to Administrative Agent, and that are no less favorable to the
Companies than would be obtained in an arm's length transaction with a
non-Affiliate.
7.15 Suspension. Suspend or go out of a substantial portion of its
business.
7.16 Compensation. Increase the annual fee or per-meeting fees paid to
directors during any year by more than 15% over the prior year; or pay or accrue
total cash compensation, during any year, to officers and senior management
employees in an aggregate amount in excess of 115% of that paid or accrued in
the prior year.
7.17 Use of Proceeds. Use the proceeds of the Advances made hereunder
for any purpose other than (i) on the Closing Date, (y) to repay in full the
outstanding principal, accrued interest, and accrued fees and expenses owing to
Existing Lender, and (z) to pay transactional costs and expenses incurred in
connection with this Agreement, and (ii) thereafter, consistent with the terms
and conditions hereof, for its lawful and permitted corporate purposes.
7.18 Change in Location of Chief Executive Office; Equipment with
Bailees. Relocate its chief executive office to a new location without providing
thirty (30) days prior written notification thereof to the Administrative Agent
and so long as, at the time of such written notification, such Company provides
any financing statements or fixture filings necessary to perfect and continue
perfected the Administrative Agent's security interests (for the benefit of the
Lender Group) and, if so requested, also provides to the Administrative Agent a
Collateral Access Agreement with respect to such new location. The Equipment
shall not at any time now or hereafter be stored with a bailee, warehouseman, or
similar party without the Administrative Agent's prior written consent.
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7.19 No Prohibited Transactions Under ERISA. Directly or indirectly:
(a) engage, or permit any Subsidiary of Borrower to engage, in
any prohibited transaction which is reasonably likely to result in a civil
penalty or excise tax described in Sections 406 of ERISA or 4975 of the IRC for
which a statutory or class exemption is not available or a private exemption has
not been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the IRC), whether or not waived;
(c) fail, or permit any Subsidiary of Borrower to fail, to pay
timely required contributions or annual installments due with respect to any
waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary of Borrower to
terminate, any Benefit Plan where such event would result in any liability of
Borrower, any of its Subsidiaries or any ERISA Affiliate under Title IV of
ERISA;
(e) fail, or permit any Subsidiary of Borrower to fail, to
make any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of Borrower to fail, to pay
to any Benefit Plan any required installment or any other payment required under
Section 412 of the IRC on or before the due date for such installment or other
payment;
(g) amend, or permit any Subsidiary of Borrower to amend, a
Benefit Plan resulting in an increase in current liability for the plan year
such that either of Borrower, any Subsidiary of Borrower or any ERISA Affiliate
is required to provide security to such Benefit Plan under Section 401(a)(29) of
the IRC; or
(h) withdraw, or permit any Subsidiary of Borrower to
withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely
to result in any liability of any such entity under Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of Borrower, any of its
Subsidiaries or any ERISA Affiliate in excess of $500,000.
7.20 Financial Covenants. Permit the Consolidated Group to fail to
maintain:
(a) EBITDA. EBITDA at the end of each fiscal quarter ending on
a date set forth below, measured on a rolling four fiscal quarter basis, of not
less than the amount set forth opposite each such date:
Date Amount
12/31/98 $16,400,000
3/31/99 $11,100,000
6/30/99 $ 9,900,000
9/30/99 $13,300,000
12/31/99 $21,100,000
3/31/00 $24,900,000
6/30/00 $28,100,000
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9/30/00 $30,200,000
12/31/00 $31,500,000
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(b) Total Debt to EBITDA. A ratio of Total Debt at the end of
each fiscal quarter ending on a date set forth below divided by EBITDA at the
end of each such fiscal quarter, measured on a rolling four fiscal quarter
basis, of less than the ratio set forth opposite each such date:
Date Ratio
12/31/98 12.2 to 1.0
3/31/99 18.0 to 1.0
6/30/99 20.2 to 1.0
9/30/99 15.0 to 1.0
12/31/99 9.5 to 1.0
3/31/00 8.0 to 1.0
6/30/00 7.1 to 1.0
9/30/00 6.6 to 1.0
12/31/00 6.3 to 1.0
(c) Tangible Net Worth. Tangible Net Worth on each date listed
below of not less than the amount set forth below opposite each such date:
Date Amount
12/31/98 ($127,800,000)
3/31/99 ($131,200,000)
6/30/99 ($133,200,000)
9/30/99 ($133,400,000)
12/31/99 ($132,800,000)
3/31/00 ($132,400,000)
6/30/00 ($130,100,000)
9/30/00 ($127,600,000)
12/31/00 ($124,900,000)
(d) Minimum Revenues. Net revenues from operations of the
Consolidated Group for each month set forth below of not less than the amount
set forth below opposite each such month:
Month Amount
Dec-98 $24,000,000
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Jan-99 $29,100,000
Feb-99 $28,500,000
Mar-99 $27,500,000
Apr-99 $30,300,000
May-99 $29,700,000
Jun-99 $29,500,000
Jul-99 $32,600,000
Aug-99 $31,900,000
Sep-99 $31,700,000
Oct-99 $31,700,000
Nov-99 $31,600,000
Dec-99 $30,900,000
Jan-00 $31,100,000
Feb-00 $30,400,000
Mar-00 $29,500,000
Apr-00 $32,500,000
May-00 $31,700,000
Jun-00 $31,500,000
Jul-00 $34,900,000
Aug-00 $34,100,000
Sep-00 $33,900,000
Oct-00 $33,900,000
Nov-00 $33,800,000
Dec-00 $33,100,000
7.21 Capital Expenditures. Permit the Consolidated Group to make
capital expenditures in any fiscal year in excess of (i) $1,200,000 for any
individual transaction, or (ii) $4,000,000 in the aggregate.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1 If Borrower or any Company fails to pay when due and payable or
when declared due and payable, any portion of the Obligations (whether of
principal, interest (including any interest which, but for the provisions of the
Bankruptcy Code, would have accrued on such amounts), fees and charges due
Lender Group, reimbursement of Lender Group Expenses, or other amounts
constituting Obligations);
8.2 (a) If any Company fails to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in Sections 6.2
(Collateral Reporting), 6.3 (Financial Statements, Reports, Certificates), 6.4
(Other Reports), 6.5 (Tax Returns), 6.7 (Title to Equipment), 6.12 (Location of
Equipment), 6.13 (Compliance with Laws), 6.14 (Employee Benefits), or 6.15
(Leases) of this Agreement and such failure continues for a period of 5 Business
Days or a period of 3 Business Days in the case of clause (a) of Section 6.2;
(b) if any Company fails or neglects to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in Sections 6.1
(Accounting System) or 6.8 (Maintenance of Equipment) of this Agreement and such
failure continues for a period of 15 days; or (c) if any Company fails or
neglects to perform, keep, or observe any other term, provision, condition,
covenant, or agreement contained in this Agreement, or in any of the other Loan
Documents (giving effect to any grace periods, cure periods, or required
notices, if any, expressly provided for in this Agreement or such other Loan
Documents); in each case, other than any such term, provision, condition,
covenant,
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or agreement that is the subject of another provision of this Section 8, in
which event such other provision of this Section 8 shall govern; provided that,
during any period of time that any such failure or neglect of a Company referred
to in this Section 8 exists, even if such failure or neglect is not yet an Event
of Default by virtue of the existence of a grace or cure period or the pre-
condition of the giving of a notice, Lender Group shall not be required during
such period to make Advances to Borrower or assist the Borrower in obtaining
Letters of Credit for the account of Borrower;
8.3 If there is a Material Adverse Change;
8.4 If any material portion of any Company's properties or assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by any Company;
8.6 If an Insolvency Proceeding is commenced against any Company and
any of the following events occur: (a) such Company consents to the institution
of the Insolvency Proceeding against it; (b) the petition commencing the
Insolvency Proceeding is not timely controverted; (c) the petition commencing
the Insolvency Proceeding is not dismissed within sixty (60) calendar days of
the date of the filing thereof; provided, however, that, during the pendency of
such period, Lender Group shall be relieved of its obligation to extend credit
hereunder; (d) an interim trustee is appointed to take possession of all or a
substantial portion of the properties or assets of, or to operate all or any
substantial portion of the business of, such Company; or (e) an order for relief
shall have been issued or entered therein;
8.7 If any Company is enjoined, restrained, or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs;
8.8 If a notice of Lien (other than a Permitted Lien), levy, or
assessment is filed of record with respect to any Company's properties or assets
by the United States Government, or any department, agency, or instrumentality
thereof, or by any state, county, municipal, or governmental agency, or if any
taxes or debts owing at any time hereafter to any one or more of such entities
becomes a Lien (other than a Permitted Lien), whether choate or otherwise, upon
any Company's properties or assets and the same is not paid on the payment date
thereof;
8.9 If a judgment or other claim becomes a Lien or encumbrance upon
any material portion of any Company's properties or assets;
8.10 If there is a default under any Indenture, any Notes or in any
Material Contract to which any Company is a party with one or more third Persons
and such default (a) occurs at the final maturity of the obligations thereunder,
or (b) results in a right by such third Person(s), irrespective of whether
exercised, to accelerate the maturity of any Company's obligations thereunder;
8.11 If any Company makes any payment on account of Indebtedness that
has been contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness;
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8.12 If any material misstatement, misrepresentation or omission exists
now or hereafter in any warranty, representation, statement, or report made to
Lender Group by any Company or any officer, employee, agent, or director of a
Company, or if any such warranty or representation is withdrawn; or
8.13 If the obligation of any Subsidiary Guarantor under its guaranty
made pursuant to Section 18 or other third Person under any Loan Document is
limited or terminated by operation of law or by such Subsidiary Guarantor or
other third Person, or any such Subsidiary Guarantor or other third Person
becomes the subject of an Insolvency Proceeding.
9. LENDER GROUP'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence, and during the
continuation, of an Event of Default Administrative Agent may, pursuant to
Sections 17.4 and 17.5, without notice of its election and without demand, do or
cause Collateral Agent to do any one or more of the following, all of which are
authorized by the Companies:
(a) Declare all Obligations, whether evidenced by this Agreement,
by any of the other Loan Documents, or otherwise, immediately due and payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrower and Lender Group;
(c) Terminate this Agreement and any of the other Loan Documents
as to any future liability or obligation of Lender Group, but without affecting
Lender Group's rights and security interests in the Personal Property Collateral
or the Real Property Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Administrative Agent considers
advisable, and in such cases, Collateral Agent will credit Borrower's Loan
Account with only the net amounts received by Collateral Agent in payment of
such disputed Accounts after deducting all Lender Group Expenses incurred or
expended in connection therewith;
(e) Intentionally Omitted;
(f) Without notice to or demand upon any Company, make such
payments and do such acts as Administrative Agent considers necessary or
reasonable to protect the security interests in the Collateral of Administrative
Agent (for the benefit of Lender Group). The Companies agree to assemble the
Personal Property Collateral if Administrative Agent so requires, and to make
the Personal Property Collateral available to Administrative Agent as
Administrative Agent may designate. The Companies authorize the Agents to enter
the premises where the Personal Property Collateral is located, to take and
maintain possession of the Personal Property Collateral, or any part of it, and
to pay, purchase, contest, or compromise any encumbrance, charge, or Lien that
in the Agents' determination appears to conflict with the security interests of
the Administrative Agent and to pay all expenses incurred in connection
therewith. With respect to any of the Companies' owned or leased premises, the
Companies hereby grant the Agents a license to enter into possession of such
premises and to occupy the same, without charge, for up to one hundred twenty
(120) days in order to exercise any of Lender Group's rights or remedies
provided herein, at law, in equity, or otherwise;
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(g) Without notice to the Companies (such notice being expressly
waived), and without constituting a retention of any collateral in satisfaction
of an obligation (within the meaning of Section 9-505 of the Code), set off and
apply to the Obligations any and all (i) balances and deposits of the Companies
held by Lender Group (including any amounts received in the Lockbox Accounts),
or (ii) Indebtedness at any time owing to or for the credit or the account of
the Companies held by Lender Group;
(h) Hold, as cash collateral, any and all balances and deposits of
the Companies held by Lender Group, and any amounts received in the Lockbox
Accounts, to secure the full and final repayment of all of the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Personal Property Collateral. Subject to the provisions of
applicable law, Collateral Agent is hereby granted a license or other right to
use, without charge for the benefit of Lender Group, the Companies' labels,
patents, copyrights, rights of use of any name, trade secrets, trade names,
trademarks, servicemarks, and advertising matter, or any property of a similar
nature, as it pertains to the Personal Property Collateral, in completing
production of, advertising for sale, and selling any Personal Property
Collateral and the Companies' rights under all licenses and all franchise
agreements shall inure to Lender Group 's benefit;
(j) Subject to the provisions of applicable law, sell the Personal
Property Collateral at either a public or private sale, or both, by way of one
or more contracts or transactions, for cash or on terms, in such manner and at
such places (including the Companies' premises) as the Agents determine is
commercially reasonable. It is not necessary that the Personal Property
Collateral be present at any such sale;
(k) Administrative Agent shall give notice of the disposition
of the Personal Property Collateral as follows:
(1) Administrative Agent shall give Borrower (as agent for
the Companies) and each holder of a security interest in the Personal Property
Collateral who has filed with the Agents a written request for notice, a notice
in writing of the time and place of public sale, or, if the sale is a private
sale or some other disposition other than a public sale is to be made of the
Personal Property Collateral, then the time on or after which the private sale
or other disposition is to be made;
(2) the notice shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in Section 12, at least five (5) days
before the date fixed for the sale, or at least five (5) days before the date on
or after which the private sale or other disposition is to be made; no notice
needs to be given prior to the disposition of any portion of the Personal
Property Collateral that is perishable or threatens to decline speedily in value
or that is of a type customarily sold on a recognized market. Notice to Persons
other than Borrower claiming an interest in the Personal Property Collateral
shall be sent to such addresses as they have furnished to the Agents;
(3) if the sale is to be a public sale, the Administrative
Agent also shall give notice of the time and place by publishing a notice one
time at least five (5) days before the date of the sale in a newspaper of
general circulation in the county in which the sale is to be held;
(l) the Administrative Agent may credit bid and purchase at any
public sale; and
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(m) any deficiency that exists after disposition of the Personal
Property Collateral as provided above will be paid immediately by Borrower. Any
excess will be returned, without interest and subject to the rights of third
Persons, by the Administrative Agent to Borrower.
9.2 Assignment of Claims Act Notices. At such time as an Event of
Default has occurred and is continuing or Administrative Agent deems itself
insecure, the Agents may file with the applicable Account Debtor and with any
other required Persons any Assignment of Claims Act Notice delivered to
Administrative Agent in accordance with this Agreement.
9.3 Remedies Cumulative. Lender Group's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Lender Group shall have all other rights and remedies not inconsistent herewith
as provided under the Code, by law, or in equity. No exercise by Lender Group of
one right or remedy shall be deemed an election, and no waiver by Lender Group
of any Event of Default shall be deemed a continuing waiver. No delay by Lender
Group shall constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If any Company fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that
Administrative Agent determines that such failure by such Company could result
in a Material Adverse Change, in its discretion and without prior notice to any
Company, Administrative Agent may do, or may cause Collateral Agent, to do any
or all of the following: (a) make payment of the same or any part thereof; (b)
set up such reserves in Borrower's Loan Account as Administrative Agent deems
necessary to protect Lender Group from the exposure created by such failure; or
(c) obtain and maintain insurance policies of the type described in Section
6.10, and take any action with respect to such policies as Administrative Agent
deems prudent. Any such amounts paid or caused to be paid by Administrative
Agent shall constitute Lender Group Expenses. Any such payments shall not
constitute an agreement by Lender Group to make similar payments in the future
or a waiver by Lender Group of any Event of Default under this Agreement.
Administrative Agent need not inquire as to, or contest the validity of, any
such expense, tax, or Lien and the receipt of the usual official notice for the
payment thereof shall be conclusive evidence that the same was validly due and
owing.
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest; etc. Each Company waives demand, protest, notice
of protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guarantees at any time
held by Lender Group on which such Company may in any way be liable.
11.2 Lender Group's Liability for Collateral. So long as Lender Group
complies with its obligations, if any, under Section 9-207 of the Code, Lender
Group shall not in any way or manner be liable or responsible for: (a) the
safekeeping of the Collateral; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any diminution in the value
thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other Person. All risk of loss, damage, or destruction of
the Collateral shall be borne by the Companies.
11.3 Indemnification. Borrower shall pay, indemnify, defend, and hold
each Agent-Related Person, each Lender, each Participant, and each of their
respective officers, directors, employees,
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counsel, agents, and attorneys-in-fact (each, an "Indemnified Person") harmless
(to the fullest extent permitted by law) from and against any and all claims,
demands, suits, actions, investigations, proceedings, and damages, and all
reasonable attorneys fees and disbursements and other costs and expenses
actually incurred in connection therewith (as and when they are incurred and
irrespective of whether suit is brought), at any time asserted against, imposed
upon, or incurred by any of them in connection with or as a result of or related
to the execution, delivery, enforcement, performance, and administration of this
Agreement and any other Loan Documents or the transactions contemplated herein,
and with respect to any investigation, litigation, or proceeding related to this
Agreement, any other Loan Document, or the use of the proceeds of the credit
provided hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event or circumstance in any manner related
thereto (all the foregoing, collectively, the "Indemnified Liabilities").
Borrower shall have no obligation to any Indemnified Person under this Section
11.3 with respect to any Indemnified Liability that a court of competent
jurisdiction finally determines to have resulted from the gross negligence or
willful misconduct of such Indemnified Person. This provision shall survive the
termination of this Agreement and the repayment of the Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other Loan Document shall be in
writing and (except for financial statements and other informational documents
which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail (postage prepaid, return
receipt requested), overnight courier, or telefacsimile to Borrower, the other
Companies or the Agents, as the case may be, at its address set forth below:
If to Borrower or ICF KAISER INTERNATIONAL, INC.
the other Companies: 9300 Lee Highway
Fairfax, Virginia 22031-1207
Attn.: Mr. Timothy P. O'Connor
Chief Financial Officer
Fax No.: (703) 934-3528
with copies to: (i) ICF KAISER INTERNATIONAL, INC.
9300 Lee Highway
Fairfax, Virginia 22031-1207
Attn.: General Counsel
Fax No.: (703) 934-3029; and
(ii) SQUIRE, SANDERS & DEMPSEY
L.L.P.
1201 Pennsylvania Ave., N.W.
Washington, D.C. 20044-0407
Attn.: James J. Maiwurm, Esq.
Fax No.: (202) 626-6780
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If to Administrative
Agent: MADELEINE L.L.C.
450 Park Avenue
New York, New York 10022
28th Floor
Attn.: Mr. Kevin P. Genda
Fax No.: (212) 755-3009
with copies to: SCHULTE ROTH & ZABEL LLP
900 Third Avenue
New York, New York 10022
Attn.: Frederic L. Ragucci, Esq.
Fax No.: (212) 593-5955
If to Collateral
Agent: At such address as the Collateral Agent has
provided to Borrower and Lenders in writing.
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other parties. All notices or demands sent in accordance with this Section 12,
other than notices by Administrative Agent in connection with Sections 9-504 or
9-505 of the Code, shall be deemed received on the earlier of the date of actual
receipt or three (3) days after the deposit thereof in the mail. The Companies
acknowledge and agree that notices sent by Administrative Agent in connection
with Sections 9-504 or 9-505 of the Code shall be deemed sent when deposited in
the mail or personally delivered, or, where permitted by law, transmitted by
telefacsimile or other similar method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT), THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE
PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR
THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE PARTIES
AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND
FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK OR, AT THE
SOLE OPTION OF ADMINISTRATIVE AGENT, IN ANY OTHER COURT IN WHICH ADMINISTRATIVE
AGENT SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF THE COMPANIES AND LENDER
GROUP WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY
HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13. THE
COMPANIES AND LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH OF THE COMPANIES AND LENDER GROUP REPRESENTS THAT IT HAS
REVIEWED THIS WAIVER
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AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF DOCUMENTS.
All documents, schedules, invoices, agings, or other papers delivered
to any Agent may be destroyed or otherwise disposed of by such Agent four (4)
months after they are delivered to or received by such Agent, unless Borrower
requests, in writing, the return of said documents, schedules, or other papers
and makes arrangements, at Borrower's expense, for their return.
15. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
15.1 Assignments and Participations.
(a) Any Lender may, with the written consent of Administrative
Agent (and, in the case of an assignment to any financial institution that is
organized outside of the United States or that maintains its chief executive
office outside of the United States, the Borrower), assign and delegate to one
or more financial institutions (each an "Assignee") all, or any ratable part, of
the Obligations, the Commitments, and the other rights and obligations of such
Lender hereunder and under the other Loan Documents, in a minimum amount of
$5,000,000; provided, however, that the parties hereto may continue to deal
solely and directly with such Lender in connection with the interest so assigned
to an Assignee until (i) written notice of such assignment, together with
payment instructions, addresses, and related information with respect to the
Assignee, shall have been given to Borrower and Administrative Agent by such
Lender and the Assignee; (ii) such Lender and its Assignee shall have delivered
to Borrower and Administrative Agent (A) a fully executed Assignment and
Acceptance ("Assignment and Acceptance") in the form of Exhibit 15.1 and (B)
such form or forms as Borrower has requested and as may be required under the
United States Foreign Ownership, Control and Influence laws and regulations as
to which any Company may be subject; and (iii) the assignor Lender or Assignee
has paid to Administrative Agent for Administrative Agent's sole and separate
account a processing fee in the amount of $2,500. Anything contained herein to
the contrary notwithstanding, the consent of Administrative Agent shall not be
required (and payment of any fees shall not be required) if such assignment is
in connection with any merger, consolidation, sale, transfer, or other
disposition of all or any substantial portion of the business or loan portfolio
of such Lender.
(b) From and after the date that Administrative Agent notifies
the assignor Lender that it has received a fully executed Assignment and
Acceptance and payment of the above-referenced processing fee, (i) the Assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Lender under the Loan
Documents, and (ii) the assignor Lender shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement and the other Loan
Documents, such Lender shall cease to be a party hereto and thereto), and such
assignment shall effect a novation between Borrower, the Companies and the
Assignee.
