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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:
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ICF Kaiser International, Inc.
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(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:
October 1, 1999
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Notes:
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[LETTERHEAD OF ICF KAISER INTERNATIONAL, INC. APPEARS HERE]
October 1, 1999
Dear Shareholder:
THIS IS NOT THE TYPICAL LETTER TO SHAREHOLDERS SLAPPED ON THE FRONT OF
A PROXY STATEMENT. PLEASE READ IT. AFTERWARD, WE HOPE YOU WILL MARK YOUR PROXY
CARD "FOR" THE IMPORTANT PROPOSALS WE ARE RECOMMENDING FOR ADOPTION BY
SHAREHOLDERS.
YOU MAY FEEL YOUR VOTE DOES NOT MATTER. IT DOES. PLEASE MAIL YOUR
PROXY TO US IN THE ENCLOSED ENVELOPE. OR, BETTER YET, ATTEND OUR ANNUAL MEETING
AT OUR HEADQUARTERS (9300 LEE HIGHWAY, FAIRFAX, VIRGINIA) AT 10:00 A.M. ON
NOVEMBER 4, 1999.
I recently received a handwritten letter from a concerned shareholder
who purchased his shares in 1993 for $6.25 per share. He dared to ask the
question on the minds of most of our shareholders: Do we have "plans to improve
things?" We do.
I am writing to report to our shareholders on those plans and more
important on our progress in implementing them. I will also outline the
matters we are asking you to vote for at our Company's annual meeting.
As detailed below, we have made substantial progress in addressing the
issues that face Kaiser. A key element to Kaiser's revival is the debt
restructuring described below and in the accompanying proxy materials. I will
be direct: The debt restructuring will involve substantial dilution of our
common shareholders' percentage ownership of the Company. However, unless we
take steps to preserve value, relative percentage ownership of the Company will
not be very important. We believe the proposed debt restructuring will enhance
the long-term value of the enterprise and provide the potential for common
shareholders to recover some of that value over time. We offer no guarantees in
this regard, only the honest assessment that the restructuring is in the
interests of all of our stakeholders. Your affirmative vote on the proposals
related to the debt restructuring, as described below, is important to our
efforts to reposition Kaiser.
Overview
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Over the past six months, the Board and the Company's new management
team have focused on rebuilding the potential for shareholder value. Our action
agenda has included:
. Completing the dispositions of our Environment and Facilities
Management Group and our Consulting Group;
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. Slashing our costs to reflect the smaller size of the Company and
the need to reduce costs generally as part of an aggressive
program to restore the Company to profitability;
. Focusing on the strengths of Kaiser's experience and reputation
in the global engineering and construction business;
. Restructuring our debt in a manner consistent with our revenue
base; and
. Proposing measures that will make our governance structure more
responsive to shareholders.
As detailed below, we have made significant progress in each of these areas.
Completing Necessary Dispositions
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Consistent with the results of the Board's study of strategic
alternatives for the Company that started during the summer of 1998, we sold:
. 100% of our Environment and Facilities Management Group in April
for $74 million in cash, and
. 90% of our Consulting Group in June for $64 million in cash plus
a $6.6 million note.
These transactions made available the cash necessary for the debt restructuring
described below.
Reducing Costs and Rightsizing the Organization; Returning to Profitability
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Our near-term goals include significant reductions in operating
costs and generating positive operating income. We are achieving both:
. Unprofitable offices have been closed in a number of locations;
others have been downsized.
. Since April 1 of this year we have reduced the workforce by
245 people, resulting in annualized savings of approximately
$19 million. Our target is near: savings of $20 million in
annual costs, as compared to the level in the first quarter of
1999. (In July and August 1999 our North American costs were
31% lower than during the quarter ended June 30.)
. Unnecessary regional management structures within our North
American and International operations groups have been eliminated
and replaced by a highly focused line of business structure.
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. As a result of these initiatives, for the quarter ended September
30, 1999 we will report positive operating income (prior to
expenses associated with our debt restructuring efforts) for the
first time since the first quarter of 1998.
. We are approaching our goal of returning the Company to operating
profitability by the end of 1999 in order to set the stage for a
profitable 2000.
Focusing on Kaiser's Global Strengths
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Among our most important assets are Kaiser's name and world-wide
reputation for quality in engineering and construction. We have positioned
ourselves to take advantage of these assets:
. The Kaiser organization has been streamlined into a single global
organization united for action in all major markets in which the
Company competes.
. At the conclusion of our debt restructuring, we plan to change
the name of ICF Kaiser International, Inc. to "Kaiser Group
International, Inc."; our principal trade name will be "Kaiser
Engineers."
. We are now concentrating on providing world-class engineering and
construction, program and project management services in our
areas of long-term core competency:
. Transit and Transportation
. Iron and Steel
. Alumina and Aluminum
. Facilities and Water/Wastewater
. Microelectronics and Clean Technology
. Kaiser's new business marketing and bidding efforts are
continuing at an aggressive pace. We are competing successfully
despite the difficulties with the best companies in the world.
. We have a reputation for providing superior engineering and
construction management services to key public- and
private-sector customers and for reliability of performance
on large public works and industrial and commercial projects.
"Signature" projects in which you can take pride in your Company's
performance and accomplishments include:
. Alcoa Alliance Over 150 Kaiser professionals work full-time
in an innovative partnering arrangement by which we provide
engineering services for the capital works programs of Alcoa's
Western Australian alumina operations.
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. Boston Harbor Kaiser is the program and construction manager
for the $3.5 billion, 14-year cleanup of the Boston Harbor.
The Boston Harbor Project is the largest capital improvement
project in New England and the second largest wastewater
treatment plant in the country.
. Nova Hut Kaiser is leading the engineering and construction
efforts to build a $262 million steel mill in Ostrava, the
Czech Republic. The new mill will help modernize the Czech
Republic's metals industry and make the country more
competitive in the modern, global marketplace.
. Miami Intermodal Center Kaiser currently serves as the
Florida Department of Transportation's Technical Services
Consultant for the implementation phase of the Miami Intermodal
Center (MIC), which is to be located adjacent to the Miami
airport. The purpose of the MIC facility is to provide commuters
and long-distance travelers with an efficient and well-organized
hub at which they can transfer from one mode of transportation
to another, such as air travel to rental car, or local bus to
long-distance train.
. Manila Transit Kaiser is managing the construction of the
$655 million, 16.9-kilometer light-rail transit line along
Epifanio de los Santos Avenue (EDSA) in Manila, the Philippines.
The EDSA line will help alleviate traffic in one of Manila's
busiest traffic corridors and reduce air pollution in one of the
world's most populous cities.
. Your Company owns a 50% interest in Kaiser-Hill Company LLC,
which is managing the clean-up of the U.S. Department of Energy's
Rocky Flats (Colorado) site, a former nuclear weapons facility. Our
management team has been able to develop technologies and systems
that have accelerated the closure of Rocky Flats by more than ten
years and reduced the cost by several billions of dollars. The
Kaiser-Hill management team's innovations have won the praise of
the DOE. As a result, Kaiser-Hill has been invited by the DOE to
negotiate a new contract for the accelerated clean-up and closure
of the site.
Restructuring Our Debt
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Today we have $140 million of 13% notes outstanding and are unable to
attract a bank line of credit. This has to change, and with your help it will.
. We have negotiated a debt reduction package to address the
Company's debt load and borrowing costs, steps which will be
important as we pursue new marketing opportunities and negotiate
contracts for large projects.
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. As a first step, on or shortly after October 1, 1999, the Company
will repurchase for cash all of its $15 million senior notes for
a discount price equal to 88% of par value ($13.2 million) plus
accrued interest from June 30, 1999.
. We are offering to restructure our $125 million senior
subordinated notes in a series of simultaneous transactions,
each of which is dependent upon consummation of the others:
. We will purchase at least $35 million principal amount of the
senior subordinated notes for cash;
. We will offer to exchange (1) redeemable convertible preferred
stock with a liquidation preference of $65 million (plus an
amount equal to accrued interest on the senior subordinated
notes to the date of closing), (2) 882,000 shares (approximately
15%) of our common stock and (3) up to $25 million of new senior
notes for the remaining senior subordinated notes. (After
completion of this exchange, the size of our Board will be
reduced to seven, and holders of the preferred stock will be
entitled to elect three of our seven directors.)
. We will enter into a new revolving credit facility, which we are
negotiating with a major commercial bank. This new line of
credit will be used to vigorously pursue new, major engineering
and construction management contracts.
As described in our proxy statement, the restructuring of our
$125 million senior subordinated notes will involve substantial dilution of
our common shareholders' percentage ownership of the Company. However, the
restructuring will reduce our outstanding 13% debt by nearly $100 million (a
nearly $115 million reduction taking into account the repurchase of senior
notes). The transaction will restore credibility to our balance sheet and reduce
our interest and dividend costs by more than one-half. Moreover, the terms of
the restructuring provide the opportunity for long-term recovery of value by our
common shareholders. The new preferred stock can be repurchased by the Company,
in whole or in part, at a discount prior to December 31, 2001. If our operations
performance permits the Company to refinance the preferred stock, a meaningful
recovery for the common shareholders is possible.
Our debt restructuring is designed to create the opportunity for
long-term value for you, our shareholders. And you play an important part in
the effort to position Kaiser for success. We are asking shareholders to vote
for measures that will permit us to proceed with our debt restructuring,
including:
. An increase in the number of shares of authorized preferred stock
and the issuance of up to 2,600,000 shares of preferred stock and
882,000 shares of
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common stock in connection with the exchange offer for the
outstanding senior subordinated notes.
. A reverse stock split, in a ratio (approximately 1 for 4.77
shares) that will result in 5,000,000 shares of common stock being
outstanding prior to issuance of the 882,000 shares referred to
above. This step is designed to raise the current share price to a
level that will help preserve the Company's important New York
Stock Exchange listing, and which will be more attractive to owners
and investors.
. A plan of quasi-reorganization under which the Company will be
able to restructure its financial accounts to eliminate its
retained earnings deficit.
More Responsive Governance Structure
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As noted above, we are also proposing measures that will make our
governance structure more responsive to shareholders. Shareholders are being
asked to approve amendments to the Kaiser Certificate of Incorporation and
Bylaws that would:
. Provide for annual election of directors rather than election to
staggered three-year terms;
. Permit shareholders to fill vacancies on the Board;
. Eliminate provisions that require the affirmative vote of
two-thirds (rather than a simple majority) of the outstanding
capital stock to approve certain transactions following a change
in the majority of directors within twelve months;
. Permit shareholders with at least 20% of the voting power of the
outstanding capital stock to require a special meeting of
shareholders to be called; and
. Eliminate the requirement that holders of two-thirds of the
outstanding capital stock approve certain amendments to our
Certificate of Incorporation and Bylaws.
Other Matters Needing Your Attention
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. There will be elections of three directors. Please review the
nominees' profiles in the proxy statement. (As noted above, if
the exchange offer involving the issuance of preferred stock is
completed, the size of the Board will be reduced to seven, and
holders of the preferred stock will be entitled to elect three
of our seven directors.)
. Amendments to Kaiser's Stock Incentive Plan (including an
increase in the number of shares available for issuance under
the Plan), which is an important
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feature for attracting and retaining top talent in a very
competitive employment marketplace.
. Ratification of the appointment of PricewaterhouseCoopers LLP as
Kaiser's independent public accountants for the fiscal year
ending December 31, 1999.
Some Important Administrative Notes
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As emphasized above, your proxy vote is important to the future of the
Company. We urge you to vote, even if you hold only a few shares. The support
of every shareholder is needed to effect the changes necessary to continue the
Company's turnaround effort.
A significant number of Kaiser shareholders hold their shares in
"street names," usually in their brokers' names rather than in their own. If you
wish to vote your street name shares at the annual meeting, please contact your
broker and discuss this; he or she should provide you with a proxy in your name
for use in voting in person at the meeting. (This form will be needed for you to
vote " broker-held shares" at the annual meeting.)
We urge you to mail back your proxy card to our stock transfer agent
as soon as possible (please use the postage-paid envelope provided with the
proxy). Please do this whether or not you intend to come to the meeting.
Sending the proxy back now will not affect your right to vote the shares you
hold in your own name if you come to the meeting. Shares held in Kaiser's
various retirement plans must be voted in advance of the meeting.
The annual meeting will start promptly at 10:00 a.m. on November 4,
1999. Our headquarters are located in Fairfax, Virginia, near the Vienna
station, 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.
All of the topics to be discussed at the meeting are fully detailed
in the accompanying proxy materials. These materials are provided to you for
your careful review in deciding your vote at the annual meeting.
In Closing, I Would Like To Share These Thoughts With You
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In recent years, our Company has experienced more than its share of
difficulties. Shareholder value has plummeted, as has, no doubt, your
confidence in Kaiser's ability to deliver profits. I began my job as your chief
executive officer nearly six months ago fully aware of the challenges facing
Kaiser. I am convinced that the turnaround effort described in this letter is
well underway, that the Company can return to profitability, and that Kaiser can
continue to win and perform on large projects over the long term.
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We have some significant challenges ahead of us short term, and the
Board of Directors and your management team is prepared to deal with these.
"Quick fixes" are not available, and there are risks attached to each step.
We can make no promises that every step will result in success. In particular,
we cannot assure that our debt restructuring will ultimately result in
significant value being available to our existing common stockholders. I am
pledging to you that, in each of the steps taken, we are placing a very high
priority on rebuilding potential value for you, our shareholders.
I hope to see you at the annual meeting here in Fairfax, Virginia.
If you cannot make the meeting in person, please feel free to contact me with
your questions, comments and suggestions. And, once again, I urge you to vote
"yes" on the proposals set forth for your consideration in the enclosed proxy
materials.
Sincerely,
/s/ James J. Maiwurm
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James J. Maiwurm
Chairman, President and Chief Executive Officer
This letter contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, which are identified by the
use of forward-looking terminology such as "may," "will," "could," "should,"
"expect," "believe," "anticipate," "aim," "intend," "plan," "estimate," or
"continue" or the negative thereof or other variations thereof. Such forward-
looking statements are necessarily based on various assumptions and estimates
and are inherently subject to various risks and uncertainties, including risks
and uncertainties relating to the possible invalidity of the underlying
assumptions and estimates, that may cause actual results to differ materially
from those stated or implied by these forward-looking statements. These
forward-looking statements also are subject to company-specific risks and
uncertainties, such as: the company's access to commercial lines of credit and
commercially satisfactory contract performance guarantee mechanisms, including
performance bonds; the ability of Kaiser-Hill Company, LLC to enter into a new
contract with the U.S. Department of Energy concerning provision of services at
the DOE's Rocky Flats (Colorado) site; and the company's ability to: maintain
existing contracts (including contracts with the federal government) at their
existing or at improved levels, accurately estimate and recover costs incurred
on fixed-price contracts, sign new contracts in established or new markets
(including international markets), conclude and implement successfully certain
acquisitions and joint-venture relationships, retain and attract key personnel,
manage significant contingent liabilities arising out of prior operations and
contacts, and avoid significant environmental fines, penalties and liabilities.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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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 Thursday, November 4, 1999, at 10:00 a.m., Eastern Time. All
shareholders of record as of September 9, 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, or until their successors are duly elected
or, if the Shareholder Democracy Proposal referred to below in proposal 4
is adopted, for terms expiring at the 2000 Annual Meeting of Shareholders.
2. Approve the issuance of shares of preferred stock and common stock in
connection with an exchange offer for outstanding debt (the "Stock Issuance
Proposal"). A vote for approval of this proposal also constitutes a vote
for approval of an increase in the number of authorized shares of preferred
stock of Kaiser from 2,000,000 to 3,100,000.
3. Approve an amendment to the certificate of incorporation to effect a
reverse split of Kaiser's outstanding common stock in a ratio that will
result in 5,000,000 shares of common stock being outstanding (approximately
1-to-4.77 shares) (the "Reverse Split Proposal"). This ratio may be
adjusted as described below in the description of the Reverse Split
Proposal. 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
(collectively, the "Shareholder Democracy Proposal") to:
. eliminate the requirement that holders of 66 2/3% of the outstanding
capital stock approve certain transactions following a change in the
majority of directors within twelve months;
. provide for an annual election of directors rather than staggered,
three-year terms;
. permit shareholders to fill vacancies on the board of directors;
. 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; and
. eliminate the requirement that holders of 66 2/3% of the outstanding
capital stock approve certain amendments to the certificate of
incorporation and bylaws.
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 amendments 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 amendments to Kaiser's Stock Incentive Plan to:
. increase the number of shares of common stock available for issuance
under this Plan;
. permit the transfer of certain options granted under the Plan to
immediate family members of Plan participants; and
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. provide greater flexibility to Kaiser's board of directors to make
future amendments to the Plan (collectively, the "Stock Incentive Plan
Proposal").
8. Approve the quasi-reorganization of Kaiser's financial statements,
pursuant to which Kaiser would adjust its capital accounts to eliminate the
accumulated deficit in retained earnings from past unprofitable operations
and establish a new retained earnings account for the accumulation of
future earnings (the "Quasi-Reorganization Proposal").
