-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MKo/6TgUfqo8SrMWGs4hTxUppLMbqsFGnRU/hgyGgs330ufK/9Ny8Odxxb37Bh93 JIzQL2rY/fRFvFaeTTfsTw== 0001077604-99-000261.txt : 19990928 0001077604-99-000261.hdr.sgml : 19990928 ACCESSION NUMBER: 0001077604-99-000261 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19990927 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ICF KAISER INTERNATIONAL INC CENTRAL INDEX KEY: 0000856200 STANDARD INDUSTRIAL CLASSIFICATION: HAZARDOUS WASTE MANAGEMENT [4955] IRS NUMBER: 541437073 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-82643 FILM NUMBER: 99717236 BUSINESS ADDRESS: STREET 1: 9300 LEE HWY CITY: FAIRFAX STATE: VA ZIP: 22031 BUSINESS PHONE: 7039343600 MAIL ADDRESS: STREET 1: 9300 LEE HWY CITY: FAIRFAX STATE: VA ZIP: 22031 FORMER COMPANY: FORMER CONFORMED NAME: ICF INTERNATIONAL INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN CAPITAL & RESEARCH CORP /DE/ DATE OF NAME CHANGE: 19910314 S-4/A 1 PRE-EFFECTIVE AMENDMENT #2 As filed with the Securities and Exchange Commission on September 24, 1999 Registration No. 333-82643 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________ PRE-EFFECTIVE AMENDMENT NO. 2 to FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ___________ ICF KAISER INTERNATIONAL, INC. (Exact name of Registrant as specified in its charter) Delaware 8711 54-1437073 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of incorporation or Classification Code No.) Identification No.) organization)
9300 Lee Highway, Fairfax, Virginia 22031-1207 (703) 934-3600 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) James J. Maiwurm, President and Chief Executive Officer 9300 Lee Highway Fairfax, Virginia 22031-1207 (703) 934-3600 (Name, address, including zip code, & telephone number, including area code, of agent for service) Copy to: Jeffrey J. Margulies, Esq. Squire, Sanders & Dempsey L.L.P. 4900 Key Tower 127 Public Square Cleveland, Ohio 44114-1304 ___________________________________ Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ]
CALCULATION OF REGISTRATION FEE - -------------------------------------------------------------------------------- Title of Each Proposed Proposed Class of Maximum Maximum Amount of Securities To Amount To Be Offering Aggregate Registration Be Registered Registered (1) (2) Price Per Unit (2) Offering Price (1) (2) Fee (3) - -------------------------------------------------------------------------------------------------------------------------------- Convertible Preferred Stock - -------------------------------------------------------------------------------------------------------------------------------- Warrants to Purchase Common Stock - -------------------------------------------------------------------------------------------------------------------------------- Common Stock, par value $.01 per share (4) - -------------------------------------------------------------------------------------------------------------------------------- New Notes - -------------------------------------------------------------------------------------------------------------------------------- Total $98,000,000 $98,000,000 $5,004 - --------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for purposes of computing the registration fee pursuant to Rule 457(o) under the Securities Act of 1933. (2) Not specified as to each class of securities being registered, since the amount of each class of securities to be offered in the exchange offer has not been finally determined. The maximum aggregate offering price of securities issued under this registration will not exceed $98,000,000 unless additional securities are subsequently registered by an amendment to the registration statement. (3) Represents registration fee due for securities being registered in excess of aggregate offering price of $80,000,000, for which amount the registration fee has been paid previously. (4) Represents common stock issuable upon conversion of convertible preferred stock and upon exercise of warrants being registered under this registration statement. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE. ================================================================================ PROSPECTUS AND CONSENT SOLICITATION STATEMENT ICF KAISER INTERNATIONAL, INC. ________________________________________________________________________________ Recapitalization Our recapitalization consists of an exchange offer, an asset sale offer and a consent solicitation, all of which are dependent upon each other.
Exchange Offer Convertible Preferred Stock . We are offering to exchange for all 12% Senior . We will issue 2,600,000 shares of redeemable Subordinated Notes due 2003 that are outstanding convertible preferred stock, with an aggregate following the purchase of those old notes in an asset liquidation preference of $65 million, or $25 per share, sale offer: plus accrued interest on the old notes from July 1, 1999 through the date of the closing of the recapitalization. . preferred stock with a liquidation preference . We will pay quarterly dividends on the preferred of $65 million plus accrued interest on the old stock at the initial rate of ____% of the liquidation notes from July 1, 1999 through the date of preference, increasing to 12% on December 31, 2001. the closing of the recapitalization, . The preferred stock will be convertible into our . warrants to purchase approximately 15% of our common stock at the holders' option on or after December common stock on a fully diluted basis, and 1, 2001. . up to $25 million principal amount of new notes. . We may redeem the preferred stock, at our option, at any time and will be required to redeem the preferred Asset Sale Offer stock on December 31, 2004. . In connection with the exchange offer, we are Warrants offering to purchase for cash at par on a pro rata basis a total of up to $40 million principal amount . We will issue an aggregate of up to 882,000 warrants, which of old notes. will entitle the holders to purchase an aggregate of approximately 15% of our common stock on a fully diluted basis. Consent Solicitation . The warrants will be immediately exercisable and will expire on December 31, 2004. . We also are soliciting the holders of the old notes . The exercise price of the warrants will be equal to for consents to remove most covenants in the the average daily closing price of our common stock for indenture governing the old notes. a specified period following consummation of the exchange offer. Market for Securities New Notes . Our common stock is listed on the New York Stock Exchange under the trading symbol "ICF." We will . The new notes will mature on December 31, 2002. apply to list the preferred stock and the common . We will pay interest on the new notes at an annual stock underlying the preferred stock and warrants. rate of 12%, payable twice a year beginning on December The warrants and the new notes will not be listed on 31, 1999. any exchange. The NYSE has notified us that we . The new notes will be unsecured senior debt. currently do not meet its newly effective continued . We may, at our option, redeem the new notes at par listing criteria, but we believe our recapitalization plus accrued interest at any time. is an important element in our efforts to remedy this situation. _______________________________________________
See "Risk Factors" on page 13 of this prospectus for a discussion of risks to be considered in connection with your investment decision. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the preferred stock, warrants, common stock or new notes or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is September ___, 1999. TABLE OF CONTENTS
Page ---- SUMMARY................................................................. 1 The Recapitalization................................................. 1 Rationale for the Recapitalization................................... 2 Cautionary Note Regarding Forward-Looking Statements................. 2 The Convertible Preferred Stock...................................... 3 The Warrants......................................................... 4 The New Notes........................................................ 4 The Exchange Offer................................................... 5 The Asset Sale Offer................................................. 6 The Consent Solicitation............................................. 6 Possible Prepackaged Plan of Reorganization.......................... 7 The Company.......................................................... 7 Strategy............................................................. 8 Risk Factors......................................................... 9 Summary Financial Data............................................... 10 RISK FACTORS............................................................ 13 CAPITALIZATION.......................................................... 17 RATIO OF EARNINGS TO FIXED CHARGES...................................... 18 UNAUDITED PRO FORMA FINANCIAL STATEMENTS................................ 19 NOTES TO THE PRO FORMA BALANCE SHEET.................................... 22 NOTES TO THE PRO FORMA INCOME STATEMENTS................................ 25 OVERVIEW AND BACKGROUND OF THE RECAPITALIZATION......................... 27 THE EXCHANGE OFFER...................................................... 27 THE ASSET SALE OFFER.................................................... 30 THE CONSENT SOLICITATION................................................ 31 POSSIBLE PREPACKAGED PLAN OF REORGANIZATION............................. 33 PROCEDURES FOR PARTICIPATING IN THE EXCHANGE OFFER, ASSET SALE OFFER AND CONSENT SOLICITATION............................................... 33 BUSINESS................................................................ 37 MANAGEMENT.............................................................. 41 UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS......................... 42 DESCRIPTION OF CONVERTIBLE PREFERRED STOCK.............................. 48 DESCRIPTION OF WARRANTS................................................. 50 DESCRIPTION OF COMMON STOCK............................................. 51 DESCRIPTION OF NEW NOTES................................................ 58 WHERE YOU CAN FIND MORE INFORMATION..................................... 80 INCORPORATION BY REFERENCE.............................................. 80 EXPERTS................................................................. 81 LEGAL MATTERS........................................................... 82
i SUMMARY The following summary highlights selected information from this prospectus and may not contain all of the information that is important to you. This prospectus includes specific terms of the preferred stock, warrants, underlying common stock and new notes, as well as information regarding our business and detailed financial data. We encourage you to read this prospectus in its entirety. The Recapitalization Overview. The recapitalization will be completed in a series of simultaneous transactions, each of which is dependent upon consummation of the others. Assuming the conditions of the exchange offer are met: . we will purchase up to $40 million principal amount of tendered old notes at par in an asset sale offer; . for the remaining tendered old notes, we 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, . warrants to purchase approximately 15% of our common stock on a fully diluted basis, and . up to $25 million principal amount of new notes; . holders of a majority of the outstanding old notes will consent to the amendment of the indenture governing the old notes; and . we will enter into a new credit facility. As a result of the recapitalization, holders of old notes will receive, for each $1,000 of old notes tendered in the asset sale offer and the exchange offer, $____ in cash, ____ shares of preferred stock, representing a liquidation preference of $_____ plus a pro rata portion of the accrued interest on the old notes from July 1, 1999 through the date of the closing of the recapitalization, warrants to purchase ___% of our common stock on a fully diluted basis, and $________ principal amount of new notes. The terms of the recapitalization are the product of negotiations with an unofficial committee of holders of old notes owning in excess of 80% of the aggregate principal amount of the old notes. Asset Sale Offer. In general terms, the indenture governing the old notes requires us to use proceeds from asset sales to reduce senior indebtedness or reinvest in our business or make an asset sale offer to purchase the old notes at par, on a pro rata basis. As a result of the sale of our Consulting Group we have approximately $40 million of available cash to fund an asset sale offer to holders of our old notes. Exchange Offer. We are offering preferred stock, warrants and new notes in exchange for all remaining tendered old notes not purchased in the asset sale offer. Our acceptance of old notes tendered in the exchange offer is conditioned on, among other things, holders of at least 95% of the principal amount of old notes accepting the exchange offer and our obtaining a new credit facility. In order to participate in the exchange offer, the holder of old notes must tender all of the old notes beneficially owned by the holder. Consent Solicitation. Simultaneously with the exchange offer we are seeking a consent from the holders of our old notes to remove substantially all restrictive covenants and some defined events of default from the indenture governing the old notes. In addition, we are requesting holders of the old notes to deliver an instruction to the Trustee not to interfere with our recapitalization. A holder of old notes does not need to consent to the proposed amendments in order to tender its old notes in the exchange offer. New Credit Facility. We are in preliminary discussions with potential lenders with respect to a new credit facility. The closing of any new credit facility is conditioned on the successful completion of the recapitalization, and obtaining a new credit facility is a condition of completing the exchange offer. We anticipate that any new credit facility will provide for revolving credit availability and the issuance of letters of credit. We expect the availability of credit under the new credit facility will be a function of a borrowing base determined with reference to eligible receivables. We further anticipate that borrowings under the new credit facility will be secured by substantially all of our assets. 1 We do not expect to have available a new revolving credit facility until the completion of the recapitalization. Until that time, we will cash collateralize any letters of credit of the type often required to support contract performance obligations and we will utilize other available cash for working capital purposes. Rationale for the Recapitalization The amount of cash flow currently available from our remaining operations is insufficient to service the interest expense associated with our existing debt obligations. We are also significantly more leveraged than our competitors. Especially in the recent past, this has sometimes impaired our ability to win new business. Additionally, our current financial position has impaired and could in the future impair our ability to retain key personnel. A realignment of our capital structure through the recapitalization will substantially reduce our level of debt and associated interest expense, and we believe we will be better able to service remaining obligations after the recapitalization. We also believe the recapitalization will enhance our ability to win new business and retain and attract key employees. The completion of the recapitalization is a condition to our securing a new credit facility, which is necessary to support short-term liquidity needs and letters of credit. If the recapitalization is not consummated, we may continue to negotiate with the holders of the old notes and senior notes for a recapitalization, we may invest the proceeds from the sale of our Consulting Group in a related business investment or we may seek implementation of the recapitalization through a so-called "prepackaged" plan of reorganization. See "Possible Prepackaged Plan of Reorganization." If we were to seek implementation of a recapitalization through confirmation in a bankruptcy proceeding, no assurance can be given that the recapitalization would meet the requirements for confirmation under the U.S. Bankruptcy Code even if the requisite consents are received and the old notes subject to the consents are voted to accept the recapitalization. Cautionary Note Regarding Forward-Looking Statements This prospectus contains what we believe are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. They are statements about future performance or results such as statements including the words, "believe," "expect" and "anticipate" when Kaiser discusses its financial condition, results of operations and business. Forward-looking statements involve risks, assumptions and uncertainties. They are not guarantees of future performance. Factors may cause actual results to differ materially from those expressed in these forward-looking statements. These factors include those identified under the caption "Risk Factors" in this prospectus, as well as the factors identified under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in Kaiser's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999 that is incorporated by reference into and delivered with this prospectus. We believe that the expectations reflected in our forward-looking statements are reasonable. However, we cannot assure you that these expectations will prove to be correct. You should consider the factors we have noted under the captions stated above as you read this prospectus. 2 The Convertible Preferred Stock Issuer.................................... ICF Kaiser International, Inc. Securities Offered........................ We are offering 2,600,000 shares of redeemable convertible preferred stock. Liquidation Preference.................... The aggregate liquidation preference is $65 million, or $25 per share, plus accrued interest on the old notes from July 1, 1999 through the date of the closing of the recapitalization. Dividends................................. Cumulative dividends on the preferred stock will be payable in cash on a quarterly basis at an initial rate per year equal to ___% of the liquidation preference per share. The dividend rate on the preferred stock will increase to 12% on December 31, 2001. If we fail for any reason to pay a dividend in cash in any quarter, and if we fail to pay the delinquent dividend and the current dividend in the following quarter, holders of the preferred stock will have the right to appoint two additional directors for the two dividends missed and one additional director if any future dividend payment is missed, up to a maximum of three additional directors. The size of our Board of Directors will be expanded accordingly. Unpaid dividends will accrue as additional dividends at 12% per year, which will be added to the liquidation preference. Conversion................................ The preferred stock will be convertible into our common stock at the option of the holder, subject to prior notice of redemption, 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 convertible 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: . 90% of the liquidation preference until June 30, 2001; . 95% of the liquidation preference from June 30, 2001 to December 31, 2001; and . 100% of the liquidation preference from and after December 31, 2001, plus any 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 a price of $.01 per share, 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................... If there is a change of control, we must offer to repurchase the preferred stock at 101% of the liquidation preference plus accumulated 3 and unpaid dividends. 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 a price of $.01 per share, 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 our 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 until the time it is convertible, at which point it 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 a proposed reverse split of the common stock is implemented, the preferred stock will represent approximately 12% of the total voting power of the common and preferred stock. If Kaiser or any of its affiliates hold any preferred stock, they will not be entitled to vote that preferred stock on these matters. The terms of the preferred stock may only be amended with a two-thirds affirmative vote of the holders of preferred stock. The Warrants Issuer.................................... ICF Kaiser International, Inc. Securities Offered........................ We are offering as part of the exchange offer an aggregate of up to 882,000 warrants, which will entitle the holders to purchase an aggregate of approximately 15% of our common stock on a fully diluted basis. Term...................................... The warrants will expire on December 31, 2004, if they have not been exercised prior to this date. Exercise Price............................ The exercise price of the warrants will be equal to the average daily closing price of our common stock for the first 20 consecutive trading days following consummation of the exchange offer. The New Notes Issuer.................................... ICF Kaiser International, Inc. Securities Offered........................ We are offering up to $25 million aggregate principal amount of new notes. Maturity Date............................. The new notes will mature on December 31, 2002. Interest Rate............................. We will pay an annual rate of interest equal to 12%. Interest Payments......................... We will make interest payments semi- annually, beginning on December 31, 1999. Ranking................................... The new notes will be unsecured senior debt. The new notes will rank senior in right of payment to any of our future subordinated debt and to any unexchanged old notes. However, the new notes will be effectively subordinated to our present and future secured obligations and to any indebtedness of those of our subsidiaries that have not guaranteed the new notes. Optional Redemption....................... We may redeem the new notes at our option, in whole or in part, at any time and from time to time at a redemption price equal to 100% of 4 the principal amount plus accrued and unpaid interest. Asset Sale Proceeds....................... If we do not reinvest cash proceeds from any future sale of assets in our business, we may have to use these proceeds to offer to purchase some of the new notes at their face amount, plus interest. Restrictive Covenants..................... The indenture governing the new notes will limit what we may do. The provisions of the indenture will limit our ability to: . incur more debt; . pay dividends, redeem stock, or make other distributions; . issue stock of subsidiaries; . make some investments; . create liens; . enter into sale/leaseback transactions; . enter into transactions with affiliates; . merge or consolidate; and . transfer or sell assets. These covenants are subject to a number of important exceptions. See "Description of New Notes." The Exchange Offer The Exchange Offer........................ We are offering to exchange preferred stock, warrants and new notes for all old notes outstanding after the asset sale offer. Minimum Tender Condition.................. In order for us to consummate the exchange offer, holders of at least 95% of the outstanding old notes must have validly tendered their old notes. Conditions of the Exchange Offer.......... Our acceptance of the exchange offer is subject to the following conditions, among other things: . the minimum tender condition of 95% must be met; . we must obtain the requisite consents from holders of the old notes; . our shareholders must approve the issuance of the preferred stock and warrants being offered in the exchange offer; and . we must obtain a new credit facility. At any time we can waive any condition to the exchange offer and accept all old notes tendered for exchange pursuant to the exchange offer. Additionally, we reserve the right at any time to terminate the exchange offer and not accept for exchange any old notes tendered for exchange. See "The Exchange Offer- Conditions of the Exchange Offer." Expiration Date........................... The exchange offer, as well as the asset sale offer and consent solicitation, will expire at 5:00 p.m., New York City time, on _______ unless we extend or earlier terminate them. We can extend the exchange offer and accept all old notes tendered for exchange or amend the terms of the exchange offer and any amendment will apply 5 to the old notes tendered pursuant to the exchange offer. Tax Consequences of the Exchange.......... The exchange, taken together with the cash purchase of old notes pursuant to the asset sale offer, should qualify as a recapitalization under the Internal Revenue Code. If that is the case, a holder of old notes who participates in both the exchange and the asset sale offer will recognize taxable gain, but not loss, equal to the lesser of the cash plus the fair market value of the new notes received or the aggregate amount of gain realized on the exchange and cash purchase of old notes. However, if the Internal Revenue Service were to successfully claim that the exchange of old notes and the cash purchase of old notes pursuant to the asset sale offer should be treated independently of each other for federal income tax purposes, a holder of the old notes who participates in both the exchange and the asset sale offer would recognize taxable gain, but not loss, on the exchange equal to the lesser of the fair market value of the new notes received or the amount of gain realized on the exchange and would recognize taxable gain or loss on the purchase of the old notes pursuant to the asset sale offer. Further, if the Internal Revenue Service were to successfully claim that the exchange does not qualify as a recapitalization, the holders of old notes who participate in the exchange offer and/or the asset sale offer would be required to recognize taxable gain or loss on both the exchange and the cash purchase. See "United States Federal Income Tax Considerations." The Asset Sale Offer The Asset Sale Offer...................... We will be offering to purchase up to $40 million of the old notes. All old notes tendered for purchase will be purchased on a pro rata basis. The offer to purchase will be made at the same time as the offer to exchange, and the purchase will be consummated immediately prior to consummation of the exchange offer. Conditions to Asset Sale Offer............ We will only consummate the asset sale offer if the conditions to the exchange offer are satisfied or waived and the exchange offer is consummated, the requisite number of consents is obtained, and the new credit facility is obtained. Tax Consequences of the Asset Sale Offer.............................. The tax consequences for holders of old notes whose old notes are purchased in the asset sale offer for the old notes are summarized above under "Tax Consequences of the Exchange." The Consent Solicitation The Consent Solicitation.................. In connection with the exchange offer, we are soliciting consents from the holders of the old notes to approve proposed amendments to the indenture governing the old notes. We also are requesting holders of the old notes to deliver an instruction to the Trustee not to interfere with our recapitalization. The proposed amendments will not become operative unless the conditions of the exchange offer are met and will become effective immediately preceding the consummation of the exchange offer. 6 Requisite Consents.......................... Consents of registered holders of a majority of the outstanding aggregate principal amount of the old notes are required to approve the proposed amendments to the indenture. Proposed Amendments......................... The proposed amendments to the indenture governing the old notes will eliminate substantially all of the restrictive covenants and some defined events of default in the old notes indenture. If the proposed amendments become effective, they will apply to all old notes issued under the old notes indenture, and each holder of old notes not tendered or accepted for exchange pursuant to the exchange offer will be bound by the proposed amendments regardless of whether the holder consented to the proposed amendments. Possible Prepackaged Plan of Reorganization Alternative Implementation of Recapitalization.......................... If holders of 95% of the outstanding old notes do not tender their old notes in the exchange offer but we obtain a substantial level of support for the recapitalization, we may elect to implement that recapitalization through a "prepackaged" plan of reorganization under Chapter 11 of the Bankruptcy Code having the same terms and conditions as regards the holders of old notes as contemplated by the recapitalization. Such a plan of reorganization would not affect Kaiser's operations, vendors or employees. Binding Effect of Plan...................... If confirmed by the Bankruptcy Court, a prepackaged plan of reorganization would bind all holders of old notes, without regard to whether they tendered their old notes in the exchange offer or the asset sale offer. Effectiveness of Tenders of Old Notes................................. Tenders of old notes and related documentation may not be withdrawn after delivery and may be counted as ballots in favor of a plan of reorganization in a Chapter 11 case. The Company We are a global provider of engineering, construction management, and project and program management services. We also own a 50% interest in Kaiser- Hill Company, LLC, which serves as the integrated management contractor at the U.S. Department of Energy's Rocky Flats Environmental Technology Site. We completed the sale of our Environment and Facilities Management Group on April 9, 1999 for net cash proceeds, after a working capital adjustment, of $74 million and on June 30, 1999 we sold 90% of our Consulting Group for $64 million in cash, plus $6.6 million of interest bearing notes. These actions were taken in response to substantial losses incurred primarily in 1998 in connection with fixed price contracts to construct four nitric acid plants. We are now focused on serving clients in five major lines of business: . Transit and Transportation - Our transit and transportation services support the planning, design, engineering, and construction of heavy- and light-rail transit systems, high-speed rail, peoplemovers, bus systems, highways and bridges, and airport improvements. . Alumina/Aluminum - We provide design and construction services for expansion and modernization of some of the world's largest alumina and aluminum facilities in locations from Kentucky to the Middle East and Australia. 7 . Facilities and Water/Wastewater - We provide engineering services to public-and private-sector clients who need to modernize or maintain facilities, to design and build new capacity for the future, or to improve existing operations and environmental conditions. Such facilities include, but are not limited to, water supply and wastewater treatment facilities. . Iron and Steel - We support the iron and steel industry by providing traditional services such as engineering, design, and project and construction management for plant expansions, modernizations, and greenfield development. . Microelectronics and Clean Technology - We also provide design/build services for the microelectronics, semiconductor, biotechnology, and telecommunication industries. Our business is global in nature with more than 30 offices worldwide. We own Kaiser-Hill Company, LLC equally with CH2M Hill Companies Ltd. We designate a majority of the members of Kaiser-Hill's Board of Managers. Kaiser- Hill currently serves as the integrated management contractor at the U.S. Department of Energy's Rocky Flats Environmental Technology Site near Denver, Colorado. The scope of Kaiser-Hill's contract with the DOE includes all elements of daily and long-term operation of the site, including stabilizing and safely storing more than 14 tons of plutonium, cleaning up areas contaminated with hazardous and radioactive waste, and restoring much of the 6,000-acre site for future use by the public. Kaiser-Hill's contract with the DOE currently expires in September 2000. On July 30, 1999, the DOE announced that it intends to negotiate with Kaiser-Hill for a new contract for services through the closure of the Rocky Flats site in 2006. Such negotiations are expected to begin in early October. The DOE has stated that if a new contract has not been entered into by November 30, 1999, it intends to conduct a competition for the new contract. We can provide no assurance as to Kaiser-Hill's ability to compete for or win a new contract if Kaiser-Hill is unable to enter into a new contract through negotiations. Strategy Our strategy is to grow the revenue base of our remaining operations and improve profitability. We will focus on new business development, cost reductions and stringent project and operating controls to achieve this goal. New Business Development. With the nitric acid projects behind us, the realignment of our capital structure will enable us to focus on expanding our revenue base. We believe our expertise in our core lines of business and worldwide presence and recognition for quality service delivery can be leveraged into significant opportunities in the future. We will seek additional contracts with our existing customers and utilize our expertise from our current projects to win business from new clients. Cost Reductions. Concurrently with the planning for the sales of the EFM and Consulting Groups, we identified approximately $20 million of cost reduction opportunities in our remaining operations. Upon elimination of these costs, we will have aligned our cost structure with our remaining revenue base. By changing the way we manage our business to a line of business focus with only two regions - North America and International - we will be able to eliminate a layer of overhead including personnel and facilities costs. In addition to reductions in overhead, reductions in technical personnel resulting in higher revenue per employee will improve profitability. As of July 31, 1999, we have effected approximately 80% of these cost reductions. Stringent Controls. Following the identification of our nitric acid plant related problems we, along with several outside consultants, thoroughly reviewed our policies and procedures in all phases of a contract lifecycle. As a result, we have implemented: . stronger financial and operating controls and project evaluation processes; . frequent senior management reviews of progress and profitability of each contract; and . a new project management reporting system that will allow us to more proactively manage profitable project execution. 8 Our principal executive office is located at 9300 Lee Highway, Fairfax, Virginia 22031-1207 and our telephone number is (703) 934-3600. Risk Factors Before making an investment, you should consider carefully the information included in the "Risk Factors" section, as well as all other information set forth in this prospectus. 9 Summary Financial Data The following statement of operations, basic and diluted (loss) per share data, and balance sheet data, excluding the data for the six months ended and as of June 30, 1999, has been derived from Kaiser's audited financial statements. The information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and with our consolidated financial statements and related notes, incorporated by reference in this prospectus. Effective January 1, 1999, the results of operations from the EFM and Consulting Groups were treated as discontinued operations and were excluded from the statement of operations data. Accordingly, the statement of operations data for the six months ended June 30, 1999 is not comparable to the data for the prior periods presented.
Year Ten Months Six Ended Ended Months February December Ended 28, 31, Year ended December 31, June 30, ------------------------------------ 1995 1995 1996 1997 1998 1999 -------- -------- --------- --------- --------- -------- (in thousands, except per share data) (unaudited) Statement of Operations Data: Gross revenue.......................... $861,518 $916,744 $1,248,443 $1,108,116 $1,210,421 $445,377 Service revenue (a).................... 459,786 425,896 532,116 426,086 345,462 127,433 Operating costs (b)................... 436,866 400,534 500,588 398,422 397,696 125,538 Depreciation and amortization.......... 9,232 8,357 10,348 9,595 9,048 3,098 Severance and restructuring - charges............................. - - - - 9,407 9,359 Other unusual charges.................. - (500) - - 7,672 1,335 Operating income (loss)................ 13,688 17,505 21,180 18,069 (78,361) (11,897) Income (loss) before income taxes, minority interest, extraordinary item and cumulative effect of accounting change................... 1,239 6,303 14,484 2,561 (97,101) (23,499) Net income (loss) before discontinued operations, extraordinary item and cumulative effect of accounting change................... (1,661) 2,252 5,834 (4,987) (93,442) (27,102) Basic and Diluted Earnings (Loss) Per Share: Continuing operations before extraordinary item and cumulative effect of accounting change................... $ (0.18) $ 0.02 $ 0.17 $ (0.22) $ (3.87) $ (1.13) Discontinued operations................ - - - - - 2.12 Extraordinary item..................... - - - - (0.05) (0.03) Cumulative effect of accounting change, net of tax.......................... - - - - (0.25) - -------- -------- ---------- ---------- ---------- -------- Total.......................... $ (0.18) $0.02 $ 0.17 $ (0.22) $ (4.17) $ 0.96 ======== ======== ========== ========== ========== ======== Weighted average common shares outstanding-basic............ 20,957 21,132 22,035 22,382 24,092 23,971 Weighted average common shares outstanding-diluted.......... 20,957 21,606 22,057 22,382 24,092 23,971 Other Data: Minority interest (c).................. $ - $ 1,960 $ 6,043 $ 10,867 $ 7,698 $ 4,205 EBITDA (d)............................. 22,920 23,402 25,485 16,797 (59,932) (2,310) Ratio of earnings to fixed charges (e)......................... (e) 1.24 1.60 1.01 (e) (e) Balance Sheet Data (end of period): Cash and cash equivalents.............. $ 28,233 $ 17,019 $ 20,250 $ 20,020 $ 15,267 $ 67,514 Total assets........................... 281,422 370,179 369,462 399,288 429,053 364,434 Long-term debt (f)..................... 126,733 120,112 156,519 141,004 137,488 137,730 Redeemable preferred stock............. 19,617 19,787 - - - - Shareholders' equity (deficit)......... 27,624 28,427 34,892 27,327 (63,118) (39,849)
10 ________________ (a) Service revenue is calculated by deducting the costs of subcontracted services and other direct costs from the gross revenue and adding our share of the income or loss of joint ventures and affiliated companies. (b) Includes direct labor and fringe benefits, group overhead and corporate general and administrative expense. (c) Minority interest represents CH2M Hill's fifty-percent ownership of Kaiser- Hill. (d) EBITDA, as presented, includes operating income (loss) plus depreciation and amortization, severance and restructuring charges, and unusual charges and minus minority interest. We believe that EBITDA provides useful information regarding our ability to service our indebtedness, but should not be considered in isolation or as a substitute for operating income or cash flow from operations, in each case as determined in accordance with generally accepted accounting principles, as an indicator of our operating performance or as a measure of our liquidity. (e) Earnings for these periods are inadequate to cover fixed charges. The deficiency, calculated as the dollar amount of earnings required to attain a ratio of one-to-one, for the year ended February 28, 1995, December 31, 1998 and the six months ended June 30, 1999 was $2,848, $103,146 and $26,495, respectively. (f) Includes unamortized discounts. The following financial information represents the results from continuing operations for the three months ended June 30, 1999, as annualized and adjusted for the effects of the following: . the anticipated increase in our service revenue based upon internal management projections, as compared to the annualization of the results from continuing operations during the second three months of 1999; and . the full-year effect of our cost reduction plan as a result of the scheduled separation of approximately 200 employees. The results from continuing operations presented in the table exclude the operating results of our EFM and Consulting Groups, which were sold during the second quarter of 1999 and whose results were otherwise included in Kaiser's results from discontinued operations not presented in the table. We believe that the annualization of the continuing operating results for the three months ended June 30, 1999 is a reasonable basis upon which to present the effects of the adjustments noted above: . since that quarter's results, excluding nonrecurring charges, reflect the most recent actual results and may represent the near- term future recurring operating trends; and . since the cost reduction plan was largely designed, planned and executed based on the cost trends and operating results, excluding nonrecurring charges, experienced during that quarter. This financial data is provided for information purposes only and is not intended to project our results of operations or financial position for any future period or as of any future date. The information is based on our unaudited historical financial information for the three months ended June 30, 1999 and should be read in conjunction with the related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in our quarterly report on Form 10-Q for the period ended June 30, 1999, that is incorporated by reference into this prospectus. 11
nualized Adjusted Run Annualized Rate Adjustments Run Rate -------- ----------- ---------- Statement of Operations Data: Gross revenue 879,520 $ 2,424 $ 881,944 Service revenue (a) 253,096 2,424 255,520 Operating costs (b) 247,952 (15,040) 232,912 Depreciation and amortization 6,468 ( 1,968) 4,500 ------- -------- -------- Operating income (loss) before other unusual (1,324) 19,432 18,108 charges Other Data: Minority interest (c) 8,492 $ 8,492 EBITDA (d) (3,348) 14,116
(a) Service revenue is calculated by deducting the costs of subcontracted services and other direct costs from the gross revenue and adding our share of the income or loss of joint ventures and affiliated companies. (b) Severance and restructuring charges and other unusual charges incurred during the three months ended June 30, 1999 have not been included in the annualized run rate column as operating costs. (c) Minority interest represents CH2M Hill's fifty-percent ownership of Kaiser- Hill. (d) EBITDA, as presented above, includes operating income (loss), plus depreciation and amortization, severance and restructuring charges, and unusual charges and minus minority interest. Other unusual charges incurred during the three months ended June 30, 1999 have not been included in the annualized run rate column and have accordingly been excluded from this definition of EBITDA. We believe that EBITDA as presented here provides useful information regarding our ability to service our indebtedness, but should not be considered in isolation or as a substitute for operating income or cash flow from operations, in each case as determined in accordance with generally accepted accounting principles, as an indicator of our operating performance or as a measure of our liquidity. The assumed increase in service revenue and the assumed decrease in costs from the cost reduction plan are not predictions of actual future results. You should not assume that the increase in service revenue and the decrease in costs necessarily will occur. Accordingly, you should not use or rely on this information as an indication of actual future results. The foregoing projections constitute what we believe are forwarding-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks, assumptions and uncertainties. There can be no assurance that future developments will be in accordance with Kaiser's expectations. See "Cautionary Note Regarding Forward-Looking Statements." 12 RISK FACTORS An investment in the securities described in this prospectus involves a high degree of risk. You should consider carefully the following factors, in addition to the other information contained in this prospectus, before participating in the exchange offer. Specific factors related to our financial performance may adversely affect our ability to pay interest and principal on our debt. Sale of operating groups will reduce cash flow. During the first half of 1999, we sold our EFM and Consulting Groups. Prior to their sale, these groups had generated cash that was used to support Kaiser's operations and debt service. In the recent past, apart from Kaiser's interest in Kaiser-Hill Company, LLC, Kaiser's other operating units have not generated positive cash flow. We rely heavily on a plan to reduce expenses and increase cash flow, which may not be successful. Our success will be dependent, to a large extent, on our ability to execute promptly and effectively our plan to reduce operating expenses, increase margins and enhance cash flow from remaining operations. We are dependent on key customers, and the loss of any of them could materially affect us. Our future profitability is dependent, to a significant extent, on Kaiser-Hill's entering into a new contract with DOE. We have several other key clients, the loss of any of which would have a significant material adverse effect on our ability to return to profitability. The loss of a significant client could impair our ability to compete for new clients and have a significant negative impact on Kaiser's future growth. We intend to continue bidding and entering into fixed price contracts, which may not be completed profitably. Our recent history of financial losses is partially attributable to our failure to accurately bid on, and our inability to perform, fixed price contracts, specifically with respect to the nitric acid plants. Despite this performance history, the nature of our business is such that we believe it is necessary for us to continue to enter into fixed price contracts. Although we believe we have put appropriate controls in place such that we can successfully bid and perform fixed price contracts, we give no assurances that all future fixed price contracts will be completed profitably. The remaining operations may not be able to retain or attract the personnel needed for growth and profitability. Our future performance will depend to a significant extent upon the efforts and abilities of senior executives, line of business managers and other key employees. Our current financial circumstances make it more difficult to retain key managers, and the loss of the services of these managers could have a material adverse effect on us. In addition, because our remaining operations are service-oriented in nature, our ability to deliver these services in a cost-effective and high quality manner depends upon our ability to attract, retain, and properly manage a staff of qualified professionals with the necessary skills. The market for these professionals is quite competitive and our current financial circumstances make it more difficult to attract these professionals. The remaining operations may not grow and become profitable in their highly competitive markets. We compete with many other firms ranging from small firms to large multinational firms having substantially greater financial, management and marketing resources. Other competitive factors include quality of services, technical qualifications, reputation, geographic presence, price, and the availability of key professional personnel. In order for us to become profitable, we will have to successfully compete against these firms in order to generate additional backlog of service contracts, including an extension of the current contract or award of a new contract for Kaiser-Hill. Holders of old notes may have to surrender any payments received from Kaiser pursuant to the asset sale offer if the payments are found to be avoidable preferences under the U.S. Bankruptcy Code. In the event we were to file for relief under Chapter 11 of the U.S. Bankruptcy Code within 90 days or possibly one year of the payment date, the payments may be avoidable as a preference and could be subject to recovery by a trustee in bankruptcy, an 13 official creditors' committee, or other representatives of creditors of Kaiser as a debtor in possession. If the payments were successfully challenged as a preference, holders either would be required to return the funds received, together with interest in a rate determined by the court, or would be precluded from receiving any distribution on account of the holders' old notes. Our financial performance is significantly tied to Kaiser-Hill, which is subject to uncertainties that may adversely affect its and our operating results. If Kaiser-Hill does not successfully negotiate a new DOE contract, we will lose a significant portion of our cash flow and value. The contract with DOE under which Kaiser-Hill operates expires in September 2000. Although we believe DOE will enter into a new contract with Kaiser-Hill, it is possible that after negotiating with Kaiser-Hill, DOE will conduct a competition for a new contract. Kaiser-Hill may not be able to compete for or win a new contract if a competition is conducted by DOE. If Kaiser-Hill does not successfully negotiate or win a new contract in any competition that is held, we will lose a significant portion of our cash flow and value. There are special Federal regulations that could adversely affect Kaiser- Hill's DOE contract. Because Kaiser-Hill provides the Federal government with nuclear energy and defense- related services, it and a number of its employees are required to have and maintain security clearances from the Federal government. There can be no assurance that the required security clearances will be obtained and maintained in the future. In addition, Kaiser-Hill is subject to foreign ownership, control and influence regulations imposed by the Federal government and designed to prevent the release of classified information to contractors subject to foreign ownership, influence and control. There can be no assurance that foreign ownership, influence and control concerns will not affect the ability of Kaiser-Hill to secure and maintain its DOE contract. There are potential substantial liabilities and costs associated with Kaiser-Hill's DOE contract. Kaiser-Hill performs DOE's Performance Based Integrating Management Contract at DOE's Rocky Flats Environmental Technology Site near Denver, Colorado. Rocky Flats is a former DOE nuclear weapons production facility. Under the DOE contract, Kaiser-Hill is responsible for, and DOE will not pay for costs associated with, liabilities caused by the willful misconduct or lack of good faith of Kaiser-Hill's managerial personnel or the failure to exercise prudent business judgment by Kaiser-Hill's managerial personnel. If Kaiser-Hill were found liable for any of these reasons, the associated costs could be substantial. We face significant contingencies, which may adversely impact our ability to meet our obligations on our debt and preferred stock and our ability to fund continuing operations. We have retained obligations relating to the operating groups that were sold. We have indemnified the purchasers of the EFM and Consulting Groups we sold against breaches of representations and warranties and covenants included in the sale agreements. We also have retained some potential liabilities arising from the pre-closing operations of these operating groups. These retained liabilities relate primarily to potential liabilities arising out of ongoing federal government audits of certain activities of the operating groups prior to their sale. We have a potential liability from a contract with Bath Iron Works as to which we currently cannot estimate the outcome. In March 1998, we entered into a $197 million maximum price contract to construct a ship building facility for Bath Iron Works. In May 1998, we learned that estimated costs to perform the contract as reflected in actual proposed subcontracts were approximately $30 million higher than the cost estimates originally used as the basis for contract negotiation between us and our customer. After learning this, we advised the customer that we were not required to perform the contract in accordance with its terms as a result of a mutual mistake between us in negotiating that contract. In October 1998, our customer presented an initial draft of a claim against us requesting payment for estimated damages and entitlements pursuant to the terminated contract. No provision for loss from this matter has been included in our financial results to date as management does not believe that it has sufficient information to reasonably estimate the outcome as negotiation activity has not been significant to date. We have contingencies from a recent acquisition that could require us to use cash that might otherwise be available for debt service or operations. In March 1998, we acquired ICT Spectrum Constructors, Inc. by issuing common stock in exchange for the stock of ICT Spectrum. We guaranteed that the market value of each of the 1.5 14 million shares of common stock issued in the acquisition will reach $5.36 by March 1, 2001. In the event that the market value does not attain the guaranteed level, we are obligated to make up the shortfall either through the payment of cash or by issuing additional shares of common stock with a total value equal to the shortfall, depending upon our preference. Under the terms of the agreement, however, the total number of contingently issuable shares of common stock cannot exceed an additional 1.5 million. Given recently quoted prices of our stock, the assumed issuance of an additional 1.5 million shares would not completely extinguish the purchase price contingency and we would be required to pay a cash fill-up to satisfy the contingency. Any future distribution of cash or common stock would be recorded as a charge to our paid-in-capital. Until the earlier of the resolution of the contingent purchase price or March 1, 2001, any additional shares assumed to be issued because of shortfalls in market value will be included in our diluted earnings per share calculations, unless they are antidilutive. The exchanged shares also contain restrictions preventing their sale prior to March 1, 2001. On March 29, 1999, one ex-ICT Spectrum shareholder, individually and on behalf of all others similarly situated, filed a class action lawsuit alleging false and misleading statements made in a private disclosure document, and asserting other claims, in connection with our acquisition of ICT Spectrum. We have filed a motion to dismiss the plaintiffs' amended complaint. There may be Y2K compliance issues associated with the remaining operations. During recent years, there has been significant global awareness raised regarding the potential disruption to business operations worldwide resulting from the inability of current computer software to process properly the change from the year 1999 to 2000. We have reviewed our data processing, operating and other computer-based systems, and we do not currently anticipate any material disruption in our operations as a result of any failure by us to achieve year 2000 compliance, but we cannot give any assurance to that effect. Even if our computer operations are unaffected by the year 2000, our business operations may be interrupted or adversely affected as a result of year 2000 complications experienced by our subcontractors, clients, vendors, or general business interruptions experienced domestically or internationally. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Other Matters - Year 2000 Readiness" in the Annual Report on Form 10-K enclosed with this prospectus. There are significant financial risks associated with the preferred stock, warrants, underlying common stock and new notes, which could adversely affect the value of the preferred stock, warrants, underlying common stock and new notes. There may not be a trading market for the preferred stock, warrants and new notes. The preferred stock, warrants and new notes are new issues of securities for which there are currently no established trading markets. We cannot assure you that a trading market for the preferred stock, warrants or new notes will develop. The absence of a trading market adversely affects the liquidity of your shares of preferred stock, warrants and new notes and it may be difficult for you to sell these securities. We do not intend to apply for listing of the warrants or the new notes on any national securities exchange or for quotation through any over-the-counter market and there is no assurance that we will be able to obtain listing or quotation of the preferred stock. If your shares of preferred stock, warrants or new notes are traded, they may trade at a substantial discount from their face or liquidation value or at a substantial discount to the implied value of the warrants taking into account their exercise price, as the case may be. Any discount could depend upon a number of factors, including: . the market demand for the preferred stock, warrants or new notes, as the case may be; . the market for similar securities; . the financial condition and performance of Kaiser; . prevailing dividend and interest rates generally in the financial markets; and . general economic conditions. 15 Our ability to pay the liquidation preference and dividends on the preferred stock depends on our financial condition at that time. Our obligations to the holders of our debt and other creditors take priority over our obligations to the holders of the preferred stock. Under Delaware law, we may not redeem the preferred stock for its stated liquidation preference if at that time our remaining assets are not sufficient to pay our outstanding obligations or if that redemption would impair our capital. See "Description of Convertible Preferred Stock" on page 48 of this prospectus. Preferred stock and warrants could result in potential dilution and impair market price. To the extent that the preferred stock and warrants are converted or exercised into our common stock, our existing shareholders will experience dilution in their percentage ownership of Kaiser. So long as the preferred stock and warrants are exercisable, the holders of these securities will have the opportunity to profit from a rise in the price of our common stock. The additional shares of common stock available for sale in the market may have a negative impact on the price and liquidity of the common stock that is currently outstanding. Preferred stock, warrants and new notes may have an adverse impact on additional financing. The holders of the preferred stock and warrants are more likely to convert or exercise them at a time when we may be able to obtain additional capital by an offering of our stock at a price higher than the conversion or exercise price of the preferred stock and warrants. This may make it more difficult to obtain additional financing at a time when additional financing may be necessary or desirable to sustain current or increased levels of operations. In addition, the new notes will represent new outstanding debt for Kaiser. Potential lenders may look unfavorably at our total debt level with this additional debt, making it more difficult for us to obtain additional financing. The repayment of new notes is not secured by our assets. Our obligation to make payments of principal and interest on the new notes is unsecured. As a result, holders of the new notes will not have any ability to use our assets as collateral for the repayment of these obligations. In addition, if we become subject to a bankruptcy or liquidation proceeding, the right of holders of the new notes to be repaid will be limited to the assets available after all of our secured creditors have been satisfied. These remaining assets will then be distributed among the remaining unsecured creditors, including trade creditors, as well as holders of the new notes. As a result, holders of the new notes may not recover their investment in these new notes. We are currently pursuing alternatives for a new secured credit facility. On a pro forma basis, assuming we are successful in obtaining that secured credit facility, the new notes would be effectively subordinated to approximately [$30 million] of secured indebtedness. The new notes will be subordinated to liabilities of some of our subsidiaries. Substantially all of our operations are conducted, and substantially all of our assets are owned, by our subsidiaries. The new notes will effectively be subordinated to all existing and future liabilities of those of our subsidiaries that have not guaranteed the new notes. Any right we may have to participate in any distribution of the assets of any of our subsidiaries upon the subsidiary's liquidation, reorganization or insolvency, and any right the holders of the new notes may consequently have to participate in the distribution of those assets, will be subject to the claims of the creditors, including trade creditors, of the subsidiary. In addition, in the event we have valid claims as a creditor of a subsidiary that are recognized, these claims would be subordinated to any security interest in the assets of the subsidiary and any indebtedness of the subsidiary senior to that held by us. As of June 30, 1999, on a pro forma basis after giving effect to the recapitalization, the aggregate principal amount of indebtedness of our subsidiaries which would have effectively ranked senior to the new notes would have been approximately [$____ million]. Our common stock could be delisted from the New York Stock Exchange, which may adversely affect holders of our common stock. Our common stock is listed on the New York Stock Exchange. In order to continue to be listed on the NYSE, we must meet specific quantitative standards. On August 5, 1999, the NYSE notified us that we were "below criteria" regarding newly effective continued listing standards. This means we are subject to the NYSE's procedures under which the NYSE evaluates whether a listed company has a plan to bring it into conformity with the applicable continued listing criteria or whether a company should be delisted from the NYSE. We do not know whether our proposed recapitalization and other ongoing programs will be sufficient to bring us into conformity with the applicable continued listing criteria. Although we would have an opportunity to appeal any decision by the NYSE to delist its common stock, there can be no assurance that this appeal would be successful. If our common stock were delisted from the NYSE, we would seek to have the common stock listed on another exchange, such as AMEX or one of the regional exchanges, or quoted in the Nasdaq National or SmallCap markets. However, many of these exchanges and markets also have minimum quantitative standards that we may be unable to meet. If our common stock is delisted from the NYSE and we are unable to have our shares included on another exchange or in the over-the-counter market, shareholders may find it more difficult to dispose of the shares or to 16 obtain accurate quotations of the market value of the shares. In addition, the market price of the shares could decline, news coverage about us could decline, and we could find it more difficult to obtain financing in the future. Kaiser does not anticipate that it will pay any dividends on its common stock in the foreseeable future, which adversely affects the value of our common stock. We have never paid dividends on our common stock and anticipate retaining all earnings for use in our business rather than paying cash dividends in the foreseeable future. Our ability to pay cash dividends on our common stock has been substantially restricted under the indentures governing our outstanding debt. The new credit facility also will likely contain provisions prohibiting us from paying dividends without the consent of the lender. These contractual restrictions will limit our ability to pay dividends in the future. Issuance of shares to former holders of ICT Spectrum stock could cause significant dilution. As noted above, if we are required to issue shares to extinguish the ICT Spectrum purchase price contingency, there will be significant dilution to shareholders. If the recapitalization is completed, holders of old notes not tendered in the exchange offer or in the asset sale offer will have reduced rights under the governing indenture and may find it difficult to sell their old notes. The amendments to the indenture governing the old notes will have the effect of reducing the rights of the holders of old notes not tendered in the exchange offer or in the asset sale offer. Concurrent with the exchange offer, we propose to amend the indenture that governs the old notes by eliminating substantially all of the covenants that restrict our activities and those of our subsidiaries. Under the indenture governing the old notes, holders of the old notes currently have the right to enforce these covenants upon us. The market price of the old notes may decline. If the exchange offer is successful, the amount of old notes outstanding will be substantially reduced. As a result, it may become much more difficult for holders to sell their old notes. In addition, the reduced liquidity of old notes outstanding after the recapitalization could have the effect of reducing the market price at which the old notes may be sold. CAPITALIZATION The following table sets forth our capitalization as of June 30, 1999, pro forma to give effect to the settlement 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 prospectus.
June 30, 1999 (a) ------------------------------------------------------ Pro Forma Pro Forma Before After Actual Recapitalization (c) Recapitalization (d) --------- ---------------- ---------------- (Dollars in thousands) Cash and cash equivalents (b) $ 90,368 $ 54,168 $11,668 ======== ======== ======= Long-term debt (including current portion): Credit Facility $ - $ - $ - New notes - - 15,880 12% Senior Notes 14,717 - - 12% Senior Subordinated Notes 123,013 123,013 - -------- -------- ------- Total Debt 137,730 123,013 15,880 Stockholders' Equity (Deficit) (39,849) (41,935) 20,565 -------- -------- ------- Total Capitalization $ 97,881 $ 81,078 $36,445 ======== ======== =======
17 ________________ (a) Assumes 100% participation by the note holders. (b) Includes $22.9 million of restricted cash being used prior to recapitalization to collateralize letters of credit. (c) Pro forma to give effect to 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 $40.0 million in cash is used and $20.0 million of new notes are exchanged, and the quasi-reorganization. RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth our ratio of earnings to fixed charges for the five years ended December 31, 1998 and the six months ended June 30, 1999. The ratio of earnings to fixed charges has been calculated by dividing fixed charges into the sum of fixed charges and income from continuing operations before income tax expense and before equity in earnings or losses of less than fifty-percent owned companies. Fixed charges consist solely of interest costs.
