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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1997 Commission File Number 0-18858
KAISER VENTURES INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 94-0594733
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3633 East Inland Empire Blvd., Suite 850
Ontario, California 91764
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(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (909) 483-8500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate by check mark whether registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.
Yes X No
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On August 6, 1997, the Company had 10,521,975 shares of Common Stock, $.03 par
value, outstanding (including 136,919 shares deemed outstanding and held in
reserve by the Company for issuance to the former general unsecured creditors of
Kaiser Steel Corporation pursuant to its Plan of Reorganization).
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TABLE OF CONTENTS TO FORM 10-Q
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INTRODUCTION
BUSINESS UPDATE.......................................................... 1
PART I
Item 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............................ 8
ITEM 2. FINANCIAL STATEMENTS............................................ 18
CONSOLIDATED BALANCE SHEETS..................................... 18
CONSOLIDATED STATEMENTS OF INCOME............................... 20
CONSOLIDATED STATEMENTS OF CASH FLOWS........................... 21
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY........................................... 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...................... 23
PART II
ITEM 1. LEGAL PROCEEDINGS............................................... 26
ITEM 2. CHANGES IN SECURITIES........................................... 26
ITEM 3. DEFAULTS UPON SENIOR SECURITIES................................. 26
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS............... 26
ITEM 5. OTHER INFORMATION............................................... 26
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................ 27
SIGNATURES................................................................. 28
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AVAILABILITY OF PREVIOUS REPORTS
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THE COMPANY WILL FURNISH WITHOUT CHARGE, TO EACH STOCKHOLDER, UPON WRITTEN
REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996 (THE "10-K REPORT") AS FILED WITH THE
SECURITIES EXCHANGE AND COMMISSION, INCLUDING THE FINANCIAL STATEMENT SCHEDULES
THERETO. THOSE REQUESTING A COPY OF THE 10-K REPORT THAT ARE NOT CURRENTLY
STOCKHOLDERS OF THE COMPANY MAY ALSO OBTAIN A COPY DIRECTLY FROM THE COMPANY.
REQUESTS FOR A COPY OF THE 10-K REPORT SHOULD BE DIRECTED TO VICE PRESIDENT-
CORPORATE RELATIONS, AT 3633 EAST INLAND EMPIRE BOULEVARD, SUITE 850, ONTARIO,
CALIFORNIA 91764.
THE READER IS ENCOURAGED TO READ THIS FORM 10-Q REPORT IN CONJUNCTION WITH
THE 10-K REPORT SINCE THE INFORMATION CONTAINED HEREIN IS OFTEN AN UPDATE OF THE
INFORMATION IN SUCH REPORT.
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KAISER VENTURES INC. AND SUBSIDIARIES
FORWARD-LOOKING STATEMENTS
EXCEPT FOR THE HISTORICAL STATEMENTS AND DISCUSSIONS CONTAINED HEREIN,
STATEMENTS CONTAINED IN THIS 10-Q REPORT CONSTITUTE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ANY 10-K, ANNUAL
REPORT TO STOCKHOLDERS, 10-Q OR 8-K REPORT OF THE COMPANY MAY INCLUDE FORWARD-
LOOKING STATEMENTS. IN ADDITION, OTHER WRITTEN OR ORAL STATEMENTS WHICH
CONSTITUTE FORWARD-LOOKING STATEMENTS HAVE BEEN MADE AND MAY BE MADE IN THE
FUTURE BY THE COMPANY. WHEN USED OR INCORPORATED BY REFERENCE IN THIS 10-Q
REPORT OR IN OTHER WRITTEN OR ORAL STATEMENTS, THE WORDS "ANTICIPATE,"
"ESTIMATE," "PROJECT" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-
LOOKING STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES
AND ASSUMPTIONS. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE,
OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY
MATERIALLY FROM THOSE ANTICIPATED, ESTIMATED, EXPECTED OR PROJECTED. FOR
EXAMPLE, ACTUAL RESULTS COULD MATERIALLY DIFFER FROM THOSE PROJECTED AS A RESULT
OF FACTORS SUCH AS, BUT NOT LIMITED TO, GENERAL ECONOMIC CONDITIONS IN THE
UNITED STATES AND SOUTHERN CALIFORNIA; THE IMPACT OF FEDERAL, STATE, AND LOCAL
LAWS AND REGULATIONS ON THE COMPANY'S DEVELOPMENT ACTIVITIES; THE IMPACT OF
WEATHER ON THE COMPANY'S CONSTRUCTION RELATED ACTIVITIES; THE DISCOVERY OF
UNANTICIPATED ENVIRONMENTAL CONDITIONS ON ANY OF THE COMPANY'S PROPERTIES; THE
FAILURE OF THE BANKRUPTCY DISCHARGE GRANTED TO THE COMPANY TO ADDRESS CLAIMS AND
LITIGATION THAT RELATE TO THE PRE-BANKRUPTCY ACTIVITIES OF KAISER STEEL
CORPORATION; OR THE FAILURE TO OBTAIN ANY REQUIRED APPROVAL OR PERMIT FOR THE
PROPOSED EAGLE MOUNTAIN LANDFILL PROJECT. READERS ARE CAUTIONED NOT TO PUT UNDUE
RELIANCE ON FORWARD-LOOKING STATEMENTS. THE COMPANY DISCLAIMS ANY INTENTION TO
UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE.
INTRODUCTION
BUSINESS UPDATE
GENERAL
Kaiser Ventures Inc. ("Kaiser" or the "Company" which shall be deemed to
include its wholly-owned subsidiaries unless otherwise provided herein)
continues to work on the development, as necessary, of its principal assets: (i)
a 50.88% interest in Fontana Union Water Company ("Fontana Union"), a mutual
water company which is leased to Cucamonga County Water District ("Cucamonga")
pursuant to a 102-year take-or-pay lease; (ii) an approximately 11.50% interest
in Penske Motorsports, Inc. ("PMI"), a publicly traded motorsports company;
(iii) approximately 668 acres (gross) of the former Kaiser Steel Corporation
("KSC") steel mill site (the "Mill Site Property"); (iv) an approximate 73%
interest in Mine Reclamation Corporation ("MRC"), the Company seeking to permit
a rail-haul municipal solid waste landfill in Riverside County (the "Landfill
Project"); and (v) the 11,350 acre idle iron ore mine in the California desert
(the "Eagle Mountain Site"), which includes the associated 460 acre town of
Eagle Mountain ("Eagle Mountain Townsite") and the land leased to MRC for the
Landfill Project. The Company also has approximately $107,000,000 of federal net
operating loss tax carryforwards as of December 31, 1996, which arose primarily
as a result of the bankruptcy reorganization of KSC. The Company is the
reorganized successor of KSC.
Since the filing of the 1996 Form 10-K Report and the first quarter 1997
10-Q Report, there have been significant developments with regard to the
expansion of PMI's business and the continued redevelopment of the Mill Site
Property. Specifically, PMI substantially expanded its business with the
successful
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KAISER VENTURES INC. AND SUBSIDIARIES
opening of the California Speedway ("TCS") and with the acquisition of interests
in companies with existing races and/or race tracks in California, Tennessee,
Illinois, North Carolina and Florida and the Company reached final agreement
with Burrtec Waste Industries, Inc. and began construction of the West Valley
materials recovery facility and transfer station (the "West Valley MRF"). See
the more detailed discussion on each of these developments below. In addition, a
reader of this Form 10-Q Report is strongly encouraged to read the entire
report, together with the Company's 1996 Form 10-K Report and first quarter 10-Q
Report for 1997 for background information and a complete understanding as to
material developments concerning the Company.
INVESTMENT IN FONTANA UNION WATER COMPANY
The Company, through a wholly-owned subsidiary, Fontana Water Resources,
Inc., leases its 50.88% ownership of the capital stock of Fontana Union, a
mutual water company, to Cucamonga pursuant to a 102-year take-or-pay lease
expiring in 2092 (the "Cucamonga Lease"). Under the terms of the Cucamonga
Lease, Cucamonga's payments to the Company are based upon established fixed
quantities of water for most of the applicable sources, multiplied by a fixed
percentage of the rate for untreated and non-interruptible water from the
Metropolitan Water District of Southern California ("MWD") as available through
the Chino Basin Municipal Water District as it may change from time-to-time (the
"Lease Rate").
The Company is continuing with its litigation against Cucamonga in San
Bernardino County Superior Court to resolve a dispute over the interpretation of
the Cucamonga Lease and the Lease Rate. In July the Company and Cucamonga
participated in a court mandated mediation conference but the parties were
unable to reach any settlement of the litigation. Trial on the matter will
likely commence in late 1997 or early 1998.
INVESTMENT IN PENSKE MOTORSPORTS, INC.
The Company currently owns 1,627,923 shares, or approximately 11.50% of the
outstanding common stock of PMI. PMI is traded on the NASDAQ National Market
under the symbol "SPWY". The Company's ownership interest in PMI was acquired as
a result of: (i) its contribution in November, 1995, to PMI of approximately 480
acres, as adjusted, of the Central Mill Site Property on which TCS has been
built; and (ii) the subsequent sale of the Speedway Business Park, totaling
approximately 54 acres to PMI in December, 1996. As discussed in more detail
below, the Company's percentage ownership in PMI was reduced from approximately
12.29% to 11.50% during the second quarter as a result of PMI's acquisition of
the majority ownership of North Carolina Motorspeedway, Inc., the owner and
operator of an approximately 1 mile oval track in Rockingham, North Carolina.
PMI is a leading promoter and marketer of professional motorsports in the
United States as well as an owner and operator of speedway facilities. As of
June 30, 1997, PMI owned: (i) Michigan International Speedway, Inc. which owns
and operates the Michigan Speedway, in Brooklyn, Michigan; (ii) The California
Speedway Corporation, which owns and operates TCS near Los Angeles, California;
(iii) Pennsylvania International Raceway, Inc. which owns and operates the
Nazareth Motor Speedway in Nazareth, Pennsylvania; (iv) approximately seventy
percent (70%) of the stock of North Carolina Motor Speedway, Inc. which owns and
operates the North Carolina Motor Speedway, Rockingham, North Carolina; (vi)
Motorsports International Corp., a motorsports apparel and memorabilia company;
and (vii) Competition Tire West, Inc. and Competition Tire South, Inc.,
distributors of Goodyear racing tires in the mid-west and southern regions of
the United States.
In the second quarter, PMI issued 907,000 shares of its common stock to
acquire the majority interest in North Carolina Motorspeedway, Inc., resulting
in the dilution of the Company's percentage ownership in
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KAISER VENTURES INC. AND SUBSIDIARIES
PMI to approximately 11.50%. North Carolina Motorspeedway hosts two NASCAR
Winston Cup series races, two NASCAR Busch Grand National Races and the annual
Unocal 76/Rockingham Pit Crew Championship.
In addition, PMI announced, on July 23, 1997, that it and International
Speedway Corporation (NASDAQ/NM:ISCA) had each acquired a forty percent (40%)
interest in Homestead-Miami Speedway, LLC, the operators of Metro-Dade Homestead
Motorsports Complex in Dade County, Florida. Ralph Sanchez, the founder of
Homestead and his partner, H. Wayne Huizenga, will each maintain a ten percent
(10%) ownership interest. Homestead is a 344 acre facility completed in 1995
with a recently reconfigured 1.5 mile oval track and a 2.21 mile road course.
Among the annual events held at Homestead are the Marlboro Grand Prix of Miami
(CART), the Jiffy Lube Miami 300 (NASCAR Busch Series) and the Florida Dodge
Dealers 400 (NASCAR Craftsman Truck Series).
On August 11, 1997, PMI announced that it and International Speedway
Corporation had each acquired a seven percent (7%) interest in Grand Prix
Association of Long Beach, Inc. (NASDAQ:GPLB) through the purchase of
stock in such company pursuant to a private placement. Grand Prix Association of
Long Beach is the owner and operator of the Toyota Grand Prix of Long Beach, the
annual CART PPG Cup race run on the streets of Long Beach, California since
1975. The Long Beach race is now the second largest open wheel car race in the
world next to the Indianapolis 500 mile race. In addition, the Grand Prix
Association of Long Beach owns and operates Gateway International Raceway in
Madison, Illinois and Memphis Motorsports Park in Millington, Tennessee.
The construction of TCS was completed during the second quarter and its
inaugural races were held on the weekend of June 21, 1997. The inaugural
weekend of TCS was a tremendous success with an estimated 170,000 individuals
attending the time trials and races at TCS.
For the second quarter of 1997, PMI announced an 87% increase in gross
revenues to a record $46.2 million and a 63% increase in net income to a record
$10.9 million or $.80 per share. For the first six months of the year, PMI
announced net income of $9.4 million or $.70 per share. Due to the seasonal
nature of racing, losses are generally anticipated in the first and fourth
quarters of the year while earnings are generally anticipated in the second and
third quarters. As a result, the Company's reported share of PMI's net
income/loss will reflect the seasonal nature of PMI's business. The Company
began accounting for its share of PMI's net income as of April 1, 1996. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The following table sets forth the range of the low and high reported bid
price of PMI's common stock for the first and second quarter of 1997, as
reported on the NASDAQ National Market System.
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1997: LOW HIGH
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Second Quarter $27.25 $32.38
First Quarter $25.00 $30.75
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On August 6, 1997, the closing price of PMI's common stock was $35.63.
PROPERTY REDEVELOPMENT
Mill Site Redevelopment Plan. During the second quarter the Company
continued its efforts to redevelop the balance of its Mill Site Property. After
the transactions with PMI and deducting the land to be used for the West Valley
MRF, the Company owns approximately 668 acres (gross). However, depending upon
the final redevelopment plan and after taking into account slope loss, rail road
easements, the San Sevaine flood control channel, proposed streets and highway
improvements, the sewer treatment facility, and other similar items, the Company
anticipates having approximately 535 useable acres available for development.
Following is a summary of the progress of the Company's redevelopment plans
during the second quarter.
The Napa Lots, which constitute a 31 acre portion of the Central Mill Site
Property, and the MRF site, as discussed below, have already received all of the
entitlements and permits necessary for their
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KAISER VENTURES INC. AND SUBSIDIARIES
development. However, the balance of the Company's Mill Site Property requires
various entitlements and permits from San Bernardino County prior to
redevelopment. The formal entitlement and permitting process commenced on April
9, 1997, when the Company filed an application for a Specific Plan with San
Bernardino County for all of its property except for approximately 26 acres
within the City of Rancho Cucamonga and approximately 135 acres known as the
East Slag Pile property. The County is presently undertaking the steps necessary
to retain an independent consultant to prepare the required environmental impact
report for the Mill Site Property and related Specific Plan. It is anticipated
that the County will select the consultant and commence preparation of the
environmental impact report by the end of the third quarter of 1997. The entire
entitlement and permitting process is currently anticipated to be completed by
the end of the first quarter of 1998.
The Specific Plan application identified a wide variety of potential uses
for the property. Potential uses include a rail-served distribution and
commercial park, an inter-modal rail-truck distribution center, warehousing, a
commercial truck stop, as well as other commercial and recreational uses. Of
course, the final use for any specific parcel of the Mill Site Property will be
dependent upon the real estate market and the needs of potential tenants, buyers
and users of a particular parcel and subject to the general limitations imposed
by the final Specific Plan. During the second quarter, the Company engaged in
preliminary discussions with possible tenants, buyers and users of portions of
the Mill Site Property. These discussions are expected to continue.
In addition to the permitting and entitlement process with the County, the
Company continued its work during the second quarter with the California
Department of Transportation and San Bernardino County to design and obtain
approval for an improved interchange at Etiwanda and the I-10 Freeway and
related street improvements. Second quarter activity focused on efforts to
secure Federal, state and/or local funding assistance related to such proposed
improvements. Significant capital funds will be required to implement the
infrastructure and access improvements. The Company will seek to minimize its
capital investments for these improvements by seeking public or private
financing sources; by structuring joint ventures and leases; or by contributing
portions of the land for an ownership interest in operating companies seeking to
develop the land. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for additional information.
In a separate decision, the Company also commenced the initial steps
necessary to demolish one of the major buildings remaining on the Mill Site, the
Fabrication #3 building, located on the southern portion of the West End
Property. Notices were sent to tenants of the building of the termination of
their leases. All affected tenants should be out by the end of the third quarter
with demolition of the building anticipated to commence before year-end.
Finally, the Company continues to undertake the remedial activities
necessary to develop the Mill Site.
WEST VALLEY MATERIALS RECOVERY FACILITY
The Company and Burrtec Waste Industries, Inc. ("Burrtec"), a privately-
held company, completed their revised agreement for the development,
construction and operation of the West Valley MRF effective as of June 19, 1997.
The West Valley MRF is a municipal solid waste transfer and recovery facility
that will be located on three parcels totaling approximately 30 acres of the
Mill Site Property. Phase 1 of the Mill Site MRF, which includes a 62,000 square
foot building, sorting equipment, and related facilities for waste transfer and
recycling services, is currently under construction and is expected to be
completed during the fourth quarter of this year. Most of the financing for
Phase 1's projected cost of approximately $10,300,000, including reimbursement
of many of the previously incurred development costs of Burrtec
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KAISER VENTURES INC. AND SUBSIDIARIES
and the Company, was obtained through the issuance and sale of $9,500,000 in
California Pollution Control Financing Authority (the "Authority") Variable Rate
Demand Solid Waste Disposal Revenue Bonds Series 1997A (the "Bonds"). This tax-
exempt financing transaction represented by the Bonds, which effectively closed
on June 25, 1997, are limited obligations of the Authority payable solely from
and secured by a pledge and lien on, the loan repayments made by West Valley
MRF, LLC ("West Valley MRF, LLC" or the "Borrower"), the newly created
California limited liability company formed by a subsidiary of the Company and
of Burrtec, and funds that may be drawn on an irrevocable direct pay letter of
credit issued by Union Bank of California, N.A. ("Union Bank"). Neither the
faith and credit nor the taxing power of the State of California or any
political subdivision thereof is pledged to the payment of the principal or
interest on the Bonds. The Bonds are backed by a letter of credit issued by
Union Bank. Pursuant to a Guaranty Agreement with Union Bank the Company and
Kaiser Recycling Corporation are liable for fifty percent (50%) of the principal
and interest on the Bonds in the event of a default by Borrower. Burrtec and its
affiliates in effect are also liable under a separate Guaranty Agreement with
Union Bank for the other fifty percent (50%) of the principal and interest on
the Bonds in the event of a default by Borrower. Fitch Investors Service rated
the Bonds upon issuance as "AA-/F-1+."
The initial variable weekly interest rate for the Bonds was 4.15%. As of
August 6, 1997, the variable weekly interest rate was 3.25%. The Bonds have a
stated maturity date of June 1, 2012, although the Borrower is required pursuant
to an agreement with Union Bank to annually redeem a portion of the Bonds on a
stated schedule. Beginning in 1998 the Borrower is required to redeem $100,000
in principal amount of the Bonds with the annual redemption increasing to a
maximum of $940,000 in the year 2011.
West Valley MRF, LLC and Union Bank have executed a Reimbursement
Agreement, which among other things, sets the terms and conditions whereby the
Borrower is required to repay Union Bank in the event of a draw under the letter
of credit, grants the Bank certain security interests in the property of
Borrower, establishes the redemption schedule for the Bonds, and sets forth
certain financial and other covenants borrower must comply with during the term
of the Bonds. The Company and Kaiser Recycling Corporation ("KRC") have also
provided to Union Bank an Environmental Guaranty Agreement pursuant to which
they are jointly and severally liable for any liability that may be imposed on
Union Bank for pre-existing environmental conditions on the Borrower's property
acquired from KRC that the Borrower fails to timely address.
As noted above, the Company and Burrtec reached formal agreement on the
terms of restructuring their previous joint venture as a limited liability
company. Effective June 19, 1997 KRC and West Valley Recycling & Transfer, Inc.
("WVRT"), Burrtec's wholly owned subsidiary, entered into a Members Operating
Agreement which is substantially the equivalent of a joint venture agreement but
for a limited liability company. Other ancillary and related agreements to the
Members Operating Agreement were also entered into as of June 19, 1997. Pursuant
to the terms of the Members Operating Agreement, KRC contributed an
approximately 23 acre parcel of the Mill Site on which Phase 1 of the West
Valley MRF is being constructed and WVRT contributed all of the goodwill of
Burrtec's recycling business presently operated out of Riverside County
entitling West Valley MRF, LLC to all revenues generated from such business
after the closing date. Under the terms of the Members Operating Agreement, KRC
and the Company remain responsible for any pre-existing environmental conditions
and WVRT is responsible for environmental issues that may arise related to the
future deposit or release, if any, of hazardous substances.
The Members Operating Agreement also addresses such items as the terms and
conditions for the contribution of up to approximately 7 acres of additional
property by KRC to West Valley MRF, LLC; future capital and financing
transactions; the governance of West Valley MRF, LLC through the creation and
operation of an Executive Committee; voting rights; indemnification obligations
between the members
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KAISER VENTURES INC. AND SUBSIDIARIES
of West Valley MRF, LLC; the daily operation of West Valley MRF by WVRT pursuant
to a separate Operation and Maintenance Agreement; distribution of cash flow in
various circumstances; rights of first refusal and various rights related to a
sale or deemed sale of a member's ownership interest in West Valley MRF, LLC and
the terms of any such sale, including a non-completion provision in certain
circumstances; events of default; remedies upon the occurrence of an event of
default by KRC or WVRT including the possible purchase of a member's interest in
West Valley MRF, LLC at a discount from appraised value; and termination and
dissolution of West Valley MRF, LLC. The Company and Burrtec have each given
their separate Performance Guaranty Agreement pursuant which they respectively
guaranty the prompt performance of their respective subsidiary's obligations
under the Members Operating Agreement and in the case of Burrtec, also under the
Operations and Maintenance Agreement which deals with the daily operation of the
West Valley MRF by WVRT.
NAPA LOTS
On April 9, 1997, the Company and Budway Enterprises, Inc. ("Budway"), a
distributor of steel and other products, entered into an agreement for the sale
of one of the Napa Lots of approximately 15.5 acres for approximately
$2,870,000, or $4.25 a square foot. The sales price, subject to normal closing
adjustments, is comprised of a minimum $1,000,000 cash down payment at the close
of the transaction plus a five year promissory note from Budway. As currently
structured, Budway's note requires a $25,000 per quarter principal payment plus
interest at the rate of ten percent (10%). The Company will subordinate the
Budway note to the construction and permanent financing for the improvements to
be built by Budway on the lot. This sale is subject to several contingencies
including Budway obtaining appropriate construction financing. Although
originally anticipated to close on or before July 31, 1997, Budway has extended
the closing date until the end of the third quarter by the deposit into escrow
of additional earnest money. The Company currently estimates the gain on the
sale to be approximately $200,000 which will be recorded when the transaction is
consummated.
WASTE MANAGEMENT
EAGLE MOUNTAIN LANDFILL PROJECT
In 1988, the Company entered into a 100-year lease agreement (the "MRC
Lease") with MRC. MRC is seeking to develop the Company's former iron ore mine
near Eagle Mountain, California into a large, regional rail-haul, municipal
solid waste landfill. MRC became a subsidiary of the Company when the Company's
subsidiary, Eagle Mountain Reclamation, Inc., acquired a 70% interest in MRC
during the first quarter of 1995 in exchange for the elimination of the minimum
monthly rent due the Company under the MRC Lease. The elimination of the minimum
monthly rent did not change the future royalty payments due the Company once the
landfill commences operations.
Financing. Since its initial acquisition of an equity interest in MRC, the
Company, through its wholly-owned subsidiary, Eagle Mountain Reclamation, Inc.,
has made additional equity investments in MRC through a series of private
placements with other MRC shareholders. Currently, the Company's ownership
interest in MRC is approximately 73%. Because additional funding was needed to
continue permitting activities, MRC completed a private placement of $2.5
million during the first quarter of 1997. The Company's portion of this $2.5
million private placement was approximately $1.9 million and has been paid. MRC
is now in the process of completing a new private placement for $2.4 million
with the Company agreeing to provide MRC with up to 75%, or approximately $1.8
million, of the $2.4 million. It is also currently anticipated that the Company
may make additional equity contributions of approximately
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KAISER VENTURES INC. AND SUBSIDIARIES
$1.9 million in 1998. Financing in addition to that noted above will be required
to complete the permitting of the Landfill Project, to fund anticipated
litigation costs and to ultimately construct the Landfill Project.
Permitting/Development Agreement. After the release of the final
environmental impact report/environmental impact statement ("EIR/EIS") in
January 1997, the Riverside Planning Commission held a total of seven public
meetings on the Landfill Project. Extensive public comment on the Landfill
Project was received and considered by the Planning Commission. After a complete
and thorough review of the Landfill Project by the Riverside County Planning
Commission, on May 7, 1997 the Planning Commission by a 4 to 1 vote recommended
to the Riverside County Board of Supervisors approval of the Landfill Project.
The Landfill Project is currently being considered by the Riverside Board of
Supervisors. To date the Board has held a total of four public meetings. Again,
extensive positive and negative public comment was received and considered
during the public hearings before the Board of Supervisors. It is anticipated
that a vote on the Landfill Project will be taken by the Riverside Board of
Supervisors by the end of August, 1997 although there is no assurance that the
vote may not be delayed beyond such date. If a positive vote is received, the
revised EIR would be again reviewed by Judge McConnell of the San Diego Superior
Court so that she may make a determination as to whether the EIR complies with
her previous decisions and applicable law. MRC would also begin the process of
reactivating or obtaining, as applicable, the various technical permits
necessary to commence construction of the Landfill Project. This process is
anticipated to take up to one year.
Concurrently with the hearing process before Riverside County, the final
terms of the Development Agreement for the Landfill Project are being
negotiated. In summary, the Development Agreement provides the mechanism by
which MRC acquires long term vested land use rights for a landfill, provides for
payments to the County pursuant to a separate Purchase and Sale Agreement and
generally governs the relationship among the parties to the Agreement. The
Development Agreement also addresses such items as the indemnification
obligations to Riverside County, the financial assurances to be provided to
Riverside County, the reservation and availability of landfill space for
Riverside County waste, events of default and remedies as well as a number of
other items. The final terms of the Development Agreement will not be determined
until the conclusion of the vote by the Riverside Board of Supervisors. The
execution of the Development Agreement being negotiated will be contingent upon
approval of the Landfill Project by the Riverside Board of Supervisors and upon
the consummation of the proposed Federal land exchange which is necessary for
the Project to proceed.
As is discussed in more detail in the Company's 1996 Form 10-K Report,
there are numerous risks associated with MRC and the Landfill Project which must
be overcome to achieve the financing, permitting, construction and operation of
the Landfill Project. There have been and will continue to be opponents to the
Landfill Project. Given the legal challenges that have occurred to date and the
controversies that generally surround landfill projects, future legal challenges
are likely. The current anticipated time schedule for the Landfill Project is
based on forward-looking information and as a result, the time schedule may not
be achieved, because of the risks associated with the Project as well as delays
inherent in the process.
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KAISER VENTURES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
SECTION 1: OPERATING RESULTS
Kaiser Ventures Inc. ("Kaiser" or the "Company") is an emerging asset
development company pursuing project opportunities and investments in activities
related to water resources, motorsports, property redevelopment and solid waste
management. The Company's long-term emphasis is on the further development of
its principal assets: (i) a 50.88% interest in Fontana Union Water Company
("Fontana Union"), a mutual water company; (ii) a 11.50% interest in Penske
Motorsports, Inc. ("PMI"), a publicly-traded professional motorsports company
that has developed the California Speedway ("TCS") on land acquired from the
Company; (iii) approximately a 73% interest in Mine Reclamation Corporation
("MRC"), the developer of the Eagle Mountain Landfill Project (the "Landfill
Project"); (iv) approximately 668 acres of the former Kaiser Steel Corporation
("KSC") steel mill site (the "Mill Site Property"); and (v) the 11,350 acre idle
iron ore mine in the California desert (the "Eagle Mountain Site"), which
includes the associated 460 acre town of Eagle Mountain ("Eagle Mountain
Townsite") and the land leased to MRC for the Landfill Project. The Company is
also pursuing other related longer-term growth opportunities on the balance of
its Mill Site Property, including the development of a transfer station and
materials recovery facility ("Mill Site MRF") and the redevelopment of
industrial and commercial parcels of land near TCS and the Mill Site MRF.
PRIMARY REVENUE SOURCES
ONGOING OPERATIONS
The Company's revenues from ongoing operations are generally derived from
the development of the Company's long-term projects. Revenues from water
resources represent payments under the lease of the Company's interest in
Fontana Union to Cucamonga County Water District ("Cucamonga"). Property
redevelopment revenues primarily reflect revenues from long-term redevelopment
activities at the Mill Site property; 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"). Income from equity method
investments reflect Kaiser's share of income related to those equity investments
(primarily PMI at this point) and joint ventures which the Company accounts for
under the equity method.
INTERIM ACTIVITIES
Revenues from interim activities are generated from various sources
primarily related to the Mill Site Property. Significant components of interim
activities include rentals under short-term tenant lease arrangements, royalty
revenues from the sale of slag to outside contractors, water and wastewater
treatment service revenues (through 1996), revenues from the sale of recyclable
materials and other miscellaneous short-term activities.
SUMMARY OF REVENUE SOURCES
Due to the development nature of certain Company projects and the Company's
continuing 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
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KAISER VENTURES INC. AND SUBSIDIARIES
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.
In addition, due to the concentration of motorsport racing events between
April and September, PMI's operations have been, and will continue to be, highly
seasonal. Except for a limited number of event week-ends in October, 1997 at TCS
and PMI's recently acquired North Carolina Speedway, PMI has no current plans to
host events in the first and fourth quarters at its existing facilities. As a
result, the Company's reported share of undistributed equity in the earnings of
PMI will likely be positive (income) in the second and third quarters and
negative (loss) in the first and fourth quarters.
RESULTS OF OPERATIONS
ANALYSIS OF RESULTS FOR THE QUARTERS ENDED JUNE 30, 1997 AND 1996
An analysis of the significant components of the Company's resource
revenues for the Quarters ended June 30, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1997 1996 % INC. (DEC)
------------ ------------ ------------
<S> <C> <C> <C>
ONGOING OPERATIONS
Water resource......................... $1,164,000 $1,000,000 16%
Property redevelopment................. 389,000 277,000 40%
Income from equity method investments.. 1,250,000 721,000 73%
---------- ----------
TOTAL ONGOING OPERATIONS.............. 2,803,000 1,998,000 40%
---------- ----------
INTERIM ACTIVITIES
Lease, service and other............... 418,000 410,000 2%
---------- ----------
TOTAL RESOURCE REVENUES............... $3,221,000 $2,408,000 34%
========== ==========
REVENUES AS A PERCENTAGE OF TOTAL
RESOURCE REVENUES:
Ongoing operations..................... 87% 83%
Interim activities..................... 13% 17%
---------- ----------
TOTAL RESOURCE REVENUES............... 100% 100%
========== ==========
</TABLE>
Resource Revenues. Total resource revenues for the second quarter of 1997
were $3,221,000, compared to $2,408,000 for 1996. Revenues from ongoing
operations increased 40% during the quarter to $2,803,000 from $1,998,000 in
1996, while revenues from interim activities increased 2% to $418,000 from
$410,000 in 1996. Revenues from ongoing operations as a percentage of total
revenues increased to 87% in 1997 from 83% in 1996.
Ongoing Operations. Water lease revenues under the Company's 102-year
take-or-pay lease with Cucamonga were $1,164,000 during the second quarter of
1997 compared to $1,000,000 for 1996. The 16% increase in water revenues during
the quarter reflects two increases; (a) an increase as of February 1, 1997 in
the effective non-interruptible untreated water rate being paid by Cucamonga
from $346.00 to $351.00 per acre foot and (b) a return to the maximum amount of
water that Cucamonga through Fontana Union can draw from the Colton/Rialto Basin
Wells. As previously disclosed, the annual amount of water available to Fontana
Union from such wells was temporarily limited to 720 acre feet from 3,000, until
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KAISER VENTURES INC. AND SUBSIDIARIES
October 1, 1996, due to low water levels detected in the Colton/Rialto Basin
Wells during 1996. In addition, as also previously disclosed, Metropolitan Water
District of Southern California ("MWD"), effective July 1, 1995, implemented
changed rates and a changed rate structure which resulted in the continuing
lease interpretation dispute with Cucamonga regarding the extent of the MWD rate
increases. Although the Company is continuing to bill Cucamonga at what it
believes is the correct MWD rate under the lease with Cucamonga, the Company has
elected to reserve the full amount in dispute and report revenues on the basis
of amounts actually received from Cucamonga. The total amount of lease payments
in dispute as of June 30, 1997 is approximately $1,073,000. In addition, MWD has
stated that it may further refine its rate structure in the near future.
Property redevelopment revenues were $389,000 for 1997 compared to $277,000
for 1996. The 40% increase from 1996 is primarily as a result of: (a) the
reclassification of the Mill Site sewer treatment plant to property
redevelopment revenues from interim activities as a result of the Company's
renovation of the plant and its renewed commitment to provide sewer services to
PMI and future Mill Site tenants ($80,000); and (b) higher rock and aggregate
sales ($36,000) at Eagle Mountain.
Income from equity method investments increased to $1,250,000 for the
second quarter of 1997 compared to $721,000 for 1996. The increase of $529,000
reflects the 63% increase in the reported second quarter net income of PMI, of
which the Company recorded its 11.93% weighted average share, ($691,000)
partially offset by the elimination of the management fee the Company received
from PMI through March 31, 1997, ($162,000). The Company's equity interest in
PMI declined, as of May 19, 1997, from 12.29% to 11.50% as a result of the
approximate 907,000 shares that PMI issued in connection with the acquisition of
a majority interest in North Carolina Motor Speedway, Inc. The Company is
recording its investment in PMI on the equity method and began recording its
share of PMI's net income concurrent with conversion of the Company's preferred
stock into common stock at the end of the first quarter of 1996.
Interim Activities. Revenues from interim activities for the second quarter
of 1997 were $418,000 compared to $410,000 for 1996. The 2% increase in revenues
from interim activities in 1997 is primarily attributable to increases in
railroad switching revenue ($54,000) and slag revenue ($53,000) offset by lower
revert, tenant service and scrap revenues ($39,000) and the reclassification of
the sewer treatment plant from interim activities to property redevelopment
revenues ($53,000).
Resource Operating Costs. Resource operating costs are those costs
directly related to the resource revenue sources. Total resource operating costs
for the second quarter of 1997 increased to $874,000 from $830,000 in 1996.
Operations and maintenance costs for 1997 were $326,000 compared to $261,000 for
1996. The 25% increase in 1997 operations and maintenance costs was primarily
due to higher property tax expense associated with the completed offsite
improvements for portions of the Mill Site property ($32,000) and increased
maintenance and supplies costs for buildings and equipment ($30,000).
Administrative support expenses for the second quarter of 1997 decreased 4% to
$548,000 from $569,000 for 1996. The decrease was primarily due to decreases in
outside professional costs ($65,000) being partially offset by increases in
insurance expense relating to the addition of environmental pollution coverage
for the Mill Site ($23,000) and depreciation expense relating to the newly
completed railroad and sewer plant improvements at the Mill Site ($14,000).
Corporate General and Administrative Expenses. Corporate general and
administrative expenses for the second quarter of 1997 increased 15% to
$1,059,000 from $920,000 for 1996. The increase is primarily due higher
professional and outside consulting expenses ($128,000).
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KAISER VENTURES INC. AND SUBSIDIARIES
Net Interest Expense. Net interest expense for the second quarter of 1997
was $237,000 compared to $139,000 in 1996. The increase was due primarily to the
interest expense associated with $3,000,000 in increased borrowings under the
Union Bank of California N.A. ("Union Bank") credit facility.
Pre-Tax Income and Income Tax Provision. The Company recorded income before
income tax provision of $1,051,000 for the second quarter of 1997, a 103%
increase from the $519,000 recorded in 1996. An income tax expense of $447,000
was recorded in the second quarter of 1997 as compared with an income tax
provision $225,000 in 1996. Historically, over 90% of the tax provisions 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.
Net Income. For second quarter of 1997, the Company reported net income of
$604,000, or $.06 per share, a 105% increase from the net income of $294,000, or
$.03 per share, reported for 1996.
ANALYSIS OF RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
An analysis of the significant components of the Company's resource
revenues for the six months ended June 30, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1997 1996 % INC. (DEC)
------------ ------------ -------------
<S> <C> <C> <C>
ONGOING OPERATIONS
Water resource......................... $2,297,000 $2,116,000 9%
Property redevelopment................. 731,000 540,000 35%
Income from equity method investments.. 1,227,000 884,000 39%
---------- ----------
TOTAL ONGOING OPERATIONS.............. 4,255,000 3,540,000 20%
---------- ----------
INTERIM ACTIVITIES
Lease, service and other............... 803,000 885,000 (9%)
---------- ----------
TOTAL RESOURCE REVENUES............... $5,058,000 $4,425,000 14%
========== ==========
REVENUES AS A PERCENTAGE OF TOTAL
RESOURCE REVENUES:
Ongoing operations..................... 84% 80%
Interim activities..................... 16% 20%
---------- ----------
TOTAL RESOURCE REVENUES............... 100% 100%
========== ==========
</TABLE>
Resource Revenues. Total resource revenues for the six months of 1997 were
$5,058,000, compared to $4,425,000 for 1996. Revenues from ongoing operations
increased 20% during the six months to
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KAISER VENTURES INC. AND SUBSIDIARIES
$4,255,000 from $3,540,000 in 1996, while revenues from interim activities
declined 9% to $803,000 from $885,000 in 1996. Revenues from ongoing operations
as a percentage of total revenues increased to 84% in 1997 from 80% in 1996.
Ongoing Operations. Water lease revenues under the Company's 102-year
take-or-pay lease with Cucamonga were $2,297,000 during the six months of 1997
compared to $2,116,000 for 1996. The 9% increase in water revenues during the
six months reflects two increases; (a) an increase as of February 1, 1997 in the
effective non-interruptible untreated water rate being paid by Cucamonga from
$346.00 to $351.00 per acre foot and (b) a return to the maximum amount of water
that Cucamonga through Fontana Union can draw from the Colton/Rialto Basin
Wells. As previously disclosed, the annual amount of water available to Fontana
Union was temporarily limited to 720 acre feet from 3,000, until October 1,
1996, due to low water levels detected in the Colton/Rialto Basin Wells during
1996. In addition, as also previously disclosed, Metropolitan Water District of
Southern California ("MWD"), effective July 1, 1995, implemented changed rates
and a changed rate structure which resulted in the continuing lease
interpretation dispute with Cucamonga regarding the extent of the MWD rate
increases. Although the Company is continuing to bill Cucamonga at what it
believes is the correct MWD rate under the lease with Cucamonga, the Company has
elected to reserve the full amount in dispute and report revenues on the basis
of amounts actually received from Cucamonga. The total amount of lease payments
in dispute as of June 30, 1997 is approximately $1,073,000. In addition, MWD has
stated that it may further refine its rate structure in the near future.
Property redevelopment revenues were $731,000 for 1997 compared to $540,000
for 1996. The 35% increase from 1996 is primarily as a result of: (a) the
reclassification of the Mill Site sewer treatment plant to property
redevelopment revenues from interim activities as a result of the Company's
renovation of the plant and its renewed commitment to provide sewer services to
PMI and future Mill Site tenants ($136,000); and (b) higher iron ore and
aggregate sales ($55,000).
Income from equity method investments increased to $1,227,000 for the six
months of 1997 compared to $884,000 for 1996. The increase of $343,000 reflects
the increase in the net income of PMI for the six months, of which the Company
recorded its 12.11% share, ($506,000), partially offset by the elimination of
the management fee which the Company received from PMI through March 31, 1997,
($163,000). The Company's equity interest in PMI declined, as of May 19, 1997,
from 12.29% to 11.50% as a result of the approximate 907,000 shares that PMI
issued in connection with the acquisition of a majority interest in North
Carolina Motor Speedway, Inc. The Company is recording its investment in PMI on
the equity method and began recording its share of PMI's net income concurrent
with conversion of the Company's preferred stock into common stock at the end of
the first quarter of 1996.
Interim Activities. Revenues from interim activities for the six months of
1997 were $803,000 compared to $885,000 for 1996. The 9% decrease in revenues
from interim activities in 1997 is primarily attributable to lower revert,
tenant service and scrap revenues ($138,000) and the reclassification of the
sewer treatment plant from interim activities to property redevelopment revenues
($106,000); offset by increases in tenant rental revenue ($40,000), railroad
switching revenue ($83,000), and slag revenue ($67,000).
Resource Operating Costs. Resource operating costs are those costs directly
related to the resource revenue sources. Total resource operating costs for the
six months of 1997 increased to $1,707,000 from $1,554,000 in 1996. Operations
and maintenance costs for 1997 were $631,000 compared to $509,000 for 1996. The
24% increase in 1997 operations and maintenance costs was primarily due to
higher property tax expense associated with the completed offsite improvements
for portions of the Mill Site property ($60,000)
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KAISER VENTURES INC. AND SUBSIDIARIES
and increased maintenance and supplies costs for buildings and equipment
($46,000). Administrative support expenses for the six months of 1997 increased
3% to $1,076,000 from $1,045,000 for 1996. The increase was primarily due to
increases in insurance expense relating to the addition of environmental
pollution coverage for the Mill Site ($52,000) and depreciation expense relating
to the newly completed railroad and sewer plant improvements at the Mill Site
($22,000), partially offset by lower salaries and outside professional costs
($42,000).
Corporate General and Administrative Expenses. Corporate general and
administrative expenses for the six months of 1997 increased 16% to $2,175,000
from $1,878,000 for 1996. The increase is due to higher professional and outside
consulting expenses ($279,000).
Net Interest Expense. Net interest expense for the six months of 1997 was
$420,000 compared to $250,000 in 1996. The increase was due primarily to the
interest expense associated with $3,000,000 in increased borrowings under the
Union Bank credit facility.
Pre-Tax Income and Income Tax Provision. The Company recorded income before
income tax provision of $756,000 for the six months of 1997, a 2% increase from
the $743,000 pretax income recorded in 1996. An income tax provision of $326,000
was recorded in the six months of 1997 as compared with $322,000 in 1996.
Historically, over 90% of the tax provisions 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.
Net Income. For six months of 1997, the Company reported net income of
$430,000, or $.04 per share, a 2% increase from the $421,000, or $.04 per share,
reported for 1996.
COMPREHENSIVE INCOME
The Financial Accounting Standards Board ("FASB") proposed, in 1996, a new
accounting standard concerning the reporting of comprehensive income. In June
1997, FASB Statement No. 130, Comprehensive Income was issued. Comprehensive
income was defined in the proposed standard as the aggregate of all changes in
shareholders' equity that occurred during the reporting periods other than
changes resulting from equity transactions with shareholders. The Statement
currently excludes the two items that the Company had previously disclosed in
the Management's Discussion and Analysis section of its 1996 Form 10-K as
comprehensive income: the increase in investment in Penkse Motorsports, Inc. due
to the Initial Public Offering, and the deferred income tax credited to equity
as a result of the reorganization. The FASB may in the future, consider whether
items such as the increase in equity due to an Initial Public Offering could be
included in Comprehensive Income. As a result, the Company has elected not to
adopt FASB 130 prior to its required adoption date, which would be the Company's
fiscal year ending December 31, 1998.
SECTION 2: FINANCIAL POSITION
Cash, and Cash Equivalents. The Company defines cash equivalents as highly
liquid debt instruments with original maturities of 90 days or less. Cash and
cash equivalents decreased $3,748,000 to $4,734,000 at June 30, 1997 from
$8,482,000 at December 31, 1996. Included in cash and cash equivalents is
$1,823,000 and $1,766,000 held solely for the benefit of MRC at June 30, 1997
and December 31, 1996, respectively. The decrease in cash and cash equivalents
is due primarily to the $4,819,000 in capital expenditures and $968,000 in
environmental remediation, incurred during the first six months of 1997.
Working Capital. During the six months of 1997, current assets decreased
$1,008,000 to $10,810,000 while current liabilities increased $910,000 to
$13,968,000. The decrease in current assets resulted primarily from the
$3,748,000 decrease in cash and cash equivalents, discussed above, partially
offset by a
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KAISER VENTURES INC. AND SUBSIDIARIES
$2,740,000 increase in accounts receivable, associated with costs and expenses
that are reimbursable from PMI and the West Valley MRF, LLC. The increase in
current liabilities resulted primarily from increase in vendor payables related
to capital projects. Also included in current liabilities at June 30, 1997 and
December 31, 1996 is $6,286,000 and $5,757,000, respectively, for environmental
remediation expenditures expected to be incurred over the next 12 months.
Finally current liabilities at June 30, 1997, and December 31, 1996 include
$1,815,000 and $1,616,000, respectively, in accounts payable and accrued
liabilities relating to MRC. As a result, working capital decreased during the
six months of 1997 by $1,918,000 to a negative $3,158,000 at June 30, 1997.
Real Estate. Real Estate decreased $1,275,000 during the six months of 1997
due to the closing of the Company's restructured joint venture with Burrtec
Waste Industries for the West Valley MRF and the resulting contribution of 23
acres of land into West Valley MRF, LLC, ($2,199,000) being partially offset by
capital expenditures related to continued redevelopment of the Mill Site
properties ($924,000).
Investments. The increase in investment in PMI is related to the Company's
recording of its share of equity in PMI's undistributed income during the six
months of 1997 ($1,115,000). The increase in investment in West Valley MRF, LLC
($1,302,000) is due to contributing the land into the joint venture ($1,750,000)
offset by a reclass of $448,000 to accounts receivable relating to development
costs which are reimbursable from the joint venture.
Other Assets. The increase in other assets is primarily related to
approximately $2.6 million of capitalized landfill permitting and development
costs incurred by MRC during the first six months of 1997, and $580,000 in
improvements to the sewer treatment plant.
Environmental Remediation. As is discussed extensively in the Company's
1996 Form 10-K Report, the Company estimates, based upon current information,
that its future remediation and other environmental costs for the balance of its
land and related matters, including groundwater and other possible third party
claims, will be between approximately $20 million and $32 million, depending
both upon the ultimate extent of the environmental remediation and clean-up
effort involved and which approved remediation alternatives are eventually
selected. In addition, the Company elected, in 1996, to restate its balance
sheets to show as a separate liability rather than, as previously, an offset to
land, the amount of future environmental related costs reflected in its
financial statements. The restatement reflects the original $34.7 million
remediation adjustment to land; the $6.6 million groundwater remediation reserve
recorded in 1988 when the Company emerged from bankruptcy as the reorganized
successor of KSC; and the net $12.5 million in environmental insurance
litigation settlement proceeds received in 1995 being offset by approximately
$22.3 million in remediation and other environmental costs expended through June
30, 1997.
As of June 30, 1997, the total short-term and long-term environmental
liabilities including remediation reflected on the Company's balance sheet was
approximately $31.5 million, the high end of the probable range of future
remediation and other environmental costs, which declined from the $32.2 million
as of December 31, 1996. The decrease is a result, primarily, of the $725,000 in
remediation and other environmental costs incurred in the six months of 1997 on
the Mill Site property.
Although ongoing environmental investigations are being conducted on the
Mill Site Property and management believes it is currently in a position to
estimate with some reasonable certainty future investigation and remediation
costs, there can be no assurance that the actual amount of environmental
remediation expenditures to be incurred 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.
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KAISER VENTURES INC. AND SUBSIDIARIES
Long-term Debt. As of June 30, 1997, the Company had $9,982,000 in long-
term debt comprised of $4,982,000 of debt issued as part of the purchase of
properties from the Lusk Joint Ventures in July 1994 and $5,000,000 borrowed
under the $30,000,000 revolving-to-term credit facility with Union Bank. The
Company increased its borrowing under the credit facility with Union Bank by
$2,000,000 in June 1997.
Long-term Liabilities. The decrease in other long-term liabilities is
primarily due to the $1,228,000 in environmental remediation undertaken during
the six months of 1997.
Minority Interest and Other Liabilities. As of June 30, 1997, the Company
has recorded $2,285,000 of minority interest relating to MRC in which the
Company had a pproximately a 73% equity interest.
Contingent Liabilities. The Company has contingent liabilities more fully
described in the notes to the financial statements.
Stockholders' Equity. The $991,000 increase in stockholders' equity for the
six months ended June 30, 1997 included, net income ($430,000), issuance of
common stock ($258,000), and deferred tax expense credited to equity due to
the utilization of the Company's reorganization NOL carryfowards ($303,000).
(See Note 2).
SECTION 3: BUSINESS OUTLOOK
The statements contained in this Business Outlook are based upon current
expectations. In addition to the forward-looking statements and information
contained elsewhere in this Report and the Company's previously filed Form 10-K
and Form 10-Q Reports, these statements are forward-looking and, therefore,
actual results may differ materially.
On-Going Operations. As noted above, the Company's revenues from ongoing
operations are generally derived from the development of the Company's major
long-term projects and investments. The development of a number of these
projects and investments, such as the take-or-pay lease with Cucamonga and the
11.50% equity ownership in PMI, are essentially complete and the Company is
recognizing significant revenues and income from these investments. The Company
expects revenues from these projects and investments to increase moderately over
time as certain key economic factors impacting these projects and investments
increase.
In regard to the lease with Cucamonga, the most significant economic factor
affecting future water lease revenues is likely to be adjustments in the MWD
rate for untreated and non-interruptible water as available through the Chino
Basin Municipal Water District (the "Lease Rate") upon which the lease payments
are calculated. The MWD rate established for untreated, non-interruptible water
is based on a number of factors, including MWD's need for funds to finance
capital improvements and to cover large fixed overhead costs. After increasing
at an average of over 9.0% per year during the past 35 years, MWD is projecting
that the MWD rate for untreated, non-interruptible water, including all of the
changed rates and charges implemented by MWD since July 1, 1995, will likely
increase at less than 5.0% per year for the next 3-5 years. This reduction is
due to a reduced capital budget, lower overhead, lower borrowing costs and
reduced levels of inflation. Also affecting the Company's future water lease
revenues is the dispute with Cucamonga regarding the calculation of the Lease
Rate. A ruling in favor of the Company would result in the receipt of all or a
portion of the $1,073,000 of lease payments in dispute as of June 30, 1997,
which the Company has fully reserved.
In regard to the Company's 11.50% investment in PMI, the most significant
factors affecting the Company's future equity income from PMI will be the
increased revenues and net income generated by PMI from the expansion of its
professional motorsports operations. Critical to this expansion is the success
of TCS as well as PMI's ability to enhance the revenues and earnings from its
two recent major acquisitions: a 70% interest in North Carolina Motorspeedway,
Inc. and a 40% interest in Homestead-Miami Speedway, LLC.
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KAISER VENTURES INC. AND SUBSIDIARIES
The success of the events at TCS and at the newly acquired race tracks, coupled
with the results of the other major racing events schedule for PMI's MIS and
Nazareth speedways and PMI's other motorsports related operations, will
determine the amount of income from equity method investments the Company
reports in the future.
The Company is also spending a significant amount of capital in the
continued development of its two other major project and investment
opportunities: the redevelopment of the remaining approximately 668 acres
(gross) of the Company's Mill Site Property and the re-permitting of the Eagle
Mountain Landfill by MRC, the Company's 73% owned subsidiary. If it is
successful in completing the development of these two projects as planned, the
Company expects to generate significant future revenues and net income from
them. However, as is noted elsewhere in this Report, there are also numerous
risks associated with completing the re-permitting of the Eagle Mountain
Landfill and the redevelopment of the remaining Mill Site Property that could
materially impact the Company's future revenues and net income from these
projects.
In regard to the redevelopment of the remaining approximately 668 acres
(gross) of the Mill Site Property, the Company is currently undertaking efforts
to obtain the entitlement and permits necessary to develop the approximately 668
acres for a variety of possible commercial, industrial and recreational uses.
These efforts, which will continue throughout 1997 and into 1998, include the
approval of possible changes that would alter and improve the existing access to
portions of the Mill Site Property. In support of these efforts, the Company
expects to spend, in 1997, up to approximately $7.0 million for required
environmental remediation and approximately $3.5 million for real estate
entitlement and improvement expenditures. The $7.0 million to be spent in 1997
for required environmental remediation is a component of the $20-32 million
estimate to complete all remaining required remediation for the Mill Site
Property. In addition, substantial capital expenditures beyond the $3.5 million
projected for 1997 will be required to complete the necessary on-site and off-
site improvements for the redevelopment of remaining Mill Site property.
The West Valley MRF, which the Company and Burrtec Waste Industries Inc.
jointly own, is under construction on 23 acres of the Mill Site property
adjacent to TCS. Financing for the construction of the West Valley MRF is in
place and the facility is expected to be in operation prior to the end of 1997.
The ultimate success of West Valley MRF is dependent upon the ability of Burrtec
Waste Industries Inc. to negotiate economically viable agreements with local
communities and waste handlers to bring their municipal and recyclable waste to
the West Valley MRF.
In regard to the Eagle Mountain Landfill, MRC continues to pursue the
activities necessary to re-permit the Landfill Project. The final EIR/EIS was
completed and released in January 1997 and on May 7, 1997 the Riverside County
Planning Commission voted to approve the EIR and forward its recommendations to
the Riverside County Board of Supervisors. The Riverside Board of Supervisors is
currently considering the Landfill Project with a vote currently anticipated
during August, 1997. In addition, if the Landfill Project is approved, the
Company anticipates further litigation by the opponents to the Landfill Project
in state and federal court in an effort to block the Landfill Project. The
Company currently expects to spend approximately $3.7 million for support of
MRC's landfill re-permitting efforts in 1997 and approximately an additional
$1.9 million in 1998.
Capital Resources. The Company expects that its current cash balances and
short-term investments together with: (a) cash provided from operating
activities; (b) amounts available under its revolving-to-term credit facility
with Union Bank (less $2,832,000 in reductions in the borrowing base and
$5,510,000 reserved for financial assurances required by the DTSC and relating
to environmental remediation on the
16
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
Mill Site Property) will be sufficient to satisfy both the Company's near-term
operating cash requirements and to enable the Company to continue to fund the
development of its long-term projects and investments. As was discussed in more
detail above, the Company expects to commit, in 1997, a total of approximately
$14.2 million for capital projects and investments. To the extent that
additional capital resources are required, such capital will be raised through
bank borrowings, partnerships, joint venture arrangements, additional equity or
the sales or monetization of assets.
Improved Cash Flow from Use of Net Operating Loss Tax Carryforwards. Due to
the Company's status as the reorganized 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
June 30, 1997, are estimated to be approximately $107,000,000 for federal
purposes and $11,000,000 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.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
17
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents................ $ 4,734,000 $ 8,482,000
Accounts receivable and other, net of
allowance for doubtful accounts of
$1,387,000 and $1,034,000, respectively.. 5,957,000 3,217,000
Insurance settlement receivable........... 119,000 119,000
------------ ------------
10,810,000 11,818,000
------------ ------------
Investment in common stock of Penske
Motorsports, Inc. (Fair market value of
1,627,923 shares equal to $53,005,000
as of June 30, 1997)....................... 38,863,000 39,978,000
------------ ------------
Investment in Fontana Union Water
Company.................................... 16,108,000 16,108,000
------------ ------------
Investment in West Valley MRF............... 2,326,000 1,024,000
------------ ------------
Real Estate
Land and improvements.................... 52,980,000 52,274,000
Real estate under development............ 4,412,000 6,393,000
------------ ------------
57,392,000 58,667,000
------------ ------------
Other Assets
Landfill permitting and development..... 8,287,000 5,645,000
Buildings and equipment (net)........... 2,668,000 2,210,000
------------ ------------
10,955,000 7,855,000
------------ ------------
Total Assets.............................. $137,569,000 $134,335,000
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
18
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
-------------- -------------
<S> <C> <C>
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable..................... $ 2,796,000 $ 2,936,000
Accrued liabilities.................. 4,646,000 4,125,000
Current portion of long-term debt.... 240,000 240,000
Environmental remediation............ 6,286,000 5,757,000
------------ ------------
13,968,000 13,058,000
------------ ------------
Long-term Liabilities
Accrued liabilities.................. 1,699,000 1,685,000
Deferred tax liabilities............. 1,958,000 1,958,000
Long-term debt....................... 9,982,000 8,102,000
Environmental remediation............ 25,238,000 26,466,000
------------ ------------
38,877,000 38,211,000
------------ ------------
Total Liabilities....................... 52,845,000 51,269,000
------------ ------------
Minority Interest....................... 2,285,000 1,618,000
------------ ------------
Commitments and Contingencies
Stockholders' Equity
Common stock, par value $.03 per
share, authorized
13,333,333 shares; issued and
outstanding
10,515,775 and 10,488,114
respectively....................... 316,000 315,000
Capital in excess of par value....... 70,997,000 70,437,000
Retained earnings since November 15, 11,126,000 10,696,000
1988................................ ------------ ------------
Total Stockholders' Equity.............. 82,439,000 81,448,000
------------ ------------
Total Liabilities and Stockholders' $137,569,000 $134,335,000
Equity................................. ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
19
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------------- ----------------------------
1997 1996 1997 1996
-------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
RESOURCE REVENUES
Ongoing Operations
Water resource........................ $ 1,164,000 $ 1,000,000 $ 2,297,000 $ 2,116,000
Property redevelopment................ 389,000 277,000 731,000 540,000
Income from equity method investments. 1,250,000 721,000 1,227,000 884,000
----------- ----------- ----------- -----------
Total ongoing operations............. 2,803,000 1,998,000 4,255,000 3,540,000
----------- ----------- ----------- -----------
Interim Activities
Lease, service and other.............. 418,000 410,000 803,000 885,000
----------- ----------- ----------- -----------
Total resource revenues.............. 3,221,000 2,408,000 5,058,000 4,425,000
----------- ----------- ----------- -----------
RESOURCE OPERATING COSTS
Operations and maintenance............. 326,000 261,000 631,000 509,000
Administrative support expenses........ 548,000 569,000 1,076,000 1,045,000
----------- ----------- ----------- -----------
Total resource operating costs....... 874,000 830,000 1,707,000 1,554,000
----------- ----------- ----------- -----------
INCOME FROM RESOURCES................... 2,347,000 1,578,000 3,351,000 2,871,000
Corporate general and administrative 1,059,000 920,000 2,175,000 1,878,000
expenses ----------- ----------- ----------- -----------
INCOME FROM OPERATIONS.................. 1,288,000 658,000 1,176,000 993,000
Net Interest expense................... 237,000 139,000 420,000 250,000
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAX PROVISION...... 1,051,000 519,000 756,000 743,000
Income tax provision
Currently payable..................... 16,000 16,000 23,000 23,000
Deferred tax expense credited to 431,000 209,000 303,000 299,000
equity............................... ----------- ----------- ----------- -----------
NET INCOME.............................. $ 604,000 $ 294,000 $ 430,000 $ 421,000
=========== =========== =========== ===========
EARNINGS PER SHARE...................... $ .06 $ .03 $ .04 $ .04
=========== =========== =========== ===========
Weighted Average Number of Shares
Outstanding............................ 10,762,000 10,711,000 10,747,000 10,730,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
20
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................. $ 430,000 $ 421,000
Provision for income tax which is
credited to equity......................... 303,000 299,000
Equity income in Penske Motorsports (1,065,000) (559,000)
Inc........................................
Depreciation and amortization............... 378,000 336,000
Allowance for doubtful accounts............. 353,000 (133,000)
Changes inassets:
Accounts receivable and other............. (736,000) 7,419,000
Changes in liabilities:
Current liabilities....................... 129,000 (3,540,000)
----------- -----------
Net cash flows from operating
activities................................. (208,000) 4,243,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Minority interest and other liabilities..... 667,000 543,000
Investment in Penske Motorsports, Inc....... --- 249,000
Environmental remediation expenditures...... (968,000) (3,777,000)
Capital expenditures........................ (4,819,000) (5,101,000)
Other investments........................... (225,000) (211,000)
----------- -----------
Net cash flows from investing
activities................................. (5,345,000) (8,297,000)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock.................... 75,000 121,000
Borrowings under revolver-to-term
credit facility............................ 2,000,000 ---
Payment of loan fees........................ (150,000) ---
Principal payments on note payable.......... (120,000) (120,000)
----------- -----------
NET CASH FLOWS FROM FINANCING ACTIVITIES..... 1,805,000 1,000
----------- -----------
NET CHANGES IN CASH AND CASH EQUIVALENTS..... (3,748,000) (4,053,000)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR..................................... 8,482,000 10,863,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF THE
PERIOD...................................... $4,734,000 $6,810,000
=========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
21
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN
----------------------- EXCESS OF RETAINED
SHARES AMOUNT PAR VALUE EARNINGS TOTAL
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996... 10,488,114 $315,000 $70,437,000 $10,696,000 $81,448,000
Issuance of shares of
Common stock............ 27,661 1,000 257,000 --- 258,000
Provision for income tax
Credited to equity...... --- --- 303,000 --- 303,000
Net Income.................. --- --- --- 430,000 430,000
---------- --------- ----------- ----------- -----------
Balance at June 30, 1997....... 10,515,775 $316,000 $70,997,000 $11,126,000 $82,439,000
========== ========= =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
22
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The unaudited, consolidated financial statements as of June 30, 1997, and
for the three and six month periods ended June 30, 1997 and 1996, as well as
related notes should be read in conjunction with the audited consolidated
financial statements and related notes as of and for the year ended December 31,
1996. In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary (all of which are normal and/or
recurring in nature) to present fairly the Company's financial position at June
30, 1997, and results of operations and cash flows for the three and six month
periods ended June 30, 1997 and 1996.
The Company has reclassified certain 1996 information to conform with the
1997 presentation.
NOTE 2. STOCKHOLDERS' EQUITY
During 1997 and 1996 the Company recorded transactions directly to
stockholders' equity other than changes resulting from net income or equity
transactions with shareholders. These transactions include deferred tax expense
credited to equity due to the utilization of the Company's reorganization NOL
carryforwards, and the increase in equity due to the Penske Motorsports, Inc.
Initial Public Offering in March 1996. These amounts for the three and six
months ended June 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Deferred tax expense credited to equity.................... $431,000 $209,000 $303,000 $ 299,000
Investment increase in Penske Motorsports, Inc............. - - - 6,116,000
-------- -------- -------- ----------
$431,000 $209,000 $303,000 $6,415,000
======== ======== ======== ==========
</TABLE>
NOTE 3. CUCAMONGA LEASE
The Company, through a wholly-owned subsidiary, Fontana Water Resources,
Inc., leases its 50.88% ownership of the capital stock of Fontana Union, a
mutual water company, to Cucamonga County Water District ("Cucamonga") pursuant
to a take-or-pay lease (the "Cucamonga Lease") that terminates in the year 2092.
The Company continues its litigation with Cucamonga in San Bernardino County
Superior Court to resolve a dispute over the interpretation of the Cucamonga
Lease. The dispute centers upon whether or not the Lease Rate in the Cucamonga
Lease should be interpreted as the Company asserts to include all the changed
rates and items implemented by Metropolitan Water District of Southern
California ("MWD") since July 1, 1995. Cucamonga continues to pay under the
terms of the Cucamonga Lease, but at a rate substantially less than the Lease
Rate that the Company maintains it is entitled to receive pursuant to the
Cucamonga Lease. Although the Company is continuing to bill Cucamonga at what it
believes is the correct Lease Rate, the Company has elected to reserve the full
amount in dispute and report revenues on
23
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
the basis of amounts received. The total amount of lease payments in dispute as
of June 30, 1997 is approximately $1,073,000.
NOTE 4. INVESTMENT IN WEST VALLEY MRF, LLC
The Company and Burrtec Waste Industries, Inc. ("Burrtec"), a
privately-held company, completed their revised agreement for the development,
construction and operation of the West Valley MRF, a municipal solid waste
transfer and recovery facility. Effective June 19, 1997, Kaiser Recycling
Corporation ("KRC") and West Valley Recycling & Transfer, Inc. ("WVRT"),
Burrtec's wholly owned subsidiary, which are the members of the newly created
limited liability company, West Valley MRF, LLC, entered into a Members
Operating Agreement which is substantially the equivalent of a joint venture
agreement but for a limited liability company. The West Valley MRF is under
construction and is expected to be completed during the fourth quarter of this
year.
Pursuant to the terms of the Members Operating Agreement, KRC contributed
an approximately 23 acre parcel of the Mill Site on which Phase 1 of the West
Valley MRF is being constructed and WVRT contributed all of the goodwill of
Burrtec's recycling business presently operated out of Riverside County
entitling West Valley MRF, LLC to all revenues generated from such business
after the closing date.
Most of the financing for Phase 1's projected cost of approximately
$10,300,000, including reimbursement of many of the previously incurred
development costs of Burrtec and the Company, was obtained through the issuance
and sale of $9,500,000 in California Pollution Control Financing Authority (the
"Authority") Variable Rate Demand Solid Waste Disposal Revenue Bonds (West
Valley MRF, LLC Project) Series 1997A (the "Bonds"). The Bonds are secured by an
irrevocable letter of credit issued by Union Bank of California, N.A. ("Union
Bank"). The Bonds have a stated maturity date of June 1, 2012, although West
Valley MRF, LLC is required pursuant to its agreement with Union Bank to
annually redeem a portion of the Bonds on a stated schedule. Pursuant to a
Guaranty Agreement with Union Bank the Company and KRC are liable for fifty
percent (50%) of the principal and interest on the Bonds in the event of a
default by the West Valley MRF, LLC.
The Company will be accounting for its investment in West Valley MRF, LLC
under the equity method.
NOTE 5. INVESTMENT IN PENSKE MOTORSPORTS, INC.
The Company currently owns 1,627,923 shares, or approximately 11.50% of the
outstanding common stock of PMI. Effective May 19, 1997, PMI issued
approximately 907,000 shares of its common stock to acquire the majority
interest in North Carolina Motorspeedway, Inc., the owner and operator of an
approximately 1 mile oval track in Rockingham, North Carolina. That transaction
resulted in the dilution of the Company's percentage of ownership in PMI from
12.29% to 11.50%. North Carolina Motorspeedway hosts two NASCAR Winston Cup
series races, two NASCAR Busch Grand National Races and the annual Unocal
76/Rockingham Pit Crew Championship.
24
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
NOTE 6. SUPPLEMENTAL CASH FLOW INFORMATION
During the six months ended June 30, 1997 the Company issued $258,000 of
common stock for payment of 1996 bonuses and 1997 compensation.
NOTE 7. COMMITMENTS AND CONTINGENCIES
The Company guaranteed fifty percent (50%) of the principal and interest on
$9.5 million in tax exempt variable interest rate bonds issued in connection
with the construction of the West Valley MRF.
ENVIRONMENTAL CONTINGENCIES
The Company estimates, based upon current information, that its future
remediation and other environmental costs, including groundwater and other
possible third party claims, will be between approximately $20 million and $31.5
million, depending both upon the ultimate extent of the environmental
remediation and the cleanup effort involved and which approved remediation
alternatives are eventually selected.
Although ongoing environmental investigations are being conducted on the
Company's property and the Company has recorded a $31.5 million environmental
remediation liability that it believes is a reasonable estimate of future
remediation and other environmental costs, there can be no assurance that the
actual amount of environmental remediation expenditures incurred will not
substantially exceed those currently recorded or that additional areas of
contamination may not be identified. Accordingly, future facts and circumstances
could cause these estimated liabilities to change significantly.
The Company anticipates recovery of the remediation costs incurred through
redevelopment of the property, primarily in connection with specific
redevelopment projects or joint ventures. Further, the Company has provided
certain financial assurances to the DTSC in connection with the anticipated
remediation activities, the primary one being the dedication of approximately
$5.5 million of Kaiser's Union Bank Credit facility.
Finally, as disclosed in the Company's 1996 Form 10-K Report, 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.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
25
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
PART II
ITEM 1. LEGAL PROCEEDINGS
As discussed in the Company's Form 10-K Report for 1996, the Company is
engaged in certain claims and litigation, which if resolved adverse to the
Company or the Company's interests, would have a material adverse impact on the
Company. There were no material developments in any legal proceeding in the
second quarter of 1997.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
On June 23, 1997, the Company held its annual meeting of stockholders.
The only action taken by the stockholders was a vote on the election of nine
directors for the Company for the ensuing year. The stockholders re-elected the
nine current members of the Board of Directors. The vote on each nominee to the
Board was as follows:
<TABLE>
<CAPTION>
ELECTION TO THE BOARD OF DIRECTORS VOTES FOR VOTES WITHHELD
VOTES FOR
<S> <C> <C>
Ronald E. Bitonti....................... 6,212,998 21,787
Todd G. Cole............................ 6,215,139 19,646
Reynold C. MacDonald.................... 6,220,871 13,914
William J. Morgan....................... 6,219,544 15,241
Charles E. Packard...................... 6,230,128 4,657
Thomas S. Rabone........................ 6,224,104 10,681
Lyle B. Stevenson....................... 6,219,371 15,414
Richard E. Stoddard..................... 6,229,619 5,166
Marshall F. Wallach..................... 6,229,942 4,843
</TABLE>
ITEM 5. OTHER INFORMATION
See the "Introduction" Section of this Form 10-Q Report.
26
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
A. Exhibits
--------
<S> <C>
Exhibit 10.1 Members Operating Agreement dated June 19, 1997 between Kaiser
Recycling Corporation and West Valley Recycling & Transfer, Inc.
Exhibit 10.1.1 Performance Guaranty and Indemnification Agreement (KRC
Obligations) dated June 19, 1997 given by Kaiser Ventures Inc.
for the benefit of West Valley MRF, LLC and West Valley
Recycling & Transfer, Inc.
Exhibit 10.2 Loan Agreement dated as of June 1, 1997 between West Valley MRF,
LLC and California Pollution Control Financing Authority.
Exhibit 10.2.1 Indenture Agreement dated as of June 1, 1997 between California
Pollution Control Financing Authority and BNY Western Trust
Company for the benefit of $9,500,000 California Pollution
Control Financing Authority Variable Rate Demand Solid Waste
Disposal Revenue Bonds (West Valley MRF, LLC Project) Series
1997A
Exhibit 10.3 Remarketing Agreement dated as of June 1, 1997, and among West
Valley MRF, LLC and Westhoff, Cone & Holmstedt and Smith Barney,
Inc. with regard to $9,500,000 California Pollution Control
Financing Authority Variable Rate Demand Stock Waste Disposal
Revenue Bonds (West Valley MRF, LLC Project) Series 1997A
Exhibit 10.4 Reimbursement Agreement dated as of June 1, 1997 between West
Valley MRF, LLC and Union Bank of California, N.A.
Exhibit 10.4.1 Guaranty and Mandatory DSR Agreement dated as of June 1, 1997
given by Kaiser Ventures Inc. and Kaiser Recycling Corporation
for the benefit of Union Bank of California, N.A.
Exhibit 10.5 Environmental Compliance Agreement dated as of June 19, 1997
between West Valley MRF, LLC and Union Bank of California, N.A.
Exhibit 10.5.1 Environmental Guaranty Agreement dated as of June 19, 1997 given
by Kaiser Ventures Inc. and Kaiser Recycling Corporation for the
benefit of Union Bank of California, N.A.
Exhibit 27 Financial Data Schedule for second quarter 10-Q.
B. Reports on Form 8-K.
--------------------
None.
</TABLE>
27
<PAGE>
KAISER VENTURES INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
KAISER VENTURES INC.
Dated: August 13, 1997 /s/ James F. Verhey
-------------------
James F. Verhey
Principal Financial Officer
28
<PAGE>
EXHIBIT 10.1
MEMBERS OPERATING AGREEMENT
OF
WEST VALLEY MRF, LLC
<PAGE>
INDEX
<TABLE>
<CAPTION>
ITEM PAGE NO.
- --------- --------
<C> <S> <C>
ARTICLE 1 Information............................. 1
1.1 Date and Parties........................ 1
1.2 Recitals................................ 1
1.3 Formation of the Company................ 2
1.4 Term.................................... 2
1.5 Purpose, Objectives, and Business of
the Company............................. 2
1.6 Index of Definitions.................... 3
ARTICLE 2 General Provisions...................... 5
2.1 Place of Business....................... 5
2.2 Kaiser's Obligations.................... 5
2.3 WVRT's Obligations...................... 9
2.4 Standard of Duty and Conduct............ 10
ARTICLE 3 Capital Contributions................... 11
3.1 Capital Accounts........................ 11
3.2 Initial Capital Contributions........... 12
3.3 Additional Capital Contributions in
General................................. 12
3.4 Failure to Make Additional Capital
Contributions........................... 12
3.5 No Voluntary Contributions or
Withdrawals............................. 13
ARTICLE 4 Financial............................... 13
4.1 Contribution of the MRF Parcel,
Household Hazardous Waste Parcel and
the Tar Pits Parcel to the Company...... 13
4.2 Contribution of Goodwill of Burrtec's
Recycling Business...................... 14
4.3 Financial Institution Loans............. 15
4.4 Loans by Members........................ 15
4.5 BWI Performance Guaranty................ 15
4.6 KVI Performance Guaranty................ 15
ARTICLE 5 Management of the Company............... 16
5.1 Management of the Company Business...... 16
5.2 Executive Committee..................... 16
5.3 Members of Executive Committee.......... 16
5.4 Executive Committee Meetings and Minutes 17
5.5 Power and Authority of the Executive 17
Committee...............................
5.6 Approved Plan........................... 19
5.7 Approved Budget......................... 19
5.8 Retention of WVRT to Operate the Project 20
5.9 Members Providing Goods and Services to
the Company............................. 20
5.10 Reimbursements to Members............... 20
5.11 Emergency Costs and Disbursements....... 20
</TABLE>
i
<PAGE>
INDEX - CONTINUED
<TABLE>
<CAPTION>
ITEM PAGE NO.
- ---------- --------
<C> <S> <C>
5.12 Company Funds........................... 21
5.13 Records of Company...................... 21
5.14 Execution of Documents.................. 21
5.15 Resolution of an Impasse on Decisions... 21
ARTICLE 6 Meetings of Members..................... 22
6.1 Meetings of Members..................... 22
6.2 Quorum.................................. 22
6.3 Actions by Members and Voting Rights.... 22
6.4 Action by Consent without Meeting....... 23
6.5 Record Date............................. 23
6.6 Vote by Proxy........................... 23
ARTICLE 7 Profits and Losses...................... 23
7.1 Percentage of Interest in the Company... 23
7.2 Allocation of Profits and Losses........ 23
ARTICLE 8 Distributions of Cash and Assets........ 23
8.1 Distribution of Cash.................... 23
8.2 Restrictions on Distributions........... 24
8.3 Distribution of Assets other than Cash.. 25
8.4 Distribution of Anticipated Original
Bond Financing/Proceeds................. 25
8.5 Distributions of Cash in the Event of
the Acceleration of a Company Obligation
Due to the Default of a Guarantor....... 25
ARTICLE 9 Accounting and Tax Matters.............. 26
9.1 Books of Account........................ 26
9.2 General Accounting Provisions........... 26
9.3 Financial Statements.................... 26
9.4 Elections............................... 27
ARTICLE 10 Relationship of Parties................. 27
ARTICLE 11 Transfer of Interests in the Company.... 28
11.1 Restrictions Against Transfer........... 28
11.2 Right of First Refusal.................. 28
11.3 Change in Control of KVI or BWI......... 29
11.4 Other Restrictions...................... 30
ARTICLE 12 Event of Default........................ 30
12.1 Event of Default Defined................ 30
12.2 Purchase of a Member's Interest in the
Company Upon the Occurrence of an Event
of Default (Appraisal).................. 31
</TABLE>
ii
<PAGE>
INDEX - CONTINUED
<TABLE>
<CAPTION>
ITEM PAGE NO.
- ---------- --------
<C> <S> <C>
ARTICLE 13 Termination............................ 35
13.1 Definitions............................ 35
13.2 Procedure Upon Termination............. 36
13.3 Election to Terminate.................. 37
13.4 Conflict Between Article 11 and
Sections 12.2 and 13.3................. 37
ARTICLE 14 Indemnification of Executive Committee. 37
ARTICLE 15 Dispute Resolution..................... 37
ARTICLE 16 Other Provisions....................... 38
16.1 Notices................................ 38
16.2 Law.................................... 39
16.3 Attorneys' Fees........................ 40
16.4 Waiver of Action for Partition......... 40
16.5 Severability........................... 40
16.6 Captions............................... 40
16.7 Construction of Agreement.............. 40
16.8 Waiver of Right or Remedy.............. 40
16.9 Successors and Assigns................. 40
16.10 Rights Under Agreement................. 41
16.11 Miscellaneous Definitions.............. 41
16.12 Entire Agreement....................... 41
16.13 Counterparts........................... 41
16.14 Members Bound by Agreement............. 41
16.15 Amendments............................. 42
16.16 Additional Documents and Acts.......... 42
</TABLE>
EXHIBITS
Exhibit "A" - The Project Site-Parcels 1, 2 and 3
Exhibit "B" - Description of all Anticipated Phases
Exhibit "C" - Phase 1 of the Project
Exhibit "D" - Kaiser Ventures Inc. Performance Guaranty Agreement
Exhibit "E" - Territory
Exhibit "F" - Burrtec Waste Industries, Inc. Performance Guaranty Agreement
Exhibit "G" - Allocation of Profits and Losses
Exhibit "H" - Operation and Maintenance Agreement
Exhibit "I" - Approved Plan
Exhibit "J" 1997 Approved Budget
Exhibit "K" Contribution Agreement
iii
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MEMBERS OPERATING AGREEMENT
OF
WEST VALLEY MRF, LLC
ARTICLE 1 - INFORMATION
1.1 DATE AND PARTIES
This MEMBERS OPERATING AGREEMENT of West Valley MRF, LLC ("AGREEMENT") is
made and entered into effective June 19, 1997, between Kaiser Recycling
Corporation, a Delaware corporation ("KAISER"), and West Valley Recycling &
Transfer, Inc., a California corporation ("WVRT"). Kaiser and WVRT are
sometimes collectively referred to herein as "MEMBERS" and individually as a
"MEMBER." In accordance with the Beverly-Killea Limited Liability Company Act
(California Corporations Code Title 2.5) (the "ACT") and subject to the Articles
of Organization, which were filed with the Secretary of State of California on
may 9, 1997, the Members enter into the following agreement regarding the
conduct of the business and affairs of the company.
1.2 RECITALS
A. Kaiser is a wholly owned subsidiary of Kaiser Ventures Inc. ("KVI") and
WVRT is a wholly-owned subsidiary of Burrtec Waste Industries, Inc. ("BWI").
KVI and BWI entered into that certain Joint Venture Agreement of Inland Empire
Resource Recovery effective April 18, 1990 (the "JOINT VENTURE"). KVI and BWI
are dissolving the Joint Venture, with KVI and BWI each contributing their
respective ownership interest in the Joint Venture to the Company to each of
their subsidiaries, which are in turn contributing their respective ownership
interests to the Company. Certain advances made by KVI and BWI in the Joint
Venture are being assumed by the Company as described in more detail on Exhibit
"J" hereto.
B. KVI, either in its own name or through a wholly owned subsidiary,
Kaiser Steel Land Development Corporation, currently owns approximately 650
acres of real property in the County of San Bernardino (the "KAISER PROPERTY").
Portions of the Kaiser Property contain hazardous materials and waste requiring
remediation. Kaiser proposes to remove the hazardous materials and waste from
the Kaiser property and prepare the Kaiser property for development as further
set forth below.
C. Kaiser and WVRT propose to engage in certain waste transfer, recovery,
and recycling activities on limited portions of the Kaiser Property (the
"PROJECT"). It is anticipated that the project when fully built as currently
anticipated will be constructed and operated on three parcels of the Kaiser
Property totaling approximately 30 acres within the area shown on Exhibit "A"
Attached hereto (the "PROJECT SITE"). The Project, as currently contemplated,
is to be constructed in multiple phases. Phase 1 of the Project, a materials
recovery facility and transfer station (the "MRF") is more particularly
described on Exhibit "C" attached hereto. Parcel 1 (hereinafter the "MRF
Parcel") and Parcel 2 (hereafter the "HOUSEHOLD HAZARDOUS WASTE PARCEL") as
identified on Exhibit "A", Collectively containing approximately 25 acres, will
require limited remediation of certain hazardous materials or waste in
accordance with applicable regulatory standards prior to their contribution and
conveyance to the Company. Similarly, Parcel 3 as identified on Exhibit "A",
containing
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approximately 5.04 acres (hereinafter the "TAR PITS PARCEL"), will
require remediation of any hazardous materials and waste in accordance with
applicable regulatory standards prior to its contribution and conveyance to the
company.
D. In the future, the Company, Kaiser and WVRT may engage in other waste
transfer, disposal and recovery activities not located on the Project Site.
E. Kaiser and WVRT anticipate that waste and recyclable materials
collected in the West Valley area of San Bernardino County (and perhaps other
areas as well) will be transported to the Project Site. Kaiser and WVRT further
anticipate that recyclable materials will be separated from the waste materials
at the Project Site. Recyclable materials will be recovered at the Project or
transported to the Project Site and sold, and non-recyclable materials will be
transported to a waste disposal site.
F. Kaiser and WVRT anticipate that concurrent with the contribution and
conveyance of the MRF Parcel to the Company by Kaiser, WVRT will contribute and
convey all of the goodwill of Burrtec's current recycling business located at
9470 Mission Boulevard, Riverside, California ("the RECYCLING BUSINESS") and
will relocate such business as soon as possible to the MRF Parcel.
G. Pursuant and subject to the terms of this Agreement, Kaiser and WVRT
desire to set forth their agreement as to the construction, ownership, and
operation of the Project as it may exist from time-to-time and the conduct of
the business of the Company.
1.3 FORMATION OF THE COMPANY
The Members have formed a limited liability company named West Valley MRF,
LLC (the "COMPANY") under the ACT by properly executing and filing the Articles
of Organization and executing this Agreement. The rights, duties and
obligations of the Members shall be determined pursuant to the Act, the Articles
of Organization and this Agreement.
1.4 TERM
The term of the Company commenced upon the filing of Articles of
Organization for the Company and it shall continue until the earlier of: (i)
December 31, 2030, (ii) one year after the conclusion of all of the Business of
the Company (as defined herein), or (iii) until the Company is dissolved, wound-
up and terminated in accordance with the provisions of this Agreement or the
Act.
1.5 PURPOSE, OBJECTIVES, AND BUSINESS OF THE COMPANY
A. The purpose of the Company is to combine the expertise and financial
strength of the Members, in the manner and to the extent set forth herein, to
accomplish the objectives set forth immediately below according to the terms and
provisions of this Agreement. The Company, therefore, shall:
1. Acquire from Kaiser by contribution the MRF Parcel upon the
completion by Kaiser of the remediation of hazardous materials and waste
(subject to the construction of certain environmental structures which will be a
part of the MRF, as set forth in Section 2.2.A.), and the
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completion by Kaiser of the permitting necessary to make the MRF parcel a
legally conveyable parcel, together with all easements and rights appurtenant
thereto or at such other time as WVRT and Kaiser shall agree in writing. If WVRT
elects, Kaiser shall also contribute the Household Hazardous Waste Parcel or the
Tar Pits Parcel or both, together with all easements and rights appurtenant
thereto upon the completion of the remediation of the hazardous materials and
waste, and upon meeting the other conditions as set forth in Section 2.2. The
Company shall not acquire any water rights from KVI or Kaiser in connection with
the transfer of the MRF Parcel, Household Hazardous Waste Parcel or the Tar Pits
Parcel.
2. Acquire from WVRT by contribution all the going concern value,
i.e., goodwill of the Recycling Business as set forth herein and relocate the
Recycling Business to the MRF Parcel, but without contributing any other assets
of the Recycling Business to the Company.
3. Obtain and maintain all necessary governmental approvals for
construction and operation of the Project as it may exist from time-to-time.
4. Enhance the value of Company assets through proper development
of the Project Site (provided all remediation required on the Project Site has
been accomplished) and construction, management, and operation thereon of a
transfer station and material recovery facility and other waste handling
facilities.
5. Own, operate, maintain, improve, mortgage, hold for
investment, sell, sublease, encumber, transfer, or in any manner dispose of or
deal with the Recycling Business, the Project and the Project Site and perform
all things necessary or incidental to such activities.
6. Engage in the acquisition, development, and operation of other
waste disposal and recovery businesses and related enterprises on the Project
Site that pertain to all the currently planned phases of the Project as
generally described in Exhibit "B" attached hereto.
B. Those acts and activities necessary for accomplishment of the purposes
and objectives of the Company in accordance with the terms and provisions of
this Agreement are sometimes referred to herein as the "BUSINESS OF THE
COMPANY."
1.6 INDEX OF DEFINITIONS
The definitions of certain terms used in this Agreement are set forth in
the following sections:
<TABLE>
<S> <C>
Act 1.1
Additional Capital Contributions 3.3
Adjustment Date 3.4.A
Affiliate 2.2.K
Appraisal Date 12.2.D.1
Appraised Value 12.2.E.1
Approved Budget 5.7
Approved Plan 5.6
Assets 12.2.D.3
Books or Books of Account 9.1
Business Day 5.4.A
</TABLE>
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<TABLE>
<S> <C>
Business of the Company 1.5.B
BWI 1.2.A
Capital Account 3.1.A
Cash 16.11.C
Closing 12.2.G.1
Code 3.1.C
Company 1.3
Company Interest 16.11.B
Company Minimum Gain Exhibit G, 1.2
Company Records 5.13
Control 2.2.K
CPA 9.1
DTSC 2.2.A
Economic Risk of Loss Exhibit G, 1.1
Emergency 5.11.B
Event of Default 12.1.A
Executive Committee 5.2
Existing Debt 12.2.E.2.(b)
Fiscal Year 9.2.C
Hazardous Materials 2.2.D
Hazardous Materials Laws 2.2.E
Herein 16.11.A
Household Hazardous Waste Parcel 1.2.C
Joint Venture 1.2.A
Kaiser 1.1
Kaiser Property 1.2.B
KVI 1.2.A
Loss Exhibit G, 1.7
Member 1.1
Member Nonrecourse Debt Exhibit G, 1.3
Member Nonrecourse Deduction Exhibit G, 1.
MRF 1.2C
MRF Parcel 1.2.C
Nonrecourse Deductions Exhibit G, 1.5
Net Capital Investment in the Company 8.1.C
Nonrecourse Liabilities Exhibit G, 1.6
Notice of Default 12.1.C
Offer Notice 11.2
Opinion of Value 12.2.D.3
Paid in Cash 16.11.C
Parcel 2.2.C
Percentage Interests 7.1
Phase 1 of the Project 1.2.C
Price Notice 12.2.E.2
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Profit Exhibit G, 1.7
Project 1.2.C
Project Site 1.2.C
Purchase Notice 12.2.A
Purchase Price 12.2.A
Purchaser 12.2.A
Recycling Business 1.2.F
Regulatory Allocations Exhibit C, 2.5
Seller 12.2.A
Statement of Value 12.2.A
Tar Pits Parcel 1.2.C
Termination Election Date 13.1.B
Termination Notice 13.1.A
Termination Period 13.1.C
Territory 2.3.A
Transfer 11.1
Transferor 11.1
WVRT 1.1
</TABLE>
ARTICLE 2 - GENERAL PROVISIONS
2.1 PLACE OF BUSINESS
The place of business of the Company initially shall be at the office
of Kaiser, 3633 East Inland Empire Boulevard, Suite 850, Ontario, California
91764, and thereafter at such other place in San Bernardino County as the
Executive Committee (as hereinafter defined) shall determine. The Members
anticipate that the place of business for the Company will be relocated to the
MRF Parcel after completion of appropriate improvements thereon.