9. Ratify the appointment of PricewaterhouseCoopers LLP as Kaiser's
independent public accountants for the fiscal year ending December 31,
1999.
10. Act on such other matters as may properly come before the meeting or any
adjournment thereof.
Your proxy is very 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. 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 November 1, 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
October 1, 1999 Senior Vice President, Treasurer and Secretary
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TABLE OF CONTENTS
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS........................................................ i
PROXY STATEMENT................................................................................. 1
ABOUT THE MEETING............................................................................... 1
SUMMARY OF MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING....................................... 3
PROPOSAL 1: ELECTION OF DIRECTORS.............................................................. 7
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS............................................... 7
DIRECTORS CONTINUING IN OFFICE................................................................ 8
Terms Expiring in 2000........................................................................ 8
Terms Expiring in 2001........................................................................ 8
INFORMATION REGARDING THE BOARD OF DIRECTORS.................................................. 9
COMPENSATION AND HUMAN RESOURCES COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION....................................................................... 11
AGREEMENTS AND TRANSACTIONS WITH CERTAIN DIRECTORS.............................................. 11
PROPOSAL 2: STOCK ISSUANCE PROPOSAL........................................................... 13
PROPOSAL 3: REVERSE SPLIT PROPOSAL............................................................ 29
PROPOSAL 4: SHAREHOLDER DEMOCRACY PROPOSAL.................................................... 33
PROPOSAL 5: RIGHTS PLAN PROPOSAL.............................................................. 36
PROPOSAL 6: OBSOLETE PREFERRED STOCK PROPOSAL................................................. 38
PROPOSAL 7: STOCK INCENTIVE PLAN PROPOSAL..................................................... 38
PROPOSAL 8: QUASI-REORGANIZATION PROPOSAL..................................................... 42
PROPOSAL 9: RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS.................................................... 44
VOTING SECURITIES OF KAISER AND CERTAIN SHAREHOLDINGS........................................... 44
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE......................................... 47
CURRENT MANAGEMENT.............................................................................. 47
EXECUTIVE COMPENSATION.......................................................................... 48
SUMMARY COMPENSATION TABLE.................................................................... 49
OPTION GRANTS IN LAST FISCAL YEAR............................................................. 52
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION VALUES....................................................................... 53
Senior Executive Officers Severance Plan................................................... 53
AGREEMENTS AND TRANSACTIONS WITH EXECUTIVE OFFICERS NAMED
IN THE SUMMARY COMPENSATION TABLE.......................................................... 54
</TABLE>
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STOCK PERFORMANCE GRAPH - PEER ISSUERS........................................................... 57
COMPENSATION AND HUMAN RESOURCES COMMITTEE REPORT
ON EXECUTIVE COMPENSATION.................................................................. 58
OTHER MATTERS................................................................................... 60
ADDITIONAL INFORMATION.......................................................................... 61
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APPENDICES
A - Unaudited Pro Forma Financial Information
B - Unaudited Selected Quarterly Financial Data
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PROXY STATEMENT
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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 November 4, 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
September 9, 1999.
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ABOUT THE MEETING
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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 1998 Annual Report to its shareholders and Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1999 (including
financial statements), the Notice of Annual Meeting of Shareholders, the plan
participant notice, the confidential voting instructions for plan participants,
this proxy statement, and the enclosed proxy card initially were mailed in a
single envelope to shareholders on or about October 1, 1999. See "Additional
Information."
Kaiser will deliver copies of Kaiser's 1998 Annual Report and Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1999 and other 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 8:30 a.m., and seating will
be available at approximately 9:00 a.m. 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
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postponement or adjournment of the meeting. Each outstanding share entitles its
holder to cast one vote on each matter to be voted upon.
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, 23,822,657 shares of Kaiser's common stock were outstanding.
Proxies received but marked as abstentions and broker nonvotes 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?
A named fiduciary is a person who under ERISA has the authority and
responsibility, if he or she chooses to exercise it, to instruct the trustee of
a plan regarding specific investments. Consequently, 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, if you choose, to
instruct the trustee of each Plan in which you participate how to vote the
shares of common stock credited to your Plan account as well as a pro-rata
portion of common 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 which must be received
by the trustee no later than November 1, 1999. If you do not send instructions
regarding the voting of common stock credited to your Plan account(s), such
shares shall be voted by the other Plan participants as named fiduciaries.
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You may also revoke previously given instructions by filing with the
trustee of a Plan no later than November 1, 1999 either written notice of
revocation or a properly completed and signed voting instruction bearing a date
later than the date of the prior instructions.
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;
. for the issuance of 2,600,000 shares of preferred stock and 882,000
shares of Kaiser's common stock, to be offered in exchange for a portion of
Kaiser's outstanding 12% Senior Subordinated Notes due 2003, and for the
corresponding increase in the number of authorized shares of preferred stock of
Kaiser from 2,000,000 to 3,100,000;
. for the amendment to the certificate of incorporation to effect a
reverse stock split;
. for the amendments to the certificate of incorporation and bylaws to
enhance shareholder voting rights;
. for the amendments to the certificate of incorporation and bylaws to
restrict the ability to adopt new shareholder rights plans;
. for the amendments to the certificate of incorporation to eliminate
certain provisions governing obsolete series of preferred stock;
. for the amendments to Kaiser's Stock Incentive Plan;
. for approval of a quasi-reorganization of Kaiser's financial statements;
and
. for ratification of the appointment of PricewaterhouseCoopers LLP as
Kaiser's independent accountants.
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," as well as broker nonvotes,
with respect to any matter will not be voted on that matter, although they will
be counted for purposes of determining whether there is a quorum. Accordingly,
an abstention or broker nonvote 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 1999 Annual Meeting,
---------------------
shareholders will elect three directors to hold office until the 2002 Annual
Meeting of Shareholders or until their successors are elected and qualified. If
the Shareholder Democracy Proposal discussed under proposal 4 below is adopted,
these directors will be elected to serve until the 2000 Annual Meeting of
Shareholders or 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
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directors. If the exchange offer is consummated, four of the current eight
directors will resign as part of the related recapitalization of Kaiser. See
"Election of Directors" at pages 7 through 13 of this proxy statement.
Proposal 2. Stock Issuance Proposal. Shareholders are being asked to
-----------------------
approve the issuance of 2,600,000 shares of preferred stock and 882,000 shares
of Kaiser's common stock, which would represent approximately 15% of Kaiser's
common stock after giving effect to the reverse stock split described in
proposal 3 below. 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. A vote for approval of this proposal also
constitutes a vote for approval of an increase in the number of authorized
shares of preferred stock of Kaiser from 2,000,000 to 3,100,000. Approval of a
majority of the total shares of common stock outstanding is required in order to
approve the issuance of the preferred stock and common stock and the
corresponding increase in the number of authorized shares of preferred stock of
Kaiser, which will be implemented through an amendment to the certificate of
incorporation. See "Stock Issuance Proposal" at pages 13 through 29 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 1-to-4.77. This ratio may
be adjusted as described below in the description of the Reverse Split Proposal.
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 29
through 33 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:
. eliminate the requirement that holders of 66 2/3% of the outstanding
capital stock approve certain transactions following a change in the
majority of directors within twelve months;
. provide for an annual election of directors rather than staggered,
three-year terms;
. permit shareholders to fill vacancies on the board of directors;
. 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; and
. eliminate the requirement that holders of 66 2/3% of the outstanding
capital stock approve certain amendments to the certificate of
incorporation and bylaws.
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 33 through 36 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 36 through 38 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, and the corresponding exhibits, related to Kaiser's previously
authorized series 1, 2C and 2D preferred stock. No shares of these series
remain outstanding and 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 38 of this proxy statement.
Proposal 7. Stock Incentive Plan Proposal. Shareholders are being asked
-----------------------------
to approve amendments to Kaiser's Stock Incentive Plan to
. increase the number of shares of common stock available for issuance
under the Plan;
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. permit the transfer of options that are not incentive stock options
to the immediate family members of persons who receive those options;
and
. 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
the amendments to the Plan. See "Stock Incentive Plan Proposal" at pages 38
through 42 of this proxy statement.
Proposal 8. Quasi-Reorganization Proposal. Shareholders are being asked
-----------------------------
to approve a quasi-reorganization accounting transaction that would adjust
Kaiser's capital accounts to eliminate the accumulated deficit in its retained
earnings. Approval of a majority of the total outstanding shares of common
stock is required to approve the quasi-reorganization. See "Quasi-
Reorganization Proposal" at pages 42 through 44 of this proxy statement.
Proposal 9. 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 page 44 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
1999 Annual Meeting and any postponement(s) or adjournment(s). Kaiser presently
is not aware of any such business.
Recommendation of the Board of Directors of Kaiser
THE BOARD OF DIRECTORS OF KAISER HAS UNANIMOUSLY 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 PROPOSALS.
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
1998 Annual Report to its shareholders and in its Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 1999, which are delivered with this
proxy statement, as well as the following:
. Kaiser requires access to a revolving credit line to fund short-term
borrowing needs and provide letter of credit capacity required in
connection with certain projects. Kaiser may not be able to generate
collateral to support a borrowing base of sufficient size to obtain
such credit or may not be able to improve operating results enough, by
removing overhead costs or otherwise, to be able to obtain such credit.
. Kaiser may not be able to obtain satisfactory contract performance
guarantee mechanisms, such as performance bonds.
. Kaiser's financial performance is significantly tied to Kaiser-Hill
Company, LLC, which is subject to uncertainties that may adversely
affect its and Kaiser's operating results. The contract with the
Department of Energy under which Kaiser-Hill operates expires in
September 2000. Although Kaiser believes the DOE will enter into a
new contract with Kaiser-Hill, it is possible that after
negotiating with Kaiser-Hill, the DOE will conduct a competition
for a new contract. Kaiser-Hill may not be able to compete for or
win a new contract if a competition is conducted by the DOE. If
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<PAGE>
Kaiser-Hill does not successfully negotiate or win a new contract in any
competition that is held, Kaiser will lose a significant portion of its
cash flow and value.
. Kaiser may not be able to maintain the existing volume or size of
contracts and may not be able to realize increased contract performance
levels.
. Kaiser is involved in a number of fixed-price contracts under which
Kaiser can benefit from cost savings or performance efficiencies. If
certain pricing and performance assumptions prove inaccurate,
unrecoverable cost overruns can occur.
. Kaiser may not be awarded new contracts for which it is competing in
its established markets or these awards may be delayed. In addition,
Kaiser may not be able to win contracts in new markets it chooses to
target. General economic conditions in the international arena,
especially Asia and Latin America, could negatively impact Kaiser's
current international business and its ability to expand in
international markets.
. Kaiser may not be able to make acquisitions and/or enter into joint
ventures, and if made, acquisitions and joint ventures may take more
time to contribute favorably to Kaiser's financial results than was
formerly assumed. Kaiser is highly leveraged and is subject to
restrictive covenants that limit its ability to fund potential
acquisitions and joint ventures beyond certain levels established in
its debt agreements.
. A portion of Kaiser's business is generated either directly or
indirectly as a result of federal and state laws, regulations, and
programs; a reduction in the number or scope of these laws, regulations
or programs could materially affect Kaiser's business.
. Kaiser's ability to attract and retain business is closely related
to its ability to attract and retain key management and operating
personnel. The market for professionals of the types employed by Kaiser
is quite competitive. Kaiser may not be able to attract and retain
personnel necessary for successful operations.
. Kaiser has several significant contingent liabilities arising out
of prior operations and contracts, its 1998 acquisition of ICT Spectrum
Constructors, Inc. and the dispositions of its Environment and
Facilities Management and Consulting Groups. Adverse resolution of one
or more of those contingencies could adversely affect Kaiser's
financial performance and condition.
. Certain of Kaiser's environmental work poses risks of large civil and
criminal liabilities for violations of environmental laws and
regulations, and liabilities to customers and to third parties for
damages arising from Kaiser's performing environmental services to its
clients. A large fine or penalty imposed on Kaiser could negatively
impact contract performance fees under certain existing contracts or
otherwise negatively affect Kaiser's financial results.
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 above as you read this proxy statement.
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<PAGE>
===============================================================================
PROPOSAL 1: ELECTION OF DIRECTORS
===============================================================================
The board of directors currently consists of the following eight directors.
Term to Expire
Thomas C. Jorling 1999
James J. Maiwurm 1999
Hazel R. O'Leary 1999
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 2002 Annual Meeting of
Shareholders, or until their successors are elected and qualified. If the
"Shareholder Democracy Proposal" described below in proposal 4 is adopted, these
nominees would be elected and qualified for a one-year term ending at the 2000
Annual Meeting of Shareholders, or until their successors are duly elected and
qualified.
If the exchange offer is consummated, the size of the board of directors
will be reduced from eight members to seven members, with the holders of the
preferred stock exchanged for 12% Senior Subordinated Notes due 2003 entitled to
elect three of the seven directors. To accomplish this result, four members of
the current board will resign and four members will continue as directors.
Pursuant to the exchange offer, the holders of 12% Senior Subordinated Notes due
2003 will receive preferred stock with terms that allow the holders to elect up
to an additional three directors under certain circumstances. See "Proposal 2:
Stock Issuance Proposal Terms of the Preferred Stock Dividends."
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
"WITHHELD" 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.
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 in June 1999. Mr. Maiwurm serves as chairman
of the board of managers of Kaiser-Hill Company, LLC, which performs the
performance based integrating management services at the Department of Energy's
Rocky Flats Environmental Technology site near Denver, Colorado. From August
1998 until elected as Kaiser's President and Chief Executive Officer, Mr.
Maiwurm was a partner of Squire Sanders & Dempsey L.L.P., Washington, D.C., and
from 1990 to 1998 was a
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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, and is a member of the board of directors of Workflow Management, Inc.,
an integrated graphic arts company providing documents, envelopes and commercial
printing to businesses in North America, the stock of which is traded on the
Nasdaq National Market System.
Hazel R. O'Leary, 62, 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.
DIRECTORS CONTINUING IN OFFICE
Terms Expiring in 2000
Jarrod M. Cohen, 32, 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 been a director of Kaiser since July 1998. An
agreement between Mr. Cohen and Kaiser is described under "Agreements and
Transactions with Certain Directors."
James T. Rhodes, 58, 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.
Terms Expiring in 2001
James O. Edwards, 56, 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.
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
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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.
Michael E. Tennenbaum, 63, has been the Managing Member of Tennenbaum &
Co., LLC since its inception in June 1996. Tennenbaum & Co., LLC is the
Managing Member of Special Value Investment Management, LLC, the Investment
Advisor to Special Value Bond Fund, LLC, an investment fund focused on high
yield bonds and special situation investments. Mr. Tennenbaum also is currently
the Chief Executive of Tennenbaum Securities, LLC, and he has held this position
since May 1997. Mr. Tennenbaum is also Chairman of the Board of Precision
Standard, Inc. 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 has been a director of Kaiser since May 1998. An
agreement between Mr. Tennenbaum and Kaiser is described under "Agreements and
Transactions with Certain Directors."
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. The current members of the Executive Committee are
Messrs. Price and Tennenbaum. As of September 10, 1999, a third member of the
Executive Committee resigned, leaving a vacancy to be filled by the board. The
Executive Committee, except ass 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.
Cohen, Edwards, Jorling 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 and Human Resources Committee. The current members of the
Compensation and Human Resources Committee are Messrs. Jorling and Rhodes and
Mrs. O'Leary. The Compensation and 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 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 and Human Resources Committee met five times in 1998; it also acted
by written consent in lieu of meetings of the committee.
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Finance Committee. The current members of the Finance Committee are
Messrs. Cohen, Edwards, Price and Tennenbaum 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 Finance 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. 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 under "Other Matters." 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 Jarrod M.
Cohen and Michael E. Tennenbaum to become directors on March 13, 1998.
Special Committee. The current members of the Special Committee are
Messrs. 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. The Compensation and Human Resources Committee
is currently studying alternative forms of director compensation.
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.
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:
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<TABLE>
<CAPTION>
==========================================================================================================================
Per Share Price
Total Value of (20-trading day Total Number of
common stock on average Phantom Stock Date of
Non-employee Director Date of Grant May 1, 1998) Units Granted Cash Payout
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tony Coelho (1) $20,001 $2.85 7,018 May 4, 2001
- -------------------------------------------------------------------------------------------------------------------------
Maynard H. Jackson, Jr. (2) $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 (3) $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. Coelho resigned from the board of directors effective September 10,
1999.
(2) Mr. Jackson resigned from the board of directors effective February 8, 1999.
(3) 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 AND HUMAN RESOURCES COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
================================================================================
The members of the Compensation and 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 year ended December 31, 1998, there were no
director relationships that require disclosure under this section.
================================================================================
AGREEMENTS AND TRANSACTIONS WITH CERTAIN 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 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
Shareholder 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. 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. The terms of that employment
agreement are described in the following paragraph. In consideration of Mr.
Edwards' agreeing to
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<PAGE>
terminate his employment agreement, Kaiser paid him an aggregate amount of
$850,000 in cash. 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 certain options previously
granted to Mr. Edwards 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 also agreed to reimburse Mr. Edwards for legal fees incurred by Mr.