Ten months Year ended Six months ----------------------------------------- Year Ended ended ended February 28, December 31, December 31, December 31, December 31, June 30, 1995 1995 1996 1997 1998 1999 ------------- ------------ ------------ ------------ ------------- --------- (Dollars in thousands) Income (loss) before income taxes, minority interest or income or loss from equity investees, discontinued operations, extraordinary item and cumulative effect of accounting change $(2,848) $ 3,180 $10,469 $ 260 $(103,146) $(26,495) ============ ============ ============ ============ ============ ======== Total Fixed Charges: Interest expense $14,799 $13,255 $17,334 $18,276 $ 20,279 $ 12,209 ============ ============ ============ ============ ============ ======== Income (loss) before income taxes, minority interest or income or loss from equity investees, discontinued operations, extraordinary item and cumulative effect of accounting change plus fixed charges $11,951 $16,435 $27,803 $18,536 $ (82,867) $(14,286) ============ ============ ============ ============ ============ ======== Ratio of earnings to fixed charges (a) 1.24 1.60 1.01 (a) (a) ============ ============ ============ ============ ============ ========
(a) Earnings for these periods are inadequate to cover fixed charges. The deficiency, calculated as the dollar amount of earnings required to attain a ratio of one-to-one, for the year ended February 28, 1995, December 31, 1998 and the six months ended June 30, 1999 was $2,848, $103,146 and $26,495, respectively. 18 UNAUDITED PRO FORMA FINANCIAL STATEMENTS The following unaudited pro forma financial statements are derived from our historical financial statements incorporated by reference into this prospectus. . The unaudited pro forma statement of operations for the year ended December 31, 1998 reflects the sale of our EFM and Consulting Groups and the completion of the recapitalization described in this prospectus, as if these transactions had occurred on January 1, 1998. . The unaudited pro forma balance sheet at June 30, 1999 reflects the completion of the recapitalization described in this prospectus, as well as several other transactions, as described in the notes to the pro forma financial statements, as if they had occurred at June 30, 1999. . The unaudited pro forma statement of operations for the six months ended June 30, 1999 reflects the operating results of the EFM and Consulting Groups as discontinued operations. As a result, they have been excluded from gross revenue, service revenue, operating income (loss), other income (expense) and all information concerning continuing operations for that period. The unaudited pro forma financial statements should be read in conjunction with the related notes, with the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and with our historical financial statements, including the related notes, incorporated by reference into this prospectus. The pro forma adjustments to give effect to the various events described above are based upon currently available information and upon assumptions that management believes are reasonable. The pro forma financial statements are provided for information purposes only and should not be construed to be indicative of our results of operations or financial position had the transactions described above been consummated on or as of the dates assumed, and are not intended to project our results of operations or financial position for any future period or as of any future date. 19 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES Unaudited Pro Forma Consolidated Balance Sheet As of June 30, 1999 (In Thousands)
Pro Forma Adjustments ----------------------------------------- Actual Other Pro Forma June 30, Significant June 30, 1999 Transactions Recapitalization 1999 -------- ------------------ ------------------- --------- Assets Current Assets Cash and cash equivalents $ 67,514 $ (36,200)/(1,2,8)/ $ (19,646)/(10,13,14)/ $ 11,668 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) (42,500) 232,119 -------- ------------ --------- -------- 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) $ (44,633) $280,731 ======== ============ ========= ======== Liabilities and Shareholders' (Deficit) Current Liabilities Accounts payable $165,983 $ (13,167)/(2,7)/ $ - $152,816 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 (22,267) - 221,933 Long-term Liabilities Long-term debt 137,730 (14,717)/(4,5)/ (107,133)/(10,11,12)/ 15,880 Revolving credit facility - - - - Other 17,699 - - 17,699 -------- ------------ --------- -------- Total Liabilities 399,629 (36,984) (107,133) 255,512 -------- ------------ --------- -------- Commitments and Contingencies Minority Interest 4,654 - - 4,654 Shareholders' Equity/(Deficit) Preferred Stock, par value $.01 per share: Authorized-650,000 shares Issued and outstanding - 650,000 shares - - 7/(11)/ 7
20 Common stock, par value $.01 per share: Authorized-90,000,000 shares Issued and outstanding- 23,822,657 shares 238 - - 238 Additional paid-in capital 75,127 - (51,297)/(11,14,15)/ 23,830 Accumulated deficit (111,704) (2,086)/(3,9)/ 113,790/(13,15)/ Cumulative translation adjustment (3,510) - - (3,510) --------- --------- -------- -------- Total Shareholders' Equity (Deficit) (39,849) (2,086) 62,500 20,565 --------- --------- -------- -------- Total Liabilities and Shareholders' Equity $ 364,434 $(39,070) $(44,633) $280,731 ========= ========= ======== ========
21 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 prospectus. Accordingly, such transactions have been included in the pro forma balance sheet presentations. 1. To record the payment, within the 30-day grace period on July 30, 1999, of $9.1 million of accrued interest on the senior notes and the old notes. 2. To pay $13.9 million in accounts payable. 3. To write-off the remaining carrying value of goodwill for a particular division. 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 733,000 ------------ (13,238,000) 8. To record the payment of cash 13,200,000 ------------ 9. To record the gain on the debt restructuring $ (38,000) ============
Recapitalization 10. To record the use of $40.0 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 reclassify $115.8 million from paid-in capital to eliminate the balance of the accumulated deficit after the completion of the exchange offer transactions assuming shareholder approval. 22 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES Pro Forma Consolidated Statement of Operations Year Ended December 31, 1998 (In thousands, except share amounts) (Unaudited)
Pro Forma Adjustments ----------------------------------------------- Actual Results Other Pro Forma Results for the year ended Sale of Significant For the year ended December 31, 1998 EFM and CG Transactions Recapitalization December 31, 1998 ----------------- ------------ ------------ ---------------- ----------------- 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 - 1,539 Interest expense (20,279) 1,994/(3)/ 1,950/(9)/ 12,949/(5)/ (3,386) ---------- --------- ------- ------- -------- Income (Loss) From Continuing Operations Before Income Taxes, Minority Interest, Extraordinary Item, and Cumulative Effect of Accounting Change (97,101) (9,889) 2,142 11,429 (93,419) Income tax benefit 11,357 - - - 11,357 ---------- --------- ------- ------- -------- Income (Loss) From Continuing Operations Before Minority Interest, Extraordinary Item, and Cumulative Effect of Accounting Change (85,744) (9,889) 2,142 11,429 (82,062) Minority interest in net income of subsidiaries (7,698) - - (7,698) ---------- --------- ------- ------- -------- Income (Loss) From Continuing Operations Before Extraordinary Item and Cumulative Effect of Accounting Change (93,442) (9,889) 2,142 11,429 (89,760) Gain (loss) on sale of discontinued operations (net of tax) - 55,642/(1)/ - - 55,642 ---------- --------- ------- ------- -------- Income (Loss) Before Extraordinary Item and Cumulative Effect of Accounting Change (93,442) 45,753 2,142 11,429 (34,118) Extraordinary Items (net of tax) (1,090) - 38/(10)/ - (1,052) ---------- --------- ------- ------- -------- Income (Loss) Before Cumulative Effect of Accounting Change (94,532) 45,753 2,180 11,429 (35,170) Cumulative effect of accounting change (net of tax) (6,000) - - - (6,000) ---------- --------- ------- ------- -------- Net Income (Loss) (100,532) 45,753 2,180 11,429 (41,170) Preferred Stock Dividends - - - 3,088/(6)/ 3,088 ---------- --------- ------- ------- -------- Net Income (Loss) Available for Common Shareholders $ (100,532) $ 45,753 $ 2,180 $ 8,341 $ (44,258) ========== ========= ======= ======= ========= Basic and Fully Diluted Earnings (Loss) Per Share: Income (Loss) From Continuing Operations Before Discontinued Operations, Extraordinary Item and Cumulative Effect of Accounting Change $ (3.87) $ (.41) $ .09 $ .34 $ (3.85) Discontinued Operations - 2.31 - - 2.31 Extraordinary Item (.05) - - - (.05) Cumulative Effect of Accounting Change (.25) - - - (.25) ---------- --------- ------- ------- -------- Net Income (Loss) Available to Common Shareholders $ (4.17) $ 1.90 $ .09 $ .34 $ (1.84) ========== ========= ======= ======= ========= Weighted Average Shares for Basic and Fully Diluted Earnings (Loss) Per Share 24,092 24,092 24,092 24,092 24,092 ========== ========= ======== ======== =========
23 ICF KAISER INTERNATIONAL, INC. AND SUBSIDIARIES Pro Forma Consolidated Statement of Operations Six Months Ended June 30, 1999 (In thousands, except share amounts) (Unaudited)
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 ---------------- ------------ ------------ ---------------- ----------------- 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 - - - 607 Interest expense (12,209) - 975/(9)/ 6,498/(5)/ (4,736) ---------- --------- ------------ ---------------- --------------- Income (Loss) From Continuing Operations Before Income Taxes and Minority Interest (23,499) 1,035 4,764 (17,700) Income tax expense benefit 602 - - - 602 ---------- --------- ------------ ---------------- --------------- Income (Loss) From Continuing Operations Before Minority Interest (22,897) 1,035 4,764 (17,098) Minority interest in net income of subsidiaries (4,205) - - - (4,205) ---------- --------- ------------ ---------------- --------------- Income (Loss) From Continuing Operations (27,102) - 1,035 4,764 (21,300) Discontinued Operations Income (Loss) from operations of discontinued operations (net of tax) 2,157 (2,157)/(2)/ - - - Gain (loss) on sale of discontinued operations (net of tax) 48,755 - - - 48,755 ---------- --------- ------------ ---------------- --------------- Income (Loss) from Continuing Operations Before Extraordinary Item 23,810 (2,157) 1,035 4,764 27,452 Extraordinary Items(net of tax) (698) - 38/(10)/ - (660) ---------- --------- ------------ ---------------- --------------- Net Income (Loss) 23,112 (2,157) 1,073 4,764 26,792 Preferred Stock Dividends - - - 1,544/(6)/ 1,544 ---------- --------- ------------ ---------------- --------------- Net Income (Loss) Available for Common Shareholders $ 23,112 $ (2,157) $ 1,073 $ 3,220 $ 25,248 ========== ========= ============ ================ =============== Basic and Fully Diluted Earnings (Loss) Per Share: Income (Loss) From Continuing Operations $ (1.13) $ - $ .04 $ .13 $ (.96) Discontinued Operations 2.12 (.09) $ - - 2.03 Extraordinary Item (.03) - - (.03) ---------- --------- ------------ ---------------- --------------- Net Income (Loss) Available to Common Shareholders $ .96 $ (.09) $ .04 $ .13 $ 1.04 ========== ========= ============ ================ =============== Weighted Average Shares for Basic and Fully Diluted Earnings (Loss) Per Share 23,971 23,971 $ 23,971 23,971 23,971 ========== ========= ============ ================ ===============
24 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). 3. To reflect the pro forma reduction of interest expense as if cash proceeds had been used to pay off the closing date revolving debt balance of $36.9 million as of the beginning of the period. 25 Recapitalization (assumes $40.0 million in cash is used and $20.0 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 pro forma reduction of interest expense on the old notes of $16.2 million and $8.1 million for the year ended December 31, 1998 and the six months ended June 30, 1999, respectively, and to record pro forma interest expense of $3.3 million and $1.6 million on the new notes for the year ended December 31, 1998 and the six months ended June 30, 1999, respectively. 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 pays the dividends to the shareholders at the ____% 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 (.8) Costs to complete transaction (.7) ------ $ .0 26 OVERVIEW AND BACKGROUND OF THE RECAPITALIZATION Kaiser incurred losses during 1997, 1998 and the first six months of 1999 of an aggregate of approximately $129 million, largely as a result of significant cost overruns on fixed price contracts to construct four nitric acid plants. During the second half of 1998, Kaiser's Board of Directors formed a special committee of members of the Board to consider strategic alternatives for Kaiser. The special committee engaged a financial advisor and, with its assistance, evaluated various opportunities available to Kaiser, including the sale of one or more of Kaiser's operating groups. As a result of that process, Kaiser sold its EFM and Consulting Groups during 1999. Because of the cash drain and continuing obligations associated with Kaiser's nitric acid plants and other losses, the sales of the EFM and Consulting Groups were not enough to restore Kaiser's financial condition. Kaiser has lost the earning power associated with the sold operating groups and continues to have significant outstanding debt, principally $125 million of the old notes. The Board of Directors considered several alternative means of stabilizing Kaiser's financial condition. Among the alternatives considered was the use of the proceeds from the Consulting Group sale in an acquisition of a related business or simply reinvesting the proceeds from the Consulting Group sale into Kaiser's existing business activities. In considering these alternatives, the Board of Directors met several times, reviewed the recommendations of its financial, legal and other professional advisors, as well as the information provided by management, and closely analyzed the information available to it. The Board of Directors ultimately determined that the recapitalization described in this prospectus represents the most advisable approach to significantly improving Kaiser's financial position and future business prospects. As a result of the process of negotiating the terms of the recapitalization, Kaiser purchased all of its outstanding 12% Senior Notes due 2003 on September 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. THE EXCHANGE OFFER Terms of the Exchange Offer Kaiser is offering to 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, warrants to purchase approximately 15% of our common stock on a fully diluted basis, 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. As a result of the recapitalization, holders of old notes will receive, for each $1,000 of old notes tendered in the asset sale offer and the exchange offer, $____ in cash, ______ shares of preferred stock, representing a liquidation preference of $____ plus the pro rata portion of the accrued interest from July 1, 1999 through the date of the closing. warrants to purchase ___% of our common stock on a fully diluted basis, and $_______ principal amount of new notes. The exchange offer is conditioned upon, among other things, at least 95% of the outstanding principal amount of the old notes being tendered for exchange. If 95% of the total outstanding notes are not tendered, or any other condition to the exchange offer is not satisfied and the recapitalization is not consummated, then we may seek implementation of the recapitalization through a so-called "prepackaged" plan of reorganization. See "Possible Prepackaged Plan of Reorganization." 27 In order to participate in the exchange offer, the holder of old notes must tender all of the old notes beneficially owned by the holder. We can extend the exchange offer and accept all old notes tendered for exchange or amend the terms of the exchange offer and any amendment will apply to the old notes tendered pursuant to the exchange offer. Additionally, we reserve the right at any time to terminate the exchange offer and not accept for exchange any old notes tendered for exchange. Old notes tendered in the exchange offer may not be withdrawn by the holder once tendered. We shall be deemed to have accepted validly tendered old notes when, as and if we have given oral or written notice to the exchange/solicitation/paying agent. The exchange/solicitation/paying agent will act as agent for the tendering holders of old notes and for the purposes of receiving the preferred stock, warrants, new notes and cash from us. If any tendered old notes are not accepted for exchange because of an invalid tender, the occurrence of other events set forth in this prospectus or otherwise, certificates for any unaccepted old notes will be returned, without expense, to the tendering holder as promptly as practicable after the exchange expiration date. By agreeing to participate in the exchange and the asset sale offer, a holder of old notes also agrees to allocate the cash, preferred stock, warrants and new notes received for the old notes in the same manner in which we will make this allocation. We will allocate the cash paid pursuant to the asset sale offer to the principal amount of the old notes. Based on this allocation method, up to $40 million in cash will be allocated to the principal amount of the old notes. Exchange Expiration Date; Extensions; Waiver; Termination; Amendments The exchange expiration date will be October ___, 1999 at 5:00 p.m., New York City time, unless we, in our sole discretion, extend the exchange offer, in which case the exchange expiration date will be the latest date and time to which the exchange offer is extended. In order to extend the exchange offer, we will notify the exchange/solicitation/paying agent of any extension by oral or written notice and will make a public announcement. In either case we will do so prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled exchange expiration date. We reserve the right, in our sole discretion: . to delay accepting any old notes, . to extend the expiration date and accept any old notes previously tendered, . to waive any condition to the exchange offer and accept any old notes tendered for exchange, . to terminate the exchange offer, whether or not any of the conditions set forth below under "Conditions of the Exchange Offer" shall have been satisfied, an d . to amend the terms of the exchange offer in any manner by giving oral or written notice of this delay, extension, termination or modification to the exchange/solicitation/paying agent. Any amendment will apply to old notes tendered. If the exchange offer is amended in a manner determined by us to constitute a material change, we will promptly disclose these amendments by means of a public announcement or a supplement to this prospectus that will be distributed to the registered holders of the old notes. 28 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; . we have obtained a new credit facility; . our shareholders have approved the issuance of the preferred stock and warrants being offered in the exchange offer; . no legal action or proceeding has been instituted or threatened with respect to the exchange offer or the consent solicitation, or which, in our sole judgment, may materially adversely affect our business, operations or financial condition; . there has not occurred . any material adverse development in any existing action or proceeding of any nature, . any general suspension of trading in, or limitation on prices for, securities on the New York Stock Exchange, . a declaration of a banking moratorium by United States authorities or any governmental agency in the United States, . the commencement of a war, armed hostilities or other international or national calamity directly or indirectly involving the United States, or . a material adverse change in general economic, political or financial conditions, if the effect of any economic, political or financial conditions on the financial markets of the United States, in our sole judgment, makes it impracticable to consummate the exchange offer; . there has not occurred any change, or development involving a prospective change, in or affecting our business or financial affairs which, in our sole judgment, would materially impair the contemplated benefits of the exchange offer or the consent solicitation; . no statute, rule or regulation has been proposed or enacted, or any action has been taken by any governmental authority, which, in our sole judgment, would or might prohibit, restrict or delay consummation of the exchange offer as presently proposed or materially impair the contemplated benefits of the exchange offer or the consent solicitation; and . there does not exist, in our sole judgment, any other actual or threatened legal impediment to the acquisition of the old notes in the asset sale offer, or the issuance of the preferred stock, warrants and new notes in the exchange offer. At any time, we can waive any condition to the exchange offer and accept all notes tendered for exchange pursuant to the exchange offer. 29 Accounting Treatment The recapitalization transaction will be accounted for as a troubled debt restructuring pursuant to Statement of Financial Accounting Standard No. 15 - Accounting by Debtors and Creditors for Troubled Debt Restructurings. . The face value of the old notes is $125.0 million. . 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 up to $40.0 million in cash and, in part, exchanged for preferred stock with a liquidation preference of $65.0 million plus the amount of accrued interest on the old notes from July 1, 1999 through the date of the closing of the recapitalization, warrants to purchase approximately 15% of our common stock on a fully diluted basis and up to $25.0 million principal amount of new notes. . New notes with a face value of up to $25.0 million 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 issued over its $.01 per share par value will be credited to paid in capital, net of any issuance costs. . The carrying value of any remaining original issue discount on the old notes will 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, assuming that $40.0 million in cash is used and $20.0 million in new notes are exchanged (Dollars in thousands):
Face value of old notes $125,000 Less: Unamortized original issue costs (1,987) Unamortized fees (2,133) -------- Carrying value prior to exchange of cash and preferred stock 120,880 Cash payment (40,000) Valuation of preferred stock issued (65,000) -------- Remaining carrying value to be exchanged for $20.0 million of new notes $ 15,880 ========
THE ASSET SALE OFFER Simultaneously with the exchange offer, Kaiser will conduct an asset sale offer pursuant to the terms of the indenture governing the old notes. We will offer to purchase at par up to $40 million aggregate principal amount of 30 old notes. We will make this asset sale offer to all holders of old notes. If the holders of old notes accept the asset sale offer in an amount greater than the aggregate amount we offer to purchase, we will purchase old notes tendered on a pro rata basis. Old notes tendered in the asset sale offer may not be withdrawn by the holder once tendered. The cash to be used in the asset sale offer will consist primarily of the proceeds from our sale of our Consulting Group. In the event we were to file for relief under Chapter 11 of the U.S. Bankruptcy Code within 90 days, or possibly one year, of making the payments made in the asset sale offer, the payments may be avoidable as a preference and could be subject to recovery by a trustee in bankruptcy, an official creditors' committee, other representatives of our creditors, or Kaiser as a debtor in possession. If the payments were successfully challenged as preferences, holders either could be required to return the funds received, together with interest at a rate determined by the court, or could be precluded from receiving any distribution on account of the holders' old notes. The asset sale offer will expire at 5:00 p.m., New York City time, on October __, 1999. The asset sale offer is made subject to satisfaction of all of the conditions to the exchange offer being satisfied or waived by us and the exchange offer not having been terminated by us. The asset sale offer will not be consummated unless the exchange offer also is consummated and the requisite consents are received. THE CONSENT SOLICITATION General In connection with the exchange offer, we are soliciting consents from the holders of the old notes to approve proposed amendments to the old notes indenture. We are also requesting holders of the old notes to deliver an instruction to the trustee not to interfere with our recapitalization. Consents of holders of a majority of the outstanding aggregate principal amount of the old notes are required to approve the proposed amendments to the old notes indenture. The proposed amendments will become effective only if the conditions of the exchange offer are satisfied or waived and will become effective immediately preceding the consummation of the exchange offer. Both our acceptance of the exchange offer and consummation of the asset sale offer are contingent upon our receipt of requisite consents from holders of the old notes. If the proposed amendments become effective with respect to the old notes indenture, they will apply to all old notes issued under that indenture. Proposed Amendments If the requisite consents are received from holders of the old notes, the old notes indenture will be amended by eliminating substantially all of the restrictive covenants governing the old notes. These proposed amendments will eliminate the following covenants and events of default in the old notes indenture: . Section 5.04 (Limitation on Additional Indebtedness) . Section 5.06 (Limitations on Restricted Payments) . Section 5.07 (Limitations on Restrictions on Distributions from Subsidiaries) . Section 5.08 (Limitations on Transactions with Affiliates) . Section 5.11 (Limitations on Guarantees) . Section 5.12 (SEC Reports) A holder of old notes need not consent to the proposed amendments in order to tender its old notes in the exchange offer. Conversely, each holder of old notes not tendered or accepted for exchange pursuant to the exchange offer will be bound by the proposed amendments if they become effective regardless of whether the holder consented to the proposed amendments. 31 Upon effectiveness of the proposed amendments, a consenting holder's right to sell or transfer the old notes will be restricted, and each consenting holder will be required to hold their old notes in certificated form as opposed to holding them in "street name." See "The Solicitation-Restriction on Transfer of Old Notes; Issuance of Certificated Notes." The proposed amendments will be set forth in an amended and restated indenture substantially in the form filed as exhibit 4(j) to the registration statement of which this prospectus forms a part. Solicitation Expiration Date; Extensions; Amendments The consent solicitation will expire at 5:00 p.m., New York City time, ________ __, 1999, unless we, in our sole discretion, extend the period during which the consent solicitation is open, in which case the solicitation expiration date will be the latest date and time to which the consent solicitation is extended. In order to extend the solicitation expiration date, we will make a public announcement prior to 9:00 a.m., New York time, on the next business day after the previously scheduled solicitation expiration date. We reserve the right, in our sole discretion, . to delay accepting any consents, . to extend the consent solicitation, . to terminate the consent solicitation, and . to amend the terms of the consent solicitation in any manner by giving oral or written notice of the delay, extension, termination or modification to the exchange/solicitation/paying agent. If the consent solicitation is amended in a manner that we determine constitutes an adverse change to the holders of the old notes, we will promptly disclose the amendment by means of a public announcement or a supplement to this prospectus that will be distributed to the registered holders of the old notes. Waivers and Nonacceptance of Consents We reserve the absolute right to waive any defects or irregularities in the furnishing of the consents. If any consents are not accepted for any reason, the notes to which the consent relates will be returned without expense to the submitting holder as promptly as practicable after the expiration or termination of the consent solicitation. Restriction on Transfer of Old Notes; Issuance of Certificated Notes If the consents become effective on the solicitation expiration date, any holder of old notes that has furnished a consent will have agreed . not to transfer, sell, assign, encumber or otherwise dispose of the beneficial ownership of the holder's old notes, unless the holder provides evidence satisfactory to us that the holder's transferee, and, if different, the beneficial owner of the old notes so transferred, has agreed in writing in form and substance satisfactory to us that the transferred old notes are subject to the terms of the consent, and that the transferee, and, if different, the beneficial owner, has agreed to be bound by the terms of the consent, and . that any old notes subject to consents that are held through DTC will be reissued in certificated form. 32 The restriction on transfer will be noted on the old notes with respect to which consents are received and none of these old notes may be transferred unless the holder delivers to us an opinion of counsel in form and substance satisfactory to us in our sole discretion that the transferee has agreed to and is bound by the proposed amendments. POSSIBLE PREPACKAGED PLAN OF REORGANIZATION It is possible that we will receive substantial support from holders of old notes for the recapitalization but not reach the 95% level of acceptance of the exchange offer required as a condition of the recapitalization. In that event, if the level of holder approval is sufficient, we may elect to implement the recapitalization through a so-called "prepackaged" plan of reorganization under Chapter 11 of the Bankruptcy Code. We would do so by filing a petition commencing a Chapter 11 bankruptcy case and asking the Bankruptcy Court to approve a plan of reorganization which would contain terms and conditions for the treatment of holders of old notes which are the same as the terms and conditions of the recapitalization. Such a plan of reorganization would not affect Kaiser's operations, vendors or employees. If we were to seek implementation of the recapitalization through a Chapter 11 plan of reorganization, no assurance can be given that the plan would meet the requirements for confirmation under the Bankruptcy Code, even if the plan received the required level of approval form the holders of the old notes. The requirement for plan approval by a impaired class of creditors is the affirmative vote of a majority in number and more than two-thirds in dollar amount of those voting to accept or reject the plan. If confirmed by the Bankruptcy Court, the plan would be binding on all holders of old notes, without regard to whether they voted in favor of the plan. If a holder of old notes executes the documents required to tender old notes in the exchange offer and the asset sale offer as contemplated in this prospectus, the tender of old notes, once delivered, may not be withdrawn, and the executed documentation will be counted at our election, as ballots in favor of a Chapter 11 plan as described above. We reserve the right to commence a Chapter 11 case before expiration of the period provided for tender of old notes in the exchange offer and the asset sale offer and to count executed documentation received as ballots in favor of the Chapter 11 plan. PROCEDURES FOR PARTICIPATING IN THE EXCHANGE OFFER, ASSET SALE OFFER AND CONSENT SOLICITATION General As previously discussed, the exchange offer, the asset sale offer and the consent solicitation are interdependent. However, you must make a separate decision as to each applicable transaction. The procedures for participating in each of the transactions are substantially similar and are described below. Procedures for Tendering Old Notes in the Exchange Offer, Tendering Old Notes in the Asset Sale Offer and Tendering Consents in the Consent Solicitation The tender of a holder's old notes or the tender of consents and its acceptance by Kaiser will constitute a binding agreement between the tendering holder and Kaiser upon the terms and subject to the conditions set forth in this prospectus and in the applicable letter of transmittal and consent form. Except as described below, a holder who wishes to tender old notes for exchange in the exchange offer or old notes for purchase in the asset sale offer or tender consents in the consent solicitation must transmit any tendered old notes, together with a properly completed and duly executed letter of transmittal and consent form, including all other documents required by the letter of 33 transmittal and consent form to the exchange/solicitation/paying agent at the address set forth below in this prospectus prior to 5:00 p.m., New York City time, on the exchange/asset sale offer/consent solicitation expiration date. The method of delivery of old notes, letter of transmittal and consent forms and all other required documents is at the election and risk of the holder. If the delivery is by mail, it is recommended that tendering holders use registered mail, properly insured, with return receipt requested. Instead of delivery by mail, it is recommended that the holder use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. Any financial institution that is a participant in The Depository Trust Company's book-entry transfer facility system may make book-entry delivery of the old notes by causing The Depository Trust Company to transfer these old notes into the exchange/solicitation/paying agent's account in accordance with The Depository Trust Company's procedures for this transfer. In connection with a book-entry transfer, a letter of transmittal and consent form need not be transmitted to the exchange/solicitation/paying agent, provided that the book- entry transfer procedure is completed prior to 5:00 p.m., New York City time, on the exchange/asset sale offer/consent solicitation expiration date. Each signature on a letter of transmittal and consent form or a notice of revocation, as the case may be, must be guaranteed except that they do not need to be guaranteed if the old notes surrendered for exchange are tendered: . by a registered holder of the old notes who has not completed either the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" in the letter of transmittal and consent form, or . by an eligible institution. In the event that a signature on a letter of transmittal and consent form or a notice of revocation, as the case may be, is required to be guaranteed, this guarantee must be by a firm which is a member of a registered national securities exchange or the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or otherwise be an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934. If the letter of transmittal and consent form is signed by a person other than the registered holder of the old notes, the tendered old notes and consents must either . be endorsed by the registered holder, with the signature guaranteed by an eligible institution, or . be accompanied by a proxy, in a form determined to be satisfactory by us, in our sole discretion, duly executed by the registered holder, with the signature guaranteed by an eligible institution. All questions concerning the validity, form, eligibility, including time of receipt, acceptance, and revocation of consents, will be decided by us in our sole discretion, which decision shall be final and binding. We reserve the absolute right to reject any and all old notes or consents not properly tendered and to reject any old notes or consents which might, in our judgment or that of our counsel, be unlawful for us to accept. We also reserve the absolute right to waive any defects or irregularities or conditions of the exchange offer as to particular old notes either before or after the exchange/asset sale offer/consent solicitation expiration date, including the right to waive the ineligibility of any holder who seeks to tender old notes in the exchange offer, old notes in the asset sale offer or consents in the consent solicitation, whether or not similar defects or irregularities are waived in the case of other holders. Our interpretation of the terms and conditions of the exchange offer, asset sale offer and consent solicitation, including the letter of transmittal and its instructions, shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of old notes for exchange or for purchase or tenders of consents must be cured within a period of time as we shall determine. Kaiser, the exchange/solicitation/paying agent, or any other person will not have any duty to give notification of defects or irregularities with respect to tenders of old notes and consents and will not incur any liability for failure to give this notification. Tenders of the old notes and consents will not be deemed to have been made until any irregularities have been cured or waived. 34 If any letter of transmittal and consent form, endorsement, proxy, power of attorney or any other document required by the letter of transmittal and consent form is signed by a trustee, executor, corporation or other person acting in a fiduciary or representative capacity, this person should indicate when signing, and, unless waived by us, must submit proper evidence satisfactory to us, in our sole discretion, of this person's authority to act. Any beneficial owner of old notes whose notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wants to tender old notes in the exchange offer or in the asset sale offer or tender consents in the consent solicitation, should contact the registered holder promptly and instruct the registered holder to tender on the beneficial owner's behalf. If a beneficial owner wishes to tender directly, the beneficial owner must, prior to completing and executing the letter of transmittal and consent form and tendering old notes and consents, make appropriate arrangements to register ownership of the notes in the beneficial owner's name. Beneficial owners should be aware that the transfer of registered ownership may take considerable time. Guaranteed Delivery Procedures Holders who wish to tender their old notes and . whose old notes are not immediately available or . who cannot deliver their old notes or any other documents required by the letter of transmittal and consent form to the exchange/solicitation/paying agent prior to the exchange/asset sale offer/consent solicitation expiration date or complete the procedure for book-entry transfer on a timely basis, may tender their old notes according to the guaranteed delivery procedures described in the letter of transmittal and consent form. Pursuant to these procedures: . the tender must be made by or through an eligible institution and a notice of guaranteed delivery, as defined in the letter of transmittal and consent form, must be signed by the holder, . on or prior to the exchange/asset sale offer/consent solicitation expiration date, the exchange/solicitation/paying agent must have received from the holder and the eligible institution a properly completed and duly executed notice of guaranteed delivery by facsimile transmission, mail or hand delivery setting forth the name and address of the holder, the certificate number or numbers of the tendered old notes, and the principal amount of tendered old notes, stating that the tender is being made and guaranteeing that, within three business days after the date of delivery of the notice of guaranteed delivery, the tendered old notes, a duly executed letter of transmittal and consent form and any other required documents will be deposited by the eligible institution with the exchange/solicitation/paying agent, and . the properly completed and executed documents required by the letter of transmittal and the tendered old notes in proper form for transfer, or confirmation of a book-entry transfer of these old notes into the exchange/solicitation/paying agent's account at DTC, must be received by the exchange/solicitation/paying agent within three business days after the exchange/asset sale offer/consent solicitation expiration date. Any holder who wishes to tender old notes pursuant to the guaranteed delivery procedures described above must ensure that the exchange/solicitation/paying agent receives the notice of guaranteed delivery and letter of transmittal relating to these old notes prior to 5:00 p.m., New York City time, on the exchange/asset sale offer/consent solicitation expiration date. 35 Acceptance of Old Notes for Exchange or Purchase and Acceptance of Consents; Delivery of Preferred Stock, Warrants and New Notes Upon satisfaction or waiver of all the conditions to the exchange offer, Kaiser will accept any and all old notes that are properly tendered in the exchange offer, old notes properly tendered in the asset sale offer and consents properly tendered in the consent solicitation prior to 5:00 p.m., New York City time, on the exchange/asset sale offer/consent solicitation expiration date. The preferred stock, warrants and new notes issued pursuant to the exchange offer will be delivered promptly after acceptance of the old notes. For purposes of the exchange offer, we will be deemed to have accepted validly tendered old notes, when, as, and if we have given oral followed by written notice to the exchange/solicitation/paying agent. Immediately prior to consummation of the exchange offer, we will consummate the asset sale offer and purchase for cash at par on a pro rata basis from the holders of old notes who elect to participate an aggregate of up to $40 million principal amount of old notes. Revocation of Consents We will process all properly completed and executed letters of transmittal and consent forms we receive, unless we receive from a holder a properly completed and duly executed notice of revocation at any time prior to the exchange/asset sale offer/consent solicitation expiration date. Until the exchange/asset sale offer/consent solicitation expiration date, any holder may revoke a consent as to any or all old notes if we receive notice of revocation. The Exchange/Solicitation/Paying Agent; Assistance The Bank of New York is the exchange/solicitation/paying agent. All tendered old notes and consents, executed letters of transmittal and consent forms and other related documents should be directed to the exchange/solicitation/paying agent. Questions and requests for assistance and requests for additional copies of the prospectus, a letter of transmittal and other related documents should be addressed to the exchange/solicitation/paying agent as follows: Exchange/Solicitation/Paying Agent By Registered or Certified By Overnight Courier: By Hand: By Facsimile: Mail: The Bank of New York The Bank of New York The Bank of New York The Bank of New York Reorganization Department Attention: Reorganization Reorganization Department Attention: Jennifer Pedi Attention: Jennifer Pedi Corporate Trust Services Attention: Jennifer Pedi 101 Barclay Street, 7 East 101 Barclay Street, 7 East Window, Ground Level (212) 815-6339 New York, New York 10286 New York, New York 10286 101 Barclay Street, 7 East New York, New York 10286 Confirm by telephone: (212) 815-6331
Financial Advisor to Kaiser We have engaged Jefferies & Company, Inc. to provide financial advisory services to us in connection with the proposed recapitalization. As part of such services, employees of Jefferies may solicit, on our behalf, holders of old notes to tender their old notes in the exchange offer and the asset sale offer and to deliver their consent to the proposed amendments to the indenture governing the old notes. As consideration for providing these services, we have agreed to pay Jefferies certain fees, to reimburse its reasonable out-of-pocket expenses and to indemnify it against liabilities, including liabilities they may incur under the Securities Act of 1933 or the Securities Exchange Act of 1934. Fees and Expenses In addition to the fees and expenses payable to Jefferies that are described above, we will pay all other fees and expenses incurred in connection with the recapitalization, including each of the following: 36 . fees and disbursements of legal counsel and a financial advisor retained by the ad hoc committee of holders of old notes formed to participate with our representatives in the determination of the terms of the recapitalization, . fees and disbursements of our counsel and independent certified public accountants, . SEC registration and NYSE listing fees, and . customary fees and out-of-pocket expenses incurred by the exchange/solicitation/paying agent for their services in connection with the recapitalization. We will pay all transfer taxes, if any, applicable to the exchange of old notes pursuant to the exchange offer. If, however, a transfer tax is imposed for any reason other than the exchange of old notes pursuant to the exchange offer, then the amount of the transfer taxes, whether imposed on the registered holder or any other persons, will be payable by the tendering holder. If satisfactory evidence of payment of these taxes or exemption is not submitted with the letter of transmittal and consent form, the amount of these transfer taxes will be billed directly to the tendering holder. BUSINESS Kaiser is a global provider of engineering, construction management, and project and program management services. Kaiser also owns a 50% interest in Kaiser-Hill Company, LLC, which serves as the integrated management contractor at the U.S. Department of Energy's Rocky Flats Environmental Technology Site. Overview of Services and Markets Kaiser's activities are focused on serving clients in five major lines of business: transit and transportation; alumina/aluminum; facilities engineering and management, including wastewater treatment; iron and steel; and microelectronics and clean technology. Transit and Transportation - Kaiser's transit and transportation services support the planning, design, engineering, and construction of heavy- and light- rail transit systems, high-speed rail, peoplemovers, bus systems, highways and bridges, and airport improvements. We are developing state-of-the- art transit systems for 20 cities worldwide and designing major highway projects throughout the United States and in selected international markets. Domestic growth is driven by the Federal Transportation Equity Act for the 21st Century. Passed in July 1998, the bill authorized $217 billion of spending during the next six years in transit and highway programs. Significant opportunities also exist internationally as developing countries seek to improve their transit systems. Current projects include transit systems in Seattle, Orlando, Los Angeles, the Philippines, and Turkey; an intercity freight and passenger rail line in Portugal; and multi-million dollar highway and bridge improvements in California, Florida, Massachusetts, and Oklahoma. Alumina/Aluminum - Kaiser provides design and construction services for expansion and modernization of some of the world's largest alumina and aluminum facilities in locations from Kentucky to the Middle East and Australia. Our areas of expertise include bauxite mining and handling; alumina refining; aluminum reduction; and fabrication and rolling. Domestic opportunities involve maintaining and retrofitting existing plants and replacing aging production capacity with newer, more efficient, and environmentally responsible facilities. Outside of the United States, there will be greater focus on building new facilities. Current projects include detailed design engineering, procurement, and construction management for the expansion of a $500 million alumina refinery in Western Australia, and engineering and design services for an aluminum expansion project in the mid-western United States. Facilities and Water/Wastewater - Kaiser provides engineering services to public- and private-sector clients who need to modernize or maintain facilities; design and build new capacity for the future; or improve 37 existing operations and environmental conditions. Future growth in this area of activity will be based in part on the trend toward outsourcing by both private- and public-sector clients. Kaiser's largest project of this type involves serving, through Kaiser-Hill Company, LLC, as the integrating management contractor at the DOE Rocky Flats site, a former nuclear weapons production facility near Denver, Colorado. In another significant project, Kaiser serves as construction manager for the $3.4 billion Boston Harbor cleanup project that is currently scheduled to continue through December 31, 2002. Iron and Steel - Kaiser supports the iron and steel industry by providing traditional services such as engineering, design, and project and construction management for plant expansions, modernizations, and greenfield development. Kaiser is the sole U.S. domestic designer and builder of coke ovens and coke oven machinery, and is active in the development of mini-mills as an alternative, cost-effective method of making steel. For example, we are providing turnkey engineering and construction services for the new $262 million thin-slab casting mini-mill project for Nova Hut, a.s. in Ostrava, Czech Republic. Microelectronics and Clean Technology - Kaiser also provides design/build services for the microelectronics, semiconductor, biotechnology, and telecommunication industries. We have constructed or remodeled over seven million square feet of manufacturing, office, and other facilities, including more than 500,000 square feet of cleanrooms, from class 1 to class 10,000. Following a contraction over the past several years, this market is expected to experience growth over the next two years, driven primarily by the automotive industry and advanced technology manufacturers' needs for increased manufacturing capacity and capabilities. A major project is the $219 million semiconductor facility for Motorola in Arizona. Kaiser-Hill Company, LLC is equally owned by Kaiser and CH2M Hill Companies Ltd.; Kaiser designates a majority of the members of Kaiser-Hill's Board of Managers. The scope of Kaiser-Hill's contract with the DOE includes all elements of daily and long-term operation of the site, including stabilizing and safely storing more than 14 tons of plutonium, cleaning up areas contaminated with hazardous and radioactive waste, and restoring much of the 6,000-acre site for future use by the public. Kaiser-Hill's contract with the DOE currently expires in September 2000. On July 30, 1999, the DOE announced that it intends to negotiate with Kaiser-Hill for a new contract for services through the closure of the Rocky Flats site in 2006. Such negotiations are expected to begin in early October. The DOE has stated that if a new contract has not been entered into by November 30, 1999, it intends to conduct a competition for the new contract. We can provide no assurance as to Kaiser-Hill's ability to compete for or win a new contract if Kaiser-Hill is unable to enter into a new contract through negotiations. General Information about Kaiser Competition and Contract Award Process The market for Kaiser's services is highly competitive. Kaiser competes with many other engineering and construction, program and project management services firms ranging from small firms to large multinational firms having substantially greater financial, management and marketing resources than Kaiser. Other competitive factors include quality of services, technical qualifications, reputation, geographic presence, price, and the availability of key professional personnel. Private-Sector Work. Competition for private-sector work generally is based on several factors, including quality of work, reputation, price and marketing approach. Kaiser's objective is to establish and maintain a strong competitive position in its areas of operations by adhering to its basic philosophy of delivering high-quality work in a timely fashion within its clients' budget constraints. Public-Sector Work. Most of Kaiser's contracts with public-sector clients are awarded through a competitive bidding process that places no limit on the number or type of offerors. The process usually begins with a government request for proposals that delineates the size and scope of the proposed contract. Proposals are evaluated by the government on the basis of technical merit, including responses to mandatory solicitation provisions, corporate and personnel qualifications, experience, and cost. Kaiser believes that its experience and ongoing work strengthen its technical qualifications and, thereby, enhance its ability to compete successfully for future government work. 38 Teaming Arrangements and Joint Ventures. In both the private and public sectors, Kaiser, acting either as a prime contractor or as a subcontractor, may join with other firms to form a team or a joint venture that competes for a single contract or submits a single proposal. Because a team of firms or a joint venture almost always can offer a stronger set of qualifications than any firm standing alone, these arrangements often are very important to the success of a particular competition or proposal. Kaiser maintains a large network of business relationships with other companies and has drawn repeatedly upon these relationships to form winning teams. Contract Structure. Kaiser operates under a number of different types of contract structures with its private- and public-sector clients, the most common of which are cost plus and fixed price. Under cost plus contracts, Kaiser's costs are reimbursed with a fee, either fixed or percentage of cost, and/or an incentive or award fee offered to provide inducement for effective project management. A variation of cost plus contracts are time-and-materials contracts under which Kaiser is paid at a specified fixed hourly rate for direct labor hours worked. Under fixed price contracts, Kaiser is paid a predetermined amount for all services provided as detailed in the design and performance specifications agreed to at the project's inception, and under which Kaiser retains more performance risk than under cost plus contracts. While these fixed price contracts can result in higher profit margins, they also can be costly if Kaiser experiences cost overruns that are not recoverable from the client. Customers Kaiser's domestic clients include the DOE and other federal departments and agencies; major corporations in the energy, transportation, chemical, steel, aluminum, mining, and manufacturing industries; utilities; and a variety of state and local government agencies throughout the United States. The DOE accounted for approximately 54% of Kaiser's consolidated gross revenue for the year ended December 31, 1998, approximately 56% for the year ended December 31, 1997, and approximately 69% for the year ended December 31, 1996. The DOE percentage will increase for fiscal 1999 since Kaiser has disposed of its EFM and Consulting Groups and continues to consolidate in its financial statements the results of Kaiser-Hill Company, LLC. Kaiser's international clients include both private firms and foreign government agencies. For the years ended December 31, 1998, 1997, and 1996, foreign clients accounted for approximately 10.1%, 14.2%, and 5.8% of Kaiser's consolidated gross revenue, respectively. Mainly due to the sales of the EFM and Consulting Groups, the Company currently expects this percentage to increase to approximately 35-40% in 1999. For information concerning gross revenue, operating income, and identifiable assets of Kaiser's business by geographic area during 1998, see note 12 to the consolidated financial statements included in Kaiser's 1998 Annual Report on Form 10-K for the year ended December 31, 1998, which is incorporated by reference into and delivered with this prospectus. Backlog Backlog refers to the aggregate amount of gross contract revenue remaining to be earned pursuant to signed contracts extending beyond one year. Kaiser ended 1998 with $3.2 billion in contract backlog. The reduction from $4.1 billion of backlog at December 31, 1997 is due primarily to the completion of another year of the Kaiser-Hill Rocky Flats contract, resulting in the conversion of approximately $632.6 million of the 1997 backlog into revenue in 1998. The backlog of the EFM and Consulting Groups totaled $659 million and $540 million, respectively, at December 31, 1998. Kaiser expects to work off 42% of the $2 billion engineering and construction and Kaiser-Hill backlog during 1999. Kaiser ended the second quarter of 1999 with approximately $900 million in contract backlog for its continuing operations; $650 million for Kaiser-Hill and $250 million for the Engineering and Construction Group. Kaiser believes that backlog is not a predictor of future gross or service revenue. Most of Kaiser's backlog relates to the Kaiser-Hill Rocky Flats contract. With the dispositions of the EFM and Consulting Groups, which were involved, to a significant extent, in providing services to the Federal government, backlog is less of an indicator of future revenue than was the case prior to those dispositions. Potential Liabilities Involving Clients and Third Parties 39 In performing services for its clients, Kaiser could potentially be liable for breach of contract, personal injury, property damage, and negligence, including improper or negligent performance or design, failure to meet specifications, and breaches of express or implied warranties. The damages available to a client, should it prevail in its claims, are potentially large and could include consequential damages. Under Kaiser-Hill's contract with the DOE, Kaiser-Hill is not responsible for, and the DOE pays all costs associated with, any liability, including without limitation, a claim involving strict or absolute liability and any civil fine or penalty, expense, or remediation cost, but limited to those of a civil nature, which may be incurred by, imposed on, or asserted against Kaiser-Hill arising out of any act or failure to act, condition, or exposure which occurred before Kaiser-Hill assumed responsibility on July 1, 1995 ("pre- existing conditions"). To the extent the acts or omissions of Kaiser-Hill constitute willful misconduct, lack of good faith, or failure to exercise prudent business judgment on the part of Kaiser-Hill's managerial personnel and cause or add to any liability, expense, or remediation cost resulting from pre- existing conditions, Kaiser-Hill is responsible, but only for the incremental liability, expense, or remediation caused by Kaiser-Hill. The Kaiser-Hill contract further provides that Kaiser-Hill will be reimbursed for the reasonable cost of bonds and insurance allocable to the Rocky Flats contract and for liabilities and expenses incidental to these liabilities, including litigation costs, to third parties not compensated by insurance or otherwise. The exception to this reimbursement provision applies to liabilities caused by the willful misconduct or lack of good faith of Kaiser-Hill's managerial personnel or the failure to exercise prudent business judgment by Kaiser-Hill's managerial personnel. Insurance Kaiser has a comprehensive risk management and insurance program that provides a structured approach to protecting Kaiser. Included in this program are coverages for: . general, automobile, pollution impairment, and professional liability; . workers' compensation; and . employers and property liability. Kaiser believes that the insurance it maintains, including self-insurance, is in amounts and protects against risks as is customarily maintained by similar businesses operating in comparable markets. At this time, Kaiser expects to continue to be able to obtain insurance in amounts generally available to firms in its industry. There can be no assurance that this situation will continue, and if insurance of these types is not available, it could have a material adverse effect on Kaiser. Kaiser has pollution insurance coverage on a claims-made basis, in amounts and on terms that are economically reasonable, against possible liabilities that may be incurred in connection with its conduct of its environmental business. An uninsured claim arising out of Kaiser's environmental activities, however, if successful and of sufficient magnitude, could have a material adverse effect on Kaiser. Government Regulation In the past, Kaiser had a number of cost-reimbursement contracts with the U.S. government, the costs of which are subject to audit by the U.S. government. Most of these contracts were held by Kaiser's former EFM and Consulting Groups, but Kaiser has retained many of the liabilities associated with the pre-closing performance of these contracts. As a result of pending audits related to fiscal year 1986 forward, the government has asserted, among other things, that some costs claimed as reimbursable under government contracts either were not allowable or not allocated in accordance with federal procurement regulations. Kaiser is actively working with the government to resolve these issues. Kaiser has provided for its estimate of the potential effect of issues that have been quantified, including its estimate of disallowed costs for the periods currently under audit and for periods not yet audited. Many of the issues, however, have not been quantified by the government or Kaiser, and others are 40 qualitative in nature, and their potential financial impact, if any, is not quantifiable by the government or Kaiser at this time. This provision will be reviewed periodically as discussions with the government progress. Kaiser may, from time to time, either individually or in conjunction with other government contractors operating in similar types of businesses, be involved in U.S. government investigations for alleged violations of procurement or other federal laws and regulations. Kaiser currently is the subject of a number of U.S. government investigations and is cooperating with the responsible government agencies involved. No charges presently are known to have been filed against Kaiser by these agencies. Employees As of June 30, 1999 Kaiser had approximately 3,300 employees, and Kaiser believes that its relations with its employees are good. Of this total, approximately 1,700 persons are employed at Kaiser-Hill's Rocky Flats site in Colorado. Approximately 1,300 of the