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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ICF Kaiser International, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
July 12, 1999
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Notes:
<PAGE>
================================================================================
[LOGO OF ICF KAISER APPEARS HERE]
ICF Kaiser International, Inc.
9300 Lee Highway
Fairfax, Virginia 22031-1207
================================================================================
Dear Shareholder:
The 1999 Annual Meeting of Shareholders of ICF Kaiser International,
Inc. will be held on _____________, _____________, 1999, at Kaiser's
headquarters, 9300 Lee Highway, Fairfax, Virginia 22031-1207. The matters on the
meeting agenda are described on the following pages. The meeting will start
promptly at 9:00 a.m. Kaiser's headquarters are located in Fairfax, Virginia,
near the Vienna station on the Orange Line of the Washington, D.C. area Metro.
On the day of the meeting, there will be a shuttle bus service departing at
frequent intervals from the south side of the Vienna station and returning to
the station after the meeting.
This year's Annual Meeting is extremely important to the future of
Kaiser. In particular, you will be asked to approve the issuance of up to
_______ shares of common stock. These shares may be used in an exchange offer
pursuant to which Kaiser will offer to exchange shares of common stock and new
notes to retire approximately $_________ of Kaiser's $125 million Senior
Subordinated Notes. Kaiser also will offer to repurchase the balance of the
outstanding Senior Subordinated Notes with cash available from the June 1999
sale of Kaiser's Consulting Group.
The reasons for this exchange and the related proposed issuance of
shares are detailed in the accompanying proxy statement. In general terms, this
exchange is an important remaining step toward restoring Kaiser to a normalized
financial position in the wake of the approximately $___ million of losses
suffered in 1997, 1998 and 1999 primarily in connection with cost overruns on
fixed price contracts to construct four nitric acid plants. Those losses,
together with other difficulties, caused Kaiser to lose approximately $____
million from September 30, 1997 through March 31, 1999.
In response to these losses, and the cash drain they represented,
beginning in August 1998 Kaiser's board of directors engaged in a thorough
review of strategic alternatives for Kaiser and its operating groups. As a
result of that review, Kaiser sold its Environment and Facilities Management
(EFM) Group in April for a cash purchase price, net of working capital
adjustments, of $74 million. At the end of June Kaiser sold a 90% interest in
its Consulting Group for $64 million of cash plus a $6.6 million note. One of
the terms of our sale of Consulting Group was that Kaiser remove from its name
the letters "ICF" no later than December 25, 1999. We will therefore, be
changing our corporate name to "Kaiser Group International, Inc."
Because of the cash drain and continuing obligations associated with
Kaiser's nitric acid and other losses, these sales were not enough to restore
Kaiser to an acceptable financial condition. With the EFM and Consulting Group
sales and nitric acid plants behind it, Kaiser has lost the earnings power
associated with the sold operating groups and still has $140 million of
outstanding notes. Moreover, we find ourselves in the position of not being able
to obtain an attractive bank credit facility until we take steps to bring our
debt load into balance with our remaining businesses.
Management and a majority of the members of the board of directors
believe that the issuance of shares of common stock we are asking you to approve
in connection with the proposed exchange offer is necessary to preserving the
value inherent in Kaiser. We recognize we are asking shareholders to swallow a
bitter pill in the form of very substantial dilution of their percentage
interests in Kaiser. However, we believe the long-term value of Kaiser's shares
will be enhanced by this step. The proposed exchange offer involves sacrifices
by the holders of our Senior Subordinated Notes and a substantial reduction of
Kaiser's long-term debt. Of course, there can be no assurance that holders of
Kaiser's Senior Subordinated Notes will accept the proposed exchange offer. As
described
<PAGE>
in the proxy statement, the exchange offer is conditioned on acceptance of the
exchange offer by the holders of 95% in principal amount of the Senior
Subordinated Notes. We are convinced that, unless the stock issuance is approved
by our shareholders and the exchange transaction is accepted by our noteholders,
Kaiser will continue to face formidable financial obstacles to stability and
future growth.
The board of directors considered several alternative means of
attempting to stabilize Kaiser's financial condition. Among the alternatives
considered was the use of the proceeds from the Consulting Group sale in an
acquisition of a related business or simply reinvesting the proceeds from the
Consulting Group sale in Kaiser's existing business activities. In considering
these alternatives the board of directors met several times, reviewed the
recommendations of its financial, legal and other professional advisors as well
as the information provided by Kaiser's management, and closely analyzed the
information available to it. A majority of the members of the board of directors
ultimately determined that the exchange offer represents the strongest
opportunity for significantly improving Kaiser's financial position.
Pending your consideration of the matters described in the proxy
statement and acceptance of the proposed exchange offer by noteholders, we are
continuing aggressive steps to align Kaiser's cost structure with its remaining
business, which includes not only our international engineering and construction
operations, but also our 50% interest in Kaiser-Hill Company LLC, which serves
as the integrating management contractor at the U.S. Department of Energy's
Rocky Flats Environmental Technology Site near Denver, Colorado.
In addition to the authorization of the stock issuance in connection
with the exchange offer, we are asking you to approve a reverse stock split,
approve certain amendments to Kaiser's Stock Incentive Plan (including an
increase to the number of shares available for issuance under that Plan),
approve various amendments to our certificate of incorporation and bylaws that
will enhance your ability, as a shareholder, to influence company decisions, and
vote on such customary matters as election of directors and ratification of our
independent accountants.
We strongly urge your affirmative vote on the proposal to authorize the
issuance of additional shares to enable Kaiser to proceed with the exchange
offer outlined in the proxy statement and your favorable vote on the other
proposals described in the proxy materials.
A very high percentage of our shareholders hold their stock in street
names, which means that the shares are registered in their brokers' names rather
than in the shareholders' names. If you want to vote your street name shares at
the meeting, you must contact your broker directly in order to obtain a proxy
issued to you by your broker. A broker letter that identifies you as a
shareholder is not the same thing as a broker-issued proxy. If you fail to bring
a broker-issued proxy to the meeting, you will not be able to vote your broker
held shares at the 1999 Annual Meeting.
We urge you to mail your proxy card to our stock transfer agent as
promptly as possible using the envelope provided. Please mail your proxy card
whether or not you plan to attend the 1999 Annual Meeting. Giving your proxy
will not affect your right to vote the shares you hold in your own name
(excluding shares held pursuant to Kaiser's various retirement plans) if you
decide to attend the meeting.
Sincerely,
James J. Maiwurm
Chairman, President and Chief Executive Officer
July __, 1999
<PAGE>
================================================================================
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
================================================================================
To the Shareholders of ICF Kaiser International, Inc.:
The 1999 Annual Meeting of Shareholders of ICF Kaiser International,
Inc. will be held at Kaiser's headquarters, 9300 Lee Highway, Fairfax, Virginia
22031-1207, on ___________, ____________ ____, 1999, at 9:00 a.m., Eastern
Daylight Savings Time. All shareholders of record as of __________ ___, 1999
will be asked to consider and vote at the meeting upon proposals to:
1. Elect three (3) directors, each for a three-year term expiring at the
2002 Annual Meeting of Shareholders, and until their successors are
duly elected or, if the Shareholder Democracy Proposal referred to
below as proposal 4 is adopted, for terms expiring at the 2000 Annual
Meeting of Shareholders.
2. Approve the issuance of shares of Kaiser's common stock in connection
with an exchange offer for outstanding debt.
3. Approve an amendment to the certificate of incorporation to effect a
reverse split of Kaiser's outstanding common stock in a ratio of one-
to-ten, or such lesser amount as the board of directors shall
determine in its discretion. As part of the approval by shareholders,
the board will have authority not to implement the reverse split in
its discretion at any time prior to its effectiveness.
4. Approve amendments to Kaiser's certificate of incorporation and bylaws
to:
(a) eliminate the provisions of the certificate of incorporation
and, where applicable, the bylaws that: (i) require the affirmative
vote of holders of 66 2/3% of the outstanding capital stock to approve
certain transactions following a change in the majority of directors
within twelve months; (ii) provide for staggered, three-year terms for
members of the board of directors; (iii) prohibit shareholders from
filling vacancies on the board of directors; and (iv) require the
affirmative vote of the holders of 66 2/3% of the outstanding capital
stock to approve certain amendments to the certificate of
incorporation and bylaws; and
(b) provide that shareholders owning at least twenty percent
(20%) of the voting power of the outstanding capital stock could
require a special meeting of shareholders to be called (the
"Shareholder Democracy Proposal").
5. Approve an amendment to Kaiser's certificate of incorporation and
bylaws to provide that no new shareholder rights plan (sometimes
referred to as a "poison pill") shall be adopted without the approval
of the shareholders (the "Rights Plan Proposal").
6. Approve an amendment to Kaiser's certificate of incorporation to
eliminate provisions related to the terms of series of preferred stock
that are no longer outstanding (the "Obsolete Preferred Stock
Proposal").
7. Approve an amendment to Kaiser's Stock Incentive Plan to:
(a) increase the number of shares of common stock available for
issuance under such Plan;
(b) to permit the transfer of certain options granted under the
Plan to immediate family members of Plan participants; and
(c) to provide greater flexibility to Kaiser's board of
directors to make future amendments to the plan.
8. Ratify the appointment of PricewaterhouseCoopers LLP as Kaiser's
independent public accountants for the fiscal year ending December 31,
1999.
9. Act on such other matters as may properly come before the meeting or
any adjournment thereof.
<PAGE>
Your proxy is important. Even if you hold only a few shares, and whether or
not you expect to attend the 1999 Annual Meeting in person, you are requested to
date, sign, and mail the proxy card you receive in the postage-paid envelope
that is provided. If you wish to have someone other than the persons named on
the enclosed proxy card vote for you, you may cross out their names on your
proxy card and insert the name of another person who will be at the meeting. You
then must give your signed proxy card to that person, otherwise he or she cannot
vote on your behalf at the meeting. You may revoke your proxy at any time by
mailing a second (or subsequent) proxy card to Kaiser's stock transfer agent for
receipt prior to the close of business on ____________, 1999 (for shares held in
Kaiser's employee plans (the "Plan Shares"), prior to the meeting (for all other
record shares), or by voting on the ballot provided to shareholders at the
meeting (other than Plan Shares and street name). The giving of your proxy will
not affect your right to vote the shares you hold in your own name (other than
Plan Shares) if you decide to attend and vote at the meeting.
This notice is given pursuant to direction of the board of directors.
Fairfax, Virginia Shaun M. Martin
____________ ____, 1999 Vice President, Treasurer and Secretary
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS................................................................... NOT-1
PROXY STATEMENT............................................................................................ 1
ABOUT THE MEETING.......................................................................................... 1
SUMMARY OF MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING.................................................. 3
PROPOSAL 1: ELECTION OF DIRECTORS......................................................................... 5
NOMINEES FOR ELECTION TO THE board of directors....................................................... 5
DIRECTORS CONTINUING IN OFFICE........................................................................ 6
Terms Expiring in 2000............................................................................ 6
Terms Expiring in 2001............................................................................ 7
INFORMATION REGARDING THE board of directors.......................................................... 7
AGREEMENTS AND TRANSACTIONS WITH CERTAIN DIRECTORS......................................................... 9
PROPOSAL 2: STOCK ISSUANCE PROPOSAL....................................................................... 12
PROPOSAL 3: REVERSE SPLIT PROPOSAL........................................................................ 18
PROPOSAL 4: SHAREHOLDER DEMOCRACY PROPOSAL................................................................ 22
PROPOSAL 5: RIGHTS PLAN PROPOSAL.......................................................................... 25
PROPOSAL 6: OBSOLETE PREFERRED STOCK PROPOSAL............................................................. 27
PROPOSAL 7: PROPOSAL TO AMEND STOCK INCENTIVE PLAN........................................................ 28
PROPOSAL 8: RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS................................................................ 32
VOTING SECURITIES OF KAISER AND CERTAIN SHAREHOLDINGS...................................................... 32
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.................................................... 35
CURRENT MANAGEMENT......................................................................................... 36
EXECUTIVE COMPENSATION..................................................................................... 37
SUMMARY COMPENSATION TABLE............................................................................ 37
OPTION GRANTS IN LAST FISCAL YEAR..................................................................... 41
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION VALUES.............................................................................. 41
Senior Executive Officers Severance Plan.......................................................... 42
AGREEMENTS AND TRANSACTIONS WITH EXECUTIVE OFFICERS NAMED
IN THE SUMMARY COMPENSATION TABLE................................................................. 42
STOCK PERFORMANCE GRAPH - PEER ISSUERS..................................................................... 45
COMPENSATION & HUMAN RESOURCES COMMITTEE REPORT
ON EXECUTIVE COMPENSATION......................................................................... 46
</TABLE>
<PAGE>
<TABLE>
<S> <C>
OTHER MATTERS.............................................................................................. 48
ADDITIONAL INFORMATION..................................................................................... 49
</TABLE>
APPENDICES
A - Unaudited Pro Forma Financial Information
B - Unaudited Selected Quarterly Financial Data
C - Form of Amendment to Certificate of Incorporation to Effect Reverse
Stock Split
D - Form of Amendment to Certificate of Incorporation to Effect Shareholder
Democracy Proposal
E - Form of Amendment to Certificate of Incorporation to Effect Rights Plan
Proposal
<PAGE>
================================================================================
PROXY STATEMENT
================================================================================
This Proxy Statement is being furnished to shareholders of ICF Kaiser
International, Inc. in connection with the solicitation of proxies for use at
the 1999 Annual Meeting of Shareholders of ICF Kaiser International, Inc. to be
held on ____________ ____, 1999, at the time and place and for the purposes set
forth in the accompanying Notice of Annual Meeting of Shareholders. The record
date for determining shareholders entitled to vote at the 1999 Annual Meeting is
______________ ____, 1999.
================================================================================
ABOUT THE MEETING
================================================================================
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At our annual meeting, shareholders will act upon the matters outlined
in the accompanying notice of annual meeting of shareholders. In addition to
customary items such as the election of directors and ratification of
accountants, shareholders are being requested to act upon a number of additional
items of significant importance to Kaiser. Kaiser's management also will report
on Kaiser and respond to questions from shareholders.
WHAT INFORMATION WILL I RECEIVE?
Copies of Kaiser's Annual Report on Form 10-K for the year ended
December 31, 1998 and Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1999 (including financial statements), the Notice of Annual
Meeting, this Proxy Statement, and the enclosed proxy card initially were mailed
in a single envelope to shareholders on or about ____________ ____, 1999. See
"Additional Information."
Kaiser will deliver copies of the annual report on Form 10-K and proxy
materials to brokerage firms and other custodians, nominees, and fiduciaries for
forwarding to beneficial owners of Kaiser 's common stock. Kaiser will reimburse
those brokerage firms, custodians, nominees, and fiduciaries for their expenses
in connection with forwarding these materials.
WHO CAN ATTEND THE MEETING?
All shareholders as of the record date, or their duly appointed
proxies, may attend the meeting. Registration will begin at ____ a.m., and
seating will be available at approximately ____. On the day of the meeting,
there will be a shuttle bus departing at frequent intervals from the south side
of the Vienna station on the Orange Line of the Washington, D.C. area metro and
returning to the station after the meeting. Cameras and recording devices will
not be permitted at the meeting.
Please note that if you hold your shares in "street name", that is,
through a broker or other nominee, you will need to bring a copy of a brokerage
statement reflecting your stock ownership as of the record date and check in at
the registration desk at the meeting. You can not vote these shares unless you
also bring a broker-issued proxy described below.
WHO IS ENTITLED TO VOTE?
Only shareholders of record at the close of business on the record
date are entitled to receive notice of the annual meeting and to vote at the
meeting the shares of common stock that they held on the record date, or any
postponement or adjournment of the meeting. Each outstanding share entitles its
holder to cast one vote on each matter to be voted upon.
<PAGE>
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting the meeting to conduct its business. As of the
record date, _______ shares of Kaiser common stock were outstanding. Proxies
received but marked as abstentions and broker non-votes will be included in the
calculation of the number of shares considered to be present at the meeting.
HOW DO I VOTE?
If you are a record holder of Kaiser shares and complete and properly
sign the accompanying proxy card and return it to Kaiser, it will be voted as
you direct. If you attend the meeting, you may deliver your completed proxy card
in person.
A very high percentage of our shareholders hold their stock in street
names, which means that the shares are registered in their brokers' names rather
than in the shareholders' names. If you want to vote your street name shares at
the meeting, you must contact your broker directly in order to obtain a proxy
issued to you by your broker. A broker letter that identifies you as a
shareholder is not the same thing as a broker-issued proxy. If you fail to bring
a broker-issued proxy to the meeting, you will not be able to vote your broker
held shares at the 1999 Annual Meeting.
If you hold your shares in "street name" through a broker or other
nominee, your broker or nominee will not be permitted to exercise voting
discretion with respect to some of the matters to be acted upon. Thus, if you do
not give your broker or nominee specific instructions, your shares may not be
voted on those matters and will not be counted in determining the number of
shares necessary for approval. Shares represented by such "broker non-votes"
will, however, be counted in determining whether there is a quorum.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote
at any time before the proxy is exercised by filing with the Secretary of Kaiser
either a notice of revocation or a duly executed proxy bearing a later date. If
you hold your shares in "street name" and you would like to vote your shares at
the meeting, you will also need to bring with you a legal proxy from your
broker. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request, although attendance at the meeting will not by
itself revoke a previously granted proxy.
HOW DO I VOTE MY PLAN SHARES?
If you participate in the ICF Kaiser International, Inc. Employee Stock
Ownership Plan, the ICF Kaiser International, Inc. Section 401(k) Plan, or the
ICF Kaiser International, Inc. Retirement Plan (collectively, the "Plans,"
individually a "Plan"), you are a named fiduciary under those plans and as such
have the right to instruct the trustee of each Plan in which you participate how
to vote the shares of Kaiser's stock credited to your Plan account as well as a
pro-rata portion of Kaiser's stock credited to the accounts of other Plan
participants and beneficiaries for which no instructions are received. Your
instructions to the trustee of a Plan should be made by completing and mailing
the instruction card mailed to you with this proxy statement. The trustee of a
Plan will vote your shares in accordance with your duly executed instructions
received by ________. If you do not send instructions regarding the voting of
Kaiser stock credited to your Plan account(s), such shares shall be voted by the
other Plan participants as named fiduciaries.
You may also revoke previously given instructions by filing with the
trustee of a Plan no later than _______ either written notice of revocation or a
properly completed and signed voting instruction bearing a date later than the
date of the prior instructions.
2
<PAGE>
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons
named as proxy holders on the proxy card will vote in accordance with the
recommendations of the board of directors. The Board's recommendations are set
forth below together with the description of each item in this proxy statement.
In summary, the Board recommends a vote:
. for election of the nominated slate of directors (see pages 5-6);
. for the issuance of up to ___ shares of common stock in to be
offered in exchange for a portion of our outstanding 12% senior subordinated
notes (see pages 12-18);
. for the amendment to the certificate of incorporation to effect a
reverse stock split (see pages 18-22);
. for the amendment to the certificate of incorporation and bylaws
to enhance shareholder voting rights (see pages 22-25);
. for the amendment to the certificate of incorporation and bylaws
to restrict the ability to adopt new shareholder rights plans (see pages 25-27);
. for the amendments to the certificate of incorporation to
eliminate certain provisions governing obsolete series of preferred stock (see
page 27);
. for the amendments to Kaiser's Stock Incentive Plan (see pages 27-
31); and
. for ratification of the appointment of PricewaterhouseCoopers LLP
as Kaiser's independent accountants (see pages 31-32).
With respect to any other matter that properly comes before the
meeting, the proxy holders will vote as recommended by the board of directors
or, if no recommendation is given, in their own discretion.
HOW ARE ABSTENTIONS AND BROKER NONVOTES TREATED?
A properly executed proxy marked "ABSTAIN" with respect to any matter
will not be voted, although it will be counted for purposes of determining
whether there is a quorum. Accordingly, an abstention will have the effect of a
negative vote.
================================================================================
SUMMARY OF MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
================================================================================
The following is a summary of the proposals presented in this proxy
statement. Shareholders are urged to read this entire proxy statement and the
attached appendices.
Proposal 1. Election of Directors. At the Annual Meeting, shareholders
---------------------
will elect three directors to hold office until the 2002 Annual Meeting of
Shareholders and until their successors are elected and qualified. If the
Shareholder Democracy Proposal discussed under Proposal No. 4 below is adopted,
these directors will be elected to serve until the 2000 Annual Meeting of
Shareholders and until their successors are duly elected and qualified. The
affirmative vote of a plurality of the shares represented at the meeting will be
required to elect each of these directors. See "Election of Directors" at pages
5 through 11 of this proxy statement.
Proposal 2. Stock Issuance Proposal. Shareholders are being asked to
-----------------------
approve the issuance of up to _____ shares of Kaiser's common stock. All of
these shares are anticipated to be issued in an exchange offer concurrently
being made to holders of our outstanding 12% senior subordinated notes due 2003.
