<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1996 Commission File Number 0-18858
KAISER VENTURES INC.
--------------------
(Exact name of registrant as specified in its charter)
DELAWARE 94-0594733
- ---------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3633 East Inland Empire Blvd., Suite 850
Ontario, California 91764
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(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (909) 483-8500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----
Indicate by check mark whether registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.
Yes X No
----
On October 31, 1996, the Company had 10,516,594 shares of Common Stock, $.03 par
value, outstanding (including 136,919 shares deemed outstanding and held in
reserve by the Company for issuance to the former general unsecured creditors of
Kaiser Steel Corporation pursuant to its Plan of Reorganization).
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TABLE OF CONTENTS TO FORM 10-Q
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PAGE
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<S> <C> <C>
INTRODUCTION
BUSINESS UPDATE.................................................................. 1
PART I
Item 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.............................. 6
Item 2. FINANCIAL STATEMENTS............................................. 13
CONSOLIDATED BALANCE SHEETS...................................... 13
CONSOLIDATED STATEMENTS OF INCOME................................ 15
CONSOLIDATED STATEMENTS OF CASH FLOWS............................ 16
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY............................................. 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS....................... 18
PART II
Item 1. LEGAL PROCEEDINGS................................................ 20
Item 2. CHANGES IN SECURITIES............................................ 20
Item 3. DEFAULTS UPON SENIOR SECURITIES.................................. 20
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS................ 21
Item 5. OTHER INFORMATION................................................ 21
Item 6. EXHIBITS AND REPORTS ON FORM 8-K................................. 21
SIGNATURES......................................................................... 21
</TABLE>
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AVAILABILITY OF PREVIOUS REPORTS
--------------------------------
THE COMPANY WILL FURNISH WITHOUT CHARGE, TO EACH STOCKHOLDER, UPON WRITTEN
REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1995, AND QUARTERLY REPORTS ON FORM 10-Q FOR THE
PERIOD ENDED MARCH 31, 1996 AND FOR THE PERIOD ENDED JUNE 30, 1996
(COLLECTIVELY, THE "REPORTS") AS FILED WITH THE SECURITIES EXCHANGE AND
COMMISSION, INCLUDING THE FINANCIAL STATEMENT SCHEDULES THERETO. THOSE
REQUESTING A COPY OF THE REPORTS THAT ARE NOT CURRENTLY STOCKHOLDERS OF THE
COMPANY MAY ALSO OBTAIN A COPY DIRECTLY FROM THE COMPANY. REQUESTS FOR COPIES
OF THE REPORTS SHOULD BE DIRECTED TO VICE PRESIDENT-CORPORATE RELATIONS, AT 3633
EAST INLAND EMPIRE BOULEVARD, SUITE 850, ONTARIO, CALIFORNIA 91764.
THE READER IS ENCOURAGED TO READ THIS FORM 10-Q REPORT IN CONJUNCTION WITH
THE REPORTS SINCE THE INFORMATION CONTAINED HEREIN IS OFTEN AN UPDATE OF THE
INFORMATION IN SUCH REPORTS.
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KAISER VENTURES INC. AND SUBSIDIARIES
SOME OF THE STATEMENTS IN THIS FORM 10-Q REPORT CONTAIN FORWARD-LOOKING
INFORMATION WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS
AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
WHEN USED OR INCORPORATED BY REFERENCE IN THIS REPORT, THE WORDS "ANTICIPATE,"
"ESTIMATE," "PROJECT" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-
LOOKING STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES
AND ASSUMPTIONS. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE,
OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY
MATERIALLY FROM THOSE ANTICIPATED, ESTIMATED, EXPECTED OR PROJECTED. FOR
EXAMPLE, ACTUAL RESULTS COULD MATERIALLY DIFFER FROM THOSE PROJECTED AS A RESULT
OF FACTORS SUCH AS GENERAL ECONOMIC CONDITIONS IN THE UNITED STATES AND SOUTHERN
CALIFORNIA; THE IMPACT OF FEDERAL, STATE, AND LOCAL LAWS AND REGULATIONS ON THE
COMPANY'S DEVELOPMENT ACTIVITIES; THE IMPACT OF WEATHER ON THE COMPANY'S
CONSTRUCTION RELATED ACTIVITIES; AND THE DISCOVERY OF UNANTICIPATED
ENVIRONMENTAL CONDITIONS ON ANY OF THE COMPANY'S PROPERTIES.
INTRODUCTION
BUSINESS UPDATE
GENERAL
Kaiser Ventures Inc. ("Kaiser" or the "Company" which shall be deemed to
include its wholly-owned subsidiaries unless otherwise provided herein)
continues to work on the development of its principal assets: (i) a 50.88%
interest in Fontana Union Water Company ("Fontana Union"), a mutual water
company; (ii) a 10.56% interest in Penske Motorsports, Inc. ("PMI"), a publicly
traded motorsports company; (iii) approximately 750 acres of the former Kaiser
Steel Corporation ("KSC") steel mill site (the "Mill Site Property"); (iv) an
approximate 73% interest in Mine Reclamation Corporation ("MRC"), the developer
of the Eagle Mountain Landfill Project (the "Landfill Project"); and (v) the
11,350 acre idle iron ore mine in the California desert (the "Eagle Mountain
Site"), which includes the associated 460 acre town of Eagle Mountain ("Eagle
Mountain Townsite") and the land leased to MRC for the Landfill Project.
Since the filing of the second quarter 1996 Form 10-Q Report, there have been
particularly significant developments with regard to the continued redevelopment
of the Mill Site Property due to the anticipated sale of approximately 54 acres
of the Mill Site Property to PMI for approximately $13.4 million and with
respect to the Landfill Project. See, "Introduction - Business Update - Property
Redevelopment - Sale of Speedway Business Park" and "Introduction - Business
Update - Waste Management Eagle Mountain Landfill Project." In addition, a
reader of this Form 10-Q Report is strongly encouraged to read the entire
report, together with the Company's 1995 Form 10-K Report and first and second
quarter 1996 Form 10-Q Reports for background information and a complete
understanding as to material developments concerning the Company.
INVESTMENT IN FONTANA UNION WATER COMPANY
The Company, through a wholly-owned subsidiary, Fontana Water Resources, Inc.,
leases its 50.88% ownership of the capital stock of Fontana Union, a mutual
water company, to Cucamonga County Water District ("Cucamonga") pursuant to a
102-year take-or-pay lease (the "Cucamonga Lease"). Under the terms of the
Cucamonga Lease, Cucamonga's payments to the Company are based upon established
fixed quantities of water for most of the applicable sources, multiplied by a
fixed percentage of the rate for untreated and non-interruptible water from the
Metropolitan Water District of Southern California ("MWD") as available through
the Chino Basin Municipal Water District as it may change from time-to-time (the
"Lease Rate").
The Company continues its litigation with Cucamonga in San Bernardino County
Superior Court to resolve a dispute over the interpretation of the Cucamonga
Lease. The dispute centers upon whether the
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KAISER VENTURES INC. AND SUBSIDIARIES
Lease Rate increased by at least 2.7% or by 5.1% or greater if the Cucamonga
Lease is interpreted as the Company asserts to include all the changed rates and
items implemented by MWD, as of July 1, 1995. Cucamonga continues to pay under
the terms of the Cucamonga Lease, but at the 2.7% rate increase as opposed to
the higher Lease Rate that the Company maintains it is entitled to receive
pursuant to the Cucamonga Lease. In addition, in the third quarter Chino Basin
Municipal Water District increased its administrative charge to $2.00 per acre
foot which Cucamonga agrees is a component of the Lease Rate. Finally, the
Company also continues to investigate the reasons for the drop in water levels
in the Colton/Rialto Basin wells which will result in a reduction in the
revenues from the Cucamonga Lease by approximately $300,000 in 1996. It is
currently unknown if the drop in water levels in the Colton/Rialto Wells is just
a short term fluctuation or a longer term change.
INTEREST IN PENSKE MOTORSPORTS, INC.
The Company currently owns approximately a 10.56% interest in PMI. PMI is
traded on the NASDAQ National Market under the symbol "SPWY." As discussed in
more detail below under "Property Redevelopment - Sale of Speedway Business
Park," the Company anticipates increasing its ownership in PMI from 1,373,625
shares to 1,627,925 shares (approximately 12.2% of PMI's outstanding shares) in
connection with the expected sale of approximately 54 acres (net) of the Mill
Site Property, (known as the Speedway Business Park), to The California Speedway
Corporation. The approximately $13,352,700 purchase price is to be paid in cash
of $5,000,000 (subject to closing adjustments) plus PMI restricted common stock
of approximately 254,300 shares. The transaction is scheduled to close during
December, 1996.
The Company acquired its original interest in PMI in November, 1995, in
exchange for approximately 475 acres of the Mill Site Property on which the
California Speedway is being built. PMI is a leading owner and operator of
speedway facilities as well as a promoter of racing events. PMI, through
subsidiaries, owns: Michigan International Speedway; Nazareth Motor Speedway;
TCS (which is under construction); a 4.5% interest in North Carolina Motor
Speedway; Motorsports International Corp., a motorsports apparel and memorabilia
company; and Competition Tire West and Competition Tire South, distributors of
Goodyear racing tires in the mid-west and southern regions of the United States.
California Speedway is to be a two mile tri-oval similar to Michigan
International Speedway and is anticipated to be completed in the Spring of 1997.
The date of the first scheduled race at the California Speedway, a NASCAR
Winston Cup race, is June 22, 1997. A second race, a CART PPG Indy Car World
Series Event, is scheduled to be held on September 28, 1997.
Currently, PMI is paying to the Company a quarterly fee of $162,500 which will
expire at the end of the first quarter of 1997. On October 31, 1996, PMI
announced record gross revenues of $24.0 million and record net income of $6.5
million or $.50 per share for the third quarter of 1996 and gross revenues of
$52.2 million and net income of $12.2 million for the first nine months of 1996.
The Company began accounting for its share of PMI's net income as of April 1,
1996. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
PROPERTY REDEVELOPMENT
After the contribution of approximately 475 acres of the Mill Site Property in
exchange for its interest in PMI, the Company currently owns approximately 700
acres of the Mill Site Property. This acreage will decrease to approximately
650 acres with the conclusion of the anticipated sale of approximately 54 acres
to PMI as discussed below. The Company is currently undertaking efforts to
obtain the entitlements and permits necessary to develop the balance of the Mill
Site Property for a variety of possible commercial, industrial and recreational
uses. These efforts include possible changes that would alter and improve the
access to portions of the Mill Site Property. In addition to these entitlement
and permitting activities, the
2
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KAISER VENTURES INC. AND SUBSIDIARIES
Company has also begun preliminary exploratory discussions with a number of
prospective users for the balance of the Mill Site Property. As discussed in
detail in the Company's 1995 Form 10-K Report, the Company is also pursuing
several other projects for the redevelopment of the Mill Site Property,
including a rail-served municipal solid waste transfer and recovery facility,
and several industrial and commercial lots adjoining the motorsports complex.
Material developments with respect to these projects are described below.
WEST VALLEY MATERIALS RECOVERY FACILITY
The Company and Burrtec Waste Industries, Inc. ("Burrtec"), a privately-held
company, are equal joint venture partners in the development of the West Valley
Materials Recovery Facility (the "Joint Venture"), a proposed rail-served
municipal solid waste transfer and recovery facility that, at full build out,
will be located on three parcels totaling approximately 30 acres of the Mill
Site Property (the "Mill Site MRF"). The transfer station and material recovery
facility are fully permitted, other than necessary construction and ancillary
permits. The Company is responsible for the environmental remediation of the
property for the Mill Site MRF and is currently in the process of remediating a
portion of the site. The remediation required has been more extensive than
originally anticipated, but should be completed as a part of the construction of
Phase 1 of the Mill Site MRF as described in more detail below.
The Company and Burrtec have reached agreement, in principle, on the terms of
restructuring the Joint Venture as a limited liability company (the West Valley
MRF, LLC, a California limited liability company). In the third quarter, the
Company's Board of Directors approved the restructuring of the Joint Venture,
and its terms as well as the construction of Phase 1 of the Mill Site MRF,
subject to obtaining acceptable third-party financing and the finalization of
the legal documentation between the Company and Burrtec.
The Company and Burrtec are also continuing to undertake those preliminary
steps necessary to construct Phase 1 of the Mill Site MRF which is currently
expected to include a 62,000 square foot building, sorting equipment, and
related facilities for waste transfer and recycling services. Offsite
improvements and the grading of the site are nearing completion. The total
estimated cost for the Phase 1 of the Mill Site MRF, including all equipment, is
approximately $10,300,000. It is anticipated that the Company and Burrtec will
be required to guarantee any third party financing obtained by the West Valley
MRF, LLC.
SALE OF SPEEDWAY BUSINESS PARK
The Company and The California Speedway Corporation have entered into an
agreement for the sale of the Speedway Business Park. The Speedway Business
Park, which encompasses approximately 54 acres (net),is located on the east side
of the Kaiser Mill Site Property between the speedway property and Cherry
Avenue. These lots, which were graded in connection with the construction of
California Speedway, include property adjoining the main entrance to the
speedway. The sales price is approximately $13,352,000, and is subject to normal
closing adjustments. The sales price will be paid in cash of $5,000,000 at the
close of the transaction with the balance of the purchase price being the
issuance of approximately 254,300 in shares of restricted PMI common stock. This
stock will increase the Company's percentage ownership interest in PMI to
approximately 12.2%. The sale, which is subject to several contingencies, is
expected to close during December 1996. The Company has already satisfied most
of the major contingencies to the proposed sale.
3
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KAISER VENTURES INC. AND SUBSIDIARIES
WASTE MANAGEMENT
EAGLE MOUNTAIN LANDFILL PROJECT
In 1988, the Company entered into a 100-year lease agreement (the "MRC Lease")
with MRC. MRC is seeking to develop the Company's former iron ore mine near
Eagle Mountain, California into a large, regional rail-haul, municipal solid
waste landfill. MRC became a subsidiary of the Company when the Company's
subsidiary, Eagle Mountain Reclamation, Inc., acquired a 70% interest in MRC
during the first quarter of 1995 in exchange for the elimination of the minimum
monthly rent due the Company under the MRC Lease. The elimination of the minimum
monthly rent did not change the future royalty payments due the Company once the
landfill commences operations.
Since its initial acquisition of an equity interest in MRC, the Company,
through its wholly-owned subsidiary, Eagle Mountain Reclamation, Inc., has made
additional equity investments in MRC. As of October 31, 1996, the Company had
invested $4,477,000 in additional equity in MRC by participating in two private
placements of MRC common stock. Currently, the Company's ownership interest in
MRC is approximately 73%. Because additional funding will be necessary to
complete all permitting activities, MRC has approved a third private placement
of $2.2 million, to be completed in early 1997, of which it is expected that the
Company will invest up to an additional $1.65 million through Eagle Mountain
Reclamation, Inc. The Company's first payment of approximately $1.05 million
will be made in the first quarter 1997, with a second payment of approximately
$600,000 due in the second quarter of 1997. Even with the anticipated successful
completion of a third private placement, additional financing will be required
to complete the permitting of the Landfill Project, to fund anticipated
litigation costs and to ultimately construct the Landfill Project.
MRC continues to pursue the activities necessary to re-permit the Landfill
Project. The draft environmental impact report/environmental impact statement
("EIR/EIS") prepared by Riverside County's and the U.S. Bureau of Land
Management's ("BLM"), independent consultant was first released to the public
for comment in July, 1996. The public comment period is now over and a large
number of comments were received. The comments are being reviewed and responses
being prepared by the independent consultant for inclusion in the final EIR/EIS.
The EIR/EIS examines the Landfill Project's potential impacts to such items as
air quality, water, traffic, noise, and natural resources and also identifies
measures to mitigate potential impacts. Once the EIR and EIS is approved,
assuming the EIR and EIS receive the necessary approvals, it will probably take
up to an additional year to secure the necessary technical permits for the
Landfill Project. Once the final EIR/EIS is completed and released, which is
currently anticipated to be late this year or early next year, the Landfill
Project will be reviewed by the Riverside County Planning Commission and
forwarded with recommendations to the Riverside County Board of Supervisors. It
has been anticipated that the Supervisors would act during the first half of
1997.
However, at an October 29, 1996, meeting of the Riverside County Board of
Supervisors, the Board voted to delay the consideration of proposals relating to
any private or public/private landfill project for at least six months. This
action was as a result of an investigation by the Federal Bureau of
Investigation of Western Waste Industries, Inc. which was proposing a major
expansion of its El Sobrante landfill in western Riverside County. Neither the
Company nor MRC have any connection with Western Waste Industries, Inc.
Regardless of this fact, the Board decided to delay its consideration of all
private and public/private landfill projects given the ongoing investigation,
which includes the review of the records of the Board of Supervisors and certain
County staff members. As noted above, MRC is proceeding with completion of the
final EIR/EIS and is scheduled for Planning Commission review in early 1997. As
the
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KAISER VENTURES INC. AND SUBSIDIARIES
Company currently understands the October 29, 1996 decision, it may result only
in minimal delay, if any, in the Board's consideration of the Eagle Mountain
Landfill Project. However, the full ramifications of the Board's vote are
unknown and further delays are possible.