Rocky Flats employees are represented by the United Steelworkers of America, Local 8031. Almost all of the union employees are contracted out to other companies working at Rocky Flats. Kaiser believes that its relations with the union are good. Corporate History and Properties ICF Kaiser International, Inc. is a Delaware corporation incorporated in 1987 under the name American Capital and Research Corporation. It is the successor to ICF Incorporated, a nationwide consulting firm organized in 1969. In 1998 Kaiser acquired the Kaiser Engineers business, which dates from 1914. In the near future, Kaiser plans to change its name to Kaiser Group International, Inc. and its ticker-symbol to "KSR." The name of its principal operating subsidiary in the United States will be changed to Kaiser Engineers, Inc. Kaiser's activities are carried out through operating subsidiaries and more than 30 offices throughout the world. Kaiser's headquarters are located at 9300 Lee Highway, Fairfax, Virginia 22031-1207, and its telephone number is (703) 934-3600. Kaiser's operations are organized into North American and International regions. The North American regional headquarters is located in Fairfax, Virginia, and the International regional headquarters is located at Q.V. 1 Building, George's Terrace, Perth WA 6000 Australia, telephone 61-89-366- 5366. Kaiser's operations are conducted in leased facilities or in facilities provided by the Federal government or other clients. Because Kaiser's operations generally do not require the maintenance of unique facilities, suitable office space is available for lease in all of the geographic areas currently served. Kaiser believes that adequate space to conduct its operations will be available for the foreseeable future. For information concerning an investment by Kaiser in Fairfax, Virginia land and buildings where Kaiser's headquarters are located, see notes 4 and 9 to the consolidated financial statements included in Kaiser's 1998 Annual Report on Form 10-K for the year ended December 31, 1998, which is incorporated by reference into and delivered with this prospectus. Legal Proceedings In the course of Kaiser's normal business activities, various claims or charges have been asserted and litigation commenced against Kaiser arising from or related to properties, injuries to persons, and breaches of contract, as well as claims related to acquisitions and dispositions. Claimed amounts may not bear any reasonable relationship to the merits of the claim or to a final court award. In the opinion of management, an adequate reserve has been provided for final judgments, if any, in excess of insurance coverage, that might be rendered against Kaiser in the event of litigation. See "Risk Factors" and note 7 to the consolidated financial statements included in Kaiser's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, which is incorporated by reference into and delivered with this prospectus for a description of certain pending legal proceedings. MANAGEMENT During 1999, Kaiser implemented certain changes in its executive management. These changes were made in light of the changes in Kaiser's business focus that resulted from its sale of the EFM and Consulting Groups, and in order to manage Kaiser's operations during what is expected to be a period of significant change, including the 41 recapitalization described in this prospectus. The following individuals currently serve as the principal executive officers of Kaiser: James J. Maiwurm, 50, Chairman of the Board, President and Chief Executive Officer. Mr. Maiwurm has been President and Chief Executive Officer of Kaiser since April 19, 1999. Mr. Maiwurm was elected to, and as Chairman of, the Board of Directors of Kaiser on June 7, 1999. Mr. Maiwurm serves as Managing Member of the board of managing directors of Kaiser-Hill Company, LLC, the joint venture that conducts the performance based integrating management services at the Department of Energy's Rocky Flats Environmental Technology Site near Denver, Colorado. From August 1998 until elected as Kaiser's President and Chief Executive Officer, Mr. Maiwurm was a partner of Squire Sanders & Dempsey L.L.P., Washington, D.C., and prior to August 1998 was a partner of Crowell & Moring LLP, Washington, D.C. Both law firms served as counsel to Kaiser. Mr. Maiwurm is a member of the Board of Trustees of Davis Memorial Goodwill Industries, Washington, D.C., a non-profit entity, and is a member of the board of directors of Workflow Management, Inc., an integrated graphic arts company providing documents, envelopes and commercial printing to businesses in North America, the stock of which is traded on the Nasdaq National Market System. Mr. Maiwurm graduated from the College of Wooster (B.A.) and the University of Michigan Law School (J.D.). S. Robert Cochran, 46, Executive Vice President and President, North America. Mr. Cochran has been President, North America for ICF Kaiser International, Inc. since April 1999. Mr. Cochran serves on the board of managing directors of Kaiser-Hill Company, LLC, the joint venture that conducts the performance based integrating management services at the Department of Energy's Rocky Flats Environmental Technology Site near Denver, Colorado. Prior to that, he was Senior Vice President for Business Development for Kaiser's former EFM Group. Before joining Kaiser in 1995, Mr. Cochran was Senior Vice President of Hazwaste Industries, Inc. & Earth Technology Incorporated, focusing primarily on business development in the hazardous and radioactive site cleanup area. He was Senior Vice President and partner with Interface Incorporated; served as Vice President of PEI/IT; was senior project and geotechnical group manager with JRB/SAIC; and for Versar, Inc., worked as a senior project geologist. He received a B.S. in Geology from James Madison University and is a registered professional geologist. Richard A. Leupen, 45, has been Executive Vice President and President, International of Kaiser since April 1999. Prior thereto, he was President of the Engineers & Constructors Group of Kaiser from August 1998. Mr. Leupen has held senior management positions in Kaiser's former Engineers & Constructors Group since 1995. Prior to joining Kaiser, Mr. Leupen worked for Protech Pty. Ltd. Mr. Leupen also serves as Managing Director of KWP Kenwalt Australia Pty. Limited, and as a director of Weda Bay Minerals Ltd. (Calgary), Strand Mining Pte. Ltd. (Singapore) Pty. Limited, Strand Management Pty. Limited as well as serving as a director of a number of Kaiser subsidiaries and affiliates. Mr. Leupen graduated from the University of South Wales in Australia (B.S.). Timothy P. O'Connor, 34, Executive Vice President and Chief Financial Officer. Mr. O'Connor has been Executive Vice President and Chief Financial Officer of ICF Kaiser International, Inc. since 1999. He had been Treasurer of Kaiser since May 1997 and has been employed by Kaiser in various financial positions since 1995. From 1990 until 1995, Mr. O'Connor was employed by Lockheed Martin Corporation of Bethesda, Maryland, where he held a number of financial positions. Prior to that, Mr. O'Connor worked for General Electric Company and Lazard Freres and Co. of New York. Mr. O'Connor, who is a Certified Cash Manager, graduated from the University of Delaware (B.S.). UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following discussion sets forth the opinion of Squire, Sanders & Dempsey L.L.P, counsel to Kaiser, regarding the material United States federal income tax consequences to holders of old notes resulting from the exchange, the cash purchase of the old notes pursuant to the asset sale offer, and the consent solicitation. The discussion assumes that holders hold the old notes, preferred stock, warrants and new notes as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended. Further, this discussion assumes that the old notes are treated as debt and not equity for United States federal income tax purposes. This discussion does not purport to deal with all aspects of United States federal income taxation that may be relevant to holders who may be subject to special federal income tax laws, such as dealers in securities, financial institutions, life 42 insurance companies, individuals who are not citizens or residents of the United States or corporations, partnerships or other entities that are not organized under the laws of the United States or any political subdivision, or persons that hold the old notes, the preferred stock, the warrants, or the new notes as part of a hedge, conversion transaction, straddle or other risk reduction transaction. In addition, the following discussion does not consider the effect of any applicable foreign, state or local tax laws. The discussion below is based upon the current provisions of the Internal Revenue Code, existing and proposed Treasury Regulations promulgated under the Internal Revenue Code, rulings of the Internal Revenue Service and judicial decisions now in effect as of the date of this prospectus. Such authorities may be repealed, revoked or modified, possibly with retroactive effect, so as to result in United States federal income tax consequences different from those described below. As discussed below, the exchange, together with the cash purchase of old notes, should constitute a recapitalization under Section 368(a)(1)(E) of the Internal Revenue Code. However, Kaiser will not seek a ruling from the Internal Revenue Service regarding any of the tax issues described in this discussion, including the tax treatment of the exchange and cash purchase as a recapitalization. Moreover, as noted in the discussion, issues relevant to the federal income tax consequences of some matters are factual in nature, and other issues involve areas of law that are ambiguous or with respect to which legal authority is lacking and as to which limited guidance is available. It is possible, for example, that the Internal Revenue Service may challenge the treatment of the exchange and cash purchase of old notes as a recapitalization and assert either that the exchange and cash purchase must be treated independently for federal income tax purposes and/or that the exchange is a taxable transaction because the old notes do not constitute "securities" or because of other legal positions. Consequently, there can be no assurance that the Service will not challenge one or more of the tax consequences described below. This discussion does not purport to deal with all aspects of United States federal income taxation that, because of specific circumstances applicable to a holder, might be relevant to a holder's decision to participate in the exchange, the cash purchase of the old notes pursuant to the asset sale offer, or the consent solicitation or to the ownership and disposition of the preferred stock, warrants and new notes. Holders are urged to consult their tax advisors concerning the United States federal income tax considerations that may be specific to them as well as any tax consequences arising under the laws of any other taxing jurisdiction. Tax Consequences to the Holders Upon the Exchange and Cash Purchase of Old Notes Importance of Whether the Old Notes Constitute "Securities." The federal income tax consequences to the holders of old notes will depend, in part, on whether the old notes constitute "securities" for federal income tax purposes. The term "security" is not defined in the Internal Revenue Code or in the Treasury Regulations and has not been clearly defined in court decisions. Although there are a number of factors that may affect the determination of whether a debt instrument is a "security," one of the most important factors is the original term of the instrument, or the length of time between the issuance of the instrument and its maturity. In general, instruments with an original term of more than ten years are likely to be treated as "securities," and instruments with an original term of less than five years are unlikely to be treated as "securities." Because the term of the old notes is between five and ten years, it is impossible to be certain regarding the treatment of such old notes as "securities." Nevertheless, although the issue is not free from doubt, the old notes should constitute "securities" for federal income tax purposes. BECAUSE THE ISSUE IS UNCERTAIN, HOLDERS ARE URGED TO CONSULT WITH THEIR TAX ADVISORS AS TO THE PROPER TREATMENT OF THE OLD NOTES. Treatment of the Exchange and the Purchase of Old Notes as a Recapitalization Under Internal Revenue Code Section 368. Assuming that the old notes are treated as securities, the exchange of old notes for preferred stock, warrants and new notes, and the purchase by Kaiser of old notes for cash, should be treated together as a recapitalization under Section 368(a)(1)(E) of the Internal Revenue Code. The new notes likely will not be considered "securities" for federal income tax purposes. If the exchange and purchase together qualify as a recapitalization, a holder that both exchanges old notes for preferred stock, warrants and new notes and sells old notes pursuant to the asset sale offer by Kaiser will recognize gain, but not loss, generally equal to the lesser of: 43 . the amount of cash received in the purchase of old notes and the fair market value of new notes received in the exchange, or . the amount of gain realized in the purchase and exchange, which is the excess, if any, of . the sum of the cash received in the purchase of old notes plus the total of the fair market values of the preferred stock, warrants and new notes received in the exchange over . the holder's aggregate adjusted tax basis in the old notes purchased and exchanged. A holder that only exchanges old notes for preferred stock, warrants and new notes will recognize gain, but not loss, generally equal to the lesser of: . the fair market value of the new notes received in the exchange, or . the amount of gain realized in the exchange, which is the excess, if any, of . the total of the fair market values of the preferred stock, warrants and new notes received in the exchange over . the holder's aggregate adjusted tax basis in the old notes exchanged. Any recognized gain will generally be treated as capital gain and will be long-term capital gain if the holder held the old notes for more than 12 months. If, however, a holder purchased the old notes at a market discount within the meaning of Internal Revenue Code Section 1278, any gain recognized will be treated as ordinary income to the extent of the accrued market discount on the old notes. A holder who participates in the purchase and exchange will generally have a tax basis in the preferred stock and warrants received in the exchange equal to the holder's adjusted tax basis in the old notes purchased and exchanged, decreased by the sum of the amount of cash received in the purchase and the fair market value of the new notes received in the exchange, and increased by the amount of gain, if any, recognized in the purchase and exchange. That basis will be allocated between the preferred stock and warrants in proportion to their relative fair market values. A holder will have a basis in the new notes equal to their fair market value at the time of the exchange. A holder's holding period for the preferred stock and warrants will include the holding period for the old notes exchanged. A holder's holding period for the new notes will begin on the day following the day of the exchange. A holder who participates only in the exchange will generally have a tax basis in the preferred stock and warrants received in the exchange equal to the holder's adjusted tax basis in the old notes exchanged, decreased by the fair market value of the new notes received in the exchange, and increased by the amount of gain, if any, recognized in the exchange. That basis will be allocated between the preferred stock and warrants in proportion to their relative fair market values on the date of the exchange. A holder will have a basis in the new notes equal to their fair market value at the time of the exchange. A holder's holding period for the preferred stock and warrants will include the holding period for the old notes exchanged. A holder's holding period for the new notes will begin on the day following the day of the exchange. Treatment of the Exchange as a Recapitalization Under Internal Revenue Code Section 368 But Treatment of the Purchase of Old Notes as a Separate Transaction. It is possible that the Internal Revenue Service could successfully claim that the purchase of old notes and the exchange must be treated independently of each other for federal income tax purposes. In that event, if the exchange qualifies as a recapitalization, a holder that exchanges old notes for preferred stock, warrants and new notes will recognize gain, but not loss, generally equal to the lesser of: . the fair market value of the new notes received in the exchange, or 44 . the amount of gain realized in the exchange, which is the excess, if any, of . the total of the fair market values of the preferred stock, warrants and new notes received in the exchange over . the holder's aggregate adjusted tax basis in the old notes exchanged. The holder's aggregate tax basis in the preferred stock and warrants received in the exchange will generally be equal to the holder's adjusted tax basis in the old notes exchanged, decreased by the fair market value of the new notes received in the exchange, and increased by the amount of gain, if any, recognized in the exchange. That basis will be allocated between the preferred stock and warrants in proportion to their relative fair market values on the date of the exchange. A holder will have a basis in the new notes equal to their fair market value at the time of the exchange. A holder's holding period for the preferred stock and warrants will include the holding period for the old notes exchanged. A holder's holding period for the new notes will begin on the day following the day of the exchange. Further, if the Internal Revenue Service successfully claims that the purchase of old notes and the exchange must be treated independently of each other for federal income tax purposes, a holder whose old notes are purchased will recognize an amount of gain or loss generally equal to the amount of cash received minus the holder's adjusted tax basis in the old notes purchased. Subject to the market discount rules discussed above, any recognized gain or loss would generally be treated as capital gain or loss and would be long-term capital gain or loss if the holder held the old notes for more than 12 months. Treatment of the Exchange as a Taxable Exchange. Assuming that the old notes constitute "securities" for federal income tax purposes, the purchase of old notes and the exchange should constitute a recapitalization under Internal Revenue Code Section 368 resulting in the federal income tax consequences discussed above under "Treatment of the Exchange and Purchase of Old Notes as a Recapitalization Under Internal Revenue Code Section 368." However, Kaiser will not seek a ruling from the Internal Revenue Service regarding the treatment of the old notes as "securities," and it is possible that the Internal Revenue Service may challenge this treatment. If this challenge were successful, the exchange would be considered a taxable exchange with the likely result that a holder would recognize gain or loss upon the exchange, in addition to any gain or loss recognized on the purchase, generally equal to the difference between: . the sum of the fair market values of the preferred stock, warrants and new notes received in the exchange, and . the holder's adjusted tax basis in the old notes exchanged. Subject to the market discount rules discussed above, any recognized gain or loss would generally be treated as capital gain or loss and would be long- term capital gain or loss if the holder held the old notes for more than 12 months. A holder's tax basis in the preferred stock, warrants and new notes would equal their respective fair market values, and their holding period would begin on the day following the day of the exchange. Payment of Accrued Interest on Old Notes. Regardless of the treatment of the purchase and exchange as described above, a holder, in addition to any gain recognized as a result of the purchase and exchange, will recognize ordinary income attributable to any consideration received as payment for accrued interest on the old notes that was not previously included in the holder's income. Holders that have already included the accrued interest in income will not recognize any additional income as a result of the consideration received as payment for the accrued interest on the old notes. For federal income tax purposes, it is unclear how much, if any, of the cash payment in the purchase and the preferred stock, warrants and new notes issued in the exchange should be allocated to accrued interest. Consistent with the form of the transaction to be consummated as part of the solicitation, Kaiser intends to take the 45 position for tax and accounting purposes, and for purposes of backup withholding and information reporting, that approximately $______ of the cash paid and $_____ in value of the preferred stock, warrants and new notes issued in the exchange will be paid to holders as payment for accrued interest on the old notes. By participating in the purchase and/or exchange, a holder agrees to allocate the cash, preferred stock, warrants and new notes received for the principal amount of the old notes and accrued and unpaid interest in the same manner in which Kaiser will make this allocation. It is possible, however, that the Internal Revenue Service may challenge this allocation and require a holder to allocate the cash, preferred stock, warrants and new notes received first to accrued and unpaid interest on all of the old notes held by the holder, and allocate any remaining cash, preferred stock, warrants and new notes to the principal amount of the old notes. This will have the effect of causing a cash basis holder to report a greater portion of the accrued interest on its old notes as ordinary income. In calculating the amount of gain or loss recognized on the purchase or exchange as described above, the amount of cash, preferred stock, warrants and new notes allocated to accrued interest will not be taken into account. Economic Accrual of Redemption Premium on Preferred Stock. The preferred stock will be redeemable, in whole or in part, at the option of Kaiser at any time following the exchange. In addition, upon the occurrence of a change of control, Kaiser is required to offer to purchase the preferred stock. The issue price of such preferred stock is generally the stock's fair market value as of the issue date. For federal income tax purposes, if a corporation issues preferred stock that may be redeemed at a price that is more than a de minimis amount higher than its issue price, the difference is treated as a "redemption premium" that is taxable to the holder on an annual economic accrual basis, which is commonly referred to as a constant-yield-to-maturity basis. In such event, the holder's tax basis in the preferred stock will increase by the amount included in the holder's gross income as accrued redemption premium. Where as in this case the preferred stock is optionally redeemable by Kaiser at any time, is subject to a mandatory purchase offer upon a change of control, and is subject to mandatory redemption on December 31, 2004, the determination of the redemption premium and the period over which that redemption premium is accrued and taxable to the holder is determined based on the date that redemption is most likely to occur, provided redemption is more likely than not to occur at some time. Kaiser believes that the most likely date of redemption of the preferred stock is December 30, 2001, at which time the preferred stock will be redeemable at 95% of its liquidation preference. Accordingly, the redemption premium will be the excess of 95% of the liquidation preference of the preferred stock over the fair market value of that stock on its date of issuance. Kaiser is required to and will provide information relating to the accrual of redemption premium to the Internal Revenue Service and make this information available to holders. A holder is required to report the accrued redemption premium for federal income tax purposes consistently with this information unless the holder explicitly discloses to the Internal Revenue Service that its determination of accrued redemption premium differs from that of Kaiser. Original Issue Discount on New Notes. The new notes may have "original issue discount." Original issue discount is the excess of the stated redemption price at maturity of the new notes over their issue price. The issue price of the new notes will equal: . their fair market value if the new notes are treated as traded on an established market within the meaning of the Treasury Regulations, . the excess of the fair market value of the old notes over the fair market value of the preferred stock and warrants issued in the exchange, but only if the new notes are not treated as traded on an established market and the old notes, preferred stock and warrants are treated as so traded, or . the stated principal amount of the new notes, if neither of the previous two alternatives applies. For federal income tax purposes, original issue discount that exceeds a de minimis amount accrues to a holder of a new note over the period to maturity based on the constant yield to maturity method, compounded semi-annually, or over such shorter permitted compounding interval selected by the holder. With respect to an original holder of a new note: 46 . is includable in that holder's gross income for federal income tax purposes and . is added to that holder's tax basis for purposes of determining gain or loss on the maturity, redemption, prior sale or other disposition of that new note. Disposition of Preferred Stock, Warrants, or New Notes. A holder generally will recognize gain or loss upon the sale, exchange, redemption or other disposition of the preferred stock, warrants, or new notes equal to the difference between the amount realized on the disposition and the holder's adjusted tax basis in the preferred stock, warrants, or new notes, as applicable. The gain or loss recognized on such a disposition generally will be capital gain or loss and will be long-term capital gain or loss if the holder's holding period for the preferred stock, warrants, or new notes, as applicable, is more than 12 months. However, an amount of gain up to the amount of accrued market discount, if any, on the old notes at the time of the exchange will be treated as ordinary income, assuming the exchange was treated as a recapitalization under Internal Revenue Code Section 368. Exercise of Conversion Option. A holder generally will not recognize gain or loss upon the conversion of shares of preferred stock into shares of common stock. However, any common stock attributable to dividend arrearages on the preferred stock at the time of the conversion will generally be treated as a taxable dividend to the holder. A holder's tax basis in the common stock will generally equal the holder's adjusted tax basis in the preferred stock converted. A holder's holding period for the common stock will include the holding period for the preferred stock converted. Exercise of Warrants. A holder will not recognize gain or loss upon the exercise of the warrants. Following exercise of the warrants, a holder's tax basis in any common stock for which the holder paid a cash exercise price should equal the holder's adjusted tax basis in the warrants exercised, increased by the exercise price. A holder's holding period for any common stock for which the holder paid a cash exercise price should commence on the day following the day that the warrants are exercised. A holder's tax basis in any common stock acquired upon exercise of the warrants using preferred stock to pay the exercise price should generally equal the holder's aggregate adjusted tax basis in the preferred stock so used plus the holder's tax basis in the warrants exercised. A holder's holding period for any common stock acquired upon exercise of the warrants using preferred stock to pay the exercise price should include the holder's holding period for the preferred stock so used. Solicitation of the Consents of Holders Concurrently with the exchange offer, Kaiser will solicit the consents of the holders of the old notes to remove most of the covenants in the old notes indenture. The federal income tax consequences to holders will depend upon whether removal or amendment of the covenants results in a deemed exchange of "modified" notes for the "original" notes. Treasury Regulations promulgated under Section 1001 of the Internal Revenue Code provide that such a deemed exchange occurs if a "significant modification," as described in the Treasury Regulations, in the terms of the debt instrument has occurred, taking into account all relevant facts and circumstances. The Treasury Regulations provide that a modification to a debt instrument that adds, deletes, or alters customary accounting or financial covenants is not a significant modification giving rise to a deemed exchange. Based on these Regulations, the removal of the covenants from the old notes indenture will not constitute a significant modification of the old notes. Accordingly, the removal of the covenants from the old notes indenture will not result in a taxable exchange of the old notes under Internal Revenue Code Section 1001. Backup Withholding and Information Reporting Under some circumstances, a holder may be subject to backup withholding at a 31% rate on payments received in the purchase or exchange and with respect to the preferred stock, warrants and new notes issued in the exchange. This withholding generally applies only if the holder: . fails to furnish the holder's social security or other taxpayer identification number, 47 . furnishes an incorrect taxpayer identification number, . is notified by the Internal Revenue Service that the holder has failed to report payment of interest and dividends properly and the Internal Revenue Service has notified Kaiser that the holder is subject to backup withholding, or . fails, under some circumstances, to provide a certified statement, signed under penalties of perjury, that the taxpayer identification number provided is the holder's correct number and that the holder is not subject to backup withholding. Any amount withheld from a payment to a holder under the backup withholding rules is allowable as a credit against the holder's federal income tax liability, provided that the required information is furnished to the Internal Revenue Service. Some holders, such as corporations and financial institutions, are not subject to backup withholding. Holders should consult their tax advisors as to their qualification for exemption from backup withholding and the procedure for obtaining this exemption. Because the purchase and exchange should be treated as a recapitalization under Internal Revenue Code Section 368, holders will be required to file information regarding the purchase and exchange in connection with filing their federal income tax returns for the period in which the purchase and exchange occur. Tax Consequences to Kaiser Upon the Purchase and Exchange of Old Notes Discharge of Indebtedness. The principal amount of Kaiser's aggregate outstanding indebtedness will be reduced upon the cash purchase and exchange of the old notes. Generally, the cancellation or other discharge of indebtedness triggers ordinary income to a debtor unless payment of the liability would have given rise to a deduction. The amount of the discharge of indebtedness income generally will be equal to the excess of the adjusted issue price, as defined in Treasury Regulation Section 1.1275-1(b), of the indebtedness discharged over the aggregate value of cash and other property, including the preferred stock, warrants and 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 Internal Revenue Code Section 108(d)(3), 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 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. DESCRIPTION OF CONVERTIBLE PREFERRED STOCK General. We are offering 2,600,000 shares of redeemable convertible preferred stock as part of the exchange offer. 48 Liquidation Preference. The preferred stock will have an aggregate liquidation preference of $65 million, or $25 per share, plus accrued interest on the old notes from July 1, 1999 through the date of the closing of the recapitalization. This means that, if Kaiser is liquidated, dissolved or wound up, each holder of a share of preferred stock will be entitled to be paid the per share liquidation preference plus the pro rata portion of that accrued interest. As a holder of preferred stock, you will not be entitled to any further payment. If the assets remaining after distribution to holders of debt and other obligations are insufficient to pay all of the holders of preferred stock, any remaining assets will be distributed on a proportionate basis to the holders of preferred stock. In a liquidation, holders of preferred stock must be paid before any holders of Kaiser common stock and other junior securities receive any payments for their shares. Rank. The preferred stock will rank ahead of Kaiser's common stock. It is not expected that there will be other classes of preferred stock immediately after the recapitalization. The Kaiser Board of Directors could at any time after the recapitalization authorize the issuance of preferred stock that ranks equal with the preferred stock. However, it may not authorize the issuance of preferred stock that ranks senior to the preferred stock or the issuance 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 an initial rate per year equal to ____% of the liquidation preference per share. The dividend rate on the preferred stock will increase to 12% on December 31, 2001. If we fail for any reason to pay a dividend in cash in any quarter, and if we fail to pay the delinquent dividend and the current dividend in the following quarter, holders of the preferred stock will have the right to appoint two additional directors for the two dividends missed and one additional director if any future dividend payment is missed, up to a maximum of three additional directors. The size of our Board of Directors will be expanded accordingly. Unpaid dividends will 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, subject to prior notice of redemption, 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: . 90% of the liquidation preference until June 30, 2001, . 95% of the liquidation preference from June 30, 2001 to December 31, 2001, and . 100% of the liquidation preference from and after December 31, 2001, 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. 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 49 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 a proposed reverse split of the common stock is implemented, the preferred stock will represent approximately 12% of the total voting power of the common and preferred stock. If Kaiser or any of its affiliates holds any preferred stock, they will not be entitled to vote that preferred stock on these matters. The terms of the preferred stock may only be amended with a two-thirds affirmative vote of the holders of preferred stock. If the shareholders of Kaiser do not approve the "shareholder democracy" amendments to Kaiser's certificate of incorporation and bylaws at the 1999 Annual Meeting of Shareholders, Kaiser intends to include a proposal seeking the approval of the "shareholder democracy" amendments 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 will be entitled to vote on this proposal at the 2000 Annual Meeting of Shareholders that number of shares of common stock into which the preferred stock will be convertible, as if the preferred stock had been converted. See "Description of Common Stock - Summary of Proposed Amendments to Kaiser's Certificate of Incorporation and Bylaws." Protective Provisions. Kaiser may not issue senior preferred stock or some types of additional indebtedness without the consent of holders of two- thirds of the preferred stock or the unanimous consent of the directors elected by the preferred stock. Warrant Exercise Provision. The preferred stock may be "useable" in the exercise of the warrants issued in the exchange offer, at a value equal to the liquidation preference, plus accumulated and unpaid dividends. DESCRIPTION OF WARRANTS General. We are offering as part of the exchange offer an aggregate of up to 882,000 warrants, which will entitle the holders to purchase an aggregate of approximately 15% of our common stock on a fully diluted basis. Exercise Price. The exercise price of the warrants will be equal to the average daily closing price of our common stock for the first 20 consecutive trading days following consummation of the exchange offer. Fractional Interests. No fractional shares of common stock will be issued upon exercise of the warrants. We will pay to the holder of a warrant at the time of exercise an amount in cash equal to the current market value of any fractional share of Kaiser common stock less a corresponding fraction of the exercise price. No Voting Rights. The holders of the warrants will have no right to vote on matters submitted to the shareholders of Kaiser. No Dividends or Rights to Share in Assets. The holders of the warrants will have no right to receive dividends. Also, the holders of the warrants will not be entitled to share in the assets of Kaiser if Kaiser is liquidated, dissolved or wound up. If a bankruptcy or reorganization action is commenced by or against Kaiser, a bankruptcy court may hold that unexercised warrants are executory contracts that may be subject to rejection by Kaiser with approval of the bankruptcy court. If this happened, the holders of warrants may, even if sufficient funds are available, receive nothing or a lesser amount as a result of a bankruptcy case than they would be entitled to if they had exercised their warrants prior to the commencement of the bankruptcy case. 50 Procedures for Exercise. You can exercise a warrant by surrendering to Kaiser the warrant certificate evidencing the warrant to be exercised, and delivering a form of election to purchase that is properly completed together with the exercise price. You can pay the exercise price by certified or official bank check or wire transfer payable to Kaiser. Alternatively, a holder can exercise a warrant by using preferred stock issued in the exchange offer, at a value equal to the liquidation value plus accumulated and unpaid dividends. After a holder has surrendered warrant certificates and paid the exercise price, Kaiser will deliver or cause to be delivered, to or upon the written order of such holder, stock certificates representing the number of whole shares of Kaiser common stock to which the holder is entitled. If less than all of the warrants evidenced by a warrant certificate are exercised, a new warrant certificate will be issued for the remaining number of warrants. Warrant Expiration. The warrants will expire on December 31, 2004 if they have not been exercised prior to this date. Registration. The warrants and the common stock underlying the warrants will be registered under the Securities Act. Adjustments. The number of shares of common stock that you can purchase upon exercise of the warrants and the exercise price will be subject to customary anti-dilution provisions. If Kaiser is subject to a merger, or all or substantially all of Kaiser's assets are sold, each warrant will be exercisable for the right to receive the kind and amount of securities, cash, or property to which the holder would have been entitled if the warrants had been exercised immediately prior to the merger or sale. DESCRIPTION OF COMMON STOCK Description of Kaiser's Capital Stock Kaiser's Board of Directors has submitted proposals to its shareholders that some terms and provisions of the Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws that govern the terms, rights and preferences of Kaiser's capital stock be amended. If these proposals are adopted, the rights attributable to holders of Kaiser common stock would be altered. A summary of the substance of those proposals is included under "Summary of Proposed Amendments to Kaiser's Certificate of Incorporation and Bylaws" below. The following summary does not give effect to the adoption of any of these proposals. The authorized capital stock of Kaiser consists of 90,000,000 shares of common stock, par value $0.01 per share, and 2,000,000 shares of preferred stock, par value $0.01 per share. As of September 1, 1999, the outstanding capital stock of Kaiser consisted of 24,833,890 shares of common stock and no shares of preferred stock. Common Stock Each share of common stock has one vote per share on all matters submitted to a vote of shareholders. Kaiser's Amended and Restated Certificate of Incorporation provides that no action may be taken by the holders of shares of common stock by written consent in lieu of holding a meeting of shareholders. Kaiser has never paid cash dividends on its common stock. The Board of Directors anticipates that for the foreseeable future no cash dividends will be paid on its common stock and that Kaiser's earnings will be retained for use in the business. The Board of Directors determines Kaiser's common stock dividend policy based on Kaiser's results of operations, payment of dividends on preferred stock, if any is outstanding, financial condition, capital requirements, and other circumstances. Kaiser's debt agreements currently do not permit dividends to be paid on its common stock. Holders of common stock have no preemptive or other rights to subscribe for additional shares of capital stock. Upon liquidation, dissolution, or winding up of Kaiser, each share of common stock will share equally in assets legally available for distribution to shareholders. 51 The transfer agent and registrar for the common stock is First Chicago Trust Company of New York, 14 Wall Street, Mail Suite 4680, New York, New York 10005. The shareholder relations telephone number at First Chicago is (201) 324-0498, and the First Chicago Web site address is http://www.fctc.com. Since September 14, 1993, the common stock has been traded on the New York Stock Exchange under the symbol "ICF." From December 14, 1989, to September 13, 1993, the common stock was traded on the Nasdaq National Market. The number of holders of record of Kaiser common stock was 1,501 as of September 1, 1999. On September 1, 1999, the closing price per share of Kaiser common stock on the NYSE was $0.50. Included in Kaiser's Annual Report on Form 10-K for the year ended December 31, 1998, which is incorporated by reference into and delivered with this prospectus, is information concerning the high and low sales prices of Kaiser common stock during each of the fiscal quarters during 1997 and 1998. The table below sets forth this price information, as reported by NYSE, for each of the quarterly periods ended since December 31, 1998. High Low ------ ----- 1999 - ----------------- First Quarter $1.500 $.813 Second Quarter $ .813 $.250 Third Quarter (through September 1, 1999) $ .500 $.406 Preferred Stock Preferred stock is available for issuance from time to time at the discretion of the Board of Directors of Kaiser and without shareholder approval. No shares are currently outstanding. For each series of preferred stock it establishes, the Board of Directors has authority to prescribe the number of shares in that series and the dividend rate. In addition, the Board of Directors has authority to prescribe the voting rights, conversion privileges, redemption, sinking fund provisions and liquidation rights, if any, and any other rights, preferences and limitations of the particular series. The issuance of preferred stock could decrease the amount of earnings and assets available for distribution to the holders of common stock or adversely affect the rights and powers, including voting rights, of the holders of common stock. Additionally, the issuance of preferred stock could have the effect of delaying, deferring or preventing a change in control of Kaiser without further action by the shareholders. Kaiser's debt agreements currently do not permit dividends to be paid on its preferred stock if any shares of preferred stock were to be issued. Senior Debt Warrants Issued in 1996 A total of 105,000 Senior Debt Warrants were issued by Kaiser under a warrant agreement dated as of December 23, 1996, between Kaiser and The Bank of New York, a New York banking corporation, as warrant agent. Each 1996 senior warrant entitles the holder to acquire one share of common stock of Kaiser, upon payment of the exercise price of $2.30, subject to adjustment as described below. All outstanding 1996 Warrants terminate and become void on December 31, 1999. The 1996 Warrants are subject to the terms contained in the 1996 Warrant Agreement; capitalized terms that are not otherwise defined below are used as defined in the 1996 Warrant Agreement. The common stock issuable upon exercise of the 1996 Warrants has been registered with the Securities and Exchange Commission and listed on the New York Stock Exchange. Non-Surviving Combination. If Kaiser proposes to enter into a transaction ------------------------- that would constitute a Non-Surviving Combination if consummated, Kaiser must give written notice to the holders promptly after an agreement is reached with respect to the Non-Surviving Combination but in no event less than 30 days prior to the consummation. As used herein, a "Non-Surviving Combination" means any merger, consolidation, or other business combination by Kaiser with one or more persons other than a wholly owned subsidiary of Kaiser in which Kaiser is not the survivor, or a sale of all or substantially all of the assets of Kaiser to one or more of the other persons, if, in connection with any of the foregoing, consideration other than consideration which includes common stock or securities convertible into, or exercisable or exchangeable for, common stock or rights or options to acquire common stock or other securities is distributed to holders of common stock in exchange for all or substantially all of their equity interest in Kaiser. 52 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: . 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 53 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 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." The rights agreement provides that a "Permitted Offer" is: . a tender or exchange offer which is for all outstanding common stock and on terms determined to be adequate and in the best interests of Kaiser and its stockholders by at least a majority of the Board of Directors who are not officers or employees of Kaiser and who are not acquiring persons or affiliates, associates, nominees or representatives of an acquiring person, . a cash tender offer for all outstanding common stock after July 31, 2000, and . the offer and acquisition of the preferred stock and warrants, including the underlying common stock, issuable in exchange for the old notes as described in this prospectus. The rights are not exercisable until the distribution date and will expire at the close of business on January 13, 2002, unless earlier redeemed by Kaiser as described below. Until the distribution date: . the rights will be evidenced by the common stock certificates and will be transferred with and only with these certificates and . the surrender for transfer of any certificates for common stock outstanding will also constitute the transfer of the rights associated with the common stock represented by the certificate. In the event that, at any time following the distribution date, a person becomes an acquiring person, then each holder of a right other than the acquiring person will have the right to receive: 54 . 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 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 55 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 By-laws and other agreements could have the effect of delaying, deferring, or preventing a change in control of Kaiser or other extraordinary corporate transaction. Kaiser's Amended and Restated Certificate of Incorporation and By-laws provide for classification of the Board of Directors into three classes, as nearly equal in number as possible, with one class of directors being elected each year for three-year terms. Under Delaware law, members of a classified board may be removed only for cause. Thus, at least two years would be required to effect a change of control in the Board of Directors, unless a shareholder had sufficient voting power to amend or repeal the Certificate of Incorporation and By-law provisions relating to classification of the Board of Directors. In addition, the Certificate of Incorporation imposes supermajority voting requirements for some corporate transactions that apply if a majority of the Board of Directors has not served in the positions for at least 12 months. Under those circumstances, the approval of two-thirds of the voting power of Kaiser's capital stock would be required in order for Kaiser to: . merge with or consolidate into any other entity, other than a subsidiary of Kaiser, . sell, lease or assign all or substantially all of the assets or properties of Kaiser, or . amend the voting provisions of the Certificate of Incorporation. 56 Other Certificate of Incorporation provisions of the type referred to above include: . the denial of the right of holders of common stock to take action by written consent in lieu of a shareholders' meeting and . the ability of the Board of Directors to determine the rights and preferences, including voting rights, of Kaiser's authorized but unissued preferred stock, and then to issue this stock. Relevant By-law provisions include those that: . require advance nomination of directors, . require advance notice of business to be conducted at shareholders' meetings, and . provide that shareholders owning at least 50% of the voting power of the capital stock are required to call a special meeting of shareholders. With the exception of the provision that authorizes the Board of Directors to fix the terms of and issue authorized but unissued shares of preferred stock, the approval of the holders of at least two-thirds of the voting power of Kaiser's capital stock is required to amend, alter, or repeal, or to adopt provisions inconsistent with, the Certificate of Incorporation and By-law provisions described above, regardless of whether a majority of the members of the Board of Directors has served in such positions for more than 12 months at the time of the action. Delaware Takeover Statute Section 203 of the Delaware General Corporation Law applies to Delaware corporations with a class of voting stock listed on a national securities exchange, authorized for quotation on an inter-dealer quotation system, or held of record by 2,000 or more persons, and restricts transactions which may be entered into by such a corporation and certain of its shareholders. The Delaware takeover statute provides, in essence, that a stockholder acquiring more than 15% of the outstanding voting shares of a corporation subject to the statute, but less than 85% of the shares, may not engage in certain "Business Combinations" with the corporation for a period of three years subsequent to the date on which the stockholder became an Interested Stockholder, unless: . prior to the date the corporation's board of directors approved either the Business Combination or the transaction in which the stockholder became an Interested Stockholder or . the Business Combination is approved by the corporation's board of directors and authorized by a vote of at least 66 2/3% of the outstanding voting stock of the corporation not owned by the Interested Stockholder. The Delaware takeover statute defines the term "Business Combination" to encompass a wide variety of transactions with or caused by an Interested Stockholder in which the Interested Stockholder receives or could receive a benefit on other than a pro rata basis with other stockholders, including mergers, some asset sales, some issuances of additional shares to the Interested Stockholder, transactions with the corporation which increase the proportionate interest of the Interested Stockholder, or transactions in which the Interested Stockholder receives some other benefits. Summary of Proposed Amendments to Kaiser's Certificate of Incorporation and Bylaws The 1999 Annual Meeting of Shareholders of Kaiser will be held on Thursday, November 4, 1999, at 10:00 a.m. At the annual meeting, Kaiser's shareholders will be asked to vote upon, among other things, proposals to: . approve the issuance of shares of the preferred stock and warrants in connection with the exchange offer; . approve a reverse stock split of Kaiser's common stock; 57 . approve the "shareholder democracy" amendments to Kaiser's certificate of incorporation and bylaws to eliminate the provisions of the certificate of incorporation and, where applicable, the bylaws that: . require the affirmative vote of holders of 66 2/3% of the outstanding capital stock to approve certain transactions following a change in the majority of directors within 12 months; . provide for staggered, three-year terms for members of the board of directors; . prohibit shareholders from filling vacancies on the board of directors; . require the affirmative vote of the holders of 66 2/3% of the outstanding capital stock to approve certain amendments to the certificate of incorporation and bylaws; and . provide that shareholders owning at least 20% of the voting power of the outstanding capital stock could require a special meeting of shareholders to be called; . approve an amendment to Kaiser's certificate of incorporation and bylaws to provide that no new shareholder rights plan, sometimes referred to as a "poison pill," shall be adopted without the approval of the shareholders; . approve an amendment to Kaiser's certificate of incorporation to eliminate provisions related to the terms of series of preferred stock that are obsolete and no longer outstanding; . approve an amendment to Kaiser's stock incentive plan to increase the number of shares of common stock available for issuance under the plan, to permit the transfer of options granted under the incentive plan to immediate family members of plan participants and to provide greater flexibility to Kaiser's board of directors to make future amendments to the plan; and . approve a quasi-reorganization of Kaiser's capital accounts to eliminate its accumulated retained earnings deficit. If the shareholders approve one or more of the foregoing proposals, the above description of the common stock and shareholder rights plan would be altered accordingly. DESCRIPTION OF NEW NOTES The following is only a summary of the terms of the new notes. We urge you to read the indenture and the exhibits to the indenture for a complete description of the terms of the new notes, copies of which are available upon request from Kaiser. The terms of the new notes include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939 as in effect on the date of the indenture. The definitions of some terms used here are set forth in "Certain Definitions" below. The terms of the new notes may differ in material respects from the terms of the old notes. Holders of old notes should review this section carefully. General Kaiser will issue the new notes in partial exchange for the old notes under an indenture between itself and Bank of New York, as trustee (the "Trustee"). The new notes: . are general unsecured obligations of Kaiser; . are limited to an aggregate principal amount of up to $25 million; . bear interest at the rate of 12% per annum, payable on June 30 and December 31 of each year, commencing on December 31, 1999, to holders of record at the close of business on the preceding June 15 or December 15, as the case may be; . mature on December 31, 2002; and . are issued only in registered form, without coupons, in denominations of $1,000 and its integral multiples. 58 The new notes may be presented for registration of transfer and/or exchange and the principal and interest on the new notes is payable at the corporate trust office of the Trustee at 101 Barclay Street, 7 East, New York, New York 10286, or at an office or agency maintained by Kaiser in the City of New York, New York. Methods of Making Payments on the New Notes Payments are made by check mailed to the registered addresses of the holders of record of the new notes. Holders must surrender their notes to the paying agent to collect principal payments. Kaiser may require payment of a sum sufficient to cover any transfer tax or other governmental charge payable in connection with transfers or exchanges of the new notes. Initially, the Trustee acts as the paying agent and the registrar under the indenture. Kaiser or any of its subsidiaries subsequently may act as the paying agent and the registrar and Kaiser may change any paying agent and any registrar without prior notice to the holders of the new notes. Ranking The new notes are senior unsecured obligations of Kaiser. The new notes will rank equal in right of payment with all of our current and future senior unsecured obligations. We are currently pursuing alternatives for a new secured credit facility. The new notes would be effectively subordinated to the rights of the lender under this credit facility. Kaiser's operations are conducted primarily through its subsidiaries. Certain of our subsidiaries have guaranteed the new notes. As to these subsidiaries, the new notes will rank as senior obligations of the subsidiary, equal in right of payment to other current and future unsecured obligations of the subsidiary. As to subsidiaries that have not guaranteed the new notes, the new notes would be effectively subordinated to the current and future obligations of those subsidiaries. As of June 30, 1999, on a pro forma basis after giving effect to the recapitalization, the aggregate principal amount of subsidiary indebtedness which would have effectively ranked senior to the new notes would have been approximately [$______ million]. Kaiser is a holding company that derives substantially all of its income from its subsidiaries. Kaiser must rely on dividends or other intercompany transfers from its subsidiaries to generate the funds necessary to meet its debt service and other obligations, including payment of principal and interest on the new notes. The ability of its subsidiaries to pay these dividends or other intercompany transfers is subject to the laws of the jurisdictions where the subsidiaries are located. Claims of creditors against these subsidiaries generally have priority as to the assets of the subsidiaries over Kaiser's equity interests and the holders of Kaiser's indebtedness. See "Capitalization." Optional Redemption of the New Notes Kaiser may choose to redeem the new notes in whole or in part, at any time, at a redemption price equal to 100% of the aggregate principal amount of the new notes, plus accrued and unpaid interest. The Trustee selects the new notes to be redeemed from among the outstanding new notes on a pro rata basis, by lot or by any other method permitted in the indenture, if less than all of the new notes are to be redeemed at any time. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder whose new notes are to be redeemed at the registered address of the holder. Interest will cease to accrue on the new notes or portions called for redemption on and after the redemption date. Sinking Fund There is no mandatory sinking fund for the new notes. Mandatory Offers to Purchase the New Notes The indenture requires Kaiser to offer to purchase a portion of the outstanding new notes under some circumstances. See "Certain Covenants - Limitations on Asset Sales and "Certain Covenants - Change of Control." Certain Covenants Change of Control. Upon any sale of all or substantially all of Kaiser's assets, or the acquisition of a majority of Kaiser's equity securities by a person or group, or Kaiser's approval of a plan of liquidation, or changes in the majority of Kaiser's board of directors, Kaiser is obligated to repurchase all outstanding new notes. The purchase price equals 101% of the principal balance of outstanding new notes, plus accrued interest to the date of purchase. Limitations on Additional Indebtedness. Kaiser will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, extend the maturity of or otherwise become liable with respect to any indebtedness, other than Permitted Indebtedness, unless it is able to demonstrate that for the four quarterly periods preceding the incurrence of this debt, its Consolidated Fixed Change Coverage Ratio, was at least 2.50 to 1.0. 59 Limitations on Subsidiary Debt and Preferred Stock. Kaiser will not permit any of its Restricted Subsidiaries, directly or indirectly, to create, incur, assume, guarantee, extend the maturity of or otherwise become liable with respect to any indebtedness, which, with respect to any Restricted Subsidiary, includes preferred stock of the Restricted Subsidiary, except for the following: . guarantees by any Restricted Subsidiary of the payment of indebtedness incurred pursuant to the Bank Credit Agreement and in compliance with the covenant described under "Limitations on Additional Indebtedness" and with the covenant described under "Limitations on Guarantees"; . Indebtedness issued to and held by Kaiser or a wholly-owned Restricted Subsidiary, except that any subsequent issue or transfer of any Capital Stock that results in any wholly-owned Restricted Subsidiary ceasing to be a wholly-owned Restricted Subsidiary or any transfer of Indebtedness, other than to a wholly-owned Restricted Subsidiary, is deemed, in each case, to constitute the incurrence of Indebtedness by the Restricted Subsidiary; . Indebtedness to Kaiser or any of its wholly-owned Restricted Subsidiaries that are engaged in Permitted Businesses in an aggregate amount, together with all Designated Investments made in subsidiaries that are not wholly-owned Restricted Subsidiaries but which are engaged only in Permitted Businesses and the management and operations of which is controlled by Kaiser, not to exceed 5% of Consolidated Tangible Assets; and . Non-recourse indebtedness incurred by a Single Purpose Subsidiary. Limitations on Restricted Payments. Kaiser will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, make any Restricted Payment if, at the time of a potential Restricted Payment, any of the following conditions exist: . a Default or Event of Default has occurred and is continuing or will occur as a consequence; . Kaiser is unable to incur an additional $1.00 of Senior Indebtedness under the covenant described in the first sentence of the first paragraph under "Limitations on Additional Indebtedness"; or . the amount of the Restricted Payment, when added to the aggregate amount of all Restricted Payments, other than those made pursuant to the exceptions described in the following paragraph, made after the date of the indenture, exceeds the sum of: . 