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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMISSION FILE NUMBER: 0-18858
KAISER VENTURES INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-0594733
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization Identification No.)
3633 E. INLAND EMPIRE BLVD.
SUITE 850
ONTARIO, CA 91764
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(Address of principal executive offices and zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (909) 483-8500
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK ($.03 PAR VALUE)
-----------------------------
(Title of class)
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S)229.405 of this chapter) is not contained herein, and
will not be contained to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. Yes No X
---- ----
At March 22, 1996, the aggregate market value of the registrant's Common Stock,
$.03 par value, held by non-affiliates of the registrant was $58,933,034.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 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
--- ---
At March 22, 1996, 10,503,594 shares of the registrant's Common Stock, $.03 par
value, were outstanding, including 136,919 shares deemed outstanding but
reserved for issuance to the general unsecured creditors of Kaiser Steel
Corporation.
DOCUMENTS INCORPORATED BY REFERENCE: The Company's Proxy Statement for the 1996
Annual Meeting of Stockholders is incorporated into Part III of this Form 10-K.
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TABLE OF CONTENTS TO FORM 10-K
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PART I
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Item 1. BUSINESS......................................... 1
Item 2. PROPERTIES....................................... 23
Item 3. LEGAL PROCEEDINGS................................ 25
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.......................................... 29
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS...................... 30
Item 6. SELECTED FINANCIAL DATA.......................... 31
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.............. 32
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...... 39
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE........... 39
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT...................................... 40
Item 11. EXECUTIVE COMPENSATION.......................... 40
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.................................. 40
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.. 40
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K............................. 41
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PART I
SOME OF THE STATEMENTS IN THIS FORM 10-K REPORT CONTAIN FORWARD-LOOKING
INFORMATION WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. ACTUAL RESULTS COULD DIFFER
FROM THOSE PROJECTED IN THESE FORWARD LOOKING STATEMENTS AS A RESULT OF FACTORS
SUCH AS THE 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 AND THE DISCOVERY OF UNANTICIPATED
ENVIRONMENTAL CONDITIONS ON ANY OF THE COMPANY'S PROPERTIES.
ITEM 1. BUSINESS
GENERAL
Kaiser Ventures Inc. ("Kaiser" or the "Company", which shall be deemed to
include its wholly owned subsidiaries unless otherwise provided herein) is an
emerging asset development company based in Southern California pursuing
projects that involve water resources, property redevelopment and solid waste
management. As the reorganized successor to Kaiser Steel Corporation ("KSC"),
the Company has substantial water and land assets formerly used in KSC's steel
making operations, including: (i) a 50.88% ownership interest in Fontana Union
Water Company ("Fontana Union"); (ii) approximately 715 acres of the former KSC
steel mill site (the "Mill Site Property"); and (iii) 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"). The
Company is seeking to maximize the profitability and utilization of these assets
by developing long-term projects.
Two related interests include the Company's approximately 72% percent interest
in Mine Reclamation Corporation ("MRC"), the Company seeking to permit a rail
haul municipal solid waste landfill at a portion of the Eagle Mountain Site and
an approximately 10.6% interest in Penske Motorsports, Inc. ("PMI"), a public
company that owns motorsports complexes in Brooklyn, Michigan and Nazareth,
Pennsylvania and related businesses and is developing and constructing a
motorsports complex on approximately 460 acres of the former KSC steel mill.
In addition, the Company's financial position is enhanced by approximately
$117,000,000 of federal net operating loss tax carryforwards ("NOLs") which
arose through the KSC bankruptcy reorganization and which are expected to reduce
most of the Company's federal tax liability in the foreseeable future. The
Company also has approximately $16,000,000 of California net operating loss
carryforwards as of December 31, 1995. The federal NOL's expire over a period
from year 2000 through 2010 while the California NOL's expire in year 1997 and
2000.
The Company's business strategy is to capitalize on its development assets by
structuring long-term projects primarily through the use of joint ventures and
long-term leases. This strategy enables the Company to minimize its capital
investment, reduce its risk, and benefit from the operational expertise of its
strategic partners or lessees. The Company will continue to focus on its
existing projects, management skills and asset base while seeking additional
growth opportunities, primarily through strategic joint ventures or
acquisitions. While this is the Company's general philosophy, the Company may
choose to become more directly involved in a particular project, when
appropriate or if the Company believes its active participation will enhance
long term shareholder value.
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To support the development of its current long-term projects and assets, the
Company is also engaged in a number of interim activities including short-term
property rentals, the operation of water and sewer treatment facilities and the
sale of recyclable materials existing on the Mill Site Property. These interim
activities have historically generated a material portion of the Company's
revenues and enabled the Company to remain profitable in each full fiscal year
since emerging from the KSC bankruptcy. The Company anticipates a decline in
these revenues as long-term, on-going projects are developed.
WATER RESOURCES
Background. Municipalities in Southern California traditionally have depended
on the availability of water from Northern California and the Colorado River for
significant portions of their water supply. Heavy usage of and competing
demands for these traditional sources, however, have decreased the reliability
of these non-local sources and forced municipalities to seek alternative water
supplies. As a result, local Southern California water resources continue to
become increasingly important and valuable.
The Company, through a wholly-owned subsidiary, Fontana Water Resources, Inc.
("FWR"), owns 50.88% of Fontana Union, a mutual water company, which was a
primary source of water for KSC's former steel making operations. Fontana Union
owns adjudicated and unadjudicated water rights to produce water from four
distinct surface and subsurface sources of water near Fontana, California,
including: (i) adjudicated surface and streambed flows from the Lytle Creek
area of the San Gabriel Mountains; (ii) adjudicated rights to the Chino Basin
subsurface aquifer; (iii) adjudicated rights to the Rialto Basin subsurface
aquifer; and (iv) unadjudicated rights to a subsurface aquifer accessed by Well
No. 22.
Kaiser's ownership of Fontana Union entitles the Company to receive all of its
proportionate share of Fontana Union's water which total's approximately 34,000
acre feet per year (an acre foot equals approximately 325,000 gallons). In
addition, when other shareholders of Fontana Union do not take their annual
proportionate shares, the unclaimed water for each year from those shareholders
is divided pro rata among those shareholders that do take such water. Currently,
the Company's pro rata interest in unclaimed water raises its effective overall
share from 50.88% to approximately 55.53%. The Company expects this supplemental
source of water to be reduced or eliminated as minority shareholders who do not
currently utilize all their water begin to use, sell or lease their water
interests.
Lease to Cucamonga County Water District. In 1989, the Company leased its
shares of Fontana Union stock to Cucamonga County Water District ("Cucamonga
Water"), a water district with an "A" credit rating from Moody's Investor
Services. Under the terms of the 102-year take-or-pay lease (the "Fontana Union
Lease"), Cucamonga Water is required to pay the Company for all of the Company's
share of the agreed upon quantity of water at a rate of 68.13% of the
Metropolitan Water District of Southern California's (the "MWD") rate for
untreated, non-interruptible water as available through Chino Basin Municipal
Water District. Because of the 102-year lease agreement, the Company does not
consolidate the accounts of Fontana Union for financial reporting purposes.
Cucamonga Water is entitled to receive all of the Company's proportionate
share of water. On a quarterly basis, Cucamonga Water pays for its
proportionate share of the agreed upon annual quantities regardless of
fluctuations in actual water flows and actual receipt and use of water.
Substantially all costs of producing the water are borne by Cucamonga Water.
Under the Fontana Union Lease, the Company and Cucamonga Water agreed that the
gross annual quantity of Fontana Union water from all sources, except the annual
Chino Basin agricultural pool transfer (which has averaged around 4,000 acre
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feet per year and for which the Company accrues revenues for its share in the
4th quarter), is approximately 34,000 acre feet or approximately 8,500 acre feet
per quarter. This fixed quantity is based on the historical average of water
available from the applicable water sources according to over 80 years of
records. Based on the Fontana Union Lease formula, the Company's gross revenues
in 1995 totaled approximately $4,974,000.
The Company employed a consulting organization in its search for a lessee of
its Fontana Union shares. The consulting agreement calls for a commission
payment of 5.42% of each payment received by the Company.
The Company's future lease revenue increases are primarily dependent upon any
adjustments in the MWD water rates upon which the lease rate is calculated. The
MWD rate established for untreated, non-interruptible water is based on a number
of factors, including the MWD need for funds to finance capital improvements and
to cover large fixed overhead costs. The MWD water rate has increased an
average of approximately 9.42% per year over the last 35 years. Recent rate
increases, effective July 1 each year, have been 12.7% in 1991, 21.2% in 1992,
18.2% in 1993, and 5.3% in 1994 and 5.1 % in 1995. Past rate increases are not
necessarily reflective of future rate increases by MWD.
On July 1, 1995, MWD implemented its previously announced changed rates and a
new rate structure. As a result of these changes, the Cucamonga Lease rate
increased by up to approximately 5.1% if the Cucamonga Lease is interpreted, as
the Company asserts, to include all the changed rates and items implemented by
MWD which must be paid, in order to receive untreated, non-interruptible water
from MWD. Cucamonga Water disputes the Company's interpretation of the
Cucamonga Lease. The Company is continuing its efforts to reach a resolution of
this dispute with Cucamonga Water. If such efforts are unsuccessful, litigation
will be commenced against Cucamonga Water. Cucamonga Water has, to date, paid
its obligations under the Cucamonga Lease on a timely basis, but at a level that
reflects a 2.7% rate increase as opposed to the 5.1% increase that the Company
maintains it is entitled to receive under the Fontana Union Lease.
Pursuant to the Fontana Union Lease, if any of the Fontana Union water sources
become sufficiently contaminated as to be unusable after treatment and/or
blending, Cucamonga Water is not obligated to pay for the quantities of
available but unusable water. The Company is not aware of any significant
contamination with respect to any water source at the present time. In
addition, if any of Fontana Union's water rights are challenged by a third
party, the Company and Cucamonga Water are obligated to share the costs of
defending such challenge. Cucamonga Water also has an option to purchase the
Company's Fontana Union shares in the year 2041, at a price generally based upon
a multiple of 15 times the then current annual lease payment, as well as the
right to purchase such shares for $1.00 in the year 2092.
The Fontana Union shares and the Fontana Union Lease are currently pledged as
collateral for the Company's $20,000,000 revolving-to-term credit facility.
The Company views the Fontana Union Lease as a mature, stable asset with its
primary variable being future MWD water rate changes. Accordingly, the Company,
in a continuing effort to maximize shareholder value, regularly evaluates
various alternatives with respect to the Fontana Union Lease. These
alternatives include, but are not limited to, retention, sale, securitization
and monetization of the Fontana Union Lease.
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PROPERTY REDEVELOPMENT
MILL SITE PROPERTY
Background. From 1948 through 1983, KSC operated a steel mill in Southern
California near the junction of the Interstate 10 and Interstate 15 freeways.
Located approximately 45 miles east of Los Angeles in one of the nation's
fastest growing areas, the Mill Site Property is served by two major railroads,
the Santa Fe and the Southern Pacific, and is situated three miles northeast of
the Ontario International Airport. The Mill Site Property consists of four
distinct parcels of land: the Central Mill Site (originally approximately 600
acres), the South Mill Site (approximately 290 acres), the West End Property
(approximately 240 acres) and the Valley Boulevard Property (approximately 42
acres). As discussed in more detail below, approximately 460 acres of the
Central Mill Site Property are now owned by The California Speedway Corporation,
a wholly owned subsidiary of Penske Motorsports, Inc. ("PMI"). The map on the
following page illustrates the location of these four parcels along with
currently planned projects for portions of these parcels. The Mill Site
Property has its own water rights supply, originally 2,930 acre feet per year,
that is entirely distinct from the Company's interest in Fontana Union. A
portion of these water rights are being sold as a part of a settlement of
litigation and other claims with an adjoining landowner, and another portion was
contributed with the property now owned by The California Speedway Corporation.
See "Part I, Item 3. Legal Proceedings" in this Form 10-K Report. The Company
anticipates making substantial expenditures in 1996 in connection with the
redevelopment of the Mill Site Property. See "Part I, Item 7. Management's
Discussion And Analysis Of Financial Condition And Results Of Operations."
Development of Central Mill Site. The Central Mill Site Property is debt
free. Until mid-1995, the Company rented portions of the Central Mill Site
property and related buildings to a variety of short-term tenants, including
light manufacturing, recycling, storage and film production operations. The
Company also provided railroad switching services for these tenants and
currently operates a water supply and treatment facility. However, with the
development of the motorsports complex, the West Valley Materials Recovery
Facility and Transfer Station and other redevelopment projects as discussed in
more detail below, these uses have been phased out.
A few identified portions of the Central Mill Site contain hazardous material
and are subject to a Consent Order with the California Environmental Protection
Agency as discussed in "Environmental" below.
Motorsports Complex
Penske Transaction. As discussed in more detail below, through a series of
transactions, including an initial public offering, the Company acquired
approximately a 10.6% interest in PMI for its contribution to PMI of
approximately 460 acres of the Central Mill Site Property on which The
California Speedway ("TCS") is being built.
During 1995, the Company continued its efforts to pursue the development and
construction of a motorsports complex on the Central Mill Site Property. On
November 22, 1995, the Company entered into an Organization Agreement with PSH
Corp., a newly formed Delaware corporation, and Penske Speedways Holding Corp.
(now called and herein after referred to a as "PMI"), also a newly formed
Delaware corporation, consummating the transactions generally described in the
Company's and Penske Speedway, Inc.'s., April, 1994 Development Agreement.
Pursuant to the terms of the Organization Agreement, Kaiser contributed all of
the issued and outstanding stock in its wholly-owned subsidiary, Speedway
Development Corporation, to PMI, in exchange for preferred shares of stock which
were
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[MAP OF KAISER'S MILL SITE PROPERTY]
[Map illustrating property owned by the Company in
San Bernardino County, California]
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convertible into a fifteen percent (15%) common stock ownership interest in PMI.
At the time of contribution, Speedway Development Corporation owned
approximately 460 acres of the Company's Central Mill Site Property on which TCS
is being built, plus 475 acre feet of annual water rights as tenants in common
with the Company. The preferred stock in PMI paid no dividends and was to be
automatically converted to common stock upon the occurrence of the earlier of
the following events: the first day of the calendar month in which the first
scheduled spectator race event is held at The California Speedway; if either
PMI, Penske Speedways, Inc. or The California Speedway Corporation initiated a
public offering; or April, 1998. In addition, until conversion of the preferred
stock, the Company was paid an annual management fee of $650,000 in quarterly
installments. As discussed below, PMI has just completed its initial public
offering.
Concurrent with the November 22, 1995 transactions discussed above, Speedway
Development Corporation through a series of transactions, was then merged into
one of PMI's indirectly wholly owned subsidiaries, The California Speedway
Corporation, a Delaware corporation.
As a result of these transactions, PMI (then called Penske Speedways Holding
Corp.) directly and indirectly owned the following principal assets: (i) one
hundred percent (100%) of the stock of Penske Speedway, Inc. which owns and
operates Michigan International Speedway ("MIS"), in Brooklyn, Michigan; (ii)
one hundred percent (100%) of the stock of The California Speedway Corporation,
the developer of The California Speedway; (iii) one hundred percent (100%) of
the stock of Motorsports International Corp. ("MIC"), a motorsports apparel and
memorabilia company; (iv) approximately eighty four percent (84%) of the stock
of Pennsylvania International Raceway, Inc. which owns and operates the Nazareth
Motor Speedway ("Nazareth"); and (v) approximately two (2) percent of the stock
of North Carolina Motor Speedway, Inc. which owns the North Carolina Motor
Speedway, Inc., Rockingham, North Carolina. As discussed below, subsequent to
this transaction, PMI, purchased all of the outstanding stock of Competition
Tire West and Competition Tire South, distributors of Goodyear racing tires in
the mid-west and southern regions of the United States.
In addition, on November 22, 1995, Facilities Investment Inc., a wholly-owned
subsidiary of International Speedway Corporation, a public company traded on the
OTC market, acquired a 20% interest in the parent of PMI, PSH Corp., for in
excess of $14 million. With the conversion of the Company's preferred stock
into common stock, but prior to the public offering discussed below, the
effective ownership of PMI was Penske Performance, Inc. with 68%, Facilities
Investments with 17% and the Company with 15%.
PMI, through it subsidiaries, promoted a total of eight major racing events at
MIS and Nazareth in 1995 and expects to promote a total of nine racing events at
MIS and Nazareth in 1996. Of the eight events in 1995, six were stock car
races, five of which were sanctioned by ("NASCAR"), and two were IndyCar
("IndyCar") races sanctioned by Championship Auto Racing Teams, Inc. ("CART").
NASCAR events promoted by Penske Speedways Holding Corp., included two NASCAR
races associated with the Winston Cup Series professional stock car racing
circuit (the "Winston Cup") and two races associated with the NASCAR Busch Grand
National Series (the "Busch Grand National").
Initial Public Offering and Recapitalization. On January 29, 1996, PMI filed
a Form S-1 Registration Statement with the Securities and Exchange Commission
(Registration No. 333-692), which registration statement was declared effective
on March 26, 1996. PMI registered 3,737,500 shares of its common stock at
$24.00 per share with approximately $89,690,000 (gross) raised with the
underwriter's over-allotment being exercised in full (the "Offering"). Trading
in PMI's stock commenced on March 27, 1996, under the symbol "SPWY" on the
NASDAQ Stock Market's National Market. Prior to the Offering, PMI which changed
its name from Penske Speedways Holding Corp. effected a recapitalization (the
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"Recapitalization"), pursuant to which (i) MIS changed its name from Penske
Speedway, Inc. to Michigan International Speedway, Inc.; (ii) MIS conveyed to
PMI all of its shares of capital stock of its subsidiary corporations (Nazareth,
The California Speedway and MIC); (iii) PMI increased its authorized common
stock to 50.0 million shares and effected a 91.575 to one share split of its
100,000 outstanding shares of common stock; (iv) James E. Williams, an original
investor in Nazareth, after the stock split exchanged his 2,557 shares
(approximately 15% of the issued and outstanding shares of common stock) of
Nazareth for 92,500 shares of common stock of PMI; (v) the Company's preferred
stock in PMI automatically converted into 1,373,625 shares of common stock; (vi)
Roger S. Penske repaid approximately $1.5 million owed to Competition Tire West;
and (vii) PMI purchased the outstanding capital stock of Competition Tire West
and Competition Tire South, distributors of Goodyear racing tires in the mid-
west and southern regions of the United States, for approximately $10.8 million
comprised of $6.3 million in cash and $4.5 million in promissory notes payable
to the selling stockholders of Competition Tire. After giving effect to the
foregoing transactions, but prior to the commencement of the Offering, the
effective beneficial ownership of the common stock of PMI was as follows:
Penske Corporation owned 67.3%, ISC owned 16.8%, the Company owned 14.9% and
James E. Williams owned 1.0%.
After completion of the Offering, including the exercise in full of the over-
allotment granted to the underwriter's of the Offering, the ownership of PMI is
approximately as follows: PSH Corp. 59.9%; public shareholders 28.8%; the
Company 10.6% and James E. Williams .7%.
The chart on the following page illustrates the corporate structure of PMI
immediately after the Offering.
Shareholders Agreement and Registration Rights Agreement. PSH Corp., PMI and
the Company entered into a Shareholders Agreement (as amended, the "Shareholders
Agreement"). The Shareholders Agreement provides that if PSH Corp. desires to
transfer any shares of capital stock of PMI for consideration to an unrelated
third party, PSH Corp. must first offer such shares to the Company on the same
terms and conditions as the proposed transfer. The Shareholders Agreement also
provides that if the Company desires to transfer any shares of capital stock of
PMI for consideration to an unrelated third party, the Company must first offer
such shares to PSH Corp. at a price equal to the average of the NASDAQ National
Market closing price of PMI's shares for the previous thirty calendar days. If
the non-transferring party is PSH Corp., then ISC has the right to purchase such
shares on the same terms and conditions as the proposed transfer. If ISC elects
not to purchase such shares, then PSH Corp. has the right to purchase such
shares on the same terms and conditions as the proposed transfer. In either
case, if the non-transferring party elects not to purchase such shares, then the
transferring party may transfer its shares to the unrelated third party. Under
certain circumstances, the Company may distribute a portion of the shares of
PMI's common stock that it owns to certain of its shareholders, free from the
right of first refusal. Under the Registration Rights Agreement between PMI and
the Company, PMI has granted incidental rights to the Company, subject to
certain limitations, each time PMI files a registration statement in connection
with the sale of its common stock.
The Shareholders Agreement also provides that PSH Corp. will vote its PMI
shares in the election of directors for one nominee of the Company to the Board
of Directors of PMI. Finally, under the terms of the Shareholders Agreement,
PMI will continue to pay the Company a fee of $162,125 per quarter during 1996
and through the first quarter of 1997.
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CHART
[Chart illustrating the corporate structure and ownership of
Penske Motorsports, Inc. after the Offering]
PMI will use the proceeds being raised by the Offering for the repayment of
outstanding indebtedness and a substantial portion of the costs related to the
construction of TCS.
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Organization Agreement. The November 22, 1995 Organization Agreement contains
among other things, the terms and conditions pursuant to which the Company
acquired its ownership interest in PMI. See "Item 1. Business - Motorsports
Complex - Penske Transaction" above. Pursuant to the Organization Agreement,
the Company has certain continuing indemnification obligations including one
with respect to various environmental matters. The Organization Agreement also
grants to PMI a right of first refusal to participate in any transaction or
opportunity that directly relates to the conduct or ownership of a motorsports
complex that comes to the Company, PSH Corp. or an affiliate of either,
excluding ISC.
Construction of The California Speedway. The Company owns substantial land
adjacent and in close proximity to TCS. However, the Company is not responsible
for the construction and operation of TCS. Total estimated construction costs
for TCS are approximately $75 million. See the map on page 5 of this Form 10-K
Report illustrating the Company's ownership of property.
PMI expects to complete the construction of The California Speedway in early
1997. The Company has already received a sanction from CART for a 1997 IndyCar
event at The California Speedway. In addition, PMI has obtained NASCAR's
conditional commitment to enter into negotiations with PMI for a single Winston
Cup event to be conducted at TCS upon its expected completion in 1997. PMI
expects to obtain the NASCAR sanction for the 1997 season. Each of CART's and
NASCAR's respective obligations are conditioned upon TCS being ready for the
1997 racing season.
The California Speedway will consist of a two mile, tri-oval track similar to
the MIS facility. Current plans call for The California Speedway to have 68,000
grandstand seats to which PMI expects to add 24,000 grandstands seats by the
year 2002. PMI has received the necessary governmental approvals for these
additional seats as well as approval for a total capacity of 107,000 spectators.
In addition to its grandstand seats, The California Speedway is expected to have
71 terrace suites, 55 chalets, and 12 grandstand pavilions and other amenities.
In addition, TCS will also include a 10,000 square foot, one-story
administration building housing corporate offices for TCS. Adjacent to the
administration building will be an 18,000 square foot maintenance building,
offices and a sign shop which will also include an above-ground fueling station
for maintenance vehicles.
Current plans call for a total of 33,166 parking spaces surrounding The
California Speedway as well as 100 spaces for bus parking. The California
Speedway could also accommodate a future Metrolink station in the northeastern
portion of the parking area, along the Atkinson Topeka & Santa Fe rail line
adjacent to The California Speedway, which is a passenger rail line connecting
the area with downtown Los Angeles.
Competition. As noted above, TCS is designed for premier stock car and
IndyCar race events, together with complementary supporting races. The only
similar competing race event in Southern California is the annual Long Beach
Grand Prix, an IndyCar race on a temporary street circuit in Long Beach,
California. There is no permanent oval race course for NASCAR Winston Cup
events or IndyCar events in Southern California. Currently, the nearest such
events are held in Phoenix, Arizona at a one mile oval speedway or at two road
courses in Northern California.
There have been and continue to be numerous attempts by other parties to
develop permanent speedways to serve the large Southern California market.
Currently, projects have been announced for sites in the Coachella Valley, Long
Beach, Lake Elsinore, San Jose and Victorville, California. None of
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these announced California projects is believed to be as advanced in the
permitting and development work as TCS. To the Company's knowledge none of these
announced projects has any commitments from NASCAR or IndyCar for race events.
Finally, to a certain extent, TCS will compete with other professional sports
and family entertainment venues in Southern California for spectators'
entertainment dollars.
The Mill Site MRF
Background. In 1989, the California legislature enacted legislation, AB 939,
which currently requires all municipalities to recycle or divert 25% of their
solid waste streams from landfills by the year 1995 and 50% by the year 2000.
Municipalities are exploring and implementing a number of alternatives in order
to comply with this new legislation, including source reduction, waste
minimization, waste-to-energy projects, composting of green waste and curbside
recycling. Another alternative is the transportation of solid waste to an
independent or municipally-owned materials recovery facility ("MRF"), which will
separate recyclable materials for either storage or sale to a variety of users.
The commercial feasibility of this industry has not yet been fully
demonstrated, as evidenced by the fact that it is the Company's understanding
that only a few of the limited number of existing MRFs in the nation are
believed to be currently profitable. However, a number of MRFs are planned or
under construction throughout the United States. The Company believes that the
enactment of AB 939, the continuing favorable public response to recycling and
more favorable pricing for recyclable products should continue to improve the
economics of MRFs in California since MRFs represent a viable alternative for
municipalities to assist them in complying with this new legislation and with
public demands for recycling.
Kaiser-Burrtec Joint Venture. In response to this potential market
opportunity, the Company and Burrtec Waste Industries, Inc. ("Burrtec"), a local
waste hauler, have entered into a joint venture agreement (the "MRF Joint
Venture") to construct and operate a proposed rail-served regional solid waste
transfer station and MRF, which would be located on approximately 30 acres of
the Central Mill Site (the "Mill Site MRF"). All necessary state and local
permits (except construction permits) for the Mill Site MRF have been granted.
During much of 1995, the MRF Joint Venture and San Bernardino County were in
discussions concerning the construction of a waste transfer station capable of
initially handling up to 2,000 tons per day of non-hazardous municipal waste.
While the MRF Joint Venture did not enter into an agreement with San Bernardino
County due to policy changes by the County, the MRF Joint Venture is still
pursuing the possibility of building one or more phases of the proposed transfer
station and MRF.
Under the terms of the MRF Joint Venture, the costs of developing,
constructing and operating each phase at the Mill Site MRF are to be shared
equally between the Company and Burrtec. The Company, however, is solely
responsible for the environmental remediation for that portion of the Central
Mill Site where the Mill Site MRF is to be located. Limited portions of this
property contain hazardous material and are subject to a Consent Order with the
California Environmental Protection Agency. See "Environmental" below. The
Company is currently in the process of remediating the MRF Site, except for
about two acres containing the tar pits area, in anticipation that one or more
phases of the MRF will soon be built. If the MRF Joint Venture delays or
abandons the Mill Site MRF, certain of the Company's remediation expenditures
for this property may be delayed until an alternative redevelopment project is
implemented. The Company has received approval from the California
Environmental Protection Agency, Department of Toxic Substances ("DTSC") of an
action plan for complete remediation of this
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<PAGE>
site. See also "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources."
The MRF Joint Venture does not intend to proceed with construction of the
project until its business plan is substantiated by: (a) the procurement of the
waste stream contracts or commitments necessary to support operation of the
first phase of the Mill Site MRF; (b) the projected economics for the project
are acceptable; and (c) there is available financing. The MRF Joint Venture
will likely seek third party financing for one or more phases of the Mill Site
MRF.
Competition. Although other entities have proposed to develop MRFs which
would serve the same geographic area as that of the Mill Site MRF, the Company
believes that none of them has yet completed the permitting process. Western
Waste Industries, an integrated waste management company, has indicated its
intention to construct a MRF on land it owns approximately three miles from the
Company's Mill Site Property. Western Waste has entered into a contract with
the City of Ontario to construct and operate such facility. The Company
believes that no draft EIR or other land use application has been filed for this
site.
Speedway Business Park and NAPA Lots
In 1995, the Company completed the process of subdividing into finished lots
approximately 60 acres adjacent to the motorsports complex. These lots are
called the Speedway Business Park. It is anticipated that business and research
facilities associated with motor vehicles will have an interest in leasing or
buying these lots. Other industrial and commercial uses unrelated to the
automotive industry could also be accommodated on these lots. Based on the
current development schedule, it is anticipated that these lots will be
available for lease or sale to prospective users beginning in the fourth quarter
of 1996.
Also adjoining TCS and the Mill Site MRF are approximately 31 acres of
undeveloped property which are being developed into four industrial zoned, rail
served lots ranging in size from 5 to 11.3 acres. These lots, called the "Napa
Lots," were separately subdivided from the motorsports complex and the Speedway
Business Park. A new road providing access to a public street for these
finished lots, TCS and the MRF site is currently under construction. It is
currently anticipated that the Napa Lots will be available for sale or lease in
the third quarter of 1996. A number of potential users have expressed an
interest in the Napa Lots.
Other Development Activities
In addition to the above projects, it is expected that the balance of the Mill
Site Property, will be redeveloped for light industrial and commercial uses, as
described below.
To further encourage development of the Mill Site Property, the Company and
the San Bernardino County Economic Development Department jointly sought and
obtained the designation of the Mill Site Property as a Recycling Market
Development Zone ("RMDZ"). RMDZ's are intended to create incentives to attract
businesses that recycle or utilize recycled products. A number of potential
users of recyclables have contacted the Company about the possibility of
locating on the Napa Lots as a result of RMDZ incentives. In addition, the MRF
may act as magnet for these types of businesses by providing a consistent stream
of raw feed stock through its recycling activities.
West End and Valley Boulevard Properties. In 1989 and 1990, the Company
entered into joint venture agreements with Lusk Ontario Industrial Partners II,
a California limited partnership, whose
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<PAGE>
general partner was The Lusk Company (collectively "Lusk"), with respect to the
West End Property and the Valley Boulevard Property. The Company and Lusk were
equal partners. For each property, Lusk funded on behalf of the respective joint
ventures 100% of the property acquisition and related costs. In July, 1994, the
Company, through a wholly owned subsidiary, Kaiser Steel Land Development, Inc.,
purchased the properties out of the Lusk Joint Ventures and settled any and all
existing and potential joint venture liabilities (including pending capital call
obligations of approximately $12,000,000) for a total consideration of
$15,000,000. The Company paid approximately $9,000,000 in cash at closing and
Lusk carried back $6,000,000 pursuant to a promissory note secured, solely, by a
first deed of trust on the properties. The principal amount of the note accrues
interest at 1.5% over the prime rate. Principal payments of $60,000 plus accrued
interest are to be made quarterly with a balloon payment due on the fourth
anniversary of the note, July 28, 1998. See also "Part II, Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
this Form 10-K Report.
Neither property has any known material environmental remediation
requirements, and both can be readily cleared for redevelopment. The Company
believes that the West End Property, portions of which are currently being
leased to a variety of short-term tenants, could be redeveloped in a variety of
ways, either directly or through joint ventures, as a modern industrial and
commercial park once economic conditions become more favorable. The land could
also be used for equity ventures. However, development of the West End Property
will involve substantial expenditures for infrastructure improvement.
South Mill Site. The South Mill Site consists of approximately 290 acres and
is debt free. This property was used by KSC primarily as a storage area for
slag, a non-hazardous, rock-like byproduct of iron and steel production.
Although the slag is being removed and sold by a third party contractor and is
producing a current revenue stream for the Company, the amount of slag is such
that it is unlikely to be cleared in less than 10 years. In addition, the
northeastern end of the South Mill Site property, which is free of slag,
currently contains the Company's sewage and wastewater treatment plants. The
sewer treatment plant is discussed in more detail below. The Company's
hazardous treatment plant was closed in mid-1994 in connection with the
expiration of the Company's contract to treat the waste of an adjacent property
owner. These uses have historically provided the Company with interim revenues
and positive cash flow while waiting to begin redevelopment of the property.
Further, approximately up to 30 acres in the southeast end of this property
contains hazardous material and is subject to the Consent Order with the
California Environmental Protection Agency as discussed in "Environmental"
below. Though the Company is exploring uses of the property that may not require
the complete removal of the slag, definitive redevelopment of this entire
property is likely to be delayed until most or all of the slag is removed and
any required remediation is completed.
Sewer Services. The Company currently provides sanitary sewer services to
California Steel Industries, Inc. ("CSI") from its sewage treatment plant
located on the northeastern end of the South Mill site property for a monthly
fee of $17,000. Beginning in August, 1996 the monthly payment will be increased
by the annual increase in the consumer price index. CSI is also obligated to
pay a substantial portion of the operating costs of the sewer treatment plant.
In addition, pursuant to a Sewer Services Agreement, the Company has agreed to
provide sanitary sewer treatment services for the wastewater generated by the
property owned by The California Speedway Corporation. In consideration for
such services, The California Speedway Corporation has agreed to pay the Company
an annual fee of $88,800 in quarterly installments beginning in April, 1997,
adjusted annually by increases in the consumer price index. The agreement also
grants an option to The California Speedway Corporation to purchase the
Company's wastewater treatment facility if (i) the Company terminates the Sewer
Services Agreement; (ii) the Company discontinues providing sewer
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<PAGE>
treatment services; (iii) the Company desires to sell or lease the sewer
treatment facility to a third party; (iv) PMI becomes a public company (even
though PMI is a public company, it has not, to date, exercised its right to
purchase the sewer treatment facility). Sewer services may be discontinued by
the Company upon the occurrence of other events. In addition, after the fifth
anniversary of the Sewer Services Agreement and upon prior written notice by the
Company to The California Speedway Corporation, the Company may terminate the
Sewer Services Agreement for good and valid business reasons exercised in good
faith.
ENVIRONMENTAL
The operation of a steel mill by the Company's predecessor, KSC, resulted in
known contamination of limited portions of the Company's Mill Site Property.
The Company is subject to a 1988 consent order (the "Consent Order") with the
DTSC which requires the Company to investigate and remediate hazardous materials
on the Mill Site Property. Under the current Consent Order, the phased
remediation scheduled is to be completed by September, 1998 unless an extension
is obtained from the DTSC.
During 1995, the Company undertook substantial activities with regard to
environmental matters. After unanimous approval in May, 1995 by the San
Bernardino County Board of Supervisors of the environmental impact report and
land use approvals necessary for the construction of TCS, the Company focused
its efforts on completing the environmental remediation necessary for TCS.
Among other items, during 1995 the Company completed the installation of a cap
on approximately 13 acres in the by-products area of the former steel mill and
installation of a vapor extraction system for the same area as required by the
DTSC.
Upon the completion of the required remedial work, the Company achieved a
major milestone on September 26, 1995, when the DTSC delivered to the Company a
letter stating that no further remedial action was necessary (except for certain
ongoing maintenance and monitoring obligations) for the property within Operable
Unit No. 2. The property within Operable Unit No. 2 includes most, but not all,
of the property to be used for TCS. Limited portions of the remaining TCS
property require some additional remediation and site cleanup work which the
Company has nearly completed. The Company's cost for these required remediation
and site cleanup activities for 1995 totaled approximately $7.5 million. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Part II, Item 7 and "Legal Proceedings - Environmental Insurance
Litigation" in Part I, Item 3 of this Form 10-K Report for additional
information. As a result of these environmental remediation activities, the
Company was able to close its transaction with Penske for the development of TCS
on November 22, 1995. See "Part I. Item 1 - Business - Motorsports Complex."
Pursuant to the terms of the Organization Agreement with PMI, Kaiser has a
continuing obligation to indemnify MIS and The California Speedway Corporation
against potential environmental liabilities associated with the pre-existing
condition of the TCS property upon the closing of the Penske transaction.
The Company currently estimates that its remediation costs for the balance of
its land will be between $14,000,000 and $24,000,000, depending upon which
approved remediation alternatives are eventually selected. This range assumes a
capping alternative can be used for the east slag pile remediation unit of
the Central Mill Site. Although environmental investigations have been conducted
on the Mill Site Property 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. Accordingly, future facts and circumstances could cause these
estimates to change significantly. The Company anticipates recovery of
remediation costs through redevelopment of the property, primarily in connection
with specific redevelopment projects or joint ventures. The Company has provided
certain financial assurances to the DTSC in connection with anticipated
remediation activities, the primary one being the dedication of $3,432,400 of
Kaiser's line of
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<PAGE>
credit to the DTSC in the event the Company fails to timely undertake and
complete certain of its responsibilities under the Consent Order. See Part II,
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations - Liquidity and Capital Resources." The West End and Valley
Boulevard Properties do not have any known environmental problems and are not
subject to the Consent Order.
Additionally, the Company is completing a DTSC approved closure plan for a
former tenant that is in bankruptcy. Since the former tenant has not been able
to fully perform its closure obligations with respect to the property it leased
from the Company, the Company, as landowner, will be required to do so. To
date, the Company's remediation and related costs have generally been reimbursed
by guaranties provided by two individuals associated with the former tenant.
The remaining remediation cost will be reimbursed up to the available amount
under the performance guarantees of approximately $125,000.
The Company is also cleaning up approximately seven acres of the Central Mill
Site on which a tenant operated a scrap metal yard. This tenant filed for
bankruptcy in December, 1995. Total remediation costs for this seven acre site
are currently estimated to be $1 million. It is unknown at this time how much
of the Company's expenditures will be recoverable by the Company.
While the Company has monitored certain groundwater wells in the past, the
DTSC requested and the Company intends to implement a supplemental groundwater
investigation system. The Company is currently discussing with the DTSC the
scope and duration of the supplemental groundwater investigation. The Company
has settled certain 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 Water. In 1995,
the Company contributed 18,000 acre feet of its water in storage thus satisfying
the first 18 years of its obligation. For more detailed information see "Item
3. Legal Proceedings - Groundwater Remediation Settlement Agreement."
In May 1989, the Company filed a lawsuit in San Francisco County Superior
Court against over eighty insurance companies which had provided comprehensive
general liability coverage to KSC since its inception in 1941. The lawsuit
sought a declaratory judgment that future costs of groundwater cleanup and other
environmental cleanup costs are covered under the insurance policies and
reimbursement for the costs already incurred. During 1995, the Company was able
to reach a settlement with all the major defendants resulting in the Company
reporting net settlement payments (net of all litigation expenses and third
party obligations) totaling approximately $12.5 million. Payment of the final
installment of the settlement proceeds is scheduled for the end of April, 1996.
See "Part I, Item 7. Management Discussion and Analysis of Financial Condition
and Results of Operations."
The Company is also involved, from time-to-time, in legal proceedings
concerning environmental matters. In February, 1996, the City of Ontario,
California served a complaint on the Company alleging that the Company is liable
for environmental contamination of one of its municipal wells. See "Part I,
Item 3. Legal Proceedings."
EAGLE MOUNTAIN TOWNSITE
The Eagle Mountain Townsite, which is owned debt free by Kaiser and which
covers approximately 460 acres, consists of more than 300 houses (of which
approximately 100 have been renovated for current occupancy), a water supply and
sewage treatment system, an office building, machine shops, school facilities
and other structures.
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<PAGE>
The Company's wholly owned subsidiary, Kaiser Eagle Mountain, Inc., operates
the Eagle Mountain Townsite. When the Eagle Mountain Iron Ore Mine was
operational, the Eagle Mountain Townsite provided housing for mine employees and
their families. The Company currently leases a portion of the Eagle Mountain
Townsite to a private company which operates a minimum security prison for the
State of California. In order to redevelop the Eagle Mountain Townsite, the
Company is preparing and will soon file a Specific Plan with the County of
Riverside. The Townsite Specific Plan is included in the processing of the
Landfill Project.
If the land exchange with the United States Bureau of Land Management (the
"BLM") is completed (see page 21 "Proposed BLM Land Exchange" in this Form 10-K
Report), the Eagle Mountain Townsite will expand to approximately 1,100 acres.
OTHER REDEVELOPMENT OPPORTUNITIES
Other Property Ownership and Development. The Company owns a number of real
estate parcels and mineral deposits in the California desert, including an
active iron ore mine leased to a third party (the "Silver Lake Mine"), and
improved and unimproved property at Lake Tamarisk, an unincorporated community
located approximately eight miles from the Eagle Mountain site.
MUNICIPAL SOLID WASTE MANAGEMENT
LANDFILL PROJECT
Background. Many of Southern California's current landfills are located in
urban areas and often are old, unlined, and lack current environmental
safeguards. Furthermore, it is becoming increasingly expensive and difficult to
permit and open new landfills or to expand existing landfills in urban areas due
to political opposition and stringent government regulations, including recent
federal regulations. The Company believes that Southern California will begin
to face a shortage of safe, permitted landfill capacity in the future. However,
the anticipated shortage in landfill capacity that was predicted in the 1980's
and early 1990's has not developed as quickly as originally anticipated because
several regional landfills were expanded and a number of other landfills are
seeking to expand their permitted capacity. In addition, the anticipated life
of many existing landfills also increased because of better landfill management
techniques and reduced waste tonnage due to recycling and the California
recession.