2.2 KAISER'S OBLIGATIONS
In addition to all other agreements and obligations of Kaiser pursuant
to the terms of this Agreement, Kaiser shall have the following obligations.
A. Kaiser shall at its expense complete or cause KVI to complete all
required assessment, characterization, monitoring and remediation activities
with respect to Hazardous Materials and waste located on the MRF Parcel, the
Household Hazardous Waste Parcel and the Tar Pits Parcel. WVRT acknowledges and
agrees that the retaining wall on the MRF Parcel, the floor of the building for
the MRF and the drainage structures for the MRF building floor and MRF Parcel
will also constitute environmental remediation structures which have or will be
built and maintained as an expense of the Company and will be paid by the
Company or reimbursed by the Company to Kaiser. WVRT and Kaiser agree that
Kaiser or KVI will enter into an agreement with the California Environmental
Protection Agency, Department of Toxic Substances Control ("DTSC") which
prohibits the use of the Project Site or any portion thereof for residential
purposes, a school, a day care center, or a hospital; provided, however, Kaiser
shall have the right, in its sole discretion to determine how to remediate the
Tar Pits Parcel provided such remediation is in compliance with
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<PAGE>
applicable Hazardous Materials Laws. Kaiser shall complete the remediation of
the MRF Parcel as soon as reasonably possible, but not later than November 30,
1997, for those items within Kaiser's direct control. It is understood that the
completion of the retaining wall and the floor of MRF building which are
required for the complete remediation of the MRF Parcel are within the direct
control of the Company. Such remediation activities shall be conducted strictly
in accordance with all required Hazardous Materials Laws (as defined below), but
such remediation shall not be required to exceed a clean-up level that is better
than required to meet the Hazardous Materials Laws applicable to a commercial or
industrial site. Kaiser shall have the right in its reasonable discretion to
delay the remediation of the Household Hazardous Waste Parcel and Tar PitS
Parcel until such time as it is anticipated that either parcel is necessary for
the conduct of the Company's business. If a rail storage yard becomes necessary
for operation of the Project and Kaiser and its Affiliates reasonably decide not
to remediate the Tar Pits Parcel at that time or if Kaiser and its Affiliates
elect to remediate the Tar Pits Parcel in such a manner so as to render it
substantially unusable for a rail yard, Kaiser shall not be required to
remediate the Tar Pits Parcel and contribute it to the Company, but in such case
Kaiser at its expense, shall provide space for a rail storage yard sufficient to
meet the reasonable requirements of the Company's business for a rail storage
yard and any incremental costs associated with the new location of the rail yard
shall be borne by Kaiser and not reimbursed by the Company. Kaiser and KVI shall
have the reasonable discretion to determine the manner of the remediation of the
Project Site or any portion thereof provided such remediation is accomplished in
accordance with applicable Hazardous Materials Laws; provided, however, Kaiser
shall have the right, in its sole discretion to determine how to remediate the
Tar Pits Parcel provided such remediation is in compliance with applicable
Hazardous Materials Laws.
B. Kaiser shall be responsible for obtaining, at its expense on or before
June 30, 1997, all necessary maps, permits, and approvals necessary to divide
the Project Site into at least three legal parcels, the MRF Parcel, the
Household Hazardous Waste Parcel and the Tar Pits Parcel. Kaiser shall pay the
direct costs of recording the required parcel map and its pro rata share of
property taxes and other similar expenses as of the date of recordation with the
Company paying its pro rata share of all such property taxes and assessments.
C. In addition to any other indemnification obligation provided by law
or by agreement, Kaiser shall indemnify, defend, and hold harmless the Company,
WVRT and their Affiliates (as defined below) and the directors, officers,
employees, and shareholders of each of them from and against any and all claims,
demands, judgments, damages, actions, causes of action, injuries, administrative
orders, consent agreements and orders, liabilities, penalties, taxes, fees,
costs, and expenses (including, but not limited to, attorneys' fees, engineering
fees, consultants' fees, and experts' fees) of any kind whatsoever, including,
but not limited to, claims arising out of loss of life, injury to others,
property, or business, or damage to natural resources, in connection with or
arising out of any Hazardous Materials attributable to pre-existing conditions
on the Kaiser Property or the Project Site or which are attributable to,
contributed to, or caused by the activities of Kaiser, its predecessors-in-
interest, third parties, or parties in contractual relationship with Kaiser, or
any of them, that occur at any time or times, except for any Hazardous Materials
attributable to conditions that occur with respect to the MRF Parcel, the
Household Hazardous Waste Parcel, or the Tar Pits parcel (each is sometimes
hereafter referred to as a "PARCEL") after the date that the particular Parcel
is contributed and conveyed to the Company by Kaiser, unless attributable to,
contributed to, or caused by the activities of Kaiser, its Affiliates or third
parties in a contractual relationship with Kaiser or its Affiliates, and such
third parties' subcontractors (except for WVRT, its Affiliates and
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<PAGE>
third parties in a contractual relationship with WVRT or its Affiliates, and
such third parties' subcontractors), and from all claims, demands, judgments,
damages, actions, causes of action, injuries, administrative orders, consent
agreements and orders, liabilities, penalties, taxes, fees, costs, and expenses
of any kind whatsoever, arising out of Kaiser's or its predecessors failure to
provide all information, make all submissions, and take all steps required by
any appropriate governmental authority under any current Hazardous Materials
Laws or any other environmental law. Notwithstanding anything contained in this
agreement, in no event shall Kaiser or its Affiliates be liable or responsible
for consequential damages. notwithstanding the termination of the Company or
this Agreement, Kaiser's obligations and liabilities under this Subsection 2.2.C
that are not attributable to the activities of the Company, WVRT, and their
respective employees and agents and persons or entities related to any of them
shall survive the termination of this Agreement or the Company.
D. For purposes of this Agreement, the term "HAZARDOUS MATERIALS"
shall mean any solid, liquid, or gaseous matter, or any combination thereof,
which is or may become hazardous, toxic, or radioactive, including, but not
limited to, those materials identified in Sections 66680 through 66685 of Title
22 of the California Code of Regulations, Division 4, Chapter 30 (as may be
amended from time to time) or any Hazardous Materials Laws (as hereinafter
defined) or any material which, if discharged, leaked, or emitted, or permitted
to be discharged, leaked, or emitted, into the atmosphere, the ground, or any
body of water, does or may (i) pollute or contaminate the same; or (ii)
adversely affect (a) the health or safety of persons, whether on the Project
Site or anywhere else; (b) the condition, use, or enjoyment of the Project Site
or any adjacent or nearby property; or (c) the Project Site.
E. The term "HAZARDOUS MATERIALS LAWS" shall mean all current laws,
regulations and remediation standards or requirements pertaining to any
hazardous or toxic substance, materials or waste, including without limitation
the comprehensive environmental response, compensation and liability act of
1980, as amended, 42 U.S.C. (S) 9601 et seq. (CERCLA), the Resource Conservation
------
and Recovery Act of 1976, 42 U.S.C. (S) 6901 et seq. (RCRA), and any other
------
federal, state, or local governmental law, authority, statute, ordinance, order,
rule, standard or regulation pertaining to health, industrial hygiene, or the
environment.
F. Kaiser shall furnish to the Company and to WVRT a report prepared
by a reputable, nationally or regionally known environmental firm on the types,
levels and extent of known Hazardous Materials on each Parcel of the Project as
it is contributed to the Company in order to establish a baseline for the
substances and their levels of occurrence as of the date of the contribution of
each Parcel to the Company. WVRT agrees that the "Revised Human Health Risk
Assessment for the Materials Recovery Facility Operable Unit No. 1 Fontana,
California March 3, 1997" shall be used as the baseline report for the MRF
Parcel. Kaiser shall represent and warrant to WVRT and the Company at the time
it provides a baseline report to the Company that such report, to the best of
Kaiser's knowledge, after reasonable inquiry, is true and correct in all
material respects with respect to the identified parcel, and such warranty and
representation shall survive the termination of this Agreement. Kaiser and the
Company shall enter into a separate MRF Parcel Environmental Contingency Plan
concurrently with the execution of this Agreement. Kaiser and the Company shall
enter into a separate environmental Contingency Plan for each Parcel, if and
when contributed to the Company.
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G. Kaiser hereby makes the following representations and warranties to
WVRT, which shall survive the termination of this Agreement:
(i) Kaiser has previously furnished to WVRT a list of all material
reports, contracts, surveys, assessments, data, correspondence, and other
similar documents concerning any Hazardous Materials known to be present on the
Project Site prepared for or on behalf of Kaiser and Kaiser has furnished to
WVRT a true copy of each item so listed.
(ii) Kaiser has previously furnished to WVRT a list of all past,
pending or threatened litigation, administrative proceedings, third party
claims, orders and notices of any kind or nature whatsoever concerning any
Hazardous Materials known by Kaiser to be present on the Project Site, and
Kaiser has furnished to WVRT, to the best of its knowledge, a true copy of each
item listed.
(iii) Kaiser to the best of its knowledge is currently in
compliance with all Hazardous Materials Laws and orders concerning the Project
Site.
H. Kaiser shall contribute and convey to the Company the MRF Parcel,
the Household Hazardous Waste Parcel and the Tar Pits Parcel subject to and in
accordance with this Agreement; provided, however, it is recognized that the Tar
Pits Parcel may not be conveyed to the Company if reasonable space for a rail
storage yard is made available to the Company at the time it is determined that
a rail storage yard is necessary for the Project.
I. Kaiser has caused its Affiliate, KVI to deliver to WVRT that
certain Performance Guaranty and Indemnification Agreement attached hereto as
Exhibit "D" as provided in Section 4.6 of this Agreement pursuant to which KVI
shall guarantee Kaiser's performance and obligations pursuant to this Agreement
and a Stock Pledge Agreement pursuant to which all the stock in Kaiser has been
pledged to secure the obligations under such Performance Guaranty and
Indemnification Agreement.
J. Kaiser shall seek in good faith to obtain a release from the DTSC
by November 30, 1997, pursuant to Section 25364.1 of The California Health and
Safety Code for the benefit of WVRT and any third party lender on the Project,
if permitted by applicable law.
K. As used in this Agreement, an "AFFILIATE" of a specified party
means (i) an entity that directly, or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with, the
party specified, except that the Company shall not be deemed an Affiliate for
the purposes of this Agreement. The term "CONTROL" means the possession, direct
or indirect, of the power to direct or cause the direction of the management and
policies of an entity.
L. Kaiser shall complete all necessary remediation activities required
by the DTSC with respect to the Household Hazardous Waste Parcel on or before
the later of December 31, 2001, or when such Parcel is necessary for the conduct
of the Company's business as reasonably determined by the Company. Subject to
Section 2.2.A., Kaiser shall complete all necessary remediation activities
required by the DTSC with respect to the Tar Pits Parcel on or before the later
of December 31, 2005, or when such Parcel is necessary for the conduct of the
Company's business as reasonably determined by the Company.
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2.3 WVRT'S OBLIGATIONS
In addition to all other agreements and obligations of WVRT pursuant to the
term of this Agreement, WVRT shall have the following obligations:
A. WVRT will, at all times, use good faith and reasonable efforts to
direct waste which BWI and its subsidiaries (and any other Affiliates of BWI
operating within the Territory, as defined below, in the waste management
business) own or control within the Territory set forth in Exhibit "E" attached
(the "TERRITORY"), to the extent they may legally do so, and when to do so would
be logical and commercially reasonable taking into account the location and the
amount of waste generated at such location and the provisions of any applicable
permit, franchise agreement or similar agreement. WVRT's good faith and
reasonable efforts shall include WVRT, BWI and its subsidiaries and any other
Affiliates of BWI operating within the Territory in the waste management
business seeking, if applicable, as reasonably and in good faith determined by
them, to negotiate, in the ordinary course of business, provisions in their
respective permits, franchise agreements or similar agreements with any Person
within the Territory requiring or allowing use of the Project for waste
generated within the Territory covered by each permit, franchise agreement or
other similar agreement. WVRT will, at all times, use good faith and reasonable
efforts to market the Project to those that own or control waste other than BWI
and its subsidiaries (and any other BWI Affiliate as provided herein) to the
extent such marketing would be logical and commercially reasonable.
B. WVRT shall contribute and convey to the Company all of the goodwill of
the Recycling Business as provided in Section 4.2 of this Agreement.
C. WVRT has caused to be delivered to Kaiser for the benefit of Kaiser and
the Company: (i) a Guaranty and Indemnification Agreement executed by BWI and
BWI related persons of even date herewith; (ii) a Performance Guaranty and
Indemnification Agreement executed by BWI of even date herewith; and (iii) a
Stock Pledge Agreement pursuant to which all of the stock in WVRT has been
pledged to secure the obligations under such Performance Guaranty and
Indemnification Agreement.
D. In addition to any other indemnification obligation provided by law or
by agreement, WVRT shall indemnify, defend and hold harmless the Company, Kaiser
and its Affiliates and the directors, officers, employees, and shareholders of
each of them from and against any and all claims, demands, judgments, damages,
actions, causes of action, injuries, administrative orders, consent agreements
and orders, liabilities, penalties, taxes, fees, costs and expenses (including,
but not limited to attorneys' fees, engineering consulting fees, and experts'
fees) of any nature or kind including, but not limited to, claims arising out of
loss of life, injury to others, property, or business or damage to natural
resources in connection with or arising out of any Hazardous Materials released
on any Parcel while the Company is the owner of that particular Parcel and while
WVRT or an Affiliate of WVRT is the operator of any phase of the Project using
that particular Parcel and which are attributable to, contributed to, or caused
by the activities of WVRT, its Affiliates, third parties, or parties in
contractual relationship with any of them, and which are not attributable to,
contributed to or caused by the activities of Kaiser, its Affiliates or third
parties in a contractual relationship with Kaiser or its Affiliates, and such
third parties' subcontractors (except for WVRT and its Affiliates or third
parties in a contractual relationship with WVRT or its Affiliates, and such
third parties' subcontractors), and from all claims, demands,
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judgments, damages, actions, causes of action, injuries, administrative orders,
consent agreements and orders, liabilities, penalties, taxes, fees, costs, and
expenses of any kind whatsoever arising out of WVRT's failure to provide all
information, make all submissions, and take all steps required by any
appropriate governmental authority under any Hazardous Materials Laws and any
release of Hazardous Materials on any Parcel while it is the operator of any
phase of the Project using that particular Parcel, except for those matters for
which Kaiser is solely responsible as provided in Section 2.2 above.
Notwithstanding anything contained herein, in no event shall WVRT or its
Affiliates be liable or responsible for any consequential damages.
Notwithstanding the termination of the Company or this Agreement, WVRT's
obligations and liabilities under this Subsection 2.3.D that are not
attributable to the activities of Kaiser or its predecessors and persons or
entities related to either of them shall survive the termination of this
Agreement or the Company.
E. In addition to any other indemnification obligation provided by law
or by agreement, WVRT shall indemnify, defend, and hold harmless the Company,
Kaiser and its Affiliates and directors, officers, employees, and shareholders
of each of them from and against any and all claims, demands, judgments,
damages, actions, causes of action, injuries, administrative orders, consent
agreements and orders, liabilities, penalties, taxes, fees, costs, and expenses
(including, but not limited to attorneys' fees, engineering consulting fees, and
experts' fees) of any kind whatsoever, including, but not limited to, claims
arising out of loss of life, injury to others, property, or business, or damage
to natural resources, in connection with or arising out of the business
conducted at or any Hazardous Materials attributable to pre-existing conditions
on the property on which the Recycling Business is currently located, 9470
Mission Boulevard, Riverside, California or has been located (collectively the
"RECYCLING BUSINESS SITE") or which are attributable to, contributed to, or
caused by the activities of WVRT, its predecessors-in-interest, third parties
who have trespassed on the Recycling Business Site, or parties in contractual
relationship with WVRT or its Affiliates, or any of them, and from all claims,
demands, judgments, damages, actions, causes of action, injuries, administrative
orders, consent agreements and orders, liabilities, penalties, taxes, fees,
costs, and expenses of any kind whatsoever, for claims arising out of WVRT'S or
its predecessors failure to provide all information, make all submissions, and
take all steps required by any appropriate governmental authority under any
Hazardous Materials Laws in connection with the Recycling Business conducted at
the Recycling Business Site. notwithstanding anything contained herein, in no
event shall wvrt or its affiliates be liable or responsible for any
consequential damages. notwithstanding the termination of the Company or this
Agreement, Burrtec's obligations and liabilities under this Subsection 2.3.E
that are not attributable to the activities of Kaiser and its predecessors and
persons and agents related to any of them, as provided herein shall survive the
termination of this Agreement or the Company.
2.4 STANDARD OF DUTY AND CONDUCT
The standard of the fiduciary duty a Member owes to the Company and to its
Members is that of a partner to a partnership and to the partners of the
partnership. Accordingly, WVRT and Kaiser shall act in good faith relative to
all matters affecting the Company and the other Members and to operate the
Company in such a manner so as to reasonably maximize the long term
profitability and value of the Company provided, however, that no actions shall
be required of WVRT that would be to the material detriment of WVRT or its
Affiliates and no actions shall be required of Kaiser that would be to the
material detriment of Kaiser or its Affiliates.
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ARTICLE 3 - CAPITAL CONTRIBUTIONS
3.1 CAPITAL ACCOUNTS
A. A separate capital account shall be established and maintained for
each Member ("CAPITAL ACCOUNT") strictly in accordance with the rules set forth
in Section 1.704-1(B)(2)(IV) of the Treasury Regulations.
B. Subject to Subsections 3.1.D and 3.1.E below, each Member's Capital
Account shall be increased from time to time by: (1) the amount of money
contributed by such Member to the Company; (2) the fair market value of property
contributed by such Member to the Company (net of liabilities secured by such
property or to which such property is subject and which are paid or payable by
the Company); and (3) the Profit (as defined on Exhibit "G" attached hereto),
and other items of income and gain allocated to such Member.
C. Subject to Subsections 3.1.D and 3.1.E below, each Member's Capital
Account shall be decreased from time to time by: (1) the amount of money
distributed to such Member; (2) the fair market value of property distributed to
such Member by the Company (net of liabilities secured by the property or to
which such property is subject and which are paid or payable by that Member);
(3) such Member's share of expenditures of the Company described in Section
705(a)(2)(B) of the Internal Revenue Code of 1986, as amended ("CODE")
(including for this purpose losses which are not deductible under Section
267(a)(1) or Section 707(b) of the Code); (4) such Member's share of amounts
paid or incurred by the Company to organize the Company (except to the extent
properly amortizable for tax purposes); and (5) Loss (as defined on Exhibit "G"
attached hereto), and other items of deduction and loss allocated to such
Member.
D. For purposes of this Section 3.1, the assumption of a Member's
unsecured liability by the Company shall be treated as a distribution of money
to that Member. The assumption of the Company's unsecured liability by a Member
shall be treated as a cash contribution to the Company by that Member.
E. If assets of the Company other than money are distributed to a
Member in liquidation of the Company, or if assets of the Company other than
money are distributed to a Member in kind, then to reflect unrealized gain or
loss, Capital Accounts for the Members shall be adjusted for the hypothetical
Profit or Loss that would have been realized by the Company if the distributed
assets had been sold for their fair market values in a cash sale. Upon the
liquidation of a Member's interest in the Company, to reflect unrealized gain or
loss, Capital Accounts for the Member shall be adjusted for the hypothetical
Profit or Loss that would have been realized by the Company if all Company
assets had been sold for their fair market values in a cash sale. Capital
Accounts also shall be adjusted upon the constructive termination of the Company
as provided under Section 708 of the Code as required by Section 1.704-
l(b)(2)(iv)(1) of the Treasury Regulations.
F. WVRT's Capital Account shall not be adjusted for any Guaranty
Advances or payments received in payment of Guaranty Advances.
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3.2 INITIAL CAPITAL CONTRIBUTIONS
The Members acknowledge that KVI and BWI have previously made initial and
subsequent capital contributions to the Joint Venture, and that upon formation
of the Company their respective capital accounts shall be transferred to the
Company by Kaiser and WVRT. Accordingly, their respective Capital Accounts as
of June 18, 1997, are $1.00 for Kaiser and $1.00 for WVRT.
3.3 ADDITIONAL CAPITAL CONTRIBUTIONS IN GENERAL
As further provided at Section 4.3, below, the Company shall attempt to
obtain sufficient financing for construction, development, and operation of each
phase of the Project by obtaining public, private, or other bond financing or by
borrowing from banks, savings and loan associations, and similar financial
institutions (or other sources if suitable to the Members). If, however, the
Executive Committee determines as provided in Section 5.3 that capital
contributions are necessary to carry out the Business of the Company after first
seeking to obtain reasonable third party financing, then the Members shall
contribute such required funds to the Company ("ADDITIONAL CAPITAL
CONTRIBUTIONS"). The Members shall make such Additional Capital Contributions
within ten days following notice from the Executive Committee calling for
Additional Capital Contributions, or by such later date as may be specified in
the notice from the Executive Committee.
3.4 FAILURE TO MAKE ADDITIONAL CAPITAL CONTRIBUTIONS
A. If any Member fails to make an Additional Capital Contribution
within the time required by this Agreement, which failure continues for a period
of twenty (20) days after written demand from the non-defaulting Member to cure
such default, such failure shall be deemed to be a material default hereunder.
Upon any such default, the non-defaulting Member, in addition to any other
rights it may have at law, in equity or pursuant to Articles 12 and 13 hereof,
may advance the defaulting Member's share of the required additional capital to
the Company and, at its option, elect to treat such advance as a contribution to
the capital of the Company by the non-defaulting Member. If the non-defaulting
Member so elects, it may cause the defaulting Member's Percentage Interest (as
hereinafter defined) to be adjusted, effective as of the date the non-defaulting
Member so notifies the defaulting Member (the "ADJUSTMENT DATE"), by increasing
the non-defaulting Member's Percentage Interest and decreasing the defaulting
Member's Percentage interest by a number of percentage points equal to the
percentage derived by dividing (a) one hundred twenty percent (120%) of the
amount of the non-defaulting Member's contribution made on behalf of the
defaulting Member by (b) the aggregate of all contributions to the capital of
the Company made by all Members, including an amount equal to the amount
contributed by the non-defaulting Member pursuant to this section 3.4.
B. On the Adjustment Date, the defaulting Member shall execute and
deliver to the non-defaulting Member an amendment to this Agreement
acknowledging the adjustment of the Members' respective Percentage Interests
described herein, together with such other documents and instruments as the non-
defaulting Member reasonably determines to be necessary or appropriate to
accomplish the transactions described in this Section 3.4. The defaulting
Member hereby grants to the non-defaulting Member an irrevocable power of
attorney, coupled with an interest, for the purpose of executing, acknowledging,
verifying, filing, certifying, publishing, and delivering any assignment of
interest in the Company, amendment to this Agreement, or other document or
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instrument required of such Member if such Member is a defaulting Member or as
otherwise necessary to carry out the provisions of this Section 3.4.
C. The Members agree that they have taken particular care to provide
fair and adequate remedies upon failure to make required Additional Capital
Contributions. Therefore, each Member agrees that damages would be an
inadequate remedy and that specific performance or injunctive relief may be
granted to compel compliance with this Section 3.4. In addition, the defaulting
Member shall pay all costs, including reasonable attorneys' fees, incurred by
the non-defaulting Member in enforcing the provisions of this Section 3.4.
3.5 NO VOLUNTARY CONTRIBUTIONS OR WITHDRAWALS
No Member shall have the right to make voluntary contributions to capital
of the Company or withdrawals from its Capital Account without the consent of
the Executive Committee.
ARTICLE 4 - FINANCIAL
4.1 CONTRIBUTION OF THE MRF PARCEL, HOUSEHOLD HAZARDOUS WASTE PARCEL AND THE
TAR PITS PARCEL TO THE COMPANY
A. Upon the remediation by Kaiser of the MRF Parcel to the satisfaction of
the DTSC as evidenced by a letter from the DTSC that no further remedial action
will be necessary for such parcel or upon the MRF Parcel's remediation to WVRT's
reasonable satisfaction and upon the MRF Parcel becoming a separate legal
parcel, and upon WVRT's written election, Kaiser shall contribute and convey the
MRF Parcel to the Company, subject to the terms and conditions of this
Agreement. Such contribution and conveyance by Kaiser shall occur no later than
June 30, 1997. The MRF Parcel shall be conveyed to the Company by Kaiser by
grant deed free and clear of all liens and encumbrances of any kind, except for
the easements, covenants and conditions now existing on the Parcel and the
covenants restricting the use of the Parcel as entered into with the DTSC. The
contribution of the MRF Parcel shall be deemed to be an additional capital
contribution to the Company by Kaiser in the amount of One Million Seven Hundred
Fifty Thousand Dollars ($1,750,000) which the Members acknowledge is a fair and
reasonable value for the MRF Parcel. Kaiser shall obtain at its expense an ALTA
extended coverage owner's policy of title insurance for the MRF Parcel, with the
Company as the insured, in the amount of $1,650,000 showing the state of title
as set forth in this Section 4.1.A. which will be delivered to the Company
concurrently with the contribution of the MRF Parcel to the Company.
B. Upon the remediation of the Household Hazardous Waste Parcel to the
satisfaction of the DTSC as evidenced by a letter from the DTSC that no further
remedial action is necessary for such parcel, upon the Household Hazardous Waste
Parcel being remediated to WVRT's satisfaction, upon the Household Hazardous
Waste Parcel becoming a separate legal parcel and upon WVRT's written election,
Kaiser shall contribute and convey the Household Hazardous Waste Parcel to the
Company, subject to the terms and conditions of this Agreement. The Household
Hazardous Waste Parcel shall be conveyed to the Company by Kaiser by a grant
deed free and clear of all liens and encumbrances of any kind, except for the
easements, covenants and conditions now existing on the Parcel and the covenants
restricting the use of the Parcel as entered into with the DTSC. The
contribution of the Household Hazardous Waste Parcel shall be deemed to be an
additional capital
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contribution to the Company by Kaiser in the amount of One Dollar ($1.00) which
the Members acknowledge is a fair and reasonable value for the Household
Hazardous Waste Parcel. This contribution shall not in any way affect the
Percentage Interests of the Members. Kaiser shall obtain at its expense an ALTA
extended coverage owner's policy of title insurance for the Household Hazardous
Waste Parcel with the Company as the insured, in the amount of $50,000, showing
the state of title as set forth in this Section 4.1.B. which will be delivered
to the Company concurrently with the contribution of the Household Hazardous
Waste Parcel to the Company.
C. Upon the remediation of the Tar Pits Parcel to the satisfaction of the
DTSC as evidenced by a letter from the DTSC that no further remedial action is
necessary for such Parcel or upon the Tar Pits Parcel being remediated to WVRT's
reasonable satisfaction, upon the Tar Pits Parcel becoming a separate legal
parcel and upon WVRT's written election, Kaiser shall contribute and convey the
Tar Pits Parcel to the Company, subject to the terms and conditions of this
Agreement; provided, however, that this Section 4.1.C shall be subject to the
provisions of Section 2.2A. The Tar Pits Parcel shall be conveyed to the
Company by Kaiser by a grant deed free and clear of all liens and encumbrances
of any kind, except for the easements, covenants and conditions now existing on
the Parcel and the covenants restricting the use of the Parcel as entered into
with the DTSC. The contribution of the Tar Pits Parcel shall be deemed to an
additional capital contribution to the Company by Kaiser in the amount of One
Dollar ($1.00) which the Members acknowledge is a fair and reasonable value for
the Tar Pits Parcel. This contribution shall not in any way affect the
Percentage Interests of the Members. If the Tar Pits Parcel is contributed to
the Company, Kaiser shall obtain at its expense an ALTA extended coverage
owner's policy of title insurance for the Tar Pits Parcel, with the Company as
the insured, in the amount of $50,000, showing the state of title as set forth
in this Section 4.1.C which will be delivered to the Company concurrently with
the contribution of the Tar Pits Parcel to the Company.
4.2 CONTRIBUTION OF GOODWILL OF BURRTEC'S RECYCLING BUSINESS
Concurrently with the contribution and conveyance of the MRF Parcel to the
Company, but not later than June 30, 1997, WVRT shall contribute and convey all
of the goodwill of the Recycling Business and shall relocate said business (but
none of the other assets of the business) to the MRF Parcel as soon as practical
thereafter. The Company shall be entitled to receive and be responsible for all
revenues, expenses, profits and losses of and associated with the Recycling
Business which accrue on or after the date of its contribution to the Company.
Pending relocation of the Recycling Business to the Project Site, the Recycling
Business shall be operated for and on behalf of the Company by WVRT as Operator
pursuant to the Operation and Maintenance Agreement attached hereto as Exhibit
"H." All costs of closing the existing site and remediating any Hazardous
Materials or waste therein shall be paid by WVRT or other applicable third party
and WVRT shall indemnify and hold harmless Kaiser, its officers, directors,
employees and Affiliates from any cost, liability, loss or expense associated
with the closing and remediating of the Recycling Business Site as provided in
Section 2.3.F. The goodwill of the Recycling Business shall be conveyed to the
Company by WVRT by general warranty assignment and bill of sale or any other
appropriate document free and clear of all liens. Such contribution, conveyance
and relocation together with the Guarantee and Indemnification Agreement as
specified in Section 4.6 hereto shall be deemed to be an additional capital
contribution in the amount of One Million Seven Hundred Fifty Thousand Dollars
($1,750,000) which the Members acknowledge is a fair and reasonable value.
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4.3 FINANCIAL INSTITUTION LOANS
The Company shall attempt to obtain sufficient financing by borrowing from
banks, savings and loan associations, insurance companies, or other financial
institutions or by obtaining public, private, or other bond financing to meet
all of the obligations and capital requirements of the Company. Such financing
shall be at the most favorable rates and fees and under the most favorable terms
reasonably available at the time of such financing and on such other terms as
are typical for such financing. Any such financing shall be subject to the
reasonable approval of the Members, which shall be evidenced by each Member's
signature on the financing transaction documents. The Members acknowledge that
they and their parent corporations or other affiliated persons or entities may
be required to guarantee the Company's obligations under such financing. In such
event, the guaranteeing entities or persons shall enter into a Contribution
Agreement substantially in the form attached hereto as Exhibit "K." Each Member
shall provide its guarantee to secure financing for Phase 1 of the Project.
4.4 LOANS BY MEMBERS
Subject to Section 4.3 above, a Member may lend or advance money to the
Company only upon such terms and conditions as may be determined and approved by
the Executive Committee. Any such approved loan or advance shall neither
increase the interest of the lending Member in the capital of the Company, nor
shall it entitle the lending Member to any increased share in the Company's
capital or profits, except as permitted by Section 3.4. Either Member may loan
funds to the Company on a short-term emergency basis. Any short-term emergency
loan shall be repayable on demand by the lending Member and shall bear a
variable rate of interest equal to 1% per annum over the Union Bank of
California reference rate as announced from time to time, but in no event
greater than the maximum rate permitted by California law. Financing for Phase 1
of the Project shall be provided in accordance with Section 4.3 above.
4.5 BWI PERFORMANCE GUARANTY
BWI has delivered to the Company and Kaiser its guarantee in the form
attached hereto as Exhibit "F" pursuant to which BWI shall guarantee the
performance of WVRT's obligations pursuant to this Agreement and pursuant to the
Operation and Maintenance Agreement.
4.6 KVI PERFORMANCE GUARANTY
KVI has delivered to the Company and WVRT its guarantee in the form
attached hereto as Exhibit "D" pursuant to which KVI will guarantee the
performance of Kaiser's obligations pursuant to this Agreement. Each of KVI's
obligations pursuant to the guarantee shall be secured by a pledge of all of the
stock in Kaiser pursuant to the terms of a Stock Pledge Agreement which has been
delivered to WVRT.
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ARTICLE 5 - MANAGEMENT OF THE COMPANY
5.1 MANAGEMENT OF COMPANY BUSINESS
The Members shall have control over the overall management, conduct, and
operation of the business and affairs of the Company and shall make all
decisions and take all actions necessary to carry out the Approved Plan (as
hereinafter defined) in accordance with the Approved Budget (as hereinafter
defined). The Members shall act through an Executive Committee (as described in
Section 5.2 below). It is recognized that the day-to-day operation and
management of the Project has been delegated to WVRT as provided in Section 5.8
below. The Members, acting through the Executive Committee, must approve any
proposed Company actions with a vote equal to or greater than seventy-five
percent (75%) of the total Percentage Interests, except in the case of an
uncured Event of Default. Upon the occurrence of an uncured Event of Default a
vote of the majority of the Percentage Interests held by non-defaulting Members
may approve the Company's actions except a defaulting Member may vote on matters
involving an item of business which would require approval of more than eighty-
nine percent (89%) of the Percentage Interests as specified in Section 5.3
below.
5.2 EXECUTIVE COMMITTEE
The management of the Business of the Company, as described in Section 5.1
above, shall generally be by an executive committee ("EXECUTIVE COMMITTEE"),
which shall be empowered to make all major and substantive decisions with
respect to the direction and control of the business of the Company.
5.3 MEMBERS OF EXECUTIVE COMMITTEE
Unless otherwise agreed by the Members, as long as WVRT and Kaiser have
equal Percentage Interests, the Executive Committee will consist of four
committee members ("COMMITTEE MEMBERS"), with two Committee Members appointed by
Kaiser and two Committee Members appointed by WVRT. If WVRT and Kaiser do not
have equal Percentage Interests, each Member shall be entitled to appoint one
individual to the Executive Committee for each ten percent (10%) of Percentage
Interest owned. Each Member may appoint an alternate for each Committee Member
of the Executive Committee appointed by such Member, and such alternate will
have all the powers of the Committee Member in his absence or inability to
serve. Each Member shall have the power to remove any Committee Member or
alternate committee member of the Executive Committee appointed by such Member.
Vacancies on the Executive Committee will be filled by appointment by the Member
which appointed the Committee Member previously holding the position which is
then vacant. Notwithstanding the number of Committee Members at each meeting,
the Committee Members shall have a vote equal to the Percentage Interest of the
Members appointing such Committee Member. The Committee Members appointed by
Kaiser together shall have one vote, and the Committee Members appointed by WVRT
together shall have one vote. Each Member shall notify the other Member in
writing of its appointments to the Executive Committee. Subject to Section 5.1,
all items before the Executive Committee shall require the approval of Committee
Members representing seventy-five percent (75%) or greater of the Percentage
Interests except that the approval of Committee Members representing more than
eighty-nine percent (89%) of the Percentage Interests eligible to vote on a
matter shall be required for (a) any capital call; (b) the expenditure or the
borrowing of funds in excess of $25,000 unless such shall have been pre-
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approved as a part of the Approved Budget; and (c) the sale or transfer of
any Company asset with a fair market value of $100,000 or greater.
5.4 EXECUTIVE COMMITTEE MEETINGS AND MINUTES
A. Regular meetings of the Executive Committee shall be held at least
monthly (unless the Executive Committee sets an alternate meeting schedule) at
such time and at such place as the Executive Committee shall determine from time
to time. Special meetings of the Executive Committee shall be held at the
written request of either Member upon at least five business days notice to all
Committee Members. The term "business days" means all days, except for
Saturdays, Sundays, and days which are legal holidays under the laws of the
United States and the State of California.
B. The Executive Committee shall prepare a written agenda for all
meetings (other than weekly job site meetings) and deliver the same to all
Committee Members at least three days prior to any such meeting. The Committee
Members shall cause written minutes to be taken at each meeting of the Executive
Committee, which shall be sent to each Committee Member within ten business days
following such meeting for approval and signature by each Committee Member.
Upon (but not before) the signature of all Committee Members, such minutes shall
become binding on the Company. Minutes of a meeting of the Executive Committee
shall be required to record all changes to the Approved Plan or Approved Budget
(as hereinafter defined) and to memorialize all actions approved by the
Committee Members.
C. Executive Committee meetings may be held through the use of
conference telephone, or similar communications equipment, as long as all
Committee Members participating in the meeting can hear one another.
Participation in a meeting pursuant to this provision constitutes presence in
person at that meeting. In that event, the Executive Committee minutes relating
thereto shall be dated, executed, become binding upon, and delivered to each
Committee Member in the manner set forth in Subsection 5.4.B, above.
D. The Executive Committee may act without a meeting if the action
taken is approved in writing by all of the Committee Members. Any Committee
Member at any time may provide in writing his approval of a request by any other
Committee Member. Such written approval may be relied on by the Committee
Member receiving the approval as if the approval were reflected in Executive
Committee minutes prepared as of the date of such written approval, and such
written approval shall be included by reference in the next Executive Committee
minutes after the date of such written approval.
5.5 POWER AND AUTHORITY OF THE EXECUTIVE COMMITTEE
In carrying out its duties hereunder, the Executive Committee, without
limiting the foregoing, subject to the limitations otherwise set forth in this
Agreement and subject to the powers expressly granted to Members of the Company,
shall have the sole and exclusive authority:
A. To purchase, lease, sell, maintain, refurbish, repair, and
otherwise deal in any Company assets, whether real property or personal;
provided, however, WVRT as operator may deal with personal property in the
ordinary course of business subject to and in accordance with the terms of its
Operation and Maintenance Agreement or the Approved Budget.
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B. To borrow money and, as security therefor, to encumber all or any
part of the Company assets.
C. To increase, modify, consolidate, or extend any financing whether
or not secured by any Company assets.
D. To pay or prepay any or all loans, obligations, or financing in
whole or in part.
E. To employ or engage from time to time, at the expense of the
Company, persons or entities to render the types of services generally needed to
accomplish Company purposes; provided, however, WVRT, as operator, may employ
persons or entities to render services in the ordinary course of business
subject to and in accordance with its Operation and Maintenance Agreement or the
Approved Budget.
F. To purchase or contract to purchase any and all machinery and
equipment necessary to commence operation of the Project or to conduct the
Business of the Company; provided, however, WVRT, as operator, may purchase
machinery and equipment in the ordinary course of business subject to and in
accordance with its Operation and Maintenance Agreement or the Approved Budget.
G. To execute, acknowledge, and deliver any and all material
agreements, documents, instruments, and the like and to take such other steps as
are necessary to effectuate the Business of the Company, which would incur an
obligation of the Company in excess of $50,000.
H. To compromise, arbitrate, or otherwise adjust claims in excess of
$10,000 in favor of or against the Company and to commence or defend litigation
with respect to the Company or the assets of the Company where the amount in
controversy is in excess of $10,000 as the Executive Committee, in its sole
discretion, deems to be in the best interest of the Company.
J. To make all Company decisions and elections for financial,
accounting and income tax purposes, including, but not limited to, the selection
of the accounting method or methods to be used by the Company for the Company's
accounting and income tax purposes, the selection of depreciation methods and
useful lives for the Company's property.
K. To adopt, amend, and/or modify, as it determines appropriate, any
Approved Plan and Approved Budget.
L. To review all fees charged for services at the Project and review
all contracts and agreements regarding the acceptance, transfer and/or recycling
of waste; provided, however, upon the termination of the Guarantee and
Indemnification Agreement described in Section 2.3.C, the Executive Committee
shall have the full authority to consider, review, approve and otherwise deal
with all fees charged for services at the Project and all contracts and
agreements regarding the acceptance, transfer and/or recycling of waste, unless
such fees or contracts and agreements have previously been approved by the
Executive Committee in an Approved Budget.
M. To review the performance of WVRT as operator of the Project or
any phase thereof and WVRT's compliance with the terms of the Operation and
Maintenance Agreement.
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N. To review, consider and seek to resolve any actual, potential or
perceived conflict between Members or a Member and the Company.
O. To undertake such other activities as may be delegated to the
Executive Committee by the Members or pursuant to any other agreement or
document.
P. To retain a CPA for the Company, if required or appropriate.
5.6 APPROVED PLAN
Attached hereto as Exhibit "I" is a written development plan, setting forth
in reasonable detail the anticipated financing, construction, development,
installation of equipment and machinery, and other plans for Phase 1 of the
Project. For any material change in Phase 1 of the Project or any subsequent
phase of the Project, the Executive Committee shall develop and adopt a written
plan for such material change or for such new phase. Any such plan (hereinafter
an "APPROVED PLAN") shall: (i) describe all modifications to existing buildings
or other improvements on the Project Site or all new buildings or other
improvements to the Project Site (including architect's and engineer's
preliminary drawings, plans, and specifications); (ii) set forth the estimated
amounts required to meet all direct and indirect costs of developing the Project
Site and constructing any phase of the Project thereon, including charges
ordinarily classified as part of construction and/or development costs; (iii)
set forth the terms of anticipated interim financing available for such
development and construction (including a summary of the principal amounts,
estimated interest expense, and estimated associated costs, such as points,
appraisal, escrow and closing fees, fees for arranging such financing, and
guarantee fees, if necessary); (iv) set forth a description of the machinery and
equipment required for that phase or improvement to the Project and for the
conduct of the Business of the Company, including an estimate of the cost of
acquiring and installing such machinery and equipment; (v) set forth the long
term financing anticipated to be available upon the expiration of the interim
financing (including a summary of the principal amounts, interest expense,
principal terms, and associated costs) and setting forth projections for the
monthly cash requirements (loan draws and capital contributions, if any, shall
be separately indicated) for the operation, on a calendar year basis, of the
planned phase of the Project at and after construction, including estimated
receipts, expenditures, and financial needs of the Company for capital and
operating expenses and income; and (vi) anticipated time schedules for
development of any particular phase of the Project on the Project Site. Any
Approved Plan shall be reviewed by the Executive Committee at least quarterly.
5.7 APPROVED BUDGET
By January 15 of each year, the Executive Committee shall consider and
adopt an annual written budget and cash flow projections ("APPROVED BUDGET"),
which the Executive Committee shall review at least quarterly, setting forth in
reasonable detail the anticipated receipts and expenditures of the Company for
that year and the amount and kind of expenditures which, in addition to those
budgeted, may be made without further action by the Executive Committee. The
Members acknowledge that they have already agreed upon a projection for the
Company for 1997 as well as a capital expenditure plan for the matters
associated with the commencement of Phase 1 of the Project which is attached
hereto as Exhibit "J".
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5.8 RETENTION OF WVRT TO OPERATE THE PROJECT
Subject to the terms and conditions of this Agreement, the Company shall
retain WVRT to operate the Project in accordance with that certain Operation and
Maintenance Agreement attached hereto as Exhibit "H" as the same may be amended
from time to time. WVRT shall be reimbursed in accordance with the terms of the
Operation and Maintenance Agreement.
An uncured Event of Default under the terms and conditions of this
Agreement by WVRT shall also be considered an Event of Default under the
Operation and Maintenance Agreement, which may be cancelled by the Company at
the option of the non-defaulting Members other than WVRT.
5.9 MEMBERS PROVIDING GOODS AND SERVICES TO THE COMPANY
A Member or an Affiliate of a Member may provide goods and/or services to
the Company upon such terms and conditions as may be agreed upon by the
Executive Committee but in no event shall a Member or an Affiliate of a Member
charge more than its actual reasonable out-of-pocket costs and appropriate and
applicable overhead expenses as agreed upon by the Company and the Member
necessary to supply such goods or service with no mark-up or profit of any
nature or kind. If services of individuals employed by a Member or an Affiliate
of a Member are used by the Company, the Company shall pay for the time
reasonably spent on the business of the Company at the actual out-of-pocket
costs of the employer including a fair allocation of the benefit burden, such as
social security and insurance costs associated with such employee and
appropriate and applicable overhead expenses as approved by the Executive
Committee.
5.10 REIMBURSEMENTS TO MEMBERS
Except for those costs and expenses incurred pursuant to Section 5.11
below, no reimbursement to a Member in excess of $5,000.00 shall be paid, owing,
due, payable, or reflected on the books and records of the Company unless and
until the approval of such reimbursement has been documented in the Executive
Committee minutes or is otherwise provided in an Approved Budget or in the
Operation and Maintenance Agreement.
5.11 EMERGENCY COSTS AND DISBURSEMENTS
A. Irrespective of the provisions set forth elsewhere in this Agreement,
at all times during the term of the Company either Member shall have the
authority, with no further approval required, to incur costs and disburse
Company funds (or disburse its own funds and be reimbursed as soon as possible
by the Company) in amounts up to $10,000.00 to the extent that such Member in
good faith determines it necessary on an emergency basis (as defined below) to
incur costs or disburse funds for the purpose of:
1. Eliminating or avoiding any unsafe conditions on or about the
Project Site;
2. Protecting the assets of the Company; or
3. Avoiding claims against the Company.
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B. "EMERGENCY" shall mean that the circumstances do not reasonably
allow time for the consultation of the Executive Committee or the Members prior
to the required action.
5.12 COMPANY FUNDS
A. The Company shall maintain such checking and savings accounts as
the Executive Committee shall determine appropriate and shall authorize in
writing. Except as otherwise set forth herein, all funds of the Company shall
be deposited only in the accounts of the Company in the Company's name, shall
not be commingled with funds of either of the Members, and shall be withdrawn
only upon such signature or signatures as may be designated in writing from time
to time by the Members through the Executive Committee.
B. Subject to the provisions of Section 5.11, no Member shall incur
nor allow the Company to incur any cost or liability of any kind or nature other
than those included in this Agreement or in the Operation and Maintenance
Agreement or in an Approved Budget unless otherwise specifically agreed to in
writing. Each Member alone shall be responsible for, and shall and hereby
indemnifies and holds the Company and the other Member harmless from, all costs
or liabilities which it causes or allows the Company to incur which are not
included in this Agreement, in the Operation and Maintenance Agreement or in the
Approved Budget.
5.13 RECORDS OF THE COMPANY
On request of either Member, the other Member shall provide copies of any
Company plans, maps, budgets, projections, minutes, books, contracts, accounting
information and records of any kind or description (collectively "COMPANY
RECORDS") in its possession or control.
5.14 EXECUTION OF DOCUMENTS
Any deeds, options, leases, purchase agreements, covenants, conditions,
and restrictions, and documents of any nature conveying, selling, obligating or
encumbering all or any part of the Company's assets with a value or involving in
excess of $50,000 shall require execution by Members owning more then seventy-
five percent (75%) of the Percentage Interests.
5.15 RESOLUTION OF AN IMPASSE ON DECISIONS
In the event the Members or the Executive Committee are unable to reach
agreement on a particular issue or matter after good faith consideration and
negotiations and there is no uncured Event of Default, a Member may submit the
matter to dispute resolution as provided in Article 15 hereof or Kaiser may sell
its Percentage Interest to WVRT (and the other Members if there are Members in
addition to WVRT) and WVRT and the other Members, if any, shall be obligated to
purchase Kaiser's Percentage Interest at the price and on the terms specified in
Section 12.2 (the "PUT RIGHT"); provided, however, there shall be no twenty
percent (20%) reduction in the Purchase Price as specified in Section 12.2. If
Kaiser desires to exercise its Put Right, it shall notify WVRT and any other
Member in writing of its election and the procedures for determining the
Purchase Price specified in Section 12.2 shall be followed except there shall be
no twenty percent (20%) reduction in the Purchase Price. The closing on any such
purchase shall occur on or before ninety (90) days following the date of the
determination of the Purchase Price as provided in Section 12.2 except that
there shall be no twenty percent (20%) discount reduction in the Purchase Price.
Kaiser shall
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transfer all of its right, title and interest in the Company free and clear of
any liens and encumbrances except for any liens and encumbrances for Company
debt. Upon purchase, the purchasing Member or Members shall assume sole
responsibility for all Company debt, and shall seek to have the guarantee of
Kaiser or an Affiliate of Kaiser for Company debt terminated and shall indemnify
Kaiser against all Company liabilities. It is recognized that the purchasing
Member or Members may not be able to obtain the release of Kaiser and its
Affiliates from third party liabilities. In such event, the purchasing Member or
Members shall pledge to Kaiser its entire Percentage Interest to secure the
purchasing Member's obligation to indemnify Kaiser from all Company obligations
including third party obligations. However, Kaiser's indemnification obligations
provided in Section 2.2.C. of this Agreement shall survive the transfer of its
interest in the Company.
ARTICLE 6 - MEETINGS OF MEMBERS
6.1 MEETINGS OF MEMBERS
All meetings of Members shall take place at the executive offices of the
Company. The Members are authorized to designate from time to time, a place or
places other than that specified above as the place for meetings of the Members.
At the annual meeting, Members may elect Managers (if any), consider reports of
the affairs of the Company, and transact any other business that is within the
powers of the Members. Notice of any annual meeting shall be sent to each
Member at least thirty (30) days prior to the date of the annual meeting. The
Executive Committee shall determine the date of any annual meeting. Any Member
may call a special meeting by giving at least ten (10) days written notice to
all other Members. The notice must specify the date, time, and place of the
special meeting and the purpose for calling the meeting. Notice of the meeting
must be sent no later than ten (10) days prior to the date of the meeting. A
Member may waive notice of an annual or special meeting prior to or after a
Members meeting.
6.2 QUORUM
At all meetings of the Members, Members owning at least seventy-five
percent (75%) of the Percentage Interests of the Company shall constitute a
quorum.
6.3 ACTIONS BY MEMBERS AND VOTING RIGHTS
Any action of the Members of record is effective if Members owing at least
seventy-five percent (75%) of the Percentage Interests vote to adopt the action
at a meeting at which a quorum of Members is present except that a vote of
Members representing more than eighty-nine percent (89%) of the Percentage
Interests eligible to vote on a matter shall be required to approve all of the
following if they should come before the Members: (a) any capital call; (b) any
expenditure or borrowing of funds in excess of $25,000, unless such funds have
been pre-approved as a part of the Approved Budget or other previous action of
the Executive Committee; and (c) any sale or transfer of any Company asset with
a fair market value of $100,000 or greater. The voting rights of the Members
are to be distributed in proportion to each Member's Percentage Interest. Upon
the occurrence of an uncured Event of Default, the defaulting Member shall have
no right to vote concerning any matter at a meeting of Members and a vote of the
majority of the Percentage Interests held by non-defaulting Members may approve
items before the meeting, except that a
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defaulting Member shall have the right to vote on matters involving an item of
business which requires approval of Members representing more than 89% of the
Percentage Interests as specified in the first sentence of this Section 6.3.
6.4 ACTION BY CONSENT WITHOUT MEETING
Any action permitted to be taken by the Members may be taken without a
meeting if all Members individually or collectively consent by signing a written
approval of the action. Any action by written consent shall have the same force
and effect as a unanimous vote of the Members.
6.5 RECORD DATE
Only persons whose names are listed as Members in the official records of
the Company ten (10) days before any meeting of the Members are entitled to
notice of or to vote at that meeting.
6.6 VOTE BY PROXY
Members may vote either in person or by proxy. Proxies must be executed in
writing by the Members. A telegram, cablegram, or similar transmission by the
Member or a photographic, photostatic, facsimile, or similar reproduction of a
writing executed by a Member is deemed an execution in writing for purposes of
this Agreement.
ARTICLE 7 - PROFITS AND LOSSES
7.1 PERCENTAGE OF INTEREST IN THE COMPANY
Subject to Section 3.4 above, the Members' respective interests in the
Company ("PERCENTAGE INTERESTS") shall be as follows:
Kaiser 50%
WVRT 50%
7.2 ALLOCATION OF PROFITS AND LOSSES
The Company's taxable profits and losses shall be allocated to the Members
in accordance with Exhibit "G" attached hereto.
ARTICLE 8 - DISTRIBUTIONS OF CASH AND ASSETS
8.1 DISTRIBUTION OF CASH
A. In all cases (except as specified in Sections 8.4 and 8.5 and
except from the liquidation of the Company following a dissolution of the
Company), the net cash proceeds of the Company from any and all sources,
including without limitation those resulting from the sale, exchange,
condemnation (or similar eminent domain taking), casualty, or other disposition
of all or any part of the Project or the Project Site or any other asset owned
by the Company or from cash
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funds from the operation of the Company, shall be distributed and applied in the
following order of priority;
1. FIRST, to the payment of all debts and liabilities of the
-----
Company to third parties then due.
2. SECOND, to the setting up of any reserves which the Executive
------
Committee deems reasonably necessary for contingent or unforeseen liabilities or
obligations of the Company or for working capital or capital improvements and
replacements or otherwise.
3. THIRD, to any expended but unreimbursed costs or disbursements
-----
owing to the Members.
4. FOURTH, to the payment of interest and other charges then due,
------
and then principal payments then due, owing on any loans from any Member to the
Company.
5. FIFTH, fifty percent (50%) of the balance of the net cash
-----
proceeds, to the payment of any unpaid advances made pursuant to the terms of
the Guaranty and Indemnification Agreement specified in Section 2.3.C.
6. SIXTH, to the Members in proportion to their respective
-----
Capital Accounts in the company until their Net Capital Investments in the
Company have been returned in full.
7. SEVENTH, to all Members in accordance with their respective
-------
Percentage interests in the Company.
B. The net cash proceeds of the Company from the liquidation of the
Company's assets following a dissolution of the Company shall be distributed as
provided in Section 13.2.
C. For purposes of this Agreement, the term "NET CAPITAL INVESTMENT IN
THE COMPANY" shall mean, with respect to each Member, such Member's aggregate
contributions to the capital of the Company reduced by distributions made to
such Member pursuant to Subsections 8.1.A.6 or 8.1.B above and pursuant to
Section 8.4 below. Net Capital Investment in the Company shall not include any
Member's loan to the Company or any advances made under the terms of the
Guaranty and Indemnity Agreement specified in Section 2.3.C.
D. The Members shall cooperate in the management of cash resources of
the Company in an effort to provide sufficient cash distribution to the Members
to meet each Member's cumulative net cash income tax liability resulting from
the activities of the Company.
8.2 RESTRICTIONS ON DISTRIBUTIONS
Distributions of cash or assets other than cash shall be made monthly.
However, no distributions shall be made to the Members if: (i) immediately after
such distribution, the Company's assets will not exceed all current liabilities
(as defined under generally accepted accounting principles) of the Company; (ii)
the Company is in default with respect to any material indebtedness or liability
of the Company or; (iii) the Executive Committee determines that such
distribution will in any way jeopardize or limit the business of the Company.
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8.3 DISTRIBUTION OF ASSETS OTHER THAN CASH
Distributions of Company assets other than Cash shall be divided among the
Members in accordance with the provisions of Subsection 8.1.A. If the Members
cannot agree as to the value of assets other than cash to be distributed, the
value of such assets shall be determined by the appraisal procedures described
in Section 12.2.
8.4 DISTRIBUTION OF ANTICIPATED ORIGINAL BOND FINANCING/PROCEEDS
The Company currently anticipates that it will have available the proceeds
from a taxexempt bond financing to pay costs related to the development,
construction and equipping of Phase 1 of the Project and related off site
improvements. A portion of these proceeds will be distributed or repaid to the
Members as the Executive Committee shall determine.
8.5 DISTRIBUTIONS OF CASH IN THE EVENT OF THE ACCELERATION OF A COMPANY
OBLIGATION DUE TO THE DEFAULT OF A GUARANTOR
As briefly described in Section 8.4 above, the Company anticipates
obtaining the proceeds of a tax-exempt bond financing to pay costs related to
the development, construction and equipping of Phase 1 of the Project. In
connection with obtaining the tax-exempt and other financing for Phase 1 of the
Project, guarantees will be required by KVI and Kaiser (collectively the "KAISER
GROUP") and by WVRT, BWI, Cole Burr, Tracy A. Burr, Cole Burr and Tracy Burr as
co-trustees of the Cole and Tracy Burr Family Trust UAD 2/5/93, Edward G. Burr
and Sandra L. Burr (collectively the "BURR GROUP"). Certain events of default
by the Kaiser Group as a guarantor or the Burr Group as a guarantor could
trigger an event of default under the terms of any loan agreement, reimbursement
agreement, deed of trust, security agreement or other similar agreement or
document that the Company may have with a lending party or financial institution
which could in turn cause an acceleration of one or more of the Company's
obligations. Upon the occurrence of an event by the Kaiser Group or the Burr
Group which is an event of default under the terms of any loan, reimbursement
agreement, deed of trust, security agreement or other similar agreement or
document that the Company may have with any lender or financial institution
which in turn triggers an acceleration of any obligation of the Company, the
amount advanced, contributed or paid for or on behalf of such Company obligation
shall be considered a Member loan for purposes of the distribution of cash.
Accordingly, the amount, advanced, contributed or paid for a Company obligation
under the circumstances described under this Section 8.5 by: (i) the Burrtec
Group under the terms of any Burrtec Group guarantee for such obligation shall,
provided that any person or entity named above as part of the Burrtec Group did
not cause the Company's event of default, be deemed for purposes of the priority
of the distribution of cash pursuant to Sections 8.1 and 13.2 as a loan from a
Member to the Company that is immediately and fully payable prior to the payment
of any other Member loan; and/or (ii) the Kaiser Group under the terms of any
Kaiser Group guarantee for such obligation shall, provided, that any entity
named above as part of the Kaiser Group did not cause the Company's event of
default, be deemed for purposes of the priority of distribution of cash pursuant
to Section 8.1 and 13.2 as a loan from a Member to the Company that is
immediately and fully payable prior to the payment of any other Member loan.
For example, if the bankruptcy or insolvency of one of the companies composing
the Kaiser Group is an event of default under the terms of a loan agreement,
reimbursement agreement or other similar agreement that the Company may have
with a lender or financial institution, and such event occurs triggering the
acceleration of a Company obligation guaranteed by the Burr Group, any amount
paid,
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advanced or contributed by the Burr Group as guarantor of such obligation
shall be deemed to be for purposes of cash distributions as a loan from a Member
to the Company and Kaiser as a member of the Kaiser Group would not receive any
cash distributions from the Company unless they were for a purpose with a higher
priority of distribution than a Member loan, until the Burr Group is fully
repaid.
ARTICLE 9 - ACCOUNTING AND TAX MATTERS
9.1 BOOKS OF ACCOUNT
The Executive Committee shall have the authority as an expense of the
Company, to retain a certified public accountant ("CPA") in order to furnish
such accounting, budgeting, and record keeping services as determined by the
Executive Committee so that the Company shall have full and complete information
available concerning the economic status of the Company, its costs and revenues,
and projections concerning future economic performance and profitability. To
that end, complete, true, and accurate books of account, budgets, projects, and
records of the Company shall be maintained at the place of business of the
Company. Said books of account, budgets, projects, and records shall be
maintained in accordance with generally accepted accounting principles. All of
such financial records of the Company are sometimes herein referred to
collectively as "BOOKS" or "BOOKS OF ACCOUNT" of the Company. WVRT and Kaiser
acknowledge that kaiser shall initially be responsible for keeping the Books or
Books of Account for the Company although WVRT shall have responsibilities
pursuant to the Operation and Maintenance Agreement.
9.2 GENERAL ACCOUNTING PROVISIONS
A. The Books of Account shall be maintained, and Profit and Loss shall
be calculated, based on generally accepted accounting principles.
B. If a question should arise as to an accounting method or procedure
to be used relative to any aspect of the accounting for the Business of the
Company, and if such question cannot be resolved by reference to a specific
provision set forth herein, such question shall be resolved by utilizing the
method or procedure which the Company's CPA, in his or her reasonable
discretion, determines is prudent or proper accounting for the Company.
C. The fiscal year of the Company for tax and financial accounting
purposes shall be determined by the Executive Committee based upon the advice of
the Company's CPA.
9.3 FINANCIAL STATEMENTS
A. The Books and records of the Company shall be available for
inspection and audit by any Member or its agents at any reasonable time after
reasonable notice has been given.
B. The Executive Committee shall file or cause to be filed the Company
tax returns.
C. The Executive Committee, at the expense of the Company, at any time
and from time to time, may select any accounting firm to perform such special
audits or accounting as the Executive Committee, in its sole discretion,
determines to be necessary.
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9.4 ELECTIONS
A. At the request in writing from either Member, the Company shall
file an election under Section 754 of the Code; provided, however, that the
Member making such request shall bear any additional bookkeeping and accounting
costs resulting from such election.
B. The tax attributes as to any property contributed by a Member to
the Company shall be allocated in accordance with Section 704(c) of the Code.
C. The Company shall make or refuse to make other elections or
determinations required or permitted for federal or state income tax or other
tax purposes, as the Executive Committee shall determine. It is the objective
of the Members to minimize on a cumulative basis both federal and state income
taxes of the Members, and required elections (where alternatives are available
under the applicable tax law) shall be made to achieve that objective.
ARTICLE 10 - RELATIONSHIP OF PARTIES
Kaiser and WVRT each agree that they will operate the Project and may
develop and operate other waste recycling and recovery facilities within the
Territory only as part of this Company or some other business entity between
them and that they and their Affiliates may not engage in any business
enterprise in the Territory to the material detriment of the Company without
offering such opportunities to the Company or the other Member. In addition,
notwithstanding the foregoing, either Member may engage in business
opportunities other than the recycling, waste transfer station and material
recovery facility business in any location, and such Member need not offer such
business or investment opportunities to the Company or any other Member, but may
take advantage of such opportunities for its own accounts or for the account of
other enterprises with which it may be associated. (For example, WVRT may
engage in the waste collection business at any location, and need not offer such
business opportunity to the Company, subject to Section 2.5 above. Similarly,
Kaiser or its Affiliates may participate in activities related to the Eagle
Mountain Landfill (other than recycling, a waste transfer station, or a
materials recovery facility in the Territory) and need not offer any such
business opportunity to the Company.) In addition, any Member or its Affiliates
may engage in a business opportunity (including the recycling, waste transfer
station and the material recovery facility business) outside the Territory, and
such Member need not offer such business or investment opportunity to the
Company or the other Member, but may take advantage of such other opportunities
for its own accounts or for the account of other enterprises with which it may
be associated. Furthermore, (a) if after a Transfer, as defined in Section 11.1
below; a person or entity that is not an Affiliate of an existing Member becomes
a new Member ("NEW MEMBER"); or (b) upon a Transfer a new person or entity
controls a Member ("CONTROLLING PERSON"); and the New Member or the Controlling
Person owns or operates prior to becoming a New Member or prior to becoming a
Controlling Person a business similar to the project (recycling, waste transfer
station and/or material recovery facilities), neither the Company nor any other
Member shall have any right to participate in such business enterprise and such
New Member or Controlling Person shall be allowed to continue in such existing
business enterprise.
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Upon any Transfer of a Member's interest in the Company, except as provided
in the paragraph immediately above, the Transferring Member shall not engage in
a waste transfer station or a materials recovery facility or both in the
Territory for a period of five (5) years following the Transfer. In addition,
any Transfer of a Member's interest in the Company shall be subject to any
obligations contained in any third party financing documents.
ARTICLE 11 - TRANSFER OF INTERESTS IN THE COMPANY
11.1 RESTRICTIONS AGAINST TRANSFER
Subject to Section 11.2, no Member shall sell, assign, convey, or
otherwise transfer all or any part of its interest in the Company or any legal
or beneficial right therein, whether voluntarily, by operation of law, by gift,
or otherwise (collectively, "TRANSFER"), without the prior written approval of
all other Members, which consent shall not be unreasonably withheld. in
addition, subject to the exceptions described herein, a Transfer shall be deemed
to have occurred if with respect to any Member or any permitted transferee of an
interest in the Company or any entity which directly or indirectly controls such
a Member or permitted transferee (collectively a "TRANSFEROR"): (i) there shall
be consummated any consolidation or merger of such Transferor with another
corporation or entity and as a result of such consolidation or merger less than
50 percent of the outstanding voting securities of the surviving or resulting
corporation or entity shall be owned in the aggregate by the stockholders of the
Transferor as the same shall have existed immediately prior to such
consolidation or merger; (ii) any sale, lease, exchange, or other transfer (in
one transaction or in a series of related transactions) of all or substantially
all of the assets of the Transferor; (iii) the liquidation or dissolution of the
transferor; or (iv) any "person" (as such term is defined in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) shall become the beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act) of 35% percent
or more of the Transferor's outstanding common stock. Notwithstanding the
foregoing: (i) a Member may Transfer its interest in the Company to any
affiliate of such Member; and (ii) there shall be no restriction on the Transfer
nor shall there be deemed a Transfer in connection with the sale, assignment,
conveyance or other transfer of stock in KVI unless the sale or other transfer
of stock in KVI results in KVI being controlled directly or indirectly or under
common control with or by a person or entity which is directly or indirectly
meaningfully engaged in the waste management business at the time of the change
of control in which case the provisions of 11.3 shall be applicable. Any
purported Transfer in violation of the provision of this Agreement shall be void
and ineffectual, shall not operate to convey any right, title, or interest in or
to the purported transferee, and shall give the other Member a right to purchase
the Company interest of the Member attempting to Transfer its Company interest
for the price and under the terms set forth in Section 11.2 below.
11.2 RIGHT OF FIRST REFUSAL
If any Member receives an offer, whether or not solicited by such Member,
from a person not then a Member to acquire all or any portion of such Member's
interest in the Company, and if such Member is willing to accept that offer,
such Member shall give written notice to the other Member of the amount and
terms of the offer, the identity of the proposed transferee, and such Member's
willingness to accept the offer ("OFFER NOTICE"). The other Member shall have
the option, within sixty (60) days after receipt of the written notice, to
acquire the designated interest of such
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Member on the same terms and conditions and for the same price as those
contained in the offer or at the appraised value of the selling Member's
interest as calculated in pursuant Section 12.2, except there shall be no
reduction in the appraised value by twenty percent (20%) of the appraisal price.
If the Member elects to purchase the transferring Member's interest in the
Company at appraised value, which election must be made prior to commencement of
the appraisal process, the purchasing Member shall pay all the costs of the
appraisal. If the other Member does not elect to acquire the entire interest
offered within 60 days after receipt of said notice, the Member desiring to
Transfer its interest in the Company may Transfer its interest in the Company to
the proposed transferee upon the terms and at the same price contained in the
notice only. In the event the ownership interest or specified portion thereof is
not sold within a six (6) month period following the expiration of the period in
which the non-selling Member has the option to purchase 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. In addition, if there is a change in the
price 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. If any
interest in the Company is Transferred pursuant to this Section 11.2, the
Capital Account of the Transferor that is attributable to such interest in the
Company shall carry over to and shall be assumed by the transferee.
11.3 CHANGE IN CONTROL OF KVI OR BWI
A. If there is a Transfer or deemed Transfer by or with respect to KVI or
Kaiser, as defined in Section 11.1 above, but without consideration of clause
(ii) of the next to the last sentence of Section 11.1. Kaiser shall give written
notice thereof to the other Members within ten (10) days and all Members other
than Kaiser shall have the option to purchase Kaiser's interest in the Company
for sixty (60) days after the date that Kaiser gives the written notice at the
appraised value of Kaiser's interest in the Company calculated pursuant to
Section 12.2, except there shall be no reduction by twenty percent (20%) in the
Purchase Price as determined pursuant to Section 12.2. The purchasing Member
shall purchase all, and not less than all, of Kaiser's interest in the Company.
Such option shall be exercised, if at all, in writing within the sixty (60) day
period specified herein with the closing to occur no later than one hundred
eighty (180) days following the date of the giving of the written notice by
Kaiser upon the terms and conditions specified in Section 12.2. The non-complete
provisions of the last paragraph of Article 10 shall apply to the extent
provided therein.
B. If there is a Transfer or deemed Transfer by or with respect to BWI or
WVRT as defined in Section 11.1 above, but without consideration of clause (ii)
of the next to the last sentence of Section 11.1. WVRT shall give written notice
there of to the other Members within ten (10) days and all Members other than
WVRT shall have the option to purchase WVRT's Percentage Interest in the Company
for sixty (60) days after the date of the that WVRT gives the written notice at
the appraised value of WVRT's Percentage Interest calculated pursuant to Section
12.2, except there shall be no reduction by twenty percent (20%) in the Purchase
Price as determined pursuant to Section 12.2. The purchasing Member shall
purchase all, and not less than, all of WVRT's Percentage Interest in the
Company. Such option shall be exercised, if at all, in writing within the sixty
(60) day period specified herein with the closing to occur no later than one
hundred eighty (180) days following the date of the giving of the written notice
by WVRT upon the terms and conditions specified in Section 12.2. The non-
complete provisions of the last paragraph of Article 10 shall apply to the
extent provided therein.
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11. 4 OTHER RESTRICTIONS
The Members acknowledge that restrictions other than those specified in
this Article 11 may be applicable to the transfer of a Member's interest in the
Company including, but not limited to, compliance with applicable securities law
and restrictions imposed pursuant to third party financing documents.
ARTICLE 12 - EVENT OF DEFAULT
12.1 EVENT OF DEFAULT DEFINED
A. Any of the following events shall constitute an "EVENT OF DEFAULT"
hereunder:
1. The material breach by either Member of any term, provision, or
covenant contained in this Agreement including without limitation, a Member's
obligation to make an Additional Capital Contribution pursuant to Section 3.3
above.
2. The occurrence of any of the prohibited Transfers specified in
Section 11.1.
3. Either Member shall commence a voluntary case under any
applicable state or federal bankruptcy, insolvency, or other similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in any
involuntary case under any such law, or shall consent to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian, or
sequestrator (or similar official) of such Member, or for any substantial part
of its property, or shall make any general assignment for the benefit of
creditors shall take any action in furtherance of any of the foregoing.
4. A court having jurisdiction shall enter a decree or order for
relief in respect of either Member in an involuntary case under any applicable
bankruptcy, insolvency, or other similar law now or hereafter in effect, or
appoint a receiver, liquidator, assignee, custodian, trustee, or sequestrator
(or similar official) of such Member, or for any substantial part of its
property, or order the winding up or liquidation of its affairs and such decree
or order shall remain unstayed and in effect for a period of 90 consecutive
days.
B. Should an uncured Event of Default occur, the non-defaulting
Member, in addition to any other rights it may have at law, in equity or
pursuant to Section 11.2 or Article 12 hereof, may advance the defaulting
Member's share of the required additional capital, or may cause an uncured non-
monetary default to be remedied. Any costs associated with same may, at the
option of the non-defaulting Member be considered a loan to the Company which
shall be repaid by the Company at a default rate of two percent (2%) per annum
over the Union Bank of California reference rate as announced from time to time,
but in no event greater than the maximum rate permitted by California law. Any
such interest shall be deducted from the defaulting Member's Capital Account.
C. If an event occurs which would be an Event of Default but which can
be cured, and if a cure is effected within thirty (30) days after the defaulting
Member's receipt of written notice expressly asserting the occurrence of the
Event of Default ("NOTICE OF DEFAULT") or, in the case of a
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non-monetary default, if the same cannot reasonably be remedied within 60 days
after the receipt of the Notice of Default, if the defaulting Member commences
remedial efforts within said 60-day period and thereafter diligently prosecutes
said cure to completion within a reasonable time period, which in no event shall
be more than 180 days from the receipt of such Notice of Default, such event
shall not constitute an Event of Default.
12.2 PURCHASE OF A MEMBER'S INTEREST IN THE COMPANY UPON THE OCCURRENCE OF AN
EVENT OF DEFAULT (APPRAISAL)
A. ELECTION TO PURCHASE.
In accordance with the provisions set forth below, at any time that
an uncured Event of Default (as defined in Section 12.1. above) has occurred,
the non-defaulting Member (hereinafter "PURCHASER") may initiate (by notice to
the other Member) a procedure whereby it can purchase all of the interest in the
Company of the defaulting Member. Any such election by the Purchaser shall be
made by giving notice (the "PURCHASE NOTICE") to the other Member (hereinafter
"SELLER") that the Purchaser desires a determination of the purchase price of
the Seller's interest in the Company. The Purchase Notice must be delivered to
the Seller within 30 days after the Event of Default has occurred. The Purchaser
also may include in the Purchase Notice a statement of its opinion of the value
of the assets of the Company ("STATEMENT OF VALUE"). If the Purchase Notice
includes a Statement of Value, the Seller, within 20 days after its receipt of
the Purchase Notice, by written notice to the Purchaser, may accept the
Statement of Value as the value of the assets of the Company, in which event,
the provisions hereunder regarding the use of appraisers shall be disregarded
and the Statement of Value shall be submitted to the Company's CPA, who shall
determine the purchase price for the Seller's interest in the Company ("PURCHASE
PRICE") in accordance with Section 12.2.E.2 below. If the Seller does not accept
the Statement of Value as described above, the Purchase Price shall be
determined in accordance with the terms of Subsections 12.2.B through 12.2.G
below.
After delivery of the Purchase Notice, the Company shall take no
actions nor continue any activities beyond the ordinary course and scope of the
Company's business, without the written approval of both Members given after the
date of delivery of the Purchase Notice.
B. APPOINTMENT OF APPRAISERS.
Within ten days after the termination of the 20-day period
described in Section 12.2.A above, the Purchaser shall appoint and pay for an
appraiser. Within 15 days after receiving notice of such appointment, the Seller
also shall appoint and pay for an appraiser. Each appraiser appointed for this
purpose:
1. Shall have had at least five years full-time experience
appraising properties and businesses in California which shall include
substantial experience in appraising properties and businesses in the solid
waste industry; and
2. Shall not have been associated, retained, or employed by nor
have acted in any capacity for the Company or either of the Members (or any
officer, stockholder, or Affiliate of the Members) for a period of ten (10)
years immediately prior to the appointment.
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The appointment of an appraiser by the Purchaser and the Seller shall be
evidenced by written notice to the other Member stating the name, address, and
qualifications of the appraiser so appointed.
C. FAILURE TO APPOINT APPRAISER.
If either the Purchaser or Seller fails to appoint an appraiser
within the 15-day period described in Subsection 12.2.B, the Company's CPA, upon
the request of the other Member, shall appoint an appraiser for such party
failing to appoint, who shall bear the costs and expenses of that appraiser. If,
after the appraisers for the Purchaser and the Seller have been appointed, an
appraiser fails to complete the appraisal assignment according to the procedures
and time limits set forth herein, the CPA may either extend the time period for
the completion of the assignment or appoint a substitute appraiser(s) to
complete the necessary appraisal assignment (whichever the CPA determines is
appropriate). If the CPA fails to act diligently to appoint an appraiser as set
forth herein, the Purchaser or Seller, as the case may be, may apply to the
presiding judge of the San Bernardino Superior Court for the selection of the
necessary appraiser for the Seller.
D. INSTRUCTIONS TO APPRAISERS/CPA.
Within ten days after the appointment of the last of the two
appraisers, the Purchaser and Seller concurrently shall provide to each
appraiser, in writing, the information and instructions set forth below and such
other information and instructions as the parties mutually deem appropriate.
1. As the date of value for the appraisals ("APPRAISAL DATE"),
the appraisers shall use the last day of the calendar month during which the
uncured Event of Default occurs.
2. The appraisers shall be provided with legal descriptions,
title reports, maps, plans, cost information, statements of profit and loss,
revenue projections, annual and quarterly financial statements, and such other
factual information as the appraisers, the Purchaser or the Seller may request.
3. The appraisers each shall be instructed to form a separate
opinion of the most probable net sale price on a going concern basis
considering, among other things, such items as tonnage of waste transferred,
waste commitment contracts, and other items pertinent to the waste hauling and
handling industry (after deducting an allowance for normal sales costs) of all
of the assets of the Company (hereinafter referred to as "OPINION OF VALUE").
For purposes of this Section 12.2, the term "ASSETS" includes all real and
personal property owned by the Company, including, but not limited to, accounts
receivable, certificates of deposit, savings and checking accounts, and
goodwill.
4. The appraisers shall assume that the assets of the Company
are free and clear of all monetary liens or encumbrances.
5. The appraisers shall assume that the assets of the Company
will be sold on a going concern basis at a price which will attract a buyer who
is willing and able to purchase with no financing provided by the Company.
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6. The Opinion of Value of the assets of the Company shall
reflect a listing and sales period of not more than 12 months.
7. The appraisers each shall report their separate Opinion of
Value of the assets of the Company to both the Purchaser and Seller in writing
within 120 days after the Appraisal Date.
8. The appraisers shall be encouraged (but not required) to
communicate with each other and share factual information bearing on the
appraisal assignment including any third party purchase offer.
9. Each appraiser shall include with each Opinion of Value a
detailed description of the assets of the Company and such appraiser's written
comments as to the characteristics of such assets of the Company which influence
his Opinion of Value but need not include any documentation or explanation as to
how the appraiser formed his Opinion of Value or the relative weight the
appraiser placed on each of the characteristics of said assets of the Company.
Concurrent with the foregoing instructions given to the appraisers,
the Purchaser shall request that the CPA, at the expense of the Company, furnish
to both Purchaser and Seller a written accounting of the Existing Debt of the
Company, as described in Subsection 12.2.E.2.(b) below, as of the Appraisal
Date.
E. APPRAISED VALUE.
1. After both Purchaser and Seller have received each
appraiser's Opinion of Value of the assets of the Company (formulated and
submitted according to the procedures and agreements set forth herein), a single
Opinion of Value ("APPRAISED VALUE") shall be determined in the following
manner:
(a) If the amount of the lower Opinion of Value is higher than 75
percent of the amount of the higher Opinion of Value, the average of the two
Opinions of Value shall be the Appraised Value of the assets of the Company.
(b) If the amount of the lower Opinion of Value is less than 75
percent of the amount of the higher Opinion of Value then the two appraisers
will select a third appraiser (which appraiser shall have the qualifications
described in Subsection 12.2.B above and shall be given the same instructions as
described in Section 12.2.D above). If the two appraisers are unable to agree
on the selection of the third appraiser within ten days after both Opinions of
Value have been delivered to the Purchaser and Seller, the CPA shall select the
third appraiser, who shall have the qualifications set forth in Subsection
12.2.B above and who shall be given the same instructions as described in
Subsection 12.2.D above. The third appraiser shall reach an Opinion of Value in
accordance with the terms hereof. The Opinion of Value of the third appraiser
shall be final and conclusive and shall be the Appraised Value. Notwithstanding
the foregoing, if the third appraiser's Opinion of Value is higher than the
higher Opinion of Value of the first two appraisers, then the higher Opinion of
Value of the first two appraisers shall be the Appraised Value. If the third
appraiser's Opinion of Value is lower than the lower Opinion of Value of the
first two appraisers, then the lower Opinion of Value of the first two
appraisers shall be the Appraised Value.
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2. The Appraised Value (or the accepted Statement of Value, as
the case may be) shall be submitted to the CPA, who, in turn, shall determine
the Purchase Price as soon as possible after he or she has been advised of the
Appraised Value. The Purchase Price shall be 80 percent of the amount, which
would be received by the defaulting Member upon liquidation of the Company.
Such determination shall be made by treating the Appraised Value as the gross
amount received by the Company upon hypothetical liquidation of all of its
assets, and by allocating to the Members' Capital Accounts the hypothetical
Profits and Losses which the Company would recognize upon such hypothetical
liquidation, after payment of the Company's Existing Debt. If, after adjustment
of the Members' Capital Accounts to reflect the allocation of Profits and Losses
to the Members upon such hypothetical liquidation, the defaulting Member would
have a deficit Capital Account balance, the Purchase Price shall be zero, and
the defaulting Member unconditionally shall be obligated to restore the
tentative deficit to the Company concurrently with closing of the sale of the
defaulting Member's interest in the Company. Immediately upon determining the
Purchase Price, the CPA shall provide both Members written notice ("PRICE
NOTICE") setting forth the following information:
(a) The Opinion of Value of each appraiser and the Appraised
Value.
(b) AN ACCOUNTING OF THE "EXISTING DEBT." For purposes of this
-----------------------------------
agreement, the term "EXISTING DEBT" shall mean the total of all monetary liens,
encumbrances, or debts of any kind or description relating to the Company's
assets or the Business of the Company, other than indebtedness reflecting the
Capital Accounts (equity interests) of the Members, as of the Appraisal Date and
shall consider and incorporate as appropriate provisional or contingent
liabilities of the Company consistent with Financial Accounting Standards Board
Release No. 5.
(c) The Seller's Purchase Price, determined in accordance with
Subsection 12.2.E.2, together with a summary of the CPA's method of calculating
said Purchase Price.
F. PRICE AND TERMS.
The amount and terms of the payments and other consideration to be
paid by Purchaser to Seller at the time of Closing shall be as follows:
1. Purchaser shall assume (if possible or, if assumption will
not be allowed by the obligee, Purchaser shall take the Seller's interest in the
Company subject to) all Existing Debt of the Company.
2. As of the date of the Closing, the Purchase Price shall be
adjusted to reflect settlement of all debts (if any) between the Members and
between the Seller and the Company. Concurrently with the transfer of title and
ownership of Seller's interest in the Company, an amount equal to the Purchase
Price, as described in Subsection 12.2.E.2, and as adjusted in accordance
herewith, shall be paid to the Seller, subject to the provisions of Section
12.G.1. below.
3. The Purchaser shall use its best efforts to cause the
Seller to be released from any liability for all Company loans, debts, and other
obligations. The Purchaser shall indemnify and hold harmless the Seller from all
damages, costs, and expenses, including reasonable attorneys' fees and costs,
arising in connection with or resulting from any liabilities, debts, and
obligations of the
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Company except those which were unknown to the Purchaser but were known to the
Seller and which the Seller failed to disclose to the Purchaser.
G. CLOSING.
1. The Members shall meet and exchange documents and pay any
amounts due and otherwise take all actions necessary to conclude the transaction
set forth herein (the "CLOSING"). The closing of the purchase and sale shall
occur at the place of business of the Company or such other location as maybe
mutually agreed upon, at 1:00 p.m. on the 30th day after the date of the
delivery of the Price Notice unless that day is a weekend or national or state
holiday and, in that event, on the next business day. At the Closing, the
Seller shall deliver to the Purchaser a duly executed and acknowledged
assignment of Seller's interest in the Company and, upon the request of the
purchaser, Concurrently therewith or at any time and from time to time
thereafter as requested by the Purchaser, Seller shall execute and deliver such
other documents and the Company records as the Seller may have in its possession
or control and that Purchaser determines are necessary or desirable to conclude
the Closing and to transfer ownership, title, and control of the Company assets
and the Business of the Company and otherwise to allow the Purchaser to complete
the Project or otherwise develop, use, sell, rent, or dispose of the assets of
the Company. The Seller shall make all Company records, contracts, and
documents available to the Purchaser for its reasonable inspection and copying.
If requested by either the Seller or the Purchaser, the Seller and the Purchaser
shall in good faith negotiate other terms for the purchase and sale; provided,
that if no agreement is reached by the Parties, the Purchaser shall deliver to
the Seller a certified or cashier's check for the amount of the cash
consideration and shall deliver any other consideration to be paid by the
Purchaser and any other documents necessary from the Purchaser to conclude the
Closing.
2. At the Closing, the Members shall conclude a settlement of
the purchase and sale of the Seller's interest in the Company, and all debts (if
any) between the Seller and the Purchaser or either of them and the Company
(including, but not limited to, loans for Capital Contributions made pursuant to
Section 3.4).
H. SPECIFIC ENFORCEMENT.
The Members agree that they have taken care to provide fair and
adequate remedies upon an Event of Default. Therefore, each Member agrees that
damages would be an inadequate remedy and that specific performance or
injunctive relief may be granted to compel compliance with this Section 12. In
addition, the defaulting Member shall pay all costs, including reasonable
attorneys' fees, incurred by the non-defaulting Member in enforcing the
provisions of this Section 12.
ARTICLE 13 - TERMINATION
13.1 DEFINITIONS
A. The term "TERMINATION NOTICE" shall mean the delivery of a notice
by one Member to the other, electing to terminate the Company, which election
shall only be made in accordance with the provisions and procedures set forth
herein when permitted pursuant to Section 13.3.
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B. The term "TERMINATION ELECTION DATE" shall mean the date of
delivery of a Termination Notice.
C. The term "TERMINATION PERIOD" shall mean the period of time
commencing with delivery of a Termination Notice from one Member to the other
Member and ending with the rescission of the termination notice or a final
settlement between the Members and between the Members and the Company,
whichever shall occur first.
13.2 PROCEDURE UPON TERMINATION
Upon termination of the Company as herein provided, the Company shall
engage in no further business thereafter other than that necessary to wind up
the business and distribute the assets or such other business as the Executive
Committee shall determine and authorize in writing. Upon a termination of the
Company for any reason, the Members through the Executive Committee shall act as
liquidator to wind up the affairs of the Company and liquidate its assets except
as provided in Section 13.4 below. The Members shall continue to divide Profits
and Losses and distributable cash during the winding-up period in the same ratio
and on the same priorities as provided under Article II of Exhibit "G" attached
hereto. Notwithstanding the foregoing, the Members through the Executive
Committee may elect to continue to the business of the Company in order to
achieve a "going concern" value for the sale of the business, but such
continuation of the Company shall be for the sole purpose of seeking to maximize
the sales price of the Company. The proceeds from the liquidation of the Company
shall be applied in the following order:
A. FIRST, to the payment of debts, liabilities and loans of the
Company other than debts, liabilities and loans payable to Members;
B. SECOND, to the setting up of any reserves which the Executive
Committee may deem necessary for any contingent or unforeseen liabilities or
obligations of the Company;
C. THIRD, to any expended but unreimbursed costs and expenses owing to
the members other than any Guaranty Advances;
D. FOURTH, to the payment of interest and other charges, and then
principal, owing with respect to any loans from any Member to the Company;
E. FIFTH, to the Members within 90 days after liquidation, prorata in
accordance with the Members' respective positive Capital Account balances, as
determined after taking into consideration all Capital Account adjustments for
that company fiscal year (other than those made necessary due to transactions
required by this Section 13.2.E and Section 13.2.G below), until their net
positive Capital Accounts have been paid in full;
F. SIXTH, to the payment of any unpaid advances made pursuant to the
terms of the guaranty and indemnification Agreement specified in Section 2.3.C;
G. SEVENTH, to all Members in accordance with their respective
Percentage interests in the Company; and
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H. EIGHTH, immediately following the allocation of Profits and Losses
pursuant to Exhibit "G" attached hereto and liquidation of the interests of all
Members, each Member with a deficit balance in its Capital Account, as
determined after taking into consideration all Capital Account adjustments for
that Company taxable year (other than those made necessary due to transactions
required by this Subsection 13.2.H), unconditionally shall be required to
restore the amount of such deficit balance to the Company within 90 days after
liquidation. Any funds received by the Company pursuant to this Subsection
13.2.H shall be paid according to Sections 13.2C through 13.2.G above.
13.3 ELECTION TO TERMINATE
Upon the occurrence of an Event of Default as set out in Section 12.1.A,
which is not cured as provided in Section 12.1.C, the non-defaulting Member may
elect to terminate the Company by delivering a Termination Notice to the other
Members.