50% of Kaiser's Consolidated Net Income accrued during the period since the date of the indenture for the new notes or, if that aggregate Consolidated Net Income is a deficit, minus 100% of the aggregate deficit; plus . the net reduction in Investments attributable to Designated Investments by Kaiser or its subsidiaries after December 31, 1999. The monetary limitations described in the immediately preceding paragraph will not prevent the following: . Kaiser or any wholly-owned Restricted Subsidiary from making investments in subsidiaries, in an aggregate amount not to exceed $4 million, pursuant to contractual obligations in existence on the date of the indenture for the new notes or directly related to projects in existence on the date of the indenture for the new notes; . Kaiser from paying any dividend, including dividends on dividends, within 60 days after the date of its declaration if this dividend could have been paid on the date of its declaration without violation of this covenant; 60 . Kaiser from purchasing or redeeming and retiring any shares of capital stock of Kaiser, and paying accrued and unpaid dividends on these shares at the time of this repurchase or redemption, in exchange for, or out of the net proceeds of a substantially concurrent sale, other than to a subsidiary of Kaiser or an employee stock ownership plan, of shares of Qualified Capital Stock of Kaiser; . Kaiser or any subsidiary from making: . investments pursuant to the provisions of employee benefit plans of Kaiser or any of its subsidiaries in an aggregate amount not to exceed $500,000 in a fiscal year, or . making loans to officers of Kaiser approved by a majority of the independent members of the Board of Directors of Kaiser, provided that the aggregate amount of investments and loans under this clause may not exceed $1 million in any fiscal year; . Kaiser or any wholly-owned Restricted Subsidiary from making Designated Investments: . in subsidiaries that are not wholly-owned Restricted Subsidiaries in an aggregate amount, together with Indebtedness incurred by or on behalf of subsidiaries that are not wholly-owned Restricted Subsidiaries in compliance with the provisions of the third clause of the covenant described under "Limitations on Subsidiary Debt and Preferred Stock", not to exceed 5% of Consolidated Tangible Assets after December 31, 1999 or . in Joint Ventures in an aggregate amount not to exceed 5% of Consolidated Tangible Assets after December 31, 1999, provided that: . the person in whom the investment is made is engaged only in Permitted Businesses; . Kaiser, directly or through wholly-owned Restricted Subsidiaries of Kaiser, controls, under an operating management agreement or otherwise, the day-to-day management and operation of this Person or otherwise has the right to exercise significant influence over the management and operation of this Person in all material respects, including without limitation the right to control or veto any material act or decision; and . after giving effect to this Investment, the aggregate amount of indebtedness and investments made by Kaiser and its subsidiaries in this Person after December 31, 1999 does not exceed $5 million; or . Kaiser or any wholly-owned Restricted Subsidiary from making Designated Investments in subsidiaries that are not wholly-owned Restricted Subsidiaries or in Joint Ventures, as long as these Designated Investments are made solely from: . the net proceeds of a substantially concurrent sale, other than to a subsidiary of Kaiser or an employee stock ownership plan, of shares of Qualified Capital Stock of Kaiser, . 50% of Kaiser's Consolidated Net Income accrued during the period after December 31, 1999, . the aggregate amount of net reductions in investments, not to exceed the aggregate amount of the Designated Investments, made by Kaiser or any Subsidiary after December 31, 1999, . Kaiser or any wholly-owned Restricted Subsidiary from making Investments in Kaiser-Hill Company LLC or its affiliates, as long as such Investments are determined by Kaiser Board of Directors to be necessary or appropriate and that such investments are proportional to simultaneous investments made by the other equity owners, 61 . Kaiser from redeeming the shares of the preferred stock, . Kaiser from issuing equity securities or making payments in respect of equity securities previously issued to former shareholders of ICT Spectrum Constructors, Inc., . Kaiser from making payments to redeem rights outstanding under Kaiser's Rights Agreement dated January 13, 1992, or . Kaiser from paying dividends on the preferred stock. Limitations on Restrictions on Distributions from Subsidiaries. Kaiser will not, and will not permit any of its Restricted Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual Payment Restriction with respect to any of its Restricted Subsidiaries, except for the following: . any Payment Restriction contained in Existing Indebtedness or existing contracts to which Kaiser or any of its Restricted Subsidiaries are parties; . any Payment Restriction under any agreement evidencing any Acquired Indebtedness that was permitted to be incurred pursuant to the indenture, as long as the Payment Restriction only applies to assets that were subject to these restrictions and encumbrances prior to the acquisition of these assets by Kaiser or its Restricted Subsidiaries; and . any Payment Restriction arising in connection with Refinancing Indebtedness, as long as any Payment Restrictions that arise under the Refinancing Indebtedness are not, taken as a whole, more restricted than those under the agreement creating or evidencing the Indebtedness being refunded or refinanced. Limitations on Transactions with Affiliates. Kaiser will not, and will not permit any of its Restricted Subsidiaries to, make any loan, advance, guarantee or capital contribution to or for the benefit of, or sell, lease, transfer or otherwise dispose of any of its properties or assets to or for the benefit of, or make any Investment in, or purchase or lease any property or assets from, or enter into or amend any contract, agreement or understanding with or for the benefit of, any Affiliate of Kaiser or any of its subsidiaries, each of which is an "Affiliate Transaction," except for the following: . Affiliate Transactions in the ordinary course of business and consistent with past practice that are fair to Kaiser or the Restricted Subsidiary and are on terms at least as favorable as would have been obtainable at that time from an unaffiliated party; . the Board of Directors of Kaiser or the Restricted Subsidiary pursuant to a Board Resolution reasonably and in good faith determines that the Affiliate Transaction is fair to Kaiser or the Restricted Subsidiary and is on terms at least as favorable as would have been obtainable at that time from an unaffiliated party; . for any Affiliate Transaction or series of Affiliate Transactions involving or having a value of more than $1 million, unless a majority of the members of the Board of Directors of Kaiser who are not affiliated with any other party to the Affiliate Transaction reasonably and in good faith determined that the Affiliate Transaction or series of Affiliate Transactions is fair to Kaiser or the Restricted Subsidiary, and is on terms at least as favorable as would have been obtainable at that time from an unaffiliated party; and . for any Affiliate Transaction or series of Affiliate Transactions involving or having a value of more than $5 million, unless Kaiser or the Restricted Subsidiary received an opinion from an Independent Financial Advisor to the effect that the financial terms of the Affiliate Transaction are fair to Kaiser or the Restricted Subsidiary from a financial point of view. 62 The limitations described in the foregoing paragraph do not apply to: . transactions exclusively between or among Kaiser and any of its wholly- owned Restricted Subsidiaries or exclusively between or among any of Kaiser's wholly-owned Restricted Subsidiaries, as long as these transactions are not otherwise prohibited by the indenture; . arms-length transactions between Kaiser or any of its wholly-owned Restricted Subsidiaries and the other owners of any subsidiary or Joint Venture that is not under control of and does not have capital stock or indebtedness held by Kaiser or its affiliates; and . reasonable compensation, indemnification and other benefits paid or made available to officers, directors and employees of Kaiser or any Subsidiary for services rendered in this Person's capacity as an officer, director or employee. Limitations on Asset Sales. Kaiser will not, and will not permit any of its Restricted Subsidiaries to, consummate any Asset Sale unless: . Kaiser or its Restricted Subsidiaries receive consideration at the time of the Asset Sale at least equal to the fair market value of the assets or Capital Stock included in the Asset Sale; . the aggregate fair market value of the consideration from the Asset Sale, other than consideration in the form of assumption of Indebtedness of Kaiser or one or more of its Restricted Subsidiaries from which Kaiser or the Restricted Subsidiaries are released, that is not in the form of cash or Cash Equivalents is not, when aggregated with the fair market value of all other non-cash or non-Cash Equivalent consideration received by Kaiser and its Restricted Subsidiaries from all previous Asset Sales since the date of the indenture for the new notes that have not yet been converted into cash or Cash Equivalents, exceed 5% of Consolidated Tangible Assets of Kaiser at the time of the Asset Sale; and . the Asset Sale has been approved by Kaiser's Board of Directors if the aggregate fair market value of the assets or Capital Stock to be sold in the Asset Sale exceeds $3 million. Within six months after consummation of any Asset Sale, Kaiser will, or will cause the applicable Restricted Subsidiary to: . reinvest the cash and Cash Equivalent portion of the Net Proceeds of the Asset Sale in a manner that would constitute a Related Business Investment; . apply the cash and Cash Equivalent portion of the Net Proceeds of the Asset Sale to repay outstanding Senior Indebtedness of Kaiser or any Restricted Subsidiary, as long as any repayment of Indebtedness under any revolving credit facility or similar agreement results in a permanent reduction in its lending commitment in an amount equal to the principal amount repaid; or . apply the cash and Cash Equivalent portion of the Net Proceeds of the Asset Sale that is neither reinvested nor applied to the repayment of Senior Indebtedness to the purchase of new notes tendered to Kaiser at a purchase price equal to 100% of its principal, plus accrued interest to the date of purchase, pursuant to an Asset Sale Offer to purchase made by Kaiser as set forth below, except that Kaiser may defer the Asset Sale Offer until this amount is at least $5 million. However, to the extent that: . any or all of the Net Proceeds of any Foreign Asset Sale are prohibited or delayed by applicable local law from being repatriated to the United States, the portion of the Net Proceeds affected will not be 63 required to be applied in the manner set forth in this covenant but may be retained by the applicable Foreign Subsidiary so long as the applicable local law will not permit repatriation to the United States and, once this repatriation of any of the affected Net Proceeds is permitted under the applicable local law, this repatriation will be immediately effected and the repatriated Net Proceeds will be applied in the manner set forth in this covenant; and . the Board of Directors determines in good faith that repatriation of any or all of the Net Proceeds of any Foreign Asset Sale would have a material adverse tax consequence, the Net Proceeds affected may be retained by the applicable Foreign Subsidiary for so long as this material adverse tax event would continue. Each Asset Sale Offer must: . be mailed to the record holders of the new notes as shown on the register of holders of new notes, with a copy to the Trustee; . specify the purchase date, which must be between 30 days and 60 days from the date the notice is mailed and not later than 240 days after the date of the Asset Sale giving rise to the Asset Sale Offer; and . otherwise comply with the procedures set forth in the indenture. Upon receiving notice of an Asset Sale Offer, holders of new notes may elect to tender their new notes in whole or in part in integral multiples of $1,000 in exchange for cash. To the extent holders properly tender notes in an amount exceeding the amount of Net Proceeds used to make the Asset Sale Offer, new notes of tendering holders will be repurchased on a pro rata basis, based on amounts tendered. Kaiser will comply with the requirements of Section 14(e) under the Exchange Act and any other securities laws and regulations to the extent these laws and regulations are applicable in connection with the repurchase of new notes pursuant to any Asset Sale Offer. Restrictions on Sale of Stock of Subsidiaries. Kaiser may not sell or otherwise dispose of any of the Capital Stock of any Restricted Subsidiary of Kaiser unless: . Kaiser either retains ownership of more than 50% of the common stock of the Restricted Subsidiary or sells all of the Capital Stock of the Restricted Subsidiary and the net proceeds from this sale or disposition are treated in a manner consistent with the treatment of Asset Sale proceeds; or . Kaiser elects to treat the amount of its remaining investment in the Restricted Subsidiary that has become a Joint Venture as a result of the sale or disposition as an Investment in the Joint Venture subject to the provisions described under "Limitations on Restricted Payments." Limitations on Mergers and Certain Other Transactions. Kaiser will not: . in a single transaction or a series of related transactions, consolidate or merge with or into, or sell, lease, convey or otherwise dispose of all or substantially all of its assets, or assign any of its obligations under the new notes or the indenture, to any Person, or . adopt a Plan of Liquidation unless, in either case: . the Person formed by or surviving the consolidation or merger, if other than Kaiser, or to which the sale, lease, conveyance or other disposition or assignment is made, or, in the case of a Plan of Liquidation, the Person to which assets are transferred, each of which is referred to as a "Successor," is a domestic corporation and the Successor assumes by supplemental indenture in a 64 form satisfactory to the Trustee all of the obligations of Kaiser under the new notes and the indenture; . immediately prior to and immediately after and giving effect to the transaction and the assumption of the obligations as set forth in the preceding clause above and the incurrence of any Indebtedness, no Default or Event of Default will have occurred and be continuing; and . immediately after and giving effect to the transaction and the assumption of the obligations as set forth in the first clause above and the incurrence of any Indebtedness, and the use of its net proceeds on a pro forma basis: . the Consolidated Tangible Net Worth of Kaiser or the Successor would be at least equal to the Consolidated Tangible Net Worth of Kaiser immediately prior to the transaction and . Kaiser or the Successor could incur at least $1.00 of additional Senior Indebtedness under the covenant described under "Limitations on Additional Indebtedness." In addition, Kaiser will not permit any Single Purpose Subsidiary that has outstanding Indebtedness to consolidate or merge with any other Person other than a Person whose activities are limited to ownership of a portion of the same project in which the merging Single Purpose Subsidiary owns an interest. The foregoing provisions of the indenture will not prohibit a transaction whose sole purpose, as determined in good faith by the Board of Directors and evidenced by a Board Resolution, is to change the state of incorporation of Kaiser or a Single Purpose Subsidiary and the transaction does not have as one of its purposes the evasion of the limitations described above. Limitations on Guarantees. Kaiser will not permit any of its Restricted Subsidiaries to guarantee any Indebtedness, other than guarantees of indebtedness under the Bank Credit Agreement permitted under the provisions of the covenant described under "Limitations on Subsidiary Debt and Preferred Stock" by subsidiaries of Kaiser who have delivered similar guarantees prior to the date of the indenture, unless Kaiser causes each Subsidiary to execute and deliver to the Trustee a supplemental indenture, pursuant to which the Subsidiary unconditionally guarantees the payment of principal and interest on the new notes. Any guarantee will be subordinated in right of payment to the guarantee by the Subsidiary pursuant to the Bank Credit Agreement. Events of Default An "Event of Default" is defined in the indenture to include any of the following: . failure by Kaiser to pay interest on any of the new notes when it becomes due and payable and the continuance of any failure for 30 days; . failure by Kaiser to pay the principal of the new notes when it becomes due and payable, whether at stated maturity, upon redemption, upon acceleration or otherwise, including failure to make payment pursuant to an Asset Sale Offer; . failure by Kaiser to comply with any covenant in the indenture and continuance of the failure for 60 days after notice of the failure has been given to Kaiser by the Trustee or by the holders of at least 25% of the aggregate principal amount of the new notes then outstanding; . failure by Kaiser or any of its subsidiaries to make any payment when due or during any applicable grace period, and the continuation of the failure for seven days, with respect to any indebtedness of Kaiser or any of its subsidiaries, other than Non-Recourse Indebtedness of a Single Purpose Subsidiary, that has an aggregate outstanding principal amount of $2 million or more; 65 . a default under any indebtedness, other than Non-Recourse Indebtedness of a Single Purpose Subsidiary, if: . the default results in the holder or holders of the indebtedness causing the indebtedness to become due prior to its stated maturity and . the principal amount of the indebtedness, together with the principal amount of any other indebtedness, which maturity has been accelerated, aggregates $2 million or more at any one time outstanding; . a court or courts of competent jurisdiction have entered one or more final judgments or orders against Kaiser or any of its subsidiaries for payment of amounts which exceed $2 million in the aggregate and the judgment or judgments have not been satisfied, stayed, annulled or rescinded within 60 days of being entered; and . some events of bankruptcy, insolvency or reorganization involving Kaiser or any of its subsidiaries. If an Event of Default, other than an Event of Default resulting from bankruptcy, insolvency or reorganization involving Kaiser, has occurred and is continuing under the indenture, the Trustee by written notice to Kaiser, or the holders of at least 25% in aggregate principal amount of the new notes then outstanding by written notice to Kaiser and the Trustee, may declare all amounts owing under the new notes to be due and payable immediately. Upon declaration of acceleration, the aggregate principal and interest on the outstanding notes will immediately become due and payable. If an Event of Default results from bankruptcy, insolvency or reorganization involving Kaiser, all outstanding notes will become due and payable without any further action or notice. In some cases, the holders of a majority in aggregate principal amount of the new notes then outstanding may waive an existing Default or Event of Default and its consequences, except a default in the payment of principal and interest on the new notes. The holders of new notes may not directly enforce the provisions of the indenture or the new notes except as provided in the indenture. Subject to some limitations, holders of a majority in principal amount of the new notes then outstanding may direct the Trustee in its exercise of any trust or power, as long as the direction does not conflict with the terms of the indenture. The Trustee may withhold from the holders of new notes notice of any continuing Default or Event of Default, except any Default or Event of Default in payment of principal and interest on the new notes, if the Trustee determines that withholding the notice is in the holders' interest. Kaiser is required to deliver to the Trustee annually a statement regarding compliance with the indenture and, upon any Officer of Kaiser becoming aware of any Default or Event of Default, a statement specifying the Default or Event of Default and what action Kaiser is taking or proposes to take with respect to the Default or Event of Default. Discharge of Indenture The indenture will permit Kaiser to terminate all of its obligations under the indenture, other than the obligation to pay the principal and interest on the new notes, and some other obligations at any time by taking the following actions: . depositing in trust with the Trustee, under an irrevocable trust agreement, money or U.S. government obligations in an amount sufficient to pay principal and interest on the new notes to their maturity or redemption and . complying with some other conditions, including delivery to the Trustee of an opinion of counsel or a ruling received from the Internal Revenue Service to the effect that holders of new notes will not recognize income, gain or loss for federal income tax purposes as a result of Kaiser's exercise of the 66 right and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case otherwise. Transfer and Exchange A holder of new notes will be able to register the transfer of or exchange of his new notes only in accordance with the provisions of the indenture. The Trustee may require a holder, among other things, to furnish appropriate endorsements and transfer documents, and to pay any taxes and fees required by law or permitted by the indenture. Without the prior consent of Kaiser, the Trustee is not required: . to register the transfer or exchange of any new note selected for redemption; . to register the transfer or exchange of any new note for a period of 15 days before a selection of new notes to be redeemed; or . to register the transfer or exchange of a new note between a record date and the next succeeding interest payment date. The holder of a new note will be treated as the owner of a new note for all purposes. Amendment, Supplement and Waiver Subject to some exceptions, the indenture or the new notes may be amended or supplemented with the consent, which may include consents obtained in connection with a tender offer or exchange offer for notes, of the holders of at least a majority in principal amount of the new notes then outstanding, and any existing Default under, or compliance with any provision of, the indenture may be waived, other than any continuing Default or Event of Default in the payment of the principal or interest on the new notes or that resulted from the failure to comply with the covenant described under "Change of Control," with the consent, which may include consents obtained in connection with a tender offer or exchange offer for notes, of the holders of a majority in principal amount of the new notes then outstanding. Without the consent of any holder, Kaiser and the Trustee may amend or supplement the indenture or the new notes to cure any ambiguity, defect or inconsistency, to provide for uncertificated new notes in addition to or in place of certificated new notes, to provide for the assumption of Kaiser's obligations to holders in the case of a merger or acquisition, or to make any change that does not adversely affect the rights of any holder. Kaiser may not, without the consent of each affected holder of new notes: . extend the maturity of any new note; . affect the terms of any scheduled payment of interest on or principal of the new notes, including without limitation any redemption provisions; . reduce the percentage of holders necessary to consent to an amendment, supplement or waiver to the indenture. The right of any holder of new notes to participate in any consent required or sought pursuant to any provision of the indenture, and the obligation of Kaiser to obtain this consent otherwise required from the holder, may be subject to the requirement that the holder be the holder of record of any new notes with respect to which the consent is required or sought as of a date identified by the Trustee in a notice furnished to holders in accordance with the terms of the indenture. 67 Concerning the Trustee The indenture contains some limitations on the rights of the Trustee, should it become a creditor of Kaiser, to obtain payment of claims in some cases, or to realize on some property received in respect of any claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest, as defined in the indenture, it must eliminate this conflict or resign. The holders of a majority in principal amount of the then outstanding new notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to some exceptions. The indenture provides that, in case an Event of Default occurs and is not cured, the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent person in similar circumstances in the conduct of his own affairs. Subject to these provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request of any holder of new notes, unless the holder has offered to the Trustee security and indemnity satisfactory to the Trustee. Definitions Set forth below is a summary of the most significant defined terms used in the indenture. Reference is made to the indenture for the full definition of all the terms included within the indenture. "Acquired Indebtedness" means: . with respect to any Person that becomes a direct or indirect Subsidiary of Kaiser after the date of the indenture, Indebtedness of this Person and its subsidiaries existing at the time this Person becomes a Subsidiary of Kaiser that was not incurred in connection with, or in contemplation of, this Person becoming a Subsidiary of Kaiser; and . with respect to Kaiser or any of its subsidiaries, any Indebtedness assumed by Kaiser or any of its subsidiaries in connection with the acquisition of an asset from another Person that was not incurred by this other Person in connection with, or in contemplation of, the acquisition. "Affiliate" of any person means any Person: . which directly or indirectly controls or is controlled by, or is under direct or indirect common control with, the referent Person, . which beneficially owns or holds 10% or more of any class of the Voting Stock of the referent Person or . of which 10% or more of the Voting Stock, or in the case of a Person which is not a corporation, 10% or more of the equity interest, is beneficially owned or held by the referent Person. For purposes of this definition, control of a Person means the power to direct the management and policies of this Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. However, the term "Affiliate" does not include, with respect to Kaiser or any wholly- owned Restricted Subsidiary of Kaiser, . any wholly-owned Subsidiary of Kaiser or . any Subsidiary of Kaiser that is not a wholly-owned Subsidiary or any Joint Venture, as long as the Subsidiary or Joint Venture is not under the control of, and does not have any Capital Stock, other than directors' qualifying shares, or Indebtedness owned or held by, any Affiliate of Kaiser. 68 "Asset Sale" for any Person means the sale, lease, transfer or other disposition or series of sales, leases, transfers or other dispositions, including without limitation by merger or consolidation, and whether by operation of law or otherwise, of any of that Person's assets, including without limitation the sale or other disposition of Capital Stock of any Subsidiary of the Person, whether by the Person or by the Subsidiary, whether owned on the date of the indenture or subsequently acquired, excluding: . any sale, lease, transfer or other disposition between Kaiser and any of its wholly-owned Restricted Subsidiaries; . any transfer of assets of Kaiser or any of its Restricted Subsidiaries that constitutes and is treated as a Designated Investment; . any transfer of assets of Kaiser or any of its Restricted Subsidiaries that constitutes a Change of Control and that is governed by and effected in accordance with the covenants described under "Limitations on Mergers and Certain Other Transactions" and "Change in Control"; and . any sale, lease, transfer or other disposition, or series of sales, leases, transfers or other dispositions, of assets having a purchase price or transaction value of $1 million or less, as long as no Default or Event of Default exists at the time of this sale. "Bank Credit Agreement" means Kaiser's principal credit agreement providing for a revolving line of credit and/or the issuance of letters of credit, as in effect from time to time among Kaiser and some of its subsidiaries and one or more banks, financial institutions or other lenders, as such agreement may be amended, restated, supplemented or otherwise modified from time to time, and includes any substitute or successor credit agreement. "Capital Stock" of any Person means any and all shares, rights to purchase, warrants or options, whether or not currently exercisable, participations or other equivalents of or interests in, however designated, the equity, including without limitation common stock, preferred stock and partnership and joint venture interests, of this Person. "Cash Equivalents" means: . obligations issued or unconditionally guaranteed by the United States of America or any agency or obligations issued by any agency or instrumentality and backed by the full faith and credit of the United States of America; . commercial paper rated the highest grade by Moody's Investors Service, Inc. and Standard & Poor's Corporation and maturing not more than one year from the date of its creation; and . readily marketable direct obligations issued by any state of the United States of America or any political subdivision having one of the two highest rating categories obtainable from either Moody's Investors Service, Inc. or Standard & Poor's Corporation. "Consolidated Depreciation Expense" of any Person for any period means the depreciation expense of the Person and its Restricted Subsidiaries for any period, to the extent included in the computation of Consolidated Net Income of this Person, determined on a consolidated basis in accordance with GAAP. "Consolidated Fixed Charge Coverage Ratio" of any Person means, with respect to any determination date, the ratio of: . EBITDA for this Person's prior four full fiscal quarters for which financial results have been reported immediately preceding the determination date to 69 . the aggregate Fixed Charges of this Person for four fiscal quarters; except that if any calculation of Kaiser's Consolidated Fixed Charge Coverage Ratio requires the use of any quarter beginning prior to January 1, 2000, this calculation will be made without regard to such quarter and, instead, shall be based on the lesser number of full fiscal quarters completed after January 1, 2000; and except that if any calculation requires the use of any quarter prior to the date that any Asset Sale was consummated, or that any Indebtedness was incurred, or that any acquisition was effected, by Kaiser or any of its Restricted Subsidiaries, this calculation will be made on a pro forma basis, giving effect to each Asset Sale, incurrence of Indebtedness or acquisition, as the case may be, and the use of any proceeds, as if the same had occurred at the beginning of the four-quarter period used to make this calculation. "Consolidated Net Income" of any Person for any period means the net income, or loss, of the relevant Person and its Restricted Subsidiaries for a period determined on a consolidated basis in accordance with GAAP; except that there will be excluded from the net income, without duplication: . the net income, or loss, of any Person, other than a Restricted Subsidiary of the relevant Person, in which any Person other than the relevant Person has an ownership interest, except to the extent that any of this income is appropriately accounted for under generally accepted accounting principles; . except to the extent includable in the consolidated net income of the relevant Person pursuant to the foregoing clause, the net income, or loss, of any Person that accrued prior to the date that . this Person becomes a Restricted Subsidiary of the relevant Person or is merged into or consolidated with the relevant Person or any of its Restricted Subsidiaries or . the assets of this Person are acquired by the relevant Person or any of its Restricted Subsidiaries; . the net income, or loss, of any Restricted Subsidiary of the relevant Person to the extent that the declaration or payment of dividends or similar distributions by the Restricted Subsidiary of that income is not permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary during the period, as long as the amount of loss excluded pursuant to this clause will not exceed that amount of net income excluded pursuant to this clause; . any gain, but not loss, together with any related provisions for taxes on any such gain, realized during the period by the relevant Person or any of its Restricted Subsidiaries upon . the acquisition of any securities, or the extinguishment of any Indebtedness, of the relevant Person or any of its Restricted Subsidiaries or . any Asset Sale by the relevant Person or any of its Restricted Subsidiaries; . in the case of a successor to this Person by consolidation, merger or transfer of its assets, any earnings of the successor prior to the merger, consolidation or transfer of assets. "Consolidated Net Tangible Assets" of any Person as of any date means the Consolidated Tangible Assets of this Person and its Restricted Subsidiaries less the total current liabilities of this Person and its Restricted Subsidiaries, on a consolidated basis as of this date. "Consolidated Tangible Assets" of any Person as of any date means the total assets of this Person and its Restricted Subsidiaries, excluding any assets that would be classified as "intangible assets" under GAAP, on a consolidated basis at this date, determined in accordance with GAAP, less all write-ups subsequent to December 31, 1999 in the book value of any asset owned by this Person or any of its Restricted Subsidiaries. 70 "Consolidated Tangible Net Worth" of any Person as of any date means the stockholders' equity, including any preferred stock that is classified as equity under GAAP, other than Disqualified Stock, of this Person and its Restricted Subsidiaries, excluding any equity adjustment for foreign currency translation for any period subsequent to December 31, 1999 and any assets that would be classified as "intangible assets" under GAAP, on a consolidated basis at this date, as determined in accordance with GAAP, less all write-ups subsequent to December 31, 1999 in the book value of any asset owned by this Person or any of its Restricted Subsidiaries. "Continuing Director" of Kaiser as of any date means a member of the Board of Directors of Kaiser who: . was a member of the Board of Directors of Kaiser on December 31, 1999 or . was nominated for election or elected to the Board of Directors of Kaiser with the affirmative vote of at least a majority of the directors who were Continuing Directors at the time of the nomination or election. "Default" means any event, act or condition that is, or after notice or the passage of time or both would be, an Event of Default. "Designated Investments" means Investments made after December 31, 1999 in: . any Subsidiary of Kaiser that is not a wholly-owned Restricted Subsidiary or . any Joint Venture, as long as this Subsidiary or Joint Venture is engaged in one or more Permitted Businesses. "Disqualified Stock" means any Capital Stock that, by its terms, by the terms of any agreement related to it or by the terms of any security into which it is convertible, puttable or exchangeable, is, or upon the happening of any event or the passage of time would be, required to be redeemed or repurchased by its issuer or any of its subsidiaries, whether or not at the option of its holder, or matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, in whole or in part, on or prior to the final maturity date of the new notes, except that Kaiser's preferred stock will not constitute Disqualified Stock. "EBITDA" means, with respect to any Person for any period, without duplication, the sum of the amounts for the period of: . Consolidated Net Income, . Consolidated Income Tax Expense, . Consolidated Amortization Expense, but only to the extent not included in Fixed Charges, . Consolidated Depreciation Expense, . Fixed Charges and . all other noncash items reducing the Consolidated Net Income of this Person and its Restricted Subsidiaries, in each case determined on a consolidated basis in accordance with GAAP, except that the amounts set forth in all but the first clause of this definition will be included only to the extent the amounts reduce Consolidated Net Income, less the aggregate amount of all noncash items, determined on a consolidated basis, to the extent the items increase Consolidated Net Income. "Exchange Act" means the Securities Exchange Act of 1934. 71 "Existing Indebtedness" means all of the Indebtedness of Kaiser and its Restricted Subsidiaries that is outstanding on January 1, 2000. "Fixed Charges" means, with respect to any Person for any period, the aggregate amount of: . interest, whether expensed or capitalized, paid, accrued or scheduled to be paid or accrued during the period, except to the extent accrued in a prior period, in respect of all Indebtedness of this Person and its Restricted Subsidiaries, including . original issue discount on any Indebtedness, and . the interest portion of all deferred payment obligations, calculated in accordance with the effective interest method, in each case to the extent attributable to the period, and . dividend requirements on preferred stock of this Person and its subsidiaries, whether in cash or otherwise, but not including dividends payable solely in shares of Qualified Capital Stock paid, accrued or scheduled to be paid or accrued during the period, except to the extent accrued in a prior period, and excluding items eliminated in consolidation. For purposes of this definition, . interest on a Capitalized Lease Obligation will be deemed to accrue at the rate of interest implicit in the Capitalized Lease Obligation in accordance with GAAP, . interest on Indebtedness that is determined on a fluctuating basis will be deemed to have accrued at a fixed rate per annum equal to the rate of interest of the Indebtedness in effect on the last day of the period with respect to which Fixed Charges are being calculated, . interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate or other rates, will be deemed to have been based upon the rate actually chosen, or, if none, then based upon the optional rate chosen as this Person may designate and . Fixed Charges will be increased or reduced by the net cost, including without limitation amortization of discount, or benefit associated with Hedging Obligations attributable to this period. For purposes of the second clause above, dividend requirements, other than dividends payable solely in shares of Qualified Capital Stock, will be increased to an amount representing the pretax earnings that would be required to cover the dividend requirements; accordingly, the increased amount will be equal to a fraction, the numerator of which is the dividend requirements and the denominator of which is 1 minus the applicable actual combined Federal, state, local and foreign income tax rate of this Person and its subsidiaries, expressed as a decimal, on a consolidated basis, for the fiscal year immediately preceding the date of the transaction giving rise to the need to calculate Fixed Charges. "Foreign Asset Sale" means any Asset Sale in respect of the Capital Stock or assets of a Foreign Subsidiary. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board, as in effect from time to time. "Hedging Obligations" of any Person means the obligations of this Person pursuant to any interest rate swap agreement; foreign currency exchange agreement, interest rate collar agreement, option or futures contract or other similar agreement or arrangement relating to interest rates or foreign exchange rates. 72 "Indebtedness" of any Person at any date means, without duplication: . all liabilities, contingent or otherwise, of this Person or borrowed money, whether or not the recourse of the lender is to the whole of the assets of this Person or only to a portion of the assets; . all obligations of this Person evidenced by bonds, debentures, notes or other similar instruments; . all obligations of this Person in respect of letters of credit or other similar instruments, or reimbursement obligations with respect thereto, other than standby letters of credit issued for the benefit of, or surety or performance bonds issued by, this Person in the ordinary course of business to the extent the letters of credit are not drawn upon; . all obligations of this Person with respect to Hedging Obligations; . all obligations of this Person to pay the deferred and unpaid purchase price of property or services, except trade payables and accrued expenses incurred by this Person in the ordinary course of business in connection with obtaining goods, materials or services, which payable is not overdue according to industry practice or the original terms of sale unless the payable is being contested in good faith; . the maximum fixed repurchase price of all Disqualified Stock of this Person; . all Capitalized Lease Obligations of this Person; . all Indebtedness of others secured by a Lien on any asset of this Person, whether or not the Indebtedness is assumed by this Person, other than a pledge by a Single Purpose Subsidiary of the Capital Stock of an Unrestricted Subsidiary or Joint Venture of the Single Purpose Subsidiary to secure Indebtedness of the Unrestricted Subsidiary or Joint Venture incurred to finance a project constituting one or more Permitted Businesses; . all Indebtedness of others guaranteed by, or otherwise the Liability of, this Person to the extent of this guarantee or Liability; and . all Attributable Indebtedness. The amount of Indebtedness of any Person at any date will be the outstanding balance at the date of all unconditional obligations as described above, the maximum liability of this Person for any contingent obligations at that date and, in the case of the eighth clause, the fair market value of any asset subject to a Lien securing the Indebtedness of others on the date that the Lien attaches. For purposes of the first sentence, the "maximum fixed repurchase price" of any Disqualified Stock that does not have a fixed repurchase price will be calculated in accordance with the terms of the Disqualified Stock as if the Disqualified Stock were purchased on any date on which Indebtedness will be required to be determined pursuant to the indenture, and if the price is based upon, or measured by, the fair market value of the Disqualified Stock, or any equity security for which it may be exchanged or converted, the fair market value will be determined in good faith by the Board of Directors of this Person, which determination will be evidenced by a Board Resolution. "Investments" of any Person means: . all investments by this Person in any other Person in the form of loans, advances or capital contributions or similar credit extensions constituting Indebtedness of this Person, and any guarantee of Indebtedness of any other Person, . all purchases, or other acquisitions for consideration, by this Person of Indebtedness, Capital Stock or other securities of any other Person and 73 . all other items that would be classified as investments, including without limitation purchases of assets outside the ordinary course of business, on a balance sheet of this Person prepared in accordance with GAAP; except that advances to non-executive employees and extensions of trade credit and advances to customers and suppliers and other contractual and trade relationships, requiring repayment within reasonable commercial periods, to the extent made in the ordinary course of business consistent with past practice and in accordance with normal industry practice, will not be deemed to constitute Investments. "Joint Venture" means: . a corporation of which less than a majority of the aggregate voting power of all classes of the Common Equity is owned by Kaiser or its Restricted Subsidiaries and . any entity other than a corporation in which Kaiser and its Restricted Subsidiaries own less than a majority of the Common Equity of this entity. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or other similar encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including without limitation any conditional sale or other title retention agreement, and any lease in the nature thereof, any option or other agreement to sell, and any filing of, or agreement to give, any financing statement under the Uniform Commercial Code, or equivalent statutes, or any jurisdiction. "Net Proceeds" with respect to any Asset Sale by any Person means the aggregate net proceeds received by this Person from the Asset Sale, including without limitation the amount of cash applied to repay Indebtedness secured by any asset involved in the Asset Sale or otherwise received as consideration for the assumption or incurrence of liabilities incurred in connection with or in anticipation of this Asset Sale, after . provision for all income or other taxes measured by or resulting from the Asset Sale or the transfer of the proceeds of the Asset Sale to this Person and . payment of all brokerage commissions and the underwriting and other fees and expenses related to the Asset Sale, whether the proceeds are in cash or property, valued at the fair market value at the time of receipt as determined in good faith by the Board of Directors of this Person, which determination will be evidenced by a Board Resolution. "Non-Recourse Indebtedness" of a Single Purpose Subsidiary means Indebtedness for which: . as to the Single Purpose Subsidiary, the sole legal recourse for collection of principal and interest on this Indebtedness is against . the specific property identified in the instruments evidencing or securing this Indebtedness and the property was acquired with the proceeds of this Indebtedness or this Indebtedness was incurred within 90 days of the acquisition of this property, . the Capital Stock of the Single Purpose Subsidiary, or . contract rights or specified revenues of the Single Purpose Subsidiary. . if the Single Purpose Subsidiary is a Restricted Subsidiary, no assets of the Single Purpose Subsidiary, other than the assets identified in the first clause of this definition, may be realized upon in collection of principal or interest on this Indebtedness and 74 . neither Kaiser nor any Restricted Subsidiary of Kaiser, other than the Single Purpose Subsidiary, is directly or indirectly liable to make any payment, has made any guarantee of payment or performance of this Indebtedness or has pledged or granted any lien or encumbrances on any assets as collateral or security with respect to this Indebtedness, other than the Capital Stock of the Single Purpose Subsidiary. "Payment Restriction," with respect to a Subsidiary of any Person, means any encumbrance, restriction or limitation, whether by operation of the terms of its charter or by reason of any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation, on the ability of: . this Subsidiary to . pay dividends or make other distributions on its Capital Stock or make payments on any obligation, liability or Indebtedness owed to this Person or any other Subsidiary of this Person, . make loans or advances to this Person or any other Subsidiary of this Person or . transfer any of its properties or assets to this Person or any other Subsidiary of this Person or . this Person or any other Subsidiary of this Person to receive or retain any . dividends, distributions or payments, . loans or advances or . transfer of properties or assets. "Permitted Businesses" means the businesses of providing engineering, construction, construction or project management or related services to public and private sector clients including the ownership of an equity interest in any such business. "Permitted Investments" means: . direct obligations of the United States of America or any of its agencies, or obligations guaranteed by the United States of America or any of its agencies, in each case maturing within 180 days of the date of the acquisition . certificates of deposit or Eurodollar deposits, due within 180 days of the date of the acquisition, with a commercial bank which is organized under the laws of the United States of America or any state having capital funds of at least $500 million or more; and . commercial paper given the highest rating by two established national credit rating agencies and maturing not more than 180 days from the date of the acquisition. "Plan of Liquidation," with respect to any Person, means a plan that provides for, contemplates or the effectuation of which is preceded or accompanied by, whether or not substantially contemporaneously, in phases or otherwise: . the sale, lease, conveyance or other disposition of all or substantially all of the assets of this Person otherwise than as an entirety or substantially as an entirety; and . the distribution of all or substantially all of the proceeds of this sale, lease, conveyance or other disposition and all or substantially all of the remaining assets of this Person to holders of Capital Stock of this Person. 75 "Qualified Capital Stock" means Capital Stock that is not Disqualified Stock. "Refinancing Indebtedness" means Indebtedness of Kaiser or a Restricted Subsidiary of Kaiser issued in exchange for, or the proceeds from the issuance and sale or disbursement of which are used substantially concurrently to repay, redeem, refund, refinance, discharge or otherwise retire for value, in whole or in part, or constituting an amendment, modification or supplement to or a deferral or renewal of any Indebtedness of Kaiser or any of its Restricted Subsidiaries existing immediately after the original issuance of the new notes or incurred pursuant to the provisions of the covenant described under "Limitations on Additional Indebtedness" in a principal amount not in excess of the principal amount of the Indebtedness so refinanced, as long as: . the Refinancing Indebtedness is the obligation of the same Person, and is subordinated to the new notes, if at all, to the same extent, as the Indebtedness being repaid; . the Refinancing Indebtedness is scheduled to mature either . no earlier than the Indebtedness being repaid or . after the maturity date of the new notes; and . the portion, if any, of the Refinancing Indebtedness that is scheduled to mature on or prior to the maturity date of the new notes has a Weighted Average Life to Maturity at the time the Refinancing Indebtedness is incurred that is equal to or greater than the Weighted Average Life to Maturity of the portion of the Indebtedness being repaid that is scheduled to mature on or prior to the maturity date of the new notes. "Related Business Investment" means any Investment directly by Kaiser or one or more of its wholly-owned Restricted Subsidiaries in any business that is closely related to or complements the business of Kaiser and its subsidiaries as this business exists on the date of the Investment. "Restricted Debt Payment" means any purchase, redemption, defeasance, including without limitation in substance or legal defeasance, or other acquisition or retirement for value, directly or indirectly, by Kaiser or a Subsidiary of Kaiser, prior to the scheduled maturity or prior to any scheduled repayment of principal or sinking fund payment, as the case may be, in respect of Indebtedness of Kaiser that is subordinate in right of payment to the new notes other than a Restricted Debt Payment made with the proceeds of a substantially concurrent sale, other than to a Subsidiary of Kaiser or an employee stock ownership plan, of Kaiser's Qualified Capital Stock, as long as all Indebtedness so purchased, redeemed, defeased or otherwise acquired or retired for value promptly is surrendered for cancellation to the Trustee for this Indebtedness. "Restricted Investment," with respect to any Person, means any Investment by this Person in any of its Affiliates or in any Person other than a wholly- owned Restricted Subsidiary other than: . a Permitted Investment or . an Investment made with the proceeds of a substantially concurrent sale, other than to a Subsidiary of Kaiser or an employee stock ownership plan, of Kaiser's Qualified Capital Stock. "Restricted Payment" means with respect to any Person: . the declaration of any dividend, other than a dividend declared by a wholly-owned Restricted Subsidiary to holders of its Common Equity, or the making of any other payment or distribution of cash, securities or other property or assets in respect of this Person's Capital Stock, except that a dividend payable solely in Qualified Capital Stock of this Person will not constitute a Restricted Payment, for purposes of this clause, the declaration of any dividend, or the making of any other 76 distribution, by any Restricted Subsidiary will only constitute a Restricted Payment to the extent of the amounts paid or payable to Persons other than Kaiser or a wholly-owned Restricted Subsidiary; . any payment on account of the purchase, redemption, retirement or other acquisition for value of this Person's Capital Stock or any other payment or distribution made, either directly or indirectly, other than a payment solely in Qualified Capital Stock; . any Restricted Investment; or . any Restricted Debt Payment. "Restricted Subsidiary" means each of the subsidiaries of Kaiser which, as of the determination date, is not an Unrestricted Subsidiary of Kaiser. "Single Purpose Subsidiary" of any Person means a Subsidiary of this Person which has no subsidiaries other than Unrestricted Subsidiaries and the activities of which are limited to: . ownership of all or a portion of the interests in a single project, either directly or through the ownership of the Capital Stock of another Person, and . the development, engineering, design, project management, construction or operation of this project. "Unrestricted Subsidiary" means: [American Venture Holdings, Inc., a Delaware corporation; American Venture Investments Incorporated, a Delaware corporation; Excell Development Construction, Inc., a Delaware corporation; International Systems, Inc., a Colorado corporation; ICF Environment, a French corporation; ICF Kaiser Holdings Unlimited, Inc., a Delaware corporation; ICF Leasing Corporation, Inc., a Delaware corporation; Cygna Energy Services, a California corporation; and Cygna Energy Services Michigan, Inc., a Michigan corporation], and each of the other subsidiaries of Kaiser so designated by a resolution adopted by the Board of Directors of Kaiser and whose creditors have no direct or indirect recourse, including without limitation recourse with respect to the payment of principal of or interest on Indebtedness of this Subsidiary, to Kaiser or a Restricted Subsidiary other than a Lien on the Capital Stock of this Unrestricted Subsidiary, except that: . no Subsidiary may be an Unrestricted Subsidiary if it owns any Capital Stock of a Restricted Subsidiary and . the Board of Directors of Kaiser will be prohibited after December 31, 1999 from designating as an Unrestricted Subsidiary any Subsidiary existing on December 31, 1999. The Board of Directors of Kaiser may designate an Unrestricted Subsidiary to be a Restricted Subsidiary, . except that any designation will be deemed to be an incurrence by Kaiser and its Restricted Subsidiaries of the Indebtedness, if any, of the designated Subsidiary for purposes of the Limitations on Additional Indebtedness covenant in the indenture as of the date of the designation, and . as long as immediately after giving effect to the designation and the incurrence of any additional Indebtedness, Kaiser and its Restricted Subsidiaries could incur $1.00 of additional Senior Indebtedness pursuant to the Consolidated Fixed Charge Coverage Ratio set forth in the Limitations on Additional Indebtedness covenant described above. Any designation or redesignation by the Board of Directors will be evidenced to the Trustee by the filing with the Trustee of a certified copy of the Resolution of Kaiser's Board of Directors giving effect to the designation or redesignation and an officer's certificate certifying that the designation or redesignation complied with the foregoing 77 conditions and setting forth the underlying calculations of the certificate and upon which certificate the Trustee will conclusively rely without any investigation whatsoever. "Voting Stock," with respect to any Person, means securities of any class of Capital Stock of this Person entitling the holders, whether at all times or only so long as no senior class of stock has voting power by reason of any contingency, to vote in the election of members of the board of directors of this Person. "Weighted Average Life to Maturity," when applied to any Indebtedness at any date, means the number of years obtained by dividing . the sum of the products obtained by multiplying . the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by . the number of years, calculated to the nearest one-twelfth, that will elapse between this date and the making of the payment by . the then-outstanding principal amount of the Indebtedness. "Wholly-Owned Restricted Subsidiary" of Kaiser means a Restricted Subsidiary of Kaiser, of which 100% of the Common Equity, except for directors' qualifying shares or certain minority interests owned by other Persons solely due to local tax considerations or local law requirements that there be more than one stockholder, but which interest is not in excess of what is required for this purpose, is owned directly by Kaiser or through one or more wholly- owned Restricted Subsidiaries of Kaiser. Satisfaction and Discharge of Indebtedness The indenture is discharged and canceled upon payment of all the principal and interest on the new notes, redemption of all the new notes or deposit with the Trustee of funds or obligations issued or guaranteed by the United States sufficient for this payment or redemption. The Trustee The Trustee is Bank of New York. The Trustee performs only those duties as are specifically set forth in the indenture, except during the continuance of an Event of Default. During the existence of an Event of Default, the Trustee exercises those rights and powers vested in it under the indenture and uses the same degree of care and skill in its exercise as a prudent person would exercise under the circumstances in the conduct of the person's own affairs. The holders of a majority in outstanding amount of the new notes will have the right, during the continuance of an Event of Default, to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee. Subject to these provisions, the Trustee is under no obligation to exercise any of its rights or powers under the indenture at the request of any of the holders of new notes, unless they offer to the Trustee security or indemnity satisfactory to it. The indenture and provisions of the Trust Indenture Act of 1939 incorporated by reference into the indenture contain limitations on the rights of the Trustee, should it become a creditor of Kaiser, to obtain payment of claims in some cases, or to realize on property received in respect of any of these claims as security or otherwise. The Trustee is permitted to engage in other transactions with Kaiser, except that if it acquires any conflicting interest within the meaning of the Trust Indenture Act of 1939, it must eliminate this conflict or resign. 78 Book-Entry, Delivery and Form The new notes are initially issued in the form of one global new note. The global new note is deposited on the date of the consummation of the exchange offer with the Trustee as custodian for The Depository Trust Company and registered in the name of Cede & Co., as nominee of the DTC. The DTC is a limited-purpose trust company that was created to hold securities for its participating organizations and to facilitate the clearance and settlement of transactions in securities between participants through electronic book-entry changes in accounts of its participants. The DTC's participants include securities brokers and dealers, banks and trust companies, clearing corporations and some other organizations. Access to the DTC's system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. Persons who are not participants may beneficially own securities held by or on behalf of the DTC only through the DTC's participants or indirect participants. Kaiser expects that pursuant to procedures established by the DTC: . upon deposit of the global new note, the DTC credits the accounts of participants exchanging old notes for new notes with portions of the principal amount of the global new note and . ownership of the notes evidenced by the global new note is shown on, and the transfer of ownership is effected only through, records maintained by the DTC, with respect to the interests of the DTC's participants and the DTC's indirect participants. Holders of new notes are advised that the laws of some states require that some persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer notes evidenced by the global new note will be limited to this extent. So long as the holder of the global new note is the registered owner of any new notes, the global new note holder is considered the sole holder under the indenture of any notes evidenced by the global new note. Beneficial owners of new notes evidenced by the global new note are considered the owners or holders under the indenture for any purpose, including with respect to the giving of any directions, instructions or approvals to the Trustee. Neither Kaiser nor the Trustee has any responsibility or liability for any aspect of the records of the depository or for maintaining, supervising or reviewing any records of the depository relating to the new notes. Payments in respect of the principal and interest, if any, on any new notes registered in the name of the global new note holder on the applicable record date is payable by the Trustee to or at the direction of the global new note holder in its capacity as the registered holder under the indenture. Under the terms of the indenture, Kaiser and the Trustee may treat the persons in whose names new notes, including the global new note, are registered as the owners for the purpose of receiving these payments. Consequently, neither Kaiser nor the Trustee has any responsibility or liability for the payment of these amounts to beneficial owners of new notes. Kaiser believes, however, that it is currently the policy of the DTC to immediately credit the accounts of the relevant participants with these payments, in amounts proportionate to their respective holdings of beneficial interests in the relevant security as shown on the records of the DTC. Payments by the DTC's participants and the DTC's indirect participants to the beneficial owners of new notes is governed by standing instructions and customary practice and is the responsibility of the DTC's participants or the DTC's indirect participants. Certificated Notes. Any beneficial owner of new notes evidenced by the global new note may obtain notes in the form of registered certificated new notes. If Kaiser notifies the Trustee in writing that the DTC is no longer willing or able to act as a depository and Kaiser is unable to locate a qualified successor within 90 days then, upon surrender by the global new note holder of its global new note, new notes in this form will be issued to each person that the global new note holder and the DTC identify as being the beneficial owner of the related new notes. 