The Eagle Mountain Landfill Site. The Company's 11,350-acre Eagle Mountain
Site, located in the remote California desert approximately 200 miles east of
Los Angeles, consists of three large open pit mines, the Eagle Mountain Townsite
and a 52-mile private rail line that accesses the site. The Company has leased
approximately 8,300 acres of the idled mine site and the rail line to MRC for
development of a rail-haul solid-waste landfill (the "Landfill Project"). As
discussed in more detail below, effective as of January 1, 1995, the Company,
through a wholly-owned subsidiary, Eagle Mountain Reclamation, Inc. ("EMR"),
became a 70% shareholder in MRC and through subsequent investments in MRC, is
currently an approximately 72% shareholder in MRC.
In anticipation of Southern California's ultimate need for new environmentally
safe landfill capacity, the Company and MRC in 1988 began the planning and
permitting for a 20,000 ton per day rail-haul, non-hazardous solid waste
landfill at Kaiser's Eagle Mountain Site. The Company believes that the Eagle
Mountain Site has many unique attributes which make it particularly well-suited
for a rail-haul, solid waste landfill, including:
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. the Eagle Mountain Site is located in a sparsely populated remote desert
area;
. the largest of the mine site's three pits, which is two miles long,
three-quarters of a mile wide and 1,500 feet deep, has the capacity to
receive over 500 million tons of non-hazardous solid waste, which is
approximately a 75 year capacity;
. MRC's state-of-the-art landfill design, including its multiple liner
system, is engineered to meet or exceed all current state and federal
environmental regulations;
. Kaiser's existing 52-mile rail line links the site to Southern
California's existing rail transportation network;
. approximately 9 million cubic yards of clay-like tailings,
environmentally suitable for use as part of the required landfill liner,
and approximately 120 million tons of washed gravel, suitable for use as
daily landfill cover, already exist on the Eagle Mountain Site;
. the arid desert location, which receives an average of less than five
inches of rain a year and has a high moisture evaporation rate,
significantly reduces the amount of leachate anticipated at the landfill
and thus provides a natural environmental safeguard;
. the Landfill Project will reclaim portions of the Eagle Mountain
property disturbed by the mining operation, eventually returning the
area to its original mountainous contour.
Current plans for operation of the landfill anticipate that non-hazardous
household solid waste will initially be delivered to MRFs and transfer
facilities throughout Southern California by municipalities and independent
waste haulers. Recyclable and hazardous materials will be separated at these
facilities, and the remaining non-hazardous solid waste will be transported,
primarily by rail, in closed and locked containers to the Eagle Mountain
landfill. MRC currently anticipates that the landfill's initial operations,
depending upon the level of disposal fees, could commence with a minimum of
approximately 3,500 tons of solid waste per day.
Founding and Ownership of MRC. MRC was formed in 1982 by waste industry
professionals to address the anticipated solid waste disposal problem in
Southern California. In order to utilize Kaiser's Eagle Mountain Site, the
Company, through its subsidiary Kaiser Eagle Mountain, Inc., entered into a
lease with MRC in 1988 for the development of the Landfill Project (the "MRC
Lease"). In 1990, a subsidiary of Browning Ferris Industries ("BFI"),
purchased a 50% interest in MRC. BFI provided a majority of MRC's funding
subsequent to its initial investment, which resulted in BFI becoming the
majority owner of MRC.
As of August 1, 1994, the ownership of MRC was restructured as part of BFI's
withdrawal from MRC. As part of the restructuring, BFI returned to MRC all of
its common and preferred stock in MRC and paid off all of MRC's outstanding bank
indebtedness in the amount of approximately $10,400,000 leaving MRC
substantially debt free. In addition, BFI provided MRC with funds in excess of
$5,000,000 to be used to fund ongoing development activities. BFI also agreed
to leave in place certain financial assurances associated with the permits that
had been granted to MRC through August 1, 1996. However, BFI will be
indemnified first by MRC and then by the Company should BFI incur any loss due
to a call on the financial assurances.
Acquisition by the Company of Majority Ownership Interest in MRC and Financial
Status. After a series of discussions, MRC and the Company entered into a
Stock Acquisition Agreement dated January
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13, 1995 pursuant to which the Company, through a wholly owned subsidiary, EMR,
agreed to acquire common stock in MRC representing a 70% ownership interest.
This transaction was consummated on February 2, 1995, but was effective as of
January 1, 1995. In exchange for the ownership interest, the MRC Lease was
amended to eliminate MRC's obligation to pay minimum rent. In addition, MRC
forgave all current contingent non-recourse obligations, including $1,500,000 in
prepaid rent and approximately $1,500,000 in other obligations the Company would
have had to repay MRC out of future royalties.
With the acquisition of the equity interest in MRC, the Company is taking a
more active role in the permitting of the Landfill Project and in assisting MRC,
as appropriate, in raising the funds necessary to complete the permitting
process. The Landfill Project is dependent upon MRC's efforts to raise
additional equity capital.
Neither the Company nor any subsidiary of the Company has any obligation to
invest funds in MRC. However, the Company in June, 1995 made a commitment,
subject to certain conditions, to provide funding to MRC, in an amount of up to
approximately $5.25 million over two years. The first stage of funding, a $3.2
million private placement to existing MRC shareholders, officers and directors
was fully subscribed and completed in the Fall of 1995. The Company invested
$1.84 million in 1995 and an additional $592,000 in January, 1996 as a component
of the first stage of funding. MRC is currently engaged in another private
placement to its existing shareholders, officers and directors seeking to raise
an additional $2.8 million. The Company through EMR intends to purchase up to
approximately $2.1 million of the stock in the private placement. Even if $2.8
million is raised through the current private placement, additional funds will
be necessary to complete the permitting process.
MRC continues to pursue financing from other prospective investors as well as
other means of raising funds or commitments such as the sale of capacity rights,
air space or disposal agreements.
MRC Lease. In connection with the reorganization of MRC, the MRC Lease was
amended effective July 29, 1994, and again amended effective January 1, 1995,
with the Company's acquisition of a 70% interest in MRC. Under the terms of the
MRC Lease, as amended to date, MRC is responsible for substantially all project
costs and activities, including landfill design, permitting, construction and
operation. MRC has also agreed to indemnify the Company against claims arising
from MRC's activities, including any environmental damage that may be caused to
the leased property by MRC's operations. The MRC Lease also provides, among
other things that: (i) the Company must give MRC notice of any proposed sale of
its interest in the Eagle Mountain property, and MRC has a right of first
refusal to purchase such interest under certain circumstances; (ii) the Company
and MRC may not participate in another project that employs a railroad in
connection with the storage or disposal of solid waste in counties surrounding
the landfill; and (iii) MRC has certain rights to terminate the MRC Lease
including: (a) upon the Company's default under the terms of the MRC Lease; (b)
upon 180 days notice at any time during the six month period immediately
following the receipt of all the necessary permits for the Landfill Project
(prior to the July 1994 amendment, once all the permits were received, MRC also
became obligated to pay minimum rent to the Company for the balance of the term
of the 100 year lease); and (c) at any time upon two year's notice.
The Company maintains and may exercise all rights it has under the MRC Lease,
including the right to re-acquire through its subsidiary, Kaiser Eagle Mountain,
Inc., the Landfill Project. In the event the Company reacquires the Landfill
Project, depending upon the circumstances, such as upon MRC's default due to
lack of funds, the non-BFI shareholders at the time of the July, 1994 amendment
shall have the right to continue in the project in some manner.
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The MRC Lease was again amended as of January 1, 1996. The amendment reduced
the amount of land that MRC leases from the Company by approximately 50%. MRC
continues to lease from the Company all the real property necessary for the
Project.
Lease Economics. Until January 1, 1995, MRC paid to the Company a minimum
monthly rent. This rent was $200,000 per month during 1994 and was originally
scheduled to increase to $300,000 a month in December 1995. However, in
conjunction with the Company's acquisition of its equity interest in MRC, the
MRC Lease was amended effective January 1, 1995, to eliminate the minimum
monthly rent. The elimination of the minimum monthly rent did not change the
future royalty payments due the Company upon the commencement of landfill
operations.
Once the landfill is operational, the Company will receive, as landlord of the
Eagle Mountain Site, the greater of (i) a royalty of $2.00 per ton of waste
received; or (ii) a royalty payment calculated as a designated percentage of the
landfill tipping fees charged by MRC. The future royalty payment paid to the
Company by MRC is based on MRC's gross collections, which are basically
equivalent to the tipping fees to be charged by MRC at the landfill. In
calculating gross collections, MRC may deduct certain items, including any
federal or state fees, the host fees paid to Riverside County and other charges
imposed or required to be collected at the landfill. Certain other revenues are
also excluded from the definition of gross collections, including any MRC
revenue from salvage, recycling or reclamation operations or from the disposal
of waste from certain areas near the Landfill Project. In addition to the
royalty payment, the Company will receive an additional $0.15 royalty for every
ton of waste transported to the landfill on the Company's 52-mile rail line.
The following table illustrates the royalty payment formula set forth in the
MRC Lease.
Monthly Average % Fee Net # Days
Royalty = Daily X Payable to X Tipping X in
Payment Tonnage Kaiser Fee Per Ton Operation
<TABLE>
<CAPTION>
AVERAGE
DAILY TONNAGE/1/ TIPPING FEE PERCENTAGE PAYABLE TO KAISER
- ------------------------- --------------------------------------------------
<S> <C>
0 - 3,500 10.0% on all tonnage during applicable month
3,501 - 4,999 10.0% on first 3,500 tons; 15.0% on balance during
applicable month
5,000 - 8,999 15.0% on all tonnage during applicable month
9,000 - 20,000 18.5% on all tonnage during applicable month
</TABLE>
/1/ Determined over the number of operating days in a calendar month.
The Company's revenues under the MRC Lease will be directly affected by the
amount of tonnage accepted at the Landfill Project and the applicable tipping
fees charged for such tonnage. The amount of tonnage depends upon MRC's
ability to obtain contracts with municipalities and waste haulers for the
receipt, transfer and disposal of solid waste. MRC has not, to date, obtained
any contract for the transfer or disposal of solid waste, although MRC is
undertaking limited marketing efforts to seek such contracts. However, there
are no assurances that MRC will be able to secure contracts for sufficient waste
tonnage to make the Landfill Project successful.
Disposal costs consist principally of tipping fees and transportation costs
associated with the hauling of waste to the landfill. Tipping fees currently
vary widely among landfills, partly as a result of real and perceived landfill
capacity shortages in areas, pending closure deadlines and partly as a result of
increased costs of construction, operation and/or closure. Tipping fees do not
include transportation
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<PAGE>
costs which may vary significantly depending upon such factors as distance to
the landfill and method of handling the waste. It is unknown at this time if
disposal costs in Southern California will sufficiently increase as to make the
Eagle Mountain Landfill attractive to those controlling the disposal of waste.
See the discussion on Disposal Fees below.
Government Regulation/Permitting. Solid waste landfills are subject to
stringent federal, state and local environmental regulations. These
regulations, among other things, require upgraded or new composite landfill
liners, leachate collection and treatment, groundwater and methane gas
monitoring, stricter siting and location criteria, closure requirements and
financial assurances (such as a surety bond) from the owner or operator. The
Eagle Mountain Landfill is designed to meet or exceed these requirements.
In order to construct and operate the Landfill Project, MRC will be required
to obtain numerous government permits and approvals relating to such matters as
land use compatibility, groundwater protection, air quality emissions, habitat
protection, and rodent, pest and litter controls. The process for obtaining
these permits and approvals is often difficult, expensive and time-consuming,
particularly because the siting of landfills is a highly political issue and
often draws opposition from environmental groups and local residents.
Through the first half of 1994, MRC was making substantial progress in
obtaining the necessary permits to commence construction of the Landfill
Project. As of June 1, 1994, MRC had received 17 of the required 20 permits and
two more of the permits were in draft form and were anticipated to be soon
issued. However, as discussed in detail below, all the permits were suspended
or voided due to the adverse outcome of litigation involving the environmental
impact report/environmental impact statement for the Landfill Project approved
by Riverside County in 1992.
By way of background, before any significant regulatory permit may be granted
relating to the construction and operation of the Landfill Project, an
environmental impact report/environmental impact statement (an "EIR") must be
certified and approved by the appropriate regulatory agencies. In October 1992,
the Riverside County Board of Supervisors approved the EIR for the Landfill
Project and MRC's local land use applications. Legal challenges to the
certification of the EIR were mounted in late 1992 by a number of individuals, a
conservation group and Eagle Crest Energy Company ("ECEC"), formerly known as
Eagle Mountain Energy Company, which is a potential competitor for the use of a
portion of the Landfill Project site.
In July 1994, the San Diego County Superior Court issued its decisions on the
challenges to the EIR for the Landfill Project. Of the more than seventy (70)
areas of concern initially raised by the plaintiffs in the cases, the Court
announced that it had eight (8) areas of concern in which the EIR was deficient,
thus requiring corrective action.
With regard to the challenges initiated by opponents the Court concluded, in
sum, that: (i) the town of Eagle Mountain should have been included in the EIR
together with an analysis of the environmental impacts associated with its
growth; (ii) the EIR should have evaluated the cumulative impacts of the Eagle
Mountain townsite and the Landfill Project; (iii) there was insufficient
evidence to support the EIR conclusion that the proposed mitigation measures for
the desert tortoise will be effective; (iv) there was insufficient documentation
and ability of the public to comment on possible seismic activity and the
ability of the landfill's liner system to withstand seismic activity; (v) there
was insufficient documentation in the record to support the EIR's conclusion
that the air quality, biological resources, and other areas of potential concern
(i.e., the "wilderness experience") associated with or a part of the Joshua Tree
National Monument would not be significantly impacted; (vi) the Level One
Contaminant Survey
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conducted by the BLM on the Eagle Mountain property should have been disclosed
to the public prior to the certification of the EIR, (even though subsequent
investigations confirmed the absence of any hazardous materials); and (vii) the
cumulative impacts of ECEC's proposed hydro-electric project together with the
Landfill Project should have been considered in the EIR. The Court also
concluded that the public should have been informed of Riverside County's
opposition to ECEC's proposed project for purposes of public comment.
Accordingly, since the EIR was determined to be inadequate in several areas, a
new EIR will be required. The Court did conclude that the Development Agreement
among the Company, MRC and Riverside County was valid and that the EIR's
discussion of MRFs was adequate. As discussed below, these two points were
appealed by one of the Landfill Project's opponents but such appeal was
unsuccessful.
As a result of the Court's determinations, the Court set aside and declared
void the Riverside County Board of Supervisors' EIR certification and all
Riverside County approvals rendered in connection with the EIR certification.
The Court ordered activities related to the development of the landfill
suspended and directed the preparation of a new final environmental impact
report in compliance with applicable law and the Court's conclusions. MRC and
the Company disagreed with many of the Court's conclusions and initially took
steps to appeal the decisions, but later withdrew their appeal to focus their
efforts on re-permitting the Landfill Project.
In March 1995, MRC initiated the necessary repermitting process by filing its
land use applications with Riverside County. MRC has been diligently pursuing
the preparation of a new EIR and environmental impact statement ("EIS"). Given
the additional work that is required it is currently estimated that completion
of the permitting of the Landfill Project will be delayed until at least late
1997 while new environmental information is assembled, a new EIR/EIS is
prepared, the necessary EIR/EIS reviews and approvals are sought and the
permitting process completed. It is anticipated that a draft of the new EIR/EIS
will be circulated for review in the second quarter of 1996. The current
permitting process has proceeded at a pace slower than previously anticipated
for, among other reasons, the two furloughs of Federal government workers (the
Bureau of Land Management and National Park Service employees) resulting in
delays in the receipt of comments on the EIR/EIS and additional studies
requested by the National Park Service.
There is no assurance that the new EIR will receive the necessary approvals,
including approval by the Riverside County Board of Supervisors. In addition,
there is no assurance that, even if the new EIR is ultimately certified and all
necessary permits are received, there will not be new legal challenges that
would further delay the construction and operation of the Landfill Project.
Given the legal challenges that have occurred to date, and the controversies
that generally surround landfill projects, future legal challenges are likely.
Two aspects of the litigation involving the EIR that were on appeal have now
been resolved. ECEC had appealed the denial of its request for an award of
attorneys' fees, but dropped such appeal in 1995. In addition, the conservation
group opposed to the Landfill Project appealed the Court's determination that
the EIR's discussion about MRF's was adequate and that the Development Agreement
was valid. The group contended that the Development Agreement was invalid
because MRC was not the current owner of all the land to be used in the Project.
On February 16, 1996, the California Court of Appeals announced its decision
upholding the trial court's ruling in these two matters, thus ruling in favor of
MRC and against the conservation group. There is other litigation and
regulatory actions affecting the Landfill Project which are described in more
detail in "Item 3. Legal Proceedings" of this Form 10-K Report.
There can be no assurance that all necessary permits or approvals will be
obtained or that they will be obtained within the time periods estimated by MRC
or the Company. In addition, any approvals and
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permits obtained may be subject to future legal challenges, revocation,
modification or failure to renew, under various circumstances.
Proposed BLM Land Exchange. Of the approximately 11,350 acres located at the
Eagle Mountain site, the Company currently owns 1,800 acres in fee and has
various possessory mining claims with respect to the remaining 9,550 acres. In
addition, the Company owns in fee approximately 3,200 acres along the 52-mile
railroad right-of-way. The major remaining portion of the Company's railroad
right-of-way consists of various private leases and an operating grant from the
BLM.
In conjunction with the landfill permitting process, the Company plans to
transfer to the BLM approximately 2,800 acres of Kaiser-owned property along the
railroad right-of-way, which property has been identified as prime desert
tortoise habitat, in exchange for fee ownership of approximately 3,500 acres of
land within the Landfill Project area. Specifically, the Company will receive
fee ownership of various non-fee mining interests currently held by the Company
near the large open pits. After extensive review and analysis, in October 1993,
the BLM issued its Record of Decision approving the land exchange with the
Company. The decision of the BLM approving the land exchange was challenged by
the filing of appeals with the Interior Board of Land Appeals ("IBLA"), the
agency having immediate appellate jurisdiction over the BLM's decision.
However, as discussed in more detail below, in March, 1995, the BLM announced
that it would join in Riverside County's additional environmental review, and
requested that the IBLA remand the decision on appeal for further agency action.
An additional discussion of the appeals is found in the "Legal Proceedings -
Litigation" section of this report.
In a separate but related action to the land exchange, the Company and the BLM
also entered into discussions with respect to the extension of the Company's
right-of-way to use the railroad, a right-of-way for an existing road and the
transfer to the Company of property rights with respect to land at the Eagle
Mountain Townsite. All issues with respect to the right-of-way were also
resolved as a part of the BLM's Record of Decision. The BLM issued a new 36
mile right-of-way for the Kaiser railroad and a new joint right-of-way for the
Eagle Mountain road and its extension to Kaiser and the Metropolitan Water
District of Southern California. These right-of-way grants were also appealed
to the Interior Bureau of Land Appeals ("IBLA").
The Record of Decision also approved the termination of the reversionary
interest with respect to approximately 460 acres within the Eagle Mountain
Townsite. This portion of the Record of Decision was also appealed to the IBLA.
See "Item 3. Legal Proceedings - Litigation."
On March 10, 1995, the BLM announced that it would join with Riverside
County's new environmental review by preparing a new or supplemental EIS for the
proposed land exchange. This additional review put the land exchange on hold
pending completion of the new environmental review process. In its press
release announcing its decision, the BLM stated that years of analysis and
review had been completed prior to the BLM's approval of the land exchange and
that the BLM believed that the document prepared in connection with the proposed
exchange remains reliable. However, the BLM noted that new environmental data
may be generated by the County on the proposed landfill and that the BLM
believed it beneficial to the public to take part in the additional
environmental review. Concurrent with this announcement, the BLM requested that
the IBLA remand the Record of Decision for further agency action which request
was later granted by the IBLA, rendering the appeals moot.
On March 22, 1995, the Federal Energy Regulatory Commission ("FERC") announced
that it was lifting what is known as the Section 24 reservation asserted by ECEC
on many of the Federal lands that are the subject of the pending land exchange.
This Section 24 reservation has been vacated except for approximately 47 acres.
This means a major impediment to the land exchange was substantially
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eliminated. However, ECEC continues to assert that it will have the power of
eminent domain over the Project in the event it is granted a license by FERC to
construct its hydro-electric project. ECEC remains an opponent to the Project.
Competition. The solid waste disposal industry is highly competitive with a
few large, integrated waste management firms and a significant number of
smaller, independent operators.
The success of the Landfill Project depends largely upon MRC's ability to
secure solid waste disposal contracts from municipalities and waste haulers in
this highly competitive environment. The ability of MRC to secure such waste
disposal contracts is predicated upon a number of factors including, but not
limited to, MRC's ability to (i) charge disposal fees comparable to those of its
competitors; (ii) provide financial and environmental safeguards against
potential liability; (iii) provide sufficient long-term capacity; and (iv)
commence operations prior to the expansion of existing landfills or the opening
of other large capacity, rail-haul landfills. Currently, there are over 20
major existing municipal solid waste landfills in Southern California serving
the same geographic area as that proposed by the Landfill Project (primarily Los
Angeles, Orange, Riverside and San Bernardino Counties). While a number of
Southern California landfills are scheduled to close in the next several years
as they reach capacity, several of them, including El Sobrante Landfill in
Riverside County and Puente Hills in Los Angeles County, are in the process of
expanding the permitted capacities of their existing facilities. In addition,
several new landfills are being proposed, including a 12,500-ton per day
landfill in Los Angeles County at Elsmere Canyon.
The Company is also currently aware of at least two other enterprises seeking
to develop rail-haul, solid waste disposal facilities which would be located in
Southern California and would compete directly with the Landfill Project. These
proposed cut-and-fill landfills include: (i) a landfill to be developed in a
desert site in San Bernardino County by Rail Cycle of Los Angeles, a joint
venture between Waste Management, Inc. and the Santa Fe Railway Company, Inc.;
and (ii) Mesquite Regional Landfill to be developed in Imperial County by a
partnership including Western Waste Industries and SP Environmental Systems,
Inc., an affiliate of the Southern Pacific Transportation Company. Both
projects are being developed by well established waste management companies
which control significant waste streams in Southern California as a result of
their waste hauling businesses. Both California rail haul projects received
certification of their respective EIR, in late 1995. Given the need to submit a
new EIR/EIS for the Project, these projects may be considered further along in
the permitting process than MRC. Like the Landfill Project, both projects face
opposition.
Competition also extends to rail-haul landfills in the states of Arizona, Utah
and Washington. In Utah, East Carbon Development Corp. operates a rail-haul
landfill capable of receiving waste from Southern California and it is actively
marketing its services to waste generators in Southern California. In addition,
BFI, the former majority shareholder of MRC, operates a landfill in La Paz
County, Arizona, with planned rail access, which will compete for Southern
California waste.
To a lesser extent, the Landfill Project will also compete with alternatives
to landfills, such as recycling and "waste-to-energy" projects.
Disposal Fees. While the Company believes that it will take several years for
MRC's projected disposal fees to be aligned at competitive levels with other
urban landfills, it also currently believes that the advantages afforded by the
Eagle Mountain site should enable it, in the long term, to compete effectively
with both existing and other proposed landfills. Within the last year, there
has been a general reduction in disposal or "tipping fees" in several areas of
Southern California. The reduction in tipping fees was accelerated with the
bankruptcy of Orange County, California. As a means of generating
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revenue, Orange County reduced its tipping fee to out-of-county trash from
$38.50 to as low as $18.00 per ton depending upon the length of the time
commitment. Trash generated within Orange County still pays approximately $38.50
per ton tipping fee. Riverside County recently proposed adopting a two tier
tipping fee structure. The tipping fee would be $30.00 for direct haul to a
landfill and $25.00 if the waste is processed through a transfer station or
materials recycling facility. Facing the loss of waste from its system, San
Bernardino County is considering dropping its tipping fee from $35.50 per ton to
$32.00, $31.00, $30.00 and $29.00 per ton with five (5), ten (10) and fifteen
(15) year commitments, respectively.
Management believes that the advantages afforded by the Eagle Mountain site
should enable it, in the long term, to compete effectively with both existing
and other proposed landfills. In addition, the success of the Project depends
upon the development of the anticipated shortage in landfill capacity in
Southern California over the next several years. However, there is no assurance
that the Company is currently able or will be able to compete effectively with
anticipated landfill space and pricing competition or that other forms of
competition will not result.
EMPLOYEES
As of March 22, 1996, Kaiser had 25 full-time and 3 part-time employees. In
addition, as of March 22, 1996, MRC, the Company's subsidiary had 5 full-time
employees and 1 part-time employee.
ITEM 2. PROPERTIES
OFFICE FACILITIES
The Company's principal offices are located at 3633 East Inland Empire
Boulevard, Suite 850, Ontario, California 91764. The Company leases
approximately 7,500 square feet in Ontario, California, pursuant to a lease
agreement expiring in August, 1999. The Company also maintains offices on the
Mill Site Property, at the Eagle Mountain site and in Denver, Colorado. MRC
leases an office in Palm Desert, California for a term that expires in August,
1997, and maintains an office at the Eagle Mountain Site.
EAGLE MOUNTAIN, CALIFORNIA
The Kaiser Eagle Mountain idle iron ore mine and the adjoining Eagle Mountain
Townsite are located in Riverside County, approximately ten miles northwest of
Desert Center, California. Desert Center is located on Interstate 10 between
Indio and Blythe. The heavy duty maintenance shops, and electrical power
distribution system have been kept substantially intact since the 1982 shutdown.
The Company also owns several buildings, a water distribution system, a sewage
treatment facility, and related infrastructure. The Eagle Mountain Townsite
includes more than 300 single family homes, approximately 100 of which have been
renovated and are currently in use. Most of the houses in use are leased to
Management and Training Corporation ("MTC") for use in conjunction with a
permitted 500-bed community-custody facility operated under a contract with the
California Department of Corrections. Utilization of the remaining houses and
related facilities will require additional renovation activities plus approval
by Riverside County of a Townsite Specific Plan.
In and around the Eagle Mountain area the Company has various possessory
mining claims on 9,555 acres and holds 1,800 acres in fee simple. In addition,
the Company and BLM are working toward a land exchange. See "Part I, Item 1.
Business" with respect to the proposed land transfer between the Company and the
BLM.
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The Company owns six deep water wells, of which two are currently being used,
and two booster pump stations that serve the Eagle Mountain mine and townsite.
RAILROAD
To transport ore from the Eagle Mountain mine to the mill site (see below),
KSC constructed a 52-mile heavy duty rail line connecting the mine to the main
Southern Pacific rail line at Ferrum, California. The Company owns in fee
approximately 10% of the 52-mile railroad right-of-way. The major remaining
portion of the railroad right-of-way consists of various private leases and an
operating right-of-way from the BLM. As a part of its Record of Decision the
BLM issued a new railroad right-of-way to the Company. However, with the recent
decision of the BLM to reconsider its Record of Decision, the new railroad
right-of-way is currently considered still pending. The railroad is included in
the lease to MRC for the Landfill Project. See "Part I, Item 1. Business."
FONTANA, CALIFORNIA
With the acquisition of approximately 460 acres by The California Speedway
Corporation for the construction of TCS, the Company now owns approximately 715
acres near Fontana, California. All of the Company's property is debt free with
the exception of the West End and Valley Boulevard parcels which total
approximately 282 acres. The West End and Valley Boulevard parcels are subject
to an outstanding note with an approximate principal balance of $5,400,000.
Located on the Mill Site Property is extensive infrastructure; including, water,
wastewater and sewage treatment facilities, and several single-story office,
storage and industrial buildings. However, all the buildings previously on the
Central Mill Site Property have been demolished as part of the development of
TCS. The Company has historically had a number of short-term lease arrangements
with unaffiliated entities for portions of this property.
There is one active deep water well on the property, with capacity
significantly in excess of the current water needs for the property. Another
deep water well formerly owned by the Company is located on the property
acquired by The California Speedway Corporation, although it was taken out of
service due to the development of TCS. It is anticipated that the Company's
water well currently used on the Central Mill Site will be taken out of service
and a third party will provide water to users of the Mill Site Property.
However, even with a third party providing water, the well may still be used for
irrigation purposes. See "Part I, Item 1. Business." The Company originally
had adjudicated water rights to extract 2,930 acre-feet of water per year for
use on the property. However, the Company as part of the transaction with PMI
and the Company's agreement to sell a portion of these water rights to
California Steel Industries, Inc. ("SCI"), an adjoining landowner, in connection
with the proposed settlement of certain disputes and litigations with such
company, the Company will own the following water rights associated with the
Mill Site Property: (i) 525 annual acre feet; (ii) 475 annual acre feet as
tenants in common with The California Speedway Corporation which has the right
of first use; and (ii) 630 acre feet in common with CSI, with CSI having the
first right of use through June 30, 2204 and the Company thereafter having the
first right of use. See "Item 3. Legal Proceedings." In addition, the Company
currently has rights to approximately 5,000 acre-feet of water in storage,
effective as of December, 1995. Pursuant to a settlement agreement reached with
the California Regional Water Quality Control Board in 1993, the Company is
obligated to contribute 1,000 acre feet of water per year for 25 years for the
purposes of a regional de-salter project. In 1995, the Company contributed
18,000 acre feet of water in storage which satisfies the Company's obligation
under the settlement agreement for the next 18 years. See "Item 3. Legal
Proceedings."
Further, the DTSC has determined that limited portions of the property require
environmental remediation. The Company is working with the DTSC to remediate
the impacted areas. As discussed in
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"Item 1. Business - Environmental," the Company undertook significant
remediation activities in 1995. The major environmentally impacted areas of the
property on which TCS is being built were remediated in 1995. The remedial
action plan for the tar pits area has been approved and the remedial action plan
for the area known as the upper Chemwest facility was also approved. As a result
of the Company's experience in remediating the limited portion of the
motorsports complex requiring remediation, the Company is evaluating other
alternatives for the remediation of the remaining impacted areas of its
property. See "Item 1. Business."
LAKE TAMARISK, CALIFORNIA
Lake Tamarisk is an unincorporated community located two miles northwest of
Desert Center, California and approximately 8 miles from the Eagle Mountain
mine. This community has 150 improved lots situated around two recreational
lakes and a nine-hole golf course. With 70 homes and a 150-space mobile home
park, the community has an average year-round population in excess of 150. Lake
Tamarisk Development Corporation ("LTDC"), a wholly-owned subsidiary of the
Company, owns 77 improved lots including one residential structure. LTDC also
owns a 240-acre parcel of unimproved land across the highway from the main
entrance to Lake Tamarisk.
OTHER REAL ESTATE PROPERTIES
The Company owns numerous small land parcels and iron ore deposits in the high
desert area of Southern California, including the Silver Lake Mine west of
Baker, California and 190 acres near Afton Canyon.
FONTANA UNION WATER COMPANY
The Company, through a wholly owned subsidiary, owns 7,632 5/8 shares or
approximately 51% of the outstanding stock of Fontana Union, a California mutual
water company. These shares entitle the Company (or its lessee) to receive, at
cost, its proportionate share of Fontana Union's water. Fontana Union owns
surface and groundwater rights in the Fontana, California area with annual
average production of approximately 38,000 acre-feet (including currently
approximately 4,000 acre feet relating to the annual Chino Basin agricultural
pool transfer). The Company's shares of Fontana Union stock are currently
leased to the Cucamonga County Water District. The Fontana Union shares and the
lease of such shares to Cucamonga County Water District are currently pledged as
collateral for the Company's $20,000,000 revolving-to-term credit facility. See
"Item 1. Business - Water Resources." The Company is currently in a rate
dispute with Cucamonga Water. See "Item 3. Legal Proceedings."
ITEM 3. LEGAL PROCEEDINGS
The Company, in the normal course of its business, is involved in various
claims and legal proceedings. Except for those matters described below,
management believes these matters will not have a material adverse effect on
Kaiser's business or financial condition. Significant legal proceedings,
including those which may have a material adverse effect on the Company's
business or financial condition, are summarized as follows:
LITIGATION
Eagle Mountain EIR Litigation. This litigation involved three separate legal
challenges to the EIR for the Landfill Project certified by the Riverside County
Board of Supervisors in October, 1992. These
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cases were heard in the San Diego Superior Court. This litigation and its impact
on MRC and the Company are discussed in detail in "Part I, Item 1. Business -
Municipal Solid Waste Management - Landfill Project - Government
Regulation/Permitting" starting on page 15 of this Form 10-K Report. The Court's
decisions have required MRC to prepare a new EIR. The litigation is still
considered technically outstanding as the San Diego Superior Court retains
jurisdiction to determine if the new EIR complies with its rulings. MRC and the
Company initially appealed the Court's decisions, but withdrew such appeals to
focus its efforts on re-permitting the Landfill Project. One of the plaintiffs
appealed and later withdrew its appeal of the denial of its request for the
award of attorneys fees. Another one of the plaintiffs, National Parks and
Conservation Association, appealed the trial court's conclusion that the
discussion of MRF in the EIR was adequate and that the Development Agreement was
valid. On February 16, 1996, the California Court of Appeals (Case No. D022183 -
Superior Court No. 662907) announced its decision upholding the trial court's
rulings on these matters resolving these issues in MRC's favor.
BLM Land Exchange. As discussed in more detail in "Item 1. Business," the
BLM issued, in October 1993, its Record of Decision approving the proposed
BLM/Kaiser land exchange. Sixteen parties appealed the BLM's decision to the
IBLA. These were generally the same parties that were involved in the
litigation before the San Diego Superior Court over the EIR for the Landfill
Project. In sum, the appealing parties argued that the federal EIS was
deficient on the same grounds as determined by the San Diego Superior Court.
However, these appeals were rendered moot when in March 1995, the BLM announced
that it would join with Riverside County in completing a new EIR/EIS for the
proposed Eagle Mountain landfill and land exchange and the IBLA returned the
BLM's record of decision for further agency action.
Another of the items in contention was whether ECEC would take action to block
the land exchange due to its position that the withdrawal of the land by the BLM
does not affect its subsequently filed power site reservation for its proposed
hydro-electric pump storage project. On March 22, 1995, the Federal Energy
Regulatory Commission ("FERC") announced that it would grant the BLM's request
to vacate the power site reservation on all the lands involved in the proposed
land exchange except for approximately 47 acres.
Finally, while not directly a part of the BLM land exchange dispute, MRC and
the Company will continue to take appropriate actions to oppose the license
application ECEC filed with FERC for the construction and operation of a
proposed hydro-electric pump storage project that would utilize a significant
portion of the Company's Eagle Mountain Site. However, due to the nature of the
FERC process, it may be a substantial period of time before MRC's and the
Company's objections are considered by FERC.
California Steel Industries, Inc. ("CSI"). In mid-1994, the Company and
California Steel Industries, Inc. ("CSI") reached a tentative settlement of all
their disputes. The Company and KSC Recovery, Inc., (the successor to the
bankruptcy estate of Kaiser Steel Corporation) have been in an adversarial
relationship for a number years with CSI. In 1984, CSI purchased approximately
340 acres of land together with the rolling and finishing steel mills of Kaiser
Steel Corporation ("KSC"). The disputes include, among others, the ownership of
certain water rights associated with the Mill Site Property and the groundwater
remediation agreement the Company reached with the California Regional Water
Quality Control Board. CSI has also been asserting a substantial claim for
environmental liabilities and resulting property damage against the KSC
bankruptcy estate managed by KSC Recovery, Inc. In the context of the
bankruptcy proceedings, CSI asserted that the Company was liable for alleged
environmental contamination of the property it acquired from KSC. CSI has
generally been unsuccessful to date in these efforts.
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Due to the complexity of the issues involved, it took a substantial period of
time to document the tentative settlement in 1994. The final settlement
agreement was executed by all the parties in November, 1995 with all the
approvals and contingencies to consummating the settlement agreement obtained
and satisfied by year-end. The closing documents and consideration are
currently held in escrow pending final distribution.
The settlement with CSI is generally in accordance with the terms previously
disclosed. All claims for environmental liability against the Company and KSC
Recovery, Inc., are resolved with CSI receiving a $27,500,000 unsecured
Class 4A claim in the KSC Recovery, Inc. bankruptcy estate. The allowance of
such a claim did not have a financial impact on the Company. The Company is
selling to CSI a portion of certain water rights associated with the Mill Site
Property. These annual water rights, which the Company currently owns are
different from and unrelated to the water rights represented by the Fontana
Union stock leased to Cucamonga Water. Under the terms of the settlement, the
Company is selling to CSI rights to 1,300 acre feet of water for $3,250,000. An
additional 630 acre feet of water will be considered "jointly owned" by CSI and
the Company. CSI will have the first right to use such water for the next nine
years. Starting in July 2004, the Company will have the first right to use such
water. The Company will receive compensation for CSI's use of all or any
portion of the annual rights to this 630 acre feet of water.
The Company is also selling to CSI the majority of the Company's discharge
units into the regional non-reclaimable wastewater line, and is entering into a
services agreement pursuant to which the Company provides sanitary sewer
services to CSI. See "Part I, Item 1,. Business - Sewer Services" for a more
detailed discussion of the sewer services provided to CSI.
Finally, under the terms of settlement, the Company will pay to CSI the
equivalent of one-third (1/3) of any net sums it may collect in settlements or
by judgments in the Company's litigation against its former general casualty and
property insurance carriers after deducting: (i) all expenses, fees and costs
associated with such litigation up to $5,000,000; (ii) the costs of defending
against CSI's various claims up to $850,000; and (iii) the Company's receipt of
the first $5,200,000 of any proceeds. As noted in "Item 1 - Business -
Environmental" the Company has successfully settled such litigation.
Warburton Litigation. The Company and KSC were named as cross-defendants in
certain litigation in the U.S. Federal District Court for the District of
Northern California (Case No. C-93-1114 CW) commenced by IMACC Corporation
("IMACC") against Dorothy Warburton ("Warburton") and others seeking a
determination of liability, contribution and indemnification for the costs of
environmental remediation for two sites that had been used at one time by IMACC
in conjunction with its barrel reconditioning business. Warburton is the owner
of the sites in question. At one time, KSC, through a wholly owned subsidiary,
owned the business now operated by IMACC. Certain other Warburton family
defendants are claiming that they should be indemnified by KSC's subsidiary or
by the Company for actions they took while officers of the KSC subsidiary. The
total damages claimed are unknown although the clean-up costs for the two sites
are presently estimated to range from $5,500,000 to approximately $8,000,000
(approximately $5,000,000 less than previously estimated). The Company through
its bankruptcy and reorganization has already settled any liability it may have
had with IMACC and state environmental regulators for the applicable sites. In
addition, under a previous agreement with IMACC, IMACC is to defend, indemnify
and hold the Company harmless from any such liability. IMACC has been defending
this lawsuit on behalf of the Company. The Company currently believes it has
numerous defenses in the litigation, as well as
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indemnification coverage from IMACC, therefore, no provision for any potential
loss has been made in the accompanying financial statements.
Asbestos Claims. The Company along with KSC are currently named in
approximately nine active asbestos litigation suits. The Company and KSC have
been previously named in other asbestos suits but for various reasons those
suits are not currently being pursued. Most of the plaintiffs alleged that they
worked in ship yards in the Oakland/San Francisco, California area and that KSC
was in some manner associated with one or more shipyards or has successor
liability from another "Kaiser" entity. Most of these lawsuits are third party
premises claims and involve multiple defendants claiming injury resulting from
exposure to asbestos. The Company anticipates that it will be named as a
defendant in additional asbestos lawsuits. All of the complaints are non-
specific. As such it is not practical at this time to determine the true nature
and extent of the claims against the Company and KSC. To date, several, but not
all, of the plaintiffs have agreed that they will not personally pursue the
Company, but they have been granted the right to pursue the Company's insurance
coverage, to the extent there is coverage. The Company currently believes that
it does have insurance coverage for at least a portion of the claims and has
tendered these suits for defense. The Company also currently believes that it
has various defenses to these claims, including the discharge granted to it in
connection with KSC's bankruptcy reorganization. However, this is an evolving
area of the law and the factual discovery with respect to these lawsuits was
just recently commenced.
City of Ontario Litigation. On February 27, 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 that 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 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 improvement or refurbishment of related facilities. The Company
has just commenced investigating the allegations and will aggressively undertake
defense of this lawsuit.