Edwards in connection with the negotiation of this agreement up to a maximum of
$10,000. 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.
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 and 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 noncompetition 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.
Keith M. Price. 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 effective as of April 30, 1999. The terms of that
employment agreement are described in the following two paragraphs. Consistent
with the terms of his employment agreement and in consideration of Mr. Price's
agreeing to terminate his employment agreement, Kaiser paid him an aggregate
amount of $677,450 in cash. 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 certain options
previously granted to Mr. Price pursuant to Kaiser's Stock Incentive Plan, (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 this 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, and further agreed
not to compete with Kaiser for a period commencing on April 30, 1999 and running
through September 30, 2000.
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,
noncompetition 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.
-12-
<PAGE>
Effective November 4, 1998, Mr. Price was promoted to Chief Executive
Officer and Kaiser agreed to extend the term of Mr. Price's employment agreement
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 shares 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.
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, or (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 Shareholder 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.
===============================================================================
PROPOSAL 2: STOCK ISSUANCE PROPOSAL
===============================================================================
GENERAL
Kaiser's shareholders are being asked to approve the issuance of shares of
preferred stock and common stock. These shares of preferred stock will be
convertible into 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. Accordingly, Kaiser is
required to seek shareholder approval of the issuance of the preferred stock and
the common stock because the preferred stock will be convertible into more than
20% of Kaiser's outstanding common stock and the common stock and the preferred
-13-
<PAGE>
stock will be issued in the same transaction. Kaiser wants to issue these
shares of preferred stock and common stock in order to exchange them for
outstanding debt securities of Kaiser, as described below.
Shareholder approval of this Stock Issuance Proposal is a condition to
consummation of the exchange offer. 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 the exchange offer 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 September 9, 1999, there were
23,822,657 shares of common stock and no shares of preferred stock outstanding.
A vote for approval of the Stock Issuance Proposal also constitutes a vote for
approval of an increase in the number of authorized shares of preferred stock of
Kaiser from 2,000,000 to 3,100,000. Since 500,000 shares of preferred stock are
reserved for issuance under Kaiser's Shareholder Rights Plan, only 1,500,000
shares of preferred stock are available for issuance, necessitating this
1,100,000 increase in the number of authorized shares of preferred stock. In
order to implement this increase, Section 4.01(B) of Kaiser's certificate of
incorporation will be amended by changing the number of authorized shares of
preferred stock from 2,000,000 to 3,100,000.
If the exchange offer is completed, current holders of Kaiser's common
stock will experience substantial dilution upon the conversion of the preferred
stock into Kaiser's common stock. See "Reduction in Voting Power if Exchange
Offer is Consummated and Additional Common Stock is Issued" below.
TERMS OF THE PREFERRED STOCK
General. We are offering 2,600,000 shares of redeemable convertible
preferred stock in the exchange offer.
Liquidation Preference. The preferred stock will have an aggregate base
liquidation preference of $65 million, or $25 per share, plus accrued interest
on the 12% Senior Subordinated Notes due 2003 from July 1, 1999 through the date
of the closing of the exchange offer. The liquidation preference will increase
at the end of each calendar quarter during 2000 and 2001 at the rate of 6.25%
per annum. The liquidation preference will be fixed after December 31, 2001.
This means that, if Kaiser is liquidated, dissolved or wound up, each holder of
a share of preferred stock will be entitled to be paid the per share liquidation
preference. Holders of preferred stock will not be entitled to any further
payment.
If the assets remaining after distribution to holders of debt and other
obligations are insufficient to pay all of the holders of preferred stock, any
remaining assets will be distributed on a proportionate basis to the holders of
preferred stock. In a liquidation, holders of preferred stock must be paid
before any holders of Kaiser's common stock and other junior securities receive
any payments for their shares.
Rank. The preferred stock will rank ahead of Kaiser's common stock. It is
not expected that there will be other classes of preferred stock immediately
after the recapitalization. The Kaiser board of directors could at any time
after the recapitalization authorize the issuance of preferred stock that ranks
equal with the preferred stock. However, it may not authorize the issuance of
preferred stock that ranks senior to the preferred stock or the issuance of some
types of additional debt without the consent of holders of two-thirds of the
preferred stock or the unanimous consent of the directors elected by holders of
the preferred stock.
Dividends. Cumulative dividends on the preferred stock will be payable in
cash on a quarterly basis at a rate per year equal to 3.75% of the liquidation
preference per share through December 31, 2000 and 5.75% from January 1, 2001
through December 31, 2001. The dividend rate on the preferred stock will
increase to 12% after December 31, 2001.
If we fail for any reason to pay a dividend in cash in any quarter and if
we fail to pay the delinquent dividend and the current dividend in the following
quarter, holders of the preferred stock will have the right to
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<PAGE>
appoint two additional directors for the two dividends missed and one
additional director if any future dividend payment is missed, up to a maximum
of three additional directors. The size of our board of directors will be
expanded accordingly. Unpaid dividends will accumulate as additional
dividends at 12% per year, which amount will be added to the liquidation
preference.
Conversion. The preferred stock will be convertible into our common stock
at the option of the holder at any time on or after December 31, 2001. The
number of shares of common stock into which each share of preferred stock will
be converted will be determined by reference to the average closing price of our
common stock for the 20 consecutive trading days preceding the conversion
election.
Redemption. We will have the option to redeem the preferred stock, in
whole or in part, following the consummation of the exchange offer at:
. 92% of the liquidation preference until December 31, 1999,
. 91% of the liquidation preference from January 1, 2000 through
March 31, 2000,
. 89% of the liquidation preference from April 1, 2000 through
June 30, 2000,
. 88% of the liquidation preference from July 1, 2000 through
September 30, 2000,
. 86% of the liquidation preference from October 1, 2000 through
December 31, 2000,
. 85% of the liquidation preference from January 1, 2001 through
March 31, 2001,
. 84% of the liquidation preference from April 1, 2001 through
June 30, 2001,
. 85% of the liquidation preference from July 1, 2001 through
September 30, 2001,
. 83% of the liquidation preference from October 1, 2001 through
December 31, 2001, and
. 100% of the liquidation preference after December 31, 2001,
plus in each case accumulated and unpaid dividends.
If we fail to redeem the preferred stock on or before December 31, 2004,
the preferred stock will become immediately convertible into a number of
shares of common stock determined by reference to $.01 per share, the holders
of the preferred stock will be entitled to appoint two additional directors,
and the dividend rate will immediately increase to 14%.
Change of Control Offer. We must offer to repurchase the preferred stock
at 101% of the liquidation preference plus accumulated and unpaid dividends in
connection with a change of control of Kaiser. If we fail to make the offer,
the preferred stock will become immediately convertible into a number of shares
of common stock determined by reference to $.01 per share, the holders of the
preferred stock will be entitled to appoint two additional directors, and the
dividend rate will immediately increase to 14%.
Voting Rights. The holders of the preferred stock generally will be
entitled to vote with holders of the common stock on all matters submitted to a
vote of our shareholders. However, holders of preferred stock will have special
voting rights as a class for the election of directors and special voting rights
regarding mergers and liquidations in which they do not receive the liquidation
preference. Each share of preferred stock will be entitled to one-fourth of a
vote for each preferred share until the time it is convertible, at which point
holders will be entitled to the number of votes corresponding to the number of
shares into which the preferred stock may be converted. Prior to conversion and
assuming the proposed reverse split of the common stock is implemented as
described in proposal 3 below, the preferred stock will represent approximately
12% of the total voting power of the common and preferred stock. If Kaiser or
any of its affiliates holds any preferred stock, they will not be entitled to
vote that preferred stock on these matters. The terms of the preferred stock may
only be amended with a two-thirds affirmative vote of the holders of preferred
stock.
If the shareholders of Kaiser do not approve the Shareholder Democracy
Proposal described below in proposal 4, Kaiser intends to include that proposal
on the agenda for the 2000 Annual Meeting of Shareholders. Under the terms of
the preferred stock to be issued pursuant to the exchange offer, the holders of
preferred stock
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<PAGE>
will be entitled to vote on that proposal at the 2000 Annual Meeting that
number of shares of common stock into which the preferred stock is convertible,
as if the preferred stock had been converted. See "Proposal 4: Shareholder
Democracy Proposal."
Protective Provisions. Kaiser may not issue senior preferred stock or some
types of additional indebtedness without the consent of holders of two-thirds of
the preferred stock or the unanimous consent of the directors elected by the
preferred stock.
DESCRIPTION OF COMMON STOCK
Common Stock
Each share of common stock has one vote per share on all matters submitted
to a vote of shareholders. Kaiser's certificate of incorporation provides that
no action may be taken by the holders of shares of common stock by written
consent in lieu of holding a meeting of shareholders.
Kaiser has never paid cash dividends on its common stock. The board of
directors anticipates that for the foreseeable future no cash dividends will be
paid on its common stock and that Kaiser's earnings will be retained for use in
the business. The board of directors determines Kaiser's common stock dividend
policy based on Kaiser's results of operations, payment of dividends on
preferred stock, if any is outstanding, financial condition, capital
requirements, and other circumstances. Kaiser's debt agreements currently do
not permit dividends to be paid on its common stock.
Holders of common stock have no preemptive or other rights to subscribe for
additional shares of capital stock. Upon liquidation, dissolution, or winding
up of Kaiser, each share of common stock will share equally in assets legally
available for distribution to shareholders.
The transfer agent and registrar for the common stock is First Chicago
Trust Company of New York, c/o Equiserve, P. O. Box 2500, Jersey City, New
Jersey 07303-2500. The shareholder relations telephone number at First Chicago
is (201) 324-0498, and the First Chicago Web site address is
http://www.equiserve.com.
- -------------------------
Since September 14, 1993, the common stock has been traded on the New York
Stock Exchange under the symbol "ICF." From December 14, 1989, to September 13,
1993, the common stock was traded on the Nasdaq National Market. The number of
holders of record of Kaiser's common stock was approximately 1,500 as of
September 9, 1999. On September 9, 1999, the closing price per share of
Kaiser's common stock on the NYSE was $0.43.
Senior Debt Warrants Issued in 1996
A total of 105,000 Senior Debt Warrants were issued by Kaiser under a
warrant agreement dated as of December 23, 1996, between Kaiser and The Bank of
New York, a New York banking corporation, as warrant agent. Each 1996 Warrant
entitles the holder to acquire one share of common stock of Kaiser, upon payment
of the exercise price of $2.30, subject to adjustment as described below. All
outstanding 1996 Warrants terminate and become void on December 31, 1999. The
1996 Warrants are subject to the terms contained in the 1996 Warrant Agreement;
capitalized terms that are not otherwise defined below are used as defined in
the 1996 Warrant Agreement. The common stock issuable upon exercise of the 1996
Warrants has been registered with the Securities and Exchange Commission and
listed on the New York Stock Exchange.
Non-Surviving Combination. If Kaiser proposes to enter into a transaction
that would constitute a Non-Surviving Combination if consummated, Kaiser must
give written notice to the holders promptly after an agreement is reached with
respect to the Non-Surviving Combination but in no event less than 30 days prior
to the consummation. As used herein, a "Non-Surviving Combination" means any
merger, consolidation, or other business combination by Kaiser with one or more
persons other than a wholly owned subsidiary of Kaiser in which Kaiser is not
the survivor, or
-16-
<PAGE>
a sale of all or substantially all of the assets of Kaiser to one or more of
the other persons, if, in connection with any of the foregoing, consideration
other than consideration which includes common stock or securities convertible
into, or exercisable or exchangeable for, common stock or rights or options to
acquire common stock or other securities is distributed to holders of common
stock in exchange for all or substantially all of their equity interest in
Kaiser.
In a Non-Surviving Combination, the surviving entity will be obligated to
distribute or pay to each holder of the 1996 Warrants, upon payment of the
purchase price prior to the expiration date, the number of shares of stock or
other securities or other property, including any cash, of the survivor that
would have been distributable or payable on account of the common stock if the
holder's 1996 Warrants had been exercised immediately prior to the Non-Surviving
Combination or, if applicable, the record date. Following the consummation of a
Non-Surviving Combination, the 1996 Warrants will represent only the right to
receive these shares of stock or other property from the survivor upon payment
of the purchase price prior to the expiration date.
No transaction is presently in progress or under negotiation that would
constitute a Non-Surviving Combination.
Adjustment. The number of shares of common stock issuable upon the
exercise of each 1996 Warrant and the purchase price are subject to adjustment
in some circumstances, including:
. a dividend or distribution on Kaiser's common stock in shares of its
common stock or a combination, subdivision, reorganization, or
reclassification of common stock,
. the issuance of shares of common stock for a consideration per share
less than the market price per share at the time of issuance,
. the issuance of rights, warrants, or options for the purchase of common
stock or for the purchase of securities convertible into or exchangeable
for common stock where the aggregate amount of consideration, taking
into account the consideration received for the issuance of the right,
warrant, or option plus any consideration to be received upon the
exercise and including, in the case of a right, warrant, or option to
purchase a convertible or exchangeable security, any consideration to be
received upon the eventual conversion or exchange of the security for
common stock per share of common stock received or receivable by Kaiser,
is less than the market price per share at the time of issuance of the
right, warrant, or option,
. the issuance of any securities convertible into or exchangeable for
common stock where the aggregate amount of consideration taking into
account the consideration received for the issuance of the convertible
or exchangeable security and the consideration to be received upon the
conversion or exchange per share of common stock received or receivable
by Kaiser is less than the market price per share of common stock on the
date of issuance of the convertible or exchangeable security, and
. a dividend or distribution on Kaiser's common stock of cash, evidences
of its indebtedness, other securities, or other properties or assets
other than any cash dividend which, when aggregated with all other cash
dividends paid in the year prior to the declaration of the cash
dividend, does not exceed 10% of the market price per share of common
stock on the date of this declaration.
If the terms of any of Kaiser's outstanding rights, warrants, or options for the
purchase of common stock or securities convertible into or exchangeable for
common stock change, in each case where the issuance caused an adjustment in the
terms of the 1996 Warrants, including by way of expiration of the securities but
excluding by way of antidilution provisions triggering an adjustment of the
terms upon the occurrence of an event that would cause an adjustment of the
terms of the 1996 Warrant, then the purchase price and the number of shares of
common stock issuable upon the exercise of each 1996 Warrant shall be readjusted
to take account of the change. Notwithstanding the foregoing, no adjustment in
the purchase price or the number of shares of common stock issuable upon
exercise of 1996 Warrants will be required:
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<PAGE>
. until cumulative adjustments would result in an adjustment of at least
one percent in the purchase price,
. for the granting, in a transaction which would otherwise trigger an
adjustment, of any rights, warrants, or options or the issuance of any
common stock to officers, directors, or employees of, or consultants or
advisors to, Kaiser where the issuances are registered with the
Securities and Exchange Commission on Form S-8 and do not, in the
aggregate exceed five percent of the number of shares of common stock
outstanding assuming the exercise of the options so granted and all
rights, warrants, options, and convertible securities then outstanding,
or
. the issuance of common stock pursuant to any dividend reinvestment plan
where the purchase price of common stock is no less than 95% of the
market price on the date of issuance.
Shareholder Rights Plan
On January 13, 1992, the board of directors of Kaiser declared a dividend
distribution to shareholders of record at the close of business on January 31,
1992 of one right for each outstanding share of common stock.
Each right entitles the registered holder of common stock to purchase from
Kaiser a unit consisting of one preferred stock unit (1/100th of a share of
Series 4 Junior Preferred Stock) at a purchase price of $50.00 per preferred
stock unit, subject to adjustment. The rights also are subject to antidilution
adjustments. The description of the rights is set forth in a rights agreement
between Kaiser and the rights agent. The rights agent is First Chicago Trust
Company of New York.
A distribution date for the rights will occur upon the earlier of:
. 10 business days following a "Stock Acquisition Date," which is the
public announcement that a person or group of affiliated or associated
persons has acquired, or obtained the right to acquire, beneficial
ownership of 20% or more of the outstanding shares of common stock or
. 10 business days following the commencement of a tender offer or
exchange offer that would if consummated result in a person or group
becoming an acquiring person.
On July 2, 1999, the Board of Directors amended the definition of acquiring
person within the rights agreement so that it now means any person or group of
affiliated or associated persons that has acquired, or obtained the right to
acquire, beneficial ownership of 20% or more of the outstanding shares of
Kaiser's common stock other than as a result of a "Permitted Offer." Following
a further amendment by the board of directors on September 15, 1999, the rights
agreement defines a "Permitted Offer" as:
. a tender or exchange offer which is for all outstanding common stock and
on terms determined to be adequate and in the best interests of Kaiser
and its stockholders by at least a majority of the board of directors
who are not officers or employees of Kaiser and who are not acquiring
persons or affiliates, associates, nominees or representatives of an
acquiring person,
. a cash tender offer for all outstanding common stock after July 31,
2000, and
. the offer and acquisition of the common stock and preferred stock,
including the underlying common stock, issuable in exchange for the
12% Senior Subordinated Notes due 2003 as described in this proxy
statement.