As discussed in more detail in the Company's 1995 10-K Report, there are
numerous risks associated with MRC and the Landfill Project which must be
overcome to achieve the financing, permitting, construction and operation of the
Landfill Project. There have been and will continue to be opponents to the
Landfill Project. The current anticipated time schedule for Landfill Project is
based on forward-looking information and as a result, the time schedule may not
be achieved, as in the past, because of the risks associated with the Project as
well as the time consuming procedural steps that must be followed.
5
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KAISER VENTURES INC. AND SUBSIDIARIES
PART I
ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Kaiser Ventures Inc. ("Kaiser" or the "Company") is an emerging company
pursuing project opportunities and investments in activities related to water
resources, property redevelopment and solid waste management. The Company's
long-term emphasis is on the development of its principal assets: (i) a 50.88%
interest in Fontana Union Water Company ("Fontana Union"), a mutual water
company; (ii) a 10.56% interest in Penske Motorsports, Inc. ("PMI"), a public
professional motorsports company that is developing the California Speedway on
land acquired from Kaiser; (iii) approximately a 73% interest in Mine
Reclamation Corporation ("MRC"), the developer of the Eagle Mountain Landfill
Project (the "Landfill Project"); (iv) approximately 750 acres of the former
Kaiser Steel Corporation ("KSC") steel mill site (the "Mill Site Property"); and
(v) the 11,350 acre idle iron ore mine in the California desert (the "Eagle
Mountain Site"), which includes the associated 460 acre town of Eagle Mountain
("Eagle Mountain Townsite") and the land leased to MRC for the Landfill
Project. The Company is also pursuing other related longer-term growth
opportunities on the balance of its Mill Site Property, including the
development of a transfer station and materials recovery facility on the Mill
Site Property ("Mill Site MRF"); and the redevelopment of industrial and
commercial parcels of land adjoining the California Speedway and the Mill Site
MRF.
Subsequent to the end of the third quarter, the Company formally agreed to
sell approximately 54.2 net acres of the Mill Site Property, known as the
Speedway Business Park, to PMI for $5.0 million in cash and approximately $8.35
million in PMI stock. It is anticipated that the transaction will close during
the fourth quarter and will result in a one time gain of approximately $6.7
million. Once this transaction is completed, the Company's interest in PMI will
increase to approximately 12.2%. See the "Introduction - Business Update"
section of this report for more information regarding this transaction.
PRIMARY REVENUE SOURCES
ONGOING OPERATIONS
The Company's revenues from ongoing operations are generally derived from the
development of the Company's long-term projects. Revenues from water resources
represent payments under the lease of the Company's interest in Fontana Union to
Cucamonga County Water District ("Cucamonga"). Property redevelopment revenues
currently reflect housing rental income, aggregate rock sales and lease payments
for the minimum security prison at the Eagle Mountain Townsite, and royalty
revenues from iron ore shipments from the Company's iron ore mine in California
(the "Silver Lake Mine"). Joint venture revenues reflect Kaiser's share of
income related to those equity investments (primarily PMI) and joint ventures
which the Company accounts for under the equity method.
INTERIM ACTIVITIES
Revenues from interim activities are generated from various sources primarily
related to the Mill Site Property. Significant components of interim activities
include rentals under short-term tenant lease arrangements, royalty revenues
from the sale of slag to outside contractors, water and wastewater treatment
service revenues, revenues from the sale of recyclable materials and other
miscellaneous interim activities.
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KAISER VENTURES INC. AND SUBSIDIARIES
SUMMARY OF REVENUE SOURCES
Due to the development nature of certain Company projects and the Company's
recognition of revenues from bankruptcy-related and other non-recurring items,
historical period-to-period comparisons of total revenues may not be meaningful
for developing an overall understanding of the Company. Therefore, the Company
believes it is important to evaluate the trends in the components of its
revenues as well as the recent developments regarding its long-term ongoing and
interim revenue sources.
In addition, due to the concentration of motor sport racing events between
April and September, PMI's operations have been, and will continue to be, highly
seasonal. PMI has no current plans to host events in the first and fourth
quarters at its existing facilities (including the California Speedway). As a
result, the Company's reported share of undistributed equity in the earnings of
PMI will likely be positive (income) in the second and third quarters and
negative (loss) in the first and fourth quarters.
RESULTS OF OPERATIONS
ANALYSIS OF RESULTS FOR THE QUARTER ENDED SEPTEMBER 30, 1996 AND 1995
An analysis of the significant components of the Company's resource revenues
for the quarter ended September 30, 1996 and 1995 follows:
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30,
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1996 1995 % INC (DEC)
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<S> <C> <C> <C>
ONGOING OPERATIONS
Water resource......................................... $ 944,000 $1,103,000 (14%)
Joint venture.......................................... 642,000 - 100%
Property redevelopment................................. 295,000 246,000 20%
---------- ----------
TOTAL ONGOING OPERATIONS............................. 1,881,000 1,349,000 39%
---------- ----------
INTERIM ACTIVITIES
Lease and royalty...................................... 293,000 307,000 (5%)
Service................................................ 57,000 101,000 (44%)
Miscellaneous.......................................... 114,000 302,000 (62%)
---------- ----------
TOTAL INTERIM ACITIVITIES............................ 464,000 710,000 (35%)
---------- ----------
TOTAL RESOURCE REVENUES.............................. $2,345,000 $2,059,000 14%
========== ==========
REVENUES AS A PERCENTAGE OF TOTAL
RESOURCE REVENUES:
Ongoing operations..................................... 80% 66%
Interim activities..................................... 20% 34%
---------- ----------
TOTAL RESOURCE REVENUES............................. 100% 100%
========== ==========
</TABLE>
Resource Revenues. Total resource revenues for the third quarter of 1996 were
$2,345,000, as compared to $2,059,000 for the third quarter of 1995. Revenues
from ongoing operations increased 39% during the third quarter of 1996 to
$1,881,000 from $1,349,000 in the third quarter of 1995, while revenues from
interim activities declined 35% to $464,000 from $710,000 in the third quarter
of 1995.
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KAISER VENTURES INC. AND SUBSIDIARIES
Revenues from ongoing operations as a percentage of total revenues increased to
80% in the third quarter of 1996 from 66% in the third quarter of 1995.
Ongoing Operations. Water lease revenues under the Company's 102-year take-or-
pay lease with Cucamonga were $944,000 during the third quarter of 1996 as
compared to $1,103,000 for the third quarter of 1995. The 14% decrease in water
revenues during the quarter reflects both an adjustment to reflect the actual
amounts being paid by Cucamonga and a reduction, affecting all parties under the
Rialto Basin judgment, in the amount of water that Cucamonga through Fontana
Union can draw from the Colton/Rialto Basin due to low water levels. Although
the Company is continuing to bill Cucamonga at what it believes is the correct
Metropolitan Water District of Southern California ("MWD") rate under the lease
with Cucamonga, the Company has elected to reserve the full amount in dispute
and report revenues on the basis of amounts received. The total amount of lease
payments in dispute as of September 30, 1996 is approximately $550,000. In
addition, MWD has stated that it may refine its rate structure further. The
annual impact of the Colton/Rialto Basin water reduction is estimated to be
approximately $300,000; of which $75,000 was recorded during the third quarter.
Joint venture revenue increased to $642,000 as a result of the $162,000
quarterly project service fee due from PMI plus $480,000 pertaining to the
Company's 10.56% share of PMI's net income for the third quarter, net of
expenses. The Company is recording its investment in PMI on the equity method
and began recording its share of PMI's net income concurrent with conversion of
the Company's preferred stock into common stock at the end of the first quarter
of 1996.
Property redevelopment revenue was $295,000 for the third quarter of 1996 as
compared to $246,000 for the third quarter of 1995. Higher iron ore sales from
one of the Company's California mines more than offset reductions in tenant
rental income at Eagle Mountain.
Interim Activities. Revenues from interim activities for the third quarter of
1996 were $464,000 as compared to $710,000 for the third quarter of 1995. The
35% decrease in revenues from interim activities in the third quarter of 1996 is
primarily attributable to lower levels of service revenues under the amended
Services Agreement with California Steel Industries ("CSI"); lower scrap sales
and slag royalties; and lower miscellaneous revenues.
Resource Operating Costs. Resource operating costs are those costs directly
related to the resource revenue sources. Total resource operating costs for the
third quarter of 1996 declined to $856,000 from $978,000 in the third quarter of
1995. Operations and maintenance costs for the third quarter of 1996 were
$303,000 compared to $403,000 for the third quarter of 1995. This 25% decrease
in operations and maintenance costs was primarily due to lower expenses
associated with the reduced levels of services being provided to CSI and lower
property taxes associated with the portion of the Mill Site Property that was
contributed to PMI for the development of TCS. Administrative support expenses
for the third quarter of 1996 decreased slightly to $553,000 from $575,000 for
the third quarter of 1995.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses for the third quarter of 1996 increased 5% to $812,000
from $771,000 for the third quarter of 1995 due primarily to higher outside
professional and legal expenses.
Net Interest Expense. Net interest expense for the third quarter of 1996, was
$156,000, a decline of 23% from $202,000 in the third quarter of 1995. The
reduction was due primarily to the capitalization of interest expense associated
with the development of certain parcels of the Mill Site Property and higher
interest income being partially offset by the increased amortization of deferred
loan fees associated with the Union Bank credit facility.
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KAISER VENTURES INC. AND SUBSIDIARIES
Income and Income Tax Provision. The Company recorded income before income tax
provision of $521,000 for the third quarter of 1996, a 382% increase from the
$108,000 recorded in the third quarter of 1995. A provision for income taxes of
$225,000 was recorded in the third quarter of 1996 as compared with $46,000 in
the third quarter of 1995. Over 90% of the tax provision in 1996 and 1995 is not
currently payable due primarily to utilization of the Company's net operating
loss carryforwards ("NOLs"). Consequently, pretax income is an important
indicator of the Company's performance.
Net Income. For the third quarter of 1996, the Company reported net income of
$296,000, or $.03 per share, a 377% increase from the $62,000, or $.01 per
share, reported for the third quarter of 1995.
ANALYSIS OF RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
An analysis of the significant components of the Company's resource revenues
for the nine months ended September 30, 1996 and 1995 follows:
<TABLE>
<CAPTION>
9 MONTHS ENDED SEPTEMBER 30,
------------------------------------------
1996 1995 % INC(DEC)
---- ---- ----------
<S> <C> <C> <C>
ONGOING OPERATIONS
Water resource......................................... $3,060,000 $3,260,000 (6%)
Joint venture.......................................... 1,526,000 - 100%
Property redevelopment................................. 835,000 766,000 9%
---------- ----------
TOTAL ONGOING OPERATIONS............................. 5,421,000 4,026,000 35%
---------- ----------
INTERIM ACTIVITIES
Lease and royalty...................................... 849,000 1,191,000 (29%)
Service................................................ 171,000 334,000 (49%)
Miscellaneous.......................................... 361,000 657,000 (45%)
---------- ----------
TOTAL INTERIM ACTIVITIES............................ 1,381,000 2,182,000 (37%)
---------- ----------
TOTAL RESOURCE REVENUES.............................. $6,802,000 $6,208,000 10%
========== ==========
REVENUES AS A PERCENTAGE OF TOTAL
RESOURCE REVENUES:
Ongoing operations..................................... 80% 65%
Interim activities..................................... 20% 35%
---------- ----------
TOTAL RESOURCE REVENUES............................. 100% 100%
========== ==========
</TABLE>
Resource Revenues. Total resource revenues for the first nine months of 1996
were $6,802,000, as compared to $6,208,000 for the first nine months of 1995.
Revenues from ongoing operations increased 35% during the first nine months of
1996 to $5,421,000 from $4,026,000 in the first nine months of 1995, while
revenues from interim activities declined 37% to $1,381,000 from $2,182,000 in
the first nine months of 1995. Revenues from ongoing operations as a percentage
of total revenues increased to 80% in the first nine months of 1996 from 65% in
the first nine months of 1995.
Ongoing Operations. Water lease revenues under the Company's 102-year take-
or-pay lease with Cucamonga were $3,060,000 during the first nine months of 1996
as compared to $3,260,000 for the first nine months of 1995. The 6% decrease in
water revenues during the nine months reflects both an
9
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
adjustment to reflect the actual amounts being paid by Cucamonga and a
reduction, affecting all parties under the Rialto Basin judgment, in the amount
of water that Cucamonga through Fontana Union can draw from the Rialto Basin due
to low water levels. Although the Company is continuing to bill Cucamonga at
what it believes is the correct lease rate under the lease with Cucamonga, the
Company has elected to reserve the full amount in dispute and report revenues on
the basis of amounts received. The total amount of lease payments in dispute as
of September 30, 1996 is approximately $550,000. In addition, MWD has stated
that it may refine its rate structure further. The annual impact of the Rialto
Basin water reduction is estimated to be approximately $300,000; of which
$225,000 was recorded during the first nine months of 1996. Offsetting these
reductions was the July, 1995 increase in water rates of 2.7% by MWD which the
Company believes should be 5.1% for purposes of the CCWD Lease. As noted above,
the Company believes the true increase should be at least 5.1% and has billed
CCWD accordingly. There was no reduction in the Company's 55.53% effective
interest in Fontana Union for 1996. As previously disclosed, the Company's
effective interest in Fontana Union may decline over time due to an increase in
the number of Fontana Union shareholders taking water. However, the Company's
effective interest in Fontana Union's water cannot fall below its equity
interest of 50.88%.
Joint venture revenue increased to $1,526,000 as a result of the $487,000 in
project service fees from PMI plus $1,039,000 pertaining to the Company's 10.56%
share of PMI's net income for the second and third quarters of 1996, net of
expenses. The Company is recording its investment in PMI on the equity method
and began recording its share of PMI's net income concurrent with conversion of
the Company's preferred stock into common stock at the end of the first quarter
of 1996.
Property redevelopment revenues were $835,000 for the first nine months of
1996 as compared to $766,000 for the first nine months of 1995. The 9% increase
from the first nine months of 1995 primarily represents higher iron ore sales
from one of the Company's California mines.
Interim Activities. Revenues from interim activities for the first nine
months of 1996 were $1,381,000 as compared to $2,182,000 for the first nine
months of 1995. As noted above, the 37% decrease in revenues from interim
activities in the first nine months of 1996 is primarily attributable to lower
levels of service revenues under the amended Services Agreement with California
Steel Industries ("CSI"); lower tenant rental income on the portion of the Mill
Site Property that was contributed to PMI in November 1995, for the development
of TCS; lower scrap sales and slag royalties; and lower miscellaneous revenues.
Resource Operating Costs. Resource operating costs are those costs directly
related to the resource revenue sources. Total resource operating costs for the
first nine months of 1996 declined to $2,442,000 from $2,849,000 in the first
nine months of 1995. Operations and maintenance costs for the first nine months
of 1996 were $812,000 compared to $1,186,000 for the first nine months of 1995.
As noted above, this 32% decrease in operations and maintenance costs was
primarily due to lower expenses associated with the reduced levels of services
being provided to CSI and lower property taxes associated with the portion of
the Mill Site Property that was contributed to PMI for the development of TCS.
In addition, Administrative support expenses for the first nine months of 1996
decreased 2% to $1,630,000 from $1,663,000 for the first nine months of 1995 due
primarily to lower depreciation expenses.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses for the first nine months of 1996 increased 6% to
$2,690,000 from $2,530,000 for the first nine months of 1995 due primarily to
higher outside professional and legal expenses.
Net Interest Expense. Net interest expense for the first nine months of 1996,
was $406,000, a decline of 26% from $546,000 in the first nine months of 1995.
The reduction was due primarily to the capitalization of interest expense
associated with the development of certain parcels of the Mill Site
10
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
Property and higher interest income being partially offset by the increased
amortization of deferred loan fees associated with the Union Bank credit
facility.
Income and Income Tax Provision. The Company recorded income before income tax
provision of $1,264,000 for the first nine months of 1996, a 347% increase from
the $283,000 recorded in the first nine months of 1995. A provision for income
taxes of $547,000 was recorded in the first nine months of 1996 as compared with
$123,000 in the first nine months of 1995. Over 90% of the tax provision in 1996
and 1995 is not currently payable and results in a direct credit to equity due
to utilization of the Company's net operating loss carryforwards ("NOLs").
Consequently, pretax income is an important indicator of the Company's
performance.
Net Income. For the first nine months of 1996, the Company reported net
income of $717,000, or $.07 per share, a 348% increase from the $160,000, or
$.02 per share, reported for the first nine months of 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash and Cash Equivalents. The Company defines cash equivalents as highly
liquid debt instruments with original maturities of 90 days or less. Cash and
cash equivalents declined $4,167,000 to $6,770,000 at September 30, 1996 from
$10,937,000 at December 31, 1995. Included in cash and cash equivalents at
September 30, 1996 is $2,297,000 held solely for the benefit of MRC. The
decrease in cash and cash equivalents is due primarily to capital expenditures,
including environmental remediation at the Mill Site, of approximately
$9,117,000 and to additional investments of approximately $2,137,000 in MRC
being offset by net cash proceeds of approximately $3,400,000 from the CSI and
environmental insurance settlements and borrowings under the Union Bank credit
facility of $3,000,000.