(c) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (1) other than as
provided in such Assignment and Acceptance, such
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assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties, or representations
made in or in connection with this Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency, or value of this Agreement
or any other Loan Document furnished pursuant hereto; (2) such assigning Lender
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of the Companies or the performance or observance by
the Companies of any of their obligations under this Agreement or any other Loan
Document furnished pursuant hereto; (3) such Assignee confirms that it has
received a copy of this Agreement, together with such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (4) such Assignee will,
independently and without reliance upon Agents, such assigning Lender, or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (5) such Assignee appoints and
authorizes each Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to such Agent by the terms
hereof, together with such powers as are reasonably incidental thereto; and (6)
such Assignee agrees that it will perform in accordance with their terms all of
the obligations which by the terms of this Agreement are required to be
performed by it as a Lender.
(d) Immediately upon each Assignee's making its processing fee
payment under the Assignment and Acceptance, this Agreement shall be deemed to
be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments of the
Assignor and Assignee arising therefrom. The Commitment allocated to each
Assignee shall reduce such Commitment of the assigning Lender pro tanto.
(e) Any Lender may at any time, with the written consent of
Administrative Agent, which consent shall not be unreasonably withheld, sell to
one or more Persons (a "Participant") participating interests in the Obligations
owing to such Lender, such Lender's Commitment, and the other rights and
interests of that Lender (the "Originating Lender") hereunder and under the
other Loan Documents (provided that no written consent of Administrative Agent
shall be required in connection with any sale of such participating interests by
a Lender to an Affiliate of such Lender); provided, however, that (i) the
Originating Lender's obligations under this Agreement shall remain unchanged,
(ii) the Originating Lender shall remain solely responsible for the performance
of such obligations, (iii) the Companies and each Agent shall continue to deal
solely and directly with the Originating Lender in connection with the
Originating Lender's rights and obligations under this Agreement and the other
Loan Documents, (iv) no Originating Lender shall transfer or grant any
participating interest under which the Participant has the sole and exclusive
right to approve any amendment to, or any consent or waiver with respect to,
this Agreement or any other Loan Document, except to the extent such amendment
to, or consent or waiver with respect to this Agreement or of any other Loan
Document would (A) extend the final maturity date of the Obligations hereunder
in which such participant is participating; (B) reduce the interest rate
applicable to the Obligations hereunder in which such Participant is
participating; (C) release all or a material portion of the Collateral (except
to the extent expressly provided herein or in any of the Loan Documents)
supporting the Obligations hereunder in which such Participant is participating;
(D) postpone the payment of, or reduce the amount of, the interest or fees
hereunder in which such Participant is participating; (E) change the amount or
due dates of scheduled principal repayments or prepayments or premiums in
respect of the Obligations hereunder in which such Participant is participating;
or (F) subordinate the Liens of Administrative Agent for the benefit of the
Lender Group to the Liens of any other creditor of any Company; and (v) all
amounts payable by Borrower hereunder shall be determined as if such Originating
Lender had not sold such participation; except that, if amounts outstanding
under this Agreement are due and unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the
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right of set-off in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under this Agreement; provided, however,
that no Participant may exercise any such right of set-off without the notice to
and consent of Administrative Agent. The rights of any Participant shall only be
derivative through the Originating Lender with whom such Participant
participates and no Participant shall have any direct rights as to the other
Lenders, each Agent, Borrower, the Subsidiary Guarantors, the Collections, the
Collateral, or otherwise in respect of the Advances or the Letters of Credit. No
Participant shall have the right to participate directly in the making of
decisions by Lenders among themselves. The provisions of this Section 15.1(e)
are solely for the benefit of Lender Group, and no Company shall have any rights
as a third party beneficiary of any of such provisions.
(f) In connection with any such assignment or participation or
proposed assignment or participation, subject to Section 17.16(d), a Lender may
disclose to a third party all documents and information which it now or
hereafter may have relating to the Companies' business.
(g) Notwithstanding any other provision in this Agreement, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury
Regulation 31 C.F.R. (S)203.14, and such Federal Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law.
(h) Madeleine, in its capacity as a Lender, and an Assignee have
executed and delivered an Assignment and Acceptance as of the Closing Date and
the rights and duties of Madeleine as a Lender and of any other Assignee of
Madeleine as a Lender are subject to such Assignment and Acceptance.
15.2 Successors. This Agreement shall bind and inure to the benefit
of the respective successors and assigns of each of the parties hereto;
provided, however, that no Company may assign this Agreement or any rights or
duties hereunder without Lenders' prior written consent and any prohibited
assignment shall be absolutely void. No consent to assignment by Lenders shall
release any Company from the Obligations. A Lender may assign this Agreement
and its rights and duties hereunder pursuant to Section 15.1 and, except as
expressly required pursuant to Section 15.1, no consent or approval by any
Company is required in connection with any such assignment.
16. AMENDMENTS; WAIVERS.
16.1 Amendments and Waivers. No amendment or waiver of any provision
of this Agreement or any other Loan Document, and no consent with respect to any
departure by any Company therefrom, shall be effective unless the same shall be
in writing and signed by Administrative Agent and Required Lenders (or by
Administrative Agent at the written request of Required Lenders), Borrower and
the Subsidiary Guarantors, and then any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no such waiver, amendment, or consent shall,
unless in writing and signed by all Lenders, Borrower and the Subsidiary
Guarantors, and acknowledged by each Agent, do any of the following:
(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees, or other
amounts due to Lenders (or any of them) hereunder or under any other Loan
Document;
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(c) reduce the principal of, or the rate of interest specified
herein on, any Advance, or any fees or other amounts payable hereunder or
under any other Loan Document;
(d) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Advances, which is required for Lenders or
any of them to take any action hereunder;
(e) increase the advance rate with respect to Advances (except
for the restoration of an advance rate after the prior reduction thereof),
or change Section 2.1(b);
(f) amend this Section 16.1 or any provision of this Agreement
providing for consent or other action by all Lenders;
(g) release Collateral other than as permitted by Section 17.11;
(h) change the definition of "Required Lenders" or "Pro Rata
Share";
(i) release Borrower or any Subsidiary Guarantor from any
Obligation for the payment of money;
(j) amend any of the provisions of Article 17 or Section 2.1(k);
or
(k) subordinate the Liens of Administrative Agent for the benefit
of the Lender Group to the Liens of any other creditor of any Company.
and, provided further, that no amendment, waiver or consent shall,
unless in writing and signed by an Agent, affect the rights or duties of such
Agent under this Agreement or any other Loan Document; and, provided further,
that the limitation contained in clause (e) above shall not be deemed to limit
the ability of Administrative Agent to make Advances or Agent Advances, or the
Collateral Agent to make Advances or Agent Loans, as applicable, in accordance
with the provisions of Sections 2.1(d), (e), (f), (g), (h), or (k). The
foregoing notwithstanding, any amendment, modification, waiver, consent,
termination, or release of or with respect to any provision of this Agreement or
any other Loan Document that relates only to the relationship of Lender Group
among themselves, and that does not affect the rights or obligations of the
Companies, shall not require consent by or the agreement of the Companies.
16.2 No Waivers; Cumulative Remedies. No failure by any Agent or any
Lender to exercise any right, remedy, or option under this Agreement, any other
Loan Document, or any present or future supplement hereto or thereto, or in any
other agreement between or among Borrower and any Agent and/or any Lender, or
delay by any Agent or any Lender in exercising the same, will operate as a
waiver thereof. No waiver by any Agent or any Lender will be effective unless
it is in writing, and then only to the extent specifically stated. No waiver by
any Agent or Lenders on any occasion shall affect or diminish each Agent's and
each Lender's rights thereafter to require strict performance by any Company of
any provision of this Agreement. Each Agent's and each Lender's rights under
this Agreement and the other Loan Documents will be cumulative and not exclusive
of any other right or remedy which any Agent or any Lender may have.
17. AGENT; LENDER GROUP.
17.1 Appointment and Authorization of Agent. Each Lender hereby
designates and appoints Madeleine as its Administrative Agent under this
Agreement and the other Loan Documents and
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authorizes Madeleine to select the Collateral Agent after consultation with
Borrower. Each Lender hereby irrevocably authorizes each such Agent to take such
action on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto. Each Agent
agrees to act as such on the express conditions contained in this Article 17.
The provisions of this Article 17 are solely for the benefit of each Agent and
Lenders, and the Companies shall not have any rights as a third party
beneficiary of any of the provisions contained herein; provided, however, that
the provisions of Sections 17.10, 17.11, and 17.16(d) also shall be for the
benefit of the Companies. Any provision to the contrary contained elsewhere in
this Agreement or in any other Loan Document notwithstanding, none of the Agents
shall have any duties or responsibilities, except those expressly set forth
herein, nor shall any Agent have or be deemed to have any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations, or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against any Agent. Except as expressly otherwise
provided in this Agreement, each Agent shall have and may use its sole
discretion with respect to exercising or refraining from exercising any
discretionary rights or taking or refraining from taking any actions which such
Agent is expressly entitled to take or assert under or pursuant to this
Agreement and the other Loan Documents, including making the determinations
contemplated by Section 2.1(b). Without limiting the generality of the
foregoing, or of any other provision of the Loan Documents that provides rights
or powers to each Agent, Lenders agree that Administrative Agent shall have the
right to exercise the following powers and to delegate the exercise of any such
powers to any other Agent as long as this Agreement remains in effect: (a)
maintain, in accordance with its customary business practices, ledgers and
records reflecting the status of the Advances, the Letters of Credit, the
Collateral, the Collections, and related matters; (b) execute and/or file any
and all financing or similar statements or notices, amendments, renewals,
supplements, documents, instruments, proofs of claim for Lenders, notices and
other written agreements with respect to the Loan Documents; (c) make Advances
for itself or on behalf of Lenders as provided in the Loan Documents; (d)
receive, apply, and distribute the Collections as provided in the Loan
Documents; (e) open and maintain such bank accounts and lock boxes as
Administrative Agent deems necessary and appropriate in accordance with the Loan
Documents for the foregoing purposes with respect to the Collateral and the
Collections; (f) perform, exercise, and enforce any and all other rights and
remedies of Lender Group with respect to Borrower, the Advances, the Letters of
Credit, the Collateral, the Collections, or otherwise related to any of same as
provided in the Loan Documents; and (g) incur and pay such Lender Group Expenses
as Administrative Agent may deem necessary or appropriate for the performance
and fulfillment of its functions and powers pursuant to the Loan Documents.
17.2 Delegation of Duties. Except as otherwise provided in this
Section 17.2, any Agent may execute any of its duties under this Agreement or
any other Loan Document by or through agents, employees, or attorneys-in-fact
and shall be entitled to advice of counsel concerning all matters pertaining to
such duties. No Agent shall be responsible for the negligence or misconduct of
any agent or attorney-in-fact that it selects as long as such selection was made
in compliance with this Section 17.2 and without gross negligence or willful
misconduct. The foregoing notwithstanding, no Agent shall make any material
delegation of duties to subagents or non-employee delegees without the prior
written consent of Required Lenders (it being understood that routine delegation
of such administrative matters as filing financing statements, or conducting
appraisals or audits, is not viewed as a material delegation that requires prior
Required Lender approval).
17.3 Liability of Agent-Related Persons-. None of Agent-Related
Persons shall (i) be liable for any action taken or omitted to be taken by any
of them under or in connection with this Agreement or any other Loan Document or
the transactions contemplated hereby (except for its own
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gross negligence or willful misconduct), or, (ii) be responsible in any manner
to any of Lenders for any recital, statement, representation or warranty made by
any Company, or any Subsidiary or Affiliate of any Company, or any officer or
director thereof, contained in this Agreement or in any other Loan Document, or
in any certificate, report, statement, or other document referred to or provided
for in, or received by any Agent under or in connection with, this Agreement or
any other Loan Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document, or
for any failure of Borrower or any other party to any Loan Document to perform
its obligations hereunder or thereunder. No Agent-Related Person shall be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books, or
records of any Company, or of any Company's Subsidiaries or Affiliates.
17.4 Reliance by Agent. Each Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex, or
telephone message, statement or other document or conversation believed by it to
be genuine and correct and to have been signed, sent, or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to Borrower or counsel to any Lender), independent accountants, and
other experts selected by such Agent. Each Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of Required
Lenders or all Lenders, as applicable, and until such instructions are received,
such Agent shall act, or refrain from acting, as it deems advisable so long as
it is not grossly negligent or guilty of willful misconduct. If any Agent so
requests, it shall first be indemnified to its reasonable satisfaction by
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. Each Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or consent of
Required Lenders or all Lenders, as applicable, and such request and any action
taken or failure to act pursuant thereto shall be binding upon all of Lenders.
17.5 Notice of Default or Event of Default. No Agent shall be deemed
to have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to defaults in the payment of principal, interest,
fees, and expenses required to be paid to such Agent for the account of such
Agent or Lenders, except in the case of the Administrative Agent with respect to
actual knowledge of the existence of an Overadvance, and except with respect to
Defaults and Events of Default of which Administrative Agent has actual
knowledge, unless Administrative Agent shall have received written notice from a
Lender or Borrower referring to this Agreement, describing such Default or Event
of Default, and stating that such notice is a "notice of default."
Administrative Agent promptly will notify Lenders of its receipt of any such
notice or of any Event of Default of which Administrative Agent has, or is
deemed to have, actual knowledge. If any Lender obtains actual knowledge of any
Event of Default, such Lender promptly shall notify the other Lenders and
Administrative Agent of such Event of Default. Each Lender shall be solely
responsible for giving any notices to its Participants, if any. Subject to
Section 17.4, Administrative Agent shall take such action with respect to such
Default or Event of Default as may be requested by Required Lenders; provided,
however, that:
(a) At all times, Administrative Agent may propose and, with the
consent of Required Lenders (which shall not be unreasonably withheld and
which shall be deemed to have been given by a Lender unless such Lender has
notified Administrative Agent to the contrary in writing within three (3)
days of notification of such proposed actions by Administrative Agent)
exercise or cause Collateral Agent to exercise, any remedies on behalf of
Lender Group; and
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(b) At all times, once Administrative Agent and Required Lenders
or all Lenders, as the case may be, have approved the exercise of a
particular remedy or pursuit of a course of action, Administrative Agent
may, but shall not be obligated to, make all administrative decisions in
connection therewith or take or cause Collateral Agent to take all other
actions reasonably incidental thereto (for example, if Required Lenders
approve the foreclosure of certain Collateral, Administrative Agent shall
not be required to seek consent for the administrative aspects of
conducting such sale or handling of such Collateral).
17.6 Credit Decision. Each Lender acknowledges that none of Agent-
Related Persons has made any representation or warranty to it, and that no act
by any Agent hereinafter taken, including any review of the affairs of the
Companies and their respective Subsidiaries or Affiliates, shall be deemed to
constitute any representation or warranty by any Agent-Related Person to any
Lender. Each Lender represents to each Agent that it has, independently and
without reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition, and creditworthiness of Borrower and any other Person (other
than Lender Group) party to a Loan Document, and all applicable bank regulatory
laws relating to the transactions contemplated hereby, and made its own decision
to enter into this Agreement and to extend credit to Borrower. Each Lender also
represents that it will, independently and without reliance upon any Agent-
Related Person and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals,
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigations as it deems necessary to inform
itself as to the business, prospects, operations, property, financial and other
condition, and creditworthiness of Borrower, and any other Person (other than
Lender Group) party to a Loan Document. Except for notices, reports, and other
documents expressly herein required to be furnished to Lenders by such Agent, no
Agent shall have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, prospects, operations,
property, financial and other condition, or creditworthiness of Borrower, and
any other Person party to a Loan Document that may come into the possession of
any of Agent-Related Persons.
17.7 Costs and Expenses; Indemnification. Any Agent may incur and
pay Lender Group Expenses to the extent such Agent deems reasonably necessary or
appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to the Loan Documents, including, without limiting the
generality of the foregoing, but subject to any requirements of the Loan
Documents that it obtain any applicable consents or engage in any required
consultation, court costs, reasonable attorneys fees and expenses, costs of
collection by outside collection agencies and auctioneer fees and costs of
security guards or insurance premiums paid to maintain the Collateral, whether
or not Borrower is obligated to reimburse any Agent or Lenders for such expenses
pursuant to the Loan Agreement or otherwise. Administrative Agent is authorized
and directed to direct Collateral Agent to deduct and retain sufficient amounts
from Collections to reimburse any Agent for such out-of-pocket costs and
expenses prior to the distribution of any amounts to Lenders. In the event any
Agent is not reimbursed for such costs and expenses from Collections, each
Lender hereby agrees that it is and shall be obligated to pay to or reimburse
such Agent for the amount of such Lender's Pro Rata Share thereof. Whether or
not the transactions contemplated hereby are consummated, Lenders shall
indemnify upon demand Agent-Related Persons (to the extent not reimbursed by or
on behalf of Borrower and without limiting the obligation of Borrower to do so),
according to their Pro Rata Shares, from and against any and all Indemnified
Liabilities; provided, however, that no Lender shall be liable for the payment
to Agent-Related Persons of any portion of such Indemnified Liabilities
resulting solely from such Person's gross negligence, bad faith, or willful
misconduct. Without limitation of the foregoing, each Lender shall reimburse
each Agent upon demand for its ratable share of any costs or out-of-pocket
expenses
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(including attorney fees and expenses) incurred by such Agent in connection with
the preparation, execution, delivery, administration, modification, amendment,
or enforcement (whether through negotiations, legal proceedings or otherwise)
of, or legal advice in respect of rights or responsibilities under, this
Agreement, any other Loan Document, or any document contemplated by or referred
to herein, to the extent that such Agent is not reimbursed for such expenses by
or on behalf of Borrower. The undertaking in this Section 17.7 shall survive the
payment of all Obligations hereunder and the resignation or replacement of such
Agent.
17.8 Agents in Individual Capacity. Each Agent and its Affiliates
may make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests, in and generally engage in any kind of banking,
lending, trust, financial advisory, underwriting, or other business with any
Company and any Company's Subsidiaries and Affiliates and any other Person party
to any Loan Documents as though such Agent were not an Agent hereunder without
notice to or consent of Lenders. Lenders acknowledge that, pursuant to such
activities, any Agent and its Affiliates may receive information regarding
Borrower, the other Companies and their Affiliates and any other Company or
Person party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrower or such other Person and that prohibit the
disclosure of such information to Lenders, and Lenders acknowledge that, in such
circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver such Agent will use its reasonable best efforts to
obtain), such Agent shall be under no obligation to provide such information to
them. With respect to Agent Advances, Madeleine shall have the same rights and
powers under this Agreement as any other Lender and may exercise the same as
though it were not Administrative Agent, and the terms "Lender" and "Lenders"
include Madeleine in its individual capacity. With respect to Agent Loans,
Collateral Agent, in its individual capacity and not in its capacity as
Collateral Agent, shall, if it is a Lender hereunder, have the same rights and
powers under this Agreement as any other Lender and may exercise the same as
though it were not Collateral Agent, and the terms "Lender" and "Lenders" shall,
in such case, include Collateral Agent in its individual capacity.
17.9 Successor Administrative Agent. Administrative Agent may resign
as Administrative Agent following notice of such resignation ("Notice") to the
Lenders and Borrower, and effective upon the appointment of and acceptance of
such appointment by, a successor Administrative Agent. If Administrative Agent
resigns under this Agreement, Required Lenders shall appoint any Lender as
successor Administrative Agent for Lenders. If no successor Administrative
Agent is appointed within thirty (30) days of such retiring Administrative
Agent's Notice, the resigning Administrative Agent may appoint a successor
Administrative Agent, after consulting with Lenders and Borrower. In any such
event, upon the acceptance of its appointment as successor Administrative Agent
hereunder, such successor Administrative Agent shall succeed to all the rights,
powers and duties of the retiring Administrative Agent and the term
"Administrative Agent" shall mean such successor Administrative Agent and the
retiring Administrative Agent's appointment, powers, and duties as
Administrative Agent shall be terminated. After any retiring Administrative
Agent's resignation hereunder as Administrative Agent, the provisions of this
Section 17 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this Agreement.
17.10 Withholding Tax.
(a) If any Lender is a "foreign corporation, partnership or
trust" within the meaning of the IRC and such Lender claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the IRC, such
Lender agrees with and in favor of Agent and Borrower, to deliver to Agent and
Borrower:
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(i) if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty, properly
completed IRS Forms 1001 and W-8 before the payment of any interest in the first
calendar year and before the payment of any interest in each third succeeding
calendar year during which interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Lender, two properly
completed and executed copies of IRS Form 4224 before the payment of any
interest is due in the first taxable year of such Lender and in each succeeding
taxable year of such Lender during which interest may be paid under this
Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required under the
IRC or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Lender agrees to promptly notify Administrative Agent and Collateral Agent
and Borrower of any change in circumstances which would modify or render invalid
any claimed exemption or reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Lender sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations of Borrower, such Lender agrees to notify
Administrative Agent and Collateral Agent and Borrower of the percentage amount
in which it is no longer the beneficial owner of Obligations of Borrower to such
Lender. To the extent of such percentage amount, Administrative Agent and
Collateral Agent and Borrower will treat such Lender's IRS Form 1001 as no
longer valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of
Borrower to such Lender, such Lender agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the IRC.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, Collateral Agent may withhold from any interest payment to such
Lender an amount equivalent to the applicable withholding tax after taking into
account such reduction. If the forms or other documentation required by
subsection (a) of this Section 17.10 are not delivered to Agents, then
Collateral Agent may withhold from any interest payment to such Lender not
providing such forms or other documentation an amount equivalent to the
applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that Administrative Agent,
Collateral Agent or Borrower did not properly withhold tax from amounts paid to
or for the account of any Lender (because the appropriate form was not
delivered, was not properly executed, or because such Lender failed to notify
Administrative Agent, Collateral Agent and Borrower of a change in circumstances
which rendered the exemption from, or reduction of, withholding tax ineffective,
or for any other reason) such Lender shall indemnify Administrative Agent,
Collateral Agent and Borrower fully for all amounts paid, directly or
indirectly, by Administrative Agent, Collateral Agent or Borrower as tax or
otherwise, including penalties and interest, and including any taxes imposed by
any jurisdiction on the amounts payable to Administrative Agent, Collateral
Agent or Borrower under this Section 17.10, together with all costs and expenses
(including attorneys fees and expenses). The obligation of Lenders under this
subsection shall survive the payment of all Obligations and the resignation of
Administrative Agent or Collateral Agent.
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17.11 Collateral Matters.