Approval of a
3
<PAGE>
majority of the shares represented at the meeting is required in order to
approve the issuance of the shares of common stock; provided that at least a
majority of the total shares of common stock outstanding cast votes at the
meeting. See "Stock Issuance Proposal" at pages 12 through 18 of this proxy
statement.
Proposal 3. Reverse Split Proposal. Shareholders are being asked to
----------------------
approve an amendment to the certificate of incorporation to effect a reverse
split of its outstanding common stock in a ratio of one-to-ten, or such lesser
amount as the board of directors shall in its discretion determine. As part of
the approval by shareholders, the board will have the authority to not implement
the reverse stock split at any time prior to its effectiveness. Approval of the
majority of the total shares of common stock outstanding is required to approve
the reverse split. See "Reverse Split Proposal" at pages 18 through 22 of this
proxy statement.
Proposal 4. Shareholder Democracy Proposal. Shareholders are being
------------------------------
asked to approve certain amendments to the certificate of incorporation and,
where applicable, the bylaws that will (a) eliminate the provisions (i) that
require the affirmative vote of holders of 66 2/3% of the outstanding capital
stock to approve certain transactions following a change in the majority of
directors within twelve months, (ii) provide for staggered three-year terms for
directors, (iii) prohibit shareholders from filling vacancies on the board of
directors, and (iv) require the affirmative vote of the holders of 66 2/3% of
the outstanding capital stock to approve certain amendments to the certificate
of incorporation and bylaws; and (b) provide that shareholders owning at least
20% of the voting power of the outstanding capital stock could require a special
meeting of shareholders to be called. Approval of 66 2/3% of the total
outstanding shares of common stock will be needed in order to approve this
proposal. See "Shareholder Democracy Proposal" at pages 22 through 25 of this
proxy statement.
Proposal 5. Rights Plan Proposal. Shareholders are being asked to
--------------------
approve amendments to the certificate of incorporation and bylaws to prohibit
any new shareholder rights plan to be adopted without the approval of Kaiser's
shareholders. Approval of a majority of the total outstanding shares of common
stock will be needed in order to approve this proposal. See "Rights Plan
Proposal" at pages 25 through 27 of this proxy statement.
Proposal 6. Obsolete Preferred Stock Proposal. Shareholders are being
---------------------------------
asked to approve amendments to the certificate of incorporation to eliminate
provisions related to Kaiser's previously authorized series 1, 2C and 2D
preferred stock, as no shares of these series remain outstanding. As a result,
these provisions are currently obsolete. A majority of the total outstanding
shares of common stock must approve this amendment in order to be adopted. See
"Obsolete Preferred Stock Proposal" at page 27 of this proxy statement.
Proposal 7. Stock Incentive Plan Proposal. Shareholders are being asked
-----------------------------
to approve amendments to Kaiser's Stock Incentive Plan to (i) increase the
number of shares of common stock available for issuance under such plan (ii) to
permit the transfer of options that are not incentive stock options to the
immediate family members of persons who receive those options and (iii) to
provide greater flexibility to the board of directors to make future amendments
to the plan without shareholder approval. A majority of the shares represented
at the meeting will be required to approve this proposal in order for the
amendments to be adopted. See "Stock Incentive Plan Proposal" at pages 27
through 31 of this proxy statement.
Proposal 8. Ratification of Accountants. Shareholders are being asked
---------------------------
to ratify the appointment of PricewaterhouseCoopers LLP as Kaiser's independent
public accountants for the fiscal year ending December 31, 1999. Approval of a
majority of the shares represented at the meeting is required to ratify this
appointment. See "Ratification of the Appointment of Independent Public
Accountants" at pages 31 through 32 of this proxy statement.
Other Business. In addition to the proposals described above,
shareholders may be asked to transact such other business that may properly come
before the Annual Meeting and any postponement(s) or adjournment(s) thereof may
be transacted. Kaiser presently is not aware of any such business.
Recommendation of the board of directors of Kaiser
A MAJORITY OF THE BOARD OF DIRECTORS OF KAISER HAS APPROVED EACH OF THE
PROPOSALS AND RECOMMENDS THAT THE SHAREHOLDERS VOTE TO ELECT EACH OF THE
NOMINATED DIRECTORS AND VOTE TO APPROVE EACH OF THE OTHER
4
<PAGE>
PROPOSALS. DIRECTOR MICHAEL E. TENNENBAUM VOTED AGAINST APPROVAL OF PROPOSAL 2,
BUT SUPPORTS THE OTHER PROPOSALS SET FORTH ABOVE.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement contains what Kaiser believes are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. They are statements about future performance or results such as statements
including the words, "believe," "expect" and "anticipate" when Kaiser discusses
its financial condition, results of operations and business. Forward-looking
statements involve risks, assumptions and uncertainties. They are not guarantees
of future performance. Factors may cause actual results to differ materially
from those expressed in these forward-looking statements. These factors include
those identified under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in Kaiser's Annual
Report on Form 10-K for the year ended December 31, 1998 and in its Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 1999, which are
delivered with this proxy statement, as well as the following:
. Kaiser may be unable to execute promptly and effectively its plan to
reduce operating expenses, increase margins and enhance cash flow from
remaining operations.
. Kaiser's future profitability is dependent upon several key clients,
including the DOE's extension of Kaiser-Hill's current contract, as
well as our remaining business.
. Kaiser's remaining operations may not be able to retain or attract the
personnel needed for growth and profitability.
. Kaiser's financial performance is significantly tied to the operations
and financial performance of Kaiser-Hill, which is subject to a number
of risks, including the risk it may incur environmental liabilities,
risks associated with the need to satisfy applicable Federal
regulations, or that its DOE contract may not be extended.
. Without the cash flows associated with the sold operations of its
former EFM and Consulting groups, Kaiser may be unable to service its
existing debt if the proposed recapitalization is not consummated.
We believe that the expectations reflected in our forward-looking
statements are reasonable. However, we cannot assure you that these expectations
will prove to be correct. You should consider the factors we have noted under
the captions stated above as you read this prospectus.
================================================================================
PROPOSAL 1: ELECTION OF DIRECTORS
================================================================================
The board of directors currently consists of the following nine
directors.
Term to Expire
Thomas C. Jorling 1999
James J. Maiwurm 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
The board of directors has nominated Messrs. Jorling and Maiwurm and
Mrs. O'Leary for election to a three-year term ending at the Annual Meeting of
Shareholders in 2002, or until their successors are elected and qualified. If
the "Shareholder Democracy Proposal" is adopted, these nominees would be elected
and qualified for a one-year term ending at the Annual Meeting of Shareholders
in the year 2000, or until their successors are duly elected.
A plurality of the votes cast at the meeting must vote for each of
these nominees in order for them to be elected. A properly executed proxy marked
"WITHHOLD AUTHORITY" with respect to the election of one or more directors will
not be voted with respect to the director or directors indicated, although it
will be counted for purposes of determining whether there is a quorum.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
Thomas C. Jorling, 59, 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. He
also serves on the Boards of Directors of Resources for the Future and Hubbard
Brook Research Foundation, each a non-profit entity. Mr. Jorling graduated from
the University of Notre Dame (B.S.), Washington State University (M.S.), and
Boston College (LL.B.).
James J. Maiwurm, 50, has been President and Chief Executive Officer of
Kaiser since April 19, 1999. Mr. Maiwurm was elected to, and as Chairman of, the
board of directors of Kaiser on June 7, 1999. From August 1998 until elected as
Kaiser's President and Chief Executive Officer, Mr. Maiwurm was a partner of
Squire Sanders & Dempsey L.L.P., Washington, D.C., and prior to August 1998 was
a partner of Crowell & Moring LLP, Washington, D.C. Both law firms served and
continue to serve as counsel to Kaiser. Mr. Maiwurm is a member of the Board of
Trustees of Davis Memorial Goodwill Industries, Washington, D.C., a non-profit
entity. Mr. Maiwurm graduated from the College of Wooster (B.A.) and the
University of Michigan Law School (J.D.).
5
<PAGE>
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 Kaiser 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.).
DIRECTORS CONTINUING IN OFFICE
Terms Expiring in 2000
Tony Coelho, 56, served as Chairman of the board of directors from
November 1998 until June 1999. Mr. Coelho is a former Congressman and Majority
Whip of the U.S. House of Representatives, and is currently General Chairman for
Gore 2000, Vice President. He was previously a consultant to Tele-
Communications, 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 Kaiser since 1990. In addition, he is a director of
Service Corporation International, Cyberonics, Inc., Kistler Aerospace
Corporation 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, 31, has been the Managing Director of J.M. Cohen and
Company since January 1999. Prior to that, he was the Managing Director, head of
Proprietary Investing, and head of Risk Management for Cowen and Company from
April 1996 to December 1998. 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 Kaiser's significant shareholders. Mr.
Cohen has informed Kaiser that as of March 31, 1999, a total of 49,000 shares of
common stock are beneficially owned by Cowen and Company, Cowen Incorporated,
and Joseph M. Cohen, an individual who may be deemed to control Cowen
Incorporated. Mr. Cohen has informed Kaiser that as of March 31, 1999, he has
sole voting power and sole investment power as to 578,000 shares of common stock
and shared voting power and shared investment power as to 1,000,000 shares of
common stock. An agreement between Mr. Cohen and Kaiser is described on pages 9
through 10 of this proxy statement.
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 Kaiser 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 ).
6
<PAGE>
Terms Expiring in 2001
James O. Edwards, 55, served as Chairman of the Board of ICF Kaiser
International, Inc. from 1987 until 1998. He also was President of ICF Kaiser
International, Inc. from 1987 to 1990 and Chief Executive Officer from 1990 to
1998. In 1974, he joined ICF Incorporated, the predecessor of ICF Kaiser
International, Inc. and was its Chairman and Chief Executive Officer from 1986
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, served as President and Chief Executive Officer of
Kaiser from November 1998 until April 1999. Mr. Price has been a director of
Kaiser 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.).
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). An agreement between Mr.
Tennenbaum and Kaiser is described on page 11 of this proxy statement.
INFORMATION REGARDING THE BOARD OF DIRECTORS
The board of directors is responsible for the overall affairs of
Kaiser. During the year ended December 31, 1998, the board of directors held 10
meetings. All directors attended at least 75% of the 1998 meetings of the board
of directors and its committees he or she was eligible to attend.
To assist the board of directors in carrying out its responsibilities,
the Board has delegated certain authority to several permanent committees, the
membership and duties of which are as follows.
Executive Committee. Until Mr. Coelho's resignation as Chairman of the
Board on June 7, 1999, the members of the Executive Committee were Messrs.
Coelho, Price and Tennenbaum. A new Executive Committee has not yet been
appointed. The Executive Committee, except as limited by Delaware law, may
exercise any of the powers and perform any of the duties of the board of
directors. It has the full authority to act on behalf of the board of directors.
There were five meetings of the Executive Committee during 1998; it also acted
by written consent in lieu of meetings of the committee.
Audit Committee. The current members of the Audit Committee are Messrs.
Jorling, Cohen, Edwards, and Rhodes. The Audit Committee reviews Kaiser's
financial statements and other financial matters with Kaiser's independent
public accountants and, when appropriate, reviews transactions proposed by
Kaiser with related parties that raise the possibility of a conflict of
interest. All voting members of the Audit Committee are independent directors as
required by the rules of the New York Stock Exchange on which Kaiser's common
stock is traded. The Audit Committee met seven times in 1998.
Compensation & Human Resources Committee. The current members of the
Compensation & Human Resources Committee are Mrs. O'Leary and Messrs. Jorling
and Rhodes. The Compensation & Human Resources Committee (a) reviews and
approves, or recommends to the entire board of directors, the annual salary,
bonus, and other benefits, direct and indirect, of the Chief Executive Officer,
executive officers, and other designated members of
7
<PAGE>
management; (b) reviews and submits to the full Board recommendations
concerning, and amendments to, new executive compensation or stock plans; (c)
establishes and periodically reviews, Kaiser's policies in the area of
management perquisites; (d) administers Kaiser's employee benefit and stock
plans to the extent such plans require board of directors' involvement; (e)
establishes and periodically reviews, Kaiser's policies in the areas of human
resources, EEO, labor relations, and diversity; and (f) determines, when
appropriate, whether indemnification of officers, directors, and/or employees
should be provided in particular cases. The Compensation & Human Resources
Committee met five times in 1998; it also acted by written consent in lieu of
meetings of the committee.
Finance Committee. The current members of the Finance Committee are
Messrs. Tennenbaum, Cohen, Edwards, and Price and Mrs. O'Leary. The Finance
Committee was created in 1998 and (a) reviews all potential acquisitions and/or
investments that are valued in excess of $3 million or that involve the issuance
by Kaiser of its common stock, (b) reviews all proposed capital expenditures,
(c) monitors and, if required, proposes to the full board changes to Kaiser's
banking and debt relationships, (d) reviews proposed dispositions of Kaiser's
assets or subsidiaries and (e) monitors financial aspects of joint ventures and
other corporate relationships. The Committee met three times in 1998; it also
acted by written consent in lieu of meetings of the committee.
Nominating Committee. The current members of the Nominating Committee
are Messrs. Coelho, Edwards, and Rhodes. The Nominating Committee (a) develops
the criteria for board membership, (b) proposes to the board of directors
nominees who meet the criteria for board membership to fill vacancies on the
board of directors as they occur, (c) applies the criteria for board membership
to incumbent directors in advance of the time when a director would otherwise be
expected to be nominated for re-election, (d) subject to compliance with state
law, recommends removal of directors in those unusual circumstances where
removal may be warranted prior to expiration of a director's term of office, and
(e) considers and recommends to the board of directors the types, functions, and
membership of board committees. The Nominating Committee will consider
candidates for director recommended by shareholders, if the recommendations are
submitted in writing to the Secretary of Kaiser. The procedures and time periods
for submitting such recommendations are explained on page 47 of this Proxy
Statement. The Nominating Committee did not meet in 1998. The Nominating
Committee did act by written consent in lieu of meetings of the committee in
nominating Michael E. Tennenbaum and Jarrod M. Cohen as directors on March 13,
1998.
Special Committee. The current members of the Special Committee are
Messrs. Coelho, Cohen, Jorling, and Tennenbaum and Mrs. O'Leary. The Special
Committee was established in August 1998 as a temporary committee for the
limited purpose of reviewing alternatives for Kaiser's Consulting Group and to
consider strategic alternatives for Kaiser as a whole. From the time of its
inception through December 31, 1998, the Special Committee met 17 times.
Following the sale of the Consulting Group in June 1999, the Special Committee
has been inactive.
Compensation of Non-employee Directors effective March 1, 1997
Directors who are not employees of Kaiser 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 expenses that he or she incurs in connection with his or her
board service. Directors of Kaiser who are employees of Kaiser 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 Kaiser 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, Kaiser 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.
8
<PAGE>
In addition to receiving compensation pursuant to the terms of the ICF
Kaiser International, Inc. Non-employee Directors Compensation and Phantom Stock
Plan described above, Mr. Coelho received cash compensation at a rate of
$120,000 per year, paid monthly from his election as Chairman of the board of
directors in November 1998 until his resignation on June 7, 1999. This amount
was paid to Mr. Coelho as consideration for his services as Chairman of the
board of directors. See "Agreements and Transactions with Certain Directors."
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 Date of
Non-employee Director common stock on average at Phantom Stock Cash Payout
Date of Grant May 1, 1998) Units Granted
- ------------------------------------------------------------------------------------------------------------------
<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 Kaiser.
================================================================================
COMPENSATION & HUMAN RESOURCES COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
================================================================================
The members of the Compensation & Human Resources Committee are Hazel
R. O'Leary (Chairperson), Thomas C. Jorling, and James T. Rhodes, none of whom
are employed by Kaiser. For the fiscal year ended December 31, 1998, there were
no director relationships that require disclosure under this section.
================================================================================
AGREEMENTS AND TRANSACTIONS WITH CERTAIN 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, for the period beginning January 1, 1999 and
ending June 7, 1999, Mr. Coelho was paid at an annual rate of $120,000. In
addition, Mr. Coelho was granted 100,000 options, expiring November 4, 2001, 50%
of which vested on May 4, 1999 with an exercise price of $1.24. The remaining
50% balance were forfeited as a result of Mr. Coelho's resignation from his
position as Chairman of the board of directors of Kaiser on June 7, 1999. These
amounts were paid to Mr. Coelho as consideration for his services as Chairman of
the board of directors.
Jarrod M. Cohen. On March 13, 1998, Kaiser 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 Kaiser
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 Kaiser's 1998 Annual Meeting of Shareholders, (ii) to vote in
favor of Kaiser-proposed nominees for election at the 1998 Annual Meeting of
Shareholders, and (iii) to be present, in person or by proxy, 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
9
<PAGE>
meetings. In addition, the Cohen Parties agreed (a) not to subject any of
Kaiser'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 Kaiser; (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 Kaiser; (d) not to become, alone or
in conjunction with others, an acquiring person as defined in Kaiser's
Shareholders Rights Plan; and (e) not to dispose of any voting securities of
Kaiser 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
Kaiser'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 Kaiser 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, Kaiser entered into an employment
agreement with Mr. Edwards for his services as Chairman and Chief Executive
Officer of Kaiser 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 Kaiser's board of
directors; severance payments as provided under Kaiser's Senior Executive
Officers Severance Plan; eligibility under Kaiser'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 Kaiser'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, Mr. Edwards' indebtedness to Kaiser outstanding on May 1,
1997, was restructured.
On November 6, 1998, Mr. Edwards entered into an agreement with Kaiser,
pursuant to which the parties mutually agreed to terminate Mr. Edwards'
employment agreement. In consideration of Mr. Edwards' agreeing to terminate his
employment agreement, Kaiser agreed to compensate him with cash in the aggregate
amount of $850,000, all of which has been paid. Kaiser 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 Kaiser'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, Kaiser, and (iv) to forgive approximately
$1,396,139 of indebtedness previously owed by Mr. Edwards to Kaiser. In
addition, Mr. Edwards agreed to provide certain consulting services to Kaiser
through January 31, 1999, for which he was compensated with approximately
$98,559 of cash payments. Kaiser 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 Kaiser and its affiliated
parties.
Keith M. Price. Effective August 5, 1998, Kaiser entered into an employment
agreement with Mr. Price for his services as President and Chief Operating
Officer of Kaiser 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 opportunity 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 Kaiser's employee benefit plans, and a one-year, non-
competition period following termination of employment for any reason other than
expiration of the contract. The agreement also provided for the grant of three-
year options to purchase 150,000 shares of Kaiser's common stock, 50% of the
options to vest on February 5, 1999 and 50% on August 4, 1999.
Effective November, 1998, Mr. Price was promoted to Chief Executive Officer
and Kaiser agreed to extend the term of Mr. Price's contract to two years
commencing as of the original August 5, 1998 commencement date and to grant Mr.
Price three year options to purchase an additional 50,000 share of Kaiser'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.
10
<PAGE>
On April 27, 1999, Mr. Price entered into an agreement with Kaiser,
pursuant to which the parties mutually agreed to terminate Mr. Price's
employment agreement. Consistent with the terms of his employment agreement, in
consideration of Mr. Price agreeing to terminate his employment agreement,
Kaiser agreed to compensate him with cash in the aggregate amount of $677,450,
all of which has been paid. Kaiser further agreed (i) to provide Mr. Price and
his dependents with continued health, welfare and life insurance benefits
through April 30, 1999, (ii) to accelerate the vesting of 125,000 options
previously granted pursuant to Kaiser's Stock Incentive Plan described in the
paragraph above, (iii) to reimburse Mr. Price for certain costs and expenses in
connection with Mr. Price's move from Washington, D.C. to Boise, Idaho, and (iv)
to continue to provide directors and officers liability insurance coverage to
Mr. Price for Mr. Price's tenure at Kaiser. In addition, Mr. Price agreed to
provide certain consulting services to Kaiser through September 30, 2000, for
which he will be compensated monthly at a rate of $200 per hour with a $10,000
per month minimum. Kaiser also agreed to reimburse Mr. Price for legal fees
incurred by Mr. Price in connection with the negotiation of the agreement up to
a maximum of $1,000. In exchange for the benefits received by Mr. Price which
are described in this paragraph, Mr. Price agreed to terminate his employment
agreement and execute a full general release as to Kaiser and its affiliated
parties.
Michael E. Tennenbaum. On March 13, 1998, Kaiser and Mr. Michael E.
Tennenbaum signed an agreement pursuant to which Kaiser agreed to nominate,
recommend, and solicit proxies for Mr. Tennenbaum's election as a Director of
Kaiser at the 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. Kaiser 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 Kaiser'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
Kaiser 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 Kaiser. The agreement states that the limitation set forth in the
immediately preceding sentence would 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 Kaiser. Kaiser 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 proxy 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 Kaiser; (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 Kaiser; and (f) would be present, in person or
by proxy, 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 Kaiser 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, Kaiser 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 Kaiser and the potential solicitation of proxies for
the election of directors of Kaiser, which reimbursement was made in the amount
of $16,307.