13.4 CONFLICT BETWEEN ARTICLE 11 AND SECTIONS 12.2 AND 13.3
After a Transfer of the Company's interest has been commenced pursuant to
Article 11, a Purchase Notice has been delivered pursuant to Section 12.2, or a
Termination Notice has been delivered pursuant to Section 13.3, neither Member
may interfere with the rights of the other by electing to terminate the Company
or by electing to proceed under any other termination or transfer provision, and
any subsequent notice thereof shall be null and void and shall not release the
Member from its obligations under the procedure already commenced. Nothing
contained herein shall prevent a Member from subsequently performing or
exercising its rights under such a transfer or termination provision after the
procedure first commenced is completed or terminated.
ARTICLE 14 - INDEMNIFICATION OF EXECUTIVE COMMITTEE
The individual members of the Executive Committee shall not be liable in
damages or otherwise to the Company or to any Member, and the Company shall
indemnify and hold harmless each member of the Executive Committee from any loss
or damage incurred by reason of any act or omission performed or omitted by such
member of the Executive Committee in good faith on behalf of the Company and in
a manner reasonably believed by such member of the Executive Committee to be
within the scope of the authority granted to him or her pursuant to the terms of
this Agreement and in the best interests of the Company; provided that (a) such
member of the Executive Committee was not guilty of gross negligence, willful
misconduct, or breach of fiduciary duty with respect to such acts or omissions;
and (b) the satisfaction of any indemnification shall be from and limited to
Company's assets, and no Member shall have any personal liability on account
thereof. This indemnification shall include payment of reasonable attorneys'
fees and other costs and expenses incurred in settling or defending any claim,
threatened action, or finally adjudicated legal proceedings.
ARTICLE 15 - DISPUTE RESOLUTION
Except in connection with the enforcement of the Guaranty and
Indemnification Agreement, if any dispute arises relating to the interpretation
or performance of this Agreement which the
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<PAGE>
parties are unable to resolve between themselves, and a Member has not elected
to pursue the purchase of another Member's interest in the Company as provided
in Section 5.15, they agree to use the following as their sole method of
resolving the dispute:
A. Kaiser and WVRT agree to jointly select a retired judicial officer
who is affiliated with the Judicial Arbitration and Mediation Service, or such
other equivalent organization as Kaiser and WVRT may mutually select, to act as
the trier of fact and judicial officer in such dispute resolution;
B. If Kaiser and WVRT are unable to agree upon a particular retired
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 WVRT;
C. Kaiser and WVRT 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 retired judicial officer shall, on his own motion, or the request
of either Kaiser or WVRT, have the authority to extend or reduce the time
periods therefor; and,
D. The retired judicial officer serving hereunder shall be designated
as a referee under the provisions of Part II, Title VIII, Chapter 6 of the
California Code of Civil Procedure (Sections 638 through 645. 1, inclusive).
Payment for the services of the retired judicial officer and the rights and
procedure of appeal, and/or other review of the decision, shall be made as
provided in such sections.
However, the dispute resolution procedures provided herein shall not apply
to any action in which injunctive relief or specific performance is sought.
ARTICLE 16 - OTHER PROVISIONS
16.1 NOTICES
Except as otherwise expressly stated in this Agreement, any notice,
information, request or reply ("NOTICE") required or permitted to be given under
the provisions of this Agreement shall be in writing and shall be given or
served either personally or by mail. If given or served by mail, such notice
shall be deemed sufficiently given if (a) deposited in the United States mail,
certified mail, return receipt requested, postage prepaid, or (b) sent by
express mail, Federal Express, or other similar overnight service, provided
proof of service is available, addressed to the addresses of the parties
specified below or to such other addresses as such party shall have provided to
another party hereto by written notice given in accordance with this Section
16.1. Any Notice given or served by regular mail shall be deemed given or served
three (3) business days after deposit in the mails, unless a copy of the notice
is concurrently transmitted by electronic or telephonic facsimile, in which case
the notice shall be deemed given or served as of the date of deposit of the
original in the mails. Any notice given or served by express mail, Federal
Express, or other similar overnight service, shall be deemed given or served the
day following deposit in the mails or delivery to the carrier, unless a copy of
the notice is concurrently transmitted by electronic or telephonic facsimile, in
which case the notice shall be deemed given or served as of the date of deposit
of the original in the mails or delivery to the carrier.
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<TABLE>
<CAPTION>
<S> <C>
TO WVRT: WEST VALLEY RECYCLING & TRANSFER, INC.
9890 Cherry Ave.
Fontana, California 92335
Attention: Cole Burr
Facsimile Number: 909.355.7158
WITH COPY TO: Edward G. Burr
6670 Federal Boulevard
Lemon Grove, California 91945
Facsimile Number: 619.287.5242
WITH COPY TO: Harold J. Delevie, Esq.
Attorney at Law
1875 Century Park East
Fifteenth Floor
Los Angeles, CA 90067-2516
Facsimile Number: 310.277.8923
TO KAISER: KAISER RECYCLING CORPORATION
3633 East Inland Empire Boulevard, Suite 850
Ontario, California 91764
Attention: Gerald A. Fawcett, President
Facsimile Number: 909.944.6605
WITH COPY TO: KAISER VENTURES INC.
3633 East Inland Empire Boulevard, Suite 850
Ontario, California 91764
Attention: Terry L. Cook, General Counsel
Facsimile Number: 909.944.6605
TO THE COMPANY: WEST VALLEY MRF, LLC
c/o WVRT Recycling & Transfer, Inc.
9890 Cherry Avenue
Fontana, California 92335
Attention: Cole Burr, President
Facsimile Number: 909.355.7158
WITH COPY TO: KAISER RECYCLING CORPORATION
3633 E. Inland Empire Blvd., Suite 850
Ontario, California 91764
Attention: President
Facsimile Number: 909.944.6605
</TABLE>
16.2 LAW
This Agreement is executed and delivered in, and shall be governed by and
construed in accordance with, the laws of the State of California and, where
applicable, other local, state, and federal rules, regulations, ordinances,
statutes, and laws.
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16.3 ATTORNEYS' FEES
In the event of a legal action between the Members arising out of this
Agreement or any amendments thereto or any documents executed in connection
herewith, the prevailing Member shall be entitled to an award of reasonable
attorneys fees and costs as against the losing Member.
16.4 WAIVER OF ACTION FOR PARTITION
To the extent permitted by law, each of the Members irrevocably waives any
right that it may have to maintain any action for partition with respect to the
property of the Company.
16.5 SEVERABILITY
If any term, provision, covenant, or condition of this Agreement is held
by a court of competent jurisdiction to be invalid, void, or unenforceable, the
rest of the Agreement shall remain in full force and effect and shall in no way
be affected, impaired, or invalidated.
16.6 CAPTIONS
The captions set forth herein are used for the purpose of convenience only
and shall not be deemed to limit the subject matter of any section or subsection
hereof or otherwise to be considered as to the meaning of any portion of this
Agreement.
16.7 CONSTRUCTION OF AGREEMENT
The covenants, agreements, and provisions contained herein shall not be
construed in favor of or against either of the Members, but shall be construed
as if both Members prepared this Agreement. Except by specific written agreement
to the contrary, the covenants, agreements, and provisions contained herein, to
the extent that the same are necessary and applicable as shown by the content
thereof, shall constitute continuing obligations between the Members beyond the
dissolution and termination of the Company.
16.8 WAIVER OF RIGHT OR REMEDY
No delay or omission in the exercise of any right or remedy of either
Member or any default by the other Member shall impair such right or remedy or
be construed as a waiver. Either Member's consent to or approval of any act by
the other Member requiring a Member's consent or approval shall not be deemed to
waive or render unnecessary a Member's consent to or approval of any subsequent
act by the other Member. Any waiver by a Member of any default must be in
writing and shall not be a waiver of any other default concerning the same or
any other provision of this Agreement.
16.9 SUCCESSORS AND ASSIGNS
Subject to the restriction on transfer of any interest in the Company set
forth in this Agreement, all provisions hereof shall be binding upon and inure
to the benefit of the successors and assigns of each Member, and each such
successor or assign shall be deemed a party hereto.
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16.10 RIGHTS UNDER AGREEMENT
Nothing in this Agreement, or in any transaction contemplated hereby,
expressed or implied, shall give or be construed to give to any person or entity
other than the parties hereto any legal or equitable right, remedy, privilege,
immunity, or claim under this Agreement or by reason of such transaction. All of
the covenants and provisions of this Agreement shall be for the sole benefit of
the parties hereto.
16.11 MISCELLANEOUS DEFINITIONS
A. HEREIN.
Whenever the word "herein" is used in this Agreement, it is
intended and shall be construed to refer to the entire Agreement and not limited
in reference to the section or subsection in which it may appear.
B. COMPANY INTEREST.
"COMPANY INTEREST" or "INTEREST IN THE COMPANY" shall mean all
rights a Member possesses or may possess in the present, or will or may possess
in the future, in or related to the Company.
C. PAID IN CASH.
"PAID IN CASH" (or "CASH") shall mean paid in cash or by
certified or cashier's check or by bank-to-bank transfer procedures suitable to
the parties.
16.12 ENTIRE AGREEMENT
This Agreement and the Exhibits attached hereto or referred to herein
together with the Articles of Organization for the Company represent the final,
complete, and exclusive agreement and understanding of the parties hereto with
respect to the matters set forth herein, and prior agreements between the
parties hereto relating to said matters are hereby declared null and void; the
provisions hereof may be modified, amended, or waived only in writing.
16.13 COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.
16.14 MEMBERS BOUND BY AGREEMENT
Each of the Members represents and warrants to the other that it has the
requisite power and authority to enter into this Agreement, and, accordingly,
the Members shall be bound by this Agreement upon the signatures herein as set
forth below.
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<PAGE>
16.15 AMENDMENTS
All Amendments to this Agreement must be in writing and signed by all of
the Members.
16.16 ADDITIONAL DOCUMENTS AND ACTS
Each Member agrees to execute and deliver additional documents and
instruments and to perform all additional acts necessary to effectively carry
out and perform all the terms, provisions and conditions this Agreement and the
transactions contemplated herein.
"KAISER" "WVRT"
KAISER RECYCLING CORPORATION WEST VALLEY RECYCLING & TRANSFER, INC.,
a Delaware corporation a California corporation
By: /s/Gerald A. Fawcett By: /s/ Cole Burr
---------------------------- --------------------
Gerald A. Fawcett, President Cole Burr, President
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<PAGE>
EXHIBITS AND SCHEDULES NOT ATTACHED.
THEY WILL BE FURNISHED TO THE
SECURITIES AND EXCHANGE COMMISSION UPON THE
WRITTEN REQUEST OF THE SECURITIES AND EXCHANGE COMMISSION.
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EXHIBIT 10.1.1
PERFORMANCE GUARANTY AND INDEMNIFICATION
AGREEMENT
(KRC OBLIGATIONS)
This PERFORMANCE GUARANTY AND INDEMNIFICATION AGREEMENT (KRC Obligations)
("AGREEMENT") is made and given effective as of the 19th day of June, 1997, by
Kaiser Ventures Inc. ("GUARANTOR") in favor of West Valley Recycling & Transfer,
Inc. ("WVRT") and West Valley MRF, LLC (the "COMPANY").
RECITALS
A. Kaiser Recycling Corporation, a Delaware corporation ("KRC") is a
wholly-owned subsidiary of Guarantor.
B. WVRT and KRC have formed the Company for the purposes of developing,
constructing and operating a materials recovery facility and transfer station on
property owned by the Company (collectively the "MRF").
C. In connection with the financing and operation of the Company and the
MRF, KRC and WVRT have entered into a Members Operating Agreement between KRC
and WVRT of even date herewith. KRC is willing to enter into this Agreement to
secure all of KRC's obligations under the Members Operating Agreement.
D. To give WVRT and its Affiliates and the Company assurances with respect
to the performance by KRC of all of its obligations pursuant to the Members
Operating Agreement, Guarantor is willing to enter into this Agreement and to
irrevocably, unconditionally and absolutely guarantee all such obligations.
NOW, THEREFORE, for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Guarantor hereby unconditionally
guarantees and agrees as follows:
1. DEFINITIONS. Terms defined in the Members Operating Agreement and not
otherwise defined in this Agreement shall have the same meaning as set forth in
the Members Operating Agreement.
2. GUARANTY AND INDEMNIFICATION. Guarantor hereby irrevocably,
unconditionally and absolutely guarantees that KRC shall fully and timely
perform all of its obligations and agreements of any nature or kind now or
hereafter existing or created pursuant to the Members Operating Agreement
subject to and in accordance with the Members Operating Agreement (including any
cure period that may be afforded KRC under the applicable provisions of the
members operating agreement). Guarantor further agrees to indemnify the Company,
WVRT and WVRT's Affiliates from and against any cost, expense, claim,
obligation, loss, liability or amount asserted against or that any of them may
become liable for or bear arising out of the failure of KRC to fully and timely
perform all of its obligations and agreements of any nature or kind now or
hereafter existing or created pursuant to the Members Operating Agreement
subject to and in accordance with the members operating
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Agreement (including any cure period that may be afforded KRC under the
applicable provisions of the Members Operating Agreement).
3. UNCONDITIONAL GUARANTY AND INDEMNIFICATION. The obligations,
covenants, agreements and duties of Guarantor under this Agreement shall not be
released or impaired in any manner whatsoever or for any reason, without the
prior written consent of WVRT and the Company.
4. NO OFFSET. Except as expressly provided in this Paragraph 4, Guarantor
shall have no right of offset for its obligations hereunder against any amounts
owed or claimed to be owed to Guarantor or an Affiliate of Guarantor by WVRT or
the Company or an Affiliate of either. Notwithstanding the foregoing, Guarantor
shall have the right to offset against any required payment of Guarantor
pursuant to this Agreement any unpaid disputed amounts of KRC bills submitted to
the Company which are received prior to the occurrence of an Event of Default by
KRC under the Members Operating Agreement; provided, however, upon resolution of
any such billing dispute any previously offset amount shall be immediately paid
in full by Guarantor.
5. WARRANTIES OF GUARANTOR. Guarantor hereby represents and warrants to
WVRT and the Company that: (a) any and all balance sheets and other financial
data that have heretofore been given to WVRT with respect to Guarantor fairly
present the financial condition of Guarantor as of the date thereof and, since
the date thereof, there has been no material adverse change in the financial
condition of Guarantor, taken as a whole; (b) except as previously disclosed in
writing to WVRT there are no material legal proceedings, claims or demands
pending against or, to the knowledge of Guarantor, threatened against, Guarantor
or any of Guarantor's assets or, if there is any such material proceeding, claim
or demand, it has been disclosed in writing to KRC and does not and shall not
have any material adverse effect upon the ability of Guarantor to perform any of
Guarantor's obligations hereunder; (c) Guarantor is not in breach or default of
any legal requirement, contract or commitment, which would have a material
adverse effect on Guarantor; and (d) no event (including specifically
Guarantor's execution and delivery of this agreement) has occurred which, with
the lapse of time or the giving of notice or both, could result in Guarantor's
breach or default under any legal requirement, contract or commitment which
would have a material adverse effect on Guarantor's performance of its
obligations hereunder.
6. NO NOTICE OF ACCEPTANCE REQUIRED. Notice to Guarantor of the
acceptance of this Agreement and of the making, renewing, assignment,
modification or amendment of the obligations guaranteed and indemnified
hereunder and each item thereof, are hereby expressly waived by Guarantor.
7. TERMINATION OF GUARANTY. Guarantor's obligations under this Agreement
shall be released and this Agreement shall terminate twelve (12) months
following the dissolution and termination of the Company and the satisfaction of
all of KRC'S obligations under the Members Operating Agreement.
8. CONSIDERATION. Guarantor acknowledges and warrants that it derived or
expects to derive financial and other advantages and benefits, directly or
indirectly, from KRC, the Company, and the commitments of WVRT and its
affiliates. It shall conclusively be deemed to have been assumed, that WVRT and
its affiliates, as applicable, have entered into the Members
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Operating Agreement, formed the Company and incurring various obligations in
reliance on this Agreement.
9. COSTS OF ENFORCEMENT AND LOCATION OF PROCEEDINGS. If Guarantor should
breach or fail to perform any provision of this Agreement or if any
representation or warranty is untrue or incorrect in any material respect,
Guarantor agrees to pay WVRT or the Company, as applicable, all costs and
expenses (including court costs and reasonable attorneys' fees) incurred by WVRT
or the Company in the enforcement hereof if legal action is commenced, as well
as all applicable damages. This Agreement is performable in Ontario, California,
and Guarantor consents and agrees that in any suit to enforce this Agreement,
WVRT may maintain such action in the courts of the State of California, and
Guarantor waives any right to otherwise object to such jurisdiction. This
Agreement shall not be subject to the dispute resolution provisions of the
Members Operating Agreement. WVRT shall have the right to enforce the terms of
this Agreement directly or on behalf of the Company, as applicable.
10. MISCELLANEOUS. Guarantor acknowledges and agrees that the Recitals
contained in this Agreement are true and correct. No modification, consent,
amendment or waiver of any provision of this Agreement, nor consent to any
departure by any Guarantor therefrom, shall be effective unless the same shall
be in writing and signed by an officer of WVRT, and then shall be effective only
in the specific instance and for the purpose for which given. No notice to or
demand on Guarantor in any case shall, of itself, entitle Guarantor to any other
or further notice or demand, in similar or other circumstances. No delay or
omission by WVRT or the Company in exercising any power or right hereunder shall
impair any such right or power or be construed as a waiver thereof or any
acquiescence therein, nor shall any single or partial exercise of any such power
preclude other or further exercise thereof, or the exercise of any other right
or power hereunder. All rights and remedies of WVRT and of the Company
hereunder are cumulative of each other and of every other right or remedy which
WVRT may otherwise have at law or in equity or under any other contract or
document, and the exercise of one or more rights or remedies shall not prejudice
or impair the concurrent or subsequent exercise of other rights or remedies. In
this Agreement, whenever the text so requires, the singular shall include the
plural and conversely. This Agreement shall be governed by and construed in
accordance with the laws of California. This Agreement shall constitute the
entire Agreement of the Guarantor with WVRT and the Company with respect to the
subject matter hereof and no representation, understanding, promise or condition
concerning the subject matter hereof shall be binding upon Guarantor unless
expressed herein or in the members operating agreement.
11. ADDITIONAL SECURITY. To secure Guarantor's obligations pursuant to
this Agreement, all the stock in KRC shall be pledged as collateral to WVRT
pursuant to the terms of a Stock Pledge Agreement.
"GUARANTOR"
"KRC"
KAISER VENTURES INC.
By: /s/ Gerald A. Fawcett
---------------------------------------
Gerald A. Fawcett,
President and Chief Operating Officer
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EXHIBIT 10.2
- --------------------------------------------------------------------------------
LOAN AGREEMENT
Between
CALIFORNIA POLLUTION CONTROL FINANCING AUTHORITY
And
WEST VALLEY MRF, LLC
Dated as of June 1, 1997
relating to
$9,500,000
California Pollution Control Financing Authority
Variable Rate Demand
Solid Waste Disposal Revenue Bonds
(West Valley MRF, LLC Project)
Series 1997A
- --------------------------------------------------------------------------------
<PAGE>
LOAN AGREEMENT
TABLE OF CONTENTS
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PARTIES..................................................................... 1
PREAMBLES................................................................... 1
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITION OF TERMS................................... 2
SECTION 1.2. NUMBER AND GENDER..................................... 2
SECTION 1.3. ARTICLES, SECTIONS, ETC............................... 2
ARTICLE II
REPRESENTATIONS
SECTION 2.1. REPRESENTATIONS OF THE AUTHORITY...................... 2
SECTION 2.2. REPRESENTATIONS OF THE BORROWER....................... 3
ARTICLE III
CONSTRUCTION OF THE PROJECT; ISSUANCE OF THE 1997A BONDS
SECTION 3.1. AGREEMENT TO CONSTRUCT THE PROJECT.................... 5
SECTION 3.2. DISBURSEMENTS FROM THE 1997A CONSTRUCTION ACCOUNT;
DISBURSEMENTS FROM THE 1997A COSTS OF ISSUANCE
ACCOUNT............................................... 5
SECTION 3.3. ESTABLISHMENT OF COMPLETION DATE; OBLIGATION OF
BORROWER TO COMPLETE 6
SECTION 3.4. INVESTMENT OF MONEYS IN FUND.......................... 7
SECTION 3.5. ISSUANCE OF ADDITIONAL BONDS.......................... 7
ARTICLE IV
LOANS OF PROCEEDS; REPAYMENT PROVISIONS
SECTION 4.1. LOAN OF BOND PROCEEDS; ISSUANCE OF BONDS.............. 8
SECTION 4.2. REPAYMENT AND PAYMENT OF OTHER AMOUNTS PAYABLE........ 8
SECTION 4.3. UNCONDITIONAL OBLIGATION..............................10
SECTION 4.4. ASSIGNMENT OF AUTHORITY'S RIGHTS......................10
SECTION 4.5. AMOUNTS REMAINING IN FUNDS............................11
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ARTICLE V
SPECIAL COVENANTS AND AGREEMENTS
SECTION 5.1. RIGHT OF ACCESS TO THE PROJECT................................ 11
SECTION 5.2. THE BORROWER'S MAINTENANCE OF ITS EXISTENCE; ASSIGNMENTS...... 11
SECTION 5.3. RECORDS AND FINANCIAL STATEMENTS OF BORROWER.................. 13
SECTION 5.4. INSURANCE..................................................... 13
SECTION 5.5. MAINTENANCE AND REPAIR; TAXES; UTILITY AND OTHER CHARGES...... 13
SECTION 5.6. QUALIFICATION IN CALIFORNIA................................... 14
SECTION 5.7. ALTERNATE CREDIT FACILITY..................................... 14
SECTION 5.8. LETTER OF CREDIT.............................................. 15
SECTION 5.9. GENERAL TAX COVENANTS......................................... 16
SECTION 5.10. SPECIAL ARBITRAGE CERTIFICATIONS.............................. 16
SECTION 5.11. NOTICE AND CERTIFICATES TO TRUSTEE............................ 16
SECTION 5.12. FINANCING AND CONTINUATION STATEMENTS......................... 17
SECTION 5.13. CHANGE IN INTEREST RATES...................................... 17
SECTION 5.14. CONTINUING DISCLOSURE......................................... 17
ARTICLE VI
DAMAGE, DESTRUCTION AND CONDEMNATION; USE OF PROCEEDS
SECTION 6.1. OBLIGATION TO CONTINUE PAYMENTS............................... 17
SECTION 6.2. APPLICATION OF NET PROCEEDS................................... 18
SECTION 6.3. INSUFFICIENCY OF NET PROCEEDS................................. 18
SECTION 6.4. DAMAGE TO OR CONDEMNATION OF OTHER PROPERTY................... 19
ARTICLE VII
LOAN DEFAULT EVENTS AND REMEDIES
SECTION 7.1. LOAN DEFAULT EVENTS........................................... 19
SECTION 7.2. REMEDIES ON DEFAULT........................................... 20
SECTION 7.3. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES................. 21
SECTION 7.4. NO REMEDY EXCLUSIVE........................................... 21
SECTION 7.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER.................... 22
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ARTICLE VIII
PREPAYMENT
SECTION 8.1. REDEMPTION OF BONDS WITH PREPAYMENT MONEYS..............22
SECTION 8.2. OPTIONS TO PREPAY INSTALLMENTS..........................22
SECTION 8.3. MANDATORY PREPAYMENT....................................22
SECTION 8.4. AMOUNT OF PREPAYMENT....................................23
SECTION 8.5. NOTICE OF PREPAYMENT....................................23
ARTICLE IX
NON-LIABILITY OF AUTHORITY; EXPENSES; INDEMNIFICATION
SECTION 9.1. NON-LIABILITY OF AUTHORITY..............................24
SECTION 9.2. EXPENSES................................................24
SECTION 9.3. INDEMNIFICATION.........................................24
ARTICLE X
MISCELLANEOUS
SECTION 10.1. NOTICES.................................................25
SECTION 10.2. SEVERABILITY............................................26
SECTION 10.3. EXECUTION OF COUNTERPARTS...............................26
SECTION 10.4. AMENDMENTS, CHANGES AND MODIFICATIONS...................27
SECTION 10.5. GOVERNING LAW; VENUE....................................27
SECTION 10.6. AUTHORIZED REPRESENTATIVE...............................27
SECTION 10.7. TERM OF THE AGREEMENT...................................27
SECTION 10.8. BINDING EFFECT..........................................27
SECTION 10.9. SURVIVAL OF FEE OBLIGATION..............................27
SECTION 10.10. PURCHASE OF BONDS.......................................27
SECTION 10.11. COMPLETE AGREEMENT......................................28
EXECUTION.....................................................................29
EXHIBIT A DESCRIPTION AND COST OF THE PROJECT................................A-1
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LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of June 1, 1997, between CALIFORNIA
POLLUTION CONTROL FINANCING AUTHORITY, a public instrumentality and political
subdivision of the State of California (the "Authority"), and WEST VALLEY MRF,
LLC (the "Borrower")
W I T N E S S E T H:
WHEREAS, the Authority is a public instrumentality and political
subdivision of the State of California, created by the California Pollution
Control Financing Authority Act (constituting Division 27 of the Health and
Safety Code of the State of California as now in effect and as it may from time
to time hereafter be amended or supplemented) (the "Act") and authorized to
finance certain capital projects consisting of solid waste pollution control
facilities;
WHEREAS, the Authority is further authorized to issue its bonds for
the purpose of paying all or any part of the costs of a project, and for any
other authorized purpose; to acquire and hold property, including funds, project
agreements and other obligations of any kind, and pledge, encumber or assign the
same, or the revenues therefrom or any portion of such revenues, or other
rights, whether then owned or possessed, or thereafter acquired, for the benefit
of the owners, and as security or additional security for any bonds or the
performance of obligations under an indenture; to provide for the advance of
bond proceeds and other funds pursuant to Project agreements as necessary to pay
or reimburse for project costs; and to enter into loan agreements; and
WHEREAS, the Borrower has duly caused an application to be filed with
the Authority for financial assistance to construct certain solid waste disposal
facilities to be located in the County of San Bernardino, California, as more
particularly described in Exhibit A hereto (the "Project"), which qualify as a
"project" under the Act; and
WHEREAS, the Authority after due investigation and deliberation has
adopted its resolutions approving said application and authorizing the making of
a loan to the Borrower for the acquisition, construction and installation of the
Project at such location or locations; and
WHEREAS, the Authority proposes to issue its California Pollution
Control Financing Authority Pollution Control Variable Rate Demand Solid Waste
Disposal Revenue Bonds (West Valley MRF, LLC Project) Series 1997A (the "1997A
Bonds"), in the aggregate principal amount of $9,500,000, to finance a portion
of the cost of acquiring, constructing and installing the Project upon the terms
and conditions set forth herein; and
WHEREAS, the Authority will enter into an Indenture, dated as of June
1, 1997 (the "Indenture"), with BNY Western Trust Company, as trustee (the
"Trustee"), pursuant to which the 1997A Bonds will be issued; and
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WHEREAS, payment of the 1997A Bonds is initially enhanced by a direct-
pay irrevocable Letter of Credit issued to the Trustee by Union Bank of
California, N.A. (the "Bank");
NOW, THEREFORE, for and in consideration of the premises and the
material covenants hereinafter contained, the parties hereto hereby formally
covenant, agree and bind themselves as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITION OF TERMS. Unless the context otherwise
requires, the terms used in this Agreement shall have the meanings specified in
Section 1.01 of the Indenture, as originally executed or as it may from time to
time be supplemented or amended as provided therein.
SECTION 1.2. NUMBER AND GENDER. The singular form of any word used
herein, including the terms defined in Section 1.01 of the Indenture, shall
include the plural, and vice versa. The use herein of a word of any gender shall
include all genders.
SECTION 1.3. ARTICLES, SECTIONS, ETC. Unless otherwise specified,
references to Articles, Sections and other subdivisions of this Agreement are to
the designated Articles, Sections and other subdivisions of this Agreement as
amended from time to time. The words "hereof," "herein," "hereunder" and words
of similar import refer to this Agreement as a whole. The headings or titles of
the several articles and sections, and the table of contents appended to copies
hereof, shall be solely for convenience of reference and shall not affect the
meaning, construction or effect of the provisions hereof.
ARTICLE II
REPRESENTATIONS
SECTION 2.1. REPRESENTATIONS OF THE AUTHORITY. The Authority makes
the following representations as the basis for its undertakings herein
contained:
(a) The Authority is a public instrumentality and political
subdivision of the State of California. Under the provisions of the Act, the
Authority has the power to enter into the transactions contemplated by this
Agreement and the Indenture and to carry out its obligations hereunder. The
Project constitutes a "project" as that term is defined in the Act. By proper
action, the Authority has been duly authorized to execute, deliver and duly
perform its obligations under this Agreement and the Indenture.
(b) On April 17, 1991 the Authority gave its preliminary approval for
the financing of the Project and on July 31, 1996 extended such preliminary
approval for the financing of the Project. On May 28, 1997, the Authority
adopted its resolution approving financing of the Project. On October 30, 1996,
a public hearing with respect to the 1997A Bonds and the Project
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was held in accordance with the provisions of the Code.
(c) The Authority has taken proper action to allocate to the 1997A
Bonds a share of the State ceiling on private activity bonds (as defined in
Section 141 of the Code), which was available to the Authority pursuant to
Section 146 of the Code, in an aggregate amount at least equal to the $9,500,000
aggregate principal amount of the 1997A Bonds. Issuance of the 1997A Bonds will
not violate any provisions of said Section 146.
(d) The Authority will issue the Bonds under and the Bonds will be
secured by the Indenture, pursuant to which the Authority's interest in this
Agreement (except certain rights of the Authority to payment for expenses and
indemnification and to inspection and consent) will be pledged to the Trustee as
security for payment of the principal of, premium, if any, and interest on the
Bonds and then to the Bank as security for the payment of the obligations of the
Borrower under the Reimbursement Agreement.
(e) The Authority has not pledged and will not pledge its interest in
this Agreement for any purpose other than to secure the Bonds under the
Indenture and the obligations of the Borrower under the Reimbursement Agreement.
(f) The Authority is not in default under any of the provisions of the
laws of the State of California which default would affect its existence or its
powers referred to in subsection (a) of this Section 2.1.
(g) The Authority has found and determined and hereby finds and
determines that (i) the Borrower is a "participating party" as such term is
defined in the Act; (ii) the loan to be made hereunder with the proceeds of the
1997A Bonds will promote the purposes of the Act by providing funds to finance
the acquisition, rehabilitation and equipping of the Project; (iii) said loan is
in the public interest, serves the public purposes and meets the requirements of
the Act; and (iv) the portion of such loan allocable to the Costs of the Project
does not exceed the total cost thereof as determined by the Borrower and
approved by the Authority.
(h) No member, officer or other official of the Authority has any
financial interest whatsoever in the Borrower or in the transactions
contemplated by this Agreement and the Indenture.
SECTION 2.2. REPRESENTATIONS OF THE BORROWER. The Borrower makes the
following representations as the basis for its undertakings herein contained:
(a) The Borrower is a limited liability company duly formed under the
laws of the State of California, is in good standing in the State of California
and has the power to enter into and has duly authorized, by proper action, the
execution and delivery of this Agreement, the Remarketing Agreement, the
Reimbursement Agreement and all other documents contemplated hereby to be
executed by the Borrower.
(b) Neither the execution and delivery of this Agreement, the
Remarketing Agreement or the Reimbursement Agreement, the consummation of the
transactions
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contemplated hereby and thereby, nor the fulfillment of or compliance with the
terms and conditions hereof and thereof, conflicts with or results in a breach
of any of the terms, conditions or provisions of the Borrower's Articles of
Organizations or Operating Agreement or of any material corporate actions or of
any material agreement or instrument to which the Borrower is now a party or by
which it is bound, or constitutes a default (with due notice or the passage of
time or both) under any of the foregoing, or results in the creation or
imposition of any prohibited lien, charge or encumbrance whatsoever upon any of
the property or assets of the Borrower under the terms of any material
instrument or agreement to which the Borrower is now a party or by which it is
bound.
(c) The Costs of the Project are as set forth in the Tax Certificate
dated the Date of Delivery and have been determined in accordance with standard
engineering/construction and accounting principles. All the information and
representations in the Tax Certificate are true and correct as of the date
thereof.
(d) The Project consists of various equipment and facilities described
in Exhibit A and the Borrower shall not make any changes to the Project or to
the operation thereof which would affect the qualification of the Project under
the Act or impair the exemption from federal income taxation of the interest on
the 1997A Bonds. In particular, the Borrower shall comply with all requirements
set forth in the Tax Certificate. The Borrower intends to own and operate the
Project as solid waste disposal facilities described by the Act until the
principal of, the premium, if any, and the interest on the 1997A Bonds shall
have been paid in full.
(e) The Borrower has title to the property comprising the Project
sufficient to carry out the purposes of this Agreement.
(f) All certificates, approvals, permits and authorizations of
applicable local governmental agencies, the State of California and the federal
government which are necessary prior to the commencement of any portion of the
Project have been obtained and continue in force.
(g) No event has occurred and no condition exists which would
constitute an Event of Default (as defined in the Indenture) or which, with the
passing of time or with the giving of notice or both would become such an Event
of Default.
(h) To the best of the knowledge of the Borrower, no member, officer,
or other official of the Authority has any interest whatsoever in the Borrower
or in the transactions contemplated by this Agreement.
(i) The Borrower is a "Small Business" as classified pursuant to Title
13 Code of Federal Regulations, Part 121 (1990 edition) or has 500 employees or
less, and is otherwise eligible for assistance from the Small Business
Assistance Fund.
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ARTICLE III
CONSTRUCTION OF THE PROJECT; ISSUANCE OF THE 1997A BONDS
SECTION 3.1. AGREEMENT TO CONSTRUCT THE PROJECT. The Borrower agrees
that it will acquire, equip, construct, rehabilitate and install, or complete
the acquisition, construction, equipping, rehabilitation and installation of,
the Project, and will acquire, equip, construct, rehabilitate and install all
other facilities and real and personal property deemed necessary for the
operation of the Project, substantially in accordance with the description of
the Project prepared by the Borrower and approved by the Authority, including
any and all supplements, amendments and additions or deletions thereto or
therefrom, it being understood that the approval of the Authority shall not be
required for changes in such description which do not substantially alter the
purpose and description of the Project as set forth in Exhibit A hereto. The
Borrower further agrees to proceed with due diligence to complete the Project
within three years from the date hereof.
In the event that the Borrower desires to alter or change the Project,
and such alteration or change substantially alters the purpose and description
of the Project as described in Exhibit A hereto, the Authority will enter into,
and will instruct the Trustee to consent to, such amendment or supplement to
Exhibit A as shall be required to reflect such alteration or change to the
Project upon receipt of:
(i) a certificate of the Authorized Representative of the Borrower
describing in detail the proposed changes and stating that they will not
have the effect of disqualifying the Project as facilities that may be
financed pursuant to the Act;
(ii) a copy of the proposed form of amended or supplemented Exhibit A
hereto;
(iii) an opinion of Bond Counsel that such proposed changes will not
adversely affect the Tax-exempt status of interest on the Bonds; and
(iv) the written approval of the Bank.
SECTION 3.2. DISBURSEMENTS FROM THE 1997A CONSTRUCTION ACCOUNT;
DISBURSEMENTS FROM THE 1997A COSTS OF ISSUANCE ACCOUNT. (a) The Borrower will
authorize and direct the Trustee, upon compliance with Section 3.03 of the
Indenture, to disburse the moneys in the 1997A Construction Account to or on
behalf of the Borrower only for the following purposes (and not for Costs of
Issuance), subject to the provisions of Section 3.3 hereof:
(i) Payment to the Borrower of such amounts, if any, as shall be
necessary to reimburse the Borrower in full for all advances and payments made
by it, at any time prior to or after the delivery of the 1997A Bonds, in
connection with (A) the preparation of plans and specifications for the Project
(including any preliminary study or planning of the Project or any aspect
thereof) and (B) subject to any limitation imposed by subsection (vi) hereof,
the acquisition,
5
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equipping, construction, rehabilitation and installation of the Project.
(ii) Payment for labor, services, materials and supplies used by or
furnished to the Borrower to improve the site and to acquire, equip, construct
and install the Project, as provided in the plans, specifications and work
orders therefor; payment of the costs of acquiring, equipping, constructing, and
installing utility services or other related facilities; payment of the costs of
acquiring all real and personal property deemed necessary to construct the
Project; insurance during the construction period as required by the
Reimbursement Agreement; and payment of the miscellaneous expenses incidental to
any of the foregoing items.
(iii) Payment of the fees, if any, of architects, engineers, legal
counsel and supervisors expended in connection with the acquisition, equipping,
construction, rehabilitation and installation of the Project.
(iv) Payment of taxes including property taxes, assessments and other
charges, if any, that may become payable during the construction period with
respect to the Project, or reimbursement thereof, if paid by the Borrower.
(v) Payment of expenses incurred in seeking to enforce any remedy
against any contractor or subcontractor in respect of any default under a
contract relating to the acquisition, equipping, construction, rehabilitation or
installation of the Project.
(vi) Payment of any other Costs of the Project permitted by the Tax
Certificate (including, without limitation, interest accruing on the 1997A Bonds
during the construction period of the Project and reimbursing the Borrower for
financing the Costs of the Project, but not including any Costs of Issuance).
All moneys remaining in the 1997A Construction Account after the
Completion Date and after payment or provision for payment of all other items
provided for in the preceding subsections (i) to (vi), inclusive, of this
Section, shall be used in accordance with Section 3.03 of the Indenture.
Each of the payments referred to in this Section 3.2(a) shall be made
upon receipt by the Trustee of a written requisition in the form prescribed by
Section 3.03 of the Indenture, signed by the Authorized Representative of the
Borrower and the Authorized Representative of the Bank.
(b) The Borrower will authorize and direct the Trustee, upon
compliance with Section 3.04 of the Indenture, to disburse the moneys in the
1997A Costs of Issuance Account to or on behalf of the Borrower only for Costs
of Issuance, subject to the provisions of Section 3.5 hereof. Each of the
payments referred to in this Section 3.2(b) shall be made upon receipt by the
Trustee of a written requisition in the form prescribed by Section 3.04 of the
Indenture, signed by the Authorized Representative of the Borrower, the
Authorized Representative of the Bank and, in the case of withdrawals from the
Authority Subaccount, the Executive Director of the Authority.
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SECTION 3.3. ESTABLISHMENT OF COMPLETION DATE; OBLIGATION OF
BORROWER TO COMPLETE. As soon as the Project is completed, the Authorized
Representative of the Borrower, on behalf of the Borrower, shall evidence the
Completion Date by providing a certificate, which shall be approved by the Bank,
to the Trustee and the Authority stating the Costs of the Project and further
stating that (i) the acquisition, equipping, rehabilitation and construction of
the Project has been completed substantially in accordance with the plans,
specifications and work orders therefor, and all labor, services, materials and
supplies used in the acquisition, equipping, rehabilitation and construction
have been paid or provided for, and (ii) all other facilities necessary in
connection with the Project have been acquired, constructed and installed in
accordance with the plans and specifications and work orders therefor and all
costs and expenses incurred in connection therewith have been paid or provided
for. Notwithstanding the foregoing, such certificate may state that it is given
without prejudice to any rights of the Borrower against third parties for any
claims or for the payment of any amount not then due and payable which exists at
the date of such certificate or which may subsequently exist.
At the time such certificate is delivered to the Trustee, moneys
remaining in the 1997A Construction Account (other than moneys relating to
provisional payments permitted by Section 3.2), including any earnings resulting
from the investment of such moneys, shall be used as provided in Section 3.03 of
the Indenture.
In the event the moneys in the 1997A Construction Account available
for payment of the Costs of the Project should be insufficient to pay the costs
thereof in full, the Borrower agrees to pay directly, or to deposit in the 1997A
Construction Account moneys sufficient to pay, any costs of completing the
Project in excess of the moneys available for such purpose in the 1997A
Construction Account. The Authority makes no express or implied warranty that
the moneys deposited in the 1997A Construction Account and available for payment
of the Costs of the Project, under the provisions of this Agreement, will be
sufficient to pay all the amounts which may be incurred for such Cost. The
Borrower agrees that if, after exhaustion of the moneys in the 1997A
Construction Account, the Borrower should pay, or deposit moneys in the 1997A
Construction Account for the payment of, any portion of the Costs of the Project
pursuant to the provisions of this Section, it shall not be entitled to any
reimbursement therefor from the Authority, from the Trustee or from the holders
of any of the Bonds, nor shall it be entitled to any diminution of the amounts
payable under Section 4.2 hereof.
SECTION 3.4. INVESTMENT OF MONEYS IN FUND. Any moneys in any fund or
account held by the Trustee shall, at the written request of the Authorized
Representative of the Borrower, be invested or reinvested by the Trustee as
provided in the Indenture. Such investments shall be held by the Trustee and
shall be deemed at all times a part of the fund or account from which such
investments were made, and the interest accruing thereon, and any profit or loss
realized therefrom, shall be credited or charged to such fund or account.
SECTION 3.5. ISSUANCE OF ADDITIONAL BONDS. If the Borrower is not in
default hereunder, the Authority may by the adoption of an appropriate
resolution or resolutions, at the request of the Borrower, authorize the
issuance of Additional Bonds upon the terms and conditions provided herein and
in Sections 2.12 and 2.13 of the Indenture, but in no event shall the Authority
be liable for not issuing such Additional Bonds. Additional Bonds may
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only be issued to provide funds to pay any one or more of the following: (i) the
costs of completing the Project; (ii) the costs of making at any time or from
time to time such substitutions, additions, modifications and improvements to
the Project or any portion thereof, or financing other facilities within the
State which qualify as a "project" under the Act, all as authorized by the Act,
as the Borrower may deem necessary or desirable; (iii) the costs of refunding,
to the extent permitted, any Bonds then Outstanding; and (iv) the costs of the
issuance and sale of the Additional Bonds, interest expenses during the
construction period and other costs reasonably related to the financing as shall
be agreed upon by the Borrower and the Authority. Prior to the issuance of such
Additional Bonds, the terms thereof, the purchase price to be paid therefor and
the manner in which the proceeds therefrom are to be disbursed shall have been
approved in writing by the Borrower; the Authority shall have entered into an
amendment to this Agreement to provide that, for all purposes of this Agreement,
the Project shall include any facilities and/or equipment being financed by the
Additional Bonds, which facilities and/or equipment shall be described in
amendments to Exhibit A hereto, and to provide for an increase in the amount
payable under Section 4.2 hereof as shall be necessary to pay the principal of,
premium, if any, and interest on the Additional Bonds as provided in the
supplemental indenture required by Sections 2.12 and 2.13 of the Indenture, and
to extend the term of this Agreement if the maturity of any of the Additional
Bonds would otherwise occur after the expiration of the term of this Agreement;
and the Authority shall have otherwise complied with the provisions of Sections
2.12 and 2.13 of the Indenture with respect to the issuance of such Additional
Bonds.
ARTICLE IV
LOANS OF PROCEEDS; REPAYMENT PROVISIONS
SECTION 4.1. LOAN OF BOND PROCEEDS; ISSUANCE OF BONDS. The Authority
covenants and agrees, upon the terms and conditions in this Agreement, to make a
loan to the Borrower for the purpose of financing the Costs of the Project and
the Costs of Issuance. The Authority further covenants and agrees that it shall
take all actions within its authority to keep this Agreement in effect in
accordance with its terms. Pursuant to said covenants and agreements, the
Authority will issue the Bonds upon the terms and conditions contained in this
Agreement and the Indenture and will cause the Bond proceeds to be applied as
provided in Article III of the Indenture.
SECTION 4.2. REPAYMENT AND PAYMENT OF OTHER AMOUNTS PAYABLE. (a) On
or before each Bond Payment Date (as hereinafter defined), until the principal
of, premium, if any, and interest on, the Bonds shall have been fully paid or
provision for such payment shall have been made as provided in the Indenture,
the Borrower covenants and agrees to pay to the Trustee as a repayment on the
loan made to the Borrower from Bond proceeds pursuant to Section 4.1 hereof, a
sum equal to the amount payable on the next Bond Payment Date as principal of
and premium, if any, and interest on, the Bonds as provided in the Indenture.
Such Loan Repayments shall be made in federal funds or other funds immediately
available at the Corporate Trust Office of the Trustee. The term "Bond Payment
Date" as used in this Section shall mean any date upon which any amounts payable
with respect to the Bonds shall become due, whether upon redemption (including
without limitation sinking fund redemption), acceleration, maturity or
otherwise.
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Each payment made pursuant to this Section 4.2(a) shall at all times
be sufficient to pay the total amount of interest and principal (whether at
maturity or upon redemption or acceleration) and premium, if any, becoming due
and payable on the Bonds on each Bond Payment Date; provided that once per year,
in June, any amount held by the Trustee in the Revenue Fund on the due date for
a Loan Repayment hereunder shall be credited against the installment due on such
date to the extent available for such purpose under the terms of the Indenture;
and provided further that, subject to the provisions of this paragraph, if at
any time the amounts held by the Trustee in the Revenue Fund are sufficient to
pay all of the principal of and interest and premium, if any, on, the Bonds as
such payments become due, the Borrower shall be relieved of any obligation to
make any further payments under the provisions of this Section. Notwithstanding
the foregoing, if on any date the amount held by the Trustee in the Revenue Fund
is insufficient to make any required payments of principal of (whether at
maturity or upon redemption (including without limitation sinking fund
redemption) or acceleration) and interest and premium, if any, on, the Bonds as
such payments become due, the Borrower shall forthwith pay such deficiency as a
Loan Repayment hereunder.
The obligation of the Borrower to make any payment under this Section
4.2(a) shall be deemed to have been satisfied to the extent of any corresponding
payment made by the Bank to the Trustee under the Letter of Credit.
(b) The Borrower also agrees to pay (i) the annual fee of the Trustee
and the Tender Agent for its ordinary services rendered as trustee, and its
ordinary expenses incurred under the Indenture, as and when the same become due,
(ii) the reasonable fees, charges and expenses (including reasonable legal fees
and expenses) of the Trustee, as bond registrar and paying agent, and the
reasonable fees of any other paying agent on the Bonds as provided in the
Indenture, as and when the same become due, (iii) the reasonable fees, charges
and expenses of the Trustee for the necessary extraordinary services rendered by
it and extraordinary expenses incurred by it under the Indenture, as and when
the same become due, (iv) the cost of printing any Bonds required to be
furnished by the Authority at the expense of the Authority, and (v) any amounts
required to be deposited in the Rebate Fund to comply with the provisions of
Section 5.10 hereof and Section 6.06 of the Indenture and the payment of any
rebate analyst. The Trustee's compensation shall not be limited by any
provision of law regarding the compensation of a Trustee of an express trust.
(c) The Borrower also agrees to pay, within 10 days after receipt of
request for payment thereof, all expenses required to be paid by the Borrower
under the terms of the Purchase Contract, executed by the Borrower and the
Authority in connection with the sale of the Bonds, and all reasonable expenses
of the Authority related to the Bonds which are not otherwise required to be
paid by the Borrower under the terms of this Agreement; including, but not
limited to, all Costs of Issuance, and all the amounts owing to the Bank from
time to time.
(d) The Borrower also agrees to pay fees and expenses of independent
certified public accountants necessary for the preparation of annual or other
audits, reports or summaries thereof required by the Indenture or by the
Authority, including a report of an independent certified public accountant with
respect to any fund established under the Indenture; and
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reasonable expenses of the Authority pursuant to Sections 44525 and 44548 of the
California Health and Safety Code, and any agency of the State of California
selected by the Authority to act on its behalf in connection with the Bonds,
including any and all reasonable expenses incurred by the Attorney General of
the State of California in connection with any litigation which may at any time
be instituted involving the Bonds.
(e) In the event the Borrower should fail to make any of the payments
required by Subsections (a) through (d) of this Section, such payments shall
continue as obligations of the Borrower until such amounts shall have been fully
paid. The Borrower agrees to pay such amounts, together with interest thereon
until paid, to the extent permitted by law, at the rate of seven percent (7%)
per annum or, if seven percent is greater than the rate then permitted by law,
at the maximum rate so permitted, following a delinquency of 30 days or longer
until such amount has been paid. Interest on overdue payments required under
subsection (a) above shall be applied as provided in Sections 5.02 and 5.03 of
the Indenture.
SECTION 4.3. UNCONDITIONAL OBLIGATION. The obligations of the
Borrower to make the payments required by Section 4.2 hereof and to perform and
observe the other agreements on its part contained herein shall be absolute and
unconditional, irrespective of any defense or any rights of set-off, recoupment
or counterclaim it might otherwise have against the Authority, and during the
term of this Agreement, the Borrower shall pay all payments required to be made
on account of the loan (which payments shall be net of any other obligations of
the Borrower) as prescribed in Section 4.2 and all other payments required
hereunder, free of any deductions and without abatement, diminution or set-off.
Until such time as the principal of, premium, if any, sinking fund installments,
if any, and interest on, the Bonds shall have been fully paid, or provision for
the payment thereof shall have been made as required by the Indenture, the
Borrower (i) will not suspend or discontinue any payments provided for in
Section 4.2 hereof; (ii) will perform and observe all of its other covenants
contained in this Agreement; and (iii) except as provided in Article VIII
hereof, will not terminate this Agreement for any cause, including, without
limitation, the occurrence of any act or circumstances that may constitute
failure of consideration, destruction of or damage to all or a portion of those
facilities or equipment comprising the Project, commercial frustration of
purpose, any change in the tax or other laws of the United States of America or
of the State of California or any political subdivision of either of these, or
any failure of the Authority or the Trustee to perform and observe any covenant,
whether express or implied, or any duty, liability or obligation arising out of
or connected with this Agreement or the Indenture, except to the extent
permitted by this Agreement.
SECTION 4.4. ASSIGNMENT OF AUTHORITY'S RIGHTS. As security for the
payment of the Bonds, the Authority will assign to the Trustee the Authority's
rights under this Agreement, including the right to receive payments hereunder
(except the right of the Authority to receive certain payments, if any, with
respect to expenses and indemnification, or to enforce its rights under Sections
4.2(c), 4.2(d), 7.3, 9.2 and 9.3 hereof and its rights of indemnification and
consent), and the Authority hereby directs the Borrower to make the payments
required hereunder (except such payments for expenses and indemnification)
directly to the Trustee. The Borrower hereby assents to such assignment and
agrees to make payments directly to the Trustee without defense or set-off by
reason of any dispute between the Borrower and the Authority or the Trustee.
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SECTION 4.5. AMOUNTS REMAINING IN FUNDS. It is agreed by the parties
hereto that after payment in full of (i) the Bonds, or after provision for such
payment shall have been made as provided in the Indenture, (ii) the fees,
charges and expenses of the Trustee and paying agents in accordance with the
Indenture, (iii) all other amounts required to be paid under this Agreement and
the Indenture, and (iv) payment to the Bank of any amounts owed to the Bank by
the Borrower under the Reimbursement Agreement, any amounts remaining in any
fund held by the Trustee under the Indenture (excepting the Rebate Fund) shall
be paid as provided in Section 10.01 of the Indenture. Notwithstanding any other
provision of this Loan Agreement or the Indenture, under no circumstances shall
proceeds of a draw on a Letter of Credit or remarketing proceeds be paid to the
Authority or the Borrower.
ARTICLE V
SPECIAL COVENANTS AND AGREEMENTS
SECTION 5.1. RIGHT OF ACCESS TO THE PROJECT. The Borrower agrees
that during the term of this Agreement the Authority, the Trustee, the Bank and
the duly authorized agents of any of them shall have the right at all reasonable
times during normal business hours to enter upon the site of the Project to
examine and inspect the Project; provided, however, that reasonable notice shall
be given to the Borrower prior to such examination or inspection. The rights of
access hereby reserved to the Authority, the Trustee and the Bank may be
exercised only after such agent shall have executed release of liability and
secrecy agreements if requested by the Borrower in the form then currently used
by the Borrower, and nothing contained in this Section or in any other provision
of this Agreement shall be construed to entitle the Authority, the Trustee or
the Bank to any information or inspection involving the confidential knowledge,
expertise or know-how of the Borrower.
SECTION 5.2. THE BORROWER'S MAINTENANCE OF ITS EXISTENCE; ASSIGNMENTS.
(a) To the extent permitted by law and its Articles of Organization, the
Borrower covenants and agrees that during the term of this Agreement it will
maintain its existence as a limited liability company, will continue to maintain
its status as a limited liability company in good standing in the State of
California, will not dissolve, sell or otherwise dispose of all or substantially
all of its assets and will not combine or consolidate with or merge into another
entity so that the Borrower is not the resulting or surviving entity (except for
a merger into a wholly-owned subsidiary of the Borrower)(any such sale,
disposition, combination or merger shall be referred to hereafter as a
"transaction"); provided, however, that if the Borrower has obtained the prior
written consent of the Authority and the Bank, the Borrower may enter into such
transaction. The consent of the Authority (which shall not be unreasonably
withheld) shall be given within thirty (30) days after the Authority receives
satisfactory evidence that:
(i) the surviving, resulting, transferee person or entity, as the
case may be, assumes and agrees in writing to pay and perform all of the
obligations of the Borrower hereunder,
(ii) the surviving, resulting, transferee person or entity, as the
case may be, qualifies to do business in the State of California,
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(iii) the existing Letters of Credit will remain in full force and
effect, and
(iv) the credit rating on the Bonds, as determined by any Rating
Agency then rating the Bonds, shall be no lower than the rating level of
the Bonds immediately prior to the transaction.
If the outcome of the transaction would have a result other than the
surviving, resulting or transferee person or entity owning any of the assets
financed with proceeds of the Bonds and assuming all of the obligations of the
Borrower to be performed hereunder, the Borrower shall deliver to the Trustee
and the Authority prior to the consummation of the transaction an Opinion of
Bond Counsel stating to the effect that the resulting change in ownership of the
assets financed with proceeds of the Bonds will not cause interest on the Bonds
to be included in gross income for federal income tax purposes.
Within 10 days after the consummation of the transaction, the Borrower
shall provide the Authority and the Trustee with counterpart copies of the
merger instruments, or other documents constituting the transaction, including
(A) copies of the instruments of assumption referred to in (i) above, (B)
evidence of qualification as referred to in (ii) above, (C) evidence
demonstrating compliance with the requirement of clauses (iii) and (iv) above,
and (D) a certificate stating that the requirements of Section 5.2(a) have been
met. The Borrower shall give the Authority at least 30 days' written notice
prior to the effective date of any transaction described above, together with
drafts of the documents of assumption and the certificate as required herein.
The Borrower agrees to provide such other information as the Authority may
reasonably request in order to assure compliance with this Section 5.2(a).
Notwithstanding any other provisions of this Section 5.2(a), the
Borrower need not comply with any of the provisions of Section 5.2(a) above if,
at the time of such merger, combination, sale of assets, dissolution or
reorganization, the Bonds will be defeased as provided in Article X of the
Indenture.
(b) The rights and obligations of the Borrower under this Agreement
may be assigned by the Borrower to any person in whole or in part, subject,
however, to each of the following conditions:
(i) No assignment other than pursuant to subsection (a) of this
Section shall relieve the Borrower from primary liability for any of its
obligations hereunder, and in the event of any assignment not pursuant to
subsection (a) of this Section the Borrower shall continue to remain
primarily liable for the payments specified in Section 4.2 hereof and for
performance and observance of the other agreements on its parts herein
provided to be performed and observed by it.
(ii) Any assignment from the Borrower shall retain for the
Borrower such rights and interests as will permit it to perform its
obligations under this Agreement, and any assignee from the Borrower shall
assume in writing the obligations of the Borrower hereunder to the extent
of the interest assigned.
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(iii) The Borrower shall give the Authority and the Bank thirty
days' prior written notice of any assignment other than pursuant to
subsection(a), and shall, within thirty days after delivery thereof,
furnish or cause to be furnished to the Authority, the Trustee and the Bank
a true and complete copy of each such assignment together with an
instrument of assumption and an Opinion of Counsel satisfactory to the
Authority that provisions of this Section 5.2(b) have been complied with.
If a merger, consolidation, sale or other transfer is effected, as
provided in this Section, all provisions of this Section shall continue in full
force and effect and no further merger, consolidation, sale or transfer shall be
effected except in accordance with the provisions of this Section.
SECTION 5.3. RECORDS AND FINANCIAL STATEMENTS OF BORROWER. (a)
The Borrower covenants and agrees at all times to keep, or cause to be kept,
proper books of record and account, prepared in accordance with generally
accepted accounting principles, in which complete and accurate entries shall be
made of all transactions of or in relation to the business, properties and
operations of the Borrower. Such books of record and account shall be available
for inspection by the Authority, the Bank or the Trustee at reasonable hours,
upon reasonable notice and under reasonable circumstances.
(b) The Borrower further covenants and agrees to furnish to the
Authority, the Remarketing Agent and the Trustee, within one hundred twenty
(120) days after the end of each Fiscal Year, with a Certificate of an
Authorized Representative of the Borrower stating that no event which
constitutes a Loan Default Event or which with the giving of notice or the
passage of time or both would constitute a Loan Default Event has occurred and
is continuing as of the end of such Fiscal Year, or specifying the nature of
such event and the actions taken and proposed to be taken by the Borrower to
cure such default, and upon written request copies of its compiled financial
statements in such form as are required to be provided to the Bank; provided,
however, that such financial statements filed by the Borrower with the Authority
are hereby determined to be an integral part of the issuance of the Bonds, which
facilitated the construction of the Project in California and therefore shall
not be construed as public records open to inspection to the extent provided
under Section 6254.15 of the Government Code of the State of California.
SECTION 5.4. INSURANCE. The Borrower agrees to insure the Project
or cause the Project to be insured during the term of this Agreement for such
amounts and for such occurrences as are customary for similar facilities within
the State of California, or as may be required by the Bank pursuant to the
Reimbursement Agreement, by means of policies issued by reputable insurance
companies qualified to do business in the State of California. The Borrower
agrees to deliver, upon request, to the Authority, the Bank and the Trustee
memorandum copies of the insurance policies or certificates of insurance, and
the certification by an insurance consultant that the insurance on the project
meets the above requirements.
SECTION 5.5. MAINTENANCE AND REPAIR; TAXES; UTILITY AND OTHER
CHARGES. The Borrower agrees to maintain the Project, or cause the Project to be
maintained, during the term of this Agreement (i) in as reasonably safe
condition as its operations
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shall permit and (ii) in good repair and in good operating condition, ordinary
wear and tear excepted, making from time to time all necessary repairs thereto
and renewals and replacements thereof.
The Borrower agrees to pay or cause to be paid during the term of this
Agreement all taxes, governmental charges of any kind lawfully assessed or
levied upon the Project or any part thereof, including any taxes levied against
any portion of the Project which, if not paid, will become a charge on the
receipts from the Project prior to or on a parity with the charge thereon and
the pledge or assignment thereof to be created therefrom or under this
Agreement, all utility and other charges incurred in the operation, maintenance,
use, occupancy and upkeep of any portion of the Project and all assessments and
charges lawfully made by any governmental body for public improvements that may
be secured by a lien on the Project, provided that with respect to special
assessments or other governmental charges that may lawfully be paid in
installments over a period of years, the Borrower shall be obligated to pay only
such installments as are required to be paid during the term of this Agreement.
The Borrower may, at the Borrower's expense and in the Borrower's name, in good
faith, contest any such taxes, assessments and other charges and, in the event
of any such contest, may permit the taxes, assessments or other charges so
contested to remain unpaid during that period of such contest and any appeal
therefrom unless by such nonpayment the Project or any part thereof will be
subject to loss or forfeiture.
SECTION 5.6. QUALIFICATION IN CALIFORNIA. The Borrower agrees
that throughout the term of this Agreement it, or any successor or assignee as
permitted by Section 5.2, will be qualified to do business in the State of
California.
SECTION 5.7. ALTERNATE CREDIT FACILITY. The Borrower may deposit
with the Trustee an Alternate Credit Facility, in lieu of keeping each Letter of
Credit in place as required by Section 5.8 hereof, at least 60 days before the
expiration date of any existing Letter of Credit.
Upon deposit with the Trustee, an Alternate Credit Facility must meet
the following conditions:
(a) the Alternate Credit Facility must be approved by the Authority or
any successors and assigns;
(b) provisions of the Alternate Credit Facility must be acceptable to
the Trustee;
(c) the term of the Alternate Credit Facility must extend at least one
year or to at least the first date on which the related Series of Bonds is
subject to redemption, pursuant to the Indenture, whichever is longer; and
(d) the Alternate Credit Facility must be in an amount sufficient to
pay principal of, interest, Purchase Price and any redemption premium
payable upon optional redemption of the related Series of Bonds.
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Not less than thirty (30) days prior to the delivery of an Alternate
Credit Facility, the Borrower shall (i) deliver to the Trustee a written
commitment for the delivery of such Alternate Credit Facility, (ii) inform the
Trustee of the date on which the Alternate Credit Facility will become
effective, which date shall not be less than five (5) calendar days prior to the
stated expiration date of the existing Letter of Credit and (iii) inform the
Trustee of the rating expected to apply to the applicable Series of Bonds after
the related Alternate Credit Facility is delivered. On or prior to the date of
the delivery of an Alternate Credit Facility to the Trustee, the Borrower shall
cause to be furnished to the Trustee (i) an opinion of Bond Counsel to the
effect that the delivery of such Alternate Credit Facility to the Trustee is
authorized under the Indenture and complies with the terms hereof and will not
adversely affect the Tax-exempt status of the Bonds, (ii) an opinion to the
effect that the Alternate Credit Facility is enforceable in accordance with its
terms, except to the extent that enforceability thereof may be limited by
bankruptcy, reorganization or similar laws limiting the enforceability of
creditors' rights generally and except that no opinion need be expressed as to
the availability of any discretionary equitable rights; and (iii) written
evidence from Moody's, if the Bonds are rated by Moody's, and S&P, if the Bonds
are rated by S&P, and/or Fitch, if the Bonds are rated by Fitch that the related
Series of Bonds shall have a long-term rating of Fitch "A+" (or equivalent) or
higher or, if the related Series of Bonds only has a short-term rating, such
short-term rating shall be in the highest short-term rating category (without
regard to "+"'s or "-"'s).
SECTION 5.8. LETTER OF CREDIT. (a) Subject to Section 5.7 hereof
and except as may be permitted under the Indenture, the Borrower agrees that
throughout the term of this Agreement it, or any successor or assignee as
permitted by Section 5.2 hereof, will maintain or cause to be maintained a
Letter of Credit for each Series of Bonds or an Alternate Letter of Credit for
each Series of Bonds. At any time the Borrower may, at its option, provide for
the delivery to the Trustee of an Alternate Letter of Credit and the Borrower
shall, in any event, cause to be delivered an Alternate Letter of Credit at
least 60 days before the expiration date of any existing Letter of Credit,
unless otherwise permitted by the Indenture, or any existing Alternate Credit
Facility. An Alternate Letter of Credit shall be an irrevocable letter of
credit or other irrevocable credit facility (including, if applicable, a
confirming letter of credit), issued by a commercial bank or other financial
institution, the terms of which shall in all material respects be the same as
the applicable Letter of Credit; provided, that the expiration date of such
--------
Alternate Letter of Credit shall be a date not earlier than one year from its
date of issuance, subject to earlier termination upon payment of the related
Series of Bonds in full or provision for such payment in accordance with Article
X of the Indenture. Not less than thirty (30) days prior to the delivery of an
Alternate Letter of Credit, the Borrower shall (i) deliver to the Trustee a
written commitment for the delivery of such Alternate Letter of Credit, (ii)
inform the Trustee of the date on which the Alternate Letter of Credit will
become effective, which date shall not be less than five (5) calendar days prior
to the stated expiration date of the existing Letter of Credit and (iii) inform
the Trustee of the rating expected to apply to the related Series of Bonds after
the Alternate Letter of Credit is delivered. On or prior to the date of the
delivery of an Alternate Letter of Credit to the Trustee, the Borrower shall
cause to be furnished to the Trustee (i) an opinion of Bond Counsel stating to
the effect that the delivery of such Alternate Letter of Credit to the Trustee
is authorized under the Indenture and complies with the terms hereof and will
not adversely affect the Tax-exempt status of the Bonds, (ii) an opinion stating
to the effect that such Alternate Letter of Credit is enforceable in accordance
with its terms (except to the extent that the enforceability thereof may
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be limited by bankruptcy, reorganization or similar laws limiting the
enforceability of creditors' rights generally and except that no opinion need be
expressed as to the availability of any discretionary equitable remedies), and
(iii) written evidence from Moody's, if the Bonds are rated by Moody's, and S&P,
if the Bonds are rated by S&P, and/or Fitch, if the Bonds are rated by Fitch
that the related Series of Bonds shall have a long-term rating of Fitch "A+" (or
equivalent) or higher or, if the related Series of Bonds only has a short-term
rating, such short-term rating shall be in the highest short-term rating
category (without regard to "+"'s or "-"'s).
(b) The Borrower shall provide a written statement to the Trustee
(with copies to the Authority) on or before June 1 of each year indicating the
status of the extension of the term of each Letter of Credit. If a Letter of
Credit provides for automatic annual extensions, the Borrower shall notify the
Trustee either (i) that the term of such Letter of Credit has been automatically
extended pursuant to its terms, or (ii) that such Letter of Credit Bank has
given written notice of a decision not to extend the term of such Letter of
Credit. If a Letter of Credit does not provide for automatic extensions, the
Borrower shall notify the Trustee whether or not the Bank has given written
approval for an extension of the term of such Letter of Credit.
SECTION 5.9. GENERAL TAX COVENANTS. It is the intention of the
parties hereto that interest on the Bonds shall be and remain Tax-exempt, and to
that end the Borrower covenants to comply with all requirements in the Tax
Certificate, in this Section and in Section 5.10 which are for the benefit of
the Trustee and each and every holder of the Bonds.
SECTION 5.10. SPECIAL ARBITRAGE CERTIFICATIONS. The Authority
hereby certifies to the Borrower that the issuance of the Bonds, in and of
itself, will not violate any provisions of Section 103, or of Section 148 of the
Code or Treasury Regulations issued under those Sections of the Code, such that
the Bonds are not Tax-exempt. To that end, the Borrower acknowledges that it
has read Sections 5.06 and 6.06 of the Indenture and that it will comply with
the requirements of those sections as if they were set forth in full in this
Agreement.
SECTION 5.11. NOTICE AND CERTIFICATES TO TRUSTEE. The Borrower
hereby agrees to provide the Trustee and the Bank with the following:
(a) On or before June 15 and December 15 of each year any of the
Bonds are Outstanding a certificate of an Authorized Representative of the
Borrower that: (i) all payments required under this Agreement have been
made and (ii) any applicable third party credit support will continue in
full force during the succeeding twelve months, or explaining why not;
(b) Within one hundred twenty (120) days of the end of the fiscal
year of the Borrower, (i) a certificate of the Borrower to the effect that
all payments have been made under this Agreement and that, to the best of
its knowledge, there exists no event of default or unmatured default and
(ii) the compiled annual financial report of the Borrower;
(c) Promptly upon knowledge of an Event of Default, notice of
such Event of Default, such notice to include a description of the nature
of such event and what steps are being taken to remedy such Event of
Default; and
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(d) On or before December 20 of each year during which any of the
Bonds are Outstanding, a written disclosure of any significant change known
to the Borrower that occurs which would adversely impact the Trustee's
ability to perform its duties under the Indenture, or of any conflicts
which may result because of other business dealings between the Trustee and
the Borrower.
SECTION 5.12. FINANCING AND CONTINUATION STATEMENTS. The Borrower
hereby agrees to file all financing and continuation statements required to be
filed, if any, relating to the Bonds and their security.
SECTION 5.13. CHANGE IN INTEREST RATES. The Authority acknowledges
the right of the Borrower to adjust the Interest Rate Period for any Series of
the Bonds from time to time under the terms and conditions of the Indenture.
SECTION 5.14. CONTINUING DISCLOSURE. The Borrower hereby covenants
and agrees, upon the adjustment to a Term Interest Rate Period for a duration of
one year or greater with respect to a Series of Bonds pursuant to Section
2.03D(II) of the Indenture and the remarketing of such Bonds pursuant to Section
4.07 of the Indenture, to comply with the continuing disclosure requirements
promulgated under S.E.C. Rule 15c2-12, as it may from time to time hereafter be
amended or supplemented. Notwithstanding any other provision of this Loan
Agreement, failure of the Borrower to comply with the requirements of S.E.C.
Rule 15c2-12, as it may from time to time hereafter be amended or supplemented,
shall not be considered a Loan Default Event; however, the Trustee at the
written request of the Remarketing Agent or the Holders of at least 25%
aggregate principal amount of Outstanding Bonds, shall but only to the extent
indemnified to its satisfaction from and against any cost, liability or expense
related thereto, including, without limitation, fees and expenses of its
attorneys and advisors and additional fees and expenses of the Trustee or any
Bondholder or beneficial owner of the Bonds may take such actions as may be
necessary and appropriate, including seeking mandate or specific performance by
court order, to cause the Borrower to comply with its obligations pursuant to
this Section 5.14.
ARTICLE VI
DAMAGE, DESTRUCTION AND CONDEMNATION;
USE OF PROCEEDS
SECTION 6.1. OBLIGATION TO CONTINUE PAYMENTS. If prior to full
payment of the Bonds (or provision for payment thereof in accordance with the
provisions of the Indenture) (i) the Project or any portion thereof is destroyed
(in whole or in part) or is damaged by fire or other casualty, or (ii) title to,
or the temporary use of, the Project or any portion thereof shall be taken under
the exercise of the power of eminent domain by any governmental body or by any
person, firm or corporation acting under governmental authority, the Borrower
shall nevertheless be obligated to continue to pay the amounts specified in
Article IV hereof, to the extent not prepaid in accordance with Article VIII
hereof.
SECTION 6.2. APPLICATION OF NET PROCEEDS. The Borrower shall be
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entitled to the Net Proceeds, if any, of any insurance or condemnation awards
resulting from the damage, destruction or condemnation of the Project or any
portion thereof. All Net Proceeds shall be deposited by the Borrower in an
escrow account and shall be applied, with the consent of the Bank and by written
notice to the Authority and the Trustee, in one or more of the following ways at
the election of the Borrower:
(a) The prompt repair, restoration, relocation, modification or
improvement of the stage of completion of construction of the damaged,
destroyed or condemned portion of the Project to enable such portion of the
Project to accomplish at least the same function as such portion of the
Project was designed to accomplish prior to such damage or destruction or
exercise of such power of eminent domain. Any balance of the Net Proceeds
remaining after such work has been completed shall be deposited in the
Revenue Fund to be applied to the payment of principal of and premium, if
any, and interest on the Bonds, or, if the Bonds have been fully paid (or
provision for payment thereof has been made in accordance with the
provisions of the Indenture), any balance remaining in the Revenue Fund
shall be paid as provided in Section 10.01 of the Indenture.
(b) Prepayment of all or a portion of the amounts payable
hereunder, in accordance with Article VIII hereof, and redemption of Bonds;
provided that no part of the Net Proceeds may be applied for such purpose
unless (1) all of the amounts payable under this Agreement are so prepaid
and all Outstanding Bonds are to be redeemed in accordance with the
Indenture, or (2) in the event that less than all of the amounts payable
hereunder are so prepaid, the Borrower shall furnish to the Authority and
the Trustee a certificate of the Authorized Representative acceptable to
the Authority and the Trustee stating (i) that the property forming part of
the portion of the Project that was damaged or destroyed by such casualty
or was taken by such condemnation proceedings is not essential to the
Borrower's use or possession of such portion of the Project or (ii) that
such part of the portion of the Project theretofore completed has been
repaired, replaced, restored, relocated, modified or improved to enable
such portion of the Project to accomplish at least the same function as
such portion of the Project was designed to accomplish prior to such damage
or destruction or the taking by such condemnation proceedings.
SECTION 6.3. INSUFFICIENCY OF NET PROCEEDS. If the Project or a
portion thereof is to be repaired, restored, relocated, modified or improved
pursuant to Section 6.2 hereof, and if the Net Proceeds are insufficient to pay
in full the cost of such repair, restoration, relocation, modification or
improvement, the Borrower will nonetheless complete the work or cause the work
to be completed and will pay or cause to be paid any cost in excess of the
amount of the Net Proceeds held in escrow.
SECTION 6.4. DAMAGE TO OR CONDEMNATION OF OTHER PROPERTY. The
Borrower shall be entitled to the Net Proceeds of any insurance or condemnation
award or portion thereof made for damages to or takings of its property not
included in the Project.
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ARTICLE VII
LOAN DEFAULT EVENTS AND REMEDIES
SECTION 7.1. LOAN DEFAULT EVENTS. Any one of the following which
occurs and continues shall constitute a Loan Default Event:
(a) failure of the Borrower to make any payment required by
Section 4.2(a) hereof when due; or
(b) failure of the Borrower to observe and perform any covenant,
condition or agreement on its part required to be observed or performed by
this Agreement other than as provided in (a), which continues for a period
of 30 days after written notice delivered to the Borrower and the Bank,
which notice shall specify such failure and request that it be remedied,
given to the Borrower and the Bank by the Authority or the Trustee, unless
the Authority and the Trustee shall agree in writing to an extension of
such time; provided, however, that if the failure stated in the notice
cannot be corrected within such period, the Authority and the Trustee will
not unreasonably withhold their consent to an extension of such time if
corrective action is instituted within such period and diligently pursued
until the default is corrected; or
(c) existence of an Event of Default under and as defined in
Section 7.01(a) or (b) of the Indenture; or
(d) existence of an Event of Default under and as defined in
Section 7.01(c) of the Indenture; or
(e) existence of an Event of Default under and as defined in
Section 7.01(e) of the Indenture.
The provisions of subsection (b) of this Section are subject to the
limitation that the Borrower shall not be deemed in default if and so long as
the Borrower is unable to carry out its agreements hereunder by reason of
strikes, lockouts or other industrial disturbances; acts of public enemies;
orders of any kind of the government of the United States or of the State of
California or any of their departments, agencies, or officials, or any civil or
military authority; insurrections, riots, epidemics, landslides; lightning;
earthquake; fire; hurricanes; storms; floods; washouts; droughts; arrests;
restraint of government and people; civil disturbances; explosions; breakage or
accident to machinery, transmission pipes or canals; partial or entire failure
of utilities; or any other cause or event not reasonably within the control of
the Borrower; it being agreed that the settlement of strikes, lockouts and other
industrial disturbances shall be entirely within the discretion of the Borrower,
and the Borrower shall not be required to make settlement of strikes, lockouts
and other industrial disturbances by acceding to the demands of the opposing
party or parties when such course is, in the judgment of the Borrower,
unfavorable to the Borrower. This limitation shall not apply to any default
under subsections (a), (c), (d) or (e) of this Section. Notwithstanding any
other provision of this Agreement to the contrary, so long as the Bank is not in
default under the Letter of Credit, the Trustee shall not without the prior
written consent or
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direction of the Bank exercise any remedies under the Agreement in the case of
any Loan Default Event described in subsections (a), (b) or (c) above; provided,
however, that no consent of the Bank shall be required with respect to the
enforcement of Section 4.2(c), 4.2(d), 7.3, 9.2 or 9.3 hereof. The Trustee may
exercise any and all remedies under the Indenture and the Agreement (except
acceleration) to collect any fees, expenses and indemnification from the
Borrower without obtaining the consent of the Bank.
SECTION 7.2. REMEDIES ON DEFAULT. Subject to Section 7.1 hereof,
whenever any Loan Default Event shall have occurred and shall be continuing,
(a) The Trustee, by written notice to the Authority, the Borrower
and the Bank, shall declare the unpaid balance of the loan payable under
Section 4.2(a) of this Agreement to be due and payable immediately,
provided that concurrently with or prior to such notice the unpaid
principal amount of the Bonds shall have been declared to be due and
payable under the Indenture. Upon any such declaration such amount shall
become and shall be immediately due and payable as determined in accordance
with Section 7.01 of the Indenture.
(b) The Trustee may have access to and may inspect, examine and
make copies of the books and records and any and all accounts, data and
federal income tax and other tax returns of the Borrower.
(c) The Authority or the Trustee may take whatever action at law
or in equity as may be necessary or desirable to collect the payments and
other amounts then due and thereafter to become due or to enforce
performance and observance of any obligation, agreement or covenant of the
Borrower under this Agreement.
(d) The Trustee shall immediately draw upon each Letter of
Credit, if permitted by its terms and required by the terms of the
Indenture, and apply the amount so drawn in accordance with the Indenture
and may exercise any remedy available to it thereunder.
In case the Trustee or the Authority shall have proceeded to enforce
its rights under this Agreement and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to the Trustee or the Authority, then, and in every such case, the Borrower, the
Trustee and the Authority shall be restored respectively to their several
positions and rights hereunder, and all rights, remedies and powers of the
Borrower, the Trustee and the Authority shall continue as though no such action
had been taken.
The Borrower covenants that, in case a Loan Default Event shall occur
with respect to the payment of any Loan Repayment payable under Section 4.2(a)
hereof, then, upon demand of the Trustee, the Borrower will pay to the Trustee
the whole amount that then shall have become due and payable under said Section,
with interest on the amount then overdue at the rate of seven percent (7%) per
annum, following a delinquency of 30 days or longer until such amount has been
paid or, if seven percent is greater than the rate then permitted by law, at the
greatest rate then permitted.
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In case the Borrower shall fail forthwith to pay such amounts upon
such demand, the Trustee shall be entitled and empowered to institute any action
or proceeding at law or in equity for the collection of the sums so due and
unpaid, and may prosecute any such action or proceeding to judgment or final
decree, and may enforce any such judgment or final decree against the Borrower
and collect in the manner provided by law the moneys adjudged or decreed to be
payable.
In case proceedings shall be pending for the bankruptcy or for the
reorganization of the Borrower under the federal bankruptcy laws or any other
applicable law, or in case a receiver or trustee shall have been appointed for
the property of the Borrower or in the case of any other similar judicial
proceedings relative to the Borrower, or the creditors or property of the
Borrower, then the Trustee shall be entitled and empowered, by intervention in
such proceedings or otherwise, to file and prove a claim or claims for the whole
amount owing and unpaid pursuant to this Agreement and, in case of any judicial
proceedings, to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee allowed in
such judicial proceedings relative to the Borrower, its creditors or its
property, and to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute such amounts as provided in
the Indenture after the deduction of its reasonable charges and expenses to the
extent permitted by the Indenture. Any receiver, assignee or trustee in
bankruptcy or reorganization is hereby authorized to make such payments to the
Trustee, and to pay to the Trustee any amount due it for reasonable compensation
and expenses, including reasonable expenses and fees of counsel incurred by it
up to the date of such distribution.
SECTION 7.3. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES. In the
event the Borrower should default under any of the provisions of this Agreement
and the Authority or the Trustee should employ attorneys or incur other expenses
for the collection of the payments due under this Agreement or the enforcement
of performance or observance of any obligation or agreement on the part of the
Borrower herein contained, the Borrower agrees to pay to the Authority or the
Trustee the reasonable fees of such attorneys and such other reasonable expenses
so incurred by the Authority or the Trustee.
SECTION 7.4. NO REMEDY EXCLUSIVE. No remedy herein conferred upon or
reserved to the Authority or the Trustee is intended to be exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement or now or hereafter existing at law or in equity or by statute. No
delay or omission to exercise any right or power accruing upon any default shall
impair any such right or power or shall be construed to be a waiver thereof, but
any such right and power may be exercised from time to time and as often as may
be deemed expedient. In order to entitle the Authority or the Trustee to
exercise any remedy reserved to it in this Article, it shall not be necessary to
give any notice, other than such notice as may be herein expressly required.
Such rights and remedies as are given the Authority hereunder shall also extend
to the Trustee, and the Trustee and the Holders of the Bonds shall be deemed
third party beneficiaries of all covenants and agreements herein contained.
SECTION 7.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. In
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the event any agreement or covenant contained in this Agreement should be
breached by the Borrower and thereafter waived by the Authority or the Trustee,
such waiver shall be limited to the particular breach so waived and shall not be
deemed to waive any other breach hereunder.
ARTICLE VIII
PREPAYMENT
SECTION 8.1. REDEMPTION OF BONDS WITH PREPAYMENT MONEYS. By virtue
of the assignment of the rights of the Authority under this Agreement to the
Trustee as is provided in Section 4.4 hereof, the Borrower agrees to and shall
pay directly to the Trustee any amount permitted or required to be paid by it
under this Article VIII. The Trustee shall use the moneys so paid to it by the
Borrower to redeem the Bonds on the date set for such redemption pursuant to
Section 8.5 hereof. The Authority shall call Bonds for redemption as required by
Article IV of the Indenture or as requested by the Borrower pursuant to the
Indenture or this Agreement.
SECTION 8.2. OPTIONS TO PREPAY INSTALLMENTS. The Borrower shall have
the option to prepay the amounts payable under Section 4.2(a) hereof by paying
to the Trustee, for deposit in the Revenue Fund, the amount set forth in Section
8.4 hereof, under the following circumstances:
(a) The Borrower may prepay all or any part of the Loan
Repayments under the circumstances described in Section 6.2 hereof, and
cause all or any part of the Bonds to be redeemed at the price and time and
under the conditions set forth in Section 4.01(4)(i) of the Indenture and
in any Supplemental Indenture.
(b) The Borrower may prepay such amounts in whole, or in part,
and cause all of the Bonds to be redeemed at the price and time and under
the conditions set forth in Section 4.01(4)(ii) of the Indenture.
(c) The Borrower shall also have the option to prepay all or any
part of the Loan Repayments and to cause all or any part of the Bonds to be
redeemed at the times and at the prices set forth in Section 4.01(5) or (6)
of the Indenture and in any Supplemental Indenture and subject to any
additional requirements of the Reimbursement Agreement.
SECTION 8.3. MANDATORY PREPAYMENT. The Borrower shall have and
hereby accepts the obligation to prepay in whole the Loan Repayments required by
Section 4.2(a) of this Agreement, together with interest accrued, but unpaid,
thereon, to be used to redeem all or a part of the Outstanding Bonds under the
following circumstances:
(a) if and when as a result of any changes in the Constitution of
the United States of America or the California Constitution or as a result
of any legislative, judicial or administrative action, this Agreement shall
have become void or unenforceable or impossible of performance in
accordance with the intention and purposes of the parties hereto, or shall
have been declared unlawful;
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(b) if, due to the untruth or inaccuracy of any representation or
warranty made by the Borrower herein or in connection with the offer and
sale of the Bonds, or the breach of any covenant or warranty of the
Borrower contained in this Agreement or in the Tax Certificate, interest on
the Bonds, or any of them, is determined not to be Tax-exempt to the
Holders thereof (other than a Holder who is a "substantial user" of the
Project or a "related person" within the meaning of Section 147(a) of the
Code) by a final administrative determination of the Internal Revenue
Service or judicial decision of a court of competent jurisdiction in a
proceeding of which the Borrower received notice and was afforded an
opportunity to participate in to the full extent permitted by law. A
determination or decision will be considered final for this purpose when
all periods for administrative and judicial review have expired; or
(c) if mandatory redemption is required by Section 4.01(2) or
4.01(3) of the Indenture or by any Supplemental Indenture.
The amount payable by the Borrower in the event of a prepayment required by this
Section shall be determined as set forth in Section 8.4 and shall be deposited
in the Revenue Fund.
SECTION 8.4. AMOUNT OF PREPAYMENT. In the case of a prepayment of
the entire amount due hereunder pursuant to Section 8.2 or 8.3 hereof, the
amount to be paid shall be a sum sufficient, together with other funds and the
yield on any securities deposited with the Trustee and available for such
purpose, to pay (1) the principal of all Bonds Outstanding on the redemption
date specified in the notice of redemption, plus interest accrued and to accrue
to the payment or redemption date of the Bonds, plus premium, if any, pursuant
to the Indenture, (2) all reasonable and necessary fees and expenses of the
Authority, the Trustee and any paying agent accrued and to accrue through final
payment of the Bonds and (3) all other liabilities of the Borrower accrued and
to accrue under this Agreement.
In the case of partial prepayment of the Loan Repayments, the amount
payable shall be a sum sufficient, together with other funds deposited with the
Trustee and available for such purpose, to pay the principal amount of and
premium, if any, and accrued interest on the Bonds to be redeemed, as provided
in the Indenture, and to pay expenses of redemption of such Bonds. All partial
prepayments of the Loan Repayments shall be applied in inverse order of the due
dates thereof.
SECTION 8.5. NOTICE OF PREPAYMENT. To exercise an option granted in
or to perform an obligation required by this Article VIII, the Borrower shall
give written notice at least fifteen (15) days prior to the last day by which
the Trustee is permitted to give notice of redemption pursuant to Section 4.03
of the Indenture, to the Authority, the Bank, and the Trustee specifying the
amount to be prepaid and the date upon which any prepayment will be made. If the
Borrower fails to give such notice of a prepayment in connection with a
mandatory redemption under this Agreement, such notice may be given by the
Authority, by the Trustee or by any Holder or Holders of 10% or more in
aggregate principal amount of each Series of the Bonds Outstanding. The
Authority and the Trustee, at the request of the Borrower or any such
Bondholder, shall forthwith take all steps necessary under the applicable
provisions of the
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Indenture (except that the Authority shall not be required to make payment of
any money required for such redemption) to effect redemption of all or part of
the then Outstanding Bonds, as the case may be, on the earliest practicable date
thereafter on which such redemption may be made under applicable provisions of
the Indenture.
ARTICLE IX
NON-LIABILITY OF AUTHORITY; EXPENSES; INDEMNIFICATION
SECTION 9.1. NON-LIABILITY OF AUTHORITY. The Authority shall not be
obligated to pay the principal of, or premium, if any, or interest on the Bonds,
except from Revenues. The Borrower hereby acknowledges that the Authority's sole
source of moneys to repay the Bonds will be provided by the payments made by the
Borrower pursuant to this Agreement, together with other Revenues, including
investment income on certain funds and accounts held by the Trustee under the
Indenture, and hereby agrees that if the payments to be made hereunder shall
ever prove insufficient to pay all principal of, and premium, if any, and
interest on the Bonds as the same shall become due (whether by maturity,
redemption, acceleration or otherwise), then upon notice from the Trustee, the
Borrower shall pay such amounts as are required from time to time to prevent any
deficiency or default in the payment of such principal, premium or interest,
including, but not limited to, any deficiency caused by acts, omissions,
nonfeasance or malfeasance on the part of the Trustee, the Borrower, the
Authority or any third party.
SECTION 9.2. EXPENSES. The Borrower covenants and agrees to pay and
to indemnify the Authority and the Trustee against all costs and charges,
including reasonable fees and disbursements of attorneys, accountants,
consultants and other experts, incurred in good faith in connection with this
Agreement, the Bonds or the Indenture.