(a) Lenders hereby irrevocably authorize Administrative Agent
to release any Lien on any Collateral (i) upon the termination of the
Commitments and payment and satisfaction in full by or on behalf of Borrower of
all Obligations; and upon such termination and payment Administrative Agent
shall deliver to Borrower (on behalf of all the Companies), at Borrower's sole
cost and expense, all UCC termination statements and any other documents
necessary to terminate the Loan Documents and release the Liens with respect to
the Collateral; (ii) constituting property being sold or disposed of if a
release is required or desirable in connection therewith and if Borrower
certifies to Administrative Agent that the sale or disposition is permitted
under Section 7.4 of this Agreement or the other Loan Documents (and
Administrative Agent may rely conclusively on any such certificate, without
further inquiry); (iii) constituting property in which no Company owned an
interest at the time the Lien was granted or at any time thereafter; or (iv)
constituting property leased to any Company under a lease that has expired or
been terminated in a transaction permitted under this Agreement. Except as
provided above, Administrative Agent will not release any Lien on any Collateral
without the prior written authorization of (y) if the release is of all or any
material portion of the Collateral, of all Lenders or (z) otherwise, of the
Required Lenders. Upon request by Administrative Agent or Borrower at any time,
Lenders will confirm in writing Administrative Agent's authority to release any
such Liens on particular types or items of Collateral pursuant to this Section
17.11; provided, however, that (i) the Agents shall not be required to execute
any document necessary to evidence such release on terms that, in either Agent's
opinion, would expose such Agent to liability or create any obligation or entail
any consequence other than the release of such Lien without recourse,
representation, or warranty, and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any Liens (other than those
expressly being released), upon (or obligations of any Company in respect of)
all interests retained by any Company, including, the proceeds of any sale, all
of which shall continue to constitute part of the Collateral.
(b) No Agent shall have any obligation whatsoever to any Lender
to assure that the Collateral exists or is owned by a Company, is cared for,
protected, or insured or has been encumbered, or that the Liens of
Administrative Agent (for the benefit of Lender Group) have been properly or
sufficiently or lawfully created, perfected, protected, or enforced or are
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure, or fidelity, or to continue
exercising, any of the rights, authorities and powers granted or available to
the Agents pursuant to any of the Loan Documents, it being understood and agreed
that in respect of the Collateral, or any act, omission or event related
thereto, subject to the terms and conditions contained herein, the Agents may
act in any manner they may deem appropriate, absent gross negligence or willful
misconduct, in their sole discretion given the Agents' own interest in the
Collateral in their capacity as Lenders and that the Agents shall have no other
duty or liability whatsoever to any Lender as to any of the foregoing, except as
otherwise provided herein.
17.12 Restrictions on Actions by Lenders; Sharing of Payments.
(a) Each of Lenders agrees that it shall not, without the
express consent of Administrative Agent, and that it shall, to the extent it is
lawfully entitled to do so, upon the request of Administrative Agent, set off
against the Obligations any amounts owing by such Lender to any Company or any
accounts of any Company now or hereafter maintained with such Lender. Each of
Lenders further agrees that it shall not, unless specifically requested to do so
by Administrative Agent, take or cause to be taken any action, including the
commencement of any legal or equitable proceedings, to foreclose any Lien on, or
otherwise enforce any security interest in, any of the Collateral the purpose
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of which is, or could be, to give such Lender any preference or priority against
the other Lenders with respect to the Collateral.
(b) Subject to Section 17.8, if, at any time or times, any
Lender shall receive (i) by payment, foreclosure, setoff, or otherwise, any
proceeds of Collateral or any payments with respect to the Obligations of
Borrower to such Lender arising under, or relating to, this Agreement or the
other Loan Documents, except for any such proceeds or payments received by such
Lender from Collateral Agent pursuant to the terms of this Agreement, or (ii)
payments from Collateral Agent in excess of such Lender's Pro Rata Share of all
such distributions by Collateral Agent, such Lender shall promptly (1) turn the
same over to Collateral Agent, in kind, and with such endorsements as may be
required to negotiate the same to Collateral Agent, or in same day funds, as
applicable, for the account of all of Lenders and for application to the
Obligations in accordance with the applicable provisions of this Agreement, or
(2) purchase, without recourse or warranty, an undivided interest and
participation in the Obligations owed to the other Lenders so that such excess
payment received shall be applied ratably as among Lenders in accordance with
their Pro Rata Shares; provided, however, that if all or part of such excess
payment received by the purchasing party is thereafter recovered from it, those
purchases of participations shall be rescinded in whole or in part, as
applicable, and the applicable portion of the purchase price paid therefor shall
be returned to such purchasing party, but without interest except to the extent
that such purchasing party is required to pay interest in connection with the
recovery of the excess payment.
17.13 Agency for Perfection. Each Agent and each Lender hereby
appoints each other Lender as agent for the purpose of perfecting the Liens of
Lender Group in assets which, in accordance with Article 9 of the Code, can be
perfected only by possession. Should any Lender obtain possession of any such
Collateral, such Lender shall notify Administrative Agent thereof, and, promptly
upon Administrative Agent's request therefor, shall deliver such Collateral to
Administrative Agent or in accordance with Administrative Agent's instructions.
17.14 Payments by Collateral Agent to Lenders. All payments to be
made by Collateral Agent to Lenders shall be made by bank wire transfer or
internal transfer of immediately available funds pursuant to the instructions
set forth on Schedule C-1, or pursuant to such other wire transfer instructions
as each party may designate for itself by written notice to Collateral Agent.
Concurrently with each such payment, Collateral Agent shall identify whether
such payment (or any portion thereof) represents principal, premium or interest
on revolving advances or otherwise.
17.15 Concerning the Collateral and Related Loan Documents. Each
member of Lender Group authorizes and directs Administrative Agent to enter
into, or to cause Collateral Agent to enter into, this Agreement and the other
Loan Documents relating to the Collateral, for the ratable benefit of Lender
Group. Each member of Lender Group agrees that any action taken by
Administrative Agent, Collateral Agent, Required Lenders, or all Lenders, as
applicable, in accordance with the terms of this Agreement or the other Loan
Documents relating to the Collateral and the exercise by Administrative Agent,
Collateral Agent, Required Lenders, or all Lenders, as applicable, of their
respective powers set forth therein or herein, together with such other powers
that are reasonably incidental thereto, shall be binding upon all of Lenders.
17.16 Field Audits and Examination Reports; Confidentiality;
Disclaimers by Lenders; Other Reports and Information. By signing this
Agreement, each Lender:
(a) is deemed to have requested that Collateral Agent furnish
such Lender, promptly after it becomes available, a copy of each field audit or
examination report (each a "Report" and
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collectively, "Reports") prepared by or at the request of Administrative Agent
or Collateral Agent, and Collateral Agent shall so furnish each Lender with such
Reports;
(b) expressly agrees and acknowledges that neither Collateral
Agent nor Administrative Agent (i) makes any representation or warranty as to
the accuracy of any Report, and (ii) shall not be liable for any information
contained in any Report;
(c) expressly agrees and acknowledges that the Reports are
not comprehensive audits or examinations, that Collateral Agent or other party
performing any audit or examination will inspect only specific information
regarding the Companies and will rely significantly upon the Companies' Books,
as well as on representations of the Companies' personnel;
(d) agrees to keep all Reports and other material information
obtained by it pursuant to the requirements of this Agreement in accordance with
its reasonable customary procedures for handling confidential information; it
being understood and agreed by the Companies that in any event such Lender may
make disclosures (i) reasonably required by any bona fide potential or actual
Assignee, transferee, or Participant in connection with any contemplated or
actual assignment or transfer by such Lender of an interest herein or any
participation interest in such Lender's rights hereunder, provided that such
potential or actual Assignee, transferee or Participant agrees to comply with
this Section 17.16(d) as if it were a Lender hereunder, (ii) of information that
has become public by disclosures made by Persons other than such Lender, its
Affiliates, assignees, transferees, or participants, or (iii) as required or
requested by any court, governmental or administrative agency, pursuant to any
subpoena or other legal process, or by any law, statute, regulation, or court
order; provided, however, that, unless prohibited by applicable law, statute,
regulation, or court order, such Lender shall notify Borrower of any request by
any court, governmental or administrative agency, or pursuant to any subpoena or
other legal process for disclosure of any such non-public material information
concurrent with, or where practicable, prior to the disclosure thereof; and
(e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i) to hold any
Agent or Lender preparing a Report harmless from any action the indemnifying
Lender may take or conclusion the indemnifying Lender may reach or draw from any
Report in connection with any loans or other credit accommodations that the
indemnifying Lender has made or may make to Borrower, or the indemnifying
Lender's participation in, or the indemnifying Lender's purchase of, a loan or
loans to Borrower; and (ii) to pay and protect, and indemnify, defend, and hold
any Agent or Lender preparing a Report harmless from and against, the claims,
actions, proceedings, damages, costs, expenses and other amounts (including,
attorney costs) incurred by such Agent or Lender preparing a Report as the
direct or indirect result of any third parties who might obtain all or part of
any Report through the indemnifying Lender.
In addition to the foregoing: (x) any Lender may from time to time
request of any Agent in writing that such Agent provide to such Lender a copy of
any report or document provided by Borrower or other Company to such Agent, and,
upon receipt of such request, such Agent shall provide a copy of same to such
Lender promptly upon receipt thereof; (y) to the extent that such Agent is
entitled, under any provision of the Loan Documents, to request additional
reports or information from Borrower, any Lender may, from time to time,
reasonably request any Agent to exercise such right as specified in such
Lender's notice to such Agent, whereupon such Agent promptly shall request of
Borrower the additional reports or information specified by such Lender, and,
upon receipt thereof, such Agent promptly shall provide a copy of same to such
Lender; and (z) any time that Collateral Agent renders to Borrower a statement
regarding the Loan Account, Collateral Agent shall send a copy of such statement
to each Lender.
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17.17 Several Obligations; No Liability. Notwithstanding that
certain of the Loan Documents now or hereafter may have been or will be executed
only by or in favor of Administrative Agent in its capacity as such, and not by
or in favor of Lenders, any and all obligations on the part of the Agents to
make any Advances shall constitute the several (and not joint) obligations of
the respective Lenders on a ratable basis, according to their respective
Commitments, to make an amount of such Advances not to exceed, in principal
amount, at any one time outstanding, the amount of their respective Commitments.
Nothing contained herein shall confer upon any Lender any interest in, or
subject any Lender to any liability for, or in respect of, the business, assets,
profits, losses, or liabilities of any other Lender. Each Lender shall be
solely responsible for notifying its Participants of any matters relating to the
Loan Documents to the extent any such notice may be required, and no Lender
shall have any obligation, duty, or liability to any Participant of any other
Lender. Except as provided in Section 17.7, no member of Lender Group shall
have any liability for the acts of any other member of Lender Group. No Lender
shall be responsible to Borrower or any other Person for any failure by any
other Lender to fulfill its obligations to make Advances, nor to advance for it
or on its behalf in connection with its Commitment, nor to take any other action
on its behalf hereunder or in connection with the financing contemplated herein.
18. GUARANTY
18.1. Guaranty. Each Subsidiary Guarantor, jointly and severally,
hereby (i) irrevocably, absolutely and unconditionally guarantees the prompt
payment, as and when due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), of all the Obligations,
including, without limitation, all amounts now or hereafter owing in respect of
the Loan Documents, whether for principal, interest (including interest accruing
on or after the filing of any petition in bankruptcy or for reorganization
relating to Borrower whether or not a claim for post-filing interest is allowed
in such proceeding), fees, expenses, indemnifications or otherwise, and
(ii) agrees to pay any and all expenses (including reasonable counsel fees and
expenses) incurred by Lender Group in enforcing its rights under this Section
18.
18.2. Obligations Unconditional.
(i) Each Subsidiary Guarantor, jointly and severally,
hereby guarantees that the Obligations will be paid strictly in accordance with
the terms of the Loan Documents, regardless of any law, regulation or order now
or hereafter in effect in any jurisdiction affecting any of such terms or the
rights of Lender Group with respect thereto. Each Subsidiary Guarantor agrees
that its guarantee constitutes a guaranty of payment when due and not of
collection, and waives any right to require that any resort be had by Lender
Group to any Collateral. The obligations of each Subsidiary Guarantor under this
Section 18 are independent of the obligations of Borrower under this Agreement
and the other Loan Documents and a separate action or actions may be brought and
prosecuted against any or all of the Subsidiary Guarantors to enforce this
Section 18 and the guaranty made pursuant hereto irrespective of whether any
action is brought against Borrower or whether Borrower is joined in any such
action. The liability of the Subsidiary Guarantors hereunder shall be absolute
and unconditional, irrespective of: (i) any lack of validity or enforceability
of any Loan Document or any agreement or instrument relating thereto; (ii) any
extension or change in the time, manner or place of payment of, or in any other
term in respect of, all or any of the Obligations (including, without
limitation, any extension for longer than the original period), or any other
amendment or waiver of or consent to any departure from any provision of any
Loan Document (including the creation or existence of any Obligations in excess
of the amounts permitted by any lending formulas contained in this Agreement);
(iii) any exchange or release of, or non-perfection of any Lien on, any
Collateral, or any release or amendment or waiver of or consent to any departure
from any other guaranty, for all or any of the Obligations; (iv) the existence
of
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any claim, set-off, defense or other right that any Subsidiary Guarantor may
have against any Person, including the Agents or the Lenders; or (v) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, Borrower or any other Subsidiary Guarantor in respect of the
Obligations.
(ii) The guaranty granted pursuant to this Section 18
(i) is a continuing guaranty and shall remain in full force and effect until
such date on which all of the Obligations and all other expenses to be paid by
Borrower pursuant hereto shall have been satisfied in full after the Commitments
shall have been terminated, (ii) shall continue to be effective or shall be
reinstated, as the case may be, if at any time any payment of any of the
Obligations is rescinded or must otherwise be returned by Lender Group upon the
insolvency, bankruptcy or reorganization of Borrower or any Company or
otherwise, all as though such payment had not been made, and (iii) shall be
binding upon each Subsidiary Guarantor and each of their respective successors
and assigns.
18.3. Waivers.
(a) Each Subsidiary Guarantor hereby waives, to the extent
permitted by applicable law, (i) promptness and diligence, (ii) notice of
acceptance and notice of the incurrence of any Obligation, (iii) notice of any
action taken by Lender Group or Borrower or other Subsidiary Guarantor or any
other agreement or instrument relating thereto, (iv) all other notices, demands
and protests, and all other formalities of every kind in connection with the
enforcement of the Obligations or of the obligations of the Subsidiary
Guarantors hereunder, the omission of or delay in which, but for the provisions
of this Section 18.3, might constitute grounds for relieving such Subsidiary
Guarantor of its obligations hereunder, (v) any right to compel or direct the
Agents or the Lenders to seek payment or recovery of any amounts owed under this
Section 18 from any one particular fund or source, (vi) any requirement that the
Agents or the Lenders protect, secure, perfect or insure any Lien or any
property subject thereto or exhaust any right or take any action against any
Person or any Collateral, and (vii) any other defenses available to Borrower or
the Subsidiary Guarantors. All such waivers by the Subsidiary Guarantors shall
be effective only to the extent permitted by applicable law.
(b) To the fullest extent permitted by applicable law, each
Company expressly waives any suretyship defenses under New York law or other
applicable law to the enforcement of the Loan Agreement, or to the enforcement
of any other Loan Document, or to any rights of the Lender Group or Agents on
behalf thereof created or granted hereby or thereby, or to the recovery by the
Lender Group or Agents for the benefit of the Lender Group against any Company
or any other Person liable therefor of any deficiency after a judicial or
nonjudicial foreclosure or sale of any collateral, whether real or personal,
from time to time securing any of the Obligations, even though such a
foreclosure or sale may impair the subrogation rights of one or more of the
Companies and may preclude one or more of the Companies from obtaining
reimbursement or contribution from other Companies.
(c) Each Company hereby agrees to keep each other Company
fully apprised at all times as to the status of its business, affairs, finances,
and financial condition, and its ability to perform its Obligations under the
Loan Documents, and in particular as to any adverse developments with respect
thereto. Each Company hereby agrees to undertake to keep itself apprised at all
times as to the status of the business, affairs, finances, and financial
condition of each other Company, and of the ability of each other Company to
perform its Obligations under the Loan Documents, and in particular as to any
adverse developments with respect to any thereof. Each Company hereby agrees, in
light of the foregoing mutual covenants to inform each other, and to keep
themselves and each other informed as to such matters, that neither the Lender
Group nor Agents shall have a duty to inform any Company of any
72
<PAGE>
information pertaining to the business, affairs, finances, or financial
condition of any other Company, or pertaining to the ability of any other
Company to perform its Obligations under the Loan Documents, even if such
information is adverse, and even if such information might influence the
decision of one or more of the Companies to continue to be jointly and severally
liable for, or to provide Collateral for, Obligations of one or more of the
other Companies. To the fullest extent permitted by applicable law, each Company
hereby expressly waives any duty of the Lender Group or Agents to inform any
Company of any such information.
18.4. Subrogation. Until such time as the Obligations have been
satisfied in full and all Commitments have been terminated, each Subsidiary
Guarantor hereby irrevocably agrees, that it will not exercise any and all
rights which it has or may have at any time or from time to time (whether
arising directly or indirectly by operation of law or contract) to assert any
claim against Borrower or any other Subsidiary Guarantor on account of any
payments made under this Agreement, including, without limitation, all existing
and future rights of subrogation, reimbursement, exoneration, contribution
and/or indemnity. If any amount shall be paid to a Subsidiary Guarantor on
account of the enforcement of such rights at any time when all of such
Obligations and all other Obligations shall not have been paid in full, such
amount shall be held in trust for the benefit of the Agents or the Lenders,
shall be segregated from the other funds of such Subsidiary Guarantor and shall
forthwith be paid over to the Collateral Agent to be applied in whole or in part
against the Obligations, whether matured or unmatured, in accordance with the
terms of this Agreement.
18.5. No Waiver; Remedies. No failure of Lender Group to exercise,
and no delay in exercising, any right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedy provided by law.
18.6. Stay of Acceleration. If acceleration of the time for payment
of any amount payable by Borrower in respect of the Obligations is stayed upon
the insolvency, bankruptcy or reorganization of Borrower, all such amounts
otherwise subject to acceleration under the terms of this Agreement shall
nonetheless be payable by the Subsidiary Guarantors, or any one of them,
forthwith on demand by Administrative Agent.
18.7 Joinder of Additional Subsidiary Guarantors. Borrower shall
cause each of its Subsidiaries that are not Subsidiary Guarantors on the Closing
Date, other than (1) Subsidiaries described in Schedule 5.3, (2) Subsidiaries
organized under the laws of any jurisdiction outside of the United States of
America, (3) Subsidiaries that do not conduct any business and do not own any
assets with a fair market value in excess of $5,000,000 in the aggregate for all
such Subsidiaries or $1,000,000 for any such individual Subsidiary or (4) ICF
Kaiser Engineers Eastern Europe, Inc. and ICF Kaiser Technology Holdings, Inc.,
as long as either such Subsidiary listed in this clause (4) owns no assets,
other than equity interests in another Person, and conducts no business, to
execute and deliver to the Administrative Agent, promptly and in any event
within five (5) days after such Subsidiary or Subsidiaries commence business or
obtain ownership of assets in excess of the Dollar amounts specified in the
foregoing clause (3), (A) a Joinder Agreement substantially in the form attached
hereto as Exhibit 18.7, (B) Annex I to a Pledge Agreement, appropriately
completed, providing that all of the capital stock of such Subsidiary shall be
pledged to Lender Group as collateral security for the Obligations and deliver
to the Administrative Agent the certificates representing such capital stock,
together with instruments of assignment and transfer in such form as the
Administrative Agent may request, and (C) such other agreements, instruments,
approvals, UCC-1 financing statements or other documents or instruments
requested by the Administrative Agent which provide that such Subsidiary shall
become bound by the guaranty set forth in this Section 18 and all of the terms,
covenants and agreements contained in the Loan Documents applicable to
Subsidiary
73
<PAGE>
Guarantors and that the assets of such Subsidiary shall become Collateral for
the Obligations and, in connection with such deliveries, cause to be delivered
to the Administrative Agent, in form and substance satisfactory to the
Administrative Agent, a favorable written opinion of counsel satisfactory to the
Administrative Agent as to such matters as the Administrative Agent may
reasonably request. Upon satisfaction of the conditions set forth in this
Section 18.7, such Subsidiary shall become a Subsidiary Guarantor and a Company
hereunder and under the other Loan Documents to the same extent as if such
Subsidiary had been a party hereto and thereto on the Closing Date.
19. GENERAL PROVISIONS.
19.1 Effectiveness. This Agreement shall be binding and deemed
effective when executed by Borrower, each of the Subsidiary Guarantors, each
Agent, and each of the Lenders.
19.2 Successors and Assigns. This Agreement shall inure to the
benefit of, and be binding upon, the parties hereto and their successors and
permitted assigns to the extent set forth in Section 15.
19.3 Section Headings. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.
19.4 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Lender Group or the
Companies, whether under any rule of construction or otherwise. On the
contrary, this Agreement has been reviewed by all parties and shall be construed
and interpreted according to the ordinary meaning of the words used so as to
fairly accomplish the purposes and intentions of all parties hereto.
19.5 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
19.6 Amendments in Writing. This Agreement can only be amended by a
writing in accordance with Section 16.
19.7 Counterparts; Telefacsimile Execution. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.
19.8 Revival and Reinstatement of Obligations. If the incurrence or
payment of the Obligations by Borrower or any Subsidiary Guarantor of the
Obligations or the transfer by either or both of such parties to Lender Group of
any property of either or both of such parties should for any reason
subsequently be declared to be void or voidable under any state or federal law
relating to creditors' rights, including provisions of the Bankruptcy Code
relating to fraudulent conveyances, preferences, and other voidable or
recoverable payments of money or transfers of property (collectively, a
"Voidable Transfer"), and if Lender Group is required to repay or restore, in
whole or in part, any such Voidable Transfer, or
74
<PAGE>
elects to do so upon the reasonable advice of its counsel, then, as to any such
Voidable Transfer, or the amount thereof that Lender Group is required or elects
to repay or restore, and as to all reasonable costs, expenses, and attorneys
fees of Lender Group related thereto, the liability of Borrower or such
guarantor automatically shall be revived, reinstated, and restored and shall
exist as though such Voidable Transfer had never been made.