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================================================================================
PROPOSAL 2: STOCK ISSUANCE PROPOSAL
================================================================================
GENERAL
Kaiser's shareholders are being asked to approve the issuance of
additional shares of Kaiser's common stock. Kaiser's common stock is listed on
the New York Stock Exchange. Companies with stock listed on the New York Stock
Exchange are required to seek shareholder approval if they want to issue
additional shares of the listed stock in an amount that is more than 20% of the
total number of shares of that stock outstanding. Kaiser wants to issue these
additional shares of common stock in order to exchange the additional shares for
outstanding debt securities of Kaiser, as described below. These additional
shares of common stock would represent more than 20% of the outstanding common
stock, both before and after the proposed exchange transaction.
Even if this proposal is approved by shareholders, the board of
directors reserves the authority to abandon the exchange offer if it determines,
in its discretion, that it is not in the best interests of Kaiser or its
shareholders.
The authorized capital stock of Kaiser consists of 90,000,000 shares of
common stock, par value $0.01 per share, and 2,000,000 shares of preferred
stock, par value $0.01 per share. As of __________ ____, 1999, there were _____
shares of common stock and no shares of preferred stock outstanding.
If the exchange offer is completed, current holders of Kaiser's common
stock will experience substantial dilution. See "Reduction in Voting Power if
Exchange Offer is Consummated" below.
DESCRIPTION OF THE RECAPITALIZATION, INCLUDING THE EXCHANGE OFFER
Overview And Background Of The Recapitalization
Kaiser incurred losses during 1997 and during 1998 suffered losses of
$100.5 million, largely as a result of significant cost overruns on fixed price
contracts to construct Kaiser's nitric acid plants. During the second half of
1998, Kaiser's board of directors formed a special committee of members of the
board to consider strategic alternatives for Kaiser. The special committee
engaged a financial advisor and, with its assistance, evaluated various
opportunities available to Kaiser, including the sale of one or more of Kaiser's
operating groups. As a result of that process, Kaiser sold its EFM and
Consulting Groups during 1999.
Because of the cash drain and continuing obligations associated with
Kaiser's nitric acid plants and other losses, the sales of the EFM and
Consulting Groups are not enough to restore Kaiser to a competitive financial
condition. Kaiser has lost the earning power associated with the sold operating
groups and continues to have $140 million principal amount of outstanding notes,
including $125 million of its 12% senior subordinated notes, or the old notes.
The amount of cash flow currently available from Kaiser's remaining
operations is insufficient to service the interest expense associated with its
existing debt obligations. A realignment of Kaiser's capital structure through
the proposed recapitalization described below will substantially reduce Kaiser's
level of debt and associated interest expense. A majority of the members of
Kaiser's board of directors and management believe the recapitalization will
enhance Kaiser's ability to win new business and retain key employees.
Currently, Kaiser is significantly more leveraged than its competitors.
Especially in the recent past, this has sometimes impaired Kaiser's ability to
win new business. Additionally, Kaiser's current financial position has in the
past and could in the future impair Kaiser's ability to retain key personnel. A
majority of the members of Kaiser's board of directors and management believe
Kaiser will be better able to service its debt remaining after the
recapitalization.
As described in more detail below, the board of directors has approved
a plan for restructuring the old notes that consists of an exchange offer, an
asset sale offer and consents to substantial amendments to the indenture
governing the old notes. If this recapitalization is not consummated, Kaiser may
continue to negotiate with the
12
<PAGE>
holders of the old notes for a restructuring of the old notes or may invest the
proceeds in a related business investment.
The board of directors considered several alternative means of
stabilizing Kaiser's financial condition before approving the proposed
recapitalization. Among the alternatives considered was the use of the proceeds
from the Consulting Group sale in an acquisition of a related business or simply
reinvesting the proceeds from the Consulting Group sale in Kaiser's existing
business activities. In considering these alternatives, the Board of Directors
met several times, reviewed the recommendations of its financial, legal and
other professional advisors as well as the information provided by management,
and closely analyzed the information available to it. A majority of the members
of the board of directors ultimately determined that the recapitalization
described below represents the strongest opportunity for significantly improving
Kaiser's financial position and future business prospects.
There can be no assurance that the holders of the old notes will
ultimately accept the exchange offer. If the exchange offer is not consummated,
Kaiser may continue to negotiate with the holders of the old notes as well as
its other creditors in an effort to restructure its current debt obligations, or
it may pursue one of the other alternatives discussed in this paragraph, among
others. Even if the exchange offer is consummated, if Kaiser is unable to
improve its financial condition and performance as needed, Kaiser will become
subject to a number of risks, including the risk that it will be unable to
compete effectively with its competitors for new business, it may be unable to
access needed financing or become the subject of creditor claims.
Management and a majority of the members of the board of directors
believe that the issuance of shares of common stock described in this Proposal
Two is necessary to preserve the value inherent in Kaiser. If the Share Issuance
Proposal is approved and the exchange offer is consummated, shareholders will
experience substantial dilution of their percentage interests in Kaiser. Old
notes will also experience substantial reduction of their current interest as a
result of the exchange offer. Of course, there can be no assurance that holders
of Kaiser's old notes will accept the proposed exchange offer even if the Stock
Issuance Proposal is approved by shareholders. As described in the following
pages, the exchange offer is subject to a number of conditions, including
acceptance of the offer by the holders of 95% in principal amount of the old
notes. Kaiser's management and a majority of the members of the board of
directors are convinced that, unless the Stock Issuance Proposal is approved by
shareholders and the exchange offer is accepted by holders of the old notes,
Kaiser will continue to face formidable financial obstacles to stability and
future growth.
You are urged to closely review and consider the information set forth
below before making a decision as to how to cast your vote on this Proposal Two.
The Recapitalization
Overview. Kaiser's recapitalization will be completed in a series of
simultaneous transactions, each of which is dependent upon consummation of the
others. These transactions will occur, assuming the conditions of the exchange
offer are met, as follows :
. Kaiser will purchase $__ million principal amount of old notes at
par in an asset sale offer;
. Kaiser will exchange $__ million of new notes and _____shares of
Kaiser's common stock for the remaining tendered old notes;
. holders of a majority of the outstanding old notes will consent
to the amendment of the indenture governing the old notes; and
. Kaiser will enter into a new $___ million credit facility;
Asset Sale Offer. In general terms, Kaiser's indentures governing its
outstanding 12% senior notes and 12% senior subordinated notes require us to use
proceeds from asset sales to reduce senior indebtedness or reinvest in Kaiser's
business or make an offer to purchase at par, first the old notes and second the
12% Senior Notes. As a result of the sale of the Consulting Group Kaiser have
approximately $66 million of available cash to fund an asset sale offer to
holders of Kaiser's old notes. If the conditions to complete the exchange are
not met, Kaiser may choose to reinvest the $66 million in Kaiser's business,
potentially through one or more acquisitions.
Exchange Offer. Kaiser is offering new notes and common stock in
exchange for all remaining old notes not purchased in the asset sale offer, $___
million after purchasing $___ million in the asset sale offer. Kaiser's
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<PAGE>
acceptance of old notes tendered in the exchange offer is conditioned on, among
other things, holders of at least 95% of the principal amount of old notes
accepting the exchange offer, the receipt of the requisite consent to amend the
old notes indenture and Kaiser's obtaining a new credit facility. In order to
participate in the exchange offer, the holder of old notes must tender all of
the old notes beneficially owned by the holder. Kaiser can extend the exchange
offer and accept all old notes tendered for exchange or amend the terms of the
exchange offer and any amendment will apply to the old notes tendered pursuant
to the exchange offer. Additionally, Kaiser reserve the right at any time to
terminate the exchange offer and not accept for exchange any old notes tendered
for exchange. Tenders of old notes may be withdrawn at any time prior to the
expiration date.
Consent Solicitation. Simultaneously with the exchange offer Kaiser is
seeking a consent from the holders of Kaiser's old notes to remove substantially
all restrictive covenants and some events of default from the indenture
governing the old notes. Kaiser is also requesting holders to deliver an
instruction to the trustee not to interfere with Kaiser's recapitalization. A
holder of old notes does not need to consent to the proposed amendments in order
to tender its old notes in the exchange offer.
New Credit Facility. Kaiser have received a term sheet from _____ for a
new $__ million credit facility. The closing of the new credit facility is
conditioned on the successful completion of the recapitalization.
The Exchange Offer
Kaiser is offering to exchange $____ million aggregate principal amount
of its new notes and ___ shares of its common stock for $______ principal amount
of old notes which are outstanding after the asset sale offer and which are
properly tendered and not withdrawn. For each $1,000 of old notes tendered,
Kaiser will exchange $_____ of new notes and _____ shares of common stock.
Subject to satisfaction of the conditions of the exchange offer, Kaiser
will accept for exchange any and all old notes that are validly tendered on or
prior to 5:00 p.m., New York City time, on _______ ____, 1999. Tenders of the
old notes may be withdrawn at any time prior to that same time and date. Kaiser
may extend the exchange expiration date and accept all old notes tendered for
exchange or amend the terms of the exchange offer and any amendment will apply
to the old notes tendered pursuant to the exchange offer.
Exchange Expiration Date; Extensions; Waiver; Termination; Amendments
The exchange expiration date will be __________ ____, 1999 at 5:00
p.m., New York City time, unless Kaiser, in its sole discretion, extends the
exchange offer, in which case the exchange expiration date will be the latest
date and time to which the exchange offer is extended.
In order to extend the exchange offer, Kaiser will notify the
exchange/solicitation/paying agent of any extension by oral or written notice
and will make a public announcement. In either case it will do so prior to 9:00
a.m., New York City time, on the next business day after the previously
scheduled exchange expiration date.
Kaiser reserves the right, in its sole discretion:
. to delay accepting any old notes,
. to extend the expiration date and accept any old notes previously
tendered, subject to withdrawal rights,
. to waive any condition to the exchange offer and accept any old
notes tendered for exchange, subject to withdrawal rights,
14
<PAGE>
. to terminate the exchange offer, whether or not any of the conditions set
forth below under "Conditions of the Exchange Offer" shall have been
satisfied, and
. to amend the terms of the exchange offer in any manner by giving oral or
written notice of this delay, extension, termination or modification to the
exchange/solicitation/paying agent. Any amendment will apply to old notes
tendered, subject to withdrawal rights.
If the exchange offer is amended in a manner determined by Kaiser to constitute
a material change, Kaiser will promptly disclose these amendments by means of a
public announcement or a supplement to this proxy statement that will be
distributed to the registered holders of the old notes.
Conditions of the Exchange Offer
The exchange offer is subject to the following conditions:
. the minimum 95% tender condition must be met
. holders of a majority of the old notes consent to the proposed amendments
to the indenture governing the old notes;
. Kaiser has a new credit facility;
. Kaiser shareholders have approved the issuance of the shares of common
stock being offered as part of the exchange offer;
. no legal action or proceeding has been instituted or threatened with
respect to the exchange offer or the solicitation, or which, in the sole
judgment of Kaiser, may materially adversely affect the business,
operations or financial condition of Kaiser;
. There has not occurred
. any material adverse development in any existing action or proceeding
of any nature;
. any general suspension of trading in, or limitation on prices for,
securities on the New York Stock Exchange,
. a declaration of a banking moratorium by United States authorities or
any governmental agency in the United States,
. the mininium 95% tender condition must be met;
. the commencement of a war, armed hostilities or other international or
national calamity directly or indirectly involving the United States,
or
. a material adverse change in general economic, political or financial
conditions, if the effect of any economic, political or financial
conditions on the financial markets of the United States, in the sole
judgment of Kaiser, shall make it impracticable to consummate the
exchange offer;
. There has not occurred any change, or development involving a prospective
change, in or affecting the business or financial affairs of Kaiser which,
in the sole judgment of Kaiser, would materially impair the contemplated
benefits of the exchange offer or the solicitation to Kaiser;
. No statute, rule or regulation has been proposed or enacted, or any action
has been taken by any governmental authority, which, in the sole judgment
of Kaiser, would or might prohibit, restrict or delay consummation of the
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<PAGE>
exchange offer as presently proposed or materially impair the contemplated
benefits of the exchange offer or the solicitation to Kaiser; and
. There does not exist, in the sole judgment of Kaiser, any other actual or
threatened legal impediment to the acquisition of the old notes in the
asset sale offer, or the issuance of the new notes or common stock in the
exchange offer.
At any time, Kaiser can waive any condition to the exchange offer and
accept all notes tendered for exchange pursuant to the exchange offer.
Accounting Treatment
The recapitalization will be accounted for as a troubled debt
restructuring pursuant to Statement of Financial Accounting Standard No. 15 -
Accounting by Debtors and Creditors for Troubled Debt Restructurings.
. The face value of the old notes is $125 million.
. The carrying amount of the old notes represents the face value of the old
notes adjusted for the unamortized original issue discount and the
unamortized debt issuance costs of the old notes.
. $___ million of the old notes have been purchased at face value for $___
million in cash and $___ million (____ shares) in common stock and will be
removed from the accounting records.
. The par value of the newly issued shares of common stock will be credited
to the common stock account.
. The excess of the total fair market value of the shares of common stock to
be issued over the par value will be credited to paid in capital, net of
any issuance costs.
. The remaining carrying value of the old notes of $___ million will be
exchanged for $____ in new notes and removed from the accounting records.
The carrying value of the new notes will represent the total future cash
payments specified by their terms, including accrued interest.
. No interest expense will be recognized on these notes between the closing
date of this recapitalization and December 31, 2003, the maturity date of
the new notes.
. Future cash payments on the remaining debt will be accounted for as
reduction of the carrying amount of the remaining debt.
. The difference between the face value of the old notes and all of the above
transactions will be recorded as an extraordinary gain on the restructuring
of the old notes, net of any other direct costs associated with this
transaction.
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<PAGE>
The following table summarizes the accounting for this transaction:
<TABLE>
<S> <C>
Face value of old notes $ 125,000,000
Less :
Unamortized original issue discount
Unamortized debt issuance costs
-------------
Carrying value of old notes
Less:
Cash exchanged
Fair market value of common stock exchanged
Carrying value of new notes
-------------
Extraordinary gain on note restructuring
=============
</TABLE>
Federal Tax Consequences to Kaiser
The principal amount of Kaiser's aggregate outstanding indebtedness
will be reduced upon the recapitalization. Generally, the cancellation or other
discharge of indebtedness triggers ordinary income to a debtor unless payment of
the liability would have given rise to a deduction. The amount of such discharge
of indebtedness income generally will be equal to the excess of the adjusted
issue price (as defined in Treasury Regulation Section 1.1275-1(b)) of the
indebtedness discharged over the aggregate value of cash and other property
(including the new notes and Kaiser common stock) transferred in satisfaction of
the indebtedness.
However, Kaiser may not realize taxable income from discharge of
indebtedness if the discharge of indebtedness occurs while Kaiser is "insolvent"
(as defined in Section 108(d)(3) of the Internal Revenue Code of 1986, as
amended). Instead, to the extent that the amount of the discharge of
indebtedness does not exceed the amount by which Kaiser is insolvent, certain
tax attributes (including net operating losses) otherwise available to Kaiser
will be reduced, generally by the amount that would otherwise be included as
ordinary income. These attribute reductions will generally have the effect of
increasing Kaiser's federal income tax liability in subsequent taxable years.
The extent, if any, to which Kaiser is insolvent is determined for this purpose
immediately before the discharge of indebtedness.
Fees and Expenses
All expenses incident to Kaiser's consummation of the exchange offer
will be borne by Kaiser. Kaiser expects such expenses will total approximately
$_______.
Reduction in Voting Power if Exchange Offer is Consummated
Current holders of common stock will experience an immediate and
substantial reduction in their aggregate voting power if the exchange offer is
consummated. Kaiser anticipates that approximately ____ additional shares of
common stock will be issued as part of the exchange offer. These additional
shares would represent approximately ____% of the total voting power of the
outstanding common stock of Kaiser, or ___% on a fully diluted basis. As a
result, although each share will continue to be entitled to one vote, the
aggregate voting power of current shareholders of Kaiser would be reduced from
100% to approximately ____% of the total voting power held by all shareholders
of Kaiser after the consummation of the exchange offer.
Capitalization
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CAPITALIZATION
The following table sets forth our capitalization as of March 31, 1999, pro
forma for the sale of EFM and Consulting and adjusted to give effect to the
consummation of the recapitalization as if it had occurred on March 31,1999. The
information set forth below should be read in conjunction with our audited
combined financial statements and related notes thereto included in Kaiser's
Quarterly Report on Form 10-Q for the period ended March 31, 1999 that has been
delivered with this proxy statement and unaudited pro forma combined financial
statements, together with the notes thereto, included as Appendix A to this
proxy Statement.
<TABLE>
<CAPTION>
As of March 31,1999
----------------------
Pro Forma
Pro forma adjusted
---------- ----------
(Dollars in thousand)
<S> <C> <C>
Cash and cash equivalents(a) $78,721
========== ==========
Long-term debt (including current portion):
Credit Facility $ - $ -
12% Senior Notes(b) 15,000 15,000
New 13% Senior Subordinated Notes -
Old 12% Senior Subordinates Notes(c) 125,000
---------- ----------
Total Debt 140,000
Stockholders' Equity (Deficit) (24,320)
---------- ----------
Total Capitalization $115,680
========== ==========
</TABLE>
(a) Includes $22.9 million of restricted cash being used to collateralize
letters of credit.
(b) Excludes $.4 million of unamortization discount.
(c) Excludes $2.1 million in unamortization discount.
Pro Forma Financial Information
Kaiser has prepared additional unaudited pro forma financial
information that describes our historical financial results as if the sales of
the EFM and Consulting Groups and the exchange transaction occurred as of
______________, ______. This information has been included as Appendix A of
this proxy statement.
Adverse Effect on Market Price of Additional Shares
All of the shares of common stock to be issued in the exchange offer
are being registered on a registration statement filed with the SEC under the
Securities Act of 1933. As a result, they will be freely transferable
immediately upon issuance. In addition, Kaiser intends to apply for listing of
the shares on the New York Stock Exchange. Sales of these shares of common stock
in the public market or the perception that such sales may occur could
materially adversely affect the market price of Kaiser common stock generally.
Vote Required for Approval of the Stock Issuance Proposal
The affirmative vote of a majority of Kaiser's outstanding present is
required to approve the Stock Issuance Proposal; provided, however, that at
least a majority of the total shares of common stock outstanding actually cast
votes at the meeting.
Recommendation of the Board of Directors
With the exception of Mr. Tennenbaum, all of the members of Kaiser's
board of directors recommend that the shareholders vote FOR the Stock Issuance
Proposal. Mr. Tennenbaum has voted against approval of the Stock Issuance
Proposal. Proxies solicited by the board of directors will be voted for this
proposal unless shareholders specify a contrary choice in their proxies.
================================================================================
PROPOSAL 3: REVERSE SPLIT PROPOSAL
================================================================================
If the exchange offer is consummated, the board of directors believes
that the best interests of Kaiser and its shareholders will be served by
amending Kaiser's certificate of incorporation, to effect a reverse split of
Kaiser's presently issued and outstanding shares of common stock. You are being
asked to approve an amendment to
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<PAGE>
Kaiser's certificate of incorporation to effect a reverse split of Kaiser's
outstanding shares of common stock, in a ratio of up to one-for-ten, or such
lower ratio as the board shall in its discretion determine. As part of this
proposal, Kaiser's board of directors will have the authority, consistent with
Delaware law, to abandon the reverse split at any time prior to its
effectiveness if they determine that its implementation is not in the best
interests of Kaiser and its shareholders.
Except as otherwise indicated, all per share information in this proxy
statement is presented without giving effect to the reverse stock split.
If the shareholders approve Proposal Two, Kaiser's certificate of
incorporation will be amended to replace the existing provision relating to
Kaiser's authorized capital with the following provision relating thereto.
Accordingly, Section 4.01(a) of the certificate of incorporation shall be
amended by deleting it in its entirety and replacing it with the following:
(A) Common Stock. Ninety million (90,000,000)
shares of common stock, par value $0.01 per share
("Common Stock") entitled to vote at any annual or
special meeting of the stockholders of the Corporation.
Each [insert actual split ratio of up to ten] shares of
the Corporation's common stock issued as of [insert
date which the Certificate of Amendment are filed], the
("Split Effective Date") shall be automatically changed
and reclassified, as of the Split Effective Date and
without further action, into one (1) fully paid and
nonassessable share of the Corporation's common stock.
If the shareholders approve this Proposal Three, the above amendment to
Kaiser's certificate of incorporation shall become effective upon the filing of
an amendment to the certificate of incorporation with the Delaware Secretary of
State. Kaiser is currently authorized to issue 90,000,000 shares of common
stock. In connection with the reverse stock split it is not proposed to amend
Kaiser's certificate of incorporation to reduce Kaiser's authorized number of
shares of common stock.