SECTION 9.3. INDEMNIFICATION. The Borrower releases the Authority
and the Trustee from, and covenants and agrees that neither the Authority nor
the Trustee shall be liable for, and covenants and agrees, to the extent
permitted by law, to indemnify and hold harmless the Authority and the Trustee
and their officers, employees and agents from and against, any and all losses,
claims, damages, liabilities or expenses, of every conceivable kind, character
and nature whatsoever arising out of, resulting from or in any way connected
with (1) the Project, or the conditions, occupancy, use, possession, conduct or
management of, or work done in or about, or from the planning, design,
acquisition, installation, rehabilitation or construction of the Project or any
part thereof; (2) the issuance of any Bonds or any certifications or
representations made in connection therewith and the carrying out of any of the
transactions contemplated by the Bonds and this Agreement; (3) the Trustee's
acceptance or administration of the trusts under the Indenture, or the exercise
or performance of any of its powers or duties under the Indenture or this
Agreement; (4) any untrue statement or alleged untrue statement of any material
fact or omission or alleged omission to state a material fact necessary to make
the statements made, in light of the circumstances under which they were made,
not misleading, in any official statement or other offering circular utilized by
the Authority or any underwriter or placement agent in connection with the sale
or remarketing of any Bond; or (5) the cleanup of any hazardous materials or
toxic wastes from the Project, or the authorization of payment of costs thereof;
provided that
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such indemnity shall not be required for damages that result from negligence or
willful misconduct on the part of the party seeking such indemnity. The
indemnity required by this Section shall be only to the extent that any loss
sustained by the Authority or the Trustee exceeds the Net Proceeds the Authority
or the Trustee receives from any insurance carried by the Borrower with respect
to the loss sustained. The Borrower further covenants and agrees, to the extent
permitted by law, to pay or to reimburse the Authority and the Trustee and their
officers, employees and agents for any and all costs, reasonable attorneys fees
and expenses, liabilities or other expenses incurred in connection with
investigating, defending against or otherwise in connection with any such
losses, claims, damages, liabilities, expenses or actions, except to the extent
that the same arise out of the negligence or willful misconduct of the party
claiming such payment or reimbursement. The provisions of this Section shall
survive any resignation or removal of the Trustee and the retirement of the
Bonds.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. NOTICES. All notices, certificates or other
communications shall be deemed sufficiently given on the second day following
the day on which the same have been mailed by certified mail, postage prepaid,
addressed to the Authority, the Borrower, the Trustee, or the Bank, as the case
may be, as follows:
To the Authority: California Pollution Control
Financing Authority
915 Capitol Mall, Room 466
Sacramento, California 95814
Attn: Executive Director
Fax: (916) 657-4821
To the Borrower: West Valley MRF, LLC
c/o Burrtec Waste Industries, Inc.
9890 Cherry Avenue
Fontana, California 92335
Attn: Chief Financial Officer
Fax: (909) 355-7158
and
Kaiser Ventures Inc.
3633 E. Inland Empire Blvd.
Suite 850
Ontario, CA 91764
Attn: Senior Vice President &
Chief Financial Officer
Fax: (909) 944-6605
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To the Trustee: BNY Western Trust Company
700 South Flower Street, Suite 500
Los Angeles, California 90017
Attn: Corporate Trust Department
Fax: (213) 630-6210
To the Bank: Union Bank of California, N.A.
530 B Street, 4th Floor
San Diego, CA 92102
Attn: Michael Conboy
Fax: (619) 230-3766
A duplicate copy of each notice, certificate or other communication given
hereunder by either the Authority or the Borrower to the other shall also be
given to the Trustee and the Bank. The Authority, the Borrower, the Trustee, and
the Bank may, by notice given hereunder, designate any different addresses to
which subsequent notices, certificates or other communications shall be sent.
SECTION 10.2. SEVERABILITY. If any provision of this Agreement shall
be held or deemed to be, or shall in fact be, illegal, inoperative or
unenforceable, the same shall not affect any other provision or provisions
herein contained or render the same invalid, inoperative, or unenforceable to
any extent whatever.
SECTION 10.3. EXECUTION OF COUNTERPARTS. This Agreement may be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument;
provided, however, that for purposes of perfecting a security interest in this
Agreement by the Trustee and the Bank under Article 9 of the California Uniform
Commercial Code, only the counterpart delivered, pledged, and assigned to the
Trustee shall be deemed the original.
SECTION 10.4. AMENDMENTS, CHANGES AND MODIFICATIONS. Except as
otherwise provided in this Agreement or the Indenture, subsequent to the initial
issuance of Bonds and prior to their payment in full, or provision for such
payment having been made as provided in the Indenture, this Agreement may not be
effectively amended, changed, modified, altered or terminated without the
written consent of the Trustee given in accordance with Section 6.07(B) of the
Indenture, and the Bank.
SECTION 10.5. GOVERNING LAW; VENUE. This Agreement shall be
construed in accordance with and governed by the Constitution and laws of the
State applicable to contracts made and performed in the State. This Agreement
shall be enforceable in the State, and any action arising out of this Agreement
shall be filed and maintained in the Sacramento County Superior Court,
Sacramento, California, unless the Authority waives this requirement. In the
event of a dispute between the parties under this Agreement, the losing party in
such dispute shall pay all costs and expenses incurred by the prevailing party
in connection therewith, including, but not limited to, attorneys' fees.
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SECTION 10.6. AUTHORIZED REPRESENTATIVE. Whenever under the
provisions of this Agreement the approval of the Borrower is required or the
Borrower is required to take some action at the request of the Authority, such
approval or such request shall be given on behalf of the Borrower by the
Authorized Representative, and the Authority and the Trustee shall be authorized
to act on any such approval or request and neither party hereto shall have any
complaint against the other or against the Trustee as a result of any such
action taken.
SECTION 10.7. TERM OF THE AGREEMENT. This Agreement shall be in
full force and effect from the date hereof and shall continue in effect as long
as any of the Bonds or the Letter of Credit is outstanding or the Trustee holds
any moneys under the Indenture, whichever is later. All representations and
certifications by the Borrower as to all matters affecting the Tax-exempt status
of the Bonds shall survive the termination of this Agreement.
SECTION 10.8. BINDING EFFECT. This Agreement shall inure to the
benefit of and shall be binding upon the Authority, the Borrower and their
respective successors and assigns; subject, however, to the limitations
contained in Section 5.2 hereof.
SECTION 10.9. SURVIVAL OF FEE OBLIGATION. The right of the
Authority, the Trustee, and the Bank to receive any fees or be reimbursed for
any expenses incurred pursuant to this Agreement, and the right of the Trustee
to be protected from any liability as provided in this Agreement shall survive
the retirement of the Bonds.
SECTION 10.10. PURCHASE OF BONDS. The Borrower agrees that it shall
not purchase Bonds from the Remarketing Agent or otherwise, and that it shall
cause any Guarantor and any shareholder of the Borrower not to purchase Bonds
from the Remarketing Agent or otherwise.
SECTION 10.11. COMPLETE AGREEMENT. The parties agree that the terms
and conditions of this Agreement supersede those of all previous agreements
between the parties, and that this Agreement, together with the documents
referred to in this Agreement, contains the entire agreement between the parties
hereto.
IN WITNESS WHEREOF, the California Pollution Control Financing
Authority has caused this Agreement to be executed in its name and its seal to
be hereunto affixed and attested by its duly authorized officers, and the
Borrower has caused this Agreement to be executed in its name all as of the date
first above written.
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CALIFORNIA POLLUTION CONTROL
FINANCING AUTHORITY
By: Chairman
By: /s/
----------------------------
Deputy
[SEAL]
Attest:
/s/
- ----------------------------
Executive Director
WEST VALLEY MRF, LLC
By: WEST VALLEY RECYCLING & TRANSFER,
INC., Member
By: /s/Cole Burr
------------------------------
Cole Burr, President
By: KAISER RECYCLING CORPORATION,
Member
By: /s/Gerald A. Fawcett
------------------------------
Gerald A. Fawcett, President
28
<PAGE>
EXHIBIT 10.2.1
---------------------------------
CALIFORNIA POLLUTION CONTROL
FINANCING AUTHORITY
and
BNY WESTERN TRUST COMPANY,
Trustee
----------------------
INDENTURE
Dated as of June 1, 1997
-----------------------
including
$9,500,000
CALIFORNIA POLLUTION CONTROL FINANCING AUTHORITY
VARIABLE RATE DEMAND
SOLID WASTE DISPOSAL REVENUE BONDS
(WEST VALLEY MRF, LLC PROJECT)
SERIES 1997A
---------------------------------
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TABLE OF CONTENTS
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Section Page
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Parties......................................................................................... 1
Preambles....................................................................................... 1
ARTICLE I
DEFINITIONS; CONTENT OF CERTIFICATES AND OPINIONS
SECTION 1.01. Definitions............................................................... 2
SECTION 1.02. Content of Certificates and Opinions...................................... 17
SECTION 1.03. Interpretation............................................................ 17
ARTICLE II
THE BONDS
SECTION 2.01. Authorization of Bonds.................................................... 18
SECTION 2.02. 1997A Bonds............................................................... 18
SECTION 2.03. Interest Rates............................................................ 19
SECTION 2.04. Demand Purchase of Bonds.................................................. 22
SECTION 2.05. Execution of Bonds........................................................ 23
SECTION 2.06. Transfer of Bonds......................................................... 24
SECTION 2.07. Exchange of Bonds......................................................... 24
SECTION 2.08. Bond Register............................................................. 24
SECTION 2.09. Temporary Bonds........................................................... 24
SECTION 2.10. Bonds Mutilated, Lost, Destroyed or Stolen................................ 25
SECTION 2.11. Book-Entry Only System.................................................... 25
SECTION 2.12. Conditions for the Issuance of Additional Bonds........................... 27
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SECTION 2.13. Procedure for the Issuance of Additional Bonds............................ 29
ARTICLE III
ISSUANCE OF 1997A BONDS; APPLICATION OF PROCEEDS
SECTION 3.01. Issuance of the 1997A Bonds............................................... 30
SECTION 3.02. Application of Proceeds of 1997A Bonds.................................... 30
SECTION 3.03. Construction Fund......................................................... 30
SECTION 3.04. Costs of Issuance Fund.................................................... 32
SECTION 3.05. Validity of Bonds......................................................... 32
ARTICLE IV
REDEMPTION AND PURCHASE OF BONDS
SECTION 4.01. Terms of Redemption of 1997A Bonds........................................ 32
SECTION 4.02. Selection of Bonds for Redemption......................................... 35
SECTION 4.03. Notice of Redemption...................................................... 36
SECTION 4.04. Partial Redemption of Bonds............................................... 36
SECTION 4.05. Effect of Redemption...................................................... 36
SECTION 4.06. Mandatory Tender for Purchase of 1997A Bonds.............................. 37
SECTION 4.07. Purchase and Remarketing of 1997A Bonds................................... 37
SECTION 4.08. Redemption, Mandatory Tender, Purchase and Remarketing of Additional Bonds 42
ARTICLE V
REVENUES; FUNDS AND ACCOUNTS;
PAYMENT OF PRINCIPAL AND INTEREST
SECTION 5.01. Pledge and Assignment; Revenue Fund....................................... 43
SECTION 5.02. Allocation of Revenues.................................................... 44
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SECTION 5.03. Priority of Moneys in Revenue Fund; Letter of Credit Amount............... 44
SECTION 5.04. Letter of Credit.......................................................... 46
SECTION 5.05. Investment of Moneys...................................................... 46
SECTION 5.06. Rebate Fund............................................................... 48
ARTICLE VI
PARTICULAR COVENANTS
SECTION 6.01. Punctual Payment.......................................................... 49
SECTION 6.02. Extension of Payment of Bonds............................................. 49
SECTION 6.03. Against Encumbrances...................................................... 49
SECTION 6.04. Power to Issue Bonds and Make Pledge and Assignment....................... 50
SECTION 6.05. Accounting Records and Reports............................................ 50
SECTION 6.06. Arbitrage Covenants....................................................... 50
SECTION 6.07. Other Covenants........................................................... 51
SECTION 6.08. Waiver of Laws............................................................ 51
SECTION 6.09. Further Assurances........................................................ 51
SECTION 6.10. Continuing Disclosure..................................................... 52
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES OF BONDHOLDERS
SECTION 7.01. Events of Default; Acceleration; Waiver of Default........................ 52
SECTION 7.02. Institution of Legal Proceedings by Trustee............................... 54
SECTION 7.03. Application of Revenues and Other Funds After Default..................... 54
SECTION 7.04. Trustee to Represent Bondholders.......................................... 55
SECTION 7.05. Bondholders' Direction of Proceedings..................................... 56
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SECTION 7.06. Limitation on Bondholders' Right to Sue................................... 56
SECTION 7.07. Absolute Obligation of Authority.......................................... 57
SECTION 7.08. Termination of Proceedings................................................ 57
SECTION 7.09. Remedies Not Exclusive.................................................... 57
SECTION 7.10. No Waiver of Default...................................................... 57
SECTION 7.11. Consent to Defaults....................................................... 57
ARTICLE VIII
THE TRUSTEE, THE PAYING AGENT, THE BOND REGISTRAR,
THE TENDER AGENT, AND THE REMARKETING AGENT
SECTION 8.01. Duties, Immunities and Liabilities of Trustee............................. 58
SECTION 8.02. Merger or Consolidation................................................... 61
SECTION 8.03. Liability of Trustee...................................................... 61
SECTION 8.04. Right of Trustee to Rely on Documents..................................... 62
SECTION 8.05. Preservation and Inspection of Documents.................................. 63
SECTION 8.06. Compensation and Indemnification.......................................... 63
SECTION 8.07. Paying Agent.............................................................. 63
SECTION 8.08. Notices to the Authority.................................................. 63
SECTION 8.09. Notices to Rating Agency and Bank......................................... 64
SECTION 8.10. Duties of Remarketing Agent............................................... 64
SECTION 8.11. Eligibility of Remarketing Agent; Replacement............................. 65
SECTION 8.12. Compensation of Remarketing Agent......................................... 65
SECTION 8.13. Appointment and Duties of Tender Agent.................................... 65
SECTION 8.14. Eligibility of Tender Agent; Replacement.................................. 66
SECTION 8.15. Compensation of Tender Agent.............................................. 66
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SECTION 8.16. Appointment and Duties of Bond Registrar.................................. 66
SECTION 8.17. Eligibility of Bond Registrar............................................. 66
SECTION 8.18. Bond Registrar's Performance of Duties.................................... 67
SECTION 8.19. Replacement of Bond Registrar............................................. 67
ARTICLE IX
MODIFICATION OR AMENDMENT OF THE INDENTURE
SECTION 9.01. Amendments Permitted...................................................... 67
SECTION 9.02. Effect of Supplemental Indenture.......................................... 69
SECTION 9.03. Endorsement of Bonds; Preparation of New Bonds............................ 69
SECTION 9.04. Amendment of Particular Bonds............................................. 69
ARTICLE X
DEFEASANCE
SECTION 10.01. Discharge of Indenture.................................................... 69
SECTION 10.02. Discharge of Liability on Bonds........................................... 70
SECTION 10.03. Deposit of Money or Securities with Trustee............................... 71
SECTION 10.04. Payment of Bonds After Discharge of Indenture Obligation.................. 71
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Liability of Authority Limited to Revenues................................ 72
SECTION 11.02. Successor Is Deemed Included in All References to Predecessor............. 72
SECTION 11.03. Limitation of Rights to Parties and Bondholders........................... 72
SECTION 11.04. Waiver of Notice.......................................................... 72
SECTION 11.05. Destruction of Bonds...................................................... 73
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SECTION 11.06. Severability of Invalid Provisions........................................ 73
SECTION 11.07. Governing Law; Venue...................................................... 73
SECTION 11.08. Notices................................................................... 73
SECTION 11.09. Evidence of Rights of Bondholders......................................... 75
SECTION 11.10. Disqualified Bonds........................................................ 75
SECTION 11.11. Money Held for Particular Bonds........................................... 76
SECTION 11.12. Funds and Accounts........................................................ 76
SECTION 11.13. Waiver of Personal Liability.............................................. 76
SECTION 11.14. Opinions of Bond Counsel.................................................. 76
SECTION 11.15. Complete Agreement........................................................ 76
SECTION 11.16. Execution in Several Counterparts......................................... 76
EXHIBIT A - Form of Bond....................................................................... A-1
EXHIBIT B - Trustee's Certificate.............................................................. B-1
EXHIBIT C - Form of Construction Fund Requisition.............................................. C-1
EXHIBIT D - Form of Costs of Issuance Fund Requisition......................................... D-1
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THIS INDENTURE, made and entered into as of the first day of June, 1997,
by and between the California Pollution Control Financing Authority, a public
instrumentality and political subdivision of the State of California (the
"Authority"), and BNY Western Trust Company, a banking corporation organized and
existing under and by virtue of the laws of the State of California, having
Corporate Trust Offices in San Francisco and Los Angeles, California, and being
qualified to accept and administer the trusts hereby created (the "Trustee");
W I T N E S S E T H:
WHEREAS, the Authority is a public instrumentality and political
subdivision of the State of California, created by the California Pollution
Control Financing Authority Act (constituting Division 27 of the Health and
Safety Code of the State of California), as supplemented and amended (the
"Act"), and authorized to finance the acquisition, rehabilitation and equipping
of solid waste pollution control facilities constituting a "project" within the
meaning of the Act; and
WHEREAS, West Valley MRF, LLC, a California limited liability company
(herein called the "Borrower"), has duly caused an application to be filed with
the Authority for financial assistance to construct certain solid waste disposal
facilities in the County of San Bernardino, California; and
WHEREAS, the Authority, after due investigation and deliberation, has
adopted a resolution approving the issuance of bonds to finance the acquisition,
construction and/or equipping of certain solid waste disposal facilities to be
located in the County of San Bernardino, California (herein called the
"Project"), for the Borrower, which Project constitutes a "project" as defined
in the Act; and
WHEREAS, pursuant to and in accordance with the Act, the Authority has
authorized and undertaken to issue its Variable Rate Demand Solid Waste Disposal
Revenue Bonds (West Valley MRF, LLC Project) Series 1997A (the "1997A Bonds"
and, together with any Additional Bonds (as defined herein), the "Bonds")
pursuant to this Indenture in order to provide funds to finance the cost of
financing the Project; and
WHEREAS, in order to provide for the authentication and delivery of the
Bonds, to establish and declare the terms and conditions upon which the Bonds
are to be issued and secured and to secure the payment of the principal thereof
and interest thereon, the Authority has authorized the execution and delivery of
this Indenture; and
WHEREAS, the Authority has undertaken to finance the cost of
acquisition, rehabilitation and construction of the Project by loaning the
proceeds derived from the sale of the Bonds to the Borrower pursuant to the Loan
Agreement (as defined herein) between the Authority and the Borrower, under
which the Borrower is required to make loan payments sufficient to pay when due
the principal of, premium, if any, and interest on, the Bonds and related
expenses; and
1
<PAGE>
WHEREAS, it has been determined that the estimated amount necessary to
finance the cost of financing the Project will require the issuance, sale and
delivery of the 1997A Bonds in the aggregate amount of $9,500,000, as
hereinafter provided; and
WHEREAS, in order to further enhance the payments of principal of, and
interest on, the 1997A Bonds the Borrower has obtained an irrevocable letter of
credit from Union Bank of California, N.A., as the letter of credit bank; and
WHEREAS, all acts and proceedings required by law necessary to make the
Bonds, when executed by the Authority, authenticated and delivered by the
Trustee and duly issued, the valid, binding and legal limited obligations of the
Authority, and to constitute this Indenture a valid and binding agreement for
the uses and purposes herein set forth in accordance with its terms, have been
done and taken, and the execution and delivery of this Indenture have been in
all respects duly authorized; and
WHEREAS, all Bonds issued under this Indenture will be secured by a
pledge and assignment of the Agreement;
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure the
payment of the principal of, premium, if any, and the interest on, all Bonds at
any time issued and outstanding under this Indenture, according to their tenor,
and to secure the performance and observance of all the covenants and conditions
therein and herein set forth, and to declare the terms and conditions upon and
subject to which the Bonds are to be issued and received, and in consideration
of the premises and of the mutual covenants herein contained and of the purchase
and acceptance of the Bonds by the Holders (as defined herein) thereof, and for
other valuable considerations, the receipt whereof is hereby acknowledged, the
Authority does hereby covenant and agree with the Trustee, for the equal and
proportionate benefit of the respective Holders from time to time of the Bonds,
as follows:
ARTICLE I
DEFINITIONS; CONTENT OF CERTIFICATES AND OPINIONS
SECTION 1.01. Definitions. Unless the context otherwise requires,
-----------
the terms defined in this Article shall, for all purposes of this Indenture and
of any indenture supplemental hereto and of any certificate, opinion or other
document herein mentioned, have the meanings herein specified, to be equally
applicable to both the singular and plural forms of any of the terms herein
defined. Unless otherwise defined in this Indenture, all terms used herein shall
have the meanings assigned to such terms in the Act.
Accountant
- ----------
"Accountant" means any firm of nationally recognized independent
certified public accountants selected by the Borrower.
2
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Act
- ---
"Act" means the California Pollution Control Financing Authority Act,
constituting Division 27 of the Health and Safety Code of the State of
California, as now in effect and as it may from time to time hereafter be
amended or supplemented.
Act of Bankruptcy
- -----------------
"Act of Bankruptcy" means with respect to any entity (i) the entry of
an order or decree, by a court having jurisdiction in the premises, for relief
against such entity in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect which remains not
discharged, bonded or stayed for at least 90 days, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) for a substantial part of such entity's property which remains not
discharged, bonded or stayed for at least 90 days, or ordering the winding up or
liquidation of its affairs; or (ii) the institution or commencement by such
entity of a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect; or (iii) the consent by it to the entry
of an order for relief against it in any involuntary case under any such law, or
to the appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) for a substantial part of such entity's
property; or (iv) the making by it of a general assignment of substantially all
of its assets for the benefit of creditors; or (v) the failure of it generally
to pay its debts as they become due, or the admission by it in writing of such
failure, within the meaning of the Bankruptcy Code of 1978, as amended, and
judicial interpretations thereof.
Additional Payments
- -------------------
"Additional Payments" means the payments required to be made by the
Borrower pursuant to Section 4.2(b), (c) and (d), 7.3, 9.2 and 9.3 of the
Agreement.
Administrative Fees and Expenses
- --------------------------------
"Administrative Fees and Expenses" means the reasonable and necessary
expenses incurred by the Authority pursuant to the Loan Agreement or this
Indenture and the compensation and expenses paid to or incurred by the Trustee,
the Tender Agent, the Bond Registrar, the Remarketing Agent and/or any Paying
Agent under the Loan Agreement or this Indenture, which include but are not
limited to printing of Bonds, accomplishing transfers or new registration of
Bonds, or other charges and other disbursements including those of their
respective officers, directors, members, attorneys, agents and employees
incurred in and about the administration and execution of the Loan Agreement and
this Indenture.
3
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Agreement or Loan Agreement
- ---------------------------
"Agreement" or "Loan Agreement" means that certain loan agreement by
and between the Authority and the Borrower, dated as of June 1, 1997, as
originally executed and as it may from time to time be supplemented, modified or
amended in accordance with the terms thereof and of this Indenture.
Alternate Credit Facility
- -------------------------
"Alternate Credit Facility" means bond insurance or other similar
credit enhancement meeting the requirements of Section 5.7 of the Agreement.
Alternate Letter of Credit
- --------------------------
"Alternate Letter of Credit" means an alternate irrevocable letter of
credit, including, if applicable, a confirming letter of credit, or similar
credit facility issued by a commercial bank, savings institution or other
financial institution, the terms of which shall in all material respects be the
same as those of the initial Letter of Credit, delivered to the Trustee pursuant
to Section 5.8 of the Agreement.
Approving Opinion
- -----------------
"Approving Opinion" means an opinion of Bond Counsel that an action
being taken (i) is authorized by the Act and this Indenture, and (ii) will not
adversely affect the Tax-exempt status of the Bonds.
Authority
- ---------
"Authority" means the California Pollution Control Financing Authority
created pursuant to, and as defined in, the Act.
Authorized Denomination
- -----------------------
"Authorized Denomination" means (i) during any Weekly Interest Rate
Period or Term Interest Rate Period of less than one year, $100,000 or any
integral multiple of $5,000 in excess thereof and (ii) during any Term Interest
Rate Period of one year or more, $5,000 or any integral multiple thereof.
4
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Authorized Representative
- -------------------------
"Authorized Representative" means with respect to the Borrower, the
person or persons at the time designated to act on behalf of the Borrower by a
written certificate signed by the Borrower, furnished to the Trustee, the Bank
and the Authority, containing the specimen signature of each such person and
with respect to the Bank, the person or persons at the time designated to act on
behalf of the Bank by a written certificate signed by the Bank, furnished to the
Trustee, the Borrower and the Authority, containing the specimen signature of
each such person.
Available Moneys
- ----------------
"Available Moneys" means (1) moneys derived from drawings under a
Letter of Credit that are not commingled with any other moneys, (2) moneys held
by the Trustee (other than in the Rebate Fund or the account described in
Section 4.07(g) hereof) and subject to a first-priority perfected lien under the
Indenture for a period of at least one hundred twenty-three (123) days and not
commingled with any moneys so held for less than said period and during and
prior to which period no petition in bankruptcy was filed by or against, and no
receivership, insolvency, assignment for the benefit of creditors or other
similar proceeding has been commenced by or against the Borrower or the
Authority or any Guarantor; provided, however, if a Guarantor exists, such
period shall be at least three hundred and seventy (370) days, or (3) investment
income derived from the investment of moneys described in clause (2) so long as
(A) investments of such moneys are in Investment Securities rated by the Rating
Agency in (i) any of the two-highest long-term rating categories; or (ii) if
applicable, the highest short-term rating category; and (B) with respect to such
investment earnings there has been delivered to the Trustee an opinion of
nationally recognized bankruptcy counsel to the effect that the payment of such
moneys to the holders of the Bonds would not constitute transfers avoidable
under 11 U.S.C. Section 547(b) and recoverable from the holders of the Bonds
under 11 U.S.C. Section 550(a) should the Authority, the Borrower, or the
Guarantor be the debtor in a case under the United States Bankruptcy Code.
Bank
- ----
"Bank" means Union Bank of California, N.A., as the Letter of Credit
Bank, and any other commercial bank, savings association or other financial
institution issuing a Letter of Credit then in effect and party to a
Reimbursement Agreement.
Bank Bonds
- ----------
"Bank Bonds" shall have the meaning ascribed thereto in Section
4.07(c)(2) hereof.
Beneficial Owners
- -----------------
"Beneficial Owners" means those individuals, partnerships,
corporations or other entities for whom the Direct Participants have caused DTC
to hold Book-Entry Bonds.
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Bond Counsel
- ------------
"Bond Counsel" means any attorney at law or firm of attorneys of
nationally recognized standing in matters pertaining to the federal tax
exemption of interest on bonds issued by states and political subdivisions, and
duly admitted to practice law before the highest court of any state of the
United States of America but shall not include counsel for the Borrower.
Bondholder
- ----------
See "Holder."
Bond Registrar or Registrar
- ---------------------------
"Bond Registrar" or "Registrar" means the entity or entities
performing the duties of the bond registrar pursuant to Section 2.08 hereof.
Bonds, Bond, 1997A Bonds or Additional Bonds
- --------------------------------------------
"Bonds" or "Bond" means the 1997A Bonds and all Additional Bonds.
"1997A Bonds" means all revenue bonds of the Authority authorized by and at any
time Outstanding pursuant hereto and executed, issued and delivered in
accordance with Section 2.02 hereof. The term "Additional Bonds" means all
revenue bonds of the Authority authorized by and at any time Outstanding
pursuant hereto and executed, issued and delivered in accordance with Sections
2.12 and 2.13 hereof.
Book-Entry Bonds
- ----------------
"Book-Entry Bonds" means the Bonds of any Series registered in the
name of the nominee of DTC, or any successor securities depository for such
Bonds, as the registered owner thereof pursuant to the terms and provisions of
Section 2.11 hereof.
Borrower
- --------
"Borrower" means West Valley MRF, LLC, a limited liability company
duly organized and existing under the laws of the State of California, or any
entity which is the surviving, resulting or transferee entity in any merger,
consolidation or transfer of assets permitted under Section 5.2 of the Agreement
and also means, unless the context otherwise requires, an assignee of the
Agreement as permitted by Section 5.2 of the Agreement, but does not mean any
affiliate of the Borrower.
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Business Day
- ------------
"Business Day" shall mean any day other than (i) a Saturday or Sunday,
(ii) a day on which commercial banks in New York, New York, or the city or
cities in which the Corporate Trust Office of the Trustee or the Tender Agent or
the office of the Bank at which demands for payment under the Letter of Credit
are to be presented are authorized or required by law to close or (iii) a day on
which the New York Stock Exchange is closed.
Certificate, Statement, Request, Requisition or Order of the Authority or the
- -----------------------------------------------------------------------------
Borrower
- --------
"Certificate," "Statement," "Request," "Requisition" or "Order" of the
Authority or the Borrower mean, respectively, a written certificate, statement,
request, requisition or order signed in the name of the Authority by its
Chairman, Executive Director or such other person as may be designated and
authorized to sign for the Authority, or in the name of the Borrower by an
Authorized Representative of the Borrower. Any such instrument and supporting
opinions or representations, if any, may, but need not, be combined in a single
instrument with any other instrument, opinion or representation, and the two or
more so combined shall be read and construed as a single instrument. If and to
the extent required by Section 1.02 hereof, each such instrument shall include
the statements provided for in Section 1.02 hereof.
Code
- ----
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
Completion Date
- ---------------
"Completion Date" means the date of completion of the Project as that
date shall be certified as provided in Section 3.3 of the Agreement.
Construction Fund
- -----------------
"Construction Fund" means the fund by that name established pursuant
to Section 3.03 hereof.
Corporate Trust Office
- ----------------------
"Corporate Trust Office" means the corporate trust office of the
Trustee at 700 South Flower Street, Suite 500, Los Angeles, California 90017, or
such other office designated by the Trustee from time to time, except that with
respect to presentation of Bonds for payment or for registration of transfer and
exchange, such term shall mean the office or agency of the Trustee at which at
any particular time, its corporate trust agency shall be conducted.
7
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Costs of Issuance
- -----------------
"Costs of Issuance" means all items of expense directly or indirectly
payable by or reimbursable to the Authority or the Borrower and related to the
authorization, issuance, sale and delivery of the Bonds, including but not
limited to costs of preparation and reproduction of documents, printing
expenses, filing and recording fees, initial fees and charges of the Trustee,
legal fees and charges, fees and disbursements of consultants and professionals,
rating agency fees, fees and charges for preparation, execution and safekeeping
of the Bonds and any other cost, charge or fee in connection with the original
issuance of the Bonds which constitutes a "cost of issuance" within the meaning
of Section 147(g) of the Code.
Costs of Issuance Fund
- ----------------------
"Costs of Issuance Fund" means the fund by that name established
pursuant to Section 3.04 hereof.
Costs of the Project
- --------------------
"Costs of the Project" means the sum of the items, or any such item,
authorized to be paid from the Construction Fund pursuant to the provisions of
Section 3.2 of the Agreement, but shall not include any Costs of Issuance.
Date of Delivery
- ----------------
"Date of Delivery" means the date of initial issuance and delivery of
a Series of the Bonds.
Determination of Taxability
- ---------------------------
"Determination of Taxability" means the occurrence or existence of any
of the conditions or events more fully described in Section 8.3(b) of the Loan
Agreement.
Direct Participants
- -------------------
"Direct Participants" means those broker-dealers, banks and other
financial institutions from time to time for which DTC holds the Bonds as
securities depository.
DTC
- ---
"DTC" means The Depository Trust Company, New York, New York, a
limited purpose trust company organized under the New York Banking Law, or any
successor securities depository for the Bonds.
8
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Event of Default
- ----------------
"Event of Default" means any of the events specified in Section 7.01
hereof.
Fiscal Year
- -----------
"Fiscal Year" means the period beginning on January 1 of each year and
ending on the next succeeding December 31, or any other twelve-month, or fifty-
two week, period hereafter selected and designated as the official fiscal year
period of the Borrower.
Fitch
- -----
"Fitch" means Fitch Investors Service, L.P., a limited partnership
organized and existing under the laws of the State of Delaware, its successors
and their assigns, or, if such entity shall be dissolved or liquidated or shall
no longer perform the functions of a securities rating agency, "Fitch" shall be
deemed to refer to any other nationally recognized securities rating agency
(other than S&P or Moody's) designated by the Authority, with the approval of
the Borrower, by notice to the Bank, the Trustee, the Remarketing Agent and the
Tender Agent.
Guarantor
- ---------
"Guarantor" means any person or entity that has guaranteed the
obligations of the Borrower under the Reimbursement Agreement or the Agreement.
Holder or Bondholder or Owner
- -----------------------------
"Holder" or "Bondholder," or "Owner," whenever used herein with
respect to a Bond, means the person in whose name such Bond is registered.
Indenture
- ----------
"Indenture" means this Indenture, as originally executed or as it may
from time to time be supplemented, modified or amended by any Supplemental
Indenture.
Information Services
- --------------------
"Information Services" means Financial Information, Inc.'s "Daily
Called Bond Service," 30 Montgomery Street, 10th Floor, Jersey City, New Jersey
07302, Attention: Editor; Kenny Information Services "Called Bond Service," 65
Broadway, 16th Floor, New York, New York 10006; Moody's "Municipal and
Government," 5250 77 Center Drive, Suite 150, Charlotte, North Carolina 28271,
Attention: Called Bonds Department; and Standard and Poor's "Called Bond
Record," 25 Broadway, 3rd Floor, New York, New York 10004; or, in accordance
with then-current guidelines of the Securities and Exchange Commission, to such
other services providing information with respect to called bonds, or no such
services, as the Authority may indicate in a certificate of the Authority
delivered to the Trustee.
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Interest Account
- ----------------
"Interest Account" means the account by that name in the Revenue Fund
established pursuant to Section 5.02 hereof.
Interest Payment Date
- ---------------------
"Interest Payment Date" means June 1, 2012 and (i) the first Wednesday
of each month of each year (or the next succeeding Business Day if such
Wednesday is not a Business Day) during a Weekly Interest Rate Period or the
last Business Day of a Term Interest Rate Period of less than one year or (ii)
June 1 and December 1 during a Term Interest Rate Period of one year or more.
Interest Period
- ---------------
"Interest Period" shall mean the period from and including any
Interest Payment Date to and including the day immediately preceding the next
following Interest Payment Date, except that the first Interest Period shall be
the period from and including the date of the first authentication and delivery
of a Series of Bonds to and including the day immediately preceding the first
Interest Payment Date relating to such Series of Bonds.
Interest Rate Period
- --------------------
"Interest Rate Period" shall mean either a Weekly Interest Rate Period
or a Term Interest Rate Period.
Investment Securities
- ---------------------
"Investment Securities" shall mean any of the following securities
(other than those issued by the Authority, the Borrower or any Guarantor):
(i) Commercial paper issued by corporations that are organized and
operating within the United States and that are rated by Moody's or S & P (a)
"A-2" or "P-2" or higher if such commercial paper has a maturity of seven days
or less, and (b) "A-1" or "P-1" if such commercial paper has a maturity of
greater than seven days;
(ii) United States Treasury notes, bonds, bills or certificates of
indebtedness or those for which the faith and credit of the United States are
pledged for the full and timely payment of principal and interest, not subject
to prepayment or call;
(iii) Negotiable certificates of deposit issued by or deposit
accounts with a nationally or state-chartered bank, including the Trustee and
its affiliates, or by a state or federally licensed branch of a foreign bank,
provided that the senior debt issued by such bank and/or its holding company
shall be rated "A" by Moody's and S&P, respectively, and the commercial paper
issued by such holding company or branch of a foreign bank shall be rated "P-1"
and "A-1" by
10
<PAGE>
Moody's and S&P, respectively;
(iv) Bonds, notes or other obligations of any state, municipality or
political subdivision the interest on which is excluded from gross income for
federal income tax purposes, which are rated "A" or higher by Moody's or S&P;
(v) Investments in or shares of any "regulated investment company"
within the meaning of Section 851(a) of the Code, the assets of which are
securities or investments described in (i) - (iv) above, including funds for
which the Trustee, its parent holding company, if any, or any affiliates or
subsidiaries of the Trustee or such holding company provide investment advisory
or other management services.
(vi) Repurchase agreements with any bank, trust company or national
banking association insured by the Federal Deposit Insurance Corporation, or
with any government bond dealer recognized as a primary dealer by the Federal
Reserve Bank of New York, which agreements are fully and continuously secured by
a valid and perfected security interest in obligations described in paragraph
(ii) of this definition or obligations which are rated "Aaa" by Moody's or "AAA"
by S&P; and
(vii) Money market funds invested solely in U.S. Treasury securities
described in paragraph (ii) of this definition, including funds for which the
Trustee, its parent holding company, if any, or any affiliates or subsidiaries
of the Trustee or such holding company provide investment advisory or other
management services.
Issuance Date
- -------------
"Issuance Date" means June 25, 1997.
Letter of Credit
- ----------------
"Letter of Credit" means, as applicable, (i) that certain Letter of
Credit issued by the Bank, naming the Trustee as beneficiary and delivered on
the date of issuance and delivery of a Series of the Bonds, pursuant to a
Reimbursement Agreement and (ii) in the event of delivery of an Alternate Letter
of Credit, such Alternate Letter of Credit.
Letter of Credit Account
- ------------------------
"Letter of Credit Account" means the account by that name in the
Revenue Fund established pursuant to Section 5.03 hereof.
Loan Default Event
- ------------------
"Loan Default Event" means any one or more of the events specified in
Section 7.1 of the Agreement.
11
<PAGE>
Loan Repayments
- ---------------
"Loan Repayments" means the payments so designated and required to be
made by the Borrower pursuant to Section 4.2 of the Agreement.
Maximum Rate
- ------------
"Maximum Rate" shall mean twelve percent (12%) per annum.
Moody's
- -------
"Moody's" means Moody's Investors Service, a corporation organized and
existing under the laws of the State of Delaware, its successors and their
assigns, or, if such corporation shall be dissolved or liquidated or shall no
longer perform the functions of a securities rating agency, "Moody's" shall be
deemed to refer to any other nationally recognized securities rating agency
(other than S&P or Fitch) designated by the Authority, with the approval of the
Borrower, by notice to the Bank, the Trustee, the Remarketing Agent and the
Tender Agent.
Net Proceeds
- ------------
"Net Proceeds" means the proceeds from insurance or from actual or
threatened condemnation or eminent domain actions with respect to the Project,
less any costs reasonably expended by the Borrower to receive such proceeds.
Opinion of Counsel
- ------------------
"Opinion of Counsel" means a written opinion of counsel (who may be
counsel for the Authority) selected by the Authority. If and to the extent
required by the provisions of Section 1.02 hereof, each Opinion of Counsel shall
include the statements provided for in Section 1.02 hereof.
Outstanding
- -----------
"Outstanding," when used as of any particular time with reference to
Bonds, means (subject to the provisions of Section 11.10 hereof) all Bonds
theretofore, or thereupon being, authenticated and delivered by the Trustee
under this Indenture except (1) Bonds theretofore canceled by the Trustee or
surrendered to the Trustee for cancellation; (2) Bonds with respect to which
liability of the Authority shall have been discharged in accordance with Section
10.02 hereof, including Bonds (or portions of Bonds) referred to in Section
11.10 hereof; and (3) Bonds for the transfer or exchange of or in lieu of or in
substitution for which other Bonds shall have been authenticated and delivered
by the Trustee pursuant to this Indenture.
12
<PAGE>
Owner
- -----
See "Holder."
Paying Agent
- ------------
"Paying Agent" means the Paying Agent described in Section 8.07
hereof.
Person
- ------
"Person" means an individual, corporation, firm, association, limited
liability company, partnership, trust, or other legal entity or group of
entities, including a governmental entity or any agency or political subdivision
thereof.
Principal Account
- -----------------
"Principal Account" means the account by that name in the Revenue Fund
established pursuant to Section 5.02.
Principal Payment Date
- ----------------------
"Principal Payment Date" means June 1, 2012.
Project
- -------
"Project" means (i) all land, buildings, structures, fixtures and
improvements and (ii) all tangible personal property purchased with proceeds of
the Bonds whether now existing or hereafter acquired, constructed or installed
as more fully described in Exhibit A to the Agreement.
Purchase Date
- -------------
"Purchase Date" shall mean the date on which any Bond is required to
be purchased pursuant to Section 2.04(A) hereof or Section 4.06 hereof.
Purchase Price
- --------------
"Purchase Price" shall mean (i) that amount equal to 100% of the
principal amount of any Bond purchased pursuant to Sections 2.04 or 4.06 of this
Indenture, plus accrued and unpaid interest thereon to but not including the
Purchase Date or the date on which such Bond is deemed purchased in accordance
with Section 2.04 hereof and (ii) with respect to any other Series of Bonds
shall mean the Purchase Price specified in the Supplemental Indenture pursuant
to which such Bonds are issued.
13
<PAGE>
Qualified Newspaper
- -------------------
"Qualified Newspaper" means The Wall Street Journal or The Bond Buyer
----------------------- --------------
or any other newspaper or journal containing financial news, printed in the
English language and customarily published on each Business Day, of general
circulation in New York, New York, and selected by the Trustee, whose decision
shall be final and conclusive.
Rating Agency
- -------------
"Rating Agency" means Moody's, if Moody's is then rating the Bonds,
S&P, if S&P is then rating the Bonds and/or Fitch, if Fitch is then rating the
Bonds.
Rebate Fund
- -----------
"Rebate Fund" means the fund by that name created pursuant to Section
5.06 hereof.
Rebate Instructions
- -------------------
"Rebate Instructions" means those calculations and directions required
to be delivered to the Trustee by the Borrower under Section 5.2 of the Tax
Certificate.
Rebate Requirement
- ------------------
"Rebate Requirement" means the Rebate Requirement defined in the Tax
Certificate.
Record Date
- -----------
"Record Date" shall mean (i) the Business Day immediately preceding
the applicable Interest Payment Date during a Weekly Interest Rate Period or any
Term Interest Rate Period of less than one year, and (ii) whether or not a
Business Day, the fifteenth day of the month prior to an Interest Payment Date
during any Term Interest Rate Period of one year or greater.
Redemption Account
- ------------------
"Redemption Account" means the account by that name established in the
Revenue Fund pursuant to Section 5.02 hereof.
Reimbursement Agreement
- -----------------------
"Reimbursement Agreement" means the Reimbursement Agreement, dated as
of June 1, 1997, between the Borrower and the Bank, as may be amended or
supplemented from time to time, or any other similar agreement entered into in
connection with the issuance of the Letter of Credit or of any Alternate Letter
of Credit.
14
<PAGE>
Remarketing Agent
- -----------------
"Remarketing Agent" shall mean with respect to the Bonds, Westhoff,
Cone & Holmstedt and its successors in such office under this Indenture.
Remarketing Agreement
- ---------------------
"Remarketing Agreement" shall mean the Remarketing Agreement, dated as
of June 1, 1997, between the Borrower and the Remarketing Agent or the agreement
or instrument pursuant to which a successor to the Remarketing Agent shall
perform its services.
Revenue Fund
- ------------
"Revenue Fund" means the fund by that name established pursuant to
Section 5.01.
Revenues
- --------
"Revenues" means all amounts received by the Authority or the Trustee
for the account of the Authority pursuant or with respect to the Agreement or
the Letter of Credit (other than payments of Purchase Price), including, without
limiting the generality of the foregoing, Loan Repayments (including both timely
and delinquent payments, any late charges, and paid from whatever source),
prepayments, insurance proceeds, condemnation proceeds, and all interest,
profits or other income derived from the investment of amounts in any fund or
account established pursuant to this Indenture, but not including payments to
the Authority, the Trustee or other parties pursuant to Sections 4.2(c) and (d),
7.3, 9.2 and 9.3 of the Agreement, including without limitation any
Administrative Fees and Expenses, or any moneys paid for deposit into the Rebate
Fund or the Authority Subaccount of the Costs of Issuance Fund.
S&P
- ---
"S&P" means Standard & Poor's, a division of The McGraw-Hill
Companies, Inc., its successors and their assigns, and, if such entity shall be
dissolved or liquidated or shall no longer perform the functions of a securities
rating agency, "S&P" shall be deemed to refer to any other nationally recognized
securities rating agency (other than Moody's or Fitch) designated by the
Authority, with the approval of the Borrower, by notice to the Bank, the
Trustee, the Remarketing Agent and the Tender Agent.
15
<PAGE>
Securities Depositories
- -----------------------
"Securities Depositories" means the following registered securities
depositories: The Depository Trust Company, 711 Stewart Avenue, Garden City,
New York 11530, Fax-(516) 227-4039 or 4190; (ii) Midwest Securities Trust
Company, Capital Structures-Call Notification, 440 South LaSalle Street,
Chicago, Illinois 60605, Fax-(312) 663-2343; and (iii) Philadelphia Depository
Trust Company, Reorganization Division, 1900 Market Street, Philadelphia,
Pennsylvania 19103, Attention: Bond Department, Fax-(215) 496-5058; or, in
accordance with then-current guidelines of the Securities and Exchange
Commission, such other securities depositories, or no such depositories, as the
Authority may indicate in a certificate of the Authority delivered to the
Trustee.
Series
- ------
"Series," whenever used herein with respect to Bonds, means all of the
Bonds designated as being of the same series, authenticated and delivered in a
simultaneous transaction, regardless of variations in maturity, interest rate,
redemption and other provisions, and any Bonds thereafter authenticated and
delivered upon transfer or exchange of or in lieu of or in substitution for (but
not to refund) such Bonds as herein provided.
State
- -----
"State" means the State of California.
Supplemental Indenture
- ----------------------
"Supplemental Indenture" means any indenture hereafter duly authorized
and entered into between the Authority and the Trustee, supplementing, modifying
or amending this Indenture; but only if and to the extent that such Supplemental
Indenture is specifically authorized hereunder.
Surplus Account
- ---------------
"Surplus Account" means the account established within the Revenue
Fund pursuant to Section 3.03 hereof.
Tax Certificate
- ---------------
"Tax Certificate" means the Tax Certificate and Agreement of the
Borrower and the Authority dated the Date of Delivery.
16
<PAGE>
Tax-exempt
- ----------
"Tax-exempt" means, with respect to interest on any obligations of a
state or local government, including the Bonds, that such interest is excluded
from gross income for federal income tax purposes (other than in the case of a
Holder of any Bonds who is a substantial user of the Project or a related person
within the meaning of Section 147(a) of the Code) whether or not such interest
is includable as an item of tax preference or otherwise includable directly or
indirectly for purposes of calculating tax liabilities, including any
alternative minimum tax or environmental tax, under the Code.
Tender Agent
- ------------
"Tender Agent" shall mean initially the Trustee and any successor
tender agent appointed pursuant to Section 8.13 hereof.
Term Interest Rate
- ------------------
"Term Interest Rate" shall mean a non-variable interest rate on a
Series of the Bonds established in accordance with Section 2.03(D) hereof.
Term Interest Rate Period
- -------------------------
"Term Interest Rate Period" shall mean each period during which a Term
Interest Rate is in effect.
Trustee
- -------
"Trustee" means BNY Western Trust Company, a banking corporation
organized and existing under and by virtue of the laws of the State of
California, having a Corporate Trust Office in San Francisco and Los Angeles,
California, or its successor as Trustee hereunder as provided in Section 8.01.
Variable Index
- --------------
"Variable Index" shall mean the current average rate for survey, as
shown on the most recent VERIFACT Weekly Mode Variable Rate Fact Sheet and
Newsletter, or any successor publication, published weekly by Ponder & Company,
or any successor entity. If for any reason the Variable Index for any rate
determination date cannot be established as provided above or is held to be
invalid or unenforceable by a court of law, the Variable Index for such rate
determination date shall be an index computed by the Remarketing Agent and shall
be equal to 95% of the yield applicable to 91-day United States Treasury bills,
such yield to be computed on the basis of the coupon equivalent of the average
per annum discount rate at which such Treasury bills shall have been sold at the
most recent Treasury auction conducted prior to such rate determination date.
17
<PAGE>
Weekly Interest Rate
- --------------------
"Weekly Interest Rate" shall mean a variable interest rate on a Series
of the Bonds established weekly in accordance with Section 2.03(C) hereof.
Weekly Interest Rate Period
- ---------------------------
"Weekly Interest Rate Period" shall mean each period during which
Weekly Interest Rates are in effect.
SECTION 1.02. Content of Certificates and Opinions. Every certificate
------------------------------------
or opinion provided for in this Indenture with respect to compliance with any
provision hereof shall include (1) a statement that the Person making or giving
such certificate or opinion has read such provision and the definitions herein
relating thereto; (2) a brief statement as to the nature and scope of the
examination or investigation upon which the certificate or opinion is based; (3)
a statement that, in the opinion of such Person, such Person has made or caused
to be made such examination or investigation as is necessary to enable such
Person to express an informed opinion with respect to the subject matter
referred to in the instrument to which such Person's signature is affixed; (4) a
statement of the assumptions upon which such certificate or opinion is based,
and that such assumptions are reasonable; and (5) a statement as to whether, in
the opinion of such Person, such provision has been complied with.
Any such certificate or opinion made or given by an officer of the
Authority or an officer or duly authorized representative of the Borrower may be
based, insofar as it relates to legal, accounting or business matters of either
of them, upon a certificate or opinion of or representation by counsel, an
Accountant or a management consultant, unless such officer knows, or in the
exercise of reasonable care should have known, that the certificate, opinion or
representation with respect to the matters upon which such certificate or
statement may be based, as aforesaid, is erroneous. Any such certificate or
opinion made or given by counsel, an Accountant or a management consultant may
be based, insofar as it relates to factual matters (with respect to which
information is in the possession of the Authority or the Borrower, as the case
may be) upon a certificate or opinion of or representation by an officer of the
Authority or the Borrower, unless such counsel, Accountant or management
consultant knows, or in the exercise of reasonable care should have known, that
the certificate or opinion or representation with respect to the matters upon
which such Person's certificate or opinion or representation may be based, as
aforesaid, is erroneous. The same officer of the Authority or the Borrower, or
the same counsel or Accountant or management consultant, as the case may be,
need not certify to all of the matters required to be certified under any
provision of this Indenture, but different officers, counsel, Accountants or
management consultants may certify to different matters, respectively.
SECTION 1.03. Interpretation. (a) Unless the context otherwise
--------------
indicates, words expressed in the singular shall include the plural and vice
----
versa and the use of the neuter, masculine, or feminine gender is for
- -----
convenience only and shall be deemed to mean and include the neuter, masculine
or feminine gender, as appropriate.
18
<PAGE>
(b) Headings of articles and sections herein and the table of contents
hereof are solely for convenience of reference, do not constitute a part hereof
and shall not affect the meaning, construction or effect hereof.
(c) All references herein to "Articles," "Sections" and other
subdivisions are to the corresponding Articles, Sections or subdivisions of this
Indenture; the words "herein," "hereof," "hereby," "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any particular
Article, Section or subdivision hereof.
ARTICLE II
THE BONDS
SECTION 2.01. Authorization of Bonds. Bonds may be issued hereunder
----------------------
from time to time in order to obtain moneys to carry out the purposes of the Act
for the benefit of the Authority and the Borrower. The maximum principal amount
of the Bonds which may be issued hereunder is not limited; subject, however, to
the right of the Authority, which is hereby reserved, to limit the aggregate
principal amount of Bonds which may be issued or outstanding hereunder. The
Bonds are designated generally as "California Pollution Control Financing
Authority Variable Rate Demand Solid Waste Disposal Revenue Bonds (West Valley
MRF, LLC Project);" each Series thereof to bear such additional designation as
may be necessary or appropriate to distinguish such Series from every other
Series of Bonds. The Bonds may be issued in such Series as from time to time
shall be established and authorized by the Authority, subject to the covenants,
provisions and conditions herein contained. This Indenture constitutes a
continuing agreement with the Holders from time to time of the Bonds to secure
the full payment of the principal (or redemption price) of and interest on all
such Bonds subject to the covenants, provisions and conditions herein contained.
SECTION 2.02. 1997A Bonds. There shall be issued under and secured
-----------
by this Indenture an initial Series of Bonds to be issued in the form of fully
registered bonds and to be additionally designated "Series 1997A", in the
principal amount of $9,500,000, to be dated the date of initial issuance and
delivery and to mature (subject to prior redemption at the prices and dates and
upon the terms and conditions hereinafter set forth) on June 1, 2012. The 1997A
Bonds shall bear interest on the unpaid principal amount thereof as set forth in
Section 2.03 hereof, provided, however, that in no event shall the rate of
interest on any Bond exceed at any time the Maximum Rate. If an Event of Default
shall have occurred and be continuing, the interest rate on the 1997A Bonds
shall be the rate on the 1997A Bonds on the day prior to the occurrence of such
Event of Default.
The 1997A Bonds shall be issuable in Authorized Denominations. The 1997A Bonds
shall be issued in substantially the form set forth in Exhibit A of this
Indenture with such variations, insertions or omissions as are appropriate and
not inconsistent therewith and shall conform generally to the rules and
regulations of any governmental authority or usage or requirement of law with
respect thereto. The 1997A Bonds shall be numbered and lettered from one upward
preceded by the letter "R" prefixed to the number and may bear such additional
letters, numbers, legends or designations as the Bond Registrar determines are
desirable.
19
<PAGE>
SECTION 2.03. Interest Rates. (A) Each Series of the Bonds shall
--------------
bear interest from and including the date of first authentication and delivery
thereof until payment of the principal or redemption price thereof shall have
been made or provided for in accordance with the provisions hereof, whether at
maturity, upon redemption or otherwise. Interest on each Series of the Bonds
with respect to the immediately preceding Interest Period shall be paid as
provided below, provided that if any Interest Payment Date is not a Business
Day, such interest shall be mailed or wired pursuant to this Section 2.03 on the
next succeeding Business Day, with the same effect as if made on the day such
payment was due. Except during a Term Interest Rate Period of one year or more,
interest on each Series of the Bonds shall be computed upon the basis of a 365-
day or 366 day, as applicable, year for the number of days actually elapsed.
During any Term Interest Rate Period of one year or more, interest on each
Series of the Bonds shall be computed upon the basis of a 360-day year,
consisting of twelve 30-day months.
Payment of the interest on any 1997A Bond shall be made to the person
appearing on the bond registration books of the Bond Registrar as the Bondholder
thereof on the Record Date, such interest to be paid by the Paying Agent to such
Bondholder (i) by check mailed by first class mail on the Interest Payment Date,
to such Bondholder's address as it appears on the registration books, or (ii)
upon written request at least three Business Days prior to the applicable Record
Date of the Bondholder of 1997A Bonds aggregating not less than $1,000,000 in
principal amount, by wire transfer in immediately available funds at an account
maintained in the United States at such wire address as such Bondholder shall
specify in its written notice (any such written request shall remain in effect
until rescinded in writing by such Bondholder); except, in each case, that, if
and to the extent that there shall be a default in the payment of the interest
due on such Interest Payment Date, such defaulted interest rate shall be the
rate on the Bonds on the day before such default occurred, and such defaulted
interest shall be paid to the Bondholder in whose name any such 1997A Bonds are
registered at the close of business on the fifth Business Day next preceding the
date of payment of such defaulted interest. Both the principal of and premium,
if any, on the 1997A Bonds shall be payable upon surrender thereof in lawful
money of the United States of America at the Corporate Trust Office of the
Trustee.
(B) In the manner hereinafter provided, the term of each Series of the
Bonds will be divided into consecutive Interest Rate Periods, during each of
which such Series of Bonds shall bear interest at a Weekly Interest Rate or a
Term Interest Rate. The first Interest Rate Period for the 1997A Bonds shall be
a Weekly Interest Rate Period. The first Interest Payment Date for the 1997A
Bonds shall be August 6, 1997. The first Interest Rate Period and the first
Interest Payment Date for any other Series of Bonds shall be specified in the
Supplemental Indenture relating to such Series of Bonds.
(C)(I) Determination of Weekly Interest Rate. During each Weekly
-------------------------------------
Interest Rate Period, such Series of Bonds shall bear interest at the Weekly
Interest Rate, which shall be determined by the Remarketing Agent not later than
5:00 p.m. (New York City time) on Tuesday of each week (or by 12:00 noon (New
York City time) on the next succeeding Business Day if such Tuesday is not a
Business Day) during such Weekly Interest Rate Period for the week commencing on
that next succeeding Wednesday (unless such Weekly Interest Rate is determined
on a Wednesday in which case it shall be effective on such day); provided,
however, that if the then current Interest Rate Period is a Term Interest Rate
Period, the Weekly Interest Rate for the
20
<PAGE>
Weekly Interest Rate Period succeeding such Term Interest Rate Period shall be
determined not later than the Business Day next preceding the effective date of
such Weekly Interest Rate Period. The Weekly Interest Rate shall be the rate
determined by the Remarketing Agent (on the basis of examination of obligations
comparable to such Series of Bonds known by the Remarketing Agent to have been
priced or traded under then prevailing market conditions) to be the minimum
interest rate which, if borne by such Series of Bonds, would enable the
Remarketing Agent to sell such Series of Bonds on such day at a price equal to
the principal amount thereof plus accrued interest; provided, however, that if
for any reason the Weekly Interest Rate cannot be determined, the Weekly
Interest Rate for the next succeeding week shall remain at the then-existing
rate, and thereafter the Weekly Interest Rate shall be a percentage per annum
equal to the Variable Index. The first Weekly Interest Rate determined for each
Weekly Interest Rate Period shall apply to the period commencing on the first
day of such Weekly Interest Rate Period and ending on the next succeeding
Tuesday. Thereafter, each Weekly Interest Rate shall apply to the period
commencing on Wednesday and ending on the next succeeding Tuesday, unless such
Weekly Interest Rate Period shall end on a day other than Tuesday, in which
event the last Weekly Interest Rate for such Weekly Interest Rate Period shall
apply to the period commencing on the Wednesday preceding the last day of such
Weekly Interest Rate Period and ending on such last day.
(II) Adjustment to Weekly Interest Rate Period. The Borrower, by written
-----------------------------------------
direction to the Trustee and the Remarketing Agent, and with the written consent
of the Bank and accompanied by an Approving Opinion, may elect to adjust the
Interest Rate Period for any Series of Bonds to a Weekly Interest Rate Period.
Such direction shall specify the effective date of such adjustment to a Weekly
Interest Rate Period, which shall be (a) the Interest Payment Date which is the
day next succeeding the last day of the then current Term Interest Rate Period
(or the Business Day next succeeding such Interest Payment Date if the
adjustment is from a Term Interest Rate Period of one year or more and such
Interest Payment Date is not a Business Day) not less than 40 days following the
date of receipt by the Trustee of such direction, or (b) any date on which such
Series of Bonds may be optionally redeemed pursuant to Section 4.03 not less
than 40 days following the date of receipt by the Trustee of such direction.
(III) Notice of Adjustment to Weekly Interest Rate Period. The Trustee
---------------------------------------------------
shall give notice by first class mail of an adjustment to a Weekly Interest Rate
Period to the Bondholders of such Series of Bonds, the Bank, the Remarketing
Agent and the Borrower not less than 35 days prior to the effective date of such
Weekly Interest Rate Period. Such notice shall state (1) that the interest rate
on such Series of Bonds will be adjusted to a Weekly Interest Rate, (2) the
effective date of such Weekly Interest Rate Period, (3) the day by which the
Weekly Interest Rate shall be determined and the manner by which such Weekly
Interest Rate may be obtained, (4) the Interest Payment Dates after such
effective date, (5) that such Series of Bonds will be purchased on such
effective date pursuant to Section 4.06 hereof, (6) the procedures for such
purchase as provided in (5) above, (7) that, subsequent to such effective date,
the Bondholders of such Series of Bonds or the Direct Participants will have the
right to demand purchase of such Series of Bonds upon not less than seven days'
notice, (8) the procedures for a demand for purchase as provided in (7) above,
(9) the redemption provisions that will pertain to such Series of Bonds during
such Weekly Interest Rate Period, and (10) the ratings which are expected to be
assigned to such Series of Bonds on such date and whether ratings will be
reduced or withdrawn. If at the time of such notice, the Interest Rate Period
for such Series of Bonds shall
21
<PAGE>
be a Term Interest Rate Period of one year or more, such notice also shall state
that all or that portion of such Series of Bonds not in Authorized Denominations
on the effective date of such Weekly Interest Rate Period will be purchased as
provided in Section 4.06 hereof.
(D)(I) Determination of Term Interest Rate. During each Term Interest
-----------------------------------
Rate Period, such Series of Bonds shall bear interest at the Term Interest Rate,
which shall be determined by the Remarketing Agent not later than 4:00 p.m. (New
York City time) on the Business Day preceding the first day of such Term
Interest Rate Period. The Term Interest Rate shall be the rate determined by the
Remarketing Agent (on the basis of examination of obligations comparable to such
Series of Bonds known to the Remarketing Agent to have been priced or traded
under then prevailing market conditions) to be the minimum interest rate which,
if borne by such Series of Bonds, would enable the Remarketing Agent to sell
such Series of Bonds on such Business Day at a price equal to the principal
amount thereof; provided, however, that if for any reason the Term Interest Rate
cannot be determined for any Term Interest Rate Period, the interest rate on
such Series of Bonds shall convert to a Weekly Interest Rate.
(II) Adjustment to Term Interest Rate Period. The Borrower, by written
---------------------------------------
direction to the Trustee and the Remarketing Agent, and with the written consent
of the Authority and the Bank and accompanied by an Approving Opinion, may elect
that the Interest Rate Period for any Series of Bonds shall be a Term Interest
Rate Period, and shall determine the duration the Term Interest Rate Period
(which may be any period of one month, three months, six months, nine months,
one year, or any multiple of six months above one year, up to and including the
period of time remaining to the maturity of such Series of Bonds). Such
direction (a) shall specify the effective date of such Term Interest Rate Period
which shall be (1) an Interest Payment Date not less than 40 days following the
date of receipt by the Trustee of such direction, (2) the Interest Payment Date
which is the day next succeeding the last day of the then-current Term Interest
Rate Period (or the Business Day next succeeding such Interest Payment Date if
the adjustment is from a Term Interest Rate Period of one year or more and such
Interest Payment Date is not a Business Day) not less than 40 days following the
date of receipt by the Trustee of such direction, or (3) any date on which such
Series of Bonds may be optionally redeemed pursuant to Section 4.01 not less
than 40 days following the date of receipt by the Trustee of such direction; (b)
shall specify the last day thereof; and (c) shall specify, if the then current
Interest Rate Period is a Weekly Interest Rate Period or a Term Interest Rate
Period of a different duration than the succeeding Term Interest Rate Period,
the effective date pursuant to Section 4.06 hereof by which such Series of Bonds
shall be purchased. If, at least 40 days prior to the last day of any Term
Interest Rate Period, the Borrower shall not have elected that such Series of
Bonds bear interest at a Weekly Interest Rate or a Term Interest Rate during the
next succeeding Interest Rate Period, the next succeeding Interest Rate Period
shall be a Term Interest Rate Period of the same duration as the immediately
preceding Term Interest Rate Period. Notwithstanding anything else provided in
this Section 2.03(D)(II), the Borrower shall not adjust to a Term Interest Rate
Period unless (a) the Letter of Credit has been modified to provide interest
coverage sufficient to maintain the rating on such Series of Bonds; provided,
however, that no Letter of Credit shall be required if the Borrower furnishes to
the Trustee not less than 40 days prior to the last day of any Term Interest
Rate Period either (1) written evidence from each rating agency then rating such
Series of Bonds that effective upon the commencement of the immediately
succeeding Term Interest Rate Period that, if such Series of Bonds then have a
long-term rating, that such Bonds
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will be rated Fitch "A+" (or equivalent) or higher or if such Bonds only have a
short-term rating, will be in the highest short-term rating category (without
regard to "+"'s or "-"'s); or (2) written consent of the Authority, and (b)
receipt by the Trustee and the Authority prior to the effective date of the Term
Interest Rate Period of a continuing disclosure agreement imposing obligations
upon the Borrower or any other responsible party to comply with the requirements
of S.E.C. Rule 15c2-12 as it may from time to time be amended or supplemented,
with respect to the Bonds; provided, however, that no continuing disclosure
agreement shall be required if (1) the duration of the Term Interest Rate Period
is less than one year and (2) such series of Bonds bearing interest at the Term
Interest Rate are in denominations of $100,000 or any integral multiple of
$5,000 in excess thereof.
(III) Notice of Adjustment to Term Interest Rate Period. The
-------------------------------------------------
Trustee shall give notice by first class mail of each Term Interest Rate Period
to the Bondholders of such Series of Bonds, the Bank and the Borrower not less
than 30 days prior to the effective date of such Term Interest Rate Period.
Such notice shall state (1) that the interest rate on such Series of Bonds will
be adjusted to or continue to be a Term Interest Rate, (2) the effective date of
such Term Interest Rate Period, (3) the day by which the Term Interest Rate for
such Term Interest Rate Period shall be determined, (4) the manner by which such
Term Interest Rate may be obtained, (5) the Interest Payment Dates after such
effective date, (6) if the then current Interest Rate Period is a Weekly
Interest Rate Period or a Term Interest Rate Period of a different duration than
the succeeding Term Interest Rate Period, that such Series of Bonds shall be
purchased on such effective date pursuant to Section 4.06 hereof, (7) the
procedures of such purchase, (8) the redemption provisions that will pertain to
such Series of Bonds during such Term Interest Rate Period, and (9) the ratings
which are expected to be assigned to such Series of Bonds on such date, whether
a Letter of Credit will be in effect and whether ratings will be reduced or
withdrawn.
(E) The determination of the interest rate on each Series of the Bonds
by the Remarketing Agent shall be conclusive and binding upon the Bondholders of
such Bonds, the Authority, the Tender Agent, the Bank, and the Trustee.
The 1997A Bonds shall be subject to redemption and purchase as provided
in Sections 4.01 and 4.06 hereof.
SECTION 2.04. Demand Purchase of Bonds. (A) Purchase of any Series
------------------------ ----------------------
of Bonds During Weekly Interest Rate Period. During any Weekly Interest Rate
- -------------------------------------------
Period, any Series of Bonds or portions thereof in Authorized Denominations
shall be purchased at the option of the Bondholder thereof, or with respect to
Book-Entry Bonds, at the option of the Direct Participant with an ownership
interest in Book-Entry Bonds, on any Business Day, at a price of 100% of the
principal amount thereof, plus accrued interest to the Purchase Date, upon (i)
delivery to the Trustee, if such Series of Bonds are Book-Entry Bonds, or
otherwise to the Tender Agent, at its Corporate Trust Office of an irrevocable
notice in writing (a "Tender Notice") by 5:00 p.m. (New York City time) on any
Business Day, which states the name of the Bondholder of such Bond or the Direct
Participant for such Bond, as applicable, such Direct Participant's account
number, payment instructions with respect to the Purchase Price of such Bond,
the principal amount, CUSIP number and Series of such Bond and the date on which
the same shall be purchased, which date shall be a Business Day not prior to the
seventh day next succeeding the date of the
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delivery of such notice to the Tender Agent, and (ii) (a) if such Series of
Bonds are not Book-Entry Bonds, delivery of such Bond to the Tender Agent at its
Corporate Trust Office, accompanied by an instrument of transfer thereof, in
form satisfactory to the Tender Agent, executed in blank by the Bondholder
thereof with the signature guaranteed in accordance with the guidelines set
forth by one of the nationally recognized medallion signature programs at or
prior to 12:30 p.m. (New York City time), on the date specified in such notice,
or (b) if such Series of Bonds are Book-Entry Bonds, upon confirmation by DTC
that a Direct Participant with respect to Book-Entry Bonds being purchased
pursuant to this Section 2.04 has an ownership interest in such Book-Entry Bond
at least equal to the amount specified in such Tender Notice, the transfer, on
the registration books of DTC, of the beneficial ownership interest in such
Book-Entry Bond tendered for purchase to the account of the Trustee, or to the
account of a Direct Participant acting on behalf of the Trustee.
(B) If moneys sufficient to pay the Purchase Price of any Series of
Bonds to be purchased pursuant to Section 2.04(A) hereof shall be held by the
Trustee on the date such Bonds are to be purchased, any such Bonds to be so
purchased which are not delivered by the Bondholders thereof to the Tender Agent
or transferred on the registration books of DTC, as applicable, on the date
specified for purchase thereof will be deemed to have been delivered for
purchase, or transferred on the registration books of DTC, as applicable, on
such date and to have been purchased. The former Bondholders of such Bonds, or
Direct Participants with respect to Book-Entry Bonds, will thereafter have no
rights with respect to such Bonds except to receive payment of the Purchase
Price therefor upon surrender of such Bonds to the Tender Agent or the transfer,
on the registration books of DTC, of the beneficial interest in such Book-Entry
Bonds.
SECTION 2.05. Execution of Bonds. The Bonds shall be executed in
------------------
the name and on behalf of the Authority with the manual or facsimile signature
of its Chairman, under its seal attested by the manual or facsimile signature of
its Executive Director or Deputy Executive Secretary. Such seal may be in the
form of a facsimile of the Authority's seal and may be reproduced, imprinted or
impressed on the Bonds. The Bonds shall then be delivered to the Trustee for
authentication by it. In case any of the officers who shall have signed or
attested any of the Bonds shall cease to be such officer or officers of the
Authority before the Bonds so signed or attested shall have been authenticated
or delivered by the Trustee or issued by the Authority, such Bonds may
nevertheless be authenticated, delivered and issued and, upon such
authentication, delivery and issue, shall be as binding upon the Authority as
though those who signed and attested the same had continued to be such officers
of the Authority, and also any Bonds may be signed and attested on behalf of the
Authority by such persons as at the actual date of execution of such Bonds shall
be the proper officers of the Authority although at the nominal date of such
Bonds any such person shall not have been such officer of the Authority.
Only such of the Bonds as shall bear thereon a certificate of
authentication substantially in the form set forth in Exhibit A, with the manual
or facsimile signature of the Trustee or the Tender Agent as authenticating
agent, shall be valid or obligatory for any purpose or entitled to the benefits
of this Indenture, and such certificate of the Trustee or Tender Agent shall be
conclusive evidence that the Bonds so authenticated have been duly executed,
authenticated and delivered hereunder and are entitled to the benefits of this
Indenture.
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SECTION 2.06. Transfer of Bonds. Any Bond may, in accordance with its
-----------------
terms, be transferred, upon the books required to be kept pursuant to the
provisions of Section 2.08 hereof, by the person in whose name it is registered,
in person or by its duly authorized attorney, upon surrender of such registered
Bond for cancellation, accompanied by delivery of a written instrument of
transfer, duly executed in a form acceptable to the Trustee. Transfer of a Bond
shall not be permitted by the Trustee during the period Bonds are selected for
redemption or after the Record Date prior to the next succeeding Interest
Payment Date.
Whenever any Bond or Bonds shall be surrendered for transfer, the
Authority shall execute and the Trustee shall authenticate and deliver a new
Bond or Bonds for a like aggregate principal amount and Series in Authorized
Denominations. The Trustee shall require the Bondholder requesting such transfer
to pay any tax or other governmental charge required to be paid with respect to
such transfer. The cost of printing Bonds and any services rendered or expenses
incurred by the Trustee in connection with any such transfer shall be paid by
the Borrower.
SECTION 2.07. Exchange of Bonds. Bonds may be exchanged at the
-----------------
Corporate Trust Office of the Trustee for a like aggregate principal amount and
Series of Bonds of other Authorized Denominations. The Trustee shall require the
Bondholder requesting such exchange to pay any tax or other governmental charge
required to be paid with respect to such exchange. The cost of printing Bonds
and any services rendered or expenses incurred by the Authority or the Trustee
in connection with any such exchange shall be paid by the Borrower.
SECTION 2.08. Bond Register. The Trustee will keep or cause to be kept
-------------
at its Corporate Trust Office sufficient books for the registration and transfer
of the Bonds, which shall at all times be open to inspection during regular
business hours by the Authority upon reasonable notice; and, upon presentation
for such purpose, the Trustee shall, under such reasonable regulations as it may
prescribe, register or transfer or cause to be registered or transferred, on
such books, Bonds as hereinbefore provided.
SECTION 2.09. Temporary Bonds. The Bonds may be issued in temporary
---------------
form exchangeable for definitive Bonds when ready for delivery. Any temporary
Bond may be printed, lithographed or typewritten, shall be in an Authorized
Denomination, shall be in fully registered form without coupons and may contain
such reference to any of the provisions of this Indenture as may be appropriate.
Every temporary Bond shall be executed by the Authority and be authenticated by
the Trustee upon the same conditions and in substantially the same manner as the
definitive Bonds. If the Authority issues temporary Bonds it will execute and
deliver definitive Bonds as promptly thereafter as practicable, and thereupon
the temporary Bonds may be surrendered, for cancellation, in exchange therefor
at the Corporate Trust Office of the Trustee and the Trustee shall authenticate
and deliver in exchange for such temporary Bonds an equal aggregate principal
amount of definitive Bonds of like Series in Authorized Denominations. Until so
exchanged, the temporary Bonds shall be entitled to the same benefits under this
Indenture as definitive Bonds authenticated and delivered hereunder.
SECTION 2.10. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond
------------------------------------------
shall become mutilated, the Authority, at the expense of the Holder of said
Bond, shall execute,
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and the Trustee shall thereupon authenticate and deliver, a new Bond of like
tenor and Series in exchange and substitution for the Bond so mutilated, but
only upon surrender to the Trustee of the Bond so mutilated. Every mutilated
Bond so surrendered to the Trustee shall be canceled by it and upon request
delivered to the Authority. If any Bond shall be lost, destroyed or stolen,
evidence of such loss, destruction or theft may be submitted to the Authority
and the Trustee and, if such evidence be satisfactory to both and indemnity
satisfactory to them shall be given, the Authority, at the expense of the
Holder, shall execute, and the Trustee shall thereupon authenticate and deliver,
a new Bond of like tenor and Series in lieu of and in substitution for the Bond
so lost, destroyed or stolen (or if any such Bond shall have matured, instead of
issuing a substitute Bond, the Trustee may pay the same without surrender
thereof upon receipt of indemnity satisfactory to the Trustee). The Authority
may require payment by the Holder of a sum not exceeding the actual cost of
preparing each new Bond issued under this Section and of the expenses which may
be incurred by the Authority and the Trustee in the premises. Any Bond issued
under the provisions of this Section in lieu of any Bond alleged to be lost,
destroyed or stolen shall constitute an original additional contractual
obligation on the part of the Authority whether or not the Bond so alleged to be
lost, destroyed or stolen be at any time enforceable by anyone, and shall be
entitled to the benefits of this Indenture with all other Bonds secured by this
Indenture.
SECTION 2.11. Book-Entry Only System. (A) Except as otherwise
----------------------
provided in subsections (B) and (C) of this Section 2.11 or as otherwise
provided in a Supplemental Indenture, the Bonds initially authenticated and
delivered hereunder shall be registered in the name of Cede & Co., as nominee of
DTC, New York, New York or such other nominee as DTC shall request. Payments of
interest on, principal of and any premium on, and the purchase price of, the
Bonds shall be made to the account of Cede & Co. on each payment date for
principal or interest or purchase price on the Bonds at the address indicated
for Cede & Co. in the registration books maintained by the Bond Registrar by
transfer of immediately available funds. DTC has represented to the Authority
that it will maintain a book-entry system in recording ownership interests of
the Direct Participants and the ownership interests of Beneficial Owners will be
recorded through book entries on the records of the Direct Participants.
(B) The Bonds shall be initially issued in the form of a separate
single authenticated fully registered Bond in the amount of each separate stated
maturity and Series. With respect to Bonds so registered in the name of Cede &
Co., the Authority, the Trustee and the Tender Agent shall have no
responsibility or obligation to any Direct Participant (with the exception of
the right of Direct Participants to demand purchase of Bonds pursuant to Section
2.04 hereof) or to any Beneficial Owner of such Bonds. Without limiting the
immediately preceding sentence, the Authority, the Trustee and the Tender Agent
shall have no responsibility or obligation with respect to (i) the accuracy of
the records of DTC, Cede & Co. or any Direct Participant with respect to any
beneficial ownership interest in the Bonds, (ii) the delivery to any Direct
Participant, Beneficial Owner or other person, other than DTC, of any notice
with respect to the Bonds, including any notice of redemption, (iii) the payment
to any Direct Participant, Beneficial Owner or other person, other than DTC, of
any amount with respect to the principal or redemption price of, or interest on,
the Bonds or (iv) any consent given or other action taken by DTC as Holder of
the Bonds. The Authority, the Trustee and the Tender Agent may treat DTC as, and
deem DTC to be, the absolute Holder of each Bond for all purposes whatsoever
(with the
26
<PAGE>
exception of the right of Direct Participants to demand purchase of Bonds
pursuant to Section 2.04 hereof) including (but not limited to) (i) payment of
the principal or redemption price of, and interest on, each such Bond, (ii)
giving notices of conversion or redemption and other matters with respect to
such Bonds and (iii) registering transfers with respect to such Bonds. The
Trustee shall pay the principal or redemption price of, and interest on, all
Bonds only to or upon the order of DTC, and all such payments shall be valid and
effective to fully satisfy and discharge the Authority's obligations with
respect to such principal or redemption price, and interest, to the extent of
the sum or sums so paid. No person other than DTC shall receive a Bond
evidencing the obligation of the Authority to make payments of principal or
redemption price of, and interest on, the Bonds pursuant to this Indenture. Upon
delivery by DTC to the Trustee of written notice to the effect that DTC has
determined to substitute a new nominee in place of Cede & Co., and subject to
the transfer provisions hereof, the word "Cede & Co." in this Indenture shall
refer to such new nominee of DTC.
(C) (1) DTC may determine to discontinue providing its services with
respect to the Bonds at any time by giving reasonable written notice to the
Authority, the Trustee and the Tender Agent and discharging its
responsibilities with respect thereto under applicable law.
(2) The Authority, in its sole discretion and without the consent
of any other person, may terminate, upon provision of notice to the Trustee
and Tender Agent, the services of DTC with respect to the Bonds if the
Authority determines that the continuation of the system of book-entry only
transfers through DTC (or a successor securities depository) is not in the
best interests of the Beneficial Owners of the Bonds or is burdensome to the
Authority.
(3) The Authority shall terminate the services of DTC with respect
to the Bonds upon receipt by the Authority, the Trustee and the Tender Agent
of written notice from DTC to the effect that DTC has received written
notice from Direct Participants having interests, as shown in the records of
DTC, in an aggregate principal amount of not less than fifty percent (50%)
of the aggregate principal amount of the then Outstanding Bonds to the
effect, that: (i) DTC is unable to discharge its responsibilities with
respect to such Bonds, or (ii) a continuation of the requirement that all of
the Outstanding Bonds be registered in the registration books kept by the
Trustee in the name of Cede & Co., as nominee of DTC, is not in the best
interest of the Beneficial Owners of such Bonds.
(D) Upon the termination of the services of DTC with respect to the
Bonds pursuant to subsection (C)(3)(ii) hereof, or upon the discontinuance or
termination of the services of DTC with respect to the Bonds pursuant to
subsection (C)(1), (C)(2) or subsection (C)(3)(i) hereof after which no
substitute Securities Depository willing to undertake the functions of DTC
hereunder can be found or which, in the opinion of the Authority, is willing and
able to undertake such functions upon reasonable and customary terms, the Bonds
shall no longer be restricted to being registered in the registration books kept
by the Trustee in the name of Cede & Co. as nominee of DTC. In such event, the
Authority shall issue and the Trustee shall transfer and exchange Bond
certificates as requested by DTC or Direct Participants of like principal
amount,
27
<PAGE>
Series and maturity, in Authorized Denominations to the identifiable Beneficial
Owners in replacement of such Beneficial Owners' beneficial interests in the
Bonds.
(E) Notwithstanding any other provision of this Indenture to the
contrary, so long as any Bond is registered in the name of Cede & Co., as
nominee of DTC, all payments with respect to the principal or redemption price
of, and interest on, such Bond and all notices with respect to such Bond shall
be made and given, respectively, to DTC as provided in the letter of
representations of the Authority and the Trustee, addressed to DTC with respect
to the Bonds (the "DTC Letter of Representations").
(F) In connection with any notice or other communication to be provided
to Bondholders pursuant to this Indenture by the Authority, the Tender Agent or
the Trustee with respect to any consent or other action to be taken by
Bondholders, the Authority, the Tender Agent or the Trustee, as the case may be,
shall establish a record date for such consent or other action and give DTC
notice of such record date not less than fifteen (15) calendar days in advance
of such record date to the extent possible.
(G) Notwithstanding any provision herein to the contrary, the Authority
and the Trustee may agree to allow DTC, or its nominee, Cede & Co., to make a
notation on any Bond redeemed in part to reflect, for informational purposes
only, the principal amount and date of any such redemption.
(H) Notwithstanding any provision herein to the contrary, so long as
the Bonds are subject to a system of book-entry only transfers pursuant to this
Section, any requirement for the delivery of Bonds to the Tender Agent in
connection with a mandatory tender pursuant to Section 4.06 hereof shall be
deemed satisfied upon the transfer, on the registration books of DTC, of the
beneficial ownership interests in such Bonds tendered for purchase to the
account of the Trustee, or a Direct Participant acting on behalf of such
Trustee.
SECTION 2.12. Conditions for the Issuance of Additional Bonds. The
-----------------------------------------------
Authority may at any time issue Additional Bonds payable from the Revenues as
provided herein and secured by a pledge of and charge and lien upon the Revenues
as provided herein equal to the pledge, charge and lien securing the Outstanding
Bonds theretofore issued hereunder, but only subject to the following specific
conditions, which are hereby made conditions precedent to the issuance of any
such Additional Bonds:
(A) The Authority shall be in compliance with all agreements and
covenants contained herein.
(B) The issuance of such Additional Bonds shall have been authorized
pursuant to the Act and shall have been provided for by Supplemental Indenture
which shall specify the following:
(1) The purpose for which such Additional Bonds are to be issued;
provided that such Additional Bonds shall be applied solely for the
purpose of (i) financing the substitutions, additions, modifications or
improvements to the
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Project, including payment of all costs incidental to or connected with
such financing, (ii) financing other facilities within the State which
qualify as a "project" under the Act and/or (iii) refunding any Bonds
then Outstanding, including payment of all costs incidental to or
connected with such refunding;
(2) The authorized principal amount and designation of such
Additional Bonds;
(3) The date and the maturity dates of and the sinking installment
payment dates, if any, for such Additional Bonds; provided that (i) for
any Additional Bonds bearing interest at a Term Interest Rate of one
year or more, each maturity date shall fall upon June 1 or December 1,
(ii) all such Additional Bonds of like maturity shall be identical in
all respects, except as to number and denomination, and (iii) serial
maturities for serial bonds or sinking installment payments for term
bonds, or any combination thereof, shall be established to provide for
the retirement of such Additional Bonds on or before their respective
maturity dates;
(4) The interest payment date for such Additional Bonds; provided
that the interest payment dates for any Additional Bonds bearing
interest at a Term Interest Rate of one year or more shall be on June 1
or December 1 in each year;
(5) The denomination or denominations of and method of numbering
such Additional Bonds;
(6) The redemption premiums, if any, and the redemption terms, if
any, for such Additional Bonds;
(7) The amount, if any, to be deposited from the proceeds of sale
of such Additional Bonds in the Interest Account hereinafter referred
to;
(8) The amount, if any, to be deposited from the proceeds of sale
of such Additional Bonds in the Construction Fund;
(9) The forms of such Additional Bonds; and
(10) Such other provisions as are necessary or appropriate and not
inconsistent herewith.
(C) The Loan Agreement shall have been amended so as to increase the
Loan Repayments by an amount at least sufficient to pay the interest on,
principal and premium, if any, of such Additional Bonds as the same become due.
(D) The issuance by a Bank of a Letter of Credit or the delivery of an
Alternate Credit Facility enhancing such Additional Bonds.
29
<PAGE>
SECTION 2.13. Procedure for the Issuance of Additional Bonds. At any
----------------------------------------------
time after the sale of any Additional Bonds in accordance with the Act, the
Authority shall execute such Additional Bonds for issuance hereunder and shall
deliver them to the Trustee, and thereupon such Additional Bonds shall be
authenticated and delivered by the Trustee to the purchaser thereof upon the
written request of the Authority, but only upon receipt by the Trustee of the
following documents or money or securities, all of such documents dated or
certified, as the case may be, as of the Date of Delivery of such Additional
Bonds by the Trustee (unless the Authority shall direct the Trustee to accept
any of such documents bearing a prior date):
(A) A certified copy of the Supplemental Indenture authorizing the
issuance of such Additional Bonds;
(B) A written request of the Authority as to the delivery of such
Additional Bonds;
(C) An Opinion of Bond Counsel to the effect that (1) the Authority has
the right and power under the Act to execute and deliver the Supplemental
Indenture and the Supplemental Indenture has been duly and lawfully executed and
delivered by the Authority, is in full force and effect and is valid and binding
upon the Authority (except as enforcement may be limited by bankruptcy,
insolvency, reorganization and other similar laws relating to the enforcement of
creditors' rights and by equitable principles), (2) the Supplemental Indenture
creates the valid pledge of and charge and lien upon the Revenues which it
purports to create as provided therein, subject to the application thereof to
the purposes and on the conditions permitted hereby, (3) such Additional Bonds
are valid and binding special obligations of the Authority (except as
enforcement may be limited by bankruptcy, insolvency, reorganization and other
similar laws relating to the enforcement of creditors' rights and by equitable
principles) and entitled to the benefits of the Act and hereof, and such
Additional Bonds have been duly and validly authorized, executed, issued and
delivered in accordance with the Act and herewith, (4) the amendments to the
Loan Agreement, required by Section 2.12(C) hereof have been duly authorized,
executed and delivered, and (5) the delivery of such Additional Bonds will not
have an adverse effect on the exclusion from gross income for federal income tax
purposes of the interest on the Bonds;
(D) A Certificate of the Authority containing such statements as may be
reasonably necessary, as determined by Bond Counsel, to show compliance with the
conditions for the issuance of such Additional Bonds contained herein;
(E) The issuance by a Bank of a Letter of Credit or the delivery of an
Alternate Credit Facility enhancing such Additional Bonds; and
(F) Such further documents, money or securities as are required by the
provisions of the Supplemental Indenture providing for the issuance of such
Additional Bonds.
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ARTICLE III
ISSUANCE OF 1997A BONDS; APPLICATION OF PROCEEDS
SECTION 3.01. Issuance of the 1997A Bonds. At any time after the
---------------------------
execution and delivery of this Indenture or from time to time thereafter, upon
the execution of the 1997A Bonds by the Authority and delivery thereof to the
Trustee, as hereinabove provided, and without any further action on the part of
the Authority, the Trustee shall authenticate upon request of the Authority, and
deliver the 1997A Bonds in an aggregate principal amount not exceeding
$9,500,000.