19.9 Integration. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
75
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the date set forth above.
Borrower:
ICF KAISER INTERNATIONAL, INC.,
a Delaware corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Senior Vice President
Administrative Agent and Lender:
MADELEINE L.L.C.
a New York limited liability company
By /s/ Kevin Genda
Name: Kevin Genda
Title:
Subsidiary Guarantors:
1 CLEMENT INTERNATIONAL CORPORATION,
a Delaware corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
2 CYGNA CONSULTING ENGINEERS &
PROJECT MANAGEMENT INC.,
a California Corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
3 CYGNA GROUP, INC.,
A DELAWARE CORPORATION
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
76
<PAGE>
4 EDA, INCORPORATED,
a Maryland corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
5 EXCELL DEVELOPMENT CONSTRUCTION, INC.,
a Delaware corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
6 GLOBAL TRADE & INVESTMENT, INC.,
a Delaware corporation
By /s/ TImothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
7 HENRY J. KAISER COMPANY,
a Nevada corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
8 ICF INCORPORATED,
a Delaware Corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
9 ICF INFORMATION TECHNOLOGY, INC.,
a Delaware Corporation
By /s/ Timothy p. O'Connor
Name: Timothy P. O'Connor
TItle: Treasurer
77
<PAGE>
10 ICF KAISER ADVANCED TECHNOLOGY, INC.,
an Idaho corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
TItle: Treasurer
11 ICF KAISER ENGINEERS, INC.,
an Ohio corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
12 ICF KAISER ENGINEERS (CALIFORNIA) CORPORATION,
a Delaware corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
13 ICF KAISER ENGINEERS CORPORATION,
a New York Corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
14 ICF KAISER ENGINEERS GROUP, INC.,
a Delaware corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
15 ICF KAISER ENGINEERS MASSACHUSETTS, INC.,
a Delaware Corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
TItle: Treasurer
78
<PAGE>
16 ICF KAISER ENGINEERS PACIFIC, INC.,
a Nevada corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
17 ICF KAISER EUROPE, INC.,
a Delaware corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
18 ICF KAISER/GEORGIA WILSON, INC.,
a Delaware corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
19 ICF KAISER GOVERNMENT PROGRAMS, INC.,
a Delaware corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
20 ICF KAISER HANFORD COMPANY,
a Delaware Corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
21 ICF KAISER HOLDINGS UNLIMITED, INC.,
a Delaware Corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
TItle: Treasurer
79
<PAGE>
22 ICF KAISER NETHERLANDS, B.V.,
a Netherlands company
By its Managing Directors:
ICF Kaiser Holdings Unlimited, Inc.,
a Delaware corporation
Represented by:
/s/ Timothy P. O'Connor
Timothy P. O'Connor
Treasurer
ICF Kaiser Engineers Eastern Europe, Inc.,
a Delaware corporation
Represented by:
/s/ Timothy P. O'Connor
Timothy P. O'Connor
Treasurer
23 ICF KAISER OVERSEAS ENGINEERING, INC.,
a DELAWARE corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
24 ICF KAISER REMEDIATION COMPANY,
a Delaware Corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
25 ICF LEASING CORPORATION, INC.,
a Delaware corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
26 ICF RESOURCES INCORPORATED,
a Delaware Corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
80
<PAGE>
27 KAISER ENGINEERS AND CONSTRUCTORS, INC.,
a Nevada Corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
28 KAISER ENGINEERS INTERNATIONAL, INC.,
a Nevada Corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
29 KE LIVERMORE, INC.,
a Delaware Corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
30 KE SERVICES CORPORATION,
a Delaware Corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
31 SYSTEMS APPLICATIONS INTERNATIONAL, INC.,
a Delaware corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
32 TUDOR ENGINEERING COMPANY,
a Delaware corporation
By /s/ Timothy P. O'Connor
Name: Timothy P. O'Connor
Title: Treasurer
81
<PAGE>
Exhibit 10(aa)
AGREEMENT
AGREEMENT (this "Agreement"), dated as of November 6, 1998, by and between
James O. Edwards, a resident of the State of Maryland ("Edwards"), and ICF
Kaiser International, Inc., a Delaware corporation (the "Company"). As used in
this Agreement, unless the context indicates otherwise, the term "ICF" shall be
deemed to refer to ICF Kaiser International, Inc. and each and every one of its
affiliated entities.
WITNESSETH
WHEREAS, Edwards presently serves as a member of the Board of Directors and
Chairman and Chief Executive Officer of ICF Kaiser International, Inc. and as a
director and officer of certain subsidiaries and affiliates of ICF Kaiser
International, Inc.; and
WHEREAS, Edwards and ICF Kaiser International, Inc. are parties to an
Employment Agreement dated May 19, 1997, including any attachments thereto and
any other agreements referred to therein or entered into pursuant thereto
(collectively, the "Executive Agreement"); and
WHEREAS, Edwards and ICF wish consensually to terminate the Executive
Agreement and sever the employment relationship between Edwards and ICF.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and promises hereinafter provided and of the actions taken pursuant thereto, the
parties agree as follows:
<PAGE>
1. Effective Date. This Agreement shall be executed and become effective
----------------
November 6, 1998 (the "Effective Date").
2. Termination of Executive Agreement. As of the Effective Date, the Executive
----------------------------------
Agreement shall be deemed terminated and shall have no further force or effect.
Edwards and ICF agree that there are no existing defaults by either party under
the Executive Agreement and that, as of the Effective Date, each party had fully
performed all of its obligations to the other party under the Executive
Agreement.
3. Resignation and Termination of Existing Employment Relationship. As of the
---------------------------------------------------------------
Effective Date, Edwards shall be deemed to have resigned from all corporate
offices of ICF, and from all offices and directorships of ICF's subsidiaries,
joint ventures, and affiliated companies, organizations and entities except as
expressly provided in Section 6(b). Edwards' employment by ICF shall be deemed
to have terminated as of the close of business on the Effective Date. Edwards
shall not be deemed to have resigned from the ICF Kaiser International, Inc.
Board of Directors. Following November 1, 1998 he shall be compensated for
service as such director on the same basis as other non-employee directors.
4. Records and Bank Accounts. As soon as practicable after the Effective Date,
-------------------------
ICF shall take such steps as may be necessary to (a) reflect in the corporate
records of ICF, its subsidiaries, joint ventures, and affiliated companies,
organizations and entities that Edwards has resigned as an officer of the
Company and as an officer and director of ICF's subsidiaries, joint ventures,
and affiliated companies, organizations and entities; and (b) remove Edwards as
an authorized signatory on all corporate bank accounts.
5. Payment for Cancellation of the Employment Agreement and Release. In
----------------------------------------------------------------
consideration of the cancellation of the Executive Agreement and the execution
by Edwards of
-2-
<PAGE>
the Release attached hereto, the following payments shall be made to Edwards and
by wire transfer or direct deposit as directed by Edwards, except that Edwards
hereby requests voluntary withholding of Federal and state wage-type withholding
in respect of such amount (calculated as though such amount were wages and in
accordance with Edwards' elections):
(a) $150,000 within five (5) business days after the Effective Date;
and
(b) $233,333.33 on or before each of January 15, February 15 and March
15, 1999.
Within five (5) business days after the Effective Date, the Company will arrange
to have issued to Edwards either a payment bond or one or more standby letters
of credit with terms acceptable to Edwards that will assure the payments due to
be made to Edwards pursuant to clause (b) above.
6. Consultation.
---------------
(a) During the period from the Effective Date until January 31, 1999,
Edwards will consult with ICF as and when requested by the Company's Chief
Executive Officer or the Board of Directors, such consultations to be at
times reasonably convenient to both Edwards and ICF. Edwards shall be
compensated biweekly for services provided pursuant to this Section 6(a) at
the rate of $425,000 annually through January 31, 1999. ICF shall reimburse
Edwards for reasonable expenses incurred in connection with his consultation
with ICF, subject to normal ICF reimbursement procedures.
(b) Edwards agrees to remain as Chairman of the Board of Managers of
Kaiser-Hill Company, LLC until December 31, 1998. Unless requested to remain
in that position, he shall be deemed to have resigned from such position as
of December 31, 1998.
-3-
<PAGE>
7. Health and Insurance Benefits. Until January 31, 1999, Edwards and his
-----------------------------
dependents shall receive the same health, welfare and life insurance benefits
that would have been made available to them had Edwards continued as an
employee, and Edwards' family health benefits shall continue thereafter until
April 30, 1999. After April 30, 1999, Edwards may elect to continue his family
health benefits provided through ICF to the extent permitted by Federal COBRA
laws in effect on the Effective Date. For purposes of COBRA compliance, the date
on which Edwards' health benefits terminate shall be April 30, 1999. Except as
specifically provided in this Section 7, all health, welfare and insurance
benefits shall terminate on January 31, 1999.
8. Options. ICF and Edwards acknowledge and agree that (a) Edwards holds and
-------
shall continue to hold the following options to purchase shares of ICF common
stock granted pursuant to ICF's Stock Incentive Plan and (b) such options have
the expiration dates set forth below:
<TABLE>
<CAPTION>
Fully
Total Vested Unvested Vesting Vested Expiration
Grant Date Options Options Options Schedule Date Date Price
<S> <C> <C> <C> <C> <C> <C> <C>
9/1/94 150,000 150,000 0 4 years 5/15/98 11/15/99 $2.51
1/24/97 40,000 10,000 30,000 4 years 1/24/01 1/24/02 $2.23
</TABLE>
Notwithstanding the terms of the grant of the options granted on January 24,
1997, such options shall be fully vested as of the Effective Date. Prior to the
expiration dates referred to above, the options referred to in this Section 8
shall be exercisable by Edwards or, in the event of his death, his estate.
9. Restricted Stock. ICF and Edwards acknowledge that Edwards holds 20,000
----------------
shares of Restricted Stock granted to him pursuant to the ICF Stock Incentive
Plan on March 4,
-4-
<PAGE>
1997, of which 6,667 shares are presently vested, and the balance of 13,333
shares shall vest, subject to a restriction on sale prior to March 4, 2000.
Consistent with the terms of the Executive Agreement, and pursuant to the ICF
Stock Incentive Plan, Edwards is hereby awarded 200,000 shares of Common Stock
which shall be issued, and fully vested, on the first anniversary of the
Effective Date or, if earlier, the occurrence of a sale of the stock, or merger
or consolidation, of the Company to or with another entity, sale of all or
substantially all of the Company's assets, or other event, in each case
resulting in a change of control of the Company which is reported on a Form 8-K
(any such sale or transaction, a "Control Transaction"). Certificates for the
shares of Restricted Stock referred to in the immediately preceding sentence
shall be delivered to Edwards (or, in the event of his death, his estate) on the
appropriate date referred to in the immediately preceding sentence.
10. Loans.
-----
(a) ICF and Edwards acknowledge that the Company has made loans to
Edwards of the aggregate principal amounts of $922,740.00 on which there
had accrued $451,480.20 of interest as of June 30, 1998 (aggregating
$1,374,220.20 of principal and interest as of June 30, 1998), and that such
loans (the "Loans") are evidenced by the documents attached as Exhibit A
(the "Loan Documents"). The Loans are due and payable on December 31, 1999.
In the event that the Company has not sold the Loans to a third party on or
before January 31, 1999, if Edwards does not pay the Loans in full on or
before December 31, 1999, the Company shall cancel the 130,665 shares of
the Company's common stock pledged as collateral for the Loans pursuant to
the Loan Documents (the "Pledged Shares"). The difference between the
Market Value (as defined in the Loan Documents) of the Pledged Shares and
the outstanding principal of, and unpaid interest on, the Loans as of the
date of cancellation of the Pledged
-5-
<PAGE>
Shares shall (i) if positive, be paid to Edwards promptly and (ii) if
negative, to the extent permitted by applicable law, be reported to Edwards
and the Internal Revenue Service as capital gain on the disposition of the
Pledged Shares.
(b) In the event that a Control Transaction closes prior to December
31, 1999, (i) if shares of the Company's common stock remain outstanding
after such closing, the Company shall make arrangements such that the
acquiring, surviving or successor entity in the Control Transaction, as the
case may be (the "Successor Entity"), shall acquire the Loans and observe
the provisions of Section 10(a) following the closing of the Control
Transaction, and (ii) if shares of the Company's common stock will not
remain outstanding after such closing, (x) the Company shall give Edwards
not less than ten (10) business days' advance notice of such closing, (y)
Edwards shall have the right to require the Company to cancel the Pledged
Shares in satisfaction of the Loans prior to such closing, and (z) if
Edwards exercises such right, the Company shall report the transaction as
contemplated by Section 10(a).
(c) If Edwards presents to the Company a party willing to purchase the
Loans for the Market Value (as defined in the Loan Documents) of the
Pledged Shares on or before January 31, 1999, the Company shall sell the
Loans to that party at that price if paid in cash.
11. Indemnification and Notice Concerning Nonrenewal of Directors and Officers
--------------------------------------------------------------------------
Insurance Coverage.
- ------------------
(a) ICF acknowledges that its Certificate of Incorporation and By-Laws
and the charters and by-laws of certain of its direct and indirect
subsidiaries and pension trusts include provisions designed to provide to
former officers, directors and trustees indemnification in respect of
threatened and commenced actions, suits and proceedings in which an
individual is a party or is threatened to be made a party by reason of the
fact that he is or was an officer,
-6-
<PAGE>
director or trustee of ICF or such subsidiaries or trusts. ICF shall, and
shall cause such subsidiaries and trusts to, continue to provide
indemnification to Edwards under such provisions to the maximum extent
permitted by applicable law.
(b) So long as ICF maintains directors and officers liability insurance
coverage, or liability insurance for the trustees of its pension trusts,
Edwards shall be covered by such insurance, with respect to his tenure with
ICF, on the same terms as other existing and former officers, directors and
trustees. If, for any reason, ICF shall not continue to have such insurance
coverage in effect on terms substantially comparable to those presently in
effect, ICF shall provide Edwards with written notice of the cancellation
or nonrenewal of such coverage not less than 20 days prior to the
effectiveness of such cancellation or nonrenewal.
12. Employment References. Nothing in this Agreement shall prevent either
---------------------
party from stating the fact that Edwards was employed by ICF, the address of his
work location, the dates of his employment, his job titles and job duties, his
rate of pay, or that he resigned from his position as an officer of ICF on or
about the Effective Date.
13. Proprietary Information and Business and Personal Property
----------------------------------------------------------
(a) Edwards will not directly or indirectly disclose any confidential
records, information, documents, data, formulae, specifications or other
trade secrets owned by ICF to any person, or use any such information,
except (i) as appropriate in connection with the activities contemplated by
Section 6 or (ii) pursuant to court order or as a result of a valid order,
subpoena or discovery request (and in the case of such disclosure Edwards
will provide ICF with written notice of the same sufficiently in advance of
the required disclosure date to allow ICF to lodge appropriate objections
to such disclosure). The immediately preceding sentence shall not apply to
information: (x) disclosure of which is required by law or by process
lawfully issued;
-7-
<PAGE>
(y) which has been disclosed to Edwards or to a third party by a person not
under a duty of confidentiality with respect to that information; or (z)
which later enters the public domain through no fault or breach of duty by
Edwards.
(b) Edwards shall have no ownership interest in any records, files,
information, documents, or the like that belong to ICF which Edwards has
used, prepared or come into contact with during his employment by ICF, and,
except as appropriate in connection with the activities contemplated by
Section 6, Edwards shall not remove written copies thereof from the
premises of ICF or any of its affiliates without ICF's written consent.
Within ten business days after the Effective Date, Edwards shall have
returned to ICF all ICF property (other than the cellular telephone, laptop
computer, calculator and facsimile machine referred to in Section 13(c))
that Edwards has in his possession. Nothing in this Agreement shall limit
Edwards's right to remove personal effects from his office within five
business days after the Effective Date.
(c) Edwards shall be entitled to the ICF-owned facsimile machine,
laptop computer, calculator and cellular telephone currently in Edwards's
possession, provided that, except as contemplated by Section 6, Edwards
---------
shall be responsible for the cost of cellular telephone service on such
cellular telephone following the conclusion of his service as a consultant
hereunder. Until July 31, 1999 or until Edwards obtains new employment,
whichever occurs first, ICF will allow Edwards to have access to his voice
mailbox on the ICF telephone system and to his ICF e-mail address.
14. No Disparaging Statements. Except as required by applicable law or legal
-------------------------
process:
-8-
<PAGE>
(a) Each of ICF and Edwards covenant and agree that following the
Effective Date neither of them nor their or its officers, directors,
affiliates, agents and/or employees shall make disparaging statements
concerning the others (for this purpose, a disparaging statement shall
refer to a statement or statements that, individually or in the aggregate,
have a materially detrimental effect on the business affairs of ICF or
Edwards, as the case may be); and
(b) Except for the press release attached as Exhibit D, neither the
Company, nor any director or executive officer of the Company other than
Edwards and Tony Coelho shall make any public statement or statement to the
press concerning Edwards or his tenure with the Company.
15. Confidentiality of Agreement. Except as required by applicable law or
----------------------------
legal process or as necessary to fulfill the terms of this Agreement or the
General Releases incorporated herein, or in connection with a party's family,
business, or tax affairs (in which case disclosure shall be on a confidential
basis to the extent practicable), the parties shall not disclose the terms or
provisions of this Agreement or such General Releases, or the fact of their
existence, to any person or entity.
16. No Admissions. Nothing contained in this Agreement or the General Releases
-------------
incorporated herein shall be considered an admission by either party of any
wrongdoing under any Federal, state or local statute, public policy, tort law,
contract law, common law or otherwise.
17. No Third Party Claims. Each party represents and warrants that no other
---------------------
person or entity has, or to the best knowledge of such party claims, any
interest in any potential claims, demands, causes of action, obligations,
damages or suits released pursuant to this Agreement; that it or he is the owner
of all other claims, demands, causes of action, obligations, damages or
-9-
<PAGE>
suits so released; that it or he has full and complete authority to execute this
Agreement; and that it or he has not sold, assigned, transferred, conveyed or
otherwise disposed of any claim, demand, cause of action, obligation or
liability subject to this Agreement and the General Releases contemplated
hereby.
18. Full Releases. Each party agrees and acknowledges that the consideration
-------------
received by it or him for this Agreement and the General Releases incorporated
herein, and for the execution hereof and thereof, shall constitute full payment,
satisfaction, discharge, compromise and release of and from all matters for
which the other party has mutually released it or him herein and in such General
Releases
19. Expenses. ICF shall reimburse Edwards for all fees and expenses of
--------
Edwards's counsel incident to the negotiation of this Agreement, up to a maximum
of $10,000. The amount of such reimbursement shall be considered a payment in
cancellation of rights under the Executive Agreement. Except as provided in the
first sentence of this Section 19, each party shall pay its own costs incident
to the negotiation, preparation, performance, execution, and enforcement of this
Agreement, and all fees and expenses of its or his counsel, accountants, and
other consultants, advisors and representatives for all activities of such
persons undertaken in connection with this Agreement.
20. No Third Party Beneficiaries. Except as expressly stated herein, the
-----------------------------
parties do not intend to make any person or entity who is not a party to this
Agreement a beneficiary hereof, and this Agreement should not be construed as
being made for the benefit of any person or entity not expressly provided for
herein.
21. Advice of Counsel. The parties acknowledge that they have been advised by
------------------
competent legal counsel in connection with the execution of this Agreement, that
they have read
-10-
<PAGE>
each and every paragraph of this Agreement and that they understand their
respective rights and obligations. Edwards declares that he has completely read
this Agreement, fully understands its terms and contents, and freely,
voluntarily and without coercion enters into this Agreement.
22. Entire Agreement. This Agreement constitutes the entire agreement of the
-----------------
parties with respect to the subject matter hereof, and all prior negotiations
and representations are merged herein or replaced hereby.
23. Severability. If any provision of this Agreement is held illegal, invalid
-------------
or unenforceable, such illegality, invalidity, or unenforceability shall not
affect any other provision hereof. Any such provision and the remainder of this
Agreement shall, in such circumstances, be deemed modified to the extent
necessary to render enforceable the remaining provisions hereof.
24. Governing Law. This Agreement shall be construed and enforced in
-------------
accordance with the law of the Commonwealth of Virginia.
25. Releases and Effectiveness. This Agreement and General Releases in the
--------------------------
forms attached hereto as Exhibits B and C, which are incorporated herein by
reference, have been executed by or on behalf of Edwards and ICF on the dates
shown opposite their respective signatures below, and this Agreement and such
General Releases are effective as of the Effective Date.
26. Disputes. In the event that any dispute arises between the parties hereto
--------
pertaining to the subject matter of this Agreement and the parties are unable to
resolve such dispute within a reasonable time through negotiations, the parties
shall attempt to resolve such dispute pursuant to a mutually agreed upon
alternate dispute resolution mechanism. Such resolution of the dispute shall be
initiated by written notice given by one party to the other. If within 10 days
after submission of such notice the parties have not agreed upon an alternate
-11-
<PAGE>
dispute resolution mechanism, the dispute shall be submitted to arbitration in
Fairfax County, Virginia. In the event the parties are unable to agree on an
alternate dispute resolution mechanism and the dispute is to be resolved
pursuant to arbitration, each party shall appoint an arbitrator within 20 days
after the original notice of the dispute, and the two arbitrators so chosen
shall promptly appoint a third arbitrator. If either party fails to name an
arbitrator as aforesaid, such arbitrator shall be designated by the American
Arbitration Association. If any arbitrator becomes disabled, resigns or is
otherwise unable to discharge the arbitrator's duties, the arbitrator's
successor shall be appointed in the same manner as such arbitrator was
appointed. The parties shall not be permitted to conduct discovery in
connection with the arbitration, and, subject only to the availability of the
arbitrators, the arbitration hearing shall be held within 30 days after
appointment of the third arbitrator. Except as aforesaid, the arbitration shall
be conducted under the applicable rules of the American Arbitration Association.
Any determination of the arbitrators shall be binding and conclusive upon the
parties hereto. Application may be made by either party to any court having
jurisdiction thereof for judicial confirmation of any determination by the
arbitrators and/or for an order of enforcement of any such decision.
27. Counterparts. This Agreement may be executed in counterparts, all of which
------------
shall be considered one and the same agreement, and shall become effective on
the Effective Date.