The rights are not exercisable until the distribution date and will expire at
the close of business on January 13, 2002, unless earlier redeemed by Kaiser as
described below.
Until the distribution date:
-18-
<PAGE>
. the rights will be evidenced by the common stock certificates and will
be transferred with and only with these certificates and
. the surrender for transfer of any certificates for common stock
outstanding will also constitute the transfer of the rights associated
with the common stock represented by the certificate.
In the event that, at any time following the distribution date, a person
becomes an acquiring person, then each holder of a right other than the
acquiring person will have the right to receive:
. upon exercise and payment of the purchase price, common stock or, in
some circumstances, cash, property or other securities of Kaiser
having a value equal to two times the purchase price of the right, or
. at the discretion of the board of directors, upon exercise and without
payment of the purchase price, common stock or, in some circumstances,
cash, property or other securities of Kaiser having a value equal to
the purchase price of the right.
In the event that, at any time following the Stock Acquisition Date:
. Kaiser is acquired in a merger or other business combination transaction
in which Kaiser is not the surviving corporation,
. Kaiser is the surviving corporation in a merger with any person, as
defined in the rights agreement, and its common stock is changed into or
exchanged for stock or other securities of any other person or cash or
any other property, or
. 50% or more of Kaiser's assets or earning power is sold or transferred,
each holder of a right, except rights held by an acquiring person or which
previously have been exercised as set forth above shall have the right to
receive, upon exercise, common stock of the acquiring company having a value
equal to two times the purchase price of the right. The events set forth in
this paragraph and in the immediately preceding paragraph are referred to as the
"Triggering Events."
As noted above, following the occurrence of any of the events described
above, all rights that are, or under some circumstances specified in the rights
agreement were, beneficially owned by any acquiring person will be null and
void.
The purchase price payable, and the number of preferred stock units or
other securities or property issuable upon exercise of the rights, are subject
to amendment from time to time to prevent dilution:
. in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Series 4 Preferred Stock,
. if holders of the Series 4 Preferred Stock are granted rights or
warrants to subscribe for Series 4 Preferred Stock or convertible
securities at less than the current market price of the Series 4
Preferred Stock, or
. upon the distribution to holders of the Series 4 Preferred Stock of
evidences of indebtedness or assets, excluding regular quarterly cash
dividends, or of subscription rights or warrants other than those
referred to above.
With exceptions, no adjustment in the purchase price will be required until
cumulative adjustments amount to at least one percent of the purchase price. In
addition, to the extent that Kaiser does not have sufficient shares of common
stock issuable upon exercise of the rights following the occurrence of a
Triggering Event, Kaiser may, under
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<PAGE>
some circumstances, reduce the purchase price. No fractional preferred stock
units will be issued and an adjustment in cash will be made.
In general, Kaiser may redeem the rights in whole, but not in part, at a
price of $0.01 per right payable in cash, common stock or other consideration
deemed appropriate by the board of directors, at any time until 10 business days
following the Stock Acquisition Date. After the redemption period has expired,
Kaiser's right of redemption may be reinstated if an acquiring person reduces
its beneficial ownership to less than 10% of the outstanding shares of common
stock in a transaction or series of transactions not involving Kaiser and there
are no other acquiring persons. Immediately upon the action of the board of
directors ordering redemption of the rights, and without any notice to the
holder of these rights prior to the redemption, the rights will terminate and
the only right of the holders of rights will be to receive the $0.01 redemption
price.
Until a right is exercised, the holder will have no rights as a shareholder
of Kaiser, including, without limitation, the right to vote or to receive
dividends.
Other than those provisions relating to the principal economic terms of the
rights, except with respect to increasing the purchase price under some
circumstances described in the rights agreement, any of the provisions of the
rights agreement may be amended by the board of directors of Kaiser prior to the
distribution date. After the distribution date, the provisions of the rights
agreement may be amended by the board in order to cure any ambiguity, to make
changes which do not adversely affect the interests of holders of rights,
excluding the interests of any acquiring person, or to shorten or lengthen any
time period under the rights agreement. However, no amendment to adjust the
time period governing redemption shall be made when the rights are not
redeemable.
One right will be distributed to shareholders of Kaiser for each share of
common stock owned of record by them at the close of business on the record
date. Until the distribution date, Kaiser will issue a right with each share of
common stock so that all shares of common stock will have attached rights.
The rights may be deemed to have anti-takeover effects. The rights
generally may cause substantial dilution to a person or group that attempts to
acquire Kaiser under circumstances not approved by the board of directors of
Kaiser. The rights should not interfere with any merger or other business
combination approved by the board of directors of Kaiser since the board of
directors may, at its option, at any time prior to the close of business on the
earlier of:
. the tenth business day following the Stock Acquisition Date or
. January 13, 2002,
redeem all but not less than all of the then outstanding rights at $0.01 per
right.
Provisions Affecting Changes of Control and Extraordinary Transactions
In addition to the shareholder rights plan, some provisions of Kaiser's
certificate of incorporation and bylaws and other agreements could have the
effect of delaying, deferring, or preventing a change in control of Kaiser or
other extraordinary corporate transaction. The Shareholder Democracy Proposal
discussed in this proxy statement, if approved by shareholders, would modify
many of these provisions.
Kaiser's certificate of incorporation and bylaws provide for classification
of the board of directors into three classes, as nearly equal in number as
possible, with one class of directors being elected each year for three-year
terms. Under Delaware law, members of a classified board may be removed only
for cause. Thus, at least two years would be required to effect a change of
control in the board of directors, unless a shareholder had sufficient voting
power to amend or repeal the certificate of incorporation and bylaw provisions
relating to classification of the board of directors.
<PAGE>
In addition, the certificate of incorporation imposes supermajority voting
requirements for some corporate transactions that apply if a majority of the
board of directors has not served in the positions for at least 12 months.
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<PAGE>
Under those circumstances, the approval of two-thirds of the voting power of
Kaiser's capital stock would be required in order for Kaiser to:
. merge with or consolidate into any other entity, other than a subsidiary
of Kaiser,
. sell, lease or assign all or substantially all of the assets or
properties of Kaiser, or
. amend the voting provisions of the certificate of incorporation.
Other certificate of incorporation provisions of the type referred to above
include:
. the denial of the right of holders of common stock to take action by
written consent in lieu of a shareholders' meeting and
. the ability of the board of directors to determine the rights and
preferences, including voting rights, of Kaiser's authorized but
unissued preferred stock, and then to issue this stock.
Relevant bylaw provisions include those that:
. require advance nomination of directors,
. require advance notice of business to be conducted at shareholders'
meetings, and
. provide that shareholders owning at least 50% of the voting power of the
capital stock are required to call a special meeting of shareholders.
With the exception of the provision that authorizes the board of directors
to fix the terms of and issue authorized but unissued shares of preferred stock,
the approval of the holders of at least two-thirds of the voting power of
Kaiser's capital stock is required to amend, alter, or repeal, or to adopt
provisions inconsistent with, the certificate of incorporation and bylaw
provisions described above, regardless of whether a majority of the members of
the board of directors has served in such positions for more than 12 months at
the time of the action.
Delaware Takeover Statute
Section 203 of the Delaware General Corporation Law applies to Delaware
corporations with a class of voting stock listed on a national securities
exchange, authorized for quotation on an inter-dealer quotation system, or held
of record by 2,000 or more persons, and restricts transactions which may be
entered into by such a corporation and certain of its shareholders. The
Delaware takeover statute provides, in essence, that an "Interested Stockholder"
acquiring more than 15% of the outstanding voting shares of a corporation
subject to the statute, but less than 85% of the shares, may not engage in
certain "Business Combinations" with the corporation for a period of three years
subsequent to the date on which the stockholder became an Interested
Stockholder, unless:
. prior to the date the corporation's board of directors approved either
the Business Combination or the transaction in which the stockholder
became an Interested Stockholder or
. the Business Combination is approved by the corporation's board of
directors and authorized by a vote of at least 66 2/3% of the
outstanding voting stock of the corporation not owned by the
Interested Stockholder.
<PAGE>
The Delaware takeover statute defines the term "Business Combination" to
encompass a wide variety of transactions with or caused by an Interested
Stockholder in which the Interested Stockholder receives or could receive a
benefit on other than a pro rata basis with other stockholders, including
mergers, some asset sales, some issuances of additional shares to the Interested
Stockholder, transactions with the corporation which increase the proportionate
interest of the Interested Stockholder, or transactions in which the Interested
Stockholder receives some other benefits.
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<PAGE>
DESCRIPTION OF THE RECAPITALIZATION, INCLUDING THE EXCHANGE OFFER
Overview and Background of the Recapitalization
Kaiser suffered losses of $100.5 million during 1998, largely as a result
of significant cost overruns on fixed price contracts to construct four nitric
acid plants. During the second half of 1998, Kaiser's board of directors formed
a special committee of members of the board to consider strategic alternatives
for Kaiser. The special committee engaged a financial advisor and, with its
assistance, evaluated various opportunities available to Kaiser, including the
sale of one or more of Kaiser's operating groups. As a result of that process,
Kaiser sold its Environmental Facilities Management (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's financial condition.
Kaiser has lost the earning power associated with the sold operating groups and
continues to have significant outstanding debt, principally $125 million of its
12% Senior Subordinated Notes due 2003, or the old notes.
The amount of cash flow currently available from our remaining operations
is insufficient to service the interest expense associated with our existing
debt obligations. We are also significantly more leveraged than our
competitors. Especially in the recent past, this has sometimes impaired our
ability to win new business. Additionally, our current financial position has
impaired and could in the future impair our ability to retain key personnel. A
realignment of our capital structure through the recapitalization will
substantially reduce our level of debt and associated interest expense, and we
believe we will be better able to service remaining obligations after the
recapitalization. We also believe the recapitalization will enhance our ability
to win new business and retain and attract key employees. The completion of the
recapitalization is a condition to our securing a new credit facility, which is
necessary to support short-term liquidity needs and letters of credit.
The board of directors considered several alternative means of stabilizing
Kaiser's financial condition. Among the alternatives considered was the use of
the proceeds from the Consulting Group sale in an acquisition of a related
business or simply reinvesting the proceeds from the Consulting Group sale into
Kaiser's existing business activities. In considering these alternatives, the
board of directors met several times, reviewed the recommendations of its
financial, legal and other professional advisors, as well as the information
provided by management, and closely analyzed the information available to it.
The board of directors ultimately determined that the recapitalization described
in this proxy statement represents the most advisable approach to significantly
improving Kaiser's financial position and future business prospects. As a
result of the process of negotiating the terms of the recapitalization, Kaiser
will purchase for cash all of its outstanding 12% Senior Notes due 2003 on or
about October 1, 1999. The purchase price to be paid by Kaiser for the $15
million outstanding principal amount of these notes is expected to be $13.2
million plus accrued interest from June 30, 1999.
As described in more detail below, the board of directors has approved a
recapitalization that consists of an exchange offer, an asset sale offer and
amendments to the indenture governing the old notes. If this recapitalization
is not consummated, Kaiser may continue to negotiate with the holders of the old
notes for a recapitalization, Kaiser may invest the proceeds in a related
business investment or Kaiser may seek implementation of the recapitalization
through a so-called "prepackaged" plan of reorganization. See "Possible
Prepackaged Plan of Reorganization." If Kaiser were to seek confirmation of the
recapitalization in a bankruptcy proceeding, no assurance can be given that the
recapitalization would meet the requirements for confirmation under the U.S.
Bankruptcy Code even if the requisite consents are received and the old notes
subject to the consents are voted to accept the recapitalization.
Management and the board of directors believe that the issuance of shares
of preferred stock and common stock described in this Stock Issuance Proposal
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 upon the
conversion of the preferred stock into Kaiser's common stock, when combined with
the issuance of Kaiser's common stock in the exchange offer. Holders of old
notes will also experience a substantial reduction of their current interest as
a result of the
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<PAGE>
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 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 Stock Issuance
Proposal.
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. Assuming the conditions of the exchange offer are met:
. Kaiser will purchase at least $35 million principal amount of tendered
old notes at par in an asset sale offer;
. for the remaining tendered old notes, Kaiser will exchange:
. preferred stock with a liquidation preference of $65 million plus
accrued interest on the old notes from July 1, 1999 through the
date of the closing of the recapitalization;
. 882,000 shares of common stock, representing approximately 15% of
Kaiser's common stock after giving effect to the proposed reverse
stock split; and
. up to $25 million principal amount of 15% Senior Notes due 2002,
or the new 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 credit facility.
The terms of the recapitalization are the product of negotiations with an
unofficial committee of holders of old notes owning in excess of 80% of the
aggregate principal amount of old notes.
Asset Sale Offer. In general terms, Kaiser's indenture governing its
outstanding old notes requires it to use proceeds from asset sales to reduce
senior indebtedness or reinvest in Kaiser's business or make an asset sale offer
to purchase the old notes at par, on a pro rata basis. As a result of the sale
of the Consulting Group, we have approximately $35 million of available cash to
fund an asset sale offer to holders of Kaiser's old notes.
Exchange Offer. Kaiser is offering preferred stock, common stock and new
notes in exchange for all remaining tendered old notes not purchased in the
asset sale offer. Kaiser's acceptance of old notes tendered in the exchange
offer is conditioned on, among other things, holders of at least 95% of the
principal amount of old notes accepting the exchange offer and Kaiser's
obtaining a new credit facility. In order to participate in the exchange offer,
a holder of old notes must tender all of the old notes beneficially owned by the
holder.
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. In addition, Kaiser is requesting holders of the old
notes 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 is in preliminary discussions with potential
lenders with respect to a new credit facility. The closing of any new credit
facility is conditioned on the successful completion of the recapitalization,
and obtaining a new credit facility is a condition of completing the exchange
offer. Kaiser anticipates that any new credit facility will provide for
revolving credit availability and the issuance of letters of credit. Kaiser
expects the availability of credit under the new credit facility will be a
function of a borrowing base determined with reference
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<PAGE>
to eligible receivables. Kaiser further anticipates that borrowings under the
new credit facility will be secured by substantially all of its assets.
Kaiser does not expect to have available a new revolving credit facility
until the completion of the recapitalization. Until that time, Kaiser will cash
collateralize any letters of credit of the type often required to support
contract performance obligations and Kaiser will utilize other available cash
for working capital purposes.
The Exchange Offer
Kaiser is offering to exchange 2,600,000 shares of preferred stock with a
liquidation preference of $65 million plus accrued interest on the old notes
from July 1, 1999 through the date of the closing of the recapitalization,
882,000 shares of common stock, representing approximately 15% of Kaiser's
common stock after giving effect to the proposed reverse stock split, and up to
$25 million aggregate principal amount of new notes, for all old notes that are
outstanding after the asset sale offer and are properly tendered at or prior to
the expiration date.
Subject to satisfaction of the conditions of the exchange offer, Kaiser
anticipates that it 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 the exchange
expiration 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 is expected to be on or about October 29, 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 followed by 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,
. to waive any condition to the exchange offer and accept any old notes
tendered for exchange,
. to terminate the exchange offer, whether or not any of the conditions
set forth below under "Conditions of the Exchange Offer" shall have
been satisfied, and
. to amend the terms of the exchange offer in any manner by giving oral
or written notice of this delay, extension, termination or modification
to the exchange/solicitation/paying agent. Any amendment will apply
to old notes tendered.
If the exchange offer is amended in a manner determined by 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;
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<PAGE>
. Kaiser has obtained a new credit facility;
. Kaiser's shareholders have approved the issuance of the shares of
preferred stock and 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 consent 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 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 asset sale offer, the exchange offer or
the consent 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 exchange offer as presently proposed or materially
impair the contemplated benefits of the asset sale offer, the exchange
offer or the consent 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 preferred stock, common
stock and new notes in the exchange offer.
At any time, Kaiser can waive any condition to the exchange offer and
accept all old notes tendered for exchange pursuant to the exchange offer.
Accounting Treatment
Kaiser expects that 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 following accounting description is based on the assumption
that the preferred stock to be issued in the exchange offer will have a
valuation of $65 million. In the event that the actual valuation of the
preferred stock, once completed, is significantly different, the accounting
treatment afforded to the recapitalization could be different.
. The face value of the old notes is $125 million.
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<PAGE>
. The carrying amount of the old notes on the financial statements
represents the face value of the old notes adjusted for the
unamortized original issue discount and the unamortized debt
issuance costs of the old notes.
. The old notes will, in part, be purchased at face value for at least $35
million in cash and, in part, exchanged for preferred stock with a
liquidation preference of $65 million plus the amount of accrued
interest on the old notes from July 1, 1999 through the date of the
closing of the recapitalization, 4,207,140 shares of common stock
(882,000 shares after a proposed reverse stock split in the ratio of 1-
to-4.77), and up to $25 million principal amount of new notes.
. The new notes will be exchanged for the remaining carrying value of
the old notes. The difference between the remaining carrying value of
the old notes and the face value of the new notes will be recognized as
an addition to interest expense over the term of the new notes. The
subsequent interest charges will be computed using an effective interest
rate which equates the remaining carrying value of the old notes to the
present value of the future principle and interest payments of the new
notes.