SECTION 3.02. Application of Proceeds of 1997A Bonds. Application of
--------------------------------------
Proceeds of 1997A Bonds. The proceeds received by the Authority from the sale of
the 1997A Bonds shall be deposited with the Trustee, who shall forthwith deposit
$190,000 of such proceeds into the Proceeds Subaccount of the 1997A Costs of
Issuance Account of the Costs of Issuance Fund, which Costs of Issuance Fund the
Trustee shall establish and maintain as further provided in Section 3.04 hereof.
The balance of such proceeds ($9,310,000) shall be deposited by the Trustee into
the 1997A Construction Account of the Construction Fund which Construction Fund
the Trustee shall establish and maintain as further provided in Section 3.03
hereof.
SECTION 3.03. Construction Fund. The Trustee shall establish the
-----------------
Construction Fund (the "Construction Fund") and an account within such fund to
be designated the "1997A Construction Account" (the "1997A Construction
Account"). The Trustee shall also create a separate account in the Construction
Fund for each Series of Bonds for which proceeds of such Bonds will be applied
to the payment of the Costs of the Project. The moneys in the Construction Fund
shall be held by the Trustee in trust and applied to the payment of the Costs of
the Project.
Before each payment is made from the Construction Fund (including any
account established therein) by the Trustee, there shall be filed with the
Trustee a requisition conforming with the requirements of this Section and
Section 3.2 of the Agreement, and in the form attached hereto as Exhibit C,
stating with respect to each payment to be made:
(1) the requisition number;
(2) the name and address of the person to whom payment is due;
(3) the purpose for which such payment is to be made;
(4) the amount to be paid;
(5) that each obligation mentioned therein has been properly
incurred and is a proper charge against the Construction Fund;
(6) that none of the items for which payment is requested has
been previously reimbursed from the Construction Fund;
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(7) that each item for which payment is requested is or was
necessary in connection with the acquisition, construction,
installation, rehabilitation or financing of the Project; and
(8) that at least 97.0% of the amount requisitioned, together
with all amounts requisitioned to date, have in the aggregate been used
to pay for or to reimburse the Borrower for expenditures properly
allocable to Costs of the Project pursuant to the Tax Certificate
(excluding Costs of Issuance).
Each such requisition shall be sufficient evidence to the Trustee of the
facts stated therein and the Trustee shall have no duty to confirm the accuracy
of such facts. Upon receipt of each such requisition, signed by an Authorized
Representative of the Borrower and an Authorized Representative of the Bank, the
Trustee shall pay the amount set forth therein as directed by the terms thereof.
Upon the receipt by the Trustee of a certificate conforming with the
requirements of Section 3.3 of the Agreement, and after payment of costs payable
from the Construction Fund or provision having been made for payment of such
costs not yet due by retaining such costs in the Construction Fund or otherwise
as directed in such certificate, the Trustee shall transfer any remaining
balance in the Construction Fund into a separate account within the Revenue
Fund, which the Trustee shall establish and hold in trust, and which shall be
entitled the "Surplus Account." A separate Surplus Account shall be established
for each Series of Bonds. The moneys in any Surplus Account shall be used and
applied (subject to Section 5.03) at the written direction of the Borrower
(unless some other application of such moneys is requested by the Borrower and
would not, in the opinion of Bond Counsel, cause interest on the Bonds to become
no longer Tax-exempt) for the following purposes in the following order: (1)
for transfer to the Bank to pay the redemption price of any Bank Bonds of the
same Series then outstanding; (2) to reimburse the Bank with respect to any draw
on the Letter of Credit made for the redemption of Bonds of the same Series in
Authorized Denominations, to the maximum degree permissible, and at the earliest
possible dates at which the Bonds can be redeemed pursuant to Section 4.01 of
this Indenture; or (3) to redeem Bonds of the same Series in Authorized
Denominations, to the maximum degree permissible, and at the earliest possible
dates at which the Bonds can be redeemed pursuant to Section 4.01 of this
Indenture. Notwithstanding Section 5.05 hereof, the moneys in such Surplus
Account shall be invested at the written instruction of the Borrower at a yield
no higher than the yield on the Outstanding Bonds (unless in the opinion of Bond
Counsel investment at a higher yield would not cause interest on the Bonds to
become no longer Tax-exempt), and all such investment income shall be deposited
in the Surplus Account and expended or reinvested as provided above.
In the event of redemption of all the Bonds of a Series pursuant to
Section 4.01 hereof or an Event of Default which causes acceleration of the
Bonds, any moneys then remaining in the account within the Construction Fund
relating to such Series of Bonds shall be transferred to the related Surplus
Account within the Revenue Fund, and all moneys in the Revenue Fund relating to
such Series of Bonds shall be used to reimburse the Bank for draws on the Letter
of Credit used to redeem Bonds of the same Series or used to redeem Bonds of the
same Series if
32
<PAGE>
there is no Letter of Credit or there is a default under the Letter of Credit.
SECTION 3.04. Costs of Issuance Fund. The Trustee shall establish
----------------------
the Costs of Issuance Fund (the "Costs of Issuance Fund") and an account within
such fund to be designated the "1997A Costs of Issuance Account" (the "1997A
Costs of Issuance Account"). The Trustee shall also create a separate account in
the Costs of Issuance Fund for each Series of the Bonds. The Trustee shall
create separate subaccounts in the 1997A Costs of Issuance Account designated
the "Proceeds Subaccount" and the "Authority Subaccount". The Trustee shall
receive and deposit into the Authority Subaccount such moneys as the Authority
shall transfer to the Trustee for such deposit. The moneys in each account and
subaccount of the Costs of Issuance Fund shall be held by the Trustee in trust
and applied to the payment of Costs of Issuance for the related Series of Bonds,
upon a requisition filed with the Trustee, in the form attached hereto as
Exhibit D, signed by an Authorized Representative of the Borrower and an
Authorized Representative of the Bank, and, in the case of any payments from the
Authority Subaccount, also signed by the Executive Director of the Authority.
All payments from the Costs of Issuance Fund shall be reflected in the Trustee's
regular accounting statements. The Trustee shall send a copy of each requisition
from the Proceeds Subaccount to the Authority. Any amounts remaining in the
related Proceeds Subaccount within the Costs of Issuance Fund six months
following the Date of Delivery of a Series of Bonds shall be transferred to the
related Construction Account for such Series of Bonds, and any amounts remaining
in the Authority Subaccount within the Costs of Issuance Fund six months
following the Date of Delivery of a Series of Bonds shall be transferred to the
Authority.
SECTION 3.05. Validity of Bonds. The validity of the authorization
-----------------
and issuance of the Bonds is not dependent on and shall not be affected in any
way by any proceedings taken by the Authority or the Trustee with respect to or
in connection with the Agreement. The recital contained in the Bonds that the
same are issued pursuant to the Act and the Constitution and laws of the State
of California shall be conclusive evidence of their validity and of compliance
with the provisions of law in their issuance.
ARTICLE IV
REDEMPTION AND PURCHASE OF BONDS
SECTION 4.01. Terms of Redemption of 1997A Bonds. The 1997A Bonds
----------------------------------
are subject to redemption if and to the extent the Borrower is entitled to make
and makes, or is required to make, a prepayment pursuant to Articles IV or VIII
of the Agreement. All such prepayments shall be deposited in the related
Redemption Account. The Authority shall not call the 1997A Bonds for optional
redemption, and the Trustee shall not give notice of any such redemption, unless
the Borrower has so directed and the Trustee has received the Bank's written
consent to such optional redemption in accordance with the Agreement and payment
has been made (or provided for through the Letter of Credit or an Alternate
Credit Facility) of all required installments of the Borrower's obligations
under the Agreement, including without limitation amounts sufficient to pay all
principal of, premium, if any, and interest due on such 1997A Bonds on the
redemption date; provided that the Authority may require such payment under
Section 8.3 of the Agreement.
33
<PAGE>
The 1997A Bonds shall be redeemed in Authorized Denominations (with
Available Moneys if the Letter of Credit enhancing the 1997A Bonds is in effect)
upon the following terms:
(1) Sinking Fund Redemption. Redemption. The 1997A Bonds shall
-----------------------
not be subject to mandatory sinking fund redemptions.
(2) Mandatory Redemption Upon Invalidity or a Determination of
----------------------------------------------------------
Taxability. In the event of a prepayment pursuant to Section 8.3(a) or (b) of
- ----------
the Agreement as a result of invalidity or a Determination of Taxability, 1997A
Bonds Outstanding on the date of the occurrence of the invalidity or
Determination of Taxability shall be redeemed in whole at any time within 30
days thereafter, at a redemption price of 100% of the principal amount thereof,
without premium, plus accrued interest to the date of redemption. No redemption
of 1997A Bonds shall be made pursuant to any of the other provisions of this
Section 4.01 following invalidity or a Determination of Taxability.
(3) Mandatory Redemption Upon Failure to Renew Letter of Credit.
-----------------------------------------------------------
The 1997A Bonds shall be redeemed in whole, at a redemption price equal to 100%
of the principal amount thereof, without premium, plus accrued interest to the
redemption date, in the event that the Letter of Credit enhancing the 1997A
Bonds then in effect is not renewed or a commitment for an Alternate Letter of
Credit or Alternate Credit Facility enhancing the 1997A Bonds is not delivered
to the Trustee at least 60 days prior to the scheduled expiration of the then
current Letter of Credit enhancing the 1997A Bonds, on a redemption date
selected by the Trustee not less than five (5) calendar days preceding the
expiration date of the then current Letter of Credit enhancing the 1997A Bonds.
(4) Optional Redemption Upon Occurrence of Extraordinary Events.
-----------------------------------------------------------
The 1997A Bonds may be redeemed in whole on any date or in part, as described
below, at the option of the Authority on any Interest Payment Date at a
redemption price equal to the principal amount thereof, without premium, plus
accrued interest to the date of redemption, upon receipt by the Trustee of a
written notice from the Borrower or the Bank stating that any of the following
events has occurred:
(i) all of the Project or a portion thereof is damaged, destroyed,
condemned or taken by eminent domain to such extent that, in the opinion of an
independent engineer evidenced by a certificate provided to the Authority and
the Trustee, which opinion may be conclusively relied upon by the Trustee and
the Authority, (1) it is not practicable or desirable to rebuild, repair or
restore the Project or such portion thereof within a period of six consecutive
months following such damage, destruction or condemnation, and the Borrower is
or will be thereby prevented from carrying on its normal operations at the
Project or such portion thereof for a period of at least six consecutive months,
or (2) the cost of restoration of the Project or such portion thereof would
substantially exceed the Net Proceeds of insurance carried thereon; or
(ii) the continued operation of such Project is enjoined or
prevented or is otherwise prohibited by, or conflicts with, any order, decree,
rule or regulation of any court or federal, state or local regulatory body,
administrative agency or other
34
<PAGE>
governmental body.
(5) Optional Redemption during Weekly Interest Rate Period.
------------------------------------------------------
On any Interest Payment Date during a Weekly Interest Rate Period and on the
effective date of any Term Interest Rate Period, the 1997A Bonds may be redeemed
by the Trustee, at the option of the Authority upon direction of the Borrower as
provided in Section 8.5 of the Loan Agreement, in whole or in part, at a
redemption price of 100% of the principal amount thereof, without premium, plus
accrued interest to the date of redemption.
(6) Optional Redemption during Term Interest Rate Period. During any
----------------------------------------------------
Term Interest Rate Period, the 1997A Bonds also shall be subject to redemption
in whole or from time to time in part, at the option of the Authority upon
direction of the Borrower as provided in Section 8.5 of the Loan Agreement, at
the times (measured from the first day of the applicable Term Interest Rate
Period), and at the redemption prices (expressed as percentages of principal
amount) set forth below, plus accrued interest, if any, to the redemption date:
<TABLE>
<CAPTION>
(Lesser of Length of Term
Interest Rate Period or
Length of Time to Maturity Redemption Dates and Prices
- ----------------------------- ---------------------------
<C> <S>
Greater than 10 and At any time on or after the 5th anniversary of
less than or equal the effective date commencing such Interest Rate
to 15 years Period at 102% declining 1/2% annually to 100%
Greater than 8 and At any time on or after the 5th anniversary of
less than or equal the effective date commencing such Interest Rate
to 10 years Period at 101 1/2% declining 1/2% annually to
100%
Greater than 6 and At any time on or after the 3rd anniversary of
less than or equal the effective date commencing such Interest Rate
to 8 years Period at 101 1/2% declining 1/2% annually to
100%
Greater than 4 and At any time on or after the 2nd anniversary of
less than or equal the effective date commencing such Interest Rate
to 6 years Period at 101% declining 1/2% annually to 100%
Greater than 3 and At any time on or after the 2nd anniversary of
less than or equal the effective date commencing such Interest Rate
to 4 years Period at 100 1/2% declining 1/2% annually to
100%
Greater than 2 and At any time on or after the 1st anniversary of
less than or equal the effective date commencing such Interest Rate
Period at 100 1/2% declining
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
(Lesser of Length of Term
Interest Rate Period or
Length of Time to Maturity Redemption Dates and Prices
- ----------------------------- ---------------------------
<C> <S>
to 3 years 1/2% annually to 100%
Greater than 1 and At any time on or after the 1st anniversary of
less than or equal the effective date commencing such Interest Rate
to 2 years Period at 100%
Less than or equal On the Interest Payment Date which is six months
to 1 year after the effective date of such Interest Rate
Period at 100%
</TABLE>
SECTION 4.02. Selection of Bonds for Redemption.
---------------------------------
Whenever provision is made in this Indenture for the redemption of less than all
of the Bonds of a Series, the Trustee shall select the Bonds to be redeemed from
all Bonds of a Series or such given portion thereof not previously called for
redemption by lot in any manner which the Trustee in its sole discretion shall
deem appropriate; provided, however, that Bank Bonds shall be the first Bonds
selected for redemption.
SECTION 4.03. Notice of Redemption. (A) Notice of redemption shall
--------------------
be mailed by first class mail not less than thirty (30) days nor more than sixty
(60) days before such redemption date, to the respective Holders of any Bonds
designated for redemption at their addresses on the registration books
maintained by the Bond Registrar. Each notice of redemption shall state the
redemption date, the place or places of redemption, if less than all of the
Bonds are to be redeemed, the distinctive number(s) and Series of the Bonds to
be redeemed, and in the case of Bonds to be redeemed in part only, the
respective portions of the principal amount thereof to be redeemed. Each such
notice shall also state that on said date there will become due and payable on
each of said Bonds the principal thereof or of said specified portion of the
principal thereof in the case of a Bond to be redeemed in part only, and that
from and after such redemption date interest thereon shall cease to accrue, and
shall require that such Bonds be then surrendered. Neither failure to receive
such notice nor any defect therein shall affect the sufficiency of such
redemption.
(B) Notice of redemption of such Series of Bonds shall be given by the
Trustee, at the expense of the Borrower, for and on behalf of the Authority.
(C) At the same time that it sends notice of redemption to Owners of
such Series of Bonds, the Trustee shall also send a copy of the notice by first
class mail, by telecopy or by overnight delivery to the Tender Agent, the Bank,
the Securities Depositories and an Information Service. Failure to provide
notice to the Tender Agent, the Bank, the Securities Depositories or an
Information Service shall not affect the validity of proceedings for the
redemption of such Series of Bonds.
SECTION 4.04. Partial Redemption of Bonds. Upon surrender of any
---------------------------
Bond redeemed in part only, the Authority shall execute and the Trustee shall
authenticate and deliver
36
<PAGE>
to the Owner thereof, at the expense of the Borrower, a new Bond or Bonds of
Authorized Denominations and of like Series equal in aggregate principal amount
to the unredeemed portion of the Bond surrendered.
SECTION 4.05. Effect of Redemption. Notice of redemption having been
--------------------
duly given as aforesaid, and moneys for payment of the redemption price of,
together with interest accrued to the date fixed for redemption on, the Bonds
(or portions thereof) so called for redemption being held by the Trustee, on the
redemption date designated in such notice, the Bonds (or portions thereof) so
called for redemption shall become due and payable, interest on the Bonds so
called for redemption shall cease to accrue, said Bonds (or portions thereof)
shall cease to be entitled to any benefit or security under this Indenture,
except for payment of particular Bonds for which moneys are being held by the
Trustee which moneys shall be pledged to such payment, and the Holders of said
Bonds shall have no rights in respect thereof except to receive payment of said
principal and interest accrued to the date fixed for redemption.
All Bonds redeemed pursuant to the provisions of this Article shall be
canceled upon surrender thereof and shall be destroyed by the Trustee, which
shall thereupon deliver to the Authority a certificate evidencing such
destruction.
SECTION 4.06. Mandatory Tender for Purchase of 1997A Bonds.
--------------------------------------------
(a) (i) On the first day of any change in each Interest Rate
Period, or
(ii) during a Weekly Interest Rate Period, on the effective date
of an Alternate Credit Facility or Alternate Letter of Credit
complying with the requirements of Section 5.7 or 5.8, as
applicable, of the Agreement (each a "Purchase Date"),
the Bondholder or Direct Participant of such 1997A Bond shall tender such 1997A
Bond for purchase as provided below and such 1997A Bond shall be purchased or
deemed purchased as provided in Section 4.07(a)(3) hereof at a Purchase Price
equal to the principal amount thereof plus accrued and unpaid interest thereon.
Subject to Section 4.07(g) hereof, payment of the Purchase Price of such Bond
shall be made by 4:30 p.m. (New York City time) (1:30 p.m. Los Angeles time), in
the same manner as payment of interest on the 1997A Bonds, to the Owner of
record, or Direct Participant with respect to Book-Entry Bonds, on the Record
Date. If the 1997A Bonds are not Book-Entry Bonds, the Holder shall deliver
such Bonds by no later than 12:30 p.m. (New York City time) (9:30 a.m. Los
Angeles time) on the Purchase Date to the Tender Agent at its Corporate Trust
Office, accompanied by an instrument of transfer thereof, in form satisfactory
to the Tender Agent, with the signature guaranteed in accordance with the
guidelines set forth by one of the nationally recognized medallion signature
programs. If the 1997A Bonds are Book-Entry Bonds, the tendering Direct
Participant shall transfer, on the registration books of DTC, the beneficial
ownership interests in such Bonds tendered for purchase to the account of the
Trustee or a Direct Participant acting on behalf of the Trustee.
(b) Any instrument delivered to the Trustee or Tender Agent in
accordance with this Section shall be irrevocable with respect to the mandatory
purchase for which such
37
<PAGE>
instrument was delivered and shall be binding upon any subsequent Bondholder or
Direct Participant of the 1997A Bond to which it relates, including any 1997A
Bond issued in exchange therefor or upon the registration of transfer thereof
and as of the date of such instrument, the Bondholder or Direct Participant of
the 1997A Bonds specified therein shall not have any right to tender for
purchase such 1997A Bonds prior to such Purchase Date.
SECTION 4.07. Purchase and Remarketing of 1997A Bonds.
---------------------------------------
(a) Purchase of 1997A Bonds.
-----------------------
Whenever the 1997A Bonds are Book-Entry Bonds, all references in this
Section 4.07 to the Tender Agent shall instead mean the Trustee, as the context
may require.
(1) As soon as practicable but in any event no later than 12:00 noon
(New York City time) (9:00 a.m. Los Angeles time) on the Business Day after a
tender is received during a Weekly Interest Rate Period, the Tender Agent shall
give telephonic, telegraphic or telecopier notice, promptly confirmed in
writing, to the Trustee and the Remarketing Agent, specifying the principal
amount of 1997A Bonds required to be tendered for purchase in accordance with
Section 4.06 hereof or tendered pursuant to Section 2.04(A) hereof. The Trustee
shall promptly supply the same notice to the Bank.
(2) The Tender Agent shall purchase, but only from the sources listed
below, 1997A Bonds required to be purchased in accordance with Section 4.06
hereof or tendered pursuant to Section 2.04(A) hereof from the Holders thereof
by 4:30 p.m. (New York City time) (1:30 p.m. Los Angeles time) on the date such
Bonds are required to be purchased at the Purchase Price provided in Section
4.06 or Section 2.04(A). Funds for the payment of such Purchase Price shall be
derived from the following sources, at the following times and in the order of
priority indicated below:
(A) from the proceeds of the remarketing of the 1997A Bonds (but
only such remarketing proceeds as are received from purchasers of the
1997A Bonds pursuant to Section 4.07(b) hereof) which have been
furnished to the Tender Agent by no later than 12:00 noon New York City
time on the Purchase Date by the Remarketing Agent; provided, however
that such proceeds shall not have been derived from the Authority or the
Borrower, any Guarantor or any shareholder of the Borrower; and
(B) from moneys which have been furnished to the Tender Agent by
no later than 4:30 p.m. New York City time on the Purchase Date,
representing the proceeds of a draw under the Letter of Credit enhancing
the 1997A Bonds.
(3) The provisions of this Section 4.07(a)(3) shall not apply at any
time the 1997A Bonds are Book-Entry Bonds. With respect to any 1997A Bonds
tendered for purchase or required to be tendered for purchase as to which
sufficient funds to accomplish such purchase are available to the Tender Agent
at the respective times at which payment of the Purchase Price is to be made as
provided herein:
38
<PAGE>
(A) Such 1997A Bonds shall be deemed purchased for all purposes of
this Indenture, irrespective of whether or not such Bonds shall have
been presented to the Tender Agent, and the former Holder or Holders of
such Bonds shall have no claim thereon, under this Indenture or
otherwise for any amount other than the Purchase Price thereof and such
Bonds shall no longer be deemed to be Outstanding for purposes of this
Indenture and the Bond Registrar shall so note on the Bond Register for
the Bonds.
(B) Subject to Section 4.07(g) hereof, in the event that any 1997A
Bonds shall not be presented to the Tender Agent, the Tender Agent shall
segregate and hold the moneys for the Purchase Price of such Bonds in
trust, uninvested, for the benefit of the former Holders of such Bonds,
who shall, except as provided in the following sentences, thereafter be
restricted exclusively to such moneys for the satisfaction of any claim
for the Purchase Price of such Bonds.
(C) In the event that any 1997A Bonds shall not be presented to
the Tender Agent at the time specified in Section 4.06 hereof or Section
2.04(A) hereof (each "Undelivered Bond"), then the Authority shall
execute and deliver to the Tender Agent for authentication a new 1997A
Bond or 1997A Bonds, as the case may be, in an aggregate principal
amount equal to the principal amount of the Undelivered Bonds bearing a
number or numbers not contemporaneously outstanding. Every 1997A Bond
authenticated and delivered as provided in the preceding sentence shall
be entitled to all the benefits of this Indenture equally and
proportionately with any and all other 1997A Bonds duly issued
hereunder. The Tender Agent shall maintain a record of any Undelivered
Bonds, together with the names and addresses of the former Holders
thereof.
(D) In case any 1997A Bonds which have been deemed purchased as
provided in Section 4.07(a)(3)(A) hereof are delivered to the Tender
Agent subsequent to the date and time specified for such delivery for
payment of the Purchase Price thereof at its Corporate Trust Office,
accompanied by an instrument of transfer thereof, in form satisfactory
to the Tender Agent, executed in blank by the Holder thereof with the
signature guaranteed in accordance with the guidelines set forth by one
of the nationally recognized medallion signature programs on any
Business Day, the Tender Agent shall (subject to Section 4.07(g) hereof)
pay the Purchase Price of such 1997A Bond to the Holder no later than
12:00 noon (New York City time) on the next succeeding Business Day. Any
such 1997A Bond so delivered to the Tender Agent shall be canceled and
delivered to the Trustee.
39
<PAGE>
(b) Remarketing of 1997A Bonds; Notice of Interest Rates.
----------------------------------------------------
(1) The Remarketing Agent shall determine the rate of interest to be
borne by the 1997A Bonds as provided in Section 2.03 hereof and shall furnish to
the Trustee, the Bank and the Tender Agent in a timely manner all information
necessary for the Tender Agent and the Trustee to carry out their respective
duties hereunder, including, but not limited to, the interest rates applicable
to all 1997A Bonds.
(2) The Remarketing Agent shall periodically inform the Trustee, the
Bank, and DTC pursuant to the DTC Letter of Representations described in Section
2.11(E) hereof, if so requested, of the rate of interest borne by the 1997A
Bonds from time to time.
(3) The Remarketing Agent shall, pursuant to the Remarketing Agreement,
use its best efforts to sell any 1997A Bonds tendered for purchase to new
purchasers. Not later than 4:00 p.m. (New York City time) (1:00 p.m. Los Angeles
time) on the Business Day before the Purchase Date, the Remarketing Agent shall
notify the Tender Agent, the Trustee and the Bank of (i) the amount of 1997A
Bonds to be purchased on the next day which have been remarketed and the name,
address and taxpayer identification number of the new purchasers and the
denominations with respect to which such remarketed 1997A Bonds are to be
registered and (ii) the amount required to be drawn under the Letter of Credit
to provide sufficient funds to purchase the 1997A Bonds actually tendered or
deemed tendered for which no remarketing proceeds are expected to be available
on the Purchase Date.
(c) Delivery of Remarketed 1997A Bonds.
----------------------------------
(1) The Tender Agent, or the Trustee for Book-Entry Bonds, shall hold
all 1997A Bonds delivered to it in trust for the benefit of the respective
Holders which shall have so delivered such Bonds or for the Direct Participants
who have transferred their interests in the Book-Entry Bonds until moneys
representing the Purchase Price of such Bonds shall have been delivered to or
for the account of or to the order of such Holders or Direct Participants. The
Trustee, for Book-Entry Bonds, or the Tender Agent (or after five days, as
provided in Section 4.07(g), the Trustee) for non-Book-Entry Bonds shall hold
all moneys for the purchase of Bonds in trust and in non-commingled funds for
the benefit of the person or entity which shall have so delivered such moneys
until Bonds purchased with such moneys shall have been delivered to or for the
account of such person or entity. Neither the Authority, the Borrower or any
Guarantor shall have any right, title, or interest in or to any moneys held by
the Trustee, the Tender Agent or the Remarketing Agent or pursuant to Section
4.07(g) hereof. 1997A Bonds purchased with moneys described in Section
4.07(a)(2)(A) or 4.07(a)(2)(B) hereof, including without limitation 1997A Bonds
issued in place of such Bonds pursuant to Section 4.07(a)(3)(C) hereof, shall be
registered as directed by the Trustee (from instructions received from the
Remarketing Agent) and made available to the Remarketing Agent by 12:00 noon
(New York City time) (9 a.m. Los Angeles time) on the date of such purchase or
transferred on the registration books of DTC on the date of such purchase or the
date the ownership interest shall be transferred to the new Direct Participants
on the books of DTC, against payment in immediately available funds or evidence
of immediately available funds in the form of a federal reserve wire number.
40
<PAGE>
(2) 1997A Bonds purchased with moneys obtained by a drawing on the
Letter of Credit (the "Bank Bonds"), including without limitation 1997A Bonds
issued in place of such Bonds pursuant to Section 4.07(a)(3)(C) hereof, shall be
held by the Tender Agent (upon written directions from the Bank) or registered
in the name of the Bank on the registration books of DTC, with respect to Book-
Entry Bonds. The Remarketing Agent shall seek to remarket any Bank Bonds prior
to remarketing any other 1997A Bonds tendered for purchase. The proceeds of any
remarketing of Bank Bonds shall be transferred by the Trustee to the Bank. Upon
receipt by the Trustee of funds representing the proceeds of the remarketing of
Bank Bonds, Bonds in place of such Bank Bonds so purchased shall be made
available for pick-up by the Remarketing Agent for subsequent delivery to the
purchasers thereof, or the ownership interest shall be transferred to the new
Direct Participants on the books of DTC. Prior to or simultaneously with such
delivery, the proceeds of such remarketing shall have been or shall be
transferred to the Bank, and the Trustee and the Tender Agent shall have
received written confirmation from the Bank of the reinstatement of the Letter
of Credit.
(3) In the event that the Remarketing Agent is able to remarket any
1997A Bonds required to be purchased pursuant to Section 4.06 hereof after the
time on which the Remarketing Agent is required to provide notice to the Trustee
as specified in this Section 4.07, the Remarketing Agent shall give notice in
the manner and containing the details set forth in this Section 4.07, as soon as
practicable after such remarketing, but in no event later than 2:00 p.m. (New
York City time) (11:00 a.m. Los Angeles time) on the Purchase Date and the 1997A
Bonds shall be registered in the names of the purchasers thereof and made
available to the Remarketing Agent as soon as practicable thereafter on such
date or the next succeeding Business Day or transferred on the registration
books of DTC to the account of Direct Participants furnished to the Trustee or
Tender Agent, as applicable, by the Remarketing Agent.
(4) If any 1997A Bond is tendered after a notice of redemption for such
Bond has been given, the Remarketing Agent will give the redemption notice to
any purchaser of such 1997A Bond or to DTC if a Book-Entry Bond and the
purchaser (including a Direct Participant) shall acknowledge receipt of such
redemption notice.
(d) Draws Upon the Letter of Credit. The Trustee shall draw on
-------------------------------
the Letter of Credit enhancing the 1997A Bonds in an amount necessary and in
sufficient time (as set forth by the terms of such Letter of Credit) so as to
provide to the Trustee or Tender Agent, as applicable, the balance of the funds
needed to purchase tendered 1997A Bonds, taking into account the remarketing
proceeds received by the Trustee, or Tender Agent, as applicable, in the
Remarketing Agent's notice pursuant to Section 4.07(b)(3) hereof not later than
4:00 p.m. (New York City time) (1:00 p.m. Los Angeles time) on the Business Day
before the Purchase Date. If the Remarketing Agent remarkets 1997A Bonds after
4:00 p.m. (New York City time) (1:00 p.m. Los Angeles time) on the Business Day
before the Purchase Date, the Trustee shall still draw on the Letter of Credit
enhancing the 1997A Bonds in an amount necessary and in sufficient time (as set
forth by the terms of such Letter of Credit) so as to provide the balance of the
funds needed to purchase tendered 1997A Bonds, without taking into account any
remarketing proceeds other than those specified in the Remarketing Agent's
notice pursuant to Section 4.07(b)(3) hereof. The Trustee shall transfer to the
Bank any excess moneys received from a draw on the Letter of Credit
41
<PAGE>
enhancing the 1997A Bonds that are not needed to pay the Purchase Price of the
1997A Bonds on the Purchase Date.
(e) Delivery of Proceeds of Sale. Upon receipt, the proceeds of the
----------------------------
remarketing by the Remarketing Agent of any 1997A Bonds shall be transferred by
the Remarketing Agent to the Trustee or the Tender Agent, as applicable, by
12:00 noon New York City time and such proceeds shall be immediately applied by
the Trustee or Tender Agent, as applicable, to the payment of the Purchase Price
of 1997A Bonds to the Holders or Beneficial Owners thereof pursuant to Section
4.07(a)(2)(A) hereof. The Trustee or the Tender Agent, as applicable, shall make
1997A Bonds available for delivery to the Remarketing Agent which are registered
pursuant to the instructions of the Remarketing Agent or shall direct the
transfer on the registration books of DTC pursuant to the instructions of the
Remarketing Agent or in the case of the remarketing of 1997A Bonds which
constitute Bank Bonds as provided in Section 4.07(c)(2) hereof. In making
payments to the Bank, the Trustee may conclusively assume that the Bank has not
been repaid from any other sources. To the extent that the Bank is repaid with
proceeds of the sale of Bank Bonds by the Remarketing Agent, new 1997A Bonds
shall be registered and delivered (or ownership interests transferred) as
provided in Section 4.07(c)(1) hereof.
(f) No Remarketing After Default. Notwithstanding any other provision
------------------------------
of this Indenture, there shall be no remarketing of 1997A Bonds under Section
4.07(b)(3) after an Event of Default under Article VII hereof.
(g) Unclaimed Moneys. The Tender Agent shall, at the end of
----------------
the fifth Business Day after the Purchase Date, transfer
all funds then held on hand by virtue of the fact that 1997A Bonds deemed
tendered on such date were not presented for purchase to the Tender Agent in
accordance with the provisions of 4.07(a) hereof to the Trustee to be held in a
segregated account for the 1997A Bonds and to hold the same in trust for the
payment of the Purchase Price thereof to the former Holders of such 1997A Bonds
as required by the provisions of Section 4.07(a) hereof. The Trustee shall pay
such Purchase Price from such amounts by check or draft of the Trustee made
payable to the party entitled to such payment as soon as practicable after such
party surrenders the 1997A Bond or Bonds so deemed purchased to the Trustee.
Any such moneys so held in trust by the Trustee shall be held uninvested until
paid to the person entitled thereto or disposed of as provided by law.
(h) Conditions to Remarketing upon Expiration of Letter of Credit.
-------------------------------------------------------------
If a commitment to renew the Letter of Credit enhancing the 1997A Bonds or to
provide an Alternate Letter of Credit or Alternate Credit Facility enhancing the
1997A Bonds shall not be provided prior to the 60th day before the scheduled
expiration date of such Letter of Credit, then the 1997A Bonds shall not be
remarketed after the 15th day prior to such expiration.
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(i) Notices Upon Delivery of Alternate Letter of Credit or Alternate
----------------------------------------------------------------
Credit Facility.
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(1) Whenever the Borrower has delivered to the Trustee a commitment for
the delivery of an Alternate Letter of Credit enhancing the 1997A Bonds pursuant
to Section 5.8 of the Agreement or a commitment for delivery of an Alternate
Credit Facility enhancing the 1997A Bonds pursuant to Section 5.7 of the
Agreement (either such instrument referred to hereafter as the "Alternate
Instrument"), the Trustee shall mail by first class mail a notice to all Holders
of the 1997A Bonds stating: (i) the name of the issuer of the Alternate
Instrument, (ii) the date on which the Alternate Instrument will become
effective, which date shall not be less than five (5) calendar days prior to the
stated expiration date of the existing Letter of Credit enhancing the 1997A
Bonds, (iii) the rating expected to apply to the 1997A Bonds after the Alternate
Instrument is delivered, and (iv) notice that the 1997A Bonds will be subject to
mandatory tender for purchase on the date of delivery of the Alternate
Instrument, and information on where such Bonds are to be delivered. Such notice
shall be mailed at least ten (10) days prior to the effective date of the
Alternate Instrument.
(2) The Trustee shall provide notice to the Authority, each rating
agency then rating the Bonds and the Borrower upon the receipt of any Alternate
Instrument.
(j) Limitations On Purchase of Bonds.
---------------------------------
The Remarketing Agent shall not sell any Bonds to the Authority, the Borrower,
any Guarantor or any shareholder of the Borrower.
SECTION 4.08. Redemption, Mandatory Tender, Purchase and Remarketing
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of Additional Bonds. Additional Bonds shall be subject to redemption, mandatory
- --------------------
tender, purchase and remarketing as provided in a related Supplemental
Indenture.
ARTICLE V
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REVENUES; FUNDS AND ACCOUNTS;
PAYMENT OF PRINCIPAL AND INTEREST
SECTION 5.01. Pledge and Assignment; Revenue Fund. (A) Subject only
-----------------------------------
to the provisions of this Indenture permitting the application thereof for the
purposes and on the terms and conditions set forth herein, all of the Revenues
and any other amounts (including proceeds of the sale of Bonds) held in any fund
or account established pursuant to this Indenture (except the Rebate Fund and
the Authority Subaccount of the Costs of Issuance Fund) are hereby pledged to
secure the full payment of the principal of, premium, if any, and interest on
the Bonds in accordance with their terms and the provisions of this Indenture
and thereafter to secure the Bank to the extent of its interest in such Revenues
and certain other funds or accounts established under this Indenture.
Notwithstanding any other provision of this Indenture, the benefits under any
Letter of Credit or Alternate Credit Facility shall apply only to the Series of
Bonds for which such Letter of Credit or Alternate Credit Facility was issued
and moneys in the account created by Section 4.07(g) hereof shall be held solely
for the benefit of the former holders of 1997A Bonds as provided in Section
4.07(g). Said pledge shall constitute a lien on and security interest in such
assets and shall attach, be perfected and be valid and binding from and after
delivery by the Trustee of the Bonds, without any physical delivery thereof or
further act.
(B) The Authority hereby transfers in trust, and assigns to the
Trustee, for the benefit of the Holders from time to time of the Bonds and the
Bank, to the extent of its interest therein, all of the Revenues and other
assets pledged in subsection (A) of this Section and all of the right, title and
interest of the Authority in the Loan Agreement (except for the right to receive
any Additional Payments to the extent payable to the Authority or the Trustee
under Sections 4.2(b), (c) and (d), 7.3, 9.2 and 9.3 of the Agreement (hereafter
referred to as "Excluded Moneys"), any rights of the Authority or the Trustee to
indemnification and rights of inspection and consent). Such assignment to the
Trustee is solely in its capacity as Trustee under the Indenture, subject to the
protections, immunities and limitations from liability afforded the Trustee
hereunder. The Trustee shall be entitled to and shall collect and receive all of
the Revenues (except Excluded Moneys), and any Revenues collected or received by
the Authority shall be deemed to be held, and to have been collected or
received, by the Authority as the agent of the Trustee and shall forthwith be
paid by the Authority to the Trustee. The Trustee also shall be entitled to and,
subject to the provisions of the Indenture, shall take all steps, actions and
proceedings reasonably necessary in its judgment to enforce, either jointly with
the Authority or separately, all of the rights of the Authority and all of the
obligations of the Borrower under the Loan Agreement.
(C) All Revenues (except Excluded Moneys) shall be promptly deposited
by the Trustee upon receipt thereof in a special fund designated as the Revenue
Fund which the Trustee shall establish, maintain and hold in trust; except as
otherwise provided in Section 5.02 hereof, all moneys received by the Trustee
and required to be deposited in the Redemption Account, including without
limitation, sinking installment payments made by the Borrower pursuant to
Section 4.01 hereof, shall be promptly deposited in the Redemption Account,
which the Trustee shall establish, maintain and hold in trust as provided in
Section 5.02 hereof. All Revenues deposited with the Trustee shall be held,
disbursed, allocated and applied by the Trustee only as provided in this
Indenture.
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(D) On the third Business Day of each June, any amount held by the
Trustee in the Revenue Fund on the due date for a Loan Repayment under the Loan
Agreement shall be credited against the installment due on such date to the
extent available for such purpose under the terms of this Indenture.
SECTION 5.02. Allocation of Revenues. On or before any date on which
----------------------
interest or principal (whether at maturity, or by redemption or acceleration) is
due, the Trustee shall transfer funds from the Revenue Fund and deposit into the
following respective accounts for each Series of Bonds (each of which the
Trustee is hereby directed and agrees to establish and maintain within the
Revenue Fund), the following amounts, in the following order of priority, the
requirements of each such account (including the making up of any deficiencies
in any such account resulting from lack of Revenues sufficient to make any
earlier required deposit) at the time of deposit to be satisfied before any
transfer is made to any account subsequent in priority;
First: to the Interest Account, the aggregate amount of interest
-----
becoming due and payable on the next succeeding Interest Payment Date or date of
redemption of all Bonds then Outstanding, until the balance in said account is
equal to said aggregate amount of interest.
Second: to the Principal Account, the amount paid by the Borrower and
------
designated as or attributable to principal on the Bonds in the most recent Loan
Repayment equal to the aggregate amount of principal due on the Principal
Payment Date, plus the aggregate amount of sinking fund payments, if any,
required to be made pursuant to Section 2.02 hereof.
Third: to the Redemption Account, the aggregate amount of principal and
-----
premium next coming due by acceleration or by redemption permitted or required
under Article IV hereof, or any portion thereof paid by the Borrower.
SECTION 5.03. Priority of Moneys in Revenue Fund; Letter of Credit
----------------------------------------------------
Amount. (a) Funds for the payment of the principal or redemption price of and
- ------
interest on a Series of Bonds shall be derived from the following sources in the
order of priority indicated in each of the accounts in the Revenue Fund;
provided however, that amounts in the respective accounts in the Revenue Fund
shall be used to pay when due (whether upon redemption, acceleration, interest
payment date, maturity or otherwise) the principal or redemption price of and
interest on the Bonds held by Holders other than the Bank or the Borrower prior
to the payment of the principal and interest on the Bonds held by the Bank or
the Borrower:
(i) moneys paid into the Letter of Credit Account of the Revenue Fund
for such Series of Bonds from a draw by the Trustee under the Letter of
Credit enhancing such Series of Bonds;
(ii) moneys paid into the Interest Account for such Series of Bonds, if
any, representing accrued interest received at the initial sale of such
Series of the Bonds and proceeds from the investment thereof which shall be
applied to the payment of interest on such Series of Bonds;
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(iii) moneys paid into the Revenue Fund pursuant to Section 10.01(b)
hereof and proceeds from the investment thereof, which constitute Available
Moneys;
(iv) any other moneys (other than from draws on the Letter of Credit
enhancing such Series of Bonds) paid into the Revenue Fund and deposited in
the Revenue Fund and proceeds from the investment thereof, which constitute
Available Moneys; and
(v) any other moneys paid into the Revenue Fund and deposited in the
Revenue Fund and proceeds from the investment thereof, which are not
Available Moneys.
The Trustee shall create within the Revenue Fund a separate account for
each Series of Bonds called the "Letter of Credit Account," into which all
moneys drawn under the Letter of Credit to pay principal, interest, or
redemption price of the Bonds for such Series of Bonds shall be deposited and
disbursed. Neither the Borrower, the Authority or any Guarantor shall have any
rights to or interest in any Letter of Credit Account. Each Letter of Credit
Account shall be established and maintained by the Trustee and held in trust
apart from all other moneys and securities held under this Indenture or
otherwise, and over which the Trustee shall have the exclusive and sole right of
withdrawal for the exclusive benefit of the Holders of the Bonds with respect to
which such drawing was made. No moneys from any Letter of Credit Account may in
any circumstance be used to pay principal or interest on any Bank Bonds.
The Trustee may establish within any Interest Account, Principal Account
or Redemption Account one or more subaccounts to facilitate the calculation of
the aging of moneys deposited with the Trustee until they become Available
Moneys.
(b) (i) The Trustee shall draw moneys under each Letter of Credit in
accordance with the terms thereof in an amount necessary to make timely payments
of principal of, premium, if any, and interest on the Bonds enhanced by such
Letter of Credit, other than Bonds owned by or for the account of the Borrower
or the Bank, when due whether at maturity, interest payment date, redemption,
acceleration or otherwise. In addition, the Trustee shall draw moneys under each
Letter of Credit in accordance with the terms thereof to the extent necessary to
make timely payments required to be made pursuant to, and in accordance with
Sections 4.06 and 4.07 hereof.
(ii) Immediately after making a drawing under the Letter of
Credit for a Series of Bonds which has been honored, the Trustee shall reimburse
the Bank for the amount of the drawing using moneys, if any, contained in:
(A) the Interest Account for such Series of Bonds, if the
drawing was to pay interest on the Bonds enhanced by such Letter of
Credit;
(B) the Principal Account for such Series of Bonds, if the
drawing was to pay principal on the Bonds enhanced by such Letter of
Credit; and
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(C) the Redemption Account for such Series of Bonds, if the
drawing was to redeem Bonds enhanced by such Letter of Credit.
(c) If at any time there shall have been delivered to the Trustee an
Alternate Letter of Credit or Alternate Credit Facility pursuant to Section 5.7
or 5.8 of the Agreement, then the Trustee shall accept such Alternate Letter of
Credit or Alternate Credit Facility and promptly surrender the related
previously held Letter of Credit to the Bank, in accordance with the terms of
such Letter of Credit, for cancellation. If at any time there shall cease to be
any Bonds Outstanding hereunder, the Trustee shall promptly surrender all
Letters of Credit to the Bank, in accordance with the terms of such Letters of
Credit, for cancellation. The Trustee shall comply with the procedures set forth
in each Letter of Credit relating to the termination thereof.
SECTION 5.04. Letter of Credit. The Trustee shall hold and maintain
----------------
each Letter of Credit for the benefit of the Bondholders whose Bonds are
enhanced by such Letter of Credit until such Letter of Credit expires in
accordance with its terms. Subject to the provisions of this Indenture, the
Trustee shall diligently enforce all terms, covenants and conditions of the
Letter of Credit, including payment when due of any draws on such Letter of
Credit, and the provisions relating to the payment of draws on, and
reinstatement of amounts that may be drawn under, such Letter of Credit, and
will not consent to, agree to or permit any amendment or modification of such
Letter of Credit which would materially adversely affect the rights or security
of the Holders of the Bonds enhanced by such Letter of Credit. If at any time
during the term of any Letter of Credit any successor Trustee shall be appointed
and qualified under this Indenture, the resigning or removed Trustee shall
request that the Bank transfer such Letter of Credit to the successor Trustee.
If the resigning or removed Trustee fails to make this request, the successor
Trustee shall do so before accepting appointment. When a Letter of Credit
expires in accordance with its terms or is replaced by an Alternate Letter of
Credit, the Trustee shall immediately surrender such Letter of Credit to the
Bank.
SECTION 5.05. Investment of Moneys. All moneys in any of the funds or
--------------------
accounts established pursuant to this Indenture shall be invested by the Trustee
as directed in writing by the Borrower or its agent, solely in Investment
Securities. Notwithstanding any other provision herein, in the absence of
written investment instructions directing the Trustee by noon of the second
Business Day preceding the day when investments are to be made, the Trustee is
directed to invest available funds in Investment Securities described in
paragraph (vii) of the definition thereof. The Trustee shall not be liable for
any losses resulting from any investments made pursuant to the preceding
sentence. The Trustee shall be entitled to rely conclusively upon the Borrower's
investment directions as to the fact that each such investment meets the
criteria of the Indenture.
Investment Securities may be purchased at such prices as the Trustee may
in its discretion determine or as may be directed by the Borrower or its agent.
All Investment Securities shall be acquired subject to the limitations set forth
in Section 6.05 hereof, the limitations as to maturities hereinafter in this
Section set forth and such additional limitations or requirements consistent
with the foregoing as may be established by Request of the Borrower.
Moneys in all funds and accounts shall be invested in Investment
Securities
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maturing not later than the date on which such moneys will be required for the
purposes specified in this Indenture. Notwithstanding anything else in this
Section 5.05, any moneys in an Interest Account, a Principal Account or a
Redemption Account held for the payment of particular Bonds of any Series shall
be invested at the written direction of the Borrower in direct obligations of
the United States or bonds or other obligations guaranteed by the United States
government or for which the full faith and credit of the United States is
pledged for the full and timely payment of principal and interest thereof (or
mutual funds consisting solely of such investments which are rated Moody's "Aaa"
or equivalent), rated in the highest rating category applicable to such
investments which mature not later than the date on which it is estimated that
such moneys will be required to pay such Bonds (but in any event maturing in not
more than thirty days), but not including any obligations issued by the
Authority or the Borrower. Moneys in a Letter of Credit Account created in
Section 5.03, remarketing proceeds and moneys held for non-presented Bonds, and
moneys described in Section 4.07(g) shall be held uninvested.
All interest, profits and other income received from the investment of
moneys in any fund established pursuant to this Indenture shall be deposited in
the fund or account which gave rise to the investment earnings. Notwithstanding
anything to the contrary contained in this paragraph, an amount of interest
received with respect to any Investment Security equal to the amount of accrued
interest, if any, paid as part of the purchase price of such Investment Security
shall be credited to the fund from which such accrued interest was paid. To the
extent that any Investment Securities are registrable, such Securities shall be
registered in the name of the Trustee or its nominee.
For the purpose of determining the amount in any fund, all Investment
Securities credited to such fund shall be valued at the lesser of cost or par
value plus, prior to the first payment of interest following purchase, the
amount of accrued interest, if any, paid as a part of the purchase price.
Subject to Section 6.06 hereof, investments in any and all funds and
accounts (other than moneys representing the proceeds of a draw on a Letter of
Credit or held in a Letter of Credit Account, remarketing proceeds, Available
Moneys, moneys being aged to become Available Moneys, or moneys held for the
payment of particular Bonds (including moneys held for non-presented Bonds or
held under Section 4.07(g) or 10.03 hereof)) may be commingled for purposes of
making, holding and disposing of investments, notwithstanding provisions herein
for transfer to or holding in particular funds and accounts, the amounts
received or held by the Trustee hereunder, provided that the Trustee shall at
all times account for such investments strictly in accordance with the funds and
accounts to which they are credited and otherwise as provided in this Indenture.
Subject to Section 6.05 hereof, any moneys invested in accordance with this
Section may be invested in a pooled investment account consisting solely of
funds held by the Trustee as a fiduciary. The Trustee may act as principal or
agent in the making or disposing of any investment. The Trustee may sell or
present for redemption any Investment Securities whenever it shall be necessary
to provide moneys to meet any required payment, transfer, withdrawal or
disbursement from the fund to which such Investment Security is credited, and
the Trustee shall not be liable or responsible for any loss resulting from such
investment.
The Authority (and the Borrower by its execution of the Loan Agreement)
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acknowledges that to the extent regulations of the Comptroller of the Currency
or other applicable regulatory entity grant the Authority or the Borrower the
right to receive brokerage confirmations of security transactions as they occur,
the Authority and the Borrower specifically waive receipt of such confirmations
to the extent permitted by law. The Trustee will furnish the Authority and the
Borrower periodic cash transaction statements which include detail for all
investment transactions made by the Trustee hereunder. The Trustee or any of
its affiliates may act as sponsor, advisor or manager in connection with any
investments made by the Trustee hereunder.
SECTION 5.06. Rebate Fund. (a) The Trustee shall establish and
-----------
maintain a fund separate from any other fund established and maintained
hereunder designated as the "Rebate Fund" (the "Rebate Fund") and an account
within such fund to be designated the "1997A Rebate Account" (the "1997A Rebate
Account"). Within the Rebate Fund, the Trustee shall maintain such other
accounts as it is instructed by the Borrower as shall be necessary in order to
comply with the terms and requirements of the Tax Certificate. Subject to the
transfer provisions provided in paragraph (e) below, all money at any time
deposited in the Rebate Fund shall be held by the Trustee in trust, to the
extent required to satisfy the Rebate Requirement (as defined in the Tax
Certificate), for payment to the federal government of the United States of
America, and no other person shall have any rights in or claim to such money.
All amounts deposited into or on deposit in the Rebate Fund shall be governed by
this Section 5.06, by Section 6.06 hereof and by the Tax Certificate (which is
incorporated herein by reference). The Trustee shall be deemed conclusively to
have complied with such provisions if it follows the directions of the Borrower
including supplying all necessary information in the manner provided in the Tax
Certificate, shall not be required to take any actions thereunder, in the
absence of written directions by the Borrower, and shall have no liability or
responsibility to enforce compliance by the Borrower or the Authority with the
terms of the Tax Certificate.
(b) Upon the Borrower's written direction, an amount shall be deposited
to the Rebate Fund by the Trustee from deposits by the Borrower, or from
available investment earnings on amounts (other than moneys representing the
proceeds of a draw on a Letter of Credit or held in a Letter of Credit Account,
remarketing proceeds, Available Moneys, moneys being aged to become Available
Moneys, or moneys held for the payment of particular Bonds (including moneys
held for non-presented Bonds or held under Section 4.07(g) or 10.03 hereof))
held in the Revenue Fund, if and to the extent required, so that the balance of
the amount on deposit thereto shall be equal to the Rebate Amount. Computations
of the Rebate Amount shall be furnished by or on behalf of the Borrower in
accordance with the Tax Certificate. The Trustee may rely conclusively upon the
Borrower's determinations, calculations and certifications required by this
Section 5.06(b). The Trustee shall have no responsibility to make any
independent calculations or determinations or to review the Borrower's
calculations hereunder r.
(c) The Trustee shall have no obligation to rebate any amounts required
to be rebated pursuant to this Section 5.06 other than from moneys held in the
funds and accounts created under this Indenture (other than moneys representing
the proceeds of a draw on a Letter of Credit or held in a Letter of Credit
Account or the Authority Subaccount of the Costs of Issuance Fund, remarketing
proceeds, Available Moneys, moneys being aged to become Available Moneys, or
moneys held for the payment of particular Bonds (including moneys held for non-
presented Bonds or held under Section 10.03)) or from other moneys provided to
it by or on
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behalf of the Borrower.
(d) The Trustee shall invest all amounts held in the Rebate Fund in
Investment Securities as instructed in writing by the Borrower, and the Borrower
shall be responsible for such instructions complying with the Tax Certificate.
Money shall not be transferred from the Rebate Fund except as provided in
paragraph (e) below.
(e) Upon receipt of the Borrower's written directions, the Trustee
shall remit part or all of the balances in the Rebate Fund to the United States,
as so directed. In addition, if the Borrower so directs, the Trustee will
deposit moneys into or transfer moneys out of the Rebate Fund from or into such
accounts or funds (other than moneys representing the proceeds of a draw on a
Letter of Credit or held in a Letter of Credit Account, remarketing proceeds,
Available Moneys, moneys being aged to become Available Moneys, or moneys held
for the payment of particular Bonds (including moneys held for non-presented
Bonds or held under Section 4.07(g) or 10.03 hereof)) as directed by the
Borrower's written directions. Any funds remaining in the Rebate Fund after
redemption and payment of all of the Bonds and payment and satisfaction of any
Rebate Amount, or provision made therefor shall be withdrawn and remitted to the
Borrower upon the Borrower's written request.
(f) Notwithstanding any other provision of this Indenture, including in
particular Article X hereof, the obligation to remit the Rebate Amounts to the
United States and to comply with all other requirements of this Section 5.06
hereof, Section 6.06 hereof and the Tax Certificate shall survive the defeasance
or payment in full of the Bonds.
ARTICLE VI
PARTICULAR COVENANTS
SECTION 6.01. Punctual Payment. The Authority shall punctually pay
----------------
or cause to be paid the principal, premium, if any, and interest to become due
in respect of all the Bonds, in strict conformity with the terms of the Bonds
and of this Indenture, according to the true intent and meaning thereof, but
only out of Revenues and other assets pledged for such payment as provided in
this Indenture. When and as paid in full, all Bonds, if any, shall be delivered
to the Trustee, shall forthwith be canceled and destroyed, and a certificate of
such destruction shall thereafter be delivered to the Authority.
SECTION 6.02. Extension of Payment of Bonds. The Authority shall not
-----------------------------
directly or indirectly extend or assent to the extension of the maturity of any
of the Bonds or the time of payment of any claims for interest by the purchase
or funding of such Bonds or claims for interest or by any other arrangement and
in case the maturity of any of the Bonds or the time of payment of any such
claims for interest shall be extended, such Bonds or claims for interest shall
not be entitled, in case of any default hereunder, to the benefits of this
Indenture, except subject to the prior payment in full of the principal of all
of the Bonds then Outstanding and of all claims for interest thereon which shall
not have been so extended. Nothing in this Section shall be deemed to limit the
right of the Authority to issue bonds for the purpose of refunding any
Outstanding Bonds, and such issuance shall not be deemed to constitute an
extension of maturity of Bonds.
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SECTION 6.03. Against Encumbrances. The Authority shall not create,
--------------------
or permit the creation of, any pledge, lien, charge or other encumbrance upon
the Revenues and other assets pledged or assigned under this Indenture while any
of the Bonds are Outstanding, except the pledge and assignment created by this
Indenture. Subject to this limitation, the Authority expressly reserves the
right to enter into one or more other indentures for any of its corporate
purposes, including other programs under the Act, and reserves the right to
issue other obligations for such purposes.
SECTION 6.04. Power to Issue Bonds and Make Pledge and Assignment.
---------------------------------------------------
The Authority is duly authorized pursuant to law to issue the Bonds and to enter
into this Indenture and to pledge and assign the Revenues and other assets
purported to be pledged and assigned, respectively, under this Indenture in the
manner and to the extent provided in this Indenture. The Bonds and the
provisions of this Indenture are and will be the legal, valid and binding
limited obligations of the Authority in accordance with their terms, and the
Authority and Trustee shall at all times, to the extent permitted by law,
defend, preserve and protect said pledge and assignment of Revenues and other
assets and all the rights of the Bondholders under this Indenture against all
claims and demands of all persons whomsoever, subject to the limitations set
forth in Article VIII relating to the Trustee.
SECTION 6.05. Accounting Records and Reports. The Trustee shall keep
------------------------------
or cause to be kept proper books of record and account in which complete and
correct entries shall be made of all transactions made by it relating to the
receipt, investment, disbursement, allocation and application of the Revenues
and the proceeds of the Bonds. Such records shall specify the account or fund to
which each investment (or portion thereof) held by the Trustee is to be
allocated and shall set forth, in the case of each Investment Security, (a) its
purchase price, (b) identifying information, including par amount, coupon rate,
and payment dates, (c) the amount received at maturity or its sale price, as the
case may be, (d) the amounts and dates of any payments made with respect
thereto, and (e) such documentation required to be retained by the Trustee to
establish that any requirements set forth in the Tax Certificate or with respect
to establishing market price. Such records shall be open to inspection by any
Holder and the Bank at any reasonable time during regular business hours on
reasonable notice.
SECTION 6.06. Arbitrage Covenants. (a) The Authority and the Borrower
-------------------
covenant and agree that neither will take any action, or fail to take any
action, if such action or failure to take such action would adversely affect the
exclusion from gross income of the interest payable on the Bonds under Section
103 of the Code. Without limiting the generality of the foregoing, the Authority
and the Borrower each covenants and agrees that it will each comply with the
requirements of the Tax Certificate.
(b) The Borrower will pay, or cause to be paid, from time to time all
amounts required to be rebated to the United States pursuant to Section 148(f)
of the Code and any temporary, proposed or final Regulations as may be
applicable to the Bonds from time to time. This covenant shall survive payment
in full or defeasance of the Bonds. The Authority and the Borrower specifically
covenant to pay or cause to be paid to the United States at the times and in the
amounts determined under Section 5.06 hereof the Rebate Requirement, as
described in the
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Tax Certificate. The Trustee agrees to comply with all written instructions of
the Borrower given pursuant to the Tax Certificate; provided, however, that the
Borrower shall be responsible for such instructions complying with the Tax
Certificate.
The Trustee conclusively shall be deemed to have complied with the
provisions of this Section 6.06(b) if it follows the instructions and directions
of the Borrower and shall not be required to take any action under this Section
6.06(b) in the absence of such directions from the Borrower. The Trustee shall
not be liable for any consequences resulting from its failure to act if no
instructions from the Borrower (or in the absence of Borrower instructions,
instructions from the Authority) are delivered to it.
(c) Notwithstanding any provision of this Section, if the Borrower
shall provide to the Trustee, the Bank and the Authority an opinion of Bond
Counsel that any action required under Section 5.06 or this Section 6.06 is no
longer required, or that some further action is required to maintain the Tax-
exempt status of interest on any Series of the Bonds, the Trustee and the
Authority may rely conclusively on such opinion in complying with the
requirements of this Section, and the covenants contained herein shall be deemed
to be modified to that extent.
SECTION 6.07. Other Covenants. (A) The Trustee shall promptly
---------------
collect all amounts due from the Borrower pursuant to the Agreement, shall
perform all duties imposed upon it pursuant to the Agreement and, subject to the
provisions of this Indenture, shall diligently enforce, and take all steps,
actions and proceedings reasonably necessary for the enforcement of all of the
rights of the Authority and all of the obligations of the Borrower pursuant to
the Agreement.
(B) The Authority shall not amend, modify or terminate any of the terms
of the Agreement, or consent to any such amendment, modification or termination,
without the prior written consent of the Trustee and the Bank. The Trustee shall
give such written consent only if (1) in the Opinion of Counsel, such amendment,
modification or termination will not materially adversely affect the interests
of the Bondholders or result in any material impairment of the security hereby
given for the payment of the Bonds, or (2) the Trustee first obtains the written
consent of the Holders of a majority in principal amount of the Bonds then
Outstanding to such amendment, modification or termination, provided that no
such amendment, modification or termination shall reduce the amount of Loan
Repayments to be made to the Authority or the Trustee by the Borrower pursuant
to the Agreement, or extend the time for making such payments, without the
written consent of all of the Holders of the Bonds then Outstanding. The Trustee
shall be entitled to rely upon an Opinion of Counsel with respect to the effect
of any amendments hereto or to the Agreement.
(C) The Authority shall not purchase Bonds from the Remarketing Agent or
otherwise.
SECTION 6.08. Waiver of Laws. The Authority shall not at any time
--------------
insist upon or plead in any manner whatsoever, or claim or take the benefit or
advantage of, any stay or extension law now or at any time hereafter in force
that may affect the covenants and agreements contained in this Indenture or in
the Bonds, and all benefit or advantage of any such law or laws is hereby
expressly waived by the Authority to the extent permitted by law.
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SECTION 6.09. Further Assurances. The Authority will make, execute
------------------
and deliver any and all such further indentures, instruments and assurances as
may be reasonably necessary or proper to carry out the intention or to
facilitate the performance of this Indenture and for the better assuring and
confirming unto the Holders of the Bonds of the rights and benefits provided in
this Indenture.
SECTION 6.10. Continuing Disclosure. Pursuant to Section 5.14 of the
---------------------
Loan Agreement, the Borrower shall, upon the adjustment to a Term Interest Rate
Period for a duration of one year or greater with respect to the Bonds pursuant
to Section 2.03D(II) hereof and the remarketing of the Bonds pursuant to Section
4.07 hereof, undertake the continuing disclosure requirements promulgated under
S.E.C. Rule 15c2-12, as it may from time to time hereafter be amended or
supplemented, and the Authority shall have no liability to the Holders of the
Bonds or any other person with respect to such disclosure matters.
Notwithstanding any other provision of this Indenture, failure of the Borrower
to comply with the requirements of S.E.C. Rule 15c2-12, as it may from time to
time hereafter be amended or supplemented, shall not be considered an Event of
Default; however, the Trustee at the written request of the Remarketing Agent or
the Holders of at least 25% aggregate principal amount of Outstanding Bonds,
shall, but only to the extent indemnified to its satisfaction from and against
any cost, liability or expense related thereto, including, without limitation,
reasonable fees and expenses of its attorneys and advisors and additional fees
and expenses of the Trustee, or any Bondholder or beneficial owner of any Bonds
may take such actions as may be necessary and appropriate, including seeking
mandate or specific performance by court order, to cause the Borrower to comply
with its obligations under Section 5.14 of the Loan Agreement.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES OF BONDHOLDERS
SECTION 7.01. Events of Default; Acceleration; Waiver of Default.
--------------------------------------------------
Each of the following events which has occurred and is continuing shall
constitute an "Event of Default" hereunder:
(a) default in the due and punctual payment of the principal of, or
premium (if any) on, any Bond when and as the same shall become due and
payable, whether at maturity as therein expressed, by proceedings for
redemption, by declaration or otherwise;
(b) default in the due and punctual payment of any installment of
interest on, or the Purchase Price of, any Bond, when and as the same shall
become due and payable;
(c) failure by the Authority to perform or observe any other of the
covenants, agreements or conditions on its part in this Indenture or in the
Bonds contained, and the continuation of such failure for a period of sixty
(60) days after written notice thereof, specifying such default and requiring
the same to be remedied, shall have been given to the Authority, the Bank,
and the Borrower by the Trustee, or to the Authority, the Bank, the Borrower
and the Trustee by the Holders of not less than sixty-six and two-thirds
percent (66-2/3%) in aggregate principal amount of the Bonds at the time
Outstanding;
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(d) the occurrence and continuance of a Loan Default Event described in
Section 7.1 of the Agreement; or
(e) receipt by the Trustee of notice from the Bank that either (i) an
Event of Default (as defined in the Reimbursement Agreement) has occurred
under a Reimbursement Agreement and directing the Trustee to accelerate the
Bonds or (ii) the Bank will not reinstate the interest portion of a Letter of
Credit after a drawing, as provided in such Letter of Credit.
No default specified in (c) above shall constitute an Event of Default
unless the Authority and the Borrower shall have failed to correct such default
within the applicable period; provided, however, that if the default shall be
--------
such that it cannot be corrected within such period, it shall not constitute an
Event of Default if corrective action is instituted by the Authority or the
Borrower (or the Bank on its behalf) within the applicable period and diligently
pursued in the sole determination of the Bank. With regard to any alleged
default concerning which notice is given to the Borrower under the provisions of
this Section, the Authority hereby grants the Borrower (or the Bank on its
behalf) full authority for the account of the Authority to perform any covenant
or obligation the non-performance of which is alleged in said notice to
constitute a default in the name and stead of the Authority with full power to
do any and all things and acts to the same extent that the Authority could do
and perform any such things and acts and with power of substitution.
During the continuance of an Event of Default described in (a), (b), (c)
or (d) above, unless the principal of all the Bonds shall have already become
due and payable, the Trustee may, and upon the written request of the Holders of
not less than sixty-six and two-thirds percent (66-2/3%) in aggregate principal
amount of the Bonds at the time Outstanding, or upon the occurrence of an Event
of Default described in (e) above, the Trustee shall, promptly upon such
occurrence, by notice in writing to the Authority, the Borrower, and the Bank,
declare the principal of all the Bonds then Outstanding, and the interest
accrued thereon, to be due and payable immediately, and upon any such
declaration the same shall become and shall be immediately due and payable,
anything in this Indenture or in the Bonds contained to the contrary
notwithstanding. Upon any such declaration the Trustee shall promptly draw upon
any then existing Letter of Credit in accordance with the terms thereof and
apply the amount so drawn to pay the principal of and interest on the Bonds
enhanced by such Letter of Credit so declared to be due and payable. Interest on
the Bonds shall cease to accrue as of the date of acceleration. The Trustee
shall promptly notify the Bondholders of the date of acceleration and the
cessation of accrual of interest on the Bonds in the same manner as for a notice
of redemption.
The preceding paragraph, however, is subject to the condition that if,
at any time after the principal of the Bonds shall have been so declared due and
payable, and before any judgment or decree for the payment of the moneys due
shall have been obtained or entered as hereinafter provided, and before any
Letter of Credit has been drawn upon in accordance with its terms and honored,
there shall have been deposited with the Trustee a sum sufficient to pay (with
Available Moneys if a Letter of Credit is in effect) all the principal of the
Bonds matured prior to such declaration and all matured installments of interest
(if any) upon all the Bonds, with interest
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on such overdue installments of principal as provided in the Agreement, and the
reasonable fees and expenses of the Trustee, including reasonable fees and
expenses of its attorneys, and any and all other defaults known to the Trustee
(other than in the payment of principal of and interest on the Bonds due and
payable solely by reason of such declaration) shall have been made good or cured
to the satisfaction of the Trustee or provision deemed by the Trustee to be
adequate shall have been made therefor, then, and in every such case, the
Holders of at least a majority in aggregate principal amount of the Bonds then
Outstanding, by written notice to the Authority and to the Trustee, may, on
behalf of the Holders of all the Bonds, rescind and annul such declaration and
its consequences and waive such default; but no such rescission and annulment
shall extend to or shall affect any subsequent default, or shall impair or
exhaust any right or power consequent thereon. Notwithstanding any other
provision of this Indenture except as provided in the following sentence, the
Trustee may not exercise any remedy in the event of a default under Section
7.01(a), (b), (c) or (d) hereof without the written consent of the Bank, so long
as each Letter of Credit is in effect and the Bank has not wrongfully failed to
make a payment thereunder. The Trustee may exercise any and all remedies under
the Indenture and the Agreement (except acceleration) to collect any fees,
expenses and indemnification from the Borrower without obtaining the consent of
the Bank.
SECTION 7.02. Institution of Legal Proceedings by Trustee. Subject to
-------------------------------------------
Section 7.01 hereof, if one or more of the Events of Default shall happen and be
continuing, the Trustee in its discretion may, and upon the written request of
the Holders of two-thirds in principal amount of the Bonds then Outstanding and
upon being indemnified to its satisfaction therefor pursuant to Section 8.03(G)
hereof shall, proceed to protect or enforce its rights or the rights of the
Holders of Bonds under the Act or under this Indenture or the Agreement by a
suit in equity or action at law, either for the specific performance of any
covenant or agreement contained herein or therein, or in aid of the execution of
any power herein or therein granted, or by mandamus or other appropriate
proceeding for the enforcement of any other legal or equitable remedy as the
Trustee shall deem most effectual in support of any of its rights or duties
hereunder.
SECTION 7.03. Application of Revenues and Other Funds After Default.
-----------------------------------------------------
If an Event of Default shall occur and be continuing, all Revenues and any other
funds then held or thereafter received by the Trustee under any of the
provisions of this Indenture (subject to Sections 3.04, 4.07(g), 5.06, 6.06 and
11.11 hereof) shall be promptly applied by the Trustee as follows and in the
following order:
(1) To the payment of reasonable charges and expenses of the Trustee
(including reasonable fees and disbursements of its counsel) incurred in and
about the performance of its powers and duties under this Indenture;
(2) To the payment of the principal of and interest then due on the
Bonds (upon presentation of the Bonds to be paid, and stamping thereon of the
payment if only partially paid, or surrender thereof if fully paid) subject
to the provisions of this Indenture (including Section 6.02 hereof), as
follows:
(i) Unless the principal of all of the Bonds shall have become
or have
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been declared due and payable,
First: To the payment to the persons entitled thereto of all
-----
installments of interest then due in the order of the maturity of
such installments, and, if the amount available shall not be
sufficient to pay in full any installment or installments maturing
on the same date, then to the payment thereof ratably, according to
the amounts due thereon, to the persons entitled thereto, without
any discrimination or preference; and
Second: To the payment to the persons entitled thereto of the
------
unpaid principal of any Bonds which shall have become due, whether
at maturity or by call for redemption, with interest on the overdue
principal at the rate borne by the respective Bonds, and, if the
amount available shall not be sufficient to pay in full all the
Bonds, together with such interest, then to the payment thereof
ratably, according to the amounts of principal due on such date to
the persons entitled thereto, without any discrimination or
preference.
(ii) If the principal of all of the Bonds shall have become or have
been declared due and payable, to the payment of the principal and
interest then due and unpaid upon the Bonds, with interest on the
overdue principal at the rate borne by the Bonds, and, if the amount
available shall not be sufficient to pay in full the whole amount so due
and unpaid, then to the payment thereof ratably, without preference or
priority of principal over interest, or of interest over principal, or
of any installment of interest over any other installment of interest,
or of any Bond over any other Bond, according to the amounts due
respectively for principal and interest, to the persons entitled thereto
without any discrimination or preference,
provided, however, that in no event shall moneys derived from drawings under a
Letter of Credit, moneys set aside to pay principal or interest on any
particular Bonds (including moneys held for non-presented Bonds or held under
Section 4.07(g) or 10.03 hereof), or the proceeds from remarketing of the Bonds
be used to pay any of the items listed in clause (1) of this Section and
Available Moneys and moneys being aged to become Available Moneys shall not be
used to pay any of the items listed in clause (1) of this Section until all
amounts have been paid under clause (2) of this Section; provided further that
proceeds of a draw on a Letter of Credit and remarketing proceeds shall be used
solely to pay principal, interest, premium, or purchase price of the applicable
Series of Bonds as otherwise provided herein.
SECTION 7.04. Trustee to Represent Bondholders. The Trustee is hereby
--------------------------------
irrevocably appointed (and the successive respective Holders of the Bonds, by
taking and holding the same, shall be conclusively deemed to have so appointed
the Trustee) as trustee and true and lawful attorney-in-fact of the Holders of
the Bonds for the purpose of exercising and prosecuting on their behalf such
rights and remedies as may be available to such Holders under the provisions of
the Bonds, this Indenture, the Agreement, the Act and applicable provisions of
any other law. Subject to Section 7.01 hereof, upon the occurrence and
continuance of an Event of Default or
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other occasion giving rise to a right in the Trustee to represent the
Bondholders, the Trustee in its discretion may, and upon the written request of
the Holders of not less than sixty-six and two-thirds percent (66-2/3%) in
aggregate principal amount of the Bonds then Outstanding, and upon being
indemnified to its satisfaction therefor, shall, proceed to protect or enforce
its rights or the rights of such Holders by such appropriate action, suit,
mandamus or other proceedings as it shall deem most effectual to protect and
enforce any such right, at law or in equity, either for the specific performance
of any covenant or agreement contained herein, or in aid of the execution of any
power herein granted, or for the enforcement of any other appropriate legal or
equitable right or remedy vested in the Trustee or in such Holders under this
Indenture, the Agreement, the Act or any other law; and upon instituting such
proceeding, the Trustee shall be entitled, as a matter of right, to the
appointment of a receiver of the Revenues and other assets pledged under this
Indenture, pending such proceedings. All rights of action under this Indenture
or the Bonds or otherwise may be prosecuted and enforced by the Trustee without
the possession of any of the Bonds or the production thereof in any proceeding
relating thereto, and any such suit, action or proceeding instituted by the
Trustee shall be brought in the name of the Trustee for the benefit and
protection of all the Holders of such Bonds, subject to the provisions of this
Indenture (including Section 6.02 hereof).
SECTION 7.05. Bondholders' Direction of Proceedings. Anything in this
-------------------------------------
Indenture to the contrary notwithstanding, but subject to Section 8.03(G), the
Holders of sixty-six and two-thirds percent (66-2/3%) in aggregate principal
amount of the Bonds then Outstanding shall have the right, by an instrument or
concurrent instruments in writing executed and delivered to the Trustee, to
direct the method of conducting all remedial proceedings taken by the Trustee
hereunder, provided that such direction shall not be otherwise than in
accordance with law and the provisions of this Indenture, and that the Trustee
shall have the right to decline to follow any such direction which in the
opinion of the Trustee would be unjustly prejudicial to Bondholders not parties
to such direction or for which it has not been provided adequate indemnity.
SECTION 7.06. Limitation on Bondholders' Right to Sue. Subject to
---------------------------------------
Section 7.01 hereof, no Holder of any Bond shall have the right to institute any
suit, action or proceeding at law or in equity, for the protection or
enforcement of any right or remedy under this Indenture, the Agreement, the Act
or any other applicable law with respect to such Bond, unless (1) such Holder
shall have given to the Trustee written notice of the occurrence of an Event of
Default; (2) the Holders of not less than sixty-six and two-thirds percent (66-
2/3%) in aggregate principal amount of the Bonds then Outstanding shall have
made written request upon the Trustee to exercise the powers hereinbefore
granted or to institute such suit, action or proceeding in its own name; (3)
subject to Section 8.03(G) hereof, such Holder or said Holders shall have
tendered to the Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such request; and (4) the Trustee
shall have refused or omitted to comply with such request for a period of sixty
(60) days after such written request shall have been received by, and said
tender of indemnity shall have been made to, the Trustee.
Such notification, request, tender of indemnity and refusal or omission
are hereby declared, in every case, to be conditions precedent to the exercise
by any Holder of Bonds of any remedy hereunder or under law; it being understood
and intended that no one or more Holders of Bonds shall have any right in any
manner whatever by such Holders' action to affect, disturb or
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prejudice the security of this Indenture or the rights of any other Holders of
Bonds, or to enforce any right under this Indenture, the Agreement, the Act or
other applicable law with respect to the Bonds, except in the manner herein
provided, and that all proceedings at law or in equity to enforce any such right
shall be instituted, had and maintained in the manner herein provided and for
the benefit and protection of all Holders of the Outstanding Bonds, subject to
the provisions of this Indenture (including Section 6.02 hereof).
SECTION 7.07. Absolute Obligation of Authority. Nothing in Section 7.06
--------------------------------
or in any other provision of this Indenture, or in the Bonds, contained shall
affect or impair the obligation of the Authority, which is absolute and
unconditional, to pay the principal of and interest on the Bonds to the
respective Holders of the Bonds at their respective dates of maturity, or upon
call for redemption, as herein provided, but only out of the Revenues and other
assets herein pledged therefor, or affect or impair the right of such Holders,
which is also absolute and unconditional, to enforce such payment by virtue of
the contract embodied in the Bonds.
SECTION 7.08. Termination of Proceedings. In case any proceedings
--------------------------
taken by the Trustee or any one or more Bondholders on account of any Event of
Default shall have been discontinued or abandoned for any reason or shall have
been determined adversely to the Trustee or the Bondholders, then in every such
case the Authority, the Bank, the Trustee and the Bondholders, subject to any
determination in such proceedings, shall be restored to their former positions
and rights hereunder, severally and respectively, and all rights, remedies,
powers and duties of the Authority, the Bank, the Trustee and the Bondholders
shall continue as though no such proceedings had been taken.
SECTION 7.09. Remedies Not Exclusive. No remedy herein conferred upon
----------------------
or reserved to the Trustee, the Bank, or to the Holders of the Bonds is intended
to be exclusive of any other remedy or remedies, and each and every such remedy,
to the extent permitted by law, shall be cumulative and in addition to any other
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise.
SECTION 7.10. No Waiver of Default. No delay or omission of the
--------------------
Trustee or of any Holder of the Bonds to exercise any right or power arising
upon the occurrence of any default shall impair any such right or power or shall
be construed to be a waiver of any such default or an acquiescence therein; and
every power and remedy given by this Indenture to the Trustee or to the Holders
of the Bonds may be exercised from time to time and as often as may be deemed
expedient.
SECTION 7.11. Consent To Defaults. Notwithstanding any other
-------------------
provisions of this Article VII, and subject to Section 8.03(G) hereof, so long
as the Bank is not continuing wrongfully to dishonor drawings under any Letter
of Credit, no Event of Default shall be declared pursuant to Section 7.01(a),
(b), or (d) hereof (except in a case resulting from the failure of the Borrower
to pay the Trustee's fees and expenses or to indemnify the Trustee), nor any
remedies exercised with respect to any Event of Default other than an Event of
Default declared pursuant to Section 7.01(e) hereof by the Trustee or by the
Bondholders (except in a case resulting from the failure of the Borrower to pay
the Trustee's fees and expenses or to indemnify the Trustee) and no Event of
Default under this Indenture shall be waived by the Trustee or the Bondholders
to the
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extent they may otherwise be permitted hereunder, without, in any case, the
prior written consent of the Bank. No Event of Default can be waived, in any
circumstance, unless the Trustee has received written notice that each Letter of
Credit, if any, has been fully reinstated and is in full force and effect.
ARTICLE VIII
THE TRUSTEE, THE PAYING AGENT, THE BOND REGISTRAR,
THE TENDER AGENT, AND THE REMARKETING AGENT
SECTION 8.01. Duties, Immunities and Liabilities of Trustee. (A) The
---------------------------------------------
Trustee and the Registrar shall, prior to an Event of Default, and after the
curing of all Events of Default which may have occurred, perform such duties and
only such duties as are specifically set forth in this Indenture. The Trustee
shall, during the existence of any Event of Default (which has not been cured),
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as prudent persons would
exercise or use under the circumstances in the conduct of their own affairs.
Notwithstanding any other provision of this Indenture, the Trustee shall perform
all duties required of it hereunder.
No provision of this Indenture shall be construed to relieve the Trustee
or the Registrar from liability for its own negligent action or its own
negligent failure to act, except that:
(a) Prior to such an Event of Default hereunder and after the curing of
all Events of Default which may have occurred,
(1) the duties and obligations of the Trustee and the Registrar,
as the case may be, shall be determined solely by the express provisions
of this Indenture, the Trustee and Registrar, as the case may be, shall
not be liable except for the performance of such duties and obligations
as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee and the Registrar, as the case may be; and
(2) in the absence of bad faith on the part of the Trustee or the
Registrar, as the case may be, the Trustee or Registrar, as the case may
be, may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificate or
opinion furnished to the Trustee or the Registrar, as the case may be,
conforming to the requirements of this Indenture; but in the case of any
such certificate or opinion which by any provision hereof is
specifically required to be furnished to the Trustee or the Registrar,
as the case may be, the Trustee or Registrar, as the case may be, shall
be under a duty to examine the same to determine whether or not it
conforms to the requirements of this Indenture; and
(b) At all times, regardless of whether or not any Event of Default
shall exist,
(1) the Trustee and the Registrar shall not be liable for any
error of judgment made in good faith by a responsible officer, director
or employee of the
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Trustee or the Registrar unless it shall be proved that the Trustee or
the Registrar, as the case may be, was negligent in ascertaining the
pertinent facts;
(2) neither the Trustee nor the Registrar shall be liable with
respect to any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders of not less than a
majority, or such larger percentage as may be required hereunder, in
aggregate principal amount of the Bonds at the time outstanding relating
to the time, method and place of conducting any proceeding for any
remedy available to the Trustee or Registrar, or exercising any trust or
power conferred upon the Trustee or the Registrar under this Indenture.
None of the provisions contained in this Indenture shall require the
Trustee or Registrar to expend or risk their own funds or otherwise incur
individual financial liability in the performance of any of their duties or in
the exercise of any of their rights or powers other than to notify the Authority
that they intend to take no particular action or to notify the Bondholders that
they will take no action, if adequate indemnity against such risk or liability
is not assured to them. All indemnifications and releases from liability granted
herein to the Trustee shall extend to the directors, officers, employees and
agents of the Trustee.
(B) The Authority may remove the Trustee at any time upon its own
decision or upon request of the Borrower, and shall remove the Trustee if at any
time requested to do so by an instrument or concurrent instruments in writing
signed by the Holders of not less than a majority in aggregate principal amount
of the Bonds then Outstanding (or their attorneys duly authorized in writing) or
if at any time the Trustee shall cease to be eligible in accordance with
subsection (E) of this Section, or shall become incapable of acting, or shall be
adjudged bankrupt or insolvent, or a receiver of the Trustee or its property
shall be appointed, or any public officer shall take control or charge of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, in each case by giving written notice of such
removal to the Trustee, and thereupon shall appoint, with the consent of the
Bank, a successor Trustee by an instrument in writing.
(C) The Trustee may at any time resign by giving written notice of such
resignation to the Authority and by giving the Bondholders notice of such
resignation by mail at the addresses shown on the registration books maintained
by the Trustee. Upon receiving such notice of resignation, the Authority shall
promptly appoint, with the consent of the Bank, a successor Trustee by an
instrument in writing. The Trustee shall not be relieved of its duties until
such successor Trustee has accepted appointment.
(D) Any removal or resignation of the Trustee pursuant to (B) or (C)
above and appointment of a successor Trustee shall become effective upon
acceptance of appointment by the successor Trustee. If no successor Trustee
shall have been appointed and have accepted appointment within forty-five (45)
days of giving notice of removal or notice of resignation as aforesaid, the
resigning Trustee or any Bondholder (on behalf of itself and all other
Bondholders) may petition any court of competent jurisdiction for the
appointment of a successor Trustee, and such court may thereupon, after such
notice (if any) as it may deem proper, appoint such successor Trustee. Any
successor Trustee appointed under this Indenture shall signify its
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acceptance of such appointment by executing and delivering to the Authority and
to its predecessor Trustee a written acceptance thereof, and thereupon such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the moneys, estates, properties, rights, powers, trusts, duties
and obligations of such predecessor Trustee, with like effect as if originally
named Trustee herein; but, nevertheless at the Request of the Authority or the
request of the successor Trustee, such predecessor Trustee shall execute and
deliver any and all instruments of conveyance or further assurance and do such
other things as may reasonably be required for more fully and certainly vesting
in and confirming to such successor Trustee all the right, title and interest of
such predecessor Trustee in and to any property held by it under this Indenture
and shall pay over, transfer, assign and deliver to the successor Trustee any
money or other property subject to the trusts and conditions herein set forth.
Upon request of the successor Trustee, the Authority shall execute and deliver
any and all instruments as may be reasonably required for more fully and
certainly vesting in and confirming to such successor Trustee all such moneys,
estates, properties, rights, powers, trusts, duties and obligations. Upon
acceptance of appointment by a successor Trustee as provided in this subsection,
the Authority shall mail a notice of the succession of such Trustee to the
trusts hereunder to each rating agency which is then rating the Bonds, to the
Bondholders at the addresses shown on the registration books maintained by the
Trustee, and to the Bank. If the Authority fails to mail such notice within
fifteen (15) days after acceptance of appointment by the successor Trustee, the
successor Trustee shall cause such notice to be mailed at the expense of the
Authority.
(E) Any Trustee appointed under the provisions of this Section in
succession to the Trustee shall be a trust company or bank having the powers of
a trust company which either (i) has a combined capital and surplus of at least
fifty million dollars ($50,000,000), and is subject to supervision or
examination by federal or state authority or (ii) is a wholly-owned subsidiary
of a bank, trust company or bank holding company meeting, on an aggregate basis,
the tests set out in clause (i). If such bank or trust company publishes a
report of condition at least annually, pursuant to law or to the requirements of
any supervising or examining authority above referred to, then for the purpose
of this subsection the combined capital and surplus of such bank or trust
company shall be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
subsection (E), the Trustee shall resign immediately in the manner and with the
effect specified in this Section.
(F) The Trustee is not responsible for effecting, maintaining or
renewing any policies of insurance of the Borrower or for any representations
regarding the sufficiency of any policy of insurance of the Borrower and shall
not be responsible for monitoring or reviewing any policy of insurance of the
Borrower or be obligated to file claims or proofs of loss in the case of
insurance or to pay taxes or assessments.
(G) The Trustee is not responsible for filing financing or continuation
statements.
(H) Subject to the provisions of Sections 5.06 and 10.03 hereof, all
moneys received by the Trustee and the Tender Agent shall, until used or applied
as herein provided, be held in trust for the purposes for which they were
received, but need not be segregated from
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other funds except draws on a Letter of Credit, all Available Moneys, all
remarketing proceeds, all moneys being aged to become Available Moneys, and
otherwise except to the extent required by law or by this Indenture. The Trustee
and the Tender Agent shall be under no liability for interest on any moneys
received by them hereunder except such as it may agree with the Authority to pay
thereon. Any interest allowed on any such moneys shall be deposited in the fund
or account to which such moneys are credited. Any moneys held by the Trustee or
the Tender Agent may be deposited by it in its banking department and invested
as provided herein.
SECTION 8.02. Merger or Consolidation. Any company into which the
-----------------------
Trustee may be merged or converted or with which it may be consolidated or any
company resulting from any merger, conversion or consolidation to which it shall
be a party or any company to which the Trustee may sell or transfer all or
substantially all of its corporate trust business, provided such company shall
be eligible under subsection (E) of Section 8.01 shall be the successor to such
Trustee without the execution or filing of any paper or any further act,
anything herein to the contrary notwithstanding.
SECTION 8.03. Liability of Trustee. (A) The recitals of facts herein
--------------------
and in the Bonds contained shall be taken as statements of the Authority, and
the Trustee shall assume no responsibility for the correctness of the same, or
make any representations as to the validity or sufficiency of this Indenture or
of the Bonds. In addition, the Trustee shall assume no responsibility with
respect to this Indenture or the Bonds other than in connection with the duties
or obligations assigned to or imposed upon the Trustee herein or in the Bonds.
The Trustee shall, however, be responsible for its representations contained in
its certificate of authentication on the Bonds. The Trustee shall not be liable
in connection with the performance of its duties hereunder, except for its own
negligence or default. The Trustee may become the Holder of Bonds with the same
rights it would have if it were not Trustee and, to the extent permitted by law,
may act as depositary for and permit any of its officers or directors to act as
a member of, or in any other capacity with respect to, any committee formed to
protect the rights of Bondholders, whether or not such committee shall represent
the Holders of a majority in principal amount of the Bonds then Outstanding.