-12-
<PAGE>
IN WITNESS WHEREOF, James O. Edwards and ICF Kaiser International, Inc.
have executed this Agreement.
ICF KAISER INTERNATIONAL, INC. JAMES O. EDWARDS
By:
---------------------------------- ---------------------------
Its Duly Authorized Representative James O. Edwards
Dated: November 6, 1998 Dated: November 6, 1998
-13-
<PAGE>
EXHIBIT A
LOAN DOCUMENTS
<PAGE>
EXHIBIT B
GENERAL RELEASE
I, JAMES O. EDWARDS, on behalf of myself and my heirs, successors, agents,
executors, administrators, attorneys and assigns, in consideration of the terms
of the Agreement effective as of November 6, 1998 by and between ICF Kaiser
International, Inc. ("ICF") and myself (the "Agreement") and the execution of a
General Release ("Release") by ICF, with effect as of November 6, 1998, hereby
release and forever discharge ICF and any and all of its present, former and
future affiliated entities, subsidiaries, departments, officers, directors,
employees, representatives, agents, attorneys, successors and assigns, from any
and all claims and causes of action (whether known or unknown) which I have
against them, in law or equity, relating to or arising under: Federal, Virginia,
or other state or local law; any employment contract or related agreements; any
employment statute or regulation; any employment discrimination law, including
but not limited to Title VII of the Civil Rights Act of 1964, as amended, and
the Age Discrimination in Employment Act of 1967, as amended; the Employee
Retirement Income Security Act of 1974, as amended; any other Federal, state, or
local civil rights, pension or labor law; contract law; tort law; and common
law, including but not limited to wrongful discharge or misrepresentation or
infliction of emotional distress; provided, however, that I do not hereby
-------- -------
release ICF from any of its obligations under the Agreement and/or under the
terms of an employee benefit plan, program or arrangement (other than any such
plan, program or arrangement providing for the payment of severance benefits).
For purposes of this Release, ICF shall be deemed to include each and every one
of its affiliated entities described in the Agreement.
<PAGE>
I further agree not to sue or otherwise institute or cause to be instituted
or in any way voluntarily participate in the prosecution of any complaints or
charges against any persons or entities released herein in any Federal, state,
District of Columbia or other court, administrative agency or other forum
concerning any claims released herein.
Except as required by law or as necessary to fulfill the terms of the
Agreement or this Release, or as necessary in connection with personal business
or tax affairs (in which case disclosure shall be on a confidential basis to the
extent practicable), I agree not to disclose the terms or provisions of this
Release, or the fact of its existence, to any person or entity.
I understand and agree that nothing contained in this Release is to be
considered an admission by ICF of any wrongdoing under any Federal, state, or
local statute, public policy, tort law, contract law, or common law.
I acknowledge that I have been advised to consult with an attorney prior to
executing this Release. I further acknowledge that I have been given a period of
at least twenty-one (21) days within which to consider and execute this Release,
unless I voluntarily choose to execute this Release before the end of the said
twenty-one (21) day period. Once executed, I understand that I have seven (7)
days following the execution of this Release to revoke it, and that this Release
is not effective or enforceable until after said seven (7) day period.
-2-
<PAGE>
I acknowledge that I have read this Release, that I understand it, and that
I am executing it freely and voluntarily. I further understand that once this
Release becomes effective (after the seven (7) day revocation period), it can
only be altered, revoked or rescinded with the express written permission of
ICF.
I further acknowledge and agree that, in the event I exercise my revocation
rights within the specified seven-day period, all rights and obligations under
this Release and the Agreement will become null and void.
This Release is executed in connection with, and is subject to terms of,
the Agreement.
Date: November 6, 1998
----------------------
James O. Edwards
Subscribed and sworn to before me this ____ day of November, 1998.
----------------------
Notary
My commission expires:
-3-
<PAGE>
ELECTION TO EXECUTE
PRIOR TO EXPIRATION OF
TWENTY-ONE DAY CONSIDERATION PERIOD
I, James O. Edwards, understand that I have at least twenty-one (21) days
within which to consider and execute the above General Release. However, after
consulting counsel, I have freely and voluntarily elected to execute the
General Release before the twenty-one (21) day period has expired.
Date: November 6, 1998
----------------------
James O. Edwards
-4-
<PAGE>
EXHIBIT C
GENERAL RELEASE
ICF Kaiser International, Inc. ("ICF"), on behalf of ICF and all of its
current, former or future affiliated entities, subsidiaries, departments,
officers, directors, employees, representatives, agents, attorneys, successors
and assigns, in consideration of the terms of the Agreement effective as of
November 6, 1998 by and between James O. Edwards ("Edwards") and ICF (the
"Agreement") and the execution of a General Release ("Release") by Edwards, with
effect as of November 6, 1998, hereby releases and forever discharges Edwards
and his heirs, successors, agents, executors, administrators, attorneys and
assigns, from any and all claims and causes of action (whether known or unknown)
which ICF has against him, in law or equity, relating to or arising under:
Federal, Virginia or other state or local law; any employment contract; any
employment statute or regulation, contract law, tort law; and common law,
including but not limited to actions for fraud and breach of contract; provided,
--------
however, that ICF does not hereby release Edwards from any of his obligations
- -------
under the Agreement.
ICF will not sue or otherwise institute or cause to be instituted or in any
way voluntarily participate in the prosecution of any complaints or charges
against Edwards or the other persons released herein in any Federal, state,
District of Columbia, or other court, administrative agency or other forum
concerning any claims released herein.
Except as required by law or as necessary to fulfill the terms of the
Agreement or this Release, or as necessary in connection with ICF's business,
legal or tax affairs (in which case
<PAGE>
disclosure shall be on a confidential basis to the extent practicable), ICF
agrees not to disclose the terms or provisions of this Release, or the fact of
its existence, to any person or entity (including employees of ICF).
ICF understands and agrees that nothing contained in this Release is to be
considered an admission by Edwards of any wrongdoing under any Federal, state,
or local statute, public policy, tort law, contract law, or common law.
ICF acknowledges that this Release can be altered, revoked or rescinded
only with the express written permission of Edwards.
This Release is executed in connection with, and is subject to the terms
of, the Agreement.
ICF KAISER INTERNATIONAL, INC.
Date: November 6, 1998 By:
----------------------------------
Its Duly Authorized Representative
Subscribed and sworn to before me this ______ day of November, 1998.
----------------------
Notary
My commission expires:
-2-
<PAGE>
EXHIBIT D
PRESS RELEASE
<PAGE>
Exhibit 10(dd)
AGREEMENT
AGREEMENT (this "Agreement"), dated as of August 7, 1998, by and between
Marc Tipermas, a resident of the State of Maryland ("Tipermas"), and ICF Kaiser
International, Inc., a Delaware corporation. As used in this Agreement, unless
the context indicates otherwise, the term "ICF" shall be deemed to refer to ICF
Kaiser International, Inc. and each and every one of its affiliated entities.
WITNESSETH
WHEREAS, Tipermas presently serves as a member of the Board of Directors
and President and Chief Operating Officer of ICF Kaiser International, Inc. and
as a director and officer of certain subsidiaries and affiliates of ICF Kaiser
International, Inc.; and
WHEREAS, Tipermas and ICF Kaiser International, Inc. are parties to an
Employment Agreement dated May 19, 1997, including any attachments thereto and
any other agreements referred to therein or entered into pursuant thereto
(collectively, the "Executive Agreement"); and
WHEREAS, Tipermas and ICF wish consensually to terminate the Exec Agreement
and sever the employment relationship between Tipermas and ICF.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and promises hereinafter provided and of the actions taken pursuant thereto, the
parties agree as follows:
<PAGE>
1. Effective Date. This Agreement shall be executed and become effective
----------------
August 7, 1998 (the "Effective Date").
2. Termination of Executive Agreements. As of the Effective Date, the
-----------------------------------
Executive Agreement shall be deemed terminated and shall have no further force
or effect. Tipermas and ICF agree that there are no existing defaults by either
party under the Executive Agreement and that, as of the Effective Date, each
party had fully performed all of its obligations to the other party under the
Executive Agreement.
3. Resignation and Termination of Existing Employment Relationship. As of
---------------------------------------------------------------
the Effective Date, Tipermas shall be deemed to have resigned from all corporate
offices and the Board of Directors of ICF, and from all offices and
directorships of ICF's subsidiaries, joint ventures, and affiliated companies,
organizations, and entities. Subject only to the provisions of Section 6,
Tipermas's employment by ICF shall be deemed to have terminated as of the close
of business on the Effective Date.
4. Records and Bank Accounts. As soon as practicable after the Effective
---------------------------
Date, ICF shall take such steps as may be necessary to (a) reflect in the
corporate records of ICF, its subsidiaries, joint ventures, and affiliated
companies, organizations, and entities that Tipermas has resigned as an officer
and director of ICF and as an officer and director of ICF's subsidiaries, joint
ventures, and affiliated companies, organizations, and entities; and (b) remove
Tipermas as an authorized signatory on all corporate bank accounts.
-2-
<PAGE>
5. Payment for Cancellation of the Employment Agreement and Release. In
----------------------------------------------------------------
consideration of the cancellation of the Executive Agreement and the execution
by Tipermas of the Release attached hereto, Tipermas shall be paid $732,500,
within seven business days of the Effective Date and by wire transfer or direct
deposit as directed by Tipermas, except that Tipermas hereby requests voluntary
withholding of Federal and state wage-type withholding in respect of such amount
(calculated as though such amount were wages and in accordance with Tipermas's
elections).
6. Consultation. During the period from the Effective Date until January
-------------
31, 1999, Tipermas (or his estate in the event of his death) will receive
compensation at an annual rate of $375,000.00, which compensation shall be paid
to Tipermas in accordance with ICF's normal payroll practices, subject to
Federal and state wage-type deductions in accordance with Tipermas's elections.
During such period, Tipermas will consult with ICF on an as needed basis, such
consultations to be at times reasonably convenient to both Tipermas and ICF. ICF
shall reimburse Tipermas for reasonable expenses incurred with connection with
his consultation with ICF, subject to normal ICF reimbursement procedures.
7. Health and Insurance Benefits. Until January 31, 1999, Tipermas and his
-----------------------------
dependents shall receive the same health, welfare and life insurance benefits
that would have been made available to them had Tipermas continued as an
employee. Tipermas may elect to continue his family health benefits provided
through ICF to the extent permitted by Federal COBRA laws in effect on the
Effective Date. For purposes of COBRA compliance, the date on which Tipermas's
health benefits terminate shall be January 31, 1999. Except as specifically
-3-
<PAGE>
provided in this Section 7, all health, welfare and insurance benefits shall
terminate on January 31, 1999.
8. Options. ICF and Tipermas acknowledge and agree that (a) Tipermas holds
--------
and shall continue to hold the following options to purchase shares of ICF
common stock granted pursuant to ICF's Stock Incentive Plan and (b) such options
have the expiration dates set forth below:
<TABLE>
<CAPTION>
Fully
Total Vested Unvested Vesting Vested Expiration
Grant Date Options Options Options Schedule Date Date Price
<S> <C> <C> <C> <C> <C> <C> <C>
4/4/94 114,940 114,940 0 4 years 4/4/98 11/1/99 $3.48
4/4/94 10,060 10,060 0 4 years 4/4/98 11/1/99 $3.48
1/24/97 26,400 6,600 19,800 4 years 1/24/01 1/24/02 $2.23
</TABLE>
Notwithstanding the terms of the grant of the options granted on January 24,
1997, such options shall be fully vested as of the Effective Date. All of the
options referred to in this Section 8 shall expire on November 1, 1999. Prior to
that date such options shall be exercisable by Tipermas or, in the event of his
death, his estate.
9. Restricted Stock. ICF and Tipermas acknowledge that Tipermas holds
-----------------
9,900 shares of Restricted Stock granted to him pursuant to the ICF Stock
Incentive Plan on March 4, 1997, of which 3,300 shares are presently vested,
subject to a restriction on sale prior to March 4, 2000. The balance of 6,600
shares of such Restricted Stock shall be forfeited. Consistent with the terms of
the Executive Agreement, and pursuant to the ICF Stock Incentive Plan, Tipermas
is hereby awarded 150,000 shares of Common Stock which shall be issued, and
fully vested, on the
-4-
<PAGE>
first anniversary of the Effective Date or, if earlier, the occurrence of any
sale of the Company or all or substantially all of the Company's assets, or
other event resulting in a change of control of the Company which is reported on
a Form 8-K. Certificates for the shares of Restricted Stock referred to in the
immediately preceding sentence, shall be delivered to Tipermas (or, in the event
of his death, his estate) on the appropriate date referred to in the immediately
preceding sentence.
10. Indemnification and Notice Concerning Nonrenewal of Directors and
-----------------------------------------------------------------
Officers Insurance Coverage.
- ----------------------------
(a) ICF acknowledges that its Certificate of Incorporation and By-Laws and
the charters and by-laws of certain of its direct and indirect subsidiaries
include provisions designed to provide to former officers and directors
indemnification in respect of threatened and commenced actions, suits and
proceedings in which an individual is a party or is threatened to be made a
party by reason of the fact that he is or was an officer or director of ICF or
such subsidiaries. ICF shall, and shall cause such subsidiaries to, continue to
provide indemnification to Tipermas under such provisions to the maximum extent
permitted by applicable law.
(b) So long as ICF maintains directors and liability insurance coverage,
Tipermas shall be covered by such insurance, with respect to his tenure with
ICF, on the same terms as other existing and former officers and directors. If,
for any reason, ICF shall not continue to have in effect directors and officers
liability insurance coverage, on terms substantially comparable to those
presently in effect, ICF shall provide Tipermas with written notice of the
cancellation or
-5-
<PAGE>
nonrenewal of such coverage not less than 20 days prior to the effectiveness of
such cancellation or nonrenewal.
11. Employment References. Nothing in this Agreement shall prevent either
----------------------
party from stating the fact that Tipermas was employed by ICF, the address of
his work location, the dates of his employment, his job titles and job duties,
his rate of pay, or that he resigned from his position as an officer of ICF on
or about the Effective Date.
12. Proprietary Information and Business and Personal Property
----------------------------------------------------------
(a) Tipermas will not directly or indirectly disclose any confidential
records, information, documents, data, formulae, specifications or other trade
secrets owned by ICF or its affiliates to any person, or use any such
information, except (a) as appropriate in connection with the consulting
activities contemplated by Section 6 or (b) pursuant to court order or as a
result of a valid order, subpoena or discovery request (and in the case of such
disclosure Tipermas will provide ICF with written notice of the same
sufficiently in advance of the required disclosure date to allow ICF to lodge
appropriate objections to such disclosure). The immediately preceding sentence
shall not apply to information: (a) disclosure of which is required by law or by
process lawfully issued; (ii) which has been disclosed to Tipermas or to a third
party by a person not under a duty of confidentiality with respect to that
information; or (iii) which later enters the public domain through no fault or
breach of duty by Tipermas.
(b) Tipermas shall have no ownership interest in any records, files,
information, documents, or the like that belong to ICF or its affiliates which
Tipermas has used, prepared or
-6-
<PAGE>
come into contact with during his employment by ICF, and, except as appropriate
in connection with the consulting activities contemplated by Section 6, Tipermas
shall not remove written copies thereof from the premises of ICF or any of its
affiliates without ICF's written consent. Within five business days after the
Effective Date, Tipermas shall have returned to ICF all ICF property (other than
the cellular telephone and facsimile machine referred to in Section 12(c)) that
Tipermas has in his possession. Nothing in this Agreement shall limit Tipermas's
right to remove personal effects from his office within five business days after
the Effective Date.
(c) Tipermas shall be entitled to the ICF-owned facsimile machine and
cellular telephone currently in Tipermas's possession, provided that, except as
---------
contemplated by Section 6, Tipermas shall be responsible for the cost of
cellular telephone service on such cellular telephone following the Effective
Date. Until December 31, 1998 or until Tipermas obtains new employment,
whichever occurs first, ICF will allow Tipermas to have access, from off ICF
premises, to his voice mailbox on the ICF telephone system and to Tipermas's ICF
e-mail address.
13. No Disparaging Statements. Each of ICF and Tipermas covenant and agree
-------------------------
that following the Effective Date neither shall make disparaging statements
concerning the other, or its officers, directors, affiliates, agents and/or
employees. For this purpose, a disparaging statement shall refer to a statement
or statements that, individually or in the aggregate, have a materially
detrimental effect on the business affairs of ICF or Tipermas, as the case may
be.
-7-
<PAGE>
14. Confidentiality of Agreement. Except as required by law or as
----------------------------
necessary to fulfill the terms of this Agreement or the General Releases
incorporated herein, or in connection with a party's family, business, or tax
affairs (in which case disclosure shall be on a confidential basis to the extent
practicable), the parties shall not disclose the terms or provisions of this
Agreement or such General Releases, or the fact of their existence, to any
person or entity.
15. No Admissions. Nothing contained in this Agreement or the General
-------------
Releases incorporated herein shall be considered an admission by either party of
any wrongdoing under any Federal, state or local statute, public policy, tort
law, contract law, common law or otherwise.
16. No Third Party Claims. Each party represents and warrants that no
----------------------
other person or entity has, or to the best knowledge of such party claims, any
interest in any potential claims, demands, causes of action, obligations,
damages or suits released pursuant to this Agreement; that it or he is the owner
of all other claims, demands, causes of action, obligations, damages or suits so
released; that it or he has full and complete authority to execute this
Agreement; and that it or he has not sold, assigned, transferred, conveyed or
otherwise disposed of any claim, demand, cause of action, obligation or
liability subject to this Agreement and the General Releases contemplated
hereby.
17. Full Releases. Each party agrees and acknowledges that the
-------------
consideration received by it or him for this Agreement and the General Releases
incorporated herein, and for the execution hereof and thereof, shall constitute
full payment, satisfaction, discharge,
-8-
<PAGE>
compromise and release of and from all matters for which the other party has
mutually released it or him herein and in such General Releases.
18. Expenses. ICF shall reimburse Tipermas for all fees and expenses of
--------
Tipermas's counsel incident to the negotiation of this Agreement, up to a
maximum of $10,000. The amount of such reimbursement shall be considered a
payment and cancellation of rights under the Executive Agreement. Except as
provided in the first sentence of this Section 18, each party shall pay its own
costs incident to the negotiation, preparation, performance, execution, and
enforcement of this Agreement, and all fees and expenses of its or his counsel,
accountants, and other consultants, advisors and representatives for all
activities of such persons undertaken in connection with this Agreement.
19. No Third Party Beneficiaries. Except as expressly stated herein, the
-----------------------------
parties do not intend to make any person or entity who is not a party to this
Agreement a beneficiary hereof, and this Agreement should not be construed as
being made for the benefit of any person or entity not expressly provided for
herein.
20. Advice of Counsel. The parties acknowledge that they have been
------------------
advised by competent legal counsel in connection with the execution of this
Agreement, that they have read each and every paragraph of this Agreement and
that they understand their respective rights and obligations. Tipermas declares
that he has completely read this Agreement, fully understands its terms and
contents, and freely, voluntarily and without coercion enters into this
Agreement.
-9-
<PAGE>
21. Entire Agreement. This Agreement constitutes the entire agreement of
-----------------
the parties with respect to the subject matter hereof, and all prior
negotiations and representations are merged herein or replaced hereby.
22. Severability. If any provision of this Agreement is held illegal,
-------------
invalid or unenforceable, such illegality, invalidity, or unenforceability shall
not affect any other provision hereof. Any such provision and the remainder of
this Agreement shall, in such circumstances, be deemed modified to the extent
necessary to render enforceable the remaining provisions hereof.
23. Governing Law. This Agreement shall be construed and enforced in
--------------
accordance with the law of the Commonwealth of Virginia.
24. Releases and Effectiveness. This Agreement and General Releases in
--------------------------
the forms attached hereto as Exhibits A and B, which are incorporated' herein by
reference, have been executed by or on behalf of Tipermas and ICF on the dates
shown opposite their respective signatures below, and this Agreement and such
General Releases are effective as of the Effective Date.
25. Disputes. In the event that any dispute arises between the parties
--------
hereto pertaining to the subject matter of this Agreement and the parties are
unable to resolve such dispute within a reasonable time through negotiations,
the parties shall attempt to resolve such dispute pursuant to a mutually agreed
upon alternate dispute resolution mechanism. Such resolution of the dispute
shall be initiated by written notice given by one party to the other. If
-10-
<PAGE>
within 10 days after submission of such notice the parties have not agreed upon
an alternate dispute resolution mechanism, the dispute shall be submitted to
arbitration in Fairfax County, Virginia. In the event the parties are unable to
agree on an alternate dispute resolution mechanism and the dispute is to be
resolved pursuant to arbitration, each party shall appoint an arbitrator within
20 days after the original notice of the dispute, and the two arbitrators so
chosen shall promptly appoint a third arbitrator. If either party fails to name
an arbitrator as aforesaid, such arbitrator shall be designated by the American
Arbitration Association. If any arbitrator becomes disabled, resigns or is
otherwise unable to discharge the arbitrator's duties, the arbitrator's
successor shall be appointed in the same manner as such arbitrator was
appointed. The parties shall not be permitted to conduct discovery in connection
with the arbitration, and, subject only to the availability of the arbitrators,
the arbitration hearing shall be held within 30 days after appointment of the
third arbitrator. Except as aforesaid, the arbitration shall be conducted under
the applicable rules of the American Arbitration Association. Any determination
of the arbitrators shall be binding and conclusive upon the parties hereto.
Application may be made by either party to any court having jurisdiction thereof
for judicial confirmation of any determination by the arbitrators and/or for an
order of enforcement of any such decision.
26. Counterparts. This Agreement may be executed in counterparts, all of
------------
which shall be considered one and the same agreement, and shall become effective
on the Effective Date.
-11-
<PAGE>
IN WITNESS WHEREOF, Marc Tipermas and ICF Kaiser International, Inc. have
executed this Agreement.
ICF KAISER INTERNATIONAL, INC. MARC TIPERMAS, Ph.D.
By:
------------------------------------ ---------------------------
Its Duly Authorized Representative Marc Tipermas, Ph.D.