Working Capital. During the first nine months of 1996, current assets
decreased $11,213,000 to $9,416,000 while current liabilities declined
$3,236,000 to $7,637,000. The decrease in current assets resulted primarily
from the $4,167,000 decrease in cash and cash equivalents, discussed above, plus
a $7,046,000 decline in accounts receivable due primarily to the receipt of over
$6,000,000 in gross proceeds from the CSI and environmental insurance
settlements. Included in current liabilities is $2,117,000 in accounts payable
and accrued liabilities relating to MRC. As a result, working capital decreased
during the first nine months of 1996 by $7,977,000 to $1,779,000 at September
30, 1996.
Real Estate. Real Estate increased $9,117,000 during the first nine months of
1996 primarily due to the capitalization of environmental remediation and real
estate development costs relating the Mill Site Property.
Investments. The Company's investment in PMI increased $7,316,000 to
$30,307,000 primarily as a result of PMI's initial public offering in March 1996
and the Company's recording of its share of equity in PMI's earnings subsequent
to the public offering. As a result of the initial public offering, the Company
increased its investment in PMI by approximately $6.5 million and recorded
corresponding increases in deferred income taxes and stockholders equity of
approximately $400,000 and $6.1 million, respectively. The Company's investment
in PMI will increase further during the fourth quarter of 1996 as a result of
the additional PMI common stock that will be received from the sale of the
Speedway Business Park property to PMI.
Other Assets. The increase in other assets is primarily related to
capitalized landfill permitting and development costs for MRC.
11
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
Long-term Debt and Other Long-term Liabilities. As of September 30, 1996, the
Company had $8,162,000 in long-term debt of which $5,162,000 pertains to the
note the Company issued as part of the purchase of properties from the Lusk
Joint Ventures in July, 1994 and $3,000,000 pertains to borrowings under its
$20.0 million revolving-to-term credit facility at September 30, 1996.
Minority Interest and Other Liabilities. At September 30, 1996, the Company
had recorded $1,553,000 of minority interest relating to MRC in which the
Company had approximately a 73% equity interest.
Contingent Liabilities. The Company has contingent liabilities more fully
described in the notes to the financial statements.
Capital Resources. The Company expects that its current cash balances and
short-term investments together with: (a) cash provided from operating
activities; (b) proceeds from the CSI and environmental insurance litigation
settlements; and (c) amounts available under its $20,000,000 revolving-to-term
credit facility (less $475,000 in reductions in the borrowing base and
$5,505,000 reserved for financial assurances required by the DTSC and relating
to environmental remediation on the Mill Site Property) will be sufficient to
satisfy both the Company's near-term operating cash requirements and to enable
the Company to continue the development of its long-term projects. To the
extent that additional capital resources are required, such capital will be
raised through bank borrowings, partnerships, joint venture arrangements,
additional equity or asset sale or monetization.
The Company expects to commit, for all of 1996, more than $17.5 million for
capital projects of which approximately $8.9 million will be for required
environmental remediation, approximately $5.6 million will be for real estate
improvement and development of certain parcels at the Company's Mill Site
Property, approximately $2.6 million will be for supporting MRC's landfill
permitting and development, and $410,000 for the Specific Plan and BLM Land
Exchange at Eagle Mountain.
12
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents.............. $ 6,770,000 $10,937,000
Accounts receivable and other, net of
allowance for doubtful accounts of
$833,000 and $494,000, respectively... 2,646,000 9,692,000
------------ -----------
9,416,000 20,629,000
------------ -----------
Investment in common stock of Penske
Motorsports, Inc. (Fair market value of
1,373,625 shares equal to $47,992,000 as
of September 30, 1996)................... 30,307,000 22,991,000
------------ -----------
Investment in Fontana Union Water
Company.................................. 16,108,000 16,108,000
------------ -----------
Real Estate
Land and improvements.................. 29,015,000 22,084,000
Real estate under development.......... 9,750,000 7,564,000
------------ -----------
38,765,000 29,648,000
------------ -----------
Other Assets
Landfill permitting and development.... 4,947,000 1,660,000
Buildings and equipment (net).......... 2,263,000 2,433,000
Other assets and investments........... 1,045,000 1,154,000
------------ -----------
8,255,000 5,247,000
------------ -----------
Total Assets.............................. $102,851,000 $94,623,000
============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
13
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable.......................................... $ 3,431,000 $ 4,065,000
Accrued liabilities....................................... 3,966,000 6,568,000
Current portion of long-term debt......................... 240,000 240,000
------------ -----------
7,637,000 10,873,000
------------ -----------
Long-term Liabilities
Accrued liabilities....................................... 1,291,000 1,111,000
Deferred tax liabilities.................................. 1,118,000 721,000
Groundwater remediation reserve........................... 1,431,000 1,431,000
Environmental remediation reserve......................... 5,500,000 5,500,000
Long-term debt............................................ 8,162,000 5,342,000
------------ -----------
17,502,000 14,105,000
------------ -----------
Total Liabilities............................................ 25,139,000 24,978,000
------------ -----------
Minority Interest and Other Liabilities...................... 1,553,000 948,000
Commitments and Contingencies
Stockholders' Equity
Common stock, par value $.03 per share, authorized
13,333,333 shares; issued and outstanding
10,488,114 and 10,470,614 respectively.................. 315,000 314,000
Capital in excess of par value............................ 67,000,000 60,256,000
Retained earnings since November 15, 1988................. 8,884,000 8,127,000
------------ -----------
Total Stockholders' Equity................................... 76,159,000 68,697,000
------------ -----------
Total Liabilities and Stockholders' Equity................... $102,851,000 $94,623,000
============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
14
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------- -------------------------------
1996 1995 1996 1995
---- ----- ---- ----
<S> <C> <C> <C> <C>
RESOURCE REVENUES
Ongoing Operations
Water resource........................ $ 944,000 $ 1,103,000 $ 3,060,000 $ 3,260,000
Joint ventures........................ 642,000 --- 1,526,000 ---
Property redevelopment................ 295,000 246,000 835,000 766,000
----------- ----------- ----------- -----------
Total ongoing operations............. 1,881,000 1,349,000 5,421,000 4,026,000
----------- ----------- ----------- -----------
Interim Activities
Lease and royalty..................... 293,000 307,000 849,000 1,191,000
Service............................... 57,000 101,000 171,000 334,000
Miscellaneous......................... 114,000 302,000 361,000 657,000
----------- ----------- ----------- -----------
Total interim activities............. 464,000 710,000 1,381,000 2,182,000
----------- ----------- ----------- -----------
Total resource revenues.............. 2,345,000 2,059,000 6,802,000 6,208,000
----------- ----------- ----------- -----------
RESOURCE OPERATING COSTS
Operations and maintenance............. 303,000 403,000 812,000 1,186,000
Administrative support expenses........ 553,000 575,000 1,630,000 1,663,000
----------- ----------- ----------- -----------
Total resource operating costs....... 856,000 978,000 2,442,000 2,849,000
----------- ----------- ----------- -----------
INCOME FROM RESOURCES................... 1,489,000 1,081,000 4,360,000 3,359,000
Corporate general and administrative
expenses............................. 812,000 771,000 2,690,000 2,530,000
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS.................. 677,000 310,000 1,670,000 829,000
Net interest expense (income).......... 156,000 202,000 406,000 546,000
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAX PROVISION...... 521,000 108,000 1,264,000 283,000
Income tax provision
Currently payable..................... 16,000 3,000 39,000 9,000
Deferred tax expense credited to
equity............................... 209,000 43,000 508,000 114,000
----------- ----------- ----------- -----------
NET INCOME.............................. $ 296,000 $ 62,000 $ 717,000 $ 160,000
=========== =========== =========== ===========
EARNINGS PER SHARE...................... $ .03 $ .01 $ .07 $ .02
=========== =========== =========== ===========
Weighted Average Number of Shares
Outstanding............................ 10,708,000 10,653,000 10,722,000 10,652,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
15
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................................. $ 717,000 $ 160,000
Provision for income tax which is credited to equity................... 508,000 114,000
Equity income in Penske Motorsports Inc................................ (1,039,000) ---
Depreciation and amortization.......................................... 538,000 379,000
Gain on sale of equipment.............................................. --- (11,000)
Allowance for doubtful accounts........................................ 339,000 241,000
Changes in assets:
Accounts receivable and other........................................ 6,707,000 355,000
Other assets......................................................... --- (4,000)
Changes in liabilities:
Long term accrued liabilities........................................ 180,000 ---
Current liabilities.................................................. (3,419,000) (350,000)
------------ -----------
Net cash flows from operating activities............................... 4,531,000 884,000
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Short-term investments and marketable securities....................... --- 3,550,000
Minority interest and other liabilities................................ 605,000 1,216,000
Investment in Penske Motorsports, Inc.................................. 236,000 (88,000)
Capital expenditures................................................... (12,261,000) (6,162,000)
Other investments...................................................... (219,000) (209,000)
------------ -----------
Net cash flows from investing activities............................... (11,639,000) (1,693,000)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock............................................... 121,000 13,000
Borrowing under revolver-to-term credit facility....................... 3,000,000 ---
Environmental insurance proceeds....................................... --- 8,101,000
Principal payments on note payable..................................... (180,000) (180,000)
------------ -----------
NET CASH FLOWS FROM FINANCING ACTIVITIES................................ 2,941,000 7,934,000
------------ -----------
NET CHANGES IN CASH AND CASH EQUIVALENTS................................ (4,167,000) 7,125,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.......................... 10,937,000 3,205,000
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD.......................... $ 6,770,000 $10,330,000
============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
16
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN
---------------------- EXCESS OF RETAINED
SHARES AMOUNT PAR VALUE EARNINGS TOTAL
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 10,470,614 $314,000 $60,256,000 $8,127,000 $68,697,000
---------- -------- ----------- ---------- -----------
Increase in investment in
Penske Motorsports, Inc.
due to public offering....... --- --- 6,116,000 --- 6,116,000
Issuance of shares of
common stock............... 17,500 1,000 120,000 --- 121,000
Net income................... --- --- --- 717,000 717,000
Provision for income tax,
credited to equity......... --- --- 508,000 --- 508,000
Balance at September 30, 1996... 10,488,114 $315,000 $67,000,000 $8,844,000 $76,159,000
========== ======== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
17
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The unaudited, consolidated financial statements as of September 30, 1996, and
for the three and nine-month periods ended September 30, 1996 and 1995, as well
as related notes should be read in conjunction with the audited consolidated
financial statements and related notes as of and for the year ended December 31,
1995. In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary (all of which are normal and/or
recurring in nature) to present fairly the Company's financial position at
September 30, 1996, and results of operations and cash flows for the three and
nine-month periods ended September 30, 1996 and 1995.
The Company has reclassified certain 1995 quarterly information to conform
with the 1996 presentation.
NOTE 2. PENSKE MOTORSPORTS, INC.
In March 1996, Penske Motorsports, Inc. ("PMI") effected a recapitalization
resulting in PMI ownership of the outstanding shares of Michigan International
Speedway, Inc., Pennsylvania International Raceway, Inc., The California
Speedway Corporation ("TCS"), Motorsports International Corp., Competition Tire
West, Inc. and Competition Tire South, Inc. Subsequent to the recapitalization,
PMI completed an initial public offering ("IPO") by issuing 3,737,500 shares of
common stock at a price to the public of $24 per share. The proceeds to PMI,
after underwriting discounts and commissions and other offering expenses, were
approximately $83.1 million. As a result of the IPO, the Company recorded,
during the second quarter of 1996, an increase in its equity investment in PMI
of $6,513,000 and corresponding increases in deferred income taxes and capital
in excess of par value of $397,000 and $6,116,000, respectively.
As an additional result of the IPO, the Company began recording it's share of
net income in the earnings of PMI effective April 1, 1996. Due to the
concentration of motor sport racing events between April and September, PMI's
operations have been, and will continue to be, highly seasonal. PMI has no
current plans to host events in the first and fourth quarters at it existing
facilities (including TCS). As a result, the Company's reported share of
undistributed equity in the earnings of PMI will likely be positive (income) in
the second and third quarters and negative (loss) in the first and fourth
quarters.
Subsequent to the end of the third quarter, the Company formally agreed to
sell approximately 54 acres (net) of the Mill Site Property, known as the
Speedway Business Park, to PMI for $5.0 million in cash and approximately $8.35
million in PMI stock or approximately 254,300 shares at $32.84/share. The
transaction will close during December, 1996 and will result in a gain of
approximately $6.7 million. Once this transaction is completed, the Company's
interest in PMI will increase to approximately 12.2%.
18
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
NOTE 3. WATER RESOURCE REVENUE
The Company, through a wholly-owned subsidiary, Fontana Water Resources, Inc.,
leases its 50.88% ownership of the capital stock of Fontana Union, a mutual
water company, to Cucamonga County Water District ("Cucamonga") pursuant to a
102-year take-or-pay lease (the "Cucamonga Lease"). The Company continues its
litigation with Cucamonga in San Bernardino County Superior Court to resolve a
dispute over the interpretation of the Cucamonga Lease. The dispute centers upon
whether the Lease Rate increased by at least 2.7% or by 5.1% or greater if the
Cucamonga Lease is interpreted as the Company asserts to include all the changed
rates and items implemented by Metropolitan Water District of Southern
California ("MWD"), as of July 1, 1995. Cucamonga continues to pay under the
terms of the Cucamonga Lease, but at the 2.7% rate increase as opposed to the
higher Lease Rate that the Company maintains it is entitled to receive pursuant
to the Cucamonga Lease. Although the Company is continuing to bill Cucamonga at
what it believes is the correct lease rate under the lease with Cucamonga, the
Company has elected to reserve the full amount in dispute and report revenues on
the basis of amounts received. The total amount of lease payments in dispute as
of September 30, 1996 is approximately $550,000.
NOTE 4. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL CONTINGENCIES
The Company currently estimates that as of September 30, 1996, its remediation
costs for the balance of its land will be between $13,000,000 and $23,000,000,
depending upon which approved remediation alternatives are eventually selected.
The Company anticipates recovery of these costs through redevelopment of the
property, primarily in connection with specific redevelopment projects or joint
ventures. The West End and Valley Boulevard Properties do not have any known
material environmental problems and are not subject to the 1988 Consent Order
with the California Environmental Protection Agency, Department of Toxic
Substances Control ("DTSC"). Although extensive environmental investigations
have been conducted on the site and are ongoing, there can be no assurance that
the actual amount of environmental remediation expenditures will not
substantially exceed those currently anticipated or that additional areas of
contamination may not be identified.
Furthermore, while the Company has monitored certain groundwater wells in the
past, the DTSC requested and the Company will implement a supplemental
groundwater monitoring system. The Company has settled obligations of
groundwater contamination with the California Regional Water Quality Control
Board. The settlement required a $1,500,000 cash payment by the Company which
was made in February, 1994, and the contribution of 1,000 acre feet of water
annually for 25 years to a water quality project. These water rights are
unrelated to those leased to Cucamonga County Water District. In 1995, the
Company contributed 18,000 acre feet of its water in storage thus satisfying the
first 18 years of its obligation. The Company remains contingently liable for
any impacts the groundwater plume may have on water wells owned by third
parties. Recently the City of Ontario, California commenced litigation against
the Company alleging that the Company has contaminated one of its municipal
wells. The Company disputes the allegation of the City of Ontario and believes
sufficient amounts have been accrued for this contingency.
19
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
PART II
ITEM 1. LEGAL PROCEEDINGS
As discussed in the Company's Form 10-K Report for 1995 and its 1996 first and
second quarter Form 10-Q Report, the Company is engaged in certain claims and
litigation, which if resolved adverse to the Company or the Company's interests,
would have a material adverse impact on the Company. There have been no
material developments in any legal proceeding except as noted below and as
discussed in the "Introduction - Business Update" section of this Form 10-Q
Report.
CITY OF ONTARIO LITIGATION
In February, 1996, the City of Ontario, California served on the Company a
complaint filed in San Bernardino County Superior Court (City of Ontario v.
Kaiser Ventures Inc., et al.; Case No. RCV 17334). In sum, the complaint
alleges there is a plume or plumes containing organic carbon, dissolved solids
and mercury originating from the Company's Mill Site Property due to activities
of KSC, and/or a former tenant of the Mill Site Property, that have impacted one
of the City of Ontario's water wells. Ontario seeks reimbursement for remedial
costs, replacement of the allegedly impacted well and replacement or
refurbishment of related facilities.