There were ____________ shareholders of record of the common stock as
of the record date. The reverse stock split is not expected to cause a
significant change in the number of record holders of the common stock. Kaiser
has no plans for the cancellation or purchase of shares of common stock from
holders of a nominal number of shares following the reverse stock split, and has
no present intention to take Kaiser private through the reverse stock split or
otherwise.
As of the record date, there were reserved for issuance upon exercise
of outstanding options an aggregate _____________ shares of common stock under
Kaiser's stock incentive plan. All outstanding options include provisions for
adjustment in the number of shares covered thereby and the exercise price
therefor in the event of a reverse stock split. If the reverse stock split is
approved and effected, there would be reserved for issuance upon exercise of all
outstanding options a total of approximately _______ shares of common stock.
Each of the outstanding options would thereafter evidence the right to purchase
a number of shares of common stock equal to the product of the number of shares
previously covered thereby divided by the actual split ratio, and the exercise
price per share would be multiplied by the actual split ratio.
The proposed reverse split will not affect any shareholder's
proportionate equity interest in Kaiser or the rights, preferences, privileges
or priorities of any shareholder, other than an adjustment which may occur due
to fractional shares. Likewise, the proposed reverse split will not affect the
total shareholders' equity of Kaiser or any components of shareholders' equity
as reflected on the financial statements of Kaiser except to change the numbers
of the issued and outstanding shares of capital stock. However, because the
number of shares of capital stock that Kaiser is authorized to issue will not be
decreased in proportion to the decrease in the number of issued shares
determined by the actual split ratio, the number of shares which are authorized
but unissued, and the percentage of ownership of Kaiser represented by such
shares if they are issued in the future in the discretion of the board of
directors, effectively will be increased.
The following table illustrates the principal effects on Kaiser's
capital stock of the reverse split:
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<PAGE>
NUMBER OF SHARES OF CAPITAL STOCK
<TABLE>
<CAPTION>
Prior to reverse split After reverse split
---------------------- -------------------
<S> <C> <C>
Common
- ------
Authorized 90,000,000 90,000,000
Issued and outstanding (1)
Available for future issuance
Preferred
- ---------
Authorized 2,000,000 2,000,000
Issued and outstanding 0 0
Available for future issuance 2,000,000 2,000,000
</TABLE>
(1) Excludes (i) ______ shares currently held in treasury (_______ shares
after the reverse split), (ii) _______ shares issuable upon exercise
of outstanding options (______ shares after the reverse split), (iii)
______ shares issuable upon exercise of outstanding warrants (____
shares after the reverse split) and (iv) _______ shares issuable upon
conversion of outstanding shares of preferred stock (_____ shares after
the reverse split), each as of the _________ ____, 1999 record date.
Exchange Of Shares; No Fractional Shares
A holder of common stock will be entitled to receive a whole number of
shares plus a fraction of a share if the number of shares of common stock held
by him prior to the reverse stock split is not evenly divisible by the actual
split ratio. However, no certificate or scrip representing fractional shares of
common stock will be issued. In lieu of any fractional shares, the transfer
agent of the common stock on behalf of all persons otherwise entitled to receive
fractional shares will, promptly following the effective time of the reverse
stock split, aggregate such fractional shares and sell the resulting whole
shares of common stock for the accounts of those persons in open market
transactions on the NYSE. Those persons will thereafter be entitled to receive
their allocable portion of the net proceeds of the sale thereof upon surrender
of their common stock certificates as described below.
Kaiser will notify holders of common stock of the effectiveness of the
reverse stock split and will furnish the holders of record of shares of common
stock at the close of business on such effective date with a letter of
transmittal for use in exchanging certificates. The holders of common stock will
be required to promptly mail their certificates representing shares of common
stock to the transfer agent, in order that new certificates giving effect to the
reverse stock split may be issued and the proceeds of the sale of any fractional
shares may be distributed. Commencing with the effective date of the reverse
stock split, previously outstanding certificates representing shares of common
stock will be deemed for all purposes to represent a fraction of the number of
shares previously represented thereby equal to the product of the number of
shares held prior to the split divided by the actual split ratio, subject to the
treatment of fractional interests as described above.
No service charge will be payable by shareholders in connection with
the exchange of certificates, all costs of which will be borne and paid by
Kaiser.
Shareholders have no right under Delaware law to dissent from the
reverse split or to dissent from the rounding up of fractional interests
resulting from the reverse split.
Change Of Purchase Rights For Preferred Stock, Options And Warrants And Notice
To Holders Of Such Stock
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<PAGE>
Pursuant to the authority conferred on it by the certificate of
incorporation, the board of directors of Kaiser adopted certain resolutions
dated ___________ pursuant to which Kaiser authorized the issuance of a series
of preferred stock designated as Series 4 Junior Preferred Stock (the "Series 4
Preferred"). Pursuant to Kaiser's shareholder rights plan, dated January 13,
1992, holders of Kaiser's common stock have the right to purchase one
one-hundredth of a share of the Series 4 Preferred at a certain price following
the acquisition by a group or persons of 20% or more of the common stock of
Kaiser. In accordance with the certificate of incorporation, the fraction of a
share of Series 4 Preferred stock for which each share of common stock has the
right to subscribe will be adjusted as of the split effective date. As a result,
each share of common stock shall thereafter have the right to subscribe for a
fraction of a share of Series 4 Preferred equal to the product of the one-one
hundredth of a share divided by the actual split ratio pursuant to the terms of
Shareholder Rights Plan.
No other series of Preferred Stock are currently outstanding.
Purposes Of The Reverse Split And Effective Increase In Authorized Shares
The Company's common stock is currently listed on the New York Stock
Exchange under the symbol "ICF." However, Kaiser may in the future apply for
listing of its common stock on the Nasdaq National Market System ("Nasdaq NMS")
the Nasdaq SmallCap Market System ("Nasdaq SCM") or the American Stock Exchange,
which have certain per share minimum bid price requirements for initial
inclusion. Kaiser anticipates that the reverse split will have the effect of
increasing the minimum bid price of its common stock sufficient to permit it to
satisfy the applicable minimum bid price criteria. Further, the board of
directors has been advised that certain securities firms limit the extension of
margin credit for, and otherwise discourage their registered representatives
from recommending, the purchase of corporate securities that have a market value
of less than $5.00 per share. Under the margin regulations of the Federal
Reserve Board, brokers, financial institutions and certain other lenders may
extend credit for the purchase of margin stock in an amount not to exceed 50% of
the market value of such shares. For purposes of these regulations, the market
value of the common stock is the closing price as reported by Nasdaq on the day
preceding the extension of credit. To increase the market value, satisfy the
Nasdaq NMS, Nasdaq SCM or American Stock Exchange listing criteria and increase
the likelihood of marginability of the common stock, the board of directors has
determined that the reverse split may be in the best interests of Kaiser and its
shareholders.
Additionally, the board of directors believes that the current price
per share of Kaiser's common stock may reduce the effective marketability of the
common stock because of the reluctance of certain brokerage firms to recommend
the purchase of lower-priced stocks to their clients. Certain institutional
investors have internal policies preventing the purchase of lower-priced stocks
to be used as collateral for margin accounts. Further, a number of brokerage
houses have policies and practices that tend to discourage individual brokers
within those firms from dealing in lower-priced stocks. Some of those policies
and practices pertain to the payment of brokers' commissions and to
time-consuming procedures that function to make the handling of lower-priced
stocks unattractive to brokers from an economic standpoint. In addition, the
structure of trading commissions tends to have an adverse impact upon holders of
lower-priced stocks because the brokerage commission on a sale of lower-priced
stocks generally represents a higher percentage of the sales price than the
commission on a relatively higher-priced stock.
The board of directors believes that the low per share market price of
the common stock impairs the marketability of the common stock to institutional
investors and members of the investing public and creates a negative impression
with respect to Kaiser. Many investors and market makers look upon lower priced
stocks as unduly speculative in nature and, as a matter of policy, avoid
investment and trading in such stocks. The foregoing factors adversely affect
both the pricing and the liquidity of the common stock. Thus, a potential
increase in trading price would be expected to be attractive to the financial
community and the investing public and in the best interest of the shareholders.
The board of directors is hopeful that the decrease in the number of
shares of common stock outstanding as a consequence of the proposed reverse
split, and the resulting anticipated increased price level, will stimulate
additional interest in Kaiser's common stock and possibly promote greater
liquidity for Kaiser's shareholders. There can be no assurance, however, that
there will be any greater liquidity, and it is possible that the liquidity could
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<PAGE>
even be adversely affected by the reduced number of shares of common stock which
would be outstanding after the proposed reverse split is effected.
It is impossible to predict the market's reaction to any reverse stock
split or, in this case, to separate that reaction from the market's reaction to
the proposed investment as a whole. If this proposal is approved, the board of
directors plans to evaluate Kaiser's prospects and the market for its stock,
whether the exchange offer has been completed, and other factors in determining
whether to proceed with the reverse split and, if so, what ratio (not to exceed
one share for each ten outstanding shares) should be used to implement the
reverse stock split.
The reverse split may result in some shareholders owning "odd lots" of
less than 100 shares. The costs, including brokerage commissions, of
transactions in odd lots are generally higher than the costs in transactions in
"round lots" of even multiples of 100.
Certain Federal Income Tax Consequences
A summary of the federal income tax consequences of the reverse split
as contemplated in Proposal Three is set forth in the paragraph below. The
discussion is based on the present federal income tax law. The discussion is not
intended to be, nor should it be relied on as, a comprehensive analysis of the
tax issues arising from or relating to the proposed reverse split. Income tax
consequences to shareholders may vary from the federal tax consequences
described generally below. SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS
TO THE EFFECT OF THE CONTEMPLATED REVERSE SPLIT UNDER APPLICABLE FEDERAL, STATE
AND LOCAL INCOME TAX LAWS.
The proposed reverse split will reconstitute a "recapitalization" to
Kaiser and its shareholders to the extent that issued shares of common stock are
exchanged for a reduced number of shares of common stock. Therefore, neither
Kaiser nor its shareholders will recognize any gain or loss for federal income
tax purposes as a result thereof, except that a shareholder who receives cash in
lieu of receiving fractional shares of common stock will be treated as selling
such fractional shares and will recognize a capital gain or loss equal to the
difference between the cash received and the basis of such fractional shares.
The shares of common stock to be issued to each shareholder will have
an aggregate basis, for computing gain or loss, equal to the aggregate basis of
the shares of such stock held by such shareholder immediately prior to the split
effective date, reduced by the basis, if any, allocated to fractional shares
that are treated as sold. A shareholder's holding period for the shares of
common stock to be issued will include the holding period for the shares of
common stock held thereby immediately prior to the split effective date provided
that such shares of stock were held by the shareholder as capital assets on the
split effective date.
Vote Required for Approval of the Reverse Split Proposal
The affirmative vote of a majority of the shares of Kaiser's
outstanding common stock is required in order to approve the reverse split
proposal. As part of this proposal, the board has the authority, consistent with
Delaware law, to abandon the reverse split at any time prior to its
effectiveness if it determines that it is not in the best interests of Kaiser or
its shareholders.
Recommendation of the board of directors
The board of directors recommends that the shareholders vote FOR the
reverse split Proposal. Proxies solicited by the board of directors will be
voted for this proposal unless shareholders specify a contrary choice in their
proxies.
================================================================================
PROPOSAL 4: SHAREHOLDER DEMOCRACY PROPOSAL
================================================================================
22
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The board of directors is proposing a series of related amendments to
Kaiser's certificate of incorporation and conforming amendments to its bylaws.
The purpose of these proposed amendments is to enhance the ability of Kaiser's
shareholders to exercise their voting rights.
In general terms, the provisions of Kaiser's certificate of
incorporation and bylaws proposed to be amended as described below may currently
have the effect of delaying, deferring, or preventing a change of control of
Kaiser or other extraordinary corporate transactions. Thus, approval of the
Shareholder Democracy Proposal could have the effect of making a change of
control of Kaiser or other extraordinary corporate transaction easier to
accomplish. In considering this effect, shareholders should note that if the
Stock Issuance Proposal is adopted, holders of Kaiser's new notes will own a
substantial portion of Kaiser's outstanding common stock. Adoption of the
Shareholder Democracy Proposal would result in holders of the old notes that
receive shares of common stock in the exchange transaction having a greater
ability to control whether or not Kaiser could effect extraordinary corporate
transactions.
Elimination of Supermajority Vote with Respect to Certain Transactions
Section 4.02(D) of Kaiser's certificate of incorporation currently
provides that, if a majority of the board of directors has not served in such
positions for at least 12 months, the approval of two-thirds of the voting power
of Kaiser's capital stock would be required in order for Kaiser to: (1) merge
with or consolidate into any other entity, other than a subsidiary of Kaiser,
(2) sell, lease or assign all or substantially all of the assets or properties
of Kaiser, or (3) amend Section 4.02(D) of the certificate of incorporation. In
the absence of this provision, Delaware law requires that transactions of the
type referred to in Section 4.02(D) of the certificate of incorporation be
approved by a majority of Kaiser's outstanding voting stock. Although provisions
such as Section 4.02(D), requiring supermajority votes for approval of certain
transactions, are not uncommon, the board of directors believes that, at the
present time, the majority vote requirement of Delaware law is sufficient to
protect the shareholders' interests.
In reaching this conclusion, the board of directors considered that
Kaiser is subject to Section 203 of the Delaware General Corporation Law, or the
Delaware takeover statute, which restricts transactions that may be entered into
by Kaiser and certain of its shareholders. The Delaware takeover statute
provides, in essence, that an interested shareholder acquiring more than 15% of
the outstanding voting shares of a corporation subject to the statute, but less
than 85% of such shares, may not engage in certain business combinations with
the corporation for a period of three years subsequent to the date on which the
shareholder became an interested stockholder, unless (1) prior to such date the
corporation's board of directors approved either the business combination or the
transaction in which the shareholder became an interested stockholder or (2) the
business combination is approved by the corporation's board of directors and
authorized by a vote of at least 66 2/3% of the outstanding voting stock of the
corporation not owned by the interested stockholder.
The Delaware takeover statute defines the term business combination to
encompass a wide variety of transactions with or caused by an interested
stockholder in which the interested stockholder receives or could receive a
benefit on other than a pro rata basis with other stockholders, including
mergers, certain asset sales, certain issuances of additional shares to the
interested stockholder, transactions with the corporation which increase the
proportionate interest of the interested stockholder, or transactions in which
the interested stockholder receives certain benefits.
Amendment to Certificate of Incorporation and Bylaws to Provide for
Annual Election of Directors
In 1992, Kaiser's shareholders approved a proposal to provide for
staggered, three-year terms for the board of directors. Under this arrangement,
the board of directors is divided into three class. One class stands for
election each year, and directors in a class are elected for three-year terms. A
classified board of directors may have the effect of making it more difficult
for a person to acquire control of Kaiser since it may require two annual
meetings to replace a majority of the directors and acquire effective control
over Kaiser. In addition, under Delaware law, members of a classified board of
directors cannot be removed except for "cause."
Some investors have come to view classified boards as having the effect
of insulating directors from a corporation's shareholders, and a number of major
corporations have determined that, regardless of the merits of a classified
board in deterring coercive takeover attempts, principles of good corporate
governance dictate that all
23
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directors of a corporation be elected annually. The board of directors of Kaiser
agrees with this conclusion. Therefore, the board of directors has unanimously
approved deletion of the provisions of Kaiser's certificate of incorporation and
bylaws which provide for staggered, three-year terms for directors.
If the Shareholder Democracy Proposal is approved by the shareholders,
Section 6.01 of the certificate of incorporation will be amended by deleting it
in its entirety and replacing it with the following:
"The business and affairs of the Corporation
shall be managed under the direction of the
Board of Directors. Subject to the rights of the
holders of any class or series of stock having
preference over the Common Stock as to dividends
or upon liquidation to elect directors under
specified circumstances, the number of directors
shall be determined by the affirmative vote of a
majority of the whole Board of Directors or by
the shareholders, but shall not be less than six
nor more than sixteen. Directors shall be
elected for a term of office that expires at the
next succeeding annual meeting of shareholders
and shall hold office until their successors
have been elected and qualified."
The deletion of the existing Section 6.01 of the certificate of
incorporation will include elimination of the provision in section 6.01(D) that
currently permits only directors to fill vacancies on the board. Thus, if the
Shareholder Democracy Proposal is approved, vacancies on the board of directors
may be filled by the directors, and also by the shareholders.
Adoption of the Shareholder Democracy Proposal will also result in
conforming amendments to section 3.01 and section 3.03 of Kaiser's bylaws,
relating to the number and classification of Kaiser's board of directors.
Elimination of Supermajority Vote to Amend Certificate of Incorporation or
Bylaws
Section 14.01 of Kaiser's certificate of incorporation and section 9.01
of Kaiser's bylaws provide that certain provisions of the certificate of
incorporation and bylaws may be amended only with the affirmative vote of the
holders of two-thirds of Kaiser's then outstanding capital stock entitled to
vote generally in the election of directors. The provisions of the certificate
of incorporation subject to this supermajority vote requirement include:
. the prohibition in section 4.02(A) of the certificate of
incorporation that prohibits the holders of common stock from
taking actions by written consent without a meeting;
. the supermajority vote requirement for certain transactions in
section 4.02(D) described above, the provisions of the
certificate of incorporation relating to the classification of
the board of directors described above;
. the provisions of section 7.01(B) of the certificate of
incorporation relating to the limitation of liability of
directors of Kaiser; and
. section 14.01 of the certificate of incorporation relating to
amendments to the certificate of incorporation.
Provisions of the bylaws requiring a supermajority vote for amendment include:
. section 2.04, relating to the calling of special meetings of
shareholders discussed below;
. section 2.05, relating to business to be conducted at
meetings;
. section 3.01, relating to the size of the board of directors;
. section 3.02, relating to nominations for election as
directors; and
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. section 3.03, relating to classification of the board of
directors.
Consistent with the other amendments described above, the board of
directors believes that the holders of a majority of the outstanding voting
stock of Kaiser should be permitted to amend Kaiser's certificate of
incorporation and bylaws, and therefore are recommending that the provisions of
the certificate of incorporation and bylaws requiring a supermajority vote for
amendment of certain provisions thereof be deleted.
Lowering Percentage of Shareholders Required to Call a Special Meeting
Section 2.04 of the bylaws currently provides as follows:
Special meetings of the shareholders may be called
by the Board of Directors, by the Chief Executive
Officer, by the President or by a writing signed by
shareholders owning at least fifty percent (50%) in
voting amount of the entire capital stock of the
Corporation issued and outstanding and entitled to
vote at such meeting. Such call shall state the
purpose or purposes of the proposed meeting. The
Secretary shall give notice of such meeting to the
shareholders entitled to vote thereat in accordance
with such call.
Kaiser's board of directors proposes to amend the first sentence of section 2.04
of the bylaws by deleting it in its entirety and replacing it with the
following:
Special meetings of the shareholders may be called
by the Board of Directors, by the Chairman of the
Board or the Chief Executive Officer, or by a
writing signed by shareholders owning at least
twenty percent (20%) in voting amount of the entire
capital stock of the Corporation issued and
outstanding and entitled to vote at such meeting.
In addition, Kaiser's board of directors proposes to amend the certificate of
incorporation to add a new section 15.01 which would include the same language
as the revised first sentence of section 2.04 of the bylaws.
The purpose of this proposed change is to permit shareholders
constituting a substantial minority, but who hold less than fifty percent (50%)
of Kaiser's outstanding voting stock, to call a special meeting of shareholders.
However, this change will not affect the percentage vote needed in order to
approve proposals properly presented at any special meeting.
Vote Required for Approval of Shareholder Democracy Proposal
The affirmative vote of at least 66 2/3% of Kaiser's outstanding common
stock is required to approve the Shareholder Democracy Proposal.
Recommendation of the Board of Directors
The board of directors recommends that shareholders vote "FOR" the
Shareholder Democracy Proposal. Proxies solicited by the board of directors will
be so voted unless shareholders specify a contrary choice in their proxies.
===============================================================================
PROPOSAL 5: RIGHTS PLAN PROPOSAL
===============================================================================
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On January 13, 1992, Kaiser's board of directors authorized the
creation of a Shareholder Rights Plan. Pursuant to the rights plan, all shares
of Kaiser's common stock that were outstanding on, or that were issued after,
January 31, 1992 and prior to the date that the rights become exercisable will
have a right attached thereto.
The rights are triggered by the acquisition of, or tender or exchange
offer for, beneficial ownership of 20% or more of Kaiser's common stock. In such
event, each right entitles the holder thereof, other than the 20% beneficial
owner, to purchase Kaiser's common stock, or in certain circumstances involving
the acquisition of Kaiser, the acquiror's common stock, having a value equal to
two times the $50.00 exercise price of a right.
The rights plan was designed to enhance the ability of the board of
directors to negotiate with a person or group that might, in the future, make an
unsolicited attempt to acquire control of Kaiser, whether through the
accumulation of shares in the open market or through a tender offer which does
not offer an adequate price. Although the rights plan does not prevent a change
of control, the rights generally would cause substantial dilution to a person or
group that attempts to acquire Kaiser on terms not approved by the board of
directors.