Dated: August 7, 1998 Dated: August 7, 1998
-12-
<PAGE>
EXHIBIT A
GENERAL RELEASE
I, MARC TIPERMAS, on behalf of myself and my heirs, successors, agents,
executors, administrators, attorneys and assigns, in consideration of the terms
of the Agreement effective as of August 7, 1998 by and between ICF Kaiser
International, Inc. ("ICF") and myself (the "Agreement") and the execution of a
General Release ("Release") by ICF, with effect as of August 7, 1998, hereby
release and forever discharge ICF and any and all of its present, former and
future affiliated entities, subsidiaries, departments, officers, directors,
employees, representatives, agents, attorneys, successors and assigns, from any
and all claims and causes of action (whether known or unknown) which I have
against them, in law or equity, relating to or arising under: Federal, Virginia,
or other state or local law; any employment contract or related agreements; any
employment statute or regulation; any employment discrimination law, including
but not limited to Title VII of the Civil Rights Act of 1964, as amended, and
the Age Discrimination in Employment Act of 1967, as amended; the Employee
Retirement Income Security Act of 1974, as amended; any other Federal, state, or
local civil rights, pension or labor law; contract law; tort law; and common
law, including but not limited to wrongful discharge or misrepresentation or
infliction of emotional distress; provided however that I do not hereby release
-----------------
ICF from any of its obligations under the Agreement and/or under the terms of an
employee benefit plan, program or arrangement (other than any such plan, program
or arrangement providing for the payment of severance benefits). For purposes
of this Release, ICF shall be deemed to include each and every one of its
affiliated entities described in the Agreement.
-13-
<PAGE>
I further agree not to sue or otherwise institute or cause to be instituted
or in any way voluntarily participate in the prosecution of any complaints or
charges against any persons or entities released herein in any Federal, state,
or other court, administrative agency or other forum concerning any claims
released herein.
Except as required by law or as necessary to fulfill the terms of the
Agreement or this Release, or as necessary in connection with personal business
or tax affairs (in which case disclosure shall be on a confidential basis to the
extent practicable), I agree not to disclose the terms or provisions of this
Release, or the fact of its existence, to any person or entity.
I understand and agree that nothing contained in this Release is to be
considered an admission by ICF of any wrongdoing under any Federal, state, or
local statute, public policy, tort law, contract law, or common law.
I acknowledge that I have been advised to consult with an attorney prior to
executing this Release. I further acknowledge that I have been given a period of
at least twenty-one (21) days within which to consider and execute this Release,
unless I voluntarily choose to execute this Release before the end of the said
twenty-one (21) day period. Once executed, I understand that I have seven (7)
days following the execution of this Release to revoke it, and that this Release
is not effective or enforceable until after said seven (7) day period.
-14-
<PAGE>
I acknowledge that I have read this Release, that I understand it, and that
I am executing it freely and voluntarily. I further understand that once this
Release becomes effective (after the seven (7) day revocation period), it can
only be altered, revoked or rescinded with the express written permission of
ICF.
I further acknowledge and agree that, in the event I exercise my revocation
rights within the specified seven-day period, all rights and obligations under
this Release and the Agreement will become null and void.
This Release is executed in connection with, and is subject to terms o
Agreement.
Date: August 7, 1998
----------------------
Marc Tipermas
Subscribed and sworn to before me this 7 day of August, 1998.
----------------------
Notary
My commission expires: November 30, 2000
-----------------
-15-
<PAGE>
ELECTION TO EXECUTE
PRIOR TO EXPIRATION OF
TWENTY-ONE DAY CONSIDERATION PERIOD
I, Marc Tipermas, understand that I have at least twenty-one (21) days
within which to consider and execute the above General Release. However, after
consulting counsel, have freely and voluntarily elected to execute the General
Release before the twenty-one (21) day period has expired. I
Date: August 7, 1998
----------------------
Marc Tipermas
-16-
<PAGE>
EXHIBIT A
GENERAL RELEASE
ICF Kaiser International, Inc. ("ICF"), on behalf of ICF and all of its
current, former or future affiliated entities, subsidiaries, departments,
officers, directors, employees, representatives, agents, attorneys, successors
and assigns, in consideration of the terms of the Agreement effective as of
August 7, 1998 by and between Marc Tipermas ("Tipermas") and ICF (the
"Agreement") and the execution of a General Release ("Release") by Tipermas,
with effect as of August 7, 1998, hereby releases and forever discharges
Tipermas and his heirs, successors, agents, executors, administrators, attorneys
and assigns, from any and all claims and causes of action (whether known or
unknown) which ICF has against him, in law or equity, relating to or arising
under: Federal, Virginia or other state or local law; any employment contract,
any employment statute or regulation, contract law, tort law; and common law,
including but not limited to actions for fraud and breach of contract; provided,
--------
however, that ICF does not hereby release Tipermas from any of his obligations
- -------
under the Agreement.
ICF will not sue or otherwise institute or cause to be instituted or
in any way voluntarily participate in the prosecution of any complaints or
charges against Tipermas or the other person released herein in any Federal,
state, or other court, administrative agency or other forum concerning any
claims released herein.
Except as required by law or as necessary to fulfill the terms of the
Agreement or this Release, or as necessary in connection with ICF's business or
tax affairs (in which case
-17-
<PAGE>
disclosure shall be on a confidential basis to the extent practicable), ICF
agrees not to disclose the terms or provisions of this Release, or the fact of
its existence, to any person or entity (including employees of the Company).
ICF understands and agrees that nothing contained in this Release is to be
considered an admission by Tipermas of any wrongdoing under any Federal, state,
or local statute, public policy, tort law, contract law, or common law.
ICF acknowledges that this Release can only be altered, revoked or
rescinded with the express written permission of Tipermas.
This Release is executed in connection with, and is subject to the terms
of, the Agreement.
ICF KAISER INTERNATIONAL, INC.
Date: August 7, 1998 By:
--------------------------------
Its Duly Authorized Representative
Subscribed and sworn to before me this 7th day of August, 1998.
--------------------------------
Notary
My commission expires: November 30, 2000
-18-
<PAGE>
Exhibit 10(ff)
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made as of the 7th day of April, 1997 by and between ICF
Kaiser International, Inc., a Delaware corporation (the "Company"), on the one
hand, and Thomas P. Grumbly, a resident of Virginia (the "Executive"), on the
other hand.
WHEREAS, ICF Kaiser desires to retain the services of Executive as
President, Federal Programs Group and Executive Vice President, ICF Kaiser
International, Inc., and Executive desires to serve in that capacity, on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
made herein, and intending to be legally bound hereby, the Company, on the one
hand, and Executive, on the other hand, agree as follows:
1. Employment Period: Duties.
--------------------------
(a) Employment and Employment Period. The Company shall employ the
---------------------------------
Executive to serve as President, Federal Programs Group ("FPG") and Executive
Vice President, ICF Kaiser International, Inc. for a period of three years
commencing April 28, 1997 (the "Employment Period"). This agreement may be
extended by mutual agreement of the parties with terms to be agreed upon. The
Company agrees to begin discussions with Executive of an such extension at least
six months prior to the end of the Employment Period.
(b) Duties and Responsibilities. The Executive shall have full line
----------------------------
responsibility and authority for the FPG of the Company. The Executive will be
a member of all senior management groups. The Executive will report to the
Chief Operating Officer of ICF Kaiser International, Inc. or in the absence
thereof to the Chief Executive Officer of ICF kaiser International, Inc. The
Executive's office will be located in the Company's headquarters office in
Fairfax, Virginia. In addition to the line responsibility for FPG, the
Executive will have the following responsibilities:
i. Chairman of a Federal Programs coordination group, which will
coordinate program and policy issues related to our federal work. The group
will include the President of the Consulting Group, and the key legal,
financial, and compliance staff with responsibilities for federal work. Through
this vehicle, the Executive will promote synergies and assure coordination with
the Company's federal consulting work.
ii. Company-wide line-of-business responsibility in the energy
and environmental area. This is another coordinating, rather than line, role: it
will make the Executive the focus, spokesman, and major strategic contributor to
the Company's environmental and energy strategies.
<PAGE>
iii. Company-wide lead, working with the Executive Vice President
for Corporate Development, for privatization -- which must be a major component
of the Company's strategy not only in FPG but also for domestic state/local
programs and international programs. The Executive is expected to chair a Task
Force to position the Company in all regards for major privatization
initiatives.
2. Compensation and Fringe Benefits.
---------------------------------
(a) Base Compensation. The Company shall pay the Executive a base
------------------
salary a the rate of $250,000 per year from April 28, 1997 through March 31,
1998; $260,000 per year from April 1, 1998 through March 31, 1999; and $270,000
per year from April 1, 1999 through March 31, 2000, all in accordance with the
Company's regular practice for compensating senior management personnel. The
Executive's base compensation will be reviewed annually thereafter.
(b) Bonus Compensation. For Calendar Year 197, the Executive will be
-------------------
paid a $25,000 signing bonus, which will be payable upon signing this Agreement.
In addition, the Executive will be guaranteed a bonus of $50,000 for Calendar
Year 1997, which will be payable upon signing this Agreement. A pro-rata share
of this $50,000 bonus (based on the portion of the year employed) is to be
returned to the Company if the Executive terminates voluntarily or for "cause,"
as defined in Section 4 below, before December 31, 1997. Please be advised that
these bonuses are paid independent of salary and are not used in retirement plan
calculations. For Calendar Year 1997, the Executive will participate in the
Annual Incentive Compensation Plan (IC) for Senior Executives as described in
Attachment A, and in the Company's Long-Term Incentive Compensation Plan. Any
bonus above the minimum is dependent upon the Company's achievement of its
profit target and the Executive's personal achievement of performance criteria
associated with his position. No bonus above the $50,000 will be paid unless
the Executive earns more than $50,000 under these plans (taking into account
pro-rata reductions in the amount earned for being employed by the Company only
part of the year). However, if less than $50,000 is earned, no refund will be
required, except as previously discussed in this paragraph. For future years
(Calendar Year 1998 and beyond), any bonus will be determined by the
Compensation Committee of the Board of Directors. Bonus awards may be comprised
of cash, stock options, and/or restricted stock. By corporate policy, bonuses
are payable only to eligible staff employed by the Company on the date of
distribution, which under current policy will be on or about March 15 of the
following calendar year.
(c) Fringe Benefits. The Executive shall be entitled to such fringe
----------------
benefits as are generally made available by the Company to senior management
personnel. Such benefits shall include participation in the Company's defined
contribution retirement plan, Section 401(k) Plan, and health, term life and
disability insurance programs. The Executive also will be reimbursed for
reasonable expenses incurred in connection with travel and entertainment related
to the Company's business and affairs which will be paid by the Company in a
manner, consistent with past practice and as amended by any subsequent changes
of Company Policy.
<PAGE>
3. Stock Options.
--------------
As soon as practicable after commencement of the Employment Period,
the Company will grant to the Executive non-qualified stock options under the
Company's Stock Incentive Plan to purchase 100,000 shares of the Company's
common stock, par value $0.01 per share ("Common Stock"), at a purchase price
equal to the average of the closing prices of the Common Stock on the New York
Exchange on each of the 20 days ending the day immediately preceding the grant
date. Such options will be represented by a Stock Option Agreement in the form
customarily used by the Company for such agreements, containing the following
provisions:
(i) Option Term. The options will expire at five years from date
------------
of grant. All unexercised vested options shall expire 90 days after the
Executive ceases being employed by the Company for any reason. All unvested
options shall expire on the date Executive's employment ends.
(ii) Vesting. Twenty-five percent (25%) of the options vest on each
--------
of the first four anniversaries of the grant date.
(iii) Exercise. Subject to applicable securities laws and
---------
regulations, all vested options are exercisable at any time prior to expiration
of their exercise period.
4. Termination.
------------
(a) In the event the Company elects to terminate this Agreement
without "cause" or the Executive elects to terminate this Agreement for "good
reason", the Company shall pay to the Executive, in addition to any amounts paid
or payable under other provisions of this agreement, a severance payment equal
to 12 times the average monthly base salary paid to the Executive for the 12-
month period immediately preceding the termination. The Company shall also
continue to pay, for 12 months, its share (plus any additionally costs due to
COBRA) of medial and dental insurance, if any, in which the Executive
participated prior to termination; however, the Executive will continue to pay
his share as well. The Executive understands that the amounts paid by the
Company may be taxable income to the Executive. For purposes of this provision,
"cause" is defined as: (i) the continued, willful and deliberate failure of the
Executive to perform the Executive's duties in a manner substantially consistent
with the manner prescribed by the Board of Directors, the Chief Executive
Officer, or Chief Operating Officer of ICF Kaiser International, Inc. consistent
with law and professional ethics (other than any such failure resulting from the
Executive's incapacity due to physical or mental illness); (ii) the engaging by
the Executive in misconduct materially, directly and demonstrably injurious to
FPG or its parent companies and/or affiliates; or (iii) the conviction of the
Executive of commission of a felony, whether or not such felony was committed in
connection with the Company's business. In no event shall the failure to
achieve profit or other financial goals or alleged incompetence on the
Executive's part be deemed to constitute "cause" so long as such failure or
incompetence does not result from the Executive's failure to perform duties in
good faith. "Good Reason" is defined
<PAGE>
as (i) without the Executive's express written consent, the offices, duties,
responsibilities, compensation, or benefits of the Executive are substantially
reduced (except in connection with the termination of employment voluntarily by
the Executive, by the Company for "cause, " or in the case of disability or
death); (ii) without the Executive's express written consent, the Company's
principal executive offices shall have been relocated outside the Washington, DC
metropolitan area, or the Executive shall be based anywhere other than the
Washington, DC metropolitan area or other office location designated in the
Executive's employment agreement (except for required travel on the Company's
business); (iii) a majority of the Board of Directors of the Company is not
comprised of "Continuing Directors," where a "Continuing Director" of the
Company as of any date means a member of the Board of Directors of the Company
who (x) was a member of the Board of Directors of the Company on the effective
date of this Agreement or (y) was nominated for election or elected to the Board
of Directors of the Company with the affirmative vote of at least a majority of
the directors who were Continuing Directors at the time of such nomination or
election; or (iv) during the first two years of the Employment Period, James O.
Edwards ceases to be an Executive Officer of the Company, except by death or
disability.
(b) After the end of the Employment Period, if no other agreement with
the Company has been made, the Executive shall be a participant in the Senior
Executive Officers' Severance Plan.
5. Non-Competition.
----------------
(a) Except as provide in paragraph (d) below, the Executive agrees
that for a period commencing as of the date of employment of the Executive by
the Company and running through the earlier of (i) the end of the Employment
Period if the Executive remains employed by the Company for the entire
Employment Period or (ii) one year following termination of the Executive's
employment by the Company for any reason, whether by action of the Executive or
the Company (the "Non-Competition Period"), the Executive will not, except as
otherwise provided herein, engage or participate, directly or indirectly, as
principal, agent, employee, employer, consultant, stockholder, partner or in any
other individual capacity whatsoever, in the planning for, conduct of, or
management of, or own any stock or any other equity investment in or debt of,
any business which is competitive with any business conducted by the Company.
The Non-Competition Period will cease if the Company fails to make any severance
payment required in Section 4 above.
For the purpose of this Agreement, a business shall be considered to
be competitive with the business of the Company only if such business is engaged
in providing services (i) similar to (x) any service currently provided by the
FPG of the Company or provided by the FPG of the Company during the Employment
Period; (y) any service which evolves from or results from enhancements in the
ordinary course during the Non-Competition Period to the services provided by
the FPG of the Company as of the date thereof or during the Employment Period;
or (z) any future service of the FPG of the Company as to which the Executive
materially and substantially participated in the design or enhancement, and (ii)
to customers and clients of the type served by the FPG of the Company during the
Non-Competition Period.
<PAGE>
(b) Non-Solicitation of Employees. During the Non-Competition Period,
-----------------------------
the Executive will not (for his own benefit or for the benefit of any person or
entity other than the Company) solicit, or assist any person or entity other
than the Company to solicit, any officer, director, executive or employee of the
Company to leave his or her employment.
(c) Reasonableness. The Executive acknowledges the (i) the markets
--------------
served by the FPG of the Company are national and international and are not
dependent on the geographic location of executive personnel or the businesses by
which they are employed, (ii) the length of the Non-Competition Period is linked
to the term of the Employment Period and the severance benefit provided for in
Section 4; and (iii) the above covenants are manifestly reasonable on their
face, and the parties expressly agree that such restrictions have been designed
to be reasonable and no greater than is required for the protection of the
Company.
(d) Investments. Nothing in this Agreement shall be deemed to
-----------
prohibit the Executive from owning equity or debt investments in any
corporation, partnership or other entity which is competitive with the Company,
provided that such investments (i) are passive investments and constitute five
- --------
percent (5%) or less of the outstanding equity securities of such an entity the
equity securities of which are traded on a national securities exchange or other
public market, or (ii) are approved by the Company.
6. Enforcement.
-----------
Executive agrees that the Company's remedies at law for any breach or
threat of breach by the Executive of the provisions of Section 5 of this
Agreement or Sections 2, 3, or 4 of Attachment B hereof will be inadequate, and
that the Company shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of Section 5 of this Agreement or Sections 2, 3, or 4
of Attachment B hereof and to enforce specifically the terms and provisions
thereof, in addition to any other remedy to which the Company may be entitled at
law or equity.
7. Notices.
--------
Any notice required or permitted under this Agreement shall be deemed
to have been effectively made or given if in writing and personally delivered or
mailed properly addressed in a sealed envelope, postage prepaid by certified or
registered mail. Unless otherwise changed by notice, notice shall be properly
addressed to Executive:
Thomas P. Grumbly
302 Buxton Road
Falls Church, VA 22046
<PAGE>
and properly addressed to the Company is addressed to:
ICF Kaiser International, Inc.
9300 Lee Highway
Fairfax, Virginia 22301-1207
Attn: James O. Edwards
with a copy to:
Paul Weeks II
Senior Vice President, Secretary
and General Counsel
ICF Kaiser International, Inc.
9300 Lee Highway
Fairfax, Virginia 22301-1207
8. Each Party Bears Own Costs.
---------------------------
In the event either of the parties to this Agreement commences any
action or proceeding arising out of, or relating in any way to, this Agreement,
each party shall bear his or its own costs, expenses, and attorney's fees.
9. Other Provisions.
-----------------
All paragraph headings used herein are for convenience only and shall
not otherwise affect the interpretation of this Agreement. This Agreement,
including the attachments referred to herein, is the sole and final agreement
among the parties hereto with respect to the matters discussed herein, and shall
supersede any and all prior agreements or understandings regarding same. No
changes shall be made to the terms hereof except by the mutual written agreement
of the parties hereto. This Agreement shall be interpreted and enforced in all
respects (including as to damages) in accordance with the laws of the
Commonwealth of Virginia, excluding the conflicts of laws rules thereof.
10. Attachments Incorporated by Reference.
--------------------------------------
(a) Attachment A- ICF Kaiser International Inc.'s Annual Incentive
Compensation (IC) Plan for Senior Executives.
(b) Attachment B - ICF Kaiser International, Inc.'s Standard Terms and
Conditions of Employment for Executive Personnel.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first written.
Executive ICF Kaiser International, Inc.
/s/ Thomas P. Grumbly /s/ James O. Edwards
- --------------------- --------------------
Thomas P. Grumbly James O. Edwards
Chairman and Chief
Executive Officer
<PAGE>
Attachment A
ANNUAL INCENTIVE COMPENSATION (IC) PLAN FOR SENIOR EXECUTIVES
-------------------------------------------------------------
I. Eligibility
-----------
Edwards, his four direct reports (COO, Tipermas, Goldman, CFO), and the three
group presidents (FPG President, Kesavan, Watson). All participants in this
plan will also be participants in the Long-Term Incentive (LTI) Plan.
II. Payment
-------
Bonuses earned under the "Corporate Pool" (defined below) will be paid in cash.
Bonuses paid under the "Group Pool" will be paid in cash and the restricted
stock that vests over 3 years, as indicated below.
III. Calculation of Pools
--------------------
Edwards and the four direct reports are paid solely from the "Corporate Pool".
The three group presidents are paid from the "Corporate Pool" and from their
"Group Pool, " as shown below. Discretionary bonuses outside of this plan may be
granted to any of these individuals for meritorious performance.
IV. Determination of Corporate Pool
-------------------------------
The size of the Corporate Pool is determined solely by the earnings-per-share
performance of ICF Kaiser International, as follows:
$80,000 for each $01. EPS over $.10 EPS (linear, no cap). The corporate pool at
$.29 EPS would equal approximately $1.5 million. For example:
1997 EPS Corporate Bonus Pool
-------- --------------------
$.10 $ 0
$.16 $ 480,000
$.22 $ 960,000
$.29 $ 1,520,000
The final accounting for EPS may be adjusted by the Compensation Committee,
after discussion with the CEO, for any one-time voluntary capital transaction,
either positive or negative.
(Note: The EPS numbers must be net of the bonus in this plan and the restricted
stock issued under the LTI Plan. This means, for example, that, to yield an EPS
of $.29, we would have to earn approximately $.37/share before the stretch
target payments of $1.5 million in bonus in this plan and the 600,000 shares of
restricted stock [at an assumed $2.50 per share] to be paid under the LTI Plan.)
<PAGE>
V. Determination of the Group Pool
-------------------------------
E&C (Watson): $30,000 plus 6,000 shares of restricted stock for each million of
Net Contribution (less Nova and all bonuses) over $22 million (linear, no cap),
plus $20,000 plus 4,000 shares of restricted stock for each million of CY1997
Net Contribution over $6 million from the Nova Hut Project. (linear, no cap)
Consulting (Kesavan): $15,000 plus 3,000 shares of restricted stock for each
million of Net Contribution (after all bonuses) over $10 million (linear, no
cap)
Federal Programs: $15,000 plus 3,000 shares of restricted stock for each million
of Net Contribution (after all bonuses) over $10 million (linear, no cap)
(Note: Sums earned under this section are billed to the groups.)
VI. 1997 Division of Corporate Pool
-------------------------------
Edwards 30%
COO 20%
Tipermas 17%
Goldman 9%
CFO 9%
Watson 5%
FPG President 5%
Kesavan 5%
(Note: Corporate Pool is a Corporate [BBU] cost)
VII. Partial-Year Issues
-------------------
1. No determinations made until financial statements finalized (March 1998).
2. No bonuses for voluntary departures before 12/31/97.
3 No partial bonuses for anybody in place less than 6 months.
4. Pro-rata bonuses for anybody in place over 6 months, but no bonuses for
voluntary departures before 12/31/97.
5. Unused percentages will e returned to net income, not allocated to
remaining participants, except that for the period there is no COO, if any,
in 1997, Tipermas will earn 20% of the pool.