The Company challenged Ontario's ability to bring this litigation given the
KSC bankruptcy and the discharge granted to the Company. In April, 1996,
Ontario brought a declaratory judgment action in the U.S. District Court for the
District of Colorado in Bankruptcy ("the U.S. Bankruptcy Court") against the
Company, (City of Ontario v. Kaiser Ventures Inc., Adversary Proceeding No. 96-
1215 MSK). In the U.S. Bankruptcy Court action, Ontario in effect sought a
determination that the matters and damages alleged in its California lawsuit
were not discharged as a part of the KSC bankruptcy proceedings.
Kaiser and the City have reached a settlement concerning the matter before the
U.S. Bankruptcy Court which settlement was approved by the U.S. Bankruptcy Court
in October. Under the terms of the settlement, Kaiser has agreed to waive its
bankruptcy-related defenses to the City's prosecution of claims for groundwater
contamination caused by mercury or other priority pollutants. In return, the
City agrees to dismiss the California litigation as to all claims related to
total dissolved solids, total dissolved carbons and sulfates, and to be bound
by the 1993 Settlement Agreement between Kaiser and the California Regional
Water Quality Control Board. It is anticipated that the City will file a
revised complaint against the Company by year end.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
20
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
See the "Introduction" Section of this Form 10-Q Report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
--------
Exhibit 10.1 - Purchase Agreement and Escrow Instructions dated
October 8, 1996, among the Company and The California Speedway
Corporation and Penske Motorsports, Inc.
Exhibit 27 - Financial Data Schedule for 3rd quarter 10-Q.
B. Reports on Form 8-K.
--------------------
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
KAISER VENTURES INC.
Dated: November 13, 1996 /s/ James F. Verhey
----------------------------
James F. Verhey
Principal Financial Officer
21
<PAGE>
EXHIBIT 10.1
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
AMONG
KAISER VENTURES INC.
(SELLER),
THE CALIFORNIA SPEEDWAY CORPORATION.
(BUYER)
AND
PENSKE MOTORSPORTS, INC.
(PMI)
DATED: OCTOBER 8, 1996
<PAGE>
INDEX
<TABLE>
<CAPTION>
ITEM PAGE NO.
---- -------
<S> <C> <C>
ARTICLE 1 RECITALS..................................................... 1
1.1 ............................................................. 1
1.2 ............................................................. 1
ARTICLE 2 AGREEMENT OF PURCHASE AND SALE............................... 1
2.1 Purchase Price............................................... 1
2.2 Payment of Purchase Price.................................... 2
2.3 Conditional Demand Registration Rights Agreement............. 3
ARTICLE 3 ESCROW....................................................... 3
3.1 Opening of Escrow............................................ 3
3.2 Delivery of Documents to Escrow.............................. 3
3.3 Close of Escrow.............................................. 4
ARTICLE 4 REVIEW OF CONDITION OF TITLE................................. 4
ARTICLE 5 ADDITIONAL COVENANTS AND AGREEMENTS.......................... 5
5.1 Cooperation.................................................. 5
5.2 Federal and State Withholding Requirements................... 6
5.3 Shareholder's Agreement...................................... 6
5.4 Registration Rights Agreement................................ 6
ARTICLE 6 POST AGREEMENT AND POST CLOSING OBLIGATIONS.................. 6
6.1 Improvements................................................. 6
6.2 Buyer's Compliance with Environmental Laws and
Indemnification for Noncompliance............................ 6
6.3 Sewer Service................................................ 9
6.4 Covenant to Cooperate, Easement and Access................... 9
6.5 Hazardous Materials.......................................... 10
ARTICLE 7 ACKNOWLEDGMENTS, REPRESENTATIONS AND WARRANTIES.............. 14
7.1 Buyer's Acknowledgments, Representations and Warranties...... 14
7.2 Seller's Acknowledgments, Representations and Warranties..... 17
ARTICLE 8 THE CLOSE OF ESCROW.......................................... 18
8.1 Conditions and Close of Escrow............................... 18
8.2 Termination Based on Failure to Close by Closing Date........ 20
8.3 Prorations................................................... 21
8.4 Seller's Fees and Costs...................................... 21
8.5 Buyer's Fees and Costs....................................... 21
ARTICLE 9 REMEDIES..................................................... 21
9.1 Seller's Remedies............................................ 21
</TABLE>
i
<PAGE>
INDEX - CONTINUED
<TABLE>
<CAPTION>
ITEM PAGE NO.
---- -------
<S> <C> <C>
9.2 Buyers Remedies................................................ 21
9.3 Right of First Refusal After Seller's Default.................. 21
9.4 Dispute Resolution............................................. 23
ARTICLE 10 GENERAL PROVISIONS............................................. 24
10.1 PMI as a Party to this Agreement............................... 24
10.2 Time of the Essence and Strict Construction.................... 24
10.3 Notice and Demands............................................. 24
10.4 Captions for Convenience....................................... 25
10.5 Severability................................................... 25
10.6 Governing Law.................................................. 25
10.7 No Oral Amendment or Modification.............................. 25
10.8 Relationship of Seller and Buyer............................... 26
10.9 Attorneys' Fees................................................ 26
10.10 Amended and Successor Statutes and Regulations................. 26
10.11 Entire Agreement............................................... 26
10.12 Exhibits and Schedules......................................... 26
10.13 Successors and Assigns......................................... 26
10.14 Eminent Domain................................................. 27
10.15 Recordation.................................................... 27
10.16 Resolution of Any Claim for Payment by One Party to Another.... 27
10.17 Counterparts................................................... 27
EXHIBIT "A" Conditional Demand Registration Rights Agreement
(Section 3.2.3)
EXHIBIT "B" Grant Deed (Section 3.2)
EXHIBIT "C" Investor Representation Certificate (Section 3.2)
</TABLE>
ii
<PAGE>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
This PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS ("AGREEMENT") is made and
entered into effective the 8/th/ day of October, 1996 ("EFFECTIVE DATE"), by and
among Kaiser Ventures Inc., a Delaware corporation ("SELLER"), The California
Speedway Corporation, a Delaware corporation("BUYER"), and Penske Motorsports,
Inc., a Delaware corporation ("PMI"), to the limited extent expressly provided
herein, with reference to the facts set forth below. Buyer and Seller are
sometimes referred to herein collectively as the "PARTIES" or individually as a
"PARTY."
ARTICLE 1
RECITALS
1.1 Seller is the owner of that certain real property, situated in the
County of San Bernardino, State of California, described as Parcels 1, 2 and 3
of Parcel Map No 14723, as per map recorded in Book 179 of Parcel Maps, pages 9
through 13 inclusive of Maps in the office of the County Recorder of said county
(the "PROPERTY").
1.2 Buyer is a wholly owned subsidiary of PMI. PMI is a party to this
Agreement only to the extent expressly specified herein.
1.3 Seller desires to sell the Property to Buyer upon the terms and
conditions set forth in this Agreement and Buyer desires to purchase the
Property as set forth herein.
NOW THEREFORE, in consideration of the mutual agreements set forth herein
and for other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
ARTICLE 2
AGREEMENT OF PURCHASE AND SALE
2.1 PURCHASE PRICE. Subject to the terms and conditions of this
Agreement, Buyer hereby agrees to purchase the Property from Seller and Seller
hereby agrees to sell the Property
1
<PAGE>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
to Buyer. The purchase price ("PURCHASE PRICE") for the Property is Thirteen
Million, Three Hundred Fifty-Two Thousand One Hundred Seventy Dollars
($13,352,170.00). The Purchase Price shall be in the form of Five Million
Dollars ($5,000,000.00) in cash and Eight Million, Three Hundred Fifty-Two
Thousand One Hundred Seventy Dollars ($8,352,170.00) in the $.01 par value
common stock of PMI. The number of shares of PMI's common stock to be issued to
Seller shall be determined by taking the average of the Bid and Ask Price for
the thirty calendar days prior to October 7, 1996, and determining an average
per share price for said thirty (30) day period and dividing such average per
share price into Eight Million Three Hundred Fifty-Two Thousand One Hundred
Seventy Dollars ($8,352,170.00) rounded to the nearest whole share (the "PMI
STOCK").
2.2 PAYMENT OF PURCHASE PRICE. The cash portion of the Purchase Price
shall be paid in good funds and other consideration in accordance with the
provisions set forth herein. The portion of the Purchase Price payable in PMI
Stock shall be satisfied by the delivery of a stock certificate in the name of
Seller denominated in the number of shares of PMI Stock computed in accordance
with Section 2.1. Seller acknowledges and agrees the PMI Stock shall be
restricted stock and subject to the restrictions, and restrictive legends,
described in Section 5.3 below and elsewhere in this Agreement and as provided
on the stock certificates for PMI shares currently held by Seller.
2.2.1 DEPOSIT. Upon the opening of escrow in accordance with Section
-------
3.1 below, Buyer shall deposit into Escrow (as defined below) the amount of
Fifty Thousand Dollars ($50,000.00) (the "CASH DEPOSIT"). The Cash Deposit
shall be credited and applied to the cash portion of the Purchase Price at the
Close of Escrow.
2.2.2 BALANCE OF PAYMENT. On or before one business day prior to the
------------------
Closing Date, Buyer shall deposit the balance of the cash portion of the
Purchase Price in the amount of Four Million, Nine Hundred Fifty Thousand
Dollars ($4,950,000.00) into Escrow, which shall be released to Seller
immediately on the Close of Escrow. On or before one business day prior to the
Closing Date, Buyer or PMI shall also deposit into Escrow a stock certificate in
the name of Seller for the PMI Stock, as determined in Section 2.1, which shall
also be released to Seller immediately on the Close of Escrow.
2
<PAGE>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
2.3 CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT. As additional
consideration for the sale of the Property, on or before one business day prior
to the Closing Date, PMI agrees to enter into and deposit into Escrow a
Conditional Demand Registration Rights Agreement in the form attached hereto as
Exhibit "A", which shall be released to Seller immediately on the Close of
Escrow.
ARTICLE 3
ESCROW
3.1 OPENING OF ESCROW. Within two business days after the Effective Date
of this Agreement, Buyer, Seller and PMI shall open escrow (the "ESCROW") by
depositing with Chicago Title Insurance Company, San Bernardino office ("ESCROW
AGENT") a fully executed original of this Agreement for use as escrow
instructions and Escrow Agent shall execute the consent of Escrow Agent which
appears at the end of this Agreement and deliver a fully executed consent to
Buyer, Seller and PMI. If Escrow Agent requires additional instructions, the
parties agree to deliver into Escrow any such deletions, substitutions and
additions which do not materially alter the terms of this Agreement. If there
is any conflict between the provisions of this Agreement and any additional or
supplementary Escrow instructions, the terms of this Agreement shall control.
3.2 DELIVERY OF DOCUMENTS TO ESCROW.
3.2.1 DEPOSIT OF GRANT DEED. On or before one business day prior to
---------------------
the Close of Escrow, Seller shall sign, acknowledge and deposit into Escrow a
grant deed in the form attached hereto as Exhibit "B" and incorporated herein
(the "GRANT DEED") conveying the property to Buyer. Provided that all terms and
conditions of this Agreement have been satisfied, on the Close of Escrow, Escrow
Agent shall immediately record the Grant Deed on behalf of Buyer.
3.2.2 DEPOSIT OF INVESTOR REPRESENTATION CERTIFICATE. On or before
----------------------------------------------
one day prior to the Close of Escrow, Seller shall also deposit into Escrow the
Investor Representation
3
<PAGE>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
Certificate in the form attached hereto as Exhibit "C" and incorporated herein
which shall be released to Buyer immediately on Close of Escrow.
3.2.3 DEPOSIT OF CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT.
-----------------------------------------------------------
On or before one day prior to the Close of Escrow, PMI shall sign and deposit
into Escrow two originals of the Conditional Demand Registration Rights
Agreement in the form attached hereto as Exhibit "A" and incorporated herein.
On the Close of Escrow, Seller shall execute the Conditional Demand Registration
Rights Agreements and one shall be immediately delivered to Seller and the other
shall be immediately delivered to Buyer.
3.2.4. DEPOSIT OF OTHER DOCUMENTS. On or before one day prior to the
--------------------------
Close of Escrow, Seller, PMI and/or Buyer shall execute, acknowledge, deliver,
and deposit into Escrow, as applicable, any document required by the Escrow
Agent in order to convey title to Buyer as contemplated herein and to otherwise
carry out the terms of this Agreement.
3.3 CLOSE OF ESCROW. Unless the parties mutually agree in writing upon a
different Closing Date, Escrow shall close on or before December 31, 1996 (the
"CLOSE OF ESCROW" or the "CLOSING DATE"), subject to the satisfaction or waiver
of the conditions described in Section 8.1.
ARTICLE 4
REVIEW OF CONDITION OF TITLE
Seller shall within ten (10) days after the Effective Date deliver to Buyer
a copy of a Preliminary Title Report ("PRELIMINARY REPORT"), prepared by Chicago
Title Insurance Company (the "TITLE COMPANY") with respect to the Property
containing such exceptions as the Title Company would specify in the title
policy, along with copies of all recorded documents, and other matters,
referenced in the Preliminary Report and platted easements. Buyer shall deliver
notice of disapproval of any exception or other title matter to Seller in
writing on or before the end of a twenty-one (21) day period ("REVIEW PERIOD")
commencing with the later of the Effective Date or receipt of the Preliminary
Report and a copy of all recorded documents referenced in the Preliminary
Report. If Buyer fails to notify Seller within the Review Period that Buyer
disapproves of any such exceptions to title, Buyer shall be deemed to have
approved the condition of title to the Property. If Buyer objects to any
exception(s) to title, and
4
<PAGE>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
such exception is capable of being removed by the payment of money by Seller
("CURABLE EXCEPTION"), except as noted below, Seller shall have ten (10)
calendar days after receipt of Buyer's objection to any exception to title, to
notify Buyer in writing that Seller shall either (a) cause any disapproved
exception(s) to be removed from title by the Closing of Escrow, or (b) obtain,
at Seller's expense, an endorsement to the Title Policy insuring Buyer against
loss by reason of such disapproved exception, acceptable to Buyer in Buyer's
sole and absolute discretion (in which case, Seller may extend the Closing of
Escrow for such period as shall be required to effect such cure or the issuance
of such title endorsement, but not beyond ten (10) calendar days).
Notwithstanding the foregoing, however, Seller shall not be obligated to cause,
or pay a total amount in excess of One Hundred Thousand Dollars ($100,000) for,
the removal or cure of any disapproved exception(s) to title or the obtaining of
any endorsements to the Title Policy. If any title exception disapproved by
Buyer is not a Curable Exception or is a Curable Exception but the total
cumulative amount to cure the Curable Exception(s) exceeds One Hundred Thousand
Dollars ($100,000), Buyer shall have ten (10) calendar days after Seller informs
Buyer in writing that any disapproved exception is not a Curable Exception or
will cost more than a total of One Hundred Thousand Dollars ($100,000) in which
to notify Seller that (i) Buyer revokes its disapproval of such exception(s) and
will proceed with the purchase without any reduction in the Purchase Price and
take title to the Property subject to such exception(s) or (ii) Buyer will
terminate this Agreement without liability to Seller. As used herein, "PERMITTED
EXCEPTIONS" means those exceptions specified in the Preliminary Report and which
Buyer has, in its discretion, accepted in accordance with the foregoing
procedure.
ARTICLE 5
ADDITIONAL COVENANTS AND AGREEMENTS
5.1 COOPERATION. Buyer, Seller and PMI acknowledge that it may be
necessary to execute documents other than those specifically referred to herein
in order to complete the acquisition of the Property on the terms and conditions
contemplated by this Agreement. Buyer, Seller and PMI hereby agree to cooperate
with each other by executing, acknowledging, delivering, and recording such
other documents or taking such other action as may be reasonably necessary or
appropriate to complete this transaction in accordance with the intent of the
parties as evidenced in this Agreement.
5
<PAGE>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
5.2 FEDERAL AND STATE WITHHOLDING REQUIREMENTS. The parties agree to
comply with the requirements of Section 1445 of the Internal Revenue Code,
California withholding requirements, and any regulations promulgated thereunder.
5.3 SHAREHOLDER'S AGREEMENT. Each of PMI and Seller agree that they have
each executed and delivered a Shareholder's Agreement dated as of November 22,
1995, as amended (the "SHAREHOLDERS AGREEMENT"), which, Shareholders Agreement
contains among other things, certain restrictions on the shares of PMI's common
stock owned by each of PMI and Seller. PMI and Seller hereby agree that the
Shareholders' Agreement is amended so that the defined term "STOCK" in the
Shareholder's Agreement includes for all purposes the PMI Stock issued by PMI to
Seller pursuant to this Agreement. In addition, the first portion of the second
sentence of Section 1.2 of the Shareholders Agreement shall be amended to read
"In addition, there shall be no restriction on a Party pledging its Stock to a
bona fide third party as collateral for a loan, bond, financial assurance or
other similar borrowing, potential borrowing, or obligation; provided ..." A
bona fide party shall be a party other than Seller or an affiliate or Seller.