. The excess of the total value of the preferred stock and the common
stockcover their $.01 per share par values will be credited to paid in
capital, net of any issuance costs.
. The carrying value of any remaining original issue discount on the
old notes will reduce the carrying value of the remaining old notes.
. The carrying value of any remaining costs originally incurred to
issue the old notes will reduce the carrying value of the remaining
old notes.
. The amount of any costs incurred to complete the restructuring of
the old notes will be expensed.
The following table summarizes the accounting for this transaction (dollars in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Face value of old notes $125,000
Less:
Unamortized original issue costs (1,987)
Unamortized fees (2,133)
--------
Carrying value of the old notes prior to the exchange of cash and stock 120,880
Cash payment (35,000)
Assumed valuation of preferred stock issued (65,000)
Assumed market value of common stock issued (1,977)
--------
Remaining carrying value of the old notes to be exchanged for up to $25 million of new notes $ 18,903
========
</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 preferred stock, common stock and new notes, transferred in
satisfaction of the indebtedness.
However, Kaiser may not realize taxable income from discharge of
indebtedness if the discharge of indebtedness occurs while Kaiser is
"insolvent," as defined in Section 108(d)(3) of the Internal Revenue Code of
1986, or if the discharge occurs while Kaiser is under the jurisdiction of a
court in a bankruptcy proceeding under title 11 of the United States Code and
the discharge of indebtedness is granted by the court or is pursuant to a plan
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<PAGE>
approved by the court. If the discharge occurs while Kaiser is insolvent, 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.
If the discharge occurs while Kaiser is in a title 11 case, the entire
amount of the discharge (which would otherwise be included as ordinary income)
will be applied to reduce tax attributes, including net operating losses, that
would be otherwise be available to Kaiser. These attribute reductions will
generally have the effect of increasing Kaiser's federal income tax liability in
subsequent taxable years.
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 $3.7
million.
Reduction in Voting Power if Exchange Offer is Consummated and Additional Common
Stock is Issued
Current holders of common stock may experience a substantial reduction in
their aggregate voting power if the exchange offer is consummated and the
preferred stock is converted into Kaiser's common stock. Kaiser anticipates
that approximately 2,600,000 shares of preferred stock and 882,000 shares of
common stock, representing approximately 15% of Kaiser's common stock after
giving effect to the proposed reverse stock split, will be issued as part of the
exchange offer. Based upon the average closing price of Kaiser's common stock
for the twenty consecutive trading days ending on September 9, 1999 of $.43 a
share, these shares will represent greater than 85% of the total voting power of
the outstanding common stock on a fully diluted basis upon the conversion of the
preferred stock into Kaiser's common stock. As a result, although each share of
common stock will continue to be entitled to one vote, the aggregate voting
power of the current shareholders of Kaiser would be reduced from 100% to less
than 15% of the total voting power held by all shareholders of Kaiser after the
consummation of the exchange offer and after the conversion of the preferred
stock into Kaiser's common stock.
Possible Prepackaged Plan of Reorganization
It is possible that we will receive substantial support from holders of old
notes for the recapitalization but not reach the 95% level of acceptance of the
exchange offer required as a condition of the recapitalization. In that event,
if the level of holder approval is sufficient, we may elect to implement the
recapitalization through a so-called "prepackaged" plan of reorganization under
Chapter 11 of the Bankruptcy Code. We would do so by filing a petition
commencing a Chapter 11 bankruptcy case and asking the Bankruptcy Court to
approve a plan of reorganization which would contain terms and conditions for
the treatment of holders of old notes which are the same as the terms and
conditions of the recapitalization. Such a plan of reorganization would not
affect Kaiser's operations, vendors or employees. Aside from holders of old
notes, the plan would not alter or impair the claims and interests of any of our
other creditors or equity security holders.
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<PAGE>
If we were to seek implementation of the recapitalization through a Chapter
11 plan of reorganization, no assurance can be given that the plan would meet
the requirements for confirmation under the Bankruptcy Code, even if the plan
received the required level of approval from the holders of the old notes. The
requirement for plan approval by an impaired class of creditors is the
affirmative vote of a majority in number and more than two-thirds in dollar
amount of those voting to accept or reject the plan. If confirmed by the
Bankruptcy Court, the plan would be binding on all holders of old notes, without
regard to whether they voted in favor of the plan.
If a holder of old notes executes the documents required to tender old
notes in the exchange offer and the asset sale offer as contemplated in this
proxy statement, the tender of old notes, once delivered, may not be withdrawn,
and the executed documentation will be counted at our election as ballots in
favor of a Chapter 11 plan as described above. We reserve the right to commence
a Chapter 11 case before expiration of the period provided for tender of old
notes in the exchange offer and the asset sale offer and to count executed
documentation received as ballots in favor of the Chapter 11 plan.
Capitalization
The following table sets forth our capitalization as of June 30, 1999, pro
forma to give effect to the purchase of the senior notes and certain other
transactions subsequent to June 30, 1999 and adjusted to give effect to the
consummation of the recapitalization as if it had occurred on June 30, 1999.
The information set forth below should be read in conjunction with our audited
financial statements and unaudited pro forma financial statements, together with
the related notes, included and incorporated by reference in this proxy
statement.
<TABLE>
<CAPTION>
June 30, 1999 (a)
------------------------------------------------------
Pro Forma Pro Forma
Before After
Actual Recapitalization (c) Recapitalization (d)
--------- --------------------- --------------------
(Dollars in thousands)
<S> <C> <C> <C>
Cash and Cash Equivalents (b) $ 90,368 $ 54,168 $16,668
======== ======== =======
Long-term Debt (including current portion):
Credit Facility $ - $ - $ -
New Notes - - 18,903
12% Senior Notes 14,717 - -
12% Senior Subordinated Notes 123,013 123,013 -
-------- -------- -------
Total Debt 137,730 123,013 18,903
Stockholders' Equity (Deficit) (39,849) (42,402) 22,075
-------- -------- -------
Total Capitalization $ 97,881 $ 80,611 $40,978
======== ======== =======
- ----------------
</TABLE>
(a) Assumes 100% participation by the noteholders.
(b) Includes $22.9 million of restricted cash being used prior to
recapitalization to collateralize letters of credit.
(c) Pro forma to give effect to the settlement of the senior notes and certain
other transactions occurring or anticipated to occur subsequent to June 30,
1999 and prior to the recapitalization.
(d) Pro forma to give effect to the recapitalization, assuming at least $35
million in cash is used and up to $25 million of new notes are exchanged,
and the quasi-reorganization.
<PAGE>
Pro Forma Financial Information
Kaiser has prepared additional unaudited pro forma financial information
that describes its historical financial results as if the sales of the EFM and
Consulting Groups and the exchange transaction had occurred as of January 1,
1998. This information has been included as Appendix A to this proxy statement.
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<PAGE>
Vote Required for Approval of the Stock Issuance Proposal
The affirmative vote of a majority of the shares of Kaiser's outstanding
common stock is required to approve the Stock Issuance Proposal.
Recommendation of the Board of Directors
The board of directors recommends that the shareholders vote FOR 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
===============================================================================
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 Kaiser's
certificate of incorporation to effect a reverse split of Kaiser's outstanding
shares of common stock, in a ratio of 1-to-4.77. This ratio may be adjusted to
obtain a final result of 5,000,000 shares of common stock outstanding after
application of the reverse stock split. Such a ratio will be determined as of
the date the amendment to the certificate of incorporation effecting the reverse
stock split is filed with the Secretary of State of the State of Delaware. 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 the Reverse Split Proposal, Section 4.01(A) of
Kaiser's certificate of incorporation will be amended by replacing the existing
provision relating to Kaiser's authorized capital with the following provision:
(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 4.77 shares of the Corporation's Common Stock issued, or such
other ratio as would result in an aggregate of 5,000,000 shares of
Common Stock outstanding, as of [insert date on which the Certificate
of Amendment is 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 Reverse Split Proposal, this amendment
will 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 approximately 1,500 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.
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<PAGE>
As of the record date, there were reserved for issuance upon exercise of
outstanding options an aggregate of 2,049,780 shares of common stock under
Kaiser's stock incentive plan. All outstanding options include provisions for
adjustment in the number of shares covered by the option and the related
exercise price 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 430,000 shares of
common stock. Each of the outstanding options would evidence the right to
purchase a number of shares of common stock equal to the product of the number
of shares previously covered by the option divided by the actual split ratio,
and the exercise price per share would be multiplied by the actual split ratio.
The proposed reverse stock 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 stock 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 number 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 common
stock of the reverse stock split after the exchange offer is completed:
NUMBER OF SHARES OF COMMON STOCK
<TABLE>
<CAPTION>
Prior to reverse stock split After reverse stock split
---------------------------- -------------------------
Common
- -------------------------------
<S> <C> <C>
Authorized 90,000,000 90,000,000
Issued and outstanding (1) 28,029,797 5,882,000
Available for future issuance 61,970,203 84,118,000
</TABLE>
(1) Excludes 2,049,780 shares issuable upon exercise of outstanding options
(approximately 430,000 shares after the reverse stock split), and 4,312,080
shares issuable upon exercise of outstanding warrants (904,000 shares after
the reverse stock split and the exchange offer), each as of the September
9, 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 the holder 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 be entitled to receive their
allocable portion of the net proceeds of the sale 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
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<PAGE>
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 reverse stock 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
stock split or to dissent from the rounding up of fractional interests resulting
from the reverse stock split.
Change of Purchase Rights for Preferred Stock, Options and Warrants and Notice
to Holders of such Stock
Pursuant to Kaiser's Shareholder Rights Plan, dated January 13, 1992,
holders of Kaiser's common stock have the right to purchase one -hundredth of
a share of the Series 4 Junior Preferred Stock (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 for which each
share of common stock has the right to subscribe will be adjusted as of the
reverse stock 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 the Shareholder Rights Plan.
Purposes of the Reverse Stock Split
Kaiser's common stock is currently listed on the New York Stock Exchange
under the symbol "ICF." The NYSE has notified us that we currently do not meet
its newly effective continued listing criteria, but we believe our
recapitalization is an important element in our efforts to remedy this
situation. 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 per share
minimum bid price requirements for initial inclusion. Kaiser anticipates that
the reverse stock split will have the effect of increasing the minimum bid price
of its common stock. 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,
American Stock Exchange or NYSE listing criteria and increase the likelihood of
marginability of the common stock, the board of directors has determined that
the reverse stock split is 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. These factors adversely affect both the
pricing and the liquidity of the common stock. Thus, a potential increase in
trading price
-31-
<PAGE>
would be expected to be attractive to the financial community and the investing
public and in the best interests 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 stock
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
even be adversely affected by the reduced number of shares of common stock which
would be outstanding after the proposed reverse stock 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 stock split.
The reverse stock 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 stock split
as contemplated in this Reverse Split Proposal 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
stock 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 STOCK SPLIT UNDER
APPLICABLE FEDERAL, STATE AND LOCAL INCOME TAX LAWS.
The proposed reverse stock 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 of the reverse stock split, 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 reverse
stock 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 immediately prior to the reverse stock split
effective date if the shares of stock were held by the shareholder as capital
assets on the reverse stock 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 stock split at any time prior to its effectiveness
if it determines that the reverse stock split is not in the best interests of
Kaiser or its shareholders.
-32-
<PAGE>
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
===============================================================================
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 this 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 the old notes who choose to participate in the
exchange offer will own a substantial portion of Kaiser's outstanding common
stock upon the consummation of the exchange offer and the conversion of the
preferred stock into Kaiser's common stock. Adoption of the Shareholder
Democracy Proposal would result in holders of the old notes that receive shares
of preferred stock and common stock in the exchange offer 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) that require 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.
-33-
<PAGE>
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 classes. 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 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:
Section 6.01. Board of Directors. 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;
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<PAGE>
. 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
. 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 is recommending that Section 14.01 of
Kaiser's certificate of incorporation and Section 9.01 of Kaiser's bylaws be
amended to require only a majority vote, as opposed to a supermajority vote, to
amend the provisions of Kaiser's certificate of incorporation and bylaws as
described above.
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.
-35-
<PAGE>
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. If Kaiser's
shareholders do not approve the Shareholder Democracy Proposal, Kaiser intends
to include this proposal on the agenda for the 2000 Annual Meeting of
Shareholders. Under the terms of the preferred stock being issued pursuant to
the exchange offer, the holders of preferred stock will be entitled to vote on
this proposal at the 2000 Annual Meeting that number of shares of common stock
into which the preferred stock is convertible, as if the preferred stock had
been converted. See "Proposal 2: Stock Issuance Proposal - Terms of the
Preferred Stock - Voting Rights."
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
===============================================================================
On January 13, 1992, Kaiser's board of directors authorized the creation of
the 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 that are outstanding 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
indenture governing the old 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 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 Affiliates 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
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<PAGE>
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), as further amended on September 15, 1999, 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 account all factors that such directors may deem relevant, (ii)
following July 31, 2000, a cash tender offer which is for all
outstanding Common Stock, and (iii) the acquisition (whether upon
initial issuance or subsequent acquisition) of the Company's Series 5
Redeemable Convertible Preferred Stock and Common Stock, including the
Common Stock issuable upon conversion of such preferred stock, issued
in exchange for the Company's 12% Senior Subordinated Notes due 2003.
The board of directors proposes to add a new Article X to the bylaws, which
would prohibit the adoption of a new rights plan without shareholder approval.
This new article of the bylaws would provide as follows:
ARTICLE X
Prohibition on Shareholder
Rights Plans
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 of 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:
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<PAGE>
In furtherance and not in limitation of the powers conferred by
statutes the Board of Directors (or duly authorized Committee of
the Board of Directors) is authorized to adopt, amend, and repeal
the By-laws 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 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 and the corresponding
exhibits, relating to Series 2C Senior Preferred Stock; and section 17.01 and
the corresponding exhibits, 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 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 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: STOCK INCENTIVE PLAN PROPOSAL
===============================================================================
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 incentive plan expires on December 31, 2005, after
which date no additional grants may be made. The board of directors has adopted
amendments to the incentive plan as described below, subject to the approval of
the shareholders.
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<PAGE>
Description of Amendments
We propose to increase the number of shares available for grants under the
plan. 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 September 9, 1999, 1,895,060 shares had been issued
upon the exercise of options granted under the incentive plan, there were
outstanding options to purchase 2,049,780 shares and 2,055,160 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 Stock Incentive Plan to 7.5% of Kaiser's common stock, on a fully
diluted basis, after consummation of the recapitalization and assuming
conversion of the preferred stock. The closing price of Kaiser's common stock
on the New York Stock Exchange on September 9, 1999 was $0.43.
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 and
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. In
addition, the proposed recapitalization plan of Kaiser contemplates that new
stock-based awards will be made to key employees following completion of the
recapitalization. As a condition to receiving new options or equity, these key
employees will be required to agree to the cancellation of existing options. In
order to provide the committee appropriate implementation flexibility following
its review and to permit new awards to be made to key employees in connection
with the recapitalization, Kaiser proposes to amend the incentive plan so that
section 3 will read in its entirety 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 7.5% of the Corporation's Common Stock, computed on
a fully diluted basis, including assumed conversion of the Corporation's
Series 5 Redeemable Convertible Preferred Stock, 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 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 to immediate family members of the persons
who receive the option grants. Accordingly, the board proposes amending section
10 of the incentive plan to read in its entirety as follows (proposed added
language underlined):
10. Transferability of Options, SARs, Restricted Shares and Restricted
-------------------------------------------------------------------
Stock Units. Options that 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).
---------------------------------------------------
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<PAGE>
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 incentive plan. Currently Section 14(c) of the incentive 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 or 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 granted to
employees of acquired businesses, extend the period during which
an outstanding Option may be exercised beyond the maximum period
provided for in Section 5(b), provided that no such extension
--------
shall effect a repricing of Options previously outstanding under
the Plan; (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 incentive plan was
adopted more than ten years ago. Given the passage of time since the incentive
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 incentive 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 replacing 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 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.
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
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<PAGE>
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 incentive 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
incentive plan.
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.
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<PAGE>
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 Stock Incentive Plan Proposal.
Kaiser's board of directors may amend, suspend or terminate all or any
portion of the incentive plan at any time, subject to shareholder 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 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 Stock Incentive
Plan Proposal.
Recommendation of the Board of Directors
The board of directors recommends that the shareholders vote "FOR" the
Stock Incentive Plan Proposal. Proxies solicited by the board of directors will
be so voted unless shareholders specify a contrary choice in their proxies.
===============================================================================
PROPOSAL 8: QUASI-REORGANIZATION PROPOSAL
===============================================================================
A quasi-reorganization is an elective accounting transaction that
allows a company to reset certain financial accounts on its balance sheet
without undergoing a legal reorganization. A quasi-reorganization accounting
transaction primarily impacts the reported balances of an entity's financial
balance sheet to portray a "fresh-start" presentation of its balance sheet
following a significant restructuring by a financially troubled company. A
quasi-reorganization accounting transaction essentially can accomplish two
balance sheet changes, one being the
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<PAGE>
restatement of the historical carrying values of assets and liabilities to
reflect current values, and the other being the elimination of an accumulated
deficit in retained earnings.