Shareholder rights plans or "poison pills" have become controversial,
and certain institutional shareholders and other shareholder groups disapprove
of shareholder rights plans. The board of directors has considered redemption of
the rights in order to eliminate the effect of the rights plan. However,
redemption of the rights is not currently permitted by the terms of the
indentures governing the old notes and Kaiser's outstanding senior notes. The
board of directors also considered terminating the rights plan, but the terms of
the rights plan do not permit its early termination. The terms of the rights
plan do permit the board of directors to effect certain amendments to the rights
plan, and on July 2, 1999 the board of directors amended the rights plan,
subject to shareholder approval, as follows:
1. The definition of "Acquiring Person" in Section 1(a)
of the Rights Agreement was amended to add the parenthetical
phrase "(other than as a result of a Permitted Offer (as
hereinafter defined))" after the first reference to common stock
in such definition and to delete references to Kaiser's Series 2C
and 2D Preferred Stock, so that Section 1(a) of the Rights
Agreement now reads in its entirety as follows (new language is
underlined):
(a) "Acquiring Person" shall mean any Person who or
which, together with all Affiliated and Associates of
such Person, shall be the Beneficial Owner of 20% or more
of the shares of Common Stock outstanding (other than as
-------------
a result of a Permitted Offer (as hereinafter defined)),
------------------------------------------------------
but shall not include (i) the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or
of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or
pursuant to the terms of any such plan or (ii) any Person
who becomes an Acquiring Person solely as a result of a
reduction in the number of shares of Common Stock by the
Company, unless and until such Person shall purchase or
otherwise become the Beneficial Owner of additional
shares of Common Stock constituting 1% or more of the
then outstanding shares of Common Stock.
2. Section 1 of the Rights Agreement was further amended
to add the definition of "Permitted Offer" as a new Section 1(q),
with the balance of the subsections of Section 1 being renumbered
accordingly. New Section 1(q) now reads as follows:
(q) "Permitted Offer" shall mean (i) a tender or exchange
offer which is for all outstanding Common Stock at a
price and on terms determined, prior to the purchase of
shares under such tender or exchange offer, by at least a
majority of the members of the Board of Directors who are
not officers or employees of the Company and who are not
Acquiring Persons or Affiliates, Associates, nominees or
representatives of an Acquiring Person, to be adequate
(taking into account all factors that such directors deem
relevant including, without limitation, prices that could
reasonably be achieved if the Company or its assets were
sold on an orderly basis designed to realize maximum
value) and otherwise in the best interests of the Company
and its stockholders (other than the Person or any
Affiliate or Associate thereof on whose basis the offer
is being made) taking into
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account all factors that such directors may deem relevant
and (ii) following July 31, 2000, a cash tender offer
which is for all outstanding Common Stock.
In addition to this amendment to the Rights Plan, the board of
directors proposes to add a new Article X to the bylaws, which would prohibit
the adoption of a new rights shall without shareholder approval. This new
article of the bylaws would provide as follows
ARTICLE X
Prohibition on Shareholder
Rights Plan
Section 10.10 Prohibition on Shareholder Rights Plans.
-----------------------------------------------------
Without the prior approval of the shareholders, the
Corporation shall not adopt a stockholder rights plan.
As used herein, the term "stockholder rights plan"
means any plan involving the issuance of stock purchase
rights which may be exercised only following the
occurrence of a tender offer for the Corporation's
outstanding Common Stock, the acquisition by a person
of a specified number or percentage of the
Corporation's outstanding Common Stock, or a merger,
consolidation, sale or assets or comparable transaction
following the acquisition by any person of such a
specified number or percentage of the Corporation's
outstanding Common Stock.
In addition, the second sentence of section 14.01 of the certificate of
incorporation, relating to the board's authority to amend the bylaws, would be
amended to provide as follows:
"In furtherance and not in limitation of the powers
conferred by statute the Board of Directors is
authorized to adopt, amend, and repeal the Bylaws of
the Corporation, provided that without the approval of
--------
the stockholders no such amendment shall authorize or
permit the adoption of a stockholder rights plan."
Vote Required for Approval of the Rights Plan Proposal
The affirmative vote of a majority of the outstanding shares of common
stock entitled to vote is required to approve the rights plan proposal.
Recommendation of the Board of Directors
The board of directors recommends that shareholders vote "FOR" the
Rights Plan Proposal. Proxies solicited by the board of directors will be so
voted unless shareholders specify a contrary choice in their proxies.
================================================================================
PROPOSAL 6: OBSOLETE PREFERRED STOCK PROPOSAL
================================================================================
Kaiser's certificate of incorporation includes lengthy and complicated
provisions relating to the terms of previously issued series of preferred stock
that are no longer outstanding and the board does not intend to issue any of
these shares in the future. These provisions include section 15.01, relating to
Series 1 Junior Convertible Preferred Stock; section 16.01, relating to Series
2C Senior Preferred Stock; and section 17.01, relating to Series 2D Senior
Preferred Stock. Since none of the shares of these series of preferred stock
remain outstanding, these provisions of the certificate of incorporation only
complicate and make extremely lengthy the certificate of incorporation.
Accordingly, the board of directors recommends that the certificate of
incorporation be amended to
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<PAGE>
delete these obsolete provisions. If this proposal is approved, the certificate
of incorporation will be restated in its entirety.
Vote Required for Approval of the Obsolete Preferred Stock Proposal
The affirmative vote of a majority of the outstanding shares of common
stock entitled to vote is required to approve the Obsolete Preferred Stock
Proposal.
Recommendation of the board of directors
The board of directors recommends that the shareholders vote "FOR" the
Obsolete Preferred Stock Proposal. Proxies solicited by the board of directors
will be so voted unless shareholders specify a contrary choice in their proxies.
================================================================================
PROPOSAL 7: PROPOSAL TO AMEND STOCK INCENTIVE PLAN
================================================================================
The ICF Kaiser International, Inc. Stock Incentive Plan, or the
incentive plan, was adopted by the Kaiser board of directors and approved by the
shareholders of Kaiser in February 1987, and was amended by the shareholders of
Kaiser in May 1996. The Plan expires on December 31, 2005. After that date no
additional grants may be made. The board of directors has approved and adopted
amendments to the incentive plan as described below, subject to the approval of
the shareholders.
Description of Amendments
We propose to increase the number of shares available for grants under
the plan by 2,000,000. Kaiser's board of directors proposes that the incentive
plan be amended to increase the number of shares of common stock as to which
awards may be granted. The incentive plan currently provides for the issuance of
up to 6,000,000 shares. As of _______, 1999, ______ shares had been issued upon
the exercise of options granted under the incentive plan, there were outstanding
options to purchase _______ shares and only [_______________] shares remained
available for issuance pursuant to future grants under the incentive plan. The
proposed amendment would increase the number of shares available for issuance
under the Incentive Plan by [2,000,000]. If the amendment is approved the total
number of shares available for future grants under the incentive plan would be
____________________ assuming no additional grants are made after the date of
this proxy statement and the date the increase is approved. The closing price of
Kaiser's common stock as quoted on the New York Stock Exchange on ________, 1999
was $_______.
The incentive plan is designed to promote the interests of Kaiser by
affording its key employees an incentive, by means of acquiring common stock of
Kaiser and share in the increase in the value of such stock, to remain in the
employ of Kaiser and to exert their maximum efforts on its behalf. The
outstanding awards were granted under circumstances such that those awards no
longer provide a realistic incentive to its grantees. The Compensation & Human
Resources Committee of the board of directors plans to review Kaiser's long-term
incentive compensation program, including the circumstances and terms under
which options, restricted stock, and other equity grants would be made in the
future, in order to accomplish the purposes of the incentive plan. New grants
will not be made under the incentive plan without the prior approval of the
committee. As an interim step in anticipation of a determination by the
committee following its review, Kaiser proposes to amend the incentive plan so
that it will read as follows:
3. Shares Subject to the Plan. The aggregate
--------------------------
combined number of shares of common stock which may be
covered by stock options ("Options"), stock appreciation
rights ("SARs"), restricted shares ("Restricted Shares"), and
restricted stock units ("Restricted Stock Units") granted
pursuant to the Plan is [8,000,000] shares, subject to
adjustment under Section 9. Shares which may be delivered on
exercise or settlement of Options, SARs, Restricted Shares,
or Restricted Stock Units may be previously issued shares
reacquired by ICF Kaiser or authorized
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<PAGE>
but unissued shares. Shares covered by Restricted Shares or
Restricted Stock Units that are forfeited and shares covered
by Options that expire unexercised or are canceled (without
having been surrendered upon the exercise of SARs, whether
settled in cash or common stock) shall again be available for
grant under the Plan.
We also propose to permit the transfer of options made under the plan
by participants to members of their immediate family. Kaiser also proposes to
amend the incentive plan to permit the transfer of options that are not
designated as incentive stock options for purposes of the tax code to immediate
family members of the persons who receive the option grants. Accordingly, the
board has proposed amending the second sentence of section 10 of the incentive
plan by adding the words "or to any member of the Participant's immediate family
(as defined in Rule 16a-1(e) of the Securities Exchange Act of 1934, as
amended)", so that section 10 of the Incentive Plan would read in its entirety
as follows (added language underlined):
10. Transferability of Options, SARs, Restricted Shares and Restricted
------------------------------------------------------------------
Stock Units. Options are intended to be incentive stock options,
-----------
SARs, Restricted Shares, and Restricted Stock Units shall be
nonassignable and nontransferable by the Participant other than by
will or the laws of descent and distribution, and shall be
exercisable during the Participant's lifetime only by the
Participant or his guardian. Options that are designated at the
time of grant as Options that are not incentive stock options may
be transferred or assigned only to a person who is at the time of
such transfer an employee of ICF Kaiser or a Subsidiary, or to any
---------
member of the Participant's immediate family (as defined in Rule
----------------------------------------------------------------
16a-1(e) of the Securities Exchange Act of 1934, as amended),
------------------------------------------------------------
except that any such options held by persons subject to the
reporting obligations of Section 16(a) of the Securities Exchange
Act of 1934, as amended, may not be transferred or assigned other
than by the laws of descent and distribution.
We also propose to amend the plan to provide greater flexibility to
make future amendments. Finally, Kaiser's board of directors has proposed to
amend the incentive plan in order to provide greater flexibility to make future
amendments to the plan. Currently Section 14(c) of the plan provides as follows:
"(c) Except as provided in Section
9, no such amendment shall, without the
approval of the shareholders of ICF Kaiser:
(i) increase the maximum number of shares
of Common Stock for which Options, SARs,
Restricted Shares of Restricted Stock Units
may be granted under the Plan; (ii) except
to the extent required or permitted under
Section 5(a) in the case of substitute
Options, reduce the price at which options
may be granted below the price provided for
in Section 5(c); (iii) reduce the option
price of outstanding Options; (iv) extend
the period during which Options, SARs,
Restricted Shares, or Restricted Stock
Units may be granted; (v) except to the
extent permitted or required under Section
5(a) in the case of substitute Options,
extend the period during which an
outstanding Option may be exercised beyond
the maximum period provided for in Section
5(b); (vi) materially increase in any other
way the benefits accruing to Participants;
or (vii) change the class of persons
eligible to be Participants."
This section of the plan has not been amended since the plan was
adopted more than ten years ago. Given the passage of time since the plan's
adoption, changes in applicable tax and securities laws, and changed
circumstances facing Kaiser, the board of directors proposes to amend Section
14(c) of the plan in order to provide a greater degree of flexibility in
altering the terms of outstanding Options, SARs, Restricted Shares and
Restricted Stock Units. Accordingly, it is proposed that Section 14(c) of the
incentive plan be amended by deleting it in its entirety and replace it with the
following:
(c) The Board may amend, modify,
suspend or terminate this Plan for any
purpose, except that (i) no amendment or
alteration that would impair the rights of
any Participant under any award previously
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<PAGE>
granted to such Participant shall be made
without such Participant's consent and (ii)
no amendment or alteration shall be
effective prior to approval by ICF Kaiser's
shareholders to the extent such approval is
then required (x) pursuant to the rules of
the Securities and Exchange Commission in
order to preserve the applicability of any
exemption provided by such rules to any
award then outstanding (unless the holder
of such award consents); (y) pursuant to
Section 162(m) of the Internal Revenue Code
of 1986; or (z) otherwise required by
applicable legal requirements.
The board of directors does not plan to utilize the additional flexibility
afforded by this amendment to reprice any outstanding options previously granted
to executive officers of Kaiser.
Material Terms of the Incentive Plan
Purpose and Administration
The purpose of the incentive plan is to promote the interests of Kaiser
by affording its key employees an incentive, by means of an opportunity to
acquire common stock and share in the increase in the value of such stock, to
remain in the employ of Kaiser and to exert their maximum efforts on its behalf.
The incentive plan is administered by the Compensation and Human
Resources Committee of the board of directors. The committee has the full
authority, consistent with the incentive plan, to promulgate such rules and
regulations with respect to the incentive plan as it deems desirable, and to
make all other determinations necessary or desirable for the administration of
the incentive plan. Under the incentive plan, grants of awards may be made to
such employees and in such amounts as determined by the committee or, in certain
cases, by the chief executive officer under authority delegated to him by the
committee.
Grants
Grants to employees under the incentive plan may consist of stock
options, stock appreciation rights, restricted shares and restricted stock
units.
Stock options may be in the form of incentive stock options or
nonstatutory stock options. Options are exercisable at such times and in such
installments as are determined by the committee, provided that no stock option
generally is exercisable more than ten years after the date of the grant.
Options generally may not be exercised following termination of employment,
except due to retirement, disability, or death. The option exercise price is
established by the committee, but it may not be less than the fair market value
of the underlying shares on the date of grant. Payment of the option exercise
price is made at the time of exercise and may be in cash, shares of common
stock, or in any combination of both.
SARs granted under the incentive plan entitle the participant to
receive a payment equal to the increase, as of the date of exercise or
surrender, in the fair market value of a stated number of shares of common stock
over the purchase price. Such payments may be made in cash, in shares of common
stock valued at their fair market value as of the date of exercise, or in any
combination of both. To date, no SARs have been awarded under the plan.
Restricted shares and restricted stock units granted under the
incentive plan are subject to forfeiture under such conditions and for such
period of time as the committee may establish at the time of grant. Such
conditions may include restrictions on transferability, requirements of
continued employment and individual or company performance. During the period in
which any shares of common stock are subject to forfeiture restrictions, the
committee may grant to the participant all or any of the rights of a stockholder
with respect to such shares. To date, no restricted stock units have ever been
awarded under the plan.
30
<PAGE>
Federal Income Tax Consequences
In general, the grant of a stock option will not be a taxable event to
a recipient and will not result in a deduction to Kaiser. The tax consequences
associated with the exercise of a stock option, and the subsequent disposition
of common stock acquired on exercise of such an option, depend upon whether the
option is an incentive stock option or a nonstatutory stock option.
Upon the exercise of a nonstatutory stock option, the participant will
recognize ordinary compensation income equal to the excess of the fair market
value of the common stock received upon exercise over the exercise price. Kaiser
will be able to claim a deduction in an equivalent amount, provided it satisfies
federal income tax withholding requirements. Any gain or loss upon a subsequent
sale or exchange of the common stock will be capital gain or loss, long-term or
short-term, depending on the holding period for the common stock.
A participant generally will not recognize ordinary income at the time of
exercise of an incentive stock option, and no deduction will be available to
Kaiser, provided the option is exercised while the participant is an employee
or, in certain circumstances, for a limited period of time thereafter. However,
the difference between the option price and the fair market value of the stock
on the date of exercise is treated as a preference item for purposes of the
alternative minimum tax. If the shares acquired under an incentive stock option
are not sold within two years after the date of grant and within one year after
the date of exercise, any gain or loss realized will be treated as a long-term
capital gain or loss. If a disposition occurs prior to the expiration of these
one-year or two-year holding periods, the participant will recognize ordinary
income at the time of disposition, and Kaiser will be entitled to a deduction in
an amount equal to the excess of the fair market value of the common stock at
the date of exercise, or the fair market value of the common stock on the
disposition date, if lower, over the exercise price.
Generally, when a participant receives payment with respect to a stock
appreciation right granted to him or her under the incentive plan, the amount of
cash and the fair market value of the common stock received will be ordinary
compensation income to such participant and will be allowed as a deduction for
federal income tax purposes by Kaiser.
A participant who receives shares of restricted stock generally will
recognize ordinary compensation income at the time the restrictions on
transferability lapse, based on the fair market value of the common stock at
that time. This amount is deductible for federal income tax purposes by Kaiser.
Dividends paid with respect to common stock that is nontransferable will be
ordinary compensation income to the participant and generally deductible by
Kaiser. Alternatively, a participant may elect immediate recognition of income
at the time of receipt of restricted stock. In such event, the participant will
recognize the fair market value of the restricted stock at the time of grant as
compensation income, and Kaiser will be entitled to a corresponding deduction.
Dividends paid with respect to these shares will not be deductible by Kaiser. If
this tax treatment is elected, and the restricted stock is subsequently
forfeited, the participant will not be entitled to any offsetting tax deduction.
Other Provisions
Kaiser may withhold, or require a participant to remit to Kaiser, an amount
sufficient to satisfy any federal, state or local withholding tax requirements
associated with awards under the incentive plan. The committee may permit a
participant to elect to satisfy all or a part of such withholding obligation by
having Kaiser retain a number of shares of common stock underlying the award
that have a fair market value equal to the amount required to be withheld.
Awards that are intended to be incentive stock options, SARs, restricted
shares, and restricted stock units are not assignable or transferable by the
participant other than by will or the laws of descent and distribution.
Nonstatutory stock options, except those held by executive officers, may be
transferred only to a person who is at the time of such transfer an employee of
Kaiser or a subsidiary of Kaiser. However, this restriction is proposed to be
amended by this Proposal 7.
Kaiser's board of directors may amend, suspend or terminate all or any
portion of the incentive plan at any time, subject to stockholder approval in
certain instances. If not terminated earlier by Kaiser, the incentive plan will
expire on December 31, 2005. No suspension or termination of the incentive plan
will alter the rights of any
31
<PAGE>
participant with respect to any award outstanding, and no amendment of the
incentive plan will alter the rights of any participant with respect to any
award outstanding, unless such amendment is approved by the participant.
Vote Required for Approval of Amendments to Stock Incentive Plan
The affirmative vote of a majority of the shares of common stock
represented at the annual meeting is required to approve the proposed amendments
to the incentive plan.
Recommendation of the board of directors
The board of directors recommends that the shareholders vote "FOR" the
amendments to the incentive plan. Proxies solicited by the board of directors
will be so voted unless shareholders specify a contrary choice in their proxies.
================================================================================
PROPOSAL 8: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS
================================================================================
Unless otherwise indicated on any proxy, it is intended that shares
represented by proxies at the annual meeting of shareholders will be voted in
favor of the appointment of PricewaterhouseCoopers LLP as independent public
accountants to audit the financial statements of Kaiser for the fiscal year
ending December 31, 1999. Prior to its merger with Price Waterhouse LLP to form
PricewaterhouseCoopers LLP, Coopers & Lybrand LLP had acted as the independent
public accountants of Kaiser since fiscal year 1989.
Kaiser expects that representatives of PricewaterhouseCoopers LLP will be
present at the meeting and will be available to respond to appropriate
questions. They will be given an opportunity to make a statement if they desire
to do so.
Vote Required for Ratification of Appointment of Independent Public Accountants
The board is seeking the approval of a majority of the shares present at
the meeting to ratify the appointment of PricewaterhouseCoopers LLP to serve as
Kaiser's independent public accountants for the year ending December 31, 1999.
Recommendation of the board of directors
The board of directors recommends that the shareholders vote FOR the
ratification of the appointment of PricewaterhouseCoopers LLP as the independent
public accountants of Kaiser for the fiscal year ending December 31, 1999.
Proxies solicited by the board of directors will be so voted unless shareholders
specify a contrary choice in their proxies.
================================================================================
VOTING SECURITIES OF KAISER AND CERTAIN SHAREHOLDINGS
================================================================================
The only class of Kaiser's capital stock that is issued, outstanding, and
entitled to vote at the 1999 Annual Meeting is Kaiser's common stock. There
were ___________ shares of common stock issued and outstanding as the record
date. Accordingly, there are __________ shares of common stock entitled to vote
at the 1999 Annual Meeting. Each of these shares is entitled to one vote.
The following table sets forth information as of the __________, 1999
record date, unless otherwise indicated, regarding each person known by us to
beneficially own 5% or more of our outstanding common stock. A person is deemed
to be a beneficial owner of our common stock if that person has voting or
investment power (or
32
<PAGE>
voting and investment powers) over any shares of common stock as of the record
date or has the right to acquire such shares pursuant to exercisable options or
warrants within 60 days from the record date.