79 Neither Kaiser nor the Trustee is liable for any delay by the global new note holder or the DTC in identifying the beneficial owners of notes and Kaiser and the Trustee may conclusively rely on, and is protected in relying on, instructions from the global new note holder or the DTC for all purposes. Same-Day Settlement and Payment. The indenture requires that payments for the notes represented by the global new note, including principal, interest and liquidated damages, if any, be made by wire transfer of immediately available funds to the accounts specified by the global new note holder. With respect to certificated new notes, Kaiser makes all payments of principal and interest by wire transfer of immediately available funds to the accounts specified by the holders or, if no account is specified, by mailing a check to each holder's registered address. Secondary trading in long-term notes and debentures of corporate issuers is generally settled in clearing-house or next-day funds. In contrast, the notes represented by the global new note are expected to trade in the DTC's same-day funds settlement system, and any permitted secondary market trading activity in these notes will, therefore, be required by the DTC to be settled in immediately available funds. Kaiser expects that secondary trading in the certificated new notes will also be settled in immediately available funds. WHERE YOU CAN FIND MORE INFORMATION Kaiser files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. You may read and copy any reports, statements or other information we file at the Securities and Exchange Commission's public reference room at the following location: Public Reference Room 450 Fifth Street, N.W. Room 1024 Washington, D.C. 20549 Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the operation of the public reference room. Our Securities and Exchange Commission filings are also available to the public from commercial document retrieval services and at the web site maintained by the Securities and Exchange Commission at http://www.sec.gov. In addition, our ------------------ filings can be inspected at the office of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. We have filed a registration statement on Form S-4 with the Securities and Exchange Commission to register the preferred stock, warrants and new notes proposed to be issued in the exchange offer described in this prospectus and the common stock underlying the preferred stock and warrants. This prospectus is a part of that registration statement. As permitted by the rules of the Securities and Exchange Commission, this prospectus does not contain all of the information included in the registration statement and the accompanying exhibits and schedules. The registration statement, together with the related exhibits and schedules, is available at the public reference room or through the web site of the Securities and Exchange Commission. You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized anyone to provide you with information that is different from or in addition to what is contained in this prospectus. Therefore, if anyone does give you information of this sort, you should not rely on it. If you are in a jurisdiction where it is unlawful to offer to exchange or sell or to ask for offers to exchange or buy the securities offered by this prospectus, or if you are a person to whom it is unlawful to direct those activities, then the offer presented in this prospectus does not extend to you. The information contained in this prospectus speaks only as of its date unless the information specifically indicates that another date applies. INCORPORATION BY REFERENCE The Securities and Exchange Commission allows us to "incorporate by reference" information into this prospectus, which means that we can disclose important information to you by referring you to other information we have filed with the Securities and Exchange Commission. The information incorporated by reference is deemed to be part of this prospectus, except for any information superseded by information in this prospectus. 80 This prospectus incorporates by reference the documents set forth below that we have previously filed with the Securities and Exchange Commission. All of the documents listed below as incorporated by reference into this prospectus also are being delivered to you with this prospectus. You should read this prospectus together with the information incorporated by reference. . 1998 Annual Report to our shareholders . Quarterly Reports on Form 10-Q and 10-Q/A for the quarter ended March 31, 1999 and on Form 10-Q for the quarter ended June 30, 1999 . Current Reports on Form 8-K dated March 10, 1999, April 9, 1999, May 12, 1999, June 10, 1999, July 6, 1999, July 7, 1999 and July 16, 1999 . Proxy Statement dated September __, 1999 relating to the 1999 Annual Meeting of Shareholders The following information contained in our 1998 Annual Report to our shareholders is included among the information incorporated by reference into this prospectus: . description of segments, classes of similar products and services, foreign and domestic operations and export sales (note 12 of notes to consolidated financial statements); . selected financial data (Item 6); . supplementary financial information (Item 8 and note 15 of notes to consolidated financial statements); . management's discussion and analysis of financial condition and results of operations (Item 7); . changes in and disagreements with accountants on accounting and financial disclosures (Item 9); and . quantitative and qualitative information about market risk (Item 7a). We also are incorporating by reference additional documents that we file with the Securities and Exchange Commission between the date of this prospectus and the consummation of the exchange offer described in this prospectus. You can request an additional free copy of any or all of these documents, including exhibits that are specifically incorporated by reference into these documents, by writing or calling: Shaun M. Martin, Senior Vice President, Treasurer and Secretary ICF Kaiser International, Inc. 9300 Lee Highway Fairfax, Virginia 22031-1207 (703) 934-3600 If you would like to request documents from us, please do so by ______________, 1999 to receive the documents before the consummation of the exchange offer. EXPERTS The consolidated financial statements incorporated in this prospectus by reference to the 1998 Annual Report to shareholders, have been incorporated by reference in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of that firm as experts in accounting and auditing. 81 LEGAL MATTERS Squire, Sanders & Dempsey L.L.P. will pass upon the validity of the preferred stock, warrants and new notes to be issued in the exchange offer and the common stock underlying the preferred stock and warrants. 82 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. Indemnification of directors and officers. Under the Delaware General Corporation Law (the "Delaware Law"), a corporation may indemnify any person who was or is a party or is threatened to be made a party to an action by reason of the person's past or present service as a director, officer, employee, or agent of the corporation or of the person's past or present service, at the corporation's request, as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise. Under the Delaware Law, a corporation may indemnify such persons against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement that are actually and reasonably incurred by that person in connection with such action. The Delaware Law provides, however, that such person must have acted in good faith and in a manner that such person reasonably believed to be in (or not opposed to) the corporation's best interests. In respect of any criminal action or proceeding, an indemnifiable person must have no reasonable cause to believe such conduct to be unlawful. In addition, the Delaware Law permits no indemnification in any action by or in the right of the corporation where such person has been adjudged liable to the corporation, unless, and only to the extent that, a court determines that such person fairly and reasonably is entitled to indemnity for such costs the court deems proper in spite of liability adjudication. The sections of the Company's Restated Certificate of Incorporation and Amended and Restated Bylaws relating to indemnification of directors and officers provide for mandatory indemnification of directors and officers on generally the same terms as permitted by the Delaware Law. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits EXHIBIT NO. DESCRIPTION OF EXHIBIT - ----------- ---------------------- 3(a) Restated Certificate of Incorporation of ICF Kaiser International, Inc. (restated through June 26, 1993) (Incorporated by reference to Exhibit No. 3(a) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the second quarter of fiscal 1994 filed with the Commission on October 15, 1 993) 3(b) Amended and Restated By-laws of ICF Kaiser International, Inc. (as amended through June 23, 1995) (Incorporated by reference to Exhibit No. 3(b) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the second quarter of fiscal 1995 filed with the Commission on October 13, 1995) 4(a) Indenture dated as of January 11, 1994, between ICF Kaiser International, Inc. and The Bank of New York, as Trustee (Incorporated by reference to Exhibit No. 4(a) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the third quarter of fiscal 1994 filed with the Commission on January 14, 1994) 4(a)(1) First Supplemental Indenture dated as of February 17, 1995 (Incorporated by reference to Exhibit No. 4(a)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) for fiscal year 1995 filed with the Commission on May 23, 1995) 4(a)(2) Second Supplemental Indenture dated September 1, 1995 (Incorporated by reference to Exhibit No. 4(a)(2) to Registration Statement on Form S-1 Registration No. 33-64655 filed with the Commission on November 30, 1995) II-1 4(a)(3) Third Supplemental Indenture dated October 20, 1995 (Incorporated by reference to Exhibit No. 4(a)(3) to Registration Statement on Form S-1 Registration No. 33-64655 filed with the Commission on November 30, 1995) 4(a)(4) Fourth Supplemental Indenture dated as of March 8, 1996 (Incorporated by reference to Exhibit No. 4(a)(4) to Transition Report on Form 10-K (Registrant No. 1-12248) for the transition period from March 1, 1995 to December 31, 1995 filed with the Commission on March 29, 1996) 4(a)(5) Fifth Supplemental Indenture dated as of June 24, 1996 (Incorporated by reference to Exhibit No. 4(a)(5) to Registration Statement on Form S-1 Registration No. 333-16937 filed with the Commission on November 27, 1996) 4(a)(6) Sixth Supplemental Indenture dated as of December 3, 1997 (Incorporated by reference to Exhibit No. 4(a)(6) to Annual Report on Form 10-K (Registrant No. 1-12248) for fiscal year 1997 filed with the Commission on March 31, 1998) 4(a)(7) Seventh Supplemental Indenture dated as of August 13, 1998 (Incorporated by reference to Exhibit No. 4(a)(7) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the third quarter of fiscal 1997 filed with the Commission on November 16, 1998) 4(a)(8) Eighth Supplemental Indenture dated as of April 9, 1999 (Incorporated by reference to Exhibit No. 4(a)(8) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the first quarter of fiscal 1999 filed with the Commission on May 17, 1999) **4(a)(9) Amended and Restated Indenture with respect to the 12% Senior Subordinated Notes due 2003 4(b) Form of 12% Senior Subordinated Note due 2003 (Incorporated by reference to Exhibit No. 4(b) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the third quarter of fiscal 1994 filed with the Commission on January 14, 1994) 4(c) Rights Agreement, dated as of January 13, 1992, between ICF Kaiser International, Inc. and Office of the Secretary, ICF Kaiser International, Inc. as Rights Agent, including (1) Form of Certificate of Designations of Series 4 Junior Preferred Stock; (2) Form of Rights Certificate; and (3) Summary of Rights to Purchase Preferred Stock (Incorporated by reference to Exhibit No. 4(h) to Quarterly Report on Form 10-Q (Registrant No. 0-18025) for the third quarter of fiscal 1992 filed with the Commission on January 14, 1992) 4(d) Indenture dated as of December 23, 1996, between ICF Kaiser International, Inc. and The Bank of New York, as Trustee, including Guarantees, dated December 23, 1996, by each of the Subsidiary Guarantors (Incorporated by reference to Exhibit No. 4(g) to Registration Statement on Form S-1 Registration No. 333-19519 filed with the Commission on January 10, 1997) 4(d)(1) First Supplemental Indenture dated as of December 3, 1997 (Incorporated by reference to Exhibit No. 4(a)(6) to Annual Report on Form 10-K (Registrant No. 1-12248) for fiscal year 1997 filed with the Commission on March 31, 1998) 4(d)(2) Second Supplemental Indenture dated as of August 13, 1998 (Incorporated by reference to Exhibit No. 4(g)(2) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the third quarter of fiscal 1997 filed with the Commission on November 16, 1998) 4(d)(3) Third Supplemental Indenture dated as of April 9, 1999 (Incorporated by reference to Exhibit 4(f)(3) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the first quarter of fiscal 1999 filed with the Commission on May 17, 1999) 4(e) Form of 12% Senior Note due 2003, Series B (Incorporated by reference to Exhibit No. 4(g) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the first quarter of fiscal 1999 filed with the Commission on May 17, 1999) II-2 4(f) Warrant Agreement dated as of December 23, 1996, between ICF Kaiser International, Inc. and The Bank of New York, as Warrant Agent (Incorporated by reference to Exhibit No. 4(j) to Registration Statement on Form S-1 Registration No. 333-19519 filed with the Commission on January 10, 1997) 4(g) Form of Warrant expiring December 31, 1999 issued under Warrant Agreement dated as of December 23, 1996 (Incorporated by reference to Exhibit No. 4(k) to Registration Statement on Form S-1 Registration No. 333-19519 filed with the Commission on January 10, 1997) 4(h) Form of Certificate of Designation regarding Redeemable Convertible Preferred Stock that is registered by and issuable in exchange offer described in this registration statement 4(i) Form of Warrant Agreement regarding warrants registered by and issuable in exchange offer described in this registration statement, including the form of warrant certificate **4(j) Form of Indenture regarding 12% Senior Notes due 2002 registered by and issuable in exchange offer described in this registration statement, including the form of senior note **5 Opinion of Squire, Sanders & Dempsey L.L.P. regarding securities being registered **8 Opinion of Squire, Sanders & Dempsey L.L.P. regarding tax consequences 10(a) Loan and Security Agreement dated as of December 18, 1998, with Madeleine L.L.C. as agent (Incorporated by reference to Exhibit No. 10(a) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on April 15, 1999) 10(b) ICF Kaiser International, Inc. Employee Stock Ownership Plan (as amended and restated as of March 1, 1993) (and further amended with respect to name change only as of June 26, 1993) (Incorporated by reference to Exhibit No. 10(c) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the second quarter of fiscal 1994 filed with the Commission on October 15, 1993) 10(b)(1) Amendment No. 1 dated April 24, 1995 (Incorporated by reference to Exhibit No. 10(l)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) for fiscal 1995 filed with the Commission on May 23, 1995) 10(b)(2) Amendment No. 2 dated December 15, 1995 (Incorporated by reference to Exhibit No. 10(b)(2) to Transition Report on Form 10-K (Registrant No. 1-12248) for the transition period from March 1, 1995 to December 31, 1995 filed with the Commission on March 29, 1996) 10(b)(3) Amendment No. 3 dated December 13, 1996 (Incorporated by reference to Exhibit No. 10(b)(3) to Registration Statement on Form S-1 Registration No. 333-19519 filed with the Commission on January 10, 1997) 10(c) Trust Agreement with Vanguard Fiduciary Trust Company dated as of August 31, 1995, for ICF Kaiser International, Inc. Employee Stock Ownership Plan (Incorporated by reference to Exhibit No. 10(c) to Registration Statement on Form S-1 Registration No. 33-64655 filed with the Commission on November 30, 1995) II-3 10(d) ICF Kaiser International, Inc. Retirement Plan (as amended and restated as of March 1, 1993) (and further amended with respect to name change only as of June 26, 1993) (Incorporated by reference to Exhibit No. 10(d) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the second quarter of fiscal 1994 filed with the Commission on October 15, 1993) 10(d)(1) Amendment No. 1 dated April 24, 1995 (Incorporated by reference to Exhibit No. 10(d)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on May 23, 1995) 10(d)(2) Amendment No. 2 dated December 15, 1995 (Incorporated by reference to Exhibit No. 10(d)(2) to Transition Report on Form 10-K (Registrant No. 1-12248) for the transition period from March 1, 1995 to December 31, 1995 filed with the Commission on March 29, 1996) 10(d)(3) Amendment No. 3 dated December 13, 1996 (Incorporated by reference to Exhibit No. 10(d)(3) to Registration Statement on Form S-1 Registration No. 333-19519 filed with the Commission on January 10, 1997) 10(e) Trust Agreement with Vanguard Fiduciary Trust Company dated as of August 31, 1995, for ICF Kaiser International, Inc. Retirement Plan (Incorporated by reference to Exhibit No. 10(e) to Registration Statement on Form S-1 Registration No. 33-64655 filed with the Commission on November 30, 1995) 10(f) Consolidated, Amended and Restated Deed of Lease Agreement between HMCE Associates Limited Partnership R.L.L.P. (as Landlord) and ICF Kaiser Hunters Branch Leasing, Inc. (as Tenant), dated November 12, 1997, for the lease of the Registrant's headquarters in Fairfax, Virginia known as Hunters Branch--Phase I (Incorporated by reference to Exhibit No. 10(g) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on March 25, 1997) 10(g) Consolidated, Amended and Restated Deed of Lease Agreement between HMCE Associates Limited Partnership R.L.L.P. (as Landlord) and ICF Kaiser Hunters Branch Leasing, Inc. (as Tenant), dated November 12, 1997, for the lease of space in the building adjacent to the Registrant's headquarters in Fairfax, Virginia known as Hunters Branch--Phase II (Incorporated by reference to Exhibit No. 10(h) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on March 25, 1997) 10(h) Contribution Agreement by and among HMCE Associates Limited Partnership R.L.L.P.; ICF Kaiser Hunters Branch Leasing, Inc.; and IFA Nutley Partners, LLC dated November 3, 1997 (Incorporated by reference to Exhibit No. 10(i) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on March 25, 1997) 10(i) ICF Kaiser International, Inc. Stock Incentive Plan (as amended and restated through March 1, 1996) (Incorporated by reference to Exhibit No. 10(j) to Registration Statement on Form S-1 Registration No. 333-16937 filed with the Commission on November 27, 1996) 10(j) Contract (#DE-AC3495RF00825) between Kaiser-Hill Company, LLC, a subsidiary of the Corporation, and the U.S. Department of Energy dated as of April 4, 1995 (IN ACCORDANCE WITH RULE 202 OF REGULATION S-T, THIS EXHIBIT NO. 10(j) WAS FILED IN PAPER ON MAY 23, 1995, ON FORM SE PURSUANT TO A CONTINUING HARDSHIP EXEMPTION and is incorporated herein by reference thereto) II-4 10(j)(1) Modifications 1 to 40 to Contract #DE-AC3495RF00825 (Incorporated by reference to Exhibit No. 10(p)(l) to Registration Statement on Form S-1 Registration No. 333-16937 filed with the Commission on November 27, 1996) 10(j)(2) Modifications 42 to 46 to Contract #DE-AC3495RF00825 (Modification 41 not received) (Incorporated by reference to Exhibit No. 10(p)(2) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on March 25, 1997) 10(j)(3) Modifications 47 to 81 to Contract #DE-AC3495RF00825 (Modifications 72 and 78 not received) (Incorporated by reference to Exhibit No. 10(j)(3) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on April 15, 1999) 10(k) ICF Kaiser International, Inc. Section 401(k) Plan (as amended and restated as of March 1, 1993) (and further amended with respect to name change only as of June 26, 1993) (Incorporated by reference to Exhibit No. 10(f) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the second quarter of fiscal 1994 filed with the Commission on October 15, 1993) 10(k)(1) Amendment No. 1 dated April 24, 1995 (Incorporated by reference to Exhibit No. 10(p)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) for fiscal 1995 filed with the Commission on May 23, 1995) 10(k)(2) Amendment No. 2 dated December 15, 1995 (Incorporated by reference to Exhibit No. 10(p)(2) to Transition Report on Form 10-K (Registrant No. 1-12248) for the transition period from March 1, 1995 to December 31, 1995 filed with the Commission on March 29, 1996) 10(k)(3) Amendment No. 3 dated December 13, 1996 (Incorporated by reference to Exhibit No. 10(q)(3) to Registration Statement on Form S-1 Registration No. 333-19519 filed with the Commission on January 10, 1997) 10(l) Trust Agreement with Vanguard Fiduciary Trust Company dated as of March 1, 1989, for the ICF Kaiser International, Inc. Section 401(k) Plan (Incorporated by reference to Exhibit No. 28(b) to Registration Statement on Form S-8 Registration No. 33-51460 filed with the Commission on August 31, 1992) Exhibit No. 10--Material Contracts (management contracts, compensatory plans, or arrangements) 10(aa) Agreement dated as of May 19, 1997 with James O. Edwards, Chairman and Chief Executive Officer of the Registrant (Incorporated by reference to Exhibit No. 10(ll) to Quarterly Report on Form 10-Q (Registrant No. 1- 12248) for the second quarter of fiscal 1997 filed with the Commission on August 14, 1997) 10(aa)(1) Agreement dated as of November 6, 1998, terminating Mr. Edwards' employment agreement (Incorporated by reference to Exhibit No. 10(aa)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on April 15, 1999) 10(bb) ICF Kaiser International, Inc. 1998 Compensation (IC) Plan for Senior Executives (adopted by the Board of Directors on February 27, 1998) (Incorporated by reference to Exhibit No. 10(bb) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on March 25, 1997) 10(cc) ICF Kaiser International, Inc. Non-employee Director Stock Option Plan (as amended and restated as of June 26, 1993) (Incorporated by reference to Exhibit No. 10(bb) to II-5 Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the second quarter of fiscal 1994 filed with the Commission on October 15, 1993) 10(dd) Agreement dated as of May 19, 1997 with Marc Tipermas, President and Chief Operating Officer of the Registrant (Incorporated by reference to Exhibit No. 10(mm) to Quarterly Report on Form 10-Q (Registrant No. 1- 12248) for the second quarter of fiscal 1997 filed with the Commission on August 14, 1997) 10(dd)(1) Agreement dated as of August 7, 1998, terminating Dr. Tipermas' employment agreement (Incorporated by reference to Exhibit No. 10(dd)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on April 15, 1999) 10(ee) ICF Kaiser International, Inc. Senior Executive Officers Severance Plan as approved by the Compensation Committee of the Board of Directors on April 4, 1994, and adopted by the Board of Directors on May 5, 1994, as further amended through May 1, 1997 (Incorporated by reference to Exhibit No. 10(ee) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on March 25, 1997) 10(ff) Employment Agreement with Thomas P. Grumbly, Executive Vice President of the Registrant, effective as of April 7, 1997 (Incorporated by reference to Exhibit No. 10(ff) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on April 15, 1999) 10(ff)(1) Letter dated March 15,1999, amending Mr. Grumbly's employment agreement (Incorporated by reference to Exhibit No. 10(ff)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on April 15, 1999) 10(gg) ICF Kaiser International, Inc. Consultants, Agents and Part-Time Employees Stock Plan dated as of June 23, 1995 (Incorporated by reference to Exhibit No. 99 to Registration Statement on Form S-8 Registration No. 33-60665 filed with the Commission on June 28, 1995) 10(hh) ICF Kaiser International, Inc. Stock Incentive Plan (as amended and restated through March 1, 1996) (Incorporated by reference to Exhibit No. 10(j) to Registration Statement on Form S-1 Registration No. 333-16937 filed with the Commission on November 27, 1996) 10(ii) Amended Employment Agreement dated as of December 1, 1996, with David Watson, Executive Vice President and President, ICF Kaiser Engineers and Constructors Group of the Registrant (Incorporated by reference to Exhibit No. 10(kk) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on March 25, 1997) 10(ii)(1) Agreement and Mutual Release dated August 17, 1998, terminating Mr. Watson's employment agreement (Incorporated by reference to Exhibit No. 10(ii)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on April 15, 1999) 10(jj) Intentionally Omitted 10(kk) Employment Agreement with Michael F. Gaffney, Executive Vice President of the Registrant, effective as of January 1, 1997 (Incorporated by reference to Exhibit No. 10(kk) to Annual Report on Form 10-K (Registrant No. 1-12248) for fiscal year 1997 filed with the Commission on March 31, 1998) II-6 10(kk)(1) Agreement dated March 8, 1999, terminating Mr. Gaffney's employment agreement (Incorporated by reference to Exhibit No. 10(kk)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on April 15, 1999) 10(ll) Letter Agreement with Cowen Incorporated and Jarrod M. Cohen, dated as of March 13, 1998 (Incorporated by reference to Exhibit No. 10(ll) to Annual Report on Form 10-K (Registrant No. 1-12248) for fiscal year 1997 filed with the Commission on March 31, 1998) (Incorporated by reference to Exhibit No. 10(mm) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on March 25, 1997) 10(mm) ICF Kaiser International, Inc. Non-employee Directors Compensation and Phantom Stock Plan as adopted by the Board of Directors on February 28, 1997, with an effective date of March 1, 1997 (Incorporated by reference to Exhibit No. 10(mm) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on April 15, 1999) 10(nn) Letter Agreement with Tennenbaum & Co., L.L.C. and Michael E. Tennenbaum, dated as of March 13, 1998 (Incorporated by reference to Exhibit No. 10(nn) to Annual Report on Form 10-K (Registrant No. 1-12248) for fiscal year 1997 filed with the Commission on March 31, 1998) 10(oo) Employment Agreement with Keith M. Price, President and Chief Executive Officer of the Registrant, effective as of August 27, 1998 (Incorporated by reference to Exhibit No. 10(oo) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the third quarter of 1998 filed with the Commission on November 16, 1998) 10(oo)(1) Terms of Promotion for Mr. Price effective as of November 4, 1998 (Incorporated by reference to Exhibit No. 10(oo)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on April 15, 1999) *10(oo)(2) Agreement dated April 27, 1999, terminating Mr. Price's employment agreement *10(pp) Employment Agreement with James J. Maiwurm, President and Chief Executive Officer of the Registrant, effective as of June 1, 1999 *10(qq) Employment Agreement with S. Robert Cochran, Executive Vice President and President, North America of the Registrant, effective as of June 1, 1999 *10(rr) Employment Agreement with Timothy P. O'Connor, Executive Vice President and Chief Financial Officer of the Registrant, effective as of June 1, 1999 *10(ss) Employment Agreement with Richard A. Leupen, Executive Vice President and President, International of the Registrant, effective as of June 1, 1999. *12 Statement regarding computation of ratio of earnings to fixed charges *21 Consolidated subsidiaries of the Registrant as of July 9, 1999 **23(a) Consent of Squire, Sanders & Dempsey L.L.P. (included in opinions filed as Exhibits 5 and 8) 23(b) Consent of PricewaterhouseCoopers LLP 24 Power of Attorney (included as part of the signature page to this Form S-4 Registration Statement) II-7 **25 Statement of Eligibility and Qualification on Form T-1 of Trustee 99 Form of Letter of Transmittal and Consent Form and related documents for the 12% Senior Subordinated Notes due 2003 - ------------- * Previously filed. ** To be filed by amendment. ITEM 22. UNDERTAKINGS (1) Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (2) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 23(a) or Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (4) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. (5) The undersigned registrant hereby undertakes: (a) To file, during any period in which offers and sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment II-8 thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 of 15(d) of the Exchange Act that are incorporated by reference in the registration statement. (b) That for the purposes of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-9 SIGNATURES Pursuant to the requirements of the 1933 Act, the registrant has duly caused this amendment to its registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Fairfax, Virginia on September 24, 1999. ICF KAISER INTERNATIONAL, INC. By: /s/ James J. Maiwurm ------------------------------- Name: James J. Maiwurm Title: Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Amendment to Registration Statement on Form S-4 has been signed below by the following persons in the capacities and on the dates indicated. (1) Principal executive officer Date: September 24, 1999 By /s/ James J. Maiwurm ------------------------------------ James J. Maiwurm Chairman, President and Chief Executive Officer (2) Principal financial and accounting officer Date: September 24, 1999 By /s/ Timothy P. O'Connor ----------------------------------- Timothy P. O'Connor Executive Vice President and Chief Financial Officer (3) The Board of Directors Date: September 24, 1999 By * ----------------------------------- Tony Coelho Director Date: September 24, 1999 By * ----------------------------------- Jarrod M. Cohen Director Date: September 24, 1999 By * ----------------------------------- James O. Edwards Director Date: September __, 1999 By ----------------------------------- Thomas C. Jorling Director Date: September 24, 1999 By * ----------------------------------- James J. Maiwurm Director Date: September __, 1999 By ----------------------------------- Hazel R. O'Leary Director S-1 Date: September 24, 1999 By * ----------------------------------- Keith M. Price Director Date: September 24, 1999 By * ----------------------------------- James T. Rhodes Director Date: September 24, 1999 By * ----------------------------------- Michael E. Tennenbaum Director * By: /s/ James J. Maiwurm ------------------------- Attorney-in-Fact S-2 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION OF EXHIBIT - ----------- ---------------------- 3(a) Restated Certificate of Incorporation of ICF Kaiser International, Inc. (restated through June 26, 1993) (Incorporated by reference to Exhibit No. 3(a) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the second quarter of fiscal 1994 filed with the Commission on October 15, 1993) 3(b) Amended and Restated By-laws of ICF Kaiser International, Inc. (as amended through June 23, 1995) (Incorporated by reference to Exhibit No. 3(b) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the second quarter of fiscal 1995 filed with the Commission on October 13, 1995) 4(a) Indenture dated as of January 11, 1994, between ICF Kaiser International, Inc. and The Bank of New York, as Trustee (Incorporated by reference to Exhibit No. 4(a) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the third quarter of fiscal 1994 filed with the Commission on January 14, 1994) 4(a)(1) First Supplemental Indenture dated as of February 17, 1995 (Incorporated by reference to Exhibit No. 4(a)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) for fiscal year 1995 filed with the Commission on May 23, 1995) 4(a)(2) Second Supplemental Indenture dated September 1, 1995 (Incorporated by reference to Exhibit No. 4(a)(2) to Registration Statement on Form S-1 Registration No. 33-64655 filed with the Commission on November 30, 1995) 4(a)(3) Third Supplemental Indenture dated October 20, 1995 (Incorporated by reference to Exhibit No. 4(a)(3) to Registration Statement on Form S-1 Registration No. 33-64655 filed with the Commission on November 30, 1995) 4(a)(4) Fourth Supplemental Indenture dated as of March 8, 1996 (Incorporated by reference to Exhibit No. 4(a)(4) to Transition Report on Form 10-K (Registrant No. 1-12248) for the transition period from March 1, 1995 to December 31, 1995 filed with the Commission on March 29, 1996) 4(a)(5) Fifth Supplemental Indenture dated as of June 24, 1996 (Incorporated by reference to Exhibit No. 4(a)(5) to Registration Statement on Form S-1 Registration No. 333-16937 filed with the Commission on November 27, 1996) 4(a)(6) Sixth Supplemental Indenture dated as of December 3, 1997 (Incorporated by reference to Exhibit No. 4(a)(6) to Annual Report on Form 10-K (Registrant No. 1-12248) for fiscal year 1997 filed with the Commission on March 31, 1998) 4(a)(7) Seventh Supplemental Indenture dated as of August 13, 1998 (Incorporated by reference to Exhibit No. 4(a)(7) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the third quarter of fiscal 1997 filed with the Commission on November 16, 1998) 4(a)(8) Eighth Supplemental Indenture dated as of April 9, 1999 (Incorporated by reference to Exhibit 4(a)(8) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the first quarter of fiscal 1999 filed with the Commission on May 17, 1999) **4(a)(9) Amended and Restated Indenture with respect to the 12% Senior Subordinated Notes due 2003 4(b) Form of 12% Senior Subordinated Note due 2003 (Incorporated by reference to Exhibit No. 4(b) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the third quarter of fiscal 1994 filed with the Commission on January 14, 1994) 4(c) Rights Agreement, dated as of January 13, 1992, between ICF Kaiser International, Inc. and Office of the Secretary, ICF Kaiser International, Inc. as Rights Agent, including (1) Form of Certificate of Designations of Series 4 Junior Preferred Stock; (2) Form of Rights Certificate; and (3) Summary of Rights to Purchase Preferred Stock (Incorporated by reference to Exhibit No. 4(h) to Quarterly Report on Form 10-Q (Registrant No. 0-18025) for the third quarter of fiscal 1992 filed with the Commission on January 14, 1992) 4(d) Indenture dated as of December 23, 1996, between ICF Kaiser International, Inc. and The Bank of New York, as Trustee, including Guarantees, dated December 23, 1996, by each of the Subsidiary Guarantors (Incorporated by reference to Exhibit No. 4(g) to Registration Statement on Form S-1 Registration No. 333-19519 filed with the Commission on January 10, 1997) 4(d)(1) First Supplemental Indenture dated as of December 3, 1997 (Incorporated by reference to Exhibit No. 4(a)(6) to Annual Report on Form 10-K (Registrant No. 1-12248) for fiscal year 1997 filed with the Commission on March 31, 1998) 4(d)(2) Second Supplemental Indenture dated as of August 13, 1998 (Incorporated by reference to Exhibit No. 4(g)(2) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the third quarter of fiscal 1997 filed with the Commission on November 16, 1998) 4(d)(3) Third Supplemental Indenture dated as of April 9, 1999 (Incorporated by reference to Exhibit 4(f)(3) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the first quarter of fiscal 1999 filed with the Commission on May 17, 1999) 4(e) Form of 12% Senior Note due 2003, Series B (Incorporated by reference to Exhibit No. 4(g) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the first quarter of fiscal 1999 filed with the Commission on May 17, 1999) 4(f) Warrant Agreement dated as of December 23, 1996, between ICF Kaiser International, Inc. and The Bank of New York, as Warrant Agent (Incorporated by reference to Exhibit No. 4(j) to Registration Statement on Form S-1 Registration No. 333-19519 filed with the Commission on January 10, 1997) 4(g) Form of Warrant expiring December 31, 1999 issued under Warrant Agreement dated as of December 23, 1996 (Incorporated by reference to Exhibit No. 4(k) to Registration Statement on Form S-1 Registration No. 333-19519 filed with the Commission on January 10, 1997) 4(h) Form of Certificate of Designation regarding Redeemable Convertible Preferred Stock that is registered by and issuable in exchange offer described in this registration statement 4(i) Form of Warrant Agreement regarding warrants registered by and issuable in exchange offer described in this registration statement, including the form of warrant certificate **4(j) Form of Indenture regarding 12% Senior Notes due 2002 registered by and issuable in exchange offer described in this registration statement, including the form of senior note **5 Opinion of Squire, Sanders & Dempsey L.L.P. regarding securities being registered **8 Opinion of Squire, Sanders & Dempsey L.L.P. regarding tax consequences 10(a) Loan and Security Agreement dated as of December 18, 1998, with Madeleine L.L.C. as agent (Incorporated by reference to Exhibit No. 10(a) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on April 15, 1999) 10(b) ICF Kaiser International, Inc. Employee Stock Ownership Plan (as amended and restated as of March 1, 1993) (and further amended with respect to name change only as of June 26, 1993) (Incorporated by reference to Exhibit No. 10(c) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the second quarter of fiscal 1994 filed with the Commission on October 15, 1993) 10(b)(1) Amendment No. 1 dated April 24, 1995 (Incorporated by reference to Exhibit No. 10(l)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) for fiscal 1995 filed with the Commission on May 23, 1995) 10(b)(2) Amendment No. 2 dated December 15, 1995 (Incorporated by reference to Exhibit No. 10(b)(2) to Transition Report on Form 10-K (Registrant No. 1-12248) for the transition period from March 1, 1995 to December 31, 1995 filed with the Commission on March 29, 1996) 10(b)(3) Amendment No. 3 dated December 13, 1996 (Incorporated by reference to Exhibit No. 10(b)(3) to Registration Statement on Form S-1 Registration No. 333-19519 filed with the Commission on January 10, 1997) 10(c) Trust Agreement with Vanguard Fiduciary Trust Company dated as of August 31, 1995, for ICF Kaiser International, Inc. Employee Stock Ownership Plan (Incorporated by reference to Exhibit No. 10(c) to Registration Statement on Form S-1 Registration No. 33-64655 filed with the Commission on November 30, 1995) 10(d) ICF Kaiser International, Inc. Retirement Plan (as amended and restated as of March 1, 1993) (and further amended with respect to name change only as of June 26, 1993) (Incorporated by reference to Exhibit No. 10(d) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the second quarter of fiscal 1994 filed with the Commission on October 15, 1993) 10(d)(1) Amendment No. 1 dated April 24, 1995 (Incorporated by reference to Exhibit No. 10(d)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on May 23, 1995) 10(d)(2) Amendment No. 2 dated December 15, 1995 (Incorporated by reference to Exhibit No. 10(d)(2) to Transition Report on Form 10-K (Registrant No. 1-12248) for the transition period from March 1, 1995 to December 31, 1995 filed with the Commission on March 29, 1996) 10(d)(3) Amendment No. 3 dated December 13, 1996 (Incorporated by reference to Exhibit No. 10(d)(3) to Registration Statement on Form S-1 Registration No. 333-19519 filed with the Commission on January 10, 1997) 10(e) Trust Agreement with Vanguard Fiduciary Trust Company dated as of August 31, 1995, for ICF Kaiser International, Inc. Retirement Plan (Incorporated by reference to Exhibit No. 10(e) to Registration Statement on Form S-1 Registration No. 33-64655 filed with the Commission on November 30, 1995) 10(f) Consolidated, Amended and Restated Deed of Lease Agreement between HMCE Associates Limited Partnership R.L.L.P. (as Landlord) and ICF Kaiser Hunters Branch Leasing, Inc. (as Tenant), dated November 12, 1997, for the lease of the Registrant's headquarters in Fairfax, Virginia known as Hunters Branch--Phase I (Incorporated by reference to Exhibit No. 10(g) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on March 25, 1997) 10(g) Consolidated, Amended and Restated Deed of Lease Agreement between HMCE Associates Limited Partnership R.L.L.P. (as Landlord) and ICF Kaiser Hunters Branch Leasing, Inc. (as Tenant), dated November 12, 1997, for the lease of space in the building adjacent to the Registrant's headquarters in Fairfax, Virginia known as Hunters Branch--Phase II (Incorporated by reference to Exhibit No. 10(h) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on March 25, 1997) 10(h) Contribution Agreement by and among HMCE Associates Limited Partnership R.L.L.P.; ICF Kaiser Hunters Branch Leasing, Inc.; and IFA Nutley Partners, LLC dated November 3, 1997 (Incorporated by reference to Exhibit No. 10(i) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on March 25, 1997) 10(i) ICF Kaiser International, Inc. Stock Incentive Plan (as amended and restated through March 1, 1996) (Incorporated by reference to Exhibit No. 10(j) to Registration Statement on Form S-1 Registration No. 333-16937 filed with the Commission on November 27, 1996) 10(j) Contract (#DE-AC3495RF00825) between Kaiser-Hill Company, LLC, a subsidiary of the Corporation, and the U.S. Department of Energy dated as of April 4, 1995 (IN ACCORDANCE WITH RULE 202 OF REGULATION S-T, THIS EXHIBIT NO. 10(j) WAS FILED IN PAPER ON MAY 23, 1995, ON FORM SE PURSUANT TO A CONTINUING HARDSHIP EXEMPTION and is incorporated herein by reference thereto) 10(j)(1) Modifications 1 to 40 to Contract #DE-AC3495RF00825 (Incorporated by reference to Exhibit No. 10(p)(l) to Registration Statement on Form S-1 Registration No. 333-16937 filed with the Commission on November 27, 1996) 10(j)(2) Modifications 42 to 46 to Contract #DE-AC3495RF00825 (Modification 41 not received) (Incorporated by reference to Exhibit No. 10(p)(2) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on March 25, 1997) 10(j)(3) Modifications 47 to 81 to Contract #DE-AC3495RF00825 (Modifications 72 and 78 not received) (Incorporated by reference to Exhibit No. 10(j)(3) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on April 15, 1999) 10(k) ICF Kaiser International, Inc. Section 401(k) Plan (as amended and restated as of March 1, 1993) (and further amended with respect to name change only as of June 26, 1993) (Incorporated by reference to Exhibit No. 10(f) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the second quarter of fiscal 1994 filed with the Commission on October 15, 1993) 10(k)(1) Amendment No. 1 dated April 24, 1995 (Incorporated by reference to Exhibit No. 10(p)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) for fiscal 1995 filed with the Commission on May 23, 1995) 10(k)(2) Amendment No. 2 dated December 15, 1995 (Incorporated by reference to Exhibit No. 10(p)(2) to Transition Report on Form 10-K (Registrant No. 1-12248) for the transition period from March 1, 1995 to December 31, 1995 filed with the Commission on March 29, 1996) 10(k)(3) Amendment No. 3 dated December 13, 1996 (Incorporated by reference to Exhibit No. 10(q)(3) to Registration Statement on Form S-1 Registration No. 333-19519 filed with the Commission on January 10, 1997) 10(l) Trust Agreement with Vanguard Fiduciary Trust Company dated as of March 1, 1989, for the ICF Kaiser International, Inc. Section 401(k) Plan (Incorporated by reference to Exhibit No. 28(b) to Registration Statement on Form S-8 Registration No. 33-51460 filed with the Commission on August 31, 1992) Exhibit No. 10--Material Contracts (management contracts, compensatory plans, or arrangements) 10(aa) Agreement dated as of May 19, 1997 with James O. Edwards, Chairman and Chief Executive Officer of the Registrant (Incorporated by reference to Exhibit No. 10(ll) to Quarterly Report on Form 10-Q (Registrant No. 1- 12248) for the second quarter of fiscal 1997 filed with the Commission on August 14, 1997) 10(aa)(1) Agreement dated as of November 6, 1998, terminating Mr. Edwards' employment agreement (Incorporated by reference to Exhibit No. 10(aa)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on April 15, 1999) 10(bb) ICF Kaiser International, Inc. 1998 Compensation (IC) Plan for Senior Executives (adopted by the Board of Directors on February 27, 1998) (Incorporated by reference to Exhibit No. 10(bb) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on March 25, 1997) 10(cc) ICF Kaiser International, Inc. Non-employee Director Stock Option Plan (as amended and restated as of June 26, 1993) (Incorporated by reference to Exhibit No. 10(bb) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the second quarter of fiscal 1994 filed with the Commission on October 15, 1993) 10(dd) Agreement dated as of May 19, 1997 with Marc Tipermas, President and Chief Operating Officer of the Registrant (Incorporated by reference to Exhibit No. 10(mm) to Quarterly Report on Form 10-Q (Registrant No. 1- 12248) for the second quarter of fiscal 1997 filed with the Commission on August 14, 1997) 10(dd)(1) Agreement dated as of August 7, 1998, terminating Dr. Tipermas' employment agreement (Incorporated by reference to Exhibit No. 10(dd)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on April 15, 1999) 10(ee) ICF Kaiser International, Inc. Senior Executive Officers Severance Plan as approved by the Compensation Committee of the Board of Directors on April 4, 1994, and adopted by the Board of Directors on May 5, 1994, as further amended through May 1, 1997 (Incorporated by reference to Exhibit No. 10(ee) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on March 25, 1997) 10(ff) Employment Agreement with Thomas P. Grumbly, Executive Vice President of the Registrant, effective as of April 7, 1997 (Incorporated by reference to Exhibit No. 10(ff) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on April 15, 1999) 10(ff)(1) Letter dated March 15,1999, amending Mr. Grumbly's employment agreement (Incorporated by reference to Exhibit No. 10(ff)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on April 15, 1999) 10(gg) ICF Kaiser International, Inc. Consultants, Agents and Part-Time Employees Stock Plan dated as of June 23, 1995 (Incorporated by reference to Exhibit No. 99 to Registration Statement on Form S-8 Registration No. 33-60665 filed with the Commission on June 28, 1995) 10(hh) ICF Kaiser International, Inc. Stock Incentive Plan (as amended and restated through March 1, 1996) (Incorporated by reference to Exhibit No. 10(j) to Registration Statement on Form S-1 Registration No. 333-16937 filed with the Commission on November 27, 1996) 10(ii) Amended Employment Agreement dated as of December 1, 1996, with David Watson, Executive Vice President and President, ICF Kaiser Engineers and Constructors Group of the Registrant (Incorporated by reference to Exhibit No. 10(kk) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on March 25, 1997) 10(ii)(1) Agreement and Mutual Release dated August 17, 1998, terminating Mr. Watson's employment agreement (Incorporated by reference to Exhibit No. 10(ii)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on April 15, 1999) 10(jj) Intentionally Omitted 10(kk) Employment Agreement with Michael F. Gaffney, Executive Vice President of the Registrant, effective as of January 1, 1997 (Incorporated by reference to Exhibit No. 10(kk) to Annual Report on Form 10-K (Registrant No. 1-12248) for fiscal year 1997 filed with the Commission on March 31, 1998) 10(kk)(1) Agreement dated March 8, 1999, terminating Mr. Gaffney's employment agreement (Incorporated by reference to Exhibit No. 10(kk)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on April 15, 1999) 10(ll) Letter Agreement with Cowen Incorporated and Jarrod M. Cohen, dated as of March 13, 1998 (Incorporated by reference to Exhibit No. 10(ll) to Annual Report on Form 10-K (Registrant No. 1-12248) for fiscal year 1997 filed with the Commission on March 31, 1998) (Incorporated by reference to Exhibit No. 10(mm) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on March 25, 1997) 10(mm) ICF Kaiser International, Inc. Non-employee Directors Compensation and Phantom Stock Plan as adopted by the Board of Directors on February 28, 1997, with an effective date of March 1, 1997 (Incorporated by reference to Exhibit No. 10(mm) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on April 15, 1999) 10(nn) Letter Agreement with Tennenbaum & Co., L.L.C. and Michael E. Tennenbaum, dated as of March 13, 1998 (Incorporated by reference to Exhibit No. 10(nn) to Annual Report on Form 10-K (Registrant No. 1-12248) for fiscal year 1997 filed with the Commission on March 31, 1998) 10(oo) Employment Agreement with Keith M. Price, President and Chief Executive Officer of the Registrant, effective as of August 27, 1998 (Incorporated by reference to Exhibit No. 10(oo) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) for the third quarter of 1998 filed with the Commission on November 16, 1998) 10(oo)(1) Terms of Promotion for Mr. Price effective as of November 4, 1998 (Incorporated by reference to Exhibit No. 10(oo)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on April 15, 1999) *10(oo)(2) Agreement dated April 27, 1999, terminating Mr. Price's employment agreement *10(pp) Employment Agreement with James J. Maiwurm, President and Chief Executive Officer of the Registrant, effective as of June 1, 1999 *10(qq) Employment Agreement with S. Robert Cochran, Executive Vice President and President, North America of the Registrant, effective as of June 1, 1999 *10(rr) Employment Agreement with Timothy P. O'Connor, Executive Vice President and Chief Financial Officer of the Registrant, effective as of June 1, 1999 *10(ss) Employment Agreement with Richard A. Leupen, Executive Vice President and President, International of the Registrant, effective as of June 1, 1999. *12 Statement regarding computation of ratio of earnings to fixed charges *21 Consolidated subsidiaries of the Registrant as of July 9, 1999 **23(a) Consent of Squire, Sanders & Dempsey L.L.P. (included in opinions filed as Exhibits 5 and 8) 23(b) Consent of PricewaterhouseCoopers LLP 24 Power of Attorney (included as part of the signature page to this Form S-4 Registration Statement) **25 Statement of Eligibility and Qualification on Form T-1 of Trustee 99 Form of Letter of Transmittal and Consent Form and related documents for the 12% Senior Subordinated Notes due 2003 - -------------- * Previously filed. ** To be filed by amendment. EX-4.(H) 2 FORM OF CERTIFICATE OF DESIGNATION Exhibit 4(h) ICF KAISER INTERNATIONAL, INC. CERTIFICATE OF DESIGNATION _____________________ Pursuant to Section 151 of the General Corporation Law of the State of Delaware _____________________ ICF Kaiser International, Inc. (the "Corporation"), a corporation organized and existing under the laws of the State of Delaware, HEREBY CERTIFIES that pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware (the "DGCL") the following resolution was duly adopted by the Board of Directors of the Corporation (the "Board of Directors"), pursuant to authority conferred upon the Board of Directors by the provisions of the Restated Certificate of Incorporation, as amended, of the Corporation (the "Certificate of Incorporation") and pursuant to authority conferred upon the Board of Directors by Section 151(g) of the DGCL, by the Certificate of Incorporation, by Article III, Section 3.05 of the By-Laws of the Corporation (the "By-Laws") and by the resolutions of the Board of Directors described herein, at a meeting of Board of Directors duly held on __________ __, 1999: WHEREAS, the Board of Directors is authorized, within the limitations and restrictions stated in the Certificate of Incorporation, to fix, by resolution or resolutions for each series of Preferred Stock (the "Preferred Stock"), the number of shares constituting such series and the voting powers and designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof, including, without limiting the generality of the foregoing, such provisions as may be desired concerning voting, redemption, dividends, dissolution or the distribution of assets, conversion or exchange, and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors under the DGCL; WHEREAS, the Board of Directors on ________ __, 1999 adopted a resolution authorizing the designation of up to 2,600,000 shares in one or more series of the Preferred Stock, including without limitation the exercise of the powers set forth in the resolution to the fullest extent permitted by Section 151(g) of the DGCL and Section 4.01(B) of the Certificate of Incorporation; WHEREAS, the Board of Directors on ________ __, 1999 adopted a resolution fixing the voting powers and designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions of such 2,600,000 shares of Preferred Stock as set forth in paragraphs (1) through (7), inclusive, below; and WHEREAS, it is the desire of the Board of Directors, pursuant to the authority conferred upon the Board of Directors by Section 151(g) of the DGCL, by Section 4.01(B) of the Certificate of Incorporation, and by the resolution of the Board of Directors dated ________ __, 1999, to fix the number of shares constituting a series of Preferred Stock and the voting powers and designations, preferences and relative, participating, optional or other special rights and qualifications, limitations and restrictions of such series as set forth in paragraphs (1) through (7), inclusive, below; NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized such series of Preferred Stock on the terms and with the provisions herein set forth: 1. Designation. The designation of the series of Preferred Stock ----------- authorized by this resolution shall be "Series 5 Redeemable Cumulative Convertible Preferred Stock" (the "Series 5 Convertible Preferred Stock") consisting of 2,600,000 shares. The par value of the Series 5 Convertible Preferred Stock shall be $.01 per share, which value does not represent a determination by the Board of Directors for the purposes of the capital accounts. 2. Rank. The Series 5 Convertible Preferred Stock shall, with ---- respect to dividend rights and rights on liquidation, winding up and dissolution, rank prior to the Common Stock, par value $0.01 per share, of the Corporation (the "Common Stock"). (All equity securities of the Corporation to which the Series 5 Convertible Preferred Stock ranks prior, including the Common Stock, are collectively referred to herein as the "Junior Securities," all equity securities of the Corporation with which the Series 5 Convertible Preferred Stock ranks on a parity are collectively referred to herein as the "Parity Securities" and all equity securities of the Corporation (other than convertible debt securities) to which the Series 5 Convertible Preferred Stock ranks junior, whether with respect to dividends or upon liquidation, dissolution, winding-up or otherwise, are collectively referred to herein as the "Senior Securities.") The Series 5 Convertible Preferred Stock shall be subject to the creation of Junior Securities, Parity Securities and Senior Securities. 3. Dividends. --------- (a) Subject to the adjustment set forth in Section 4, the holders of the shares of Series 5 Convertible Preferred Stock shall be entitled to receive, out of funds legally available for the payment of dividends, cumulative dividends paid in cash at the initial rate of ____% of the Liquidation Preference Per Share (as defined in Section 4(a)). Such dividends shall be payable in quarterly payments in arrears on March 31, June 30, September 30 and December 31 of each year commencing on the Transaction Date (as defined in Section 5(a)) (each such date, a "dividend payment date"), in preference to dividends on the Junior Securities. Such dividends shall be payable to the holders of the Series 5 Convertible Preferred Stock who are holders of record on the record date fixed by the Board of Directors (each such date, a "dividend payment 2 record date"). Except as provided in Section 3(c), each of such quarterly dividends shall be fully cumulative and shall accrue (whether or not declared), without interest, from the previous dividend payment date. Dividends payable for the first dividend period and any partial dividend period shall be calculated on the basis of a 360-day year and the actual number of days elapsed in the period for which payable. The dividend rate is subject to following adjustments: (a) if - the Series 5 Convertible Preferred Stock shall not have been redeemed prior to December 31, 2001, the dividend rate payable in cash shall increase to 12.0% of the Liquidation Preference Per Share on such date; (b) if not redeemed on - December 31, 2004, the dividend rate shall increase to 14.0% of the Liquidation Preference Per Share thereafter; and (c) if the Corporation shall - fail to make a Change of Control Offer (as defined in Section 5(c)), the dividend rate shall increase to 14% from and after the quarter next following a Change of Control (as defined in Section 5(c)). (b) All dividends paid with respect to shares of the Series 5 Convertible Preferred Stock pursuant to Section 3(a) shall be paid pro rata to --- ---- the holders entitled thereto. (c) If any dividends are not paid in full upon the shares of the Series 5 Convertible Preferred Stock and any other Parity Securities, all dividends declared and paid upon shares of the Series 5 Convertible Preferred Stock and any other Parity Securities shall be declared and paid pro rata so --- ---- that the amount of dividends declared per share of the Series 5 Convertible Preferred Stock and such Parity Securities shall in all cases bear to each other the same ratio that accrued dividends per share on the Series 5 Convertible Preferred Stock and such Parity Securities bear to each other. (d) (i) Holders of shares of the Series 5 Convertible Preferred Stock shall be entitled to receive the dividends provided for in Section 3(a) hereof in preference to and in priority over any dividends upon any of the Junior Securities. (ii) So long as any shares of the Series 5 Convertible Preferred Stock are outstanding, the Board of Directors shall not declare, and the Corporation shall not pay or set apart for payment any dividend on any of the Junior Securities, or set apart for payment money for a sinking or other similar fund for, the repurchase, redemption or other retirement of, any Junior Securities or any warrants, rights or options exercisable for or convertible into any of the Junior Securities (other than (a) purchases or redemptions - pursuant to or in accordance with employee benefit plans, employee stock subscriptions and stock option agreements entered into between the Corporation and certain of its or its subsidiaries' directors, officers and employees, (b) - the repurchase, redemption or other retirement of any Junior Securities or Parity Securities or any warrants, rights or options exercisable for or convertible into any of the Junior Securities or Parity Securities made pursuant to the requirements of Section 5(a) hereof and (c) the repurchase, redemption or - other retirement of debentures or other debt securities that are convertible into or exchangeable for any of the Junior Securities or Parity Securities), or make any distribution in respect of the Junior Securities, either directly or indirectly, and whether in cash, obligations or other property (other than distributions or dividends in Junior Securities to the holders of Junior Securities), and shall not permit any corporation or other entity directly or indirectly controlled by the Corporation to purchase or redeem any of the Junior Securities or any warrants, rights, calls or options exercisable for or convertible into any of the Junior 3 Securities (other than (x) purchases or redemptions pursuant to or in accordance - with employee benefit plans, employee stock subscriptions and stock option agreements entered into between the Corporation and certain of its or its subsidiaries' directors, officers and employees and (y) the repurchase, - redemption or other retirement of debentures or other debt securities that are convertible or exchangeable into any of the Junior Securities or Parity Securities) unless prior to or concurrently with such declaration, payment, setting apart for payment, repurchase, redemption or other retirement or distribution, as the case may be, all accrued and unpaid dividends on shares of the Series 5 Convertible Preferred Stock not paid on the dates provided for in Section 3(a) hereof (including accrued dividends not paid by reason of the terms and conditions of Section 3(a) or Section 3(c) hereof) shall have been or be paid. (e) Subject to the foregoing provisions of this Section 3, the Board of Directors may declare and the Corporation may pay or set apart for payment dividends and other distributions on any of the Junior Securities, Parity Securities and Senior Securities, and may repurchase, redeem or otherwise retire any of the Junior Securities, Parity Securities or Senior Securities or any warrants, rights or options exercisable for or convertible into any of the Junior Securities, Parity Securities or Senior Securities, and the holders of the shares of the Series 5 Convertible Preferred Stock shall not be entitled to share therein. (f) Holders of shares of the Series 5 Convertible Preferred Stock at the close of business on a dividend payment record date shall be entitled to receive the dividend payable on such shares unless such shares shall have been converted or redeemed prior to such dividend payment date. 4. Liquidation Preference. ---------------------- (a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of shares of Series 5 Convertible Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders an amount in cash equal to Liquidation Preference Per Share for each share outstanding. For purposes of this Certificate of Designation, the "Liquidation Preference Per Share" shall mean an amount in cash per share equal to the sum of (i) $25.00, (ii) the interest - -- accrued and unpaid, if any, on the Corporation's 12% Senior Subordinated Notes due 2003 for the period commencing July 1, 1999 and ending on the date immediately preceding the Transaction Date, and (iii) all accrued but unpaid --- dividends thereon to the date of redemption, repurchase, conversion, liquidation, dissolution or winding up before any payment shall be made or any assets distributed to the holders of any of the Junior Securities. If the assets of the Corporation are not sufficient to pay in full the liquidation payments payable to the holders of outstanding shares of the Series 5 Convertible Preferred Stock and any Parity Securities, then the holders of all such shares shall share ratably in such distribution of assets in accordance with the amount which would be payable on such distribution if the amounts to which the Holders of outstanding shares of Series 5 Convertible Preferred Stock and the holders of outstanding shares of such Parity Securities are entitled were paid in full. Except as provided in this Section 4(a), holders of the Series 5 Convertible Preferred Stock shall not be entitled to any distribution in the event of liquidation, dissolution or winding up of the affairs of the Corporation. 