Kaiser has conducted a preliminary evaluation of its assets and
liabilities and has determined that the overall difference between historical
carrying values and current values is not significant. Accordingly, Kaiser does
not anticipate recording any adjustments to the historical carrying values of
its assets or liabilities on its balance sheet as part of the quasi-
reorganization. However, the board believes that the significant deficit in
Kaiser's retained earnings account hampers Kaiser's potential successes in
business development opportunities and limits its flexibility in considering or
taking various actions that may be in the best interest of Kaiser and its
shareholders. This proposal is intended to minimize negative impacts associated
with those limitations.
Generally accepted accounting principles permit a quasi-reorganization
only if certain requirements and conditions are met. These conditions include:
. the deficit in retained earnings must be extinguishable by a similar
offset against available paid-in capital,
. the approval of shareholders, and
. no change in accounting methods within 12 months following the
effective date of the quasi-reorganization.
In addition, Kaiser must demonstrate other characteristics consistent with the
"fresh-start" concepts intended by generally accepted accounting principles,
including evidence of a substantial change in ownership and management
subsequent to the deficit being incurred and currently profitable operations or
reasonable prospects for profitable operations.
As of June 30, 1999, Kaiser's balance sheet reflected an accumulated
deficit in its retained earnings of $111.7 million and a positive balance of
additional paid-in capital of $75.1 million. Upon the issuance of preferred
stock and common stock as part of the exchange offer for outstanding debt as
described in the Stock Issuance Proposal, it is anticipated that the balance of
additional paid-in capital will exceed the accumulated deficit in retained
earnings at the effective time of the quasi-reorganization, allowing for
satisfaction of that applicable condition. Kaiser does not anticipate any
change in accounting methods during the 12-month period following the effective
date of the quasi-reorganization.
The current deficit in the retained earnings account resulted largely from
the substantial losses, and ensuing restructuring transactions, incurred during
1997, 1998 and 1999 in connection with cost overruns on fixed price contracts to
construct four nitric acid plants. Following the sale in 1999 of two of its
operating groups, Kaiser is proposing a recapitalization in order to reduce the
amount of its outstanding debt and has taken and is continuing to take actions
designed to stabilize and improve its financial condition. Kaiser believes
these actions will satisfy the other "fresh-start" general conditions summarized
above.
The board of directors has reviewed Kaiser's future prospects for
profitability and has determined that Kaiser could reasonably anticipate
profitability in the foreseeable future, although no assurances can be given in
that regard. In the event Kaiser is not profitable during the year after the
quasi-reorganization is effective, the Securities and Exchange Commission could
reject the quasi-reorganization accounting.
The board has concluded that a quasi-reorganization is appropriate under
Kaiser's circumstances. Accordingly, the board has approved and is proposing
that the shareholders approve a quasi-reorganization transaction to restate the
financial accounts to eliminate the accumulated retained earnings deficit from
Kaiser's balance sheet. If the applicable conditions summarized above are met,
including the approval of the transaction by the shareholders, the accumulated
deficit in Kaiser's retained earnings will be eliminated in a quasi-
reorganization accounting transaction likely to be recorded in its balance sheet
as of December 31, 1999.
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<PAGE>
Vote Required for Approval of the Quasi-Reorganization Proposal
The affirmative vote of a majority of the outstanding shares of common
stock is required to approve the Quasi-Reorganization Proposal.
Recommendation of the Board of Directors
The board of directors recommends that shareholders vote "FOR" the Quasi-
Reorganization Proposal. Proxies solicited by the board of directors will be so
voted unless shareholders specify a contrary choice in their proxies.
===============================================================================
PROPOSAL 9: 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 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 23,822,657 shares of common stock issued and outstanding as of the record
date and 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 dates 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 voting and
investment powers) over any shares of common stock or has the right to acquire
such shares within 60 days.
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<PAGE>
<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; 1,675,000 (a) 7.0 %
Joseph M. Cohen; Jarrod M. Cohen
Financial Square
New York, NY 10005-3597
- ----------------------------------------------------------------------------------------------------
SG Cowen Securities Corporation 1,681,600(b) 7.1%
1221 Avenue of the Americas
New York, New York 10020
- ----------------------------------------------------------------------------------------------------
State of Wisconsin Investment Board 2,092,200(c) 8.8 %
P.O. Box 7842
Madison, WI 53707
- ----------------------------------------------------------------------------------------------------
Tennenbaum & Co., LLC; 2,600,000(d) 10.9 %
Michael E. Tennenbaum
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 September 9, 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 626,000 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.
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, 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 September 9, 1999, the record date.
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<PAGE>
<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
September 9, 1999 record date of shares of common of Kaiser
(unless otherwise indicated) stock of Kaiser(a) (*Less than 1%)
====================================================================================================
(i) Nominees for Director
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Thomas C. Jorling 22,727(b) *
James J. Maiwurm 0 *
Hazel R. O'Leary 18,927(c) *
- ----------------------------------------------------------------------------------------------------
(ii) Directors Continuing in Office
- ----------------------------------------------------------------------------------------------------
Jarrod M. Cohen 1,675,000(d) 7.0%
James O. Edwards 505,585(e) 2.1%
Keith M. Price 217,794(f) *
James T. Rhodes 7,018(g) *
Michael E. Tennenbaum 2,600,000(h) 10.9%
- ---------------------------------------------------------------------------------------------------
(iii) Executive Officers Named in the Summary Compensation Table
- ---------------------------------------------------------------------------------------------------
Michael F. Gaffney 10,075(i) *
Former Executive Vice President
Thomas P. Grumbly 100,000(j) *
Former Executive Vice President
Sudhakar Kesavan 60,594(k) *
Former Executive Vice President
Richard Leupen 164,950(l) *
Executive Vice President
Marc Tipermas 278,300(m) 1.2%
Former President and Chief Operating Officer
David Watson 119,800(n) *
Former Executive Vice President
- ---------------------------------------------------------------------------------------------------
(iv) All Directors and Current Executive Officers
as a Group (11 Persons) 5,220,119(o) 21.9%
====================================================================================================
</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
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 6,000 shares that may be acquired
within 60 days of September 9, 1999 upon the exercise of stock options.
Mr. Jorling has 16,727 Phantom Stock Units.
(c) Ms. O'Leary has 16,727 Phantom Stock Units. Mrs. O'Leary also owns directly
2,200 other shares.
(d) 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 September 9, 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 626,000 shares and shared
voting and investment power as to 1,000,000 shares. Mr. Jarrod Cohen is a
director of Kaiser.
(e) Mr. Edwards' share ownership includes 861.48 shares allocated to his ESOP
account, 748.62 shares allocated to his Section 401(k) Plan account,
22,501.88 shares allocated to his Retirement Plan account, and 150,000
shares that may be acquired within 60 days of September 9, 1999 upon the
exercise of stock options. Mr. Edwards owns 156,033 restricted shares.
Mr. Edwards also owns directly 175,440 other shares.
(f) Mr. Price has 16,727 Phantom Stock Units. Mr. Price's share ownership
includes 1,066.92 shares allocated to his Retirement Plan account and
200,000 shares that may be acquired within 60 days of September 9, 1999 upon
the exercise of stock options.
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<PAGE>
(g) Mr. Rhodes has 7,018 Phantom Stock Units.
(h) 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 2,600,000 shares of common stock included in this table.
Mr. Tennenbaum also has 7,018 Phantom Stock Units.
(i) Mr. Gaffney's share ownership includes 175.28 shares allocated to his
Retirement Plan account and 9,900 shares that may be acquired within 60 days
of September 9, 1999 upon the exercise of stock options.
(j) Mr. Grumbly's share ownership includes 100,000 shares that may be acquired
within 60 days of September 9, 1999 upon the exercise of stock options.
(k) Mr. Kesavan's share ownership includes 1,291.52 shares allocated to his ESOP
account, 612.58 allocated to his Retirement Plan account, and 36,927 shares
that may be acquired within 60 days of September 9, 1999 upon the exercise
of stock options. Mr. Kesavan also owns 21,763 restricted shares.
(l) Mr. Leupen's shares ownership includes 164,950 shares that may be acquired
within 60 days of September 9, 1999 upon the exercise of stock options.
(m) Dr. Tipermas' share ownership includes 125,000 shares that may be acquired
within 60 days of September 9, 1999 upon the exercise of stock options. He
also owns 153,300 restricted shares.
(n) Mr. Watson's share ownership includes 119,800 shares that may be acquired
within 60 days of September 9, 1999 upon the exercise of stock options.
(o) This total includes 64,217 Phantom Stock Units, 861.48 shares allocated to
ESOP accounts, 748.62 shares in Section 401(k) Plan accounts, 23,568.80
shares allocated to individuals under the Retirement Plan or held in
directed investment accounts under the Retirement Plan, 520,950 shares that
may be acquired within 60 days of September 9, 1999 upon the exercise of
stock options, 156,033 restricted shares and 4,453,740 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, 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 the Stock
Issuance Proposal. 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 in June 1999. Mr. Maiwurm serves as chairman of the
board of managers of Kaiser-Hill Company, LLC, which performs the performance
based integrating management services at the Department of Energy's Rocky Flats
Environmental Technology site near Denver, Colorado. From August 1998
-47-
<PAGE>
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 from 1990 to
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, and
is a member of the board of directors of Workflow Management, Inc., an
integrated graphic arts company providing documents, envelopes and commercial
printing to businesses in North America, the stock of which is traded on the
Nasdaq National Market System.
S. Robert Cochran, 46, Executive Vice President and President, North
America. Mr. Cochran has been President, North America for ICF Kaiser
International, Inc. since April 1999. Mr. Cochran serves on the board of
managers of Kaiser-Hill Company, LLC, which performs the performance based
integrating management services at the Department of Energy's Rocky Flats
Environmental Technology Site near Denver, Colorado. Prior to that, he was
Senior Vice President for Business Development for Kaiser's former Environment
and Facilities Management 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 is a registered professional geologist.
Richard A. Leupen, 46, 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 Pty
Limited (Singapore), Strand Management Pty Limited as well as serving as a
director of a number of Kaiser subsidiaries and affiliates.
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. Mr. O'Connor serves on the board of managers of Kaiser-
Hill Company, LLC, which performs the performance based integrating management
services at the Department of Energy's Rocky Flats Environmental Technology site
near Denver, Colorado. 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 is a Certified
Cash Manager.
===============================================================================
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).
-48-
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================================
SUMMARY COMPENSATION TABLE
=========================================================================================================================
Annual Compensation Long-term 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)
- -------------------------------------------------------------------------------------------------------------------------
Keith M. Price, Former President and CEO(d)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
- -------------------------------------------------------------------------------------------------------------------------
<PAGE>
David Watson, Former Executive Vice President(k)
- -------------------------------------------------------------------------------------------------------------------------
Fiscal 1998...... $239,313 0 (b) $ 59,850(k) 0 $318,453
- -------------------------------------------------------------------------------------------------------------------------
Fiscal 1997...... $275,018 $ 60,000 (b) $104,832(k) 0 $ 90,662
- -------------------------------------------------------------------------------------------------------------------------
Fiscal 1996...... $227,899 $115,000 $ 8,376(b) $ 18,975(k) 94,800 options $ 29,574
=========================================================================================================================
</TABLE>
(a) Cash bonuses are reported for the year of service for which the cash bonus
was earned, even if pre-paid or paid in a subsequent year. Restricted stock
and options are reported for the year of service for which the stock and/or
options were earned, even if the grant date falls in a subsequent fiscal
year. No dividends are paid on any shares of restricted stock.
(b) Any amounts shown in the ``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.
-49-
<PAGE>
(c) Kaiser's 1998 contributions to the named executive officers pursuant to
Kaiser's Retirement Plan were not 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." 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." For his service in
1998, Mr. Edwards was awarded 200,000 shares of restricted stock on November
6, 1998. These shares will fully vest on November 6, 1999 or, if earlier,
upon a change of control. 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:
Fiscal 1998 $ 2,545 Spouse travel
$ 2,857 Kaiser match under Kaiser's Section 401(k) Plan
$ 150,000 Severance payments
Fiscal 1997 $ 2,731 Kaiser match under Kaiser's Section 401(k) Plan
$ 10,184 Kaiser Retirement Plan Contribution for 1997
made in September 1998
$ 2,328 Spouse travel
Fiscal 1996 $ 9,492 Kaiser Retirement Plan contribution for 1996
made in September 1997
$ 2,731 Kaiser match under Kaiser's Section 401(k) Plan
$ 875 Imputed income for Kaiser-paid life insurance
(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:
Fiscal 1998 $ 361 Spouse travel
$ 3,304 Kaiser match under Kaiser's Section 401(k) Plan
$ 273 Imputed income for Kaiser-paid life insurance
Fiscal 1997 $ 3,225 Kaiser match under Kaiser's Section 401(k) Plan
$ 273 Imputed income for Kaiser-paid life insurance
$ 10,184 Kaiser Retirement Plan Contribution for 1997
made in September 1998
$ 584 Spouse travel
Fiscal 1996 $ 9,492 Kaiser Retirement Plan contribution for 1996
made in September 1997
$ 3,188 Kaiser match under Kaiser's Section 401(k) Plan
$ 660 Imputed income for Kaiser-paid life insurance
$ 1,553 Spouse travel
(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,
-50-
<PAGE>
2001, provided Mr. Kesavan remains an employee of ICF Consulting Inc. 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 will fully vest on January 1,
2000; provided Mr. Kesavan remains an employee of ICF Consulting Inc. 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:
Fiscal 1998 $ 2,500 Kaiser match under Kaiser's Section 401(k) Plan
$ 531 Spouse travel
Fiscal 1997 $ 2,423 Kaiser match under Kaiser's Section 401(k) Plan
$ 10,184 Kaiser Retirement Plan Contribution for 1997
made in September 1998
$ 89 Imputed income for Kaiser-paid life insurance
Fiscal 1996 $ 9,492 Kaiser Retirement Plan contribution for 1996
made in September 1997
$ 2,405 Kaiser match under Kaiser's Section 401(k) Plan
$ 230 Imputed income for Kaiser-paid life insurance
(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 in
connection with Mr. Grumbly's resignation from Kaiser. The amounts show in
column (i) of the table for Mr. Grumbly comprise the following:
Fiscal 1998 $ 3,346 Kaiser match under Kaiser's Section 401(k) Plan
$ 580 Spouse travel
Fiscal 1997 $ 3,269 Kaiser match under Kaiser's Section 401(k) Plan
$ 10,184 Kaiser Retirement Plan contribution for 1997
made in September 1998
(i) The amounts shown in column (i) of the table for Mr. Leupen comprise the
following:
Fiscal 1998 $ 1,385 Kaiser match under Kaiser's Section 401(k) Plan
$ 7,897 Kaiser 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 Kaiser Retirement Plan contribution for 1997
$ 14,904 Car Allowance
Fiscal 1996 $ 8,828 Kaiser Retirement Plan contribution for 1996
$ 14,904 Car allowance
(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." 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:
Fiscal 1998 $ 3,400 Kaiser match under Kaiser's Section 401(k) Plan
$ 515 Spouse travel
$ 442 Imputed income for Kaiser-paid life insurance
$ 732,500 Severance payment
Fiscal 1997 $ 3,231 Kaiser match under Kaiser's Section 401(k) Plan
$ 10,184 Kaiser Retirement Plan contribution for 1997
made in September 1998
$ 429 Imputed income for Kaiser-paid life insurance
-51-
<PAGE>
$ 145 Spouse travel
Fiscal 1996 $ 9,492 Kaiser Retirement Plan contribution for 1996
made in September 1997
$ 3,202 Kaiser match under Kaiser's Section 401(k) Plan
$ 706 Imputed income for Kaiser-paid life insurance
$ 400 Spouse travel
(k) Mr. Watson ceased to be employed by Kaiser, effective August 7, 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 Mr.
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." 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:
Fiscal 1998 $ 4,886 Lump-sum relocation payment made in 1998
$ 3,400 Kaiser 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 Kaiser match under Kaiser's Section 401(k) Plan
$ 10,184 Kaiser Retirement Plan contribution for 1997
made in September 1998
$ 145 Spouse travel
Fiscal 1996 $ 9,492 Kaiser Retirement Plan contribution for 1996
made in September 1997
$ 3,192 Kaiser match under Kaiser's Section 401(k) Plan
$ 908 Imputed income for Kaiser-paid life insurance
$ 15,982 Reimbursed relocation expense
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. 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 Price Expiration Date Grant Date
Securities Options Granted ($/Sh)(b) Present Value
Underlying Options To Employees in $(c)
Granted (#) Fiscal Year(a)
- ------------------------------------------------------------------------------------------------------------------------------
<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 A. Leupen(d) ............ 50,000 4.7% $2.50 February 27, 2003 $ 84,425
- ------------------------------------------------------------------------------------------------------------------------------
Richard A. 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
-52-
<PAGE>
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. 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 A. Leupen .......... 0 0 75,000/125,000 8,100/$8,100(3)
- ------------------------------------------------------------------------------------------------------------------------
Marc Tipermas .............. 0 0 151,400/0 N/A(2)
- ------------------------------------------------------------------------------------------------------------------------
David Watson ............... 0 0 42,450/77,350 N/A(2)
========================================================================================================================
</TABLE>
________
The exercise price of all options is the average closing price of 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 and Human Resources 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 and Human Resources Committee. As of September
9, 1999, the record date, there were no persons whose severance payments were
governed by the SEOSP. Recent employment agreements with members of senior
-53-
<PAGE>
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 and Human Resources Committee Report on Executive Compensation."