<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 stock
common stock of Kaiser common stock of Kaiser of Kaiser
===================================================================================================================
<S> <C> <C>
Cowen and Company; Cowen Incorporated;
Joseph M. Cohen; Jarrod M. Cohen 1,627,000 (a) _____ %
Financial Square
New York, NY 10005-3597
- -------------------------------------------------------------------------------------------------------------------
SG Cowen Securities Corporation
1221 Avenue of the Americas 1,681,600(b) _____ %
New York, New York 10020
- -------------------------------------------------------------------------------------------------------------------
State of Wisconsin Investment Board
P.O. Box 7842 2,092,200(c) _____ %
Madison, WI 53707
- -------------------------------------------------------------------------------------------------------------------
Tennenbaum & Co., LLC;
Michael E. Tennenbaum 2,600,000(d) _____ %
11100 Santa Monica Boulevard
Suite 210
Los Angeles, CA 90025
===================================================================================================================
</TABLE>
(a) The information with respect to the shares of common stock
beneficially owned by Cowen and Company, Cowen Incorporated, Joseph M.
Cohen, and Jarrod M. Cohen is based on information from Mr. Jarrod
Cohen, managing director of Cowen and Company, and is current as of
March 31, 1999. Mr. Cohen has informed Kaiser that a total of 49,000
shares are beneficially owned by Cowen and Company, Cowen Incorporated
and Joseph M. Cohen, an individual who may be deemed to control Cowen
Incorporated. Mr. Cohen has informed Kaiser that he has sole voting
and investment power as to 578,000 shares and shared voting and
investment power as to 1,000,000 shares. Mr. Jarrod Cohen is a
director of Kaiser.
(b) This information is based on a Report on Schedule 13G, which was filed
with the SEC reporting share ownership as of December 31, 1998.
(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. 7 dated February 2, 1999,
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, Amendment No. 2 dated May 4,
1999, which was filed with the SEC. Mr. Tennenbaum is a director of
Kaiser.
33
<PAGE>
The following table sets forth information regarding the beneficial
ownership of shares of common stock of Kaiser by each nominee for director, by
all directors continuing in office, by current and past executive officers named
in the Summary Compensation Table on page 36 of this proxy statement, and by all
directors and current executive officers as a group. Unless otherwise stated in
the accompanying footnotes, the information set forth below is current as of the
____________ ____, 1999, record date, except that information with respect to
ownership of shares of common stock held by Messrs. Gaffney, Tipermas and Watson
and in Kaiser's Employee Stock Ownership Plan, Section 401(k) Plan, and
Retirement Plan is current as of December 31, 1998.
<TABLE>
<CAPTION>
====================================================================================================================
Certain beneficial owners
of shares of common stock Amount and Nature Percent of
of Kaiser as of the of beneficial ownership common stock
____________ ____, 1999 record date of shares of common of Kaiser
(unless otherwise indicated) stock of Kaiser(a) (*Less than 1%)
====================================================================================================================
<S> <C> <C>
(i) Nominees for Director
- --------------------------------------------------------------------------------------------------------------------
Thomas C. Jorling (b) *
James J. Maiwurm 0 0%
Hazel R. O'Leary (c) *
- --------------------------------------------------------------------------------------------------------------------
(ii) Directors Continuing in Office
- --------------------------------------------------------------------------------------------------------------------
Tony Coelho (d) *
Jarrod M. Cohen 1,627,000 (e) ___ %
James O. Edwards (f) *
Keith M. Price (g) *
James T. Rhodes (h) *
Michael E. Tennenbaum 2,600,000 (i) ___ %
- --------------------------------------------------------------------------------------------------------------------
(iii) Executive Officers Named in the Summary Compensation Table
- --------------------------------------------------------------------------------------------------------------------
Michael F. Gaffney (j) *
Former Executive Vice President
Thomas P. Grumbly (k) *
Former Executive Vice President
Sudhakar Kesavan (l) *
Former Executive Vice President
Richard Leupen (m) *
Executive Vice President
Marc Tipermas (n) *
Former President and Chief Operating Officer
David Watson (o) *
Former Executive Vice President
- --------------------------------------------------------------------------------------------------------------------
(iv) All Directors and Current Executive Officers
as a Group (10 Persons) __________ (p) ______ %
====================================================================================================================
</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 as of which the
information is presented. 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 Kaiser within
60 days from the date as of which the information is presented is not
deemed to be outstanding for the purposes of computing the percentage
ownership of any other person.
(b) Mr. Jorling's share ownership includes _____ shares that may be
acquired within 60 days of _____________, 1999 upon the exercise of
stock options. Mr. Jorling has ______ Phantom Stock Units which are
fully described on pages 8-9 of this Proxy Statement.
(c) Ms. O'Leary has _____ Phantom Stock Units which are fully described on
pages 8-9 of this Proxy Statement.
(d) Mr. Coelho's share ownership includes _____ shares that may be
acquired within 60 days of ___________, 1999 upon the exercise of
stock options. He also owns directly _____ other shares. Mr. Coelho
has ______ Phantom Stock Units which are fully described on pages 8
through 9 of this Proxy Statement.
34
<PAGE>
(e) The information with respect to the shares of common stock
beneficially owned by Cowen and Company, Cowen Incorporated, Joseph M.
Cohen, and Jarrod M. Cohen is based on information from Mr. Jarrod
Cohen, managing director of Cowen and Company, and is current as of
March 31, 1999. Mr. Cohen has informed Kaiser that a total of 49,000
shares are beneficially owned by Cowen and Company, Cowen Incorporated
and Joseph M. Cohen, an individual who may be deemed to control Cowen
Incorporated. Mr. Cohen has informed Kaiser that he has sole voting
and investment power as to 578,000 shares and shared voting and
investment power as to 1,000,000 shares. Mr. Jarrod Cohen is a
director of Kaiser.
(f) Mr. Edwards' share ownership includes ______ shares allocated to his
ESOP account, _____ shares allocated to his Section 401(k) Plan
account, ______ shares allocated to his Retirement Plan account, and
______ shares that may be acquired within 60 days of _________, 1999
upon the exercise of stock options. Mr. Edwards owns _____ Restricted
Shares. Mr. Edwards also owns directly _________ other shares.
(g) Mr. Price has ______ Phantom Stock Units which are fully described on
pages 8 through 9 of this Proxy Statement. Mr. Price's share ownership
includes ____ shares allocated to his Section 401(k) account and
_______ shares that may be acquired within 60 days of ____________,
1999 upon the exercise of stock options.
(h) Mr. Rhodes has ______ Phantom Stock Units which are fully described on
pages 8 through 9 of this Proxy Statement.
(i) 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, Amendment No. 2 dated May 4,
1999, which was filed with the SEC. Mr. Tennenbaum is a director of
Kaiser. Mr. Tennenbaum is the Managing Member of and may be deemed to
control Tennenbaum & Co. LLC, which owns ____ shares of common stock
included in this table. Mr. Tennenbaum also has ___ Phantom Stock
Units which are fully described on pages 8 through 9 of this proxy
statement.
(j) Mr. Gaffney's share ownership includes _____ shares allocated to his
Retirement Plan account and _______ shares that may be acquired within
60 days of _________, 1999 upon exercise of options.
(k) Mr. Grumbly's share ownership includes ____ shares allocated to his
Section 401(k) Plan and ______ shares that may be acquired within 60
days of ________, 1999 upon exercise of options.
(l) Mr. Kesavan's share ownership includes _____ shares allocated to his
ESOP account, _____ allocated to his Retirement Plan account, and
______ shares that may be acquired within 60 days of ________, 1999
upon the exercise of options. Mr. Kesavan also owns _____ other
shares.
(m) Mr. Leupen's shares ownership includes ______ shares that may be
acquired within 60 days of _________, 1999.
(n) Dr. Tipermas' share ownership includes _____ shares allocated to his
ESOP account, ______ shares allocated to his Retirement Plan account
and _____ shares that may be acquired within 60 days of _________,
1999 upon exercise of options. He also owns ______ restricted shares
and ______ other shares held directly.
(o) Mr. Watson's share ownership includes ______ shares allocated to his
Section 401(k) Plan account, _____ shares that may be acquired within
60 days of _________, 1999 upon exercise of options and _____ other
shares held directly.
(p) This total includes ________ Phantom Stock Units, ________ shares
allocated to ESOP accounts, ______ shares in Section 401(k) Plan
accounts, ______ shares allocated to individuals under the Retirement
Plan or held in directed investment accounts under the Retirement
Plan, ______ shares that may be acquired within 60 days of
_____________, 1999 upon the exercise of stock options, and ______
restricted shares that will be vested within 60 days of ___________,
1999 and ____________ other shares.
================================================================================
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
================================================================================
The U.S. Securities and Exchange Commission requires Kaiser to tell its
shareholders when certain persons fail to report their transactions in Kaiser'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,
35
<PAGE>
Kaiser believes that all Section 16(a) filing requirements applicable to its
officers, directors, and beneficial owners of more than 10% of its equity
securities were timely met, other than the delinquencies disclosed in this
paragraph.
================================================================================
CURRENT MANAGEMENT
================================================================================
During 1999, Kaiser implemented certain changes in its executive
management. These changes were made in light of the changes in Kaiser's business
focus that resulted from its sale of the EFM and Consulting groups, and in order
to manage Kaiser's operations during what is expected to be a period of
significant changes, including the exchange offer described under Proposal 2.
The following individuals currently serve as the principal executive officers of
Kaiser:
James J. Maiwurm, 50, Chairman of the Board, President and Chief Executive
Officer. Mr. Maiwurm has been President and Chief Executive Officer of Kaiser
since April 19, 1999. Mr. Maiwurm was elected to, and as Chairman of, the board
of directors of Kaiser on June 7, 1999. From August 1998 until elected as
Kaiser's President and Chief Executive Officer, Mr. Maiwurm was a partner of
Squire Sanders & Dempsey L.L.P., Washington, D.C., and prior to August 1998 was
a partner of Crowell & Moring LLP, Washington, D.C. Both law firms serve as
counsel to Kaiser. Mr. Maiwurm is a member of the Board of Trustees of Davis
Memorial Goodwill Industries, Washington, D.C., a non-profit entity. Mr. Maiwurm
graduated from the College of Wooster (B.A.) and the University of Michigan Law
School (J.D.).
S. Robert Cochran, 43, Executive Vice President and President, North
America. Mr. Cochran has been President, North America for ICF Kaiser
International, Inc. since April 1999. Cochran serves on the board of managing
directors of Kaiser-Hill, LLC, the joint venture that conducts the performance
based integrating management services at the Department of Energy's Rocky Flats
Environmental Technology Site near Denver, Colorado contract. Prior to that, he
was Senior Vice President for Business Development for Kaiser's former
Environment and Facilities Group. Before joining Kaiser in 1995, Mr. Cochran was
Senior Vice President of Hazwaste Industries, Inc. & Earth Technology
Incorporated, focusing primarily on business development in the hazardous and
radioactive site cleanup area. He was Senior Vice President and partner with
Interface Incorporated; served as Vice President of PEI/IT; was senior project
and geotechnical group manager with JRB/SAIC; and for Versar, Inc., worked as a
senior project geologist. He received a B.S. in Geology from James Madison
University and is a registered professional geologist.
Richard A. Leupen, 45, has been Executive Vice President and President,
International of Kaiser since April 1999. Prior thereto, he was President of the
Engineers & Constructors Group of Kaiser from August 1998. Mr. Leupen has held
senior management positions in Kaiser's former Engineers & Constructors Group
since 1995. Prior to joining Kaiser, Mr. Leupen worked for Protech Pty. Ltd. Mr.
Leupen also serves as Managing Director of KWA Kenwalt Australia Pty Ltd, and as
a director of Weda Bay Minerals Ltd (Calgary), Strand Mining Pte Ltd (Singapore)
Pty Limited, Strand Management Pty Limited as well as serving as a director of a
number of Kaiser subsidiaries and affiliates. Mr. Leupen graduated from the
University of South Wales in Australia (B.S.).
Timothy P. O'Connor, 34, Chief Financial Officer and Executive Vice
President. Mr. O'Connor has been Executive Vice President and Chief Financial
Officer of ICF Kaiser International, Inc. since 1999. He had been Treasurer of
Kaiser since May 1997 and has been employed by Kaiser in various financial
positions since 1995. From 1990 until 1995, Mr. O'Connor was employed by
Lockheed Martin Corporation of Bethesda, Maryland, where he held a number of
financial positions. Prior to that, Mr. O'Connor worked for General Electric
Company and Lazard Freres and Co. of New York. Mr. O'Connor, who is a Certified
Cash Manager, graduated from the University of Delaware (B.S.).
36
<PAGE>
================================================================================
EXECUTIVE COMPENSATION
================================================================================
The following table shows the compensation received for each of the three
fiscal years ended December 31, 1998 by each person who served as Kaiser's Chief
Executive Officer during fiscal 1998, the four other most highly compensated
executive officers of Kaiser who were serving as such as of December 31, 1998
and two other highly compensated executive officers who ceased serving Kaiser
during 1998 (, each a named executive officer).
<TABLE>
<CAPTION>
===============================================================================================================================
SUMMARY COMPENSATION TABLE
===============================================================================================================================
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 ($) ($)(a) ($)(b) ($)(a) (#)(a) (c)
------------- --- ------ ------ ------ ------ ---
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Keith M. Price, Former 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, Former 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, Former 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, Former 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 A. 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>
37
<PAGE>
(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 "All Other 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 year 1997 and Mr.
Watson for fiscal year 1996 were amounts reimbursed for the payment of
taxes.
(c) Kaiser's 1998 contributions to the named executive officers pursuant to
Kaiser's retirement plan will not be determined or made until September
1999. Kaiser will disclose these contributions for the named executive
officers in its 1999 annual report to shareholders to be distributed 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 year 1999.
(d) Mr. Price was appointed President and Chief Operating Officer of Kaiser as
of August 5, 1998. As a result, the information for fiscal year 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
Kaiser, pursuant to which he became 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 "Senior Executive Officers Severance Plan" and "Agreements
and Transactions with Certain Directors" at pages 41 and 9 through 11,
respectively, of this proxy statement. The amount in column (d) represents
a signing bonus paid to Mr. Price in connection with his agreeing to serve
as President and CEO of Kaiser. The amounts in column (i) of the table for
Mr. Price comprise the following:
Fiscal 1998 $ 1,757 Company match under Kaiser's Section 401(k) Plan
$ 3,770 Spouse travel
$ 943 Car allowance
$ 45,598 Relocation expenses
(e) Mr. Edwards resigned as Chairman and CEO of Kaiser 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 Kaiser employed him, including amounts paid pursuant
to Mr. Edwards' severance arrangements with Kaiser. Mr. Edwards also was
paid $49,520 in fiscal 1998 and $49,039 in fiscal 1999 for consulting
services. For a fuller description of the terms of these agreements, please
refer to the discussion under "Senior Executive Officers Severance Plan"
and "Agreements and Transactions with Certain Directors" at pages 41 and 9
through 11, respectively, of this Proxy Statement. 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 Kaiser'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
Kaiser'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 Kaiser'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>
<S> <C>
Fiscal 1998 $ 2,545 Spouse travel
$ 2,857 Company match under Kaiser's Section 401(k) Plan
$ 150,000 Severance payments
Fiscal 1997 $ 2,731 Company match under Kaiser'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 Kaiser's Section 401(k) Plan
$ 875 Imputed income for Company-paid life insurance
</TABLE>
38
<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>
<S> <C>
Fiscal 1998 $ 361 Spouse travel
$ 3,304 Company match under Kaiser's Section 401(k) Plan
$ 273 Imputed income for Company-paid life insurance
Fiscal 1997 $ 3,225 Company match under Kaiser'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 Kaiser's Section 401(k) Plan
$ 660 Imputed income for Company-paid life insurance
$ 1,553 Spouse travel
</TABLE>
(g) Effective June 30, 1999, Mr. Kesavan ceased to be employed by Kaiser in
connection with the sale of the Consulting Group. For his service in fiscal
1997, Mr. Kesavan was awarded 5,400 shares of Restricted Stock on March 9,
1998. The closing price of Kaiser's common stock on March 9, 1998, was
$2.688. These Restricted Shares would have fully vested on March 9, 2001,
provided Mr. Kesavan had remained an employee of Kaiser. For his service in
fiscal 1996, Mr. Kesavan was awarded 12,016 restricted shares on March 4,
1997. The closing price of Kaiser's common stock on March 4, 1997, was
$2.375. These restricted shares would have vested on January 1, 2000,
provided Mr. Kesavan remains an employee of Kaiser. As of December 31,
1998, Mr. Kesavan owned a total of 17,416 restricted shares; the closing
price of Kaiser'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>
<S> <C>
Fiscal 1998 $ 2,500 Company match under Kaiser's Section 401(k) Plan
$ 531 Spouse travel
Fiscal 1997 $ 2,423 Company match under Kaiser'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 Kaiser's Section 401(k) Plan
$ 230 Imputed income for Kaiser-paid life insurance
</TABLE>
(h) Mr. Grumbly was employed by Kaiser from April 1997 until his resignation in
April 1999 in connection with Kaiser's sale of its EFM Group. As a result,
compensation for 1997 represents amounts paid during only an 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 Kaiser's
common stock on March 9, 1998, was $2.688. These restricted shares were
forfeited on _____________, 1999 in connection with Mr. Grumbly's
resignation from Kaiser. The amounts show in column (i) of the table for
Mr. Grumbly comprise the following:
<TABLE>
<S> <C>
Fiscal 1998 $ 3,346 Company match under Kaiser's Section 401(k) Plan
$ 580 Spouse travel
Fiscal 1997 $ 3,269 Company match under Kaiser's Section 401(k) Plan
$ 10,184 Company Retirement Plan contribution for 1997 made in September 1998
</TABLE>
(i) The amounts shown in column (i) of the table for Mr. Leupen comprise the
following:
<TABLE>
<S> <C>
Fiscal 1998 $ 1,385 Company match under Kaiser'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>
39
<PAGE>
(j) Dr. Tipermas ceased to be employed by Kaiser as of August 7, 1998. As a
result, the amounts shown for fiscal 1998 represent all compensation paid
or earned during the 8 months of fiscal 1998 that Kaiser employed Dr.
Tipermas, including amounts paid pursuant to Dr. Tipermas' severance
arrangements with Kaiser. Dr. Tipermas also was paid $142,909 in fiscal
1998 and $43,269 in fiscal 1999 for consulting services. For a fuller
description of the terms of these agreements, please refer to the
discussion under "Senior Executive Officers Severance Plan" and "Agreements
and Transactions with Executive Officers Named in the Summary Compensation
Table" at pages 41 through 44 of this proxy statement. For his service in
fiscal 1996, Dr. Tipermas was awarded 9,900 shares of restricted stock on
March 20, 1997. The closing price of Kaiser'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 Kaiser'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>
<S> <C>
Fiscal 1998 $ 3,400 Company match under Kaiser'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 Kaiser'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 Kaiser'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 Kaiser, effective August 17, 1998. As a
result, the information set forth in the table for fiscal 1998 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 Kaiser. For a fuller description of
the terms of these agreements, please refer to the discussion under "Senior
Executive Officers Severance Plan" and "Agreements and Transactions with
Executive Officers Named in the Summary Compensation Table" at pages 41
through 44 of this proxy statement. For his service in fiscal 1997, Mr.
Watson was awarded 39,000 shares of Restricted Stock on March 9, 1998. The
closing price of Kaiser'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 Kaiser'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 Kaiser. As of
December 31, 1998, Mr. Watson owned a total of 45,600 restricted shares;
the closing price of Kaiser'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:
<TABLE>
<S> <C>
Fiscal 1998 $ 4,886 Lump-sum relocation payment made in 1998
$ 3,400 Company match under Kaiser'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 Kaiser'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 Kaiser's Section 401(k) Plan
$ 908 Imputed income for Kaiser-paid life insurance
$ 15,982 Reimbursed relocation expense
</TABLE>
40
<PAGE>
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 36 of this proxy
statement. No grants were made during such period to Messrs. Edwards, Grumbly,
Tipermas or Watson.
<TABLE>
<CAPTION>
================================================================================================================
OPTION GRANTS IN LAST FISCAL YEAR
- ----------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f)
- ----------------------------------------------------------------------------------------------------------------
Name Number of % of Total Exercise Expiration Date Grant Date
Securities Options Granted Price Present Value
Underlying To Employees in ($/Sh)(b) $(c)
Options Fiscal Year(a)
Granted (#)
- ----------------------------------------------------------------------------------------------------------------
<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, 200l $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) Kaiser 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 Kaiser'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.
(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, which vested 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. On April 27, 1999, all then unvested
options were immediately vested pursuant to an agreement among Kaiser and
Mr. Price. See "Agreements and Transactions with Certain Directors."
(g) Three-year options granted November 4, 1998, vesting 50% on May 4, 1999 and
50% on November 4, 1999. On April 27, 1999, all then unvested options were
immediately vested pursuant to an agreement among Kaiser and Mr. Price. See
"Agreements and Transactions with Certain Directors."