INSURANCE COVERAGE LITIGATION
In 1989 the Company initiated litigation against a number of insurance
companies which had provided comprehensive general liability coverage to KSC
seeking, among other things, the costs of environmental remediation. This
lawsuit was successfully settled with the principal insurance carrier defendants
in 1995. For a more detailed explanation of this litigation see "Item 1.
Business - Property Redevelopment - Environmental."
BANKRUPTCY CLAIMS
The Company's predecessor, KSC, was in reorganization under Chapter 11 of the
United States Bankruptcy Code from February 1987 until November 1988. Pursuant
to the KSC Plan of Reorganization (the "KSC Plan"), the Company has established
a subsidiary, KSC Recovery, which is engaged in the process of pursuing certain
legal actions on behalf of the former creditors of KSC and handling the
remaining administrative duties of the KSC bankruptcy estate, including claims
resolution. All litigation and bankruptcy administration costs are borne by KSC
Recovery, which maintains a cash reserve from previous litigation and other
recoveries to fund anticipated ongoing litigation and administration costs. The
major remaining claims in the bankruptcy estate were resolved in 1995, including
the CSI claim discussed above. Resolution of these claims will allow for a
distribution of cash and stock to the unsecured creditors of the KSC bankruptcy
estate in the second quarter of 1996.
28
<PAGE>
Consistent with KSC Recovery's role as an agent of the former KSC creditors, the
Company's consolidated statements of operations and cash flows do not reflect
any of KSC Recovery's activities.
From time-to-time, various other environmental and similar types of claims,
such as the asbestos litigation mentioned above, that relate to KSC pre-
bankruptcy activities are asserted against KSC and the Company. In connection
with the KSC Plan, the Company, as the reorganized successor to KSC, was
discharged from all liabilities that may have arisen prior to confirmation of
the KSC Plan, except as otherwise provided by the KSC Plan and by law. Although
the Company believes that in general all pre-petition claims were discharged
under the KSC Plan, in the event any of these claims or other similar claims are
ultimately determined to survive the KSC bankruptcy, it could have a material
adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
Not applicable.
29
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock commenced trading on the NASDAQ National Market
System in the fourth quarter of 1990 under the symbol "KSRI." In June, 1993,
Kaiser changed its name to Kaiser Resources Inc. and symbol to "KRSC." Most
recently, the Company changed its name, in June 1995, to Kaiser Ventures Inc.,
but its trading symbol remained the same. The following table sets forth the
high and low reported sale prices of the Company's Common Stock for the periods
indicated, as reported on the NASDAQ National Market System.
<TABLE>
<CAPTION>
LOW HIGH
------- -------
<S> <C> <C>
1995:
Fourth quarter..... $ 9.13 $13.00
Third quarter...... $ 6.38 $ 9.75
Second quarter..... $ 6.25 $ 8.00
First quarter...... $ 5.25 $ 8.25
1994:
Fourth quarter..... $ 5.50 $ 8.50
Third quarter...... $ 6.50 $12.00
Second quarter..... $10.50 $15.50
First quarter...... $14.25 $17.50
</TABLE>
As of March 22, 1996, there were 2,973 holders of record of the Company's
Common Stock.
As of March 22, 1996 the Company held 136,919 shares that are deemed
outstanding but reserved for issuance to the former general unsecured creditors
of KSC pursuant to the KSC Plan. A substantial portion of the shares reserved
for the benefit of the KSC general unsecured creditors were distributed in 1995,
and effective as of March 15, 1996.
The Company has neither declared nor paid any cash dividends on its Common
Stock since emerging from the KSC bankruptcy in November 1988 and does not
intend to declare dividends on its Common Stock in the foreseeable future. Any
future decisions by the Company to pay cash dividends will depend upon its
growth, profitability, financial condition and other factors the Board of
Directors may deem relevant. The Company presently intends to retain its
earnings to finance the development and expansion of its business and for use in
connection with future acquisitions.
30
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The information presented below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements, related notes and other
financial information included herein.
<TABLE>
<CAPTION>
SELECTED STATEMENT OF INCOME DATA
FOR THE YEARS ENDED DECEMBER 31: 1995 1994 1993 1992 1991
------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total revenues........................... $11,108,000 $12,471,000 $10,591,000 $ 9,944,000 $ 8,635,000
Costs and expenses....................... 8,071,000 8,611,000 8,144,000 7,789,000 7,367,000
----------- ----------- ----------- ----------- -----------
Income from operations................... 3,037,000 3,860,000 2,447,000 2,155,000 1,268,000
Net interest expense (income)............ 587,000 (173,000) (466,000) (341,000) (494,000)
----------- ----------- ----------- ----------- -----------
Income before income tax provision
and extraordinary loss.................. 2,450,000 4,033,000 2,913,000 2,496,000 1,762,000
Taxes currently payable.................. --- 125,000 50,000 --- ---
Deferred tax expense..................... 721,000 --- --- --- ---
Deferred tax expense credited to equity.. 335,000 1,621,000 1,171,000 1,027,000 677,000
----------- ----------- ----------- ----------- -----------
Income before extraordinary loss......... 1,394,000 2,287,000 1,692,000 1,469,000 1,085,000
Extraordinary loss (net of taxes)........ --- 2,233,000 --- --- ---
----------- ----------- ----------- ----------- -----------
Net income............................... $ 1,394,000 $ 54,000 $ 1,692,000 $ 1,469,000 $ 1,085,000
=========== =========== =========== =========== ===========
Earnings per share
Before extraordinary loss............. $.13 $.21 $.16 $.14 $.11
After extraordinary loss.............. $.13 $.01 $.16 $.14 $.11
Weighted average number of
shares outstanding....................... 10,671,665 10,671,154 10,604,122 10,176,367 10,109,450
SELECTED BALANCE SHEET DATA
AS OF DECEMBER 31:....................... 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
Cash, cash equivalents and
short-term investments.................. $10,937,000 $ 6,829,000 $15,922,000 $ 8,110,000 $ 9,111,000
Working capital.......................... 9,014,000 2,433,000 13,020,000 9,679,000 9,936,000
Total assets............................. 94,703,000 81,578,000 74,676,000 66,162,000 63,715,000
Long-term debt........................... 5,342,000 5,700,000 --- --- ---
Long-term environmental
remediation reserves................... 6,931,000 1,667,000 1,799,000 6,006,000 6,107,000
Stockholders' equity..................... 68,697,000 66,802,000 66,664,000 57,751,000 55,194,000
</TABLE>
(1) The deferred tax expense credited to equity represents taxes that are
recorded by the Company for financial reporting purposes, but are not
payable due to the Company's utilization of Net Operating Loss ("NOL")
benefits from losses arising prior to and through the KSC bankruptcy.
Although the amount of this benefit is not included in net income,
stockholders' equity is increased in an amount equal to the NOL tax benefit
reported. NOL carryforwards at December 31, 1995, were approximately
$117,000,000 and $16,000,000, for federal and California income tax
purposes, respectively.
31
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Kaiser Ventures Inc. ("Kaiser" or the "Company") is an emerging asset
development company pursuing projects and 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)
approximately 750 acres of the former Kaiser Steel Corporation ("KSC") steel
mill site (the "Mill Site Property"); and (iii) 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"). During
1995, the Company recognized revenues primarily from the lease of its interest
in Fontana Union and from the redevelopment of its Eagle Mountain Townsite. In
November, 1995, the Company completed a transaction with Penske Motorsports,
Inc. ("PMI") whereby a subsidiary of PMI, The California Speedway Corporation,
acquired approximately 460 acres of the Central Mill Site Property for the
development of a motorsports complex in exchange for a 15% interest in PMI
(which currently is 10.6% after the Offering). Since such transaction, PMI has
become a public company. The Company is also pursuing other related longer-term
growth opportunities on the balance of its Mill Site Property, including the
development of a joint venture of a transfer station and materials recycling
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. See "Item 1. Business" for additional information concerning
these projects.
As previously disclosed in it's 1995 Form 10-Q Reports, the Company, in
January, 1995, acquired a 70% interest in Mine Reclamation Corporation ("MRC"),
the developer of the Eagle Mountain Landfill Project (the "Landfill Project")
(see "Item 1. Business"). Concurrent with this acquisition, MRC and the
Company amended the MRC Lease to terminate the minimum monthly rent payments by
MRC to the Company. Consequently, the Company did not receive any rent payments
from MRC during 1995 nor will it in the future until commencement of operations
at the Landfill Project. The transaction was treated as a purchase, and the
assets acquired and liabilities assumed were recorded at their fair market
value. In addition, the Company decided in June, 1995 to provide up to
approximately $5.25 million in equity or other funding to MRC. The Company's
funding of MRC will be in stages over the next two years and will be subject to
periodic review by the Company's Board of Directors. The first stage of funding
was a private placement involving the Company and several other MRC
shareholders, who jointly agreed to provide up to $3.2 million in equity to MRC
in order to support the continued permitting and development of the Landfill
Project through mid-1996. The Company's share of the first stage funding was
$2,432,000 of which $1,840,000 was funded during 1995 and $592,000 during
January, 1996. The Company's current ownership interest in MRC is approximately
72%. The Company and other MRC shareholders agreed, during the first quarter of
1996, to a second private placement to provide up to an additional $2.8 million
to MRC, of which the Company's maximum share is $2.1 million. The second
private placement will support the continued permitting and development of the
Landfill Project through the end of 1996. While the Company has made the
decision to invest up to approximately $5.25 million in equity in MRC, the
Company is not obligated to provide additional funding to MRC beyond its current
commitments. The Company is consolidating MRC for financial statement purposes.
32
<PAGE>
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 Water"). Property redevelopment
revenues primarily 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
income related to those equity investments (primarily PMI) and joint ventures
which the Company accounts for under the equity method. Prior to 1995, waste
management revenues reflected the minimum lease payments under MRC's 100-year
lease in connection with the Landfill Project.
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. However, excluding the one-time $2.2 million
gain on the sale of water rights to CSI, the revenues generated by interim
activities were substantially diminished in 1995 as a result of the development
of The California Speedway.
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. See "Part I, Item 1. Business" for a discussion of
recent material events affecting the Company's revenue sources.
RESULTS OF OPERATIONS
ANALYSIS OF RESULTS FOR THE YEAR ENDED DECEMBER 31, 1995 AND 1994
An analysis of the significant components of the Company's resource revenues
for the year ended December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1994 % INC. (DEC)
----------- ---------- -------------
<S> <C> <C> <C>
ONGOING OPERATIONS
Water resource $4,974,000 $4,820,000 3%
Property redevelopment 998,000 1,052,000 (5%)
Joint venture 162,000 --- 100%
Waste management --- 2,400,000 (100%)
---------- ---------- ----
TOTAL ONGOING OPERATIONS 6,134,000 8,272,000 (26%)
---------- ---------- ----
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1995 1994 % INC. (DEC)
------------- ------------- -------------
<S> <C> <C> <C>
INTERIM ACTIVITIES
Lease and royalty 1,450,000 1,250,000 16%
Service 419,000 1,875,000 (78%)
Sale of water rights to CSI 2,200,000 --- 100%
Miscellaneous 905,000 1,074,000 (16%)
----------- ----------- ---
TOTAL INTERIM ACTIVITIES 4,974,000 4,199,000 18%
----------- ----------- ---
TOTAL RESOURCE REVENUES $11,108,000 $12,471,000 (11%)
=========== =========== ===
REVENUES AS A PERCENTAGE OF TOTAL
RESOURCE REVENUES:
Ongoing operations 55% 66%
Interim activities 45% 34%
----------- -----------
TOTAL RESOURCE REVENUES 100% 100%
=========== ===========
</TABLE>
Resource Revenues. Total resource revenues for 1995 were $11,108,000, as
compared to $12,471,000 for 1994. Revenues from ongoing operations declined 26%
during the year to $6,134,000 from $8,272,000 in 1994, while revenues from
interim activities increased 18% to $4,974,000 from $4,199,000 in 1994.
Revenues from ongoing operations as a percentage of total revenues decreased to
55% in 1995 from 66% in 1994; however, excluding the non-recurring gain on the
sale of water rights to CSI, ongoing operations represented 69% of total
revenues.
Ongoing Operations. Water lease revenues under the Company's 102-year take-
or-pay lease with Cucamonga Water were $4,974,000 during 1995 as compared to
$4,820,000 for 1994. The 3% increase in water revenues during the year reflects
the July, 1995 5.1% increase in water rates of The Metropolitan Water District
of Southern California ("MWD") offset by a small decline, from 56.11% in 1994 to
55.53% in 1995, in the Company's effective interest in Fontana Union. As
previously disclosed, the expected decline in the Company's effective interest
in Fontana Union is 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 50.9%. MWD, effective
July 1, 1995, implemented changed rates and a changed rate structure which has
resulted in a continuing lease interpretation dispute with Cucamonga Water
regarding the extent of the MWD rate increase. The total amount of lease
payments in dispute as of December 31, 1995 is approximately $80,000.
Property redevelopment revenues were $998,000 for 1995 as compared to
$1,052,000 for 1994. The 5% reduction from 1994 primarily represents lower
aggregate and rocks sale revenues at Eagle Mountain.
Joint venture revenue increased 100% to $162,000 as a result of the project
service fee due from PMI.
There were no waste management revenues during 1995 compared to $2,400,000 in
1994 as a result of the Company's acquisition of a 70% equity interest in MRC
effective January 1, 1995, and the elimination of MRC's minimum monthly rent
payments to the Company. Elimination of the maximum monthly rent payments will
not, however, affect the payments due the Company upon the commencement of
landfill operations.
Interim Activities. Revenues from interim activities for 1995 were $4,974,000
as compared to $4,199,000 for 1994. As noted above, the 18% increase in
revenues from interim activities in 1995 is primarily attributable to the $2.2
million gain on the sale of water rights to CSI and higher scrap revenues being
partially offset by lower levels of service revenues under the amended Services
Agreement with
34
<PAGE>
CSI and lower miscellaneous revenues. It is anticipated that in 1996, these
revenues will substantially decrease because of both the non-recurring nature of
the sale of water rights to CSI and the development of The California Speedway.
Resource Operating Costs. Resource operating costs are those costs directly
related to the resource revenue sources. Total resource operating costs for
1995 declined to $3,870,000 from $5,155,000 in 1994. Operations and maintenance
costs for 1995 were $1,496,000 compared to $1,970,000 for 1994. The 24%
decrease in 1995 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 at the mill site. Administrative support expenses for
1995 decreased 25% to $2,374,000 from $3,185,000 for 1994. The decrease was
primarily due to non-recurring environmental cleanup costs in 1994 relating to
two mill site tenants that went out of business and lower legal expenses.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses for 1995 increased 22% to $4,201,000 from $3,456,000 for
1994. The increase was due primarily to expenses related to the departure of
the Company's President and CEO and the resulting management realignment.
Net Interest Expense (Income). Net interest expense for 1995 was $587,000,
compared with net interest income of $173,000 in 1994. The fluctuation was due
primarily to lower average cash balances on hand during 1995 and interest
expense on the $6.0 million note issued as part of the purchase of properties
from the Lusk Joint Ventures in July, 1994.
Income and Income Tax Provision. The Company recorded income before income
tax provision of $2,450,000 for 1995, a 39% decrease from the $4,033,000
recorded in 1994. A provision for income taxes of $1,056,000 was recorded in
1995 as compared with $1,746,000 in 1994. All of the income tax provision in
1995 and over 90% of the tax provision in 1994 are not currently payable due
primarily to utilization of the Company's net operating loss carryforwards
("NOL's"). Consequently, pretax income is an important indicator of the
Company's performance.
Income Before Extraordinary Loss. For 1995, the Company reported income
before extraordinary loss of $1,394,000, or $.13 per share, a decrease of 39%
from the $2,287,000, or $.21 per share, reported for 1994.
UMWA Extraordinary Loss (Net of Taxes). As previously disclosed, the Company,
together with Kaiser Coal and KSC Recovery, settled all outstanding claims with
the UMWA Combined Benefit Fund and 1992 Benefit Trust in 1994. The Company's
share of the settlement was $3,788,000. As a result, for 1994 the Company
recorded an extraordinary loss (net of taxes) of $2,233,000.
Net Income. For 1995, the Company reported net income after extraordinary
items of $1,394,000, or $.13 per share, a 26 fold increase from the $54,000, or
$.01 per share, reported for 1994.
ANALYSIS OF RESULTS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
An analysis of the significant components of the Company's resource revenues
for the years ended December 31, 1994 and 1993 follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1994 1993 % INC. (DEC)
----------- ----------- ------------
<S> <C> <C> <C>
ONGOING OPERATIONS
Water resources $4,820,000 $4,263,000 13%
Property redevelopment 1,052,000 920,000 14%
Waste management 2,400,000 1,300,000 85%
---------- ----------
TOTAL ONGOING OPERATIONS 8,272,000 6,483,000 28%
---------- ----------
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1994 1993 % INC. (DEC)
------------- ------------ -------------
<S> <C> <C> <C>
INTERIM ACTIVITIES
Lease and royalty 1,250,000 1,025,000 22%
Service 1,875,000 2,676,000 (30%)
Miscellaneous 1,074,000 407,000 164%
-----------
TOTAL INTERIM ACTIVITIES 4,199,000 4,108,000 2%
----------- -----------
TOTAL RESOURCE REVENUES $12,471,000 $10,591,000 18%
=========== ===========
REVENUES AS A PERCENTAGE OF TOTAL
RESOURCE REVENUES:
Ongoing operations 66% 61%
Interim activities 34% 39%
----------- -----------
TOTAL RESOURCE REVENUES 100% 100%
=========== ===========
</TABLE>
Resource Revenues. Total resource revenues for 1994 were $12,471,000 as
compared to $10,591,000 for 1993. For 1994, revenues from ongoing operations
increased 28% to $8,272,000 from $6,483,000 in 1993, while revenues from interim
activities increased 2% to $4,199,000 from $4,108,000 in 1993. Revenues from
ongoing operations as a percentage of total revenues amounted to 66% in 1994 as
compared to 61% in 1993.
Ongoing Operations. Water lease revenues under the Company's 102-year take-
or-pay lease with Cucamonga Water were $4,820,000 during 1994 as compared to
$4,263,000 for 1993. The Fontana Union Lease was amended in July 1993,
retroactive to January 1, 1993, in order to establish fixed quantities of water
for most of the water resources upon which the Fontana Union Lease is based. As
a result, revenues for 1994 and 1993 reflect the fixed quantities in the amended
Fontana Union Lease. The 13% increase in water revenues for 1994 primarily
reflects the 5.3% and 18.2% increases in water rates of MWD, that were
implemented in July 1994 and July 1993, respectively. These rate increases were
partially offset by a decline in the Company's effective interest in Fontana
Union from 57.95% in 1993 to 56.11% in 1994.
Property redevelopment revenues for this time period were $1,052,000 for 1994
compared to $920,000 for 1993. The 14% increase reflects increased tenant
rental income and aggregate/rock sales at Eagle Mountain.
Waste management revenues increased 85% during 1994 to $2,400,000 from
$1,300,000 for 1993 as MRC's minimum lease payments increased from $100,000 to
$200,000 per month in December 1993.
Interim Activities. Revenues from interim activities for 1994 were $4,199,000
as compared to $4,108,000 for 1993. The 2% increase in revenues from interim
activities in 1994 over 1993 is primarily attributable to higher miscellaneous
revenues associated with property tax refunds for the Mill Site Property and
other receipts from KSC Recovery plus additional tenant rental income from the
West End and Valley Boulevard properties ("Lusk Properties") that were purchased
from the joint ventures between Kaiser and The Lusk Company ("Lusk Joint
Ventures") in July 1994 ("Lusk Purchases") being partially offset by lower
service revenues from CSI under the tentative settlement agreement.
Resource Operating Costs. Operations and maintenance costs for 1994 were
$1,970,000 compared to $2,167,000 for 1993. The 9% decrease in 1994 was due
primarily to a reduction in expenses associated with the CSI Services Agreement,
better cost controls and better utilization of manpower.
36
<PAGE>
Administrative support expenses for 1994 increased by 26% to $3,185,000 from
$2,524,000 for 1993 due primarily to environmental cleanup costs at the Mill
Site Property related to two interim tenants who went out of business and higher
legal expenses related both to the MRC settlement with Browning Ferris
Industries ("BFI") and to regulatory and litigation proceedings involving the
Federal Energy Regulatory Commission with regard to Eagle Crest Energy Company's
("ECEC") proposed hydro-electric project on the Company's Eagle Mountain
property.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses for 1994 at $3,456,000 were consistent with the
$3,453,000 in expenses reported for 1993.
Net Interest Income (Expense). Net interest income for 1994 was $173,000,
compared with $466,000 for 1993. The 63% decrease in net interest income in
1994 was primarily due to the purchase of properties from the Lusk Joint
Ventures in July 1994, which involved the payment of approximately $9,000,000 of
cash and the issuance of a $6,000,000 note.
Income and Income Tax Provision. The Company recorded income before income
tax provision of $4,033,000 for 1994, a 38% increase over the $2,913,000
recorded for 1993. A provision for income taxes of $1,746,000, before
extraordinary loss, was recorded in 1994 as compared with $1,221,000 in 1993.
Over 90% of the income tax provisions in 1994 and 1993 are not payable due
primarily to utilization of the Company's net operating loss carryforwards
("NOL's").
Income Before Extraordinary Items. For 1994, the Company reported $2,287,000
of income before an extraordinary loss or $.21 per share, an increase of 35%
over the $1,692,000 or $.16 per share reported for 1993.
UMWA Extraordinary Loss (Net of Taxes). As discussed above, the Company
settled all outstanding claims with the UMWA Combined Benefit Fund and 1992
Benefit Trust in 1994 and recorded an extraordinary loss (net of taxes) of
$2,233,000, which was comprised of the $3,788,000 settlement amount plus
settlement expenses of $150,000 less tax benefits of $1,705,000.
Net Income. As a result of the extraordinary loss described above, the
Company reported net income after extraordinary items of $54,000, or $.01 per
share, for 1994, a decrease from the $1,692,000 or $.16 per share reported for
1993.
LIQUIDITY AND CAPITAL RESOURCES
Cash, Cash Equivalents and Short Term Investments. The Company defines cash
equivalents as highly liquid debt instruments with original maturities of 90
days or less. Cash and cash equivalents increased $7,658,000 to $10,863,000 at
December 31, 1995 from $3,205,000 at December 31, 1994. Included in cash and
cash equivalents at December 31, 1995 is $2,309,000 held solely for the benefit
of MRC. The Company also had short-term investments, comprised of treasury
bills and certificates of deposit, of $74,000 at December 31, 1995, compared
with $3,624,000 at December 31, 1994.
Total cash and cash equivalents plus short-term investments showed an increase
of $4,108,000 in 1995 to $10,937,000 due primarily to the receipt of
approximately $13,823,000 in proceeds from the environmental insurance
litigation settlements and by the recording of $2,309,000 in cash from the
acquisition of MRC being partially offset by the $3,778,000 United Mine Workers
of America ("UMWA") settlement payment and the expenditure of $7,457,000 for
environmental remediation and site clearance at the Mill Site Property.
Working Capital. During 1995, current assets increased $11,236,000 to
$21,078,000 while current liabilities increased $4,655,000 to $12,064,000. The
increase in current assets resulted primarily from
37
<PAGE>
the $4,108,000 increase in cash and cash equivalents plus short-term investments
discussed above plus the $3,661,000 due from CSI for the sale of water rights
and sewer discharge units under the Settlement Agreement and the remaining
$2,701,000 due under the environmental insurance litigation settlements. The
increase in current liabilities resulted primarily from $3,938,000 in
obligations arising from the Company's environmental insurance litigation
settlement proceeds, $1,608,000 in accounts payable and accrued liabilities
relating to MRC and increases in accounts payable relating to the environmental
remediation at the Mill Site Property. Offsetting these increases is the
reduction due to the UMWA settlement payment. As a result, working capital
increased during 1995 by $6,581,000 to $9,014,000 at December 31, 1995.
Real Estate. Real Estate declined $21.8 million during 1995 primarily because
of Kaiser's contribution of $22.5 million of land to PMI in return for preferred
stock in PMI (see "Item 1. Business"). In addition, since the environmental
insurance litigation settlements received during 1995 were intended to cover
both the cost of remediating the Company's Mill Site property as well as any
future environmental claims, the Company has recorded approximately $7.0 million
of the net settlement proceeds received as a reimbursement of current and prior
year capitalized environmental remediation costs. The remaining $5.5 million of
net settlement proceeds was recorded as a reserve for future environmental
remediation. Finally, since Kaiser has begun to develop the Napa Street,
Speedway Business Park and West Valley MRF portions of its Mill Site property
(see "Item 1. Business"), the carrying value of these properties have been
reclassified as real estate under development.
Investments. The increase in investment in Penske Motorsports, Inc. is
primarily related to the Company's contribution of land to PMI in return for
preferred stock in PMI.
Other Assets. The increase in other assets is primarily related to
capitalized landfill permitting and development costs for MRC.
Long-term Debt. As of December 31, 1995, the Company had $5,342,000 in long-
term debt associated with the note the Company issued as part of the purchase of
properties from the Lusk Joint Ventures in July 1994. The Company has no
outstanding borrowings under its $20.0 million revolving-to-term credit facility
at December 31, 1995.
Long-term Liabilities. The increase in other long-term liabilities is
primarily due to the recording of $5.5 million of net proceeds received from the
environmental insurance settlements as a reserve for future environmental
remediation. In addition, the Company recorded $721,000 in deferred tax
liabilities during 1995.
Minority Interest and Other Liabilities. At December 31, 1995, the Company
recorded $948,000 of minority interest relating to MRC in which the Company had
approximately a 72% 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 $339,000 in reductions in the borrowing base and
$3,432,000 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
38
<PAGE>
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, in 1996, a total of approximately $14.6 million
for capital projects of which approximately $7.0 million will be for required
environmental remediation, $4.6 million will be for real estate improvement and
development of certain parcels at the Company's Mill Site Property, $2.6 million
will be for supporting MRC's landfill permitting and development, and $400,000
at Eagle Mountain for the Specific Plan and BLM Land Exchange.
Further, in January 1995, the Company acquired a 70% interest in MRC. See
"Item 1. Business" for additional information concerning the acquisition. The
transaction was treated as a purchase and the assets acquired and liabilities
assumed were recorded at their fair market value. Subsequent to the
acquisition, the Company has invested $2,384,000 in equity in MRC and now owns
approximately 72% of MRC. Although neither the Company nor any of its
subsidiaries has any obligation to invest funds in MRC, the Company may, in the
future, provide additional funding to MRC. Other than as discussed above, it is
not possible, at this time, to estimate what level of future funding, if any,
might be provided to MRC. Because the Company is not obligated to invest funds
in MRC, the Company's exposure to any operating losses of MRC will be limited to
the amount of any funds invested by the Company in MRC.
IMPROVED CASH FLOW FROM USE OF NET OPERATING LOSS TAX CARRYFORWARDS
Due to the Company's status as successor to KSC and its use of KSC-related
NOLs, income taxes actually paid by the Company are substantially less than the
income tax provision reported in its financial statements. The tax benefit
associated with the utilization of these NOLs is reflected as an increase to
stockholders' equity rather than as an increase to net income. The Company
expects that its use of these NOLs will substantially reduce the cash paid for
income taxes until these NOLs are fully utilized. The total NOLs at December
31, 1995, are estimated to be approximately $117,000,000 for federal purposes
and $16,000,000 for California purposes. The federal NOLs expire in varying
amounts over a period from year 2000 to 2010 while the California NOLs expire in
year 1997 and 2000.
If within a three-year period, 50% or more of the stock of the Company changes
ownership, the future annual use of NOLs may be limited. The annual limitation
would be calculated as the product of: (i) the highest long-term tax-exempt
rate for a designated period prior to the ownership change; and (ii) the market
value of the Company at such time.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Please see Item 14 of this Form 10-K Report for financial statements and
supplementary data.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
39
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference from the Executive Compensation Section of the
Company's Proxy Statement for its 1996 Annual Meeting of Stockholders (the "1996
Proxy Statement"), a definitive copy of which will be filed within 120 days of
December 31, 1995.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the Executive Compensation Section of the 1996
Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Incorporated by reference from the Security Ownership of Principal
Shareholders and Management Section of the 1996 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
40
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following financial statements and financial schedules are filed as a
part of this report:
<TABLE>
<CAPTION>
Page
----
<S> <C>
(1) Financial Statements
--------------------
Report of Independent Auditors................................ 51
Consolidated Balance Sheets................................... 52
Consolidated Statements of Income............................. 54
Consolidated Statements of Cash Flows......................... 55
Consolidated Statements of Changes in Stockholders' Equity.... 56
Notes to Consolidated Financial Statements.................... 57
(2) Financial Statement Schedules
-----------------------------
II Valuation and Qualifying Accounts and Reserves............ 71
</TABLE>
All other schedules are omitted because they are not required, are
inapplicable, or the information is included in the Consolidated Financial
Statements or Notes thereto.
(b) Reports on Form 8-K.
The following reports on Form 8-K have been filed during the last quarter of
the period covered by this Form 10-K Report to the date of this report.
(1) Announcement of the consummation of a transaction between the Company and
Penske Speedways Holding, Corp. dated November 22, 1995.
(c) Exhibits. The following exhibits are filed as part of this Form 10-K:
41
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
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EXHIBIT SEQUENTIAL NUMBERING
NUMBER DOCUMENT DESCRIPTION SYSTEM
- ---------- ----------------------------------------------------- --------------------
<S> <C> <C>
2.1 Second Amended Joint Plan of Reorganization
as Modified, as filed with the United States
Bankruptcy Court for the District of Colorado on
September 9, 1988, incorporated by
reference from Exhibit 2.1 of the Company's
Form 10-K Report for the year ended December 31,
1988.
2.2 Second Amended Joint Plan of Reorganization
Modification, as filed with the United States
Bankruptcy Court on September 26, 1988,
incorporated by reference from Exhibit
2.2 of the Company's Form 10-K Report for the
year ended December 31, 1988.
2.3 United States Bankruptcy Court Order dated
October 4, 1988, confirming the Second
Amended Joint Plan of Reorganization as
Modified, incorporated by reference from
Exhibit 2.3 of the Company's Form 10-K
Report for the year ended December 31, 1988.
4.1 Restated Certificate of Incorporation of Kaiser
Steel Corporation filed with the Secretary of
State of Delaware on November 17, 1988,
incorporated by reference from Exhibit
D(i) to the Company's Form 8-A dated November
21, 1988.
4.1.1 Certificate of Amendment to Restated Certificate
of Incorporation of Kaiser Steel Resources,
Inc. filed with the Delaware Secretary of
State on October 2, 1990, incorporated by
reference from the Company's Form 8-K
Report dated September 18, 1990.
4.1.2 Certificate of Amendment to Restated Certificate
of Incorporation of Kaiser Steel Resources,
Inc. changing the Corporation's name to
Kaiser Resources Inc., filed with the Delaware
Secretary of State on June 14, 1993,
incorporated by reference from Exhibit
4.1.2 of the Company's Form 10-K Report for the
year ended December 31, 1993.
4.1.3 Certificate of Amendment to Restated Certificate
of Incorporation of Kaiser Resources Inc.
changing the Corporation's name to
Kaiser Ventures Inc., filed with the Delaware
Secretary of State on June 19, 1995.
4.2 Amended and Restated Bylaws of Kaiser Steel
Resources, Inc., effective March 22,
1989, incorporated by reference from Exhibit
3.2 of the Company's Form 10-K Report for the
year ended December 31, 1989.
</TABLE>
42
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<TABLE>
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- ---------- ----------------------------------------------------- --------------------
<S> <C> <C>
4.2.1 Amendment to Amended and Restated Bylaws of Kaiser
Steel Resources, Inc., effective November 18,
1991, incorporated by reference from Exhibit
3.2.1 of the Company's Form 10-K Report for the
year ended December 31, 1991.
10.1 Lease Entered Into Between Kaiser Eagle
Mountain, Inc., and Mine Reclamation Corporation,
dated November 30, 1988, incorporated by reference
from Exhibit 10.1 of the Company's Form 10-K
Report for the year ended December 31, 1988.
10.1.1 First Amendment dated December 18, 1990, to
Lease dated November 30, 1990 between Kaiser Eagle
Mountain, Inc. and Mine Reclamation Corporation,
incorporated by reference from the Company's Form
8-K Report dated December 18, 1990.
10.1.2 Second Amendment dated July 29, 1994, to Lease
dated November 30, 1990, between Kaiser Eagle
Mountain, Inc. and Mine Reclamation Corporation,
incorporated by reference from Exhibit 4 of the
Company's Form 10-Q Report for the period ending
June 30, 1994.
10.1.3 Third Amendment dated January 29, 1995, but
effective as of January 1, 1995, to Lease dated
November 30, 1990, between Kaiser Eagle
Mountain, Inc. and Mine Reclamation Corporation,
incorporated by reference from Exhibit 10.1.3 of
the Company's Form 10-K Report for the year ended
December 31, 1994.
10.1.4 Fourth Amendment dated effective January 1,
1996, between Kaiser Eagle Mountain, Inc. and
Mine Reclamation Corporation.
10.1.5 Settlement Agreement dated June 30, 1994, by
and among Mine Reclamation Corporation,
Browning-Ferris Industries, Inc., BFI
Riverside, Inc., BFI California, Inc., Kaiser
Eagle Mountain, Inc., and Kaiser Resources Inc.,
incorporated by reference by the Company's Form
10-Q Report for the period ending June 30,
1994.
10.1.6 Stock Acquisition Agreement between Eagle
Mountain Reclamation, Inc. and Mine Reclamation
Corporation dated January 13, 1995, incorporated by
reference from Exhibit 10.1.5 of the Company's
Form 10-K Report for the year ended December 31,
1994.
</TABLE>
43
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<TABLE>
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<S> <C> <C>
10.2. Dissolution Agreement among Lusk-Kaiser
Fontana Joint Venture, Kaiser Steel Resources,
Inc., The Lusk Company, Service Mortgage Company
and Lusk Ontario Industrial Partners II,
effective September 30, 1992, incorporated by
reference from Exhibit 10.2.4 of the Company's
Form S-2 (Registration No. 33-56234).
10.2.1 Option Agreement dated July 22, 1994, among
Kaiser Resources Inc., Kaiser Steel Land
Development, Inc., The Lusk Company, The Lusk
Ontario Industrial Partners II, Ltd.,
Kaiser-Lusk West Joint Venture, and Kaiser-
Lusk Valley Boulevard Joint Venture,
incorporated by reference from Exhibit 3 of the
Company's Form 10-Q Report for the period
ending June 30, 1994.
10.2.2 Dissolution Agreement among Lusk-Kaiser West
End Joint Venture, Kaiser Resources Inc.,
The Lusk Company, Service Mortgage Company
and Lusk-Ontario Industrial Partners II,
dated July 31, 1994, incorporated by
reference from Exhibit 10.2.7 of the Company's
Form 10-K Report for the year ended December 31,
1994.
10.2.3 Dissolution Agreement among Lusk-Kaiser Valley
Boulevard Joint Venture, Kaiser Resources Inc.,
The Lusk Company, Service Mortgage Company
and Lusk-Ontario Industrial Partners II,
dated July 31, 1994, incorporated by
reference from Exhibit 10.2.7 of the Company's
Form 10-K Report for the year ended December 31,
1994.
10.3 Eagle Mountain Lease Between Management and
Training Corporation and Kaiser Steel
Corporation, dated November 16, 1987,
incorporated by reference from Exhibit
10.4 of the Company's Form 10-K Report for the
year ended December 31, 1988.
10.3.1 First Amendment dated July 1, 1990, to Lease
between Management and Training Corporation and
Kaiser Steel Resources, Inc., incorporated by
reference from Exhibit 10.3.1 of the Company's
Form 10-K Report for the year ended December 31,
1990.
10.3.2 Second Amendment dated November 16, 1992, to
Lease dated November 16, 1987 between Management
and Training Corporation and Kaiser Steel
Resources, Inc., incorporated by
reference from Exhibit 10.3.2 of the Company's
Form S-2 Registration No. 33-56234).
10.4 Richard E. Stoddard Employment Agreement
dated effective January 1, 1996.
</TABLE>
44
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<TABLE>
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- ---------- ----------------------------------------------------- --------------------
<S> <C> <C>
10.5 Gerald A. Fawcett Employment Agreement,
dated effective January 1, 1996.
10.7 Metallic Reclamation Slag Processing and
Marketing Agreement between Kaiser Steel
Resources, Inc. and Harsco Corporation,
Heckett Division, dated April 20, 1992,
incorporated by reference from Exhibit
10.7.1 of the Company's Form S-2 (Registration
No. 33-56234).
10.8 Lease Agreement between American Trading Estate
Properties, Landlord and Kaiser Resources Inc.,
Tenant, dated June 6, 1994, incorporated by
reference from Exhibit 10.8 of the Company's
10-K Report for the year ended 1994.
10.9 Environmental Agreement, State of California,
Health and Welfare Agency, Department of
Health Services, Consent Order Health and Safety
Code Sections 205, 25355.1(a)(B),
25355.5(a)(C), dated August 22, 1988,
incorporated by reference from Exhibit
10.14 of the Company's Form 10-K Report for the
year ended December 31, 1988.
10.10 Environmental Agreement, California Regional
Water Quality Control Board, Santa Ana Region,
Cleanup and Abatement Order No. 87-121, dated
August 26, 1987, incorporated by
reference from Exhibit 10.15 of the Company's
Form 10-K Report for the year ended December 31,
1988.
10.10.1 Environmental Agreement, California Regional
Water Quality Control Board, Santa Ana Region,
Cleanup and Abatement Order No. 91-40, dated
March 11, 1991, incorporated by
reference from Exhibit 10.11.1 of the Company's
Form S-2 (Registration No. 33-56234).
10.10.2 Settlement Agreement between Kaiser Resources
Inc. and California Regional Water Quality
Control Board, Santa Ana Region, dated October
21, 1993, incorporated by reference from
Exhibit 10.11.2 of the Company's Form 10-K
Report for the year ended December 31, 1993.
10.11 Lease of Corporate shares of Fontana Union
Water Company coupled with Irrevocable Proxy
between Kaiser Resources Inc. and Cucamonga
County Water District dated July 1, 1993,
incorporated by reference from Exhibit 1
to Form 10-Q dated June 30, 1993.
10.12 Assignment from Kaiser Steel Resources, Inc. to
KSC Recovery, Inc., dated December 29, 1989,
incorporated by reference from Exhibit
10.20 of the Company's Form 10-K Report for the
year ended December 31, 1989.
</TABLE>
45
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<TABLE>
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<S> <C> <C>
10.13 Amended, Restated and Substituted Kaiser Steel
Resources, Inc. 1989 Stock Plan, incorporated
by reference from the Company's Proxy Statement
for the Special Meeting of Stockholders held on
October 2, 1990.
10.14 Kaiser Steel Resources, Inc. 1992 Stock Option
Plan, as amended, incorporated by reference
from Exhibit 10.16 of the Company's Form S-2
(Registration No. 33-56234).
10.15 Kaiser Ventures Inc. 1995 Stock Option Plan.
10.16 Joint Venture Agreement for Inland Empire
Resource Recovery, incorporated by reference
from Exhibit 10.17 of the Company's Form 10-K
Report for the year ended December 31, 1991.
10.17 Third Amended Plan of Reorganization of Fontana
Union Water Company dated September 26, 1990,
incorporated by reference from Exhibit 10.18 of the
Company's Form S-2 (Registration No.
33-56234).
10.18 Settlement Agreement among Fontana Union Water
Company, Kaiser Steel Resources, Inc., San
Gabriel Valley Water Company and Cucamonga
County Water District dated February 7, 1992,
incorporated by reference from Exhibit 10.19 of the
Company's Form S-2 (Registration No.
33-56234).
10.19 Mining Lease between Kaiser Steel Resources,
Inc. and Levand Steel and Supply Corporation/K.D.
Mining and Consulting Co. effective January 2,
1993, incorporated by reference from Exhibit
10.20 of the Company's Form S-2 (Registration
No. 33-56234).
10.20 Organization Agreement, dated November 22, 1995
by and among PSH Corp., Kaiser Ventures Inc. and
Penske Motorsports, Inc. (f/k/a Penske Speedway
Holdings Corp.), incorporated by reference
from Exhibit 10.23 of the Company's 8-K Report
dated November 22, 1995.