On August 30, 1999, the board of directors suspended the operation of the SEOSP,
except to the extent the SEOSP is applicable to any officer of Kaiser by prior
action of the board or the Compensation and Human Resources Committee and/or
incorporated by reference into an existing employment agreement between Kaiser
and the officer.
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 and
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 September 9, 1999, the record date, severance benefits
have been paid under the SEOSP to five persons.
In connection with the termination of their employment with Kaiser since
January 1, 1998, six of the Named Executive Officers identified in the Summary
Compensation Table 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."
===============================================================================
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."
Michael F. Gaffney. 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. The terms of that employment
agreement are described in the following paragraph. In consideration of Mr.
Gaffney's agreeing to terminate his employment agreement, Kaiser paid him an
aggregate amount of $250,000 in cash and agreed 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 noncompetition agreement, and execute a full general
release as to Kaiser and its affiliated parties.
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 provided for a base annual salary of $230,000 for
the 15-month period beginning January 1, 1997, with a $20,000 annual increase
for the next 12-month period and a $25,000 annual increase for the remaining
months; annual bonus compensation to be determined by reference to sales
targets, operating group revenue and profit targets, and other qualitative
factors as determined by the Compensation and Human Resources Committee of
Kaiser's board of directors; a specified severance payment; eligibility under
Kaiser's employee benefit plans; and a six-month noncompetition period following
employment termination.
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 provided for: a base
annual salary of $250,000 beginning April 28, 1997, subject to annual increases
of $10,000; a signing bonus of $50,000 for the period ended December 31, 1997;
an additional bonus opportunity to be determined by the Compensation and 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
was terminated other than for cause. The agreement also provided for the grant
of 100,000 options, 25% of which vest on each of the first four anniversaries of
the grant date.
-54-
<PAGE>
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 all previously granted Kaiser's common
stock options; and waive the noncompetition provisions of the April 1997
employment agreement. Mr. Grumbly terminated his employment with Kaiser on
May 9, 1999.
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 August 4, 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 August 4, 1998, subject to annual increases to be determined by the
Compensation and 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, and not less than $150,000 for
the period ended August 4, 1999; a 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 noncompetition period
following termination for "cause" of Mr. Leupen's employment. The agreement also
provides 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" 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
at the time of such termination. In the event that Mr. Leupen terminated the
agreement for "good reason" (as defined in the agreement), he is entitled to
receive a severance payment equal to one times his annual base salary then in
effect.
In connection with his return to Australia and his appointment to serve as
President, International and Executive Vice President of Kaiser, Mr. Leupen and
Kaiser entered into a new employment agreement. 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 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."
Marc Tipermas. 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. The terms of that employment agreement are
described in the following paragraph. 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 certain options previously granted pursuant to
Kaiser's Stock Incentive Plan, and (iii) consistent with the terms of his
employment agreement, to award 150,000 shares of common stock, which shares vest
upon the earlier of August 7, 1999, or the occurrence of any sale of Kaiser or
all or substantially all of Kaiser's assets, or other event resulting in a
change of control of Kaiser. All unexercised options held by Dr. Tipermas on
November 1, 1999 will expire. In addition, Dr. Tipermas agreed to provide
certain consulting services to Kaiser through January 31, 1999, for which he was
compensated at an annual rate of $375,000. Kaiser also agreed to reimburse Dr.
Tipermas for legal fees incurred by Dr. Tipermas in connection with the
negotiation of this agreement up to a maximum of $10,000. 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.
-55-
<PAGE>
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 and 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
benefits plans; a cash payment of $50,000, net of taxes, in return for an
agreement not to sell shares of Kaiser's common stock without the Compensation
and Human Resources Committee approval; and a one-year noncompetition 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 were outlined in
the agreement.
David Watson. On August 7, 1998, Mr. Watson entered into an agreement with
Kaiser, pursuant to which the parties mutually agreed to terminate Mr. Watson's
employment agreement. The terms of that employment agreement are described in
the following paragraph. In consideration of Mr. Watson's 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) to reimburse up to $2,500 of legal fees incurred by Mr. Watson in
connection with the negotiation of this agreement. In exchange for the benefits
received by Mr. Watson which are described in this paragraph, Mr. Watson
agreed to terminate his employment agreement and 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.
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 provided
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 and Human Resources 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 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 anniversary
of the grant date. In return for the benefits afforded Mr. Watson in his
employment agreement, Mr. Watson agreed to a one-year noncompetition and
nonsolicitation period following termination of his employment for any reason.
-56-
<PAGE>
===============================================================================
STOCK PERFORMANCE GRAPH - PEER ISSUERS
===============================================================================
===============================================================================
[STOCK PERFORMANCE 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 nine companies: EA Engineering, Science, and
Technology, Inc.; Fluor 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.
<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>
-57-
<PAGE>
===============================================================================
COMPENSATION AND HUMAN RESOURCES COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
===============================================================================
The board of directors has delegated certain of its powers to its
Compensation and 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 Compensation and Human Resources 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:
. 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
. 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 longer than one fiscal year. Kaiser
does not grant significant perquisites to its employees, officers, or executive
officers.
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:
. the Incentive Compensation Plan ("IC Plan") for Senior Executives which
was adopted by the Compensation and Human Resources Committee at a
meeting held on December 16, 1997, and which applies to awards made
for service in 1998 and later years;
. the general provisions of Kaiser's Stock Incentive Plan, which was
adopted in 1987 and applies to all key employees of Kaiser; and
. a cash bonus plan under which bonuses can be awarded based on
performance during the year to all employees, including vice presidents
and above.
-58-
<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 Compensation and Human Resources 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 Compensation and Human Resources 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
Compensation and Human Resources 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. 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."
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."
The following members of the Compensation and Human Resources Committee are
submitting this report:
Hazel R. O'Leary (Committee Chairperson)
Thomas C. Jorling
James T. Rhodes
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<PAGE>
===============================================================================
OTHER MATTERS
===============================================================================
At October 1, 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 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 5, 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 February 5, 2000, and no later than March 6, 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 December 7, 2000. Any shareholder
proposal submitted other than for inclusion in the proxy materials for that
meeting must be delivered to Kaiser no later than March 6, 2000, or such
proposal will be considered untimely. If a shareholder proposal is received
after March 6, 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
-60-
<PAGE>
(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
interview without special compensation. Kaiser has also engaged Corporate
Investor Communications, Inc. to aid in the solicitation. For these services,
Kaiser will pay Corporate Investor Communications, Inc., a fee of $10,000 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's common 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 years ended December
31, 1998 and for the quarter ended June 30, 1999, and the related "Management's
Discussion and Analysis of Financial Condition and Results of Operations" are
incorporated by reference to Kaiser's 1998 Annual Report to its shareholders and
Kaiser's Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1999. Copies of the 1998 Annual Report and the Form 10-Q are being furnished
with this Proxy Statement.
Fairfax, Virginia Shaun M. Martin
October 1, 1999 Senior Vice President, Treasurer and Secretary
-61-
<PAGE>
Appendix A
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements are derived from our
historical financial statements incorporated by reference into this proxy
statement.
. The unaudited pro forma statement of operations for the year ended
December 31, 1998 reflects the sale of our EFM and Consulting Groups
and the completion of the recapitalization described in this proxy
statement, as if these transactions had occurred on January 1, 1998.
. The unaudited pro forma balance sheet at June 30, 1999 reflects the
completion of the recapitalization described in this proxy statement,
as well as several other transactions, as described in the notes to
the pro forma financial statements, as if they had occurred at
June 30, 1999.
. The unaudited pro forma statement of operations for the six months
ended June 30, 1999 reflects the operating results of the EFM and
Consulting Groups as discontinued operations. As a result, they have
been excluded from gross revenue, service revenue, operating income
(loss), other income (expense) and all information concerning continuing
operations for that period.
The unaudited pro forma financial statements should be read in conjunction with
the related notes, with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and with our historical financial
statements, including the related notes, incorporated by reference into this
proxy statement.
The pro forma adjustments to give effect to the various events described
above are based upon currently available information and upon assumptions that
management believes are reasonable. The pro forma financial statements are
provided for information purposes only and should not be construed to be
indicative of our results of operations or financial position had the
transactions described above been consummated on or as of the dates assumed, and
are not intended to project our results of operations or financial position for
any future period or as of any future date.
A-1
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Balance Sheet
As of June 30, 1999
(In Thousands)
<TABLE>
<CAPTION>
Pro Forma Adjustments
------------------------------------------------
Actual Other Pro Forma
June 30, Significant June 30,
1999 Transactions Recapitalization 1999
-------- ------------ ----------------- ------------
Assets
Current Assets
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 67,514 $(36,200) /1,2,8/ $ (14,646)/10,13,14/ $ 16,668
Restricted cash 22,854 - (22,854)/10/ -
Contract receivables, net 204,758 - - 204,758
Prepaid expenses and other current assets 15,693 - - 15,693
Deferred income taxes - - - -
-------- -------- ---------- --------
Total Current Assets 310,819 (36,200) (37,500) 237,119
-------- -------- ---------- --------
Fixed Assets
Furniture, equipment, and leasehold improvements 17,182 - - 17,182
Less depreciation and amortization (13,244) - - (13,244)
-------- -------- ---------- --------
3,938 - - 3,938
-------- -------- ---------- --------
Other Assets
Goodwill, net 21,687 (2,124)/3/ - 19,563
Investments in and advances to affiliates 8,939 - - 8,939
Capitalized software development costs 2,046 - - 2,046
Notes receivable 6,550 - - 6,550
Other 10,455 (746)/6/ (2,133)/12/ 7,576
-------- -------- ---------- --------
49,677 (2,870) (2,133) 44,674
-------- -------- ---------- --------
Total Assets $364,434 $(39,070) $ (39,633) $285,731
======== ======== ========== ========
Liabilities and Shareholders' (Deficit)
Current Liabilities
Accounts payable $165,983 $(12,700)/2,7/ $ - $153,283
Accrued salaries and benefits 35,447 - - 35,447
Other accrued expenses 22,959 - - 22,959
Accrued Interest 9,100 (9,100)/1/ - -
Deferred revenue 6,404 - - 6,404
Income taxes payable 4,307 - - 4,307
-------- -------- ---------- --------
Total Current Liabilities 244,200 (21,800) - 222,400
Long-term Liabilities
Long-term debt 137,730 (14,717)/4,5/ (104,110)/10,11,12,15/ 18,903
Revolving credit facility - - - -
Other 17,699 - - 17,699
-------- -------- ---------- --------
Total Liabilities 399,629 (36,517) (104,110) 259,002
-------- -------- ---------- --------
Commitments and Contingencies
Minority Interest 4,654 - - 4,654
Shareholders' Equity/(Deficit)
Preferred Stock, par value $.01 per share:
Authorized-3,100,000 shares
Issued and outstanding-2,600,000 shares - - 7/11/ 7
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
Common stock, par value $.01 per share:
Authorized-90,000,000 shares
<S> <C> <C> <C> <C>
Issued and outstanding-23,822,657 shares
(actual) and 28,029,797 share (pro forma) 238 - (42)/15/ 280
Additional paid-in capital 75,127 - (49,829)/11,14,15,17/ 23,363
Accumulated deficit (111,704) (2,553)/3,9/ 114,257 /13,15/ -
Cumulative translation adjustment (3,510) - - (3,510)
-------- -------- -------- --------
Total Shareholders' Equity (Deficit) (39,849) (2,553) 64,477 22,075
-------- -------- -------- --------
Total Liabilities and Shareholders' Equity $364,434 $(39,070) $(39,633) $285,731
======== ======== ======== ========
</TABLE>
A-3
<PAGE>
NOTES TO THE PRO FORMA BALANCE SHEET
Other Significant Transactions
Several transactions completed subsequent to June 30, 1999 were deemed to be
significant to presenting the pro forma effects of the exchange offer
transaction described in this proxy statement. Accordingly, such transactions
have been included in the pro forma balance sheet presentations.
1. To record the payment, within the 30-day grace period on July 30, 1999, of
$9.1 million of accrued interest on the senior notes and the old notes.
2. To pay $13.9 million in accounts payable.
3. To write-off the remaining carrying value of goodwill for a particular
division.
To record the anticipated settlement, prior to the recapitalization transaction
discussed below, of the $15.0 million in senior notes with the following
series of adjustments:
4. to record settlement of $15.0 million of senior notes ($15,000,000)
5. To write-off the unamortized original issue discount 283,000
6. To write-off the unamortized issuance costs 746,000
7. To expense and accrue the professional fees incurred
to complete this restructuring 1,200,000
----------
(12,771,000)
8. To record the payment of cash 13,200,000
----------
9. To record the loss on the debt restructuring ($ 429,000)
==========
Recapitalization
10. To record the use of $35.0 million in cash, including $22.9 million in
currently restricted cash, to pay off an equal amount of the old notes.
The restricted cash balance is required to support uncollateralized letters
of credit until Kaiser obtains access to a revolving line of credit that
eliminates the cash collateral requirement.
11. To record the issuance of $65.0 million in newly issued preferred stock to
extinguish an equivalent amount of the old notes. A total of 2,600,000
shares with a par value of $.01/share.
12. To write-off the remaining $2.1 million of unamortized carrying value of
the costs incurred by Kaiser to issue the old notes.
13. To record the $2.0 million estimate of the costs, including professional
fees, to be incurred for debt modification as part of this exchange offer.
14. To record the $0.5 million estimate of costs, including professional fees,
to be incurred to issue the new preferred stock as a charge to paid-in
capital.
Quasi-Reorganization
15. To record the issuance of 4,207,140 shares (882,000 shares after a
proposed reverse stock split in the ratio of 1-to-4.77) of common stock at
$.47/share (an estimate of the fair market value per common share as of the
closing of the recapitalization).
A-4
<PAGE>
16. The "Weighted Average Shares for Basic and Fully Diluted Earnings (Loss)
Per Share" as reported in the column(s) labeled "Actual Results for the six
months (and year ended) June 30, 1999 (December 31, 1998)" have been
restated to reflect the pro forma issuance of 4,207,140 shares of common
stock.
17. To reclassify $116.3 million from paid-in capital to eliminate the balance
of the accumulated deficit after the completion of the exchange offer
transactions assuming shareholder approval.