4 (b) For the purposes of this Section 4, neither the voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation nor the consolidation or merger of the Corporation with or into one or more other corporations nor the consolidation or merger of one more corporations with or into the Corporation shall de deemed to be a voluntary or involuntary liquidation, dissolution or winding up. 5. Redemption; Repurchase Upon Change of Control. --------------------------------------------- (a) Voluntary Redemption by the Corporation. The Corporation may --------------------------------------- redeem at its option the Series 5 Convertible Preferred Stock, at any time in whole or from time to time in part after the Transaction Date (as defined in this Section 5(a)), at the redemption price per share (expressed as a percentage of the Liquidation Preference Per Share) set forth below, to the extent the Corporation shall have funds legally available for such payment. If redeemed during any of the periods set forth below, the redemption price per share shall be as follows: Period Redemption Price Per Share ------ -------------------------- Transaction Date until June 30, 2001.................... 90.00% June 30, 2001 to December 31, 2001...................... 95.00% December 31, 2001 and thereafter........................ 100.00% As used herein, the term "Transaction Date" shall mean the date of initial issuance of the Series 5 Convertible Preferred Stock. (b) Redemption Pro Rata, etc. (i) So long as any shares of the ------------------------ Series 5 Convertible Preferred Stock are outstanding, any repurchase, redemption or other retirement of any Parity Securities or any warrants, rights or options exercisable for or convertible into any of the Parity Securities (other than the repurchase, redemption or other retirement of debentures or other debt securities that are convertible or exchangeable into any Parity Securities) must be made on a pro rata basis with the Series 5 Convertible Preferred Stock so --- ---- that the total redemption prices of the shares redeemed of Series 5 Convertible Preferred Stock and such Parity Securities shall in all cases bear to each other the same ratio that the total redemption prices of all shares outstanding on the applicable date of Series 5 Convertible Preferred Stock and such Parity Securities bear to each other, unless prior to or concurrently with such repurchase, redemption or other retirement, as the case may be, all accrued and unpaid dividends on shares of the Series 5 Convertible Preferred Stock not paid on the dates provided for in Section 3(a) hereof (including accrued dividends not paid by reason of the terms and conditions of Section 3(a) or Section 3(c) hereof) shall have been or be paid. 5 (ii) Shares of Series 5 Convertible Preferred Stock that have been issued and reacquired in any manner, including shares purchased or redeemed or exchanged or converted, shall (upon compliance with any applicable provisions of the laws of the State of Delaware) have the status of authorized and unissued shares of the class of Preferred Stock undesignated as to series and may be redesignated and reissued as part of any series of the Preferred Stock. (iii) In the event that fewer than all the outstanding shares of Series 5 Convertible Preferred Stock are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be selected pro rata, except that in any redemption of fewer than --- ---- all the outstanding shares of Series 5 Convertible Preferred Stock, the Corporation may redeem all shares held by any holders of a number of shares not to exceed 100, including all shares held by holders who, after giving effect to such redemption, would hold less than 100 shares, as may be specified by the Corporation. (iv) In the event the Corporation shall redeem shares of Series 5 Convertible Preferred Stock, written notice of such redemption shall be given by first class mail, postage prepaid mailed not less than 30 days nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed at such holder's address as the same appears on the stock register of the Corporation; provided, however, that no failure to give such notice nor any -------- ------- defect therein shall affect the validity of the proceeding for the redemption of any shares of Series 5 Convertible Preferred Stock to be redeemed except as to the holder to whom the Corporation has failed to give said notice or except as to the holder whose was defective. Each such notice shall state: (i) the - redemption date; (ii) the number of shares of Series 5 Convertible Preferred -- Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed from such holder, the number of shares to be redeemed from such holder or the method by which the number of shares to be redeemed will be determined; (iii) the redemption price; (iv) the place or places where --- -- certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue - on such redemption date. The Board of Directors shall be authorized to establish such other reasonable procedures for redemption and payment of the redemption price that are not inconsistent with the foregoing provisions. (v) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price of the shares called for redemption) dividends on the shares of Series 5 Convertible Preferred Stock so called for redemption shall cease to accrue and said shares shall no longer be deemed to be outstanding and shall have the status of authorized but unissued shares of Preferred Stock, undesignated as to series, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price and any accrued and unpaid dividends) shall cease. Upon surrender in accordance with said notice of the certificates for any shares to redeemed (properly endorsed or assigned for transfer, if the Board of Directors shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid plus any accrued and unpaid dividends. In case fewer than all the shares represented by any such certificate are 6 redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder hereof. (c) Repurchase in Connection with a Change of Control. (i) If a ------------------------------------------------- Change of Control (as defined below) shall occur, each holder of Series 5 Convertible Preferred Stock shall have the right to require the Corporation to repurchase all or any part (but not any fractional shares) of that holder's Series 5 Convertible Preferred Stock pursuant to the offer described below (the "Change of Control Offer"). In the Change of Control Offer, the Corporation shall offer a payment in cash equal to 101% of the Liquidation Preference Per Share repurchased (the "Change of Control Payment"). Within 30 days following any Change of Control, the Corporation shall mail a notice to each holder of Series 5 Convertible Preferred Stock describing the transaction or transactions that constitute the Change of Control and offering to repurchase Series 5 Convertible Preferred Stock on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by this Certificate of Designation and described in such notice. The Corporation shall comply with the requirements of federal and state securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Series 5 Convertible Preferred Stock as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with this Section 5(c), the Corporation shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 5(c) by virtue of such conflict. On the Change of Control Payment Date, the Corporation shall, to the extent lawful: (x) accept for payment all - Series 5 Convertible Preferred Stock or portions thereof properly tendered pursuant to the Change of Control Offer; (y) deposit with the persons appointed - by the Corporation to act as the paying agent (the "Paying Agent") an amount equal to the Change of Control Payment in respect of all Series 5 Convertible Preferred Stock or portions thereof so tendered; and (z) deliver or cause to be - delivered to an agent appointed by the Corporation (the "Transfer Agent") the Series 5 Convertible Preferred Stock so accepted together with an officers' certificate stating the Liquidation Preference Per Share or portions thereof being purchased by the Corporation. The Paying Agent shall promptly mail to each holder of Series 5 Convertible Preferred Stock so tendered the Change of Control Payment for such Series 5 Convertible Preferred Stock, and the Transfer Agent shall promptly authenticate and mail (or cause to be transferred by book-entry) to each holder of Series 5 Convertible Preferred Stock a new certificate representing the Series 5 Convertible Preferred Stock equal in Liquidation Preference Per Share to any unpurchased portion of the Series 5 Convertible Preferred Stock surrendered, if any. The Corporation shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. The Corporation shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Certificate of Designation applicable to a Change of Control Offer made by the Corporation and purchases all Series 5 Convertible Preferred Stock validly tendered and not withdrawn under such Change of Control Offer. Notwithstanding the provisions of this Section 5(c), nothing in this Section 5(c) shall operate (or be deemed to operate) to prevent the Corporation from redeeming in accordance with the provisions of Section 5(a) any shares of Series 5 Convertible 7 Preferred Stock in advance of any Change of Control, or following any Change of Control, with respect to any shares not tendered pursuant to this Section 5(c). (ii) For purposes of Section 5(c), "Change of Control" means the occurrence of any of the following: (v) the sale, lease, conveyance or other - disposition of all or substantially all of the Corporation's assets as an entirety or substantially as an entirety to any Person or "group" (within the meaning of section 13(d)(3) of the Exchange Act) in one or a series of transactions taking place after the issuance of the Series 5 Convertible Preferred Stock, provided that a transaction where the holders of all classes of -------- Common Equity of the Corporation immediately prior to such transaction own, directly or indirectly, more than 50% of the aggregate voting power of all classes of Common Equity of such Person or group immediately after such transactions shall not be a Change of Control; (w) the acquisition by the - Corporation and any of its Subsidiaries of 50% or more of all classes of Common Equity of the Corporation in one transaction or a series of related transactions; (x) the approval by the Corporation of a Plan of Liquidation of - the Corporation; (y) any transaction or series of transactions taking place - after the Transaction Date (as a result of a tender offer, merger, consolidation or otherwise) that results in, or that is in connection with, (I) any Person, - including a "group" (within the meaning of section 13(d)(3) of the Exchange Act) that includes such Person, acquiring "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% or more of the aggregate voting power of all classes of Common Equity of the Corporation or any Person that possesses "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% or more of the aggregate voting power of all classes of Common Equity of the Corporation, or (II) less than 50% -- (measured by the aggregate voting power of all classes) of the Corporation's Common Equity being registered under section 12(b) or 12(g) of the Exchange Act; or (z) a majority of the Board of Directors not being comprised of Continuing - Directors. (iii) For purposes of Section 5(c), the following terms shall have the respective meanings as follow: "Capital Stock" of any Person means any and all shares, rights to purchase, warrants or options (whether or not currently exercisable), participations or other equivalents of or interests in (however designated) the equity (including without limitation common stock, preferred stock and partnership and joint venture interests) of such Person. "Common Equity" of any Person means all Capital Stock of such Person that is generally entitled to (x) vote in the election of directors of - such Person or (y) if such Person is not a corporation, vote or otherwise - participate in the selection of the governing body, partners, managers or others that will control the management and policies of such Person. "Continuing Director" of the Corporation as of any date means a member of the Board of Directors who (x) was a member of the Board of Directors - on November 15, 1999 or (y) was nominated for election or elected to the Board - of Directors with the affirmative vote of at least a majority of the directors who were Continuing 8 Directors at the time of such nomination or election or elected or appointed by the holders of the Series 5 Convertible Preferred Stock pursuant to Section 7(b) and, as the case may be, Section 7(c). "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Person" means any individual, corporation, partnership, joint venture, incorporated or unincorporated association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof or other entity of any kind. "Plan of Liquidation," with respect to any Person, means a plan that provides for, contemplates or the effectuation of which is preceded or accompanied by (whether or not substantially contemporaneously, in phases or otherwise): (x) the sale, lease, conveyance or other disposition of all or - substantially all of the assets of such Person otherwise than as an entirety or substantially as an entirety; and (y) the distribution of all or substantially - all of the proceeds of such sale, lease, conveyance or other disposition and all or substantially all of the remaining assets of such Person to holders of Capital Stock of such Person. "Subsidiary" of any Person means (x) any corporation of which at - least a majority of the aggregate voting power of all classes of the Common Equity is owned by such Person directly or through one or more other Subsidiaries of such Person and (y) any entity other than a corporation in which - such Person, directly or indirectly, owns at least a majority of the Common Equity of such entity. 6. Conversion. ---------- (a) Upon the terms and in the manner set forth in this Section 6 and subject to prior redemptions, if any, of Series 5 Convertible Preferred Stock made in accordance with Section 5, each share of the Series 5 Convertible Preferred Stock shall be convertible, at the option of the holder thereof at any time (x) on and after December 31, 2001 and (y) if the Corporation shall fail to - - make a Change of Control Offer in accordance with Section 5(c)(i), in each case, upon surrender to the Corporation of the certificates for the shares to be converted, into a number of fully paid and nonassessable shares of Common Stock equal to Liquidation Preference Per Share divided by the Current Market Price ---------- (as defined below) (the "Conversion Ratio"); provided, however, that the right -------- ------- to convert shares of Series 5 Convertible Preferred Stock that have been called for redemption pursuant to Section 5 shall terminate at the close of business on the date notice of redemption is first sent or given by the Corporation with respect to such shares, unless the Corporation shall default in making payment of the amount payable upon such redemption. (b) In order to convert shares of the Series 5 Convertible Preferred Stock, the holder thereof shall (i) deliver a properly completed and duly - executed written notice of election to convert to the Corporation at its principal office or at the office of the agency which may be 9 maintained for such purpose (the "Conversion Agent") specifying in such notice the number (in whole shares) of shares of the Series 5 Convertible Preferred Stock to be converted and the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued, (ii) -- surrender the certificate for such shares of Series 5 Convertible Preferred Stock to the Corporation or the Conversion Agent, accompanied, if so required by the Corporation or the Conversion Agent, by a written instrument or instruments of transfer in form reasonably satisfactory to the Corporation or the Conversion Agent duly executed by the holder or his attorney duly authorized in writing, and (iii) pay any transfer or similar tax required by law. --- (c) (i) Conversion shall be deemed to have been effected at the close of business on the date (the "Conversion Date") on which the Corporation or the Conversion Agent shall have received the notice of election to convert, the surrendered certificate, any required payments and all other required documents. Immediately upon conversion, the rights of the holders of converted shares of Series 5 Convertible Preferred Stock shall cease and the persons entitled to receive the shares of Common Stock upon the conversion of such shares of Series 5 Convertible Preferred Stock shall be treated for all purposes as having become the beneficial owners of such shares of Common Stock. Conversion shall be at the Conversion Ratio in effect at such time on such date, unless the stock transfer books of the Corporation shall be closed on that date, in which event such person or persons shall be deemed to have become such holder or holders of record of the Common Stock at the close of business on the next succeeding day on which such stock transfer books are open, but such conversion shall be at the Conversion Ratio in effect on the date upon which such shares shall have been surrendered and such notice and any required payments received by the Corporation. (ii) As promptly as practicable after the Conversion Date, the Corporation shall deliver or cause to be delivered at the office or agency of the Conversion Agent, to or upon the written order of the holder of the surrendered shares of Series 5 Convertible Preferred Stock, a certificate or certificates representing the number of fully paid, nonassessable shares of Common Stock into which such shares of Series 5 Convertible Preferred Stock have been converted in accordance with the provisions of this Section 6, and any cash payable in respect of fractional shares as provided in Section 6(d). (iii) Upon the surrender of a certificate representing shares of Series 5 Convertible Preferred Stock that is converted in part, the Corporation shall issue or cause to be issued for the holder a new certificate representing shares of Series 5 Convertible Preferred Stock equal in number to the unconverted portion of the shares of Series 5 Convertible Preferred Stock represented by the Certificate so surrendered. (d) No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon the conversion of any shares of Series 5 Convertible Preferred Stock. Instead of any fractional interest in a share of Common Stock which would otherwise be deliverable upon the conversion of a share of Series 5 Convertible Preferred Stock, the Corporation shall pay to the holder of such share (a "Fractional Shareholder") an amount in cash (computed to the nearest cent) equal to the Current Market Price (as defined below) thereof on the business day next preceding the day of conversion multiplied by such ------------- fractional interest. If more than one share shall be surrendered for conversion at the time by the same holder, the 10 number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate stated value of the shares of Series 5 Convertible Preferred Stock so surrendered. (e) Subject to the final sentence of this Section 6(e), for purposes of any computation under Sections 6(a) and 6(d)(i), the "Current Market Price" at any date shall be deemed to be the average daily closing price of Common Stock for the 20 consecutive trading days ending on the trading day prior to the date in question. The closing price for each day shall be (x) if the Common - Stock is listed or admitted to trading on a national securities exchange, the closing price on the New York Stock Exchange Consolidated Tape (or any successor composite tape reporting transactions on national securities exchanges) or, if such a composite tape shall not be in use or shall not report transactions in the Common Stock, the last reported sales price regular way on the principal national securities exchange on which the Common Stock is listed or admitted to trading (which shall be the national securities exchange on which the greatest number of shares of Common Stock has been traded during such 20 consecutive trading days), or, if there is no transaction on any such day in any such situation, the mean of the bid and asked prices on such day, or (y) if the - Common Stock is not listed or admitted to trading on any such exchange, the closing price, if reported, or, if the closing price is not reported, the average of the closing bid and asked prices as reported by the National Association of Securities Dealers Automated Quotation System (NASDAQ) or a similar source selected from time to time by the Corporation for the purpose. In the event such closing prices are unavailable, the Current Market Price shall be deemed to be the fair market value as determined in good faith by the Board of Directors, on the basis of such relevant factors as it in good faith considers, in the reasonable judgment of the Board of Directors, appropriate. All calculations under this Section 6(e) shall be made to the nearest one- hundredth of a cent or to the nearest one-hundredth of a share, as the case may be. At any time after a Change of Control or December 31, 2004, the Current Market Price shall be conclusively deemed to be $.01 per share. (f) The Conversion Ratio shall be subject to adjustment as follows: (i) If, during the 20 consecutive trading day period during which the determination of the Conversion Ratio occurs, the Corporation shall (v) declare or pay a dividend on its outstanding Common Stock in shares of - Common Stock or make a distribution to all holders of its Common Stock in shares of Common Stock, (w) subdivide its outstanding shares of Common Stock into a - greater number of shares of Common Stock, (x) combine its outstanding shares of - Common Stock into a smaller number of shares of Common Stock, (y) issue by - reclassification of its shares of Common Stock other securities of the Corporation or (z) issue or sell shares of Common Stock (or securities - convertible into or exchangeable for Common Stock) without consideration or for a consideration per share of Common Stock the fair market value of which as of the date of such issuance or sale is less than the Current Market Price as of such date, then the Conversion Ratio in effect immediately prior thereto shall be adjusted appropriately by the Board of Directors so that the holder of any shares of Series 5 Convertible Preferred Stock thereafter converted shall be entitled to receive the number and kind of shares of Common Stock of other securities that the holder would have owned or have been entitled to receive after the happening of any of the events described above had such shares of Series 5 Convertible Preferred Stock been converted immediately prior to the happening of such 11 event or any record date with respect thereto. An adjustment made pursuant to this Section 6(f)(i) shall be applied by the Board of Directors in its reasonable judgment, and shall become effective on the date of the dividend payment, subdivision, combination, issuance or sale retroactive to the record date with respect thereto, if any, for such event. Such adjustment shall be made successively. (ii) Notwithstanding the foregoing, no adjustments of any kind under this Section 6(f)(ii) shall be made with respect to the sale and issuance by the Corporation of any shares of Common Stock, rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase shares of Common Stock in connection with either (x) an underwritten - public offering or (y) any transaction as to which the Corporation has received - a written opinion of a nationally recognized investment bank stating that the transaction is fair to the Corporation from a financial point of view. (iii) No adjustment in the Conversion Ratio shall be required unless such adjustment would require an increase or decrease of at least 1% of such price; provided, however, that any adjustments which by reason of this -------- ------- Section 6(f)(iii) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 6(f) shall be made to the nearest one-hundredth of a cent or to the nearest one- hundredth of a share, as the case may be. 7. Voting Rights. ------------- (a) Generally. The holders of record of shares of Series 5 --------- Convertible Preferred Stock shall not be entitled to any voting rights except as hereinafter provided in this Section 7 or as otherwise provided by law. (b) Election of Series 5 Convertible Preferred Stock Directors. The ---------------------------------------------------------- holders of Series 5 Convertible Preferred Stock shall have the exclusive right, voting separately as a class, to elect three (3) members of the Board of Directors (the "Series 5 Convertible Preferred Stock Directors") at each meeting of stockholders held for the purpose of electing directors or by the written consent of the holders of Series 5 Convertible Preferred Stock pursuant to Section 228 of the General Corporation Law of the State of Delaware. The initial Series 5 Convertible Preferred Stock Directors shall be ____________, ____________ and ____________, and shall be reasonably satisfactory to the Corporation. The initial Series 5 Convertible Preferred Stock Directors shall hold such positions until their respective successors shall be elected and qualified at the second annual meeting of stockholders of the Corporation or at a special meeting of the holders of Series 5 Convertible Preferred Stock, called as hereinafter provided, or in accordance with Section 228 of the General Corporation Law of the State of Delaware. (c) Election of Additional Directors. In addition to the right to -------------------------------- elect the Series 5 Convertible Preferred Stock Directors set forth in the preceding Section 7(b), the holders of Series 5 Convertible Preferred Stock shall have the exclusive right, voting separately as a class, to appoint under the conditions specified below, the number of additional directors set forth in the following subsection 7(c)(i) through (iv), inclusive (such additional directors, the "Series 5 Convertible Preferred Stock Additional Directors"): 12 (i) Failure to Pay Dividends. If at any time or times the ------------------------ Corporation shall fail for any reason to pay any quarterly dividend in cash on the Series 5 Convertible Preferred Stock in accordance with the provisions of Section 3(a), then the number of directors constituting the Board of Directors, without further action, shall be increased by two (2), and the holders of Series 5 Convertible Preferred Stock shall have the exclusive right, voting separately as a class, to elect two additional directors of the Corporation to fill such newly created directorships, the remaining directors (other than the Series 5 Convertible Preferred Stock Directors and, as the case may be, any Series 5 Convertible Preferred Stock Additional Directors appointed pursuant to this Section 7(c)) to be elected by the other class or classes of stock entitled to vote therefor, at each meeting of the Corporation's stockholders held for the purpose of electing directors (unless such failure to pay the quarterly dividend shall have occurred one time only in any four quarter period, the Corporation brings current the dividend arrearage in the following quarter and the Corporation timely pays the dividend payable in the immediately following quarter); provided that (X) the holders of Series 5 Convertible Preferred Stock -------- - shall be entitled to elect one (1) additional director in accordance with this Section 7(c) if the Corporation shall fail to pay any dividend payment in any subsequent quarter when due, and (Y) the holders of Series 5 Convertible - Preferred Stock shall not have the right to elect more than three (3) directors of the Corporation pursuant to this Section 7(c)(i). (ii) Failure to Redeem Prior to December 31, 2001. If the -------------------------------------------- Corporation shall fail to redeem the all of the then outstanding Series 5 Convertible Preferred Stock prior to December 31, 2001, then the number of directors constituting the Board of Directors shall be increased, without further action, by such number as would be necessary to give the holders of Series 5 Convertible Preferred Stock a majority of members of the Board of Directors (including the Series 5 Convertible Preferred Stock Directors and the Series 5 Convertible Preferred Stock Additional Directors, if any), and the holders of Series 5 Convertible Preferred Stock shall have the exclusive right, voting separately as a class, to elect such number of directors of the Corporation to fill such newly created directorships, the remaining directors (other than the Series 5 Convertible Preferred Stock Directors and, as the case may be, any Series 5 Convertible Preferred Stock Additional Directors appointed pursuant to this Section 7(c)) to be elected by the other class or classes of stock entitled to vote therefor, at each meeting of the Corporation's stockholders held for the purpose of electing directors. (iii) Failure to Make Change of Control Offer. If the Corporation --------------------------------------- shall fail to make a Change of Control Offer in accordance with Section 5(d)(i), the number of directors constituting the Board of Directors, without further action, shall be increased by two (2) and the holders of Series 5 Convertible Preferred Stock shall have the exclusive right, voting separately as a class, to elect two directors of the Corporation to fill such newly created directorships, the remaining directors (other than the Series 5 Convertible Preferred Stock Directors and, as the case may be, any Series 5 Convertible Preferred Stock Additional Directors appointed pursuant to this Section 7(c)) to be elected by the other class or classes of stock entitled to vote therefor, at each meeting of the Corporation's stockholders held for the purpose of electing directors. 13 (iv) Failure to Redeem on December 31, 2004. If the Corporation -------------------------------------- shall fail to redeem the then outstanding Series 5 Convertible Preferred Stock on December 31, 2004, then the number of directors constituting the Board of Directors, without further action, shall be increased by two (2), and the holders of Series 5 Convertible Preferred Stock shall have the exclusive right, voting separately as a class, to elect two directors, of the Corporation to fill such newly created directorships, the remaining directors (other than the Series 5 Convertible Preferred Stock Directors and, as the case may be, any Series 5 Convertible Preferred Stock Additional Directors appointed pursuant to this Section 7(c)) to be elected by the other class or classes of stock entitled to vote therefor, at each meeting of the Corporation's stockholders held for the purpose of electing directors. (v) General Provisions Concerning Election of Additional ---------------------------------------------------- Directors. - --------- (A) Except with respect to the appointment of the initial Series 5 Convertible Preferred Stock Directors pursuant to Section 7(b), whenever any voting right pursuant to Section 7(b) or 7(c)(i) - (iv) shall have vested, such right may be exercised initially either at a special meeting of the holders of Series 5 Convertible Preferred Stock, called as hereinafter provided, or at any annual meeting of stockholders held for the purpose of electing directors, and thereafter at such meetings or by the written consent of the holders of Series 5 Convertible Preferred Stock pursuant to Section 228 of the General Corporation Law of the State of Delaware. Such voting right shall continue until such time as (I) in the case of any voting right vesting pursuant - to Section 7(c)(i), all cumulative dividends accumulated on all outstanding Series 5 Convertible Preferred Stock shall have been paid in full or declared and set aside for payment in full, (II) in the case of any voting right vesting -- pursuant to Section 7(c)(ii) or (iv), the Corporation shall have redeemed all of the then outstanding Series 5 Convertible Preferred Stock, and (III) in the case --- of any voting right vesting pursuant to Section 7(c)(iii), a Change of Control Offer shall have been made, at which time (in the case of each of the immediately preceding (I), (II) and (III)), such voting right of the holders of Series 5 Convertible Preferred Stock shall terminate, subject, in the case of any voting right vesting pursuant to Section 7(c)(i) only, to revesting in the event of each and every subsequent failure of the Corporation to pay cash dividends in any quarter as described above. (B) At any meeting held for the purpose of electing directors, a quorum shall be the number of shares of Series 5 Convertible Preferred Stock, present in person or represented by proxy. At any meeting held for purposes other than the election of directors where shares of the Series 5 Convertible Preferred Stock are entitled to a separate vote, the affirmative vote of a majority of the then outstanding shares of the Series 5 Convertible Preferred Stock, present in person or represented by proxy, shall be required to take action. At any such meeting or adjournment thereof (x) the absence of a - quorum of the holders of Series 5 Convertible Preferred Stock shall not prevent the election of directors other than those to be elected by the holders of stock of such class and the absence of a quorum or quorums of the holders of capital stock entitled to elect such other directors shall not prevent the election of directors to be elected by the holders of Series 5 Convertible Preferred Stock and (y) in the absence of a quorum of the holders of shares of Series 5 - Convertible Preferred Stock, a majority of such holders present in person or represented by proxy shall have the power to adjourn the meeting for the election of directors which the holders of shares of Series 5 Convertible 14 Preferred Stock may be entitled to elect, from time to time, without notice (except as required by law) other than announcement at the meeting, until a quorum shall be present. (C) The term of office of all directors elected by the holders of Series 5 Convertible Preferred Stock pursuant to Section 7(b) and 7(c)(i)-(iv) in office at any time when the aforesaid voting rights are vested in the holders of Series 5 Convertible Preferred Stock shall terminate upon the election of their successors at any meeting of stockholders for the purpose of electing directors. Upon any termination of the aforesaid voting rights in accordance with Section 7(c)(v)(A), the term of office of all directors elected by the holders of Series 5 Convertible Preferred Stock pursuant to Section 7(c)(i), (ii), (iii), or (iv) then in office shall thereupon terminate and upon such termination the number of directors constituting the Board of Directors shall, without further action, be reduced, (I) in the case of Series 5 - Convertible Preferred Stock Additional Directors elected pursuant to Section 7(c)(i), by two (2) or, as the case may be, three (3), (II) in the case of -- Series 5 Convertible Preferred Stock Additional Directors elected pursuant to Section 7(c)(ii), by two (2) or such greater number by which the number of directors constituting the Board of Directors shall have been increased pursuant to Section 7(c)(ii), and, (III) in the case of Series 5 Convertible Preferred --- Stock Additional Directors elected pursuant to Section 7(c)(iii) or (iv), by two (2), subject always to the increase of the number of directors pursuant to Section 7(c)(i) in case of the future right of the holders of Series 5 Convertible Preferred Stock to elect directors as provided herein. (D) In case of any vacancy occurring among the directors so elected, the remaining director who shall have been so elected may appoint a successor to hold office for the unexpired term of the director whose place shall be vacant. If all directors so elected by the holders of Series 5 Convertible Preferred Stock shall cease to serve as directors before their terms shall expire, the holders of Series 5 Convertible Preferred Stock then outstanding may, at a special meeting of the holders called as provided above, elect successors to hold office for the unexpired terms of the directors whose places shall be vacant. (d) Authorization of Senior Securities. So long as any shares of the ---------------------------------- Series 5 Convertible Preferred Stock are outstanding (except when notice of the redemption of all outstanding shares of Series 5 Convertible Preferred Stock has been given pursuant to Section 5 and funds have been deposited in trust for such redemption), the Corporation shall not, without (x) the affirmative vote or - consent of the holders of at least 66-2/3% of the shares of Series 5 Convertible Preferred Stock at the time outstanding, or (y) the unanimous consent of - directors elected by the holders of Series 5 Convertible Preferred Stock pursuant to Section 7(b) and (c), given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting called for the purpose, at which the holders of Series 5 Convertible Preferred Stock shall vote separately as a class, or such directors, as the case may be, authorize any new class of Senior Securities or Additional Indebtedness, except as may be permitted under the Corporation's senior credit facility expiring December 31, 2004. For purposes of this Section 7(d), "Additional Indebtedness" means [to be defined]. (e) Authorization of Other Securities, Changes in Capital, etc. ---------------------------------------------------------- Except as set forth in Section 7(d) above, (x) the creation, authorization or - issuance of any shares of any Junior Securities, Parity Securities or Senior Securities, (y) the creation of any indebtedness of any kind - 15 of the Corporation, or (z) the increase or decrease in the amount of authorized - capital stock of any class, including Preferred Stock, shall not require the consent of the holders of Series 5 Convertible Preferred Stock and shall not be deemed to affect materially and adversely the rights, preferences, privileges or voting rights of shares of Series 5 Convertible Preferred Stock. (f) Changes in Designations of Series 5 Convertible Preferred Stock. --------------------------------------------------------------- So long as any shares of the Series 5 Convertible Preferred Stock are outstanding (except when notice of the redemption of all outstanding shares of Series 5 Convertible Preferred Stock has been given pursuant to Section 5 and funds have been deposited in trust for such redemption), the Corporation shall not, without the affirmative vote or consent of the holders of at least 66-2/3% of the shares of Series 5 Convertible Preferred Stock at the time outstanding, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting called for the purpose, at which the holders of Series 5 Convertible Preferred Stock shall vote separately as a class, amend the Certificate of Designation so as to affect materially and adversely the specified rights, preferences, privileges or voting rights of shares of Series 5 Convertible Preferred Stock. (g) Mergers and Liquidations. So long as any shares of the Series 5 ------------------------ Convertible Preferred Stock are outstanding (except when notice of the redemption of all outstanding shares of Series 5 Convertible Preferred Stock has been given pursuant to Section 5 and funds have been deposited in trust for such redemption), the Corporation shall not, without the affirmative vote or consent of the holders of at least a majority of the shares of Series 5 Convertible Preferred Stock at the time outstanding, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting called for the purpose, at which the holders of Series 5 Convertible Preferred Stock shall vote separately as a class, consummate a merger or plan of liquidation where the holders of Series 5 Convertible Preferred Stock will receive, in accordance with the terms of such merger or plan of liquidation, less than the Liquidation Preference Per Share. (h) Matters Submitted to Vote of Stockholders. (i) Each holder of ----------------------------------------- Series 5 Convertible Preferred Stock shall be entitled to vote on all matters submitted to a vote of the holders of Common Stock. Each share of Series 5 Convertible Preferred Stock shall entitle the holder thereof to one-fourth of a vote at any annual or special meeting of the Corporation's stockholders; provided, however, that, from and after December 31, 2001, each share of Series - -------- ------- 5 Convertible Preferred Stock shall entitle the holder thereof to the number of votes equal to the number of shares of Common Stock into which such share of Series 5 Convertible Preferred Stock may be converted from time to time on the record date for determining the stockholders entitled to vote. (ii) Neither the Corporation nor any of its direct or indirect subsidiaries will be permitted to vote the shares of Series 5 Convertible Preferred Stock that either the Corporation or such subsidiaries may hold from time to time, on any matters submitted to a vote of stockholders of the Corporation. (iii) Notwithstanding the provisions of the preceding Section 7(h)(i), if at the 1999 Annual Meeting of Stockholders, the stockholders of the Corporation shall not have voted to approve the Board of Directors' proposal to amend the Certificate of Incorporation and, 16 where applicable, the bylaws (x) to eliminate provisions that (I) require the - - affirmative vote of holders of 66 2/3% of the outstanding capital stock to approve certain transactions following a change in the majority of directors within twelve months, (II) provide for staggered three-year terms for the Board -- of Directors, (III) prohibit stockholders from filling vacancies on the Board of --- Directors and (IV) require the affirmative vote of 66 2/3% of the outstanding -- capital stock to approve certain amendments to the Certificate of Incorporation and bylaws, (y) to provide that stockholders owning at least 20% of the voting - power of the outstanding capital stock could require a special meeting of stockholders to be call, and (z) to prohibit any new stockholder rights plan to - be adopted without the approval of the Corporation's stockholders, then each share of Series 5 Convertible Preferred Stock shall entitle the holder thereof to vote on such proposal at the 2000 Annual Meeting of Stockholders that number of shares of Common Stock into which the Series 5 Convertible Preferred Stock would be converted in accordance with Section 6 (notwithstanding the date from and after which the Series 5 Convertible Preferred Stock becomes convertible pursuant to such Section 6). 8. Limitations. Except as may otherwise be required by law, the ----------- shares of Series 5 Convertible Preferred Stock shall not have any powers or designations, preferences or relative, participating, optional or other special rights or qualifications, limitations or restrictions other than those specifically set forth in this resolution (as such resolution may be amended from time to time) or otherwise in the Certificate of Incorporation. [Remainder of page intentionally blank.] 17 IN WITNESS WHEREOF, the undersigned does make and file this Certificate of Designation, under penalties of perjury, and hereby declares and certifies that this Certificate of Designation is the act and deed of the Corporation, and that the facts stated herein are true, and, accordingly, has hereunto set his hand this ____ day of _________, 1999. _______________________________ Name: Title: EX-4.(I) 3 FORM OF WARRANT AGREEMENT Exhibit 4(i) WARRANT AGREEMENT ----------------- WARRANT AGREEMENT, dated as of __________ __, 1999 (the "Agreement"), between ICF Kaiser International, Inc., a Delaware corporation (the "Company"), and __________________________, as warrant agent (with any successor Warrant Agent, the "Warrant Agent"). RECITALS WHEREAS, the Company is engaged in a restructuring of its outstanding debt in a recapitalization as described in the Company's Registration Statement on Form S-4, SEC Registration No. 333-82643 filed with the Securities and Exchange Commission (as amended, the "Registration Statement"), pursuant to which the Company has offered to exchange convertible preferred stock and warrants to purchase its common stock for a portion of the Company's outstanding 12% Senior Subordinated Notes due 2003 (the "Old Notes"); WHEREAS, this Agreement is to reflect the issuance and delivery by the Company of warrant certificates (the "Warrant Certificates") evidencing warrants (the "Warrants") to acquire, under certain circumstances, up to an aggregate of 882,000 shares, subject to adjustment, of its Common Stock (as defined below), representing 15% of the fully diluted Common Stock of the Company; and WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing so to act, in connection with the issuance of the Warrant Certificates and other matters as provided in this Agreement; NOW, THEREFORE, in consideration of the foregoing and for the purpose of defining the terms and provisions of the Warrants and the respective related rights and obligations of the Company, the Warrant Agent and the record holders from time to time of the Warrants, the Company and the Warrant Agent agree as follows: ARTICLE I DEFINITIONS Section 1.01 Certain Definitions As used in this Agreement, the following terms shall have the following respective meanings: "Affiliate" of any person means any person directly or indirectly controlling or controlled by or under direct or indirect common control with such person. For purposes of this definition, "control" when used with respect to any person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Change of Shares" has the meaning set forth in Section 4.01(a). "Common Equity Securities" means Common Stock and securities convertible into, or exercisable or exchangeable for, Common Stock, or rights or options to acquire Common Stock or such other securities, excluding the Warrants. "Common Stock" means the common stock, $0.01 par value per share, of the Company, and any other capital stock of the Company into which such common stock may be converted or reclassified or that may be issued in respect of, in exchange for, or in substitution of, such common stock by reason of any stock splits, stock dividends, distributions, mergers, consolidations or other like events. "Common Stock Distribution" has the meaning set forth in Section 4.01(b). "Company" means ICF Kaiser International, Inc., a Delaware corporation, and its successors and assigns. "Convertible Securities" has the meaning set forth in Section 4.01(c). "Depositary" means, with respect to the warrants issued in the form of one or more Global Warrants, The Depository Trust Company or another Person designated as Depositary by the Company, which must be a clearing agency registered under the Exchange Act. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Expiration Date" means December 31, 2004, subject to the provisions of Section 3.05. "Global Warrant" means a security evidencing all or a portion of the Warrants issued to the Depositary or its nominee in accordance with Section 2.01 and bearing the legend set forth in Exhibit B. --------- "Holders" means, from time to time, the holders of the Warrants. "NASD" means the National Association of Securities Dealers, Inc. "Nasdaq Stock Market" means The Nasdaq Stock Market, Inc. "Non-Surviving Combination" means any merger, consolidation or other business combination by the Company with one or more Persons (other than a wholly-owned subsidiary of the Company) in which the Company is not the survivor, or a sale of all or substantially all of the assets of the Company to one or more such other Persons, if, in connection with any of the 2 foregoing, consideration (other than consideration which includes Common Equity Securities) is distributed to holders of Common Stock in exchange for all or substantially all of their equity interest in the Company. "Options" has the meaning set forth in Section 4.01(c) "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, or governmental unit or related agency or political subdivision. "Purchase Price" means the purchase price per share of Common Stock to be paid upon the exercise of each Warrant in accordance with the terms hereof, which price per share shall be equal to the average daily closing price of the Common Stock for the first 20 consecutive trading days following consummation of the recapitalization contemplated in the Registration Statement, subject to adjustment from time to time pursuant to Article IV. "Registration Statement" has the meaning set forth in the Recitals above. "Rights" has the meaning set forth in Section 4.01(c). "Securities Act" means the Securities Act of 1933, as amended. "Surviving Combination" means any merger, consolidation or other business combination by the Company with one or more Persons in which the Company is the survivor, or a purchase of substantially all of the assets of another Person by the Company. "Survivor" has the meaning set forth in Section 3.05(b). "Transaction" means any transaction (including, without limitation, a merger, consolidation, sale of all or substantially all of the Company's assets, or recapitalization of the Common Stock) in which the previously outstanding Common Stock shall be changed into or exchanged for different securities of the Company or common stock or other securities of another corporation or interests in a noncorporate entity or other property (including cash) or any combination of any of the foregoing. "Transfer Agent" has the meaning set forth in Section 8.01. ARTICLE II ORIGINAL ISSUANCE OF WARRANTS Section 2.01 Form of Warrant Certificates The Warrant Certificates (a) shall be issued in registered form only - and substantially in the form attached as Exhibit A to this Agreement, (b) shall --------- - be dated the date of 3 issuance (whether upon initial issuance, registration of transfer, exchange or replacement), (c) shall show the date of countersignature and (d) shall contain - - such legends and endorsements, each as provided by the Company, typed, stamped, printed, lithographed or engraved, as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law or with any rule or regulation pursuant to any law or with any rule or regulation of any securities exchange on which the Warrants shall be listed, or to conform to customary usage. The Warrant Certificates shall be in a format and in a form reasonably satisfactory to the Warrant Agent. Warrants may be issued initially in the form of one or more permanent Global Warrants in registered form for an aggregate of 882,000 shares of Common Stock, substantially in the form set forth in Exhibit A, deposited with the --------- Warrant Agent, as custodian for the Depositary, and, if issued in the form of one or more permanent Global Notes, shall bear the legend set forth on Exhibit ------- B. The aggregate number of Warrants represented by any Global Warrant may from - - time to time be increased or decreased by adjustments made on the records of the Warrant Agent, as custodian for the Depositary, as provided in this Agreement. Pending the preparation of definitive Warrant Certificates, temporary Warrant Certificates may be issued, which may be printed, lithographed, typewritten, mimeographed or otherwise produced, and which will be substantially of the tenor of the definitive Warrant Certificates in lieu of which they are issued. If temporary Warrant Certificates are issued, the Company will cause definitive Warrant Certificates to be prepared without unreasonable delay. After the preparation of definitive Warrant Certificates, the temporary Warrant Certificates shall be exchangeable for definitive Warrant Certificates upon surrender of the temporary Warrant Certificates to the Warrant Agent, without charge to the Holder. Until so exchanged the temporary Warrant Certificates shall in all respects be entitled to the same benefits under this Agreement as definitive Warrant Certificates. Section 2.02 Execution and Delivery of Warrant Certificates Warrant Certificates evidencing Warrants to purchase initially an aggregate of up to 882,000 shares of Common Stock shall be executed, on or after the date of this Agreement, by the Company and delivered to the Warrant Agent for countersignature, and the Warrant Agent shall countersign and deliver such Warrant Certificates upon the order and at the direction of the Company to such holders of Old Notes as so ordered and directed. The Warrant Agent is hereby authorized to countersign and deliver Warrant Certificates as required by this Section 2.02 or by Section 3.04, Article V or Section 9.04. The Warrant Certificates shall be executed on behalf of the Company by its Chairman, Chief Executive Officer or President or by any of its Vice Presidents, either manually or by facsimile signature. The Warrant Certificates shall be authenticated by manual signature of an authorized signatory of the Warrant Agent and shall not be valid for any purpose unless so countersigned, and shall be dated the date of authentication by the Warrant Agent. In case any officer of the Company whose signature shall have been placed upon any of the Warrant Certificates shall cease to be the Chairman, Chief Executive Officer, President or a Vice President of the Company before countersignature by the Warrant Agent and 4 issuance and delivery of the Warrant Certificates, such Warrant Certificates may, nevertheless, be countersigned by the Warrant Agent and issued and delivered with the same force and effect as though such person had not ceased to be such officer of the Company. ARTICLE III NUMBER OF UNDERLYING SHARES; EXERCISE OF WARRANTS; EXPIRATION; NON-SURVIVING COMBINATION Section 3.01 Number of Underlying Shares Each Warrant Certificate shall, when countersigned by the Warrant Agent, entitle the Holder of the Warrant Certificate, subject to the provisions of the Warrant Certificate, and of this Agreement, to receive one share of Common Stock for each Warrant represented by the Warrant Certificate, subject to adjustment as provided in this Agreement, upon payment of the Purchase Price for each of such shares. Section 3.02 Exercise of Warrants Subject to the terms and conditions set forth in this Agreement, the Warrants shall be exercisable at any time after their issuance and on or prior to the Expiration Date. Section 3.03 Expiration of Warrants The Warrants shall terminate and become void as of the close of business on the Expiration Date; provided that the Warrants will terminate and become void prior to the Expiration Date in the event of a Non-Surviving Combination, pursuant to Section 3.05. The Company shall give notice not less than 90, and not more than 120, days prior to the Expiration Date to the Holders of all then-outstanding Warrants to the effect that the Warrants will terminate and become void as of the close of business on the Expiration Date; provided that the failure by the Company to give such notice as provided in this Section shall not affect such termination and status of the Warrants as of the close of business on the Expiration Date. Section 3.04 Method of Exercise In order to exercise a Warrant, the Holder must surrender the Warrant Certificates evidencing such Warrant to the Warrant Agent, with one of the forms on the reverse of or attached to the Warrant Certificate duly executed, and tender the Purchase Price. The Purchase Price shall be payable by certified or official bank check or wire transfer, payable in United States currency to the order of the Company. If fewer than all of the Warrants represented by a Warrant Certificate are being exercised, such Warrant Certificate shall be surrendered and, subject to the provisions of 5 Article V, a new Warrant Certificate of the same tenor and for the number of Warrants that were not exercised shall be executed by the Company. The Warrant Agent shall countersign the new Warrant Certificate, register it in such name or names as may be directed in writing by the Holder and deliver the new Warrant Certificate to the Person or Persons entitled to receive the same. Upon surrender of a Warrant Certificate and payment of the Purchase Price in conformity with the foregoing provisions, the Warrant Agent shall promptly notify the Company and deliver or cause to be delivered to the exercising Holder appropriate evidence of ownership of any shares of Common Stock or other securities or property (including any money) to which the Holder is entitled, subject to the provisions of Section 9.02. Section 3.05 Non-Surviving Combination (a) If the Company proposes, prior to the Expiration Date, to enter into a transaction that would constitute a Non-Surviving Combination if consummated, the Company shall give written notice to the Warrant Agent and to the Holders of Warrants, promptly after an agreement in principle is reached with respect to the Non-Surviving Combination but in no event less than 30 days prior to the consummation of the Non-Surviving Combination. Such notice shall describe the transaction in reasonable detail and specify the consideration to be received by the Holders. The Company shall also furnish to each Holder of Warrants all notices and materials furnished to its stockholders in connection with such transactions. (b) The Company agrees that it will not enter into an agreement providing for a Non-Surviving Combination, unless the party to such transaction that is the surviving entity (the "Survivor") shall be obligated to distribute or pay to each Holder of 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 issuable if such Holder's Warrants had been exercised immediately prior to such Non-Surviving Combination (or, if applicable, the record date for such transaction). Following the consummation of a Non-Surviving Combination, the Warrants shall represent only the right to receive such shares of stock or other property from the Survivor upon payment of the Purchase Price prior to the Expiration Date. Section 3.06 Use of Series 5 Convertible Preferred Stock for Exercise of Warrants Any Holder who is also a holder of the Company's Series 5 Redeemable Cumulative Convertible Preferred Stock ("Series 5 Convertible Preferred Stock") issued on the date of initial issuance of such Series 5 Convertible Preferred Stock, may, at such Holder's option, use shares of Series 5 Convertible Preferred Stock held by such Holder in lieu of cash to pay the exercise price to acquire shares of Common Stock pursuant to the Warrants. For purposes of this Section 3.06, each share of Series 5 Convertible Preferred Stock shall have a value equal to the Liquidation Preference Per Share (as such term is defined in the Company's Certificate of Designation relating to the Series 5 Convertible Preferred Stock.) 