5.4 REGISTRATION RIGHTS AGREEMENT. Each of PMI and Seller agree that they
have each executed and delivered a Registration Rights Agreement dated as of
March 21, 1996, which Registration Rights Agreement grants among other things,
Seller certain "piggyback" registration rights with regard to PMI's common stock
owned by Seller. PMI and Seller hereby agree that the Registration Rights
Agreement is amended so that the defined term "SHARES" in the Registration
Rights Agreement includes for all purposes the PMI Stock issued by PMI to Seller
pursuant to this Agreement.
ARTICLE 6
POST AGREEMENT AND POST CLOSING OBLIGATIONS
6.1 IMPROVEMENTS. Seller shall have no liability or responsibility for
improvements on-site or off-site (except for agreed upon sewer improvements and
the costs related thereto as is more particularly set forth in Section 6.3) for
the benefit of the Property after the Effective
6
<PAGE>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
Date; provided, however, Seller shall have the continuing obligation to
remediate or remove Hazardous Materials on the Property, if any, as described in
Section 6.5.
6.1.1 BUYER'S IMPROVEMENTS. Buyer desires to commence construction
--------------------
of certain improvements associated with The California Speedway project on or
adjoining the Property ("BUYER'S IMPROVEMENTS") prior to the Closing Date. As
of the Effective Date Seller hereby grants Buyer an irrevocable license until
January 1, 1997, to construct and maintain Buyer's Improvements on or associated
with the Property. No fee shall be payable by Buyer for the license. Buyer's
Improvements will be constructed and maintained at Buyer's sole cost and
expense. Should Seller not consummate the sale of the Property to Buyer as
provided herein on or before December 31, 1996, the license shall be revocable
by Seller in whole or in part, but shall continue until such time as Seller in
good faith reasonably determines that a removal of all or any portion of Buyer's
Improvements is desirable to market or develop all or any portion of the
Property. Accordingly, in the event the sale of the Property to Buyer is not
consummated on or before midnight, December 31, 1996, should Seller so
determine, upon Seller's written notice to Buyer, Buyer, at its expense, shall
immediately remove Buyer's Improvements as necessary or appropriate and restore
the Property to substantially its condition prior to the installation of Buyer's
Improvements. During the period of the license, Buyer shall maintain insurance
covering the Buyer's Improvements, including liability insurance, in amounts and
from carriers as reasonably requested by Seller naming Seller as an additional
insured. Buyer shall promptly pay all contractors and subcontractors involved
in the construction or maintenance of the Buyer's Improvements except that Buyer
may in good faith dispute any portion of any bill or invoice associated with the
construction or maintenance of the Buyer's Improvements. Buyer shall permit no
liens or encumbrances to be placed on the Property (unless Buyer provides to
Seller or the Title Company payment bonds covering the same and pending the
outcome of the dispute). Buyer shall indemnify, defend, and hold Seller and its
officers, directors, shareholders, partners, employees, affiliates, and assigns
(collectively the "SELLER INDEMNIFIED PARTIES") harmless from and against all
liability, obligations, claims, damages, penalties, losses, causes of action,
costs, and expenses (including attorneys' fees, expert witness fees, consulting
and other professional fees) imposed upon, incurred by or asserted against the
Seller Indemnified Parties as a result of Buyer's Improvements including,
7
<PAGE>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
without limitation, the construction and/or maintenance Buyer's Improvement, or
Buyer's, its agents or other third party actions on the Property.
6.1.2 FEES. Except as otherwise expressed or provided herein and if
----
the Property is sold to Buyer as provided, herein, from and after the Effective
Date, Buyer shall be responsible for and obligated to pay all fees, assessments,
special taxes or in-lieu fees encumbering or other use related to the Property
or required by any governmental agency, assessment district, community
facilities district, fee district or any other similar entity for or in
connection with the improvement of the Property.
6.1.3 NO OBLIGATION FOR OTHER IMPROVEMENTS. Seller is not obligated
------------------------------------
in any way to construct any improvements on the Property. Buyer shall have the
sole responsibility for processing approvals and construction of any and all
improvements on the Property. All expenses, responsibilities, and conditions
associated with governmental approvals for the development of the Property shall
be assumed by and be the sole responsibility of Buyer from and after the Closing
Date; provided, however, that all such expenses prior to the Closing Date shall
also be the responsibility of Buyer to the extent they are imposed directly as a
result of the construction and maintenance of Buyer's Improvements.
6.2 BUYER'S COMPLIANCE WITH ENVIRONMENTAL LAWS AND INDEMNIFICATION FOR
NONCOMPLIANCE. During the term of the license granted in Section 6.1.1, Buyer
specifically covenants and agrees to timely and fully comply with all applicable
Environmental Laws (as defined in Section 6.5.2), and shall not allow the
contamination of the Property (including, but not limited to, any building,
surrounding property, the surface, subsurface, water and air) with Hazardous
Materials. Furthermore, Buyer shall not, nor shall it allow any of its agents
to, use, store, handle or treat Hazardous Materials on the Property except in
full compliance with Environmental Laws. Buyer shall indemnify, defend, and
hold the Seller Indemnified Parties harmless from and against all liability,
obligations, claims, damages, penalties, losses, causes of action, costs, and
expenses (including attorneys' fees, expert witness fees, consulting and other
professional fees) imposed upon incurred by or asserted against the Seller
Indemnified Parties as a result of any violation or asserted violation of or
failure to timely or fully comply with Environmental Laws by Buyer, or its
agents or as a result of any contamination to the Property
8
<PAGE>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
or other property (including, but not limited to, improvements, surface,
subsurface water and air) or any allegations related thereto.
6.3 SEWER SERVICE. Seller, or a wholly owned subsidiary of Seller, will
provide sewer service to the Property subject to and in accordance with that
certain Sewer Services Agreement dated November 21, 1995, between Seller and
Speedway Development Corporation (which corporation merged into The California
Speedway Corporation), except that the charge for such service shall be
determined by mutual agreement at the time Buyer's development plans for the
Property have been completed and prior to the start of construction of the
improvements contemplated in the development plans. The Sewer Services
Agreement shall be deemed amended to include the obligations specified in this
Section 6.3. In the event Buyer and Seller are unable to reach a mutual
agreement on the additional sewer service charges, Buyer and Seller shall submit
such dispute to the dispute resolution procedures specified in Section 9.4. For
example, if the Property is used for parking to serve the seating currently
planned for Phase 1 for The California Speedway (approximately 70,000 seats),
there will be no anticipated increase in sewer usage. However, if a museum is
placed on the Property, there may be increased usage of the sewer service
resulting in the need to negotiate a new sewer service charge. Should the sewer
plant existing at that time not serve or have enough capacity to serve the
Property, and Buyer determines it wants the service provided by Seller, Buyer
shall pay all costs necessary to serve and increase the capacity of the sewer
system and plant and its ability to handle the resulting influent and effluent.
In the event Buyer should at any time modify the development on the Property or
increase its use so that the sewer system and plant may be impacted, the Parties
shall again in good faith negotiate the charge for sewer service in accordance
with the procedures set forth in this Section 6.3.
6.4 COVENANT TO COOPERATE, EASEMENTS AND ACCESS. Seller and Buyer
acknowledge that each owns property other than the Property within the area that
is generally known as the former Kaiser Mill Site. Seller and Buyer agree to
cooperate with each other to effect the development of their respective
properties so long as that cooperation does not materially adversely affect the
cooperating Party's property, in the reasonable determination of the cooperating
Party. The Property, at no cost to Seller, shall be burdened with appropriate
access and right of way easements for the benefit of Seller and its
subsidiaries, as and if such
9
<PAGE>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
easements shall be mutually agreed upon by Buyer and Seller. In addition, Seller
and its subsidiaries shall have the right, without cost, to use any existing or
future easement on or adjoining the Property dedicated for any utility use
(i.e., a use related to water, sewer, gas, electricity, telephone, fiber optics,
etc., but public access or a street would not be a utility use) provided that
Seller shall be responsible for all the costs of restoring the Property in
substantially the same condition as prior to the use of any utility easement. In
no event shall Seller's exercise of any utility easement materially interfere
with Buyer's use of the Property. Seller, its subsidiaries and their authorized
representatives shall have access across or on the Property for the limited
purposes of installing, maintaining or monitoring any utilities, the water
system, the By-Products Area Cap, groundwater monitoring wells or any other
similar item and such other items as may be mutually agreed upon by Seller and
Buyer.
6.5 HAZARDOUS MATERIALS.
6.5.1 HAZARDOUS MATERIALS DEFINED. For the purposes of this
---------------------------
Agreement, "Hazardous Materials" shall mean and refer to any material or
substance which as of the Closing Date is (i) defined or listed as a "hazardous
waste", "extremely hazardous waste", "restrictive hazardous waste", "hazardous
substance", "hazardous material", "hazardous chemical", "extremely hazardous
substance", "toxic substance", "toxic pollutant", "pollutant", "pollution",
"regulated substance", "pesticide", "contaminant", "hazardous air pollutant", or
words of similar import, or considered a waste, condition of pollution, or
nuisance, pursuant to the laws of California and/or the United States; (ii)
gasoline, diesel fuel, oil, used oil, petroleum, or a petroleum product or
fraction thereof; (iii) asbestos and asbestos-containing construction materials
as defined by federal or state law, by weight, of asbestos; (iv) substances
known by the State of California or the United States to cause cancer and/or
reproductive toxicity; (v) toxic, corrosive, flammable, infectious, radioactive,
mutagenic, explosive or otherwise hazardous substances which are or become
regulated by any governmental agency or instrumentality of the United States, or
any state or any political subdivision thereof; (vi) polychlorinated biphenyls
(PCBs); (vii) urea formaldehyde foam insulation; (viii) all hazardous air
pollutants or materials known to cause serious health effects (including,
without limitation, volatile hydrocarbons, pesticides, herbicides and industrial
solvents); and/or (ix) substances
10
<PAGE>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
which constitute a material health, safety or environmental risk to any Person
or property. It is the intent of the Parties hereto to construe the term
"Hazardous Materials" in its broadest sense.
6.5.2 ENVIRONMENTAL LAWS DEFINED. For purpose of this Agreement the
--------------------------
term Environmental Law means any Federal, State or local law, statute, ordinance
or regulation pertaining to health, industrial hygiene or environmental
conditions existing as of the Closing Date, including, but not by way of
limitation, (a) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), (b) the Resource Conservation and Recovery Act
of 1976 ("RCRA"), (c) California Health and Safety Code Sections 25100 et seq.,
(d) the Safe Drinking Water and Toxic Enforcement Act of 1986, (e) the Federal
Water Pollution Control Act, (f) the Porter-Cologne Water Quality Control Act,
(g) California Civil Code Sections 3479 et seq., and (h) Federal and State
Occupational Safety and Health Acts and the regulations and administrative codes
applicable thereto.
6.5.3 SELLER'S OBLIGATION TO REMOVE. Seller has previously entered
-----------------------------
into a Consent Order dated August 22, 1988 (the "CONSENT ORDER") with the State
of California Department of Health Services, now known as the California
Department of Toxic Substances Control ("DTSC"). Pursuant to the Consent Order
and under the supervision of the DTSC, Seller has remediated what is known as
Operable Unit No. 2, which operable unit includes most of the Property. Seller
has received a clearance letter from the DTSC dated September 26, 1995, stating
that no further remediation is necessary with respect to Operable Unit No. 2 and
a site certification dated October 26, 1995, from the DTSC regarding completion
of remedial action plans for such Operable Unit. However, during the
construction of The California Speedway and during the remediation of impacted
soils on property formerly leased to a bankrupt tenant of Seller, a limited
amount of soils impacted by Hazardous Materials were discovered, removed, and
stockpiled on the Property (the "IMPACTED SOILS"). The Impacted Soils will be
removed in accordance with all applicable laws and without causing contamination
of any kind to the Property or the property of third parties by Seller, at its
sole cost and expense, as soon as reasonably possible but no later than prior to
the Close of Escrow.
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In addition, and subject to the limitations described below, Seller shall assume
liability (including indemnifying and holding Buyer harmless) ("SELLER'S
ENVIRONMENTAL RESPONSIBILITIES") for claims by any third party (including,
without limitation, any order or directive of any governmental agency), whether
such claim is made against Buyer or Seller, for or relating to (a) any violation
of any Environmental Laws occurring at the Property during Seller's ownership of
the Property (except any violation of Environmental Laws committed by Buyer, or
its agents); or (b) any environmental contamination or conditions occurring at
the Property during Seller's ownership of the Property requiring remediation,
unless such environmental contamination or conditions were as a result of
Buyer's, or its agents activities or conduct or, including, without limitation,
subject to the before described exceptions in all cases: (1) contamination or
conditions that originated at the Property during Seller's ownership of the
Property; and (2) contamination or conditions that originated at any location on
the Property during Seller's ownership of the Property and that migrated from
the Property prior or subsequent to Closing; and (3) contamination or conditions
originating off the Property that have come to be located at the Property during
Seller's ownership of the Property and that migrate from the Property prior or
subsequent to the Close of Escrow. Seller shall have the exclusive right at all
times to defend, settle, appeal, compromise, arbitrate or negotiate any claim
and action and any remedial measures proposed or required by any governmental
entity or other third party and to take or cause to be taken any such remedial
measures ultimately determined to be required with respect to Seller's
Environmental Responsibilities. Such remedial measures may include, without
limitation: (a) sampling, laboratory testing and analysis of environmental
media; (b) contracting for and monitoring of remedial work; (c) preparation and
filing of all documents required by local, state and federal environmental
agencies having jurisdiction; and/or (d) the reasonable restriction on use as
described herein; provided, however all such remedial measures shall be deemed
to include the restoration of the Property in all material respects to its
condition (excluding the condition requiring remedial work) immediately
preceding such remedial work. Buyer agrees that Buyer shall not intervene,
interfere with, or participate in any of the foregoing activities without
Seller's express written consent, which consent shall not be unreasonably
withheld or delayed; provided, however, that if Seller fails to timely engage in
such activities, Buyer may reasonably defend, settle, appeal, compromise,
arbitrate or negotiate any remedial measures proposed or required by any
governmental entity and to take or cause to be taken any such remedial
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PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
measures ultimately determined to be required with respect to Seller's
Environmental Responsibilities following written notice by Buyer to Seller (if
circumstances reasonably permit such written notice) and Seller fails to timely
undertake such activities in accordance with a schedule acceptable to the
appropriate regulatory agency or third party. Buyer agrees, however, to
cooperate reasonably in any such activities at the request of Seller, including
without limitation, (x) joining in the execution of any documents required by
governmental authorities to be executed by Buyer as the owner of the Property
(unless Buyer reasonably objects to the contents of any such documents); and (y)
allowing Seller and Seller's agents, subcontractors and designees to have access
to and across the Property at reasonable times in order to carry out Seller's
Environmental Responsibilities hereunder, provided that Seller and any such
agents, subcontractors, and designees provide evidence of adequate general
liability insurance prior to entering the Property.
Notwithstanding the foregoing, Seller shall only be obligated to remediate
any Hazardous Materials on the Property existing on the Closing Date, except
those attributable to Buyer, its agents, and their activities, to industrial
standards and not residential standards as reasonably determined by the DTSC.
In connection therewith, if the reasonable estimated cost for remediation and
restoration of the Property or any portion thereof will exceed Five Hundred
Thousand Dollars ($500,000) on a cumulative basis, upon Seller's and Buyer's
mutual agreement, Buyer will execute, acknowledge and deliver to the DTSC a
"Covenant to Restrict Use of Property" which is a deed restriction which
provides generally that the Property or a portion thereof can not be used for
the following purposes: (i) a residence, including any mobile home or factory-
built housing, constructed or installed for use as permanently occupied
residential human habitation; (ii) a long-term care hospital for humans,
provided that nothing therein shall restrict use of the Property for any
infirmary, medical aid station or emergency medical care facility where there is
no intent for any patient to remain in such facility for more than 24 hours;
(iii) a traditional public or private school for persons under 21 years of age,
provided that nothing therein shall restrict the use of the Property for any
specialized training programs related to then-existing facilities on the
Property; or (iv) a day-care center for children, and containing such other
terms and conditions typically required by the DTSC, and such additional terms
and conditions that do not materially adversely interfere with the development
of the Property. Buyer shall not unreasonably withhold its agreement or consent
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PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
to Seller's request for a "Covenant to Restrict Use of Project" as provided
herein; provided, however, Buyer shall not be deemed to have unreasonably
withheld its consent or agreement if any restriction that would be imposed
pursuant to the "Covenant to Restrict Use of Property" would prohibit or
unreasonably interfere with a use of the Property that is reasonably related to
the development and operation of a motorsports speedway. Should Buyer not agree
to provide an executed and acknowledged "Covenant to Restrict Use of Project"
upon Seller's request, the Parties shall use the dispute resolution procedures
described in Section 9.4 of this Agreement to resolve such dispute.