A-5
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
Year Ended December 31, 1998
(In thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
------------------------------------------
Actual Results Other Pro Forma
for the year ended Sale of Significant for the year ended
December 31, 1998 EFM and CG Transactions Recapitalization December 31, 1998
------------------ ---------- ------------ ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Gross Revenue $1,210,421 $(210,529)/2/ - $ - $ 999,892
Subcontract and direct
material costs (794,794) 78,131 /2/ - - (716,663)
Provision for contract
losses (76,210) - - - (76,210)
Equity in net income of
unconsolidated
subsidiaries 6,045 (600)/2/ - - 5,445
---------- ---------- --------- ---------- -----------
Service Revenue 345,462 (132,998) - - 212,464
Operating Expenses
Direct labor and fringe
benefits 282,562 (64,225)/2/ - - 218,337
Group overhead 92,151 (48,144)/2/ - - 44,007
Corporate general and
administrative 22,983 (5,970)/2/ - - 17,013
Depreciation and
amortization 9,048 (2,776)/2/ (192)/8/ (480)/7/ 5,600
Severance and restructuring 9,407 - - - 9,407
Other unusual charges 7,672 - - - 7,672
---------- --------- --------- ---------- -----------
Operating Income (Loss) (78,361) (11,883) 192 480 (89,572)
Other Income (Expense)
Debt restructuring costs - - - (2,000)/4/ (2,000)
Interest income 1,539 655 /3/ - - 2,194
Interest expense (20,279) 1,944 /3/ 1,950 /9/ 7,175 /5/ (9,210)
---------- --------- --------- ---------- -----------
Income (Loss) From
Continuing Operations
Before Income
Taxes, Minority Interest,
Extraordinary Item, and
Cumulative Effect of
Accounting Change (97,101) (9,284) 2,142 5,655 (98,588)
Income tax benefit 11,357 - - - 11,357
---------- ---------- --------- ---------- ----------
Income (Loss) From
Continuing Operations
Before Minority Interest,
Extraordinary Item, and
Cumulative Effect of
Accounting Change (85,744) (9,284) 2,142 5,655 (87,231)
Minority interest in net
income of subsidiaries (7,698) - - (7,698)
---------- ---------- ----------- ----------- ----------
Income (Loss) From
Continuing Operations
Before Extraordinary Item
and Cumulative Effect
of Accounting Change (93,442) (9,284) 2,142 5,655 (94,929)
Gain on sale of
discontinued operations
(net of tax) - 55,642 /1/ - - 55,642
---------- ----------- ----------- ----------- -----------
Income (Loss) Before
Extraordinary Item and
Cumulative Effect of
Accounting Change (93,442) 46,358 2,142 5,655 (39,287)
Extraordinary Items (net
of tax) (1,090) - (429)/10/ - (1,519)
---------- ----------- ------------ ----------- ----------
Income (Loss) Before
Cumulative Effect of
Accounting Change (94,532) 46,358 1,713 5,655 (40,806)
Cumulative effect of
accounting change (net of
tax) (6,000) - - - (6,000)
----------- ----------- ------------ ----------- ----------
Net Income (Loss) (100,532) 46,358 1,713 5,655 (46,806)
Preferred Stock Dividends - - - (2,495)/6/ (2,495)
---------- ----------- ------------ ----------- ----------
Net Income (Loss)
Available for
Common Shareholders $ (100,532) $ 46,358 $ 1,713 $ 3,160 $ (49,301)
========== =========== ============ ========== ==========
Basic and Fully Diluted
Earnings (Loss) Per Share:/16/
Income (Loss) From Continuing
Operations Before Discontinued
Operations, Extraordinary Item
and Cumulative Effect of
Accounting Change $ (3.30) $ (.33) $ .08 $ .11 $ (3.44)
Discontinued Operations - 1.97 - - 1.97
Extraordinary Item (.04) - (.02) - (.06)
Cumulative Effect of
Accounting Change (.21) - - - (.21)
---------- ------------ ------------ ------------ -----------
Net Income (Loss)
Available to Common
Shareholders $ (3.55) $ 1.64 $ .06 $ .11 $ (1.74)
========== ============ ============ =========== ===========
Weighted Average Shares
for Basic and Fully
Diluted Earnings (Loss)
Per Share/16/ 28,299 28,299 28,299 28,299 28,299
========== ============ ============ =========== ===========
</TABLE>
A-6
<PAGE>
ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
Six Months Ended June 30, 1999
(In thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
-------------------------------
Actual Results Pro Forma Results
for the Other for the
six months ended Sale of Significant six months ended
June 30, 1999 EFM and CG Transactions Recapitalization June 30, 1999
------------- ---------- ------------ ---------------- -----------
<S> <C> <C> <C> <C> <C>
Gross Revenue $ 445,377 $ - - $ - $ 445,377
Subcontract and direct
material costs (320,940) - - - (320,940)
Equity in net income of
unconsolidated
subsidiaries 2,996 - - - 2,996
--------- --------- ------------ ------- ---------
Service Revenue 127,433 - - - 127,433
Operating Expenses
Direct labor and fringe benefits 97,310 - - - 97,310
Group overhead 20,089 - - - 20,089
Corporate general and administrative 8,139 - - - 8,139
Depreciation and amortization 3,098 - (60)/8/ (266)/7/ 2,772
Other unusual charges 1,335 - - - 1,335
Severance and restructuring 9,359 - - - 9,359
--------- --------- ------------ ------- ---------
Operating Income (Loss) (11,897) - 60 266 (11,571)
Other Income (Expense)
Debt restructuring costs - - - (2,000)/4/ (2,000)
Interest income 607 327/3/ - - 934
Interest expense (12,209) 2,570/3/ 900/9/ 3,639/5/ (5,100)
--------- --------- ------------ ------- ---------
Income (Loss) From Continuing
Operations Before
Income Taxes and Minority Interest (23,499) 2,897 960 1,905 (17,737)
Income tax expense benefit 602 - - - 602
--------- --------- ------------ ------- ---------
Income (Loss) From Continuing (22,897) 2,897 960 1,905 (17,135)
Operations Before
Minority Interest
Minority interest in net (4,205) - - - (4,205)
income of subsidiaries
--------- --------- ------------ ------- ---------
Income (Loss) From Continuing
Operations (27,102) 2,897 960 1,905 (21,340)
Discontinued Operations
Income (Loss) from operations
of discontinued
operations (net of tax) 2,157 (2,157)/2/ - - -
Gain on sale of discontinued
operations (net of tax) 48,755 - - - 48,755
--------- --------- ------------ ------- ---------
Income (Loss) from Continuing
Operations Before
Extraordinary Item 23,810 740 960 1,905 27,415
Extraordinary Items(net of tax) (698) - (429)/10/ - (1,127)
--------- --------- ------------ ------- ---------
Net Income (Loss) 23,112 740 531 1,905 26,288
Preferred Stock Dividends - - - (1,228)/6/ (1,228)
--------- --------- ------------ ------- ---------
Net Income (Loss) Available for
Common Shareholders $ 23,112 $ 740 $ 531 $ 677 $ 25,060
========= ========= ============ ======== =========
Basic and Fully Diluted Earnings
(Loss) Per Share:/16/
Income (Loss) From
Continuing Operations $ (.96) $ .10 $ .03 $ .02 $ (.81)
Discontinued Operations 1.80 (.08) $ - - 1.72
Extraordinary Item (.02) (.01) - (.03)
--------- --------- ------------ -------- ---------
Net Income (Loss) Available to
Common Shareholders $ .82 $ .02 $ .02 $ .02 $ .88
========= ========= ============ ======== =========
Weighted Average Shares
for Basic and Fully
Diluted Earnings (Loss)
Per Share/16/ 28,178 28,178 $28,178 28,178 28,178
========= ========= ============ ======= =========
</TABLE>
A-7
<PAGE>
NOTES TO THE PRO FORMA INCOME STATEMENTS
1. Sale of EFM and the Consulting Group
Sale of EFM
-----------
On April 9, 1999, we sold specified assets and certain liabilities of EFM
for $82.0 million, less $8.0 million in working capital, for total cash
proceeds of $74.0 million. The gain, for purposes of the pro forma
presentations, on the sale of EFM was calculated as follows, as if the
transaction had taken place on:
January 1, 1998 January 1, 1999
---------------- ----------------
Sale proceeds 74,000 74,000
Transaction fees (2,056) (2,056)
-------- --------
Net sales price 71,944 71,944
Net assets of discontinued operations (31,016) (33,838)
-------- --------
Gain 40,928 38,106
Tax provision (a) (26,391) (24,721)
-------- --------
Gain on sale, net of tax $ 14,537 $ 13,385
======== ========
Sale of the Consulting Group
----------------------------
On June 30, 1999, we sold 90% of our Consulting Group for $64 million in
cash, $6.6 million of interest bearing notes and a $3.0 million working
capital receivable. The gain, for purposes of the pro forma presentations,
on the sale of the Consulting Group was calculated as follows, as if the
transaction had taken place on:
January 1, 1998 January 1, 1999
---------------- ----------------
Sale proceeds 73,550 73,550
Transaction fees (1,082) (1,082)
-------- --------
Net sales price 72,468 72,468
Net assets of discontinued operations
and other asset write-offs (20,568) (27,283)
-------- --------
Gain 51,900 45,185
Tax provision (a) (10,795) (9,815)
-------- --------
Gain on sale, net of tax $ 41,105 $ 35,370
======== ========
(a) Assumes goodwill write-off is not deductible for tax purposes.
2. To remove the divestitures' results of operations for the respective periods
(Effective January 1, 1999, the results of operations of EFM and the
Consulting Group were reflected in the income statement as discontinued
operations).
A-8
<PAGE>
3. To reflect the pro forma reduction of $2.0 million and $2.6 million interest
expense as if cash proceeds had been used to pay off the closing date
revolving debt balance of $36.9 million as of the beginning of the period
and to accrue $.6 million and $.3 million in interest income for the year
ended December 31, 1998 and the six months ended June 30, 1999,
respectively, on the $6.6 million of notes received as part of the sale of
the Consulting Group.
Recapitalization (assumes $35.0 million in cash is used and $25.0 million in new
notes are exchanged)
4. To record the expenses of $2.0 million for professional fees estimated to be
incurred to complete the exchange offer.
5. To reflect the following pro forma reduction of interest expense;
<TABLE>
<CAPTION>
Year Ended Six Month Ended
December 31, 1998 June 30, 1999
---------------------------- -------------------------
<S> <C> <C>
. the reduction of 13% interest expense on the $125.0
million of old notes $16,200 $ 8,100
. to increase interest expense equal to 15% on the $25.0
million of new notes (3,750) (1,875)
. to record the effective interest expense necessary to
accrete the remaining $18.9 million carrying value of the
old notes to the face value of the $25.0 million in new
notes exchanged (5,275) (2,586)
------- -------
$ 7,175 $ 3,639
======= =======
</TABLE>
6. To reflect the pro forma effect of the accrual of dividends on the preferred
stock as if it had been issued as of the beginning of the period. The
adjustment assumes Kaiser accrues the dividends to the shareholders at the
3.75% annual dividend rate.
7. To reflect the pro forma reduction of amortization expense associated with
the capitalized issue costs of the old notes. The remaining unamortized
carrying value of the issue costs was reclassified as a reduction of the
carrying value of the new notes.
Other Significant Transactions
8. To reflect the pro forma reduction of amortization expense associated with
the capitalized issue costs of the senior notes.
9. To reflect the pro forma reduction of interest expense on the senior notes.
10. To record the settlement of the $15.0 million senior notes as follows
(dollars in millions):
Principal $15.0
Less: Cash payment (13.2)
Unamortized original issue discount (.3)
Unamortized issuance costs (.7)
Costs to complete transaction (1.2)
-----
$ .4
A-9
<PAGE>
Appendix B
Quarterly financial information for fiscal quarters during the six months ended
June 30 is presented in the following tables (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Second First
1999 Quarter Quarter
------------- --------------
<S> <C> <C>
Gross revenue $219,880 $225,497
Service revenue 63,274 64,159
Operating income (loss) -10,095 -1,802
Income (loss) from continuing operations before income taxes, minority
interest, extraordinary item and cumulative effect of accounting change -16,113 -7,386
Net income (loss) before discontinued operations, extraordinary item
and cumulative effect of account change -18,809 -8,293
Net income (loss) 28,831 -5,719
Basic and fully diluted per share amounts for:
Continuing operations before extraordinary item and cumulative
effect of accounting change -$0.79 -$0.34
Discontinued operations (net of tax) 2.03 0.09
Extraordinary item (net of tax) -0.03 0.00
Cumulative effect of accounting change (net of tax) 0.00 0.00
-------- --------
Net income (loss) $ 1.21 -$0.25
======== ========
1998
Gross revenue $263,129 $256,839
Service revenue 33,593 74,532
Operating income (loss) -39,227 4,348
Income (loss) from continuing operations before income taxes, minority
interest, extraordinary item and cumulative effect of accounting change -43,731 -7
Net income (loss) before discontinued operations, extraordinary item
and cumulative effect of accounting change -31,612 -2,050
Net income (loss) -35,668 445
Basic and fully diluted per share amounts for:
Continuing operations before extraordinary item and cumulative
effect of accounting change -$1.31 -$0.09
Discontinued operations (net of tax) 0.08 0.10
Extraordinary item (net of tax) 0.00 0.00
Cumulative effect of accounting change (net of tax) -0.25 0.00
-------- --------
Net income (loss) -$1.48 $ 0.01
======== ========
</TABLE>
B-1
<PAGE>
[Logo appears here] Proxy Solicited on Behalf of the Board of Directors of the
Company for the Annual Meeting of Shareholders to be held
on Thursday, November 4, 1999
The undersigned hereby constitutes and appoints James J. Maiwurm and Jarrod
P M. Cohen, and each of them, his or her true and lawful agents and proxies
R with full powers of substitution in each, to represent the undersigned at
O the Annual Meeting of Shareholders of ICF KAISER INTERNATIONAL, INC. to be
X held at the headquarters of the Company, 9300 Lee Highway, Fairfax,
Y Virginia on Thursday, November 4, 1999, at 10:00 a.m., and at any
adjournments thereof, on all matters coming before said meeting.
Election of Directors, Nominees: Thomas C. Jorling
James J. Maiwurm
Hazel R. O'Leary
You are encouraged to specify your choices by marking the appropriate boxes,
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. The Proxies named
above cannot vote your shares unless you sign and return this card.
SEE REVERSE
SIDE
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
[LOGO APPEARS HERE] Annual Meeting
of Shareholders
November 4, 1999
10:00 a.m.
Auditorium
9300 Lee Highway
Fairfax, VA 22031
<PAGE>
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR election of
directors and FOR proposals 2, 3, 4, 5, 6, 7, 8 and 9.
- -------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR election of directors and
FOR proposals 2, 3, 4, 5, 6, 7, 8 and 9.
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
<CAPTION>
FOR WITHHELD 5. Rights Plan Proposal FOR AGAINST ABSTAIN
1. Election of
Directors [ ] [ ] [ ] [ ] [ ]
(see reverse)
For, except vote withheld from 6. Obsolete Preferred FOR AGAINST ABSTAIN
the following nominee(s): Stock Proposal [ ] [ ] [ ]
- ------------------------------
2. Stock Issuance FOR AGAINST ABSTAIN 7. Stock Incentive Plan FOR AGAINST ABSTAIN
Proposal [ ] [ ] [ ] Proposal [ ] [ ] [ ]
3. Reverse Split FOR AGAINST ABSTAIN 8. Quasi-Reorganization FOR AGAINST ABSTAIN
Proposal [ ] [ ] [ ] Proposal [ ] [ ] [ ]
4. Shareholder FOR AGAINST ABSTAIN 9. Ratification of FOR AGAINST ABSTAIN
Democracy [ ] [ ] [ ] Accountants [ ] [ ] [ ]
Proposal
- ----------------------------------------------------------------------------------------
</TABLE>
NOTE: Please sign exactly as name appears
hereon. Joint owners should each sign.
When signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such.
The signer hereby revokes all proxies
heretofore given by the signer to vote at
said meeting or any adjournments thereof.
_________________________________________
_________________________________________
SIGNATURE(S) DATE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
Annual Meeting
of
ICF Kaiser International, Inc.
Shareholders
Thursday, November 4, 1999
10:00 a.m.
Auditorium
9300 Lee Highway
Fairfax, VA
===============================================================================
Agenda
------
* Election of three directors
* Approval of proposals 2, 3, 4, 5, 6, 7, 8 and 9
* Report on the progress of the Company
* Questions from shareholders in attendance
===============================================================================
<PAGE>
CONFIDENTIAL VOTING INSTRUCTIONS
ICF KAISER INTERNATIONAL, INC. This confidential Voting Instruction
Card is solicited on behalf of the
Board of Directors
To: The Trustee of the ICF Kaiser International, Inc. Employee Stock
Ownership, Retirement and Section 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: (i) to vote 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) to vote as a named fiduciary the proportionate amount
of shares 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 November 4, 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, 8 and 9.
(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 [ ] ABSTAIN
(3) REVERSE SPLIT PROPOSAL
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) SHAREHOLDER DEMOCRACY PROPOSAL
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(5) RIGHTS PLAN PROPOSAL
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(6) OBSOLETE PREFERRED STOCK PROPOSAL
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(7) STOCK INCENTIVE PLAN PROPOSAL
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(8) QUASI-REORGANIZATION PROPOSAL
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(9) RATIFICATION OF ACCOUNTANTS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Dated ____________, 1999 __________________________________
Signature
Please Mark, Sign, Date and Return the Voting Instructions
Promptly using the Enclosed Envelope.
<PAGE>
Participant Notice
ICF Kaiser International, Inc. Employee Stock Ownership, Retirement
and Section 401(k) Plans
October 1, 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 November
4, 1999, to elect directors and to conduct other business.
While only the Trustee of the ICF Kaiser International, Inc. Employee Stock
Ownership, Retirement and Section 401(k) 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 September 9, 1999, (the record
date for the annual meeting) and a named fiduciary under 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 ratio
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.
A named fiduciary is a person who under ERISA has the authority and
responsibility (if he or she chooses to exercise it) to instruct the trustee of
a plan regarding specific investments. Consequently, due to the provisions of
each of the Plans, each Plan participant as a named fiduciary may (if he or she
chooses) instruct the trustee of the Plan as to how to vote shares of Company
Stock allocated to his or her own Plan account and how to vote a pro-rata
portion of those shares of Company Stock which are not voted by participants
with such shares allocated to their accounts.
Accordingly, please review the enclosed information carefully and complete the
Instruction Card and return it to First Chicago Trust, Division of Equiserve,
525 Washington Blvd., Jersey City, NJ 07310 by November 1, 1999. If you wish to
vote the Company Stock allocated to you under any Plan in a different manner
than Company Stock allocated to you under another Plan, or if you wish to vote
the Company Stock allocated to your Plan accounts in a different manner than
Company Stock allocated to Plan participants who do not vote Company Stock
allocated to their accounts, please contact Client Administration at First
Chicago Trust, Division of Equiserve, 525 Washington Blvd., Jersey City, NJ
07310 (201-222-4683) for another Instruction Card.
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
November 1, 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 Client Administration at First Chicago Trust, Division of Equiserve, 525
Washington Blvd., Jersey City, NJ 07310 (201-222-4683).
Trustee of the ICF Kaiser International, Inc. Employee Stock Ownership,
Retirement and Section 401(k) Plans