6 ARTICLE IV ADJUSTMENTS Section 4.01 Adjustments of Exercise Price and Number of Shares of Common Stock The number and kind of shares purchasable upon the exercise of Warrants and the Purchase Price shall be subject to adjustment from time to time as follows: (a) Changes in Common Stock. In the event the Company shall, at any ----------------------- time or from time to time, (i) issue any shares of Common Stock as a stock - dividend to the holders of Common Stock, (ii) subdivide or combine the -- outstanding shares of Common Stock into a greater or lesser number of shares, (iii) issue any shares of its capital stock in a reclassification or --- reorganization of the Common Stock, or (iv) issue any shares of Common Stock -- pursuant to the terms of the agreement by which the Company acquired ICT Spectrum Constructors, Inc. (any such issuance, subdivision, combination, reclassification or reorganization being called a "Change of Shares"), then (x) - in the case of (i) or (ii) above, the number of shares of Common Stock that may be purchased upon the exercise of each Warrant shall be adjusted to the number of shares of Common Stock that the Holder of such Warrant would have owned or have been entitled to receive after the happening of such event had such Warrant been exercised immediately prior to the record date (or, if there is no record date, the effective date) for such event, and the Purchase Price shall be adjusted to the price (calculated to the nearest 1,000th of one cent) determined by multiplying the Purchase Price immediately prior to such event by a fraction, the numerator of which shall be the number of shares of Common Stock purchasable with one Warrant immediately prior to such event and the denominator of which shall be the number of shares of Common Stock purchasable with one Warrant after the adjustment referred to above and (y), in the case of (iii) above, paragraph - (l) below shall apply. An adjustment made pursuant to clause (x) of this paragraph (a) shall become effective retroactively immediately after the record date in the case of such dividend and shall become effective immediately after the effective date in other cases, but any shares of Common Stock issuable solely as a result of such adjustment shall not be issued prior to the effective date of such event. (b) Common Stock Distribution. In the event the Company shall, at any ------------------------- time or from time to time, issue, sell or otherwise distribute (including by way of deemed distributions pursuant to paragraphs (c) and (d) below) any shares of Common Stock (other than pursuant to a Change of Shares or the exercise of any Option, Convertible Security (each as defined in paragraph (c) below) or Warrant) (any such event, including any deemed distributions described in paragraphs (c) and (d), being called a "Common Stock Distribution"), for a consideration per share less than the current market price per share of Common Stock (as defined in paragraph (f) below), on the date of such Common Stock Distribution, then, effective upon such Common Stock Distribution, the Purchase Price shall be reduced to the price (calculated to the nearest 1,000th of one cent) determined by multiplying the Purchase Price in effect immediately prior to such Common Stock Distribution by a fraction, the numerator of which shall be the sum of (i) the number of shares of Common Stock outstanding (exclusive of - any treasury shares) immediately prior to such Common Stock Distribution multiplied by the current market price per share of Common Stock on the date of such Common Stock Distribution, plus (ii) the ---- -- 7 consideration, if any, received by the Company upon such Common Stock Distribution, and the denominator of which shall be the product of (x) the total - number of shares of Common Stock outstanding (exclusive of any treasury shares) immediately after such Common Stock Distribution and (y) the current market - price per share of Common Stock on the date of such Common Stock Distribution. If any Common Stock Distribution shall require an adjustment to the Purchase Price pursuant to the foregoing provisions of this paragraph (b), including by operation of paragraph (c) or (d) below, then, effective at the time such adjustment is made, the number of shares of Common Stock purchasable upon the exercise of each Warrant shall be increased to a number determined by multiplying the number of such shares so purchasable immediately prior to such Common Stock Distribution by a fraction, the numerator of which shall be the Purchase Price in effect immediately prior to such adjustment and the denominator of which shall be the Purchase Price in effect immediately after such adjustment. In computing adjustments under this paragraph, fractional interests in Common Stock shall be taken into account to the nearest 1,000th of a share. The provisions of this paragraph (b), including by operation of paragraph (c) or (d) below, shall not operate to increase the Purchase Price or reduce the number of shares of Common Stock purchasable upon the exercise of any Warrant, except by operation of paragraph (j) or (k) below. (c) Issuance of Options. In the event the Company shall, at any time ------------------- or from time to time, issue, sell, distribute or otherwise grant in any manner (including by assumption) any rights to subscribe for or to purchase, or any warrants or options for the purchase of, Common Stock or any stock or securities convertible into or exchangeable for Common Stock, other than the convertible preferred stock issuable in the recapitalization concurrently with the issuance of the Warrants as contemplated in the Registration Statement (any such rights, warrants or options being called "Options" (the term "Options" shall also include without limitation any rights ("Rights") to purchase Common Stock and each other security for which such rights are at any time exercisable issued pursuant to the Rights Agreement between the Company and the Rights Agent designated in that Rights Agreement approved by the Board of Directors of the Company on January 13, 1992, as amended from time to time) and any such convertible or exchangeable stock or securities being called "Convertible Securities"), whether or not such Options or the rights to convert or exchange such Convertible Securities are immediately exercisable, and the price per share at which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of such Convertible Securities (determined by dividing (i) the aggregate amount, if any, received or receivable by the Company as - consideration for the issuance, sale, distribution or granting of such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of all such Options, plus, in the case of Options to acquire Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the conversion or exchange of all such Convertible Securities, by (ii) the total maximum number of shares of -- Common Stock issuable upon the exercise of all such Options or upon the conversion or exchange of all Convertible Securities issuable upon the exercise of all such Options) is less than the current market price per share of Common Stock on the date of the issuance, sale, 8 distribution or granting of such Options then, for purposes of paragraph (b) above, the total maximum number of shares of Common Stock issuable upon the exercise of all such Options or upon the conversion or exchange of the total maximum amount of the Convertible Securities issuable upon the exercise of all such Options shall be deemed to have been issued as of the date of the issuance, sale, distribution or granting of such Options and shall be deemed to be outstanding and the Company shall be deemed to have received as consideration such price per share, determined as provided above. Except as otherwise provided in paragraphs (j) and (k) below, no additional adjustment of the Purchase Price shall be made upon the actual exercise of such Options or upon conversion or exchange of the Convertible Securities issuable upon the exercise of such options. If the minimum and maximum numbers or amounts referred to in this paragraph (c) or in paragraph (d) below cannot be calculated with certainty as of the date of the required adjustment, such numbers and amounts shall be determined in good faith by the Board of Directors of the Company. (d) Issuance of Convertible Securities. In the event the Company ---------------------------------- shall, at any time or from time to time, issue, sell or otherwise distribute (including by assumption) any Convertible Securities (other than upon the exercise of any Option), whether or not the rights to convert or exchange such Convertible Securities are immediately exercisable, and the price per share at which Common Stock is issuable upon the conversion or exchange of such Convertible Securities (determined by dividing (i) the aggregate amount, if any, - received or receivable by the Company as consideration for the issuance, sale or distribution of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange of all such Convertible Securities, by (ii) the total maximum number -- of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) is less than the current market price per share of Common Stock on the date of such issuance, sale or distribution, then, for the purposes of paragraph (b) above, the total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities shall be deemed to have been issued as of the date of the issuance, sale or distribution of such Convertible Securities and shall be deemed to be outstanding and the Company shall be deemed to have received as consideration such price per share, determined as provided above. Except as otherwise provided in paragraphs (j) and (k) below, no additional adjustment of the Purchase Price shall be made upon the actual conversion or exchange of such Convertible Securities. (e) Dividends and Distributions. In the event the Company shall, at --------------------------- any time or from time to time, distribute to the holders of Common Stock any dividend or other distribution of cash, evidences of its indebtedness, other securities or other properties or assets (in each case other than (i) dividends - payable in Common Stock, Options or Convertible Securities and (ii) any cash -- dividend that, when added to all other cash dividends paid in the one year prior to the declaration date of such dividend (excluding any such other dividend included in a previous adjustment of the Purchase Price pursuant to this paragraph (e)), does not exceed 10% of the current market price per share of Common Stock on such declaration date), or any options, warrants or other rights to subscribe for or purchase any of the foregoing, then (x) the Purchase Price - shall be decreased to a price determined by multiplying the Purchase Price then in effect by a fraction, the numerator of which shall be the current market price per share of Common Stock on the record date for such distribution less the sum of (I) the cash portion, if - 9 any, of such distribution per share of Common Stock outstanding (exclusive of any treasury shares) on the record date for such distribution plus (II) the then ---- -- fair market value (as determined in good faith by the Board of Directors of the Company) per share of Common Stock outstanding (exclusive of any treasury shares) on the record date for such distribution of that portion, if any, of such distribution consisting of evidences of indebtedness, other securities, properties, assets, options, warrants or subscription or purchase rights, and the denominator of which shall be such current market price per share of Common Stock and (y) the number of shares of Common Stock purchasable upon the exercise - of each Warrant shall be increased to a number determined by multiplying the number of shares of Common Stock so purchasable immediately prior to the record date for such distribution by a fraction, the numerator of which shall be the Purchase Price in effect immediately prior to the adjustment required by clause (A) of this sentence and the denominator of which shall be the Purchase Price in effect immediately after such adjustment. The adjustments required by this paragraph (e) shall be made whenever any such distribution is made and shall be retroactive to the record date for the determination of stockholders entitled to receive such distribution. (f) Current Market Price. For the purpose of any computation under -------------------- paragraphs (b), (c), (d) and (e) of this Section, the current market price per share of Common Stock at any date shall be the average of the daily closing prices for the 20 consecutive trading days ending on the last full trading day prior to the time and date as of which the current market price is to be computed in connection with the event giving rise to the adjustment required by paragraph (b), (c), (d) or (e). The closing price for any day shall be the last reported sale price regular way or, in case no such reported sale takes place on such day, the average of the closing bid and asked prices regular way for such day, in each case (1) on the principal national securities exchange on which the - shares of Common Stock are listed or to which such shares are admitted to trading or (2) if the Common Stock is not listed or admitted to trading on a - national securities exchange, in the over-the-counter market as reported by the Nasdaq Stock Market or any comparable system or (3) if the Common Stock is not - listed on the Nasdaq Stock Market or a comparable system, as furnished by two members of the NASD selected from time to time in good faith by the Board of Directors of the Company for that purpose. In the absence of all of the foregoing, or if for any other reason the current market price per share cannot be determined pursuant to the foregoing provisions of this paragraph (f), the current market price per share shall be the fair market value as determined in good faith by the Board of Directors of the Company. (g) Certain Distributions. If the Company shall pay a dividend or --------------------- make any other distribution payable in Options or Convertible Securities, then, for purposes of paragraph (b) above (by operation of paragraph (c) or (d) above, as the case may be) such Options or Convertible Securities shall be deemed to have been issued or sold without consideration except for such amounts of consideration as shall have been deemed to have been received by the Company pursuant to paragraphs (c) or (d) above, as appropriate. (h) Consideration Received. If any shares of Common Stock shall be ---------------------- issued and sold in an underwritten public offering, the consideration received by the Company for such shares of Common Stock shall be deemed to include the underwriting discounts and commissions realized by the underwriters of such public offering. If any shares of Common Stock, Options or Convertible Securities shall be issued, sold or distributed for a consideration 10 other than cash, the amount of the consideration other than cash received by the Company in respect shall be deemed to be the then fair market value of such consideration (as determined in good faith by the Board of Directors of the Company). If any Options shall be issued in connection with the issuance and sale of other securities of the Company, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued, sold or distributed for such amount of consideration as shall be allocated to such Options in good faith by the Board of Directors of the Company. (i) Deferral of Certain Adjustments. No adjustment to the Purchase ------------------------------- Price (including the related adjustment to the number of shares of Common Stock purchasable upon the exercise of each Warrant) shall be required under this Agreement (i) unless such adjustment, together with other adjustments carried - forward as provided below, would result in an increase or decrease of at least one percent of the Purchase Price, provided that any adjustment which by reason of this clause (i) of this paragraph (i) is not required to be made shall be carried forward and taken into account in any subsequent adjustment and (ii) -- solely with respect to Options that are Rights, until the time such Options become exercisable. (j) Changes in Options and Convertible Securities. If the exercise --------------------------------------------- price provided for in any Options referred to in paragraph (c) above, the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in paragraph (c) or (d) above, or the rate at which any Convertible Securities referred to in paragraph (c) or (d) above are convertible into or exchangeable for Common Stock shall change at any time (other than under or by reason of provisions designed to protect against dilution upon an event which results in a related adjustment pursuant to this Article IV), the Purchase Price then in effect and the number of shares of Common Stock purchasable upon the exercise of each Warrant shall be readjusted (effective only with respect to any exercise of any Warrant after such readjustment) to the Purchase Price and number of shares of Common Stock so purchasable that would then be in effect had the adjustment made upon the issuance, sale, distribution or granting of such Options or Convertible Securities been made based upon such changed purchase price, additional consideration or conversion rate, as the case may be, but only with respect to such Options and Convertible Securities as then remain outstanding. (k) Expiration of Options and Convertible Securities. If, at any time ------------------------------------------------ after any adjustment to the number of shares of Common Stock purchasable upon the exercise of each Warrant shall have been made pursuant to paragraph (c), (d) or (j) above or this paragraph (k), any Options or Convertible Securities shall have expired unexercised or, solely with respect to Options that are Rights, are redeemed, the number of such shares so purchasable shall, upon such expiration or such redemption, be readjusted and shall become such as they would have been had they been originally adjusted (or had the original adjustment not been required, as the case may be) as if (i) the only shares of Common Stock deemed to have been issued in connection with such Options or Convertible Securities were the shares of Common Stock, if any, actually issued or sold upon the exercise of such Options or Convertible Securities and (ii) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise plus the aggregate consideration, if any, actually received by the Company for the issuance, sale, distribution or granting of all such Options or Convertible 11 Securities, whether or not exercised; provided that (x) no such readjustment - shall have the effect of decreasing the number of such shares so purchasable by an amount (calculated by adjusting such decrease to account for all other adjustments made pursuant to this Article IV following the date of the original adjustment referred to above) in excess of the amount of the adjustment initially made in respect of the issuance, sale, distribution or granting of such Options or Convertible Securities and (y) in the case of the redemption of - any Rights, there shall be deemed (for the purposes of paragraph (c) above) to have been issued as of the date of such redemption for no consideration a number of shares of Common Stock equal to the aggregate consideration paid to effect such redemption divided by the current market price of the Common Stock on the date of such redemption. (l) Other Adjustments. In the event that at any time, as a result of ----------------- an adjustment made pursuant to this Article IV, the Holders shall become entitled to receive any securities of the Company other than shares of Common Stock, the number of such other securities so receivable upon exercise of the Warrants and the Purchase Price applicable to such exercise shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of Common Stock contained in this Article IV. (m) Excluded Transactions. Notwithstanding any provision in this --------------------- Article IV to the contrary, no adjustment shall be made pursuant to this Article IV in respect of (i) any change in the par value of the Common Stock, (ii) the - -- granting of any Options or the issuance of any shares of Common Stock, whether pursuant to a Company stock option plan, employee stock purchase plan, employment agreement, or otherwise, in any case, which would otherwise trigger an adjustment under paragraph (b) above, that may be registered on Form S-8 or any successor form under the Securities Act, to any officers, directors or employees of, or any consultants or advisors to, the Company, or (iii) the --- issuance of Common Stock pursuant to any dividend reinvestment plan; provided that clause (ii) of this paragraph (m) shall not apply to any such grant or issuance if, after giving effect to the grant or issuance, the aggregate amount of Common Stock issued in all transactions covered by clause (ii) of this paragraph (m) (assuming the exercise of all then outstanding Options granted in such transactions) would exceed 5% of the number of shares of Common Stock then outstanding (after giving effect to the exercise of the Options so granted and all then outstanding Options or Convertible Securities). Section 4.02 Notice of Adjustment Whenever the number of shares of Common Stock or other stock or property issuable upon the exercise of each Warrant is adjusted, as provided in this Agreement, the Company shall promptly give a written certificate of the Company to the Warrant Agent of such adjustment or adjustments and shall cause the Warrant Agent promptly to mail by first-class mail, postage prepaid, to each Holder notice of such adjustment or adjustments. In addition, the Company at its sole expense shall within 120 calendar days following the end of each fiscal year of the Company during which any Warrants remain outstanding, and promptly upon the request of any Holder of a Warrant in connection with the exercise of any of such Holder's Warrants, cause to be delivered to the Warrant Agent a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular 12 accountants employed by the Company) setting forth the number of shares of Common Stock or other stock or property issuable upon the exercise of each Warrant after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. The Warrant Agent shall be entitled to rely on such certificates and shall be under no duty or responsibility with respect to any such certificate except to exhibit the same from time to time to any Holder desiring an inspection of the certificate during reasonable business hours. The Warrant Agent shall not at any time be under any duty or responsibility to any Holder to determine whether any facts exist that may require any adjustment of the number of shares of Common Stock or other stock or property issuable on exercise of the Warrants, or with respect to the nature or extent or any such adjustment when made, or with respect to the method employed in making such adjustment or the validity or value (or the kind or amount) of any shares of Common Stock or other stock or property which may be issuable on exercise of the Warrants. The Warrant Agent shall not be responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver any shares of Common Stock or stock certificates or other common stock or property upon the exercise of any Warrant. Section 4.03 Statement of Warrants Irrespective of any adjustment in the number or kind of shares issuable upon the exercise of the Warrants, Warrants previously or subsequently issued may continue to express the same number and kind of shares as are stated in the Warrants initially issuable pursuant to this Agreement. Section 4.04 Fractional Interest The Company shall not be required to issue fractional shares of Common Stock on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same Holder, the number of full shares of Common Stock which shall be issuable upon such exercise shall be computed on the basis of the aggregate number of shares of Common Stock acquirable on exercise of the Warrants so presented. If any fraction of a share of Common Stock would, except for the provisions of this Section, be issuable on the exercise of any Warrant (or specified portion of a Warrant), the Company shall pay an amount in cash calculated by it to be equal to the then current market price per share multiplied by such fraction computed to the nearest whole cent. The Holders, by their acceptance of the Warrant Certificates, expressly waive any and all rights to receive any fraction of a share of Common Stock or a stock certificate representing a fraction of a share of Common Stock. ARTICLE V WARRANT TRANSFERS Section 5.01 Warrant Transfer Books The Warrant Certificates shall be issued in registered form only. The Company shall cause to be kept at the office of the Warrant Agent a register in which, subject to such 13 reasonable regulations as it may prescribe, the Company shall provide for the registration of Warrant Certificates and of transfers or exchanges of Warrant Certificates by the Warrant Agent as provided in this Agreement. At the option of the Holder, Warrant Certificates may be exchanged at such office, upon payment of the charges provided in this Agreement. Whenever any Warrant Certificates are so surrendered for exchange, the Company shall execute, and the Warrant Agent shall countersign and deliver, the Warrant Certificates that the Holder making the exchange is entitled to receive. All Warrant Certificates issued upon any registration of transfer or exchange of Warrant Certificates shall be the valid obligations of the Company, evidencing the same obligations, and entitled to the same benefits under this Agreement, as the Warrant Certificates surrendered for such registration of transfer or exchange. Section 5.02 Registration of Transfer and Exchange (a) Transfer and Exchange of Warrant Certificates. When Warrant --------------------------------------------- Certificates are presented to the Warrant Agent with a request to register the transfer of the Warrant Certificates, the Warrant Agent shall register the transfer as requested if the requirements under this Agreement as set forth in this Section 5.02 for such transaction are met; provided that the Warrant Certificates presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Warrant Agent, duly executed by the Holder or his attorney duly authorized in writing. (b) Restrictions on Exchange of a Warrant Certificates for a -------------------------------------------------------- Beneficial Interest in a Global Warrant. A Warrant Certificate may not be - --------------------------------------- exchanged for a beneficial interest in a Global Warrant except upon satisfaction of the requirements set forth below. Upon receipt by the Warrant Agent of a Warrant Certificate, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Warrant Agent, together with written instructions from the Company directing the Warrant Agent to make, or to direct the Depositary to make, an endorsement on the Global Warrant to reflect an increase in the aggregate number of Warrants represented by the Global Warrant, then the Warrant Agent shall cancel such Warrant Certificate and cause, or direct the Depositary to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Warrant Agent, the aggregate number of Warrants represented by the Global Warrant to be increased accordingly. If no Global Warrant is then outstanding, the Company shall issue and the Warrant Agent shall authenticate such a Global Warrant for the appropriate number of Warrants. (c) Transfer and Exchange of Global Warrants. The transfer and ---------------------------------------- exchange of Global Warrants or beneficial interests in Global Warrants shall be effected through the Depositary in accordance with this Agreement and the applicable procedures of the Depositary. 14 (d) Transfer of a Beneficial Interest in a Global Warrant for a ----------------------------------------------------------- Warrant Certificate. - ------------------- (i) Any Person having a beneficial interest in a Global Warrant may upon request exchange such beneficial interest for a Warrant Certificate. Upon receipt by the Warrant Agent of instructions from the Depositary or its nominee on behalf of any Person having a beneficial interest in a Global Warrant and upon receipt by the Warrant Agent of a written order or such other form of instructions as is customary for the Depositary or the Person designated by the Depositary as having such a beneficial interest containing registration instructions, then the Warrant Agent will cause, in accordance with the standing instructions and procedures existing between the Depositary and the Warrant Agent, the aggregate number of Warrants represented by the Global Warrant to be reduced and, following such reduction, the Company will execute and the Warrant Agent will authenticate and deliver to the transferee a Warrant Certificate. (ii) Warrants issued in exchange for a beneficial interest in a Global Warrant pursuant to this Section 5.02(d) shall be registered in such names and in such denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Warrant Agent in writing. The Warrant Agent shall deliver such Warrant Certificates to the Persons in whose names such Warrants are so registered. (e) Restrictions on Transfer and Exchange of Global Warrants. -------------------------------------------------------- Notwithstanding any other provisions of this Agreement, a Global Warrant may not be transferred as a whole except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. (f) General. The Warrant Agent shall retain copies of all letters, ------- notices and other written communications received pursuant to this Section 5.02. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Warrant Agent. No service charge shall be payable by Holders for any registration of transfer or exchange of Warrant Certificates. The Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Warrant Certificates. 15 ARTICLE VI WARRANT HOLDERS Section 6.01 No Voting Rights Prior to the exercise of the Warrants, no Holder of a Warrant, as such, shall be entitled to any rights of a stockholder of the Company, including, without limitation, the right to receive dividends or subscription rights, the right to vote, to consent, to exercise any preemptive right, to receive any notice of meetings of stockholders for the election of directors of the Company or any other matter or to receive any notice of any proceedings of the Company, except as may be specifically provided for in this Agreement. Section 6.02 Right of Action All rights of action in respect of this Agreement are vested in the Holders of the Warrants, and any Holder of any Warrant, without the consent of the Warrant Agent or any Holder of any other Warrant, may, on such Holder's own behalf and for such Holder's own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company suitable to enforce, or otherwise in respect of, such Holder's rights under this Agreement, including the right to exercise, exchange or surrender for purchase such Holder's Warrants in the manner provided in this Agreement. ARTICLE VII WARRANT AGENT Section 7.01 Nature of Duties and Responsibilities Assumed The Company hereby appoints the Warrant Agent to act as agent of the Company as set forth in this Agreement. The Warrant Agent hereby accepts the appointment as agent of the Company and agrees to perform that agency upon the terms and conditions set forth in this Agreement, by all of which the Company and the Holders of Warrants, by their acceptance of this Agreement, shall be bound. The Warrant Agent shall not by countersigning Warrant Certificates or by any other act under this Agreement be deemed to make any representation as to validity or authorization of the Warrants or the Warrant Certificates (except as to its countersignature on the Warrant Certificates) or of any securities or other property delivered upon exercise of any Warrant, or as to the number or kind or amount of stock or other securities or other property deliverable upon exercise of any Warrant or the correctness of the representations of the Company made in such certificates that the Warrant Agent receives. The Warrant Agent shall not have any duty to calculate or determine any adjustments with respect to the kind and amount of shares or other securities or any property receivable by Holders upon the exercise of Warrants required from time to time, and the Warrant Agent shall have no duty or responsibility in determining the accuracy or correctness of any such calculation, other than to apply any adjustment, notice of which is given by the Company to the Warrant Agent to be 16 mailed to the Holders in accordance with Section 4.02. The Warrant Agent shall not (a) be liable for any recital or statement of fact contained in this - Agreement or in the Warrant Certificates or for any action taken, suffered or omitted by it in good faith in the belief that any Warrant Certificate or any other document or any signature is genuine or properly authorized, (b) be - responsible for any failure on the part of the Company to comply with any of its covenants and obligations contained in this Agreement or in the Warrant Certificates or (c) be liable for any act or omission in connection with this - Agreement except for its own gross negligence or willful misconduct. The Warrant Agent is hereby authorized to accept instructions with respect to the performance of its duties under this Agreement from the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Treasurer, the Secretary or the Assistant Secretary of the Company and to apply to any such officer for instructions (which instructions will be promptly given in writing when requested), and the Warrant Agent shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with the instructions of any such officer, except for its own gross negligence or willful misconduct, but in its discretion the Warrant Agent may in lieu of such instructions accept other evidence of such or may require such further or additional evidence as it may deem reasonable. Any application by the Warrant Agent for written instructions from the Company may, at the option of the Warrant Agent, set forth in writing any action proposed to be taken or omitted by the Warrant Agent under this Agreement and the date on and/or after which such action shall be taken or such omission shall be effective. The Warrant Agent shall not be liable for any action taken by, or omission of, the Warrant Agent in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than three business days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to any earlier date) unless prior to taking any such action (or the effective date in the case of an omission), the Warrant Agent shall have received written instructions in response to such application specifying the action to be taken or omitted. The Warrant Agent may execute and exercise any of the rights and powers vested in it under this Agreement or perform any duty under this Agreement either itself or by or through its attorneys, agents or employees, provided reasonable care has been exercised in the selection of any such attorney, agent or employee. The Warrant Agent shall not be under any obligation or duty to institute, appear in or defend any action, suit or legal proceeding in respect of this Agreement, unless first indemnified to its satisfaction, but this provision shall not affect the power of the Warrant Agent to take such action as the Warrant Agent may consider proper, whether with or without such indemnity. The Warrant Agent shall promptly notify the Company in writing of any claim made or action, suit or proceeding instituted against or arising out of or in connection with this Agreement. No provision of this Agreement shall require the Warrant Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties under this Agreement or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. The Company will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further acts, instruments and assurances as may reasonably be required by the Warrant Agent in order to enable it to carry out or perform its duties under this Agreement. 17 The Warrant Agent shall act solely as agent of the Company under this Agreement. The Warrant Agent shall not be liable except for the failure to perform such duties as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Warrant Agent, whose duties and obligations shall be determined solely by the express provisions of this Agreement. Section 7.02 Right to Consult Counsel The Warrant Agent may at any time consult with legal counsel of its selection satisfactory to it (who may be legal counsel for the Company), and the Warrant Agent shall incur no liability or responsibility to the Company or to any Holder for any action taken, suffered or omitted by it in good faith in accordance with the opinion or advice of such counsel. Section 7.03 Compensation and Reimbursement; Indemnification The Company agrees to pay to the Warrant Agent from time to time compensation for all services rendered by it under this Agreement as the Company and the Warrant Agent may agree from time to time in writing, and to reimburse the Warrant Agent for reasonable expenses and disbursements incurred in connection with the execution and administration of this Agreement (including the reasonable compensation and the expenses of its counsel), and further agrees to indemnify the Warrant Agent for, and to hold it harmless against, any and all loss, liability, damage, claim or expense incurred without gross negligence, bad faith or willful misconduct on its part, arising out of or in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending itself against any such claim or liability in connection with the exercise or performance of any of its powers or duties under this Agreement. The provisions of this Section 7.03 shall survive the termination of this Agreement. Section 7.04 Warrant Agent May Hold Company Securities Except as may be limited by applicable law, the Warrant Agent and any stockholder, director, officer or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or other securities of the Company or its Affiliates or become pecuniarily interested in transactions in which the Company or its Affiliates may be interested, or contract with or lend money to the Company or its Affiliates or otherwise act as fully and freely as though it were not the Warrant Agent under this Agreement. Nothing in this Agreement shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other person. Section 7.05 Resignation and Removal; Appointment of Successor (a) No resignation or removal of the Warrant Agent and no appointment of a successor warrant agent shall become effective until the acceptance of appointment by the successor warrant agent as provided in this Agreement. The Warrant Agent may resign its duties and be discharged from all further duties and liability under this Agreement (except liability arising as a result of the Warrant Agent's own gross negligence, bad faith or willful misconduct) 18 after giving written notice to the Company. The Company may remove the Warrant Agent upon written notice, and the Warrant Agent shall in like manner be discharged from all further duties and liabilities under this Agreement, except as set forth above. The Warrant Agent shall, at the Company's expense, cause to be mailed (by first-class mail, postage prepaid) to each Holder of a Warrant at its last address as shown on the register of the Company maintained by the Warrant Agent a copy of said notice of resignation or notice of removal, as the case may be. Upon such resignation or removal, the Company shall appoint in writing a new warrant agent. If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such resignation by the resigning Warrant Agent or after such removal, then the Company shall become Warrant Agent until a successor Warrant Agent has been appointed, and the Holder of any Warrant may apply to any court of competent jurisdiction for the appointment of a new warrant agent. Any new warrant agent, whether appointed by the Company or by such a court, shall be a corporation doing business under the laws of the United States, any state of the United States, or the District of Columbia, in good standing and having a combined capital and surplus of not less than $50,000,000. The combined capital and surplus of any such new warrant agent shall be deemed to be the combined capital and surplus as set forth in the most recent annual report of its condition published by such warrant agent prior to its appointment, provided that such reports are published at least annually pursuant to law or to the requirements of a federal or state supervising or examining authority. After acceptance in writing of such appointment by the new warrant agent, it shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as the Warrant Agent, without any further assurance, conveyance, act or deed; but if for any reason it shall be necessary or expedient to execute and deliver any further assurance, conveyance, act or deed, the same shall be done at the expense of the Company and shall be legally and validly executed and delivered by the resigning or removed Warrant Agent. Not later than the effective date of any such appointment, the Company shall give notice of the appointment to the resigning or removed Warrant Agent. Failure to give any notice provided for in this Section, however, or any defect in such notice, shall not affect the legality or validity of the resignation or removal of the Warrant Agent or the appointment of a new warrant agent, as the case may be. (b) Any corporation into which the Warrant Agent or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Warrant Agent or any new warrant agent shall be a party or any person to whom the Warrant Agent transfers substantially all of its corporate trust business shall be a successor Warrant Agent under this Agreement without any further act, provided that such corporation (i) would be eligible for - appointment as successor to the Warrant Agent under the provisions of Section 7.05(a) or (ii) is a wholly-owned subsidiary of the Warrant Agent. Any such -- successor Warrant Agent shall promptly cause notice of its succession as Warrant Agent to be mailed (by first class mail, postage prepaid) to each Holder at such Holder's last address as shown on the register maintained by the Warrant Agent pursuant to Section 5.01. 19 ARTICLE VIII COVENANTS OF THE COMPANY Section 8.01 Reservation of Common Stock for Issuance on Exercise of Warrants; Listing The Company will at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, solely for the purpose of issuance upon exercise of Warrants as provided in this Agreement, such number of shares of Common Stock as shall then be issuable upon the exercise of all outstanding Warrants. The Company covenants that all shares of Common Stock which shall be so issuable shall, upon such issuance, be duly and validly issued and fully paid and nonassessable, and that upon issuance such shares shall be listed on each national securities exchange or quotation system (including the Nasdaq Stock Market), if any, on which any other shares of outstanding Common Stock of the Company are then listed. The Company or the transfer agent for the Common Stock (the "Transfer Agent") and every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of any of the Warrants as provided in this Agreement will be irrevocably authorized and directed at all times to reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Agreement on file with the Transfer Agent and with every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented by the Warrants. The Warrant Agent is hereby irrevocably authorized to requisition from time to time from such Transfer Agent the stock certificates required to honor outstanding Warrants upon exercise in accordance with the terms of this Agreement. The Company will supply such Transfer Agent with duly executed certificates for such purposes and will provide or otherwise make available any cash that may be payable as provided in Section 4.04. The Company will furnish such Transfer Agent a copy of all notices of adjustment and related certificates transmitted to each holder pursuant to Section 4.02. Section 8.02 Agreements Respecting Warrants The Company agrees that it will not enter into any agreement or instrument which would preclude the exercise of the Warrants for shares of Common Stock. Section 8.03 Registration under Federal Securities Laws The Company has registered under the Securities Act all of the Warrants and the Common Stock issuable upon exercise of the Warrants. The Company shall use all reasonable efforts to maintain such effectiveness continually until the close of business on the Expiration Date or such other date on which the Warrants terminate and become void prior to the Expiration Date. 20 ARTICLE IX MISCELLANEOUS Section 9.01 Money and Other Property Deposited with the Warrant Agent Any money, securities or other property which at any time shall be deposited by the Company or on its behalf with the Warrant Agent pursuant to this Agreement shall be assigned, transferred and set over to the Warrant Agent in trust for the purpose for which such moneys, securities or other property shall have been deposited; but such moneys, securities or other property need not be segregated from other funds, securities or other property of the Warrant Agent except to the extent required by law. The Warrant Agent shall distribute any money deposited with it for payment and distribution to any Holder by mailing by first-class mail a check in such amount as is appropriate, to such Holder at the address shown on the Warrant register maintained pursuant to Section 5.01, or as it may be otherwise directed in writing by such Holder, upon surrender of such Holder's Warrants. Any money or other property deposited with the Warrant Agent for payment and distribution to any Holder that remains unclaimed for two years, less one day, after the date the money was deposited with the Warrant Agent shall be paid to the Company upon its request. Section 9.02 Payment of Taxes The Company will pay all taxes and other governmental charges that may be imposed on the Company or the Warrant Agent in respect of any issuance or delivery of Common Stock upon the exercise of Warrants. The Company will not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Common Stock or other securities underlying the Warrants or payment of cash or other property to any person other than the Holder of a Warrant Certificate surrendered upon the exercise of Warrants, and in case of such transfer or payment, the Warrant Agent and the Company shall not be required to issue any stock certificate or security or pay any cash or distribute any property until such tax or charge has been paid or it has been established to the Warrant Agent's and the Company's satisfaction that no such tax or other charge is due. Section 9.03 Surrender of Certificates Any Warrant Certificate surrendered for exercise or purchased or otherwise acquired by the Company shall, if surrendered to the Company, be delivered to the Warrant Agent, and all Warrant Certificates surrendered or so delivered to the Warrant Agent shall promptly be canceled by such Warrant Agent and shall not be reissued by the Company. The Warrant Agent shall return such canceled Warrant Certificates to the Company. Section 9.04 Mutilated, Destroyed, Lost and Stolen Warrant Certificates If (a) any mutilated Warrant Certificate is surrendered to the - Warrant Agent or (b) the Company and the Warrant Agent receive evidence to their - satisfaction of the destruction, loss or theft of any Warrant Certificate, and there is delivered to the Company and the Warrant 21 Agent such security or indemnity as may be reasonably required by them to save each of them harmless, then, in the absence of notice to the Company or any officer in the corporate trust department of the Warrant Agent that such Warrant Certificate has been acquired by a bona fide purchaser, the Company shall execute and upon its written request the Warrant Agent shall countersign and deliver, in exchange for any such mutilated Warrant Certificate or in lieu of any such destroyed, lost or stolen Warrant Certificate, a new Warrant Certificate of like tenor and for a like aggregate number of warrants. Upon the issuance of any new Warrant Certificate under this Section 9.04, the Company may require the payment by the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation to such issuance and other expenses (including the reasonable fees and expenses of the Warrant Agent) in connection with such issuance. Every new Warrant Certificate executed and delivered pursuant to this Section 9.04 in lieu of any destroyed, lost or stolen Warrant Certificate shall constitute an original contractual obligation of the Company, whether or not the destroyed, lost or stolen Warrant Certificate shall be at any time enforceable by anyone, and shall be entitled to the benefits of this Agreement equally and proportionately with any and all other Warrant Certificates duly executed and delivered under this Agreement. The provisions of this Section 9.04 are exclusive and shall preclude (to the extent lawful) all other rights or remedies with respect to the replacement of mutilated, destroyed, lost or stolen Warrant Certificates. Section 9.05 Notice Any notice or communication by the Company or the Warrant Agent to the other is duly given if in writing and delivered in person, mailed by first- class mail (registered or certified, return receipt requested), or sent by telecopier or overnight air courier guaranteeing next day delivery, to the other's address: If to the Company: ICF Kaiser International, Inc. 9300 Lee Highway Fairfax, Virginia 22031-1207 Attention: President and Chief Executive Officer cc: Chief Financial Officer If to the Warrant Agent: [ ] Attention: 22 The Company or the Warrant Agent by notice to the other may designate additional or different addresses for subsequent notices or communications. All distributions and notices to Holders required by this Agreement to be given or made by the Company shall be addressed to the Holders at their last known addresses as they shall appear on the registration books maintained by the Warrant Agent. All notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the next business day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first- class mail to the Holder's address shown on the register of the Company maintained by the Warrant Agent. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Warrant Agent at the same time. Section 9.06 Persons Benefiting This Agreement shall be binding upon and inure to the benefit of the Company and the Warrant Agent, and their respective successors and assigns. Nothing in this Agreement is intended or shall be construed to confer upon any person, other than the Company, the Warrant Agent and the Holders, any right, remedy or claim under or by reason of this or any part of this Agreement. Section 9.07 Counterpart Originals The parties may sign any number of copies of this Agreement. Each signed copy shall be an original, but all of them together represent the same agreement. Section 9.08 Amendments The Company may, without the consent of the Holders of the Warrants, by supplemental agreement or otherwise, make any changes or corrections in this Agreement (a) to cure any ambiguity or correct or supplement - any provision in this Agreement which may be defective or inconsistent with any other provision in this Agreement or to correct any clerical omission or mistake or manifest error contained in this Agreement, (b) to add to the covenants and - agreements of the Company for the benefit of the Holders, or surrender any rights or power reserved to or conferred upon the Company in this Agreement, or (c) that do not adversely affect - 23 the interests of the Holders in any material respect. The Warrant Agent shall join with the Company in the execution and delivery of any such supplemental agreements unless it affects the Warrant Agent's own rights, duties or immunities under this Agreement, in which case such party may, but shall not be required to, join in such execution and delivery. Prior to executing any such supplemental agreement, the Warrant Agent shall be entitled to receive and shall be protected in relying upon a certificate of the Company which states that the proposed supplemental agreement is in compliance with the terms of this Section 9.08. Section 9.09 Termination This Agreement (other than the Company's obligations with respect to Warrants previously exercised under Article III, and with respect to compensation, reimbursement and indemnification under Section 7.03) shall terminate and be of no further force and effect, provided the Company has complied with Section 3.05 in the case of a Non-Surviving Combination, on the earlier of (a) the Expiration Date and (b) the consummation of a Non-Surviving Combination. Section 9.10 Governing Law THIS AGREEMENT AND EACH WARRANT ISSUED UNDER THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF __________________, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. Section 9.11 Headings The headings of the Articles and Sections of this Agreement have been inserted for convenience of reference only, are not to be considered a part of this Agreement and shall in no way modify or restrict any of the terms or provisions of this Agreement. [Remainder of page intentionally blank.] 24 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed, as of the day and year first above written. ICF KAISER INTERNATIONAL, INC. By:_______________________________ Name: Title: _________________________________, as Warrant Agent By:______________________________ Name: Title: EXHIBIT A No._______________ Certificate for ________ Warrants CUSIP No. ________________ [Form of Warrant Certificate] VOID (UNLESS EXTENDED AFTER 5:00 P.M. [CITY, STATE OF WARRANT AGENT TIME], DECEMBER 31, 2004 WARRANTS TO ACQUIRE COMMON STOCK OF ICF KAISER INTERNATIONAL, INC. This certifies that ___________________________________, or registered assigns, is the registered holder of the number of Warrants set forth above (the "Warrants"). Each Warrant entitles the holder (the "Holder"), subject to the provisions contained in this Warrant Certificate and in the Warrant Agreement referred to below, to acquire from ICF Kaiser International, Inc., a Delaware corporation (the "Company"), one share of Common Stock, $0.01 par value per share, of the Company (the "Common Stock") for consideration equal to the Purchase Price (as defined in the Warrant Agreement) per share of Common Stock. The Warrants evidenced by this Warrant Certificate shall not be exercisable after and shall terminate and become void as of the close of business on December 31, 2004 (the "Expiration Date") or as of the closing of any Non- Surviving Combination, if earlier. This Warrant Certificate is issued under and in accordance with a Warrant Agreement dated as of _________ __, 1999 (the "Warrant Agreement"), between the Company and _________________, as warrant agent (the "Warrant Agent", which term includes any successor Warrant Agent under the Warrant Agreement), and is subject to the terms and provisions contained in the Warrant Agreement, to all of which terms and provisions the Holder of this Warrant Certificate consents by acceptance of this Warrant Certificate. The Warrant Agreement is incorporated in this Warrant Certificate by reference and made a part of this Warrant Certificate. Reference is hereby made to the Warrant Agreement for a full statement of the respective rights, limitations of rights, duties and obligations of the Company, the Warrant Agent and the Holders of the Warrants. Capitalized terms not defined in this Warrant Certificate have the meanings ascribed to them in the Warrant Agreement. A copy of the Warrant Agreement may be obtained for inspection by the Holder of this Warrant Certificate upon written request to the Company at 9300 Lee Highway, Fairfax, Virginia 22031- 1207, Attention: ________________________. As provided in the Warrant Agreement and subject to the terms and conditions set forth in the Warrant Agreement, the Warrants are immediately exercisable. A-1 If the Company proposes, prior to the Expiration Date, to enter into a merger, consolidation, sale of assets or other business combination with one or more persons (other than a wholly-owned subsidiary of the Company) in which consideration (other than Common Equity Securities) is distributed to the holders of Common Stock in exchange for all or substantially all of their equity interest in the Company (a "Non-Surviving Combination"), the Company shall give written notice to the Holders promptly after an agreement is reached but in no event less than 30 days prior to the closing of any such transaction. In the event the Company enters into a Non-Surviving Combination, upon payment of the Purchase Price prior to the Expiration Date, the Holder of this Warrant Certificate will be entitled to receive the shares of stock or other securities or other property (including any money) of the surviving entity in such Non- Surviving Combination as the Holder would have received had the Holder exercised its Warrants immediately prior to such Non-Surviving Combination (or, if applicable, the record date for that transaction). In order to exercise a Warrant, the registered Holder of this Warrant Certificate must surrender this Warrant Certificate at the office of the Warrant Agent, with the Exercise Subscription Form on the reverse side duly executed by the Holder of this Warrant Certificate, with signature guaranteed as specified, and tender the Purchase Price therefor. ICF KAISER INTERNATIONAL, INC. By:_____________________________ Name: Title: DATED: Countersigned: _________________, as Warrant Agent By:_____________________________ Authorized Signatory Date of Countersignature: A-2 [FORM OF REVERSE OF WARRANT CERTIFICATE] ICF KAISER INTERNATIONAL, INC. ------------------------------ This Warrant Certificate and all rights under this Warrant Certificate are transferable by the registered Holder of this Warrant Certificate, in whole or in part, on the register maintained by the Warrant Agent, upon surrender of this Warrant Certificate for registration of transfer at the office of the Warrant Agent maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Warrant Agent duly executed by, the registered Holder of this Warrant Certificate or its attorney duly authorized in writing, with signature guaranteed as specified in the attached Form of Transfer. Upon any partial transfer, the Company will issue and deliver to such Holder a new Warrant Certificate or Certificates with respect to any portion not so transferred. No service charge shall be made for any registration of transfer or exchange of Warrant Certificates, but the Company may require payment by the Holder of a sum sufficient to cover any tax or other governmental charge payable in connection with any partial transfer. All shares of Common Stock issuable by the Company upon the exercise of the Warrants shall, upon such issue, be duly and validly issued and fully paid and nonassessable, and upon issuance such shares shall be listed on each national securities exchange or quotation system (including the Nasdaq Stock Market), if any, on which any other shares of outstanding Common Stock are then listed. Each taker and holder of this Warrant Certificate, by taking or holding the same, consents and agrees that the holder of this Warrant Certificate when duly endorsed in blank may be treated by the Company, the Warrant Agent and all other persons dealing with this Warrant Certificate as the absolute owner of the related Warrants for any purpose and as the person entitled to exercise the rights represented by this Warrant Certificate, or to the transfer of such Warrants on the register of the Company maintained by the Warrant Agent, any notice to the contrary notwithstanding, but until such transfer on such register, the Company and the Warrant Agent may treat the registered Holder of such Warrants as the owner for all purposes. The number of shares of Common Stock issuable upon exercise of the Warrants is subject to adjustment in certain events, including (i) stock dividends, stock - splits and reclassification affecting the Common Stock, (ii) the issuance of -- certain rights, warrants or options, or convertible or exchangeable securities, to the holders of Common Stock entitling them to acquire Common Stock at a price per share lower than its then market value and (iii) sales by the Company of --- Common Stock at a price per share lower than its then market value. The Warrants do not entitle any Holder to any of the rights of a stockholder of the Company. This Warrant Certificate and the Warrant Agreement are subject to amendment as provided in the Warrant Agreement. A-3 This Warrant Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by an authorized signatory of the Warrant Agent. This Warrant Certificate and all rights under this Warrant Certificate shall be governed by and construed in accordance with the laws of the State of ______________, without regard to principles of conflicts of laws. A-4 EXERCISE SUBSCRIPTION FORM (to be executed only upon exercise of Warrant) The undersigned hereby irrevocably elects to exercise __________________________ of the Warrants represented by this Warrant Certificate, for the acquisition of one share each of Common Stock, $0.01 par value per share, of ICF Kaiser International, Inc., on the terms and conditions specified in this Warrant Certificate and the Warrant Agreement referred to in this Warrant Certificate, surrenders this Warrant Certificate and all right, title and interest in it to ICF Kaiser International, Inc. and directs that the shares of Common Stock deliverable upon the exercise of such Warrants be registered or placed in the name and at the address specified below and delivered to such address. Date: ________________, ____. /1/ - ------------------------- (Signature of Owner) _____________________________ (Name Printed in Full) _____________________________ (Street Address) _____________________________ (City) (State) (Zip Code) Signature Guaranteed by: _____________________________ _____________________________ /1/ The signature must correspond with the name as written upon the face of the within Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever, and must be guaranteed. A-5 FORM OF TRANSFER FOR VALUE RECEIVED the undersigned registered Holder of this Warrant Certificate hereby sells, assigns and transfers unto the Assignee(s) named below (including the undersigned with respect to any Warrants constituting a part of the Warrants evidenced by this Warrant Certificate not being assigned) all of the right of the undersigned under this Warrant Certificate, with respect to the number of Warrants set forth below: - ------------------------------------------------------------------------- Social Security or other identifying Name of number of Number of Assignee(s) Address assignee(s) warrants - ------------------------------------------------------------------------- - ------------------------------------------------------------------------- and does hereby irrevocably constitute and appoint the Warrant Agent as the undersigned's attorney to make such transfer on the register maintained by the Warrant Agent for that purpose, with full power of substitution in the premises. Date:____________, ____ /2/ - ------------------------------ (Signature of Owner) _____________________________ (Street Address) _____________________________ (City) (State) (Zip Code) Signature Guaranteed by: _____________________________ _____________________________ /2/ The signature must correspond with the name as written upon the face of the within Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever, and must be guaranteed. A-6 EXHIBIT B FORM OF LEGEND FOR GLOBAL WARRANTS Any Global Warrant authenticated and delivered under the Warrant Agreement shall bear a legend in substantially the following form: THIS WARRANT IS A GLOBAL WARRANT WITHIN THE MEANING OF THE WARRANT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS WARRANT IS NOT EXCHANGEABLE FOR WARRANTS REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT AS DESCRIBED IN THE WARRANT AGREEMENT, AND NO TRANSFER OF THIS WARRANT (OTHER THAN A TRANSFER OF THIS WARRANT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT AS DESCRIBED IN THE WARRANT AGREEMENT. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER OR EXCHANGE, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. B-1 EX-23.(B) 4 CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23(b) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-4 of ICF Kaiser International, Inc. and its subsidiaries of our report dated April 15, 1999 relating to the consolidated financial statements and financial statement schedule which appear in the 1998 Annual Report to Shareholders. We also consent to the references to us under the heading "Experts" in such Registration Statement. PricewaterhouseCoopers LLP McLean, Virginia September 24, 1999 EX-99 5 FORM OF LETTER OF TRANSMITTAL & CONSENT FORM Exhibit 99 LETTER OF TRANSMITTAL AND CONSENT FORM To Tender For Purchase 12% Senior Subordinated Notes Due 2003 on A Pro Rata Basis and To Tender For Exchange 12% Senior Subordinated Notes Due 2003 and To Consent To Certain Indenture Amendments With Respect To The 12% Senior Subordinated Notes Due 2003 of ICF KAISER INTERNATIONAL, INC. Pursuant to Prospectus Dated September __, 1999 - -------------------------------------------------------------------------------- THE ASSET SALE OFFER/EXCHANGE OFFER/CONSENT SOLICITATION WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON ____________, 1999, UNLESS EXTENDED. TENDERS OF CONSENTS MAY ONLY BE REVOKED UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS AND HEREIN. TENDERS OF OLD NOTES MAY NOT BE WITHDRAWN ONCE MADE. - -------------------------------------------------------------------------------- The Paying/Exchange/Solicitation Agent for the Asset Sale Offer/Exchange Offer/Consent Solicitation is: THE BANK OF NEW YORK By Registered or Certified By Overnight Courier: By Hand: By Facsimile: Mail: The Bank of New York The Bank of New York The Bank of New York The Bank of New York Reorganization Department Attention: Reorganization Reorganization Department Attention: Jennifer Pedi Attention: Jennifer Pedi Corporate Trust Services Attention: Jennifer Pedi 101 Barclay Street, 7 East 101 Barclay Street, 7 East Window, Ground Level (212) 815-6339 New York, New York 10286 New York, New York 10286 101 Barclay Street, 7 East New York, New York 10286 Confirm by telephone: (212) 815-6331