10.20.1 First Amendment to Organization Agreement
dated March 21, 1996, by and among PSH Corp.,
Kaiser Venture Inc., and Penske Motorsports, Inc.
10.21 Shareholders Agreement, dated November 22, 1995
by and among PSH Corp., Kaiser Ventures Inc. and
Penske Motorsports, Inc. (f/k/a Penske Speedway
Holdings Corp.) incorporated by reference
from Exhibit 10.24 of the Company's 8-K Report
dated November 22, 1995.
</TABLE>
46
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<TABLE>
<CAPTION>
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EXHIBIT SEQUENTIAL NUMBERING
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- ---------- ----------------------------------------------------- --------------------
<S> <C> <C>
10.21.1 First Amendment to Shareholders Agreement,
dated March 21, 1996, between Penske
Motorsports, Inc. and Kaiser Ventures Inc.
10.22 Water Rights Agreement, dated November 21, 1995
by and among Kaiser Ventures Inc., Kaiser
Inc. and The California Speedway Corporation
(successor by merger to Speedway Development
Corporation).
10.23 Access Agreement, dated as of November 22, 1995
by and among Kaiser Ventures Inc., Kaiser
Land Development, Inc. and The California
Corporation.
10.24 Sewer Services Agreement, dated as of
November 22, 1995 between Kaiser Ventures
Inc. and The California Speedway Corporation
(successor by merger to Speedway Development
Corporation).
10.25 Revolving Credit and Term Loan Agreement
between Fontana Water Resources, Inc. and
Union Bank, dated September 30, 1994,
(Excluding the exhibits), incorporated
by reference from Exhibit 10.21 of the
Company's Form 10-K Report for the year
ended December 31, 1994.
10.25.1 Guaranty executed by Kaiser Resources Inc. in
favor of Union Bank, dated September 30,
1994, incorporated by reference from Exhibit
10.21.1 of the Company's Form 10-K Report for the
year ended December 31, 1994.
10.26 Settlement Agreement among Kaiser Resources
Inc., KSC Recovery, Inc., Kaiser Coal
Corporation, the UMWA Combined Benefit Fund
and the UMWA 1992 Benefit Plan dated
December 1, 1994, incorporated by
reference from Exhibit 10.22 of the Company's
10-K Report for the year ended December 31, 1994.
21 The Company has nine active subsidiaries.
Fontana Water Resources, Inc., Kaiser Eagle
Mountain, Inc., Kaiser Steel Corporation,
Kaiser Steel Land Development, Inc.,
Kaiser Waste Treatment, Inc., Kaiser Recycling
Corporation, Kaiser Reclamation, Inc.,
Speedway Development Corp. and KSC Recovery,
Inc. are incorporated under the laws of the
State of Delaware. Lake Tamarisk Development
Corporation is incorporated under the
laws of the State of California.
23 Consent of Ernst & Young LLP.
24 Power of Attorney (included in the
signature page).
</TABLE>
47
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: April 1, 1996
KAISER VENTURES INC.
By: /s/ Richard E. Stoddard
------------------------------
Name: Richard E. Stoddard
--------------------------
Title: Chief Executive Officer and
----------------------------------
Chairman of the Board
----------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
(Power of Attorney)
48
<PAGE>
Each person whose signature appears below constitutes and appoints RICHARD E.
STODDARD and GERALD A. FAWCETT as his true and lawful attorneys-in-fact and
agents, each acting alone, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments to this Form 10-K and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all said attorneys-in-fact and agents, each acting alone, or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------- ------------------------------ -------------
<S> <C> <C>
1. Principal Executive Officer
/s/ Richard E. Stoddard Chief Executive Officer and April 1, 1996
- -------------------------------- Chairman of the Board
Richard E. Stoddard
2. President
/s/ Gerald A. Fawcett President and Chief Operating April 1, 1996
- -------------------------------- Officer
Gerald A. Fawcett
3. Principal Financial and
Accounting Officer
/s/ James F. Verhey Sr. Vice President Finance and April 1, 1996
- -------------------------------- Chief Finance Officer
James F. Verhey
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------- -------------
<S> <C> <C>
4. Directors
/s/ Cass D. Alvin Director April 1, 1996
- ------------------------------
Cass D. Alvin
/s/ Ronald E. Bitonti Director April 1, 1996
- ------------------------------
Ronald E. Bitonti
/s/ Kenneth R. Casey Director April 1, 1996
- ------------------------------
Kenneth R. Casey
/s/ Todd G. Cole Director April 1, 1996
- ------------------------------
Todd G. Cole
/s/ Elmer W. Johnson Director March 30, 1996
- ------------------------------
Elmer W. Johnson
/s/ Reynold C. MacDonald Director April 1, 1996
- ------------------------------
Reynold C. MacDonald
/s/ William J. Morgan Director April 1, 1996
- ------------------------------
William J. Morgan
/s/ Charles E. Packard Director April 1, 1996
- ------------------------------
Charles E. Packard
/s/ Thomas S. Rabone Director April 1, 1996
- ------------------------------
Thomas S. Rabone
/s/ Lyle B. Stevenson Director April 1, 1996
- ------------------------------
Lyle B. Stevenson
/s/ Marshall F. Wallach Director April 1, 1996
- ------------------------------
Marshall F. Wallach
</TABLE>
50
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Kaiser Ventures Inc.
We have audited the accompanying consolidated balance sheets of Kaiser
Ventures Inc. (the "Company") as of December 31, 1995 and 1994, and the
related consolidated statements of income, cash flows, and stockholders'
equity for each of the three years in the period ended December 31, 1995.
Our audits also included the financial statement schedules listed in the
Index at Item 14(a). These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Kaiser Ventures Inc. at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion, the
related financial statement schedules, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
ERNST & YOUNG LLP
Riverside, California
February 9, 1996
51
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents.............. $10,863,000 $ 3,205,000
Short-term investments................. 74,000 3,624,000
Accounts receivable and other, net
of allowance for doubtful accounts
of $414,000 and $156,000,
respectively......................... 10,141,000 3,013,000
----------- -----------
Total current assets................. 21,078,000 9,842,000
----------- -----------
Real Estate
Land and improvements.................. 21,715,000 51,103,000
Real estate under development.......... 7,564,000 ---
----------- -----------
Total real estate...................... 29,279,000 51,103,000
----------- -----------
Investment in Penske Motorsports, Inc. ... 22,991,000 250,000
Investment in Fontana Union Water
Company.................................. 16,108,000 16,046,000
Other Assets
Landfill permitting and development.... 1,660,000 ---
Buildings and equipment (net).......... 2,433,000 2,706,000
Other assets and investments........... 1,154,000 1,631,000
----------- -----------
Total other assets..................... 5,247,000 4,337,000
----------- -----------
Total Assets.............................. $94,703,000 $81,578,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
52
<PAGE>
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable....................... $ 4,324,000 $ 1,170,000
Accrued liabilities.................... 7,500,000 5,999,000
Current portion of long-term debt...... 240,000 240,000
----------- -----------
Total current liabilities.......... 12,064,000 7,409,000
----------- -----------
Long-term Liabilities
Deferred tax liabilities............... 721,000 ---
Groundwater remediation reserve........ 1,431,000 1,667,000
Environmental remediation reserve...... 5,500,000 ---
Long-term debt......................... 5,342,000 5,700,000
----------- -----------
Total long-term liabilities........ 12,994,000 7,367,000
----------- -----------
Total liabilities.................. 25,058,000 14,776,000
----------- -----------
Minority Interest and Other Liabilities... 948,000 ---
Commitments and Contingencies
Stockholders' Equity
Common stock, par value $.03 per
share, authorized
13,333,333 shares; issued and
outstanding 10,470,614 and
10,437,362, respectively........... 314,000 313,000
Capital in excess of par value......... 60,256,000 59,756,000
Retained earnings since November 15,
1988.................................. 8,127,000 6,733,000
----------- -----------
Total stockholders' equity............. 68,697,000 66,802,000
----------- -----------
Total Liabilities and Stockholders'
Equity................................... $94,703,000 $81,578,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
53
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1995 1994 1993
----------- ------------ ------------
<S> <C> <C> <C>
RESOURCE REVENUES
Ongoing Operations
Water resource......................$ 4,974,000 $ 4,820,000 $ 4,263,000
Property redevelopment.............. 998,000 1,052,000 920,000
Joint venture....................... 162,000 --- ---
Waste management.................... --- 2,400,000 1,300,000
----------- ----------- -----------
Total ongoing operations.......... 6,134,000 8,272,000 6,483,000
----------- ----------- -----------
Interim Activities
Lease and royalty................... 1,450,000 1,250,000 1,025,000
Service............................. 419,000 1,875,000 2,676,000
Sale of water rights................ 2,200,000 --- ---
Miscellaneous....................... 905,000 1,074,000 407,000
----------- ----------- -----------
Total interim activities.......... 4,974,000 4,199,000 4,108,000
----------- ----------- -----------
Total resource revenues........... 11,108,000 12,471,000 10,591,000
----------- ----------- -----------
RESOURCE OPERATING COSTS
Operations and maintenance................ 1,496,000 1,970,000 2,167,000
Administrative support expenses........... 2,374,000 3,185,000 2,524,000
----------- ----------- -----------
Total resource operating costs.... 3,870,000 5,155,000 4,691,000
----------- ----------- -----------
INCOME FROM RESOURCES...................... 7,238,000 7,316,000 5,900,000
Corporate general and administrative
expenses................................ 4,201,000 3,456,000 3,453,000
----------- ----------- -----------
INCOME FROM OPERATIONS..................... 3,037,000 3,860,000 2,447,000
Net interest expense (income)............. 587,000 (173,000) (466,000)
----------- ----------- -----------
INCOME BEFORE INCOME TAX PROVISION
AND EXTRAORDINARY LOSS................... 2,450,000 4,033,000 2,913,000
Income tax provision
Currently payable................... --- 125,000 50,000
Deferred tax expense................ 721,000 --- ---
Deferred tax expense credited
to equity......................... 335,000 1,621,000 1,171,000
----------- ----------- -----------
INCOME BEFORE EXTRAORDINARY LOSS........... 1,394,000 2,287,000 1,692,000
EXTRAORDINARY LOSS (NET OF INCOME
TAXES OF $1,705,000)..................... --- 2,233,000 ---
----------- ----------- -----------
NET INCOME.................................$ 1,394,000 $ 54,000 $ 1,692,000
=========== =========== ===========
EARNINGS PER SHARE BEFORE
EXTRAORDINARY LOSS.......................$ .13 $ .21 $ .16
=========== =========== ===========
EARNINGS PER SHARE AFTER
EXTRAORDINARY LOSS.......................$ .13 $ .01 $ .16
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING.............................. 10,671,665 10,671,154 10,604,122
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
54
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------ -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................$ 1,394,000 $ 54,000 $ 1,692,000
Provision for income tax which is
credited to equity........................ 335,000 38,000 1,171,000
Deferred tax expense....................... 721,000 --- ---
Depreciation and amortization.............. 436,000 430,000 346,000
Extraordinary loss accrued but not paid.... --- 3,938,000 ---
Gain on sale of assets..................... (2,200,000) (10,000) ---
Allowance for doubtful accounts............ 258,000 (148,000) 246,000
Changes in assets:
Accounts receivable and other............. (755,000) 456,000 417,000
Changes in liabilities:
Current liabilities....................... (3,140,000) (876,000) 909,000
Long-term groundwater remediation costs... (236,000) (132,000) (1,332,000)
----------- ----------- ------------
Net cash flows from operating activities... (3,187,000) 3,750,000 3,449,000
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Short-term investments and marketable
securities............................... 3,550,000 6,418,000 (10,042,000)
Net impact of MRC acquisition.............. 1,538,000 --- ---
Capital expenditures....................... (7,319,000) (2,900,000) (1,565,000)
Investment in Penske Motorsports, Inc. .... (309,000) (250,000) ---
Investment in Fontana Union Water Co....... (62,000) --- ---
Purchase of Lusk Joint Venture
Properties................................ --- (8,814,000) ---
Other investments.......................... (184,000) (100,000) (123,000)
----------- ----------- ------------
Net cash flows from investing activities... (2,786,000) (5,646,000) (11,730,000)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock................... 166,000 46,000 6,051,000
Principal payments on note payable......... (358,000) (60,000) ---
Net environmental insurance proceeds....... 13,823,000 --- ---
Payment of loan fees....................... --- (765,000) ---
----------- ----------- ------------
Net Cash Flows from Financing Activities.... 13,631,000 (779,000) 6,051,000
----------- ----------- ------------
NET CHANGES IN CASH AND CASH EQUIVALENTS.... 7,658,000 (2,675,000) (2,230,000)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR......................... 3,205,000 5,880,000 8,110,000
----------- ----------- ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR....$10,863,000 $ 3,205,000 $ 5,880,000
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
55
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
CAPITAL IN
COMMON STOCK EXCESS OF RETAINED TREASURY
--------------------------
SHARES AMOUNT PAR VALUE EARNINGS STOCK TOTAL
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992...... 9,909,596 $297,000 $52,473,000 $4,988,000 $(7,000) $57,751,000
Provision for income tax,
credited to equity......... --- --- 1,171,000 --- --- 1,171,000
Retirement of treasury stock... (2,333) --- (7,000) --- 7,000 ---
Issuance of shares of
common stock............... 520,699 16,000 6,035,000 --- --- 6,051,000
Net Income..................... --- --- --- 1,691,000 --- 1,691,000
---------- --------- ----------- ---------- -------- -----------
Balance at December 31, 1993...... 10,427,962 313,000 59,672,000 6,679,000 --- 66,664,000
---------- --------- ----------- ---------- -------- -----------
Provision for income tax,
credited to equity......... --- --- 38,000 --- --- 38,000
Issuance of shares of
common stock............... 9,400 --- 46,000 --- --- 46,000
Net Income..................... --- --- --- 54,000 --- 54,000
---------- --------- ----------- ---------- -------- -----------
Balance at December 31, 1994...... 10,437,362 313,000 59,756,000 6,733,000 --- 66,802,000
---------- --------- ----------- ---------- -------- -----------
Provision for income tax,
credited to equity......... --- --- 335,000 --- --- 335,000
Issuance of shares of
common stock............... 33,252 1,000 165,000 --- --- 166,000
Net Income..................... --- --- --- 1,394,000 --- 1,394,000
---------- --------- ----------- ---------- -------- -----------
Balance at December 31, 1995...... 10,470,614 $314,000 $60,256,000 $8,127,000 $ --- $68,697,000
========== ========= =========== ========== ======== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
56
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS
On November 16, 1988, the Company began operations as Kaiser Steel Resources,
Inc. upon the successful completion of the reorganization of Kaiser Steel
Corporation ("KSC") under Chapter 11 of the Bankruptcy Code. The Company has
changed its name twice since reorganization in June 1993 and 1995, to Kaiser
Resources Inc. and to Kaiser Ventures Inc. ("Kaiser" or the "Company"),
respectively.
The Company's business focuses on the long-term development of its principal
assets including water resources, land and waste management assets. The
development of these assets is financed primarily through joint venture and
long-term lease arrangements. Ongoing operations refer to those revenue
resources which the Company is developing over the long-term while interim
activities refer to those revenue resources which are temporary or short-term in
nature and which are earned while the Company is evaluating the appropriate
long-term use of the asset or property.
At December 31, 1995, the Company's long-term projects include: (i) a 50.88%
interest in Fontana Union Water Company ("Fontana Union"), a mutual water
company; (ii) an approximately 15.0% (now approximately 10.6%) interest in
Penske Motorsports, Inc. ("PMI") which is currently developing The California
Speedway on the Company's Mill Site Property; (iii) the remaining 715-acres of
the former Kaiser Steel Corporation ("KSC") steel mill site (the "Mill Site
Property"). On the remaining Mill Site Property, the Company is pursuing a joint
venture for the development of a transfer station and materials recycling
facility ("Mill Site MRF"). The Company is also planning the development of
industrial and commercial parcels of land adjoining these two projects discussed
above. In addition, the Company owns 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") where the Company's
approximately 72% owned subsidiary, Mine Reclamation Corporation ("MRC"), is
developing the proposed Eagle Mountain Landfill Project (the "Landfill
Project").
The Company's consolidated financial statements include the following
significant entities: Fontana Water Resources, Inc., Kaiser Steel Land
Development, Inc., Eagle Mountain Reclamation, Inc., Lake Tamarisk Development
Corporation, Kaiser Eagle Mountain, Inc. and Mine Reclamation Corporation. See
Note 2 below for additional information concerning the Company's subsidiaries.
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
primarily 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 for those equity investments (primarily PMI) and joint ventures which the
Company accounts for under the equity method. Prior to 1995, waste management
revenues reflected the minimum lease payments under MRC's 100-year lease in
connection with the Landfill Project. (See Note 5.)
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
57
<PAGE>
treatment service revenues, revenues from the sale of recyclable materials and
other miscellaneous interim activities.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF FINANCIAL STATEMENT PRESENTATION
The stated value of the assets and liabilities of the Company were carried
forward from those of KSC except as adjusted in reorganization.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
all wholly-owned subsidiaries and majority owned investments, except as
specified below. Intercompany accounts and transactions have been eliminated.
Fontana Union Water Company ("Fontana Union"). The Company, through its
wholly-owned subsidiary Fontana Water Resources, Inc. ("FWR"), owns 50.88% of
Fontana Union, a mutual water company, which entitles the Company to its
proportionate share of Fontana Union Water. The Company has effectively
transferred its control in Fontana Union to Cucamonga Water pursuant to a 102-
year lease of its Fontana Union shares ("Fontana Union Lease") which the Company
entered into in March 1989 and which was amended in 1989, 1992 and 1993. The
investment in Fontana Union is recorded on the cost method. (See Note 9).
KSC Recovery, Inc. ("KSC Recovery"). The Company's wholly-owned subsidiary,
KSC Recovery, Inc., acts solely as an agent for KSC's former creditors in
pursuing bankruptcy related adversary litigation and administration of the KSC
bankruptcy estate. All costs of the adversary litigation and bankruptcy
administration are borne by KSC Recovery and funded by proceeds of litigation
settlements and other recoveries. Consistent with KSC Recovery's agency role,
the activity of KSC Recovery is not included in Kaiser's financial statements,
however, it is included in the consolidated tax return.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with
original maturities of 90 days or less to be cash equivalents. The Company
maintains its cash balances with high quality financial institutions.
SHORT TERM INVESTMENTS
The Company's short term investments include treasury bills and certificates
of deposit with maturities within one year which management classifies as "held
to maturity." These debt securities are carried on the balance sheet at the
lower of cost or market. As cost approximates market, there are no unrealized
gains or losses.
REAL ESTATE
In accordance with FASB Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of (FASB 121); the
Company records impairment losses on long-lived assets used in operations when
events and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less than
the
58
<PAGE>
carrying amounts of those assets. There has been no requirement to record
impairment losses on the Company's assets under FASB 121.
The Company capitalizes, as incurred, development costs and certain qualifying
remediation costs for environmental contamination. Capitalized remediation
costs include those costs, net of recoveries, that enhance or improve the
condition of the property as compared with the condition when acquired as a
result of the reorganization.
Interest and property taxes related to real estate under development are
capitalized during periods of development.
INVESTMENT IN PENSKE MOTORSPORTS, INC.
The Company accounts for its investment in Penske Motorsports, Inc. under the
equity method of accounting.
DEFERRED COSTS
Included in other assets are deferred loan fees of $761,000 incurred in 1994,
which are being amortized over the life of the related loan on a straight-line
basis. Amortization of these deferred loan fees, which is included in net
interest expense (income) was $77,000 and $18,000 for 1995 and 1994,
respectively.
BUILDINGS AND EQUIPMENT
Buildings and equipment are stated on the cost basis. Depreciation is provided
on the straight line method over the estimated useful lives of the respective
assets.
REVENUE RECOGNITION
Revenues are recognized when the Company has completed the earnings process
and an exchange transaction has taken place.
INCOME TAXES
The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of temporary timing differences between the financial
statement and tax bases of assets and liabilities at the applicable enacted tax
rates.
PER SHARE AMOUNTS
Earnings per share is computed based on the weighted average number of common
stock and common stock equivalents (including stock options) outstanding during
each period.
STOCK OPTIONS
The Company accounts for its stock compensation arrangements under the
provisions of APB 25, "Accounting for Stock Issued to Employees" and intends to
continue to do so.
59
<PAGE>
FINANCIAL STATEMENT PRESENTATION AND RECLASSIFICATIONS
The Company has reclassified certain amounts in its Consolidated Financial
Statements for the years ended in 1993 and 1994 in order to conform with the
1995 presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 3. ACCOUNTS RECEIVABLE
Accounts receivable as of December 31 consisted of the following:
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
California Steel Industries............. $ 3,661,000 $ ---
Environmental insurance settlement
proceeds............................... 2,701,000 ---
Cucamonga County Water District......... 1,710,000 1,679,000
Other................................... 2,483,000 1,334,000
----------- ----------
10,555,000 3,169,000
Allowance for doubtful accounts......... (414,000) (156,000)
----------- ----------
Total.............................. $10,141,000 $3,013,000
=========== ==========
</TABLE>
NOTE 4. INVESTMENT IN PENSKE MOTORSPORTS, INC.
On November 22, 1995, the Company entered into an Organization Agreement with,
among other parties, Penske Speedways Holding Corp., (now called "PMI"), a newly
formed Delaware corporation, consummating the transactions generally described
in the Company's and Penske Speedway, Inc.'s, Development Agreement entered into
by the parties in April, 1994.
As of December 31, 1995, PMI directly and indirectly owned the following
principal assets: (i) one hundred percent (100%) of the stock of Penske
Speedway, Inc. which owns and operates Michigan International Speedway ("MIS"),
in Brooklyn, Michigan; (ii) one hundred percent (100%) of the stock of The
California Speedway Corporation, the developer of The California Speedway; (iii)
one hundred percent (100%) of the stock of Motorsports International Corp., a
motorsports apparel and memorabilia company; (iv) approximately eighty four
percent (84%) of the stock of Pennsylvania International Raceway, Inc. which
owns and operates the Nazareth Motor Speedway ("Nazareth"); and (v)
approximately two (2) percent of the stock of North Carolina Motor Speedway,
Inc. which owns the North Carolina Motor Speedway, Inc., Rockingham, North
Carolina.
With Kaiser's conversion of its preferred stock of PMI into common stock of
PMI, the effective ownership of PMI was Penske Performance, Inc. with 68%,
Facilities Investments with 17% and the Company with 15%. Prior to this
transaction, Kaiser was to be paid a fee of $650,000 per year. On January 29,
1996, Penske Speedways Holding Corp.
60
<PAGE>
filed an S-1 Registration Statement with the Securities and Exchange Commission.
(See Note 17. Subsequent Event.)
A condensed balance sheet of PMI as of December 31, 1995 follows:
<TABLE>
<S> <C>
Current Assets............................ $ 8,458,000
Property and Equipment.................... 61,009,000
Other Assets.............................. 3,788,000
-----------
Total Assets......................... $73,255,000
===========
Current Liabilities....................... $15,664,000
Other Liabilities......................... 1,454,000
Deferred taxes............................ 9,115,000
Minority Interest......................... 1,210,000
Stockholders' Equity...................... 45,812,000
-----------
Total Liabilities and Stockholders'
Equity.............................. $73,255,000
===========
</TABLE>
NOTE 5. MINE RECLAMATION CORPORATION
The Company, in January, 1995, acquired a 70% interest in Mine Reclamation
Corporation ("MRC"), the developer of the Eagle Mountain Landfill Project.
Concurrent with this acquisition, MRC and the Company amended the MRC Lease to
terminate the minimum monthly rent payments by MRC to the Company.
Consequently, the Company did not receive any rent payments from MRC during 1995
nor will it in the future until commencement of operations at the Landfill
Project. The transaction which was insignificant to the financial position and
total assets of the Company has been treated as a purchase, and the assets
acquired and liabilities assumed were recorded at their fair market value.
In June 1995, the Company's Board of Directors committed to provide up to
approximately $5.25 million in equity or other funding to MRC. The Company's
funding of MRC will be in stages over the next two years and will be subject to
periodic review by the Company's Board of Directors. The Company's current
ownership interest in MRC is approximately 72%.
While the Company has made the decision to invest up to approximately $5.25
million in equity in MRC, the Company is not obligated to provide additional
funding to MRC beyond its current commitments. MRC will need additional capital
to successfully complete the permitting and development process.
NOTE 6. BUILDINGS AND EQUIPMENT (NET)
Buildings and equipment (net) as of December 31 consisted of the following:
<TABLE>
<CAPTION>
1995 1994
----------- ------------
<S> <C> <C>
Buildings and structures................ $ 2,063,000 $ 2,383,000
Machinery and equipment................. 1,557,000 1,910,000
----------- -----------
3,620,000 4,293,000
Accumulated depreciation................ (1,187,000) (1,587,000)
----------- -----------
Total.............................. $ 2,433,000 $ 2,706,000
=========== ===========
</TABLE>
61
<PAGE>
NOTE 7. ACCRUED LIABILITIES
Accrued liabilities as of December 31 consisted of the following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Environmental insurance settlement costs... $ 3,938,000 $ ---
Groundwater remediation costs.............. 300,000 90,000
Coal Industry Retiree Health Benefit
Act of 1992 Settlement.................... --- 3,838,000
Compensation and related employee costs.... 1,460,000 848,000
Other...................................... 1,802,000 1,223,000
----------- -----------
Total................................. $ 7,500,000 $ 5,999,000
=========== ===========
</TABLE>
NOTE 8. ENVIRONMENTAL REMEDIATION RESERVE
In May 1989, the Company filed a lawsuit in San Francisco County Superior
Court in California against over eighty insurance companies which had provided
comprehensive general liability coverage to KSC since its inception in 1941.
During 1995, the Company was able to reach settlements with all the major
defendants resulting in the Company receiving net settlement payments (net of
all expenses and third party obligations) totaling approximately $12.5 million.
These settlements were intended to cover both the cost of remediating the
Company's Mill Site Property, as well as any future environmental claims except
for certain personal injury asbestos claims. The Company has recorded $7.0
million of the net settlement proceeds as a reimbursement of current and prior
year remediation costs and the remaining $5.5 million of net proceeds as a
reserve for future environmental remediation expenditures. (See Note 13.)
NOTE 9. LONG-TERM DEBT
As of December 31, 1995, long-term debt consisted of a $5,582,000 note, which
includes the current portion of $240,000 secured by a first trust deed issued to
The Lusk Company as part of the Company's purchase of property from the Lusk
Joint Ventures. This note is payable in quarterly payments of $60,000 plus
interest at the Bank of America prime rate plus 1.5% (10% at December 31, 1995)
with all remaining principal and accrued and unpaid interest due and payable on
July 28, 1998.
The Company, through FWR, has a 9-year, $20,000,000 revolving-to-term credit
facility with Union Bank at floating interest rates and collateralized by the
Company's shares of Fontana Union and the lease of those shares to Cucamonga
Water. At December 31, 1995, there were no loans outstanding under the credit
facility. The borrowing base available under the credit facility is limited to
the discounted present value of a five year projection of future payments under
the Fontana Union Lease, as defined in the credit facility agreement. Under the
borrowing base calculations, the maximum amount available was $19,661,000 as of
December 31, 1995. In an agreement with the DTSC, dated December 15, 1995, the
Company has reserved $3,432,000 of the available amount as financial assurance
that certain environmental remediation work is performed on limited sections of
the Mill Site property.
Total interest expense incurred in 1995 and 1994 was $625,000 and $263,000,
respectively. No interest expense was incurred in 1993.
62
<PAGE>
NOTE 10. STOCKHOLDERS' EQUITY
COMMON STOCK OUTSTANDING
At December 31, 1995 and 1994, Kaiser Resources Inc. common stock has a par
value of $0.03 and 13,333,333 authorized shares, of which 10,470,614 and
10,437,362 were outstanding, respectively.
In November 1988, 10,000,000 shares of common stock (after giving effect for a
3 for 1 reverse stock split that took place in 1990) were issued pursuant to the
KSC Plan of Reorganization. As of December 31, 1995, 682,662 of these shares
are being held for the benefit of the former general unsecured creditors of the
predecessor company pending the resolution of disputed bankruptcy claims. The
final resolution of these claims will result in the final allocation of the held
shares among the unsecured creditor group, which presents no liability to the
Company. For financial reporting purposes these shares have been considered
issued and outstanding.
In February 1993, the Company completed a stock offering of 2,000,000 shares
of its common stock, including 500,000 shares sold by the Company and 1,500,000
shares sold by its two principal stockholders. After the Company's
proportionate share of costs of approximately $100,000 incurred in connection
with the stock offering, the Company realized net proceeds from the stock
offering of approximately $6,000,000.
STOCK OPTION AND STOCK GRANT PROGRAMS
In October 1990, the Company's stockholders approved the Amended, Restated and
Substituted Kaiser Steel Resources, Inc. 1989 Stock Plan (the "1989 Stock
Plan"). The 1989 Stock Plan provided for the grant of incentive stock options,
non-qualified stock options, stock appreciation rights, restricted stock or
deferred stock awards. Certain options granted under the 1989 Stock Plan are
still outstanding. No compensation expense was incurred by the Company during
1995, 1994 and 1993.
In June 1995, the Company's stockholders approved the 1995 Stock Plan. The
1995 Stock Plan provides for the grant of incentive stock options and non-
qualified stock options. The 1995 Stock Option Plan is administered by the
Board of Directors. The 1995 Plan is a three-year Plan with years running from
July 1 to June 30. Each July 1, an amount equal to 2% of the Company's shares
outstanding became available to support grants of stock options to employees
during that year. At the end of each plan year, reserved plan shares not made
subject to stock options revert to normal unissued share status. Grants are
generally established at fair market value of the Company's common stock on the
date of the grant and the exercise thereof may extend for up to 10 years with
various vesting schedules.
In addition, under the 1995 Stock Plan, each director when first elected to
the Board shall automatically be granted options for 5,000 common stock shares.
Each non-employee director who is re-elected or serving an unexpired term as a
member of the Board at an annual meeting of holders of stock of the Company will
be automatically granted an additional 1,500 stock options. These options have
an exercise price equal to the fair market value of the Company's Common Stock
on the date of the grant.
63
<PAGE>
The following is a summary of the Stock Plans' activities:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
--------------------------
RESERVED PRICE PER
SHARES NUMBER SHARE
--------- ------- ---------------
<S> <C> <C> <C>
Balance at December 31, 1992 180,947 279,236 $ 3.00 - 17.58
Additional shares reserved... 226,107 --- ---
Granted...................... (291,200) 291,200 $12.55 - 13.64
Exercised.................... --- (10,699) $12.70 - 13.64
-------- -------
Balance at December 31, 1993 115,854 559,737 $ 3.00 - 17.58
Additional shares reserved... 204,259 --- ---
Granted...................... (155,000) 155,000 $ 8.05 - 16.85
Exercised.................... --- (9,400) $ 3.00 - 9.20
-------- -------
Balance at December 31, 1994 165,113 705,337 $ 3.00 - 17.58
Additional shares reserved... 209,102 --- ---
Granted...................... (182,000) 182,000 $ 5.83 - 7.00
Forfeitures.................. 7,374 (7,374) ---
-------- -------
Exercised.................... --- (17,801) $ 3.00 - 7.00
-------- -------
Balance at December 31,1995 199,589 862,162 $ 3.00 - 17.58
======== =======
</TABLE>
As of December 31, 1995, 594,447 options of the 862,162 granted
remain vested and unexercised under the 1989, 1992 and 1995 stock plans.
In 1988, the Company granted stock options totaling 533,333 shares
with a nominal exercise price to certain of its officers as part of the
emergence from bankruptcy reorganization. These options became 50% vested at
the date of grant with the remaining options ratably vesting through June 1,
1991. As of December 31, 1995, 169,999 of these options remain vested and
unexercised.
NOTE 11. SUPPLEMENTAL CASH FLOW INFORMATION
During 1995, in connection with the contribution of the 460 acres to Penske
Motorsports, Inc., the Company reclassified $22.5 million of land to
investment in Penske Motorsports, Inc.
The Company paid interest during 1995 and 1994 of $607,000 and $144,000,
respectively. There was no interest paid in 1993.
In 1994, non-cash investing activities included a $6,000,000 note payable
as part of the Company's purchase of properties owned by the Lusk Joint
Ventures.
NOTE 12. INCOME TAXES
The income tax provisions for the years ended December 31, 1995,
1994 and 1993 are composed of the following:
64
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993
----------- ------------ ----------
<S> <C> <C> <C>
Current tax expense:
Federal........................... $ --- $ 92,000 $ 37,000
State............................. --- 33,000 13,000
----------- ----------- ----------
--- 125,000 50,000
----------- ----------- ----------
Deferred tax expense credited to equity:
Federal........................... --- 1,371,000 990,000
State............................. 335,000 250,000 181,000
----------- ----------- ----------
335,000 1,621,000 1,171,000
----------- ----------- ----------
Deferred tax expense:
Federal........................... --- --- ---
State............................. 721,000 --- ---
----------- ----------- ----------
721,000 --- ---
----------- ----------- ----------
Tax benefit of extraordinary item (Note
13):
Current tax benefit:
Federal........................... --- (92,000) ---
State............................. --- (30,000) ---
----------- ----------- ----------
--- (122,000) ---
----------- ----------- ----------
Deferred tax benefit credited to equity:
Federal........................... --- (1,339,000) ---
State............................. --- (244,000) ---
----------- ----------- ----------
--- (1,583,000) ---
----------- ----------- ----------
$1,056,000 $ 41,000 $1,221,000
=========== =========== ==========
</TABLE>
In accordance with SFAS 109, the tax benefits of all deductible temporary
differences and loss carryforwards that existed at the date of a reorganization
must be credited directly to additional paid-in capital when the initial
recognition of these benefits occurs subsequent to the reorganization.
There were no income taxes paid in 1995. Income taxes paid in 1994 and 1993
were $272,000 and $138,000, respectively.
Deferred tax liabilities (assets) are comprised of the following as of
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Land held for development............... $ 4,744,000 $ 9,705,000
Investment in Fontana Union............. 6,440,000 6,440,000
Investment in Penske Motorsports Inc.... 9,031,000 ---
Joint venture losses.................... --- 453,000
Depreciation............................ 103,000 135,000
------------ ------------
20,318,000 16,733,000
------------ ------------
Groundwater remediation................. (695,000) (665,000)
Bankruptcy Estate interest income....... --- (569,000)
Insurance Proceeds...................... (5,098,000) ---
Investment in MRC....................... (1,837,000) ---
Accounts receivable reserve............. (166,000) (63,000)
Other................................... (1,219,000) (271,000)
Loss carryforwards...................... (45,912,000) (45,020,000)
------------ ------------
(54,927,000) (46,588,000)
------------ ------------
Deferred tax asset valuation allowance.. 35,330,000 29,855,000
------------ ------------
$ 721,000 $ ---
============ ============
</TABLE>
As indicated above, the net change in the valuation allowance was $5,475,000
in 1995.
65
<PAGE>
A reconciliation of the effective income tax rate to the federal statutory
rate, for financial reporting purposes, is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Federal statutory rate.................... 34.0% 34.0% 34.0%
Increase resulting from state tax, net
of federal benefit....................... 6.1 6.1 6.1
Other..................................... 3.0 3.0 1.8
---- ---- ----
43.1% 43.1% 41.9%
==== ==== ====
</TABLE>
The consolidated Net Operating Loss ("NOL") carryforwards available for
federal income tax purposes as of December 31, 1995, are approximately
$117,000,000 and will expire over a period from year 2000 through 2010. The
amount of NOL carryforwards available for California state tax purposes is
approximately $16,000,000 as of December 31, 1995. During 1993, the California
Legislature amended the tax code relative to the generation and use of NOL
carryforwards available for California state tax purposes. This legislation,
among other changes, reduced the NOL carryforwards from 15 years to 5 years.
Therefore, the Company's NOL carryforwards available for California state tax
purposes now expire in year 1997 and 2000. In addition, there are certain
limitations as to the future annual use of NOLs if 50% or more of the stock of
the Company changes ownership. The Company also has approximately $5,256,000 of
investment tax credit carryforwards available. The credits will expire in the
years 1996 through 2000 and can be utilized only after the NOL is exhausted.
NOTE 13. EXTRAORDINARY LOSS
During the first quarter of 1994, the Company learned that it may be
responsible for the payment of premiums levied pursuant to the Coal Industry
Retiree Health Benefit Act of 1992 (the "Coal Act"). This legislation not only
imposes liability for premiums on companies currently in the coal mining
industry, but also on companies and their successors that were in the coal
mining industry. Prior to 1985, coal mines were operated to support the
Company's steel making operations. In December 1994, the Company reached an
agreement settling all outstanding and future claims under which the Company
paid $3,778,000 plus expenses. The settlement was recorded as an extraordinary
loss of $2,233,000 (net of tax benefits of $1,705,000).
NOTE 14. LEASED ASSETS AND SIGNIFICANT CUSTOMERS
LONG-TERM LEASES
The Company has long-term lease agreements with Cucamonga Water pursuant to
the Fontana Union Lease (Note 1), Management Training Corporation ("MTC") and
California Steel Industries ("CSI"). Minimum lease payments expected to be
received by the Company through the next five years are as follows:
<TABLE>
<CAPTION>
YEAR ENDING FONTANA UNION CSI SERVICE
DECEMBER 31 LEASE MTC LEASE AGREEMENT TOTAL
- -------------- ------------- --------- ------------- -----------
<S> <C> <C> <C> <C>
1996 $5,079,000 $704,000 $204,000 $5,987,000
1997 $5,310,000 $704,000 $102,000 $6,116,000
1998 $5,577,000 $616,000 $ --- $6,193,000
1999 $5,862,000 $ --- $ --- $5,862,000
2000 $6,139,000 $ --- $ --- $6,139,000
</TABLE>
66
<PAGE>
The net book values of Fontana Union and Eagle Mountain at December 31, 1995
were $16,108,000 and $9,082,000, respectively. Only a portion of Eagle Mountain
is being utilized for the MTC Lease.
SIGNIFICANT CUSTOMERS
The Company received substantial portions of its revenue from the following
customers:
<TABLE>
<CAPTION>
YEAR ENDING FONTANA UNION CSI SERVICE
DECEMBER 31 LEASE MTC LEASE AGREEMENT TOTAL
- -------------- ------------- --------- ------------- -----------
<S> <C> <C> <C> <C>
1995 $4,974,000 $699,000 $ 416,000 $ ---
1994 $4,820,000 $694,000 $1,859,000 $2,400,000
1993 $4,263,000 $687,000 $2,652,000 $1,300,000
</TABLE>
NOTE 15. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL CONTINGENCIES
The Company currently estimates that as of December 31, 1995, its remediation
costs for the balance of its land will be between $14,000,000 and $24,000,000,
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
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. (See Note 8.)
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 Water. 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 believes sufficient
amounts have been accrued for this contingency.
PENSION PLANS
The Company currently sponsors a voluntary qualified 401(k) savings plan and a
nonqualified pension plan, available to all full-time employees. Participants
may make contributions of up to 10% of their compensation with the Company
matching one-half of each participant's contribution up to 6% of compensation.
The non-qualified plan mirrors the qualified 401(k) plan.
67
<PAGE>
Total expense relative to these plans for the years ended December 31, 1995,
1994 and 1993, was $170,000, $139,000 and $131,000, respectively.
LETTERS OF CREDIT
At December 31, 1995, the Company had guaranteed letters of credit outstanding
on its behalf to third parties totaling $420,000. These letters of credit were
issued for reclamation activities performed at two idled coal properties, on
behalf of and at the expense of the KSC bankruptcy estate.
NOTE 16. LEGAL PROCEEDINGS
Significant legal proceedings which may have a significant direct financial
impact on the Company are summarized as follows:
BANKRUPTCY ADVERSARY LITIGATION
The Company's predecessor, KSC, was in reorganization under Chapter 11 of the
United States Bankruptcy Code from February 1987 until November 1988. Pursuant
to the KSC Plan of Reorganization, the Company has established a subsidiary, KSC
Recovery, Inc. ("KSC Recovery") see Note 1, which was engaged in the process of
pursuing certain legal actions on behalf of the former creditors of KSC and
handling the remaining administrative duties of the KSC bankruptcy estate,
including claims resolution.