6.5.4 SELLER'S RIGHT TO TERMINATE. Should any Seller Environmental
----------------------------
Responsibilities, other than the removal of the Impacted Soil, be discovered
prior to the Close of Escrow which would cause Seller to be liable for or incur
expenses on a cumulative basis in excess of Five Hundred Thousand Dollars
($500,000), Seller shall have the right to terminate this Agreement, and except
for each Party's obligations to indemnify the other as provided herein and
except for the license to construct and maintain the Buyer's Improvements as
specified in Section 6.1.1, the respective rights, duties and obligations of
Buyer and Seller under this Agreement shall forthwith terminate without further
liability. A termination under this Section 6.5.4 shall not be considered a
default by Seller.
6.5.5 SELLER'S ENVIRONMENTAL INDEMNITY. Seller shall indemnify, defend,
--------------------------------
and hold Buyer and its officers, directors, shareholders, partners, employees,
affiliates, and assigns (collectively the "BUYER INDEMNIFIED PARTIES") harmless
from and against all liability, obligations, claims, damages, penalties, losses,
causes of action, costs, and expenses (including attorneys' fees, expert witness
fees, consulting and other professional fees) imposed upon incurred by or
asserted against the Buyer Indemnified Parties as a result of any violation or
asserted violation of, or failure to timely or fully comply with Environmental
Laws, or as a result of any contamination of the Property or other property
(including, but not limited to, other improvements, surface, subsurface water
and air) or any allegations related thereto by Hazardous Materials which
occurred or relates to activity occurring prior to the Closing Date, except for
any contamination caused by Buyer, its agents, or as a result of their
activities.
ARTICLE 7
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PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
ACKNOWLEDGMENTS, REPRESENTATIONS AND WARRANTIES
7.1 BUYER'S ACKNOWLEDGMENTS, REPRESENTATIONS AND WARRANTIES.
7.1.1 PURCHASE "AS IS". Buyer is relying solely upon its own
----------------
inspections, investigations and analyses of the Property in entering into this
Agreement and is not relying in any way upon any representations, statements,
agreements, warranties, studies, reports, descriptions, guidelines or other
information or material furnished by Seller or its representatives, whether oral
or written, express or implied, of any nature whatsoever regarding any such
matters except as provided in Section 7.2, the Investor Representation
Certificate and the deed for the Property. Buyer acknowledges that it is
familiar with the Property. Buyer has made such independent investigations and
analyses as Buyer deems necessary or appropriate concerning Buyer's proposed
use, development and sale of the Property. Buyer is buying the Property on an
"as is-all faults" basis, except as to Hazardous Materials as set forth in
Section 6.5 and the other obligations of Seller as set forth in this Agreement.
Nothing is this Section 7.1.1 shall be deemed to supersede any obligation
of Seller set forth in this Agreement or in any other written agreement between
Buyer, or any affiliate of Buyer and Seller. In the event of a conflict between
this Section and any other term or provision of this Agreement or any other
written agreement between Buyer, or any affiliate of Buyer and Seller pertaining
to the Property, such other terms and provisions shall control.
7.1.2 BUYER'S AUTHORITY. Buyer and PMI and the individuals executing
-----------------
this Agreement for Buyer and PMI have the legal power, right and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.
7.1.3 FULL DISCLOSURE. Buyer and PMI represent and warrant that they
---------------
have made full and accurate disclosure to Seller of all material matters
concerning Buyer, PMI and the PMI Stock. Buyer and PMI shall continue to keep
Seller informed as to all material matters affecting Buyer, PMI and the PMI
Stock until the Close of Escrow.
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7.1.4 PMI STOCK. The PMI Stock when issued and delivered to Seller
---------
shall have been validly issued in compliance with applicable laws and PMI's
organizational documents, fully paid and non-assessable and such shares shall be
free and clear of all pledges, security interests, charges, encumbrances, equity
claims, and options except those imposed by state and federal securities laws
and subject to that certain Shareholder's Agreement by and among PSH Corp.,
Seller, and PMI dated November 22, 1995, as amended to date.
7.1.5 NO FINDERS. No finder, broker or other intermediary has been
----------
used by Buyer in connection with the transactions contemplated by this Agreement
and no person will be entitled to a finder's fee or brokerage commission upon
consummation of such transactions or otherwise in connection therewith. Buyer
agrees to indemnify and hold harmless Seller from and against any finder's fees
or brokerage commission arising out of the conduct of Buyer.
7.1.6 LITIGATION. To the best of Buyer's and PMI's knowledge,
-----------
(except as disclosed in writing by Buyer and/or PMI to Seller or Seller's
counsel) neither Buyer nor PMI has received written notice of any threatened or
pending litigation against Buyer or PMI which would materially and adversely
affect the Property or Buyer's pr PMI's obligations pursuant to this Agreement.
7.1.7 NO CONFLICT. To the best of Buyer's and PMI's knowledge,
-----------
neither Buyer's nor PMI's execution of this Agreement nor performance by Buyer
or PMI of any of their respective obligations hereunder including, without
limitation, the purchase of the Property on the terms and conditions
contemplated by this Agreement (a) violates or shall violate any written or oral
contract, agreement or instrument to which Buyer or PMI is a party or is bound
or which affects the PMI Stock or Property or any part of it, or (b) shall
constitute or result in violation or breach by Buyer or PMI of any judgment,
order, writ, injunction, or decree issued or imposed upon Buyer or PMI, or
result in violation of any applicable laws; and no approval, consent, order,
authorization, designation, filling (other than recording), required in
conjunction with Buyer's execution of this Agreement and performance of its
obligations hereunder.
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7.1.8 NO KNOWLEDGE OF A RELEASE ON THE PROPERTY. To the best of
------------------------------------------
Buyer's knowledge, neither Buyer, nor its respective agents have deposited or
released any amount of Hazardous Materials on the Property or on other property
owned by them that has migrated or may migrate to the Property.
7.2 SELLER'S ACKNOWLEDGMENTS, REPRESENTATIONS AND WARRANTIES.
7.2.1 SELLER'S AUTHORITY. Seller and the individuals executing this
------------------
Agreement for Seller have the legal right and authority to enter into this
Agreement and to consummate the transactions contemplated hereby.
7.2.2 OWNERSHIP OF THE PROPERTY. Seller is the owner of the Property
-------------------------
and the Property as of the Closing Date shall be free and clear of all liens,
restrictions, easements, leases, tenancies, assessments, charges, rights of use
or possession of any other title objections except the Permitted Exceptions and
except for those obligations imposed in connection with any future development
of the Property and as provided in Section 6.1 of the Organization Agreement
dated November 22, 1995, by and among PSH Corp., Seller and PMI which, as to
Seller, shall be extinguished upon the transfer of title to the Property to
Buyer.
7.2.3 NO FINDERS. No finder, broker or other intermediary has been
----------
used by Seller in connection with the transactions contemplated by this
Agreement and no person will be entitled to a finder's fee or brokerage
commission upon consummation of such transactions or otherwise in connection
therewith. Seller agrees to indemnify and hold harmless Buyer from and against
any finder's fee or brokerage commission arising out of the conduct of Seller.
7.2.4 EMINENT DOMAIN. To the best of Seller's knowledge, Seller has
--------------
received no written notice from any governmental authority that eminent domain
proceedings for the condemnation of the Property or any part in thereof are
pending.
7.2.5 LITIGATION. To the best of Seller's knowledge, (except as
----------
disclosed in writing by Seller to Buyer or Buyer's counsel) Seller has received
no written notice of any
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threatened or pending litigation against Seller which would materially and
adversely affect the Property or Seller's obligations pursuant to this
Agreement.
7.2.6 NO CONFLICT. To the best of Seller's knowledge, neither
-----------
Seller's execution of this Agreement nor performance by Seller of any of its
obligations hereunder including, without limitation, the transfer, assignment
and sale of the Property contemplated by this Agreement (a) violates or shall
violate any written or oral contract, agreement or instrument to which Seller is
a party or is bound or which affects the Property or any part of it, or (b)
shall constitute or result in violation or breach by Seller of any judgment,
order, writ, injunction, or decree issued or imposed upon Seller, or result in
violation of any applicable laws; and no approval, consent, order,
authorization, designation, filling (other than recording), required in
conjunction with Seller's execution of this Agreement and performance of its
obligations hereunder.
7.2.7 PROPERTY WITHIN OPERABLE UNIT NO. 2. All of the Property is
------------------------------------
located within DTSC Operable Unit No. 2 under the Consent Order except for
approximately the West one-half of Parcel 1 of Parcel Map 14723 which is located
within the former boundaries of what is known as the "Koppers Property."
ARTICLE 8
THE CLOSE OF ESCROW
8.1 CONDITIONS AND CLOSE OF ESCROW. Escrow Agent shall close the Escrow
(the "CLOSE OF ESCROW") on or before the Closing Date WHEN AND ONLY WHEN each of
the following conditions has been, satisfied or waived in writing by the
appropriate Party:
8.1.1 SUPPLEMENTS TO PRELIMINARY REPORT. If any title exceptions are
---------------------------------
recorded against the Property before the Close of Escrow in addition to the
Permitted Exceptions or instruments disclosed in this Agreement, Buyer shall
have the same rights of approval or disapproval with respect to each exception
as set forth in Article IV approved such exceptions within three (3) business
days after receipt of a supplemental report showing such exceptions or this
Agreement shall terminate.
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8.1.2 TITLE POLICY. Seller shall be unconditionally committed to
------------
procure from the Title Company, at Seller's expense, an ALTA form B (latest
edition) Owner's policy of title insurance for real property, a CLTA joint
protection policy of title insurance (the "TITLE POLICY") together with such
endorsements as Buyer may reasonably request including ALTA Endorsements numbers
100 (modified), 100.b, 103.1, 103.7, 116.1, and 116.4 with a liability limit in
the amount of the Purchase Price and insuring fee title vested in Buyer free and
clear of any liens, encumbrances and interests except: (i) the Permitted
Exceptions; (ii) those rights, interests and easements reserved by Seller if any
in Seller's Grant Deed; (iii) the matters described in the printed form portion
of the Title Policy; and (iv) any items caused by the acts or omissions of Buyer
or permitted to be placed of record by Buyer as of the Close of Escrow.
8.1.3 DEPOSIT OF PURCHASE PRICE. Buyer shall have deposited the full
-------------------------
Purchase Price in Escrow including a stock certificate for the PMI Stock in
Seller's name. Upon the Close of Escrow, the full Purchase Price shall be
delivered to Seller.
8.1.4 DEPOSIT OF CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT.
-----------------------------------------------------------
Buyer shall have deposited into Escrow two executed copies of the Conditional
Demand Registration Rights Agreement. With the Close of Escrow, Seller shall
execute both copies of the Conditional Demand Registration Rights Agreement and
Escrow Agent shall deliver one to Buyer and the other to Seller.
8.1.5 BUYER'S PERFORMANCE, REPRESENTATIONS AND WARRANTIES. Buyer
---------------------------------------------------
shall have duly performed each and every undertaking and agreement to be
performed by it hereunder and under the terms and conditions of this Agreement,
and Buyer's representations and warranties shall be true and correct in all
respects at and as of the Close of Escrow. Buyer shall deposit into Escrow for
the benefit of Seller a certificate signed by an officer of Buyer stating that
all the representations and warranties of Buyer are true and correct as of the
Closing Date. Upon the Close of Escrow, Buyer's certificate shall be delivered
to Seller.
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8.1.6 DEED TO THE PROPERTY. Seller shall deposit into Escrow the
--------------------
executed Grant Deed for the Real Property in recordable form. Upon the Close of
Escrow, the Title Company shall record the deed on behalf of Seller.
8.1.7 SELLER'S INVESTMENT REPRESENTATION. Seller shall deposit into
----------------------------------
Escrow its executed Investment Representation Certificate dated as of the
Closing Date which shall be delivered to Buyer's upon the Close of Escrow.
8.1.8 SELLER'S PERFORMANCE. Seller shall have duly performed each
--------------------
and every undertaking and agreement to be performed by it hereunder and under
the terms and conditions of this Agreement including, but not limited to, the
removal of the Impacted Soil, and Seller's representations and warranties shall
be true and correct in all respects at and as of the Close of Escrow. Seller
shall deposit into Escrow for the benefit of Buyer a certificate signed by an
officer or Seller stating that all the representations and warranties of Seller
are true and correct as of the Closing Date. Upon the Close of Escrow, Seller's
Certificate shall be delivered to Buyer.
8.1.9 LITIGATION. Neither PMI, Buyer nor Seller shall be subject to
----------
any judgment, order, decree, or injunction of a court of competent jurisdiction
which would impose any limitation on the ability of either Party to consummate
the transactions contemplated herein.
8.1.10 LOT-LINE ADJUSTMENT. After receipt of a letter from the DTSC
--------------------
stating that no further remedial action is necessary for what is known as the
A&C Parcel (other than disposal of any Impacted Soils) or receipt of other
similar environmental documentation satisfactory to Buyer, Seller shall have
caused to have recorded the lot-line adjustment between Parcels 3 and 4 of
Parcel Map 14723, identified as the County of San Bernardino file number LLA/95-
0053/W133-89/W96-0012.
8.2 TERMINATION BASED ON FAILURE TO CLOSE BY CLOSING DATE. If Escrow
fails to close by the Closing Date for any reason other than Buyer's or Seller's
default, then, except for each Party's obligations to indemnify the other as
provided herein and except for the license to
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PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
construct and maintain the Improvements as specified in Section 6.1.1, the
respective rights, duties and obligations of Buyer and Seller under this
Agreement shall forthwith terminate without further liability. The Parties shall
immediately thereafter sign such instructions and other instruments as may be
necessary to effect the cancellation of this Escrow, and each Party shall pay
its respective share (if any) of escrow cancellation charges. Upon cancellation,
Escrow Agent shall immediately return the funds, less applicable escrow
cancellation charges, and documents to the parties that furnished them and
Escrow Holder shall return the Deposit to Buyer less any cancellation fees.
Notwithstanding the provisions of this paragraph, the Parties may extend the
Closing Date by their mutual written agreement in which event the provisions of
this Paragraph shall apply to the extended closing date with the same force and
effect as the Closing Date.
8.3 PRORATIONS. Property taxes, special assessments, utility charges and
other similar amounts with respect to the Property shall be prorated as of the
Closing Date by the Escrow Agent, in accordance with the Escrow Agent's standard
practices and as shall be mutually agreed upon by Buyer and Seller prior to the
Close of Escrow. All such adjustments shall be against the cash portion of the
Purchase Price.
8.4 SELLER'S FEES AND COSTS. Seller will pay (i) the fee for the Title
Policy; (ii) one-half of Escrow Agent's escrow fee; and (iii) usual Seller's
document-drafting review and recording charges.
8.5 BUYER'S FEES AND COSTS. Buyer will pay (i) County Documentary
Transfer Tax in the amount Escrow Agent determines to be required by law, (ii)
one-half of Escrow Agent's escrow fee, and (iii) usual Buyer's document-drafting
and recording charges.
ARTICLE 9
REMEDIES
9.1 SELLER'S REMEDIES. If Escrow fails to close due to Buyer's default
under this Agreement, Seller shall have the right to, with or without notice or
demand, pursue all legal remedies against Buyer and PMI, including the right to
specific performance.
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9.2 BUYER'S REMEDIES. If Escrow fails to close due to Seller's default
under this Agreement, Buyer shall have the right to, with or without notice or
demand, pursue all legal remedies against Seller, including the right to
specific performance.
9.3 RIGHT OF FIRST REFUSAL AFTER SELLER'S DEFAULT. If Escrow fails to
close solely due to: (i) Seller's default; (ii) Seller's inability to convey
acceptable title as stated in Article 4; (iii) Seller's failure to remove the
Impacted Soils from the Site Property; (iv) failure to record the lot line
adjustment described in Section 8.1.10; or (v) because of Seller's exercise of
its rights pursuant to Section 6.5.4 under this Agreement, Buyer shall
thereafter have until and including December 31, 2001, the right of first
refusal to acquire the Property or any portion thereof upon the terms and
conditions provided below. If Escrow fails to close for any reason other than
stated in this Paragraph, Buyer shall not obtain the right of first refusal
provided below.
(a) If Seller wishes to sell the Property or any portion thereof for
consideration to a third person, Buyer shall have the first option to purchase
all, and only all, of the Property or portion thereof offered for sale, which
option shall be exercised by it, if at all, by giving written notice to Seller
on or before twenty-one (21) days after receipt of the notice specified in
Section 9.3(b) below. The purchase price and sales terms for the Property, or
any portion thereof to be purchased by the Buyer shall be the same price and
same terms as set forth in the notice of proposed sale. However, if any of the
consideration specified in the notice is property other than cash, Buyer may
substitute cash in an amount equivalent to the fair market value of the non-cash
consideration, unless such consideration shall be securities in an operating
company, in which event Buyer shall provide the identical non-cash consideration
offered by the proposed purchaser. If no closing date for the sale is
specified, the closing shall occur no later than sixty (60) days after receipt
by the Buyer of the notice required by Section 9.3(b).