For information, call: (212) 815-6331
- ------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF OLD NOTES AND CONSENTS TENDERED - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ Name(s) and Address(es) of Registered Holder(s) Please fill in, if blank, exactly as name(s) appear(s) on Old Note(s) - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ (1) - ---------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------ --------------------------------------------- PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT FOR WHICH OLD NOTES TENDERED CONSENTS TENDERED (Attach additional schedule, if necessary) (Attach additional schedule, if necessary) - ------------------------------------------------------------------------ --------------------------------------------- - --------------------------- -------------------------------------------- ---------------------- ---------------------- (2) (3) (4) (5) Asset Sale Offer Certificate Number(s) Exchange Offer Proposed Amendments Instruction to (if enclosing Both Asset Sale Offer and Exchange Offer to Indenture Trustee certificates) (Check appropriate box) - --------------------------- -------------------------------------------- ---------------------- ---------------------- - --------------------------- -------------------------------------------- ---------------------- ---------------------- - --------------------------- -------------------------------------------- ---------------------- ---------------------- - --------------------------- -------------------------------------------- ---------------------- ---------------------- - --------------------------- -------------------------------------------- ---------------------- ----------------------
The undersigned acknowledges receipt of the Prospectus, dated _____________, 1999 (the "Prospectus"), of ICF Kaiser International, Inc., a Delaware corporation ("Kaiser"), relating to: . the offer of Kaiser, upon the terms and subject to the conditions set forth in the Prospectus and in this Letter of Transmittal and Consent Form and the instructions hereto, to purchase for cash on a pro rata basis a total of up to $40 million aggregate principal amount of its 12% senior subordinated notes due 2003 (the "Asset Sale Offer"); . the offer of Kaiser, upon the terms and subject to the conditions set forth in the Prospectus and in this Letter of Transmittal and Consent Form and the instructions hereto, to exchange 2,600,000 shares of Kaiser's convertible preferred stock (the "Preferred Stock"), warrants to purchase approximately 15% of Kaiser's common stock on a fully diluted basis (the "Warrants") and up to $25 million principal amount of Kaiser's 13% Senior Notes due 2002 (the "New Notes") (collectively, the "Exchange Offer") for all 12% Senior Subordinated Notes due 2003 (the "Old Notes") outstanding following the purchase of the Old Notes in the Asset Sale Offer; and . the solicitation by Kaiser (the "Consent Solicitation") of consents (the "Consents"), upon the terms and subject to the conditions set forth in the Prospectus and in this Letter of Transmittal and Consent Form and the instructions hereto, from registered holders of the Old Notes to: . certain amendments (the "Proposed Amendments") to the indenture governing the Old Notes, as more fully described in the Prospectus, and . an instruction to the trustee under the indenture governing the Old Notes not to interfere with the Asset Sale Offer, Exchange Offer and Consent Solicitation (the "Instruction to Trustee"). THE ASSET SALE OFFER/EXCHANGE OFFER/CONSENT SOLICITATION WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON __________, 1999 (THE "EXPIRATION DATE"), UNLESS EXTENDED. HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE CASH PURSUANT TO THE ASSET SALE OFFER OR RECEIVE PREFERRED STOCK, WARRANTS AND NEW NOTES PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER THEIR OLD NOTES TO THE PAYING/EXCHANGE/SOLICITATION AGENT BY 5:00 P.M. ON THE EXPIRATION DATE. This Letter of Transmittal and Consent Form is to be used either (a) if Old Notes are to be physically delivered to the Paying/Exchange/Solicitation Agent or (b) if delivery of Old Notes is to be made by book-entry transfer to the account maintained by the Paying/Exchange/Solicitation Agent at The Depository Trust Company ("DTC" or the "Book-Entry Transfer Facility") pursuant to the procedures set forth in the Prospectus under the caption "Procedures for Tendering Old Notes in the Exchange Offer, Tendering Old Notes in the Asset Sale Offer and Tendering Consents in the Consent Solicitation." Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Paying/Exchange/Solicitation Agent. Holders whose Old Notes are not available or who cannot deliver their Old Notes and all other documents required hereby to the Paying/Exchange/Solicitation Agent by 5:00 p.m. on the Expiration Date nevertheless may tender their Old Notes in accordance with the guaranteed delivery procedures set forth in Instruction 1 hereto. The Asset Sale Offer/Exchange Offer/Consent Solicitation is not being made to (nor will the surrender of Old Notes or Consents be accepted from or on behalf of) holders in any jurisdiction in which the making or accepting of the Asset Sale Offer/Exchange Offer/Consent Solicitation would not be in compliance with the laws of such jurisdiction. All capitalized terms used herein and not defined herein shall have the meanings ascribed to them in the Prospectus. -2- IMPORTANT PROCEDURES TO BE FOLLOWED IN COMPLETING THIS LETTER OF TRANSMITTAL AND CONSENT FORM (A) In order to participate in the Exchange Offer and the Asset Sale Offer, the holder of Old Notes must tender all of the Old Notes beneficially owned by the holder. No partial tenders of Old Notes will be accepted by Kaiser. (B) Holders who wish to tender their Old Notes in the Asset Sale Offer and/or the Exchange Offer must: . complete columns (1) through (3) in the box above entitled "Description of Old Notes and Consents Tendered," Please check the appropriate box in column (3) indicating whether you wish to tender your Old Notes in the Asset Sale Offer, in the Exchange Offer or in both the Asset Sale Offer and the Exchange Offer. Holders who fail to check any of these three choices in column (3), but who otherwise list the amount of Old Notes being tendered in column (3), will be deemed to have tendered their Old Notes in both the Asset Sale Offer and the Exchange Offer. . complete the appropriate box below under "Method of Delivery" and . sign where indicated below. By doing so, the undersigned will have tendered their Old Notes upon and subject to the terms and conditions described in the Prospectus and herein. Old Notes tendered in the Exchange Offer and the Asset Sale Offer may not be withdrawn by the holder once tendered. (C) Holders who wish to consent to the Proposed Amendments and the Instruction to Trustee must: . complete columns (1), (4) and (5) in the box above entitled "Description of Old Notes and Consents Tendered" and . sign where indicated below. By doing so, the undersigned will have consented to the Proposed Amendments and the Instruction to Trustee upon and subject to the terms and conditions as described in the Prospectus and herein. Only registered holders of Old Notes are entitled to Consent to the Proposed Amendments and the Instruction to Trustee. (D) Holders who properly tender their Old Notes in the Asset Offer pursuant to the Prospectus and this Letter of Transmittal and Consent Form will be deemed to have executed the "Option of Holder to Elect Purchase" included in the Certificate for the Old Notes. -3- METHOD OF DELIVERY [_] CHECK HERE IF CERTIFICATES FOR TENDERED OLD NOTES ARE ENCLOSED HEREWITH. [_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE PAYING/EXCHANGE/ SOLICITATION AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution: --------------------------------------------- DTC Account Number: -------------------------------------------------------- Transaction Code Number: --------------------------------------------------- [_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE PAYING/EXCHANGE/ SOLICITATION AGENT AND COMPLETE THE FOLLOWING (SEE INSTRUCTIONS 1 AND 4): Name(s) of Registered Holder(s): ------------------------------------------- Window Ticket Number (if any): --------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: ------------------------ Name of Eligible Institution which Guaranteed Delivery: -------------------- IF DELIVERED BY THE BOOK-ENTRY TRANSFER FACILITY, PROVIDE THE FOLLOWING INFORMATION: DTC Account Number: -------------------------------------------------------- Transaction Code Number: --------------------------------------------------- -4- NOTE: SIGNATURE MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. Ladies and Gentlemen: Upon the terms and subject to the conditions of the Asset Sale Offer/Exchange Offer/Consent Solicitation, the undersigned hereby tenders to Kaiser the principal amount of Old Notes and/or Consents indicated in the box entitled "Description of Old Notes and Consents Tendered" in respect of the Old Notes and Consents indicated above. Subject to, and effective upon, the acceptance of the Old Notes and Consents tendered hereby, the undersigned hereby irrevocably sells, assigns and transfers to or upon the order of Kaiser all right, title and interest in and to such Old Notes, and hereby irrevocably constitutes and appoints the Paying/Exchange/Solicitation Agent the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that said Paying/Exchange/Solicitation Agent also acts as the agent of Kaiser and as Trustee under the indenture governing the Old Notes) with respect to Old Notes and Consents, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest) to (a) deliver certificates representing such Old Notes, deliver the Consents contained herein, and to deliver all accompanying evidences of transfer and authenticity to or upon the order of Kaiser upon receipt by the Paying/Exchange/Solicitation Agent, as the undersigned's agent, of the cash, Preferred Stock, Warrants and New Notes to which the undersigned is entitled upon the acceptance by Kaiser of such Old Notes and Consents pursuant to the Asset Sale Offer/Exchange Offer/Consent Solicitation, (b) receive all benefits and otherwise to exercise all rights of beneficial ownership of such Old Notes, all in accordance with the terms of the Asset Sale Offer/Exchange Offer/Consent Solicitation, and (c) present such Old Notes for transfer on the register for such Old Notes. THE ASSET SALE OFFER/EXCHANGE OFFER/CONSENT SOLICITATION IS NOT BEING MADE TO, NOR WILL TENDERS OF OLD NOTES AND CONSENTS BE ACCEPTED FROM OR ON BEHALF OF, HOLDERS OF THE OLD NOTES IN ANY JURISDICTION IN WHICH THE MAKING OF THE OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION OR WOULD OTHERWISE NOT BE IN COMPLIANCE WITH ANY PROVISION OF ANY APPLICABLE SECURITIES LAW. The undersigned understands and acknowledges that Kaiser reserves the right, in its sole discretion, to purchase or make offers for any Old Notes that remain outstanding subsequent to the Expiration Date or to terminate the Asset Sale Offer/Exchange Offer/Consent Solicitation and, to the extent permitted by applicable law, purchase Old Notes in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers will differ from the terms of the Asset Sale Offer/Exchange Offer/Consent Solicitation. The undersigned hereby represents and warrants that (a) the undersigned accepts the terms and conditions of the Asset Sale Offer/Exchange Offer/Consent Solicitation, (b) the undersigned has full power and authority to tender, exchange, assign and transfer the Old Notes tendered hereby, and when the same are accepted for exchange by Kaiser, Kaiser will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim or right, and (c) the undersigned has full power and authority to tender the Consents tendered hereby. The undersigned will, upon request, execute and deliver any additional documents deemed by the Paying/Exchange/Solicitation Agent or Kaiser to be necessary or desirable to complete the sale, assignment and transfer of the Old Notes tendered hereby. The undersigned agrees that all authority conferred or agreed to be conferred by this Letter of Transmittal and Consent Form and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. The undersigned understands that tenders of the Old Notes and Consents pursuant to any one of the procedures described in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and Kaiser in accordance with the terms and subject to the conditions of the Asset Sale Offer/Exchange Offer/Consent Solicitation. The undersigned recognizes that, under certain circumstances set forth in the Prospectus, Kaiser may not be required to accept any of the Old Notes or Consents tendered. The undersigned agrees that tenders of Old Notes in the Asset Sale Offer and/or the Exchange Offer may not be withdrawn once made, and also agrees that tenders of Consents may only be revoked under the circumstances described in the Prospectus. Unless otherwise indicated herein under the box entitled "Special Issuance Instructions" below, Preferred Stock, Warrants and New Notes, and Old Notes not validly tendered or accepted, will be issued in the name of the undersigned. Similarly, unless otherwise indicated under the box entitled "Special Delivery Instructions" below, Preferred Stock, Warrants and New Notes, and Old Notes not validly tendered or accepted, will be delivered to the undersigned at the -5- address shown in such box below the signature of the undersigned. The undersigned recognizes that Kaiser has no obligation pursuant to the "Special Issuance Instructions" to transfer any Old Notes from the name of the registered holder thereof if Kaiser does not accept any of the principal amount of such Old Notes so tendered. All questions as to the validity, form, eligibility (including time of receipt) and revocation of the Consents will be determined by Kaiser in its sole discretion, which determination will be final and binding. Kaiser reserves the absolute right to reject any and all Old Notes and Consents not properly tendered or any Old Notes and Consents that Kaiser's acceptance of which would, in the opinion of counsel for Kaiser, be unlawful. Kaiser also reserves the right to waive any irregularities or conditions of tender as to particular Old Notes and Consents. Kaiser's interpretation of the terms and conditions of the Asset Sale Offer/Exchange Offer/Consent Solicitation (including the instructions in this Letter of Transmittal and Consent Form) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes and Consents must be cured within such time as Kaiser shall determine. Neither Kaiser, the Paying/Exchange/Solicitation Agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Old Notes and Consents, nor shall any of them incur any liability for failure to give such notification. Tenders of Old Notes and Consents will not be deemed to have been made until such irregularities have been cured or waived. Any Old Notes and Consents received by the Paying/Exchange/Solicitation Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned without cost to such holder by the Paying/Exchange/Solicitation Agent to the tendering holders of Old Notes and Consents, unless otherwise provided in this Letter of Transmittal and Consent Form, as soon as practicable following the Expiration Date. [the rest of this page is intentionally left blank] -6- - -------------------------------------------------------------------------------- PLEASE SIGN HERE (To be Completed By All Tendering Holders) X ---------------------------------------------------------------------------- X ---------------------------------------------------------------------------- (Signature(s) of Holder(s) Or Authorized Signatory) Must be signed by the registered holder(s) of Old Notes exactly as their name(s) appear(s) on certificate(s) for the Old Notes or by person(s) authorized to become registered holder(s) by endorsements and documents transmitted with this Letter of Transmittal and Consent Form. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation, agent or other person acting in a fiduciary or representative capacity, please provide the following information. See Instruction 4. Name(s): ----------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Please Print) Capacity (full title): Address: ----------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Including Zip Code) Area Code and Telephone No.: --------------------------------------------------- SIGNATURE GUARANTEE (SEE INSTRUCTION 4) - ------------------------------------------------------------------------------- (Name of Eligible Institution Guaranteeing Signature(s)) - ------------------------------------------------------------------------------- (Address, Including Zip Code, and Telephone No., Including Area Code, of Firm) - ------------------------------------------------------------------------------- (Authorized Signature) - ------------------------------------------------------------------------------- (Printed Name) - ------------------------------------------------------------------------------- (Title) Date: __________________, 1999 - -------------------------------------------------------------------------------- -7- FORM OF PROXY The undersigned hereby irrevocably appoints ______________________ as attorney and proxy of the undersigned, with full power of substitution, to execute and deliver the Letter of Transmittal and Consent Form on which this form of proxy is set forth with respect to the Old Notes in accordance with the terms of the Asset Sale Offer/Exchange Offer/Consent Solicitation described in the Prospectus, with all the power the undersigned would possess if executing personally. THIS PROXY IS IRREVOCABLE AND IS COUPLED WITH AN INTEREST AND SHALL EXPIRE ON THE DATE OF THE CLOSING OF THE EXCHANGE OFFER. The aggregate principal amount and serial numbers of Old Notes as to which this Proxy is given are set forth below. - -------------------------------------------------------------------------------- Aggregate Principal Amount of Old Note(s) Certificate Number(s) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SIGN HERE (To be Completed By All Tendering Holders) X ---------------------------------------------------------------------------- X ---------------------------------------------------------------------------- (Signature(s) of Holder(s) Or Authorized Signatory) Must be signed by the registered holder(s) of Old Notes exactly as their name(s) appear(s) on certificate(s) for the Old Notes or by person(s) authorized to become registered holder(s) by endorsements and documents transmitted with this Letter of Transmittal and Consent Form. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation, agent or other person acting in a fiduciary or representative capacity, please provide the following information. See Instruction 4. Name(s): ----------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Please Print) Capacity (full title): Address: ----------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Including Zip Code) Area Code and Telephone No.: --------------------------------------------------- SIGNATURE GUARANTEE (SEE INSTRUCTION 4) - ------------------------------------------------------------------------------- (Name of Eligible Institution Guaranteeing Signature(s)) - ------------------------------------------------------------------------------- (Address, Including Zip Code, and Telephone No., Including Area Code, of Firm) - ------------------------------------------------------------------------------- (Authorized Signature) - ------------------------------------------------------------------------------- (Printed Name) - ------------------------------------------------------------------------------- (Title) Date: __________________, 1999 - -------------------------------------------------------------------------------- -8- - -------------------------------------------------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS (See Instructions 4, 5 and 8) To be completed ONLY if certificates for Old Notes in a principal amount not exchanged and/or certificates for New Notes, Preferred Stock and Warrants are to be issued in the name of someone other than the undersigned, or if Old Notes are to be returned by credit to an account maintained by the Book-Entry Transfer Facility. Issue (check appropriate box) [_] New Notes, Preferred Stock and Warrants to: [_] Old Notes to: Name: ----------------------------------------------------------------------- (Please Print) Address: -------------------------------------------------------------------- ---------------------------------------------------------------------------- Zip Code ---------------------------------------------------------------------------- Taxpayer Identification Number (You must also complete substitute Form W-9 below.) Credit unaccepted Old Notes tendered by book-entry transfer to: [_] The Depository Trust Company account set forth below - ------------------------------------------------------------------------------- (DTC Account Number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (See Instructions 4, 5 and 8) To be completed ONLY if certificates for Old Notes in a principal amount not exchanged and/or certificates for New Notes, Preferred Stock and Warrants to be sent to someone other than the undersigned at an address other than that shown above. Deliver (check appropriate box) [_] New Notes, Preferred Stock and Warrants to: [_] Old Notes to: Name: ----------------------------------------------------------------------- (Please Print) Address: -------------------------------------------------------------------- ---------------------------------------------------------------------------- Zip Code ---------------------------------------------------------------------------- Taxpayer Identification Number (You must also complete substitute Form W-9 below.) - -------------------------------------------------------------------------------- -9- INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE Asset Sale Offer/Exchange Offer/Consent Solicitation 1. Delivery of this Letter of Transmittal and Consent Form and Certificates; Guaranteed Delivery Procedures. To be effectively tendered pursuant to the Asset Sale Offer/Exchange Offer/Consent Solicitation, the Old Notes, together with a properly completed Letter of Transmittal and Consent Form (or facsimile thereof), duly executed by the registered holder thereof, and any other documents required by this Letter of Transmittal and Consent Form, must be received by the Paying/Exchange/Solicitation Agent at one of its addresses set forth on the first page of this Letter of Transmittal and Consent Form. If the beneficial owner of any Old Notes is not the registered holder, then such person may validly tender his or her Old Notes and Consents only by obtaining and submitting to the Paying/Exchange/Solicitation Agent a properly completed Letter of Transmittal and Consent Form from the registered holder. OLD NOTES AND CONSENTS SHOULD BE DELIVERED ONLY TO THE PAYING/EXCHANGE/SOLICITATION AGENT AND NOT TO KAISER OR TO ANY OTHER PERSON. THE METHOD OF DELIVERY OF OLD NOTES AND CONSENTS AND ALL OTHER REQUIRED DOCUMENTS TO THE PAYING/EXCHANGE/SOLICITATION AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY TO THE PAYING/EXCHANGE/SOLICITATION AGENT BY 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. If a holder desires to tender Old Notes and Consents and such holder's Old Notes are not immediately available, or if time will not permit such holder's Letter of Transmittal and Consent Form, Old Notes, or other required documents to reach the Paying/Exchange/Solicitation Agent on or before the Expiration Date, or if time will not permit the holder to complete the procedure for book- entry transfer, such holder's tender may be effected if: (a) the tender is made through an Eligible Institution (as defined); (b) prior to the Expiration Date, the Paying/Exchange/Solicitation Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder of the Old Notes, the certificate number or numbers of such Old Notes and the principal amount of Old Notes tendered in the Asset Sale Offer and/or Exchange Offer, stating that the tender is being made thereby, and guaranteeing that, within three business days after the Expiration Date, the Letter of Transmittal and Consent Form (or facsimile thereof) together with the certificate(s) representing the Old Notes to be tendered in proper form for transfer or a Book-Entry Confirmation, as the case may be, and any other documents required by the Letter of Transmittal and Consent Form will be deposited by the Eligible Institution with the Paying/Exchange/Solicitation Agent; and (c) such properly completed and executed Letter of Transmittal and Consent Form (or facsimile thereof), together with the certificate(s) representing all tendered Old Notes in proper form for transfer and all other documents required by the Letter of Transmittal and Consent Form, or confirmation of a book-entry transfer of these Old Notes into the Paying/Exchange/Solicitation Agent's account at DTC, are received by the Paying/Exchange/Solicitation Agent within three business days after the Expiration Date. Any holder who wishes to tender Old Notes pursuant to the guaranteed delivery procedures described above must ensure that the Paying/Exchange/Solicitation Agent receives the Notice of Guaranteed Delivery and Letter of Transmittal and Consent Form relating to these Old Notes prior to 5:00 p.m., New York City time, on the Expiration Date. 2. Acceptance of Old Notes for Purchase or Exchange and Acceptance of Consents. Upon satisfaction or waiver of all the conditions to the Exchange Offer, Kaiser will accept any and all Old Notes that are properly tendered in the Exchange Offer, Old Notes properly tendered in the Asset Sale Offer and Consents properly tendered in the Consent Solicitation prior to 5:00 p.m., New York City time, on the Expiration Date. The Preferred Stocks, Warrants and New Notes issued pursuant to the Exchange Offer will be delivered promptly after acceptance of the Old Notes. For purposes of the Exchange Offer, Kaiser will be deemed to have accepted validly tendered Old Notes, when, as, and if Kaiser has given oral or written notice to the Paying/Exchange/Solicitation Agent. -10- 3. Revocation of Consents. Tendered Consents may be revoked at any time prior to 5:00 p.m., New York City time on the Expiration Date, unless previously accepted. To be effective, a written or facsimile transmission notice of revocation must (a) be received by the Paying/Exchange/Solicitation Agent at one of its addresses set forth on the first page of this Letter of Transmittal and Consent Form prior to 5:00 p.m., New York City time, on the Expiration Date, unless previously accepted, (b) specify the name of the person who tendered the Consents, (c) contain the description of the Consents to be revoked and (d) be signed by the holder of the Old Notes in the same manner as the original signature appears on this Letter of Transmittal and Consent Form (including any required signature guarantees). The signature(s) on the notice of revocation must be guaranteed by an Eligible Institution unless such Consents have been tendered (a) by a registered holder of Old Notes who has not completed either the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" on this Letter of Transmittal and Consent Form or (b) for the account of an Eligible Institution. All questions as to the validity, form and eligibility (including time of receipt) of such revocation notices shall be determined by Kaiser, whose determination shall be final and binding on all parties. If the Consents to be revoked have been delivered or otherwise identified to the Paying/Exchange/Solicitation Agent, a signed notice of revocation is effective immediately upon receipt by the Paying/Exchange/Solicitation Agent of a written or facsimile transmission notice of revocation even if physical release is not yet effected. Revocations may not be rescinded, and any Consents revoked will thereafter be deemed not validly tendered for purposes of the Asset Sale Offer/Exchange Offer/Consent Solicitation. However, properly revoked Consents may be retendered at any time on or prior to the applicable Expiration Date. 4. Signatures on this Letter of Transmittal and Consent Form, Proxies and Endorsements; Guarantee of Signatures. If this Letter of Transmittal and Consent Form is signed by the registered holder(s) of the Old Notes tendered hereby, the signature must correspond exactly with the name(s) as written on the face of the certificates without any change whatsoever. If any Old Notes tendered hereby are owned of record by two or more joint owners, all such owners, must sign this Letter of Transmittal and Consent Form. If any Old Notes tendered hereby are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal and Consent Form as there are different registrations of certificates. When this Letter of Transmittal and Consent Form is signed by the registered holder or holders specified herein and tendered hereby, no endorsements of certificates or separate proxies are required unless Preferred Stocks, Warrants and New Notes are to be issued, or certificates for any untendered principal amount of Old Notes are to be reissued, to a person other than the registered holder. If this Letter of Transmittal and Consent Form is signed by a person other than the registered holder(s), then the tendered Old Notes and Consents must either (a) be endorsed by the registered holder(s), with the signature guaranteed by an Eligible Institution or (b) be accompanied by a proxy, duly executed by the registered holder(s), with the signature on such proxy guaranteed by an Eligible Institution. Such proxy must be delivered with this Letter of Transmittal and Consent Form. If this Letter of Transmittal and Consent Form or a Notice of Guaranteed Delivery or any certificates are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by Kaiser, evidence satisfactory to Kaiser of their authority so to act must be submitted with this Letter of Transmittal and Consent Form. Except as described below, signatures on this Letter of Transmittal and Consent Form or a notice of revocation, as the case may be, must be guaranteed by an Eligible Institution. Signatures on this Letter of Transmittal and Consent Form or a notice of revocation, as the case may be, need not be guaranteed if the Old Notes tendered and Consents pursuant hereto are tendered (a) by a registered holder of Old Notes who has not completed either the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" on this Letter of Transmittal and Consent Form or (b) for the account of an Eligible Institution. In the event that signatures on this Letter of Transmittal and Consent Form or a notice of revocation, as the case may be, are required to be guaranteed, such guarantee must be by a firm which is a member of a registered national securities exchange, or a member of the National Association of Securities Dealers, Inc., or by a commercial bank or trust company having an office or correspondent in the United States, or otherwise an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934 (each, an "Eligible Institution"). -11- Endorsements on certificates for Old Notes or signatures on proxies required by this Instruction 4 must be guaranteed by an Eligible Institution. 5. Special Issuance and Delivery Instructions. Tendering holders should indicate in the applicable box the name and address to which certificates for the Preferred Stock, Warrants and New Notes and/or substitute certificates evidencing Old Notes for the principal amounts not exchanged are to be issued or sent, if different from the name and address of the person signing this Letter of Transmittal and Consent Form. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated. If no such instructions are given, any Old Notes not exchanged will be returned to the name and address of the person signing this Letter of Transmittal and Consent Form. 6. Beneficial Owners. Any beneficial owner of Old Notes whose notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wants to tender Old Notes in the Exchange Offer or in the Asset Sale Offer or tender Consents in the Consent Solicitation, should contact the registered holder promptly and instruct the registered holder to tender on the beneficial owner's behalf. If a beneficial owner wishes to tender directly, the beneficial owner must, prior to completing and executing the Letter of Transmittal and Consent Form and tendering Old Notes and Consents, make appropriate arrangements to register ownership of the notes in the beneficial owner's name. Beneficial owners should be aware that the transfer of registered ownership may take considerable time. 7. Tax Identification Number; Withholding. A holder of Old Notes whose Old Notes are accepted must provide Kaiser with the holder's correct taxpayer identification number, which, in the case of a holder who is an individual, is his or her social security number, or otherwise establish an exemption from backup withholding. If Kaiser is not provided with the correct taxpayer identification number, the tendering holder of Old Notes may be subject to a $50 penalty imposed by the Internal Revenue Service (the "IRS"), and the cash received pursuant to the Asset Sale Offer, together with any payments made on account of the Preferred Stock, Warrants and New Notes acquired pursuant to the Exchange Offer, may be subject to backup withholding in an amount equal to 31% of any such cash or payments. To prevent backup withholding, each tendering holder of Old Notes subject to backup withholding must provide its correct taxpayer identification number by completing the Substitute Form W-9 provided in this Letter of Transmittal and Consent Form, including the certifications contained therein. Certain tendering holders of Old Notes (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding requirements. A foreign individual and other exempt holders (i.e., corporations) should certify to such exempt status on the Substitute Form W-9 provided in this Letter of Transmittal and Consent Form. 8. Transfer Taxes. Holders tendering pursuant to the Asset Sale Offer/Exchange Offer/Consent Solicitation will not be obligated to pay brokerage commissions or fees or to pay transfer taxes with respect to their tender under the Asset Sale Offer/Exchange Offer/Consent Solicitation unless the box entitled "Special Issuance Instructions" in this Letter of Transmittal and Consent Form has been completed, or unless the Preferred Stock, Warrants and New Notes are to be issued to any person other than the holder of the Old Notes tendered. Kaiser will pay all other charges or expenses in connection with the Asset Sale Offer/Exchange Offer/Consent Solicitation. If holders tender Old Notes and the Asset Sale Offer/Exchange Offer/Consent Solicitation is not consummated, certificates representing the Old Notes will be returned to the holders at Kaiser's expense. Except as provided in this Instruction 8, it will not be necessary for transfer tax stamps to be affixed to the certificate(s) specified in this Letter of Transmittal and Consent Form. 9. Inadequate Space. If the space provided herein is inadequate, the aggregate principal amount of the Old Notes and Consents being tendered and the certificate numbers (if available) should be listed on a separate schedule attached hereto and separately signed by all parties required to sign this Letter of Transmittal and Consent Form. 10. Mutilated, Lost, Stolen or Destroyed Old Notes. Any holder whose Old Notes have been mutilated, lost, stolen or destroyed should contact the Paying/Exchange/Solicitation Agent at the address indicated above for further instructions. 11. Request for Assistance or Additional Copies. Requests for assistance or additional copies of the Prospectus or this Letter of Transmittal and Consent Form may be obtained from the Paying/Exchange/Solicitation Agent at its telephone number set forth on the first page of this Letter of Transmittal and Consent Form. -12-
- ------------------------------------------------------------------------------------------------------------------------------------ PAYOR'S NAME: THE BANK OF NEW YORK - ------------------------------------------------------------------------------------------------------------------------------------ --------------------------------------------------------------------------------------------------- SUBSTITUTE Social Security Number Or PART I - PLEASE PROVIDE YOUR TIN IN Taxpayer Identification Number Form W-9 THE BOX AT RIGHT AND CERTIFY BY ----------------------------------- Department of the Treasury SIGNING AND DATING BELOW Internal Revenue Service ------------------------------------------------------------------------------------------------- Payor's Request for Taxpayer CERTIFICATION - UNDER PENALTIES OF PERJURY, I CERTIFY THAT: Identification Number (TIN) (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me) and (2) I am not subject to backup withholding either because: (a) I am exempt from backup withholding; or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends , or (c) the IRS has notified me that I am no longer subject to backup withholding. ------------------------------------------------------------------------------------------------- PART II - AWAITING TIN PART III - EXEMPT ------------------------------------------------------------------------------------------------- CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of under-reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out item (2). If you are exempt from backup withholding, check the box in Part III. Signature __________________________________________ Date______________________________________ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ PAYOR'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN) Please fill out your name and address below: - ---------------------------------------------------------------------------------------------------------------------------------- Name - ---------------------------------------------------------------------------------------------------------------------------------- Address (Number and street) - ---------------------------------------------------------------------------------------------------------------------------------- City, State and Zip Code - ---------------------------------------------------------------------------------------------------------------------------------- NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE ASSET SALE OFFER/EXCHANGE OFFER/CONSENT SOLICITATION. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART II OF SUBSTITUTE FORM W-9. - ------------------------------------------------------------------------------------------------------------------------------------ CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number to the payer at the time of payment, 31% of all reportable payments made to me will be withheld until I provide a number and that, if I do not provide my taxpayer identification number within 60 days, such retained amounts shall be remitted to the IRS as backup withholding. _______________________________________________ ________________________________________________ Signature Date - ------------------------------------------------------------------------------------------------------------------------------------
-13- NOTICE OF GUARANTEED DELIVERY TO TENDER FOR PURCHASE 12% SENIOR SUBORDINATED NOTES DUE 2003 ON A PRO RATA BASIS AND TO TENDER FOR EXCHANGE 12% SENIOR SUBORDINATED NOTES DUE 2003 AND TO CONSENT TO CERTAIN INDENTURE AMENDMENTS WITH RESPECT TO THE 12% SENIOR SUBORDINATED NOTES DUE 2003 OF ICF KAISER INTERNATIONAL, INC. PURSUANT TO PROSPECTUS DATED __________, 1999 This Notice of Guaranteed Delivery or a form substantially equivalent hereto must be used to accept the offer of ICF Kaiser International, Inc., a Delaware corporation ("Kaiser"), to purchase a pro rata share of its 12% Senior Subordinated Notes due 2003 (the "Asset Sale Offer") and to exchange 2,600,000 shares of convertible preferred stock (the "Preferred Stock"), warrants to purchase approximately 15% of Kaiser's common stock on a fully diluted basis (the "Warrants"), and up to $25 million principal amount of Kaiser's 13% Senior Notes due 2002 (the "New Notes") (collectively, the "Exchange Offer"), for all 12% Senior Subordinated Notes due 2003 (the "Old Notes") outstanding following the purchase of the Old Notes in the Asset Sale Offer, if (a) certificates representing the Old Notes are not immediately available or (b) time will not permit the Old Notes and all other required documents to reach the Paying/Exchange/Solicitation Agent on or prior to the Expiration Date or (c) time will not permit the holder of Old Notes to complete the procedure for book- entry transfer. This form may be delivered by an Eligible Institution (as defined) by mail or hand delivery or transmitted, via facsimile, telegram or telex to the Paying/Exchange/Solicitation Agent as set forth below. All capitalized terms used herein but not defined herein shall have the meanings ascribed to them in the Prospectus dated ___________, 1999 (the "Prospectus"). THE ASSET SALE OFFER/EXCHANGE OFFER/CONSENT SOLICITATION IS NOT BEING MADE TO (NOR WILL THE SURRENDER OF OLD NOTES OR CONSENTS BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF THE ASSET SALE OFFER/EXCHANGE OFFER/CONSENT SOLICITATION WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. - -------------------------------------------------------------------------------- THE ASSET SALE OFFER/EXCHANGE OFFER/CONSENT SOLICITATION WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON __________, 1999, UNLESS EXTENDED. TENDERS OF CONSENTS MAY ONLY BE REVOKED UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSENT FORM. TENDERS OF OLD NOTES MAY NOT BE WITHDRAWN ONCE MADE. - -------------------------------------------------------------------------------- The Paying/Exchange/Solicitation Agent for the Asset Sale Offer/Exchange Offer/Consent Solicitation THE BANK OF NEW YORK By Registered or Certified By Overnight Courier: By Hand: By Facsimile: Mail: The Bank of New York The Bank of New York The Bank of New York The Bank of New York Reorganization Department Attention: Reorganization Reorganization Department Attention: Jennifer Pedi Attention: Jennifer Pedi Corporate Trust Services Window, Attention: Jennifer Pedi 101 Barclay Street, 7 East 101 Barclay Street, 7 East Ground Level (212) 815-6339 New York, New York 10286 New York, New York 10286 101 Barclay Street, 7 East New York, New York 10286 Confirm by telephone: (212) 815-6331
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE, TELEGRAM OR TELEX, OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on the Letter of Transmittal and Consent Form is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal and Consent Form. Ladies and Gentlemen: The undersigned hereby tender(s) to Kaiser, upon the terms and subject to the conditions set forth in the Prospectus, receipt of which is hereby acknowledged, the principal amount of Old Notes set forth below, pursuant to the guaranteed delivery procedures set forth in the Prospectus under the caption "Procedures for Participating in the Exchange Offer, Asset Sale Offer and Consent Solicitation." Subject to and effective upon acceptance for purchase or exchange of the Old Notes tendered herewith, the undersigned hereby sells, assigns and transfers to or upon the order of Kaiser all right, title and interest in and to and any and all claims in respect of or arising or having arisen as a result of the undersigned's status as a holder of, all Old Notes tendered hereby. In the event of a termination of the Asset Sale Offer/Exchange Offer/Consent Solicitation, the Old Notes tendered pursuant thereto will be returned to the tendering Old Note holder promptly. The undersigned hereby represents and warrants that the undersigned accepts the terms and conditions of the Prospectus and the Letter of Transmittal and Consent Form, has full power and authority to tender, sell, assign and transfer the Old Notes tendered hereby and that Kaiser will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned will, upon request, execute and deliver any additional documents deemed by the Paying/Exchange/Solicitation Agent or Kaiser to be necessary or desirable to complete the sale, assignment and transfer of the Old Notes tendered. All authority herein conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall survive the death or incapacity of the undersigned and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives of the undersigned. - -------------------------------------------------------------------------------- PLEASE SIGN AND COMPLETE Signature (s) of Registered Holder(s) or Address(es): Authorized Signatory: ---------------------------------------- - ------------------------------------------------ ---------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------- Name(s) of Registered Holder(s): Area Code and Telephone No.: - ------------------------------------------------ ---------------------------------------------------- - ------------------------------------------------ If Old Notes will be delivered by a book-entry Principal Amount of Old Notes Tendered: transfer, provide the following information: Transaction Code No.: - ------------------------------------------------ ------------------------------- - ------------------------------------------------ Certificate No(s). of Old Note (if available): Depository Account No.: ----------------------------- - ------------------------------------------------ - ------------------------------------------------
- -------------------------------------------------------------------------------- This Notice of Guaranteed Delivery must be signed by the registered holder(s) of Old Notes exactly as their name (s) appear (s) on the Old Notes or by person (s) authorized to become registered holder (s) by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, guardian, attorney-in-fact, officer of a corporation, executor, administrator, agent or other representative, such person must provide the following information: PLEASE PRINT NAME(S) AND ADDRESS(ES) Name: --------------------------------------------------------------- --------------------------------------------------------------- Capacity: --------------------------------------------------------------- --------------------------------------------------------------- Address(es): --------------------------------------------------------------- --------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member of a registered national securities exchange, or a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States, or otherwise an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934 (each, an "Eligible Institution") hereby guarantees that, within three business days from the date of this Notice of Guaranteed Delivery, a properly completed and validly executed Letter of Transmittal and Consent Form (or a facsimile thereof), together with Old Notes tendered hereby in proper form for transfer (or confirmation of the book-entry transfer of such Old Notes into the Paying/Exchange/Solicitation Agent's account at a Book-Entry Transfer Facility) and all other required documents will be deposited by the undersigned with the Paying/Exchange/Solicitation Agent at one of its addresses set forth above. Name of Firm: ---------------------- --------------------------- Authorized Signature Address: --------------------------- Name: ---------------------- - ----------------------------------- Title: --------------------- Area Code and Telephone No.: Date: - ----------------------------------- ---------------------- DO NOT SEND OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF OLD NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND VALIDLY EXECUTED LETTER OF TRANSMITTAL AND CONSENT FORM AND ANY OTHER REQUIRED DOCUMENTS. THE BANK OF NEW YORK 101 Barclay Street, 7 East New York, New York 10286 ICF KAISER INTERNATIONAL, INC. OFFER TO PURCHASE A PRO RATA SHARE OF ITS 12% SENIOR SUBORDINATED NOTES DUE 2003 AND OFFER TO EXCHANGE 2,600,000 SHARES OF CONVERTIBLE PREFERRED STOCK WARRANTS TO PURCHASE APPROXIMATELY 15% OF COMMON STOCK ON A FULLY DILUTED BASIS, AND UP TO $25 MILLION PRINCIPAL AMOUNT OF NEW NOTES FOR ANY AND ALL OUTSTANDING 12% SENIOR SUBORDINATED NOTES DUE 2003 AND SOLICITATION OF CONSENT TO CERTAIN INDENTURE AMENDMENTS WITH RESPECT TO THE 12% SENIOR SUBORDINATED NOTES DUE 2003 - -------------------------------------------------------------------------------- THE ASSET SALE OFFER/EXCHANGE OFFER/CONSENT SOLICITATION WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON ______ __, 1999, UNLESS EXTENDED. TENDERS OF CONSENTS MAY ONLY BE REVOKED UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSENT FORM. TENDERS OF OLD NOTES MAY NOT BE WITHDRAWN ONCE MADE. - -------------------------------------------------------------------------------- To Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees: We have been appointed by ICF Kaiser International, Inc. ("Kaiser"), to act as the Paying/Exchange/Solicitation Agent in connection with: . the offer of Kaiser to purchase for cash at par on a pro rata basis from the holders of tendered 12% Senior Subordinated Notes due 2003 up to $40 million principal amount of 12% Senior Subordinated Notes due 2003 (the "Asset Sale Offer"), . the offer of Kaiser to exchange 2,600,000 shares of convertible preferred stock (the "Preferred Stock"), warrants to purchase approximately 15% of Kaiser's common stock on a fully diluted basis (the "Warrants"), and up to $25 million principal amount of Kaiser's 13% Senior Notes due 2002 (the "New Notes") (collectively, the "Exchange Offer"), for all 12% Senior Subordinated Notes due 2003 (the "Old Notes") outstanding following the purchase of the Old Notes in the Asset Sale Offer, and . the solicitation of holders of Old Notes to consent to the amendments of the indenture governing the Old Notes (the "Consent Solicitation"), upon the terms and subject to the conditions set forth in the Prospectus dated _______, 1999 (the "Prospectus") and in the related Letter of Transmittal and Consent Form and the instructions thereto (the "Letter of Transmittal and Consent Form"). Enclosed herewith are copies of the following documents: 1. The Prospectus; 2. The Letter of Transmittal and Consent Form for your use and for the information of your clients; 3. Notice of Guaranteed Delivery to be used to accept the Asset Sale Offer, Exchange Offer and Consent Solicitation if the Old Notes and all other required documents cannot be delivered to the Paying/Exchange/Solicitation Agent on or prior to the Expiration Date (as defined) or if the holder of Old Notes cannot complete the procedure for book-entry transfer; and 4. A form of letter which may be sent to your clients for whose account you hold the Old Notes in your name or in the name of a nominee, with space provided for obtaining such clients' instructions with regard to the Asset Sale Offer, Exchange Offer and Consent Solicitation. PLEASE NOTE THAT THE ASSET SALE OFFER, EXCHANGE OFFER AND CONSENT SOLICITATION WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON _________, 1999 (THE "EXPIRATION DATE"), UNLESS EXTENDED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. Kaiser will not pay any fees or commission to any broker or dealer or other person (other than to the Paying/Exchange/Solicitation Agent) for soliciting tenders of the Old Notes and Consents pursuant to the Asset Sale Offer, Exchange Offer and Consent Solicitation. You will be reimbursed for customary mailing and handling expenses incurred by you in forwarding the enclosed materials to your clients. Additional copies of the enclosed materials may be obtained by contacting the Paying/Exchange/Solicitation Agent as provided in the enclosed Letter of Transmittal and Consent Form. Very truly yours, The Bank of New York NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS THE AGENT OF KAISER OR THE PAYING/EXCHANGE/SOLICITATION AGENT OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT TO THE ASSET SALE OFFER, EXCHANGE OFFER OR CONSENT SOLICITATION NOT CONTAINED IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL AND CONSENT FORM. ICF KAISER INTERNATIONAL, INC. OFFER TO PURCHASE A PRO RATA SHARE OF ITS 12% SENIOR SUBORDINATED NOTES DUE 2003 AND OFFER TO EXCHANGE 2,600,000 SHARES OF CONVERTIBLE PREFERRED STOCK, WARRANTS TO PURCHASE APPROXIMATELY 15% OF COMMON STOCK ON A FULLY DILUTED BASIS, AND UP TO $25 MILLION PRINCIPAL AMOUNT OF NEW NOTES FOR ANY AND ALL OUTSTANDING 12% SENIOR SUBORDINATED NOTES DUE 2003 AND SOLICITATION OF CONSENT TO CERTAIN INDENTURE ADMENDMENTS WITH RESPECT TO THE 12% SENIOR SUBORDINATED NOTES DUE 2003 - -------------------------------------------------------------------------------- THE ASSET SALE OFFER/EXCHANGE OFFER/CONSENT SOLICITATION WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON _______, 1999, UNLESS EXTENDED. TENDERS OF CONSENTS MAY ONLY BE REVOKED UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSENT FORM. TENDERS OF OLD NOTES MAY NOT BE WITHDRAWN ONCE MADE. - -------------------------------------------------------------------------------- ____________, 1999 To Our Clients: Enclosed for your consideration is the Prospectus dated _________, 1999 (the "Prospectus") and the related Letter of Transmittal and Consent Form and instructions thereto (the "Letter of Transmittal and Consent Form") in connection with the offer of ICF Kaiser International, Inc., a Delaware corporation ("Kaiser"), to purchase a pro rata share of its 12% Senior Subordinated Notes due 2003 (the "Asset Sale Offer") and to exchange 2,600,000 shares of convertible preferred stock (the "Preferred Stock"), warrants to purchase approximately 15% of Kaiser's common stock (the "Warrants") on a fully diluted basis, and up to $25 million principal amount of Kaiser's 13% Senior Notes due 2002 (the "New Notes") (collectively, the "Exchange Offer"), for all 12% Senior Subordinated Notes due 2003 (the "Old Notes") outstanding following the purchase of the Old Notes in the Asset Sale Offer, and in connection with the solicitation (the "Consent Solicitation") of consents (the "Consents") upon the terms and subject to the conditions set forth in the Prospectus and Letter of Transmittal and Consent Form. Consummation of the Asset Sale Offer/Exchange Offer/Consent Solicitation is subject to certain conditions described in the Prospectus. Capitalized terms used herein but not defined shall have the meanings ascribed to them in the Prospectus. WE ARE THE REGISTERED HOLDER OF OLD NOTES HELD BY US FOR YOUR ACCOUNT. A TENDER OF ANY SUCH OLD NOTES CAN BE MADE ONLY BY US AS THE REGISTERED HOLDER AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL AND CONSENT FORM IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER OLD NOTES HELD BY US FOR YOUR ACCOUNT. Accordingly, we request instructions as to whether you wish us to tender any or all such Old Notes held by us for your account or whether you wish us to tender consents pursuant to the terms and conditions set forth in the Prospectus and the Letter of Transmittal and Consent Form. We urge you to read carefully the Prospectus and the Letter of Transmittal and the Consent Form before instructing us to tender your Old Notes or Consents. Your instructions to us should be forwarded as promptly as possible in order to permit us to tender Old Notes or Consents on your behalf in accordance with the provisions of the Asset Sale Offer/Exchange Offer/Consent Solicitation. THE ASSET SALE OFFER/EXCHANGE OFFER/CONSENT SOLICITATION WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON ______________ (THE "EXPIRATION DATE"), UNLESS EXTENDED. Tenders of Old Notes may not be withdrawn once made. Tenders of Consents may only be revoked under the circumstances described in the Prospectus and the Letter of Transmittal and Consent Form. Your attention is directed to the following: 1. The Exchange Offer is for the entire aggregate principal amount of outstanding Old Notes following the Asset Sale Offer. 2. Consummation of the Asset Sale Offer/Exchange Offer/Consent Solicitation is conditioned upon the conditions set forth in the Prospectus under the caption "Conditions of the Exchange Offer." 3. Tendering holders may revoke their Consent at any time until the Expiration Date. 4. Any transfer taxes incident to the transfer of Old Notes from the tendering holder to Kaiser will be paid by Kaiser, except as provided in the Prospectus and the instructions to the Letter of Transmittal and Consent Form. 5. The Asset Sale Offer/Exchange Offer/Consent Solicitation is not being made to (nor will the surrender of Old Notes be accepted from or on behalf of) holders of Old Notes in any jurisdiction in which the making or acceptance of the Asset Sale Offer/Exchange Offer/Consent Solicitation would not be in compliance with the laws of such jurisdiction. 6. The acceptance of Old Notes validly tendered, the acceptance of Consents validly tendered and not revoked and the payment of cash and the issuance of Preferred Stock, Warrants and New Notes to the tendering Old Note holders will be made as promptly as practicable after the Expiration Date. Subject to rules promulgated pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), Kaiser, however, expressly reserves the right to delay acceptance of any of the Old Notes or Consents or to terminate the Asset Sale Offer/Exchange Offer/Consent Solicitation if any of the conditions set forth in the Prospectus under the caption "Conditions of the Exchange Offer" shall not have been satisfied or waived by Kaiser. 7. Kaiser expressly reserves the right, in its sole discretion, . to delay accepting any Old Notes or Consents, . to extend the Asset Sale Offer/Exchange Offer/Consent Solicitation, . to amend the terms of the Asset Sale Offer/Exchange Offer/Consent Solicitation, or . to terminate the Asset Sale Offer/Exchange Offer/Consent Solicitation. Any delay, extension, amendment or termination will be followed as promptly as practicable by oral or written notice to the Paying/Exchange/Solicitation Agent and a public announcement thereof. In the case of an extension, such public announcement shall include disclosure of the approximate number of Old Notes and Consents deposited to date and shall be made prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Without limiting the manner in which Kaiser may choose to make a public announcement of any extension, amendment or termination of the Asset Sale Offer/Exchange Offer/Consent Solicitation, Kaiser shall have no obligation to publish, advertise, or otherwise communicate any such public announcement, other than by making a timely release to the Dow Jones News Service. Except as otherwise provided in the Prospectus, revocation rights with respect to Old Notes or Consents tendered pursuant to the Asset Sale Offer/Exchange Offer/Consent Solicitation will not be extended or reinstated as a result of an extension or amendment of the Asset Sale Offer/Exchange Offer/Consent Solicitation. 8. Consummation of the Asset Sale Offer/Exchange Offer/Consent Solicitation may have adverse consequences to non-tendering Old Note holders, including that the reduced amount of outstanding Old Notes as a result of the Asset Sale Offer/Exchange Offer/Consent Solicitation may adversely affect the trading market, liquidity and market price of the Old Notes. If you wish to have us tender any or all of the Old Notes held by us for your account, please so instruct us by completing, executing and returning to us the instruction form that follows. [the rest of this page is intentionally left blank] ICF KAISER INTERNATIONAL, INC. INSTRUCTIONS REGARDING THE ASSET SALE OFFER/EXCHANGE OFFER/CONSENT SOLICITATION WITH RESPECT TO THE 12% SENIOR SUBORDINATED NOTES DUE 2003 THE UNDERSIGNED ACKNOWLEDGE(S) RECEIPT OF YOUR LETTER AND THE ENCLOSED DOCUMENTS REFERRED TO THEREIN RELATING TO THE ASSET SALE OFFER/EXCHANGE OFFER/CONSENT SOLICITATION OF KAISER. THIS WILL INSTRUCT YOU WHETHER TO TENDER THE PRINCIPAL AMOUNT OF OLD NOTES INDICATED BELOW HELD BY YOU FOR THE ACCOUNT OF THE UNDERSIGNED PURSUANT TO THE TERMS OF AND CONDITIONS SET FORTH IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSENT FORM. Box 1 [_] Please tender the Old Notes held by you for my account, as indicated below. Box 2 [_] Please do not tender any Old Notes held by you for my account. Date:__________________________________, 1999 Principal Amount of Old Notes to be Tendered: $___________________________________________* - ------------------------------------------------------------ - ------------------------------------------------------------ Signature(s) - ------------------------------------------------------------ - ------------------------------------------------------------ Please print name(s) here - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ Please type or print address - ------------------------------------------------------------ Area Code and Telephone Number - ------------------------------------------------------------ Taxpayer Identification or Social Security Number - ------------------------------------------------------------ May Account Number with You - ------------------------ *UNLESS OTHERWISE INDICATED, SIGNATURE(S) HEREON BY BENEFICIAL OWNER(S) SHALL CONSTITUTE AN INSTRUCTION TO THE NOMINEE TO TENDER ALL OLD NOTES OF SUCH BENEFICIAL OWNER(S). -----END PRIVACY-ENHANCED MESSAGE-----