<PAGE>
Attachment B
ICF Kaiser International, Inc.
Standard Terms and Conditions
of Employment for Executive Personnel
Attachment B to the Employment Agreement (the "Base Agreement") as of
April 7, 1997 between ICF Kaiser International, Inc. (the "Company") and Tom
Grumbly (the "Executive"). This Attachment B and Agreements incorporated into or
referred to in the Base Agreement and the Base Agreement are collectively
referred to as this "Agreement".
1. Devotion to Interests of the Company Except as expressly authorized
------------------------------------
by the Chief Executive Officer or the Board of Directors of ICF Kaiser
International, Inc., until the effective date of notice of termination of this
Agreement by either the Executive or the Company, with or without cause, the
Executive shall render his business services solely in the performance of his
duties under this Agreement. The Executive shall use his best efforts to
promote the interests and welfare of the Company and its subsidiaries and
affiliates.
2. Trade Secrets. The Executive shall not use or disclose to third
-------------
parties any of the Company's trade secrets or other confidential information.
The term "trade secrets or other confidential information" includes, by way of
example, matters of a technical nature, such as scientific, trade and
engineering secrets, "know-how", formulae, secret processes or machines,
inventions, computer programs (including documentation of such programs) and
research projects, and matters of a business nature, such as proprietary
information about costs, profits, markets, sales, lists of customers, and other
information of a similar nature to the extent not available to the public, and
plans for future development. After termination of this Agreement, the
Executive shall not use or disclose trade secrets or other confidential
information unless such information becomes a part of the public domain other
than through a breach of this Agreement or is disclosed to the Executive by a
third party who is entitled to receive and disclose such information.
3. Return of Documents and Property. Upon the effective date of notice
--------------------------------
of the Executive's or the Company's election to terminate this Agreement, or at
any time upon the request of the Company, the Executive (or his heirs or
personal representatives) shall deliver to the Company (a) all documents and
materials containing trade secrets or other confidential information relating to
the Company's business and affairs, and (b) all documents, materials and other
property belonging to the Company, which in either case are in the possession or
under the control of the Executive (or his heirs or personal representatives).
4. Discoveries and Work. All discoveries and works made or conceived by
--------------------
the Executive during his employment by the Company, jointly or with others, that
relate to the Company's activities shall be owned by the Company. The term
"discoveries and works" includes, by the way of example, inventions, computer
programs (including documentation of such programs), technical improvements,
processes, drawings and works of authorship. The Executive shall (a) promptly
notify, make full disclosure to, and executive and deliver any
<PAGE>
documents requested by, the Company to evidence or better assure title to such
discoveries and works in the Company, (b) assist the Company in obtaining or
maintaining for itself at its own expense United States and foreign patents,
copyrights, trade secret protection or other protection of any and all such
discoveries and works, and (c) promptly execute, whether during his employment
by the Company or thereafter, all applications or other endorsements necessary
or appropriate to maintain patents and other rights for the Company and to
protect its title thereto. Any discoveries and works which, within six months
after the termination of the Executive's employment by the Company, are made,
disclosed, reduced to a tangible or written form or description, or are reduced
to practice by the Executive and which pertain to the business carried on or
products or services being sold or developed by the Company at the time of such
termination shall, as between the Executive and the Company, be presumed to have
been made during the Executive's employment by the Company. Set forth on
Schedule I attached hereto is a list of discoveries and works, whether or not
registered or patented, including a brief description thereof, which are owned
by the Executive, which the Executive conceived or made prior to this employment
by the Company and its affiliates and which are excluded from this Agreement.
5. Severability. Should any provision of this Agreement be determined to
------------
be unenforceable or prohibited by any applicable law, such provision shall be
ineffective to the extent, and only to the extent, of such unenforceability or
prohibition without invalidating the balance of such provision or any other
provision of this Agreement, and any such unenforceability or prohibition in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
6. Assignment. The Executive's rights and obligations under this
----------
Agreement shall not be assignable by the Executive. The Company's rights and
obligations under this Agreement shall not be assignable by the Company except
as incident to the transfer, by merger or otherwise, of all or substantially all
of the business of the Company. In the event of any such assignment by the
Company, all rights of the Company under this Agreement shall inure the benefit
of the assignee.
<PAGE>
SCHEDULE I
----------
Discoveries and Works Owned by the Executive
NONE
<PAGE>
Exhibit 10(ff)(1)
[ICF KAISER LETTERHEAD APPEARS HERE]
March 15, 1999
Mr. Thomas P. Grumbly
Executive Vice President and President,
Environment and Facilities Management Group
ICF Kaiser International, Inc.
9300 Lee Highway
Fairfax, VA 22031-1207
Re: Employment Agreement
--------------------
Dear Tom:
I refer to your Employment Agreement dated April 7, 1997. The purpose of
this letter is to confirm the arrangements approved by the Human Resources &
Compensation Committee of the Board of Directors in light of the planned sale of
the ICF Kaiser International, Inc. Environment and Facilities Management Group
to The IT Group, Inc. (the "EFM Transaction"). To the extent the provisions of
this letter are inconsistent with your Employment Agreement, the terms of this
letter shall govern.
1. Your base compensation shall increase to $270,000 per year effective
February 1, 1999.
2. You agree to cooperate with ICF Kaiser and The IT Group, Inc. in
connection with the EFM Transaction, and to remain as an employee of
ICF Kaiser for a period of 30 days after closing of the EFM
Transaction. This letter agreement assumes that the EFM Transaction
will close on or before June 1, 1999. If the closing does not take
place on or before that date, we will agree on mutually satisfactory
arrangements concerning any continuation of your services to ICF
Kaiser.
3. Consistent with the terms of your Employment Agreement, ICF Kaiser
will continue to pay, for a period of 12 months following the
termination of your employment with ICF Kaiser, ICF Kaiser's share
(plus any additional costs due to COBRA) of medical and dental
insurance, if any, in which you are currently participating. You
will continue to pay your share as well. You understand that amounts
paid by ICF Kaiser may constitute taxable income to you.
<PAGE>
Mr. Thomas P. Grumbly
March 15, 1999
Page 2
4. As promptly as practicable after your execution of this letter, you
will be paid the sum of $50,000 (less applicable withholding
amounts).
5. On the earlier of April 28, 1999, and the closing of the EFM
Transaction, you will be paid $270,000 plus an amount equal to 9%
per annum on such amount from February 1, 1999, to the date of
payment.
6. To the extent your options to purchase ICF Kaiser common stock are
not vested on the date you cease being employed by ICF Kaiser, such
options will vest on such date and shall remain exercisable for a
period of 90 days after you cease being employed by ICF Kaiser.
7. The payments provided to you pursuant to this letter agreement are
in lieu of all amounts due to you upon termination of your
employment under your Employment Agreement, including, without
limitation, the provisions of Section 4 of your Employment
Agreement.
8. Effective on the date you cease being employed by ICF Kaiser, the
Company waives the provisions of Section 5 of your Employment
Agreement relating to noncompetition.
If you agree that the foregoing accurately reflects the arrangements
that have been agreed to, please sign where indicated below.
Very Truly yours,
ICF KAISER INTERNATIONAL, INC.
By: /s/ Keith M. Price
--------------------------------------
Keith M. Price
President and Chief Executive Officer
AGREED:
/s/ Thomas P. Grumbly
- -------------------------
Thomas P. Grumbly
<PAGE>
Exhibit 10(ii)(1)
[ICF KAISER LETTERHEAD APPEARS HERE]
AGREEMENT AND MUTUAL GENERAL RELEASE
I, David Watson, understand and, of my own free will, enter into this
Agreement and General Release ("Agreement") with ICF Kaiser International, Inc.
and its subsidiaries (the "Company")and, in consideration of a supplemental
separation payment ("Separation Benefit")described herein, agree as follows:
I. As referred to in this Agreement, the Company includes its parents,
subsidiaries, affiliates and divisions, their respective successors and
assigns, and all of their past and present directors, officers,
representatives, shareholders agents, employees and their respective
heirs and personal representatives or any of them.
II. I hereby acknowledge that I resign my position as Executive Vice
President and President, Engineers and Constructors effective Friday,
August 7, 1998 at 12 midnight. Effective on that date and at that time I
will no longer hold myself out as an officer of the Company nor will I
bind it in any way. My full-time employment with the Company terminates
at midnight on October 7, 1998. Effective October 8, 1998, I will be a
part-time employee, paid at a rate of $145.00 per hour for any hours
that either Keith Price or Richard Leupen approves. I agree to be on
call and available to the Company through my last day of full-time
employment.
III. I acknowledge that Company officers explained the Company's standard
severance policy for which I am eligible. In recognition of my position
as President, Engineers and Constructors, the Company will give me an
increased severance payment, as described in Paragraph IV below, if, and
only if, I sign this Agreement and comply with its terms. I understand
that the Company will not be required to provide the additional
separation benefit until after this Agreement becomes effective.
IV. The separation benefit that I will consist of the following items:
A) Severance: I will receive 52 weeks severance, effective from my last
--------- --------
day of full-time employment, at my current salary, less deductions
required by law, and paid in a lump sum on or about October 1, 1998, but
no later than October 16, 1998.
B) Restricted Stock: The 45,600 shares of restricted stock that were
----------------
granted to me (6,600 shares on March 20, 1997 and 39,000 shares on March
9, 1998) will fully vest effective on my last day of my employment. I
understand that I will be given the certificates for these 45,600 shares
on the last day of my full-time employment provided that I have
satisfied all tax withholding obligations related to these shares.
C) Legal Fees: I will be reimbursed for all legal expenses I incur in
connection with my termination settlement and this Agreement up to a
maximum of $2,500.
D) Use of Club Memberships: The Company will enable me to use its
-----------------------
Corporate Membership at Avenel and retain my status as designated
representative through December 31, 1999. I will be responsible for all
remaining initiation fees and ongoing membership dues. The club may be
used by any ICF Kaiser International employee through December 31, 1999.
Effective January 1, 2000 Avenel will convert ICF Kaiser's Executive
Business Membership to a Patron Membership classification in my name.
E) Total Separation Benefit: The supplemental separation benefit
------------------------
consisting of A), B), C), and D) as described above is in excess of the
Company's severance policy which provides for a number of weeks' pay
based on tenure and my Employment Agreement dated December 1, 1996 that
I would otherwise be eligible to receive.
F) Final Payment: I will be issued a severance payment as stated in A)
-------------
above, less deductions required by law, on a date appropriate with this
Agreement's Revocation Period. The severance payment is taxed at the
federal government supplement tax rate (currently 28 percent).
1
<PAGE>
G) References: I hereby authorize Keith M. Price and Marcy A. Romm to
----------
provide my only employment references. In providing this authorization,
I hereby release the Company from any and all claims that may arise out
of the Company's response to a request for employment reference
information.
V. Confidentiality Agreement: I understand that I continue to be bound by
-------------------------
the Confidentiality Agreement that I signed upon employment.
VI. Non-Disparagement: Each of the Company and I covenant and agree that
-----------------
following the date of this Agreement neither shall make disparaging
statements concerning the other, or its officers, directors, affiliates,
agents and/or employees. For this purpose a disparaging statement shall
be a statement or statements that, individually or in the aggregate,
have a materially detrimental effect on the business affairs of the
Company or me, as the case may be.
VII. Confidentiality of Agreement: Except as required by law or as necessary
----------------------------
to fulfill the terms of this Agreement or the General Releases
incorporated herein, or in connection with a party's family, business,
or tax affairs (in which case disclosure shall be on a confidential
basis to the extent practicable), neither the Company nor I shall
disclose the terms or provisions of this Agreement, or the fact of its
existence, to any person or entity.
VIII. Non-Competition: I agree that for a period of one year from the date of
---------------
this Agreement I will not engage or participate, directly or indirectly,
as principal, agent, employee, employer, consultant, stockholder,
partner or in any other individual capacity whatsoever, in the planning,
conduct, or management of, or own any stock or any other equity
investment in or debt of, any business which is competitive with any
business conducted by the Company.
IX. Non-Solicitation of Employees: I agree that for a period of one year
-----------------------------
from the date of this Agreement, I will not, for my own benefit or for
the benefit of any person or entity, actively solicit any officer,
director, executive, or employee to leave the Company's employment.
X. Legal Compliance:
-----------------
A. I understand that this Agreement does not constitute an admission by
the Company of any: (a) violation of any statute, law or regulation;
(b) breach of contract, actual or implied; or (c) commission of any
tort.
B. The terms and provisions of the Agreement shall be governed by and
interpreted in accordance with the laws of the Commonwealth of
Virginia and of the United States of America, without giving effect
--------
to the doctrine of conflict of laws.
I realize there are many laws and regulations prohibiting employment
discrimination or otherwise regulating employment or claims related
to employment pursuant to which I may have rights or claims. These
include Title VII of the Civil Rights Act of 1964, as amended; the
Age of Discrimination in Employment Act of 1967, as amended (the
"ADEA"); the Americans with Disabilities Act of 1990; the National
Labor Relations Act, as amended; the Employee Retirement Income
Security Act of 1974, as amended; the Civil Rights Act of 1991; the
Workers Adjustment and Retraining Notification Act of 1988; 42
U.S.C. (S) 1981 and federal, state and local human rights, fair
employment and other laws. I also understand there are other
statutes and laws of contract and tort otherwise relating to my
employment. I intend to and do hereby waive and release any rights I
may have under these and other laws.
C. In exchange for my receipt of the separation benefit, on behalf of
myself, my heirs and personal representatives, I hereby release and
discharge the Company from any and all charges, claims and actions
arising out of my employment or the termination of my employment
with the Company. I will immediately withdraw with prejudice any
such charges, claims and actions that I have brought before signing
this Agreement, and I will not bring any such charges, claims and
2
<PAGE>
actions against the Company in the future, except a charge, claim or
action based upon rights or claims that may arise under the ADEA
after the date that I sign this Agreement.
D. In consideration of my agreements set forth herein, the Company
hereby releases and discharges me from any and all charges, claims
and actions arising out of my employment or the termination of my
employment with the Company, other than charges, claims and actions
arising under this Agreement. The Company has not brought, and will
not bring, any such charges, claims and actions in the future,
except a charge, claim or action based upon its rights or claims
that may arise under this Agreement.
E. Should any provision of this Agreement be determined to be
unenforceable or prohibited by any applicable law, such provision
shall be ineffective to the extent, and only to the extent, of such
unenforceability or prohibition without invalidating the balance of
such provision or any other provision of this Agreement, and any
such unenforceability or prohibition in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
XI. Agreement Review Period: I was given a copy of this Agreement on August
-----------------------
7, 1998. I have had an opportunity to consult an attorney before signing
it and was given a period of at least twenty-one (21) days, or until
August 28, 1998, to consider this Agreement. I acknowledge that in
signing this Agreement, I have relied only on the promises written in
this Agreement and not on any other promise made by the Company.
---
XII. Agreement Revocation Period: I have seven (7) days to revoke this
---------------------------
Agreement after I sign it. The Agreement does not become effective or
enforceable until: (i) the Company has received a copy signed by me; and
(ii) the seven (7) day revocation period has ended. Severance payment
will be made on the Company's scheduled payday that follows the date of
this Agreement.
XIII. Agreement Modification or Change: This Agreement may not be modified or
--------------------------------
changed orally. Any modifications and changes must be made by the
signature of Marcy A. Romm, Senior Vice President and Director of Human
Resources.
I have read this Agreement and General Release and I understand all of
its terms. I enter into and sign this Agreement knowingly and voluntarily, with
full knowledge of what it means.
/s/ David Watson Date: August 17, 1998
---------------------- -----------------
David Watson
ICF KAISER INTERNATIONAL, INC.
By: /s/ Marcy A. Romm Date: August 17, 1998
----------------------------------- -----------------
Marcy A. Romm
Senior Vice President and Director
of Human Resources
ICF Kaiser International, Inc.
<PAGE>
Exhibit 10(KK)(1)
AGREEMENT
AGREEMENT (this "Agreement") dated as of March 8, 1999, by and between
Michael Gaffney, a resident of the State of Virginia ("Gaffney"), and ICF Kaiser
International, Inc. a Delaware corporation (the "Company"). As used in this
Agreement, unless the context indicates otherwise, the term "the Company" shall
be deemed to refer to ICF Kaiser International, Inc. and each and every one of
its affiliated entities.
WITNESSETH
WHEREAS, Gaffney presently serves as Executive Vice President of the
Company; and
WHEREAS, Gaffney and the Company wish consensually to sever the employment
relationship between Gaffney and the Company.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and promises hereinafter provided and of the actions taken pursuant thereto, the
parties agree as follows:
1. Effective Date. This Agreement shall be executed and become effective
--------------
March 17, 1999, (the Effective Date").
2. Resignation and Termination of Existing Employment Relationship. As
---------------------------------------------------------------
of the Effective Date, Gaffney shall be deemed to have resigned from all
corporate offices of the Company, and from all offices and directorships of the
Company's subsidiaries, joint ventures, and affiliated companies, organizations
and entities including, without limitation, plan committees for employee benefit
plans trusts. During the period from the Effective Date until the close of
business fifteen days after the Effective Date, Gaffney shall assist the Company
as requested by the Company's Chief Executive Officer, Chief Financial Officer,
Group Presidents, or any member of the Board of Directors. Gaffeny's full-time
employment by the Company shall be deemed to have terminated as of the close of
business
1
<PAGE>
on March 17, 1999. Thereafter, and if requested by the Company, Gaffney shall
serve as a variable part-time employee at a rate of $121.19 per hour.
3. Records. As soon as practicable after the Effective Date, the Company
-------
shall take such steps as may be necessary to reflect in the corporate records of
the Company, its subsidiaries, joint ventures, and affiliated companies,
organizations and entities that Gaffney has resigned as an officer of the
Company and as an officer and director of the Company's subsidiaries, joint
ventures, and affiliated companies, organizations and entities.
4. Payment: The following amounts, less required Federal and state
-------
withholding and other deductions and without interest, shall be paid to Gaffney
by wire transfer as directed by Gaffney.
(a) $150,000 on or before April 4, 1999,
(b) $50,000 on or before May 4, 1999, and
(c) $50,000 on or before June 4, 1999.
5. Health Benefits. Gaffney and his dependents shall continue to be
---------------
covered under the Company's provided health insurance April 30, 1999. Gaffney
may elect to continue his family health benefits provided through the Company to
the extent permitted by Federal COBRA laws in effect as of the date of this
Agreement. For purposes of COBRA compliance, the date on which Gaffney's health
benefits terminate shall be April 30, 1999. Except as specifically provided in
this Section 5, all health benefits shall terminate on April 30, 1999.
6. Indemnification and Notice Concerning Nonrenewal of Directors,
--------------------------------------------------------------
Officers and Fiduciaries Insurance Coverage:
- -------------------------------------------
(a) The Company acknowledges that its Certificate of Incorporation and
By-Laws and the charters and by-laws of certain of its direct and indirect
subsidiaries and employee
2
<PAGE>
benefit plans and related trusts include provisions designed to provide to
former officers, directors and fiduciaries indemnification in respect of
threatened and commenced actions, suits and proceedings in which an individual
is a party or is threatened to be made a party by reason of the fact that he is
or was an officer, director or fiduciary of the Company or such subsidiaries or
trusts. The Company shall, and shall cause such subsidiaries and trusts to
continue to provide indemnification to Gaffney under such provisions to the
maximum extent permitted by applicable law.
(b) So long as the Company maintains directors and officers liability
insurance coverage, or liability insurance for the fiduciaries of its employee
benefits plans and related trusts, Gaffney shall be covered by such insurance,
with respect to his tenure with the Company, on the same terms as other existing
and former officers, directors and fiduciaries. If, for any reason, the Company
shall not continue to have such insurance coverage in effect on terms
substantially comparable to those presently in effect, the Company shall
purchase substantially comparable insurance coverage for acts arising before the
termination of the previously existing insurance (also knows as "tail" or "run-
off" insurance).
7. Employment Reference. Nothing in this Agreement shall prevent either
--------------------
party from stating the fact that Gaffney was employed by the Company, the
address of his work location, the dates of his employment, his job titles and
job duties, his rate of pay, or that he resigned from his position as an officer
of the Company on or about March 17, 1999. The Company may respond to
employment inquiries in accordance with the Company Kaiser Employee Handbook.
8. Proprietary Information and Business and Personal Property.
----------------------------------------------------------
3
<PAGE>
(a) Gaffney will not directly or indirectly disclose any confidential
records, information, documents, data formulae, specifications or other trade
secrets owned by the Company to any person, or use any such information, except
(i) as appropriate in connection with the activities contemplated by Section 2
or (ii) pursuant to court order or as a result of a valid order, subpoena or
discovery request (and in the case of such disclosure Gaffney will provide the
Company with written notice of the same sufficiently in advance of the required
disclosure date to allow the Company to lodge appropriate objections to such
disclosure). The immediately preceding sentence shall not apply to information:
(x) disclosure of which is required by law or by process lawfully issued; (y)
which has been disclosed to Gaffney or to a third party by a person not under a
duty of confidentiality with respect to that information; or (z) which later
enters the public domain through no fault or breach of duty by Gaffney.
(b) Gaffney shall have no ownership interest in any records, files,
information, documents, or the like that belong to the Company which Gaffney has
used, prepared or come into contact with during his employment by the Company,
and, except as appropriate in connection with the activities contemplated by
Section 2, Gaffney shall not remove written copies thereof from the premises of
the Company or any of its affiliates without the Company's written consent.
Within five (5) business days after the Effective Date, Gaffney shall have
returned to the Company all of the Company property Gaffney has in his
possession. Nothing in this Agreement shall limit Gaffney's right to remove
personal effects from his office within five business days after the Effective
Date.
(c) Until May 31, 1999 Gaffney shall remain on the Company-sponsored
cellular telephone program provided that Gaffney be responsible for the cost of
--------
cellular telephone service as of the Effective Date. Until May 31, 1999 or
until Gaffney obtains new
4
<PAGE>
employment, whichever occurs first, the Company will allow Gaffney to have
access to his voice mailbox on the Company telephone system and to his the
Company e-mail address.
9. No Disparaging Statements. Except as required by applicable law or
-------------------------
legal process; each of the Company and Gaffney covenant and agree that following
the Effective Ate neither of them nor their of its officers, directors,
affiliates, agents and/or employees shall make disparaging statements concerning
the others (for this purpose, a disparaging statement shall refer to a statement
or statements that, individually or in the aggregate, have a materially
detrimental effect on the business affairs of the Company or Gaffney, as the
case may be).