In 1994, KSC Recovery, the Company and California Steel Industries, Inc.,
("CSI") a major unsecured claimant in the KSC bankruptcy, reached a tentative
global settlement of all outstanding litigations, including those before the
bankruptcy court. In 1995, the Company and CSI entered into definitive
Settlement documents and all conditions to the Settlement were satisfied by
December 31, 1995.As a part of the settlement, the Company sold to CSI certain
water rights and discharge units associated with the Company's mill site
property for in excess of $3,000,000. In addition, the Company will pay to CSI
in the future the equivalent of one third (1/3) of any net sums it may collect
in settlements or by judgments in the Company's litigation against its former
general casualty and property insurance carriers related primarily to
environmental remediation claims after the Company's receipt of the first
$5,200,000 of any proceeds (net of expenses, fees and costs). As a result of
this settlement, the Company recognized a gain of $2,200,000 in 1995.
All remaining major claims in the KSC bankruptcy were settled in 1995 which
will allow for a future distribution of stock and cash in accordance with the
Plan of Reorganization. All litigation and bankruptcy administration costs are
borne by KSC Recovery, which maintains a cash reserve from previous litigation
and other recoveries to fund anticipated ongoing litigation and administration
costs.
From time-to-time, various other environmental and similar types of claims
such as injury or death from asbestos exposure that relate to KSC pre-bankruptcy
activities are asserted against the Company and/or KSC Recovery. In connection
with the KSC Plan of Reorganization, the Company, as the reorganized successor
to KSC, was discharged from all liabilities that may have arisen prior to
confirmation of the KSC Plan of Reorganization, except as otherwise provided by
the plan or by law. Although the Company believes there is no ongoing
contamination from its activities and that all pre-petition environmental claims
(such as the CSI claims, and other similar claims) were discharged under the KSC
Plan of Reorganization, in the event any of these claims are ultimately
determined to survive the KSC bankruptcy, it could have a material adverse
effect on the Company.
68
<PAGE>
OTHER LITIGATION
In addition, the Company, in the normal course of its business, is involved in
various claims and legal proceedings. Management believes these matters will
not have a material adverse effect on Kaiser's business or financial condition.
NOTE 17. SUBSEQUENT EVENT
On March 26, 1996, the Form S-1 Registration Statement, filed by PMI with the
Securities and Exchange Commission on January 29, 1996, went effective with the
offering of 3,737,500 shares of common stock at a price of $24.00 per share
which raised approximately $89,690,000 (gross). The effect of the offering was
to decrease the Company's ownership in PMI to approximately 10.6%. At the $24.00
per share offering price the Company's 1,373,625 shares of common stock in PMI,
had a value of $32,967,000.
69
<PAGE>
NOTE 17. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
1995
Resource revenues......................... $1,999,000 $2,150,000 $2,089,000 $ 4,870,000
Income from operations.................... $ 237,000 $ 243,000 $ 291,000 $ 2,266,000
Income before income tax provision........ $ 88,000 $ 86,000 $ 108,000 $ 2,168,000
Net income................................ $ 50,000 $ 49,000 $ 62,000 $ 1,233,000
Earnings per share........................ $ .00 $ .00 $ .01 $ .12
1994
Resource revenues......................... $2,944,000 $2,848,000 $3,302,000 $ 3,377,000
Income from operations.................... $ 781,000 $ 882,000 $1,105,000 $ 1,092,000
Income before income tax provision and
extraordinary loss........................ $ 889,000 $ 998,000 $1,146,000 $ 1,000,000
Income before extraordinary loss.......... $ 504,000 $ 566,000 $ 650,000 $ 567,000
Extraordinary loss (net of taxes)......... --- --- --- $ 2,233,000
Net income (loss)......................... $ 504,000 $ 566,000 $ 650,000 $(1,666,000)
Earnings (loss) per share
Before extraordinary loss................. $ 0.05 $ 0.05 $ 0.06 $ 0.05
After extraordinary loss.................. $ 0.05 $ 0.05 $ 0.06 $ (0.15)
1993
Resource revenues......................... $2,167,000 $2,475,000 $2,638,000 $ 3,311,000
Income from operations.................... $ 405,000 $ 595,000 $ 684,000 $ 763,000
Income before income tax provision........ $ 521,000 $ 713,000 $ 792,000 $ 887,000
Net income................................ $ 296,000 $ 404,000 $ 448,000 $ 544,000
Earnings per share........................ $ .03 $ .04 $ .04 $ .05
</TABLE>
70
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO DEDUCTIONS
BEGINNING COSTS AND FROM BALANCE AT
CLASSIFICATION OF PERIOD EXPENSES RESERVES (A) END OF PERIOD
- ------------------------------------- ---------- --------- ------------ -------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
- -----------------------------
Allowance for losses in collection
of current accounts receivable....... $156,000 $343,000 $ 85,000 $414,000
======== ======== ======== ========
YEAR ENDED DECEMBER 31, 1994
- ----------------------------
Allowance for losses in collection
of current accounts receivable....... $314,000 $149,000 $307,000 $156,000
======== ======== ======== ========
YEAR ENDED DECEMBER 31, 1993
- ----------------------------
Allowance for losses in collection
of current accounts receivable....... $ 68,000 $276,000 $ 30,000 $314,000
======== ======== ======== ========
</TABLE>
(A) Amount charged off during the year.
71
<PAGE>
EXHIBIT 4.1.3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * * * * *
KAISER RESOURCES INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That at a meeting of the Board of Directors of KAISER RESOURCES
INC., resolutions were duly adopted setting forth a proposed amendment to the
Certificate of Incorporation of said corporation, declaring said amendment to be
advisable and calling a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed amendment is a
follows:
RESOLVED, That the Certificate of Incorporation of this corporation be
amended by changing the First Article thereof so that, as amended said
Article shall be and read as follows:
"FIRST: The name of corporation is
KAISER VENTURES INC."
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
the annual meeting of the stockholders of said corporation was duly called and
held upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, SAID KAISER RESOURCES INC., has caused this certificate
to be signed by Daniel N. Larson, its President and attested by Terry L. Cook,
its Secretary this 19th day of June, 1995.
/s/ Daniel N. Larson
--------------------
By: Daniel N. Larson, President
ATTEST:
/s/ Terry L. Cook
- -----------------
By: Terry L. Cook, Secretary
<PAGE>
EXHIBIT 10.1.4
FOURTH AMENDMENT TO LEASE
This FOURTH AMENDMENT TO LEASE ("AMENDMENT") is made and entered into
effective the 1st day of January, 1996, by and between Kaiser Eagle Mountain,
Inc., a Delaware corporation ("KEM") and Mine Reclamation Corporation, a
California corporation ("MRC").
RECITALS
--------
A. KEM and MRC are parties to that certain Lease dated November 30,
1988, as amended by that certain First Amendment to Lease dated December 18,
1990, as further amended by that certain Second Amendment to Lease dated July
29, 1994 and as further amended by that certain Third Amendment to Lease dated
January 30, 1995 (the "Lease", as amended, being referred to herein as the
"LEASE"), pursuant to which KEM leased to MRC certain real property located in
San Bernardino County, California which is commonly known as part of KEM's Eagle
Mountain Mine for the purposes of, developing, permitting constructing and
operating a solid waste municipal landfill.
B. MRC and KEM desire, by this Amendment, to reduce the amount of land
being leased by MRC from KEM.
NOW, THEREFORE, it is agreed as follows:
1. REDUCTION OF AMOUNT OF PROPERTY LEASE. KEM and MRC agree, that
commencing as of January 1, 1996, the real property leased from KEM by MRC shall
be reduced in amount and shall be the real property described in Exhibit "A"
attached hereto and incorporated herein by this reference and MRC shall have no
further rights of any nature or kind in the property previously leased from KEM
except for the property described in Exhibit "A." MRC shall continue to lease
all real property specified in the Lease as set forth in Exhibit "A" upon the
terms and conditions of the Lease. The reduction in the amount of land leased
from KEM shall not reduce in any respect the rent, royalty payments, or other
amounts due KEM under the terms of the Lease.
2. NO OTHER CHANGES. Except as otherwise expressly amended or modified
by the terms of this Amendment, the terms of the Lease shall remain unchanged,
ad in full force and affect.
3. FURTHER COOPERATION. KEM and MRC shall execute, notarize and
deliver to the other party any document that may be required to carry out the
intent and purpose of this Agreement.
4. HEADINGS. The captions or headings of sections and paragraphs in
this Amendment are for convenience and reference only and are not to be
interpreted as controlling, or affecting the subject matter contained
thereunder.
5. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall be an original of this Amendment for all
purposes, and all of which together shall constitute one and the same
instrument.
1
<PAGE>
6. GOVERNING LAW. This Amendment shall be governed by and construed
accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties have executed this Amendment and made it
effective on the date first written above.
MINE RECLAMATION CORPORATION KAISER EAGLE MOUNTAIN, INC.
a California corporation a Delaware corporation
By: /s/ Richard A. Daniels By: /s/ Gerald A. Fawcett
---------------------- ---------------------
Its: President and CEO Its: President
---------------------- ---------------------
The undersigned hereby confirms its previous guaranty of Landlord's
performance with respect to the Lease and all amendments thereto, and agrees to
be bound by the provisions of the Lease and amendments (including those
contained in this Amendment) which expressly apply to the undersigned.
KAISER VENTURES INC.
a Delaware corporation
By: /s/ Gerald A. Fawcett
---------------------
Its: President
--------------------
2
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION NOT ATTACHED
WILL BE FURNISHED TO THE SEC
UPON REQUEST
3
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
OF
RICHARD E. STODDARD
THIS EMPLOYMENT AGREEMENT is made and entered into effective January 15,
1996 by and between Richard E. Stoddard ("EMPLOYEE") and Kaiser Ventures Inc.
("KAISER").
RECITALS
A. Employee is currently employed by Kaiser as its Chairman of the Board
pursuant to that certain employment letter dated February 28, 1994.
B. Kaiser desires to expand Employee's duties and responsibilities by
appointing him Chief Executive Officer of the Corporation. As of November 28,
1995, all officers of the Corporation began to report directly to Employee.
C. The intent of this Agreement is to set forth the current agreement
and understanding of Employee and Kaiser with regard to Employee's continued
employment by Kaiser.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. EMPLOYMENT, POSITIONS AND DUTIES. Kaiser hereby continues the
employment of Employee upon the terms and conditions set forth in this
Agreement. Employee's positions with Kaiser shall be Chief Executive Officer
and Chairman of the Board of Directors. Employee shall have the
responsibilities and duties normally incident to such positions, including, but
not limited to, those duties and responsibilities set forth in Exhibit "A"
attached hereto and incorporated herein by this reference and such other duties
and responsibilities as may be reasonably assigned to him from time-to-time by
Kaiser's Board of Directors. Employee agrees to devote his full business time
and attention to the discharge of his duties and responsibilities under this
Agreement.
2. TERM. Subject to the provisions for termination hereinafter
provided, the term of Employee's employment shall commence as of January 15,
1996, and shall terminate on January 15, 1999, unless extended as provided in
Paragraph 10.
3. BASE SALARY. Retroactive to February 1, 1995, Employee's annual base
salary shall be Two-Hundred Eighty Thousand Dollars ($280,000) per year.
Notwithstanding the foregoing, the Board of Directors may in good faith and in
its reasonable discretion may elect to cause the Corporation to issue to
Employee restricted stock with a value of up to Forty Thousand Dollars ($40,000)
per year in lieu of cash compensation provided that subsequent to the date of
this Agreement there are no material adverse changes in the tax and securities
laws during the year preceding any proposed grant of restricted stock pertaining
to or affecting Employee's receipt, taxation, sale or transfer of restricted
stock. In the event of any material adverse change in the tax or securities
laws pertaining to Employee's receipt, taxation, sale or transfer of restricted
stock as reasonably determined in good faith by Employee or Kaiser, Employee and
Kaiser
1
<PAGE>
shall in good faith discuss any changes that may be appropriate or necessary in
connection with any grant of restricted stock to Employee. For 1996, as a part
of Employee's annual base salary the Board has elected to issue to Employee
Forty Thousand Dollars ($40,000) of restricted stock in lieu of Forty Thousand
Dollars ($40,000) cash compensation. In the event that any restricted stock is
issued to Employee as a part of his annual base salary, the value of such
restricted stock at the time of its grant shall be counted as base salary in the
calculation of any bonus that may be awarded to Employee. For all other
purposes, any such stock shall be treated as salary for the calculation of any
benefits based upon an employee's salary as may be required by law or any
benefit plan.
Prior to the first meeting of the Board of Directors in any calendar year,
the Compensation and Benefits Committee of the Board will review Employee's
salary and report its recommendations for any revision to the full Board at such
meeting. Employee's annual base salary shall be adjusted effective as of
January 1 of each year, commencing January 1, 1997, by the increase in the
consumer price index over the prior applicable year utilizing the Consumer Price
Index for Urban Wage Earners and Clerical Workers, U.S. City Average, All Items,
published by the Bureau of Labor Statistics of the United Stated Department of
Labor. The entire Board of Directors has final responsibility for the review,
approval or disapproval of any revisions to Employee's annual base salary.
4. ANNUAL BONUS. In addition to his base salary, Employee shall be
entitled to participate in the bonus program of Kaiser applicable to senior
executives as it may be amended from time to time. The timing, size and/or
amount of any bonus awarded to Employee during the term of this Agreement will
be determined in accordance with the process set forth in paragraph 3 above for
the annual base salary review and based upon the bonus program developed from
time to time by the Compensation and Benefits Committee and approved by the
Board of Directors. The bonus for any year, if any, will be determined based
upon such review. The Board of Directors may award in good faith and in its
reasonable discretion up to fifty percent (50%) of any bonus in restricted stock
provided that subsequent to the date of this Agreement there are no material
adverse changes in the tax and securities laws pertaining to or affecting
Employee's receipt, taxation, sale or transfer of restricted stock. In the
event of any material adverse change in the tax or securities laws during the
year preceding any proposed grant of restricted stock pertaining to Employee's
receipt, taxation, sale or transfer of restricted stock as reasonably determined
in good faith by Employee or Kaiser, Employee and Kaiser shall in good faith
discuss any changes that may be appropriate or necessary in connection with any
grant of restricted stock to Employee
5. STOCK OPTIONS AND OTHER STOCK RELATED INCENTIVES. Employee shall be
eligible for the grant of incentive stock options, non-qualified stock options
and other forms of stock related incentives from time-to-time in the discretion
of the Stock Option Committee of the Board of Directors. The timing, size and
amount of any future stock options or other stock related incentives will be
determined generally in accordance with the process used to determine the award
of any bonus to Employee. The grant and exercise of the stock options and other
stock related incentives shall generally be subject to and governed by the terms
of Kaiser's 1995 Stock Option Plan or any similar or successor plan. However,
the Stock Option Committee may award stock options, restricted or other stock
related incentives outside the 1995 Stock Option Plan in its discretion.
2
<PAGE>
For 1996, the Stock Option Committee has awarded to Employee stock options
for 50,000 shares pursuant to the 1995 Stock Option Plan.
6. OTHER BENEFITS. Employee will be entitled to participate in all
benefits provided by Kaiser to its employees and to senior executives in
accordance with and subject to Kaiser's polices and procedures as they may exist
from time-to-time, including, but not limited to, medical and dental insurance,
life insurance, 401(k) savings plan, any pension plan, deferred compensation
plan, education and seminar reimbursement, car allowance, and reimbursement of
reasonable expenses for company business. Employee shall be entitled to four
(4) weeks of paid vacation per year.
7. RESTRICTED STOCK. Any restricted stock issued by Kaiser in lieu of
cash payments in connection with Employee's base salary or any bonus, shall be
subject to the terms and conditions of a mutually agreed upon stock restriction
agreement which may provide, among other things, for the forfeiture of such
stock in phases if Employee should voluntarily terminate his employment with
Kaiser within a certain period of time. The restricted stock granted as part of
Employee's 1996 salary shall vest on January 15, 1997. The restricted stock
granted as a part of Employee's 1995 bonus shall vest 50% on January 15, 1997
and 50% on January 15, 1998, and as otherwise provided in the stock restriction
agreement for each grant.
8. DEDUCTIONS. Applicable federal and state income taxes, social
security contributions (FICA), Medicare contributions, medical insurance
premiums and any other appropriate or customary deductions shall withheld from
any compensation paid to Employee by Kaiser.
9. CHANGE OF CONTROL. If Kaiser is sold or merged with another company,
or all or a substantial portion of all of the principal assets of the Kaiser (as
determined on a cumulative basis from the date of this Agreement) are sold or
transferred to shareholders or third parties or more than twenty-five percent
(25%) of the outstanding capital stock of the Company is acquired by another
person or persons acting as a group (any of these events being a "Change of
Control"), and if thereafter without Employee's prior consent, there shall be:
a. Any involuntary termination of Employee's employment (other than
for cause, death or disability);
b. Any material reduction in Employee's positions, responsibilities,
including reporting responsibilities, or authority, including title,
responsibilities or authority as it may be increased from time-to-time;
c. The assignment to Employee of duties inconsistent with
Employee's positions immediately prior to a Change in Control or as the same may
be increased from time-to-time after a Change in Control;
d. Any assignment to a location unacceptable to Employee;
3
<PAGE>
e. Any failure to provide Employee with compensation and benefits
on terms at least as favorable as those enjoyed by Employee under this Agreement
immediately prior to a Change in Control, or the taking of any action that would
materially reduce any of Employee's compensation and benefits in effect at the
time of the Change in Control;
f. Any requirement that Employee travel in performance of his
duties on behalf of Kaiser for a substantially greater period of time during any
year than was required of him during the year preceding the year in which the
Change of Control occurred;
g. Any failure of Kaiser's Board of Directors to nominate Employee
for election as a member of Kaiser's Board of Directors and to elect him as
Chairman, as the case may be, at the expiration of Employee's then existing term
of office
then, at Employee's option, exercisable within ninety (90) days of the
date Employee knew, or should have known exercising reasonable care, of the
occurrence of any of the foregoing events and the expiration of any applicable
cure period, Employee shall have the right to terminate his employment by
written notice to Kaiser, and on the date of such termination Kaiser will pay
Employee an amount equal to one year's annual base salary (based on Employee's
then current base salary) payable in one lump sum or, at Employee's option, over
such period of time not to exceed twelve (12) months. In addition, for a period
of one (1) year following Employee's termination of employment as provided
herein, Employee will continue to receive all benefits afforded to him prior to
the Change of Control at Kaiser's expense. Furthermore, options to acquire
shares of Kaiser stock, restricted stock or any other stock related incentive
will immediately and fully vest, notwithstanding any other applicable vesting
schedule. After such termination, Employee shall be entitled, for a period of
two years, to exercise his stock options as to all such shares. This provision
shall take precedence over any contrary provision in any standard stock option
agreement.
The parties acknowledge that Kaiser is evaluating this provision which may
lead to an amendment of this provision to more closely align shareholders and
management's financial interests, but any such revision shall be mutually
agreeable to Kaiser and Employee.
10. TERMINATION OF EMPLOYMENT.
a. TERMINATION WITHOUT CAUSE OR EXTENSION OF EMPLOYMENT. In the
------------------------------------------------------
event Kaiser elects to terminate Employee's employment without cause (as defined
below) during the term of this Agreement or in the event Kaiser or Employee
elect for any reason not to continue Employee's employment for at least one year
after the scheduled expiration of this Agreement, then Kaiser agrees to pay
Employee an amount equal to one year's annual base salary (based on your then
current annual base salary). In the event neither party notifies the other in
writing prior to January 15, 1998, that Employee's services will not continue
beyond the scheduled term of this Agreement, the term of this Agreement will be
automatically extended for one (1) additional year. After such termination or
failure to continue employment, Employee shall be entitled, for a period of
4
<PAGE>
two years to exercise his stock options as to any then vested, including any
options within one year of termination or failure to continue employment,
notwithstanding any other applicable provision contained in any option
agreement. In addition to the foregoing related to stock options, with respect
to any restricted stock or other stock related incentives, Employee shall
continue to vest in such securities for a period of one year following
termination or failure to continue Employee's employment as provided herein.
b. TERMINATION FOR CAUSE. If Kaiser elects to terminate Employee's
----------------------
employment for cause (as defined below), Employee's employment will terminate on
the date fixed for termination by Kaiser and thereafter Kaiser will not be
obligated to pay Employee any additional compensation, other than the
compensation due and owing up to the date of termination. After such
termination, Employee shall be entitled, for a period of ninety (90) days, to
exercise any stock options or other stock related incentives that are vested as
of the date of termination.
c. DEFINITION OF CAUSE. "CAUSE" for the purposes of this Agreement
--------------------
shall mean any of the following:
i. Willful breach by Employee of any provision of this
Agreement, provided, however, if the breach is not a material breach, Kaiser
shall give Employee written notice of such breach and Employee shall have thirty
(30) days in which to cure such breach. No written notice or cure period shall
be required in the event of a willful and material breach of this Agreement by
Employee;
ii. Gross negligence or dishonesty in the performance of
Employee's duties or responsibilities hereunder;
iii. Engaging in conduct or activities or holding any position
that materially conflicts with the interest of, or materially interferes with
Employee's duties and responsibilities to Kaiser or its Affiliates; or
iv. Engaging in conduct which is materially detrimental to the
business of Kaiser or its affiliates.
d. WRITTEN AGREEMENT. This Agreement may be terminated at any
-----------------
time upon the parties mutual written agreement.
11. CONFIDENTIALITY
a. EMPLOYEE'S OBLIGATIONS. Employee agrees that (a) except as
----------------------
provided in this Agreement Employee shall maintain the confidential nature of
any Proprietary Information received or acquired by him, and (b) Employee shall
use such Proprietary Information solely for the purpose of meeting his
obligations under this Agreement and not in connection with any other business
or activity. "PROPRIETARY INFORMATION" means all oral, written or recorded
information about or related to the Kaiser or any of its Affiliates or its or
their technology, assets, liabilities, or business, whether acquired before or
after the date hereof, and regardless of the manner in which it is acquired,
together with any documents or other materials prepared by Employee which
5
<PAGE>
contain or reflect such information. After termination of employment upon
demand of Kaiser, Employee agrees to return or destroy any and all materials
containing any Proprietary Information.
b. KAISER'S OBLIGATIONS. Kaiser agrees that it shall maintain the
--------------------
confidential nature of any confidential information pertaining to Employee,
except such disclosures as requested by law.
c. LIMITATIONS ON CONFIDENTIAL OBLIGATIONS AND USE RESTRICTIONS.
------------------------------------------------------------
The restrictions in Paragraphs 11(a) and (b) above do not apply to information
which the disclosing party can demonstrate (i) is then in the public domain by
acts not attributable to such disclosing party or (ii) is hereafter received on
an unrestricted basis by such disclosing party from a third party source who, to
such disclosing party's knowledge after due inquiry, is not and was not bound by
confidentiality obligations to Kaiser or any Affiliate thereof (in the case of
Paragraph 11(a)) or to Employee (in the case of Paragraph 11(b)). In addition,
Employee and Kaiser are permitted to disclose any Proprietary Information as
necessary in the defense or prosecution of any legal action.
d. ACTIONS IF DISCLOSURE REQUIRED. If Employee is required by law
-------------------------------
to make any disclosure otherwise prohibited hereunder, such party shall use its
best efforts to provide the other with prompt prior notice where possible so
that (a) the other party (with the reasonable cooperation of the party required
to make such disclosure) may seek an appropriate protection order or other
remedy and/or (b) the parties can seek in good faith to agree on the appropriate
scope and approach to disclosure. If a protective order or other remedy is not
obtained, the party required to make such disclosure may furnish only that
portion of information protection hereby which it is legally compelled to
disclose and shall use its reasonable efforts to obtain confidential treatment
for all information so disclosed.
e. INJUNCTION. Each party agrees that remedies at law may be
-----------
inadequate to protect against breach of this Paragraph 10, and hereby agrees to
the granting of injunctive relief without proof of actual damage.
12. MISCELLANEOUS.
a. ENTIRE AGREEMENT; AMENDMENTS. This Agreement states the entire
-----------------------------
understanding and agreement between the parties with respect to its subject
matter and may only be amended by a written instrument duly executed by Employee
and Kaiser.
b. ASSIGNMENT. This Agreement and the rights and obligations of
-----------
Employee may not be sold, transferred, assigned, pledged or hypothecated by
Employee.
c. NON-WAIVER. Failure to insist upon strict compliance with any
-----------
provision of this Agreement or the waiver of any specific event of non-
compliance shall not be deemed to be or operate as a waiver of such provision or
any other provision hereof or any other event of non-compliance.
6
<PAGE>
d. BINDING EFFECT. This Agreement shall be binding upon and inure
---------------
to the benefit of Kaiser, its successors and assigns and, Employee's heirs,
successors, and legal or personal representatives.
e. HEADINGS. The headings throughout this Agreement are for
---------
convenience only and shall in no way be deemed to define, limit, or add to the
meaning of any provision of this Agreement.
f. CONTEXT. Whenever required by the context, the singular shall
--------
include the plural, the plural the singular, and one gender such other gender as
is appropriate.
g. NOTICES. All notices, request, demands, consents and other
--------
communications hereunder shall be transmitted in writing and shall be deemed to
have been duly given when hand delivered or sent by certified United States
mail, postage prepaid, with return by certified requested, addressed to the
parties as follows:
Kaiser Ventures Inc.
3633 E. Inland Empire Blvd., Suite 850
Ontario, CA 91764
Richard E. Stoddard
1111 Crestridge Drive
Littleton, CO 80121
h. COSTS. In the event any party hereto is successful in whole or
------
in part in any action taken to enforce the provisions of this Agreement, the
prevailing party shall be reimbursed all costs incurred in such legal action
including reasonable attorney's fees in such action.
i. SEVERABILITY. If any provision or clause of this Agreement, as
-------------
applied to any party or circumstances shall be adjudged by a court to be invalid
or unenforceable, said adjudication shall in no manner effect any other
provision of this Agreement, the application of such provision to any other
circumstances or the validity or enforceability of this Agreement.
j. DEFINITION OF AFFILIATE. The term "AFFILIATE" for purposes of
------------------------
this Agreement shall mean any person or entity now or hereafter in control,
controlled by or in common control with Kaiser. It shall also include any
direct or indirect subsidiary of such Corporation and any company in which
Kaiser has more than a ten percent (10%) ownership interest.
k. GOVERNING LAW. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the State of California.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement to be effective as of the day and year first written above not
withstanding the actual date of signature.
"EMPLOYEE"
RICHARD E. STODDARD
/s/ Richard E. Stoddard
--------------------------------
Richard E. Stoddard
"KAISER"
KAISER VENTURES INC.
By: /s/ Lyle B. Stevenson
------------------------------
Lyle B. Stevenson, Chairman of
the Compensation and Benefits
Committee
By: /s/ James F. Verhey
-----------------------------
James F. Verhey,
Senior Vice President-Finance
8
<PAGE>
SCHEDULE "A"
Richard E. Stoddard
Chairman of the Board of Directors and Chief Executive Officer
This position will report to the Board of Directors.
RESPONSIBILITIES:
This position has total responsibility for ever facet of the strategy, planning,
operation, project implementation, performance and direction of Kaiser Ventures
Inc. and all its subsidiaries.
Within this framework of ultimate responsibility, Mr. Stoddard has delegated
certain operational and implementation duties to the President and Chief
Operating Officer. Shown below are strategic functions which will remain under
the direct control of Mr. Stoddard as Chairman and CEO.
. Corporate planning and strategy.
. Determination of the direction and goals of the Company.
. Future growth opportunity decisions.
. Development of all project exit strategies.
. Major corporate financial or other resource commitments.
. All phases of investor relations.
. Relationships with major shareholders.
. All phases of the corporation's legal strategy, including compliance with
laws and regulations.
. Outside auditor performance and relationships.
. Corporate accounting policies and financial reporting responsibilities.
. Corporate financing strategy and fiscal accountability.
. Major joint venture partner relations.
. Major negotiations on behalf of the corporation.
. Financial analysis and modeling of corporate opportunities.
. Political lobbying at the Federal and State level.
. Public relations and corporate participation policy.
. Establishment of policies for the conduct of the Company's business.
. Oversee the implementation of corporate policy.
. As chairman, conduct the meetings and business of the Board of Directors.
. Implement the decisions of the Board of Directors.
9
<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
OF
GERALD A. FAWCETT
THIS EMPLOYMENT AGREEMENT is made and entered into effective January 15,
1996 by and between Gerald A. Fawcett ("EMPLOYEE") and Kaiser Ventures Inc.
("KAISER").
RECITALS
A. Employee is currently employed by Kaiser as its Executive Vice
President.
B. Kaiser desires to expand Employee's duties and responsibilities by
appointing him President and Chief Operating Officer of the Corporation.
C. The intent of this Agreement is to set forth the current agreement
and understanding of Employee and Kaiser with regard to Employee's continued
employment by Kaiser.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. EMPLOYMENT, POSITIONS AND DUTIES. Kaiser hereby continues the
employment of Employee upon the terms and conditions set forth in this
Agreement. Employee's positions with Kaiser shall be President and Chief
Operating Officer reporting to the Chief Executive Officer. Employee shall have
the responsibilities and duties normally incident to such positions, including,
but not limited to, those duties and responsibilities set forth in Exhibit "A"
attached hereto and incorporated herein by this reference and such other duties
and responsibilities as may be reasonably assigned to him from time-to-time by
Kaiser's Chief Executive Officer. Employee agrees to devote his full business
time and attention to the discharge of his duties and responsibilities under
this Agreement.
2. TERM. Subject to the provisions for termination hereinafter
provided, the term of Employee's employment shall commence as of January 15,
1996, and shall terminate on January 15, 1998.
3. BASE SALARY. Employee's annual base salary shall be Two-Hundred
Thousand Dollars ($200,000) per year. Notwithstanding the foregoing, the Board
of Directors may in good faith and in its reasonable discretion may elect to
cause the Corporation to issue to Employee restricted stock with a value of up
to Forty Thousand Dollars ($40,000) per year in lieu of cash compensation
provided that subsequent to the date of this Agreement there are no material
adverse changes in the tax and securities laws pertaining to or affecting
Employee's receipt, taxation, sale or transfer of restricted stock. In the
event of any material adverse change in the tax or securities laws during the
year preceding any proposed grant of restricted stock pertaining to Employee's
receipt, taxation, sale or transfer of restricted stock as reasonably determined
in good faith by Employee or Kaiser, Employee and Kaiser shall in good faith
discuss any changes that may be appropriate or necessary in connection with any
grant of restricted stock to Employee. For 1996, as a part of Employee's annual
base salary the Board has elected to issue to Employee Forty Thousand Dollars
($40,000) of restricted stock in
1
<PAGE>
lieu of Forty Thousand Dollars ($40,000) cash compensation. In the event that
any restricted stock is issued to Employee as a part of his annual base salary,
the value of such restricted stock at the time of its grant shall be counted as
base salary in the calculation of any bonus that may be awarded to Employee. For
all other purposes, any such stock shall be treated as salary for the
calculation of any benefits based upon an employee's salary as may be required
by law or any benefit plan.
Prior to the first meeting of the Board of Directors in any calendar
year, the Compensation and Benefits Committee of the Board will review
Employee's salary and report its recommendations for any revision to the full
Board at such meeting. Employee's annual base salary shall be adjusted
effective as of January 1 of each year, commencing January 1, 1997, by the
increase in the consumer price index over the prior applicable year utilizing
the Consumer Price Index for Urban Wage Earners and Clerical Workers, U.S. City
Average, All Items, published by the Bureau of Labor Statistics of the United
Stated Department of Labor. The entire Board of Directors has final
responsibility for the review, approval or disapproval of any revisions to
Employee's annual base salary.
3. ANNUAL BONUS; ELIMINATION OF EAGLE MOUNTAIN BONUS. In addition to
his base salary, Employee shall be entitled to participate in the bonus program
of Kaiser applicable to senior executives as it may be amended from time to
time. The timing, size and/or amount of any bonus awarded to Employee during
the term of this Agreement will be determined in accordance with the process set
forth in paragraph 2 above for the annual base salary review and based upon the
bonus program developed from time to time by the Compensation and Benefits
Committee and approved by the Board of Directors. The bonus for any year, if
any, will be determined based upon such review. Pursuant to previous agreements
and understanding with Employee, Employee was entitled to receive a bonus upon
the permitting of the Eagle Mountain landfill project. Employee and Kaiser
agree that such bonus provisions are hereby terminated and Employee shall no
longer have the contractual right to receive a bonus upon the permitting of the
Eagle Mountain landfill.
4. STOCK OPTIONS AND OTHER STOCK RELATED INCENTIVES. Employee shall be
eligible for the grant of incentive stock options, non-qualified stock options
and other forms of stock related incentives from time-to-time in the discretion
of the Stock Option Committee of the Board of Directors. The timing, size and
amount of any future stock options or other stock related incentives will be
determined generally in accordance with the process used to determine the award
of any bonus to Employee. The grant and exercise of the stock options and other
stock related incentives shall generally be subject to and governed by the terms
of Kaiser's 1995 Stock Option Plan or any similar or successor plan. However,
the Stock Option Committee may award stock options, restricted or other stock
related incentives outside the 1995 Stock Option Plan in its discretion.
For 1996, the Stock Option Committee has awarded to Employee stock
options for 10,000 shares pursuant to the 1995 Stock Option Plan.
5. OTHER BENEFITS. Employee will be entitled to participate in all
benefits provided by Kaiser to its employees and to senior executives in
accordance with and subject to Kaiser's polices and procedures as they may exist
from time-to-time, including, but not limited to, medical and dental insurance,
life insurance, 401(k) savings plan, any pension plan, deferred
2
<PAGE>
compensation plan, education and seminar reimbursement, car allowance, and
reimbursement of reasonable expenses for company business. Employee shall be
entitled to four (4) weeks of paid vacation per year.
6. RESTRICTED STOCK. Any restricted stock issued by Kaiser in lieu of
cash payments in connection with Employee's base salary or any bonus, shall be
subject to the terms and conditions of a mutually agreed upon stock restriction
agreement which may provide, among other things, for the forfeiture of such
stock in phases if Employee should voluntarily terminate his employment with
Kaiser within a certain period of time. In addition to any other rights to vest
in such stock, the restricted stock granted as part of Employee's 1996 annual
base salary shall vest on January 15, 1997.
7. DEDUCTIONS. Applicable federal and state income taxes, social
security contributions (FICA), Medicare contributions, medical insurance
premiums and any other appropriate or customary deductions shall withheld from
any compensation paid to Employee by Kaiser.
8. SALARY MAKE-UP PAYMENT. In recognition of Employee's services to
Kaiser in 1995 beyond those scheduled to be performed by Employee, Employee
shall receive a salary make-up payment of Thirty Nine Thousand Dollars
($39,000).
9. CHANGE OF CONTROL. If Kaiser is sold or merged with another
company, or all or a substantial portion of all of the principal assets of the
Kaiser (as determined on a cumulative basis from the date of this Agreement) are
sold or transferred to shareholders or third parties or more than twenty-five
percent (25%) of the outstanding capital stock of the Company is acquired by
another person or persons acting as a group (any of these events being a "Change
of Control"), and if thereafter without Employee's prior consent, there shall
be:
a. Any involuntary termination of Employee's employment (other
than for cause, death or disability);
b. Any material reduction in Employee's positions,
responsibilities, including reporting responsibilities, or authority, including
title, responsibilities or authority as it may be increased from time-to-time;
c. The assignment to Employee of duties inconsistent with
Employee's positions immediately prior to a Change in Control or as the same may
be increased from time-to-time after a Change in Control;
d. Any assignment to a location unacceptable to Employee;
e. Any failure to provide Employee with compensation and benefits
on terms at least as favorable as those enjoyed by Employee under this Agreement
immediately prior to a Change in Control, or the taking of any action that would
materially reduce any of Employee's compensation and benefits in effect at the
time of the Change in Control;
3
<PAGE>
f. Any requirement that Employee travel in performance of his
duties on behalf of Kaiser for a substantially greater period of time during any
year than was required of him during the year preceding the year in which the
Change of Control occurred;
then, at Employee's option, exercisable within ninety (90) days of the
date Employee knew, or should have known exercising reasonable care, of the
occurrence of any of the foregoing events and the expiration of any applicable
cure period, Employee shall have the right to terminate his employment by
written notice to Kaiser, and on the date of such termination Kaiser will pay
Employee an amount equal to one year's annual base salary (based on Employee's
then current base salary) payable in one lump sum or, at Employee's option, over
such period of time not to exceed twelve (12) months. In addition, for a period
of one (1) year following Employee's termination of employment as provided
herein, Employee will continue to receive all benefits afforded to him prior to
the Change of Control at Kaiser's expense. Furthermore, options to acquire
shares of Kaiser stock, restricted stock or any other stock related incentive
will immediately and fully vest, notwithstanding any other applicable vesting
schedule. After such termination, Employee shall be entitled, for a period of
two years, to exercise his stock options as to all such shares. This provision
shall take precedence over any contrary provision in any standard stock option
agreement.
The parties acknowledge that Kaiser is evaluating this provision which
may lead to an amendment of this provision to more closely align shareholders
and management's financial interests, but any such revision shall be mutually
agreeable to Kaiser and Employee.
10. TERMINATION OF EMPLOYMENT.
a. TERMINATION WITHOUT CAUSE. In the event Kaiser elects to
--------------------------
terminate Employee's employment without cause (as defined below) during the term
of this Agreement, then Kaiser agrees to pay Employee an amount equal to one
year's annual base salary (based on your then current annual base salary).
After such termination Employee shall be entitled, for a period of two years to
exercise his stock options as to any then vested, including any options within
one year of termination or failure to continue employment, notwithstanding any
other applicable provision contained in any option agreement. In addition to
the foregoing, with respect to any restricted stock or other stock related
incentives, Employee shall continue to vest in such securities for a period of
one year following termination or failure to continue Employee's employment as
provided herein.
b. TERMINATION FOR CAUSE. If Kaiser elects to terminate
----------------------
Employee's employment for cause (as defined below), Employee's employment will
terminate on the date fixed for termination by Kaiser and thereafter Kaiser will
not be obligated to pay Employee any additional compensation, other than the
compensation due and owing up to the date of termination. After such
termination, Employee shall be entitled, for a period of ninety (90) days, to
exercise any stock options or other stock related incentives that are vested as
of the date of termination.
c. DEFINITION OF CAUSE. "CAUSE" for the purposes of this
--------------------
Agreement shall mean any of the following:
4
<PAGE>
i. Willful breach by Employee of any provision of this
Agreement, provided, however, if the breach is not a material breach, Kaiser
shall give Employee written notice of such breach and Employee shall have thirty
(30) days in which to cure such breach. No written notice or cure period shall
be required in the event of a willful and material breach of this Agreement by
Employee;
ii. Gross negligence or dishonesty in the performance of
Employee's duties or responsibilities hereunder;
iii. Engaging in conduct or activities or holding any position
that materially conflicts with the interest of, or materially interferes with
Employee's duties and responsibilities to Kaiser or its Affiliates; or
iv. Engaging in conduct which is materially detrimental to
the business of Kaiser or its affiliates.
d. WRITTEN AGREEMENT. This Agreement may be terminated at
------------------
any time upon the parties mutual written agreement.
11. CONFIDENTIALITY
a. EMPLOYEE'S OBLIGATIONS. Employee agrees that (a) except as
----------------------
provided in this Agreement Employee shall maintain the confidential nature of
any Proprietary Information received or acquired by him, and (b) Employee shall
use such Proprietary Information solely for the purpose of meeting his
obligations under this Agreement and not in connection with any other business
or activity. "PROPRIETARY INFORMATION" means all oral, written or recorded
information about or related to the Kaiser or any of its Affiliates or its or
their technology, assets, liabilities, or business, whether acquired before or
after the date hereof, and regardless of the manner in which it is acquired,
together with any documents or other materials prepared by Employee which
contain or reflect such information. After termination of employment upon
demand of Kaiser, Employee agrees to return or destroy any and all materials
containing any Proprietary Information.
b. KAISER'S OBLIGATIONS. Kaiser agrees that it shall maintain
--------------------
the confidential nature of any confidential information pertaining to Employee,
except such disclosures as requested by law.
c. LIMITATIONS ON CONFIDENTIAL OBLIGATIONS AND USE RESTRICTIONS.
------------------------------------------------------------
The restrictions in Paragraphs 11(a) and (b) above do not apply to information
which the disclosing party can demonstrate (i) is then in the public domain by
acts not attributable to such disclosing party or (ii) is hereafter received on
an unrestricted basis by such disclosing party from a third party source who, to
such disclosing party's knowledge after due inquiry, is not and was not bound by
confidentiality obligations to Kaiser or any Affiliate thereof (in the case of
Paragraph 11(a)) or to Employee (in the case of Paragraph 11(b)). In addition,
Employee and Kaiser are permitted to disclose any Proprietary Information as
necessary in the defense or prosecution of any legal action.