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 36 of this proxy
statement. None of such named executive officers exercised stock options during
the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
==========================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
- ----------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
- ----------------------------------------------------------------------------------------------------------
Name Shares Value Number of Securities Value of Unexercised
Acquired on Realized Underlying Unexercised In-the-Money Options
Exercise (#) ($) Options at 12/31/98 (#) at 12/31/98 ($)
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>
________
41
<PAGE>
The exercise price of all options is the average closing price of Kaiser'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 Kaiser'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.
Senior Executive Officers Severance Plan
In 1994, the then-named Compensation Committee of the board of
directors approved the adoption of Kaiser's Senior Executive Officers Severance
Plan (the "SEOSP"). As amended, the SEOSP currently entitles eligible
participants to receive a minimum severance benefit equal to six months of the
participant's average monthly salary, unless a participant is entitled to a
greater benefit under his or her employment agreement with Kaiser, then such
arrangement prevails over the lower SEOSP benefit. The SEOSP also requires that
Kaiser and a SEOSP participant to execute mutual general releases in order to
obtain the SEOSP benefit.
Under the terms of the SEOSP, 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 the ________
__, 1999, record date, there were ____ persons whose severance payments are
governed by the SEOSP. However, recent employment agreements with members of
senior management have excluded them from participation in the SEOSP, and Kaiser
expects the terms of the SEOSP to be reviewed in connection with the review of
Kaiser's incentive compensation program during the second half of 1999. See
"Compensation & Human Resources Committee Report on Executive Compensation."
A participant is eligible to receive severance payments if Kaiser
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 the ________ __, 1999, record date, severance benefits
have been paid under the SEOSP to only _____ persons.
In connection with the termination of their employment with Kaiser
since January 1, 1998, ___ of the Named Executive Officers identified in the
Summary Compensation Table on page 36 of this proxy statement, received
severance packages, some of which included payments made pursuant to the SEOSP.
These severance arrangements are described under "Agreements and Transactions
with Executive Officers Named in the Summary Compensation Table" on page 41 of
this proxy statement.
================================================================================
AGREEMENTS AND TRANSACTIONS WITH EXECUTIVE OFFICERS
NAMED IN THE SUMMARY COMPENSATION TABLE
(Two of whom also are Directors)
================================================================================
James O. Edwards. Agreements and transactions between Kaiser and Mr.
Edwards are described under "Agreements and Transactions with Certain Directors"
on page 10 of this Proxy Statement.
Michael F. Gaffney. Effective January 1, 1997, Kaiser entered into an
employment agreement with Mr. Gaffney for his services as Senior Vice President
of Kaiser 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
42
<PAGE>
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
Kaiser's board of directors; a specified severance payment; eligibility under
Kaiser'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 Kaiser,
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, Kaiser 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 Kaiser and
its affiliated parties.
Thomas P. Grumbly On April 7, 1997, Kaiser 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 Kaiser's performance; eligibility under
Kaiser'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 annual
anniversaries of the grant date.
On March 15, 1999, in consideration for Mr. Grumbly's remaining in the
employ of Kaiser for a period of at least 30 days after the closing of the sale
of Kaiser's Environment and Facilities Management Group on April 9, 1999, Kaiser
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; pay out the 12-month severance upon the
closing of the EFM transaction; vest Kaiser common stock options; and waive the
non-competition provisions of the April 1997 employment agreement.
Richard A. Leupen Kaiser entered into an employment agreement with Mr.
Leupen for his services as President of the Engineers and Constructors Group and
Executive Vice President of Kaiser 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 Kaiser'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; Kaiser 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 Kaiser or by Mr. Leupen without "good
reason" in the event that his responsibilities are substantially reduced or
materially changed or in the event that Kaiser 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 severance payment equal
to one time his annual base salary then in effect.
In connection with his appointment to serve as President, International and
Executive President of Kaiser, Mr. Leupen entered into a new agreement and
Kaiser. Effective June 1, 1999, Mr. Leupen entered into an employment agreement
pursuant to which he is entitled to be compensated with an annual base salary of
$260,000 and is also eligible to receive a maximum annual bonus of $130,000,
subject to the achievement of certain performance
43
<PAGE>
thresholds, and a retention bonus of $25,000 on each of December 31, 1999 and
May 1, 2000 subject to his continued employment.
Keith M. Price. Agreements and transactions between Kaiser and Mr. Price
are described under "Agreements and Transactions with Certain Directors" on page
10 of this Proxy Statement.
Marc Tipermas. Effective May 1, 1997, Kaiser entered into an employment
agreement with Dr. Tipermas for his services as President and Chief Operating
Officer of Kaiser through December 31, 1999. Dr. Tipermas also was a Director of
Kaiser 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 Kaiser's board of directors;
severance payments as provided under Kaiser's Senior Executive Officers
Severance Plan, with a minimum of two years; eligibility under Kaiser's employee
benefit plans; a cash payment of $50,000, net of taxes, in return for an
agreement not to sell shares of Kaiser 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 Kaiser's
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 Kaiser,
pursuant to which the parties mutually agreed to terminate Dr. Tipermas'
employment agreement. In consideration of Dr. Tipermas agreeing to terminate his
employment agreement, Kaiser paid him $732,500 in cash. Kaiser 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 Kaiser's 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 Kaiser. All unexercised options held by Dr.
Tipermas on November 6, 1999 will expire. In addition, Dr. Tipermas agreed to
provide certain consulting services to Kaiser through January 31, 1999, for
which he was compensated with approximately $186,178 of cash payments. Kaiser
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 Kaiser and its affiliated parties.
David Watson. Effective November 13, 1995, Kaiser entered into an
employment agreement with Mr. Watson for his services as Executive Vice
President and President of the International Operations Group of Kaiser through
November 13, 1998. This agreement was subsequently amended, effective December
1, 1996, to provide 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 Kaiser'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 Kaiser,
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, Kaiser paid him $300,019 in cash in October 1998. Kaiser
further agreed (i) to enable Mr. Watson to continue to use Kaiser'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
44
<PAGE>
agreement, execute a full general release as to Kaiser and its affiliated
parties, and further agreed not to compete with Kaiser for a period of one year
following the termination of his employment by Kaiser.
================================================================================
STOCK PERFORMANCE GRAPH - PEER ISSUERS
================================================================================
================================================================================
COMPARISON OF CUMULATIVE TOTAL RETURN
ASSUMES INITIAL INVESTMENT OF $100 AND REINVESTMENT OF DIVIDENDS
[GRAPH APPEARS HERE]
================================================================================
The above graph plots cumulative total return on a $100 investment in ICF
Kaiser International, Inc. common stock for the past five years. The S&P 500
Index and a group of peer issuers are shown for comparison and include
reinvestment of dividends where applicable. The peer issuers were selected
because they were environmental services companies of comparable size to Kaiser
and include the following eight companies: EA Engineering, Science, and
Technology, Inc.; Flour Corporation; Foster Wheeler; Harding Associates,
Incorporated; International Technologies Corporation; Jacobs Engineering;
Morrison-Knudsen; Roy F. Weston, Inc., and TRC Companies. These are the same
peer issuers as those identified as New Peer Issuers by Kaiser in its 1998 proxy
statement.
45
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Cumulative Total Return
- --------------------------------------------------------------------------------
1994 1995 1996 1997 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ICF Kaiser International, Inc. $ 64.10 $ 87.18 $ 38.46 $ 47.43 $ 29.50
- --------------------------------------------------------------------------------
S&P 500 $101.32 $139.40 $171.40 $228.59 $293.91
- --------------------------------------------------------------------------------
Peer Issuers Only $ 97.36 $143.72 $136.45 $ 96.34 $102.37
- --------------------------------------------------------------------------------
Peer Issuers plus
ICF Kaiser International Inc. $ 96.77 $142.72 $134.72 $ 95.49 $101.07
- --------------------------------------------------------------------------------
</TABLE>
================================================================================
COMPENSATION & HUMAN RESOURCES COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
================================================================================
The board of directors has delegated certain of its powers to its
Compensation & Human Resources Committee. On behalf of the board, the committee
reviews the annual salary, bonuses, and other benefits, direct and indirect,
paid to the CEO and those persons designated as executive officers under SEC
rules and regulations. The committee reviews employment agreements and other
employment-related arrangements, both proposed and existing, with persons who
are or will become executive officers.
On behalf of the board, the committee administers Kaiser's Stock Incentive
Plan, the Employee Stock Purchase Plan, the Section 401(k) Plan, the Retirement
Plan, the Non-employee Directors Stock Option Plan, the Non-employee Directors
Compensation and Phantom Stock Plan, the Senior Executive Officers' Severance
Plan, and all welfare benefit plans to the extent such plans require the
involvement of the board of directors. The committee has authority to determine
whether indemnification of officers, directors, and/or employees should be
provided in specific cases. The committee has the power to establish, and then
periodically review, Kaiser's policies in the area of management perquisites,
with the full board of directors having final decision-making authority with
respect to perquisites for executive officers and other members of senior
management. Beginning in 1997, the Committee began to establish and periodically
review Kaiser's policies in the areas of human resources, EEO, labor relations,
and diversity.
Kaiser's executive compensation philosophy did not change significantly
from fiscal years 1993 through 1998. Based on compensation data provided to it
by an independent compensation consulting firm regarding positions of similar
content in the industrial sector, Kaiser developed its compensation philosophy:
(a) to provide levels of total direct compensation (including compensation for
the CEO) at approximately the 50th percentile to 25% above the 50th percentile
of total direct compensation paid to comparable employees by other companies and
(b) to provide incentive compensation that rewards performance, including
performance by the CEO, based on the individuals' initiative, achievements, and
contributions to overall corporate performance during the fiscal year. In
addition, some of Kaiser's employment arrangements provide for minimum bonuses.
Because Kaiser's incentive compensation plans only apply to performance during a
single fiscal year, these plans do not meet the SEC's definition of long-term
incentive plans (defined as those covering incentive compensation for
performance over a period long than one fiscal year). Kaiser does not grant
significant perquisites to its employees, officers, or executive officer.
During 1998 the key elements of Kaiser's incentive compensation program
consisted of cash bonuses, stock options, and restricted stock. The program is
divided into three parts: (i) the Incentive Compensation Plan ("IC Plan") for
Senior Executives which was adopted by the Committee at a meeting held on
December 16, 1997, and which applies to awards made for service in 1998 and
later years; (ii) the general provisions of Kaiser's Stock Incentive Plan, which
was adopted in 1987 and applies to all key employees of Kaiser; and (iii) a cash
bonus plan under which bonuses can be awarded based on performance during the
year to all employees, including vice presidents and above.
46
<PAGE>
The IC Plan for Senior Executives defined "Senior Executive" as the CEO,
his four direct reports (the President and Chief Operating Officer, the
Executive Vice President and Director of Corporate Development, the Executive
Vice President and Chief Administrative Officer, and the Executive Vice
President and Chief Financial Officer), and Kaiser's three Group Presidents.
Incentive compensation can be paid in cash to the CEO and his four direct
reports solely from a Corporate Pool, the value of which is determined solely by
the annual earnings-per-share performance of Kaiser. The EPS numbers must be net
of the bonus paid, either in the form of cash or restricted stock, under the IC
Plan for Senior Executives; the final accounting for the Corporate Pool may be
adjusted by the committee for any one-time voluntary capital transaction, either
positive or negative. No Corporate Pool was earned for 1998. Incentive
compensation can be paid to the three Group Presidents in cash and/or restricted
from both the Corporate Pool and the "Group Pool." The value of the Group Pool
is determined by the net contribution to earnings made by the respective groups.
The net contribution amounts are determined net of cash bonuses paid and net of
the value of any restricted stock awarded under the IC Plan for Senior
Executives. Each of the Group Presidents were entitled to awards from the Group
Pool based on their Group's performance in 1998 as described further below.
The committee has the discretion under the Stock Incentive Plan to grant
statutory options, non-statutory options, stock appreciation rights, restricted
shares, and restricted stock units to participants under this plan; all Senior
Executives, all executive officers, and all senior management personnel are
participants. The purpose of the plan is to afford participants an opportunity
to acquire shares of Kaiser's common stock, to share in the increase in the
value of the common stock, to remain in the employ of Kaiser, and to exert their
maximum efforts on Kaiser's behalf. The committee takes into account Kaiser's
overall performance during the fiscal year together with the individual
participant's performance, and grants can be made to individuals who also
received grants under the IC Plan for Senior Executives.
Named Executive Officers
There are eight current and former executive officers named in the Summary
Compensation Table on page 36 of this Proxy Statement. The named executive
officers are Keith M. Price, former President and CEO; James O. Edwards, former
Chairman and CEO; Michael F. Gaffney, former Executive Vice President; Sudhakar
Kesavan, Former Executive Vice President; Thomas P. Grumbly, former Executive
Vice President; Richard A. Leupen, Executive Vice President; Marc Tipermas,
former President and Chief Operating Officer; and David Watson, former Executive
Vice President.
Compensation of the Chief Executive Officer
In 1998 Mr. Edwards served as Chairman and Chief Executive Officer of
Kaiser until November 6, 1998. He was compensated for this service according to
the terms of an employment agreement negotiated with Kaiser that became
effective as of May 1997. Effective as of November 6, 1998, Mr. Edwards'
employment with Kaiser was terminated and he was compensated according to the
terms of a negotiated agreement effective as of that date. These agreements are
described in detail under the heading, "Agreements and Transactions with Certain
Directors" on pages 9 through 11 of this proxy statement.
Mr. Price served as President and Chief Operating Officer of Kaiser from
August 6, 1998, until November 4, 1998, at which time he was promoted to Chief
Executive Officer. He was compensated for his service as President and Chief
Operating Officer according to the terms of an employment agreement negotiated
with Kaiser and effective as of August 6, 1998. Upon his promotion, his
employment agreement was renegotiated. The agreements are described in detail
under the heading, "Agreements and Transaction with Certain Directors" on pages
9 through 11 of this proxy statement.
The following members of the Compensation & Human Resources Committee
are submitting this report:
Hazel R. O'Leary (Committee Chairperson)
Thomas C. Jorling
James T. Rhodes
47
<PAGE>
================================================================================
OTHER MATTERS
================================================================================
At ________ __, 1999, the board of directors was not aware that any
matters not referred to on the enclosed proxy card would be presented for action
at the meeting. If any such matter properly comes before the meeting, shares
represented by proxies in the accompanying form will be voted with respect
thereto in accordance with the judgment of the holders of such proxies.
The 2000 Annual Meeting of Shareholders of Kaiser is scheduled to be
held on May __, 2000.
Director Nominations. Shareholders wishing to nominate persons for
election as a Director at the 2000 Annual Meeting, or otherwise to present
business at that meeting, must do so pursuant to a timely notice sent in writing
to the Secretary of Kaiser, 9300 Lee Highway, Fairfax, Virginia 22031. To be
timely, the notice must be received by Kaiser at the above address no earlier
than ________ __, ____, and no later than _______ __, 2000. A shareholder's
notice of nomination must set forth:
(a) as to each person who is not an incumbent director whom a
shareholder proposes to nominate for election or re-election as a
director
(i) the name, age, business address, and residence address of
such person,
(ii) the principal occupation or employment of such person,
(iii) the class and number of shares of capital stock of Kaiser
which are beneficially owned by such person, and
(iv) any other information relating to such person that is
required to be disclosed in solicitation for proxies for
elections of directors pursuant to the rules and
regulations of the SEC under the Securities Exchange Act of
1934, as amended, and
(b) as to the shareholder giving the notice
(i) the name and record address of such shareholder, and
(ii) the class and number of shares of capital stock of Kaiser
which are beneficially owned by such shareholder.
Such notice shall be accompanied by the written consent of each
proposed nominee to serve as a director of Kaiser if elected. Kaiser may require
any proposed nominee to furnish such other information as reasonably may be
required by Kaiser to determine the eligibility of such proposed nominee to
serve as a director of Kaiser. Persons nominated by shareholders for election as
a director will not be eligible to serve as a director unless nominated in
accordance with the foregoing procedures.
Shareholder Proposals and Other Business. Shareholders wishing to
submit proposals to be included in the proxy statement for the 2000 Annual
Meeting should submit them in writing to the Secretary of Kaiser, 9300 Lee
Highway, Fairfax, Virginia 22031, no later than ___________ __, 2000. Any
shareholder proposal submitted other than for inclusion in the proxy materials
for that meeting must be delivered to Kaiser no later than _______, 2000, or
such proposal will be considered untimely. If a shareholder proposal is received
after __________, 2000, Kaiser may vote in its discretion as to the proposal all
of the shares for which it has received proxies for the 2000 Annual Meeting.
A shareholder's notice with respect to other business to be brought
before the 2000 Annual Meeting by such shareholder must set forth as to each
matter of business:
(a) a brief description of such business and the reasons for
conducting it at the meeting,
(b) the name and address of the shareholder proposing such business,
(c) the class, series, and number of shares of the capital stock of
Kaiser beneficially owned by such shareholder, and
(d) any material interest of such shareholder in such business.
Proxy Solicitation Costs. Kaiser has borne the cost of preparing,
assembling, and mailing these items. Directors, officers, and employees of
Kaiser may solicit proxies on behalf of Kaiser by telephone and personal
48
<PAGE>
interview without special compensation. Kaiser has also engaged _________ to aid
in the solicitation. For these services, Kaiser will pay ____________, a fee of
$__________ and reimburse it for its out-of-pocket disbursements and expenses.
Kaiser will, upon request, reimburse brokerage firms and other nominees for
their reasonable expenses in forwarding solicitation material to the beneficial
owners of Kaiser stock.
================================================================================
ADDITIONAL INFORMATION
================================================================================
Kaiser's consolidated financial statements and notes thereto
(including, solely with respect to the fiscal year periods, the "Selected
Quarterly Financial Information (unaudited)") for each of the three fiscal years
ended December 31, 1998 and for the fiscal quarter ended March 31, 1999, and the
related "Management's Discussion and Analysis of Financial Condition and Results
of Operations" is hereby incorporated by reference to Kaiser's Annual Report on
Form 10-K for the year ended December 31, 1998 (the "Form 10-K") and Kaiser's
Quarterly Report on Form 10-Q for the period ended March 31, 1999 (the "Form
10-Q"). Copies of Kaiser's Form 10-K and Form 10-Q are being furnished with this
Proxy Statement.
Fairfax, Virginia Shaun M. Martin
_______ __, 1999 Secretary
49
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements are derived from
Kaiser's historical financial statements, included in our annual report on Form
10-K for the year ended December 31, 1998 and for the quarterly period and March
31, 1999 that have been delivered with this proxy statement, and certain
assumptions deemed appropriate by our management. The unaudited pro forma
statement of operations for this year ended December 31, 1998 reflects (i) the
sale of our EFM and Consulting Groups and (ii) the completion of the
recapitalization described in this proxy statement, as if such transactions had
occurred on January 1, 1998. The unaudited pro forma balance sheet at March 31,
1999 reflects such transactions as if the transactions in (i) and (ii) had
occurred at March 31, 1999. The unaudited pro forma financial statements should
be read in conjunction with the related notes, with the "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and with our
historical financial statements, including the related notes, included in our
annual report on Form 10-K for the year ended December 31, 1998 and for the
quarterly period and March 31, 1999 that have been delivered with this proxy
statement.
The pro forma adjustments to give effect to the various events described
above are based upon currently available information and upon certain
assumptions that management believes are reasonable. The pro forma financial
statements are provided for information purposes only and should not be
construed to be indicative of our results of operations or financial position
had the transactions described above been consummated on our as of the dates
assumed, and are not intended to project our results of operations or financial
position for any future period or as of any future date.