The Trustee may execute any of the trusts or powers set forth herein and
perform the duties required of it hereunder by or through attorneys, agents, or
receivers, and shall be entitled to the advice of counsel concerning all matters
of trusts and its duties herein.
(B) The Trustee shall not be liable for any error of judgment made in
good faith by a responsible officer, director or employee unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts.
(C) The Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
Holders of not less than a majority in aggregate principal amount of the Bonds
at the time Outstanding relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee under this Indenture.
(D) The Trustee shall be under no obligation to exercise any of the
rights or
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powers vested in it by this Indenture at the request, order or direction of any
of the Bondholders pursuant to the provisions of this Indenture unless such
Bondholders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred therein or
thereby.
(E) The Trustee shall not be liable for any action taken by it in good
faith and believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Indenture.
(F) The Trustee shall not be deemed to have knowledge of any default or
Event of Default hereunder unless and until it shall have actual knowledge
thereof, or shall have received written notice thereof, at its Principal
Corporate Trust Office. Except as otherwise expressly provided herein, the
Trustee shall not be bound to ascertain or inquire as to the performance or
observance of any of the terms, conditions, covenants or agreements herein or of
any of the documents executed in connection with the Bonds, or as to the
existence of a default or Event of Default thereunder. The Trustee shall not be
responsible for the validity or effectiveness of any collateral given to or held
by it.
(G) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of its rights or
powers, other than to notify the Authority that it intends to take no particular
action or to notify the Bondholders that it will take no action, if repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it. The Trustee shall, however, in any case, make drawings
under each Letter of Credit, pay principal and Purchase Price of and premium, if
any, or interest on the Bonds as it becomes due and accelerate the Bonds as
required by the Indenture, notwithstanding anything to the contrary herein.
(H) The Trustee shall have no responsibility, opinion or liability with
respect to any information statement or recital found in any Official Statement
or other disclosure material, prepared or distributed with respect to the
issuance of such bonds, except for information provided by the Trustee.
SECTION 8.04. Right of Trustee to Rely on Documents. The Trustee shall
-------------------------------------
be protected in acting upon any notice, resolution, request, consent, order,
certificate, report, opinion, bond or other paper or document believed by it to
be genuine and to have been signed or presented by the proper party or parties;
in particular, the Trustee shall be entitled to rely upon a Certificate of the
Borrower to the effect that no Act of Bankruptcy has occurred. The Trustee may
consult with counsel, who may be counsel of or to the Authority or the Borrower,
with regard to legal questions, and the opinion of such counsel shall be full
and complete authorization and protection in respect of any action taken or
suffered by it hereunder in good faith and in accordance therewith.
The Trustee shall not be bound to recognize any person as the Holder of
a Bond unless and until such Bond is submitted for inspection, if required, and
its title thereto is satisfactorily established, if disputed.
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Whenever in the administration of the trusts imposed upon it by this
Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
Certificate of the Authority, and such Certificate shall be full warrant to the
Trustee for any action taken or suffered in good faith under the provisions of
this Indenture in reliance upon such Certificate, but in its discretion the
Trustee may, in lieu thereof, accept other evidence of such matter or may
require such additional evidence as it may deem reasonable.
SECTION 8.05. Preservation and Inspection of Documents. All documents
----------------------------------------
received by the Trustee under the provisions of this Indenture shall be retained
in its possession and shall be subject at all reasonable times to the inspection
of the Authority and any Bondholder and the Bank, and their agents and
representatives duly authorized in writing, at reasonable hours and under
reasonable conditions.
SECTION 8.06. Compensation and Indemnification. The Authority shall pay
--------------------------------
to and Indemnification. the Trustee, the Tender Agent, the Paying Agent and the
Registrar (solely from Additional Payments) from time to time reasonable
compensation for all services rendered under this Indenture, and also all
reasonable expenses, charges, legal and consulting fees and other disbursements
and those of its attorneys, agents and employees, incurred in and about the
performance of its powers and duties under this Indenture, and the Trustee shall
have a lien therefor on any and all funds (except the Rebate Fund, the moneys
held for particular Bonds (including non-presented Bonds), any moneys derived
from a Letter of Credit, remarketing proceeds, Available Moneys, moneys being
aged to become Available Moneys, and moneys held pursuant to Sections 4.07(g) or
10.03) at any time held by it under this Indenture which lien shall be prior and
superior to the lien of the Holders of the Bonds. The Authority further
covenants and agrees to indemnify and save the Trustee, the Tender Agent, the
Paying Agent and the Registrar, harmless against any losses, expenses and
liabilities which they may incur arising out of or in the exercise and
performance of its powers and duties hereunder, including the costs and expenses
of defending against any claim of liability, but excluding liabilities which are
due to the negligence or willful default of the indemnified party. The
obligations of the Authority under this Section shall survive resignation or
removal of the Trustee, the Tender Agent, the Paying Agent and the Registrar
under this Indenture and payment of the Bonds and discharge of this Indenture.
SECTION 8.07. Paying Agent. The Authority, with the written approval
------------
of the Trustee and the Bank, may appoint and at all times have a Paying Agent in
such cities as the Authority deems desirable, for the payment of the principal
of, and the interest (and premium, if any) on, the Bonds. It shall be the duty
of the Trustee to make such credit arrangements with such Paying Agent as may be
necessary to assure, to the extent of the moneys held by the Trustee for such
payment, the prompt payment of the principal of, and interest (and premium, if
any) on, the Bonds presented at either place of payment. The Trustee will not be
responsible for the failure of the Bank or any other party to make funds
available to the Trustee or Paying Agent. The Trustee is the initial Paying
Agent. If the Paying Agent is any entity other than the Trustee, (i) the Paying
Agent may not hold any such funds and (ii) the Paying Agent shall be subject to
the same standards applicable to the Trustee as set forth in this Indenture.
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SECTION 8.08. Notices to the Authority. The Trustee shall provide the
------------------------
Authority and the Bank with the following:
(a) On or before September 15 of each year, commencing September 15,
1997, during which any of the Bonds are outstanding, or upon any significant
change that occurs which would adversely impact the Trustee's ability to perform
its duties under the Indenture, a written disclosure of any such change, or if
applicable, of any conflicts that the Trustee may have as a result of other
business dealings between the Trustee and the Borrower. The Trustee may rely on
a Certificate of the Borrower delivered pursuant to Section 5.11(d) of the
Agreement to the extent of the information required in such certificate for
purposes of this subparagraph (a). If there are not such instances of a
significant change, or of a conflict existing, then a statement to that effect
shall be provided on such date;
(b) If there is a failure to pay any amount of principal or, Purchase
Price of, premium, if any, or interest on any Bond when due; or if there is a
failure of the Borrower to provide any notice, certification or report specified
in Section 5.11 of the Agreement; or if there is an occurrence of an Event of
Default hereunder, of which the Trustee has knowledge, the Trustee shall provide
written notice to the Authority within five Business Days of such occurrence and
such notice shall include a statement setting forth the steps the Trustee is
taking to remedy such failure or Event of Default, as applicable; and
(c) As of June 30 and December 31 of each year, a Trustee's
certificate, in the form of Exhibit B attached hereto, which shall be received
no later than July 15 or January 15 next following each such June 30 or December
31, as the case may be.
SECTION 8.09. Notices to Rating Agency and Bank. The Trustee shall
---------------------------------
provide Rating Agency and Bank. any Rating Agency and the Bank with written
notice upon the occurrence of: (i) the expiration, termination or extension of
any Letter of Credit; (ii) the discharge of liability on any Series of the Bonds
pursuant to Section 10.02 hereof; (iii) the resignation or removal of the
Trustee, Tender Agent, or Remarketing Agent; (iv) acceptance of appointment as
successor Trustee, Tender Agent, or Remarketing Agent hereunder; (v) the
redemption of all Bonds; (vi) conversion to a new Interest Rate Period or to an
Interest Rate Period not enhanced by a Letter of Credit; (vii) a material change
in the Indenture, the Loan Agreement, or a Letter of Credit; and (viii) when a
Series of Bonds is no longer Outstanding. The Trustee shall also notify any
Rating Agency of any changes to any of the documents to which the Trustee is a
party, upon its receipt of notification of any such changes.
SECTION 8.10. Duties of Remarketing Agent. The Authority, with the
---------------------------
advice of the Borrower, shall appoint the Remarketing Agent for the Bonds,
subject to the conditions set forth in Section 8.11 hereof. The Remarketing
Agent shall designate to the Trustee its principal office and signify its
acceptance of the duties and obligations imposed on it hereunder by a written
instrument of acceptance delivered to the Authority and the Trustee under which
the Remarketing Agent will agree to perform the obligations of the Remarketing
Agent set forth herein and under which the Remarketing Agent will agree to keep
such books and records as shall be consistent with prudent industry practice and
to make such books and records available for
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inspection by the Authority, the Trustee, the Bank and the Borrower at all
reasonable times. The Remarketing Agent shall set the interest rates on the
1997A Bonds and perform the other duties provided for in Section 2.03 and shall
remarket 1997A Bonds as provided in Section 4.07 hereof. There may be separate
Remarketing Agents for these two functions. The Remarketing Agent shall hold all
moneys delivered to it in trust in non-commingled funds for the benefit of the
person or entity which shall have so delivered such moneys until such moneys are
paid to the Trustee or the Tender Agent as provided herein. The Remarketing
Agent may for its own account or as broker or agent for others deal in Bonds and
may do anything any other Holder may do to the same extent as if the Remarketing
Agent were not serving as such.
SECTION 8.11. Eligibility of Remarketing Agent; Replacement. (A) Any
---------------------------------------------
successor Remarketing Agent shall be a bank, trust company or member of the
National Association of Securities Dealers, Inc. organized and doing business
under the laws of the United States or any state or the District of Columbia and
shall have a capitalization of at least $150,000,000 as shown in its most recent
published annual report. The Remarketing Agent shall have a rating of at least
Moody's "Baa3/P-3" or an equivalent rating from another Rating Agency, or be
approved by the Rating Agency. The initial Remarketing Agent shall be Westhoff,
Cone & Holmstedt.
(B) The Remarketing Agent may resign by notifying the Authority, the
Trustee, the Tender Agent, the Borrower and the Bank at least 45 days before the
effective date of such resignation. The Authority may remove the Remarketing
Agent and with the consent of the Borrower and the Bank, appoint a successor by
notifying the Remarketing Agent, the Bank and the Trustee. No resignation or
removal shall be effective until the successor has delivered an acceptance of
its appointment to the Trustee.
(C) If the Letter of Credit is terminated for any reason, or an Event
of Default under this Indenture occurs, the Remarketing Agent for the respective
Series of Bonds shall have the right to resign immediately.
(D) The appointment of any Remarketing Agent pursuant to this Section
8.11 shall terminate (subject to renewal by the Authority or replacement by a
successor Remarketing Agent as provided in this Section) fifteen days prior to
the commencement of any Term Interest Rate Period of three years' or longer
duration of any Series of Bonds for which such Remarketing Agent was appointed.
SECTION 8.12. Compensation of Remarketing Agent. The Remarketing Agent
---------------------------------
shall not be entitled to any compensation from the Authority or the Trustee but,
rather, shall make separate arrangements with the Borrower for its compensation.
SECTION 8.13. Appointment and Duties of Tender Agent. The Authority
--------------------------------------
hereby appoints the Trustee as initial Tender Agent, provided that if the Bonds
are no longer Book-Entry Bonds, the Authority, with the advice of the Borrower,
shall appoint a successor Tender Agent, subject to the conditions of Section
8.14 hereof. The Tender Agent shall designate its principal office and signify
its acceptance of all of the duties and obligations imposed upon it hereunder by
a written instrument of acceptance delivered to the Authority, the Trustee, the
Bank
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and the Remarketing Agent. The Tender Agent shall perform the duties provided
for in this Indenture and in exercising such duties shall be entitled to the
same rights and immunities applicable to the Trustee as set forth in this
Indenture and shall not be liable for any action or omission to act except for
negligence or willful misconduct. Notwithstanding any provision in this
Indenture to the contrary, the Tender Agent shall not be responsible for any
misconduct or negligence on the part of any agent, correspondent, attorney or
receiver appointed with due care by it hereunder.
SECTION 8.14. Eligibility of Tender Agent; Replacement. The Tender
----------------------------------------
Agent and any successor to
the Tender Agent shall be a bank or trust company organized and doing business
under the laws of the United States or any state and shall either (i) have a
combined capital and surplus of at least fifty million dollars ($50,000,000),
and be subject to supervision or examination by federal or state authority or
(ii) be a wholly-owned subsidiary of a bank, trust company or bank holding
company meeting, on an aggregate basis, the tests set out in clause (i). If
such bank or trust company publishes a report of condition at least annually,
pursuant to law or to the requirements of any supervising or examining authority
above referred to, then for the purpose of this subsection the combined capital
and surplus of such bank or trust company shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. At all times when the Bonds are not Book-Entry Bonds the Tender
Agent shall have an office or agency for servicing the Bonds in New York, New
York. The Tender Agent or the bank, trust company or bank holding company of
which the Tender Agent is a wholly-owned subsidiary shall have a rating of at
least Moody's "Baa3/P-3" or an equivalent rating from another Rating Agency, or
be approved by the Rating Agency.
The Tender Agent may resign by notifying the Authority, the Trustee, the
Bank, the Remarketing Agent and the Bondholders at least 30 days before the
effective date of such resignation. The Trustee, with the consent of the
Borrower and the Bank, may remove the Tender Agent and appoint a successor by
notifying the Tender Agent, the Remarketing Agent, the Bank and the Authority.
No resignation or removal shall be effective until the successor has delivered
an acceptance of its appointment to the Trustee and the predecessor Tender
Agent.
In the event of the resignation or removal of the Tender Agent, such
Tender Agent shall pay over, assign and deliver any moneys held by it as Tender
Agent to its successor, or if there is no successor, to the Trustee. In the
event that for any reason there shall be a vacancy in the office of Tender
Agent, the Trustee shall act as such Tender Agent to the extent it has
operational capacity to perform such tasks.
SECTION 8.15. Compensation of Tender Agent. The Tender Agent shall not
----------------------------
be entitled to any compensation from the Authority, the Remarketing Agent or the
Trustee but, rather, shall only be entitled to compensation from the Borrower.
The Borrower shall transmit all payment of fees to the Trustee who shall, in
turn, make payment to the Tender Agent.
SECTION 8.16. Appointment and Duties of Bond Registrar. The Authority
----------------------------------------
hereby designates the Trustee as initial Bond Registrar, provided that the
Tender Agent shall act as co-Bond Registrar with respect to Bonds tendered
pursuant to Sections 2.04 or 4.06.
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The Bond Registrar shall not be entitled to any compensation from the
Authority, the Remarketing Agent, or the Trustee but, rather, shall only be
entitled to compensation from the Borrower.
SECTION 8.17. Eligibility of Bond Registrar. A Bond Registrar appointed
-----------------------------
pursuant to this Indenture shall be a corporation organized and doing business
under the laws of the United States or any state or the District of Columbia,
subject to supervision or examination by federal or state authority and shall
either (i) have a combined capital and surplus of at least fifty million dollars
($50,000,000), and be subject to supervision or examination by federal or state
authority or (ii) be a wholly-owned subsidiary of a bank, trust company or bank
holding company meeting, on an aggregate basis, the tests set out in clause (i).
If such bank or trust company publishes a report of condition at least annually,
pursuant to law or to the requirements of any supervising or examining authority
above referred to, then for the purpose of this subsection the combined capital
and surplus of such bank or trust company shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published.
SECTION 8.18. Bond Registrar's Performance of Duties. The Bond
--------------------------------------
Registrar shall perform the duties provided for in this Indenture and in
exercising such duties shall be entitled to the same rights and immunities
applicable to the Trustee as set forth in this Indenture and shall not be liable
for any action or omission to act except for negligence or willful misconduct.
SECTION 8.19. Replacement of Bond Registrar. The Bond Registrar may
-----------------------------
resign by notifying the Authority, the Trustee, the Bank and the Borrower at
least 30 days before the effective date of such resignation. The Authority, with
the consent of the Borrower and the Bank, may remove the Bond Registrar and
appoint a successor by notifying the Bond Registrar, the Remarketing Agent, the
Bank and the Trustee. No resignation or removal shall be effective until the
successor has delivered an acceptance of its appointment to the Trustee and the
predecessor Bond Registrar.
In the event of the resignation or removal of the Bond Registrar, such
Bond Registrar shall pay over, assign and deliver any moneys held by it as Bond
Registrar to its successor, or if there is no successor, to the Trustee. In the
event that for any reason there shall be a vacancy in the office of Bond
Registrar, the Trustee shall act as such Bond Registrar to the extent it has
operational capacity to perform such tasks.
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ARTICLE IX
MODIFICATION OR AMENDMENT OF THE INDENTURE
SECTION 9.01. Amendments Permitted. (A) This Indenture and the
--------------------
rights and obligations of the Authority and of the Holders of the Bonds and of
the Trustee may be modified or amended from time to time and at any time by an
indenture or indentures supplemental hereto, which the Authority and the Trustee
may enter into when the written consent of the Holders of sixty-six and two-
thirds percent (66-2/3%) in aggregate principal amount of all Bonds then
Outstanding, and the Bank, shall have been filed with the Trustee. No such
modification or amendment shall (1) extend the fixed maturity of any Bond, or
reduce the amount of principal thereof, or extend the time of payment, or change
the method of computing the rate of interest thereon, or extend the time of
payment of interest thereon, without the consent of the Holder of each Bond so
affected, or (2) reduce the aforesaid percentage of Bonds the consent of the
Holders of which is required to effect any such modification or amendment, or
permit the creation of any lien on the Revenues and other assets pledged under
this Indenture prior to or on a parity with the lien created by this Indenture,
or deprive the Holders of the Bonds of the lien created by this Indenture on
such Revenues and other assets (except as expressly provided in this Indenture),
without the consent of the Holders of all of the Bonds then Outstanding. It
shall not be necessary for the consent of the Bondholders to approve the
particular form of any Supplemental Indenture, but it shall be sufficient if
such consent shall approve the substance thereof. Promptly after the execution
by the Authority and the Trustee of any Supplemental Indenture pursuant to this
subsection (A), the Trustee shall mail a notice, setting forth in general terms
the substance of such Supplemental Indenture, to each Rating Agency then rating
the Bonds and the Holders of the Bonds at the address shown on the registration
books of the Trustee. Any failure to give such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
Supplemental Indenture.
(B) This Indenture and the rights and obligations of the Authority, of
the Trustee and of the Holders of the Bonds may also be modified or amended from
time to time and at any time by an indenture or indentures supplemental hereto,
which the Authority and the Trustee may enter into without the consent of any
Bondholders, but only to the extent permitted by law and after receipt of an
opinion of counsel that the provisions of such Supplemental Indenture shall not
materially adversely affect the interests of the Holders of the Bonds,
including, without limitation, for any one or more of the following purposes:
(1) to add to the covenants and agreements of the Authority in
this Indenture contained other covenants and agreements thereafter to be
observed, to pledge or assign additional security for the Bonds (or any
portion thereof), or to surrender any right or power herein reserved to or
conferred upon the Authority;
(2) to make such provisions for the purpose of curing any
ambiguity, inconsistency or omission, or of curing or correcting any
defective provision, contained in this Indenture, or in regard to matters
or questions arising under this Indenture, as the Authority may deem
necessary or desirable and not inconsistent with this Indenture;
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(3) to modify, amend or supplement this Indenture in such manner
as to permit the qualification hereof under the Trust Indenture Act of
1939, as amended, or any similar federal statute hereafter in effect, and
to add such other terms, conditions and provisions as may be permitted by
said act or similar federal statute;
(4) to conform to the terms and provisions of any Alternate Letter
of Credit or Alternate Credit Facility or to obtain a rating on the Bonds;
(5) to provide for the issuance of a Series of Bonds, and to
provide the terms and conditions under which such Bonds may be issued,
subject to and in accordance with the provisions of Article II (which shall
not require determination by the Trustee of the effect on the interests of
Holders of Bonds); or
(6) to modify, amend or supplement this Indenture in such a manner
to permit the Authority, the Trustee, the Borrower or any other responsible
party to comply with the requirements of S.E.C. Rule 15c2-12, as it may
from time to time be amended or supplemented, with respect to the Bonds.
The Trustee shall give notice of any such modification or amendment to each
Rating Agency then rating the Bonds.
(C) The Trustee may in its discretion, but shall not be obligated to,
enter into any such Supplemental Indenture authorized by subsections (A) or (B)
of this Section which materially adversely affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
SECTION 9.02. Effect of Supplemental Indenture. Upon the execution
--------------------------------
of any Supplemental Indenture pursuant to this Article, this Indenture shall be
deemed to be modified and amended in accordance therewith, and the respective
rights, duties and obligations under this Indenture of the Authority, the
Trustee and all Holders of Bonds Outstanding shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modification
and amendment, and all the terms and conditions of any such Supplemental
Indenture shall be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.
Any such Supplemental Indenture shall comply with the terms of this
Article IX, and the Trustee may conclusively rely on an Opinion of Counsel that
the Supplemental Indenture complies with the provisions therein.
SECTION 9.03. Endorsement of Bonds; Preparation of New Bonds. Bonds
----------------------------------------------
delivered after the execution of any Supplemental Indenture pursuant to this
Article may, and if the Trustee so determines shall, bear a notation by
endorsement or otherwise in form approved by the Authority and the Trustee as to
any modification or amendment provided for in such Supplemental Indenture, and,
in that case, upon demand of the Holder of any Bond Outstanding at the time of
such execution and presentation of such Holder's Bond for the purpose at the
office of the Trustee or at such additional offices as the Trustee may select
and designate for that
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purpose, a suitable notation shall be made on such Bond. If the Supplemental
Indenture shall so provide, new Bonds so modified as to conform, in the opinion
of the Authority and the Trustee, to any modification or amendment contained in
such Supplemental Indenture, shall be prepared and executed by the Authority and
authenticated by the Trustee, and upon demand of the Holders of any Bonds then
Outstanding shall be exchanged at the Corporate Trust Office of the Trustee
without cost to any Bondholder, for Bonds then Outstanding, upon surrender for
cancellation of such Bonds, in equal aggregate principal amounts of the same
Series and maturity.
SECTION 9.04. Amendment of Particular Bonds. The provisions of this
-----------------------------
Article shall not prevent any Bondholder from accepting any amendment as to the
particular Bonds held by him or her, provided that due notation thereof is made
on such Bonds.
ARTICLE X
DEFEASANCE
SECTION 10.01. Discharge of Indenture. Bonds of any Series that bear
----------------------
interest at a Term Interest Rate to the maturity of such Series of Bonds may be
paid by the Authority in any of the following ways, provided that the Authority
also pays or causes to be paid any other sums payable hereunder by the Authority
and related to the respective Series:
(a) by paying or causing to be paid with Available Moneys the principal
of, interest and premium, if any, on the Bonds of the Series Outstanding,
as and when the same become due and payable;
(b) by depositing with the Trustee, in trust, at or before maturity,
money or securities in the necessary amount (as provided in Section 10.03)
to pay or redeem with Available Moneys all Bonds of the Series then
Outstanding; or
(c) by delivering to the Trustee, for cancellation by it, the Bonds of
the Series then Outstanding.
If the Authority shall also pay or cause to be paid all other sums
payable hereunder by the Authority, then and in that case, at the election of
the Authority (evidenced by a Certificate of the Authority, filed with the
Trustee, signifying the intention of the Authority to discharge all such
indebtedness and this Indenture), and notwithstanding that any Bonds shall not
have been surrendered for payment, this Indenture and the pledge of Revenues and
other assets made under this Indenture and all covenants, agreements and other
obligations of the Authority under this Indenture shall cease, terminate, become
void and be completely discharged and satisfied except only as provided in
Section 10.02 hereof. In such event, upon Request of the Authority, the Trustee
shall cause an accounting for such period or periods as may be requested by the
Authority to be prepared and filed with the Authority and shall execute and
deliver to the Authority all such instruments as may be necessary or desirable
to evidence such discharge and satisfaction, and the Trustee shall pay over,
transfer, assign or deliver all moneys or securities or other property held by
it pursuant to this Indenture (other than the Rebate Fund) which are not
required for the payment or redemption of Bonds not theretofore surrendered for
such payment or redemption
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and any amounts owed to the Trustee hereunder in the following order (1) first,
to the Bank to the extent of any amounts due to the Bank pursuant to the
Reimbursement Agreement and (2) second, to the Borrower, provided, however, that
notwithstanding any provision of this Indenture or the Loan Agreement, under no
circumstances may the Authority or the Borrower receive any funds derived from a
draw on any Letter of Credit, remarketing proceeds, or moneys held for the
payment of particular Bonds (including moneys held for non-presented Bonds). All
moneys or securities held by the Trustee in the Authority Subaccount of the
Costs of Issuance Fund shall be transferred to the Authority.
SECTION 10.02. Discharge of Liability on Bonds. Upon the deposit with
-------------------------------
the Trustee, in trust, at or before maturity, of money or securities in the
necessary amount (as provided in Section 10.03 hereof) to pay or redeem any
Outstanding Bond (whether upon or prior to its maturity or the redemption date
of such Bond), provided that, if such Bond is to be redeemed prior to maturity,
notice of such redemption shall have been given as in Article IV provided or
provision satisfactory to the Trustee shall have been made for the giving of
such notice, then all liability of the Authority in respect of such Bond shall
cease, terminate and be completely discharged, except only that the Holder
thereof shall thereafter be entitled to payment of the principal of, premium, if
any, and interest on such Bond by the Authority, and the Authority shall remain
liable for such payment, but only out of such money or securities deposited with
the Trustee as aforesaid for their payment and such money or securities shall be
pledged to such payment; provided further, however, that the provisions of
Section 10.04 hereof shall apply in all events.
The Authority may at any time surrender to the Trustee for cancellation
by it any Bonds previously issued and delivered, which the Authority may have
acquired in any manner whatsoever, and such Bonds, upon such surrender and
cancellation, shall be deemed to be paid and retired.
SECTION 10.03. Deposit of Money or Securities with Trustee. Whenever in
-------------------------------------------
this Indenture it is provided or permitted that there be deposited with or held
in trust by the Trustee money or securities in the necessary amount to pay or
redeem any Bonds, the money or securities to be deposited or held may include
money or securities held by the Trustee in the funds and accounts established
pursuant to this Indenture (exclusive of the Rebate Fund, each Letter of Credit
Account, the Authority Subaccount of the Costs of Issuance Fund and the account
described in Section 4.07(g) hereof) and shall be:
(a) Available Moneys in an equal amount to the principal amount of such
Bonds, and all unpaid interest thereon to maturity except that, in the case
of Bonds which are to be redeemed prior to maturity and in respect of which
notice of such redemption shall have been given as in Article IV provided
or provision satisfactory to the Trustee shall have been made for the
giving of such notice, the amount to be deposited or held shall be the
principal amount or redemption price of such Bonds and all unpaid interest
thereon to the redemption date; or
(b) Investment Securities of the type described in clause (ii)
(including funds described in clause (v) rated Moody's "Aaa" or equivalent
which consist solely of securities
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described in clause (ii)) of the definition of Investment Securities
purchased with Available Moneys, the principal of and interest on which
when due and without reinvestment will provide money sufficient to pay the
principal of, premium, if any, all unpaid interest to maturity, or to the
redemption date, on the Bonds to be paid or redeemed, as such principal and
interest become due, with maturities no longer than 30 days or as may be
necessary to make the required payment on the Bonds provided that, in the
case of Bonds which are to be redeemed prior to the maturity thereof,
notice of such redemption shall have been given as in Article IV provided
or provision satisfactory to the Trustee shall have been made for the
giving of such notice;
provided, in each case, that the Trustee shall have been irrevocably instructed
(by the terms of this Indenture or by Request of the Authority) to apply such
money or Investment Securities to the payment of such principal, premium, if
any, and interest with respect to such Bonds and provided further that each
Rating Agency then rating such Bonds and the Trustee shall have received a
report of an Accountant that the moneys or Investment Securities on deposit are
sufficient to pay the principal, premium, if any, and interest on the Bonds to
maturity or the redemption date, and a legal opinion from a nationally
recognized firm in bankruptcy law that payment of the Bonds from such moneys
would not constitute transfers avoidable under 11 U.S.C. Section 547(b) should
the Borrower, any Guarantor or the Authority become the debtor in a case under
the United States Bankruptcy Code.
SECTION 10.04. Payment of Bonds After Discharge of Indenture
---------------------------------------------
Obligation. Notwithstanding any provisions of this Indenture, any moneys
- ----------
deposited with the Trustee in trust for the payment of the principal of, or
interest or premium on, any Bonds remaining unclaimed after the principal of any
Bond has become due and payable (whether at maturity or upon call for redemption
or by declaration as provided in this Indenture), shall be disposed of as
provided by law and the Holders of such Bonds shall thereafter be entitled to
look only to the transferee of such moneys (presently the State Controller) for
payment thereof, and all liability of the Trustee with respect to such moneys
shall thereupon cease; provided, that before the disposition of such moneys as
aforesaid, the Trustee may (at the cost of the Borrower) first publish at least
once in a Qualified Newspaper a notice, in such form as may be deemed
appropriate by the Trustee, in respect of the Bonds so payable and not presented
and in respect of the provisions relating to the disposition of the moneys held
for the payment thereof.
MISCELLANEOUS
SECTION 11.01. Liability of Authority Limited to Revenues.
------------------------------------------
Notwithstanding anything in this Indenture or in the Bonds contained, the
Authority shall not be required to advance any moneys derived from any source
other than the Revenues and other assets pledged under this Indenture for any of
the purposes in this Indenture mentioned, whether for the payment of the
principal of or interest on the Bonds or for any other purpose of this
Indenture. Nevertheless, the Authority may, but shall not be required to,
advance for any of the purposes hereof any funds of the Authority which may be
made available to it for such purposes.
SECTION 11.02. Successor Is Deemed Included in All References to
--------------------------------------------------
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Predecessor. Whenever in this Indenture either the Authority, the Bank or
- -----------
the Trustee is named or referred to, such reference shall be deemed to include
the successors or assigns thereof, and all the covenants and agreements in this
Indenture contained by or on behalf of the Authority, the Bank or the Trustee
shall bind and inure to the benefit of the respective successors and assigns
thereof whether so expressed or not. All the covenants, stipulations, promises
and agreements in this Indenture contained, by or on behalf of the Authority,
shall bind and inure to the benefit of its successors and assigns, whether so
expressed or not. If any of the powers or duties of the Authority shall
hereafter be transferred by any law of the State of California, and if such
transfer shall relate to any matter or thing permitted or required to be done
under this Indenture by the Authority, then the body or official of the State of
California who shall succeed to such powers or duties shall act and be obligated
in the place and stead of the Authority as in this Indenture provided.
SECTION 11.03. Limitation of Rights to Parties and Bondholders. Nothing
------------------------------------------------
in this Indenture or in the Bonds expressed or implied is intended or shall be
construed to give to any person other than the Authority, the Trustee, the Bank,
the Borrower, the Direct Participants (as provided in Section 2.04 hereof) and
the Holders of the Bonds, any legal or equitable right, remedy or claim under or
in respect of this Indenture or any covenant, condition or provision therein or
herein contained; and all such covenants, conditions and provisions are and
shall be held to be for the sole and exclusive benefit of the Authority, the
Trustee, the Bank, the Borrower, the Direct Participants (as provided in Section
2.04 hereof) and the Holders of the Bonds.
SECTION 11.04. Waiver of Notice. Whenever in this Indenture the giving
----------------
of notice by mail or otherwise is required, the giving of such notice may be
waived in writing by the person entitled to receive such notice and in any such
case the giving or receipt of such notice shall not be a condition precedent to
the validity of any action taken in reliance upon such waiver.
SECTION 11.05. Destruction of Bonds. Whenever in this Indenture
--------------------
provision is made for the cancellation by the Trustee and the delivery to the
Authority of any Bonds, the Trustee may, in lieu of such cancellation and
delivery, destroy such Bonds, and deliver a certificate of such destruction to
the Authority.
SECTION 11.06. Severability of Invalid Provisions. If any one or more
----------------------------------
of the provisions contained in this Indenture or in the Bonds shall for any
reason be held to be invalid, illegal or unenforceable in any respect, then such
provision or provisions shall be deemed severable from the remaining provisions
contained in this Indenture and such invalidity, illegality or unenforceability
shall not affect any other provision of this Indenture, and this Indenture shall
be construed as if such invalid or illegal or unenforceable provision had never
been contained herein. The Authority hereby declares that it would have entered
into this Indenture and each and every other Section, paragraph, sentence,
clause or phrase hereof and authorized the issuance of the Bonds pursuant
thereto irrespective of the fact that any one or more Sections, paragraphs,
sentences, clauses or phrases of this Indenture may be held illegal, invalid or
unenforceable.
SECTION 11.07. Governing Law; Venue. This Indenture shall be construed
--------------------
in accordance with and governed by the Constitution and laws of the State
applicable to contracts made and performed in the State. This Indenture shall be
enforceable in the State, and any action
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arising out of this Indenture shall be filed and maintained in the Sacramento
County Superior Court, Sacramento, California, unless the Authority waives this
requirement. In the event of a dispute between the parties under this Indenture,
the losing party in such dispute shall pay all costs and expenses incurred by
the prevailing party in connection therewith, including but not limited to
attorneys' fees.
SECTION 11.08. Notices. Notices shall be delivered to each Bondholder
-------
by first-class mail, postage prepaid, at the address set forth for such
Bondholder on the registration books of the Trustee. Any notice to or demand
upon the Trustee may be served or presented, and such demand may be made, at the
Corporate Trust Office of the Trustee, which at the date of adoption of this
Indenture is located at the following address:
BNY Western Trust Company
700 South Flower Street, Suite 500
Los Angeles, California 90017
Attn: Corporate Trust Department
or at such other address as may have been filed in writing by the Trustee with
the Authority. Any notice to or demand upon the Authority, the Borrower, the
Bank or Rating Agency shall be deemed to have been sufficiently given or served
for all purposes by being delivered or sent by telex or by being deposited,
postage prepaid, in a post office letter box, addressed, as the case may be, as
follows:
To the Authority:
California Pollution Control Financing Authority
915 Capitol Mall, Room 466
Sacramento, California 95814
Attn: Executive Director
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To the Bank:
Union Bank of California, N.A.
530 B Street, 4th Floor
San Diego, CA 92102
Attn: Michael Conboy
Vice President
To the Borrower:
West Valley MRF, LLC
c/o Burrtec Waste Industries, Inc.
9890 Cherry Avenue
Fontana, CA 92335
Attn: Chief Financial Officer
and
Kaiser Ventures Inc.
3633 E. Inland Empire Blvd.
Suite 850
Ontario, CA 91764
Attn: Senior Vice President
& Chief Financial Officer
To the Rating Agency:
Fitch Investors Service
One State Street Plaza, 34th Floor
New York, New York 10004
Attn: Public Finance - Municipal
Structure Group
or such other addresses as may have been filed in writing with the Trustee.
SECTION 11.09. Evidence of Rights of Bondholders. (a) Any request,
---------------------------------
consent or other instrument required or permitted by this Indenture to be signed
and executed by Bondholders may be in any number of concurrent instruments of
substantially similar tenor and shall be signed or executed by such Bondholders
in person or by an agent or agents duly appointed in writing. Proof of the
execution of any such request, consent or other instrument or of a writing
appointing any such agent, or of the holding by any person of Bonds transferable
by delivery, shall be sufficient for any purpose of this Indenture and shall be
conclusive in favor of the Trustee and of the Authority if made in the manner
provided in this Section.
(b) The fact and date of the execution by any person of any such
request, consent or other instrument or writing may be proved by the certificate
of any notary public or
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other officer of any jurisdiction, authorized by the laws thereof to take
acknowledgments of deeds, certifying that the person signing such request,
consent or other instrument acknowledged to such notary public or other officer
the execution thereof, or by an affidavit of a witness of such execution duly
sworn to before such notary public or other officer.
(c) The ownership of registered Bonds shall be proved by the bond
registration books held by the Trustee. The Trustee and the Authority may
conclusively assume that such ownership continues until written notice to the
contrary is served upon the Trustee. The fact and the date of execution of any
request, consent or other instrument and the amount and distinguishing numbers
of Bonds held by the person so executing such request, consent or other
instrument may also be proved in any other manner which the Trustee may deem
sufficient. The Trustee may nevertheless, in its discretion, require further
proof in cases where it may deem further proof desirable.
Any request, consent, or other instrument or writing of the Holder of
any Bond shall bind every future Holder of the same Bond and the Holder of every
Bond issued in exchange therefor or in lieu thereof, in respect of anything done
or suffered to be done by the Trustee or the Authority in accordance therewith
or reliance thereon.
SECTION 11.10. Disqualified Bonds. In determining whether the Holder
------------------
of the requisite aggregate principal amount of Bonds have concurred in any
demand, request, direction, consent or waiver under this Indenture, Bonds which
are owned or held by or for the account of the Authority or the Borrower, or by
any other obligor on the Bonds, or by any person directly or indirectly
controlling or controlled by, or under direct or indirect common control with,
the Authority or the Borrower or any other obligor on the Bonds, shall be
disregarded and deemed not to be Outstanding for the purpose of any such
determination provided that, for the purpose of determining whether the Trustee
shall be protected in relying on any such demand, request, direction, consent or
waiver, only Bonds which the Trustee knows to be so owned shall be disregarded.
Bonds so owned which have been pledged in good faith may be regarded as
Outstanding for the purposes of this Section if the pledgee shall establish to
the satisfaction of the Trustee the pledgee's right to vote such Bonds and that
the pledgee is not a person directly or indirectly controlling or controlled by,
or under direct or indirect common control with, the Authority or the Borrower
or any other obligor on the Bonds. In case of a dispute as to such right, any
decision by the Trustee taken upon the advice of counsel shall be full
protection to the Trustee.
SECTION 11.11. Money Held for Particular Bonds. The money held by the
-------------------------------
Trustee for the payment of the interest, principal or premium due on any date
with respect to particular Bonds (or portions of Bonds in the case of registered
Bonds redeemed in part only) shall, on and after such date and pending such
payment, be set aside on its books and held in trust by it for the Holders of
the Bonds entitled thereto, subject, however, to the provisions of Section 10.04
hereof.
SECTION 11.12. Funds and Accounts. Any fund or account required by
------------------
this Indenture to be established and maintained by the Trustee may be
established and maintained in the accounting records of the Trustee, either as a
fund or an account, and may, for the purposes of
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such records, any audits thereof and any reports or statements with respect
thereto, be treated either as a fund or as an account; but all such records with
respect to all such funds and accounts shall at all times be maintained in
accordance with industry standards and with due regard for the requirements of
Section 6.05 hereof and for the protection of the security of the Bonds and the
rights of every Holder thereof.
SECTION 11.13. Waiver of Personal Liability. No member, officer, agent
----------------------------
or employee of the Authority, and no officer, official agent or employee of the
State of California or any department, board or agency of the foregoing shall be
individually or personally liable for the payment of the principal of or premium
or interest on the Bonds or be subject to any personal liability or
accountability by reason of the issuance thereof; but nothing herein contained
shall relieve any such member, officer, agent or employee from the performance
of any official duty provided by law or by this Indenture.
SECTION 11.14. Opinions of Bond Counsel. Whenever in this Indenture
------------------------
it is required that prior to the taking of any action (including but not limited
to any modifications of arbitrage covenants contained in Sections 5.06 and 6.06
hereof) an opinion of Bond Counsel is required to be delivered to the effect
that such action will not adversely affect the Tax-exempt status of the Bonds,
and such opinion is not given by Orrick, Herrington & Sutcliffe LLP, the opinion
of Bond Counsel shall instead affirmatively state, in a manner acceptable to the
Authority and the Trustee, that interest on the Bonds is Tax-exempt and will
remain so after the action in question. This Section shall apply in the same
fashion with respect to the affirmative opinion of any such successor Bond
Counsel.
SECTION 11.15. Complete Agreement. The parties agree that the terms
------------------
and conditions of this Indenture supersede those of all previous agreements
between the parties, and that this Indenture, together with the documents
referred to in this Indenture, contains the entire agreement between the parties
hereto.
SECTION 11.16. Execution in Several Counterparts. This Indenture may be
---------------------------------
executed in any number of counterparts and each of such counterparts shall for
all purposes be deemed to be an original; and all such counterparts, or as many
of them as the Authority and the Trustee shall preserve undestroyed, shall
together constitute but one and the same instrument.
IN WITNESS WHEREOF, the CALIFORNIA POLLUTION CONTROL FINANCING AUTHORITY
has caused this Indenture to be signed in its name by its Chairman and its seal
to be hereunto affixed and attested by its Executive Director and BNY WESTERN
TRUST COMPANY, in token of its acceptance of the trusts created hereunder, has
caused this Indenture to be signed in its corporate name by one of the officers
thereunto duly authorized all as of the day and year first above written.
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CALIFORNIA POLLUTION CONTROL
FINANCING AUTHORITY
By Chairman
By: /s/
-------------------------------------
Deputy
[Seal]
Attest:
/s/
______________________________
Executive Director
BNY WESTERN TRUST COMPANY,
As Trustee
By: /s/
-------------------------------------
Authorized Officer
79
<PAGE>
EXHIBITS NOT ATTACHED.
THEY WILL BE FURNISHED TO THE
SECURITIES AND EXCHANGE COMMISSION UPON THE WRITTEN REQUEST OF THE SECURITIES
AND EXCHANGE COMMISSION.
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<PAGE>
EXHIBIT 10.3
$9,500,000
CALIFORNIA POLLUTION CONTROL FINANCING AUTHORITY
VARIABLE RATE DEMAND SOLID WASTE DISPOSAL REVENUE BONDS
(WEST VALLEY MRF, LLC PROJECT)
SERIES 1997A
REMARKETING AGREEMENT
---------------------
Dated as of June 1, 1997
West Valley MRF, LLC
c/o Kaiser Ventures Inc.
3633 East Inland Empire Boulevard,
Suite 850
Ontario, California 91764
and
c/o Burrtec Waste Industries, Inc.
9890 Cherry
Fontana, California 92335
Ladies and Gentlemen:
This is to confirm the agreement between the undersigned, Westhoff, Cone &
Holmstedt (the "Remarketing Agent") and West Valley MRF, LLC, a California
limited liability company (the "Borrower") for the Remarketing Agent to act as
exclusive remarketing agent in connection with the offering and sale from time
to time in the secondary market of $9,500,000 aggregate principal amount of the
California Pollution Control Financing Authority Variable Rate Demand Solid
Waste Disposal Revenue Bonds (West Valley MRF, LLC Project) Series 1997A (the
"Bonds").
The Bonds will be issued under the provisions of the California Pollution
Control Financing Authority Act, commencing with Section 44500 of the California
Health and Safety Code, as now in effect and as it may from time to time
hereafter be amended or supplemented (the "Act"). The Bonds shall be
substantially in the form and subject to redemption as described in, and shall
be issued and secured under and pursuant to the provisions of an Indenture,
dated as of June 1, 1997 (the "Indenture") by and between the California
Pollution Control Financing Authority (the "Authority") and BNY Western Trust
Company, as trustee (the "Trustee"). The Bonds are secured by payments made by
the Borrower to the Authority pursuant to a Loan Agreement, dated as of June 1,
1997 (the "Loan Agreement") by and
1
<PAGE>
between the Authority and the Borrower. The Authority has authorized the
issuance of the Bonds in an initial resolution dated April 17, 1991, as amended
by a resolution dated July 31, 1996 and the final resolution dated May 28, 1997
adopted by the Authority (collectively, the "Authorizing Resolutions").
At 8:00 a.m., California time on June 25, 1997, or at such other time or on
such earlier or later date as the Authority, the Borrower and Westhoff, Cone &
Holmstedt, as Underwriter, mutually agree upon (the "Closing"), an irrevocable
direct-pay letter of credit (the "Letter of Credit") dated June 25, 1997 (the
"Letter of Credit") will be issued by Union Bank of California, N.A. (the
"Bank"), in favor of the Trustee pursuant to the Reimbursement Agreement, dated
as of June 1, 1997 (the "Reimbursement Agreement"), by and between the Bank and
the Borrower. The Letter of Credit will be issued in the principal amount of the
Bonds, plus the lesser of $140,548 or plus 45 days interest on the Bonds
(calculated at the rate of 12% per annum, on the basis of a 365 or 366 day year
as the case may be). So long as the Bonds are book-entry only, the Authority has
appointed the Trustee and the Trustee has agreed to serve as the Tender Agent
and the Bond Registrar. References in this Remarketing Agreement to Tender Agent
and Bond Registrar shall mean the Trustee unless the context requires otherwise.
If the Bonds are not book-entry only bonds, the Authority shall appoint a Tender
Agent and a Bond Registrar as provided in the Indenture.
All capitalized terms used herein and not defined herein shall have the
meanings specified in the Indenture.
1. Appointment of Remarketing Agent; Responsibilities of Remarketing Agent.
-----------------------------------------------------------------------
(a) Subject to the terms and conditions herein contained, the Borrower and
the Authority have appointed the Remarketing Agent, and the Remarketing Agent
hereby accepts such appointment, as exclusive remarketing agent in connection
with the offering and sale of the Bonds from time to time in the secondary
market subsequent to the initial offering, issuance and sale of the Bonds.
The Remarketing Agent shall mean with respect to the Bonds and to the
responsibility for the performance of obligations of the Remarketing Agent
pursuant to this Remarketing Agreement, unless specifically stated otherwise,
Westhoff, Cone & Holmstedt and its respective successors in such office under
this Remarketing Agreement.
(b) In its capacity as Remarketing Agent, upon notice from the Tender Agent
that it has received notice from a Bondholder pursuant to Section 2.04 of the
Indenture, or of a mandatory tender for purchase pursuant to Section 4.06 of the
Indenture, in each case given pursuant to and in accordance with the Indenture,
the Remarketing Agent shall exercise its best efforts to remarket any bonds (the
"Remarketed Bonds") which are the subject of any such notice at a price of not
less than 100% of the principal amount thereof, plus accrued interest, subject,
in all respects, to the terms and conditions of the Indenture and Section 7 of
this Remarketing Agreement. By no later than 4:00 p.m. (New York City time) on
the Business Day before the date on which Bonds are subject to purchase pursuant
to Section 2.04 or Section 4.06 of the Indenture (the "Purchase Date"), the
Remarketing Agent shall notify the
2
<PAGE>
Trustee and the Bank of the amount of Bonds to be purchased on the next day
which have been remarketed by that time. No later than 2:00 p.m. (New York City
time), on the Purchase Date, the Remarketing Agent shall update such
notification to inform the Trustee of the actual amount of Bonds which have been
remarketed, including the amount of any Bonds remarketed after the deadline for
notification to the Trustee provided in paragraph 1(b) above.
(c) The Trustee, upon instructions from the Remarketing Agent, shall
register the Remarketed Bonds and make the Remarketed Bonds available to the
Remarketing Agent by 12:00 noon (New York City time) or shall cause the
Remarketed Bonds to be transferred on the registration books of The Depository
Trust Company, New York, New York ("DTC") on the Purchase Date, against payment
in immediately available funds or evidence of immediately available funds in the
form of federal reserve wire number from the aggregate principal amount of Bonds
remarketed.
(d) Bonds which are subject to purchase pursuant to the Indenture and
subsection 1(b) above and which are not remarketed are defined herein as "Bank
Bonds." The Bank Bonds shall be held by the Tender Agent or registered directly
or indirectly in the name of the Bank on the registration books of DTC, with
respect to Book-Entry Bonds. The Remarketing Agent shall seek to remarket any
Bank Bonds at a price of 100% of the principal amount of such Bank Bonds plus
accrued interest, if any, to the date of purchase, prior to remarketing any
other Bonds tendered for purchase. Upon receipt by the Trustee of funds
representing the proceeds of the remarketing of Bank Bonds, Bonds in place of
such Bank Bonds so purchased shall be made available for pick-up by the
Remarketing Agent for subsequent delivery to the purchasers thereof, or the
ownership interest shall be transferred to the new Direct Participants on the
books of the DTC. Prior to or simultaneously with such delivery, the proceeds of
such remarketing shall have been or shall be delivered to the Trustee and
transferred to the Bank, and the Trustee shall have received confirmation from
the Bank of the reinstatement of the Letter of Credit.
(e) The Borrower agrees that, unless this Remarketing Agreement has been
previously terminated pursuant to the terms hereof, the Remarketing Agent shall
act as exclusive remarketing agent with respect to the Bonds on the terms and
conditions herein contained at all times, including any remarketing of Bank
Bonds, any remarketing of the Bonds in connection with, or in anticipation of,
the establishment of a Term Interest Rate Period and any remarketing of the
Bonds upon an expiration or termination of the Letter of Credit or Alternate
Credit Facility.
(f) The Borrower and the Remarketing Agent agree that the responsibilities
of the Remarketing Agent hereunder will include (i) the soliciting of purchases
of Bonds from investors that customarily purchase tax-exempt securities in large
denominations; provided, however, that in connection with the sale of Bonds
subject to a Term Interest Rate Period the Remarketing Agent need not be
restricted to investors that customarily purchase tax-exempt securities in large
denominations, (ii) effecting and processing such purchases, (iii) billing and
receiving payment for Bonds Purchased, (iv) causing the proceeds from the
secondary sale of the Bonds to be transferred to the Tender Agent for deposit
pursuant to the Indenture or transferred to the Trustee for payment to the Bank,
and (v) performing such other related
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<PAGE>
functions as may be reasonably requested by the Borrower and agreed to by the
Remarketing Agent as specified in the Indenture.
(g) The Remarketing Agent will, at the times prescribed in the Section 2.03
of the Indenture, set interest rates on the Bonds and shall notify the Trustee
and the Bank of rates of interest borne by the Bonds from time to time as
provided in the Indenture, and at the times provided in the Indenture. The
Remarketing Agent agrees not to sell any Bonds purchased pursuant to the
Indenture to the Borrower or the Authority, or any Guarantor or any Operating
Entity, or to any person who controls, is controlled by, or is under common
control with, the Borrower or the Authority.
(h) The Borrower agrees, at the Borrower's expense, to take all steps
reasonably requested by the Remarketing Agent to enable the Remarketing Agent to
comply with the requirements, if any, of Rule 15c2-12, as promulgated and
amended from time to time by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended ("Rule 15c2-12") and as applicable
to the Bonds.
(i) In connection with the performance of its duties hereunder, the
Remarketing Agent agrees to keep such books and records with respect to the
remarketing of the Bonds as shall be consistent with prudent industry practice
and to make such books and records with respect to the remarketing of the Bonds
available for inspection by the Authority and the Borrower at all reasonable
times.
2. The Bonds. As more fully described in the Indenture, the Bonds will be
---------
issuable, subject to the terms and conditions of the Indenture, in the form of
fully registered Bonds in the denominations of (1) $100,000 each or any integral
multiple of $5,000 in excess of $100,000 during the Weekly Interest Rate Period
or Term Interest Rate Period of less than one year, or (b) in denominations of
$5,000 each or any integral multiple thereof during a Term Interest Rate Period.
The Bonds shall initially bear interest at the Weekly Interest Rate determined
by Westhoff Cone, as provided in the Indenture.
3. Furnishing of Offering Materials.
--------------------------------
(a) The Borrower agrees to furnish, or cause to be furnished, the
Remarketing Agent with as many copies as the Remarketing Agent may reasonably
request of the Official Statement, dated June 24, 1997, relating to the Bonds
(the "Official Statement"), as the same may be supplemented or amended from time
to time, and such other information with respect to the Authority, the Borrower,
the Bank, the Loan Agreement, the Indenture, the Reimbursement Agreement, the
Letter of Credit, the Paying Agent, the Tender Agent and the Bonds, as the
Remarketing Agent shall reasonably request from time to time.
(b) If, at any time prior to Closing or during the term of this Remarketing
Agreement, any event or condition known to the Borrower relating to or affecting
the Borrower, the Reimbursement Agreement, the Letter of Credit, the Loan
Agreement, the Bonds, the Indenture, or the documents or transactions
contemplated thereby, shall occur which in the reasonable judgment of the
Authority or the Borrower, as the case may be, might
4
<PAGE>
affect the correctness or completeness of any statement of a material fact
contained in the Official Statement, as it shall have been supplemented or
amended with the information furnished from time to time pursuant to this
Section 3, or which in the reasonable judgment of the Authority or the Borrower,
as the case may be, might result in the Official Statement, as so supplemented
or amended, containing any untrue, incorrect or misleading statement of a
material fact or omitting to state a material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading, (i) the Borrower will promptly notify the Remarketing
Agent of the circumstances and details of such event, and (ii) if, in the
opinion of the Remarketing Agent, the Borrower or the Authority, such event or
condition requires the preparation and publication of an amendment or supplement
to the Official Statement, the Borrower, at its expense, will promptly prepare
or cause to be prepared an appropriate amendment or supplement thereto so that
the statements in the Official Statement as so amended or supplemented will not
contain any untrue, incorrect or misleading statement of a material fact or omit
to state a material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading, in
a form and manner approved by the Remarketing Agent, the Borrower and the
Authority.
(c) In connection with the remarketing of the Bonds as a result of, or in
anticipation of, (i) an expiration or termination of the Letter of Credit or an
Alternate Credit Facility, or (ii) an establishment of a Term Interest Rate
Period, the Borrower shall prepare, at its sole expense, any disclosure
documents that in the reasonable opinion of the Remarketing Agent, the Borrower
or the Authority are necessary or desirable. Such disclosure documents shall be
in form and substance acceptable to the Remarketing Agent and its counsel. The
Borrower and the Remarketing Agent agree to cooperation fully in the preparation
of any such disclosure documents.
4. Representations, Warranties, Covenants and Agreements of the Borrower.
---------------------------------------------------------------------
The Borrower represents, warrants, covenants and agrees that:
(a) the Borrower is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of California and the
Borrower has all requisite power and authority to own and operate its properties
and to carry on its business as now conducted and as contemplated by the Loan
Agreement;
(b) the Borrower has all requisite power and authority to enter into,
execute, deliver and perform its obligations under the Loan Agreement, this
Remarketing Agreement, the Reimbursement Agreement, the Purchase Contract, and
to approve the Official Statement and the Purchase Contract;
(c) The Purchase Contract has been validly authorized, executed and
delivered by the Borrower and constitutes a legal, valid and binding agreement
of the Borrower enforceable against the Borrower in accordance with its terms,
except as enforceability of the indemnification provisions thereof may be
limited by applicable securities law or public policy and except as enforcement
thereof may be limited by bankruptcy, insolvency, moratorium and other laws
affecting the enforcement of creditors' rights generally and to the application
of
5
<PAGE>
such equitable principles as the court having jurisdiction may impose,
regardless of whether such enforceability is considered in a proceeding in
equity or at law;
(d) the Loan Agreement, this Remarketing Agreement, the Reimbursement
Agreement and the Purchase Contract have been validly authorized, executed and
delivered by the Borrower and constitute the legal, valid and binding agreements
of the Borrower, enforceable against the Borrower in accordance with their
respective terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, moratorium and other laws affecting the enforcement of creditors'
rights generally and to the application of such equitable principles as the
court having jurisdiction may impose, regardless of whether such enforceability
is considered in a proceeding in equity or at law;
(e) the Purchase Contract, this Remarketing Agreement and the Official
Statement (and its distribution in preliminary final form) have been duly
authorized by the Borrower;
(f) with respect to the Borrower or the Project, or otherwise to the
Borrower's actual knowledge, the Official Statement does not include any untrue
statement of a material fact and does not omit to state any material fact
necessary to make the statements therein in the light of the circumstances under
which they were made, not misleading in any material respect. The Borrower
authorizes the Official Statement to be used by the Remarketing Agent in
connection with the offering and sale from time to time of the Bonds in the
secondary market in compliance with applicable law;
(g) except as have been obtained, no consent, approval, authorization or
order of any court or governmental body is required to be obtained by the
Borrower for the consummation by the Borrower of the transactions contemplated
herein except such as may be required under the state securities or Blue Sky
laws, in connection with the distribution of the Bonds by the Underwriter;
(h) the execution and delivery of the Loan Agreement, this Remarketing
Agreement, the Reimbursement Agreement and the Purchase Contract by the Borrower
and performance by the Borrower of its obligations thereunder, (i) will not
conflict with or result in a breach of any of the material terms, conditions or
provisions of any material agreement or instrument to which the Borrower is
party, or constitute a default thereunder and (ii) to the best of Borrower's
knowledge, based on due inquiry, will not violate any order, decree, judgment,
action, suit, proceeding, inquiry or investigation at law or in equity by or
before any court or any provision of any statute, rule or regulation applicable
to or binding on the Borrower or affecting any of its property;
(i) except as set forth in the Official Statement, there is no action,
suit, proceeding, inquiry or investigation, at law or in equity, before or by
any court, government agency, public board or body, pending or, to the best of
such Borrower's knowledge, threatened against the Borrower or involving any of
the property or assets under the control of the Borrower including, without
limitation, the Project, that involves the possibility of any judgment or
uninsured liability which may result in any materially adverse change in the
business, properties, assets or in the condition, financial, physical, legal or
otherwise, of the
6
<PAGE>
Borrower or of the Project; and
(j) the Borrower will diligently and reasonably cooperate with the
Remarketing Agent to qualify the Bonds and/or the related obligations of the
Borrower for offer and sale under the securities or "Blue Sky" laws of such
states as the Remarketing Agent may request; provided that in no event shall the
Borrower be obligated to qualify to do business in any state where it is not now
so qualified or to take any action which would subject it to general service of
process in any state where it is not now so subject. It is understood that the
Borrower is not responsible for compliance with or the consequences of failure
to comply with such securities or Blue Sky laws.
5. Representations, Warranties, Covenants and Agreements of the Remarketing
------------------------------------------------------------------------
Agent. The Remarketing Agent represents, warrants, covenants and agrees as
- -----
follows:
(a) The Remarketing Agent has been duly organized and is validly existing
and in good standing under the laws of the State of California;
(b) The Remarketing Agent has full power and authority to take all action
required to be taken by it by or under, and to perform and observe, the
covenants and agreements on its part contained in this Remarketing Agreement and
is fully licensed in all jurisdictions where necessary to perform its
obligations and duties as set forth in this Remarketing Agreement;
(c) The Remarketing Agent has, on or before the date hereof, duly taken all
action necessary to be taken by it prior to such date to authorize the
execution, delivery and performance of this Remarketing Agreement and the
carrying out, giving effect to, consummation and performance of the transactions
and obligations contemplated thereby;
(d) This Remarketing Agreement when executed and delivered by the parties
hereto will constitute a valid and binding obligation of the Remarketing Agent
enforceable against the Remarketing Agent in accordance with its terms, except
as the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws, judicial decisions or principles of
equity relating to or affecting the enforcement of creditors' rights or
contractual obligations generally; and
(e) The execution and delivery of this Remarketing Agreement, the
compliance with the terms, conditions or provisions hereof, and the consummation
of the transactions herein contemplated do not, upon the date of execution and
delivery thereof, and will not violate any presently existing law, regulation,
order, writ, injunction or decree of any court or governmental instrumentality
applicable to the Remarketing Agent.
6. Conditions To Remarketing Agent's Obligations. The obligations of the
---------------------------------------------
Remarketing Agent under this Remarketing Agreement have been undertaken in
reliance on, and shall be subject to, the due performance by the Borrower of the
obligations and agreements to be performed by the Borrower hereunder, on and as
of the date of delivery of this Remarketing Agreement and on and as of each date
on which Bonds are to be offered and sold in the secondary market pursuant to
this Remarketing Agreement. The obligations of the
7
<PAGE>
Remarketing Agent hereunder with respect to each date on which Bonds are to be
offered and sold in the secondary market pursuant to this Remarketing Agreement
are also subject, in the discretion of the Remarketing Agent, to the following
further conditions:
(a) The Indenture, the Loan Agreement, the Letter of Credit and the
Reimbursement Agreement shall be in full force and effect and shall not have
been amended, modified or supplemented in any way which would materially and
adversely affect the Bonds, except as may have been agreed to in writing by the
Remarketing Agent, and there shall be in full force and effect such additional
resolutions, agreements, certificates (including such certificates as may be
required in order to establish the exclusion of interest on the Bonds from gross
income for federal, state and local income tax purposes) and opinions as shall
be necessary to effect the transactions contemplated hereby, which resolutions,
agreements, certificates and opinions shall be reasonably required by, and
satisfactory in form and substance to, Bond Counsel and counsel to the
Remarketing Agent; and
(b) There shall be no material adverse change in the properties or
condition (financial or otherwise) of the Bank, the Authority or the Borrower
since the date of the Official Statement relating to the Bonds being offered and
sold on such date, as such Official Statement may be amended or supplemented; no
"Event of Default" (as defined in the Indenture) shall have occurred and be
continuing and no event shall have occurred and be continuing which, with the
passage of time or giving of notice or both under the Indenture, would
constitute such an Event of Default under the Indenture; and no event shall have
occurred which, independent of the fact that such event with the giving of
notice or passage of time or both would be an "Event of Default" under the
Indenture, would have a materially adverse effect on the properties or condition
(financial or otherwise) of the Borrower.
7. Term and Termination of Remarketing Agreement.
---------------------------------------------
(a) This Remarketing Agreement shall become effective upon execution by the
Remarketing Agent, the Borrower and the Authority, and shall continue in full
force and effect with respect to the Bonds to and including the earlier of (i)
the establishment of a Term Interest Rate Period extending to the final maturity
of the Bonds and the remarketing of all Bonds, including Bank Bonds, if any, in
connection therewith and (ii) the date on which payment in full of the Bonds
shall have been made or provided for in accordance with the Indenture, subject
to the right of the Remarketing Agent to resign as Remarketing Agent at any time
upon the giving of not less than 45 days prior written notice to the Authority,
the Bank, the Borrower, the Trustee, and the Tender Agent. The Remarketing Agent
may be removed at any time by the Authority provided that no such removal shall
be effective until the successor has delivered an acceptance of its appointment
to the Trustee. Upon such removal this Remarketing Agreement shall terminate. If
the Letter of Credit is terminated for any reason, or an Event of Default under
the Indenture occurs, the Remarketing Agent shall have the right to resign
immediately. The appointment of the Remarketing Agent pursuant to this
Remarketing Agreement shall terminate (subject to renewal by the Borrower)
fifteen days prior to the commencement of any Term Interest Rate Period of three
years or longer duration.
(b) In addition to the provisions of paragraph (a) of this Section 7, the
Remarketing
8
<PAGE>
Agent may suspend its obligations under this Remarketing Agreement any time by
notifying the Authority, the Borrower, the Trustee, the Tender Agent and the
Bank in writing or by telegram, telex or other electronic communication of its
election so to do, if:
(i) Legislation shall have been introduced in or enacted by the Congress of
the United States of America or the Legislature of the State of California or
adopted by either House of the Congress or House of said Legislature, or
legislation pending in the Congress of the United States of America or in the
Legislature of the State of California shall have been amended, or legislation
shall have been recommended for passage (by press release, other form of notice
or otherwise) by the Governor of California or the President of the United
States of America, the Treasury Department of the United States of America, the
Internal Revenue Service or Chairman or ranking minority member of the U.S.
Senate Committee on Finance or the U.S. House of Representatives Committee on
Ways and Means or legislation shall have been proposed for consideration by
either such Committee by any member thereof or legislation shall have been
favorably reported for passage to either House of Congress of the United States
of America or to either House of the Legislature of the State of California by a
Committee of such House to which legislation has been referred for
consideration, or a decision by a court established under Article III of the
constitution of the United States of America shall be rendered or a ruling,
regulation or official statement by or on behalf of the Treasury Department of
the United States of America, the Internal Revenue Service or other governmental
agency shall be made, with respect to Federal taxation of revenues or with
respect to other income of the general character expected to be derived under
the Indenture by the Authority or upon interest received on securities of the
general character of the Bonds or which would have the effect of changing,
directly or indirectly, the Federal income tax consequences of receipt of
interest on securities of the general character of the Bonds in the hands of the
owners thereof which in the reasonable opinion of the Underwriter would
materially adversely affect the marketability of the Bonds;
(ii) Legislation shall be introduced by committee, by amendment or
otherwise, in, or be enacted by, the House of Representatives or the Senate of
the Congress of the United States of America, or a decision by a court of the
United States of America shall be rendered, or a stop order, ruling, regulation
or official statement by, or on behalf of, the United States Securities and
Exchange Commission or other governmental agency having jurisdiction of the
subject matter shall be made or proposed, to the effect that the offering or
sale of obligations of the general character of the Bonds, as contemplated
hereby, is or would be in violation of any provision of the Securities Act of
1933, as amended and as then in effect, or the Securities Exchange Act of 1934,
as amended and as then in effect, or the Trust Indenture Act of 1939, as amended
and as then in effect, or with the purpose or effect of otherwise prohibiting
the offering or sale of obligations of the general character of the Bonds, or
the Bonds, as contemplated hereby;
(iii) Any information shall have become known, which, in the reasonable
opinion of the Remarketing Agent, makes untrue, incorrect or misleading in any
9
<PAGE>
material respect any statement or information contained in the Official
Statement, as the information contained therein has been supplemented or amended
by other information furnished in accordance with Section 3 hereof, or causes
the Official Statement, as so supplemented or amended, to contain an untrue,
incorrect or misleading statement of a material fact or to omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading;
(iv) Except as provided in clauses (i) and (ii) hereof, any legislation,
resolution, ordinance, governmental or quasi-governmental rule or regulation
shall be introduced in, or be enacted by any federal governmental body,
department or agency of the United States of America, the State of California or
a decision by any court of competent jurisdiction within the United States of
America, the State of California shall be rendered which, in the opinion of the
Remarketing Agent, materially adversely affects the marketability of the Bonds;
(v) Additional material restrictions not in force as of the date hereof
shall have been imposed upon trading in securities generally by any governmental
authority purporting to have jurisdiction regarding the trading of the Bonds or
by any national securities exchange;
(vi) Any governmental authority shall impose, as to the Bonds, or
obligations of the general character of the Bonds, any material restrictions not
now in force, or increase materially those now in force;
(vii) A general banking moratorium shall have been established by federal,
California or New York authorities;
(viii) The withdrawal or downgrading of the short term rating of the Bonds
to less than "F-1+" by Fitch Investors Service, L.P.;
(ix) There shall have occurred the outbreak or material escalation or
material re-escalation of hostilities involving the United States of America, or
the declaration by the United States of a national emergency or war, which in
the judgment of the Remarketing Agent has had a materially adverse effect on the
marketability of the bonds on the terms and in the manner contemplated by the
Official Statement; or
(x) An event, including, without limitation, the bankruptcy or default of
any other Issuer of or obligations of the general character of the Bonds or on
tax-exempt commercial paper, shall have occurred which, in the opinion of the
Remarketing Agent, makes the marketability of the Bonds at interest rates not in
excess of the Maximum Rate of interest permitted on the Bonds pursuant to the
Indenture impossible over an extended period of time.
8. Payment of Fees and Expenses.
----------------------------
10
<PAGE>
(a) In consideration of the services to be performed by the Remarketing
Agent under this Remarketing Agreement, the Borrower agrees to pay to the
Remarketing Agent the following fees: (i) during the period the Bonds are in a
Weekly Interest Rate Period, an annual fee equal to one eighth of one percent
(0.125%) of the weighted average daily principal amount of such Bonds
outstanding, and (ii) in connection with the remarketing of Bonds in a Term
Interest Rate Period, an amount as shall be agreed to between the Borrower and
the Remarketing Agent prior to any such remarketing and as shall reflect, in the
opinion of the Remarketing Agent, then current sales of tax exempt obligations
comparable to the Bonds being remarketed in a Term Interest Rate Period (which
sales commissions and associated expenses shall be in accordance with the then
current standard in the market for such obligations). It is understood and
agreed that payment of the fee referred to in clause (i) of this paragraph (a)
shall be made by the Borrower in arrears, promptly upon receipt of an invoice
therefor from the Remarketing Agent, such invoice to be sent quarterly by the
Remarketing Agent. It is further understood and agreed that payment of the fee
referred to in clause (ii) of this paragraph (a) shall be made by the Borrower
on the date on which such Bonds are being remarketed subject to the Term
Interest Rate Period.
(b) The Borrower shall bear all reasonable expenses incident to the
performance of the obligations of the Authority and the Remarketing Agent
hereunder, including but not limited to: (i) the cost of printing and
preparation for printing or other reproduction (for distribution in connection
with any offering of Bonds hereunder) and distribution of the Official Statement
or any amendment or supplement thereof, any subsequent Official Statement
relating to the Bonds and any additional material described in and/or furnished
pursuant to Section 3 hereof; (ii) the fees and disbursements of counsel to the
Authority and the Borrower and any other experts or consultants retained by the
Authority or the Borrower; (iii) the reasonable fees and disbursements of
counsel to the Remarketing Agent in connection with the preparation and review
of any amendment or supplement to the Official Statement or any additional
material described in and/or furnished pursuant to Section 3 hereof; and (iv)
the fees and expense of each securities rating agency in connection with the
Bonds; it being understood that none of such expenses shall be paid by the
Remarketing Agent. The Borrower shall reimburse the Remarketing Agent for all
costs and out-of-pocket expenses actually incurred by the Remarketing Agent in
connection with the performance of the Remarketing Agent's obligations with
respect to the transactions contemplated hereby; it being understood that the
Remarketing Agent shall endeavor, to the extent practicable, to obtain the prior
consent of the Borrower, to the incurring by the Remarketing Agent of such costs
and out-of-pocket expenses; and it being further understood that such
reimbursement shall be made by the Borrower.
(c) Notwithstanding the foregoing, the Borrower shall be under no
obligation to make the payments described in paragraphs (a) and (b) of this
Section 8 during any period in which the Remarketing Agent has terminated or
suspended its obligations pursuant to Section 7 hereof; provided, however, that
such fees shall be prorated to the extent there has been performance of the
obligations of the Remarketing Agent hereunder for less than a full period.
9. Indemnification and Contribution.
--------------------------------
11
<PAGE>
(a) The Remarketing Agent will indemnify and hold harmless the Authority,
its members, employees, directors, its officers, agents and attorneys, the
Borrower, its directors, its officers and each person, if any, who controls the
Borrower within the meaning of the Act (for the purposes of this paragraph (a),
as the context requires, collectively, the "Indemnified Parties"), to the extent
permitted under applicable law, against any losses, claims, damages or
liabilities, joint or several, to which the Indemnified Parties may become
subject, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon the representations and
warranties contained in Section 5 hereof being untrue at the time of remarketing
any Bond pursuant hereto; and will reimburse any legal or other expenses
reasonably incurred by such Indemnified Parties in connection with investigating
or defending any such loss, claim, damage, liability or action. This indemnity
provision will be in addition to any liability which the Remarketing Agent may
otherwise have.
(b) Promptly after receipt by an Indemnified Party under this Section 9 of
the notice of the commencement of any action, such Indemnified Party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section 9, notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any Indemnified Party otherwise than under
this Section 9 except to the extent that the indemnifying party is able to
demonstrate actual prejudice in not being so notified. In case any such action
is brought against any Indemnified Party, and it notifies an indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party, similarly notified, to assume the defense thereof so long as
its interests are not adverse to those of the Indemnified Party, with counsel
reasonably satisfactory to such Indemnified Party, and after notice from the
indemnifying party to such Indemnified Party of its election to assume the
defense thereof, the indemnifying party will not be liable to such Indemnified
Party under this Section 9 for any legal or other expenses subsequently incurred
by such Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation. If the indemnifying party does not elect to
assume the defense of any such suit, it will reimburse the Indemnified Parties
for the reasonable fees and expenses of any counsel retained by them. In the
event that the Parties to any such action (including impleaded parties) include
one or more indemnifying parties and one or more Indemnified Parties, and one or
more Indemnified Parties shall have been advised by counsel reasonably
satisfactory to the Underwriters and the Borrower that there may be one or more
legal defenses available to any of the Indemnified Parties, which are different
from, additional to, or in conflict with those available to any of the
indemnifying parties, the indemnifying parties will reimburse the Indemnified
Parties for the reasonable fees and expenses of any counsel retained by the
Indemnified Parties (it being understood that the indemnifying parties shall
not, in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys for all Indemnified Parties, which firm shall be
designated by the Indemnified Parties, the Remarketing Agent or the Borrower, as
the case may be). Each indemnifying party agrees promptly to notify each
Indemnified Party of the commencement of any litigation or proceedings against
it in connection with the remarketing of the Bonds. No indemnifying party shall
be liable under this Section 9 for the amount of any compromise or settlement of
any action unless such
12
<PAGE>
compromise or settlement has been approved in writing by such indemnifying
party, which approval shall not be unreasonably withheld. The indemnity
agreements contained in this Section 9 shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of the
Remarketing Agent, or the delivery of and any payment for any Bonds hereunder,
and shall survive the termination or cancellation of this Remarketing Agreement.
(c) If the indemnification provided for in this Section 9 is unavailable,
because of limitations imposed by securities laws or for any other reason, to a
party that would otherwise have been an Indemnified Party in respect of any
losses, claims, damages or liabilities (or actions in respect thereof) referred
to therein, then each party which would have been an indemnifying party shall,
in lieu of indemnifying such Indemnified Party, contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion so that the
Remarketing Agent is responsible for that portion represented by the percentage
that the Remarketing Agent's commission with respect to such remarketing bears
to the aggregate principal amount of such Bonds being remarketed and the
Borrower is responsible for the balance; provided, however, that (i) in no case
shall the Remarketing Agent be responsible for any amount in excess of such
commission applicable to the Bonds remarketed by the Remarketing Agent and (ii)
no person guilty of fraudulent misrepresentation within the meaning of Section
11(f) of the 1933 Act be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation within the meaning of Section 11(f)
of the 1933 Act. The amount paid or payable by an Indemnified Party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subparagraph (c) shall be deemed to include any legal
or other expenses reasonably incurred by such Indemnified Party in connection
with investigating or defending any such action or claims (which shall be
limited as provided in subparagraph (b) above if the indemnifying party has
assumed the defense of any such action in accordance with the provision
thereof).
10. Dealing in Bonds by Remarketing Agent. The Remarketing Agent, either as
-------------------------------------
principal or agent, may in good faith buy, sell, own, hold and deal in any of
the Bonds, and may join in any action which any Bondholder may be entitled to
take with like effect as if it did not act in any capacity hereunder. The
Remarketing Agent in its individual capacity, either as principal or agent, may
also engage in or be interested in any financial or other transaction with the
Authority or the Borrower, and may act as depositary, trustee, or agent for any
committee or body of Bondholders or other obligations of the Authority or the
Borrower, as freely as if it did not act in any capacity hereunder. Under such
circumstances, the Remarketing Agent shall have only those rights set forth in
the Bonds.
11. Remarketing Agent Not Acting as Underwriter. It is understood and
-------------------------------------------
agreed by the parties hereto that the Remarketing Agent is only obligated
hereunder to use its best efforts to solicit indications of interest on the part
of the purchasers of any tendered Bonds. The Remarketing Agent shall be
construed to be acting as agent only for and on behalf of the owners from time
to time of the Bonds.
12. Notices. Except as otherwise specifically provided in this Remarketing
-------
13
<PAGE>
Agreement, all notices, demands and formal actions under this Remarketing
Agreement shall be in writing and mailed, by registered or certified mail,
postage prepaid, return receipt requested, telegraphed or delivered, as follows:
(a) to the Remarketing Agent by delivering the same in writing to Westhoff
Cone, 1777 Botelho Dr., Suite 370, Walnut Creek, California 94596, Attention:
Anthony E. Cone;
(b) to the Borrower by delivering the same in writing to West Valley MRF,
LLC, c/o Kaiser Ventures Inc., 3633 East Inland Empire Boulevard, Suite 850,
Ontario, California 91764; Attention: Senior Vice President and Chief Financial
Officer, and to Burrtec Waste Industries, Inc. 9890 Cherry, Fontana, California
92335; Attention: Chief Financial Officer.
(c) to the Trustee by delivering the same in writing to BNY Western Trust
Company, 700 South Flower Street, Suite 500, Los Angeles, California 90017;
Attention: Institutional Trust Services; and
(d) to the Bank by delivering the same in writing to Union Bank of
California, N.A., 530 B Street, 4th Floor, San Diego, California 92101;
Attention: Michael Conboy, Vice President.
Each party may, by notice given under this Remarketing Agreement, designate
other addresses to which subsequent notices, requests, reports or other
communications shall be directed.
13. Assignment, Third Party Beneficiaries. The obligations of the
-------------------------------------
respective parties hereto may not be assigned or delegated to any other person
without the consent of the Authority and the other parties hereto. This
Remarketing Agreement will inure to the benefit of and be binding upon the
Authority, the Borrower and the Remarketing Agent and their respective
successors and assigns, and will not confer any rights upon any other person,
other than persons, if any, controlling the Remarketing Agent within the meaning
of the Securities Exchange Act of 1934, as amended and the Authority and the
Borrower and its directors and alternate directors or any person who controls
the Borrower within the meaning of Section 15 of the 1933 Act. The terms
"successors" and "assigns" shall not include any purchaser of any Bonds merely
because of such purchase.
14. Limited Obligations. The obligations and liabilities of the Borrower
-------------------
hereunder are general obligations of the Borrower and no any person executing
this Remarketing Agreement shall be liable personally for the obligations of the
Borrower hereunder or be subject to any personal liability or accountability by
reason of the execution hereof. Neither the faith and credit nor the taxing
power of the State or any political subdivision thereof is pledged to the
obligations of the Borrower hereunder.
15. Survival of Representations and Warranties. All of the representations
------------------------------------------
and warranties of the Authority and the Borrower in this Remarketing Agreement
shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of the Remarketing Agent and termination of
this Remarketing Agreement.
14
<PAGE>
16. Section Headings. Section headings have been inserted in this
----------------
Remarketing Agreement as a matter of convenience of reference only, and it is
agreed that such section headings are not a part this Remarketing Agreement and
will not be used in the interpretation of any provision of this Remarketing
Agreement.
17. Severability. If any provisions of this Remarketing Agreement shall be
------------
held or deemed to be or shall, in fact, be invalid, inoperative or unenforceable
as applied in any particular case in any jurisdiction or jurisdictions, or in
all jurisdictions because it conflicts with any provisions of any constitution,
statute, rule of public policy, or any other reason, such circumstances shall
not have the effect of rendering the provision in question invalid, inoperative
or unenforceable in any other case or circumstances, or of rendering any other
provisions inoperative or unenforceable to any extent whatever.
18. Counterparts. This Remarketing Agreement may be executed by the parties
------------
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
19. Amendments. This Remarketing Agreement may not be altered, amended,
----------
supplemented or modified in any manner whatsoever except by written instrument
signed by the Borrower and the Remarketing Agent with the consent of the
Authority and the Bank.
20. Legal Fees. The parties agree that the terms and conditions of this
----------
Remarketing Agreement supersede those of all previous agreements between the
parties, and that this Remarketing Agreement contains the entire agreement
between the parties hereto. In the event of a dispute between the parties under
this Remarketing Agreement, the losing party in such dispute shall pay all
reasonable costs and expenses incurred by the prevailing party in connection
therewith, including but not limited to attorney's fees.
21. Governing Law. This Agreement shall be governed exclusively by and
-------------
construed in accordance with the applicable laws of the State of California
applicable to contracts made and performed in the State of California. This
Agreement shall be enforceable in the State of California, and any action
arising out of this Remarketing Agreement shall be filed with and maintained in
the Superior Court for the County of Sacramento provided that the Authority may
waive the requirement of venue.
Very truly yours,
WESTHOFF, CONE & HOLMSTEDT
By: /s/ Anthony Cone
----------------------
Authorized Officer
15
<PAGE>
Accepted and agreed to as
of the date first above written:
WEST VALLEY MRF, LLC
By: WEST VALLEY RECYCLING & TRANSFER, INC., Member
By: /s/ Cole Burr
----------------------------
Cole Burr, President
By: KAISER RECYCLING CORPORATION, Member
By: /s/ Gerald A. Fawcett
----------------------------
Gerald A. Fawcett, President
16
<PAGE>
EXHIBIT 10.4
REIMBURSEMENT AGREEMENT
BETWEEN
UNION BANK OF CALIFORNIA, N.A.
AND
WEST VALLEY MRF, LLC
Dated as of June 1, 1997
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Application, Reimbursement and Other Payments; Definitions....... 1
SECTION 2. Conditions Precedent to the Issuance of the Letter of Credit..... 11
SECTION 3. Approval of Construction Fund Disbursements...................... 14
SECTION 4. Obligations of the Borrower...................................... 18
SECTION 5. Representations and Warranties of the Borrower................... 19
SECTION 6. Affirmative Covenants of the Borrower............................ 22
SECTION 7. Negative Covenants of the Borrower............................... 28
SECTION 8. Events of Default................................................ 29
SECTION 9. Rights and Remedies.............................................. 32
SECTION 10. Amendments, Etc................................................. 34
SECTION 11. Addresses For Notices........................................... 34
SECTION 12. No Waiver; Remedies; Set-off.................................... 35
SECTION 13. Indemnification................................................. 35
SECTION 14. Continuing Obligation........................................... 37
SECTION 15. Transfer of Letter of Credit; Reduction of Letter of
Credit Commitment and Related Matters.................................. 37
SECTION 16. Liability of the Bank........................................... 37
SECTION 17. Permitted Contests.............................................. 38
SECTION 18. Governing Law................................................... 38
SECTION 19. Assignment by the Bank.......................................... 38
SECTION 20. Representations and Warranties of the Bank...................... 38
SECTION 21. Headings........................................................ 39
SECTION 22. Further Assurances.............................................. 39
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
SECTION 23. Survival of Representations and Warranties...................... 39
SECTION 24. Severability of Provisions...................................... 39
SECTION 25. Execution in Counterparts....................................... 39
SECTION 26. Time............................................................ 40
</TABLE>
EXHIBITS
A - Form of Letter of Credit
B - Initial DSR Deposit Schedule
C - Form of Deed of Trust
D - Disbursement Schedule
E - Agreement to Furnish Insurance
F - List of Material Contracts, Permits and Franchises
G - Schedule of Financial Covenants
H - Notice of Default
2
<PAGE>
REIMBURSEMENT AGREEMENT
REIMBURSEMENT AGREEMENT, dated as of June 1, 1997, made by WEST VALLEY MRF,
LLC, a California limited liability company (the "BORROWER"), in favor of UNION
BANK OF CALIFORNIA, N.A. (the "BANK").
WHEREAS, the Borrower has requested the California Pollution Control
Financing Authority, a public instrumentality and political subdivision of the
State of California (the "ISSUER"), to finance, pursuant to a Loan Agreement
dated as of June 1, 1997 (the "LOAN AGREEMENT") between the Issuer and the
Borrower, a part of the cost of acquiring and financing certain facilities
described in the Loan Agreement (the "PROJECT"), by the issuance pursuant to an
Indenture dated as of June 1, 1997 (the "Indenture"), between the Issuer and BNY
Western Trust Company, as trustee (the "TRUSTEE"), of $9,500,000 in principal
amount of the Issuer's Variable Rate Demand Solid Waste Disposal Revenue Bonds
(West Valley MRF, LLC Project) Series 1997A (the "BONDS"); capitalized terms
used herein without definition shall have the respective meanings ascribed to
them in the Indenture or the Loan Agreement; and
WHEREAS, the Borrower has requested the Bank to issue a letter of credit
substantially in the form of Exhibit A hereto (the "LETTER OF CREDIT"), in an
amount of up to $9,640,548 (the "Letter of Credit Commitment") of which not more
than $9,500,000 may be drawn with respect to principal on the Bonds and not more
than the lesser of (i) 45 days' interest on the Bonds at an interest rate equal
to 12% per annum or (ii) $140,548 may be drawn with respect to interest on the
Bonds.
NOW, THEREFORE, in consideration of the premises and in order to induce the
Bank to issue the Letter of Credit, the parties hereby agree as follows:
SECTION 1. Application, Reimbursement and Other Payments; Definitions.
----------------------------------------------------------
(a) The Borrower hereby applies to the Bank for, and authorizes and
instructs the Bank to issue, for the Borrower's account, the Letter of Credit in
the amount of the Letter of Credit Commitment subject to reduction as therein
provided.
(b) The Borrower hereby agrees to pay to the Bank (i) on the date that
any amount is drawn under the Letter of Credit, a sum equal to the amount drawn
under the Letter of Credit; provided however that, (1) with respect to any
drawing under the Letter of Credit made pursuant to a liquidity drawing
certificate in the form of Exhibit 2 to the Letter of Credit (a "Liquidity
Drawing"), the Borrower agrees to repay to the Bank, on or before the one
hundred and twentieth (120th) day following the date of the Liquidity Drawing,
an aggregate amount equal to such Liquidity Drawing together with interest on
the unpaid balance thereof at an interest rate equal to one percent (1%) above
the Bank's Reference Rate (as defined below); and (2) upon receipt by the Bank,
funds representing the remarketing proceeds of Bank Bonds shall be applied by
the Bank to reduce, pro tanto, the Borrower's repayment obligation with respect
--- -----
to Liquidity Drawings; (ii) upon each transfer of the Letter of Credit, a sum in
such amount as shall be necessary to cover the transfer fee and costs and
expenses of the Bank incurred in connection with each transfer of the Letter of
Credit in accordance with its terms to a successor trustee under the Indenture;
(iii) on demand, any amount that is paid by the Bank in connection with its
exercise of its discretionary rights pursuant to paragraph (b) of Section 9 of
this Agreement or pursuant to the Borrower Agreements (as hereinafter defined)
or any security agreement entered into pursuant to Section 6(k) hereof; (iv)
concurrently with each drawing under the Letter of Credit a drawing fee in the
amount of One Hundred Dollars ($100); (v) on demand, interest on any and all
amounts unpaid by the Borrower when due hereunder from the date such amounts
become due until payment in full at a rate per annum (computed for
1
<PAGE>
the actual number of days elapsed on the basis of a year of 360 days) equal to
four percent (4%) per annum above the Reference Rate (as defined below) as in
effect from time to time, but in no event shall such fluctuating rate exceed the
maximum rate of nonusurious interest allowed from time to time by law as is now
or, to the extent allowable by law, as may hereafter be in effect; and (vi) on
demand, any and all reasonable out-of-pocket charges and expenses which the Bank
may pay or incur (including reasonable attorneys' fees) in enforcing any rights
under this Agreement.
(c) The obligations of the Borrower under this Agreement are
guaranteed pursuant to the Guaranties and upon fulfillment of the conditions set
forth in Section 3(a) below are expected to be secured pursuant to the Deed of
Trust.