10. Confidentiality of Agreement. Except as required by applicable law or
----------------------------
legal process or as necessary to fulfill the terms of this Agreement or the
General Releases incorporated herein, or in connection with a party's family,
business, or tax affairs (in which case disclosure shall be on a confidential
basis to the extent practicable), the parties shall not disclose the terms or
provisions of this Agreement or such General Releases, or the fact of their
existence, to any person or entity.
11. No Admission. Nothing contained in this Agreement or the General
------------
Releases incorporated herein shall be considered an admission by either party of
any wrongdoing under any Federal, state or local statute, public policy, tort
law, contract law, common law or otherwise.
12. No Third Party Claims. Each party represents and warrants that no
---------------------
other person or entity has, or to the best knowledge of such party claims, any
interest in any potential claims, demands causes of action, obligations, damages
or suits released pursuant to this Agreement; that it or he is the owner of all
other claims, demands, causes of action, obligations, damages or suits so
released; that it or he has full and complete authority to execute this
Agreement; and that it or
5
<PAGE>
he has not sold, assigned, transferred, conveyed or otherwise disposed of any
claim, demand, cause of action, obligation or liability subject to this
Agreement and the General Releases contemplated hereby.
12. Full Releases. Each party agrees and acknowledges that the
-------------
consideration received by it or him for this Agreement and the General Release
provided below, and for the execution hereof and thereof, shall constitute full
payment, satisfaction, discharge, compromise and release of and from all matters
for which the other party has mutually released it or him herein and in such
General Releases.
13. No Third Party Beneficiaries. Except as expressly stated herein, the
----------------------------
parties do not intend to make any person or entity who is not a party to this
Agreement a beneficiary hereof, and this Agreement should not be construed as
being made for the benefit of any person or entity not expressly provided for
herein.
14. Non-Competition.
---------------
(a) Gaffney agrees that for a six (6) month period commencing as of
the Effective Date, Gaffney will not, except as otherwise provided herein,
engage or participate, directly or indirectly, as principal, agent, employee,
employer, consultant, stockholder, partner or in any other individual capacity
whatsoever, in the planning, conduct, or management of, or own any stock or any
other equity investment in or debt of, any business which is competitive with
any business conducted by the Company.
For the purpose of this Agreement, a business shall be considered to
be competitive with the business of the Company only if such business is engaged
in providing engineering and construction services (i) similar to (x) any
service currently provided by the Company during the Non-Competition Period; or
(y) any future service of the Company as to
6
<PAGE>
which Gaffney materially and substantially participated in the design or
enhancement, and (ii) to customers and clients of the type served by the Company
during the Non-Competition Period.
(b) Solicitation of Employees. During the Non-Competition Period,
-------------------------
Gaffney will not (for his own benefit or for the benefit of any person or entity
other than the Company) solicit, or assist any person or entity other than the
Company to solicit, any officer, director, executive or employee of the Company
to leave his or her employment.
(c) Reasonableness. Gaffney acknowledges that (i) the markets served
--------------
by the Company are national and international and are not dependent on the
geographic location of executive personnel or the businesses by which they are
employed, (ii) the length of the Non-Competition Period is linked to the term of
the severance benefit provided for above; and (iii) the above covenants are
manifestly reasonable on their face, and the parties expressly agree that such
restrictions have been designed to be reasonable on their face, and the parties
agree that such restrictions have been designed to be reasonable and no greater
than is required for the protection of the Company.
16. Advice of Counsel. The parties acknowledge that they have been
-----------------
advised, or have knowingly waived such advice, by competent legal counsel in
connection with the execution of this Agreement, that they have read each and
every paragraph of this Agreement and that they understand their respective
rights and obligations. Gaffney declares that he has completely read this
Agreement, fully understands its terms and contents, and freely, voluntarily and
without coercion enters into this Agreement.
17. Entire Agreement. This Agreement constitutes the entire Agreement of
----------------
the parties with respect to the subject matter hereof, and all prior
negotiations and representations are merged herein or replace hereby.
7
<PAGE>
18. Severability. If any provision of this Agreement is held illegal,
------------
invalid or unenforceable, such illegality, invalidity, or unenforceability shall
not affect any other provision hereof. Any such provision and the remainder of
this Agreement shall, in such circumstances, be deemed modified to the extent
necessary to render enforceable the remaining provisions hereof.
19. Governing Law. This Agreement shall be construed and enforced in
-------------
accordance with the law of the Commonwealth of Virginia.
20. Releases and Effectiveness. This Agreement and General Releases in
--------------------------
the forms attached hereto as Exhibits A and B, which are incorporated herein by
reference, have been executed by or on behalf of Gaffney and the Company on the
dates shown opposite their respective signatures below, and this Agreement and
such General Releases are effective as of the Effective Date.
21. Disputes. In the event that nay dispute arises between the parties
--------
hereto pertaining to the subject matter this Agreement and the parties are
unable to resolve such dispute within a reasonable time through negotiations,
the parties shall attempt to resolve such dispute pursuant to a mutually agreed
upon alternate dispute resolution mechanism. Such resolution of the dispute
shall be initiated by written notice given by one party to the other. If within
10 days after submission of such notice the parties have not agreed upon an
alternate dispute resolution mechanism, the dispute shall be submitted to
arbitration in Fairfax County, Virginia. In the event the parties are unable to
agree on an alternate dispute resolution mechanism and the dispute is to be
resolved pursuant to arbitration, each party shall appoint an arbitrator within
20 days after the original notice of the dispute, the two arbitrators so chosen
shall promptly appoint a third arbitrator. If either party fails to name an
arbitrator as aforesaid, such arbitrator shall be designated by the American
Arbitration Association. If any arbitrator
8
<PAGE>
becomes disabled, resigns or is otherwise unable to discharge the arbitrator's
duties, the arbitrator's successor shall be appointed in the same manner as such
arbitrator was appointed. The parties shall not be permitted to conduct
discovery in connection with the arbitration, and, subject to only to the
availability of the arbitrators, the arbitration hearing shall be held within 30
days after appointment of the third arbitrator. Except as aforesaid, the
arbitration shall be conducted under the applicable rules of the American
Arbitration Association. Any determination of the arbitrators shall be binding
and conclusive upon the parties hereto. Application may be made by either party
to any court having jurisdiction thereof for judicial confirmation of any
determination by the arbitrators and/or for an order of enforcement of any such
decision.
22. Counterparts. This Agreement may be executed in counterparts, all of
------------
which shall be considered one and the same agreement, and shall become effective
on the Effective Date.
IN WITNESS WHEREOF, Gaffney and the Company have executed this Agreement.
ICF KAISER INTERNATIONAL, INC. MICHAEL GAFFNEY
By: /s/ R A Levy /s/ Michael Gaffney
---------------------------------- ------------------------
Its Duly Authorized Representative Michael Gaffney
Dated: March 8, 1999 Dated: March 8, 1999
-------- -------
EXHIBIT A
- ---------
GENERAL RELEASE
---------------
The ICF Kaiser International, Inc. ("the Company"), on behalf of the
Company and all of its current, former or future affiliated entities,
subsidiaries, departments, officers, directors, employees,
9
<PAGE>
representatives, agents, attorneys, successors and assigns, in consideration of
the terms of the Agreement dated March 8, 1999 between Michael Gaffney
-------
("Gaffney") and the Company (the "Agreement"), and the execution of the General
Release ("Release") by Gaffney, hereby releases and forever discharges Gaffney
and his heirs, successors, agents, executors, administrators, attorneys and
assigns, from any and all claims and causes of action (whether known or unknown)
which the Company has against him in law or equity, under Federal, state,
District of Columbia or other local law, and any claims relating to or arising
under any employment contract, any employment statue or regulation, including
but not limited to actions for fraud and breach of contract; provided, however,
--------
that the Company does not hereby release Gaffney from his obligation under the
Agreement.
The Company will not sue or otherwise institute or cause to be instituted
or in any way voluntarily participate in the prosecution of any complaints or
charges against any persons or entities released herein in any federal, state,
District of Columbia or other court, administrative agency or other forum
concerning any claims released herein.
Except as required by law or as necessary to fulfill the terms of the
Agreement or this Release, or as necessary in connection with the Company
business or tax affairs (in which case disclosure shall be on a confidential
basis to the extent practicable), the Company agrees not to disclose the terms
or provisions of this Release, or the fact of its existence, to any person or
entity.
The Company understands and agrees that nothing contained in this Release
is to be considered an admission by Gaffney of any wrongdoing under any federal,
state or local statute, public policy, tort law, contract law, or common law.
The Company acknowledges that this Release can only be altered, revoked or
rescinded with the express written permission of Gaffney.
This Release is executed in connection with, and is subject to the terms
of, the Agreement.
ICF KAISER International, Inc.
Date: March 9, 1999 By: /s/ R A Levy
------- ------------------------
Subscribed and sworn to before me this 9th day of March 1999.
--- -----
/s/ Sandra D. Little
____________________________
Notary
My Commission expires: November 30, 2000
-------------------------
10
<PAGE>
EXHIBIT B
- ---------
GENERAL RELEASE
---------------
I, Michael Gaffney, on behalf of myself and my heirs, successors, agents,
executors, administrators, attorneys and assigns, in consideration of the terms
of the Agreement dated March 8, 1999, between ICF Kaiser International, Inc.
-------
("the Company"), and myself (the "Agreement"), and the execution of the General
Release ("Release") by the Company, hereby affiliated entities, subsidiaries,
departments, officers, directors, employees, representatives, agents, attorneys,
successors and assigns, from any and all claims and causes of action (whether
known or unknown) which I have against them in law or equity, under Federal,
state, District of Columbia or other local law, and any claims relating to or
arising under any employment contract, any employment statute or regulation, or
any employment discrimination law, including but not limited to Title VII of the
Civil Rights Act of 1964, as amended; the Age Discrimination in Employment Act
of 1967, as amended; the Employment Retirement Income Security Act of 1974; any
other federal, state, or local civil rights, pension or labor law; contract law;
tort law; or infliction of emotional distress, provided, however, that I do not
---------
hereby release the Company from its obligations under the Agreement.
I further agree not to sue or otherwise institute or cause to be instituted
or in any way voluntarily participate in the prosecution of any complaints or
charges against any persons or entities released herein in any federal, state,
District of Columbia or other court, administrative agency or other forum
concerning any claims released herein.
Except as required by law or as necessary to fulfill the terms of the
Agreement or this Release, or as necessary in connection with personal business
or tax affairs (in which case disclosure shall be on a confidential basis to the
extent practicable), I agree not to disclose the terms or provisions of this
Release, or the fact of its existence, to any person or entity.
I understand and agree that nothing contained in this Release is to be
considered an admission by the Company of any wrongdoing under any federal,
state or local statute, public policy, tort law, contract law, or common law.
I acknowledge that I have been advised in writing to consult with an
attorney prior to executing this Release. I further acknowledge that I have
been given a period of at least twenty-one (21) days within which to consider
and execute this Release, unless I voluntarily choose to execute this Release
before the end of the twenty-one (21) day period. Once executed, I understand
that I have seven (7) days following the execution of this Release to revoke it,
and that this Release is not effective or enforceable until after this seven-day
period.
11
<PAGE>
I acknowledge that I have read this Release, that I understand it, and that
I am executing it freely and voluntarily. I further understand that once this
Release becomes effective (after the seven day revocation period), it can only
be altered, revoked or rescinded with the express written permission of the
Company.
This Release is executed in connection with, and is subject to terms of,
the Agreement.
Date: March 9, 1999 /s/ Michael Gaffney
------- ---------------------------
Michael Gaffney
Subscribed and sworn to before me this 8th day of March 1999.
--- -----
/s/ Anupo Susi
----------------------------
Notary
My Commission expires: 30 June 2002
--------------------
ELECTION TO EXECUTE PRIOR TO EXPIRATION
-OF TWENTY-ONE DAY CONSIDERATION PERIOD-
----------------------------------------
I, Michael Gaffney, understand that I have at least twenty-one (21) days
within which to consider and execute the above General Release. However, after
consulting counsel, I have freely and voluntarily elected to execute the General
Release before the twenty-one (21) day period has expired.
/s/ Michael Gaffney
-------------------------------
Michael Gaffney
12
<PAGE>
Exhibit 10(oo)(1)
Exhibit 10(oo)(1)
- -----------------
Terms of Promotion for Keith Price
----------------------------------
In light of Mr. Prices' change of status, the Company has agreed that the
term of his employment with the Company will be extended for a period of two
years commencing August 5, 1998, rather than the one-year period stated in Mr.
Price's Employment Agreement.
In consideration of Mr. Price's agreement to take on the additional
responsibilities of Chief Executive Officer, the Company has agreed, subject to
approval of the Board's Compensation and Human Resources Committee, that the
Company will grant to Mr. Price non-qualified stock options under the Company's
Stock Incentive Plan to purchase an additional 50,000 shares of the Company's
common stock at a purchase price equal to the average of the closing prices of
the Company's common stock on the New York Stock Exchange on each of the twenty
days ending on November 3, 1998 ($1.24). The terms of these additional options
will be as follows:
(a) Option Term. The options will expire three years from the November 4, 1998
-----------
date of grant.
(b) Vesting. Fifty percent of the options will vest on May 4, 1999, and fifty
-------
percent will vest on November 4, 1999, provided that Mr. Price continues to
--------
serve as the Company's Chief Executive Officer on such dates. In addition,
the options will vest on the date (i) of a change of control reportable by
the Company on SEC Form 8-K or (ii) the Company closes a sale of all or
substantially all of its assets.
(c) Exercise. Subject to applicable securities laws and regulations, all
--------
vested options are exercisable at any time after they vest and prior to the
expiration of their exercise.
<PAGE>
Exhibit 21
ICF KAISER INTERNATIONAL, INC.
9300 Lee Highway, Fairfax, Virginia 22031
(703) 934-3600
ICF Kaiser International, Inc.'s consolidated subsidiaries at April 12,
1999, are listed below. Consolidated subsidiaries which are less than wholly
owned are indicated by the ownership percentage figure in parentheses following
the name of the consolidated subsidiary.
<TABLE>
<CAPTION>
JURISDICTION
CONSOLIDATED SUBSIDIARY OF FORMATION
- ----------------------------------------------------------------------------------------------
<S> <C>
I. Clement International Corporation Delaware
I. Cygna Group, Inc. Delaware
II. Liability Risk Management, Inc. California
I. EDA, Incorporated Maryland
I. HBG Hawaii, Inc. Delaware
I. HBG International, Inc. Delaware
I. ICF Consulting Group, Inc. Delaware
I. ICF Incorporated Delaware
II. ICF/EKO (63.0%) Russia
I. ICF Information Technology, Inc. Delaware
II. Phase Linear Systems Incorporated Delaware
I. ICF Kaiser Development Corporation, Inc. Delaware
II. Global Trade & Investment, Inc. Delaware
I. ICF Kaiser Engineers Group, Inc. Delaware
II. Henry J. Kaiser Company Nevada
II. ICF Kaiser Engineers, Inc. Ohio
III. Henry J. Kaiser Company (Canada) Ltd. Canada
III. ICF Kaiser EFM Holdings, Inc. Delaware
III. ICF Kaiser Engineers & Builders, Inc. Delaware
III. ICF Kaiser Engineers (California) Corporation Delaware
III. ICF Kaiser Engineers Corporation New York
III. ICF Kaiser Engineers of Michigan, Inc. Michigan
III. ICF Kaiser International Planning & Design, Inc. (33 1/3%) Pennsylvania
III. ICF Kaiser Overseas Engineering, Inc. Delaware
III. Kaiser Engineers Limited United Kingdom
IV. Kaiser Engineers Technical Services Limited (80%) Cyprus
III. Kaiser Engineers and Constructors, Inc. Nevada
IV. ICF Kaiser Engenharia e Participacoes Ltda. (99.9%) Brazil
V. ICF Kaiser Construcoes e Engenharia Ltda (99.989%) Brazil
IV. ICF Pty. Ltd. (50%) Australia
IV. Kaiser Engineers Limited (0.02%) U.K.
IV. Kaiser Engenharia S.A. (50%) Portugal
V. ICF Kaiser Construcoes e Engenharia Ltda (0.01%) Brazil
IV. Kaiser Engineers (NZ) Ltd (1%) New Zealand
IV. Kaiser Engineers Pty. Ltd. (50%) Australia
V. KWA Kenwalt (50%) Australia
V. ICF Kaiser Aluterv KFT Hungary
</TABLE>
Page 1 of 3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
V. ICF Kaiser Engineers Asia Pacific Pty Ltd Australia
V. ICF Kaiser Engineers (Hong Kong) Ltd Hong Kong
V. ICF Kaiser Engineers (Singapore) Pte Ltd Singapore
V. Kaiser Engineers (NZ) Limited (99%) New Zealand
III. Kaiser Engineers International, Inc. Nevada
IV. ICF Pty. Ltd. (50%) Australia
IV. ICF Kaiser Engenharia e Participacoes Ltda.(0.1%) Brazil
IV. ICF Kaiser Panama S.A. Panama
IV. Kaiser Engenharia S.A. (50%) Portugal
IV. Kaiser Engineers Pty. Ltd. (50%) Australia
III. Kaiser Engineers Limited (99.98%) U.K.
IV. Kaiser Engineers Technical Services Limited (80%) Cyprus
IV. Kaiser Engineers (UK) Limited (50%) U.K.
III. Kaiser Engineers (UK) Limited (50%) U.K.
IV. Kaiser Engineers Technical Services Limited (20%) Cyprus
III. KE Services Corporation Delaware
III. Kaiser Engenharia e Constructoes Limitada Brazil
II. International Waste Energy Systems, Inc. Delaware
II. KE Livermore, Inc. Delaware
I. ICF Kaiser Engineers Massachusetts, Inc. Delaware
I. ICF Kaiser Engineers Pacific, Inc. Nevada
I. ICF Kaiser Europe, Inc. Delaware
I. ICF Kaiser / Georgia Wilson, Inc. Delaware
I. ICF Kaiser Government Programs, Inc. Delaware
II. Kaiser-Hill Company, LLC (50%) Colorado
III. Kaiser-Hill Funding Company, L.L.C. (98%) Delaware
II. Kaiser-Hill Funding Company, L.L.C. (1%) Delaware
I. ICF Kaiser Hanford Company Delaware
I. ICF Kaiser Holdings Unlimited, Inc. Delaware
II. American Venture Investments Incorporated Delaware
III. American Venture Holdings, Inc. Delaware
II. Cygna Consulting Engineers and Project Management, Inc. California
II. Excell Development Construction, Inc. Delaware
II. ICF Kaiser DPI Holding Co., Inc. Delaware
II. ICF Kaiser Engineers Eastern Europe, Inc. Delaware
III. ICF Kaiser Netherlands B.V. (10%) Netherlands
II. ICF Kaiser Hunters Branch Leasing, Inc. Delaware
II. ICF Kaiser Netherlands B.V. (90%) Netherlands
II. ICF Leasing Corporation, Inc. Delaware
I. ICF Kaiser Servicios Ambientales, S.A. de C.V. (66 2/3%) Mexico
I. ICF Kaiser Technology Holdings, Inc. Delaware
II. ICF Kaiser Advanced Technology, Inc. Idaho
III. ICF Kaiser Advanced Technology of New Mexico, Inc. New Mexico
I. ICF Resources Incorporated Delaware
II. ICF R G.P. No. 1, Inc. Delaware
</TABLE>
Page 2 0f 3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
II. Public/Private Policy Analysis, Inc. Delaware
I. Monument Select Insurance Company Vermont
I. Systems Applications International, Inc. Delaware
I. The K.S. Crump Group, Inc. Delaware
I. Tudor Engineering Company Delaware
</TABLE>
Page 3 0f 3
<PAGE>
Exhibit No. 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
ICF Kaiser International, Inc. (the Company) on Forms S-8 [Registration Nos.
33-42677 (Non-Employee Directors Stock Option Plan), 33-42678 (Stock Incentive
Plan), 33-51460 (Section 401(k) Plan), 33-60663 (Retirement Plan), 33-60661
and 33-65351 (Employee Stock Ownership Plan), 33-60665 (Consultants, Agents
and Part-Time Employees Stock Plan) and 33-51812 (Employee Stock Purchase
Plan)] and on Form S-3 [Registration No. 33-51677 (600,000 Warrants)], and
[Registration No. 333-16937 (1,135,795 shares)] of our report dated April 15,
1999, on our audits of the consolidated financial statements and financial
statement schedule of ICF Kaiser International, Inc. and Subsidiaries as of
December 31, 1998 and 1997, and for each of the three years in the period
ended December 31, 1998, which report is included in the Company's Report on
Form 10-K.
PricewaterhouseCoopers LLP
McLean, Virginia
April 15, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 15,267,000
<SECURITIES> 0
<RECEIVABLES> 294,928,000
<ALLOWANCES> 10,850,000
<INVENTORY> 0
<CURRENT-ASSETS> 346,859,000
<PP&E> 43,996,000
<DEPRECIATION> 57,441,000
<TOTAL-ASSETS> 429,053,000
<CURRENT-LIABILITIES> 344,570,000
<BONDS> 137,488,000<F1>
0
0
<COMMON> 242,000
<OTHER-SE> 63,360,000
<TOTAL-LIABILITY-AND-EQUITY> 429,053,000
<SALES> 0
<TOTAL-REVENUES> 1,216,466<F2>
<CGS> 0
<TOTAL-COSTS> 1,077,356
<OTHER-EXPENSES> 141,261
<LOSS-PROVISION> 76,210,000
<INTEREST-EXPENSE> 20,279,000
<INCOME-PRETAX> (97,101,000)
<INCOME-TAX> (11,357,000)
<INCOME-CONTINUING> (85,744,000)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,090,000)
<CHANGES> (6,000,000)
<NET-INCOME> (100,532,000)
<EPS-PRIMARY> (4.17)
<EPS-DILUTED> (4.17)
<FN>
<F1>Excludes current portion of bonds, mortgages, and similar debt.
<F2>Represents gross revenue which includes costs of certain services
subcontract3d to third parties and other reimbursable direct project costs,
such as materials procured by the company on behalf of its customers. Gross
revenue also includes equity income in affiliates for purpose of this schedule.
</FN>
</TABLE>