(b) If Seller wishes to sell, transfer, or otherwise dispose of all or
a portion of the Property for consideration to a third person, Seller shall
first give Buyer and Seller at least twenty-on (21) days advance written notice
of its desire to do so. The notice shall specify the Property or portion
thereof to be sold, the price, the proposed terms and the name, address and
phone number of the proposed purchaser. Along with the notice required pursuant
to this Section 9.3(b), Seller shall furnish to Buyer any proposed sale
agreement with the proposed
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PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
purchaser unless the proposed purchaser requires the non-disclosure of such
agreement in which event Seller shall fully summarize the material terms of the
proposed sale agreement.
(c) Notwithstanding the provisions of this Section 9.3, Seller may
transfer all or any portion of Property to an affiliate provided such affiliate
becomes a party to this agreement for purposes of this Section 9.3. In
addition, there shall be no restrictions on a Seller pledging the Property or
any portion thereof as collateral for any bona fide loan, bond, financial
assurance, guaranty or other obligation.
(d) After compliance with the terms of this provision of this Section
9.3, if applicable, and if Buyer or fails to exercise their right of first
refusal, Seller shall be free to sell or otherwise transfer the Property or any
portion thereof to the identified proposed purchaser. In the event if any
material change in the proposed terms and conditions, Seller shall again comply
with the provisions of this Section 9.3 except that Buyer shall than only have
ten (10) days in which to exercise their right of first refusal, as provided
herein.
(e) The right of first refusal provided herein shall be personal to
Buyer and it may not assign its rights, if any, under this Section 9.3 to any
party. Any attempt to assign any rights under this 9.3 shall be void and of no
effort.
9.4 DISPUTE RESOLUTION. In any dispute arises relating to the
interpretation or performance of this Agreement which the parties are unable to
resolve between themselves, they agree to use the following as their sole method
of resolving the dispute:
(a) Seller and Buyer agree to jointly select a judicial officer who is
affiliated with the Judicial Arbitration and Mediation Service, or such other
equivalent organization as Seller and Buyer may mutually select, to act as the
trier of fact and judicial officer in such dispute resolution;
(b) If Seller and Buyer are unable to agree upon a particular judicial
officer, then the decision shall be made by the chief executive officer of the
Judicial Arbitration and Mediation Service, after consulting with Seller and
Buyer.
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PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
(c) Seller and Buyer shall have the same rights of discovery as if the
dispute were being resolved in the Superior Court of the State of California.
However, the judicial officer shall, on his own motion, or the request of either
Seller or Buyer, have the authority to extend or reduce the time periods
therefor; and
(d) The judicial officer serving hereunder shall be designated as a
referee under the provisions of Title VIII, Chapter 6 of the California Code of
Civil Procedure (Sections 638 through 645.1, inclusive). Payment for the
services of the judicial officer and the rights and procedure of appeal, and/or
other review of the decision, shall be made as provided in such sections.
The Parties acknowledge and agree that the aforementioned method of dispute
resolution shall relate only to disputes with respect to the interpretation or
performance of any provision of this Agreement and shall not apply to the
enforcement of any provision with respect to which there is no dispute over
interpretation or performance or with respect to which any previous dispute over
interpretation or performance has been resolved. Furthermore, the dispute
resolution procedures provided herein shall not apply to any action in which
injunctive relief is sought.
ARTICLE 10
GENERAL PROVISIONS
10.1 PMI AS A PARTY TO THIS AGREEMENT. PMI is a Party to this Agreement
but only for the purpose and obligations expressly provided for in this
Agreement.
10.2 TIME OF THE ESSENCE AND STRICT CONSTRUCTION. Time is of the essence
pursuant to this Agreement for the performance and observance of all obligations
of Seller and Buyer hereunder and all provisions of this Agreement shall be
strictly construed.
10.3 NOTICE AND DEMANDS. All notices or demands required or permitted
pursuant to this Agreement shall be in writing, signed by the Party giving the
same, and shall be deemed properly given and received when personally served or
upon the earlier of (i) receipt
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PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
or (ii) rejection, if sent by registered or certified mail, postage prepaid or
by nationally recognized overnight courier service, such as Federal Express, and
addressed to the intended recipient at its address as set forth below or at any
other address of which such Party gives the other Party notice in accordance
with the provisions of this Section 10.2.
IF TO BUYER: Penske Motorsports, Inc.
3270 W. Big Beaver Road, Suite 130
Troy, MI 48084
ATTN.: Richard J. Peters, President & CEO
WITH A COPY TO: Penske Motorsports, Inc.
3270 W. Big Beaver Road, Suite 130
Troy, MI 48084
ATTN.: Robert Kurnick, General Counsel
IF TO SELLER: Kaiser Ventures Inc.
3633 E. Inland Empire Blvd., Suite 850
Ontario, CA 91764
ATTN.: Gerald A. Fawcett, President & COO
WITH A COPY TO: Kaiser Ventures Inc.
3633 E. Inland Empire Blvd., Suite 850
Ontario, CA 91764
ATTN.: Terry L. Cook, General Counsel
10.4 CAPTIONS FOR CONVENIENCE. The headings and captions of this Agreement
are for convenience and reference only and shall not be considered in
interpreting the provisions hereof.
10.5 SEVERABILITY. Any provision in this Agreement which is illegal,
invalid or unenforceable in any jurisdiction, shall, as to such jurisdiction, be
ineffective to the extent of such illegality, invalidity or unenforceability
without invalidating the remaining provisions hereof or affecting the legality,
validity or enforceability of such provision in any other jurisdiction. Seller
and Buyer shall negotiate in good faith to replace any illegal, invalid or
unenforceable provision of this Agreement with a legal, valid and enforceable
provision that, to the extent possible, will preserve the economic bargain of
this Agreement, or shall otherwise amend this Agreement, including the provision
relating to choice of law, to achieve such result.
25
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PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
10.6 GOVERNING LAW. This Agreement shall be interpreted and enforced
according to the laws of the State of California.
10.7 NO ORAL AMENDMENT OR MODIFICATION. No provision of this Agreement
may be amended or modified except to the extent any such amendment or
modification is expressly set forth in a written instrument executed by the
Party against whom the amendment or modification is sought.
10.8 RELATIONSHIP OF SELLER AND BUYER. Nothing contained in this
Agreement shall be deemed or construed as creating the relationship of principal
and agent, partnership, or joint venture and no provision in this Agreement and
no act of Seller or Buyer shall be deemed to create any relationship other than
that of Seller and Buyer. Without limiting the generality of the foregoing, all
obligations of Seller and Buyer with respect to third parties shall be
independent.
10.9 ATTORNEYS' FEES. If it becomes necessary for Seller or Buyer to
bring an action (including any form of dispute resolution), either at law or in
equity, to enforce or interpret the provisions of this Agreement, the prevailing
Party in such action shall be entitled to recover its reasonable attorneys' fees
and other professional fees and costs of all types, as a part of any judgment
therein, in addition to any other award which may be granted.
10.10 AMENDED AND SUCCESSOR STATUTES AND REGULATIONS. All references in
this Agreement to a statute or regulation or section of same, shall include
future amendments and successor statutes, regulations, or sections thereof, as
applicable, and all references in this Agreement to any local, state or federal
government commission, department or agency or instrumentality or court shall
include their successors.
10.11 ENTIRE AGREEMENT. This Agreement and the exhibits attached hereto
contains all of the agreements and understanding with respect to the matters
covered hereby, and no prior agreements, oral or written, or understandings,
representations, or warranties of any nature or kind what so ever pertaining to
such matters shall be effective for any purpose unless expressly incorporated
into the provisions of this Agreement or the exhibits attached hereto.
26
<PAGE>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
10.12 EXHIBITS AND SCHEDULES. All exhibits and schedules which are
referred to in this Agreement are incorporated into this Agreement as though
fully set forth herein.
10.13 SUCCESSORS AND ASSIGNS. Neither Seller nor Buyer may, voluntarily
or by operation of law, assign or otherwise transfer any of its rights or
obligations under this Agreement without obtaining the prior written consent of
the other Party, which consent may be withheld in such Party's sole and absolute
discretion. Subject to the restrictions and prohibitions on assignment each and
all of the covenants and conditions of this Agreement shall inure to the benefit
of and shall be binding upon the successors in interest of Seller, and, subject
to the restrictions on transfers herein provided, the successors, heirs,
representatives and assigns of Buyer.
10.14 EMINENT DOMAIN. If, prior to the Close of Escrow, all or any
portion of the Property is taken or appropriated by any public or quasi-public
authority under the power of eminent domain or such an eminent domain action is
threatened pursuant to a resolution of intention to condemn filed by any public
entity, and if such taking will, in Buyer's good faith determination, materially
and adversely affect the Property, then Buyer may terminate this Agreement
without further liability hereunder and receive a refund of its Deposit and
documents deposited herein. If Buyer does not timely terminate this Agreement
or if a partial taking of the Property which does not materially and adversely
affect the Property occurs, then this Agreement shall remain in full force and
effect and upon the Closing Date Buyer shall receive from Seller any award paid
for that portion of the Property taken or the right to an award if not paid as
of the Closing Date. Buyer must elect to terminate or maintain the Agreement by
notice in writing to Seller with ten (10) days after written notice by Seller of
a threatened taking or it shall be deemed that Buyer has elected not to
terminate this Agreement.
10.15 RECORDATION. This Agreement may be recorded at the request and
expense of any party hereto. The party requesting recordation shall pay all the
expenses of the recordation of this Agreement.
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PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
10.16 RESOLUTION OF ANY CLAIM FOR PAYMENT BY ONE PARTY TO ANOTHER. Buyer
and Seller agree to mutually negotiate in good faith the resolution of any
amounts claimed to be owed by one party to another with regard to grading,
excavation, By-Products Area cap monitoring and related expenses, and other
similar items.
10.17 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
executed by their respective duly authorized representative as of the day and
year first above written.
"SELLER" "PMI"
KAISER VENTURES INC. PENSKE MOTORSPORTS, INC.
a California Corporation a Delaware corporation
By: /s/ Gerald A. Fawcett By: /s/ Richard J. Peters
-------------------------------- ------------------------------
Gerald A. Fawcett, President & Richard J. Peters, President &
Chief Operating Officer Chief Executive Officer
"BUYER"
THE CALIFORNIA SPEEDWAY CORPORATION
a Delaware corporation
By: /s/ Richard J. Peters
----------------------------
Richard J. Peters, President &
Chief Executive Officer
CONSENT BY PSH CORP.
PSH Corp. is a party to the Shareholders Agreement dated as of November 22,
1996, as amended, among Penske Motorsports, Inc., PSH Corp. and Kaiser Ventures
Inc. PSH Corp.
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<PAGE>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
hereby consents to the amendment of the Shareholders Agreement as provided in
Section 5.3 of this Agreement.
PSH CORP.
By: /s/ Richard J. Peters
----------------------------
Richard J. Peters, President
29
<PAGE>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
STATE OF MICHIGAN )
) ss.
COUNTY OF WAYNE )
On this the 9th day of October 1996, before me, Sandra Nieman, the
undersigned Notary Public, personally appeared Richard J. Peters, President and
Chief Executive Officer of The California Speedway Corporation, personally known
to me (or proved to me on the basis of satisfactory evidence), to be the person
whose name is subscribed to the within instrument, and acknowledged that he
executed it.
Witness my hand and official seal.
/s/ Sandra Nieman
-----------------------------
[SEAL] Notary's Signature
STATE OF MICHIGAN )
) ss.
COUNTY OF WAYNE )
On this the 9th day of October 1996, before me, Sandra Nieman, the
undersigned Notary Public, personally appeared Richard J. Peters, President and
Chief Executive Officer of Penske Motorsports, Inc., personally known to me (or
proved to me on the basis of satisfactory evidence), to be the person whose name
is subscribed to the within instrument, and acknowledged that he executed it.
Witness my hand and official seal.
/s/ Sandra Nieman
-----------------------------
[SEAL] Notary's Signature
30
<PAGE>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
STATE OF MICHIGAN )
) ss.
COUNTY OF WAYNE )
On this the 9th day of October 1996, before me, Sandra Nieman, the
undersigned Notary Public, personally appeared Richard J. Peters, President of
PSH Corp., personally known to me (or proved to me on the basis of satisfactory
evidence), to be the person whose name is subscribed to the within instrument,
and acknowledged that he executed it.
Witness my hand and official seal.
/s/ Sandra Nieman
-----------------------------
[SEAL] Notary's Signature
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN BERNARDINO )
On this the 8th day of October 1996, before me, Patricia M. Williams, the
undersigned Notary Public, personally appeared Gerald A. Fawcett, President and
Chief Operating Officer of Kaiser Ventures Inc., personally known to me (or
proved to me on the basis of satisfactory evidence), to be the person whose name
is subscribed to the within instrument, and acknowledged that he executed it.
Witness my hand and official seal.
/s/ Patricia M. Williams
----------------------------
[SEAL] Notary's Signature
31
<PAGE>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
EXHIBITS
EXHIBIT "A" Conditional Demand Registration Rights Agreement (Section 3.2.3)
EXHIBIT "B" Grant Deed (Section 3.2)
EXHIBIT "C" Investor Representation Certificate (Section 3.2)
32
<PAGE>
EXHIBIT "A"
CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT
This CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is
made as of __________, 1996 between Penske Motorsports, Inc., a Delaware
corporation (the "COMPANY") and Kaiser Ventures Inc., a Delaware corporation
("KAISER").
RECITALS
A. Kaiser is currently the owner of 1,373,625 shares of the common stock
of the Company, $.0l par value share, and will acquire an additional _______
shares of the Company's common stock upon the consummation of a proposed real
estate transaction (collectively the "SHARES"), as set forth in a Purchase
Agreement and Escrow among the Company, Kaiser and The California Speedway
Corporation ("TCSC").
B. The Company, Kaiser and PSH Corp., a Delaware corporation ("PENSKE"),
are parties to a Shareholders Agreement, dated November 22, 1995, as amended
pursuant to a First Amendment to Shareholders Agreement, dated March 21, 1996
(the "SHAREHOLDERS AGREEMENT").
C. In order to accommodate those person or entities that may accept the
pledge of all or any portion of the Shares as collateral for a loan, bond,
financial assurance or other similar obligation, Kaiser desires to obtain, and
the Company is willing to grant, certain registration rights for the Shares in
the event a holder of a security interest in the Shares should foreclose on the
Shares and then be required to sell all or any portion of such Shares to satisfy
all or a portion of Kaiser's indebtedness to such lender.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the Company and Kaiser agree as
follows:
1. CONFIRMATION OF ABILITY TO PLEDGE THE SHARES. The Company hereby
agrees that Kaiser shall have the right to pledge all or any part of the shares
to a third party as collateral for a loan, bond, financial assurance or other
similar borrowing, potential borrowing, or obligation (hereafter a "SECURED
LENDER" and collectively "SECURED LENDERS")) subject to the terms and conditions
of this Agreement, the Shareholders Agreement, the Lock-up Agreement between
Kaiser and CS First Boston dated March 21, 1996, and any restrictions imposed by
applicable law.
2. DEMAND REGISTRATION RIGHTS.
(a) Subject to the terms and conditions of this Agreement, upon
written demand to the Company by a Secured Lender who is the beneficial owner of
a majority of the Registrable Securities (as defined below) pledged to Secured
Lenders (a "MAJORITY HOLDER"), the Company shall undertake all reasonable
efforts to effect the registration of all or any portion of the Registrable
Securities (as defined below) owned by the Secured Lenders under the Securities
Act of 1933, as amended (the "SECURITIES ACT") and pursuant to applicable state
"blue sky" laws ("DEMAND REGISTRATION"). The term "REGISTRABLE SECURITIES"
means those shares beneficially owned by a Secured Lender and acquired from
Kaiser through foreclosure or
A-1
<PAGE>
CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT
through a transfer in lieu of foreclosure, and as a result of a default by
Kaiser under the terms of any security or pledge agreement which grants to such
Secured Lender a security interest in, or pledge of, all or any part of the
Shares together with all the Shares deemed Registrable Securities pursuant to
Section 2(b) below. The terms "beneficial owner" or "beneficial ownership" as
used in this Agreement shall mean ownership in accordance with Rule 13d-3
promulgated pursuant to the Securities Exchange Act of 1934, as amended.
(b) Each request for a Demand Registration shall specify the approximate
number of Registrable Securities requested to be registered. Within ten (10)
days after receipt of any such request, the Company will give written notice of
such requested registration to all Secured Lenders known to the Company and will
include in such registration all Shares with respect to which the Company has
received written requests for inclusion therein within fifteen (15) days after
the receipt of Company's notice. All of such Shares shall thereafter be deemed
Registrable Securities for purposes of this Agreement.
(c) The holders of Registrable Securities are entitled to request two
Demand Registrations, an initial Demand Registration and a second Demand
Registration pursuant to Paragraph 3(c) below. The Secured Lenders will pay all
Registration Expenses (as defined in Paragraph 6 below) pro-rata on the basis of
the amount of securities being sold by each such holder participating in the
Demand Registration. No party has any rights under this Agreement to request
Demand Registrations except as provided in this Agreement. A registration will
not count as a permitted Demand Registration until it has become effective,
(unless such Demand Registration has not become effective due solely to the
fault of the holders requesting such registration). The Demand Registrations
shall be underwritten registrations.