(d) If any change in any law or regulation or in the interpretation
thereof (whether or not having the force of law) by any court or administrative
or governmental authority charged with the administration thereof shall either
(i) impose, modify or deem applicable any capital adequacy, reserve, special
deposit, tax or similar requirement or modify any deduction, credit, tax
preference item or other allowance for federal income tax purposes with respect
to this Agreement, the Letter of Credit or letters of credit issued by, or
assets held by, or outstanding commitments of, or deposits in or for the account
of, the Bank or any bank or financial institution participating in the Bank's
rights and obligations hereunder or under the Letter of Credit (a
"Participant"), or (ii) impose on the Bank or any Participant any other
condition regarding this Agreement or the Letter of Credit, or (iii) subject the
Bank or any Participant to any tax, charge, fee, deduction or withholding of any
kind whatever (except for a change in the rate of tax on the overall net income
of the Bank or such Participant) and the result of any event referred to in
clause (i), (ii) or (iii) above shall be to increase the cost to the Bank of
issuing or maintaining the Letter of Credit or the cost to such Participant of
participating herein or in the Letter of Credit or reduce the amount of any
payment receivable by the Bank or such Participant (which increase in cost or
reduction in payment shall be the result of the Bank's or such Participant's
reasonable allocation of the aggregate of such cost increases or payment
reductions resulting from such events), then, upon demand by the Bank after
notice has been given as provided below (acting on its own behalf or on behalf
of such Participant), the Borrower shall promptly pay to the Bank from time to
time as specified by the Bank all additional amounts which are necessary to
compensate the Bank and/or such Participant (as the case may be) for such
increased costs or reduction in payments. Bank shall provide ten (10) Business
Day's prior written notice to Borrower prior to the imposition of any of the
foregoing items. All payments in respect of increased costs or reduced payments
shall be accompanied by interest thereon from the date of demand until payment
in full thereof at the Reference Rate. A certificate as to such increased cost
or reduced payment incurred by the Bank or such Participant as a result of any
event mentioned in clause (i), (ii) or (iii) above, showing the manner of
calculation thereof, shall be submitted by the Bank or such Participant to the
Borrower and shall be rebuttably presumed to be correct.
(e) The Borrower hereby agrees to pay to the Bank, on demand, any and
all expenses, including reasonable attorneys' fees and legal expenses, incurred
or paid by the Bank in connection with (i) the preparation and negotiation of
this Agreement and the instruments referred to herein, (ii) the closing of the
transactions contemplated hereby, (iii) collecting the Borrower's indebtedness
to the Bank under this Agreement, (iv) protecting or foreclosing against or
otherwise enforcing any collateral security therefor, or (v) protecting,
exercising or enforcing any or all of the Bank's rights and remedies against the
Borrower, including, without limitation, all reasonable fees and disbursements
of counsel for the Bank in any reorganization, insolvency or bankruptcy
proceeding affecting the Borrower or any Guarantor.
(f) On the date of issuance of the Letter of Credit (the "DATE OF
ISSUANCE") the Borrower shall pay to the Bank (i) a non-refundable letter of
credit fee for the period from the Date of Issuance to June 1, 1998 in an amount
equal to the sum resulting when One Hundred Sixty Eight Thousand
2
<PAGE>
Seven Hundred and Ten Dollars ($168,710) is multiplied by a fraction the
numerator of which is the number of days from the Date of Issuance to June 1,
1998 and the denominator of which is 365; and (ii) the sum of Seventy Two
Thousand Three Hundred and Four Dollars ($72,304), representing the unpaid
balance of the nonrefundable commitment fee payable to the Bank. On June 1, 1998
and on the first Business Day of each September, December, March and June and
thereafter (each of said dates being referred to in this paragraph as a
"commitment fee payment date"), the Borrower shall pay to the Bank a
nonrefundable quarterly commitment fee in an amount equal to the amount
resulting when the amount available to be drawn under the Letter of Credit on
such commitment fee payment date is multiplied by the appropriate quarterly
percentage set forth below:
<TABLE>
<CAPTION>
========================================================================
ANNUAL RATE QUARTERLY RATE LETTER OF CREDIT AMOUNT
========================================================================
<S> <C> <C>
1.75% 0.4375% $7,230,411 - $9,640,548
- ------------------------------------------------------------------------
1.60% 0.40% $4,820,274 - $7,230,410
- ------------------------------------------------------------------------
1.40% 0.35% $2,410,137 - $4,820,273
- ------------------------------------------------------------------------
1.25% 0.3125% $0 - $2,410,136
- ------------------------------------------------------------------------
</TABLE>
(g) Reference is made to the DSR Deposit Schedule attached hereto as
Exhibit B (the "DSR DEPOSIT SCHEDULE"). On or before the Date of Issuance, the
Borrower shall establish an interest bearing deposit account (the "DSR ACCOUNT")
with the Bank, which account shall be utilized by the Borrower and the Bank as
follows:
(i) So long as the Letter of Credit is outstanding, during each
month of the twelve-month period ending in April of each of the years listed in
the DSR Deposit Schedule, the Borrower shall deposit into the DSR Account an
amount equal to one twelfth of the amount set forth on the DSR Deposit Schedule
opposite each such calendar year, so that on or before April 15 of each such
year the aggregate amount on deposit in the DSR Account equals or exceeds the
appropriate amount specified in the DSR Deposit Schedule (as such annual deposit
amounts are adjusted each year in accordance with clause (v) below); provided,
however, that in each of the months of January, February, March and April of
1998, the Borrower shall deposit $25,000 into the DSR Account.
(ii) Promptly after the receipt thereof, the Borrower shall also
deposit into the DSR Account: (a) 100% of the net proceeds of any new debt
and/or equity offering(s), excluding debt incurred for the purchase and/or lease
of equipment used in operations; and (b) 100% of the net proceeds of the sale of
any assets, excluding sales in the ordinary course of business.
(iii) Not later than forty-five (45) days after the end of each
fiscal quarter, Borrower shall deposit into the DSR Account a sum equal to fifty
percent (50%) of the Excess Cash Flow for such fiscal quarter.
(iv) So long as no Event of Default shall have occurred and be
continuing hereunder, monies on deposit in the DSR Account shall be used to
prepay the Borrower's obligations under the Loan Agreement (or to reimburse the
Bank in connection with any such prepayment) on the Interest Payment Date in
June of each year from and including 1998 to and including 2011, by the amount
on deposit in the DSR Account on the date the Borrower gives notice of
prepayment under Section 8.5 of the Loan Agreement, which notice the Borrower
agrees to give not later than April 17 of each year from 1998
3
<PAGE>
through 2011; provided, however, that (i) in no event shall the amount specified
in any notice of prepayment in any year be less than the amount specified for
such year on the DSR Deposit Schedule (as adjusted from time to time pursuant to
clause (v) below); and (ii) the amount of the prepayment shall be at least
$100,000 and in increments of $5,000 each thereafter. In accordance with Section
4.01 of the Indenture, the Borrower shall direct the Issuer to call the Bonds
for partial optional redemption and the Trustee to give notice of such
redemption. The Bank shall provide its written consent to each such prepayment
as required under the Indenture and, when the Letter of Credit has been drawn
upon in the amount of the prepayment, shall withdraw from the DSR Account the
amount necessary to reimburse itself. Monies deposited into the DSR Account
after the notice of prepayment given in 2011 shall be used to reimburse the Bank
for any unreimbursed draws on the Letter of Credit and otherwise to satisfy any
unpaid obligations of the Borrower to the Bank hereunder.
(v) Promptly after each Bond redemption effected pursuant to
clause (iv) above, the DSR Deposit Schedule shall be adjusted as follows: an
amount equal to the portion of the total Bond redemption which is derived from
payments made by the Borrower into the DSR Account pursuant to clauses (ii) and
(iii) of this Section 1(g) shall be applied to reduce the amount of all
subsequent Annual DSR Deposit Amounts, with thirty percent (30%) of such amount
being allocated to all remaining Annual DSR Deposit Amounts so that each such
Annual DSR Deposit Amount is reduced by the same ratio that the 30% aggregate
reduction bears to the aggregate of all remaining Annual DSR Deposit Amounts,
and seventy percent (70%) being applied to such Annual DSR Deposit Amounts in
inverse order of maturity. After each annual adjustment in the DSR Deposit
Schedule, the remaining equal monthly DSR Deposits required under clause (i)
above shall be reduced accordingly.
(vi) Until such time as the Letter of Credit has expired and all
obligations of the Borrower hereunder have been paid and performed in full,
monies on deposit in the DSR Account including the interest earnings thereon
shall be used solely for the purpose described in clause (iv) above; provided
however that upon the occurrence of an Event of Default, the Bank shall have the
right to withdraw monies from the DSR Account and apply such monies toward
payment of any obligation of the Borrower then due and payable hereunder. To
secure payment and performance of its obligations hereunder, the Borrower hereby
grants to the Bank a security interest in the DSR Account, and in all the
proceeds thereof and earnings thereon.
(vii) Monies on deposit in the DSR Account shall be invested in
money-market funds or such other liquid, short-term investments as are mutually
satisfactory to the Borrower and the Bank. Interest earnings shall be retained
in the DSR Account and the Borrower shall be entitled to a credit against its
regular monthly deposit obligation described in clause (i) above in an amount
equal to the interest earnings credited to the DSR Account during the preceding
month.
(viii) The Borrower may make prepayments and optional redemptions
in addition to those described in clauses (i), (ii) and (iii) above, provided
that the Borrower shall have deposited the amount of such additional
prepayment/optional redemption into the DSR Account not later than the date on
which the Borrower gives notice of prepayment under Section 8.5 of the Loan
Agreement. There shall also be deposited into the DSR Account any casualty
insurance proceeds received by the Bank which are not utilized to repair or
replace damaged collateral. Unless otherwise agreed to by the Borrower and the
Bank the aggregate amount of such additional deposits made in any year shall be
added to the amount specified in the annual notice of prepayment given each year
and shall be used to reimburse the Bank for the amounts drawn on the Letter of
Credit when the Bonds are redeemed in June. The Borrower acknowledges that, upon
the occurrence of certain events specified in the Guaranties, the Bank shall
have the right to demand of the Kaiser Guarantors or the Burrtec Guarantors, as
the case may be, that such Guarantors make certain payments to the Bank which,
upon receipt by the Bank, shall be deposited into the
4
<PAGE>
DSR Account. The Borrower hereby acknowledges that it has received a copy of the
Guaranties and consents to all the provisions thereof, including the provisions
regarding mandatory deposits by the Guarantors to the DSR Account.
(h) All payments to the Bank by the Borrower hereunder shall be made
in lawful currency of the United States and in immediately available funds to
the Bank at its office at 530 B Street, Fourth Floor, San Diego, California
92101 or such other office as the Bank may hereafter notify the Borrower in
writing.
(i) As used herein the following terms shall have the following
respective meanings:
"Agreement to Furnish Insurance" shall mean the Agreement to Furnish
------------------------------
Insurance substantially in the form attached hereto as Exhibit E.
"Borrower Agreements" means the Security Agreement, the Deed of Trust,
-------------------
the Environmental Agreement, the ADR Agreement executed by the Borrower in
favor of the Bank, the Application and each other agreement executed by the
Borrower evidencing or securing the Borrower's obligations to the Bank in
connection with the Letter of Credit, the Bonds or the Project.
"Borrower's Funds" shall mean the sum of $ n/a or such other sum as
---------------- ---
may be determined by Bank in accordance with Sections 3(b)(vii) and 6(o)
hereof to be made available by Borrower in a form satisfactory to Bank for
disbursement in the manner and for the purposes described in this
Agreement. Borrower's Funds shall be disbursed prior to disbursement of any
Bond proceeds.
"Borrower's Funds Account" shall mean a special non-interest bearing
------------------------
account with the Bank into which Borrower's Funds shall be deposited
pending any disbursement thereof.
"Burrtec Guarantor" means each or any of the following Guarantors:
-----------------
Burrtec Waste Industries, Inc., a California corporation ("BWI"); West
Valley Recycling & Transfer, Inc., a California corporation ("WVRT");
Edward G. Burr, Sandra L. Burr; and E. Cole Burr and Tracy A. Burr, both
individually and as trustees of the Cole and Tracy Burr Family Trust.
"Burrtec Guaranty" means the Guaranty executed by the Burrtec
----------------
Guarantors.
"BWI" means Burrtec Waste Industries, Inc., a California corporation.
---
"BWI Performance Guaranty" means that certain Performance Guaranty and
------------------------
Indemnification Agreement dated June 19, 1997 given by BWI in favor of the
Borrower, KRC and KRC's affiliates.
"Certified Invoice" shall mean a certified invoice for progress
-----------------
payments as customarily used by Bank, a copy of which has been delivered by
Bank to Borrower prior to or concurrently with the execution of this
Agreement.
"Change Order" shall mean any amendment or modification to the General
------------
Contract or any subcontract.
"Completion Date" shall mean February 15, 1998; provided however that
---------------
upon the
5
<PAGE>
occurrence of any Force Majeure Delays the Completion Date shall be extended by
the number of days in each such Force Majeure Delay; provided however that in no
event shall the Completion Date be later than May 15, 1998.
"Cost Breakdown" means an itemized schedule on a component, unit and
--------------
trade breakdown basis covering all costs of constructing and completing the
Improvements.
"Cumulative Change Order Amount" shall mean $250,000.
------------------------------
"Corporate Guarantor" means each or any of the following corporations:
-------------------
Kaiser Ventures Inc., a Delaware corporation ("KVI"); Kaiser Recycling
Corporation, a Delaware corporation ("KRC"); BWI and WVRT.
"Debt" of any Person means, at any date without duplication: (a) all
----
obligations of such Person for borrowed money; (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments;
(c) all obligations of such Person to pay the deferred purchase price of
property or services (excluding normal trade payables not overdue that are
incurred in the ordinary course of such Person's business); (d) all
indebtedness created or arising under any conditional-sale or other title-
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement
in the event of default are limited to repossession or sale of such
property); (e) all obligations of such Person as lessee under leases that
have been or should be, in accordance with generally accepted accounting
principles, recorded as capitalized leases; (f) all obligations, contingent
or otherwise of such Person under acceptance, letter-of-credit or similar
facilities; (g) all obligations of such Person to purchase, redeem, retire,
defease or otherwise acquire for value any capital stock of such Person or
any warrants, rights or options to acquire such capital stock, valued, in
the case of redeemable preferred stock, at the greater of its voluntary and
involuntary liquidation preference plus accrued and unpaid dividends; (h)
all executory obligations of such Person in respect of interest-rate swap
agreements and other similar agreements designed to hedge against
fluctuations in interest rates; (i) all Debt referred to in any of clauses
(a) through (h) above that is guaranteed directly or indirectly by such
Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (i) to pay or purchase such Debt or to advance or
supply funds for the payment or purchase of such Debt, (ii) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make payment
of such Debt or to assure the holder of such Debt against loss, (iii) to
advance or supply funds to maintain working capital or equity capital of
another Person or otherwise to maintain the net worth or solvency of such
Person (including any agreement in the nature of a support arrangement to
pay for property or services irrespective of whether such property is
received or such services are rendered) or (iv) otherwise to assure a
creditor against loss; and (j) all Debt referred to in any of clauses (a)
through (h) above secured by (or for which the holder of such Debt has an
existing right, contingent or otherwise, to be secured by) any Lien on
property (including accounts receivable and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the
payment of such Debt.
"Debt Service Coverage Ratio" shall have the meaning ascribed thereto
---------------------------
on Exhibit G hereto.
"Deed of Trust" means the Deed of Trust and Assignment of Leases and
-------------
Rents executed by the Borrower in favor of the Bank substantially in the
form of Exhibit C.
"Default" means any event or condition that, with the giving of notice
-------
or the lapse of time,
6
<PAGE>
or both, would become an Event of Default.
"Default Rate" means the applicable rate set forth in Section 1(b)(v)
------------
hereof.
"Design Professional" shall mean J.R. Miller & Associates, the person
-------------------
or firm which prepared the Plans and Specifications.
"Disbursement Schedule" shall mean the Disbursement Schedule attached
---------------------
hereto as Exhibit D providing for the manner of disbursement of Bond
proceeds to pay for the costs of Project.
"EBITDA" means, for any fiscal period for any Person, net income (or
------
net loss), plus the sum of (a) net interest expense and letter of credit
fees, (b) income-tax expense, (c) depreciation expense, (d) amortization
expense, and (e) noncash write-downs or write-offs of assets, in each case
determined in accordance with generally accepted accounting principles for
such period.
"Environmental Agreement" has the meaning set forth in Section
-----------------------
3(a)(viii) hereof.
"Event of Default" has the meaning set forth in Section 8 hereof.
----------------
"Excess Cash Flow" means for any fiscal quarter, EBITDA as measured
----------------
for the quarter, less a) monthly deposits into the DSR Account made in
accordance with the adjusted annual DSR Deposit Schedule; b) voluntary
prepayments of Debt owed to Bank; c) actual interest expense and letter of
credit fees paid; d) accrued taxes; e) Permitted Unfinanced Capital
Expenditures actually made; f) increases in net working capital; g)
scheduled principal amortization of Funded Debt; and h) cash distributed to
members (not to exceed monthly deposits into the DSR Account made in
accordance with the adjusted Annual DSR Deposit Schedule).
"Final Disbursement" shall have the meaning ascribed thereto in
------------------
Section 3(d)(iii) hereof.
"Force Majeure Delay" shall mean any delay caused by civil
-------------------
disturbance, riot, natural disaster, act of God (including but not limited
to fires, storms or earthquakes), unforeseeable shortage of materials or
other event beyond the reasonable control of the Borrower.
"Funded Debt" means all Debt of Borrower evidenced by notes, bonds,
-----------
debentures or other similar instruments, including Debt under capitalized
leases but excluding trade payables, accrued expenses incurred in the
ordinary course of business and advances under revolving credit facilities
which, if repaid, are available to be re-borrowed by the Borrower.
"General Contract" shall mean the construction contract executed or to
----------------
be executed by and between Borrower and the General Contractor.
"General Contractor" shall mean Shook Building Systems, Inc.
------------------
"Governmental Action" means any authorization, approval, consent,
-------------------
waiver, exception, license, filing, registration, permit, notarization,
notification or other requirement of any Governmental Person.
"Governmental Authority" means the authority of the United States, the
----------------------
State of California, any political subdivision thereof and any city and any
agency, department, commission, board,
7
<PAGE>
bureau or instrumentality of any of them.
"Governmental Person" means, whether domestic or foreign, any
-------------------
national, federal, state or local government, any political subdivision
thereof, or any governmental, quasi-governmental, judicial, public or
statutory instrumentality, authority, body or entity, including any central
bank and any comparable authority.
"Governmental Rule" means any treaty, law, rule, regulation,
-----------------
ordinance, order, code, interpretation, judgment, writ, injunction, decree,
determination, directive, guideline, policy or similar form of decision of
any Governmental Person.
"Guarantor" means any of the Burrtec Guarantors and either of the
---------
Kaiser Guarantors.
"Guarantor Agreements" means the Guaranties and the ADR Agreements
--------------------
executed by the Guarantors.
"Guaranty" means each Guaranty and Mandatory DSR Deposit Agreement
--------
dated as of the date hereof executed by a Guarantor in favor of the Bank.
"Improvements" shall mean the improvements being constructed or
------------
acquired and installed as a part of the Project as described in the Plans,
including on-and offsite improvements and equipment.
"Kaiser Guarantor" means each of KVI and KRC.
----------------
"Kaiser Guaranty" means the Guaranty executed by the Kaiser
---------------
Guarantors.
"KRC" means Kaiser Recycling Corporation, a Delaware corporation.
---
"KVI" means Kaiser Ventures Inc., a Delaware corporation.
---
"KVI Performance Guaranty" means that certain Performance Guaranty and
------------------------
Indemnification Agreement dated June 19, 1997 given by KVI in favor of the
Borrower, WVRT and WVRT's affiliates.
"Lien" means, with respect to any asset, (a) any lien, charge, option,
----
claim, mortgage, deed of trust, security interest, pledge or other
encumbrance of any kind in respect of such asset or (b) the interest of a
vendor or lessor under any conditional-sale agreement, capital lease or
other title retention agreement relating to such asset.
"Obligations" means all payment obligations of the Borrower to the
-----------
Bank outstanding from time to time under this Agreement and the other
Related Documents to which the Borrower is a party, whether for principal,
interest, fees, expenses, indemnification or otherwise.
"Permitted Liens" means such of the following as to which no
---------------
enforcement, collection, execution, levy or foreclosure proceeding has been
commenced: (a) Liens for taxes, assessments and governmental charges or
levies to the extent not required to be paid under the Deed of Trust; (b)
pledges or deposits to secure obligations under workers compensation laws
or similar legislation or to secure public or statutory obligations; (c)
easements, rights of way and other encumbrances on title to real property
that do not, in the Bank's good faith discretion, render title to the
property
8
<PAGE>
encumbered thereby unmarketable or materially and adversely affect the use
of such property for its present purposes; (d) deposits to secure the
performance of bids, trade contracts (other than for borrowed money),
leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of like nature incurred in the ordinary course of
business; and (e) purchase money liens.
"Permitted Unfinanced Capital Expenditures" shall have the meaning
-----------------------------------------
ascribed thereto in Section 7(f)(ii).
"Person" means an individual, a corporation, a partnership, an
------
association, a business trust or any other entity or organization,
including any Governmental Person.
"Plans" shall mean the final plans and specifications (including any
-----
AIA general conditions incorporated in the specifications or other general
conditions acceptable to the Bank and any addenda thereto) for the
construction of the Improvements prepared by the Architect, and approved as
required in this Agreement and all amendments and modifications thereof
made by approved Change Orders.
"Project" shall have the meaning ascribed thereto in the first whereas
-------
clause of this Agreement.
"Property" shall mean, collectively, the Real Property together with
--------
all buildings, structures and other improvements now or hereafter located
on the Real Property.
"Real Property" shall mean the real property located in San Bernardino
-------------
County, California, and more particularly described on Exhibit A to the
Deed of Trust.
"Reference Rate" means the variable rate of interest per annum
--------------
announced by the Bank from time to time as its "reference rate." Such
"reference rate" is set by the Bank as a general reference rate of
interest, taking into account such factors as the Bank may deem
appropriate, it being understood that many of the Bank's commercial or
other loans are priced in relation to such rate, that it is not necessarily
the lowest or best rate actually charged to any customer and that the Bank
may make various commercial or other loans at rates of interest having no
relationship to such rate. For purposes of this Agreement, each change in
the Reference Rate shall be effective as of the opening of business on the
date announced as the effective date of any change in such "reference
rate."
"Related Documents" shall have the meaning ascribed thereto in Section
-----------------
4(a)(i) hereof.
"Requirements" shall have the meaning ascribed to such term in Section
------------
5(k).
"Security Agreement" has the meaning ascribed thereto in Section
------------------
2(a)(ix).
"Subsidiary" of any Person means any corporation, partnership, joint
----------
venture, trust or estate of which (or in which) more than 50% of (a) the
outstanding capital stock having ordinary voting power to elect a majority
of the Board of Directors of such corporation (irrespective of whether at
the time capital stock of any other class or classes of such corporation
has or might have voting power upon the occurrence of any contingency), (b)
the interest in the capital or profits of such partnership or joint venture
or (c) the beneficial interest of such trust or estate is at the time
directly or indirectly owned by such Person, by such Person and one or more
of its other Subsidiaries, or by one or more of such Person's other
Subsidiaries.
9
<PAGE>
"Title Company" shall mean Chicago Title Company.
-------------
"WVRT" means West Valley Recycling & Transfer, Inc., a California
----
corporation.
(j) Unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all accounting determinations hereunder shall be
made, and all financial statements required to be delivered hereunder shall be
prepared, in accordance with generally accepted accounting principles as in
effect from time to time, on a basis consistent with the financial statements
previously delivered to the Bank.
(k) In this Agreement, the singular includes the plural; words
importing any gender include the other genders; references to statutes are to be
construed as including all statutory provisions consolidating, amending or
replacing the statute referred to; references to "writing" include printing,
typing, lithography and other means of reproducing words in a tangible visible
form; the words "including," "includes" and "include" are deemed to be followed
by the words "without limitation"; references to articles, sections (or
subdivisions of sections), recitals, exhibits, annexes or schedules are to those
of this Agreement unless otherwise indicated; references to agreements and other
contractual instruments are deemed to include all subsequent amendments and
other modifications to such instruments, but only to the extent such amendments
and other modifications are not prohibited by the terms of this Agreement; and
references to Persons include their respective permitted successors and assigns.
SECTION 2. Conditions Precedent to the Issuance of the Letter of Credit.
------------------------------------------------------------
Subject to the prior fulfillment of the following conditions precedent set forth
in clauses (a) through (d) below, the Bank shall issue the Letter of Credit,
effective on the Date of Issuance:
(a) The Bank shall have received, on or before the Date of Issuance,
the following, in form and substance satisfactory to the Bank:
(i) Good standing certificates for the Borrower and for all
Corporate Guarantors from the offices of the Secretaries of State of California
and Delaware, as applicable, together with copies of (i) all Borrower action
authorizing the execution, delivery and performance by the Borrower of this
Agreement, the Deed of Trust, and the Loan Agreement and other Borrower
Agreements and approving the Letter of Credit; (ii) the Members Operating
Agreement for the Borrower, the Borrower's Certificate of Formation (Form LLC-1)
and all amendments thereto; (iii) the Operation and Maintenance Agreement
between the Borrower and WVRT relating to the Project Site; (iv) the BWI
Performance Guaranty and the KVI Performance Guaranty; (v) all action of the
Corporate Guarantors authorizing the execution, delivery and performance of the
Corporate Guaranties and the ADR Agreements; and (vi) the Corporate Guarantors'
Articles of Incorporation and By-laws and all amendments thereto;
(ii) A certificate of the secretary or assistant secretary of each
Corporate Guarantor and of two members of the Executive Committee of the
Borrower, certifying the name and true signatures of the individuals authorized
to sign this Agreement and the other documents to be delivered by the Borrower
or any Corporate Guarantor hereunder;
(iii) The favorable opinion of Orrick, Herrington & Sutcliffe, as
bond counsel, as to the validity of the Bonds and as to federal income tax
matters, and a favorable opinion of McCabe & Voss, as special counsel to the
Borrower, and Gresham, Savage, Nolan and Tilden, LLP, as counsel to the Borrower
as to such other matters as the Bank may reasonably request;
(iv) An executed counterpart of the Loan Agreement;
10
<PAGE>
(v) An executed counterpart of the Indenture;
(vi) Original insurance policies or certificates thereof or other
evidence for the insurance required by Section 6(d) hereof satisfactory to the
Bank;
(vii) the Kaiser Guaranty duly executed and delivered by the
Kaiser Guarantors;
(viii) the Burrtec Guaranty duly executed and delivered by the
Burrtec Guarantors;
(ix) A fully executed counterpart of the Alternative Dispute
Resolution Agreements duly executed and delivered by each of the Borrower and
the Guarantors (collectively, the "ADR Agreements" and individually, each or any
"ADR Agreement");
(x) A fully-executed counterpart of the Application for
Irrevocable Standby Letter of Credit (the "Application"); provided, however,
-------- -------
that in the event of any inconsistency between the terms of this Agreement and
the Application, this Agreement shall control and govern; and
(xi) Such other documents, instruments, approvals (and, if
requested by the Bank, certified duplicates of executed copies thereof) or
opinions as the Bank may reasonably request on or before the Date of Issuance.
(b) The following statements shall be true and correct on the Date of
Issuance and the Bank shall have received a certificate signed by a duly
authorized agent of the Borrower, dated the Date of Issuance, so stating:
(i) the representations and warranties contained in Section 5
hereof, or made by the Borrower or any Guarantor in any statement, certificate
or document delivered by the Borrower or any Guarantor in connection with this
Agreement, are correct in all material respects on and as of the Date of
Issuance as though made on and as of such date; and
(ii) no Event of Default (as defined in Section 8 hereof) has
occurred and is continuing, or would result from the issuance of the Letter of
Credit, and no event has occurred and is continuing which would constitute an
Event of Default but for the requirement that notice be given or time elapse or
both.
(c) On or before the Date of Issuance:
(i) the Issuer shall have duly adopted resolutions authorizing the
execution, delivery and performance by the Issuer of the Loan Agreement and the
Indenture, and on the Date of Issuance such resolutions shall continue to be in
full force and effect;
(ii) the Trustee shall have accepted the trusts of the Indenture;
(iii) all conditions precedent to the issuance of the Bonds shall
have occurred;
(iv) The Bank shall have received written notice from Fitch's
Rating Service that it has assigned a rating or ratings for the Bonds of not
lower than the current long- and short-term
11
<PAGE>
ratings (as applicable) assigned to the Bank by such rating agency; and
(v) the Issuer shall have duly executed, issued and delivered the
Bonds to the Trustee and the Trustee shall have authenticated and delivered the
Bonds to the underwriter.
(d) No change shall have occurred in any law or regulation thereunder
or interpretation thereof which in the opinion of counsel for the Bank would
make it illegal for the Bank to issue the Letter of Credit as provided herein.
SECTION 3. Approval of Construction Fund Disbursements.
-------------------------------------------
On the Date of Issuance, an initial requisition of Bond Proceeds in the
amount of $190,000 (the "Initial Requisition") shall be disbursed by the Trustee
for Costs of Issuance subject to compliance with the requirements of the
Indenture. Unless approved by the Bank in writing, no further funds shall be
disbursed without the prior fulfillment of all the conditions precedent set
forth in clauses (a) and (b), below; except that notwithstanding the foregoing
the Trustee may disburse all funds in the Authority Subaccount of the Costs of
Issuance Account which funds were provided by the Issuer's Small Business
Assistance Fund.
(a) The Bank shall have received at least one Business Day before the
date of the first Borrower requisition following the Initial Requisition (the
"Subsequent Requisition Date"), and the Borrower hereby covenants that the Bank
shall receive on or before July 15, 1997, the following, in form and substance
satisfactory to the Bank:
(i) A fully executed copy of the General Contract in form
satisfactory to Bank and an Assignment of Construction Contract in form
satisfactory to Bank and written consent thereto by the General Contractor.
(ii) An Assignment of the Plans and of the agreement with the
Design Professional pursuant to which the Plans were prepared, in form
satisfactory to Bank together with written consent thereto by the Design
Professional.
(iii) The Deed of Trust fully executed and acknowledged by the
Borrower;
(iv) Preliminary Site Assessment (the "PSA") performed by the
Bank's Hazardous Materials Department or an engineering firm satisfactory to the
Bank, conducted in accordance with the Bank's scope of work; together with (i)
hazardous materials studies with satisfactory results prepared by environmental
engineers approved by the Bank; (ii) satisfactory soils report by soils engineer
approved by the Bank confirming, among other things, that the soil at the
Project Site is of sufficient stability to support the Facilities; and (iii)
receipt of a Release of Liability from the California Department of Toxic
Substances Control;
(v) an MAI Appraisal of the Land and Improvements performed by an
appraiser, and in form and substance and showing an appraised value,
satisfactory to the Bank in its sole discretion;
(vi) An ALTA LP-10 loan policy or policies of title insurance, or
its equivalent or a written commitment by the title insurer to issue one, with a
liability limit of $9,640,548, issued by a title insurer acceptable to the Bank
insuring the interests of the Bank under the Deed of Trust as a valid first
priority lien on the Project; said policy or policies shall contain only such
exceptions from its coverage as have been approved in writing by the Bank;
12
<PAGE>
(vii) Original insurance policies or certificates thereof for the
insurance specified in that certain Agreement to Furnish Issuance being executed
concurrently herewith;
(viii) Executed counterparts of Environmental Compliance Agreement
(the "Environmental Agreement") as executed by the Borrower for the benefit of
the Bank;
(ix) Form UCC-1 Financing Statements executed by the Borrower
required to perfect the personal property security interests granted to the Bank
under the Deed of Trust;
(x) the first page of a copy of the Plans signed and all pages
initialed by Borrower, Bank and General Contractor, if required by Bank;
(xi) the Cost Breakdown;
(xii) the building permit and any other authorization, if any,
which may be required from any Governmental Authority having jurisdiction over
the Property or the construction of the Improvements;
(xiii) A Security Agreement (the "SECURITY AGREEMENT") duly
executed and delivered by the Borrower;
(xiv) Form UCC-1 Financing Statement(s) executed by the Borrower
required to perfect the personal property security interests granted to the Bank
under the Security Agreement;
(xv) Such other documents, instruments, approvals (and, if
requested by the Bank, certified duplicates of executed copies thereof) or
opinions as the Bank may reasonably request.
(b) Each Borrower requisition from the Trustee, submitted as required
by Section 3.2 of the Loan Agreement shall be approved as to form by the Bank
prior to submission thereof by the Borrower to the Trustee. Any obligation of
the Bank to approve the form of any requisition shall be subject to the prior
fulfillment of all of the following conditions precedent:
(i) no Event of Default shall have occurred and be continuing and
no event which with notice or lapse of time or both would become such an Event
of Default shall have occurred and be continuing hereunder or under any Borrower
Agreement;
(ii) the representations and warranties of the Borrower made
hereunder or in connection herewith shall be true and correct in all material
respects on the date of such requisition fully as if made on and as of such date
and, as to each of the foregoing conditions, the Borrower shall have so
certified in writing to the Bank;
(iii) each of the conditions precedent set forth in Section 2(a)
through (d) and Section 3(a) hereof shall have been fulfilled;
(iv) each requisition shall be accompanied by Certified Invoices,
receipts or other evidence satisfactory to the Bank in its good faith discretion
as to the cost of the item with respect to which the requisition is being
submitted;
(v) if Bank requests, it shall have received a list of the names
and addresses of
13
<PAGE>
all material dealers, laborers and subcontractors with whom agreements have been
made by the General Contractor and/or Borrower to deliver materials to and/or
perform work on the Improvements;
(vi) the Improvements shall not have been materially injured or
damaged by fire or other casualty unless insurance proceeds are available in an
amount which the Bank deems sufficient, which when combined with Borrower's
Funds, in its reasonable judgment to effect the satisfactory restoration of the
Improvements and to permit the completion thereof prior to the Completion Date;
(vii) Borrower shall have deposited with Bank cash in the amount,
estimated by Bank, necessary to pay for the costs of completion of construction
of the Improvements to the extent that the aggregate amount of the undisbursed
Bond proceeds and Borrower's Funds, designated for the payment of the remaining
costs to be incurred in the completion of construction of the Improvements is,
in the opinion of Bank, insufficient therefor;
(viii) Advice from Bank's Inspection Department to the effect
that, to date, the Improvements have been constructed in accordance with the
Plans and that the present state of construction of the Improvements will,
barring then unforeseen and unknown delays, permit completion of construction of
the Improvements on or before the Completion Date;
(ix) if Bank so requests, (a) Title Company shall have issued its
continuation endorsement (CLTA Endorsement 122 or comparable endorsement) to
Bank indicating that since the last preceding disbursement to Borrower or
General Contractor, there has been no change in the state of title, that there
are no intervening liens which may now or hereafter take priority over the
disbursement to be made and that there are no survey exceptions not theretofore
approved by Bank; and (b) upon completion of the foundation(s), Title Company
has issued its foundation endorsement (CLTA Endorsement 102.5 or comparable
endorsement) insuring Bank that the foundation(s) is constructed wholly within
the boundaries of the Property and does not encroach on any easements nor
violate any covenants, conditions or restrictions of record; and
(x) with respect to all items of personal property specified in
such requisition, if requested by the Bank, form UCC-1 financing statements
identifying such personal property and duly executed by the Borrower.
(c) Prior to authorizing the final disbursement of Bond Proceeds, the
following conditions shall have been satisfied:
(i) No Event of Default, or fact or circumstance which, with the
giving of notice or the passage of time, or both, would constitute an Event of
Default, shall exist hereunder or under any of the Borrower Agreements;
(ii) If Bank requests, it shall have received a list of the names
and addresses of all material dealers, laborers and subcontractors with whom
agreements have been made by the General Contractor and/or Borrower to deliver
materials to and/or perform work on the Improvements;
(iii) The representations and warranties of Borrower made in
Section 5 hereof shall be true and correct in all material respects on and as of
the date of the disbursement with the same effect as if made on such date;
(iv) The Improvements shall not have been materially damaged by
fire or other casualty unless insurance proceeds are available and (when
combined with Borrower's Funds) are sufficient
14
<PAGE>
in the Bank's good faith judgment to effect the satisfactory restoration of the
Improvements and to permit the completion thereof prior to the Completion Date;
(v) Advice from Bank's Inspection Department to the effect that
the Improvements have been completed substantially in accordance with the Plans,
as modified pursuant to any approved Change Orders;
(vi) Evidence that Borrower has filed the Notice of Completion of
the Improvements necessary to establish commencement of the shortest statutory
period for the filing of mechanics' and materialmen's liens;
(vii) Subsequent to expiration of the period during which any lien
for labor, services or material may be validly recorded against the Property or
the Improvements, Title Company shall have rewritten and reissued the Title
Policy with such endorsements as Bank may require, including, without
limitation, CLTA Endorsements 100 (unmodified), 102.5, 103.7, 104.7, 110.9,
111.5 and 116, which reissued Title Policy shall insure that the Improvements
have been completed free of all mechanics' and materialmen's liens or claims
thereof;
(viii) Evidence of approval of completion of the Improvements by
Borrower; and
(ix) Evidence of the approval by all Governmental Authorities of
the Improvements in their entirety for permanent occupancy, to the extent any
such approval is a condition of the lawful use and occupancy of the
Improvements.
(d) The Bond proceeds and Borrower's Funds shall be used only for the
payment of costs of construction of the Improvements and the acquisition and
installation of equipment in accordance with the Plans and other costs related
thereto, as set forth on the Disbursement Schedule, and shall be disbursed as
follows:
(i) Upon satisfaction of the conditions of clause (a) of this
Section 3, Bank shall authorize disbursement of Bond Proceeds in accordance with
the Disbursement Schedule the amounts necessary to pay all costs, charges and
expenses incurred or to be incurred (as estimated by Bank) in connection with
the Letter of Credit and the Bond financing or payable pursuant to this
Agreement or the other Related Documents, excluding direct costs of labor and
materials related to the Improvements, and including but not limited to the
initial fees payable to the Bank (which are deemed earned on the Date of
Issuance and are not refundable in whole or part), predevelopment, permitting
and offsite costs, service charges, title charges, tax and lien service charges,
recording fees, escrow fees, appraisal fees, legal fees, real property taxes and
assessments, insurance premiums, fees payable in connection with any commitment
to provide permanent financing of the Improvements, and any amount required to
pay existing encumbrances affecting the Property and amounts required to
complete the purchase of the Property;
(ii) Upon satisfaction of the conditions of clause (b) of this
Section 3, Bank shall authorize disbursement of Bond Proceeds directly to
Borrower such sums as are required for the payment of the costs and expenses of
constructing, acquiring or installing the Improvements, which disbursements
shall be made in accordance with the applicable provisions of the Disbursement
Schedule. All funds disbursed hereunder to Borrower shall be received by
Borrower in trust and Borrower agrees that the same shall be used only for the
payment of those items contemplated by the particular disbursement; and
15
<PAGE>
(iii) The Final Disbursement shall be the payment of any monies
retained from progress payments or draws as set forth in the Disbursement
Schedule. Subject to the provisions of this Agreement, the final disbursement
shall be made only after Borrower has satisfied the conditions of clause (c) of
this Section 3, and delivered or caused to be delivered to Bank, in addition to
the Title Policy and endorsements or coverages required pursuant to the terms
hereof, such additional endorsements to the Title Policy as Bank may require.
Bank may withhold the Final Disbursement until Borrower has furnished Bank with
the written approval of such final disbursement by Title Company and the surety
on any bond required by Bank.
(e) The Borrower understands and agrees that in no event shall the
Bank be required to approve aggregate requisitions for more than $9,500,000. The
Borrower acknowledges and agrees that its costs and expenses incurred in
connection with the Project exceed the amounts for which the Bank will approve
requisitions and that the Borrower shall be directly liable for the payment of
such costs.
SECTION 4. Obligations of the Borrower.
---------------------------
(a) The obligations of the Borrower under this Agreement shall be
absolute, unconditional and irrevocable subject to and in accordance with the
terms of this Agreement, and shall be performed strictly in accordance with the
terms of this Agreement, under all circumstances whatsoever, including without
limitation the following circumstances:
(i) any lack of validity or enforceability of the Letter of
Credit, the Bonds, the Loan Agreement, the Indenture, the Borrower Agreements or
the Guarantor Agreements (collectively, the "Related Documents");
(ii) any amendment or waiver of or any consent to departure from
all or any of the Related Documents;
(iii) the existence of any claim, set-off, defense or other rights
which the Borrower may have at any time against the Trustee, any beneficiary or
any transferee of the Letter of Credit (or any persons or entities for whom the
Trustee, any such beneficiary or any such transferee may be acting), the Bank,
any Guarantor or any other person or entity, whether in connection with this
Agreement, the Related Documents or any unrelated transaction;
(iv) any breach of contract or other dispute between the Borrower
and the Trustee, any beneficiary or any transferee of the Letter of Credit (or
any persons or entities for whom the Trustee, any such beneficiary or any such
transferee may be acting), the Issuer, the owners of the Bonds, the Bank, any
Guarantor or any other person or entity;
(v) any statement or any other document presented under the Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect
whatsoever; or
(vi) payment by the Bank under the Letter of Credit against
presentation of a sight draft or certificate which does not comply with the
terms of the Letter of Credit, provided that such payment shall not have
constituted gross negligence or willful misconduct of the Bank.
(b) The Bank shall not be obligated to issue any further credits, to
cure any defaults under the Indenture, the Loan Agreement, any Related Document
or otherwise, or in any other manner to extend any financial consideration to
the Borrower beyond performance by the Bank of its obligations under
16
<PAGE>
the Letter of Credit.
(c) The Bank shall not be deemed to have waived or released any of its
rights or remedies (whether specified in or arising under this Agreement or
otherwise available to it by law or agreement) unless it signs a written waiver
or release. Delay or failure to act on the Bank's part shall not constitute a
waiver of or otherwise preclude enforcement of any of its rights and remedies.
All of the Bank's rights and remedies shall be cumulative and may be exercised
singularly or concurrently. The Bank need not resort to any particular right or
remedy before exercising or enforcing any other, and the Bank's resort to any
right or remedy shall not preclude the exercise or enforcement of any other
right and remedy.
SECTION 5. Representations and Warranties of the Borrower. The Borrower
----------------------------------------------
represents and warrants as follows:
(a) The Borrower was duly organized and is validly existing under the
laws of the state of its formation and is duly qualified to do business in and
is in good standing under the laws of any other jurisdiction in which the
conduct of its business or the ownership of its properties makes such
qualification necessary.
(b) The execution, delivery and performance by the Borrower of this
Agreement and of each of the Related Documents to be executed, delivered and
performed by the Borrower are within the Borrower's powers, have been duly
authorized by all necessary Borrower action, do not contravene (i) the
Borrower's Articles of Organization and its Members Operating Agreement or (ii)
any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award or any indenture, agreement, lease, instrument or other
contractual restriction binding on or affecting the Borrower and (except as
provided in this Agreement) do not result in or require the creation of any
lien, security interest or other charge or encumbrance upon or with respect to
any of its properties other than the liens created by the Borrower Agreements or
any other Related Documents. The Borrower is not in violation of or in default
under (in any material respect) any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or any such indenture,
agreement, lease, instrument or other contractual restriction. All legally
required orders, consents, easements, permits or other authorizations or
approvals of any public boards or bodies have been duly and validly issued and
remain in full force and effect, and no additional authorization, approval,
consent, agreement, permit, order or other action by, and no notice to or filing
or registration with, any governmental authority or regulatory body is required
for (1) the due execution, delivery and performance by the Borrower of this
Agreement or any of the Related Documents to be executed, delivered and
performed by the Borrower; or (2) the acquisition, construction and maintenance
of the Project.
(c) This Agreement, the Loan Agreement and each of the Borrower
Agreements have each been duly authorized, executed and delivered and constitute
the legal, valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(d) There is no pending action or proceeding before any court,
governmental agency or arbitrator against or directly involving the Borrower
and, to the best of the Borrower's knowledge, there is no threatened action or
proceeding affecting the Borrower or before any court, governmental agency or
arbitrator which may materially and adversely affect the financial condition or
operations of the Borrower.
(e) If the Borrower shall have any employee benefit plan subject to
the provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") the Borrower shall be in
17
<PAGE>
compliance in all material respects with Part I of Subtitle B of Title I thereof
and the regulations and published interpretations thereunder. No Reportable
Event (as defined in Section 4043(b) of ERISA) shall have occurred with respect
to any employee benefit plan, which is subject to the provisions of Title IV of
ERISA and which is maintained for employees of the Borrower (a "Plan"),
administered by the Borrower or any administrator designated by the Borrower.
There shall be no unfunded vested liability, on an aggregate basis, with respect
to the Plans administered by the Borrower or the administrators designated
thereunder as of the date hereof.
(f) To the best of Borrower's knowledge after due inquiry, no
information furnished by the Borrower to the Bank in connection with this
Agreement or any Related Document includes any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
made, in the light of the circumstances in which they were made, not misleading.
(g) There are no actions, suits or proceedings pending, or to the
knowledge of the Borrower threatened against or affecting the validity or
enforceability of this Agreement or any Borrower Agreement or the priority of
the liens thereof, at law or in equity, or before or by any governmental
authority or local authority.
(h) The Borrower has good title to its material assets and the same
are not subject to any liens or encumbrances other than encumbrances as have
been previously disclosed by the Borrower, in writing, to the Bank or reflected
in the financial statements delivered to the Bank.
(i) The Borrower possesses all necessary trademarks, trade names,
copyrights, patents, patent rights and licenses to conduct its business as now
operated, without any known conflict with the valid trademarks, trade name,
copyrights, patents and license rights of others.
(j) Attached hereto as Exhibit "F" is a true, complete and correct
list of all material agreements, contracts, franchises, and permits owned by or
held in the name of the Borrower (collectively the "MATERIAL AGREEMENTS,"
individually each or any "MATERIAL AGREEMENT").
(k) The Property and the actual use thereof by Borrower complies in
all material respects with all laws, regulations, orders, building restrictions
and requirements of, and all permits and approvals from, and agreements with and
commitments to, all Governmental Authority, judicial or legal authorities having
jurisdiction over the Property or any business conducted thereon or therefrom,
and with all restrictive covenants and other title encumbrances encumbering the
Property (all collectively, the "Requirements"). Borrower has received no
notices of violations of any Requirements.
(l) With the exception of leased equipment used in the ordinary course
of business and equipment owned and provided by the Project operator, Borrower
owns or will own directly, all of the personal property and fixtures necessary
for the operation and management of the Property following construction of the
Improvements for the uses intended to be conducted thereon or required by Bank
as additional security for the Borrower's obligations hereunder, in each case
free and clear of all liens, encumbrances and adverse claims (other than
Permitted Liens) and the security interest of Bank in such personal property
shall be a first lien thereon.
(m) Borrower has not received, except from the Bank or the Authority,
financing for either the acquisition of the Project or the construction and
installation of the Improvements.
(n) The Plans are satisfactory to Borrower and to the extent required
by applicable law or any effective restrictive covenant, by all applicable
Governmental Authority and the beneficiary of any
18
<PAGE>
such covenant respectively; the Plans so approved have been initialed by
Borrower and General Contractor, all construction, if any, heretofore performed
on the Improvements has been performed within the perimeter of the Property in
accordance with the Plans and any restrictive covenants applicable thereto;
there are no structural defects in the Improvements, and no violation of any
Local Requirement exists with respect thereto.
(o) All utility services necessary for the construction of the
Improvements and the operation thereof for their intended purpose are either
available at the boundaries of the Property or all necessary steps have been
taken by Borrower and all governmental authorities having jurisdiction over the
Property to assure the complete construction and installation thereof, including
water supply, storm and sanitary sewer facilities, gas, electric and telephone
facilities.
(p) All roads necessary for the full utilization of the Improvements
for their intended purposes have either been completed or the necessary rights-
of-way therefor have either been acquired by applicable Governmental Authority
or have been dedicated to public use and accepted by applicable Governmental
Authority and all necessary steps have been taken by Borrower and applicable
Governmental Authority to assure the complete construction and installation
thereof.
(q) Borrower has examined, is familiar with, and the Improvements will
in all respects conform to and comply with all covenants, conditions,
restrictions, reservations and zoning ordinances affecting the Property.
(r) Borrower has not dealt with any person, firm or corporation who is
or may be entitled to any finder's fee or brokerage commission (other than the
Borrower's financial advisors, underwriters and remarketing agents in connection
with the sale of the Bonds) in connection with the execution of this Agreement
or the consummation of the transactions contemplated hereby and Borrower does
hereby indemnify and agree to hold Bank harmless from and against any and all
loss, cost liability or expense, including reasonable attorneys' fees, Bank may
suffer or sustain should such warranty or representation prove inaccurate in
whole or in part.
SECTION 6. Affirmative Covenants of the Borrower. So long as the Expiration
-------------------------------------
Date (as defined in the Letter of Credit) has not occurred or so long as any
amount is due and owing to the Bank hereunder, unless the Bank shall otherwise
consent in writing the Borrower will:
(a) Maintain its existence and remain qualified to do business in
California and maintain its principal place of business in California.
(b) Comply in all material respects with all applicable laws, rules,
regulations and orders of any governmental authority, non-compliance with which
would materially and adversely affect the ability of the Borrower to perform its
obligations hereunder or under any Borrower Agreement, such compliance to
include, without limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon it or upon its property,
except to the extent compliance with any of the foregoing is then being
contested as provided in Section 17 hereof.
(c) Maintain, at its own cost and expense, all of the liens created
under the Borrower Agreements as duly perfected liens on the property encumbered
thereby, subject only to Permitted Liens and such other liens, claims and
exceptions as the Bank shall have consented to in writing.
(d) Obtain, maintain and, upon request, furnish or cause to be
furnished to the Bank (i) copies of policies for the insurance required to be
maintained as provided in the Agreement to Furnish
19
<PAGE>
Insurance attached hereto as Exhibit "E"; and, without duplication of the
foregoing, (ii) casualty insurance with fire and extended coverage (with
lender's loss payable endorsements in favor of the Bank); third-party
environmental liability and general public liability insurance naming the Bank
as an additional insured and worker's compensation insurance (but only if and
when the Borrower has employees), with the same coverage amounts, terms and
conditions as are currently in existence as of the date of this Agreement; the
insurance company or companies providing such insurance may be changed upon not
less than ten (10) Business Days prior written notice to the Bank but without
having to obtain the Bank's prior written consent as long as the replacement
insurance company has an A.M. Best's rating of B+ or above; all such policies
shall require at least thirty (30) days' prior notice to the Bank of
cancellation or reduction in coverage; and, if requested, receipts showing
payment of all insurance premiums shall be provided to the Bank.
(e) Pay and discharge all lawful claims, including taxes, assessments
and governmental charges or levies imposed upon it or its income or profits or
upon the Project prior to the date upon which penalties attach thereto; provided
that the Borrower shall not be required to pay any such tax, assessment, charge
or levy, the payment of which is being contested as permitted under Section 17
hereof.
(f) Comply promptly with any valid requirement of any Governmental
Authority where noncompliance would materially and adversely affect the ability
of the Borrower to perform its obligation hereunder.
(g) The Bank may assume that the statements, facts, information and
representations contained in any affidavits, orders, receipts or other written
instruments which are filed with, or exhibited to, the Bank by or on behalf of
the Borrower are true and correct in all material respects and may rely thereon
without any investigation or inquiry and any action taken by the Bank in
reliance thereon shall conclusively be deemed to be in the discharge of the
Bank's obligations hereunder.
(h) At any reasonable time and upon reasonable notice to the Borrower,
from time to time and as may be reasonably requested, permit the Bank or any
agents or representatives thereof to examine and make copies of and abstracts
from the records and books of account of, and visit the properties of, the
Borrower and consult with any of its agents and representatives. The Bank agrees
to use reasonable efforts to ensure that any information obtained pursuant to
this paragraph which is not contained in a report or other document otherwise
available to the public generally, to the extent permitted by law and except as
may be required by valid subpoena or in the normal course of business operations
(which shall include the Bank's sharing of its liability under the Letter of
Credit with other banks which give appropriate assurances of confidential
treatment of such information), will be treated confidentially by the Bank and
will not be distributed or otherwise made available by the Bank to any person or
entity, other than their respective employees, authorized agents or
representatives who need to review or be informed of such information in
connection with their employment by Bank.
(i) Keep proper books of record and account, in which full and correct
entries shall be made of financial transactions and the assets and business of
the Borrower in accordance with generally accepted accounting principles.
(j) Furnish to the Bank the following: (i) as soon as reasonably
possible, and in any event within ten (10) days, after the occurrence of each
Event of Default (as hereinafter defined) of which the Borrower has knowledge, a
statement signed by the Borrower setting forth the details of such Event of
Default and the action which the Borrower proposes to take with respect thereto;
(ii) upon request, copies of all federal income tax returns of the Borrower
promptly after the same are filed with the taxing authorities; (iii) within 45
days of each March 31, June 30 and September 30, balance sheets of the Borrower
(including a reconciliation of net worth) as at said dates and income and
expense statements for
20
<PAGE>
the year-to-date period ending on each of said dates, certified by two members
of the Executive Committee of the Borrower accompanied by the certificate of
such two members certifying (A) that, as at the end of such period there existed
no Event of Default hereunder nor any known event which with notice, lapse of
time or both would constitute an Event of Default hereunder; and (B) compliance
by the Borrower with the financial covenants required under this Agreement and
setting forth the calculations demonstrating such compliance; (iv) within 120
days of the end of each fiscal year of the Borrower the complete annual
financial statements of the Borrower for such fiscal year, accompanied by a
review report thereon of a nationally or regionally recognized firm of certified
public accountants; and (v) such other information respecting the business,
properties or the condition or operations, financial or otherwise, of the
Borrower which the Bank may from time to time reasonably request. All financial
reports and statements required hereunder shall be prepared in accordance with
generally accepted accounting principles consistently applied. All financial
statements, tax returns and the information contained therein shall be deemed
confidential and shall be handled in the manner specified in Section 6(h) of
this Agreement.
(k) From time to time, record, register and file all such notices,
statements and other documents and take such other reasonable steps, including,
but not limited to, the amendment of the Borrower Agreements or the execution of
any other security agreement relating hereto and any instruments perfecting
interests thereunder, as may be necessary or advisable to render fully valid and
enforceable under all applicable laws the rights, liens and priorities of the
Bank with respect to all security from time to time furnished in connection with
this Agreement or intended to be so furnished, in each case in such form and at
such times as shall be satisfactory to the Bank, and pay all fees and expenses
(including reasonable attorneys' fees) incident to compliance with this
paragraph; provided that the amendment to any Borrower Agreements shall not
change the business terms of this Agreement or the transactions contemplated
hereby.
(l) Duly and punctually pay or cause to be paid all principal and
interest on the Debt of the Borrower to third parties in excess of $50,000 in
principal amount, comply with and perform all material conditions, terms and
obligations of the notes evidencing such Debt and the security agreements, deeds
of trust and mortgages securing it, promptly inform the Bank of any default, or
anticipated default, under any such material provision of any such note,
security agreement, deed of trust or mortgage, and forward to the Bank a copy of
any notice of default or notice of an event that might result in default under
any such note, security agreement, deed of trust or mortgage; provided that the
Borrower shall not be required to pay any such Debt, the payment of which is
being contested as permitted in Section 17 hereof.
(m) Maintain an interest bearing deposit account with the Bank (the
"PROJECT RESERVE ACCOUNT") in an amount of not less than $650,000; any draws on
the Project Reserve Account must be fully refunded within ninety (90) days of
drawing and, in any event, prior to any future distributions to the Borrower's
LLC members, whichever occurs first.
(n) Attached hereto (and incorporated herein by this reference) as
Exhibit G is a schema setting forth financial ratios and covenants relating to
the Borrower. The Borrower covenants that it shall comply with each of the
financial covenants set forth on such Exhibit G.
(o) At the time and in amounts required by Bank, Borrower shall
deposit Borrower's Funds in the Borrower's Funds Account. Borrower's Funds shall
be disbursed from such account in the manner provided in Section 3 hereof.
Should it appear at any time that the Bond proceeds then held by the Trustee are
insufficient, in Bank's reasonable judgment, to provide the financing for the
completion of the Improvements, Borrower, within ten (10) days following receipt
of written demand by Bank for additional funds, shall pay to Bank an amount
equal to such deficiency as expressed in said demand for deposit in the
Borrower's Funds Account.
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<PAGE>
(p) Borrower shall at its own cost and expense, maintain the Deed of
Trust as a first lien on the Property and deliver or cause to be delivered to
Bank from time to time such endorsements to the Title Policy and such other
title insurance coverages as Bank shall require.
(q) Borrower shall allow Bank, or its representatives (and Bank shall
have the right) to enter upon the Property, inspect the Improvements and all
materials to be used in the construction thereof and to examine the Plans and
all detailed plans and shop drawings which are or may be kept at the
construction site and will cooperate, and cause the General Contractor or, if
none, the subcontractors, to cooperate with Bank. Inspection by Bank of
construction shall be for the purpose of protecting the security of Bank and
such inspection is in no way to be construed as a representation that there is a
compliance with the Plans or that the construction is free from faulty material
or workmanship. The Borrower agrees to pay the Bank its standard construction
inspection fee (not to exceed $500) in connection with each such inspection.
(r) Unless prior arrangements satisfactory to both Bank and Title
Company have been made, Borrower shall not commence construction of the
Improvements, including grading and site clearance, or undertake any act on the
Property prior to recordation of the Deed of Trust, the result of which would
cause any mechanics' or materialman's lien thereafter filed to take priority
over the lien of the Deed of Trust. Borrower shall cause construction of the
Improvements to be commenced not more than thirty (30) days after the
recordation of the Deed of Trust. Following the commencement of construction,
Borrower shall cause the construction of the Improvements to be prosecuted with
diligence and continuity. In any event, on or before the Completion Date,
Borrower shall cause the construction of the Improvements to be completed
substantially in accordance with the Plans, free and clear of liens or claims
for liens, and shall cause all licenses and permits necessary for the occupancy
and use of the Improvements to be issued.
(s) Borrower shall not permit any change in the Plans or the
performance of any work pursuant to any Change Order, which when added to the
cumulative amount of all Change Orders previously agreed to by Borrower and all
increases in the General Contract price resulting from Change Orders heretofore
agreed to by Borrower, will result in a change in the General Contract price or
in the cost of construction of the Improvements in excess of the Cumulative
Change Order Amount, or which will materially reduce the square foot area of the
Improvements, unless it shall have received the specific approval of Bank to
such Change Order and provided that the additional funds necessary to pay for
such Change Orders are provided as Borrower's Funds. Bank is hereby authorized
to and shall disburse said funds in accordance with the Disbursement Schedule
for the payment of such Change Orders upon completion of such changes to Bank's
satisfaction.
(t) Borrower shall not modify the Cost Breakdown without Bank's prior
written consent, which consent shall be conditioned upon Bank having received
evidence satisfactory to it that (i) the change in the Cost Breakdown is
reasonably necessary; and (ii) in the opinion of Bank, there remains sufficient
funds in the undisbursed portion of the Loan and of Borrower's Funds designated
herein and allocated on the Disbursement Schedule for the costs of construction
of the Improvements to pay for all remaining costs of completion of construction
of the Improvements.
(u) Borrower shall require covenants from the General Contractor to
the same effect as the covenants made by Borrower in Paragraphs (r), (s) and (t)
of this Section 6, and that General Contractor will, upon request, deliver to
Bank the names of all persons with whom General Contractor has contracted or
intends to contract for the construction of the Improvements or for the
furnishing of labor or materials therefor.
22
<PAGE>
(v) Borrower shall not execute any contract or become party to any
arrangement for the performance of work on the Property except with the General
Contractor or except with the consent of the Bank.
(w) Borrower shall deliver to Bank, on demand, any contracts, bills of
sale, statements, receipted vouchers or agreements, under which Borrower claims
title to any materials, fixtures or articles incorporated in the Improvements.
(x) Upon demand of Bank, Borrower shall correct any defect in the
Improvements or any departure from the Plans not approved by Bank; the advance
of any Loan proceeds shall not constitute a waiver of Bank's right to require
compliance with this covenant with respect to any such defects or departures
from the Plans not theretofore discovered by, or called to the attention of
Bank.
(y) Borrower shall receive the disbursements to be made hereunder as a
trust fund for the purpose of paying the costs of acquisition, installation and
construction of the Improvements and related soft costs and it will apply the
same first to such payment before using any part thereof for any other purpose.
(z) Borrower shall notify Bank immediately on completion of the
foundation of the Improvements.
(aa) Borrower shall not install materials, personal property,
equipment, or fixtures subject to any security agreement or other agreement or
contract wherein the right is reserved to any person, firm or corporation to
remove or repossess any such material, equipment or fixtures, or whereby title
to any of the same is not completely vested in Borrower at time of installation,
without Bank's written consent.
(bb) All easements, declarations of covenants, conditions and
restrictions, and private or public dedications affecting the Property shall be
submitted to Bank for its approval and such approval shall be obtained prior to
the execution or granting of any thereof by Borrower, accompanied by a drawing
or survey showing the precise location of each thereof.
(cc) Borrower shall comply promptly with all Requirements of any
Governmental Authorities having jurisdiction over the Property or the
construction and operation of the Improvements thereon. Borrower shall obtain,
preserve and maintain in good standing, as applicable, all rights and privileges
necessary or desirable for the operation of the Property and the conduct of
Borrower's business thereon and therefrom.
(dd) Borrower shall promptly notify Bank in writing of:
(i) any litigation affecting the Borrower or the Property that may
reasonably be expected to result in a material adverse change in (i) Borrower's
ability to timely perform any of its obligations hereunder or under any of the
Borrower Agreements, or (ii) the physical condition or operation of the
Property;
(ii) any notice that the Improvements or construction thereof, the
Property or Borrower's business fails in any material respect to comply with any
applicable Requirement; and
(iii) any other circumstance, event or occurrence that results in
a material adverse change in (i) the physical condition or operation of the
Property, (ii) the financial condition of the
23
<PAGE>
Borrower, or (iii) Borrower's ability to perform in a timely manner any of its
obligations hereunder or under any of the Borrower Agreements.
SECTION 7. Negative Covenants of the Borrower. So long as the Expiration
----------------------------------
Date has not occurred or any amount is due and owing to the Bank hereunder,
unless the Bank shall otherwise consent in writing, the Borrower shall not:
(a) [INTENTIONALLY OMITTED]
(b) Compliance with ERISA. (i) Voluntarily terminate any Plan (if any
---------------------
such Plan is in existence) so as to result in any material (in the reasonable
opinion of the Bank) liability of the Borrower to the Pension Benefit Guaranty
Corporation ("PBGC") or (ii) enter into any Prohibited Transaction (as defined
in Section 4975 of the Internal Revenue Code of 1986, as amended, and in ERISA)
involving any Plan which results in any material (in the reasonable opinion of
the Bank) liability of the Borrower to PBGC, (iii) cause any occurrence of any
Reportable Event (as defined in Section 4043(b) of ERISA) which results in any
material (in the reasonable opinion of the Bank) liability of the Borrower to
PBGC or (iv) allow or suffer to exist any other event or condition known to the
Borrower which results in any material (in the reasonable opinion of the Bank)
liability of the Borrower to PBGC.
(c) Amendment of Related Documents. Enter into or consent to any
------------------------------
amendment of or supplement to any Related Document.
(d) Liens and Encumbrances. Create, incur, assume or permit to exist,
----------------------
any mortgage, deed of trust, lien, security interest (whether possessory or
nonpossessory) or other encumbrance of any kind (including without limitation
the charge upon property purchased under a conditional sale or other title
retention agreement) upon property of any kind, whether real, personal or mixed,
now owned or hereafter acquired by the Borrower or upon the income or profits
thereof, except to Bank and except for (a) Permitted Liens existing as of the
date hereof; (b) future purchase money security interests encumbering only the
property (other than inventory) purchased; (c) liens arising in connection with
leases of specific items of equipment; (d) liens for taxes, fees, assessments or
other governmental charges or levies, either not delinquent or are being
contested in good faith by appropriate proceedings, provided the same (except
for real property taxes or assessments) have no priority over any of Bank's
security interests; (e) liens of materialmen, mechanics, warehousemen, carriers,
or other similar liens arising in the ordinary course of business and securing
obligations which are not delinquent or are being contested in good faith by
appropriate proceedings; (f) liens arising out of a judgment or award not
exceeding One Hundred Thousand Dollars ($100,000) (exclusive of amounts covered
by insurance) with respect to which an appeal is being prosecuted, a stay of
execution pending appeal having been secured; (g) leases or subleases and
licenses granted to others not interfering in any material respect with the
business of Borrower; (h) easements, rights of way, servitudes or zoning or
building restrictions and other minor encumbrances on real property and
irregularities in the title to such property which do not in the aggregate
materially impair the use or value of such property or risk the loss or
forfeiture of title thereto; (i) liens which constitute banker's liens, rights
of setoff or similar rights and remedies as to deposit accounts or other funds
maintained with any bank or other financial institution, whether arising by
operation of law or pursuant to contract and (j) liens incurred in connection
with the extension, renewal or refinancing of the indebtedness secured by liens
of the type described in clauses (a) through (c) above, provided that any
extension, renewal or replacement lien is limited to the property encumbered by
the existing lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase.
(e) Acquisitions. During any fiscal year, acquire whether through the
------------
purchase of assets or the purchase of shares, partnership interests or other
ownership interests, a controlling interest in
24
<PAGE>
any entity or substantially all the assets of any entity or sole proprietorship
(an "Acquisition") unless, prior thereto, the Bank has, in its sole discretion,
approved such Acquisition in writing.
(f) Capital Expenditures. (i) During the period from the Date of
--------------------
Issuance through March 31, 1998, permit the aggregate amount of capital
expenditures (other than capital expenditures financed with Bond proceeds) to
exceed Six Hundred Thousand Dollars ($600,000); and (ii) during the period from
April 1, 1998 through December 31, 1998 and during each fiscal year thereafter
permit the aggregate amount of unfinanced capital expenditures to exceed Two
Hundred Fifty Thousand Dollars ($250,000). Capital expenditures permitted under
clause (ii) of this Section 7(f) are referred to as "Permitted Unfinanced
Capital Expenditures."
(g) Limitation on Aggregate Debt. Permit aggregate outstanding Debt to
----------------------------
exceed One Million Dollars ($1,000,000).
(h) Limitation on Distributions. Permit the aggregate amount of
---------------------------
distributions to its members (including both distributions actually paid and
distributions which are accrued and payable) in any fiscal quarter to exceed the
amount of scheduled DSR Deposits paid into the DSR Account in such quarter, as
adjusted pursuant to Section 1(g)(v), plus the amount of any Excess Cash Flow
payments deposited into the DSR Account during such quarter.
(i) Breach or Sale of Material Agreements, Franchises or Permits.
------------------------------------------------------------
Promptly upon obtaining any knowledge of any material default under any Material
Agreement, the Borrower shall give the Bank written notice of such default and
advise the Bank in writing of the action proposed to be taken to cure such
default.
SECTION 8. Events of Default. The occurrence of any of the following events
-----------------
shall be an "Event of Default" hereunder unless waived by the Bank in writing:
(a) The Borrower shall fail to pay when due any amount due hereunder
and such failure shall continue for five (5) days after such due date;
(b) Any representation or warranty made by the Borrower hereunder or
under any Borrower Agreement or in any statement, certificate or document
delivered by the Borrower in connection with this Agreement or any Related
Document shall prove to have been incorrect in any material respect when made;
or
(c) The Borrower shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement or any of the Borrower
Agreements and any such failure shall be impossible for the Borrower to remedy
or which shall remain unremedied for thirty (30) days after written notice
thereof shall have been given to the Borrower by the Bank; provided however any
such failure which is not impossible to cure but which is not reasonably
susceptible of cure within a 30-day period shall not constitute an Event of
Default hereunder unless either (A) the Borrower shall fail to initiate and
diligently pursue all action necessary to remedy such failure; or (B) such
failure is not remedied within sixty (60) days after written notice thereof to
the Borrower from the Bank; or
(d) An Event of Default specified in any of the Borrower Agreements
shall have occurred; or
(e) An Event of Default (as defined in the Indenture) shall have
occurred under the Indenture; or
25
<PAGE>
(f) A Loan Default Event (as defined in the Loan Agreement) shall have
occurred under the Loan Agreement; or
(g) Any material provision of this Agreement or any Borrower Agreement
shall at any time for any reason cease to be valid and binding on the Borrower,
or shall be declared to be null and void, or the validity or enforceability
thereof shall be contested by the Borrower or any governmental agency or
authority (other than the Issuer) and the happening of the events heretofore set
forth in this paragraph (g) shall materially and adversely affect the Bank's
rights under this Agreement, or the Borrower shall deny that it has any or
further liability or obligation under this Agreement or any Borrower Agreement;
or
(h) The Borrower shall (i) fail to make any payment, equal to or
exceeding $50,000 of any principal of or interest or premium on any Debt (as
defined below) when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Debt, or (ii) fail to perform or observe any material term,
covenant or condition on its part to be performed or observed under any
agreement or instrument relating to any Debt when required to be performed or
observed, and such failure shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the effect of such failure to
perform or observe is to accelerate, or to permit the acceleration of, the
maturity of any Debt, the unpaid principal amount of which then equals or
exceeds $50,000. "Debt" of the Borrower (which shall not include any
indebtedness hereunder) means (A) indebtedness for borrowed money or for the
deferred purchase price of property or services in respect of which the Borrower
is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in
respect of which the Borrower otherwise assures a creditor against loss and (B)
obligations under leases which shall have been or should be, in accordance with
generally accepted accounting principles, recorded as capital leases in respect
of which obligations the Borrower is liable, contingently or otherwise, as
obligor, guarantor or otherwise, or in respect of which obligations the Borrower
assures a creditor against loss; or
(i) Any membership interests in the Borrower shall be held by any
person or entity other than KRC, KVI, BWI or WVRT; or
(j) The Borrower or any Guarantor shall become insolvent or generally
fail to pay, or admit in writing its inability to pay, debts as they become due
or the Borrower or any Guarantor applies for, consents to, or acquiesces in the
appointment of, a trustee, receiver or other custodian for the Borrower or any
Guarantor and property thereof, or makes a general assignment for the benefit of
creditors; or, in the absence of such application, consent or acquiescence, a
trustee, receiver or other custodian is appointed for the Borrower or any
Guarantor, or for a substantial part of the property thereof and is not
discharged within 45 days; or any bankruptcy, reorganization, debt arrangement,
or other case or proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding, is commenced in respect of the Borrower
or any Guarantor, or any event shall occur similar to any of the foregoing under
the laws of any jurisdiction, and if such case or proceeding is not commenced by
the Borrower or any Guarantor, it is consented to or acquiesced in by the
Borrower or any Guarantor or remains for 45 days undismissed; or the Borrower or
any Guarantor takes any action to authorize, or in furtherance of, any of the
foregoing; or
(k) the occurrence of a Payment Event of Default under the Kaiser
Guaranty; or
(l) Borrower or General Contractor shall fail to (i) commence
construction of the Improvements within the time periods required in this
Agreement; (ii) proceed diligently and continuously with the construction of the
Improvements or the construction of the Improvements is otherwise discontinued
for a period of ten (10) consecutive business days or more, for any reason other
than Force
26
<PAGE>
Majeure Delay; or (iii) complete the construction of the Improvements and cause
the issuance of all licenses and permits necessary for the occupancy, use or
sale of the Improvements, on or before the Completion Date; or
(m) Borrower voluntarily suspends the transaction of business or there
is an attachment, execution or other judicial seizure of any portion of
Borrower's assets and such seizure is not discharged within ten (10) business
days; or
(n) Any person obtains an order or decree in any court of competent
jurisdiction enjoining the construction of the Improvements or enjoining or
prohibiting Borrower or Bank or either of them from performing this agreement,
and such proceedings are not discontinued and such decree is not vacated within
ten (10) days after the granting thereof; or
(o) Borrower neglects, fails or refuses to keep in full force and
effect any permit or approval with respect to the construction of the
Improvements or the use and occupancy thereof; or
(p) If any bonded notice to withhold in connection with the Project is
served on Bank in accordance with the provision of California law and within
five (5) business days of the receipt of such notice the claim set forth therein
is not discharged or, if the amount claimed is disputed in good faith by
Borrower or General Contractor, an appropriate counter bond or equivalent
acceptable to Bank is filed with Bank; or
(q) The imposition, voluntary or involuntary, of any lien or
encumbrance upon the Property without Bank's written consent or unless an
adequate counter bond is provided and such lien is accordingly released within
ten (10) days of the imposition of such lien; or
(r) Bank fails to have an enforceable first lien on or security
interest in any property given as security for the Borrower's obligations
hereunder.
SECTION 9. Rights and Remedies.
-------------------
(a) Defaults under this Agreement. Upon the occurrence of an Event of
-----------------------------
Default hereunder, or at any time thereafter while such default continues, the
Bank, in its sole discretion, may:
(i) send notice to the Trustee of the occurrence of such Event of
Default (in substantially the form attached hereto as Exhibit H) whereupon the
Trustee shall immediately declare a mandatory redemption of the Bonds under
Section 7.01 of the Indenture; and
(ii) exercise any rights and remedies available to it by law,
hereunder under any Related Document or under any other agreement including,
without limitation, the Borrower Agreements, and any agreement executed pursuant
to Section 6(k) hereof; and
(iii) enter the Property and take possession of it, whether in
person, by agent or by court-appointed receiver, perform any and all work and
labor necessary to complete the Improvements substantially in accordance with
the Plans, collect rents and otherwise protect its collateral and rights
hereunder or under the Borrower Agreements. If Bank exercises any of the rights
or remedies provided in this subparagraph (iii), that exercise shall not make
Bank a partner or joint venturer of Borrower. All sums which are expended by
Bank in completing the Improvements or in preserving its collateral shall be
considered a loan to Borrower secured by the Deed of Trust and bearing interest
at the Default Rate; and
27
<PAGE>
(iv) terminate all disbursements of Borrower's Funds or Bond
proceeds; and
(v) take possession of all funds and deposits of Borrower on hand
or deposit in any account at Bank or any branch at Bank and apply said funds in
such order at priority as Bank may elect in connection with the obligations of
Borrower under the Loan Documents.
(b) Default under Other Documents. The Bank may cure an Event of
-----------------------------
Default under any Related Document, provided, however, that nothing contained
herein shall obligate the Bank to cure such an Event of Default.
(c) Requirement of Full Collateralization. Upon the occurrence and
-------------------------------------
during the continuance of an Event of Default hereunder, an amount equal to the
sum of (i) the then Stated Amount of the Letter of Credit, (ii) any unreimbursed
drawings thereunder, and (iii) any and all amounts due to the Bank under the
Letter of Credit, this Agreement or any of the Related Documents shall become
immediately due and payable by the Borrower to the Bank, without presentment,
demand, protest or other requirements of any kind, all of which are hereby
expressly waived by the Borrower, and such amount shall be immediately deposited
by the Borrower into a special interest bearing account with the Bank as
collateral security to be held for the benefit of the Bank for the reimbursement
of any drawings under the Letter of Credit and other amounts due and payable
under this Agreement. Effective one hundred twenty-six (126) days following the
receipt of the full amount due and owing under this Agreement, the Bank shall
execute such releases with respect to the obligations to it of the Borrower as
are necessary and appropriate and this Agreement shall thereupon terminate,
provided that no event described in Section 8(i) hereof has occurred before or
during such one hundred twenty-six (126) day period. The Bank shall cause any
cash collateral received by it to be invested in a manner so as not to cause the
Bonds to be treated as "arbitrage bonds" under the Code and the Regulations.
(d) Curing of Default by Disbursement. Upon the occurrence of a
---------------------------------
default which may be cured by the payment of money, the Bank, without waiving
any right of enforcement or foreclosure under the Borrower Agreements which the
Bank may have by reason of such default, or any other right the Bank may have
against the Borrower because of such default, shall have the right to make such
payment from any account of Borrower maintained with Bank thereby curing the
default.
(e) Remedies are Cumulative. All remedies of the Bank provided for
-----------------------
herein are cumulative and shall be in addition to any and all other rights and
remedies provided in any Related Document or any other document or by law. The
exercise of any rights of the Bank hereunder shall not in any way constitute a
cure or waiver of a default hereunder or elsewhere, or invalidate any act done
pursuant to any notice of default, or prejudice the Bank in the exercise of any
of its other rights hereunder or elsewhere, or invalidate any act done pursuant
to any notice of default, or prejudice the Bank in the exercise of any of its
other rights hereunder or elsewhere unless, in the exercise of said rights, the
Bank realizes all amounts owed to it hereunder and under any Related Document or
any other document. This Agreement hereby incorporates any alternative dispute
resolution agreement previously, concurrently or hereafter executed between the
Borrower and the Bank.
(f) Power of Attorney. Upon the occurrence of an Event of Default,
-----------------
Borrower hereby constitutes and appoints Bank its true and lawful attorney in
fact with the power and authority, including full power of substitution, as
follows:
(i) To take possession of the Property and complete the
Improvements.
(ii) To use any of Borrower's Funds and any Bond proceeds which
may
28
<PAGE>
remain undisbursed under the Indenture for the purpose of completing the
Improvements and for other costs related thereto.
(iii) To make such additions and changes and corrections in the
Plans as may be necessary or desirable as Bank in its sole discretion deems
proper to complete the Improvements.
(iv) To employ such contractors, subcontractors and agents,
architects and inspectors as are required to complete the Improvements.
(v) To employ security personnel to protect the Property and
Improvements from injury.
(vi) To pay, settle or compromise all existing bills and claims
against Borrower's Funds or any Bond proceeds which may remain undisbursed under
the Indenture or as may be necessary or desirable, as Bank in its sole
discretion deems proper, for the completion of the Improvements or for
protection or clearance of title to the Property and Personal Property or for
the protection of Bank's interest with respect thereto.
(vii) To prosecute and defend all actions and proceedings in
connection with the construction of the Improvements.
(viii) As Bank in its sole discretion deems proper, to execute,
acknowledge, and deliver all instruments and documents in the name of Borrower
which may be necessary or desirable to do and to do any and every act with
respect to the construction of the Improvements which Borrower might do on its
own behalf. This Power of Attorney is a power coupled with an interest and
cannot be revoked and any costs or expenses incurred by Bank in connection with
any acts by Bank under or pursuant to this Section 9(f) shall be at the cost and
expense of Borrower, repayable on demand by Borrower to Bank with interest
thereon at the Default Rate, with any such advances made or costs or expenses
incurred by Bank to be secured by the Deed of Trust and the Borrower Agreements.
(g) Disclaimer. WHETHER OR NOT BANK ELECTS TO EMPLOY ANY OR ALL OF THE
----------
REMEDIES AVAILABLE TO IT UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, BANK SHALL
NOT BE LIABLE FOR THE CONSTRUCTION OF OR FAILURE TO CONSTRUCT OR COMPLETE OR
PROTECT THE IMPROVEMENTS OR FOR PAYMENT OF ANY EXPENSE INCURRED IN CONNECTION
WITH THE EXERCISE OF ANY REMEDY AVAILABLE TO BANK OR FOR THE CONSTRUCTION OR
COMPLETION OF THE IMPROVEMENTS OR FOR THE PERFORMANCE OR NON-PERFORMANCE OF ANY
OTHER OBLIGATION OF BORROWER.
SECTION 10. Amendments, Etc. No amendment or waiver of any provision of
---------------
this Agreement nor consent to any departure by the Borrower therefrom shall in
any event be effective unless the same shall be in writing and signed by the
Bank or its authorized representative, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given.
SECTION 11. Addresses For Notices. All notices and other communications
---------------------
provided for hereunder shall be in writing and, if to the Borrower, mailed or
delivered to it, addressed to it at West Valley MRF, LLC, c/o Burrtec Waste
Industries, Inc., 9890 Cherry Avenue, Fontana, California 92335, Attn: Mr. David
Marriner, CFO; and Kaiser Ventures Inc., 3633 E. Inland Empire Blvd., Suite 850,
Ontario, CA 91764, Attn: Mr. James F. Verhey, Senior Vice President, or if to
the Bank, mailed or delivered to it, addressed to it at 530 B Street, 4th Floor,
San Diego, California 92101, Attention: Regional Office/Michael
29
<PAGE>
Conboy, or at such other address as shall be designated by such party in a
written notice to the other party. All such notices and other communications
shall, when mailed, be effective five (5) days after the date of deposit in the
mails, addressed as aforesaid.
SECTION 12. No Waiver; Remedies; Set-off.
----------------------------
(a) No failure on the part of the Bank to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
(b) Upon the occurrence and during the continuance of any Event of
Default hereunder, the Bank is hereby authorized at any time and from time to
time, without notice to the Borrower (any such notice being expressly waived by
the Borrower) to set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Bank to or for the credit or the account of the Borrower
against any and all of the obligations of the Borrower now or hereafter existing
hereunder, irrespective of whether or not the Bank shall have made any demand
hereunder and although such obligations may be contingent and unmatured.
(c) The rights and authorization granted to the Bank in the foregoing
paragraph (b) shall be available to any bank or financial institution acquiring
a participation in, or otherwise reimbursing the Bank for drawings made under,
the Letter of Credit to the same extent as if such bank or financial institution
had issued a letter of credit hereunder on behalf of the Borrower in the amount
of such participation or reimbursement.
SECTION 13. Indemnification. The Borrower shall indemnify and hold the
---------------
Bank harmless from and against any and all claims, damages, losses, liabilities,
costs or expenses whatsoever which the Bank may incur (or which may be claimed
against the Bank by any person or entity whatsoever) by reason of or in
connection with (a) any breach by the Borrower of any representation, warranty
or covenant contained in this Agreement; (b) the execution and delivery or
transfer (to a successor trustee) of, or payment or failure to pay under, the
Letter of Credit; provided, however, that the Borrower shall not be required to
-------- -------
indemnify the Bank for any claims, damages, losses, liabilities, costs or
expenses to the extent, but only to the extent, caused by (i) the willful
misconduct or gross negligence of the Bank in determining whether a sight draft
or certificate presented under the Letter of Credit complied with the terms of
the Letter of Credit or (ii) the Bank's grossly negligent or willful failure to
pay under the Letter of Credit after the presentation to it by the Trustee or a
successor trustee of a sight draft or certificate strictly complying with the
terms and conditions of the Letter of Credit; (c) any failure by the Borrower,
the Issuer or any underwriter to comply with applicable federal and state laws
and regulations pertaining to the offer and sale of the Bonds including in
particular any such laws applicable to the Letter of Credit; and (d) the
Project, or the conditions, occupancy, use, possession, conduct or management
of, or work done in or about, or from the planning, design, acquisition,
installation or construction of the Project or any part thereof (including
liability arising from loss or damage to any property or injury to or death of
any person occurring on or about or resulting from any defect in the Project);
(e) the issuance of any Bonds or any certifications or representations made in
connection therewith (except those made by the Bank) and the carrying out of any
of the transactions contemplated by the Loan Agreement; or (f) any untrue
statement or alleged untrue statement of any material fact or omission or
alleged omission to state a material fact necessary to make the statements made,
in light of the circumstances under which they were made, not misleading in any
official statement or other offering circular utilized by the Issuer in
connection with the sale of any Bonds, except with respect to statements or
omissions which are the result of information provided by the Bank. The Borrower
further covenants and agrees, to the extent permitted by law, to pay or to
reimburse the Bank for any and all costs,
30
<PAGE>
reasonable attorneys' fees, liabilities or expenses incurred in connection with
investigating, defending against or otherwise arising or incurred in connection
with any such losses, claims, damages, liabilities, expenses or actions.
Promptly upon obtaining actual knowledge that it has incurred any such damages,
costs, fees, liabilities or expenses, the Bank shall give notice thereof to the
Borrower. The provisions of this Section shall survive the expiration of the
Letter of Credit. Promptly after receipt of notice of commencement of any
action, suit or proceeding against the Bank in respect of which a claim is to be
made against the Borrower under this Section 13, the Bank shall notify the
Borrower of the commencement of such action, suit or proceeding, enclosing a
copy of all papers served, but the omission so to notify the Borrower of any
such action, suit or proceeding shall not relieve it from any liability which it
may have to the Bank otherwise than under this Section 13. In case any such
action, suit or proceeding shall be brought against the Bank and it shall notify
the Borrower of the commencement thereof, the Borrower shall be entitled to
participate in, and to assume the defense thereof, with counsel satisfactory to
the Bank and after notice from the Borrower to the Bank of the Borrower's
election so to assume the defense thereof the Borrower shall not be liable to
the Bank for any legal or other expenses, other than reasonable costs of
investigation subsequently incurred by the Bank in connection with the defense
thereof. The Bank shall have the right to employ its own counsel in any such
action, but the fees and expenses of such counsel shall be at the expense of the
Bank, unless (i) the employment of counsel by the Bank has been authorized by
the Borrower, (ii) the Bank shall have reasonably concluded that there may be a
conflict of interest between the Borrower and the Bank in the conduct of the
defense of such action (in which case the Borrower shall not have the right to
direct the defense of such action on behalf of the Bank), or (iii) the Borrower
shall not in fact have employed counsel to assume the defense of such action.
The Borrower shall not be liable for any settlement of any action or claim
effected without its consent. For the purposes of this Section 13, the term
"Bank" shall include, and the Borrower's indemnity hereunder shall run to the
benefit of, the directors, officers, employees and agents of the Bank. The
indemnification in this Section 13 is in addition to (but not in duplication of)
the Borrower's reimbursement obligation contained in Section 1 hereof.
SECTION 14. Continuing Obligation.
---------------------
(a) This Agreement is a continuing obligation and shall (i) be binding
upon the Borrower, its successors and assigns, and (ii) inure to the benefit of
and be enforceable by the Bank and its successors, transferees and assigns;
provided, however, that the Borrower may not assign all or any part of this
Agreement without the prior written consent of the Bank.
SECTION 15. Transfer of Letter of Credit; Reduction of Letter of Credit
-----------------------------------------------------------
Commitment and Related Matters.
- ------------------------------
(a) The Letter of Credit may be transferred in accordance with the
provisions set forth therein.
(b) If the Letter of Credit Commitment is reduced as provided in the
Letter of Credit on account of the payment, prepayment or redemption of the
Bonds, then the Bank shall have the right to require the Trustee (at no charge
to the Borrower or the Trustee) to surrender the outstanding Letter of Credit to
the Bank on or before the tenth (10th) business day following the effective date
of such partial reduction of the Letter of Credit Commitment and to accept on
such date, in substitution for the then outstanding Letter of Credit, a
substitute irrevocable letter of credit in the form of Exhibit A hereto, dated
such date, in a Stated Amount equal to the amount to which the Letter of Credit
Commitment shall have been so reduced but otherwise having terms identical to
the then outstanding Letter of Credit.