5
<PAGE>
d. ACTIONS IF DISCLOSURE REQUIRED. If Employee is required by
-------------------------------
law to make any disclosure otherwise prohibited hereunder, such party shall use
its best efforts to provide the other with prompt prior notice where possible so
that (a) the other party (with the reasonable cooperation of the party required
to make such disclosure) may seek an appropriate protection order or other
remedy and/or (b) the parties can seek in good faith to agree on the appropriate
scope and approach to disclosure. If a protective order or other remedy is not
obtained, the party required to make such disclosure may furnish only that
portion of information protection hereby which it is legally compelled to
disclose and shall use its reasonable efforts to obtain confidential treatment
for all information so disclosed.
e. INJUNCTION. Each party agrees that remedies at law may be
-----------
inadequate to protect against breach of this Paragraph 11, and hereby agrees to
the granting of injunctive relief without proof of actual damage.
12. MISCELLANEOUS.
a. ENTIRE AGREEMENT; AMENDMENTS. This Agreement states the
-----------------------------
entire understanding and agreement between the parties with respect to its
subject matter and may only be amended by a written instrument duly executed by
Employee and Kaiser.
b. ASSIGNMENT. This Agreement and the rights and obligations of
-----------
Employee may not be sold, transferred, assigned, pledged or hypothecated by
Employee.
c. NON-WAIVER. Failure to insist upon strict compliance with any
-----------
provision of this Agreement or the waiver of any specific event of non-
compliance shall not be deemed to be or operate as a waiver of such provision or
any other provision hereof or any other event of non-compliance.
d. BINDING EFFECT. This Agreement shall be binding upon and
---------------
inure to the benefit of Kaiser, its successors and assigns and, Employee's
heirs, successors, and legal or personal representatives.
e. HEADINGS. The headings throughout this Agreement are for
---------
convenience only and shall in no way be deemed to define, limit, or add to the
meaning of any provision of this Agreement.
f. CONTEXT. Whenever required by the context, the singular shall
--------
include the plural, the plural the singular, and one gender such other gender as
is appropriate.
g. NOTICES. All notices, request, demands, consents and other
--------
communications hereunder shall be transmitted in writing and shall be deemed to
have been duly given when hand delivered or sent by certified United States
mail, postage prepaid, with return by certified requested, addressed to the
parties as follows:
Kaiser Ventures Inc.
3633 E. Inland Empire Blvd., Suite 850
Ontario, CA 91764
6
<PAGE>
Gerald A. Fawcett
11633 Holmes
Yucaipa, Ca 92399
h. COSTS. In the event any party hereto is successful in whole
------
or in part in any action taken to enforce the provisions of this Agreement, the
prevailing party shall be reimbursed all costs incurred in such legal action
including reasonable attorney's fees in such action.
i. SEVERABILITY. If any provision or clause of this Agreement,
-------------
as applied to any party or circumstances shall be adjudged by a court to be
invalid or unenforceable, said adjudication shall in no manner effect any other
provision of this Agreement, the application of such provision to any other
circumstances or the validity or enforceability of this Agreement.
j. DEFINITION OF AFFILIATE. The term "AFFILIATE" for purposes of
------------------------
this Agreement shall mean any person or entity now or hereafter in control,
controlled by or in common control with Kaiser. It shall also include any
direct or indirect subsidiary of such Corporation and any company in which
Kaiser has more than a ten percent (10%) ownership interest.
k. GOVERNING LAW. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement to be effective as of the day and year first written above not
withstanding the actual date of signature.
"EMPLOYEE"
GERALD A. FAWCETT
/s/ Gerald A. Fawcett
---------------------
Gerald A. Fawcett
"KAISER"
KAISER VENTURES INC.
By: /s/ Lyle B. Stevenson
-------------------------
Lyle B. Stevenson, Chairman of
the Compensation and Benefits
Committee
By: /s/ James F. Verhey
-------------------------
James F. Verhey,
Senior Vice President-Finance
7
<PAGE>
SCHEDULE "A"
GERALD A. FAWCETT
PRESIDENT & CHIEF OPERATING OFFICER
Position shall report directly to the C.E.O.
RESPONSIBILITIES:
- -----------------
. Day-to-day management issues, performance, and operational decisions at all
locations and MRC.
. Administrative issues, performance, decisions at all locations and MRC.
. Personnel issues.
. Budget preparation and budget performance.
. Control capital expenditures.
. Oversee capital projects.
. Implementation of specific strategic decisions and corporate policy.
. Operational purchases and asset sales.
. Operational legal issues, i.e. contracts, leases, agreements, disputes, etc.
. Employee and community communications.
. Retiree communications and relations.
. Kaiser-Burrtec joint venture issues, including the MRF.
. Local cities and county relations.
. Local political relations and communication.
. Interaction with various agency and regulatory bodies.
. Tenant, vendor, and contractor issues, all locations.
. Marketing MRC.
. Conflict resolution, all locations, internal and external.
. Political campaign contributions.
. Charitable donations.
. Employee participation in community and business organizations, memberships.
. Employee training and education.
. Fill in for C.E.O. when necessary.
. Other duties as directed by the C.E.O.
8
<PAGE>
EXHIBIT 10.15
KAISER VENTURES INC.
1995 STOCK OPTION PLAN
<PAGE>
<TABLE>
<CAPTION>
SECTION CONTENTS PAGE
- ------- -------- ----
<S> <C> <C>
1. General Purpose of Plan; Definitions 1
2. Administration 3
3. Stock Subject to Plan 4
4. Eligibility 5
5. Stock Options 5
6. Stock Appreciation Rights 9
7. Restricted Stock 10
8. Deferred Stock Awards 12
9. Transfer, Leave of Absence, etc. 13
10. Amendments and Termination 13
11. Unfunded Status of Plan 14
12. General Provisions 14
13. Effective Date of Plan 15
</TABLE>
KAISER VENTURES INC.
1995 STOCK OPTION PLAN
SECTION 1. General Purpose of Plan; Definitions.
------------------------------------
The name of this plan is the Kaiser Ventures Inc. 1995 Stock Option Plan (the
"Plan"). The purpose of the Plan is to enable Kaiser Ventures Inc. (the
"Company") and its Subsidiaries to retain and attract executives and other key
employees, non-employee directors and consultants who contribute to the
Company's success by their ability, ingenuity and industry, and to enable such
individuals to participate in the long-term success and growth of the Company by
giving them a proprietary interest in the Company.
For purposes of the Plan, the following terms shall be defined as set forth
below:
a. "Board" means the Board of Directors of the Company as it may be
-----
comprised from time to time.
b. "Cause" means a felony conviction of a participant or the failure of a
-----
participant to contest prosecution for a felony, willful misconduct,
dishonesty or intentional violation of a statute, rule or regulation, any
of which, in the judgment of the Company, is harmful to the business or
reputation of the Company.
c. "Code" means the Internal Revenue Code of 1986, as amended from time to
----
time, or any successor statute.
2
<PAGE>
d. "Committee" means the Committee referred to in Section 2 of the Plan. If
---------
at any time no Committee shall be in office, then the functions of the
Committee specified in the Plan shall be exercised by the Board, unless
the Plan specifically states otherwise.
e. "Consultant" means any person performing services for the Company or any
----------
Parent Corporation or Subsidiary of the Company and who is not (i) an
employee of the Company or any Parent Corporation or Subsidiary of the
Company or (ii) a Non-Employee Director.
f. "Company" means Kaiser Ventures Inc., a corporation organized under the
-------
laws of the State of Delaware (or any successor corporation).
g. "Deferred Stock" means an award made pursuant to Section 8 below of the
--------------
right to receive stock at the end of a specified deferral period.
h. "Disability" means permanent and total disability as determined by the
----------
Committee.
i. "Disinterested Person" shall have the meaning set forth in Rule 16b-
--------------------
3(c)(2)(i) as promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, or any successor definition adopted
by the Commission.
j. "Early Retirement" means retirement, with consent of the Committee at the
----------------
time of retirement, from active employment with the Company and any
Subsidiary or Parent Corporation of the Company.
k. "Fair Market Value" of Stock on any given date shall be determined by the
-----------------
Committee as follows: (a) if the Stock is listed for trading on one of
more national securities exchanges, or is traded on the Nasdaq Stock
Market, the average of the bid and ask prices for the Stock on the
principal such exchange or the Nasdaq Stock Market for the five business
days prior to and including the date in question, or if such Stock shall
not have been traded on such principal exchange on any such date, the
last reported sales price on such principal exchange or the Nasdaq Stock
Market on the first day prior thereto on which such Stock was so traded;
or (b) if the Stock is not listed for trading on a national securities
exchange or the Nasdaq Stock Market, but is traded in the over-the-
counter market, including the Nasdaq System, closing bid price for such
Stock on the date in question, or if there is no such bid price for such
Stock on such date, the closing bid price on the first day prior thereto
on which such price existed; or (c) if neither (a) or (b) is applicable,
by any means fair and reasonable by the Committee, which determination
shall be final and binding on all parties.
l. "Incentive Stock Option" means any Stock Option intended to be and
----------------------
designated as an "Incentive Stock Option" within the meaning of Section
422 of the Code.
m. "Non-Employee Director" means any member of the Board who is not an
---------------------
employee of the Company, any Parent Corporation or Subsidiary.
n. "Non-Qualified Stock Option" means any Stock Option that is not an
--------------------------
Incentive Stock Option, and is intended to be and is designated as a
"Non-Qualified Stock Option."
o. "Normal Retirement" means retirement from active employment with the
-----------------
Company and any Subsidiary or Parent Corporation of the Company on or
after age 60.
3
<PAGE>
p. "Parent Corporation" means any corporation (other than the Company) in an
------------------
unbroken chain of corporations ending with the Company if each of the
corporations (other than the Company) owns stock possessing 50% or more
of the total combined voting power of all classes of stock in one of the
other corporations in the chain.
q. "Restricted Stock" means an award of shares of Stock that are subject to
----------------
restrictions under Section 7 below.
r. "Retirement" means Normal Retirement or Early Retirement.
----------
s. "Stock" means the Common Stock, $.03 par value per share, of the Company.
-----
t. "Stock Appreciation Right" means the right pursuant to an award granted
------------------------
under Section 6 below to surrender to the Company all or a portion of a
Stock Option in exchange for an amount equal to the difference between
(i) Fair Market Value, as of the date such Stock Option or such portion
thereof is surrendered, of the shares of Stock covered by such Stock
Option or such portion thereof, and (ii) the aggregate exercise price of
such Stock Option or such portion thereof.
u. "Stock Option" means any option to purchase shares of Stock granted
------------
pursuant to Section 5 below.
v. "Subsidiary" means any corporation (other than the Company) in an
----------
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns
stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
SECTION 2. Administration.
--------------
The Plan shall be administered by the Board of Directors or by a Committee of
not less than three, or if allowed by Rule 16b-3 or any successor rule, two
Disinterested Persons, who shall be appointed by the Board of Directors of the
Company and who shall serve at the pleasure of the Board.
The Committee shall have the power and authority to grant to eligible
employees or Consultants, pursuant to the terms of the Plan: (i) Stock Options,
(ii) Stock Appreciation Rights, (iii) Restricted Stock, or (iv) Deferred Stock
awards.
In particular, the Committee shall have the authority:
(i) to select the officers and other key employees of the Company and its
Subsidiaries and other eligible persons to whom Stock Options, Stock
Appreciation Rights, Restricted Stock and/or Deferred Stock awards may
from time to time be granted hereunder;
(ii) to determine whether and to what extent Incentive Stock Options, Non-
Qualified Stock Options, Stock Appreciation Rights, Restricted Stock
and/or Deferred Stock awards, or a combination of the foregoing, are to
be granted hereunder;
(iii) to determine the number of shares to be covered by each such award
granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with the terms of
the Plan, of any award granted hereunder (including, but not limited to,
any restriction on any Stock Option or other
4
<PAGE>
award and/or the shares of Stock relating thereto), which authority shall
be exclusively vested in the Committee (and not the Board) for purposes
of establishing performance criteria used with Restricted Stock and
Deferred Stock awards; and
(v) to determine whether, to what extent and under what circumstances Stock
and other amounts payable with respect to an award under this Plan shall
be deferred either automatically or at the election of the participant.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan. The Committee may
delegate its authority to officers of the Company for the purpose of selecting
employees who are not officers of the Company for purposes of (i) above.
All decisions made by the Committee pursuant to the provisions of the Plan
shall be final and binding on all persons, including the Company and Plan
participants.
SECTION 3. Stock Subject to Plan.
---------------------
(a) The total number of shares of Stock reserved and available for
distribution under the Plan other than pursuant to Section 5(k) shall be 2% of
the number of shares of Stock outstanding on July 1, 1995; provided, however,
that on July 1, 1996 and July 1, 1997, such number shall be increased by a
number equal to 2% of the number of shares of Stock outstanding on such date;
and provided further that any shares of Stock not subject to issuance pursuant
to outstanding Stock Options as of June 30, 1996 and 1997, respectively, shall
not be available for issuance pursuant to Stock Options granted after the close
of the period ending on the respective June 30. For purposes of the preceding
sentence, common stock of the Company (excluding Treasury shares) shall be
included when calculating the number of shares of stock outstanding on a given
date. Notwithstanding the foregoing, the total number of shares reserved and
available for distribution under the Plan pursuant to Incentive Stock Options
granted hereunder shall be 625,000, subject to any adjustment which may be made
under the following paragraph. Such shares may consist, in whole or in part, of
authorized and unissued shares. If during the year during which shares of Stock
initially become subject to Stock Options, the shares of Stock cease to become
subject to Stock Options, the shares of Stock may become subject to Stock
Options again under the Plan, but only during such year. For purposes of the
preceding sentence, the term year shall mean the period beginning on July 1 and
ending on June 30 of the following year.
In addition to the shares of Stock reserved and available for distribution
under the Plan as described in the preceding paragraph, the total number shares
of Stock reserved and available for distribution under the Plan shall include
such additional Stock as to which Stock Options are granted pursuant to Section
5(k).
(b) Subject to paragraph (b)(iv) of Section 6 below, if any shares that have
been optioned cease to be subject to Stock Options, or if any shares subject to
any Restricted Stock or Deferred Stock award granted hereunder are forfeited or
such award otherwise terminates without a payment being made to the participant,
such shares shall again be available for distribution in connection with future
awards under the Plan, subject to the provisions of Section 3(a) above, but only
during the year during which shares of Stock initially become subject to such
Stock Options, Restricted Stock or Deferred Stock awards.
(c) In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, other change in corporate structure affecting
the Stock, or spin-off or other distribution of assets to shareholders, such
substitution or adjustment shall be made in the aggregate number of shares
reserved for issuance
5
<PAGE>
under the Plan, in the number and option price of shares subject to outstanding
options granted under the Plan, and in the number of shares subject to
Restricted Stock or Deferred Stock awards granted under the Plan as may be
determined to be appropriate by the Committee, in its sole discretion, provided
that the number of shares subject to any award shall always be a whole number.
Such adjusted option price shall also be used to determine the amount payable by
the Company upon the exercise of any Stock Appreciation Right associated with
any Option.
SECTION 4. Eligibility.
-----------
Officers, other key employees of the Company and Subsidiaries, Non-Employee
Directors, and Consultants who are responsible for or contribute to the
management, growth and/or profitability of the business of the Company and its
Subsidiaries are eligible to be granted Stock Options, Stock Appreciation
Rights, Restricted Stock or Deferred Stock awards under the Plan. Except for
Non-Employee Directors, whose participation in the Plan shall be limited as
provided in paragraph (k) of Section 5, the optionees and participants under the
Plan shall be selected from time to time by the Committee, in its sole
discretion, from among those eligible, and the Committee shall determine, in its
sole discretion, the number of shares covered by each award.
SECTION 5. Stock Options.
-------------
Any Stock Option granted under the Plan shall be in such form and upon such
terms and conditions as the Committee may from time to time approve. In
addition, subject to the restrictions contained in this Plan and applicable law,
the Committee shall have the authority to modify the terms and conditions of any
previously granted Stock Option.
The Stock Options granted under the Plan may be of two types: (i) Incentive
Stock Options and (ii) Non-Qualified Stock Options. No Options shall be granted
under the Plan after June 30, 1998.
The Committee shall have the authority to grant any optionee Incentive Stock
Options, Non-Qualified Stock Options, or both types of options (in each case
with or without Stock Appreciation Rights). To the extent that any option does
not qualify as an Incentive Stock Option, it shall constitute a separate Non-
Qualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of this Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be so exercised, so
as to disqualify either the Plan or any Incentive Stock Option under Section 422
of the Code. The preceding sentence shall not preclude any modification or
amendment to an outstanding Incentive Stock Option, whether or not such
modification or amendment results in disqualification of such Option as an
Incentive Stock Option, provided the optionee consents in writing to the
modification or amendment.
Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
(a) Option Price. The option price per share of Stock purchasable under a
------------
Stock Option shall be determined by the Committee at the time of grant. In no
event shall the option price per share of Stock purchasable under a Non-
Qualified Stock Option be less than 85% of the Fair Market Value of the Stock on
the date of the grant of the option or, in the case of an Incentive Stock
Option, less than 100% of such Fair Market Value. If an employee owns or is
deemed to own (by reason of the attribution rules applicable under Section
424(d) of the Code) more than 10% of the combined voting power of all classes of
stock of
6
<PAGE>
the Company or any Parent Corporation or Subsidiary and an Incentive Stock
Option is granted to such employee, the option price shall be no less than 110%
of the Fair Market Value of the Stock on the date the option is granted.
(b) Option Term. The term of each Stock Option shall be fixed by the
-----------
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is deemed to
own (by reason of the attribution rules of Section 424(d) of the Code) more than
10% of the combined voting power of all classes of stock of the Company or any
Parent Corporation or Subsidiary and an Incentive Stock Option is granted to
such employee, the term of such option shall be no more than five years from the
date of grant.
(c) Exercisability. Stock Options shall be exercisable at such time or times
--------------
as determined by the Committee at or after grant. In the event that the
Committee does not determine the time at which a Stock Option shall be
exercisable, such Stock Option shall be exercisable one year after the date of
grant. If the Committee provides, in its discretion, that any option is
exercisable only in installments, the Committee may waive such installment
exercise provisions at any time. Notwithstanding anything contained in the Plan
to the contrary, the Committee may, in its discretion, extend or vary the term
of any Stock Option or any installment thereof, whether or not the optionee is
then employed by the Company, if such action is deemed to be in the best
interests of the Company. Notwithstanding anything contained in the Plan to the
contrary, unless the Stock Option agreement or employment agreement of an
individual receiving a Stock Option provides otherwise, any Stock Option granted
under this Plan shall be exercisable in full, without regard to any installment
exercise or vesting provisions, for a period specified by the Company, but not
to exceed sixty (60) days prior to the occurrence of any of the following
events: (i) dissolution or liquidation of the Company other than in conjunction
with a bankruptcy of the Company or any similar occurrence; (ii) any merger,
consolidation, acquisition, separation, reorganization, or similar occurrence,
where the Company will not be the surviving entity; or (iii) the transfer of a
material portion of or substantially all of the assets of the Company or 51% or
more of the outstanding stock of the Company. The grant of an option pursuant
to the Plan shall not limit in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge, exchange or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its business or assets.
(d) Method of Exercise. Stock Options may be exercised in whole or in part at
------------------
any time during the option period by giving written notice of exercise to the
Company specifying the number of shares to be purchased. Such notice shall be
accompanied by payment in full of the purchase price, either by check, or by any
other form of legal consideration deemed sufficient by the Committee and
consistent with the Plan's purpose and applicable law, including promissory
notes or a properly executed exercise notice together with irrevocable
instructions to a broker acceptable to the Company to promptly deliver to the
Company the amount of sale or loan proceeds to pay the exercise price. As
determined by the Committee at the time of grant or exercise, in its sole
discretion, payment in full or in part may also be made in the form of
unrestricted Stock already owned by the optionee or, in the case of the exercise
of a Non-Qualified Stock Option, Restricted Stock or Deferred Stock subject to
an award hereunder (based, in each case, on the Fair Market Value of the Stock
on the date the option is exercised, as determined by the Committee), provided,
however, that, in the case of an Incentive Stock Option, the right to make a
payment in the form of already owned shares may be authorized only at the time
the option is granted, and provided further that in the event payment is made in
the form of shares of Restricted Stock or a Deferred Stock award, the optionee
will receive a portion of the option shares in the form of, and in an amount
equal to, the Restricted Stock or Deferred Stock award tendered as payment by
the optionee. If the terms of an option so permit, an optionee may elect to pay
all or part of the option exercise price by having the Company withhold from the
shares of Stock that would otherwise be issued upon exercise that number of
shares of Stock having a Fair Market Value equal to the aggregate option
exercise price for the shares with respect to which such election is made. No
shares of Stock shall be issued until full payment therefor has been made. An
optionee shall
7
<PAGE>
generally have the rights to dividends and other rights of a shareholder with
respect to shares subject to the option when the optionee has given written
notice of exercise, has paid in full for such shares, and, if requested, has
given the representation described in paragraph (a) of Section 12.
(e) Non-transferability of Options. No Stock Option shall be transferable by
------------------------------
the optionee otherwise than by will or by the laws of descent and distribution,
and all Stock Options shall be exercisable, during the optionee's lifetime, only
by the optionee, unless such transfer would not disqualify the Option under Rule
16b-3.
(f) Termination by Death. If an optionee's employment by the Company and any
--------------------
Subsidiary or Parent Corporation terminates by reason of death, the Stock Option
may thereafter be immediately exercised, to the extent then exercisable, by the
legal representative of the estate or by the legatee of the optionee under the
will of the optionee, for a period of three years from the date of such death or
until the expiration of the stated term of the option, whichever period is
shorter.
(g) Termination by Reason of Disability. If an optionee's employment by the
-----------------------------------
Company and any Subsidiary or Parent Corporation terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of termination due to Disability,
but may not be exercised after three years from the date of such termination of
employment or the expiration of the stated term of the option, whichever period
is the shorter. In the event of termination of employment by reason of
Disability, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, the
option will thereafter be treated as a Non-Qualified Stock Option.
(h) Termination by Reason of Retirement. If an optionee's employment by the
-----------------------------------
Company and any Subsidiary or Parent Corporation terminates by reason of
Retirement, any Stock Option held by such optionee may thereafter be exercised
to the extent it was exercisable at the time of such Retirement, but may not be
exercised after three years from the date of such termination of employment or
the expiration of the stated term of the option, whichever period is the
shorter. In the event of termination of employment by reason of Retirement, if
an Incentive Stock Option is exercised after the expiration of the exercise
periods that apply for purposes of Section 422 of the Code, the option will
thereafter be treated as a Non-Qualified Stock Option.
(i) Other Termination. Unless otherwise determined by the Committee, if an
-----------------
optionee's employment by the Company and any Subsidiary or Parent Corporation
terminates for any reason other than death, Disability or Retirement, the Stock
Option shall thereupon terminate, except that, if the optionee is involuntarily
terminated without Cause by the Company and any Subsidiary or Parent
Corporation, the option may be exercised to the extent it was exercisable at
such termination for the lesser of three months or the balance of the option's
term in the case of an Incentive Stock Option, or the lesser of three years or
the balance of the option's term in the case of a Non-Qualified Stock Option.
In the event of termination of employment by reason of Retirement, if an
Incentive Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, the option will thereafter
be treated as a Non-Qualified Stock Option.
(j) Annual Limit on Incentive Stock Options. The aggregate Fair Market Value
---------------------------------------
(determined as of the time the Stock Option is granted) of the Common Stock with
respect to which an Incentive Stock Option under this Plan or any other plan of
the Company and any Subsidiary or Parent Corporation is exercisable for the
first time by an optionee during any calendar year shall not exceed $100,000.
(k) Non-Employee Directors. Each Non-Employee Director shall be entitled to
----------------------
Stock Options only as provided in this paragraph (k). Each Non-Employee
Director who, on or after the Plan's effective
8
<PAGE>
date, is elected, reelected or serving an unexpired term as a member of the
Board, shall automatically be granted Stock Options as follows:
(i) One-Time Initial Grant. Each Non-Employee Director shall, after the
----------------------
Plan's effective date and on the date such Non-Employee Director is
first elected to the Board, be automatically granted a Stock Option to
purchase 5,000 shares of Stock at an option price per share equal to
100% of the Fair Market Value of a share of Stock on the date of such
grant. Such Stock Option shall become exercisable six months after
the date of grant. No more than one such Stock Option may be granted
to a Non-Employee Director, regardless of the number or sequence of
his or her terms as a member of the Board.
(ii) Annual Grant. Each Non-Employee Director who is reelected or serving
------------
an unexpired term as a member of the Board at an annual meeting of
holders of stock of the Company occurring after the Plan's effective
date and prior to January 1, 1999 shall, as of the date of such annual
meeting, be automatically granted a Stock Option to purchase 1,500
shares of Stock at an option price per share equal to 100% of the
Fair Market Value of a share of Stock on the date of such grant.
Notwithstanding the foregoing, if less than eleven calendar months
have elapsed since the preceding annual meeting, the number of shares
as to which such Stock Option shall be granted shall be determined by
multiplying the number of full calendar months which have elapsed
since the preceding annul meeting by 125. Each such Stock Option
shall become exercisable six months after the date of grant. Any
person who is first elected as a director at an annual meeting of
shareholders shall, at such meeting, receive the initial Stock Option
grant of 5,000 shares described in subparagraph (i) above and not the
1,500 share Stock Option provided in this subparagraph (ii).
All such Stock Options shall be designated as Non-Qualified Options and shall be
subject to the same terms and provisions as are then in effect with respect to
granting of Non-Qualified Options to officers and key employees of the Company,
except that (i) the term of each such Stock Option shall expire on the earlier
of three years after the date on which the optionee ceases to be a director and
ten years after the date of grant, and (ii) no Stock Appreciation Rights may be
granted any Non-Employee Director under this Paragraph (k) or in any manner
under this Plan. Subject to the foregoing, all provision of this Plan not
inconsistent with the forgoing shall apply to Stock Options granted to Non-
Employee Directors. The maximum number of shares as to which Stock Options may
be granted to any Non-Employee Director under this Plan shall be 15,000 shares.
SECTION 6. Stock Appreciation Rights.
-------------------------
(a) Grant and Exercise. Except as set forth in paragraph (k) of Section 5,
------------------
Stock Appreciation Rights may be granted in conjunction with all or part of any
Stock Option granted under the Plan. In the case of a Non-Qualified Stock
Option, such rights may be granted either at or after the time of the grant of
such Option. In the case of an Incentive Stock Option, such rights may be
granted only at the time of the grant of the option.
A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, except that a
Stock Appreciation Right granted with respect to less than the full number of
shares covered by a related stock Option shall not be reduced until the exercise
or termination of the related Stock Option exceeds the number of shares not
covered by the Stock Appreciation Right.
A Stock Appreciation Right may be exercised by an optionee, in accordance
with paragraph (b) of
9
<PAGE>
this Section 6, by surrendering the applicable portion of the related Stock
Option. Upon such exercise and surrender, the optionee shall be entitled to
receive an amount determined in the manner prescribed in paragraph (b) of this
Section 6. Stock Options which have been so surrendered, in whole or in part,
shall no longer be exercisable to the extent the related Stock Appreciation
Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
--------------------
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable only at such time or
times and to the extent that the Stock Options to which they relate
shall be exercisable in accordance with the provisions of Section 5
and this Section 6 of the Plan.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee shall be
entitled to receive up to, but not more than, an amount in cash or
shares of Stock equal in value to the excess of the Fair Market Value
of one share of Stock over the option price per share specified in the
related option multiplied by the number of shares in respect of which
the Stock Appreciation Right shall have been exercised, with the
Committee having the right to determine the form of payment.
(iii)Stock Appreciation Rights shall be transferable only when and to the
extent that the underlying Stock Option would be transferable under
Section 5 of the Plan.
(iv) Upon the exercise of a Stock Appreciation Right, the Stock Option or
part thereof to which such Stock Appreciation Right is related shall
be deemed to have been exercised for the purpose of the limitation set
forth in Section 3 of the Plan on the number of shares of Stock to be
issued under the Plan, but only to the extent of the number of shares
issued or issuable under the Stock Appreciation Right at the time of
exercise based on the value of the Stock Appreciation Right at such
time.
(v) A Stock Appreciation Right granted in connection with an Incentive
Stock Option may be exercised only if and when the market price of the
Stock subject to the Incentive Stock Option exceeds the exercise price
of such Option.
SECTION 7. Restricted Stock.
----------------
(a) Administration. Shares of Restricted Stock may be issued either alone
--------------
or in addition to other awards granted under the Plan. The Committee shall
determine the officers, key employees and Consultants of the Company and
Subsidiaries to whom, and the time or times at which, grants of Restricted Stock
will be made, the number of shares to be awarded, the time or times within which
such awards may be subject to forfeiture, and all other conditions of the
awards. The Committee may also condition the grant of Restricted Stock upon the
attainment of specified performance goals. The provisions of Restricted Stock
awards need not be the same with respect to each recipient.
(b) Awards and Certificates. The prospective recipient of an award of
-----------------------
shares of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the then applicable terms and conditions.
(i) Each participant shall be issued a stock certificate in respect of
shares of Restricted Stock awarded under the Plan. Such certificate
shall be registered in the name of the participant,
10
<PAGE>
and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award, substantially
in the following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions
(including forfeiture) of the Kaiser Ventures Inc. 1995 Stock
Option Plan and an Agreement entered into between the registered
owner and Kaiser Ventures Inc. Copies of such Plan and Agreement
are on file in the offices of Kaiser Ventures Inc., 3633 East
Island Empire Blvd., Suite 850, Ontario, CA 91764."
(ii) The Committee shall require that the stock certificates evidencing
such shares be held in custody by the Company until the restrictions
thereon shall have lapsed, and that, as a condition of any Restricted
Stock award, the participant shall have delivered a stock power,
endorsed in blank, relating to the Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
---------------------------
pursuant to the Plan shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of this Plan and the award agreement, during
a period set by the Committee commencing with the date of such award
(the "Restriction Period"), the participant shall not be permitted to
sell, transfer, pledge or assign shares of Restricted Stock awarded
under the Plan. In no event shall the Restriction Period be less than
one (1) year. Within these limits, the Committee may provide for the
lapse of such restrictions in installments where deemed appropriate.
(ii) Except as provided in paragraph (c)(i) of this Section 7, the
participant shall have, with respect to the shares of Restricted
Stock, all of the rights of a shareholder of the Company, including
the right to vote the shares and the right to receive any cash
dividends. The Committee, in its sole discretion, may permit or
require the payment of cash dividends to be deferred and, if the
Committee so determines, reinvested in additional shares of Restricted
Stock (to the extent shares are available under Section 3 and subject
to paragraph (f) of Section 12). Certificates for shares of
unrestricted Stock shall be delivered to the grantee promptly after,
and only after, the period of forfeiture shall have expired without
forfeiture in respect of such shares of Restricted Stock.
(iii) Subject to the provisions of the award agreement and paragraph
(c)(iv) of this Section 7, upon termination of employment for any
reason during the Restriction Period, all shares still subject to
restriction shall be forfeited by the participant.
(iv) In the event of special hardship circumstances of a participant whose
employment is terminated (other than for Cause), including death,
Disability or Retirement, or in the event of an unforeseeable
emergency of a participant still in service, the Committee may, in its
sole discretion, when it finds that a waiver would be in the best
interest of the Company, waive in whole or in part any or all
remaining restrictions with respect to such participant's shares of
Restricted Stock.
(v) Notwithstanding the foregoing, unless the Restricted Stock Award or
employment agreement of an individual receiving a Restricted Stock
Award provides otherwise, the restrictions and conditions of a
Restricted Stock Award shall lapse for a period specified by the
Company, but not to exceed sixty (60) days prior to the occurrence of
any of the
11
<PAGE>
following events: (i) dissolution or liquidation of the Company other
than in conjunction with a bankruptcy of the Company or any similar
occurrence; (ii) any merger, consolidation, acquisition, separation,
reorganization, or similar occurrence, where the Company will not be
the surviving entity; or (iii) the transfer of a material portion of
or substantially all of the assets of the Company or 51% or more of
the outstanding stock of the Company. The grant of a Restricted Stock
Award pursuant to the Plan shall not limit in any way the right or
power of the Company to make adjustments, reclassification,
reorganizations or changes of its capital or business structure or to
merge, exchange or consolidate or to dissolve, liquidate, sell or
transfer all or any part of its business or assets.
SECTION 8. Deferred Stock Awards.
---------------------
(a) Administration. Deferred Stock may be awarded either alone or in
--------------
addition to other awards granted under the Plan. The Committee shall determine
the officers, key employees and Consultants of the Company and Subsidiaries to
whom and the time or times at which Deferred Stock shall be awarded, the number
of Shares of Deferred Stock to be awarded to any participant or group of
participants, the duration of the period (the "Deferral Period") during which,
and the conditions under which, receipt of the Stock will be deferred, and the
terms and conditions of the award in addition to those contained in paragraph
(b) of this Section 8. The Committee may also condition the grant of Deferred
Stock upon the attainment of specified performance goals. The provisions of
Deferred Stock awards need not be the same with respect to each recipient.
(b) Terms and Conditions.
--------------------
(i) Subject to the provisions of this Plan and the award agreement,
Deferred Stock awards may not be sold, assigned, transferred, pledged
or otherwise encumbered during the Deferral Period. In no event shall
the Deferral Period be less than one (1) year. At the expiration of
the Deferral Period (or Elective Deferral Period, where applicable),
share certificates shall be delivered to the participant, or his legal
representative, in a number equal to the shares covered by the
Deferred Stock award.
(ii) Amounts equal to any dividends declared during the Deferral Period
with respect to the number of shares covered by a Deferred Stock award
will be paid to the participant currently or deferred and deemed to be
reinvested in additional Deferred Stock or otherwise reinvested, all
as determined at the time of the award by the Committee, in its sole
discretion.
(iii)Subject to the provisions of the award agreement and paragraph
(b)(iv) of this Section 8, upon termination of employment for any
reason during the Deferral Period for a given award, the Deferred
Stock in question shall be forfeited by the participant.
(iv) In the event of special hardship circumstances of a participant whose
employment is terminated (other than for Cause) including death,
Disability or Retirement, or in the event of an unforeseeable
emergency of a participant still in service, the Committee may, in its
sole discretion, when it finds that a waiver would be in the best
interest of the Company, waive in whole or in part any or all of the
remaining deferral limitations imposed hereunder with respect to any
or all of the participant's Deferred Stock.
(v) A participant may elect to further defer receipt of the award for a
specified period or until a specified event (the "Elective Deferral
Period"), subject in each case to the Committee's approval and to such
terms as are determined by the Committee, all in its sole discretion.
12
<PAGE>
Subject to any exceptions adopted by the Committee, such election must
generally be made prior to completion of one half of the Deferral
Period for a Deferred Stock award (or for an installment of such an
award).
(vi) Each award shall be confirmed by, and subject to the terms of, a
Deferred Stock agreement executed by the Company and the participant.
SECTION 9. Transfer, Leave of Absence, etc.
-------------------------------
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer of an employee from the Company to a Parent Corporation or
Subsidiary, or from a Parent Corporation or Subsidiary to the Company, or from
one Subsidiary to another;
(b) a leave of absence, approved in writing by the Committee, for military
service or sickness, or for any other purpose approved by the Company if the
period of such leave does not exceed ninety (90) days (or such longer period as
the Committee may approve, in its sole discretion); and
(c) a leave of absence in excess of ninety (90) days, approved in writing
by the Committee, but only if the employee's right to reemployment is guaranteed
either by a statute or by contract, and provided that, in the case of any leave
of absence, the employee returns to work within 30 days after the end of such
leave.
SECTION 10. Amendments and Termination.
--------------------------
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made (i) which would impair the rights
of an optionee or participant under a Stock Option, Restricted Stock or other
Stock-based award theretofore granted, without the optionee's or participant's
consent, or (ii) which without the approval of the stockholders of the Company
would cause the Plan to no longer comply with Rule 16b-3 under the Securities
Exchange Act of 1934, Section 422 of the Code or any other regulatory
requirements. Further, the provision in Section 5(k) of the Plan may not be
amended more than once every six months, other than to comply with changes in
the Code, the Employee Retirement Income Security Act of 1974, or the rules
thereunder. Notwithstanding the foregoing, no Stock Options shall be granted
under the Plan after June 30, 1998, except as provided in paragraph (k)(ii) of
Section 5.
The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively, but no such amendment shall impair the
rights of any holder without his or her consent except to the extent authorized
under the Plan. The Committee may also substitute new Stock Options for
previously granted options, including previously granted options having higher
option prices.
SECTION 11. Unfunded Status of Plan.
-----------------------
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize
the creation of trusts or other arrangements to meet the obligations created
under the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder, provided, however, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.
13
<PAGE>
SECTION 12. General Provisions.
------------------
(a) The Committee may require each person purchasing shares pursuant to a
Stock Option under the Plan to represent to and agree with the Company in
writing that the optionee is acquiring the shares without a view to distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock delivered under the Plan pursuant to
any Restricted Stock, Deferred Stock or other Stock-based awards shall be
subject to such stock-transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Stock is
then listed, and any applicable Federal or state securities laws, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
(b) Subject to paragraph (d) below, recipients of Restricted Stock,
Deferred Stock and other Stock-based awards under the Plan (other than Stock
Options) are not required to make any payment or provide consideration other
than the rendering of services.
(c) Nothing contained in this Plan shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases. The adoption
of the Plan shall not confer upon any employee of the Company or any Subsidiary
any right to continued employment with the Company or a Subsidiary, as the case
may be, nor shall it interfere in any way with the right of the Company or a
Subsidiary to terminate the employment of any of its employees at any time.
(d) Each participant shall, no later than the date as of which any part of
the value of an award first becomes includible as compensation in the gross
income of the participant for Federal income tax purposes, pay to the Company,
or make arrangements satisfactory to the Committee regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements and the Company and Subsidiaries
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the participant. With respect to
any award under the Plan, if the terms of such award so permit, a participant
may elect by written notice to the Company to satisfy part or all of the
withholding tax requirements associated with the award by (i) authorizing the
Company to retain from the number of shares of Stock that would otherwise be
deliverable to the participant, or (ii) delivering to the Company from shares of
Stock already owned by the participant, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by the
participant under this Section 12(d). Any such election shall be in accordance
with, and subject to, applicable tax and securities laws, regulations and
rulings.
(e) At the time of grant, the Committee may provide in connection with any
grant made under this Plan that the shares of Stock received as a result of such
grant shall be subject to a repurchase right in favor of the Company, pursuant
to which the participant shall be required to offer to the Company upon
termination of employment for any reason any shares that the participant
acquired under the Plan, with the price being the then Fair Market Value of the
Stock or, in the case of a termination for Cause, an amount equal to the cash
consideration paid for the Stock, subject to such other terms and conditions as
the Committee may specify at the time of grant. The Committee may, at the time
of the grant of an award under the Plan, provide the Company with the right to
repurchase, or require the forfeiture of, shares of Stock acquired pursuant to
the Plan by any participant who, at any time within two years after termination
of employment with the Company, directly or indirectly competes with, or is
employed by a competitor of, the Company.
14
<PAGE>
(f) The reinvestment of dividends in additional Restricted Stock (or in
Deferred Stock or other types of Plan awards) at the time of any dividend
payment shall only be permissible if the Committee (or the Company's chief
financial officer) certifies in writing that under Section 3 sufficient shares
are available for such reinvestment (taking into account then outstanding Stock
Options and other Plan awards).
SECTION 11. Effective Date of Plan.
----------------------
The Plan shall be effective on the date it is approved by a vote of the
holders of a majority of the Stock present and entitled to vote at a meeting of
the Company's shareholders.
15
<PAGE>
EXHIBIT 10.20.1
March 21, 1996
Kaiser Ventures Inc.
3633 E. Inland Empire Blvd.
Suite 850
Ontario, CA 91764
Gentlemen:
This letter serves to acknowledge the agreement of the parties hereto with
respect to the amendment of certain terms and conditions of the Organization
Agreement (the "Organization Agreement"), dated as of November 22, 1995, by and
----------------------
among PSH Corp., a Delaware corporation, Kaiser Ventures Inc. (formerly known as
Kaiser Resources Inc.), a Delaware corporation, and Penske Motorsports, Inc.
(formerly known as Penske Speedways Holding Corp.), a Delaware corporation (the
"Corporation").