Unaudited Pro Forma Consolidated Balance Sheet
As of March 31, 1999
(In Thousands)
<TABLE>
<CAPTION>
Actual Pro Forma Adjustments
-------------------------------------
March 31, Sale of Sale of
1999 EFM CG
---------------- ----------------- ----------------
<S> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 14,282 $ - $ 41,539 (4,6)
Contract receivables, net 214,312 - (1,948)
Prepaid expenses and other current assets 13,831 - (31)
Restricted cash - 10,000 (3) 12,900 (6)
Notes receivable - - 3,000
Deferred income taxes 34,205 (19,446) (1) (14,759)(4)
Net assets of discontinued operations 66,458 (47,242) (2) (19,216)(5)
---------- --------- ----------
Total Current Assets 343,088 (56,688) 21,485
---------- --------- ----------
Fixed Assets
Furniture, equipment, and leasehold improvements 17,498 - (131)
Less depreciation and amortization (13,184) - 121
---------- --------- ----------
4,314 - (10)
---------- --------- ----------
Other Assets
Goodwill, net 22,967 - (2,205)
Investments in and advances to affiliates 7,708 - 1,785 (7)
Capitalized software development costs 1,533 - -
Notes receivable - 6,550 (4)
Other 12,119 - -
---------- --------- ----------
44,327 - 6,130
---------- --------- ----------
Total Assets $ 391,729 $ (56,688) $ 27,605
========== ========= ==========
Liabilities and Shareholders' (Deficit)
Current Liabilities
Debt currently payable $ 36,876 $ (36,876) (3) $ -
Accounts payable 168,036 (10,844) (3) (8,761)(6)
Accrued salaries and benefits 31,231 (2,500) (3) (76)
Other accrued expenses 59,162 (11,724) (3) -
Deferred revenue 13,037 - -
Income taxes payable 2,422 - -
---------- --------- ----------
Total Current Liabilities 310,764 (61,944) (10,750)
Long-term Liabilities
Long-term debt 137,610 - -
Other 8,704 - -
---------- --------- ----------
Total Liabilities 457,078 (61,944) (10,750)
---------- --------- ----------
Commitments and Contingencies
Minority Interest 2,582 - -
Shareholders' Equity
Preferred stock - - -
Common stock, par value $.01 per share:
Authorized-90,000,000 shares
Issued and outstanding- 23,790,995 and 24,257,828 shares 238 - -
Additional paid-in capital 75,218 - -
Notes receivable collateralized by common stock - - -
Accumulated deficit (140,476) 5,256 (1) 38,355 (4,7)
Cumulative translation adjustment (2,911) - -
---------- --------- ----------
Total Shareholders' Equity (Deficit) (67,931) 5,256 38,355
---------- --------- ----------
Total Liabilities and Shareholders' Equity $ 391,729 $ (56,688) $ 27,605
========== ========= ==========
<CAPTION>
Pro Forma Pro Forma
before March 31,
Recapitalization Recapitalization 1999
---------------- ---------------- ----------------
<S> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 55,821 $ - $ -
Contract receivables, net 212,364 - -
Prepaid expenses and other current assets 13,800 - -
Restricted cash 22,900 - -
Notes receivable 3,000 - -
Deferred income taxes - - -
Net assets of discontinued operations - - -
---------- --------- --------
Total Current Assets 307,885 - -
---------- --------- --------
Fixed Assets
Furniture, equipment, and leasehold improvements 17,367 - -
Less depreciation and amortization (13,063) - -
---------- --------- --------
4,304 - -
---------- --------- --------
Other Assets
Goodwill, net 20,762 - -
Investments in and advances to affiliates 9,493 - -
Capitalized software development costs 1,533 - -
Notes receivable 6,550 - -
Other 12,119 - -
---------- --------- --------
50,457 - -
---------- --------- --------
Total Assets $ 362,646 $ - $ -
========== ========= ========
Liabilities and Shareholders' (Deficit)
Current Liabilities
Debt currently payable $ 3 $ - $ -
Accounts payable 147,797 - -
Accrued salaries and benefits 28,655 - -
Other accrued expenses 46,162 - -
Deferred revenue 13,037 - -
Income taxes payable 2,422 - -
---------- --------- --------
Total Current Liabilities 238,070 - -
Long-term Liabilities
Long-term debt 137,610 - -
Other 8,704 - -
---------- --------- --------
Total Liabilities 384,384 - -
---------- --------- --------
Commitments and Contingencies
Minority Interest 2,582 - -
Shareholders' Equity
Preferred stock - - -
Common stock, par value $.01 per share:
Authorized-90,000,000 shares
Issued and outstanding- 23,790,995 and 24,257,828 shares 238 - -
Additional paid-in capital 75,218 - -
Notes receivable collateralized by common stock - - -
Accumulated deficit (96,865) - -
Cumulative translation adjustment (2,911) - -
---------- --------- --------
Total Shareholders' Equity (Deficit) (24,320) - -
---------- --------- --------
Total Liabilities and Shareholders' Equity $ 362,646 $ - $ -
========== ========= ========
</TABLE>
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
Year Ended December 31, 1998
(In thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Actual Results Pro Forma Adjustments
---------------------------------
for the year ended Sale of Sale of
December 31, 1998 EFM CG
----------------- -------------- -------------
<S> <C> <C> <C>
Gross Revenue $ 1,210,421 $ (105,306)(2) $ (105,223) 5
Subcontract and direct material costs (794,794) 53,362 (2) 24,769 5
Provision for contract losses (76,210) - -
----------------- -------------- -------------
Service Revenue 339,417 (51,944) (80,454)
Operating Expenses
Direct labor and fringe benefits 282,562 (26,553)(2) (37,672) 5
Group overhead 92,151 (18,863)(2) (29,281) 5
Corporate general and administrative 22,983 (945)(2) (5,025) 5
Depreciation and amortization 9,048 (1,598)(2) (988) 5
Severance and restructuring 9,407 - -
Other unusual charges 7,672 - -
----------------- -------------- -------------
Operating Income (Loss) (84,406) (3,985) (7,488)
Other Income (Expense)
Gain on sale of business - - -
Interest income 1,539 - -
Interest expense (20,279) 1,282 (8) 711 5
Equity in net income of unconsolidated subsidiaries 6,045 (600)(2) -
----------------- -------------- -------------
Income (Loss) Before Income Taxes, Minority Interest, Discontinued
Operations, Extraordinary Item, and Cumulative Effect of
Accounting Change (97,101) (3,303) (6,777)
Income tax provision (benefit) (11,357) - -
----------------- -------------- -------------
Income (Loss) Before Minority Interest, Discontinued Operations,
Extraordinary Item, and Cumulative Effect of Accounting Change (85,744) (3,303) (6,777)
Minority interest in net income of subsidiaries 7,698 - -
----------------- -------------- -------------
Income (Loss) Before Discontinued Operations, Extraordinary Item
and Cumulative Effect of Accounting Change $ (93,442) $ (3,303) $ (6,777)
Discontinued Operations
Gain (Loss) on Sale of discontinued operations (net of tax) - 13,762 (1) 29,524 4
----------------- -------------- -------------
Income (Loss) Before Extraordinary Item and Cumulative Effect
of Accounting Change $ (93,442) $ 10,459 $ 22,747
Basic and Fully Diluted Earnings (Loss) Per Share
Income (Loss) Before Discontinued Operations, Extraordinary Item
and Cumulative Effect of Accounting Change $ (3.88) $ (0.14) $ (0.28)
Discontinued Operations - 0.57 1.23
----------------- -------------- -------------
Income (Loss) Before Extraordinary Item and Cumulative Effect
of Accounting Change $ (3.88) $ 0.43 $ 0.95
================= ============== =============
Weighted average shares for basic and fully diluted earnings
(loss) per share 24,092 24,092 24,092
================= ============== =============
<CAPTION>
Pro Forma Pro Forma Results
before Recapiti- for the year ended
Recapitalization lization December 31, 1998
---------------- ------------ -----------------
<S> <C> <C> <C>
Gross Revenue $ 999,892 - $ -
Subcontract and direct material costs (716,663) - -
Provision for contract losses (76,210) - -
-------------- ------------ -----------------
Service Revenue 207,019 - -
Operating Expenses
Direct labor and fringe benefits 218,337 - -
Group overhead 44,007 - -
Corporate general and administrative 17,013 - -
Depreciation and amortization 6,462 - -
Severance and restructuring 9,407 - -
Other unusual charges 7,672 - -
-------------- ------------ -----------------
Operating Income (Loss) (95,879) - -
Other Income (Expense)
Gain on sale of business - - -
Interest income 1,539 - -
Interest expense (18,286) - -
Equity in net income of unconsolidated subsidiaries 5,445 - -
-------------- ------------ -----------------
Income (Loss) Before Income Taxes, Minority Interest, Discontinued
Operations, Extraordinary Item, and Cumulative Effect of
Accounting Change (107,181) - -
Income tax provision (benefit) (11,357) - -
-------------- ------------ -----------------
Income (Loss) Before Minority Interest, Discontinued Operations,
Extraordinary Item, and Cumulative Effect of Accounting Change (95,824) - -
Minority interest in net income of subsidiaries 7,698 - -
-------------- ------------ -----------------
Income (Loss) Before Discontinued Operations, Extraordinary Item
and Cumulative Effect of Accounting Change $ (103,522) $ - $ -
Discontinued Operations
Gain (Loss) on Sale of discontinued operations (net of tax) 43,286 - -
-------------- ------------ -----------------
Income (Loss) Before Extraordinary Item and Cumulative Effect
of Accounting Change $ (60,236) $ - $ -
Basic and Fully Diluted Earnings (Loss) Per Share
Income (Loss) Before Discontinued Operations, Extraordinary Item
and Cumulative Effect of Accounting Change $ (4.30) $ - $ -
Discontinued Operations 1.80 - -
-------------- ------------ -----------------
Income (Loss) Before Extraordinary Item and Cumulative Effect
of Accounting Change $ (2.50) $ - $ -
============== ============ =================
Weighted average shares for basic and fully diluted earnings
(loss) per share 24,092 24,092 24,092
============== ============ =================
</TABLE>
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statements of Operations
Three Months Ended March 31, 1999
(In thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Actual Results
for the three Pro Forma Adjustments
----------------------------------
months ended Sale of Sale of
March 31, 1999 EFM CG
-------------------- ------------------ -------------
<S> <C> <C> <C>
Gross Revenue $ 225,497 $ - $ -
Subcontract and direct material costs (162,858) - -
---------- --------- -
Service Revenue 62,639 - -
Operating Expenses
Direct labor and fringe benefits 48,459 - -
Group overhead 10,937 - -
Corporate general and administrative 3,804 - -
Depreciation and amortization 1,481 - -
Other unusual charges 895 - -
Severance and restructuring - -
Discontinued operations - - -
---------- --------- -----------
Operating Income (Loss) (2,937) - -
Other Income (Expense)
Gain on sale of business - - -
Interest income 268 - -
Interest expense (5,852) 211 (8) -
Equity in net income of unconsolidated subsidiaries 1,520 - -
---------- --------- ----------
Income (Loss) From Continuing Operations Before Income Taxes
and Minority Interest (7,001) 211 -
Income tax provision (benefit) (1,020) 83 -
--------- --------- ----------
Income (Loss) From Continuing Operations Before Minority Interest (5,981) 128 -
Minority interest in net income of subsidiaries 2,082 - -
--------- --------- ----------
Income (Loss) From Continuing Operations (8,063) 128 -
Discontinued Operations
Income (Loss) from operations of discontinued operations (net of tax) 2,344 (855) (2) (1,489)
Gain (Loss) on Sale of discontinued operations (net of tax) - 15,557 (1) 30,834
--------- --------- ----------
Net Income from Continuing Operations before Extraordinary Item (5,719) 14,830 29,345
Extraordinary Item (net of tax) - 698 -
--------- --------- ---------
Net Income (Loss) $ (5,719) $ 14,132 $ 29,345
========= ========= =========
Basic and Fully Diluted Earnings (Loss) Per Share
Income (Loss) From Continuing Operations $ (0.34) $ 0.01 $ -
Discontinued Operations 0.10 0.61 1.22
Extraordinary Item - (0.03) -
--------- --------- ---------
Income (Loss) Before Extraordinary Item $ (0.24) $ 0.59 $ 1.22
========= ========= =========
Weighted average shares for basic and fully diluted earnings (loss) per share 24,068 24,068 24,068
========= ========= =========
<CAPTION>
Pro Forma Results
Pro Forma for the three
before Recapiti- months ended
Recapitalization lization March 31, 1999
------------------ ---------- -----------------
<S> <C> <C> <C>
Gross Revenue $ 225,497 $ - $ -
Subcontract and direct material costs (162,858) - -
---------- ---------- ---------------
Service Revenue 62,639 - -
Operating Expenses
Direct labor and fringe benefits 48,459 - -
Group overhead 10,937 - -
Corporate general and administrative 3,804 - -
Depreciation and amortization 1,481 - -
Other unusual charges 895 - -
Severance and restructuring - - -
Discontinued operations - - -
---------- ---------- ---------------
Operating Income (Loss) (2,937) - -
Other Income (Expense)
Gain on sale of business - - -
Interest income 268 - -
Interest expense (5,641) - -
Equity in net income of unconsolidated subsidiaries 1,520 - -
---------- ---------- ---------------
Income (Loss) From Continuing Operations Before Income Taxes
and Minority Interest (6,790) - -
Income tax provision (benefit) (937) - -
---------- ---------- ---------------
Income (Loss) From Continuing Operations Before Minority Interest (5,853) - -
Minority interest in net income of subsidiaries 2,082 - -
---------- ---------- ---------------
Income (Loss) From Continuing Operations (7,935) - -
Discontinued Operations
Income (Loss) from operations of discontinued operations (net of tax) - -
Gain (Loss) on Sale of discontinued operations (net of tax) 46,391 - -
---------- ----------- ---------------
Net Income from Continuing Operations before Extraordinary Item 38,456 - -
Extraordinary Item (net of tax) 698 - -
---------- ----------- ---------------
Net Income (Loss) $ 37,758 $ - $ -
========== =========== ===============
Basic and Fully Diluted Earnings (Loss) Per Share
Income (Loss) From Continuing Operations $ (0.33) $ - $ -
Discontinued Operations 1.93 - -
Extraordinary Item (0.03) - -
---------- ----------- ---------------
Income (Loss) Before Extraordinary Item $ 1.57 $ - $ -
========== =========== ===============
Weighted average shares for basic and fully diluted earnings (loss) per
share 24,068 24,068 24,068
========== =========== ===============
</TABLE>
<PAGE>
Notes to the Pro Forma Financial Information:
1) On April 9, 1999, we sold specified assets and certain liabilities of our
Environmental and Facilities Management Group (EFM) for $82 million, less
$8 million in working capital, for total cash proceeds of $74 million. The
gain on the sale of EFM was calculated as follows, as if the transaction
had taken place on:
<TABLE>
<CAPTION>
January 1, January 1, March 31,
1998 1999 1999
-------------- -------------- --------------
<S> <C> <C> <C>
Sale proceeds 74,000 74,000 74,000
Transaction fees (2,056) (2,056) (2,056)
-------------- -------------- --------------
Net sales price 71,944 71,944 71,944
Net assets of discontinued operations (29,356) (301,560) (47,242)
-------------- -------------- --------------
Gain 42,588 41,384 24,702
Tax provision (a) (28,826) (25,827) (19,446)
-------------- -------------- --------------
Gain on sale, net of tax $ 13,762 $ 15,557 $ 5,256
============== ============== ==============
</TABLE>
(a) Assumes goodwill expense is not deductible for tax purposes.
2) To record the removal of EFM's net assets and the results of operations for
the respective periods from the books and records.
3) The cash proceeds $74 million from the sale of EFM have been recorded as
follows:
$36,876 to pay off the outstanding balance on the revolving line of
credit
10,844 to pay trade accounts payable
2,500 to pay deferred salaries and related costs
11,724 to pay other accrued expenses, primarily related to
settlements on the Nitric Acid projects
10,000 to collateralize outstanding letters of credit
2,056 to pay commissions and professional fees associated with
closing the EFM sale
-------
$74,000
=======
4) On June 30, 1999, we sold of 90% of our interest in the Consulting Group
for $70.55 million plus a $3 million adjustment of working capital in
exchange for $64 million in cash, $3 million in a short-term promissory
note, and $6.55 million in long-term notes. The gain on the sale of the
Consulting Group was calculated as follows, as if the transaction had taken
place on:
<TABLE>
<CAPTION>
January 1, January 1, March 31,
1998 1999 1999
-------------- -------------- --------------
<S> <C> <C> <C>
Sale proceeds $ 73,550 $ 73,550 $ 73,550
Transaction fees (800) (800) (800)
-------------- -------------- --------------
Net sales price 72,750 72,750 72,750
Net assets of discontinued operations
and other asset write-offs (22,337) (20,301) (19,216)
-------------- -------------- --------------
Gain 50,413 52,449 53,534
Tax provision (a) (20,884) (21,615) (15,179)
-------------- -------------- --------------
Gain on sale, net of tax $ 29,254 $ 30,834 $ 38,355
============== ============== ==============
</TABLE>
(a) Assumes goodwill expense is not deductible for tax purposes.
5) To record the removal of the Consulting Group's net assets and results of
operations for the respective periods from the books and records.
6) The cash proceeds of $64 million from the sale of the Consulting Group have
been recorded as follows:
$ 8,761 to pay trade accounts payable
12,900 to collateralize additional outstanding letters of credit
41,539 retained cash
800 to pay commissions and professional fees associated with
closing of sale
-------
$64,000
=======
7) To reclassify the remaining 10% ownership in the Consulting Group as an
equity investment.
8) To reflect the pro forma reduction to interest expense as if the cash
proceeds had been used to pay off the revolving debt as of the beginning of
the period.
<PAGE>
CONFIDENTIAL VOTING INSTRUCTIONS
ICF KAISER INTERNATIONAL, INC. This confidential Proxy is solicited on
behalf of the Board of Directors
To: The Trustee of the ICF Kaiser International, Inc. Retirement and
401(k) Plans (the "Plans")
Pursuant to the terms of each of the Plans, I the undersigned, as a
participant or a beneficiary and a named fiduciary under each of the Plans,
hereby direct the Trustee to vote:
(i) the shares of ICF Kaiser International, Inc. Stock ("Company
Stock") allocated to my accounts under each of the Plans on the record
date; and
(ii) the proportionate amount of Company Stock which is allocated to
the accounts of other participants and beneficiaries in each of the
Plans but for which no voting instructions are received in a timely
fashion ,
at the Annual Meeting of Shareholders of ICF Kaiser International, Inc. on _____
__________, 1999, and at any adjournment thereof, in the manner specified below.
The Board of Directors recommends votes be cast FOR the election of
directors and FOR proposals 2, 3, 4, 5, 6, 7 and 8.
(1) ELECTION OF DIRECTORS Thomas C. Jorling, James J. Maiwurm and Hazel R.
O'Leary
[_] FOR all nominees (except as marked to the contrary)
[_] WITHHOLD AUTHORITY to vote for all nominees
(Instruction: If you wish to withhold authority to vote for any
individual nominee, strike a line through the nominee's name in
the list above.)
(2) STOCK ISSUANCE PROPOSAL
[_] FOR [_] AGAINST [_] WITHHELD
(3) REVERSE SPLIT PROPOSAL
[_] FOR [_] AGAINST [_] WITHHELD
(4) SHAREHOLDER DEMOCRACY PROPOSAL
[_] FOR [_] AGAINST [_] WITHHELD
(5) RIGHTS PLAN PROPOSAL
[_] FOR [_] AGAINST [_] WITHHELD
(6) OBSOLETE PREFERRED STOCK PROPOSAL
[_] FOR [_] AGAINST [_] WITHHELD
(7) STOCK INCENTIVE PLAN PROPOSAL
[_] FOR [_] AGAINST [_] WITHHELD
<PAGE>
(8) RATIFICATION OF ACCOUNTANTS
[_] FOR [_] AGAINST [_] WITHHELD
Dated ______, 1999
______________________________________
Signature
Please Mark, Sign, Date and Return the Voting
Instructions Promptly using the Enclosed Envelope.
<PAGE>
Participant Notice
ICFKaiser International , Inc. Retirement and 401(k) Plans
______________________, 1999
Dear Plan Participant:
The enclosed Proxy Statement and Confidential Voting Instructions have been
furnished by Icf Kaiser International, Inc. in conjunction with the Annual
Meeting of Shareholders of ICF Kaiser International, Inc. to be held on ________
_____________, 1999, to elect directors and to conduct other business.
While only the Trustee of the ICF Kaiser International, Inc. Retirement and
401(k0 Plans (the "Plans") can actually vote the shares of ICF Kaiser
International, Inc. stock ("Company Stock") held in the each of the Plans, you,
as a participant or a beneficiary with Company Stock credited to your accounts
under the Plans as of _______________________, 1999, (the record date for the
annual meeting) and a named fiduciary under the each of the Plans, are entitled
to instruct the Trustee of the Plans with respect to the following:
(1) The voting of Company Stock allocated to your accounts under the Plans
on the record date;
(2) The voting of a pro-rata portion of Company Stock (based upon the
ration of the amount of Company Stock in your account under each Plan and
the total amount of Company Stock in each of the Plans) allocated to the
accounts under each Plan of other participants and beneficiaries for which
no instructions are received,
Accordingly, please review the enclosed information carefully and complete
the Instruction form and return it to the Trustee by __________, 1999.
If your voting instructions are not timely received, the Trustee will vote
the Company Stock allocated to your accounts under a Plan and uninstructed
Company Stock, in the aggregate in accordance with timely instructions received
from other Plan participants acting as named fiduciaries under the Plans. If
the Voting Instruction Form is received after the close of business on ________
______________, 1999, the Trustee cannot ensure that your voting instructions
will be followed.
It should be noted that your instructions to the Trustee are strictly
confidential. Under no circumstances will the Trustee or any of their agents
disclose to ICF Kaiser International, Inc. or any other party how, or if, you
voted. The Trustee will supervise and control the mailing of all materials to
Plan participants and the receipt of all Voting Instruction Forms and will not
disclose to any outside party the name and address of any Plan participant. You
may, therefore, feel completely free to instruct the Trustee to vote these
shares in the manner you think best.
If you have any questions regarding the information provided to you, you
may contact _________________________.
Trustee of the ICF Kaiser International, Inc. Retirement and
401(k) Plans