31
<PAGE>
SECTION 16. Liability of the Bank. The Borrower assumes all risks of the
---------------------
acts or omissions of the Trustee and any transferee of the Letter of Credit with
respect to its use of the Letter of Credit; provided, however, this assumption
with respect to the Bank is not intended to, and shall not, preclude the
Borrower's pursuing such rights and remedies as it may have against the Trustee
or any transferee at law or under any other agreement. Neither the Bank nor any
of its officers, employees, agents or directors shall be liable or responsible
for: (a) the use which may be made of the Letter of Credit or for any acts or
omissions of the Trustee and any transferee of the Letter of Credit in
connection therewith; (b) the validity, sufficiency or genuineness of documents,
or of any endorsement(s) thereon, even if such documents should in fact prove to
be in any or all respects invalid, insufficient, fraudulent or forged; (c)
payment by the Bank against presentation of documents which do not comply with
the terms of the Letter of Credit, including failure of any documents to bear
any reference or adequate reference to the Letter of Credit; or (d) any other
circumstances whatsoever in making or failing to make payment under the Letter
of Credit; provided, however, anything in the preceding clauses (a) (b), (c) and
-------- -------
(d) to the contrary notwithstanding, the Borrower shall have a claim against the
Bank, and the Bank shall be liable to the Borrower, to the extent, but only to
the extent, of any direct, as opposed to consequential, damages suffered by the
Borrower which the Borrower proves were caused by (i) the Bank's willful
misconduct or gross negligence or (ii) the Bank's willful failure to pay under
the Letter of Credit after the presentation to it by the Trustee (or a successor
trustee under the Indenture to whom the Letter of Credit has been transferred in
accordance with its terms) of a sight draft and certificate strictly complying
with the terms and conditions of the Letter of Credit. In furtherance and not in
limitation of the foregoing, the Bank may accept documents that appear on their
face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary; provided, however, that
if the Bank shall receive written notification at 1980 Saturn Street, Monterey
Park, California, Attention: Letter of Credit Department (with a copy to the
Bank at 530 B Street, Fourth Floor, San Diego, California 92101, Attn: Michael
Conboy) from both the Trustee and the Borrower that sufficiently identified (in
the reasonable opinion of the Bank) documents to be presented to the Bank are
not to be honored, the Bank agrees that, upon being indemnified to its
satisfaction by the Trustee and the Borrower, it will not honor such documents
thereafter.
SECTION 17. Permitted Contests. The Borrower shall not be required to (a)
------------------
pay any tax, assessment or other charge or comply with any statute, law, rule,
regulation or ordinance referred to in Section 6 hereof, or (b) make any payment
of any Debt referred to in paragraph (h) of Section 8 hereof, or (c) pay any
Debt referred to in Section 6(l) hereof so long as the Borrower shall (i)
contest, in good faith, the existence, amount or validity thereof, the amount of
damages caused thereby or the extent of its liability therefor, by appropriate
proceedings which shall operate during the pendency thereof to prevent (A) the
collection of, or other realization upon, the tax, assessment, charge, lien,
encumbrance, indebtedness, or obligation so contested, or (B) the sale,
forfeiture or loss or any collateral therefor or any property of the Borrower or
any part thereof, and (ii) give such security to the Bank as may be demanded by
the Bank or, in the alternative, provide the Bank with evidence satisfactory to
the Bank in its good faith judgment of sufficient bonding to ensure payment and
to ensure compliance with the foregoing provisions of this Section 17. The
Borrower shall give prompt written notice to the Bank of the commencement of any
contest referred to in this Section 17.
SECTION 18. Governing Law. This Agreement shall be governed by, and
-------------
construed and interpreted in accordance with, the laws of the State of
California.
SECTION 19. Assignment by the Bank. The Bank may assign, negotiate, pledge
----------------------
or otherwise hypothecate, or grant participations in, all or any portion of its
rights and security hereunder, including, without limitation, the instruments
securing the Borrower's obligations hereunder. In case of such assignment, the
Borrower shall accord full recognition thereto and agree that all rights and
remedies of the
32
<PAGE>
Bank in connection with the interest so assigned shall be enforceable against
the Borrower by such assignee with the same force and effect and to the same
extent as the same would have been enforceable by the Bank, but for such
assignment. No such assignment by the Bank, however, will relieve the Bank of
its obligations under this Agreement either voluntarily or by operation of law.
In connection with any proposed assignment, the Bank may disclose to the
proposed assignee any information that the Borrower is required to deliver to
the Bank pursuant to this Agreement; provided, however, in the event of any such
disclosure, the Bank shall obtain from the proposed assignee appropriate
assurances of confidential treatment of the disclosed information.
SECTION 20. Representations and Warranties of the Bank. The Bank
------------------------------------------
represents and warrants that the Letter of Credit and this Agreement are valid
and enforceable against the Bank except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
SECTION 21. Headings. Section headings in this Agreement are included
--------
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
SECTION 22. Further Assurances. The Borrower agrees to do such further
------------------
acts and things and to execute and deliver to the Bank such additional
assignments, agreements, powers and instruments, as the Bank may require or deem
advisable to carry into effect the purposes of his Agreement or to better assure
and confirm unto the Bank its rights, powers and remedies hereunder. Bank shall
have the right, in its reasonable discretion, to obtain new appraisals or update
existing appraisals at any time while the Letter of Credit remains outstanding.
Borrower agrees to cooperate with Bank and the appraiser (and use best efforts
to cause the tenants on the Project to cooperate with Bank and the appraiser) in
permitting access to the Property and in obtaining operating and other relevant
information on the Property. Following an Event of Default hereunder or in the
case of a request to transfer the Property pursuant to the Deed of Trust,
Borrower shall pay all reasonable appraisal fees and related expenses incurred
by Bank in obtaining such appraisal reports.
SECTION 23. Survival of Representations and Warranties. All agreements,
------------------------------------------
representations and warranties made in this Agreement and in any certificates
delivered pursuant hereto shall survive the execution and delivery of this
Agreement and the issuance of the Letter of Credit hereunder until any and all
sums payable under this Agreement, or which are secured by the Borrower
Agreements have been paid in full.
SECTION 24. Severability of Provisions. Any provision of this Agreement
--------------------------
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 25. Execution in Counterparts. This Agreement may be executed in
-------------------------
any number of counterparts and by different parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute but one and the same Agreement.
33
<PAGE>
SECTION 26. Time. Time is of the essence of this Agreement, and each and
----
every provisions hereof in which time is an element.
IN WITNESS WHEREOF, the parties hereto have caused this Reimbursement
Agreement to be duly executed and delivered as of the date first above written.
WEST VALLEY MRF, LLC,
a California limited liability company
By: Kaiser Recycling Corporation,
a Delaware corporation, member
By: /s/ James F. Verhey
------------------------------
Name: James F. Verhey
Title: Sr. Vice President Finance & CFO
By: West Valley Recycling & Transfer, Inc.,
a California corporation, member
By: /s/ Eric D. Herbert
------------------------------
Name: Eric D. Herbert
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Mike E. Conboy
---------------------------
Name: Michael E. Conboy
Title: Vice President
34
<PAGE>
EXHIBITS AND SCHEDULES NOT ATTACHED.
THEY WILL BE FURNISHED TO THE
SECURITIES AND EXCHANGE COMMISSION UPON THE WRITTEN REQUEST OF THE SECURITIES
AND EXCHANGE COMMISSION.
35
<PAGE>
EXHIBIT 10.4.1
GUARANTY AND MANDATORY DSR DEPOSIT AGREEMENT
THIS GUARANTY AND MANDATORY DSR DEPOSIT AGREEMENT is dated (for reference
purposes only) as of June 1, 1997 and is made and entered into in connection
with the provision by Bank of the credit facility referred to in paragraph 1
below, pursuant to which each Guarantor (as defined below) expects to derive
direct and/or indirect benefit.
NOW, THEREFORE, the parties agree as follows:
1. OBLIGATIONS GUARANTIED. For consideration, the adequacy, sufficiency and
receipt of which is hereby acknowledged, the undersigned (collectively,
"Guarantors" and individually each or any "Guarantor") unconditionally, jointly
and severally guarantee and promise to pay to UNION BANK OF CALIFORNIA, N.A.
("Bank") on demand, in lawful United States money, subject to the limitations
set forth in Section 19, below, all principal, interest, reasonable attorneys'
fees, expenses and other sums due or which become due pursuant to any or all of
the following: (a) that certain Reimbursement Agreement of even date herewith
(as from time to time amended the "Reimbursement Agreement") by and between West
Valley MRF, LLC, a California limited liability company, ("Borrower") and Bank,
pursuant to which Bank has issued or will issue its Letter of Credit to support
payment of those certain bonds in the aggregate principal amount not to exceed
$9,500,000 of the Variable Rate Demand Solid Waste Disposal Revenue Bonds (West
Valley MRF, LLC project), series 1997A (the "Bonds") being issued by the
California Pollution Control Financing Authority to assist the Borrower in
financing a part of the cost of the development, construction and equipping of
the Project (as defined in the Reimbursement Agreement); (b) any Borrower
Agreement (as defined in the Reimbursement Agreement), including, without
limitation, any deeds of trust or security agreements securing the Reimbursement
Agreement; and (c) all extensions, renewals and modifications of any of the
foregoing (individually and collectively, the "Obligations"), whether due or not
due, absolute or contingent, liquidated or unliquidated, legal or equitable,
whether Borrower is liable individually or jointly or with others, whether
incurred before, during or after any bankruptcy, reorganization, insolvency,
receivership or similar proceeding ("Insolvency Proceeding"), and whether
recovery thereof is or becomes barred by a statute of limitations or is or
becomes otherwise unenforceable, together with all expenses of, for and
incidental to collection, including reasonable attorneys' fees. This Guaranty is
in addition to any other guaranties of the Obligations. The maximum amount
payable by Guarantors to Bank hereunder shall be limited to the maximum amount
specified in Section 19, below. Capitalized terms used herein without definition
shall have the respective meanings ascribed thereto in the Reimbursement
Agreement.
2. REINSTATEMENT. All of Bank's rights pursuant to this Guaranty continue
with respect to amounts previously paid to Bank on account of any Obligations
which are thereafter restored or returned by Bank, whether in an Insolvency
Proceeding of Borrower or for any other reason, all as though such amounts had
not been paid to Bank, and each Guarantor's liability under this Guaranty (and
all its terms and provisions) shall be reinstated and revived as provided
herein, notwithstanding any surrender or cancellation of this Guaranty. Bank,
in its sole discretion, may determine whether any amount paid to it must be
restored or returned; provided, however, that if Bank elects to contest any
claim for return or restoration, each Guarantor agrees to indemnify and hold
Bank harmless from and against all costs and expenses, including reasonable
attorneys' fees, expended or incurred by Bank in connection with such contest.
if any Insolvency Proceeding is commenced by or against Borrower or any
Guarantor, at Bank's election, each Guarantor's obligations under this Guaranty
shall immediately and without notice or demand become due and payable, whether
or not then
1
<PAGE>
otherwise due and payable.
3. AUTHORIZATION. Each Guarantor authorizes Bank, without notice and without
affecting such Guarantor's liability under this Guaranty, from time to time,
whether before or after any revocation of this Guaranty, to (a) renew,
compromise, extend, accelerate, release, subordinate, waive, amend and restate,
or otherwise amend or change, the interest rate, time or place for payment or
any other terms of all or any part of the Obligations; (b) accept delinquent or
partial payments on the Obligations; (c) take or not take security or other
credit support for this Guaranty or for all or any part of the Obligations, and
exchange, enforce, waive, release, subordinate, fail to enforce or perfect, sell
or otherwise dispose of any such security or credit support; (d) apply proceeds
of any such security or credit support and direct the order or manner of its
sale or enforcement as Bank, in its sole discretion, may determine; and (e)
release or substitute Borrower or any Guarantor or other person or entity liable
in respect of all or any part of the Obligations.
4. WAIVERS. To the maximum extent permitted by law, each Guarantor waives (a)
all rights to require Bank to proceed against Borrower or proceed against,
enforce or exhaust any security for the Obligations or to marshal assets or to
pursue any other remedy in Bank's power whatsoever; (b) all defenses arising by
reason of: any disability or other defense of Borrower, the cessation for any
reason of the liability of Borrower, any defense that any other indemnity,
guaranty or security was to be obtained, any claim that Bank has made such
Guarantor's obligations more burdensome or more burdensome than Borrower's
obligations, and the use of any proceeds of the Obligations other than as
intended or understood by Bank or such Guarantor; (c) all presentments, demands
for performance, notices of nonperformance, protests, notices of protest,
notices of dishonor, notices of acceptance of this Guaranty, and all other
notices or demands to which such GUarantor might otherwise be entitled; (d) all
conditions precedent to the effectiveness of this Guaranty; (e) all rights to
file a claim in connection with the Obligations in an Insolvency Proceeding
filed by or against Borrower; (f) all rights to require Bank to enforce any of
its remedies and (g) until the Obligations are satisfied or fully paid, with
such payment not subject to return: (i) all rights of subrogation,
indemnification or reimbursement, (ii) all rights of recourse to any assets or
property of Borrower or to any collateral or credit support for the Obligations,
(iii) all rights to participate in or benefit from any security or credit
support Bank may have or acquire, and (iv) all rights, remedies and defenses
such Guarantor may have or acquire against Borrower; provided however that
-------- -------
anything in this Guaranty to the contrary notwithstanding, the Guarantors shall
only be required to waive and forebear the enforcement of any rights of
subrogation, indemnification or reimbursement against any person or entity so
long as such person or entity is in default in the payment of any obligation due
and owing to Bank; during the continuance of any such default all such rights of
subrogation, indemnification and reimbursement shall be subordinated as provided
in Section 6 below. Bank may foreclose, either by judicial foreclosure or by
exercise of power of sale, any deed of trust which secures any Obligations, and
even though such foreclosure or exercise may destroy or diminish the rights of
the Guarantors, or any of them, against Borrower, each Guarantor shall remain
liable for any part of the Obligations remaining unpaid after foreclosure. Each
Guarantor understands that if Bank forecloses by trustee's sale on a deed of
trust securing any of the Obligations, Guarantor would then have a defense
preventing Bank from thereafter enforcing Guarantor's liability for the unpaid
balance of the secured Obligations. This defense arises because the trustee's
sale would eliminate Guarantor's right of subrogation, and therefore Guarantor
would be unable to obtain reimbursement from Borrower. Guarantor specifically
waives this defense and all rights and defenses that Guarantor may have because
the Obligations are secured by real property. This means, among other things:
(1) Bank may collect from Guarantor without first foreclosing on any real or
personal property collateral pledged by Borrower; and (2) if Bank forecloses on
obligations may be reduced only by
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the price for which the collateral is sold at the foreclosure sale, even if the
collateral is worth more than the sale price; and (B) Bank may collect from
Guarantor even if Bank, by foreclosing on the real property collateral, has
destroyed any right Guarantor may have to collect from Borrower. This is an
unconditional and irrevocable waiver of any rights and defenses Guarantor may
have because the Obligations are secured by real property. these rights and
defenses include, but are not limited to, any rights or defenses based upon
Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure. Each
Guarantor agrees that such Guarantor shall remain liable (subject to the limits
set forth in Section 19, below) for any part of the Obligations remaining unpaid
after a trustee's sale, although such Guarantor would not become subrogated to
any part of the Obligations that such Guarantor has paid and would therefore be
unable to obtain reimbursement for those payments from Borrower. Each Guarantor
may therefore incur a partially or totally unreimbursable liability under the
Guaranty. Each Guarantor waives all benefits under California Civil Code
sections 2808, 2809, 2810, 2819, 2839, 2845, 2846, 2848, 2849, 2850, 2855, 2899
and 3433 and California Code of civil procedure sections 580a, 580b, 580d and
726.
5. GUARANTOR TO KEEP INFORMED. Each Guarantor warrants having established
with Borrower adequate means of obtaining, on an ongoing basis, such information
as such Guarantor may require concerning all matters bearing on the risk of
nonpayment or nonperformance of the Obligations. Each Guarantor assumes sole,
continuing responsibility for obtaining such information from sources other than
from Bank. Bank has no duty to provide any information to any Guarantor until
Bank receives such Guarantor's written request for specific information in
Bank's possession and Borrower has authorized Bank to disclose such information
to such Guarantor.
6. SUBORDINATION. All liabilities and commitments of Borrower to any
Guarantor, and all liabilities and commitments of any guarantor of any of the
Obligations to any other Guarantor, which presently or in the future may exist
("Guarantor Claims") are hereby subordinated to the Obligations; provided
however that so long as the party against which such Guarantor Claims are
asserted is not in default in the payment of any obligations due and owing to
Bank, payments and distributions from Borrower to any Guarantor or among or
between any of the guarantors (including any Guarantor) of any of the
Obligations shall be permitted in the ordinary course of business. Whenever any
such default shall have occurred and be continuing, Guarantor Claims against
such party in default will be enforced, and performance thereon received by any
Guarantor only as a trustee for Bank, and each Guarantor will promptly pay over
to Bank upon demand all proceeds recovered for application to the Obligations
without reducing or affecting such Guarantor's liability under other provisions
of this Guaranty.
7. REPRESENTATIONS AND WARRANTIES. The Guarantors represent and warrant to
the Bank as follows:
(a) Corporate Existence and Power. Each Guarantor (i) is a corporation
-----------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware, (ii) is duly qualified or licensed as a foreign corporation
and is in good standing in the State of California and in each other
jurisdiction in which it owns or leases property or in which the conduct of its
business requires it to so qualify or be licensed and (iii) has all requisite
corporate power and authority to own or lease and operate its properties and to
carry on its business as now conducted and as proposed to be conducted.
(b) Authorization. The execution, delivery and performance by the
-------------
Guarantors of this Guaranty, and the consummation of the transactions
contemplated hereby and thereby, are within each Guarantor's corporate powers,
have been duly authorized by all necessary corporate action of
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such Guarantor and do not contravene such Guarantor's charter documents or
bylaws.
(c) Binding Effect. This Guaranty has been duly executed and delivered by
--------------
the Guarantors. This Guaranty is the legal, valid and binding obligation of each
Guarantor, enforceable against such Guarantor in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting creditors' rights
generally.
(d) Other Information. To the knowledge of Guarantors, no information,
-----------------
exhibit or report furnished by any Guarantor to Bank in connection with the
Reimbursement Agreement or this Guaranty contains any material misstatement of
fact or omits to state a material fact or any fact necessary to make the
statements contained therein, in light of the circumstances in which made, not
misleading.
(e) Litigation. Except as disclosed in writing to Bank by letter dated
----------
June 13, 1997, there is no action, suit, investigation, litigation or proceeding
affecting the Guarantors pending or, to the best knowledge of the Guarantors,
threatened before any court, governmental agency or arbitrator (a) that would be
reasonably likely to have a materially adverse effect on the business, condition
(financial or otherwise), operations, performance, properties or prospects of
the Guarantors or (b) that purports to affect the legality, validity or
enforceability of this Guaranty or the consummation of the transactions
contemplated hereby.
(f) Financial Statements. The audited consolidated balance sheet of Kaiser
--------------------
Ventures Inc., a Delaware corporation ("KVI") and its Subsidiaries as of
December 31, 1996, and the related audited consolidated statements of income,
retained earnings and cash flows of KVI and its Subsidiaries for the fiscal year
then ended, fairly present the consolidated financial condition of KVI and its
Subsidiaries as of such date and the consolidated results of the operations of
KVI and its Subsidiaries for the fiscal year ended on such date, all in
accordance with generally accepted accounting principles applied on a consistent
basis. The unaudited consolidated balance sheet of KVI and its Subsidiaries as
of March 30, 1997, and the related unaudited consolidated statements of
operation, retained earnings and cash flows of KVI and its Subsidiaries for the
three-month period then ended, reviewed (subject to normal year-end audit
adjustments) by the chief financial officer or chief accounting officer of KVI
as having been prepared in accordance with generally accepted accounting
principles applied on a consistent basis, fairly present the consolidated
financial condition of KVI and its Subsidiaries as of such date and the
consolidated results of the operations of KVI and its Subsidiaries for the
three-month period ending on such date. Since March 31, 1997 there has been no
materially adverse change in the business, condition (financial or otherwise),
operations, performance, properties or prospects of KVI or any of its
Subsidiaries. KVI and its Subsidiaries have no material contingent liabilities,
except as disclosed in such consolidated financial statements or the notes
thereto, that would be reasonably likely to have a materially adverse effect on
the business, condition (financial or otherwise), operations, performance,
properties or prospects of KVI or any of its Subsidiaries.
g) Burdensome Agreements. Except as otherwise disclosed in writing,
---------------------
neither KVI nor any of its Subsidiaries is a party to any indenture, loan
agreement, credit agreement, lease or other agreement or instrument, or subject
to any charter or corporate restriction, that would be reasonably likely to have
a materially adverse effect on the business, condition (financial or otherwise),
operations, performance, properties or prospects of KVI or any of its
Subsidiaries or on the ability of KVI or any of its Subsidiaries to carry out
its obligations under this Guaranty.
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h) Taxes. KVI and its Subsidiaries have filed, or there has been filed on
-----
their behalf, all tax returns (federal, state, local and foreign) required to be
filed before the date of the making of this representation and warranty, and KVI
and its Subsidiaries have paid all taxes shown thereon to be due, including
interest, additions to taxes and penalties, or have provided adequate reserves
for the payment thereof.
(i) Title to Properties; Ownership. KVI and its Subsidiaries have good and
------------------------------
marketable title to all material properties, real or personal, purported to be
owned thereby. KVI is the legal and beneficial owner of all of the outstanding
capital stock of Kaiser Recycling Corporation, a Delaware corporation, and such
stock is not subject to any lien or other encumbrance other than the lien of the
stock pledge agreement securing KVI's obligations under the KVI Performance
Guaranty.
(j) Regulation. Neither Guarantor is currently subject to financial,
----------
organizational or rate regulation (i) under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act, the Investment
Company Act of 1940 or any Governmental Rule limiting its ability to incur Debt
or (ii) by the California Public Utilities Commission.
8. COVENANTS. The Guarantors covenant and agree that, unless Bank otherwise
consents in writing and so long the Obligations remain unpaid
(a) Each of the Guarantors will, preserve, renew and keep in full force
and effect its corporate existence (in the jurisdiction thereof) and the
material rights, privileges, franchises and governmental approvals necessary or
desirable for the normal conduct of its business.
(b) Neither Guarantor will merge or consolidate with or into, or sell,
assign, lease or otherwise dispose of (whether in one transaction or in a series
of transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to any Person, unless, in the case of any merger or
consolidation, such Guarantor is the surviving entity; provided however that the
Guarantors shall be permitted, upon notice to the Bank, to transfer any or all
of the assets or capital stock of KRC to Burrtec Waste Industries, Inc. ("BWI")
or any wholly-owned subsidiary of BWI or KVI.
(c) KVI will deliver the following to the Bank:
(i) as soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of KVI, a copy of
the quarterly report on Form 10-Q filed by KVI with the SEC with respect to such
fiscal quarter;
(ii) as soon as available and in any event within 105 days after the
end of each fiscal year of KVI , a copy of the annual report on Form 10-K filed
by KVI with the SEC with respect to such fiscal year, in each case containing
financial statements audited by Ernst & Young or another "Big Six" accounting
firm, together with a certificate of such accounting firm stating that in the
course of the regular audit of the business of KVI and its Subsidiaries, which
audit was conducted by such accounting firm in accordance with generally
accepted auditing standards, such accounting firm has obtained no knowledge that
an Event of Default has occurred and is continuing or, if in the opinion of such
accounting firm an Event of Default has occurred and is continuing, a statement
as to the nature thereof.
(iii) promptly upon the filing thereof, a copy of any report on
Form 8-K filed by KVI with the SEC;
5
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(iv) as soon as available and in any event within 30 days after the
end of each fiscal year of KVI, a budget, an operating plan, and an operating-
profit and cash-flow projection for KVI for the then current fiscal year, as
prepared by KVI and approved by the Guarantor's board of directors;
(v) forthwith upon KVI's becoming aware of the occurrence of any
Event of Default relating to KVI, a certificate of the chief financial officer
or chief accounting officer of KVI setting forth the details thereof and the
action that KVI is taking or proposes to take with respect thereto;
(vi) promptly after the commencement thereof, notice of all material
actions, suits and proceedings before any Governmental Authority or arbitrator,
affecting KVI or any of its Subsidiaries, of the type described in Section
7(e), above;
(vii) promptly after the occurrence thereof, notice of any event or
condition that constitutes or causes a materially adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of KVI or any of its Subsidiaries, if such event or
condition could materially impair either Guarantor's ability to perform its
obligations under this Guaranty; and
(viii) promptly upon request, such other information respecting the
business, condition (financial or otherwise), operations, performance,
properties or prospects of either Guarantor as the Bank may from time to time
reasonably request. All non-public information will be treated confidentially by
the Bank and will not be distributed or otherwise made available by the Bank to
any person or entity, other than the Bank's employees, authorized agents or
representatives who need to review or be informed of such information in
connection with their employment by the Bank.
(d) KVI will maintain, and cause each of its Subsidiaries to maintain,
insurance with responsible and reputable insurance companies or associations
that have an A.M. Best Co. rating of at least B+:6 or a Solvency International
or equivalent rating as in effect on the Date of Issuance for such insurance
company or association, in such amounts and covering such risks as is usually
carried by companies engaged in similar businesses and owning similar properties
in the same general areas in which KVI or such Subsidiary operates provided,
--------
however, that in the case of any liability insurance (excluding directors and
- -------
officers liability insurance), such insurance shall name the Bank as an
additional insured and shall provide for at least 30 days' prior written notice
to the Bank of any amendment, nonrenewal or cancellation thereof (except that
only 10 days' notice need be provided for cancellation due to the Guarantor's
failure to pay thereunder).
(e) KVI will maintain its fiscal year and fiscal quarters so that they
correspond to the calendar year and calendar quarters.
9. ASSIGNMENTS. Without notice to the Guarantors, Bank may assign the
Obligations and this Guaranty, in whole or in part, and may disclose to any
prospective or actual purchaser of all or part of the Obligations any and all
information Bank has or acquires concerning either Guarantor, this Guaranty and
any security for this Guaranty provided that each such prospective or actual
purchaser must agree to maintain the confidentiality of all such information.
10. COUNSEL FEES AND COSTS. The prevailing party shall be entitled to
attorneys' fees (including
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a reasonable allocation for any appropriately documented fees of Bank's internal
counsel), and all other costs and expenses which it may incur in connection with
the enforcement or preservation of its rights under, or defense of, this
Guaranty or in connection with any other dispute or proceeding relating to this
Guaranty, whether or not incurred in an Insolvency Proceeding, arbitration,
litigation or other proceeding.
11. [INTENTIONALLY OMITTED]
12. MULTIPLE GUARANTORS/BORROWERS. When there is more than one Borrower named
herein, or when this Guaranty is executed by more than one Guarantor, then the
words "Borrower" and "Guarantor," respectively, shall mean all and any one or
more of them, and their respective successors and assigns, including debtors-in-
possession and bankruptcy trustees, and words used herein in the singular shall
be considered to have been used in the plural where the context and construction
so requires in order to refer to more than one Borrower or Guarantor, as the
case may be. This Guaranty may be executed in any number of counterparts and by
different parties hereto on separate counterparts. Each counterpart, when so
executed and delivered, shall be deemed to be an original and all counterparts,
taken together, shall constitute but one and the same Guaranty.
13. WAIVER OF JURY TRIAL. EACH GUARANTOR AND BANK HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS GUARANTY, ANY OF THE
OBLIGATIONS, OR ANY RELATED AGREEMENTS OR INSTRUMENTS, OR IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DISCUSSIONS, DEALINGS OR ACTIONS OF SUCH
PARTIES OR ANY OF THEM (WHETHER ORAL OR WRITTEN) WITH RESPECT THERETO, OR TO THE
TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. EACH PARTY
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED IN ACCORDANCE WITH THE PROVISIONS OF THE ALTERNATIVE
DISPUTE RESOLUTION AGREEMENT REFERRED TO IN PARAGRAPH 18 BELOW. EACH GUARANTOR
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION
FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER DOCUMENT TO WHICH IT
IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR BANK AGREEING
TO THE CREDIT EXTENSION REFERRED TO HEREIN.
14. INTEGRATION/SEVERABILITY/AMENDMENTS. This Guaranty is intended by each of
the Guarantors and Bank as the complete, final expression of their agreement
concerning its subject matter. It supersedes all prior understandings or
agreements with respect thereto and may be changed only by a writing signed by
Bank and the Guarantor intended to be bound by such writing. No course of
dealing, or parol or extrinsic evidence shall be used to modify or supplement
the express terms of this Guaranty. If any provision of this Guaranty is found
to be illegal, invalid or unenforceable, such provision shall be enforced to the
maximum extent permitted, but if fully unenforceable, such provision shall be
severable, and this Guaranty shall be construed as if such provision had never
been a part of this Guaranty and the remaining provisions shall continue in full
force and effect.
15. JOINT AND SEVERAL. If more than one Guarantor signs this Guaranty, the
obligations of each Guarantor under this Guaranty are joint and several in
accordance with the terms of this Agreement,
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and independent of the Obligations and of the liabilities and commitments of any
other person or entity. A separate action or actions may be brought and
prosecuted against any Guarantor, whether action is brought against Borrower,
any other Guarantor or any other person or entity liable in respect of all or
any part of the Obligations, and whether Borrower or such others are joined in
any such action.
16. NOTICE. Any notice given by any party under this Guaranty shall be
effective only upon its receipt by the other party and only if (a) given in
writing and (b) personally delivered or sent by United States mail, postage
prepaid, and addressed to Bank or Guarantor at their respective addresses for
notices indicated below. Each Guarantor and Bank may change the place to which
notices, requests, and other communications are to be sent to them by giving
written notice of such change to the other.
17. CALIFORNIA LAW. Subject to paragraph 13 of this Guaranty, this Guaranty
shall be governed by and construed according to the laws of California, and each
Guarantor submits to the nonexclusive jurisdiction of the state or federal
courts in California.
18. DISPUTE RESOLUTION. This Guaranty hereby incorporates any alternative
dispute resolution agreement previously, concurrently or hereafter executed
between any Guarantor and Bank.
19. LIMITATION ON GUARANTOR'S LIABILITY. Notwithstanding the provisions of
Section 1 hereof or anything else to the contrary in this Guaranty, Guarantor's
liability under this Guaranty for the obligations shall not exceed the sum of
the following (collectively, the "Guaranteed Liability Amount"): (a) the lesser
of (i) FOUR MILLION EIGHT HUNDRED TWENTY THOUSAND TWO HUNDRED SEVENTY FIVE AND
NO/100 DOLLARS ($4,820,275.00); or (ii) fifty percent (50%) of all obligations
representing principal outstanding at the time of demand by Bank under this
Guaranty (the "Principal Amount") without reduction for any payments with
respect to the Obligations received by Bank after such demand from any source
other than a Guarantor hereunder including, without limitation, any payments
from Borrower or any other guarantor of the Obligations or derived from any
collateral securing the Obligations; (b) all interest, fees and like charges
owing and allocable to the Principal Amount as reasonably determined by Bank;
and (c) without allocation in respect of the Principal Amount, all costs,
attorneys' fees and expenses of Bank relating to or arising out of the
enforcement of the Obligations and all indemnity liabilities of Guarantor under
this Guaranty; provided however, that Guarantors' liability for all costs, fees,
expenses and indemnity liabilities specified in the preceding clause (c) shall
terminate upon receipt by Bank from Guarantors of the full Guaranteed Liability
Amount. The foregoing limitation applies only to Guarantor's liability under
this particular Guaranty. Unless Bank otherwise agrees in writing, every other
guaranty previously, concurrently or hereafter given to Bank by Guarantor is
independent of this Guaranty and of every other such Guaranty. Without notice
to Guarantor, Bank may apply or reapply any amounts received in respect of the
Obligations from any source other than from Guarantor to that portion of the
obligations not included with the Guaranteed Liability Amount.
20. EVENTS OF DEFAULT. The occurrence of any of the following events shall be
an "Event of Default" hereunder:
(a) The occurrence of an Event of Default (as defined in Section 8 of the
Reimbursement Agreement); or
(b) Any representation or warranty made any Guarantor hereunder or in any
statement,
8
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certificate or document delivered by such Guarantor in connection with the this
Guaranty shall prove to have been incorrect in any material respect when made;
or
(c) Either Guarantor shall fail to perform or observe any other material
term, covenant or agreement contained in this Guaranty and any such failure
shall be impossible for such Guarantor to remedy or which shall remain
unremedied for thirty (30) days after written notice thereof shall have been
given to such Guarantor by Bank; provided however any such failure which is not
impossible to cure but which is not reasonably susceptible of cure within a 30-
day period shall not constitute an Event of Default hereunder unless either (A)
the Guarantors shall fail to initiate and diligently pursue all action necessary
to remedy such failure; or (B) such failure is not remedied within sixty (60)
days after written notice to the Guarantors from the Bank; or
(d) Either Guarantor shall (i) fail to make any payment, equal to or
exceeding $100,000 of any principal of or interest or premium on any Debt (as
defined below) when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Debt, or (ii) fail to perform or observe any material term,
covenant or condition on its part to be performed or observed under any
agreement or instrument relating to any Debt when required to be performed or
observed, and such failure shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the effect of such failure to
perform or observe is to accelerate, or to permit the acceleration of, the
maturity of any Debt, the unpaid principal amount of which then equals or
exceeds $100,000. "Debt" of either Guarantor (which shall not include any
indebtedness hereunder) means (A) indebtedness for borrowed money or for the
deferred purchase price of property or services in respect of which either
Guarantor is liable, contingently or otherwise, as obligor, guarantor or
otherwise, or in respect of which any Guarantor otherwise assures a creditor
against loss and (B) obligations under leases which shall have been or should
be, in accordance with generally accepted accounting principles, recorded as
capital leases in respect of which obligations or such Guarantor is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or in respect of
which obligations any Guarantor assures a creditor against loss.
21. MANDATORY DEPOSIT INTO DSR ACCOUNT. Upon the occurrence and during the
continuance of an Event of Default hereunder, (but without limiting any other
rights or remedies available to Bank under the Reimbursement Agreement and this
Guaranty or otherwise available under California law, all of which rights and
remedies are hereby expressly reserved) an amount equal to the Guaranteed
Liability Amount shall become immediately due and payable by the Guarantors to
the Bank, without presentment, demand, protest or other requirements of any
kind, all of which are hereby expressly waived by the Guarantors. Upon receipt
by Bank of the amount (or any portion thereof) required to be paid by the
Guarantors under this Paragraph 21, Bank shall deposit the Principal Amount
thereof (together with the accrued interest received by the Bank allocable to
such Principal Amount) into the DSR Account established pursuant to the
Reimbursement Agreement, to be applied in accordance with the provisions of the
Reimbursement Agreement. Either of the following two events shall constitute a
"Payment Event of Default" hereunder: (1) any intentional misrepresentation of a
material fact by either Guarantor; or (2) failure by the Guarantors to deposit
the Guaranteed Liability Amount into the DSR Account within ninety (90) days
after the occurrence of an Event of Default. Upon the occurrence of a Payment
Event of Default hereunder, the Bank shall have the right, at its option, to
declare an Event of Default under the Reimbursement Agreement and to exercise
any and all rights and remedies provided thereunder.
22. TERMINATION. Subject to reinstatement pursuant to Paragraph 2 above, this
Guaranty and
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all of the rights of the bank hereunder shall terminate upon the earlier of (i)
receipt by the bank of the guaranteed liability amount, or (ii) the payment in
full of all of the obligations.
Each Guarantor acknowledges having received a copy of this Guaranty and
having made each waiver contained in this Guaranty with full knowledge of its
consequences.
Dated as of June 1, 1997
GUARANTORS
KAISER VENTURES INC.,
a Delaware corporation
By: /s/ James F. Verhey
-------------------
Name: James F. Verhey
Title: Sr. Vice President Finance & CFO
KAISER RECYCLING CORPORATION,
a Delaware corporation
By: /s/ James F. Verhey
-------------------
Name: James F. Verhey
Title: Sr. Vice President Finance & CFO
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EXHIBIT 10.5
ENVIRONMENTAL COMPLIANCE AGREEMENT
==================================
This ENVIRONMENTAL COMPLIANCE AGREEMENT ("Agreement") is dated as of June
19, 1997, and is being entered into between West Valley MRF, LLC, a California
limited liability company ("Obligor"), and Union Bank of California, N.A.
("Bank").
The parties hereto enter this Agreement on the basis of the following
facts, understandings and intentions:
A. Bank has made financing arrangements with Obligor as evidenced by that
certain Reimbursement Agreement dated as of June 1, 1997, between the Bank and
the Obligor (the "Reimbursement Agreement"). Such extension of credit or other
financing arrangements, together with any amendments, replacements,
substitutions, extensions or refundings thereof, are hereinafter referred to as
the "Credit Extension". Capitalized terms used herein without definition shall
have the respective meanings ascribed thereto in the Reimbursement Agreement.
B. In connection with the Credit Extension, Obligor will undertake or has
undertaken certain obligations set forth in this Agreement. All of said
obligations of Obligor to Bank hereunder, together with any amendments,
substitutions, extensions or modifications thereof, are hereinafter referred to
as the "Environmental Obligation".
C. The term "Collateral" shall mean any real or personal property to
which Bank has been granted a security interest by Obligor in connection with
the Credit Extension.
D. The term "Property" shall mean that certain real property located in
the County of San Bernardino, State of California, and more particularly
described in Exhibit "A", attached hereto, including any improvements affixed to
-----------
and becoming a part of said real property.
E. Obligor is a limited liability company, the only members of which are
West Valley Recycling & Transfer, Inc., a California corporation, ("WVRT") and
Kaiser Recycling Corporation, a Delaware Corporation ("KRC"). WVRT is a wholly-
owned subsidiary of Burrtec Waste Industries, Inc., a California Corporation,
("BWI") and KRC is a wholly-owned subsidiary of Kaiser Ventures Inc., a Delaware
Corporation ("KVI"). Obligor is developing, building and equipping a materials
recovery facility and transfer station on the property (the "MRF").
F. Bank would not make the Credit Extension if, as a result, Bank might
incur any liability arising with regard to any Environmental Condition (as
defined in Section 1, below) now or hereafter present at, in, on, under, around
or that affects any portion of the Property. Bank requires that Obligor execute
this Agreement as a further assurance against such liability and that KRC, KVI,
BWI and WVRT guaranty certain aspects of Obligor's Environmental Obligation to
the Bank as provided herein and as evidenced by the two Environmental Guaranty
Agreements (the "Environmental Guarantees") substantially in the forms attached
hereto as Exhibits "B" and "C".
--------------------
G. It is the intention of Bank that, as between Bank and Obligor, Obligor
shall be liable as set out in this Agreement for the Environmental Obligation.
Obligor shall be solely responsible for any and all liability arising with
regard to any Hazardous Substance that is present at any time, whether before or
after the date of this Agreement, whether at, in, on, under, above, around or
that affects any portion of the Property, and Bank shall under no circumstances
have any liability therefor except to the degree that it would be responsible
under federal, state or local environmental laws for conduct by the Bank, its
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employees, contractors or agents and their respective subcontractors, that
deposits, releases or exacerbates any Environmental Condition at, in, on, under,
above, around or that affects any portion of the Property. However, Bank will
not be liable for any action or inaction related to a breach or default of this
Agreement by the Obligor, including, but not limited to, Obligor's duty of
compliance regarding Hazardous Substances as set out in Article 5 of this
Agreement, unless Bank's liability arises out of its gross negligence or willful
misconduct. It is intended by the parties that this Agreement be fully
enforceable to the maximum extent permitted by law.
NOW THEREFORE, in consideration of, and as an inducement for, bank making
the credit extension and for other good and valuable consideration, Obligor
agrees as follows:
1. DEFINITIONS. For purposes of this agreement, the following terms shall
have the following meaning:
A. "BURRTEC-RELATED ENVIRONMENTAL OBLIGATION" shall mean any
----------------------------------------
environmental Obligation of Obligor hereunder which arises as a result of any
subsequent environmental condition other than (i) the presence of unknown Pre-
Existing Environmental Conditions or (ii) any escape, release, discharge,
deposit, emission or other effect from the migration of a Pre-Existing
Environmental Condition from the Environmental Response Structures, which is
caused by an act of God or other natural cause beyond the reasonable control or
prevention of Obligor.
B. "ENVIRONMENTAL CONDITION" shall mean and include the Environmental
-----------------------
Response Structures, all Pre-Existing Environmental Conditions and Subsequent
Environmental Conditions.
C. "ENVIRONMENTAL RESPONSE STRUCTURES" shall include but not be limited
---------------------------------
to the MRF building floor and cap system including the sidewalls of the below
grade mechanical equipment pits, the "warning barrier" of yellow caution tape
placed beneath the concrete floor, the clean, compacted fill beneath the warning
barrier and above the affected soil and burial cell, and any portion of the
building wall which is below the grade of the building floor, the associated
drainage structures, the soil cement cap and its drainage structures, including
the drain and culvert (which are yet to be built) leading to the flood control
basin which are part of the cap system and the integrity of the Hazardous
Substances burial cells beneath the caps and all monitoring and maintenance and
other requirements associated with the structures as more fully set out in KVI's
Operation and Maintenance Agreement, Operation and Maintenance Plan for the MRF
Building Floor Cap and the Soil Cement Cap areas and in the Amendment to
Operable Unit No. 1, Tar Pits Remedial Action Plan ("Amended RAP"). The
Environmental Response Structures are for the purpose of capping and containing
Hazardous Substances on the Property existing as of June 19, 1997.
D. "HAZARDOUS SUBSTANCES" shall mean any substance, material, or waste
--------------------
(including, without limitation, raw materials, building components, recycled or
recyclable materials, wastes, and the products and by-products of manufacturing,
processing or other activities) which is or becomes designated, classified or
regulated as being "toxic", "hazardous" or similarly designated, classified or
regulated under any federal, state or local law, ordinance, rule or regulation.
the term "Hazardous Substances" shall include, without limitation, (i)
substances defined as "hazardous substances" or "toxic substances" for purposes
of the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601 et seq. or the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq.; (ii) substances defined as "hazardous wastes" or
"hazardous substances" for purposes of Section 25117 or Section 25316,
respectively, of the California Health and Safety Code; and (iii) petroleum,
flammable explosives, urea formaldehyde insulation, asbestos, polychlorinated
biphenyls (PCBs), and radioactive materials.
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E. "KAISER-RELATED ENVIRONMENTAL OBLIGATION" shall mean any Environmental
---------------------------------------
Obligation of Obligor hereunder which arises as a result of or in connection
with any Pre-Existing Environmental Condition, whether known or unknown, and/or
any of the Environmental Response Structures including, without limitation, any
release, deposit or other effect related to the migration of a Pre-Existing
Environmental Condition from the Environmental Response Structures.
F. "PRE-EXISTING ENVIRONMENTAL CONDITION" shall mean any escape, release,
------------------------------------
discharge, emission, deposit, migration or other effect of or from Hazardous
Substances that were present at any time, at, on, in, under, above, around or
that affected any portion of the Property on or prior to june 19, 1997, by any
cause whatsoever, whether man-made or resulting from natural causes or acts of
god, including, without limitation, fire, flood, explosion or earthquake. In
addition, a Pre-Existing Environmental Condition includes off-site environmental
damages, claims, or litigation involving Obligor, KVI, or KRC for Hazardous
Substances at, on, in, under, above, around or that affected any portion of the
Property on or prior to june 19, 1997, or for the future release of known or
unknown Hazardous Substance(s) at, in, on, above, under, around or that affect
any portion of the property or that migrate from the Property if they were
present on the Property on or prior to June 19, 1997. A general, but not all-
inclusive, description of known Pre-Existing Environmental Conditions is
reflected in the materials listed on Exhibit "B" attached hereto.
----------
G. "SUBSEQUENT ENVIRONMENTAL CONDITION" shall mean any escape, release,
----------------------------------
discharge, emission deposit, migration or other effect of or from a Hazardous
Substances at, on, in, under, above, around or that affects any portion of the
Property at any time after June 19, 1997 by any cause whatsoever, whether man-
made or resulting from natural causes or migration acts of God, including,
without limitation, fire, flood, explosion or earthquake.
2. INDEMNITY REGARDING ENVIRONMENTAL CONDITIONS. Obligor agrees to
indemnify and hold Bank harmless from and against all liabilities, claims,
actions, foreseeable and unforeseeable consequential damages, costs and expenses
(including sums paid in settlement of claims and all reasonable consultant,
expert and legal fees and expenses, including reasonable allocated costs of in-
house legal and technical services) or loss directly or indirectly arising out
of or resulting from any and all Environmental Conditions at, on, in, under,
above, around or that affect any portion of the Property, including those
incurred in connection with any investigative, containment, removal, remedial,
cleanup, monitoring, restoration or post-remedial operation and maintenance
work, or any resulting damages or injuries to the person or property of any
third party or to any natural resources, however, the Obligor shall have no duty
to indemnify and defend the bank, to the degree that Bank would be legally
responsible under federal, state or local environmental laws, for a release or
deposit of Hazardous Substances or exacerbation of any environmental condition
caused by the Bank, its employees, contractors, subcontractors and/or agents.
however, Bank will not be responsible for any action or inaction related to a
breach or default of this agreement by the Obligor, including, but not limited
to, Obligor's duty of compliance regarding Hazardous Substances as set out in
Article 5 of this Agreement, unless Bank's liability arises out of its gross
negligence or willful misconduct.
3. DEFENSE AND INDEMNITY PROCEDURES. After receipt by the Bank of notice
of any claim, complaint or the commencement of any action or proceeding with
respect to which indemnification is being sought under this agreement by the
Bank, the Bank will notify Obligor, KVI and VWI in writing of such claim,
complaint or of the commencement of such action or proceeding, but failure to
notify the Obligor, KVI and/or BWI will not relieve the Obligor from any
liability or obligation which the Obligor may have pursuant to this agreement,
unless and only to the extent that such failure results in the forfeiture by
Obligor of material rights and defenses. The Obligor will assume the defense of
such claim, action or proceeding, including the employment of counsel reasonably
satisfactory to the Bank and the prompt
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payment of the fees and disbursements of such counsel. In the event, however,
the Bank reasonably determines that having common counsel would present such
counsel with a conflict of interest, or if Obligor fails to assume the defense
of the claim, complaint, action or proceeding or to employ counsel reasonably
satisfactory to the Bank, in either case in a timely manner, then the Bank may
employ separate counsel to represent or defend it in any such claim, action or
proceeding and Obligor will promptly pay the reasonable fees and disbursements
of such counsel. It is further agreed that Obligor will not, without the prior
written consent of the Bank, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification or contribution may be sought unless such
settlement, compromise or consent includes an unconditional release of the Bank
hereunder from all liability arising out of such claim, action, suit or
proceeding.
It is further agreed that Obligor will promptly reimburse the Bank
hereunder for all reasonable third-party expenses (including reasonable
attorneys' and other legal fees and disbursements) as they are incurred by the
Bank in connection with investigating, preparing for or defending, or providing
evidence in, any pending or threatened action, claim, suit or proceeding in
respect of which indemnification or contribution may be sought hereunder and in
enforcing this Agreement.
4. REPRESENTATION AND WARRANTY REGARDING HAZARDOUS SUBSTANCES. Before
signing this Agreement, Obligor researched and inquired, or has had an
opportunity to research and inquire, into the previous uses and ownership of the
Property. Based on that due diligence, as generally described in Exhibit "D"
-----------
attached hereto, obligor represents and warrants that to the best of Obligor's
- --------
knowledge, no Hazardous Substance has been released onto or disposed of or
otherwise is present at, in, on, under, above, around or that affect any portion
of the Property, except to the extent disclosed to Bank in writing by KVI and as
identified on the attached Exhibit "D." (List of Environmental Documents
----------
including Reports, Documents and Litigation Matters made available to Bank).
5. COMPLIANCE REGARDING HAZARDOUS SUBSTANCES. Except for those Hazardous
Substances used or found to be present on the Rroperty in connection with the
ordinary course of the business presently being or anticipated to be conducted
on the Property including those listed on Exhibit "E" attached hereto, and which
-----------
are in compliance with all laws, regulations, ordinances, rules, permits,
licenses, orders or other legally mandated requirements or plans governing or
applicable to Hazardous Substances, Obligor shall not knowingly and shall not
knowingly permit any third party to use, generate, manufacture, store, release,
discharge or dispose of any Hazardous Substance in a reportable quantity as
defined under federal or state Laws, at, on, in, under, above, around or in a
manner which affects the Property, or transport in a reportable quantity as
defined under federal or state laws any hazardous substance to or from the
Property without the prior written consent of Bank, which consent shall not be
unreasonably withheld, conditioned or delayed so long as such use, generation,
manufacture, storage, release, discharge or transport does not arise from a
proposed change in the character of the use of the Property; and that any such
activity does not affect the Release from liability which Bank has obtained from
the Department of Toxic Substances Control ("Department") pursuant to California
Health and Safety code section 253641; (iii) and, Obligor demonstrates to the
satisfaction of Bank that such use, generation, manufacture, storage, release,
discharge or transport will be in full compliance with all laws, regulations,
ordinances, rules, permits, licenses, orders, agreements, and/or plans governing
or applicable to Hazardous Substances on the Property. To the best of its
knowledge, Obligor has complied and shall comply and seek to cause all occupants
and licensees of the Property to comply (including, if necessary, by resort to
and diligent pursuit of all reasonably available legal, equitable and
administrative remedies and proceedings) with all laws, ordinances, rules,
regulations, orders, agreements and/or plans governing or applicable to
Hazardous Substances on the Property, as well as the directives of all
governmental authorities exercising jurisdiction over the Property.
Notwithstanding the foregoing, Obligor may engage in emergency remediation work
that is necessary to immediately protect public health and safety and property
without first
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obtaining Bank's consent but Obligor shall notify the Bank and obtain its
consent as provided herein as soon as possible.
6. NOTICES REGARDING HAZARDOUS SUBSTANCES. Until full performance of the
Environmental Obligation and repayment of the Credit Extension, Obligor shall
promptly notify Bank if Obligor knows, suspects or believes there may be any
Hazardous Substance of a material nature at, on, in, under, above, around, or
that affects the groundwater or soil vapor on any portion of the Property, to
the extent not previously disclosed by Obligor that is discovered after the date
of this Agreement, or that Obligor, or the Property may be subject to any
threatened or pending investigation by any governmental agency under any law,
ordinance, rule or regulation pertaining to any hazardous substance, or may be
subject to any claim or litigation by a third party regarding the presence of a
Hazardous Substance in relation to its business and/or the Property. Subsequent
to the date of this agreement, Obligor shall furnish Bank with copies of any
pertinent and material notice, summons, letter, report or other written
communication relating to the presence of Hazardous Substances at, on, in,
under, above, around or that affect any portion of the Property within five (5)
business days after Obligor's receipt thereof. The parties to this agreement
recognize that Hazardous Substances are present on the Property and that these
Hazardous Substances may be known and unknown and that the known Hazardous
Substances have been identified in the 1988 consent order entered into by KVI
and the Department and subsequent studies related to the Property as described
in Exhibit "B" hereto, and that the Department approved KVI's amended RAP for
the Property, that the Department is to issue a no further action letter in
usual form for the MRF Parcel that will provide closure as to the identified
Hazardous Substances subject to continuing Operation and maintenance
obligations, and other legal obligations and that KVI has entered into an
operation and maintenance agreement with the department and that KVI has
developed and submitted an operation and maintenance plan to the department to
protect the environmental response structures which are located or to be located
on the Property.
7. REMEDIATION WORK. If any investigation, monitoring, containment,
cleanup, removal, restoration, remedial, or post-remedial operation and
maintenance work of any kind or nature (the "Remediation Work") is or becomes
necessary or required pursuant to any applicable federal, state or local law,
ordinance, rule or regulation or the order or directive of any governmental
authority exercising jurisdiction over the Property, due to the presence or
suspected presence of an environmental condition, Obligor shall promptly
commence to perform, or cause to be performed, and thereafter diligently
prosecute to completion, all such Remediation Work provided that such
Remediation Work shall never require a clean-up to standards greater than then
existing industrial standards, unless necessitated by off-site damages, natural
resources, or this agreement. the remediation work will be conducted in
accordance with the documents, if any, identified in Exhibit "D", i.e., the KVI
-----------
Amended RAP, the Operation and Maintenance Agreement, and the Operation
Maintenance Plan, as modified, and as such documents shall be amended from time
to time, and in material compliance with all applicable laws, ordinances, rules
and regulations, the agreements, orders, and directives of all governmental
authorities exercising jurisdiction over the property or the remediation work.
Obligor shall cause all Remediation Work to be performed in a good and
workmanlike manner by one or more qualified environmental engineers or
contractors. If requested by Bank, Obligor's obligations with regard to the
remediation work shall include obtaining a letter or other written statement in
usual form from the governmental authority(ies), exercising or having the right
to exercise jurisdiction over the Property, or the Remediation Work, that no
further action is required, subject, but not limited to, any continuing
monitoring, or operation and maintenance obligations, provided, however, if all
non-lead agencies having a right to exercise jurisdiction defer to a designated
lead agency's decision or if there is a single agency designation, only the
designated lead agency needs to furnish the required letter or written
statement. Obligor shall pay for all Remediation Work, including the costs of
plans and specifications, utilities, permits, fees, taxes and insurance premiums
in connection therewith, and shall keep the Property free from all mechanics' or
other liens arising out of the Remediation Work. Obligor
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shall keep Bank fully apprised of all material developments and
findings during the course of any Remediation Work and shall furnish to Bank,
promptly upon receipt or preparation, such information concerning the
Remediation Work as Bank may reasonably request from time to time in order to
verify Obligor's compliance with this section and to protect Bank's security,
including, without limitation, copies, if any, or all reports, studies,
analyses, contracts, manifests, orders, correspondence, videos, or computer
generated materials. Upon Bank's request, Obligor shall also furnish bank with
written confirmation in a form satisfactory to Bank showing that all
contaminated soil and other materials removed, if any, from the property and any
other property affected by the Remediation Work have been properly disposed of
in accordance with all applicable laws, ordinances, rules and regulations and
the orders and directives of all governmental authorities exercising
jurisdiction over the remediation work, the property, or the property, which may
include the holding of such materials in a legally permitted manner and for the
legally permitted length of time, until deposited into KVI's proposed corrective
action management unit. Bank shall have the right, but not the obligation, to
participate in any action or proceeding relating to the presence or suspected
presence of any Hazardous Substances at, in, on, under, above, around or that
affects any portion of the Property, or the necessity for or adequacy of any
Remediation Work. Such participation shall be solely for the purpose of
protecting Bank's security, and shall not affect the release of liability
previously issued by the Department to the Bank and shall not impose any
liability on Bank or result in a waiver of any default of Obligor provided,
however, the Bank, shall be responsible only to the degree that it would be
legally responsible under federal, state or local environmental laws, for any
gross negligence or for willful misconduct that results in the deposit or
release of Hazardous Substances or exacerbation of any environmental condition
caused by the bank, its employees, contractors, subcontractors and/or agents.
8. ENVIRONMENTAL GUARANTEES.
(a) All Kaiser-Related Environmental Obligations shall be
guaranteed, jointly and severally by KVI and KRC in accordance with the
Environmental Guaranty Agreement executed by KVI and KRC, substantially in
the form attached here as Exhibit "B".
------------
(b) All Burrtec-Related Environmental Obligations shall be
guaranteed, jointly and severally, by BWI and WVRT in accordance with the
Environmental Guaranty Agreement executed by BWI and WVRT, substantially
in the form attached here as Exhibit "C".
------------
9. SITE VISITS, OBSERVATIONS AND TESTING. At its expense until the
occurrence of an Event of Default, Bank and its agents and representatives shall
have the right at any reasonable time upon reasonable notice to enter and visit
the Property for the purposes of observing the Property, taking and removing
soil or groundwater samples, and conducting tests on any part of the property.
Obligor, at its expense, shall have the right to observe the Bank, comment on
testing and sampling protocols and to obtain splits of any samples taken by the
Bank. Bank is under no duty, however, to visit or observe the property or to
conduct tests, and any such acts by Bank shall be solely for the purposes of
verifying Obligor's compliance with this agreement and protecting Bank's
security. No site visit, observation or testing by Bank shall result in a waiver
of any default of Obligor, impose any liability on Bank, or affect the
Department's release of liability previously issued to the Bank except to the
extent the Bank, its employees, contractors and/or agents are found to be
legally responsible under federal, state or local environmental laws or for
increased remediation costs to the Obligor as a result of gross negligence or
willful misconduct that results in a deposit, release or exacerbation of
Hazardous Substances onto or from the Property. In no event shall any site
visit, observation or testing by Bank be a representation that Hazardous
Substances are or are not present at, on, in, under, above, around, or that
affect any portion of the Property, or that there has been or shall be
compliance with any law, regulation, ordinance order, or agreement pertaining to
Hazardous Substances or any other applicable law or regulation. Neither Obligor
nor any other party is entitled to rely on any site visit, observation or
testing by Bank. Bank owes no duty of care to protect Obligor or any other party
against
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or to inform Obligor or any other party of, any Hazardous Dubstances or any
other adverse condition affecting the Property. However, Bank shall promptly
provide Obligor, at Obligor's cost, a copy of all reports, studies, drafts,
analysis and correspondence related to any site visit, sample or test taken by
or on behalf of the Bank. In each instance, Bank shall give reasonable notice
before entering the property or any place which the Bank is permitted to enter
under this section. Bank shall make reasonable efforts to avoid interfering with
the use of the Property in exercising any rights provided in this section.
10. SUBROGATION. Upon the occurrence of an event of default, Bank shall
have full benefit of any and all rights which Obligor now or hereafter may have
against third parties with regard to Hazardous Substances, whether such rights
arise by contract, by operation of law, or in equity, and shall have the right,
but not the obligation, to enforce such rights for the sole benefit of Bank
directly against any such third party. If the consent of any such third party is
necessary to fully effectuate the foregoing subrogation and assignment of
Obligor's rights, Obligor shall promptly obtain and provide such consent.
11. EVENT OF DEFAULT. A breach by Obligor of any material covenant,
warranty or other provision of this Agreement shall constitute, at the election
of Bank in its reasonable discretion, an event of default (an "Event of
Default") under this Agreement after the required notice has been given herein
and Obligor, or any Guarantor of this Agreement has not commenced performance of
their respective obligations and diligently proceeded with such performance as
required herein. Prior to declaring an Event of Default under this Agreement,
Bank shall give Obligor, and BWI thirty (30) days prior written notice detailing
the reasons why the Bank may declare an Event of Default under this Agreement.
However, if the Environmental Condition is such that it involves a material and
imminent danger to human health or safety the bank shall be required to give
only such notice as may be reasonable in emergency circumstances. The Bank shall
not declare an event of default if Obligor (i) complies or commences compliance
with its obligations under this agreement on or before the lapse of said thirty
(30) day period or such shorter period of time as may be reasonable in the event
of an emergency situation; and (ii) thereafter diligently prosecutes such
performance until the breach has been cured. The Bank acknowledges and
recognizes that Remediation Work often takes longer to plan, undertake and
complete than thirty (30) days and that an event of default shall not occur
under this agreement so long as obligor commences appropriate action within the
30-day period specified above and diligently proceeds with the appropriate
Remediation Work with reasonable promptness.
12. ENVIRONMENTAL OBLIGATION NOT SECURED BY REAL PROPERTY. The liability
of Obligor under this agreement is secured pursuant to the security agreement
but is not and shall not be secured by (i) The Deed of Trust which secures
Obligor's obligations with respect to the credit extension; or (ii) any other
lien encumbering all or any portion of the Property or any other real property.
The liability of Obligor under this agreement shall not be limited to or
measured by the amount, if any, outstanding under the Credit Extension or by
reference to the value of any of the property or collateral. No action for the
enforcement of or recovery of damages under this Agreement shall constitute an
"action" within the meaning of Section 726 of the California Code of Civil
Procedure, and no judgment against obligor in any action hereunder shall
constitute a money judgment or deficiency judgment within the meaning of
sections 580a, 580b, 580d or 726 of the California Code of Civil Procedure. The
rights of Bank under this agreement shall be cumulative and in addition to any
other rights and remedies of bank under any other document or instrument or at
law or in equity.
13. WAIVER OF SURETYSHIP AND GUARANTOR DEFENSES. To the extent Obligor is
a surety or a guarantor hereunder for any obligation of the Borrower and the
owner of the Property, or either of them ("Principal"), Obligor expressly waives
and relinquishes any and all rights and remedies Obligor may have or be able to
assert by reason of laws relating to the rights and remedies of sureties or
guarantors. The obligations of Obligor under this agreement are independent of
the obligations of Principal and a separate
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action may be brought and prosecuted against Obligor whether or not an action is
brought against Principal or Principal is joined in any such action. Obligor
authorizes Bank, without notice to or demand of or consent from, Obligor and
without affecting Obligor's liability under this agreement, from time to time to
amend, modify, change, alter, waive, release, extend, renew, surrender or
enforce any obligation of principal; take, hold, enforce, waive, impair,
compromise or release security for the performance of any obligation of
principal; apply any such security and direct the order or manner of sale
thereof as Bank in its sole and complete discretion may determine; release or
substitute, in whole or in part, any person or entity liable for any obligation
of principal; and settle or compromise any obligation of principal. Obligor
shall be and remain bound under this agreement notwithstanding any such action
by Bank. Obligor waives all rights under California Civil Code Section 2845 and
waives any right to require Bank to proceed against Principal, proceed against
or exhaust any security now or hereafter held by Bank, or pursue any other
remedy in Bank's power whatsoever. Bank may, at its election, exercise any right
or remedy Bank may have against Principal or any security now or hereafter held
by Bank without affecting or impairing in any way the liability of Obligor under
this agreement. Obligor waives any defense arising out of the absence,
impairment or loss of any right of reimbursement or subrogation or any other
right of remedy of Obligor against Principal or any such security, regardless of
the cause of any such absence, impairment or loss. Obligor waives any defense
arising by reason of any disability or other defense of Principal or by reason
of the cessation from any cause whatsoever of the liability of Principal.
Obligor waives any setoff, defense or counterclaim, which Principal may have or
claim to have against bank. until all obligations of Principal to Bank have been
performed in full, Obligor shall have no right of subrogation and waives any
right to enforce any remedy Bank now has or may hereafter have against
Principal. Obligor waives all rights under California Civil Code section 2849
and any other benefit of or right to participate in any security now or
hereafter held by Bank. At the option of bank, Obligor may be joined in any
action or proceeding commenced by Bank against Principal in connection with or
based on any obligation of Principal and Bank may recover against Obligor in
such action or proceeding without any requirement that Bank first assert,
prosecute or exhaust any right, remedy or claim against Principal.
14. SURVIVAL. This agreement and the obligations and liabilities of
Obligor hereunder shall survive and remain in full force and effect following
the performance, repayment or discharge of the environmental obligation and the
Credit Extension, including, without limitation, by a full or partial
reconveyance of all or any portion of the Property or by amounts paid or credit
bid at a foreclosure sale or by discharge in connection with a deed in lieu of
foreclosure. Obligor waives the right to assert any statute of limitations as a
bar to the enforcement of this agreement.
15. SEVERABILITY. If any of Obligor's obligations hereunder shall be held
to be unenforceable, the remainder of this agreement and its application to all
obligations other than those with respect to which it is held unenforceable
shall not be affected thereby and shall remain in full force and effect.
16. ATTORNEYS' FEES. If bank is required to enforce Obligor's obligations
hereunder, Obligor shall pay to Bank all costs incurred, whether or not suit is
filed, including, but not limited to, reasonable attorneys' fees (including
reasonably allocated costs of in-house legal services) and court costs.
17. GOVERNING LAW. The terms of this agreement shall be governed by and
construed according to the laws of the State of California.
18. JOINT AND SEVERAL OBLIGATIONS. If more than one person or entity has
executed this agreement as obligor, their liability shall be joint and several,
except as otherwise provided for in this Agreement.
19. SUCCESSORS AND ASSIGNS. All of the provisions hereof shall inure to
the benefit of Bank
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successors and assigns and be binding upon Obligor and Obligor's successors and
assigns; provided, however, that no assignment of this agreement by obligor
shall release Obligor from Obligor's obligations hereunder.
20. NO THIRD-PARTY BENEFICIARY. The terms of this agreement are for the
sole and exclusive protection and benefit of Bank. No party shall be a third-
party beneficiary hereunder and no provision hereof shall operate or inure to
the use or benefit of any third party.
21. CONFIDENTIALITY. The Bank agrees that, as to third parties, except
for documents that are already available to the public, it will maintain the
confidentiality of all data, reports, correspondence, tests, and other
information pertaining to environmental conditions and remediation work except
as otherwise required by law or except as necessary to enforce the terms of this
agreement.
22. COUNTERPARTS. This Agreement may be executed in duplicate originals
or in any number of counterparts, and the signature pages of each counterpart
may be removed and attached to one agreement which shall be deemed an original,
and shall constitute one instrument.
23. ENTIRE AGREEMENT. Other than the Reimbursement Agreement, the
Borrower agreements referenced therein and the Environmental Guarantees, there
are no oral or side agreements between Bank and Obligor affecting this
Agreement, and this Agreement contains the entire agreement of the parties with
regard to the subject matter contained herein. No amendment, modification,
termination or cancellation of this agreement shall be effective unless in
writing and signed by both Bank, and Obligor, BWI and KVI.
IN WITNESS WHEREOF, Obligor has executed this agreement as of the date
first above written with the intent to be legally bound thereby.
WEST VALLEY MRF, LLC
a California limited liability company
By: West Valley Recycling & Transfer, Inc.,
a California corporation, Member
By: /s/ Cole Burr
---------------------------------------
Name: Cole Burr
Title: President
By: Kaiser Recycling Corporation
a Delaware corporation, Member
By: /s/ James F. Verhey
--------------------------------------
Name: James F. Verhey
Title: Vice President
9
<PAGE>
EXHIBITS AND SCHEDULES NOT ATTACHED.
THEY WILL BE FURNISHED TO THE
SECURITIES AND EXCHANGE COMMISSION UPON THE WRITTEN REQUEST OF THE SECURITIES
AND EXCHANGE COMMISSION.
10
<PAGE>
EXHIBIT 10.5.1
ENVIRONMENTAL GUARANTY AGREEMENT
THIS ENVIRONMENTAL GUARANTY AGREEMENT is dated as of June 19, 1997 and is being
executed and delivered by the undersigned Guarantors to and for the benefit of
Union Bank of California, N.A. ("BANK") in connection with the following:
A. Bank has made financing arrangements with West Valley MRF, LLC, a California
limited liability company ("Borrower") as evidenced by that certain
reimbursement agreement dated as of june 1, 1997, between bank and borrower (the
"Reimbursement Agreement"). such extension of credit or other financing
arrangements, together with any amendments, replacements, substitutions,
extensions or refundings thereof, are hereinafter referred to as the "Credit
Extension".
B. It is a condition precedent to Bank's obligation to proceed with the Credit
Extension that Borrower execute and deliver to Bank that certain Environmental
Compliance Agreement of even date herewith (as from time to time amended, the
"Environmental Agreement"). Capitalized terms used herein without definition
shall have the respective meanings ascribed thereto in the environmental
agreement.
C. Each Guarantor expects to derive benefit, either directly or indirectly, as
a result of the Credit Extension and acknowledges that Bank would not proceed
with the performance of its obligations with respect to the Credit Extension
without receiving the Environmental Agreement from Borrower and this
Environmental Guaranty Agreement from the Guarantors.
NOW, THEREFORE, the undersigned Guarantors do hereby agree as follows:
1. Obligations Guaranteed.
(a) For consideration, the adequacy, sufficiency and receipt of which is hereby
acknowledged, the undersigned (collectively, "Guarantors" and individually
each or any "Guarantor"), jointly and severally guarantee to bank that,
upon the occurrence of an event of default under the environmental
agreement arising as a result of borrower's failure to pay or perform any
Kaiser-Related Environmental Obligation (hereinafter a "Guaranteed
Obligation"), guarantors shall promptly pay and/or perform such guaranteed
obligation without further notice or demand except for the notices required
pursuant to the Environmental Agreement and shall pay to Bank and hold Bank
harmless from all damages, costs, expenses and liabilities incurred by Bank
as a result of Borrower's failure to perform such guaranteed obligations,
whether Borrower is liable individually or jointly or with others, whether
incurred before, during or after any bankruptcy, reorganization,
insolvency, receivership or similar proceeding ("Insolvency Proceeding"),
and whether recovery thereof is or becomes barred by a statute of
limitations or is or becomes otherwise unenforceable, together with all
reasonable expenses of, for and incidental to collection, including
reasonable attorneys' fees.
(b) Without limiting Guarantors' liability under clause (a) above, Guarantors
jointly and severally guarantee to Bank that, if all the following events
occur, namely: (i) the occurrence of an Event of Default under the
Environmental Agreement arising as a result of Borrower's failure to pay or
perform any Burrtec-Related Environmental Obligation; and (ii) the breach
of such Burrtec-Related Environmental Obligation caused or contributed to
the release, at, on, in, under, above, around or that affects any Portion
of the Property, of some Hazardous Substances or newly-formed Hazardous
Substances not present at, on, in, under, above, around, or that affects
any portion of the
1
<PAGE>
Property on or prior to June 19, 1997; and (iii) as a matter of applicable
federal or state law, either Guarantor is liable with respect to the
release of such newly formed Hazardous Substance; and (iv) Bank obtains a
judgment against BWI arising out of BWI's liability as a guarantor of such
Burrtec-Related Environmental Obligation and such release; and (v) such
judgement remains unsatisfied after the later to occur of (1) completion by
the Bank of a judgement debtor's examination of BWI and the recordation of
abstracts of judgement in each county in the State of California in which
BWI holds title to real property as disclosed in such debtor's examination;
or (2) ninety (90) days shall have elapsed after entry of judgement against
BWI; then, Guarantors, jointly and severally agree to pay to Bank
----
immediately upon demand the amount of the judgment obtained against BWI in
the above-described circumstances; provided however, if an Insolvency
----------------
Proceeding is commenced by or against BWI prior to Bank's obtaining a
judgment against BWI, then upon Bank's obtaining a final determination of
its claim against BWI from the court having jurisdiction in such Insolvency
Proceeding, then Guarantors jointly and severally agree to pay to Bank
immediately upon demand the amount determined by such court to be due,
provided Guarantors would also be liable under (iii) of this paragraph and
upon Bank's assignment of its claim in the bankruptcy to the Guarantors.
Guarantors' obligations under this Environmental Guaranty Agreement are in
addition to (i) any other guaranties of the Guaranteed Obligations; and
(ii) any other guaranties now or hereafter given by Guarantors to Bank in
connection with any other obligations of Borrower to Bank; provided,
however, that no other guaranties now or hereafter given by Guarantors to
Bank in connection with any other obligations of Borrower to Bank shall
apply to the Environmental Agreement or any obligations thereunder.
2. Reinstatement. All of Bank's rights pursuant to this Guaranty continue with
respect to amounts previously paid to Bank on account of any Guaranteed
Obligations which are thereafter restored or returned by Bank, whether in an
Insolvency Proceeding of Borrower or for any other reason, all as though such
amounts had not been paid to Bank, and each Guarantor's liability under this
Guaranty (and all its terms and provisions) shall be reinstated and revived,
notwithstanding any surrender or cancellation of this Guaranty. Bank, in its
sole discretion, may determine whether any amount paid to it must be restored or
returned; provided, however, that if Bank elects to contest any claim for return
or restoration, each Guarantor agrees to indemnify and hold Bank harmless from
and against all reasonable costs and expenses, including reasonable attorneys'
fees, expended or incurred by Bank in connection with such contest. If any
insolvency proceeding is commenced by or against Borrower or any Guarantor, at
Bank's election, each Guarantor's obligations under this Guaranty shall
immediately and without notice or demand become due and payable, whether or not
then otherwise due and payable.
3. Authorization. Each Guarantor authorizes Bank, subject to the Environmental
Agreement, without notice and without affecting such Guarantor's liability under
this Guaranty, from time to time, whether before or after any revocation of this
Guaranty, to (a) renew, extend, accelerate, release, subordinate or waive, the
interest rate, time or place for payment or any other terms of all or any part
of the Guaranteed Obligations; provided however, without limiting Bank's rights
----------------
under the preceding clause of this subsection 3(a), no amendment or modification
of the Guaranteed Obligations agreed to between Bank and Borrower shall be
binding upon either Guarantor without such Guarantor's written consent; (b)
accept delinquent or partial payments on the guaranteed obligations; (c) take or
not take security or other credit support for this guaranty or for all or any
part of the Guaranteed Obligations, and exchange, enforce, waive, release,
subordinate, fail to enforce or perfect, sell or otherwise dispose of any such
security or credit support; (d) apply proceeds of any such security or credit
support and direct the order or manner of its sale or enforcement as bank, in
its sole discretion, may determine; and (e) release or substitute borrower or
any Guarantor or other person or entity liable in respect of all or any part of
the Guaranteed
2
<PAGE>
Obligations.
4. Waivers. To the maximum extent permitted by law and subject the provisions
of the Environmental Agreement, each Guarantor waives (a) all rights to require
Bank to proceed against Borrower or proceed against, enforce or exhaust any
security for the Guaranteed Obligations or to marshal assets or to pursue any
other remedy in Bank's power whatsoever; (b) all defenses arising by reason of:
any disability or other defense of Borrower, the cessation for any reason of the
liability of Borrower, any defense that any other indemnity, guaranty or
security was to be obtained, any claim that Bank has made such Guarantor's
obligations more burdensome or more burdensome than Borrower's obligations, and
the use of any proceeds of the Guaranteed Obligations other than as intended or
understood by Bank or such Guarantor; (c) all presentments, demands for
performance, notices of nonperformance, protests, notices of protest, notices of
dishonor, notices of acceptance of this Guaranty, and all other notices or
demands to which such Guarantor might otherwise be entitled; (d) all conditions
precedent to the effectiveness of this Guaranty except as provided herein; (e)
all rights to file a claim in connection with the Guaranteed Obligations in an
Insolvency Proceeding filed by or against Borrower; (f) all rights to require
Bank to enforce any of its remedies and (g) until the Guaranteed Obligations are
satisfied or fully paid, with such payment not subject to return: (i) all
rights of subrogation, indemnification or reimbursement, (ii) all rights of
recourse to any assets or property of borrower or to any collateral or credit
support for the guaranteed obligations, (iii) all rights to participate in or
benefit from any security or credit support Bank may have or acquire, and (iv)
all rights, remedies and defenses such Guarantor may have or acquire against
Borrower; provided however that anything in this Guaranty to the contrary
notwithstanding, the Guarantors shall only be required to waive and forebear the
enforcement of any rights of subrogation, indemnification or reimbursement
against any person or entity so long as such person or entity is in default in
the payment or performance of any obligation due and owing to Bank; during the
continuance of any such default all such rights of subrogation, indemnification
and reimbursement shall be subordinated as provided in Section 6 below. Bank
may foreclose, either by judicial foreclosure or by exercise of power of sale,
any deed of trust which secures any Guaranteed Obligations, and even though such
foreclosure or exercise may destroy or diminish the rights of the Guarantors, or
any of them, against Borrower, each Guarantor shall remain liable for any part
of the Guaranteed Obligations remaining unpaid after foreclosure. Under
California law, in the absence of waivers and agreements to the contrary, if a
creditor forecloses by trustee's sale on a deed of trust securing a loan, the
creditor cannot thereafter enforce a guarantor's liability for the unpaid
balance of the loan. This results because the trustee's sale would eliminate
the guarantor's right of subrogation, and therefore the guarantor would be
unable to obtain reimbursement from the Borrower. Each Guarantor waives the
right to assert the defense described in the two immediately preceding
sentences, and each Guarantor agrees that such Guarantor shall remain liable for
any part of the Guaranteed Obligations remaining unpaid after a trustee's sale,
although such Guarantor would not become subrogated to any part of the
Guaranteed Obligations that such Guarantor has paid and would therefore be
unable to obtain reimbursement for those payments from Borrower. Each Guarantor
may therefore incur a partially or totally unreimbursable liability under the
guaranty. Each Guarantor waives all benefits under California Civil Code
sections 2808, 2809, 2810, 2819, 2839, 2845, 2846, 2848, 2849, 2850, 2855, 2899
and 3433 and California Code of Civil Procedure sections 580a, 580b, 580d and
726.
5. Guarantor to Keep Informed. Each Guarantor warrants having established with
Borrower adequate means of obtaining, on an ongoing basis, such information as
such Guarantor may require concerning all matters bearing on the risk of
nonpayment or nonperformance of the Guaranteed Obligations. Each Guarantor
assumes sole, continuing responsibility for obtaining such information from
sources other than from Bank. Bank has no duty to provide any information to
any Guarantor
3
<PAGE>
until Bank receives such Guarantor's written request for specific
information in Bank's possession and Borrower has authorized Bank to disclose
such information to such Guarantor.
6. Subordination. All liabilities and commitments of Borrower to any Guarantor,
and all liabilities and commitments of any guarantor of any of the Guaranteed
Obligations to any other Guarantor, which presently or in the future may exist
("Guarantor Claims") are hereby subordinated to the Guaranteed Obligations;
provided however that so long as the party against which such Guarantor Claims
are asserted is not in default in the payment of any obligations due and owing
to Bank, payments and distributions from Borrower to any Guarantor or among or
between any of the guarantors (including any Guarantor) of any of the Guaranteed
Obligations shall be permitted in the ordinary course of business. Whenever any
such default shall have occurred and be continuing, Guarantor claims against
such party in default will be enforced, and performance thereon received by any
Guarantor only as a trustee for Bank, and each Guarantor will promptly pay over
to Bank upon demand all proceeds recovered for application to the Guaranteed
Obligations without reducing or affecting such Guarantor's liability under other
provisions of this Guaranty.
7. Representations and Warranties.
a. Corporate Existence and Power. Each Guarantor (i) is a corporation duly
-----------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, (ii) is duly qualified or licensed as a foreign corporation and is in
good standing in the State of California and in each other jurisdiction in which
it owns or leases property or in which the conduct of its business requires it
to so qualify or be licensed and (iii) has all requisite corporate power and
authority to own or lease and operate its properties and to carry on its
business as now conducted and as proposed to be conducted.
b. Authorization. The execution, delivery and performance by the Guarantors
-------------
of this Guaranty, and the consummation of the transactions contemplated hereby
and thereby, are within each Guarantor's corporate powers, have been duly
authorized by all necessary corporate action of such Guarantor and do not
contravene such Guarantor's charter documents or bylaws.
c. Binding Effect. This Guaranty has been duly executed and delivered by
--------------
the Guarantors. This Guaranty is the legal, valid and binding obligation of each
Guarantor, enforceable against such Guarantor in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting creditors, rights
generally.
d. Other Information. To the actual knowledge of Guarantors, no information,
------------------
exhibit or report furnished by any Guarantor to Bank in connection with this
Guaranty contains any material misstatement of fact or omits to state a material
fact or any fact necessary to make the statements contained therein, in light of
the circumstances in which made, not misleading.
e. Litigation. Except as previously disclosed in writing to Bank, there is
----------
no action, suit, investigation, litigation or proceeding affecting the
Guarantors pending or, to the best knowledge of the Guarantors, threatened
before any court, governmental agency or arbitrator (a) that would be reasonably
likely to have a materially adverse effect on the business, condition (financial
or otherwise), operations, performance, properties or prospects of the Guarantor
or (b) that purports to affect the legality, validity or enforceability of this
Guaranty or the consummation of the transactions contemplated hereby.
4
<PAGE>
8. Covenants. The Guarantors covenant and agree that, unless Bank otherwise
consents in writing and so long the Guaranteed Obligations remain unpaid (i)
each of the Guarantors will, preserve, renew and keep in full force and effect
its corporate existence (in the jurisdiction thereof) and the rights,
privileges, franchises and governmental approvals necessary or desirable for the
normal conduct of its business; and (ii) neither Guarantor will merge or
consolidate with or into, or sell, assign, lease or otherwise dispose of
(whether in one transaction or in a series of transactions) all or substantially
all of its assets (whether now owned or hereafter acquired) to, any person,
unless, in the case of any merger or consolidation, the Guarantor is the
surviving entity.
9. Assignments. Without notice to any of the Guarantors, Bank may assign the
Guaranteed Obligations and this Guaranty, in whole or in part, and may disclose
to any prospective or actual purchaser of all or part of the Guaranteed
Obligations any and all information Bank has or acquires concerning any
Guarantor, this Guaranty and any security for this Guaranty. The Bank agrees to
use reasonable efforts to ensure that any of the information referred to in this
paragraph which is not contained in a report or other document otherwise
available to the public generally, to the extent permitted by law and except as
may be required by valid subpoena or in the normal course of business
operations, will be treated confidentially by the Bank and will not be
distributed or otherwise made available by the Bank to any person or entity,
other than (i) the Bank's employees, authorized agents or representatives who
need to review or be informed of such information in connection with their
employment by Bank; and (ii) such prospective or actual purchaser (which shall
be required to give appropriate written assurance of confidential treatment of
such information).
10. Counsel Fees and Costs. The prevailing party shall be entitled to
attorneys' fees (including a reasonable allocation for any appropriately
documented fees of Bank's internal counsel), and all other reasonable costs and
expenses which it may incur in connection with the enforcement or preservation
of its rights under, or defense of, this Guaranty or in connection with any
other dispute or proceeding relating to this Guaranty, whether or not incurred
in an Insolvency Proceeding, arbitration, administrative hearing, litigation or
other proceeding.
11. [INTENTIONALLY OMITTED]
12. Multiple Guarantors/Borrowers. When there is more than one Borrower named
herein, or when this Guaranty is executed by more than one Guarantor, then the
words "Borrower" and "Guarantor," respectively, shall mean all and any one or
more of them, and their respective successors and assigns, including debtors-in-
possession and bankruptcy trustees, and words used herein in the singular shall
be considered to have been used in the plural where the context and construction
so requires in order to refer to more than one Borrower or Guarantor, as the
case may be. This Guaranty may be executed in any number of counterparts and by
different parties hereto on separate counterparts. Each counterpart, when so
executed and delivered, shall be deemed to be an original and all counterparts,
taken together, shall constitute but one and the same guaranty.
13. Waiver of Jury Trial. EACH GUARANTOR AND BANK HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS GUARANTY, ANY OF THE
GUARANTEED OBLIGATIONS, OR ANY RELATED AGREEMENTS OR INSTRUMENTS, OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DISCUSSIONS, DEALINGS OR ACTIONS
OF SUCH PARTIES OR ANY OF THEM (WHETHER ORAL OR WRITTEN) WITH RESPECT THERETO,
OR TO THE TRANSACTIONS
5
<PAGE>
RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. EACH PARTY HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
IN ACCORDANCE WITH THE PROVISIONS OF THE ALTERNATIVE DISPUTE RESOLUTION
AGREEMENT REFERRED TO IN PARAGRAPH 18 BELOW. EACH GUARANTOR ACKNOWLEDGES AND
AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION
(AND EACH OTHER PROVISION OF EACH OTHER DOCUMENT TO WHICH IT IS A PARTY) AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR BANK AGREEING TO THE CREDIT
EXTENSION REFERRED TO HEREIN.
14. Integration/Severability/Amendments. This Guaranty is intended by each of
the Guarantors and Bank as the complete, final expression of their agreement
concerning its subject matter. it supersedes all prior understandings or
agreements with respect thereto and may be changed only by a writing signed by
Bank and the Guarantor intended to be bound by such writing. No course of
dealing, or parol or extrinsic evidence shall be used to modify or supplement
the express terms of this Guaranty. If any provision of this Guaranty is found
to be illegal, invalid or unenforceable, such provision shall be enforced to the
maximum extent permitted, but if the provision is fully unenforceable, such
provision shall be severable, and this Guaranty shall be construed as if such
provision had never been a part of this Guaranty and the remaining provisions
shall continue in full force and effect.
15. Joint and Several. If more than one Guarantor signs this Guaranty, the
obligations of each Guarantor under this Guaranty are joint and several in
accordance with the terms of this agreement, and independent of the Guaranteed
Obligations and of the liabilities and commitments of any other person or
entity. A separate action or actions may be brought and prosecuted against any
Guarantor, whether action is brought against Borrower, any other Guarantor or
any other person or entity liable in respect of all or any part of the
Guaranteed Obligations, and whether Borrower or such others are joined in any
such action.
16. Notice. Any notice given by any party under this Guaranty shall be
effective only upon its receipt by the other party and only if (a) given in
writing and (b) personally delivered or sent by United States mail, postage
prepaid, and addressed to Bank or Guarantor at their respective addresses for
notices indicated below. Each Guarantor and Bank may change the place to which
notices, requests, and other communications are to be sent to them by giving
written notice of such change to the other.
17. California Law. Subject to paragraph 13 of this Guaranty, this Guaranty
shall be governed by and construed according to the laws of California, and each
Guarantor submits to the nonexclusive jurisdiction of the state or federal
courts in California.
18. Dispute Resolution. This Guaranty hereby incorporates any alternative
dispute resolution agreement previously, concurrently or hereafter executed
between any Guarantor and Bank.
[Document Continues on the Next Page]
6
<PAGE>
19. Scope of Guaranty. The parties acknowledge that this Guaranty is given
solely with respect to environmental obligations that may arise as specified in
the Environmental Agreement and as set forth herein.
Each Guarantor acknowledges having received a copy of this Guaranty and
having made each waiver contained in this Guaranty with full knowledge of its
consequences.
Dated as of June 19, 1997
GUARANTORS
KAISER VENTURES INC.,
a Delaware corporation
By: /s/ James F. Verhey
-------------------
Name: James F. Verhey
Title: Sr. Vice President Finance & CFO
KAISER RECYCLING CORPORATION,
a Delaware corporation
By: /s/James F. Verhey
------------------
Name: James F. Verhey
Title: Sr. Vice President Finance & CFO
Address for both Guarantors: c/o Kaiser Ventures, Inc.
3633 E. Inland Empire Blvd., Suite 850
Ontario, CA 91764
Address for Bank: Union Bank of California, N.A.
530 B Street, Fourth Floor
San Diego, California 92101
Attention: Michael E. Conboy
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME FROM THE JUNE
30, 1997 FORM 10-Q REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,734,000
<SECURITIES> 0
<RECEIVABLES> 6,076,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,810,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 137,569,000
<CURRENT-LIABILITIES> 13,968,000
<BONDS> 9,982,000
0
0
<COMMON> 316,000
<OTHER-SE> 82,123,000
<TOTAL-LIABILITY-AND-EQUITY> 137,569,000
<SALES> 0
<TOTAL-REVENUES> 5,058,000
<CGS> 0
<TOTAL-COSTS> 1,707,000
<OTHER-EXPENSES> 2,175,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 420,000
<INCOME-PRETAX> 756,000
<INCOME-TAX> 326,000
<INCOME-CONTINUING> 430,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 430,000
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