(d) Subject to the restrictions below, the Company may include in the
Demand Registration any securities which are not Registrable Securities. If a
Demand Registration is an underwritten offering and the managing underwriters
advise the Company in writing that in their opinion the number of Registrable
Securities and the additional securities requested to be included in such
offering, if any, exceeds the number of securities that can be reasonably sold
in such offering without adversely affecting the marketability of the offering,
the Company will include in such registration, prior to the inclusion of any
additional securities which are not Registrable Securities, the number of
Registrable Securities requested to be included that in the opinion of such
underwriters can be sold without adversely affecting the marketability of the
offering. In such event, the amount of Registrable Securities to be registered
shall be first allocated to all those Shares requested by a Majority Holder with
the balance of the Registrable Securities to be included in the Demand
Registration allocated pro-rata among the other respective holders of such
Registrable Securities on the basis of the amount of Registrable Securities,
excluding the Majority Holder, owned by each other holder; but in no event shall
the number of shares registered in the initial Demand Registration be less than
850,000 Shares of Registrable Securities unless agreed upon in writing by the
Company and the Secured Lenders.
(e) The Company will not be obligated to effect any Demand Registration
within nine (9) months after the effective date of a previous registration
statement filed by the Company under the Securities Act of 1933. The Company
may postpone for up to three (3) months the filing or the effectiveness of a
registration statement for the Demand Registration if
A-2
<PAGE>
CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT
the Company in its reasonable good faith judgment, determines that such Demand
Registration would reasonably be expected to have an adverse effect on any then
existing proposal or plan by the Company or of its Subsidiaries to engage in any
acquisition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer, issuance and selling of additional stock
whether through a public offering or otherwise, or any similar transaction;
provided that in such event, the holders of Registrable Securities initially
requesting such Demand Registration will be entitled to withdraw such request
and, if such request is withdrawn, such Demand Registration will not count as a
Demand Registration under this Agreement. Notwithstanding the foregoing, in the
event the Company has filed or intends to file a registration statement within
three (3) months and such filing or intent to file precludes the Secured Lenders
from registering their Registrable Securities such Secured Lenders shall have
"piggyback" registration rights in accordance with, and subject to the terms and
conditions of the Registration Rights Agreement, dated as of March 21, 1996, by
and between the Company and Kaiser (the "REGISTRATION RIGHTS AGREEMENT"), as if
such Registrable Securities are "Shares" thereunder.
3. CONDITIONS OF OBLIGATION TO REGISTER SHARES. The obligation of the
Company under this Agreement to register any of the Shares owned by a Secured
Lender are subject to each of the following conditions:
(a) The amount of Registrable Securities being registered on behalf of
the Majority Holder must be beneficially owned by the Majority Holder. Any
Secured Lender other than the Majority Holder need not be the owner of Shares to
participate in a Demand Registration, but in no event shall Kaiser or an
affiliate of Kaiser be deemed a Secured Lender hereunder.
(b) Prior to the commencement of the registration of the Registrable
Securities, the Secured Lender shall have first offered the Registrable
Securities to the Company, in accordance with the procedures and on the terms
and conditions set forth in Section 1.3 of the Shareholders Agreement. If the
Company elects not to purchase the Registrable Securities, then the Secured
Lenders shall offer the Registrable Securities to PSH Corp., in accordance with
the procedures and on the terms and conditions set forth in Section 1.3 of the
Shareholders Agreement except that PSH Corp. shall have ten (10) days in which
to exercise its option purchase shares. If PSH Corp., elects not to purchase
the Registrable Securities, then the Secured Lenders shall offer the Registrable
Securities to Penske Performance, Inc. in accordance with the procedures and on
the terms and conditions set forth in Section 1.3 of the Shareholders Agreement,
except that Penske Performance, Inc. shall have ten (10) days in which to
exercise its option to purchase such shares. If Penske Performance, Inc.,
elects not to purchase the Registrable Securities, then the Secured Lenders
shall offer the Registrable Securities to International Speedway Corporation in
accordance with the procedures and on the terms and conditions set forth in
Section 1.3 of the Shareholders Agreement, except that International Speedway
shall have ten (10) days in which to exercise its option to purchase such
Registrable Securities. If International Speedway Corporation elects not to
purchase the Registrable Securities then the Secured Lenders may exercise the
Demand Registration rights hereunder.
(c) The Company shall not be required to include in any Registration
statement more than 850,000 Shares of the Registrable Securities on behalf of
the Secured
A-3
<PAGE>
CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT
Lenders. However, after a twelve (12) month period after the effective date of
the initial registration statement, the Secured Lenders may by written demand to
the Company require the registration of the balance of the Registrable
Securities not previously registered.
(d) During such time as Secured Lender may be engaged in a
distribution of the Shares that are registered, such holder will comply with
Rules 10b-7 promulgated under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), and pursuant thereto, Secured Lender will, among other
things, cause to be furnished to each broker through whom Registration
Securities may be offered, or to the offeree if an offer is not made through a
broker, such copies of the prospectus covering the Shares that are registered
and any amendment or supplement thereto and documents incorporated by reference
therein as may be required by law and the Secured Party shall not bid for or
purchase any shares of the Company or attempt to induce any other person to
purchase any securities of the Company other than as permitted under Exchange
Act.
(e) To the extent not inconsistent with applicable law, each Secured
Lender will agree not to effect any public sale or distribution (including sales
pursuant to Rule 144) of equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for such securities during the
seven (7) days prior to, and the 180-day period beginning on the effective date
of the underwritten Demand Registration, unless the underwriter managing the
registered public offering otherwise agrees.
(f) Each Secured Lender participating in a Demand Registration shall
furnish to the Company a written undertaking that such Secured Lender is bound
by and will abide by the terms of this Agreement.
4. SECURED LENDER'S COOPERATION. The Secured Lender will cooperate with
the Company in connection with the preparation of the registration statement,
and for so long as the Company is obligated to file and keep effective the
registration statement, will provide to the Company, in writing, for use in the
registration statement, all information regarding Secured Party as may be
necessary to enable the Company to prepare the registration statement and
prospectus covering the Registrable Securities, to maintain the currency and the
currency and effectiveness thereof and otherwise to comply with all applicable
requirements of law in connection therewith.
5. EXERCISE OF PIGGYBACK REGISTRATION RIGHTS. In the event a Secured
Lender makes a written demand for registration pursuant to the terms of this
Agreement, Kaiser shall not have any "piggyback" registration rights pursuant to
the Registration Rights Agreement for such registration statement. However,
Kaiser's inability to participate in a registration shall not otherwise affect
its "piggyback" registration rights under the Registration Rights Agreement nor
shall it count as an offering in which Kaiser declined to participate.
6. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for the Company and all
A-4
<PAGE>
CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT
independent certified public accountants, underwriters and other Persons
retained by the Company (all such expenses being herein called "REGISTRATION
EXPENSES"), will be borne by Secured Lenders unless such registration shall be
deemed an exercise of Kaiser's "piggyback" pro-rata on the basis of the amount
of the securities being sold by each such holder, registration rights under the
Registration Rights Agreement in which case the allocation of Registration
Expenses provided in the Registration Rights Agreement shall be applicable.
(b) Notwithstanding Paragraph 6(a) above, if the Company should also
register securities pursuant to the same registration statement as for all or
any portion of the Shares being registered on behalf of a Secured Lender, the
Registration Expenses shall be allocated and paid pro rata among all such
persons, including the Company, on the amount of securities being sold by each
such person.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted by law,
the Secured Lenders, their respective officers, directors, counsel and each
Person who controls Secured Lenders (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by Kaiser or the Secured Lenders
for use therein or by Kaiser's or the Secured Lenders failure to deliver a copy
of the registration statement or prospectus or any amendments or supplements
thereto after the Company has furnished the Secured Lenders with a sufficient
number of copies of the same.
(b) In connection with any registration statement in which Secured
Lenders are participating, the Secured Lenders and Kaiser will furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law each of the Secured Lenders and
Kaiser, will indemnify the Company, its directors, officers, counsel,
accountants and each Person who controls the Company (within the meaning of the
Securities Act) against all losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged untrue statement of material fact contained
in the registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that such untrue statement or
omission is contained in any information or affidavit so furnished in writing by
any of the Secured Lenders or Kaiser. No Secured Party or Kaiser shall be
responsible for the information furnished by the other.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel
A-5
<PAGE>
CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and will survive the transfer of securities.
8. TERMINATION. This Agreement shall automatically terminate and be of
no further force or effect upon the twentieth (20th) anniversary date of this
Agreement.
9. THIRD PARTY BENEFICIARY. Kaiser and the Company agree that any
Secured Lender (as defined herein) shall have the right to enforce the terms and
conditions of this Agreement as if they were originally a party to this
Agreement. This Agreement is for the benefit of each Secured Lender.
10. MISCELLANEOUS.
(a) DEFINITION OF PERSON. "PERSON" means any individual, corporation,
--------------------
partnership, limited liability company, limited liability partnership, firm,
joint venture, association, joint-stock company, trust or un-incorporated
organization.
(b) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the
----------------------
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and Kaiser and any Secured Lender.
(c) SEVERABILITY. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
(d) COUNTERPARTS. This Agreement may be executed simultaneously in
------------
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.
(e) DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
--------------------
are inserted for convenience only and do not constitute a part of this
Agreement.
(f) GOVERNING LAW. The corporate law of Delaware will govern all
-------------
issues concerning the relative rights of the Company and its stockholders. All
other questions
A-6
<PAGE>
CONDITIONAL DEMAND REGISTRATION RIGHTS AGREEMENT
concerning the construction, validity and interpretation of this Agreement and
the exhibits and schedules hereto will be governed by the internal law, and not
the law of conflicts, of Michigan.
(g) NOTICES. All notices, demands or other communications to be given
-------
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable express courier service (charges
prepaid) or mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demand and other
communications will be sent to the addresses indicated below:
TO: Penske Motorsports, Inc.
13400 Outer Drive West
Detroit, Michigan 48239
Attention: President
WITH A COPY TO: Robert H. Kurnick, Jr.
c/o Penske Auto Centers, Inc.
3270 W. Big Beaver Road, Suite 130
Troy, Michigan 48084
TO: Kaiser Ventures Inc.
3633 E. Inland Empire Boulevard, Suite 850
Ontario, California 91764
Attention: President
WITH A COPY TO: Terry Cook
c/o Kaiser Ventures Inc.
3633 E. Inland Empire Boulevard, Suite 850
Ontario, California 91764
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
"COMPANY"
PENSKE MOTORSPORTS, INC.
By:
------------------------------
Richard J. Peters, President &
Chief Executive Officer
"KAISER"
KAISER VENTURES INC.
By:
------------------------------
Gerald A. Fawcett, President &
Chief Operating Officer
A-7
<PAGE>
EXHIBIT "B"
RECORDING REQUESTED BY AND WHEN
RECORDER MAIL THIS DEED TO:
The California Speedway Corporation
3270 W. Big Beaver Road, Suite 130
Troy, MI 48084
Attn: Robert Kurnick, Esq.
Mail tax statement to above address
- --------------------------------------------------------------------------------
SPACE ABOVE THIS LINE FOR RECORDER'S USE
DOCUMENTARY TRANSFER TAX $ see attached
__________________________________ APN _________________________
Signature of Declarant or Agent determining tax
- --------------------------------------------------------------------------------
CORPORATION GRANT DEED
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
Kaiser Ventures Inc. a Delaware corporation
does hereby GRANT to The California Speedway Corporation, a Delaware corporation
that certain real property located in the County of San Bernardino, State of
California, described as:
Parcels 1, 2, and 3 of Parcel Map 14723, as per map recorded in Book 179 of
Parcel Maps, pages 9 through 13, inclusive of Parcel Maps, in the office of the
County Recorder of said county.
SUBJECT TO all covenants, conditions, restrictions and easements of record.
RESERVING TO Grantor all water rights which were adjudicated in the name of
Grantor, as successor to Kaiser Steel Corporation, in the San Bernardino County
Superior Court Civil Action no. 164327, encaptioned Chino Basin Municipal Water
---------------------------
District vs. City of Chino, et al, all riparian and appropriative rights to
- ---------------------------------
surface waters, all water rights represented by water stock, and all water
storage rights.
Date: ____________________________ GRANTOR:
KAISER VENTURES INC.a
a Delaware corporation
By: ____________________________
Gerald A. Fawcett
its President
B-1
<PAGE>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
EXHIBIT "C"
INVESTOR REPRESENTATION CERTIFICATE
OF
KAISER VENTURES INC.
This Investor Representation Certificate is given by Kaiser Ventures Inc.,
a Delaware corporation (the "INVESTOR") to Penske Motorsports, Inc., a Delaware
corporation ("COMPANY") as of ________________, 199__.
RECITALS
A. As a portion of the consideration for its purchase of certain real
property from the Investor, as described in the Purchase Agreement and Escrow
Instructions by and between Company and Investor dated ____________________,
(the "REAL ESTATE TRANSACTION"), Company has agreed to issue a certain number of
shares of its $.01 par common stock (the "PMI STOCK") to Investor.
B. In order to show its compliance with the Securities Act of 1933, as
amended (the "1933 ACT"), and the applicable provisions of California
Corporations Code (S)25102(f), the Company has requested, and the Investor has
agreed to give, certain representations and warranties as provided herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Investor hereby acknowledges,
represents and warrants to the Company the following:
1. PURCHASE FOR INVESTOR'S ACCOUNT. Investor hereby confirms that the
PMI Stock to be received by it as a part of the Real Estate Transaction will be
acquired for investment for its own account, not as a nominee or agent, and not
with a view to the sale or distribution of any part thereof, and that it has no
present intention of selling, granting participation in, or otherwise
distributing the same, but subject, nevertheless, to any requirement of law that
the disposition of its property shall at all times be within its control. By
executing this Agreement,
C-1
<PAGE>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
Investor further represents that it does not have any contract, undertaking,
agreement, or arrangement with any person to sell, transfer, or grant
participations to such person, or to any third person, with respect to the PMI
Stock.
2. PMI STOCK NOT REGISTERED. Investor understands that the PMI Stock is
not registered under the 1933 Act or qualified under the California Corporate
Securities law on the ground that the issuance of the PMI Stock provided for
pursuant to the Real Estate Transaction is exempt from registration under the
1933 Act and from qualification under the California Corporate Securities law
and that the Company's reliance on such exemption is, among other things,
predicated on Investor's representations set forth herein.
3. SOPHISTICATED INVESTOR. Investor represents and warrants that it
and/or its representatives are experienced in evaluating and investing in
companies such as the Company, Investor is able to fend for itself, has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of its investment and protecting its interests,
and has the ability to bear the economic risks of its investment.
4. ACCREDITED INVESTOR. Investor represents and warrants that it is an
existing shareholder of the Company and is an "accredited" investor as that term
is defined in Regulation D promulgated pursuant to the 1933 Act.
5. RESTRICTIONS ON RESALE. Investor understands that the PMI Stock may
not be sold, transferred, or otherwise disposed of without registration under
the 1933 Act and qualification under the California Corporate Securities law or
an exemption therefrom.
6. LEGENDS ON THE STOCK CERTIFICATE. All certificates for shares of the
PMI shall bear a legend in substantially the following form:
"These securities have not been registered under the Securities Act of
1933 or qualified under the California Corporate Securities law. They may not
be sold, offered for sale, pledged or hypothecated in the absence of an
effective registration statement as to the securities under said Act and/or
qualification under said Corporate Securities law or an
C-2
<PAGE>
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
opinion of counsel satisfactory to the Company that such registration and/or
qualification is not required."
7. STOCK TRANSFER BOOKS. In addition to the legend requirement to be
placed on the stock certificates, the Company shall make a notation regarding
the restrictions on transfer of the PMI Stock in its books, and shares of common
stock shall be transferred on the books of the Company only if transferred or
sold pursuant to and in compliance with the provisions of this Agreement.
IN WITNESS WHEREOF, Investor, through a duly authorized officer, hereby
duly executes this Certificate to be effective as of the date first set forth
above.
"INVESTOR"
KAISER VENTURES INC.
a California corporation
By:
------------------------------
Gerald A. Fawcett, President &
Chief Operating Officer
C-3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME FROM THE
SEPTEMBER 30, 1996 FORM 10-Q REPORT AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 6,770,000
<SECURITIES> 0
<RECEIVABLES> 2,646,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,416,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 102,851,000
<CURRENT-LIABILITIES> 7,637,000
<BONDS> 8,162,000
0
0
<COMMON> 315,000
<OTHER-SE> 75,844,000
<TOTAL-LIABILITY-AND-EQUITY> 102,851,000
<SALES> 0
<TOTAL-REVENUES> 6,802,000
<CGS> 0
<TOTAL-COSTS> 2,442,000
<OTHER-EXPENSES> 2,690,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 406,000
<INCOME-PRETAX> 1,264,000
<INCOME-TAX> 547,000
<INCOME-CONTINUING> 717,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 717,000
<EPS-PRIMARY> $.07
<EPS-DILUTED> $.07
</TABLE>