-----------
The parties hereto agree that, on the date that the Securities and Exchange
Commission declares effective the Registration Statement (No. 333-692) filed by
the Corporation, the Organization Agreement will automatically be amended by
deleting Sections 5.3, , 8.2, 8.3 and 8.10(a) in their entirety from the
Organization Agreement, and that such Sections will have no further force or
effect whatsoever. In addition, Section 8.1 of the Organization Agreement is
also deleted in its entirety and Section 8.1 replaced with the following:
8.1 Information. In addition to any information that is provided to a
-----------
member of the Board of Directors of the Corporation or a member of the
Board of Directors of each of the Corporation's direct or indirect
subsidiaries, the Corporation will (so long as Kaiser holds any Preferred
Stock or more than 2% of the outstanding common stock of the Corporation)
cooperate with Kaiser to provide Kaiser with such information which is
reasonably necessary to enable Kaiser to timely file its reports required
under the Securities Exchange Act of 1934, as amended; provided, however,
that in no event will Kaiser release or publicly disclose any such
information without either (i) the written consent of the Corporation,
which consent will not be unreasonably withheld, or (ii) the prior public
release of such information by the Corporation.
<PAGE>
Kaiser Ventures Inc.
March 21, 1996
Page 2
Except as expressly modified hereby, the other provisions of the
Organization Agreement will continue in full force and effect in accordance with
the terms thereof.
Very truly yours,
PSH CORP.
By: /s/ Rich Peters
--------------------------
Its: President
--------------------------
PENSKE MOTORSPORTS, INC.
By: /s/ Rich Peters
--------------------------
Its: President
--------------------------
AGREED AND ACCEPTED:
KAISER VENTURES INC.
By: /s/ Richard E. Stoddard
---------------------------------
Title: Chief Executive Officer
and Chairman of the Board
-------------------------
Date: March 21, 1996
-------------------------------
<PAGE>
EXHIBIT 10.21.1
FIRST AMENDMENT TO SHAREHOLDERS AGREEMENT
This First Amendment to Shareholders Agreement (this "First Amendment"), dated
---------------
as of March 21, 1996, by and among PSH Corp., a Delaware corporation ("Penske"),
------
Kaiser Ventures Inc., (formerly known as Kaiser Resources Inc.), a Delaware
corporation ("Kaiser"), and Penske Motorsports, Inc., (formerly known as Penske
------
Speedways Holding Corp.), a Delaware corporation (the "Corporation").
-----------
Capitalized terms used herein but not otherwise defined will have the meanings
set forth in the Shareholders Agreement (as defined below).
WHEREAS, Penske, Kaiser and the Corporation entered into a Shareholders
Agreement (the "Shareholders Agreement"), dated November 22, 1995, pursuant to
----------------------
which the Shareholders (i) set forth terms and conditions of certain options to
purchase or sell shares of Stock and certain restrictions on the transfer of
ownership and control of shares of Stock and (ii) provided for continuity and
order in the control, management and operation of the Corporation and otherwise
defined the respective rights, duties and obligations of and between the
Corporation and the Shareholders; and
WHEREAS, the Shareholders and the Corporation desire to amend the Shareholders
Agreement as set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements herein contained, the parties hereto agree as follows:
1. NEW SECTION 1. Upon the Effective Date (as defined below), Sections
1.1 through 1.8 of the Shareholders Agreement are deleted in their entirety and
replaced with the following:
1.1 SALE OR OTHER DISPOSITION. A Shareholder who wishes to sell, transfer
or otherwise dispose of all or part of its ownership interest in the
Corporation for consideration to a third Person shall first give the other
Shareholder at least thirty (30) days advance written notice of its desire
to do so. The notice shall identify the amount of the ownership interest to
be sold or otherwise transferred and the name, address and phone number of
the proposed transferee, if there is an identified proposed transferee, and
if Penske is the proposed selling Shareholder, the price for such ownership
interest. The ownership interest specified in the notice may thereafter be
sold or transferred only upon strict compliance with this Agreement.
Notwithstanding the foregoing, upon the occurrence of a breach or default
of a material provision of this Agreement or the Organization Agreement,
which remains uncured for a period of sixty (60) days following receipt of
notice of default from the non-defaulting party to the defaulting party,
the ownership interest of the non-defaulting party may be transferred or
disposed of without compliance with Sections 1.1 through 1.6 of this
Agreement and the defaulting party shall continue to be bound by the terms
of this Agreement.
1.2 TRANSFERS TO AFFILIATES AND PLEDGE TO SECURE LOAN. Subject to
Kaiser's restrictions on transfers to its shareholders as set forth in
Section 1.4 below, but notwithstanding Section 1.1, any Shareholder may
transfer all or any portion of its Stock to an Affiliate provided such
Affiliate becomes a party to this Agreement. For purposes of this Section
1.2,
<PAGE>
the shareholders of Kaiser shall not be considered Affiliates of Kaiser. In
addition, there shall be no restrictions on a Party pledging its Stock to
secure a bonafide third person loan; provided, however, the documents
evidencing any such pledge shall be subject to the rights of the non-
pledging Party under this Agreement and the Organization Agreement. After
compliance with the terms of this Agreement, if applicable, and any other
express agreement of the Shareholders, a Shareholder shall be free to sell
or otherwise transfer for consideration its Stock to a third Person,
subject only to compliance with applicable federal and state securities
laws.
1.3 OPTION TO PURCHASE.
(a) For a period of thirty (30) days (the "Original Period") after a
---------------
Party receives the notice specified in Section 1.1 above (the "Non-Selling
-----------
Party"), the Non-Selling Party (or the Non-Selling Party's permitted
-----
designee) shall have the first option to purchase all, and only all, of the
ownership interest offered for sale or other disposition, which option
shall be exercised by it, if at all, by giving written notice to the
selling Shareholder on or before thirty (30) calendar days after the
receipt of the Section 1.1 notice. The sales terms (other than purchase
price and the form of payment of the purchase price) for any ownership
interest to be purchased by the Non-Selling Party shall be the same terms
as set forth in the notice of proposed sale, except that, (i) if the Non-
Selling Party is Penske, then the purchase price for any ownership interest
to be purchased by Penske shall be the average of the closing prices for
shares of the Corporation's publicly traded Common Stock, as reported in
the Wall Street Journal or, if the Wall Street Journal is not then
available, then such other publication which regularly quotes the closing
prices for the Corporation's publicly traded stock, for the thirty (30)
calendar days preceding the date on which the Section 1.1 notice of
proposed sale is received (the "Original Kaiser Sale Price"), or (ii) if
--------------------------
the Non-Selling Party is Kaiser, then the purchase price for any ownership
interest to be purchased by Kaiser as set forth in the notice provided for
in Section 1.1. The purchase price shall be payable by the Non-Selling
Party in cash at closing of the sale. If no closing date for the sale is
specified in the Section 1.1 notice, the closing shall occur no later than
sixty (60) days after receipt by the Non-Selling Party of the notice
required by Section 1.1. Should there be multiple Non-Selling Parties, each
Non-Selling Party shall have the first option to purchase that percentage
of the ownership interest offered for sale equal to the percentage of its
ownership interest in the stock of the Corporation owned by all the Non-
Selling Parties immediately prior to the date of the notice specified in
Section 1.1 above. This procedure will continue until there are no
ownership interests available for sale or disposition existing for which
options shall not have been exercised by Non-Selling Parties.
(b) If the Non-Selling Party elects not to exercise its option to
purchase the offered ownership interest or fails to timely elect to
exercise its option to purchase, the selling Shareholder who has given
notice of its desire to sell its ownership interest may, for a three (3)
month period beginning at the end of the thirty (30) day period specified
in Section 1.3(a), sell the specified ownership interest subject to this
Section 1.3; provided, however, that, since
-2-
<PAGE>
the ownership interest may not have been registered under the Securities
Act of 1933, as amended (the "Act"), and is a "restricted security" as
---
defined in Rule 144 under the Act, the ownership interest may not be
offered for sale, sold or otherwise transferred except pursuant to an
effective registration statement under the Act or pursuant to an exemption
from registration under the Act, the availability of which is to be
established to the reasonable satisfaction of the Corporation. If the
selling Shareholder fails to sell its ownership interest within the three
(3) month period described in the preceding sentence upon the terms set
forth in the notice of proposed transfer, such ownership interest or the
specified part thereof shall thereafter again be subject to the right of
first refusal procedures set forth in this Agreement and, if there is a
change in the price, the number of shares proposed to be sold or a material
change in the other terms of the proposed sale, the right of first refusal
procedures in this Agreement shall again be applicable subject to the
following sentence. If Kaiser is the selling Shareholder and Kaiser
proposes to transfer the offered ownership interest to any third Person
offeree other than the offeree identified in the notice given pursuant to
Section 1.1, or if no offeree is identified in such notice, then when such
offeree becomes known to Kaiser, Kaiser shall notify the Non-Selling Party
in writing within ten (10) business days after it receives the offer (in
each case, the "Subsequently Known Offeree"). Such notice shall contain the
--------------------------
same information required under Section 1.1 and the price for such offered
ownership interest or part thereof. If the Subsequently Known Offeree or an
Affiliate of the Subsequently Known Offeree engages in the promoting or
marketing of motorsports or motorsports related activities (collectively
the "Motorsports Business"), the purchase by such Subsequently Known
--------------------
Offeree shall be conditioned on a right of first refusal whereby the Non-
Selling Party (or its designee) for a period of ten (10) business days from
receipt of written notice of such Subsequently Known Offeree's intent to
purchase may elect to purchase the offered ownership interest. It is
understood that if Kaiser provides notice of a Subsequently Known Offeree
during the Original Period then nothwithstanding anything herein to the
contrary, the purchase price at which the Non-Selling Party can purchased
the offered ownership interest shall be the Original Kaiser Sale Price.
During such period, the Non-Selling Party (or its designee) shall have the
option to purchase the offered ownership interest at a price equal to the
price and on the terms set forth in the notice provided by Kaiser pursuant
to this Section 1.3(b). After the ten (10) business day option period, if
applicable, for any Subsequently Known Offeree engaged in the Motorsports
Business, Kaiser may sell its ownership interest or the specified portion
thereof to the Subsequently Known Offeree strictly in compliance with the
terms set forth in such written notice. In the event the ownership interest
or specified portion thereof is not sold within a two (2) month period
following the expiration of the ten (10) business day option period, if
applicable, described in the preceding sentence upon the terms set forth in
the notice of the proposed transfer, such ownership interest or the
specified portion thereof shall thereafter again be subject to the right of
first refusal procedures set forth in this Agreement and if there is a
change in the price, the number of shares proposed to be sold or a material
change in the other terms of the proposed sale, the right of first refusal
procedures in this Agreement shall again be applicable.
-3-
<PAGE>
1.4 TRANSFERS TO KAISER SHAREHOLDERS. Beginning January 1, 1999, if,
after complying with Section 1 of this Agreement, Kaiser proposes to make a
distribution or otherwise transfer all or part of the ownership interest in
the Corporation to shareholders of Kaiser, Kaiser will make such
distribution or transfer subject to the following conditions:
(a) Kaiser may not distribute in any one transaction less than fifty
percent (50%) of the total ownership interest held by Kaiser at any one
time;
(b) if, upon receipt of such distribution or other transfer of
ownership interest, a Kaiser shareholder will own or control, directly or
indirectly, in excess of five percent (5%) of the total ownership interest
of the Corporation held by Kaiser at such time (a "Significant
-----------
Shareholder") then, such Significant Shareholder shall take such ownership
-----------
interest subject to Penske's right of first refusal (and, if applicable,
Facility Investments, Inc. ("FII") and International Speedway Corporation
---
("ISC") as depicted in a November 22, 1995 letter agreement (the "Letter
--- ------
Agreement") among FII, ISC, Penske and the Corporation) described in this
---------
Section 1, and such shareholder shall agree in writing to be bound by the
terms and conditions of this Section 1 and the Letter Agreement; and
(c) no such distribution or transfer will be for less than 100
shares per shareholder of the Corporation's common stock.
1.5 LEGEND ON CERTIFICATES. To effectuate this Agreement, all
Shareholders shall deliver to the Corporation each certificate evidencing
its ownership interest owned and the Corporation shall affix a legend on
the face of each certificate which shall read substantially as follows:
"Ownership, assignment, sale, transfer or other disposition of this
certificate or any certificate issued in lieu thereof, is subject to
the restrictions contained in an agreement dated effective the _____
day of ______ 199_, between Penske Motorsports, Inc. (f/k/a Penske
Speedways Holding Corp.), and certain of the shareholders of Penske
Motorsports, Inc., as amended, a copy of which agreement, as amended,
is on file in the office of the Corporation."
1.6 FUTURE ISSUANCES OF CERTIFICATES. All future certificates evidencing
an ownership interest represented by said certificates shall be subject to
this Agreement. Each Shareholder hereto agrees that any additional
ownership interest in the Corporation it may acquire, including any
ownership interest which it may have the option or right to acquire, shall
be subject to this Agreement. The Corporation agrees that any certificate
it may issue to any present or future owner of the ownership entity shall
bear the legend set forth in Section 1.5, and that it will require every
future owner of an ownership interest to agree to be bound by the Agreement
and sign an appropriate execution page thereto."
2. VOTING AGREEMENT. Upon the Effective Date, Section 2.1 of the
Shareholders Agreement is deleted in its entirety and replaced with the
following:
-4-
<PAGE>
2.1 KAISER BOARD SEAT. So long as Kaiser holds outstanding shares of the
Corporation's issued and outstanding Common Stock equal to or greater than
five (5) percent of the total issued and outstanding shares of Common Stock
of the Corporation and Penske owns outstanding shares of common stock of
the Corporation, Penske shall vote all of its stock in favor of electing a
single Kaiser nominee to the Board of Directors of the Corporation. Penske
and Kaiser agree that they shall extend the term of the voting agreement
provided in this Section 2.1 for an additional ten (10) years at least six
(6) months prior to the tenth anniversary of the Effective Date of this
Amendment.
3. CERTAIN OPERATING MATTERS. Upon the Effective Date, Sections 3.1
through Sections 3.3 of the Shareholders Agreement are deleted in their entirety
and Section 3.4 of the Shareholders Agreement is renumbered to be Section 3.1.
The following provisions are added to Article III of the Shareholders Agreement:
3.2 PAYMENTS. The Corporation hereby agrees to pay to Kaiser an amount
equal to $650,000 (the "Final Payment"), which Final Payment, along with
amounts previously paid to Kaiser, represent payment in full to Kaiser for
tenant relocation, site planning matters and other similar types of items
(collectively, the "Project Charges"). The Final Payment shall not bear
---------------
interest. Kaiser and Penske agree and acknowledge that the total amount
paid for Project Charges equals $1,137,500, inclusive of the Final Payment
and, upon payment of the Final Payment, Kaiser will be entitled to no other
Project Charges. The Final Payment will be payable quarterly in four
installments of $162,500 commencing on the date three months after the date
of this Agreement and continuing every 90 days thereafter until paid in
full.
3.3. REGISTRATION RIGHTS AGREEMENT. Penske and Kaiser shall cause the
Corporation to enter into a registration rights agreement with Kaiser in
the form attached as Exhibit A to this First Amendment.
---------
4. EFFECTIVE DATE. The provisions of this First Amendment shall not
take effect unless and until the occurrence of the Effective Date, which shall
be the effective date of the Corporation's Registration Statement on Form S-1,
Registration Number 333-692 (the "Effective Date"). At the Effective Date, the
--------------
Shareholders Agreement shall be automatically amended without any further action
by any Person as provided herein. If the Effective Date has not occurred by
December 31, 1996, then this Agreement shall be automatically void.
5. OTHER PROVISIONS SURVIVE. The term "Agreement" as used in the
Shareholders Agreement shall hereafter mean the Shareholders Agreement as
amended by this First Amendment and shall continue in full force and effect in
accordance with the terms thereof and hereof and until the Effective Date, if
ever this Agreement shall have no force or effect.
6. GOVERNING LAW. This Agreement shall be construed under and
governed by the laws of the State of Delaware.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
PENSKE MOTORSPORTS, INC.
By: /s/ Rich Peters
----------------------------
Title: President
-------------------------
KAISER VENTURES, INC.
By: /s/ Terry L. Cook
-----------------------------
Title: Senior Vice President and
General Manager
---------------------------
PSH CORP.
By: /s/ Rich Peters
-----------------------------
Title: President
---------------------------
-6-
<PAGE>
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
-----------------------------
<PAGE>
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is made as of March
---------
__ , 1996 between Penske Motorsports, Inc., a Delaware corporation (the
"Company") and Kaiser Ventures Inc., a Delaware corporation ("Kaiser").
------- ------
WHEREAS, the Company, Kaiser and PSH Corp., a Delaware corporation
("Penske"), are parties to a Shareholders Agreement, dated November 22, 1995
------
(the "Shareholders Agreement"), which the parties agreed to amend pursuant to a
----------------------
First Amendment to Shareholders Agreement, dated March __, 1996 (the "First
-----
Amendment").
- ---------
WHEREAS, pursuant to the First Amendment, Kaiser agreed to certain
modifications to the Shareholders Agreement in consideration for, among other
things, the entering into of this Agreement.
WHEREAS, the Company is willing to grant certain registration rights to
Kaiser with respect to the 1,373,625 shares of Common Stock of the Company, $.01
per value share (the "Shares"), as set forth herein.
------
Unless otherwise provided in this Agreement, capitalized terms used in this
Agreement will have the meanings set forth in paragraph 8 hereof.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the Company and Kaiser agree as
follows:
1. PIGGYBACK REGISTRATION RIGHTS.
-----------------------------
(a) RIGHT TO PIGGYBACK. If the Company proposes to register any of its
------------------
common stock under the Securities Act of 1933, as amended (the "Securities
----------
Act"), in connection with a firm commitment underwritten public offering of its
common stock for cash, and the registration form to be used may be used for the
registration of Registrable Securities (as defined below) ("Piggyback
---------
Registration"), the Company will give written notice to Kaiser of its intention
- ------------
to effect such a registration and will include in such registration all
Registrable Securities with respect to which the Company has received a written
request from Kaiser for inclusion therein within 15 days after the receipt of
the Company's notice, subject to subparagraph 1(c) below.
(b) PIGGYBACK EXPENSES. The Registration Expenses (as defined below) of
------------------
Kaiser will be paid by the Company in a Piggyback Registration.
(c) PRIORITY ON REGISTRATIONS. If the managing underwriters of the
-------------------------
Piggyback Registration determined in their sole but good faith discretion and
advise the Company in writing that in their reasonable opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering without adversely affecting the marketability
of the offering, the Company will include in such registration (i) first, the
securities the Company
<PAGE>
proposes to sell, (ii) second, the Registrable Securities requested by Kaiser to
be included in such registration and (iii) third, other securities requested to
be included in such registration.
(d) REMEDIES. Kaiser will not seek an injunction restraining or otherwise
--------
delaying any Piggyback Registration as the result of any controversy that might
arise with respect to the interpretation or implementation of this Agreement.
(e) AVAILABILITY OF DOCUMENTS. The Company shall furnish to Kaiser such
-------------------------
number of copies of prospectuses, including preliminary prospectuses, reasonably
necessary to conform with the requirements of the Securities Act, and such other
documents as Kaiser may reasonably request, to facilitate the disposition of the
Registrable Securities being sold by Kaiser upon exercise of the Piggyback
Registration rights contained in this Agreement.
(f) BLUE SKY COMPLIANCE. The Company shall use its reasonable efforts to
-------------------
register and qualify securities covered by the Piggyback Registration rights
contained in this Agreement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably appropriate for the distribution of the
securities covered by the Piggyback Registration; provided, however, that the
Company will not be required to qualify as a foreign corporation or to take any
action which would subject it to the service of process in such state or
jurisdiction, other than as to matters and transactions relating to the offer
and sale of the offered securities, in any jurisdiction where it is not now so
subject.
2. HOLDBACK AGREEMENTS. Kaiser agrees not to effect any sale, transfer or
-------------------
other distribution (including sales pursuant to Rule 144 or Rule 144A) of equity
securities of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, for the period commencing seven days prior to
and ending on the first to occur of the (i) one year anniversary of the
effective date of any Piggyback Registration in which Registrable Securities are
included (except as part of such underwritten registration) or (ii) the date on
which any similar lock-up imposed upon the Company in such registration
terminates, unless the underwriters managing the registered public offering
otherwise agree.
3. CONDITIONS OF OBLIGATION TO REGISTER SHARES. The obligations of the
-------------------------------------------
Company under this Agreement are subject to the following conditions:
(a) The Company will not be required to include any Registrable Securities
in a Piggyback Registration unless Kaiser accepts, in writing, the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
the Company. If Kaiser does not accept the terms of the underwriting as agreed
upon between the Company and the underwriter, Kaiser shall withdraw. (b)
Kaiser 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 Kaiser
as may be necessary to enable the Company to prepare the registration statement
and prospectus covering the Registrable Securities, to maintain
2
<PAGE>
the currency and effectiveness thereof and otherwise to comply with all
applicable requirements of law in connection therewith.
(c) During such time as Kaiser may be engaged in a distribution of
Registrable Securities, such holder will comply with Rules 10b-7 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
------------
pursuant thereto, Kaiser will, among other things, cause to be furnished to each
broker through whom Registrable Securities may be offered, or to the offeree if
an offer is not made through a broker, such copies of the prospectus covering
the Registrable Securities and any amendment or supplement thereto and documents
incorporated by reference therein as may be required by law and Kaiser 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.
4. CERTAIN LIMITATION ON FUTURE RIGHTS. From and after the date of this
-----------------------------------
Agreement, the Company shall not enter into any agreement with any other holder
or prospective holder of any securities of the Company providing for the grant
to any such prospective holder of Piggyback Registration rights unless such
agreement includes the substantial equivalent of (a) Section 1(c) of this
Agreement as a term of such agreement and in such section, the agreement
provides that Kaiser will have a priority with respect to Piggyback Registration
superior to any other holder of securities of the Company, excluding, in all
cases, the Company, and (b) Section 2 of this Agreement as a term of such
agreement.
5. 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 independent certified public accountants, underwriters
(excluding discounts and commissions) and other Persons retained by the Company
(all such expenses being herein called "Registration Expenses"), will be borne
---------------------
as provided in this Agreement.
(b) To the extent Registration Expenses are not required to be paid by the
Company, Kaiser will pay those Registration Expenses allocable to the
registration of its securities so included, and any Registration Expenses not so
allocable will be borne by all sellers of securities included in such
registration in proportion to the aggregate selling price of the securities to
be so registered.
6. INDEMNIFICATION.
---------------
(a) The Company agrees to indemnify, to the extent permitted by law,
Kaiser, its officers, directors, counsel and each Person who controls Kaiser
(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
3
<PAGE>
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
for use therein or by Kaiser's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished Kaiser with a sufficient number of copies of the same. In
connection with an underwritten offering, the Company will indemnify such
underwriters, their officers and directors and each Person who controls such
underwriters (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of Kaiser.
(b) In connection with any registration statement in which Kaiser is
participating, 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,
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 Kaiser.
(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 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.
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. Kaiser may not
-------------------------------------------
participate in any registration hereunder which is underwritten unless it (a)
agrees to sell its securities on the basis provided in any underwriting
arrangements approved by the Person or Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney,
4
<PAGE>
indemnities, underwriting agreements and other documents required under the
terms of such underwriting arrangements.
8. DEFINITIONS.
-----------
"Person" means any individual, corporation, partnership, limited liability
------
company, limited liability partnership, firm, joint venure, association, joint-
stock company, trust or unincorporated organization.
"Registrable Securities" means (i) the Shares and (ii) any Common Stock
----------------------
issued or issuable with respect to the securities referred to in clause (i) by
way of a stock dividend, stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. As to
any particular Registrable Securities, such securities will cease to be
Registrable Securities when they have been distributed to the public pursuant to
an offering registered under the Securities Act or sold to the public through a
broker, dealer or market maker in compliance with Rule 144 or Rule 144A under
the Securities Act (or any similar rule then in force).
9. TERMINATION. This Agreement shall automatically terminate and be of no
-----------
further force or effect upon the first to occur of (i) Kaiser's failure to
participate in two firm commitment underwritten public offerings in which
Piggyback Registration rights were offered to it and there was no material
restriction on the number of Registrable Securities proposed to be registered on
behalf of the Company, or (ii) the tenth anniversary date of this Agreement
10. MISCELLANEOUS.
-------------
(a) 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.
(b) SUCCESSORS AND ASSIGNS. This Agreement and the respective rights and
----------------------
obligations hereunder shall not be assigned by either party except with the
prior written consent of the non-assigning party, which consent shall be subject
to the sole discretion of the non-assigning party.
(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.
5
<PAGE>
(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 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.
* * * * *
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
PENSKE MOTORSPORTS, INC.
By:
-------------------------------------
Its:
----------------------------------
KAISER VENTURES INC.
By:
-------------------------------------
Its:
----------------------------------
7
<PAGE>
EXHIBIT 10.22
WATER RIGHTS AGREEMENT
This WATER RIGHTS AGREEMENT ("Agreement") is entered into as of November
21, 1995, by and between KAISER VENTURES INC. ("Kaiser") and SPEEDWAY
DEVELOPMENT CORPORATION ("SDC") with reference to the following facts:
RECITALS
A. From 1942 until 1983, Kaiser Steel Corporation operated a large steel
production and processing facility on approximately 2,000 acres of land near
Fontana, California, owned by Kaiser Steel Corporation (the "Fontana Property").
Concurrently with the execution of this Agreement, Kaiser is conveying and
transferring to SDC by grant deed approximately 470 acres of the Fontana
Property, as specifically described in Exhibit "A" attached hereto and
incorporated herein by this reference (the "SDC Property") and an interest in
certain water rights as more specifically described herein and subject to the
terms and conditions described herein.
B. Pursuant to the judgment (the "1978 Judgment") in Chino Basin Municipal
------------------------
Water District v. City of Chino, et al., San Bernardino Superior Court, Case No.
- ----------------------------------------
RCV 51010 (the "Water Case"), non-agricultural overlying rights to the
beneficial use of 2,930.274 acre-feet of water annually from the safe yield of
the Chino groundwater basin were decreed to Kaiser as set forth at page 60, line
9 of Exhibit "D" to the 1978 Judgment (the "Water Rights"). The Water Rights
are more specifically described in Section II.B.8 and Exhibits "D" and "G" of
the 1978 Judgment. Kaiser is now completing negotiations with California Steel
Industries, Inc. ("CSI") which will recognize the ownership by CSI of a portion
of these Water Rights and interests therein, but without interference with
Kaiser's ability to make and perform this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. GRANT OF AN INTEREST IN WATER RIGHTS. In connection with the
conveyance to SDC of the approximately 470 acres described in Exhibit "A,"
Kaiser hereby conveys, transfers and assigns to SDC an undivided right in 475
acre-feet annually of the Water Rights, which 475 acre-feet annually shall be
held by Kaiser and SDC and their respective successors and assigns, as tenants
in common, and used in accordance with the terms of this Agreement, and referred
to herein as the "Joint Water Rights." The term "annually" means the period
from July 1 through June 30 (hereinafter "Water Year"). Such Joint Water Rights
shall not be subject to partition, provided that if this clause is not
enforceable, it shall not invalidate this Agreement and shall not limit the
priority of the use rights with respect to the Joint Water Rights as set forth
in Paragraph 2 below.
2. PRIORITY OF USE. SDC shall have the first right and priority to the
use of the Joint Water Rights for use on the SDC Property, and for the
activities thereon. To the extent, in any given Water Year, that SDC does not
make such use of the Joint Water
1
<PAGE>
Rights, Kaiser shall have the right to the use of all or any unused portion of
the Joint Water Rights, or to store such water for its account that year
pursuant to the carry-over provisions of the 1978 Judgment, or under a storage
agreement with the Chino Basin Watermaster.
3. WATER RIGHTS DEFINED BY 1978 JUDGMENT. The Water Rights, and the Joint
Water Rights which are part thereof, are subject to the provisions of the 1978
Judgment, which defines and limits their use. Nothing in this Agreement is
intended to change or modify the nature or use of such rights in a manner
inconsistent with the 1978 Judgment. However, Kaiser represents that it is
familiar with the 1978 Judgment, and to the best of its knowledge such Judgment
does not constitute a bar or impediment to the implementation of this Agreement.
4. AGENCY AGREEMENT. The parties contemplate that all or a portion of the
Joint Water Rights may be assigned by the parties to the San Gabriel Valley
Water Company ("Water Company") by an agency agreement pursuant to Section 6 of
Exhibit "G" to the 1978 Judgment, to exercise such rights to provide water
service to the lands of the parties. The agency agreement shall provide that
the Water Company will pay a percentage that is currently anticipated to be at
least 90% of the then-current replenishment charge for the Chino Basin for such
amount of the Joint Water Rights that it delivers. To the extent that the Joint
Water Rights or any portion thereof are used to supply the SDC land, the Water
Company shall make such payments to SDC or its successors or assigns. To the
extent that the Joint Water Rights or any portion thereof are used for Kaiser
land, (i.e., that part of the Fontana Property presently owned by Kaiser, its
subdivisions or affiliates, less the approximate 470 acres being conveyed to
SDC) the Water Company shall make such payments to Kaiser or its successors or
assigns. Any unused Water made available under the agency agreement shall
accrue to the account of Kaiser as water carried-over or stored under the 1978
Judgment, and no compensation shall be due to SDC.
5. EXTRACTION OF JOINT WATER RIGHTS. If the Joint Water Rights are not
assigned to the Water Company pursuant to Paragraph 4 hereof, they may be pumped
from wells located on the property of either party, pursuant to a separate Waste
Facilities Cooperation Agreement between the parties. This provision shall not
be deemed to require SDC or its successors or assigns to construct any new wells
on its land or to maintain any Kaiser wells except as may be provided in the
Water Facilities Cooperation Agreement. To the extent that such Joint Water
Rights are exercised from wells located on the property of the other party, the
party pumping the water acts as a limited purpose agent of the other solely for
the foregoing purpose.
6. NOTIFICATION TO WATERMASTER AND INTERVENTION IN WATER CASE. The
parties shall provide the Chino Basin Watermaster with a copy of this Agreement,
and shall direct that 475 acre-feet annually of Kaiser's Water Rights shall be
held jointly by Kaiser and SDC as tenants in common, to be used in accordance
with the terms hereof, and that the Watermaster records shall be modified
accordingly. SDC shall also undertake such proceedings as may be necessary to
intervene in the Water Case, and to be bound by the terms of the Judgment
therein, A copy of any agency agreement with the Water Company shall also be
filed with the Watermaster.
2
<PAGE>
7. AMENDMENT. This Agreement cannot be modified except by written
document signed by all of the parties.
8. CHOICE OF LAWS. This Agreement shall in all respects be interpreted,
enforced, and governed by and under the internal laws of the State of
California.
9. INTERPRETATION OF WATER RIGHTS AGREEMENT. The language of this
Agreement shall be construed as a whole according to a fair meaning, and not
strictly for or against any of the parties.
10. ATTORNEY'S FEES. In the event that either of the parties breaches
this Agreement, the breaching party or parties shall pay each prevailing party
all costs of any action or proceeding for damages and/or enforcement, including
reasonable attorney's fees and costs.
11. INTEGRATION. This Agreement is part of the Grant Deed for the SDC
Property. This Agreement constitutes the final and complete agreement of the
parties hereto with respect to the subject matter hereof and supersedes all
prior or contemporaneous negotiations, premises, covenants, agreement or
representations concerning matters directly, indirectly or collaterally related
to the subject matter of this Agreement.
12. ASSIGNMENT. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of the parties, and their subsidiaries
and affiliates. In the case of SDC, the terms successors and assigns shall
include but not be limited to NationsBank, N.A., the lenders who are or will be
parties to the credit agreement and all related documents that supply funding
for the California Speedway Project, and the entities who may take through them
by foreclosure or by deed in lieu of foreclosure proceedings.
13. COUNTERPARTS. This Agreement may be executed in counterparts by the
parties and shall become effective and binding at such time as all of the
parties have signed a counterpart of this Water Rights Agreement.
14. REPRESENTATIONS AND WARRANTIES. Kaiser represents and warrants to SDC
as follows: (a) Kaiser is the legal and beneficial owner of the water rights to
be transferred as described herein to SDC under this Agreement, and such rights
are not subject to any lien, charge, option, mortgage, deed of trust, security
interest or other encumbrance or any other type of preferential arrangement,
except as provided in the 1978 Judgment or herein; (b) Kaiser has full power and
authority, and has taken all action necessary, to execute and deliver this
agreement and any and all other documents required or permitted to be executed
or delivered by it in connection with this Agreement and to fulfill its
obligations under, and to consummate the transactions contemplated by, this
Agreement, and to its knowledge no governmental authorizations or other
authorizations or consents (except as contemplated hereby) are required in
connection therewith; (c) this Agreement constitutes the legal, valid and
binding obligation of Kaiser, enforceable against Kaiser in accordance with its
terms, subject to
3
<PAGE>
bankruptcy, insolvency, and other laws pertaining to creditors' rights; (d) to
the best of Kaiser's knowledge, the water available under the SDC Property is of
a quality currently suitable for irrigation purposes; and (e) the water
represented by the Joint Water Rights currently may be legally used by SDC for
irrigation purposes on the SDC Property.
15. FURTHER ASSURANCES. The parties will promptly execute such additional
agreements, instruments and other documents, and take such further actions, as
may be reasonable or desirable in order to effect the purposes and intent of
this Agreement.
WHEREFORE, the parties hereto have executed this Water Rights Agreement as
of the date and year set forth above.
"KAISER"
KAISER VENTURES INC.
By: /s/ Daniel N. Larson
---------------------------------
Daniel N. Larson, President
and Chief Executive Officer
"SDC"
SPEEDWAY DEVELOPMENT CORPORATION
By: /s/ Lee R. Redmond III
---------------------------------
Lee R. Redmond III, Vice President
4
<PAGE>
EXHIBIT 10.23
ACCESS AGREEMENT
(THE CALIFORNIA SPEEDWAY PROPERTY)
This ACCESS AGREEMENT ("Agreement") is made and entered into effective as
of November 21, 1995 by and among KAISER VENTURES INC. ("Kaiser"), KAISER STEEL
LAND DEVELOPMENT, INC. ("Development") and THE CALIFORNIA SPEEDWAY CORPORATION
("TCSC").
RECITALS
A. Kaiser, PSH Corp., and Penske Speedways Holding Corp. have entered
into that certain Organization Agreement dated of even date herewith (the
"Organization Agreement"). Pursuant to the terms of the Organization Agreement,
certain real property as described on Exhibit "A" attached hereto and
incorporated herein by this reference (the "TCS Property") will be transferred
to Speedway Development Corporation ("SDC") which corporation will be
immediately acquired by TCSC through a series of transactions.
B. Development is a wholly owned subsidiary of Kaiser and is the owner
of certain property west of the San Sevaine Flood Control Channel generally
known as the "West End Property" as illustrated on Exhibit "B" attached hereto
and incorporated herein by this reference.
C. There are and will be various points of ingress and egress to the
TCS Property. However, the Parties pursuant to this Agreement desire to clarify
the access the TCS Property will or may have from its western boundary.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. CONSTRUCTION OF NAPA STREET. Kaiser hereby agrees to undertake and
complete the timely construction of Napa Street in accordance with the Planned
Development and Conditions of Development for the TCS Property and the property
known as the Speedway Business Park as approved by the San Bernardino County
Board of Supervisors on May 2, 1995 and the construction plans of The California
Speedway in effect as of the date of this Agreement. The Parties acknowledge
and agree that Napa Street will be the principal and may ultimately be the only
point of ingress and egress to and from the western border of the TCS Property.
Consistent with the foregoing Planned Development and Conditions of Development,
upon completion Napa Street will be dedicated to San Bernardino County as a
public street and right-of-way. The Parties acknowledge that the cost of the
construction of Napa Street and related improvements has been allocated among
and shall be paid by Kaiser, Kaiser Steel Land Development, Inc., Inland Empire
Resource Recovery, Inc. and TCS in accordance with the formula and sharing
arrangement set forth in Schedule 1 attached hereto and incorporated herein by
this reference.
2. GATE 8 ACCESS. Kaiser and Development have granted to TCSC a
temporary non-exclusive easement for the benefit of the TCS Property for the use
of the existing Gate 8 point of ingress and egress from Etiwanda Boulevard, all
as more particularly described in the Grants of Easement (Gate 8 Access),
attached hereto as Exhibit "B" and incorporated herein by this reference.
1
<PAGE>
3. ALTERNATIVE ACCESS IF GATE 8 IS NOT AVAILABLE. If Napa Street is
constructed and there is an abandonment of the existing Gate 8 access by Kaiser
and Development due to development of the West End Property, and if there is an
internal road system constructed in the West End Property which could reasonably
be extended to provide access across the San Sevaine Flood Control Channel to
the TCS Property without material disruption to the development of the West End
Property, Development agrees that upon TCS's request, Development will grant to
TCS one permanent non-exclusive easement for ingress and egress to the TCS
Property through the constructed road system in accordance with a route mutually
selected by the Parties. TCS shall be responsible for all incremental or
special costs associated with extending the constructed road system to the TCS
Property, including, but not limited to, the costs of the fair market value of
the land (as shall be mutually agreed upon by the Parties) necessary for the
land extension, design, permitting, construction and maintenance. If the
Parties cannot agree on the fair market value of the land, the determination
shall be made by a qualified independent appraiser selected by the Parties, with
the Parties sharing the cost of the appraisal.
4. HAUL ROAD EASEMENT. Kaiser agrees to in good faith seek to provide
an easement for the benefit of TCS Property along the haul road that currently
originates at San Bernardino Avenue (also known as Fourth Street) and generally
parallels the east side of the San Sevaine Flood Control Channel as illustrated
on Exhibit "B" attached hereto and incorporated herein by this reference. In
the event Kaiser is able to provide such easement and if NAPA Street has been
constructed and improved and open for six (6) months, Kaiser shall not be
required to provide the Gate 8 easement as described in Paragraph 2 or the
alternative access, if available, as described in Paragraph 3 of this Agreement
if Kaiser has determined that the redevelopment of its property requires the
termination of the Gate 8 easement or the alternative access. The Parties
acknowledge that Kaiser is not guaranteeing that ultimately it will be able to
provide such "Haul Road" easement but Kaiser will in good faith take reasonable
actions to provide such easement. All third party costs to obtain such an
easement, such as surveying, recording, legal and other similar fees and costs
and all improvements to and maintenance (caused by TCSC or its invitees) of the
haul road shall be at the expense of TCSC. Sums associated with environmental
remediation activities at the haul road that may be required to provide the
easement to TCS shall be the responsibility of Kaiser and the provisions of
(S)9.1, (S)9.4(a) and (S)11.2 of the Organization Agreement shall be applicable
to Kaiser's obligations hereunder.
5. TERMINATION OF AGREEMENT. This Agreement shall terminate upon the
earlier of the following to occur:
a. the fiftieth (50th) anniversary of this Agreement, assuming
the "Haul Road" easement has not been recorded;
b. the dedication of Napa Street as a public street and right-of-
way which is open for six (6) months, and the grant and recordation of another
permanent easement for ingress and egress over the West End Property by Kaiser
and/or Development to TCSC, as provided in Paragraph 3;
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<PAGE>
c. the dedication of Napa Street as a public street and right-of-
way which is open for six (6) months, and the grant and recordation of a
permanent easement for ingress and egress along the haul road or a substantially
similar route by Kaiser to TCSC, as provided in Paragraph 4;
d. the dedication of Napa Street as a public street and right-of-
way which is open for six (6) months, the termination of the Gate 8 easements as
provided in Exhibit "B" hereof, and after Kaiser's good faith efforts, there is
no recordation of a permanent haul road easement for the benefit of the TCS
Property, as provided in Paragraph 4 prior to the expiration of ten (10) years
after the termination of the Gate 8 easements; or
e. the mutual written agreement of the Parties hereto.
6. NOTICE. Any demand, consent or notice required or permitted to be
given hereunder shall be in writing, shall be given by personal delivery or by
certified U.S. mail, return receipt requested, addressed to Kaiser, Development
or to TCSC at their respective addresses given below, and shall be effective on
receipt (or if rejected, shall be effective and deemed received on the date of
rejection). Either Party may by notice to the other specify a different address
in the United States for notice purposes.
IF TO TCSC: The California Speedway Corporation
3633 East Inland Empire Blvd., Suite 850
Ontario, CA 91764
Attention: Les Richter
WITH A COPY TO: Penske Corporation
13400 Outer Drive, West
Detroit, Michigan 48239
Attention: Lawrence N. Bluth, Esq.
IF TO KAISER: Kaiser Ventures Inc.
3633 East Inland Empire Blvd., Suite 850
Ontario, California 91764
Attention: Daniel N. Larson
WITH A COPY TO: Kaiser Ventures Inc.
3633 East Inland Empire Blvd., Suite 850
Ontario, California 91764
Attention: Terry L. Cook, Esq.
IF TO DEVELOPMENT Kaiser Steel Land Development, Inc.
3633 East Inland Empire Blvd., Suite 850
Ontario, California 91764
Attention: Daniel N. Larson
WITH A COPY TO: Kaiser Ventures Inc.
3633 East Inland Empire Blvd., Suite 850
Ontario, California 91764
Attention: Terry L. Cook, Esq.
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<PAGE>
7. WAIVER. No failure or delay of a Party in the exercise of a right
given hereunder to such Party shall constitute a waiver thereof nor shall any
single or partial exercise of any such right constitute a waiver of any other or
further exercise thereof, or of any other right. No waiver by Kaiser or TCSC of
any provision hereof shall be deemed a waiver of any other provision or of any
subsequent breach of the same provision.
8. ATTORNEY'S FEES. In the event there is any dispute concerning the
terms of this Agreement, or the performance of any Party pursuant to the terms
of this Agreement, and any Party retains counsel for the purpose of enforcing
any of the provisions of this Agreement, or asserting the terms of this
Agreement in defense of any suit or arbitration proceeding filed against said
Party, the prevailing Party in such a dispute shall be entitled to recover, in
addition to any other remedy to which such Party may be entitled, all of its
reasonable costs and reasonable attorney's fees incurred in connection with the
dispute, irrespective of whether or not a lawsuit or arbitration proceeding is
actually commenced or prosecuted to conclusion.
9. CHOICE OF LAW. This Agreement shall be governed by the laws of the
State of California.
10. FURTHER COOPERATION. Each Party shall take such further steps and
sign or cause to be signed such further documents or instruments as may be
necessary from time-to-time to achieve the purposes of this Agreement.
11. ENTIRE AGREEMENT; AMENDMENT. This Agreement, the exhibits hereto
and the Organization Agreement state the entire agreement and understanding of
the subject of this Agreement and supersedes all prior understanding and
agreement, if any. This Agreement may not be amended or modified except by a
subsequent written document executed by the Parties. In the event of a conflict
between this Agreement and the Organization Agreement, the provisions of the
Organization Agreement shall prevail. This Agreement shall not be deemed to
relieve Kaiser, PSH Corp., or PSHC of their respective responsibilities under
the Organization Agreement.
12. DISPUTE RESOLUTION. If 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) Kaiser and TCSC agree to jointly select a judicial officer who is
affiliated with the Judicial Arbitration and Mediation Service, or such other
equivalent organization as Kaiser Development and TCSC may mutually select, to
act as the trier of fact and judicial officer in such dispute resolution;
(b) If Kaiser and TCSC 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 Kaiser and
TCSC;
(c) Kaiser and TCSC 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
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shall, on his own motion, or the request of either Kaiser or TCSC, 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.
13. SUCCESSOR AND ASSIGN. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of the Parties hereto.
14. HEADING. The headings used in this Agreement are for convenience
and reference only and they shall not be considered a part of this Agreement and
shall not affect its interpretation.
15. CONTEXT. Whenever required by the context, the singular shall
include the plural, the plural the singular, and gender shall include such other
gender as is appropriate.
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed an
original, but all of such counterparts shall constitute one and the same
instrument.
IN WITNESS THEREOF, this Access Agreement has been executed as of the
date first set forth above.
"KAISER"
KAISER VENTURES INC.
By: /s/ Daniel N. Larson
-----------------------------------
Daniel N. Larson
President & Chief Executive Officer
"DEVELOPMENT"
KAISER STEEL LAND DEVELOPMENT, INC.
By: /s/ Daniel N. Larson
-----------------------------------
Daniel N. Larson
President & Chief Executive Officer
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<PAGE>
"TCSC"
THE CALIFORNIA SPEEDWAY CORPORATION
By: /s/ Walter Czarnecki
------------------------------
Walter P. Czarnecki, President
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<PAGE>
EXHIBIT 10.24
SEWER SERVICES AGREEMENT
DATED AS OF NOVEMBER 21, 1995
BETWEEN
KAISER VENTURES INC.
AND
SPEEDWAY DEVELOPMENT CORPORATION
<PAGE>
SEWER SERVICES AGREEMENT
THIS SEWER SERVICES AGREEMENT ("Agreement") is made and entered into as
of November 21, 1995 between KAISER VENTURES INC., a Delaware corporation
("Kaiser"), and SPEEDWAY DEVELOPMENT CORPORATION, a California corporation
("SDC"). (Kaiser and SDC are sometimes referred to herein individually as a
"Party" or collectively as "Parties").
RECITALS
A. Kaiser and its wholly owned subsidiaries are currently the owners of
approximately 1200 acres of land located in San Bernardino County, California
that is the site of the former Kaiser Steel Corporation steel mill (the "Kaiser
Property").
B. Kaiser is currently the owner of a sanitary sewer treatment
facility, associated land and assets (collectively the "Sewer Treatment
Facility") that serves the Kaiser Property and the property adjacent thereto
currently owned by California Steel Industries, Inc. ("CSI").
C. SDC will acquire approximately 470 acres of the Kaiser Property as
more specifically described in Exhibit "A" attached hereto and incorporated
herein by this reference (the "TCS Property").
D. In connection with a contemplated motorsports complex to be
developed and operated on the TCS Property, SDC desires to acquire from Kaiser a
long term commitment for sanitary sewer treatment services to the TCS Property
from the Sewer Treatment Facility and Kaiser is willing to provide sanitary
sewer treatment services through the Sewer Treatment Facility for the benefit of
the TCS Property upon the terms and conditions set forth in this Agreement.
E. In addition to the provision of sanitary sewer services, SDC desires
to acquire an option to purchase the Sewer Treatment Facility and Kaiser is
willing to grant to SDC such an option upon the terms and conditions set forth
in this Agreement.
F. At of the date of this Agreement, Kaiser will own, directly or
indirectly, an interest in SDC.
G. This Agreement is entered into in connection with that certain
Organization Agreement by and among Kaiser, Penske Speedways Holdings Corp. (the
"Corporation") and PSH Corp. ("Penske") dated November 21, 1995 (the
"Organization Agreement").
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. SEWER SERVICES. Subject to the terms and conditions of this
Agreement, for the term of this Agreement Kaiser agrees to treat sanitary sewage
for the benefit of the TCS Property through the Sewer Treatment Facility.
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2. LIMITATION ON DISCHARGES. Discharges originating on the TCS
Property of any nature or kind into the sanitary sewer system by SDC and any
tenants, occupants or others on or using the TCS Property sewer system and
related facilities that are prohibited or limited as described in the "General
Prohibitions and Limitations on Discharges" attached hereto as Schedule "A" and
incorporated herein by this reference or elsewhere in this Agreement, shall not
be discharged into the sanitary sewer system.
SDC shall be responsible for any improper discharges by SDC and any
tenants, occupants or others on the TCS Property into the sanitary sewers on the
TCS Property and for all fines, costs, damages, expenses and liabilities which
result therefrom.
3. TERM. The term of this Agreement shall begin on the date hereof and
shall terminate on December 31, 2015 unless sooner terminated as provided
herein.
4. PAYMENTS.
(a) Annual Charge and Adjustments. In payment for all sewer treatment
-----------------------------
services furnished to SDC, commencing April 1, 1997, SDC shall pay to Kaiser
$88,800 annually, plus the annual CPI Increase specified in Paragraph 4(d)
below, payable in equal quarterly installments; provided, however, the total
annual payments due Kaiser for 1997 shall be pro rated and therefore total
$66,600 for such year. Such quarterly installments shall be due on January 1,
April 1, July 1, and October 1 of each year, with the first such quarterly
payment due on April 1, 1997. The first CPI Increase shall be made effective as
of January 1, 1997, and as of January 1 of each year thereafter as provided in
Paragraph 4(d) below. The foregoing annual rate assumes that: (i) CSI
continues to receive and pay for sewer treatment services from the Sewer
Treatment Facility in accordance with that certain Amended Services Agreement
between Kaiser and CSI dated effective January 1, 1995, or pursuant to a similar
agreement on substantially similar terms and conditions; (ii) the peak flows
into the Sewer Treatment Facility from the TCS Property shall not exceed 1.77
million gallons per day during an Event Week, as defined below; and (iii) the
flows into the Sewer Treatment Plant from the TCS Property during non-Event
Weeks do not exceed an average of 0.05 million gallons per day. An "Event Week"
shall mean the week in which a major racing event occurs on the TCS Property
through the completion of the last racing event which would include rain days.
The Parties shall negotiate in good faith a new annual rate for sewer treatment
services in the event (x) CSI no longer receives sewer treatment services and/or
the resulting effluent from the Sewer Treatment Facility in an amount
substantially equal to those historically provided or taken; or (y) the total
payments made by CSI to Kaiser (which shall include the treatment service
charges and reimbursed costs and cost sharing) are materially less than those
specified in the Amended Services Agreement or a substantially similar
agreement; or (z) the flows into the Sewer Treatment Plant from the TCS Property
exceed the maximums specified herein.
(b) Manner of Payments. All amounts payable by SDC to Kaiser
-------------------
hereunder shall be paid without deduction or offset, at Kaiser's address for
notice hereunder or as Kaiser may otherwise direct in writing.
(c) Interest. All late payments shall accrue interest at the rate
--------
of twelve percent (12%) per annum until paid in full.
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<PAGE>
(d) CPI Adjustment. The term "CPI Increase" means the product
---------------
obtained by multiplying the annual sewer treatment services charge as it may be
adjusted from time-to-time as a result of previous CPI Increases or other
mutually agreed upon increases by a fraction, the numerator of which is the
Index, as defined below, published nearest but prior to the January 1 of each
year beginning January 1, 1997 and the denominator of which is the Index
published nearest but prior to January 1, 1996. The first CPI Adjustment shall
be as of January 1, 1997. As used herein the term "Index" refers to the
Consumer Price Index for Urban Wage Earners and Clerical Workers, Los
Angeles/Anaheim/Riverside area, All Items, 1982-1984 equals 100, published by
the Bureau of Labor Statistics of the United States Department of Labor. If the
Index is discontinued or revised during the term of this Agreement, such other
government index or computation with which it is replaced shall be used in order
to obtain substantially the same result as would have been obtained had the
Index not been discontinued or revised.
5. PAYMENT FOR IMPROVEMENTS. The Parties acknowledge that SDC
contemplates the development, construction and operation of a motorsports
complex on the TCS Property. SDC shall pay all costs and expenses for, or
associated with, the development, construction and improvements to the sewer
system and related facilities serving the TCS Property and shall pay for all
improvements necessary to the Sewer Treatment Facility that may be necessary
from time-to-time to treat the sanitary sewer flows from the TCS Property.
However, the Parties acknowledge that others will use or have the benefit of the
sewer system and related facilities on the TCS Property and that such other
users may be required to pay SDC a fair portion of the costs associated with the
construction and maintenance of the sewer system on TCS's Property as a
condition of such usage. SDC acknowledges and agrees that Kaiser and others are
paying their applicable share of the sewer system and improvements to the Sewer
Treatment Facility to be made at the time of the construction of the motorsports
complex for the benefit of the Kaiser land known as the MRF parcel, Napa lots
and the Speedway Business Park. Kaiser acknowledges and agrees that contracts
for such system usage will contain a "Limitation on Discharges" provision
substantially comparable to Paragraph 2 of this Agreement except the reference
to SDC shall be changed to the applicable party using the system. In the event
a party advances any sums for the payment of improvements or upgrades that are
payable by the other party, that party shall fully reimburse the party seeking
reimbursement for such amounts within thirty (30) days of substantiated billing.
Kaiser shall make no advance, absent an emergency, without the prior written
consent of SDC, which consent will not be unreasonably withheld.
6. TAXES. Any taxes, fees, charges and assessments that may be imposed
by a governmental entity or quasi governmental entity on: (i) any upgrades or
improvements to the Sewer Treatment Facility directly related to providing sewer
treatment service to the TCS Property; and (ii) the flows or discharges
attributable to the TCS Property shall be paid by SDC. Any such taxes, fees,
charges and/or assessments may be paid directly by SDC or, if paid by Kaiser,
SDC shall pay such substantiated amounts within thirty (30) days of billing by
Kaiser. SDC may in good faith challenge any such taxes, fees, charges and
assessments that may be imposed by a governmental entity or a quasi-governmental
entity provided that suitable financial assurances are provided to Kaiser and/or
the entity imposing or seeking to impose the tax, fee, charge or assessment for
the full payment thereof together with interest and possible penalties on the
amount in dispute.
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<PAGE>
7. MAINTENANCE OF FACILITIES. SDC shall be responsible for all
maintenance and repair of the sanitary sewers and related facilities located
within TCS Property for the benefit of the TCS Property and must obtain Kaiser's
approval, which will not be unreasonably withheld, for additional connections or
discharges to such sanitary sewers beyond those contemplated in the construction
plans for The California Speedway in effect as of the date of this Agreement or
the Planned Development for the TCS Property and the Speedway Business Park as
approved by the San Bernardino County Board of Supervisors on May 2, 1995.
Other persons may be responsible to Kaiser and to SDC for the services required
to maintain and repair the sanitary sewers and related facilities located within
the TCS Property with SDC's prior written consent, and Kaiser's prior written
consent if required by the first sentence of this paragraph. Kaiser shall be
responsible for the maintenance and repair of the Sewer Treatment Facility
unless extraordinary maintenance or repairs are as a result of SDC's uncured
violation of this Agreement.
8. OPERATIONAL MATTERS AND PROBLEMS.
(a) Operation Problems. In the event of an operational problem
------------------
involving the Sewer Treatment Facility or the sewer system on SDC's Property,
either Party may notify the other Party's on-site operating management. If the
situation is not corrected within forty-eight (48) hours following such
notification, Kaiser or SDC, as the case may be, following notice to the other,
may take any actions which are necessary to insure compliance with applicable
permit, statutory, or regulatory or contractual requirements, including, without
limitation, expending such sums as are reasonably necessary to achieve such
compliance. In the event that either Party would suffer substantial damage by
reason of such a problem prior to the expiration of the foregoing forty-eight
(48) hour notice period, either Party shall be entitled to take whatever
immediate actions are necessary in order to protect its respective systems,
property, or personnel. To the extent possible, notice of such immediate
actions must be given prior to taking such actions. All costs expended by a
Party for the purpose of curing the other Party's default as provided herein
shall be for the other Party's account.
(b) Notification Procedures. SDC shall adhere to such reasonable
-----------------------
procedures as Kaiser may specify for notifying Kaiser's designated personnel of
Event Weeks, unusual occurrences or potentially dangerous conditions arising in
the conduct of operations which may affect the Sewer Treatment Facility or sewer
treatment services.
(c) Cooperation. The Parties shall at all times cooperate with each
-----------
other with regard to the subject matter addressed by this Agreement. To that
end, the Parties agree that they will exchange the names and the phone numbers
of personnel to be contacted on a 24-hour-per-day basis. It is also recognized
that it is essential that any upset, disruption or unusual occurrence in the
sewer system or the Sewer Treatment Facility be communicated to the other Party
at the earliest possible time. The Parties will communicate as far ahead of
time as possible concerning planned or suspected trouble in the sewer system or
Sewer Treatment Facility. SDC and Kaiser shall comply with the reasonable
directions of each other as to the nature and scope of their respective
operations which affect, directly or indirectly, the sewer treatment services
being provided.
(d) Reasonable Rules of Operation. Kaiser may establish such
-----------------------------
reasonable rules pertaining to the other Party's discharges as may be required
to properly operate the Sewer
4
<PAGE>
Treatment Facility and provide sewer treatment services. SDC and Kaiser shall
cooperate with each other in developing and complying with all such rules so as
to ensure the safest and most trouble-free operation of such system for the
benefit of all users of the Sewer Treatment Facility.
9. SERVICE OF OTHERS. The Parties acknowledge that the Sewer Treatment
Facility may be used to provide lawful sewer treatment services for the Kaiser
Property and the property currently owned by CSI. However, except as otherwise
expressly provided herein with respect to the TCS Property, nothing in this
Agreement shall obligate Kaiser to provide sewer treatment services directly to
any such purchaser or lessee of the Kaiser Property or shall make any such
purchaser or lessee a third party beneficiary of this Agreement.
Kaiser shall have the right to furnish sewer treatment services for the
benefit of the Kaiser Property and to third parties on properties in the
vicinity of the TCS Property or the Kaiser Property, and to have access to and
right to use upon reasonable notice and without charge, all sewer utility
easements reserved in the TCS Property or the Kaiser Property for this purpose,
if in accordance with applicable permits, laws and the terms of this Agreement
and/or the Organization Agreement. In addition and in furtherance of the
foregoing, SDC shall grant to Kaiser, without charge, reasonable easements in or
across the TCS Property, in order to provide sewer treatment services provided
such easements and/or use do not materially interfere with the development or
operation of The California Speedway as a motorsports complex. SDC acknowledges
that Kaiser currently provides sewer treatment services to CSI and will provide
sewer treatment services to the areas of the Kaiser Property known as the NAPA
lots, the Speedway Business Park and the MRF parcel. Subsequent to the date of
this Agreement, SDC and the Corporation shall have the right to review and
approve in writing any new sewer services agreement utilizing the Sewer
Treatment Facility, which approval shall not be unreasonably withheld. SDC and
the Corporation shall review and make a determination on any proposed sewer
treatment services agreement within twenty-one (21) days of their receipt of the
proposed agreement. The proposed agreement shall be deemed acceptable if SDC
and the Corporation fail to object or comment on the proposed agreement with the
twenty-one (21) day period.
10. LIMITATION OF LIABILITY. Kaiser shall not be liable to SDC for
failure to furnish sewer treatment services to the TCS Property in accordance
with this Agreement if the failure results from: (i) acts of God; (ii) strikes,
lockouts or other labor disputes; (iii) the making of repairs, alterations or
improvements not arising out of the willful misconduct or negligence of Kaiser
or other owner or occupants of the Kaiser Property; (iv) inability to secure a
proper supply of utilities, labor or services after making reasonable efforts to
obtain such; (v) a prohibited or limited discharge is made into the sewer
treatment system from the TCS Property in violation of this Agreement; (vi) the
receipt of insufficient influent into the Sewer Treatment Facility; (vii) any
other cause beyond Kaiser's reasonable control (each of the items (i)-(vii) a
"Force Majeure Event"); (viii) lawful termination of this Agreement; (ix)
Kaiser no longer being able to legally provide such service; (viii) Kaiser is
required to make a material unreimbursed expenditure to provide or to continue
to provide such service to the TCS Property; or (x) the default of SDC, under
the terms of this Agreement. Kaiser shall use reasonable efforts to remedy any
Force Majeure Event, provided that Kaiser shall have no obligation to resolve
any labor dispute except on terms acceptable to it in its reasonable discretion.
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<PAGE>
11. LIMITATION ON DAMAGES. Under no circumstances whatsoever shall
Kaiser be liable to SDC or any third party for loss of profits or any other
consequential damages caused by Kaiser's failure to furnish sewer services with
respect to the TCS Property in accordance with the terms of this Agreement. If
the sewer treatment services to be furnished by Kaiser to SDC are rationed by
governmental authority, public utility or other entity, Kaiser may apportion
such sewer treatment service among the users of the Sewer Treatment Facility in
any reasonable manner without liability to the others.
12. INSURANCE. SDC and Kaiser, at their own expense, shall maintain,
during the term of this Agreement, at a minimum the following policies of
insurance in such amounts as is each Party's ordinary and customary business
practice:
i. Commercial General Liability in a total aggregate amount,
including excess or umbrella coverage of not less than $5,000,000
ii. Automobile and Property Damage Liability with not less than
$1,000,000 combined single limit
iii. Worker's Compensation and Employer's Liability Insurance
Kaiser and SDC shall, upon demand, provide the other Party with proof of
the coverage required in this Paragraph 12.
Said policies, other than the worker's compensation and employer's
liability policies, shall name each other as additional insureds and provide
that such policies shall not be cancelled except upon thirty (30) days prior
written. All insurance is to be provided with insurers with a current AM Best's
rating of no less than A,VII, unless otherwise mutually approved. All insurance
is to be placed with an insurer admitted in the State of California.
Subject to the Organization Agreement, Kaiser and TCS each hereby releases
from liability and waives any rights of recovery against the other and the
shareholders, directors, officers, employees, attorneys, contractors, agents and
affiliates of the other, for any loss arising out of the acts or omission of a
Party in connection with the matters covered by the Agreement for: (a)
personal injury or property damage on, in or about the TCS Property or the
Kaiser Property; or (b) out of the ownership, use, occupancy or maintenance of
the TCS Property or the Kaiser Property, but only to the extent the loss is
covered by insurance. Each Party shall give notice to its insurance carriers
that the foregoing mutual release and waiver is contained in this Agreement.
13. SEWER SERVICE CONDITIONED UPON MAINTENANCE OF ALL PERMITS. Kaiser's
obligation to provide sewer treatment services hereunder is expressly
conditioned on, among other things, Kaiser's ability to maintain or obtain, as
applicable, necessary permits, consents, certificates or contractual
entitlements for its operations in connection therewith, and upon Kaiser
obtaining authority from the agencies or other entities involved to serve the
TCS Property using Kaiser's or SDC's permits, consents, certificates and
entitlements, as the case may be. In addition, Kaiser's obligation to provide
sewer treatment services is expressly conditional upon: (i) receipt of certain
minimum sanitary flows which are necessary to maintain the operation of the
Sewer Treatment Facility; (ii) Kaiser not being required to make any material
unreimbursed expenditure, which remains unreimbursed or for which it has no
separate written agreement for its payment, in connection with the Sewer
Treatment Facility in order to continue to provide
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<PAGE>
sewer treatment services to the TCS Property; and (iii) there is no material
adverse change in the laws and/or regulatory system governing or applicable to
Kaiser providing sewer treatment services to the TCS Property after the date of
this Agreement, which would include any determination that Kaiser must operate
the sewer treatment plant as a regulated utility. Kaiser shall in good faith
take reasonable action to maintain or obtain, as applicable, all necessary
permits, consents, certificates and entitlements in connection with the Sewer
Treatment Facility, but Kaiser shall not be required to make a material,
unreimbursed expenditure in order to maintain or obtain any of the foregoing.
SDC shall provide reasonable cooperation and assistance to Kaiser, as requested
by Kaiser, to maintain or obtain all necessary permits, consents, certificates
and entitlements for the sewer system and the Sewer Treatment Facility. For
purposes of this Agreement, a material unreimbursed expenditure shall mean any
expenditure or cumulative expenditures related to a particular item in excess of
fifty thousand dollars ($50,000).
14. COMPLIANCE WITH APPLICABLE LAWS. Both Kaiser and SDC shall comply
with all applicable statutes, regulations, rules and ordinances regarding water
quality and hazardous or toxic waste, substances, or materials, and any other
applicable statutes, regulations, rules and ordinances regarding the
environment (collectively, "Environmental Laws"), as well as with the terms of
all permits, governmental authorizations and the like applying to the Parties'
usage of the sanitary sewer services supplied hereunder. Each Party (the
"Indemnifying Party") hereby agrees to indemnify, defend, protect and hold
harmless the other Party from all claims, liabilities, damages, fines, costs of
remedial action, civil penalties, attorneys fees, consulting fees, and the like
("Losses"), on account of or resulting from any claim or liability arising from
any violation by the Indemnifying Party of any Environmental Law or permit that
pertains to or includes the sanitary sewer system, sanitary sewer treatment
services and the Sewer Treatment Facility; provided, however nothing herein
shall be construed to limit the indemnities provided in the Organization
Agreement or Losses that may be imposed under applicable law.
Each Party agrees to provide contemporaneous notice of any such reportable
release to a governmental authority to the other where such release occurs with
respect to or in connection with any services or utilities provided hereunder.
15. ACQUISITION OF THE SEWER TREATMENT FACILITY.
(a) Right of First Refusal. Subsequent to the date of this Agreement,
----------------------
SDC or its successor shall have the right of first refusal or option to purchase
the Wastewater Treatment Facility, should Kaiser: (i) elect to terminate the
Sewer Services Agreement for the TCS Property; (ii) discontinue sewer treatment
services to the TCS Property; or (iii) desire to sell or lease the Sewer
Treatment Facility to a third party. Such right of first refusal or option may
only be exercised by SDC if it is compliance with the terms of this Agreement
and if Penske, the Corporation and any direct or indirect affiliate of Penske
(as those terms are defined in the Organization Agreement) is in compliance with
all material terms and provisions of the Organization Agreement and all other
agreements referred to therein in which any such entity is a party. The
purchase price shall be for cash at the fair market value thereof as determined
below, less twenty five percent (25%) of the fair market value, and the closing
on such purchase shall take place no later than ninety (90) days after notice of
exercise is given. The Sewer Treatment Facility shall be sold free and clear of
any financial liens and encumbrances, or other liens or
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<PAGE>
encumbrances that might materially interfere with the operation of the facility
as historically conducted or contemplated by The California Speedway
construction plans other than those liens and encumbrances found to be
acceptable to SDC and Penske. Kaiser shall also transfer to the purchaser any
and all governmental permits and licenses, which can lawfully be transferred,
associated with the Sewer Treatment Facility and/or the assets and shall grant
to the purchaser perpetual easements upon Kaiser's Property, then in existence,
to permit the purchaser to operate and maintain the Sewer Treatment Facility and
the assets for the benefit of the TCS Property as then conducted or contemplated
in the TCS construction plans. If SDC (a successor or a subsidiary of SDC)
purchases the Sewer Treatment Facility, SDC shall continue to offer to serve and
to serve all existing or proposed users of sewer treatment service provided by
the Sewer Treatment Facility in accordance with any written agreement for the
provision of such services then in effect which has been approved by SDC as
provided in Paragraph 9 of this Agreement. SDC acknowledges that it may need to
seek certain approvals and permits or make modifications to the Sewer Treatment
Facility upon a change in ownership. The fair market value of the Sewer
Treatment Facility, shall be determined as follows:
(1) Subject to the provisions of Paragraph 15(d) of this Agreement, if
Kaiser receives a bona fide third party offer that it desires to accept for the
sale or lease of the Sewer Treatment Facility, permits, the fair market value
for the Sewer Treatment Facility and the associated assets shall be the price,
terms and conditions as offered by the proposed purchaser or lessee; provided,
however, the purchase price to SDC shall be less the twenty five percent (25%)
discount referenced in Paragraph 15(a) above. SDC shall have thirty (30) days
from the receipt of such notice to elect to exercise its right of first refusal
assuming SDC is in compliance with the terms of this Agreement and Penske and
its direct and indirect affiliates are in compliance with all the material terms
and conditions of the Organization Agreement or any other material agreement
referenced therein applicable to Kaiser. In the event SDC fails to exercise its
right of first refusal as provided herein or SDC or Penske or its direct or
indirect affiliates is not in compliance with the material terms and conditions
of this Agreement, the Organization Agreement or any material agreement
reference therein applicable to Kaiser, then Kaiser shall be free to sell or
lease the Sewer Treatment Facility and its assets to the proposed purchaser or
lessee subject to outstanding agreements regarding sewer service, including the
Sewer Services Agreement with SDC. If SDC exercises its right of first refusal,
but fails to consummate the purchase or lease as a result of SDC's fault, SDC's
right of first refusal shall terminate and shall no longer be applicable.
(2) In the event there is no third party offer, fair market value
shall be determined by the fair market value of the Sewer Treatment Facility and
its associated assets as an operating facility as determined by an independent
appraiser, familiar with the permitting, construction and operation of a sewer
treatment facility, mutually selected by Kaiser and Penske Speedways Holding
Corp.; provided, however, the purchase price to SDC shall be less the twenty
five percent (25%) discount referenced in Paragraph 15(a) above. If the parties
are unable to mutually select an independent appraiser, an independent appraiser
familiar with the permitting, construction and operation of sewer treatment
facilities in Southern California, shall be selected by the American Arbitration
Association, Los Angeles, California. The costs of any arbitration and of the
independent appraiser shall be borne equally by Kaiser and Penske Speedways
Holding Corp.
8
<PAGE>
In determining fair market value by appraisal, "Fair Market Value"
shall be based upon the "as is" "where is" condition and location of the Sewer
Treatment Facility as an operating facility less the value or, if greater, the
depreciated cost of any improvements to the Sewer Treatment Facility funded by
the Corporation or any subsidiary of the Corporation.
(b) Option to Purchase. Subsequent to the fifth (5th) anniversary of
------------------
this Agreement, SDC (or its successor) shall have the option at any time
thereafter to purchase the Sewer Treatment Facility at fair market value as
determined in Paragraph 16(a) above; provided, however, the purchase price shall
be less the twenty five percent (25%) discount referenced in Paragraph 16(a)
above; provided, however, SDC shall: (i) continue to offer and provide sewer
treatment service in accordance with written contracts to existing users; and
(ii) offer and provide sewer treatment service to the Kaiser Land on reasonable
terms that does not then receive sewer treatment service to the extent that:
(x) such service may be legally provided; (y) such service will not materially
interfere with the services then being provided by the Sewer Treatment Facility
to the TCS Property; and/or (z) SDC will not be required to make a material
unreimbursed expenditure to provide such service.
(c) Option to Purchase if a Public Company. In the event the
---------------------------------------
Corporation becomes a Public Company as defined in Paragraph 8.3 of the
Organization Agreement prior to the fifth (5th) anniversary of this Agreement,
SDC (or its successor) shall have the option to at any time to acquire the Sewer
Treatment Facility at fair market value as determined in Paragraph 15(a) above;
provided, however, the purchase price shall be less the twenty five percent
(25%) discount referenced in Paragraph 15(a) above; and further more provided,
however, SDC shall: (i) continue to offer and provide sewer service in
accordance with written contracts then in existence; and (ii) offer and provide
sewer service to the Kaiser Property that does not then receive sewer service
to the extent that: (y) such service will not materially interfere with the
services then being provided by the sewer facility to the TCS Property; or (z)
SDC will not be required to make a material unreimbursed expenditure to provide
such service. Notwithstanding the foregoing, such option shall not be effective
if Kaiser determines in good faith that for legal or regulatory reasons that the
Sewer Treatment Facility will not be able to serve existing and future users of
such services associated with the Kaiser Property. In such event, and assuming
SDC still desires to exercise the option provided in this Paragraph 15(c),
Kaiser and SDC (or its successor) will in good faith negotiate for the sale of
the Sewer Treatment Facility which will accommodate Kaiser 's concerns. For
example, it may be necessary for Kaiser to continue to own a significant
interest in the Sewer Treatment Facility but SDC could own the controlling
interest.
(d) Restrictions on Transfer. Notwithstanding anything contained
-------------------------
herein, Kaiser shall not voluntarily sell, lease or transfer the Sewer Treatment
Facility for a period of five (5) years from the date hereof without SDC's prior
written consent, except a transfer to a wholly owned subsidiary of Kaiser as
permitted in Paragraph 27 of this Agreement, which subsidairy shall take subject
to the provisions of this Agreement.
16. DEFAULT.
(a) The occurrence of any one or more of the following events shall
constitute a default ("Default") hereunder:
9
<PAGE>
(i) The failure by SDC or Kaiser to make when due any payment required
of it as provided herein, if such failure continues for a period of ten (10)
days after written notice thereof by Kaiser to SDC or SDC to Kaiser, as
applicable.
(ii) The failure by Kaiser or SDC to perform or observe any covenant
or condition of this Agreement to be performed or observed by such Party, if
such failure continues for a period of thirty (30) calendar days after written
notice thereof from either Party to the defaulting Party; provided, however,
that if the nature of the obligation is such that a period of more than thirty
(30) days is reasonably required for cure, then there shall be no Default so
long as such Party commences the cure within the thirty (30) day period and
thereafter diligently pursues it to completion.
(iii) The filing by or against Kaiser or SDC of a petition to have
such Party adjudged a bankrupt or a petition for reorganization or arrangement
under any law relating to bankruptcy (unless, in the case of a petition filed
against such Party, the same is dismissed within sixty (60) days); or the
appointment of a trustee or receiver to take possession of, or the attachment or
other judicial seizure of, substantially all of such Party's assets or a portion
of the Sewer Treatment Facility, as the case may be, if the right to take
possession or the seizure is not terminated within sixty (60) days.
(iv) An uncured default under a material provision of the Organization
Agreement by Penske, the Corporation or any direct or indirect subsidiary of the
Corporation shall be deemed a default by SDC under this Agreement.
(v) An uncured default under a material provision of the Organization
Agreement by Kaiser shall be deemed a default by Kaiser under this Agreement.
17. REMEDIES. If a Default by either Party occurs, the non-defaulting
Party may, at any time thereafter, with or without notice (except for notices
required by law) or demand and without limiting such non-defaulting Party in the
exercise of any other right or remedy:
(i) Terminate this Agreement; and/or
(ii) Pursue any other remedy now or hereafter available to such
non-defaulting Party.
18. ADVANCEMENT OF FUNDS, ETC. If either Kaiser or SDC, after notice from
the other Party, fails to make a payment or perform any other act required
hereunder (whether or not a Default has occurred), the notifying Party may make
such payment or perform such other act to the extent such Party may reasonably
deem desirable. The defaulting Party shall reimburse the non-defaulting Party
on demand for any costs (including reasonable attorneys' fees) the non-
defaulting Party incurs in connection therewith. No such action by the non-
defaulting Party shall cure or waive the other Party's default.
19. TERMINATION. In addition to any other right of termination provided
in this Agreement, this Agreement shall terminate upon:
(a) Expiration of the term specified in Paragraph 3;
10
<PAGE>
(b) Exercise of the termination rights set forth in Paragraph 18
arising out of a Party's Default;
(c) By Kaiser at any time upon one year's prior written notice to SDC
after the fifth (5th) anniversary of this Agreement for a good and valid
business reason exercised in good faith; and
(d) Written notice by Kaiser to SDC, for any of the reasons specified
in Paragraph 13; provided, however, Kaiser shall provide as much advanced notice
as reasonable possible to SDC upon a termination under this Paragraph 19(d).
20. COOPERATION IF THERE IS CONNECTION TO A MUNICIPAL SEWER SYSTEM. In
the event of the termination of this Agreement and Kaiser (or its successor) or
SDC (or its successor) is not furnishing sewer treatment services to CSI, the
Kaiser Property, or the TCS Property, the Parties agree to work in good faith to
share and use the existing sewer facilities and the sewer system in such a
manner so as to connect with a municipal sewer system at a cost as minimal as
reasonably possible.
21. NOTICE. Any demand, consent or notice required or permitted to be
given hereunder shall be in writing, shall be given by personal delivery or by
certified U.S. mail, return receipt requested, addressed to Kaiser or to SDC at
their respective addresses given below, and shall be effective on receipt (or if
rejected, shall be effective and deemed received on the date of rejection).
Either Party (or its permitted successor) may by notice to the other specify a
different address in the United States for notice purposes.
IF TO SDC: Speedway Development Corp.
3633 East Inland Empire Blvd., Suite 850
Ontario, CA 91764
Attention: President
WITH A COPY TO: Penske Corporation
13400 Outer Drive, West
Detroit, Michigan 48239
Attention: Vice President & General Counsel
IF TO KAISER: Kaiser Ventures Inc.
3633 East Inland Empire Blvd., Suite 850
Ontario, California 91764
Attention: President
WITH A COPY TO: Kaiser Ventures Inc.
3633 East Inland Empire Blvd., Suite 850
Ontario, California 91764
Attention: Vice President & General Counsel
22. WAIVER. No waiver by Kaiser or SDC of any provision hereof shall be
deemed a waiver of any other provision or of any subsequent breach of the same
provision. The
11
<PAGE>
acceptance of any payment hereunder by Kaiser or SDC shall not be a waiver of
any preceding breach by the other of any provision hereof, other than the
failure of SDC or Kaiser to pay the particular payment so accepted, regardless
of Kaiser's or SDC's knowledge, as the case may be, of the preceding breach at
the time of acceptance.
23. ATTORNEY'S FEES. In the event there is any dispute concerning the
terms of this Agreement, or the performance of any Party pursuant to the terms
of this Agreement, and any Party retains counsel for the purpose of enforcing
any of the provisions of this Agreement, or asserting the terms of this
Agreement in defense of any suit or arbitration proceeding filed against said
Party, the prevailing Party in such a dispute shall be entitled to recover, in
addition to any other remedy to which such Party may be entitled, all of its
reasonable costs and reasonable attorney's fees incurred in connection with the
dispute, irrespective of whether or not a lawsuit or arbitration proceeding is
actually commenced or prosecuted to conclusion.
24. CHOICE OF LAW. This Agreement shall be governed by the laws of the
State of California.
25. GOOD FAITH. Except where this Agreement permits a Party to act or
refuse to act in its sole discretion, in exercising their rights and performing
their obligations with respect to this Agreement, each Party shall act
reasonably and shall cooperate in good faith and fair dealing toward one
another, so that to the purpose of this Agreement can be obtained.
26. ASSIGNMENT. Kaiser shall have the right to any time to assign this
Agreement and transfer all duties and obligations associated with this Agreement
to a wholly owned subsidiary provided such subsidiary is also the sole owner of
the Sewer Treatment Facility and provided further that Kaiser shall continue to
remain liable for the performance of Kaiser's contractual obligations hereunder
until a sale of the Sewer Treatment Facility to a third party after compliance
with the right of first refusal procedures specified in Paragraph 16(a) of this
Agreement. The Parties acknowledge that it is currently contemplated that SDC
(or its successor) will construct and operate TCS on the TCS Property. Without
Kaiser's prior written consent, which it will not unreasonably withheld, SDC (or
its successor) shall have no authority to assign its rights in this Agreement
without a sale or other transfer of the entire TCS Property or that portion of
the TCS Property not encumbered by a California Department of Toxic Substances
Control Covenant to Restrict Use of Real Property, except to the holder of the
deed of trust (or its beneficiary) for the TCS Property not encumbered by a DTSC
Convenant to Restrict Use of Real Property or to the purchaser of that TCS
Property as a result of a foreclosure sale or a deed in lieu of foreclosure.
27. FURTHER COOPERATION. Each Party shall take such further steps and
sign or cause to be signed such further documents or instruments as may be
necessary from time-to-time to achieve the purposes of this Agreement.
IN WITNESS THEREOF, this Services Agreement has been executed as of the
date first set forth above.
12
<PAGE>
"KAISER"
KAISER VENTURES INC.
By: /s/ Daniel N. Larson
---------------------------------------
Daniel N. Larson
President and Chief Executive Officer
"SDC"
SPEEDWAY DEVELOPMENT CORPORATION
By: /s/ Lee R. Redmond III
---------------------------------------
Lee R. Redmond III, Vice President
13
<PAGE>
SCHEDULE "A"
TO
SEWER SERVICES AGREEMENT
BETWEEN KAISER VENTURES INC.
AND SPEEDWAY DEVELOPMENT CORPORATION
NOT ATTACHED
WILL BE FURNISHED TO THE SEC UPON REQUEST
14
<PAGE>
EXHIBIT 23
CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos.E33-51116, 33-39557, 33-39556 and 33-00000) pertaining to the
Kaiser Steel Resources, Inc. 1992 Stock Option Plan, the Kaiser Steel Resources,
Inc. 1989 Officer Bonus Program, the Amended, Restated and Substituted Kaiser
Steel Resources, Inc. 1989 Stock Plan, and the Kaiser Ventures Inc. 1995 Stock
Option Plan, respectively, of Kaiser Ventures Inc. of our report dated February
9, 1996, with respect to the consolidated financial statements and schedules of
Kaiser Ventures Inc. included in this Annual Report (Form 10-K) for the year
ended December 31, 1995.
ERNST & YOUNG LLP
Riverside, California
April 3, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 10,863,000
<SECURITIES> 0
<RECEIVABLES> 10,141,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,078,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 94,703,000
<CURRENT-LIABILITIES> 12,064,000
<BONDS> 5,342,000
0
0
<COMMON> 314,000
<OTHER-SE> 68,383,000
<TOTAL-LIABILITY-AND-EQUITY> 94,703,000
<SALES> 0
<TOTAL-REVENUES> 11,108,000
<CGS> 0
<TOTAL-COSTS> 3,870,000
<OTHER-EXPENSES> 4,201,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 587,000
<INCOME-PRETAX> 2,450,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,394,000
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